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International Business Management

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Executive Summary

Currently, Grippy Tyres is looking for a suitable country to expand into. This report recommends Grippy Tyres to expand into Thailand, as Thailand currently is a land of opportunities for foreign investors.
Thailand has many basic appeals that will attract other companies, such as a high quantity of natural resources especially rubber, as well as a prime location geographically in between Malaysia and the rest of Asia. Therefore, by expanding into Thailand, Grippy Tyres will be able to take advantage of the natural resources as well as the good location provided.
Thailand is currently welcoming foreign investors into the country, along with the benefits such as reduced tax. Furthermore, the economy of Thailand has been growing steadily since 2006, and it has been forecasted that it will continue to grow. Furthermore, the government of Thailand wants an upward flow of foreign investment in order to supply it's mega-projects, and thus, this is the prime time to expand into Thailand.
Although there are some difficulties right now in Thailand, such as the political state which involves the Red and Yellow Shirts, the Minister of Foreign Affairs assures other countries that they will do their best to protect the foreign companies when they expand into Thailand. Furthermore, the cultural problems involved when expanding into a different country is slightly reduced due to the fact that Thailand and Malaysia are neighbours, and thus, share some similar culture.
Therefore, this is the correct time to expand into Thailand, in order to get a foothold into what is forecasted to be an excellent country to have a business in later. Thus, Grippy Tyres should take advantage of this opportunity to expand into Thailand when they are welcoming foreign investors.

1.0 Introduction
The main purpose of this research is to examine the different environmental factors which is present in Thailand in order to determine the viability of starting a possible joint-venture in that country. This research will discuss on the potential of a joint-venture in Thailand for tyre productions. The company, Grippy Tyres is a joint-venture company to produce tyres in Thailand. Grippy Tyres, a tyre company that produce high quality tyres. Grippy Tyres plan to increase the cost efficiency and also maintaining their quality by expanding the business through joint-venture. Thailand is known for rubber production and also its relatively low production cost. Tyres like Michelin, Bridgestone also had their production plant in Thailand as it is more cost efficient compared to their home country.
Thailand is one of the good countries to expand into due to its geographical location. It is located in the central of Asia, which means that it is not prone to disasters like earthquakes. It also controls the only land route from Malaysia and Singapore to the rest of Asia, which means that the country has high level of traffic movement. Moreover, Thailand has both east and west coast, making it an easy location to reach by sea route. Therefore, due to the fact that Thailand is in a very good location geographically, expanding there is huge benefit for the company.
Grippy Tyres chooses Thailand because of the increasing economy growth. Thailand’s GDP has been increasing since year 2000 till now, with slight exception during year 2008. The type of joint-venture Grippy Tyres will be embarking on would be forward integration joint-venture.

2.0 Thailand’s Basic Appeal
Thailand is in a prime location in the world, as it is between Malaysia and Singapore and the rest of Asia. Therefore, companies utilizing land routes that wish to trade between Malaysia and the rest of Asia has to pass through Thailand, thus earning Thailand profits. Moreover, being in the middle also attracts companies to trade in Thailand as they know that they will get the best of both sides in terms of the market.
Thailand also possesses a large amount of natural resources, such as tin, rubber, timber and natural gas according to the CIA World Factbook (2010). Most notably, there is an easy access to rubber in Thailand which will further help Grippy Tyres. Therefore, due to the good location, increasing GDP and FDI, as well as the easy access of natural resources including rubber, Thailand is a good and stable country to expand into.

3.0 Environmental Considerations
3.1 Economic Factor
Thailand is currently undergoing a growth state in the economic sector. The GDP and FDI of Thailand have been steadily increasing since 2006 according to Chadin (2006). According to the CIA World Factbook (2010), Thailand’s GDP has increased by 7.6% from 2009 to 2010.
Furthermore, Thailand has one of the lowest unemployment rates in the world, with only 1.2% during 2010 according to the CIA World Factbook (2010). However, according to Trading Economics (2010), the unemployment rate in Thailand had dropped to 0.68% during December 2010, which is one of the lowest unemployment rates in the world. Therefore, due to it being such a low unemployment rate, many people in Thailand have a sustainable income. For example, according to the CIA World Factbook (2010), the population of Thailand below the poverty line was only 9.6% during 2006, and it is likely that it has decreased further following the growth in GDP. Therefore, since people in Thailand have a sustainable income, it seems likely that they will purchase more goods such as cars as well as the car parts like tyres.
Thailand's economy is very stable right now despite the inflation at 3.3% in 2010 according to the CIA World Factbook (2010). Although it might seem high, the inflation was much lower in 2009, at a negative value of -0.9%. Therefore, Thailand is not suffering from inflation compared to other countries that might also be attractive for a joint venture such as Brazil and Indonesia.
Therefore, due to the factors above that describe why Thailand is a stable country in terms of economy, it is worthwhile to expand to Thailand for a joint venture currently.

