Market Entry Mode in Thailand
There are many types of entry modes into a market, such as joint venture, franchise, and wholly owned subsidiary. For our business to go into Thailand, we considered these few options and highlighted that joint venture is a preferred entry mode. One important point is the language barrier in Thailand. Though most of the Thai understand English but the mother tongue of Thailand is Thai language. In order to reach out to the entire population, communication is vital as to reach out the non English speaking consumer or working partners. Be it in advertisement, menu, labour and local documentation.
We need the help of a local partner to understand their culture better and language in order to penetrate into the market. Joint venture benefits both company as sharing of information and exchange of knowledge as both teams work together. The local partner have a deep understanding of the local market and strategy while we, the foreign partner can give idea, technology, recipe and a different perceptive. It is also an alliance between two parties to form a partnership whereby we shared intellectual property, assets, knowledge, and profits.
This occurs provided both partied have a mutual trust, belief, understanding and expanding the business. The local partners will help our business to integrate into their market and also fight off bigger competitors when both parties work together. A few advantages to go into joint venture is they have an existing customer based and we can ‘tap in’ to their existing market and making use of their credibility to start off. When a consumer sees us with another well known name, they can relate the high quality of the company provide. (Cited from http://entrepreneurs.about.com/od/beyondstartup/a/jointventures.htm) We have identify Bay Bread Group as our preferred partner as they are in food and beverages industries and have vast experience in Thailand market and well established over the years. They own La Boulange, a cafe and bakery which offers healthy and authentic traditional French bakery.
They provide a warm and welcoming atmosphere at their stores. They pride themselves on providing freshly baked homemade specialites every day. (Cited from http://laboulangebakery.com/) The objective of joint venture with them is to also reduce competition as a cut down in competition will result as profits. We would like to have the control of the company shares. Our partner will have a smaller percentage of shares. However to attract them to join us, we will give them a larger percentage of profits (eg. 55%-45%) What we looking for are an expansion in the future and moving forward when the store is stable and we have an idea and skills, we can open a second outlet.
There are risks involved in joint venture. This occurs when two partners have difference in point of view, culture and background. They may have different mindset and different way of doing things. Without trust, conflicts will happen and lead to inefficiency of company operations. If a joint venture fails, the risk involved is greater as time is wasted, lose of money in initial investment, expose of technology and recipe to others and also tarnish the credibility of the company. Cited from http://entrepreneurs.about.com/od/beyondstartup/a/jointventures.htm) Franchising is a practice of using another company successful business model. It is another method of setting up a store and distributes goods and services without much investment and liability to the stores.
The franchisor has a legal agreement to allow the franchisee to use their name, product, technology and trademark. (Cited from http://www. referenceforbusiness.com/encyclopedia/For-Gol/Franchising.html) In our business model, we did not consider a wholly owned subsidiary mode of entry because of the language barrier and need of a local partner to guide in the local regulations before we can integrate into the market. We consider our business has just started to grow and the reputation of the brand is well known in the Singapore market but not oversea. Therefore finding a franchisee is a problem and we wanted to understand the local market of Thailand rather than collecting profits from the franchisee. Understand the local market will make us adapt and customize our business to fulfill the needs of the local.