Discuss about the International Business Strategy for EVRAZ.
EVRAZ is the vertically integrated steel and mining and vanadium business having operations in Russian Federation, USA, South Africa, and Italy etc[1]. It is known across the world as the top steel producer. A large amount of company’s internal consumption of iron and coking coal is covered through mining operations. The company is listed at the London Stock Exchange and is willing to expand its business in Thailand by forming a joint venture with Baoshan Iron & Steel Co., Ltd. The company was established in February 3, 2000[2]. They sell semi-finished products. They completed the task of asset sales of stainless steel. The companies are planning under the international strategy of Resource seeking. The purpose of new joint venture is to utilize the capacity of both the organizations in order to create better opportunities in Thailand. Thailand has better opportunities in term of resources, market, efficiency and innovation. This will provide the company with a competitive edge over the other companies. It is a common practice followed by many international companies to utilize opportunities at developing countries due to easy availability of resources. This is necessary for a company to grow in future in order to draw multiple opportunities.
It is a newly industrialized country. It is expected to grow at in the range of 3.8 to 4.3 percent. Thailand is dominated by industrial and service sector[3]. Thailand is the second largest economy in South-east Asia. It is due to the growing opportunity in trade and commerce sector. International companies are exploring multiple opportunities due to easy norms and resources provided by the country[4]. It is necessary for an organization to utilize the resources in order to manage the cost[5]. Thailand is recognized as one of the county with great development stories. The most important sub sector of industry is manufacturing as there is a huge prospective growth. The country is constantly focusing on developing SEZ for seeking more attention of foreign investors. This will not only create more opportunities not for the foreign company but for the local people also[6].
Both the companies can utilize the growing situations in terms of growing situation at Thailand. Over the last four years Thailand has seen tremendous growth in terms of social and economic development. The country has moved from a low-income country to an upper middle class country in a very less time. The government has earned growth to raise long-term growth in order to achieve a high status. Foreign direct investment is one of the important components for Thailand economy. The country provides a modern legal framework and a dynamic business environment which attract attention of many people. FDI flow in Thailand has tripled in 2015. It is due to the government’s policies as enforced in order to attain economy. EVRAZ and Baoshan Iron & Steel Co., Ltd have to utilize the resources available in Thailand in order to attain economy of scales[7].
The reason behind making an investment in Thailand is as follows:
There is an availability of skilled labor in the country that will help in attain objectives as laid down by the company.
Secondly, it is due to the strategic location at the heart of Asia that provides it with an added advantage over other South-east Asian countries. It is one of the emerging markets with a lot of potential.
Thirdly the government policies are liberal and there are numerous agencies that help in making a reliable investment.
The country has a total harmony with the objectives of WTO Regulations. As such there are no restrictions levied on the Country in terms of carrying out a trade activity. Moreover there are no restrictions on the manufacturing sector and on any other local requirements[8].
The major drawback of the country in terms of the foreign direct investments is as follows:
Firstly there is a lack of proper infrastructure that has affected the overall growth in the country. Secondly there is a limitation on the skilled labor in Thailand. Moreover the country is currently facing problems that are caused due to political uncertainty, piracy and counterfeiting[9].
There are certain types of business activities that are reserved especially for Thai nationals. Government has restricted the foreign investment in the sector in order to promote the interest of local people. Foreign investment in certain sector is restricted to 50 percent only unless permitted by the government authority.
A Thai private company can be wholly owned by the wholly owned foreign companies. For those businesses that are reserved for Thai the investment allowed is only up to 49%. The board of investment provides with a permit to start a business[10].
Resource seeking is the strategy used by majority of foreign countries in order to attain economy of scale. Both the companies can utilize the opportunities due to availability of resources. The logical framework is necessary to implement the utilization of the resources as one of the important strategy to make foreign investment in foreign land. Resource seeking is one of the most considered strategies used by most of the companies in order to attain sustainable results[11]. The main purpose behind investment in a developing country is in order to attain resources easily. Most of the developed countries are making an investment in the developing countries are making an investment in order to utilize resources efficiently[12].
Thailand is a country that is rich in natural resources. There is deposition of various mineral resources like coal, gold, lead, tungsten etc. availability of mineral resources make it suitable for the foreign companies to start there venture in Thailand. Availability of resources on the host country helps in smooth and easy function. The assets of both the companies can be equally utilized at Thailand in order to achieve target. Moreover availability of natural resources in Thailand discovered on the year 1970 has reduced the country Reliance on imported petroleum. The country has seen an annual increase in production of mine. This has reduced the dependency of Thailand for various resources on the other countries. The country’s major mineral products include lignite, zinc ore, lead concentrates, tin, gypsum, and iron ore. This has considerably increased the opportunity for the foreign nations who wants to make investment in order to manufacture mineral based resources.
Thailand has faced the shortage in terms of availability of skilled labors in the year 2016. According to the World Bank Thailand will be facing biggest shortage in term of skilled labor in ASEAN region. As per the research made by Dhurakij Pundit University 83.5 percent of the labor in Thailand are unskilled. This has put Thailand into the list of unskilled country. The new joint venture formed by both the companies might face an issue while looking for skilled labor. The education system in Thailand is currently facing many obstacles due to inequalities.
However there are more opportunities in order to retrieve the resources in an efficient manner. It is necessary for a country to form a strategic alliance only after utilizing the available opportunities.
The business polices in Thailand are very easy that makes it favorable for both the countries to make an investment. The government policies are liberal and support foreign investment made by various countries. The FDI policies are favorable that makes it easy for the foreign investor to make fruitful investment in Thailand.
There are multiple challenges attached with the investment opportunity in Thailand. One of the major issues is the infrastructure. Country is facing major problems that are caused due to poor infrastructure. There are certain restrictions on the trade facilities made by the government in order to secure the local interest. Availability of skilled labor is an issue. The company needs to appoint skilled employees from the foreign country. This will however create a burden on the company in terms of cost. The cost of employment will increase in near future in terms of hiring skilled labor.
Conclusion
EVRAZ and Baoshan Iron & Steel Co., Ltd. Needs to make strategic necessity in order to implement foreign strategy in term of establishment of a joint venture in Thailand. The report provides with information related to the strategic policies of resource seeking while considering expansion. Thailand has multifold growing opportunities as it has developed many resources in recent times. Both the companies can take advantage from the growing opportunity in Thailand. Although the country has an issue with the availability of skilled labors but it should explore the other resources in order to attain results. It is due to the government’s policies and the various FDI policies the new joint venture can attain better result. This report encompasses all the relevant strategic policies as necessary in order to make investment in Thailand. However it is necessary for a foreign company to consider all the relevant points while implementing the policies in a foreign country. Resource seeking is advantageous where a company is believed to attain efficient results through its foreign policies.
Our business, [WEBSITE], 2017, https://www.evraz.com/ (Accessed on: 13 February 2017)
Baoshan Iron & Steel Co., Ltd., [WEBSITE], 2017, https://www.baosteel.com/group_en/contents/2898/40043.html (Accessed on: 13 February 2017)
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Thailand faces greatest shortage of skilled labor in Asean: World Bank, [WEBSITE], 2016, https://www.nationmultimedia.com/news/national/aec/30278222 (Accessed on: 13 February 2017)
Suttinee Yuvejwattana, Thai Economy Expanded More Than Expected in Second Quarter, [WEBSITE], 2016, https://www.bloomberg.com/news/articles/2016-08-15/thailand-s-economy-expanded-more-than-expected-in-second-quarter (Accessed on: 13 February 2017)
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