3.2 Political Factor
3.2.1 Red Shirt Protesters
During a year ago, the Red Shirt protesters caused a major protest in Thailand. The protest resulted in politic instability. These protesters are protesting to dissolve the parliament and to force a new general election. The Red Shirt protest was one of the worst in the Thailand history but the policies and investment remain unchanged. Furthermore, Thai Finance Minister, Korn Chatikavanij strongly welcome investment from Malaysia. (http://www.theborneopost.com/?p=25844).

3.3 Social Factor
3.3.1 Thailand’s Demographic
The present total population of Thailand which is estimated 66,720,153(July 2011). Thailand’s nation median age is 34.2 average age. The age structures of Thailand’s nation are 0-14 years is 19.9%, 15-64 years is 70.9%, 65 years and over is 9.2%. The group age between 15-64 years shows that there would be high participation in labour workforce.
3.3.2 Thailand’s Cuisine
Thailand is famous for its spicy traditional food such as Tom Yam, Green Curry. It is commonly known that Thai foods are generally spicy and hot. Malaysian foods have similarity with Thai food as both countries traditional food are generally spicy and hot as well. Examples, Chinese with its dry spicy Bak Kut Teh, Malay with its Nasi Lemak Sambal and Indian with its curry. Due to the similarity, both countries would be able to adapt to it.

3.3.3 Thailand’s Language
Language may lead to a big impact in Thailand because the official language spoken in Thailand is Thai. Thai language is spoken by almost the entire population that lives in Thailand. Although English is not their main language in Thailand, English is a mandatory subject in Thailand education system. (http://www.hellosiam.com/html/thailand/thailand-language.htm).
Even though English is not the main language spoken in Thailand, most of the Thais are able to communicate in English. With English, it will be easier for the Thais to interact with foreigners. Still, problem might occur when operating the business there due to miscommunication with the less educated local workers, failure to communicate with workers may slow down the company’s performance and production.

3.4 Legal Factor
Grippy Tyres chooses Thailand as its joint-venture destination due to the advantages of the legal factors between Malaysia and Thailand. AFTA (ASEAN Free Trade Area) is a trade bloc agreement formed to encourage local production in ASEAN countries and promotes trading. With AFTA, Grippy Tyres benefits from the lower tariff barrier when tyres are imported or exported between both Malaysia and Thailand.
Addition to that, CEPT (Common Effective Preferential Tariff) scheme is another agreement setup to promote trades as well. CEPT main objective is to reduce intra-regional tariffs and abolish non-tariff barriers. With CEPT, Grippy Tyres again benefit from the lowered or free of tariff. This will help to lower the production cost for the tyres.
Moreover, both Malaysia and Thailand are part of the APEC (Asia-Pacific Economic Cooperation). APEC exists to promote free trade and economic cooperation among the Asia Pacific region. APEC’s main goal is to assist in sustainable economic growth in the Asia-Pacific region.
With all these organisations, Grippy Tyres will surely benefit from the joint-venture partnership in Thailand.

3.5 Environmental Factor

Figure 1: World’s Top 5 Rubber Producer http://www.boi.go.th/english/why/rubber_2010.pdf Thailand is the world leading natural rubber production in the world, this is because Thailand is one of the best countries to plant rubber tree. This is because Thailand has low flat land and also because of the suitable weather which is the monsoon climate. (http://www.kwintessential.co.uk/articles/article/Thailand/Rubber-Trees-Thailand/885) It is difficult to growth these rubber tree without these criteria. Furthermore, Thailand Prime Minister plans to expand their rubber plantation. (http://www.therubbereconomist.com/The_Rubber_Economist/News/Entries/2011/2/5_Entry_2.html)
With Thailand expanding their plantation around the country, this will be another good advantage for Grippy Tyres because a Grippy Tyres main natural resource is rubber. Grippy Tyres will be able to utilize one of Thailand’s most produced natural resources.

4.0 Kluckhohn-Strodtbeck & Hofstede Framework
4.1 Kluckhohn-Strodtbeck Framework
The Kluckhohn-Strodtbeck framework is a framework for analyzing cultural differences along six dimensions.

