Consumer Electronics in Thailand: A Strategic Reference, 2007
ICON Group International, July 2007, Pages: 227
How to Strategically Evaluate Thailand
Perhaps the most efficient way of evaluating Thailand is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to consumer electronics are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries
Demand/Market Potential Driven Firm
Relative Accessibility
Accessibility/Supply Averse Firm
In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm).
Latent Demand and Accessibility in Thailand
This report provides a detailed overview of factors driving latent demand and accessibility for consumer electronics in Thailand. Latent demand is largely driven by economic fundamentals specific to consumer electronics. This topic is discussed in Chapter 2 using work carried out in Thailand on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for consumer electronics in Thailand. I use the term “micro” since the discussion is focused specifically on consumer electronics.
Chapter 3 is also a stand-alone report that I have authored. It covers proxy pro-forma financial indicators of firms operating in Thailand. I use the word “proxy” because the provided figures only cover a “what if” scenario, based on actual operating results for firms in Thailand. The numbers are only indicative of an average firm whose primary activity is in Thailand. It covers a vertical analysis of the maximum likelihood balance sheet, income statement, and financial ratios of firms operating in Thailand. It does so for a particular Standard Industrial Classification (SIC) code. That code covers “audio recordings, household audio and video equipment”, as defined in Chapter 3. Again, while “audio recordings, household audio and video equipment” does not exactly equate to “consumer electronics”, it nevertheless gives an indicator of how Thailand compares to other countries for a proxy adjacent category along various dimensions.
Chapter 4 deals with macro-accessibility and covers factors that go beyond consumer electronics. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Thailand:
Openness to Trade in Thailand
Openness to Direct Investment in Thailand
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks
Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in the Chapter 4, which is a general overview of investment and business conditions in Thailand. Chapter 4 is also presented from the perspective of an American firm, though is equally applicable to most firms entering Thailand. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier.
1 INTRODUCTION & METHODOLOGY 1
1.1 What Does This Report Cover? 1
1.2 How to Strategically Evaluate Thailand 1
1.3 Latent Demand and Accessibility in Thailand 3
2 CONSUMER ELECTRONICS IN THAILAND 5
2.1 Latent Demand and Accessibility: Background 5
2.2 Latent Demand: Market Composition 6
2.3 Market Data 7
2.3.1 Production 7
2.3.2 Exports 8
2.3.3 Imports 9
2.4 Accessibility: Market Entry 11
2.4.1 Government Incentives 13
2.4.2 Human Resource Development Plan 13
2.4.3 New Logistic Systems 13
2.5 Market Issues and Obstacles 13
2.6 Prospective Buyers 14
2.7 Accessibility: Trade Event 14
2.8 Key Contacts 14
3 FINANCIAL INDICATORS: AUDIO RECORDINGS, HOUSEHOLD AUDIO AND VIDEO EQUIPMENT 16
3.1 Overview 16
3.1.1 Financial Returns and Gaps in Thailand 17
3.1.2 Labor Productivity Gaps in Thailand 20
3.1.3 Limitations and Extensions 20
3.2 Financial Returns in Thailand: Asset Structure Ratios 21
3.2.1 Overview 21
3.2.2 Assets - Definitions of Terms 21
3.2.3 Asset Structure: Outlook 24
3.2.4 Large Variances: Assets 25
3.2.5 Key Percentiles and Rankings 28
3.3 Financial Returns in Thailand: Liability Structure Ratios 43
3.3.1 Overview 43
3.3.2 Liabilities and Equity - Definitions of Terms 43
3.3.3 Liability Structure: Outlook 45
3.3.4 Large Variances: Liabilities 46
3.3.5 Key Percentiles and Rankings 49
3.4 Financial Returns in Thailand: Income Structure Ratios 62
3.4.1 Overview 62
