West Farmers’ Expansion Strategy In Thailand

West Farmers’ Background

West Farmers is a corporation based in Australia that deals in diverse business operations. The firm has previously ventured its operations into Thailand’s market and now wants to have an even stronger presence in that country. To do so successfully, the company needs to have an in-depth understanding of the business environment in Thailand, the culture of its people, the strategies it needs to employ, as well as the international business rules and regulations it needs to abide to. This report, therefore, takes off with a description of West Farmers in terms of the sort of businesses it undertakes, and a bit of its background information. What follows is a description of the macroeconomic position of Thailand and why West Farmers considers it a favorable economy to set up business. Another factor that the company has to consider is those elements that are necessary for the commencement, continuation and growth of its business operations in Thailand.

All the above mentioned aspects will get weighed against those of Australia because operating in Thailand will mean mixing the; for example, human resource will get sourced from both Thailand and Australia. All these considerations that have to get evaluated are so that West Farmers garners the right strategy to expand business in Thailand’s market. This report on West Farmers’ objectives in Thailand will decide on, recommend, and justify the best entry mode that will guarantee quality expansion, the necessary human resource management needs, the global marketing strategies and policies, and the target market for its products.  

West Farmers is one of the largest listed companies in Australia; it was formed in 1914 as a cooperative for Western Australian farmers. The company’s headquarters are based in Western Australia. The company’s diverse business operations entail: liquor, supermarkets, hotels and convenience stores; office supplies; home improvement; department stores; it also has an industrials arm with businesses in energy and fertilizers, chemicals, industrial and safety products as well as coal. The company is one of the largest private sector employers in Australia with approximately 220,000 employees and about 530,000 shareholders. West Farmer’s main objective is to provide its shareholders with satisfactory return. That is why the company is very keen on stretching it presence overseas, for example, Thailand which is under evaluation in this report.

Thailand is a country in South Eastern Asia; it borders the Gulf of Thailand and Andaman Sea, southeast of Burma. The country lies on an area of 513,120 sq. km. The population of the country is around 68,200,000:

0-14 years: 17.18% (male 6,000,434/female 5,714,464)

15-24 years: 14.47% (male 5,030,930/female 4,839,931)

25-54 years: 46.5% (male 15,678,250/female 16,038,155)

55-64 years: 11.64% (male 3,728,028/female 4,208,624)

65 years and over: 10.21% (male 3,047,938/female 3,914,070) (2016 EST.), ( Thiamwong, McManus & Suwanno, 2013).

The population of the country is however not stable; this is due to the effects of the excessive mortality as a result of AIDS. As a result the country’s population experiences higher death rates, higher infant mortality, lower life expectancy, lower population growth rates, as well as changes in the distribution of population by sex and age contrary to what is expected. In 2015, the number of HIV/AIDS related deaths in Thailand was 14,200 and it ranked 15 in the country comparison to the world (Manopaiboon, 2013).

Thailand’s Background

Economy wise, Thailand has properly developed infrastructure and the economy is a free-enterprise one; it also has generally pro-investment policies. The country’s economic history is a strong one, but in 2013-15 it experienced slow growth. The decline was resulted from domestic political turmoil and lethargic global demand; these limited the country’s traditionally strong exports- mostly agricultural products, electronics, processed foods, automobile and spare parts. The May 2014 coup d’état led to a decrease in tourism by 6-7% but the sector is now recovering, and it also resulted in the depreciation of the Thai baht by more than 8% in 2015 (Meelarp, 2016). Another aspect of Thailand’s economy is that the country experiences labor shortages and the country has, therefore, brought aboard approximately 2-4 million migrant workers from its neighboring countries.  

In 2013, in order to for the Thai government to boost availability of labor, it implemented a 300 baht i.e. around $10 per day minimum wage policy that applies nationwide; it also deployed new tax reforms whose design aims at lowering rates on middle-income earners. The ratio of household debt to GDP is over 80%. West Farmers must therefore use an effective strategy that will enable them deal with the shortage of labor. They can, for example, hire labor from neighboring countries just like what many other companies in Thailand do, or they can offer better incentives to their employees and thus lure many more potential workers to their company, among other measures.