4.1.2 Investigation & Comparison of Cultural Issue
The 6 dimensions that are investigated and compared are environment awareness, time management, trust and security, self accomplishment, the socials belief on welfare and preference in conducting activities.
4.1.2.1 Environment Awareness
Thailand’s weather is tropical season which is rainy, hot, and hazy. Southwest monsoon season period starts from middle of May to September. Other season would be cool. Northeast monsoon period begins from November to middle of March. The southern isthmus would be constantly hot and wet (cia factbook 2011). However, Malaysia also shares a similar season with Thailand which is a tropical season country. There are two season of Malaysia which are the annual southwest monsoons and northeast monsoons. The climate between Thailand and Malaysia are relatively similar, because they are just next to each others.
Furthermore, Thailand and Malaysia also shares the similar raw material which is rubber. Thailand is the largest rubber producer in the world. Thailand and Malaysia both are the top five rubber production in the world.
4.1.2.2 Time Management
In order to engage in Thailand market first we have to identify both culture differences and similarity. Malaysia’s culture time orientation can be classified as polychromic. This means they will look at time as a flexible. Malaysians prefer to build a good relationship rather than the time management of the other parties. This means that punctuality is not the main concern for the Malaysians. (http://pgoh13.com/msian_quirks.html)
Thailand culture time orientation is also classified as polychromic. To the Thais, time is not important for them. (http://academic2.american.edu/~zaharna/Thailand/Culture.htm). Thais usually show up late which is very similar to Malaysia culture because Malaysian and Thai don’t really practice time orientation as monochronic.

4.1.2.3 Trust and Security
4.1.2.4 Self Accomplishment
4.1.2.5 The Socials Belief on Welfare
4.1.2.6 Preference in Conducting Activities

4.2 Hofstede Framework
Hofstede Framework is a framework for studying the differences in culture and can be divided into 5 different dimensions which are, individualism vs collectivism, power distance, uncertainty avoidance, masculinity vs femininity and long-term orientation according to Geert Hofstede. (http://www.geert-hofstede.com/) Figure 2: Hofstede Framework comparisons between Malaysia and Thailand Country/Dimensions | PDI | IDV | MAS | UAI | LTO | Malaysia | 104 | 26 | 50 | 36 | | Thailand | 64 | 20 | 34 | 64 | 56 |
Figure 3: Detailed information of the dimensions of Hofstede Framework

4.2.1 Hoftstede Framework Analysis - Thailand According to Figure 3 above, both Thailand’s highest Hofstede ranking is PDI(Power Distance Index) and UAI(Uncertainty Avoidance Index) which are equal at 64. The high PDI shows that Thailand has a high level of inequality in terms of power and wealth. This condition has already been accepted by the society as a part of Thailand’s culture and it is not necessarily forced upon population. Eventhough Thailand’s PDI is 64, it can be considered slightly lower compared to the average of the rest of Asia which is 71. As for UAI, it is an indication of the society’s level of tolerance for uncertainty. Thailand’s UAI is 64, which shows that the society has low level of tolerance towards uncertainty. In order to minimize the problem, the government implemented strict rules and regulations, laws and policies. With Thailand’s UAI, which is 64, it can be considered as slightly higher compared to the average of the rest of Asia which is 58.
As for IDV(Individualism), it is Thailand’s lowest dimension which is 20. This indicates that Thailand’s society is a Collectivist rather than Individualist. This shows that Thailand’s society prefers to work as a team rather than individual. The society prefers to create a strong relationship where everyone contributes to their group. Lastly, Thailand’s MAS(Masculinity) is 34, lowest compared to 53, the average of Asian countries and 50, the average of the World. This indicates that the society is less competitive as compared to the rest. The society preserves the traditional male and female roles within the country.

4.2.2 Hofstede Framework Analysis – Malaysia
According to Figure 3 above, Malaysia’s highest Hofstede ranking is PDI(Power Distance Index) at 104. This indicates that Malaysia have high level of inequality in terms of power and wealth. The inequality level is higher compared to Thailand. As for UAI(Uncertainty Avoidance Index), Malaysia had a lower UAI compared to Thailand. Malaysia’s UAI at 36 which is relatively low compared to the average of the rest of Asia which is 58. This indicates that Malaysia’s society have higher tolerance towards uncertainty compared to Thailand’s society. This might be due to the number of races and cultures that Malaysia had.
As for IDV(Individualism), it is also Malaysia’s lowest dimension which is 26. This also shows that Malaysia’s society is a Collectivist rather than Individualist and the society prefers to work as a team rather than individually. Lastly, Malaysia’s MAS(Masculinity) is 50 which is higher than Thailand and almost similar to the rest of Asia due to Asia’s average is 53.

