Businees Enterprise and Innovation
Innovation in Thailand
The following ages focus on analyzing the innovation process in Thailand. The Introduction reveals the points-of-view that this paper intends to address. This is followed by a section that describes important issues about the business environment in Thailand, in order to understand the factors that affect companies’ activity in this country. The Innovation process in Thailand presents some of the most important characteristics of the Thai innovation process. The Recommendations section describes important factors that companies that want to invest in the Thai innovation process must take into consideration. The Conclusions section presents some of the most important issues addressed by the paper.
Introduction
The business environment that is significantly influence by the process of globalization determines companies to develop different types of strategies that allow them to create competitive advantage. Some of them focus on reducing the prices of their products. This objective is usually reached by addressing the outsourcing strategy of some of their processes. This helps them reduce production costs, which leads to reduced prices of these companies’ products and services. This allows companies that use outsourcing to increase their market share.
Other companies prefer to focus on strategies based on differentiation in order to create competitive advantage. In such cases, companies study their competitors and determine what types of products and services they should develop in order to produce differentiation. It is difficult to establish which strategy is the most efficient. This is because the success of these strategies varies in accordance with the characteristics of each industry. In the case of mass products, like food and clothes, it is recommended to develop strategies based on price. But in the case of products and services that are purchased by smaller groups of customers, it is recommended to focus on strategies based on differentiation.
Another successful strategy that can be used by companies in order to create competitive advantage is based on developing innovation processes. In numerous businesses, especially those characterized by increased use of technology, innovation is very important. Technological developments play a very important role in helping companies expand their business. Innovative products and services have been observed to significantly influence companies’ success on the market.
External Business Environment in Thailand
Economic environment
Thailand has a very well developed infrastructure that attracts investors in the country’s economy. The country’s government understands the demands of the globalized business environment, and the fact that in order to improve the country’s economic situation it is necessary to support private initiatives, from both the national and the international environment. In other words, Thailand’s economy strongly relies on free enterprise. Much of the Thai economy is based on export industries.
The policies developed by the government that are oriented towards investments are reflected by Thailand’s strong economic growth. The country’s exports, mostly machinery, electronic components, agricultural economies, jewelry, represent more than half of GDP and are the most important economic drivers. However, the economic and financial crisis has also affected Thailand. As a consequence, most of the country’s economic sectors have reported problems. But the Thai economy has significantly improved, also as a result of important levels of exports (CIA, 2012). It is expected that the country’s economy will continue to improve.
The most important industries in Thailand are represented by tourism, textiles and garments, agricultural processing, beverages, tobacco, light manufacturing, computers, furniture, plastic, automobiles, and others. The most exported commodities in Thailand are represented by textiles and footwear, fishery products, rice, rubber, jewelry, automobiles, computers and electrical appliances. The most important exports partners are China, Japan, the U.S., Hong Kong, Malaysia, Singapore, and Indonesia. The most imported commodities in Thailand are represented by capital goods, intermediate goods and raw materials, consumer goods, fuels, and others. The most important imports partners are Japan, China, the UAE, the U.S., Malaysia, and South Korea.
Social environment
Thailand reaches a 67,091,089 population. The ethnic groups in the country are Thai 75%, Chinese 14%, and other 11%. The languages in Thailand are represented by Thai, English, ethnic and regional dialects. The religions in Thailand are represented by Buddhist 94.6%, Muslim 4.6%, Christian 0.7%, and others 0.1%.
Cultural environment
The cultural characteristics are very important when analyzing countries’ business environment. The important cultural differences between countries represent important factors that influence customers’ behavior in these countries, relationships between different countries, and economic relationship between countries with different types of cultures. These companies’ international success relies on their ability to understand these cultural differences and to develop strategies in accordance with the cultural environment of the countries they want to address.
In order to analyze Thailand’s cultural environment it is important to take into consideration the cultural dimensions developed by Geert Hofstede. These cultural dimensions are represented by: power distance, individualism and collectivism, masculinity and femininity index, uncertainty avoidance index, long-term and short-term orientation. These are important characteristics of the Thai culture that can help understand the behavior of customers, companies, and authorities.
Power distance index
This cultural dimension reflects how less power members of the society accept the fact that the power is not equally distributed. It also reflects how societies handle different inequalities between people. Thailand’s power distance index reaches a score of 64, which is slightly lower in comparison with average Asian countries. This means that inequalities are accepted in this society. Hierarchical ranks have important privileges and employees show their loyalty towards these ranks. Relationships between managers and employees are formal, and the information flow is hierarchical and controlled.