Political wise, Thailand’s government is said to be a constitutional monarchy and the King is the most respected and a revered head of state. The country, as of 2016, is run by a military junta and organized political opposition is not allowed. Repeated military coups occur once in a while occur in Thailand and there have been attempts to pass a draft new constitution that would to a large extent limit the power of elected governments. The country has therefore in the last two decades experienced a number of unstable governments which affects its economy. Despite these challenges and others, West Farmers is not shying away from investing in Thailand because the country is an excellent gateway to the regions of Asia and their markets.

The country is strategically and well located as an imports and exports hub and route which makes it easy for a country located in Thailand to easily trade with countries such as China, India, other ASEAN countries and the outside world. The economy of the country is rapidly growing and thus, West Farmers is on the right track with its choice of expanding its business in Thailand. For instance, the firm can boost its retail and hotel business in Thailand to serve the sub-region of Greater Mekong that currently has much potential in terms of development of new markets. The good infrastructure and promising developments in Thailand means that West Farmers stands an unmatched opportunity to thrive in the country; this is considering its desirable success in its home country Australia.

Cultural and Ethical Environment

Australia in comparison to Thailand has a larger area, 7,741,220sq.km; its population of 22,681,261 is however lesser than Thailand’s. There is much cultural and ethical difference between Thailand and Australia and that West Farmers must ready itself to brace and deal with if it is to successfully operate in Thailand, as discussed in this report.

culture. In Thailand, the formal language is Thai and English is considered a preserve language for the elite; on the other hand, English is the formal language and everyone speaks the language and even immigrants quickly adapt. This difference in language use is a concern that West Farmers has to keenly handle. For the running of its business, the company will have to employ a management that understands both Thai and English perfectly.  That way the management will serve as an excellent link between the entire task force of the firm and the leadership as well as the shareholders of the company. For the expat Australian managers who will handle the firms business in Thailand it is paramount that they acknowledge and understand that the different culture.

Thailand employs a very complex hierarchy of respect; before doing business, one has to build a relationship; and the there is also the aspect of emotional restraint (Noy, 2011). The Australian managers and other employees may find it different because they are used to a less hierarchy and less bureaucracy.  For instance, in Thailand there is a cultural manner in which final deals get made; it can include having to go a dinner, attend a traditional event, meet up the family, among other things al in the name of building a relationship first. In Australia, on the other hand, all that is required is a straight up and down process that only requires a genuine lawyer, an office, and signing of papers. To be on the safe side West Farmers will have to subject itself to the cultural ways of Thailand and its people for it to be able to expand swiftly and achieve its desired milestones.

Power distance. The power distance between the two countries is very significant. According to Hofstede’s Power distance Index measures (Hofstede, 2013), Thailand has a 64 on the cultural scale while Australia has a 36. This power distance index gauges to what extent the less powerful members of institutions and organizations accept and anticipate that power gets unequally distributed (Basabe & Ros, 2005). It represents the level of inequality defined not from above but from below; power distance proposes that inequality in a society is endorsed by both the followers and the leaders (Phongpaibul & Boehm, 2005). The power distance of the two countries indicates that the gap between the rich and the poor in Thailand is big and the opportunity that the people of Thailand have to rise in society is very limited. In Australia, on the other hand, the gap is less and the Australians have better chances to rise through the societal levels.  A strategy that West Farmers can adopt to make its presence in Thailand even more solid is that of giving its workers, and clients, favorable working and business conditions respectively. These efforts will in time reflect in the country’s economy and their effects in trying to bridge the gap between the ‘have’ and ‘have-nots’. Subsequently, the people of Thailand will be willing to work for and transact with West Farmers which will mean more revenue for the company’s shareholder, a main objective of the firm.

