Local knowledge and finding the right business partner are crucial for Thai expansion into regional markets, executives have told a seminar in Bangkok.
"Finding the right partners, ones with the same philosophy and ability to resolve conflicts once they arise, is very important, as they will help you to expand the business and provide local information on the ground," Kamtorn Sila-on, S&P Syndicate Plc's vice-president for production and supply chains, said at Capital Market Research Forum 2014 yesterday.
"For retail businesses such as S&P, the size of the market and capital investment requirement are important factors for expansion — whether it will be barely or really profitable. For example, S&P may be able to open only a couple of shops in Europe compared with a couple of dozen in Asean," he said.
"More importantly, companies must look internally and ask whether its Thai operation is mature since if the domestic operation is still growing, then the focus should be here. But if it's not still growing, then it may be time to begin thinking about expanding abroad with a clear strategy."
At present, S&P operates 24 shops outside Thailand including in Britain, Singapore, Switzerland and China.
From the perspective of a large company, Siam Cement Group Plc (SCG) began expanding into Asean in 2003 after a brief pause in the wake of the 1997 financial crisis.
Chief financial officer Chaovalit Ekabut said before SCG began looking to invest outside Thailand, it exported products to the target countries in order to create demand.
At the same time, it is essential to create brand awareness and relationships with a local partner, he said. Once the market grew to the right size then SCG expanded its operation there.
"Acquisition is faster and more certain. Inheriting clients carries less risk compared with greenfield projects that take years before getting the desired revenue," said Mr Chaovalit.
As of June, SCG had US$2.4 billion worth of assets in Asean or 17% of the total.
But with opportunities, there are many issues to consider such as laws, regulations, exchange rates, and infrastructure and transport, as logistics is important for delivery. Therefore the viability of a business must be carefully studied before entering the market.
However, both companies agreed that government agencies should play a more active role in facilitating Thai businesses venturing abroad.
"From SCG's perspective, information on trade agreements that Thailand has signed with target countries is vital," said Mr Chaovalit.
"Pacts such as the Asean Free Trade Agreement are meant to eliminate tariffs between countries. But in practice, it takes a lot of time to maximise the benefits of such FTAs."