Individualism and collectivism
This index reflects the preference for a social framework that allows people to take care of themselves and their family, or to prefer group organization. In other words, it reflects the level of independence within the society. Thailand reaches a 20 score on individualism. This means that Thailand is a very collectivist country. This also reveals the importance of loyalty within groups in this country. Thai are not confrontational people, and it is difficult for them to express disagreement. Business with Thai relies on developing strong relationships, which means that patience is very important. It is also recommended to be careful in not producing offence to Thai people.
Masculinity and femininity index
This indicator reveals the masculine orientation of the society that is reflected by a preference towards achievement, heroism, assertiveness, and material rewards. The feminine orientation of the society is reflected by a preference towards cooperation, modesty, and quality of life. In this case, Thailand has a 34 score, which means that this is a feminine society. This is the lowest masculinity score in comparison with Asian countries. This reflects the reduced levels of assertiveness and competitiveness. It also reflects the society’s orientation towards traditional roles of males and females within the society.
Uncertainty avoidance index
This dimension reveals society members’ comfort with uncertainty. Thailand reaches a 64 score in this case. This means that the country prefers to avoid uncertainty. In order to reduce the level of uncertainty, the country’s government develops strict laws (Hofstede, 2010). This is intended to increase control and to reduce risks.
Long-term orientation
This dimension reflects society’s position on traditions and values. In this case, Thailand has a 56 score. This means that people in this country respect tradition and inequalities between people. The most important values in Thailand are represented by working hard, having a sense of moderation, investing in personal relationships and network, flexibility, and others.
The Innovation Process
In order to understand the innovation conditions in Thailand, it is important to describe the innovation process. The steps of the process of innovation are represented by strategic, thinking, portfolio management and metrics, research, insight, innovation development, market development, and selling. The innovation process is intended to help companies create competitive advantage. Therefore, in the strategic thinking step, companies try to determine how the innovation they are investing in can add value to their strategic objectives (Morris, 2011). During this step companies also try to identify the activities where innovation is expected to have the greatest success potential.
Innovation portfolios are managed in order to reduce the risks associated by this process. The research process is important in identifying these risks, but also in identifying technological developments, customer needs and preferences, and others. It is important to identify these preferences of customers in order to be able to orient the innovation process towards these preferences.
It has been observed that innovation is one of the most important factors that determine economic development. Therefore, in order to expand their business on international level, most companies prefer to address countries that are able to support innovation. These are countries where governments support an innovation oriented environment through laws and policies, but also through financial incentives provided to companies that want to invest in innovation.
Such a country is Thailand. The country’s government understands the importance of innovation and its effects on the national economy. Therefore, the government tries to support the innovation process by investing in developing the country’s infrastructure and by developing several programs that focus on supporting innovation. As a consequence, the government created the National Innovation Agency. This agency focuses on ensuring collaboration between different important players in the innovative field in order to improve the results of innovative processes in Thailand.
The most important sectors that the agency focuses on are represented by bio business, like biotechnology, bio-based materials, and natural products, and by energy and environment, design and branding. The strategic programs developed by the agency refer to building the national innovation system, cluster grants and venture capital schemes, innovation management and entrepreneurship professional development program, and promoting an innovation culture. This reveals the country’s strong interest in supporting innovation processes.
Regarding the activity of building the national innovation system, the National innovation Agency has supported the establishment of the University Business Incubator. This program must reach the objective of supporting and developments of commercial value and innovation from research and development. The principles that this program is based on are represented by inspiring, teaching, connecting, and creating. The University Business Incubator [program ensures the collaboration between important universities and institutions in Thailand.
However, there are certain problems that characterize the innovation problems in Thailand. Some of these problems are represented by the reduced opportunities of professionals in the country to access technological developments (Lorlowhakarn & Ellis, 2005). This is because the financial resources that are required to support profitable business innovation are not in accordance with these requirements. The technical resources that are necessary to technology companies are expensive for Thai companies to purchase. Therefore, some of these companies and their employees prefer to use those in countries that are more technologically developed in comparison with Thailand. In order to support companies and professionals that require access to such technological developments, the country’s government has developed the Thailand Science Park and the Software Park. These programs are intended to stimulate the development of the Thai software industry that helps companies in this country to adapt to the digital requirements of the business environment.
There are numerous enterprise level innovations that are supported by the National Innovation Agency and that benefit from the collaboration between important institutions in the country in order to ensure their success. The Plaitanoids project is intended to determine the chemistry and biological properties of natural bio active products. The objectives of the Lotusia project are represented by developing alternative cosmetics with bio active ingredients from certain plants. Biodegradable plastics and their development represent another important innovation project that benefits from the support of the Thai government and that is expected to provide important revenues. Other projects include natural rubber and products, Thai shrimp traceability initiative, organic agriculture, and others.
However, when analyzing the innovation environment in Thailand it is important to take into consideration the challenges that influence this process. Such challenges are represented by the fact that the complexity of tasks involved in the production process is not in accordance with the products that are produced by Thai companies. In other words, these companies are trying to develop complex products with simple tasks. Specialists in the field consider that the sophistication of tasks is important, and not the sophistication of products.