Individualism vs. Collectivism. According to Hofstede’s Power distance Index measures (Hofstede, 2013), on the individualism cultural scale, Australia has a high index than Thailand for it has a 90 while the latter has a 20. Individualism which is opposed to collectivism implies the degree to which individuals are incorporated into groups (Polyorat, Alden, & Alden, 2005). Having a 90, it means that Australia is individualistic and its society is comprised of individuals whose ties are loose; persons are, thus, expected to look after themselves and their immediate families. Having a 20, it means that Thailand is a collectivist and its society is made up of people who from birth onwards get continually integrated into cohesive in-groups that are strong; this groups consistently protect a person in return for absolute loyalty.  In Australia, therefore, people are more oriented on individual rights and personal achievements (Boonsathorn, 2007).

In Thailand, it is more about the group’s success and therefore group work is important and the opinions of those on a higher level get more considered than those of an individual. West Farmers will have to expect that decisions will need to be evaluated not just by the manager but also inclusive of other stakeholder representatives. For example, hiring and firing decisions that the company makes in Thailand will have to be in the interest of the concerned in-group and depict nepotism. The company should also not expect to draw conclusions from discussions made in one group as people of Thailand tend to shy away from making a valid point that may seem to contradict the interest of the group present. The firm would, thus, need to value and perform one-on-one meetings once in a while. The company would also need to adapt to collectiveness and this will require patience.

Masculinity / femininity. In terms of masculinity and according to Hofstede’s Power distance Index measures (Hofstede, 2013), Australia has a 61 while Thailand has a 34 in the masculinity cultural scale. Masculinity which is the opposite of femininity indicates the distribution or roles between the males and females (Hofstede, 2011). It is a vital issue for any particular society and an issue that West farmers will have to think of carefully as it ventures farther in expanding its business in Thailand. As per the index, the population of Australia possesses more masculine traits: material success, assertiveness, power, self-centeredness, individual achievements, and strength. These traits have for long helped Australia to thrive economically, even in the world arena (Fitzsimmons & Douglas, 2005). In comparison, Thailand is less masculine as shown by the scale meaning that it has more femininity aspects which are not so favorable when it comes to driving an economy forward (Van Esterik, 2000). West Farmers will have to employ mechanisms that help its work force in Thailand develop more masculine traits. The enhancement will help the company thrive at a commendable pace as it does in its home country and other countries it invests in.

Uncertainty avoidance index. Thailand, according to Hofstede’s Power distance Index measures (Hofstede, 2013), has a 64 in the UAI cultural scale while Australia has a 51. Uncertainty avoidance is concerned with the tolerance for ambiguity and uncertainty that a society possesses; it shows to what extent a society programs its members to feel either comfortable or uncomfortable when faced with unstructured situations (Rapp, Bernardi & Bosco, 2010). In Thailand, people are less keen on uncertainty that those in Australia; they therefore plan things carefully to avoid a situation of uncertainty (Patterson, Cowley & Prasongsukarn, 2006). Thailand, therefore, has stricter rules and laws, safety and security measures, and on the religious and philosophical level they are governed by a belief in unquestionable Truth.  Australians are not that strict and that is why their index is lower than that of Thailand. For West Farmers to work hand in hand with the people of Thailand, they will have to raise their uncertainty avoidance index as a company.

Long-term orientation. The Hofstede’s Power distance Index measures (Hofstede, 2013). indicates that Australia has a 31 while Thailand has a 56 in the long-term orientation cultural scale. Being a fifth dimension of Hofstede, long-term orientation distinguishes the difference in thinking between the people in the West and those in the East. The said difference emanates from the aspect of westernization and mixing of cultures from other countries and even in-mixing of people from different areas of a country. Thailand with its high index rate has a more long-term orientation in that it is more persistent, it orders relationships by status and observes the order, it is thrift, and the people there have a sense of shame (Prasongsukarn, 2015). Australia with its lower index is inclined to a much short-term orientation in that the people there protect their ‘face’, they have personal stability and steadiness, they have respect and they reciprocate gifts, greetings, and favors. West Farmers will have to incline more into long-term orientation as it conducts its business in Thailand.

