International Business Capstone

Running Head: International Business Capstone
International Business Capstone

International Business Capstone 1
Contents
Introduction.................................................................................................................................................2
Thailand market analysis.............................................................................................................................2
PESTEL analysis............................................................................................................................................3
Porter's National Competitive Advantage theory........................................................................................4
Advantages and Disadvantages for expansion in Thailand..........................................................................6
Recommendation and Conclusion...............................................................................................................7
References...................................................................................................................................................9

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Introduction
The purpose of this report is to provide a brief view about the market expansion activities of the
Japanese company Sharp Motors. The company is a Japanese car manufacturer company
producing cars the market of Japan. Sharp was originated in the year 1970 in Nagoya, Japan.
Japan is the place where major manufacturing activities of the company are conducted including
production of cars. Further, the company decided to cut the cost of production and expand their
business (inaugurate manufacturing plant) in the Asian market. The company identified Thailand
as a potential market that can help them to expand their sales and earn optimum revenue.
Further, the below mentioned report provides market analysis of Thailand that can help the
company to sustain its growth. Further, the report also discusses about the PESTEL analysis and
porter’s National Competitive Advantage that can help the company to adequately analyse the
market conditions and grow. The latter part of the report provides information about the
advantages and the disadvantages that the company would receive by expanding the automobile
market of Thailand. The recommendations provide extent of feasibility to which it is profitable
for the company Sharp motors to expand their manufacturing unit in the automobile industry of
Thailand.
Thailand market analysis
The automotive industry of Thailand is the largest industry of Southeast Asia. This industry of
Thailand ranks 12th position in the world in terms of revenue. So, it should be noted that the
market is very profitable for a good automotive company to enter and initiate sales. This industry
of Thailand has an annual output of serving nearly 2 million vehicles to the people worldwide.
Toyota Company has a major share in the Thailand’s automotive manufacturing activities.
Further carmakers in Thailand produced a total of 1,915,420 cars and commercial vehicles in
2015 (Oxford Business Group 2018). The domestic market of Thailand is very volatile as major
companies present in this industry aims to export their products so as to gain optimum revenue.
The market hit an unstable growth as the carmakers are focusing more on export due to which
the domestic demand is unable to meet up to the domestic supply (Warr 2017).

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Further, this unstable growth of the market was covered by the buyer’s incentive program under
which the domestic demand was captured by the domestic companies providing them efficient
revenue as well. Subsequently, the Thailand’s board of investment also started providing
subsidies to the eco-cars that raised the sales in the market by providing revenue to the
companies as well. A notable fact is that the Thai companies gain the advantage of ASEAN Free
Trade Area, due to which they trade out of Thailand and earn revenue. Thailand has the biggest
market for pickup trucks with over fifty percent of market share for one ton truck. There is
adequate availability of technology and raw material that provides an ease to the company to
manufacture their products and initiate sales as well (Barnes, Black, and Techakanont 2017).
PESTEL analysis
The PESTEL analysis provides in depth analysis of the market in which the company Sharp
motors is going to enter. Further, PESTEL analysis of Thailand is discussed below:
Political
The country Thailand is a constitutional monarchy which is now switched between the military
junta and parliamentary democracy. The country has now become an industrialized country by
exporting goods produced in Thailand. However, the political system of the country is unstable
that raises question on the activities of the companies. Further, there is a risk for the investors as
the political system of the country acts as a barrier in many case of growth.
Economic
The country ranks on 27th position in world’s economy and second largest in ASEAN. The
economy of the country is dominated by service sector that contributed approximately 55.9% to
the overall GDP of the country (Gupta 2018). The GDP of the country in the year 2016 was
5,907.91 USD and the GDP per capita according to PPP in Thailand was 15681.80 USD in 2016.
There is high FDI in the country that reduces the level of unemployment as well (Trading
Economics 2018).
Social

