Category: International growth
Author: Leevi Törmäkangas
Winning Tips for Doing Business in Thailand
Continuing Excedea’s annual traditions, our 20-strong team of management consultants headed to a yet another exciting destination for a week of networking, fact-finding and exploring local business opportunities. This time around, in November 2018, Excedeans landed in Bangkok, Thailand to find out more about the local business culture. We navigated to meetings through the city’s bustling traffic, gathering a lot of new information and establishing contacts with local businesses. We now share some of the lessons learnt during that trip.
Thailand’s growth is picking up again
Thailand is a regional economic powerhouse in Southeast Asia. It has undergone remarkable growth and transformed into an industrialised economy within the last half-century.
Dubbed as a growth miracle, Thailand had the world’s fastest growing economy in the 1980s and early 1990s. This was driven by export-led economic policies, with industries such as automotive and electronics acting as catalysts for the boom. The expansion came to a halt in the aftermath of the Asian financial crisis of 1997, and subsequent years of political uncertainty were met with volatility in the economic sphere. After the latest military coup in 2014, the situation has stabilised. The last few years have witnessed an uptick, and projections show that Thailand is now back on track for robust growth, at least in the short run.
To improve growth prospects in the longer run, the government has launched a programme titled Thailand 4.0. Its underlying rationale is to boost Thailand’s competitiveness and prepare the economy for a shift toward knowledge-intensive production. Resources will be allocated, for instance, toward upskilling workers, R&D expenditure and digitalisation of public services. Consequently, business opportunities are opening up for companies that have solutions in the fields of connectivity, eHealth, smart cities and renewable energy, among others.
Doing Business in Thailand – Some Do’s and Don’ts
While Thailand boasts a business-friendly regulative environment, there are certain pitfalls that foreign companies should avoid when they are considering expanding to Thailand.
1. Understand the vitality of trust
The business culture differs significantly from what Europeans are used to. Social relationships, family and tradition play a much bigger role in Thailand. Indeed, social and business life are very much intertwined, and many local businesses are structured along kinship and social network lines. Thus, the importance of networking and building up personal relationships is essential. This applies to everyday aspects, such as arranging meetings. Merely sending e-mails to a company is not that effective, and it might prove difficult to set up high-profile meetings without reference letters or knowing the right contacts. In addition, there are a number of peculiarities when it comes to meeting etiquette, and you should read up on these beforehand (and perhaps practice how to perform a proper wai, a Thai greeting). In the first meeting, the exchange of business cards and gifts is important, as the Thai culture holds gift-giving in high regard.
2. Choose the right local partner
Let’s assume you’ve done your homework, issued a feasibility study on the Thai market and all signs point to it being a profitable target for your product. Your next step is to select the best potential local partner. Bear in mind these two factors:
- Do not underestimate due diligence –Some of the local salespeople tend to hold a portfolio of products and sell those that yield the highest commissions. To avoid a situation where your product is not the primary one being actively marketed, it is crucial to conduct proper due diligence. This includes not only checking up potential partners’ financials but doing a more thorough background inspection. We heard that a Nordic firm once struggled with their Thailand sales lagging behind the anticipated market share. It was later revealed they had made a suboptimal choice of a distributor, who was pushing lower quality products to clients instead. On the other hand, your partner must also have a wide network, since things often happen through connections and mutual favours.
- Visit Thailand on a regular basis – As was mentioned previously, the business culture revolves around face-to-face meetings in Thailand. Once you have established a local partner, make clear plans and schedule regular visits to meet them. This is also a way to build up trust and educate yourself on the local culture and manners. For instance, communication patterns are different from Europe, and it takes time to internalise them. To exaggerate a bit, there are 100 ways to say no in Thailand, and some 95 of them begin with a “yes”. Moreover, many Westerners find that time is perceived differently in Thailand. Punctuality is respected when it comes to business meetings, but attitudes are more relaxed elsewhere in society. Thus, do not expect things to work out with clockwork precision. You must have patience and put the effort into understanding the local culture when doing business in Thailand.
3. Hone your pitching techniques
- Highlight your experience. Even if you are representing an innovative start-up, it is best to approach clients by emphasising your credentials rather than the qualities of being “fresh” and “young”. Instead, state how many cumulative years of experience your key personnel have, and present reference cases from established client companies. With business cards and introductions, spell out and mention all relevant academic titles to boost your credibility.
- Keep calm and avoid overly aggressive selling techniques. These are unlikely to work in Thailand. Particularly if you are pitching to government authorities, it is best to focus on the benefits and qualities of your product and justify these in detail.
- Remain flexible about your business model. It is not a good idea to enter negotiations with rigid plans for your revenue model or pricing. Especially for IT solutions, be prepared to scrap your initial plans and adopt a different, tailored pricing scheme. Firms in Thailand may have considerably shorter pricing horizons and may not be willing to purchase your service on a “per user” basis, for instance.
A gateway to nearby emerging markets
To summarise our findings, you shouldn’t plan to go to Thailand if you are looking for quick profits. Rather, be prepared to spend time and resources when entering the market and make a commitment once you’ve established your business there. After all, Thailand provides a gateway to the neighbouring emerging markets in Southeast Asia. Together, the ten ASEAN economies form a sizeable market with a population of 650 million people. The region is also home to some of the world’s most rapidly growing economies, such as Myanmar, Vietnam, Indonesia and the Philippines. With the right approach and partners, you can seize these opportunities and grow your business in Southeast Asia.
At Excedea we have a strong track record of executing numerous International Growth projects in Asian countries. In the process, we have systematically built up an extensive network of Regional Experts in all key markets. Hence, we can provide our clients with hands-on support during all stages of international expansion.
If you are interested to discuss the topic further, please contact us by email