3.4.2 Income Statements - Definitions of Terms 62
3.4.3 Income Structure: Outlook 64
3.4.4 Large Variances: Income 65
3.4.5 Key Percentiles and Rankings 68
3.5 Financial Returns in Thailand: Profitability Ratios 83
3.5.1 Overview 83
3.5.2 Ratios - Definitions of Terms 83
3.5.3 Ratio Structure: Outlook 85
3.5.4 Large Variances: Ratios 86
3.5.5 Key Percentiles and Rankings 89
3.6 Productivity in Thailand: Asset-Labor Ratios 104
3.6.1 Overview 104
3.6.2 Asset to Labor: Outlook 105
3.6.3 Asset to Labor: International Gaps 106
3.6.4 Key Percentiles and Rankings 109
3.7 Productivity in Thailand: Liability-Labor Ratios 124
3.7.1 Overview 124
3.7.2 Liability to Labor: Outlook 125
3.7.3 Liability and Equity to Labor: International Gaps 126
3.7.4 Key Percentiles and Rankings 129
3.8 Productivity in Thailand: Income-Labor Ratios 142
3.8.1 Overview 142
3.8.2 Income to Labor: Outlook 143
3.8.3 Income to Labor: Gaps 144
3.8.4 Key Percentiles and Rankings 147
4 MACRO-ACCESSIBILITY IN THAILAND 162
4.1 Executive Summary 162
4.2 Economic Fundamentals and Dynamics 162
4.2.1 Continued Openness to Foreign Engagement 162
4.2.2 Macro-Economic Accounts and Indicators 163
4.2.3 The Government’s Role in the Economy 163
4.2.4 International Trade 163
4.2.5 Sustaining the Economic Recovery 163
4.3 Political Risks 164
4.3.1 Economic Relationship with the United States 164
4.3.2 Political Risks 164
4.3.3 The Political System 164
4.4 Marketing Strategies 165
4.4.1 Distribution Channel Options 165
4.4.2 Pricing Issues 165
4.4.3 Finding a Local Partner 166
4.4.4 Retail Distribution in Thailand 166
4.4.5 Direct Marketing Options 167
4.4.6 Franchising Activities 168
4.4.7 Creating a Joint Venture 168
4.4.8 Creating a Sales Office 169
4.4.9 Selling Strategies 169
4.4.10 Advertising and Trade Promotion 171
4.4.11 Government Procurement 172
4.4.12 Countertrade 173
4.4.13 Hiring Local Counsel 174
4.4.14 Performing Due Diligence and Checking Bona Fides 175
4.5 Import and Export Regulation Risks 175
4.5.1 Tariffs on Agriculture and Food Products 175
4.5.2 Non-Tariff Barriers 175
4.5.3 Import Tariffs and License Requirements 176
4.5.4 Licenses Required for Imports 177
4.5.5 Controls on Exports 177
4.5.6 Import/Export Documentation Requirements and Certification 177
4.5.7 Entering Temporary Imports 177
4.5.8 Labeling Issues 178
4.5.9 Restrictions on Imports 178
4.5.10 Warranty and Non-Warranty Repairs 178
4.5.11 Local Standards 179
4.5.12 Free Trade Zone Options 179
4.5.13 Additional Trade Issues 180
4.5.14 Adherence to Free Trade Agreements 180
4.5.15 Customs Contact Information 180
4.6 Investment Climate 181
4.6.1 Openness to Foreign Investment 181
4.6.2 Treaty of Amity 182
4.6.3 Work Permits 182
4.6.4 Land Ownership 183
4.6.5 Conversion and Transfer Policies 183
4.6.6 Expropriation and Compensation 183
4.6.7 Dispute Settlement 183
4.6.8 Performance Requirements and Incentives 184
4.6.9 Right to Private Ownership and Establishment 187
4.6.10 Intellectual Property Risks 187
4.6.11 Transparency of the Regulatory System 188
4.6.12 Capital Market Risks 189
4.6.13 Political Violence 190
4.6.14 Corruption 190
4.6.15 Bilateral Investment Agreements 191
4.6.16 OPIC and Other Investment Insurance 191
4.6.17 Labor 191
4.6.18 Free Trade Zone Options 192
4.7 Trade and Project Financing 193
4.7.1 The Banking System 193
4.7.2 Foreign Exchange Control Risks 193
4.7.3 International Financial Institutions 195
4.8 Travel Issues 201
4.8.1 Local Business Practices 201
4.8.2 Infrastructure for Conducting Business 203
4.8.3 Entering Temporary Imports 205
4.8.4 Country Data 207
4.9 Key Contacts 207
4.9.1 U.S. Government 207
4.9.2 Royal Thai Government 209
4.9.3 Trade Associations 213
4.9.4 Market Research Firms 214
4.9.5 Web Sites for Investors and Exporters 216
5 DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS 218
5.1 Disclaimers & Safe Harbor 218
5.2 Icon Group International, Inc. User Agreement Provisions 219
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