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The people of the country follow the culture of Buddhism; it is the main predominated religion
present in the country. The country has population of 6.89 crores people. This country is also
considered as second world country.
Technological
There high degree of internet users present in the company. With this effect it should be noted
that the country uses technology to optimum level that brings innovation in use in various
companies. Large scale companies present in the country aim to use information technology
available with them to gain customer satisfaction. Thailand is Asia’s leading manufacturing hub.
Environmental
Water pollution is one of the biggest issues attracted with the growth of Thailand. Nevertheless,
the environment of the country is suitable for people to live in. The country has strong policies
for environmental issues. The country present in the industry wisely uses the resources to save
them for the future generation. The country has also implemented 20 year plan for the
Enhancement and Conservation of National Environment Quality and steady grow of
environment (Kuroiwa, and Techakanont 2017).
Legal
The legal system of the country is a combination of the traditional as well as western Thai laws.
The government of the country holds a liberal attitude towards the international trade activities in
the country. The country has also maintained relationships with the WTO (World Trade
Organization) and ASEAN (Association of Southeast Asian nations) nations so as to reduce the
tariffs, and duties related to the export (Ng, Hamid, and Yusof 2017).
Porter's National Competitive Advantage theory
This theory is again an important theory that helps in understanding the nation’s condition for
doing business. It is sometimes also referred to as the diamond model for the business. For
Thailand’s car manufacturing sector this theory is illustrated below:
Firm Strategy, structure and rivalry

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This company has adopted various types of strategy for their business. These strategies will be
designed as per the competitor’s strategy for the market. Two major strategies that it can adopt
for the Thailand market are Product Differentiation and market Development. They can utilize
both these strategies for penetrating inside Thailand as both of them aims to fulfill the demands
of the people which others fail to do. Structure of the company is hierarchical where there are
several functional units present at different levels (Wonglimpiyarat 2018). The major rivals of
the company includes Toyota, Auto alliance (Mazda and Ford), general motors, BMW
manufacturing, Nissan Motors, TATA motors, Mercedes-Benz Thailand, Suzuki motors, Volvo
cars etc.
Demand Condition
Thailand is an emerging country hence there is lot of potential for this company to sell their.
Since the demand of the cars is going to increase in the coming years. But the more important
fact is that production unit at this place can helping fulfilling the demands of South Asian market
which is very large. This region is expected to be the largest consumer of automobile products in
the coming years since they have very diverse economic backgrounds of people hence they also
demand of cars of various price ranges (Rothaermel 2015).
Related and Supporting industries
Due to presence of much larger players in the industry, There are large numbers of suppliers
present hence the supporting industries are in huge numbers and providing raw materials at lower
cost. The glass and steel industry of Thailand is very good. Both are the biggest supporter
industries of Automobile sector.
Factor conditions
The factor conditions are very helpful for the company. This can be understood by the following
points:
 Skilled labors: There is highly skilled labor force present inside the nation. In the last few
decades with the entrance of new manufacturing sector firms in Thailand, the availability
of highly skilled employees have increased.

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 Material Resources: There is easy availability of raw material especially glass, steel and
plastic as well knowledge resources are also present in huge numbers (Riasi 2015).
 Deregulation of labor market: There is deregulation of the labor market which will help
in ensuring high level of growth. It will help in enduring stronger precautionary savings.
 Liquidity of national stock markets: There is a lot of instability noticed in the capital
market of Thailand. This can be a challenge for the company.
Advantages and Disadvantages for expansion in Thailand
There are many kinds of advantages and disadvantages of expanding in Thailand.
Advantages:
 Highly skilled, cheap and knowledgeable laborers are present in the Thailand.
 Since the excise duty on the export from Thailand is very low hence companies usually
focus on manufacturing in Thailand and export it. This leaves the vacancy for satisfying
the local market which cited firm can capitalize upon (Law 2017).
 Trade policies and other government policies also support the manufacturing sector
within the nation.
 Stronger supply and demand network which help in doing effective business. This also
helps in fulfilling the demands of the market (Lazzarini 2015).
 Production technology inside Thailand is very good along with the availability high
quality resources.
 Easy reach to the neighboring markets like India and China the consumption is very high.
 A company can own 100% share in the business and can take out whenever required.
Disadvantages:
 The stability of the market has been a challenge over the years as the stock markets have
seen a downfall in the past.