5.0 Foreign Direct Investment
In the past, Thailand has adapted the Foreign Business Act in 1999, which is an amendment of the Alien Business Law which was created in 1972 according to Piyanuj and Kopkit (2002). According to Brimble (2002), the law reduced the limits on foreign ownership of firms in certain industries such as cement, textiles, footwear and garments. It also relaxes the limits of foreign participation in several professions such as law, accounting, most type of constructions and advertising. However, establishments of large foreign discount stores caused a public outcry, which caused the government to review the law.
Thailand has suffered badly in the past due to the economic crisis which happened because of its weak financial sector. According to Brimble (2002), Thailand had unsound lending activities, low bank capital requirements and a misallocation of funds. Furthermore, they were suffering from a lax regulatory framework, which includes a lack of transparency, inadequate supervision and growing political influence in macroeconomic management. Thus, the financial sector of Thailand had a near collapse.
However, Thailand has steadily recovered since the economic crisis. FDI inflows to Thailand increased by a great amount after the financial crisis erupted in 1997 according to Chadin (2006). Most of it was due to a surge of problem companies seeking takeover partners. Foreign investors from other countries had increased purchasing power in Thailand due to the fact that the Thailand currency depreciated by 38%. It was dominated mainly by Japan, the United States, Singapore, Hong Kong and the European Union which together held 88% of the investments in Thailand.
Currently, Thailand is actively promoting the country as a good place for foreign investment, by using tax incentives according to Chadin (2006). Recently, the statutory tax rate on corporate income has been reduced so that companies are able to pay taxes of less than 30%. Furthermore, the flow of FDI to Thailand has been steadily increasing since 2002 till the present day. The flow of FDI into Thailand has been dominated by Singapore, which has 41% of the total FDI in 2004. In 2006, it was forecasted that the FDI inflows would have an upward trend in order to finance the government mega-projects, as well as to keep the balance of payment in a good shape. Therefore, it can be said that Thailand is seeking out more foreign investments and joint ventures in order to keep its increasing growth in FDI and GDP.
According to Bangkok Companies (2011), Thailand will produce 1.2 million vehicles in 2006, and 700,000 of them will be for domestic use. Furthermore, this number is expected to rise each year. Therefore, being a tyre company, this is currently a good time to enter the Thailand market and start getting a foothold.

6.0 Conclusion
In conclusion, Thailand is currently experiencing a rapid growth in the economic factors. Since many companies are expending into Thailand now, Grippy Tyres should do the same in order to reap the benefits. Although there might be some cultural problems in the way of the joint venture, it is believed that Thailand and Malaysia share some same cultural values, and thus, it will be easy for Malaysia to adapt to the Thailand culture. Therefore, this is the prime time to expand and start a foothold in Thailand, especially since Thailand itself is welcoming foreign investment right now.

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...International Business Management Set up and operate a Business in Foreign Country Abstract This paper deals with the international business. It emphasizes on the means to start the business and the cost associated with the initiation of the business. It also describes the most important aspect of managing human resource. Because of the competitive environment, the need to do the business internationally has increased. This paper provides the overview of the two countries i.e. china and South Africa. Broad description of the legal processes that were supposed to be followed by the company to initiate business in the China has been explained. Apart from this, the staffing of local and expatriate staff along with the labor organization and legislation of the foreign country has been described. Therefore, the paper provides detailed analysis of the conditions that should be kept in mind while establishing business in the foreign country. Introduction International business is a term, which is used collectively to describe issues relating to the firm’s operations with interests in numerous countries. These firms are sometimes referred as multinational corporations. The main area of concern in the international business is the cultural considerations. These considerations include dissimilarity in law and legal systems, living standards, language barriers, climate and many more (Cherunilam, 2005). All these issues need to be overcome for an MNC in order to obtain success in...

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...with different degrees of emphasis at one time or another 2. What is ‘Factor Endowments Theory’? Ans. The factor endowment theory was developed by Swedish economist Eli Heckscher and his student Bertil Ohlin. This theory consists of two important theorems, namely, the Heckscher-Ohlin theorem and the factor price equalization theorem. TheHeckscher-Ohlin theorem examines the reasons for comparative cost differences in production and states that a country has comparative advantage in the production of that commodity which uses more intensively the country’s more abundant factor. The factor price equalization theorem examines the effect or international trade on factor prices and states that free international trade equalizes factor prices between countries, relatively and absolutely, and thus serves as a substitute for international factor mobility. 3. Explain the term ‘Totalitarianism’? Ans. In totalitarianism, also called authoritarianism, individual freedom is completely subordinated to the power of the authority of state and concentrated in the hands of one person or in a small group, which is not constitutionally accountable to the people. Societies ruled by a pressure clique- political, economic or military or by a dictator, plus most oligarchies and monarchies-belong to this category. The doctrines of fascism and erstwhile communism are example of Totalitarianism. During the first and second world wars the authoritarian governments began to appear in most...

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