- March 19, 2013
- Posted by: essay
- Category: Term paper writing
Market entry options
In actuality, the position of the Swiss company in the chocolate market is relatively strong, although it still fails to take the lead in the global chocolate market. Nevertheless, the company attempts to expand its operations internationally and enhance its position in international markets. In this regard, the Thai market is attractive for the company but the company should be aware of possible risks and threats associated with the development of business in Thailand and take into consideration cultural specificities of the country. At this point, it is important to dwell upon the analysis of the current environment in Thailand for the business development, in order to assess prospects of entering the Thai market by the Swiss chocolate company adequately and to elaborate the efficient market entering strategy. In this regard, it is possible to use the PEST analysis, which allows the company to evaluate the current political, economic, social, and technological environment.
First of all, it is important to take into consideration political factors, which are still very significant for the business development in Thailand. To put it more precisely, Thailand is a developing country, where democracy is still underdeveloped. As a result, politics and the political struggle within the country may play a significant part in the economic development of Thailand. Nevertheless, Thailand has been developing on the ground of the open market economy principles but the impact of the political authorities and the government on economy is still quite significant. Therefore, the Swiss company cannot ignore political factors, while entering the Thai market.
Moreover, the government of Thailand can change its economic policies because the recent economic crisis may lead to the introduction of stricter, protective policies in relation to local companies that may raise barriers for entry for the Swiss company. This means that the economic policies of Thailand may become stricter and the country will not be as open for foreign investors as it used to be before the crisis anymore. Naturally, such political situation is unfavorable for the development of business in Thailand but, today, it is still unclear whether the government will introduce any restrictive and protectionist measures or probably the Thai economy will remain open for foreign investors.
In such a context, economic factors prove to be as important as political ones. In actuality, the Thai economy is developing and it has elements of open market economy. However, the Thai economy is not as open as the economy of Switzerland, the EU, and other well-developed, democratic countries of the world. This means that there is still the risk of the unfair competition in Thailand that may pose certain problems for the Swiss company entering the national market.
On the other hand, the Thai economy has a number of advantages compared to the Swiss or European economy. To put it more precisely, the local labor force is cheap that attracts foreign investors to develop their business in Thailand. Low costs of labor force can decrease costs of production and, therefore, the company can decrease the price of its products making them more available for customers and more attractive for customers. In such a way, the company can benefit from low costs of the labor force and develop its production facilities and business in Thailand to export its products from Thailand to other countries of the Asia-Pacific region. At this point, it is worth taking into consideration the physical location of Thailand, which is almost in the heart of the Asia-Pacific region.
In fact, the company can conduct flexible pricing policies respectively to the current situation in the market. Today, flexible pricing policies are very important for the company’s success in the Thai market and international markets because flexible pricing policies allow the company to reduce prices at the moment, when negative effects of the global financial crisis are still very significant. The company may raise the price in the course of time as the local and global economy will recover from the negative effects of the global economic crisis (Noi, 1998). Anyway, flexible pricing policies put the company into an advantageous position compared to its rivals, who conduct rigid pricing policies and cannot change their prices respectively to the situation in the market.
Furthermore, the Swiss company should take into consideration social factors, which may affect consistently its business development in Thailand. In actuality, the current social environment in Thailand is still unstable. Thailand is still recovering after the recent riots and unrest in the country provoked by the deteriorating economic situation and growing dissatisfaction of the population with the government. In such a situation, the risk of further social conflicts in Thailand persists, until the government fails to solve problems of the local population and the local economy fails to start recovering after the economic crisis.
On the other hand, local people are eager to work because they need to earn money and to have a job. The high unemployment rate and the large share of the young population in the total population of Thailand provides employers with a large choice of professionals, who can work in the company. Therefore, the company can employ professionals and save costs on the labor force.