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 Excessive competition in the Automobile sector is present and some of them have a
market size that is capable of changing the trends in the market (Somsuk,
Wonglimpiyarat, and Laosirihongthong 2012).
 Lesser in-house demand of Automobile in the country. This may also be due to the reason
that the per capita income of the nation is on lower side.
 It is a developing nation and hence a bit poorer infrastructure is present.
 In the ease of doing business it stands on the 17th spot.
 Higher corporate taxes i.e. up to 30% on the net profit.
 Thailand’s culture is different from that of the culture that is present in Sharp motors
(Jones, and Pimdee 2016).
Recommendation and Conclusion
On analyzing the market condition of Automobile sector in Thailand several things can be
recommended for the Sharp motors regarding their expansion plan in this nation. The first and
foremost thing that it must consider is that there is a section of market in the Thailand Itself who
demands goes unnoticed as most of the rivals focuses on export of the products. Second is that
they must hire local staffs so as to understand the social and cultural aspect of the Thailand.
Third recommendation in this regards is the fact that company must rely on the Jpanese
technology for production as it is more advanced as compared to Thailand’s market. They also
need to adopt the same quality standards as they have adopted in parent nation. Apart from this it
is also crucial that a thorough training plan must be made by the company for itself. This will
help them in implementation of the expansion strategy at much faster rate. Company must stick
with their strategies like product differentiation so as to fulfill the demands of larger market
section. In the amount of competition that is present in the Thailand market without having larger
product range it will not be easier for the company to make their mark in the industry. Since this
country allows 100% ownership for foreign companies hence sharp must also enter the country
on their own basis (Intarakumnerd 2017).

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From the above report it can be concluded that Thailand market is an excellent place for doing
business especially in regards to the automobile industry. Companies like Sharp motors have an
excellent opportunity to expand in this market. This is illustrated by the fact that many Japanese
companies have already expanded in this market and is doing excellent business. It comes in the
ASEAN free trade regions and hence no excise duty is imposed on the export facilities. These
successes can be attributed because of many favorable opportunities in the market. Various
external factors are supporting the manufacturing companies within Thailand. The availability of
skilled labors, excellent distribution network, and larger number of suppliers, advanced
production technology are some of the factors that works in favor of companies expansion plan
in Thailand. It is at 17th position in the ease of doing business hence acts as a very good place
for doing productions.

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References
Barnes, J., Black, A. and Techakanont, K., 2017. Industrial Policy, Multinational Strategy
and Domestic Capability: A Comparative Analysis of the Development of South Africa’s and
Thailand’s Automotive Industries. The European Journal of Development Research, 29(1),
pp.37-53.
CIA., 2018. World Factbook Title [online]. Available at
https://www.cia.gov/library/publications/the-world-factbook/geos/th.html Accessed on 30
April 2018.
Gupta, A., 2018. More Japanese Automotive Companies To Use Thailand As Manufacturing
Base [online]. Available at < https://www.thailand-business-news.com/corporate/52682-
japanese-automotive-companies-use-thailand-manufacturing-base.html> Accessed on 30
April 2018.
Intarakumnerd, P., 2017. Thai automotive industry: International trade, production networks,
and technological capability development. In Production Networks in Southeast Asia (pp.
161-182). Routledge.
Jones, C. and Pimdee, P., 2016. Innovative ideas: Thailand 4.0 and the fourth industrial
revolution. Asian International Journal of Social Sciences, 17(1), pp.4-35.
Kuroiwa, I. and Techakanont, K., 2017. Formation of Automotive Manufacturing Clusters in
Thailand (No. DP-2016-32).
Law, C.M., 2017. Restructuring the global automobile industry(Vol. 4). Taylor & Francis.
Lazzarini, S.G., 2015. Strategizing by the government: Can industrial policy create firm‐level
competitive advantage?. Strategic Management Journal, 36(1), pp.97-112.
Ng, S.C., Hamid, N.A.A. and Yusof, S.R.M., 2017, June. Green Manufacturing Performance
Measure for Automobile Manufacturers. In Industrial Engineering, Management Science and
Application (ICIMSA), 2017 International Conference on (pp. 1-5). IEEE.

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Oxford Business Group., 2018. Thailand's automobile industry sees rise in production
[online]. Available at < https://oxfordbusinessgroup.com/analysis/smooth-drive-automobile-
industry-sees-production-growth-while-domestic-sales-have-been-volatile> Accessed on 30
April 2018.
Riasi, A., 2015. Competitive advantages of shadow banking industry: An analysis using
Porter diamond model. Business Management and Strategy, 6(2), pp.15-27.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Somsuk, N., Wonglimpiyarat, J. and Laosirihongthong, T., 2012. Technology business
incubators and industrial development: resource-based view. Industrial Management & Data
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Trading Economics., 2018. Thailand GDP per capita PPP [online]. Available at <
https://tradingeconomics.com/thailand/gdp-per-capita-ppp> Accessed on 30 April 2018.
Warr, P., 2017. Thailand’s Automotive Manufacturing Corridor.
Wonglimpiyarat, J., 2018. The pursuit of original equipment manufacturer strategy: insights
from an Asian country. R&D Management, 48(2), pp.243-252.