Ethics. In Thailand, the way of the people, be it in business or their personal activities, is highly influenced by their religion and political system. According to Cooper (2008), ninety percent of the people in Thailand practice Buddhism which requires them to respect one other people, to have exceptional modesty, and to be kind always. The Thai people, therefore, can practice their religious beliefs at any time; such as going to the shrine, the Buddhist shrines are found almost everywhere. Their also believe in having a spirit house erected in every building. The other thing is that Thai people have much reverence to the Queen; it is not only unethical to talk ill or dishonor the Queen or any member of the Royal family, it is an offence that can also cause one to serve a long jail term. These, among others, are ethical issues that West Farmers will need to deal with and where necessary accommodate to make in showing consideration and respect to its Thailand employees and clients.

West Farmers seeks to serve almost every segment of the market in Thailand; this is because of its wide range of business operations which means variety in products and services. Within the last decade and even now, Thailand is on a significant progress in terms of enhancing its economic drive. The growth has seen the country experience more and more investments from businesses abroad. West Farmers is, thus, not the only company seeking to have a quality market share in Thailand; the country is quickly becoming a strategic region in Asia, more so Southern Asia. Though the population of the indigenous Chinese in Thailand is only about 20% of the country’s population, they are the ones who own the most businesses in that country; their businesses are the major drivers of Thailand’s economy and as that they have a very strong competitive advantage (Kenny, 2009).

To be able to deal with the competition from the Chinese businesses and others, West farmers will have to serve the underserved sectors of the country’s economy. The best of these sectors are the ones that deal with manufacturing and industrial goods. Apart from its retail businesses, West Farmers is well grounded in the said sectors. Thailand is more inclined towards the production of rice; the country has for long been the leading exporter of rice in the world (Srisopaporn et.al, 2015). The country is also still a major producer of tapioca, sugar, cotton, and coconuts. A majority i.e. two-thirds of the labor force in Thailand is, thus, tied to agriculture (Kenny, 2009). The country also leads in the production of gemstones, particularly sapphires (Shor & Weldon, 2009). The nature of Thailand’s economic sectors, as explained above, indicate the favorable chances that West farmers has to enter, and secure for itself a competitive advantage. The firm will have ease in serving the multinationals residing in and those who import from Thailand the products that West Farmers will get to make available. West Farmers is best suited to use the localization and international strategy in its expansion bid in Thailand. It has a good opportunity to serve the locals as well as the international market, while located in Thailand all along.

The human resource factor is one that is bound to challenge West farmers to some extent. The first reason for this is the much difference in the cultures of the two countries. The people of Thailand speak Thai as their official language while the Australians use English as their official language. That is why earlier in this report, an explanation as given as to why the expats managers from Australia will need to find leaders and a good number of key employees who can speak both languages. It is unrealistic that a firm should expect to find a full task force that is fluent in English in Thailand (Wailerdsak, 2013). The other reason is that with Thailand being mostly an agriculture-based economy, it is hard to find sufficient number of workers who have trained in industrial and manufacturing fields (Chittithaworn et.al, 2011). The company will have to, therefore, source employees from Australia and other parts of the world. The firm will also have to provide training in the English language to its Thai workers for the sake of a better future for the company in Thailand.

Conclusion

Thailand is a good investment destination for West Farmers considering its strategic position in the Asian continent. Australia, as well as Thailand, has good maritime waters through which the firm can transport goods to and fro Thailand effectively. The firm will not only expand business in Thailand, but also to other Asian countries. This report has delved into West Farmers as a company, its home country Australia, and Thailand where it has set up business and intends to expand. The discussion is on the nature and background, the cultural and ethical variations, and the economic and political factors of the two countries that will influence its operations. The report also looks at the entry mode that will enable the firm to make quality expansion, the target market for its products, as well as the human resource management and needs.  The recommendations given in the report will help West Farmers to achieve its goals in Thailand.   

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