At the same time, technological factors raise certain problems in face of the Swiss company because Thailand is underdeveloped technologically. Therefore, the country does not manufacture equipment the company uses for production of its chocolate and related products. Nevertheless, the country can supply cocoa and other products essential for the production of chocolate. In addition, the company can supply the production lines to Thailand and develop the local production of chocolate using the equipment from Switzerland. The automation of production lines can facilitate the work of employees and minimizes the share of manual labor that decreases the risk of error and, therefore, guarantees the high quality of products. In such a way, the company is likely to need to supply its equipment to Thailand and construct production facilities there to start the production process and to take a leading position in the market. In addition, employees may need some training to learn how to use the equipment that increases the costs of entering the Thai market.
In spite of the aforementioned challenges, the Swiss company still has sufficient resources to launch business in Thailand. At this point, it is important to conduct the SWOT analysis to reveal strengths and weaknesses of the company in the contemporary competitive environment (See App. Table 1).
On analyzing current strengths of the Swiss company, it is possible to single out the extensive experience of the company in the chocolate industry. In fact, the company has its own technologies and extensive experience, which help the company to offer customers products of the high quality. In addition, another strength of the company is its existing international network. In fact, the company has already started the strategy of the aggressive international market expansion and has built up the international network, which though is underdeveloped yet. Nevertheless, the company has experience of entering new markets and this experience is successful. Therefore, the company can use its experience, while entering the Thai market. Finally, the company has significant financial and technological resources, which it can use to enter the Thai market successfully and to take the leading position in the market.
On the other hand, the company still faces a number of weaknesses. First, the company needs to adapt to the new cultural environment because Thailand has a totally different culture compared to other countries, where the company operates. Second, the company needs to develop local production facilities and develop close relations with local suppliers and authorities. In such a way, the company can develop its subsidiary in Thailand and make it working autonomously of other units of the company. In addition, this will save costs the company spends on supply of products essential for the production of chocolate. Finally, the uncertain socioeconomic and political situation can raise substantial barriers on the way of the company to the Thai market.
In actuality, the company has ample opportunities to take the leading position in the Thai market. In fact, the company can enhance its position in international markets and gain a larger share of the market in the Asia-Pacific region. Furthermore, the company can decrease the costs of production and, therefore, costs of products due to the low costs of the local labor force. In addition, the company can expand its international network consistently and use the full potential of local suppliers
Nevertheless, the company should be aware of existing threats, which it can face while entering the Thai market. First, the growing competition is one of the major threats to the company because the competition in the chocolate industry keeps growing and the major rivals of the company attempt to expand their markets too. As a result, they lead the global competition and the company has to cope with the competition to take the leading position in Thailand. Furthermore, the uncertain socioeconomic and political environment put under a threat the successful business development in Thailand. For instance, the introduction of restrictive, protectionist measures will undermine the position of the company in the Thai market and raise entering barriers substantially. In addition, the economic recession and global financial crisis has had a negative impact on the development of business in Thailand. The low business activity in Thailand and the threat of the introduction of protectionist policies by the government can be a threat for the position of the company in Thailand. Finally, there is a common threat, such as possible decline in the development of the chocolate industry caused by the overall decline in consumption caused by the economic crisis. However, the latter threat is a short-term threat, because the situation will improve as soon as the global economy starts to recover.
n such a context, the company should develop an efficient market entry strategy. In this respect, it is possible to recommend applying the aggressive expansion strategy, which should be based on the active promotion of the brand and development of the local production facilities. The strategy will be attractive for local authorities due to substantial investments and employment that can ease the tension in the area, where production facilities will be located. In fact, the aggressive expansion strategy will allow the company to take the lead in the Thai chocolate industry and create the basis for the further international market expansion being conducted by the company.
In addition, the company should focus on the use of cocoa and other ingredients from local farmers that will ensure that the company will stimulate the development of the local economy. In fact, the use of local suppliers will decrease the costs of production consistently. At the same time, the company will gain the support of the local community and authorities, because they are interested in the development and rise of the local economy. The development of business that engages local farmers will stimulate the development of farming and the rise of the local economy. Moreover, the company will offer new jobs in the labor market that is also beneficial for Thailand suffering from negative effects of the global financial crisis. In such a way, the company will enhance its position in the Thai market and gain the support of both the local community and authorities.