The companies in Thailand focus on performing the dimple tasks of the product development process, like assembly, testing, and packaging. Complex tasks like research and development, design, marketing, branding, and others are performed in technologically developed countries (Sander, 2011). Therefore, experts on innovation consider that in order for Thailand to increase the value produced by innovation processes in this country it is important to have more workers performing complex tasks. This means that Thailand does not have sufficient skilled workforce able to perform such complex activities.
Another challenge of the innovation process in Thailand is represented by the research and development process (Bangkok Post, 2011). This is one of the most important factors that influence innovation. These processes are mostly important for technological developments. Therefore, Thailand must increase its research and development potential.
Recommendations
It is obvious that Thailand has a significant innovative potential. But there are certain issues that must be taken into consideration by companies that want to invest in the Thai innovation process. The most important issue that must be addressed by these companies is whether innovation in Thailand can be sufficiently supported in order to increase the value it must produce. The country’s government understands the importance of innovation and the fact that this innovation requires the support and collaboration between authorities, different institutions in the public sector, and companies in the country.
Therefore, the Thai government is determined to support innovation processes in the country and to encourage investors from technologically develop countries. The government gas improved the infrastructure in order to create a proper business environment required by these investors. In addition to this, the Thai government has developed the National Innovation Agency that focuses on supporting a series of innovation projects. These are important arguments that recommended that companies invest in innovation projects in Thailand. However, it is important to focus on the industries that are considered to have the highest innovation potential in Thailand. These industries are represented by bio business, like biotechnology, bio-based materials, and natural products, and by energy and environment, design and branding.
Companies that want to invest in Thailand must identify the limitations that characterize the innovation activity in this country. Some of these issues are represented by the reduced access of companies and professionals in Thailand to technological developments, the reduced skilled workforce, the reduced level of education in the country that affects the success of innovation, the research and development process, the fact that companies in Thailand mostly focus on producing complex products with simple tasks, and others. These are important factors that must be taken into consideration when establishing the innovation potential of Thailand.
The reduced access of companies and professionals in Thailand to technological developments reflects their little experience with such developments. Therefore, if companies want to invest in Thailand, they must be able to transfer the know how required by their business activities. In addition to this, they must significantly invest in upgrading the Thai companies they intend to do business with. The reduced number of skilled employees represents an important barrier that affects companies that want to invest in the Thai innovation. Therefore, it is important that companies invest in the human resources involved in their activities in Thailand. This is in strong relationship with another barrier that influences the innovation process in this country and that is represented by the level of education in Thailand. Most people in this country benefit from primary and secondary education. This is because it is difficult for them to access higher levels of education because their reduced incomes. It is important that the Thai government focuses on developing strategies intended to improve the educational system in the country.
The research and development process is not sufficiently developed in Thailand, in accordance with the opinion of specialists in the field. This situation can be attributed to other innovation barriers, like the reduced access to technological developments, and the educational system in the country. The reduced complexity of tasks involved in production process in Thailand must also be improved in order to increase the value developed by innovation.
Conclusions
Thailand has an important innovative potential that can be addressed by companies that focus their strategies on innovation in order to create competitive advantage. The country’s government is oriented towards encouraging investments by developing the Thai infrastructure, and by developing organizations that focus on supporting innovation processes. These organizations are intended to ensure the collaboration between different institutions that can support innovation. Therefore, it is important that these companies focus on strategies that help them improve their innovation process.
Reference list:
1. Thailand (2012). Central Intelligence Agency, the World Factbook. Retrieved April 8, 2012 from https://www.cia.gov/library/publications/the-world-factbook/geos/th.html.
2. Hofstede, G. (2010). Thailand. Retrieved April 9, 2012 from http://geert-hofstede.com/thailand.html.
3. Morris, L. (2011). How to Innovate: The Innovation Process. Innovation Management. Retrieved April 9, 2012 from http://www.innovationmanagement.se/2011/09/16/how-to-innovate-the-innovation-process/.
4. Lorlowhakarn, S. & Ellis, W. (2005). Thailand’s National Innovation Agency. CACCI Journal. Retrieved April 9, 2012.
5. Sander, F. (2011). Thailand’s Innovation Challenge: Complex Products, Simple Tasks. The World Bank. Retrieved April 9, 2012 from http://blogs.worldbank.org/eastasiapacific/thailands-innovation-challenge-complex-products-simple-tasks.
6. Lack of Innovation as Thai R&D Falls Flat (2011). Bangkok Post. Retrieved April 9, 2012 from http://www.bangkokpost.com/business/economics/222395/lack-of-innovation-as-thai-r-d-falls-flat.
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