Business Strategies and Organizational Structure of M&S Textile Australia - Case Study Example

M&S Textile Australia Student name State and city name Professor’s name Institution name Submission date Table of Contents I.Executive summary 3 II.Introduction 4 III.Background 4 IV.Business strategies and organizational structure 6 Business strategies 6 Organizational structure 7 V.Legal and political 8 VI.Culture and ethics 9 Culture 9 Ethics 10 VII.International Human Resource Management 11 VIII.Global Opportunities 11 IX.Market entry strategies 12 X.Recommendation and conclusion 12 XI.References 13 I. Executive summary The following is a report that presents and argues the concept of transferring production plantation for M&S Textile to a country known as Thailand. The report provides crucial information regarding the opportunities and the challenges likely to be faced by M&S Textile Australia. The report analyzes the business strategies and organizational structures that can benefit or prove challenge to M&S Textile Australia. The legal and political aspect of the country is also considered during the analysis, which is crucial for success of M&S Textile Australia in the country. The report also evaluates the culture and ethics of the country and the relationship with the relocation of M&S Textile production facility. The report provides crucial information based on figures obtained through research studies on Thailand’s global opportunities for M&S Textile Australia. The report also provides necessary market entry strategies that can help M&S Textile Australia establish a foundation in Thailand. The report concludes with a recommendation for M&S Textile Australia based on the findings highlighted in the report. II. Introduction The Australian textile industry is faced with difficult trading conditions, which is affecting revenue performance for M&S Textile industry, one of the largest textile manufacturing companies in the world[Kav12]. Cheap textile products from importers are flooding the market and influencing consumer purchasing power. M&S Textile Australia is struggling to compete with these foreign traders due to high wages in Australia and increasing operating costs[Pay11]. M&S Textile Australia is now facing major challenges from exchange rate fluctuations and Australian dollar, which has reduced the company’s price competitiveness in the international market. In order for M&S Textile to remain competitive in the textile industry, major production changes have to take place. M&S Textile is transferring all its production facilities offshore in order to reduce its operating costs and improve its competitiveness in the market. M&S Textile Australia is set to shift its production facilities to Thailand, which offers more opportunities for the company to minimize its cost and maximize its strength[Pay11]. Therefore, there this report will provide vital information on the advantages and disadvantages of shifting production to Thailand. Other consideration such as business strategies, legal, political, culture, ethics, global opportunities and market entry strategies will be adequate analyzed to provide enough information for decisional purposes. III. Background Thailand is one of the biggest economy on the Indochina Peninsula as economic development propels towards a rapidly growing industrialization[Jar11]. Thailand exports sector accounts two-thirds of the country’s gross domestic product. This means that Thailand is extremely export dependent, which is also influencing the country’s economic growth rate. Thailand is the biggest production center in south East Asia, according to some research analysts[Jar11]. Thailand is commonly known for its cheap labor, which provides a great opportunity for M&S textile Australia to reduce cost and maximize on profits. In addition, this enables Thailand to be a key player in global supply chains. M&S textile Australia can also find it advantageous to shift its production plants to Thailand where employment regulations are extremely low. People in Thailand value collective production where every individual contributes to the economy[Mat10]. This is essential for M&S textile in reducing cost since majority of people in Thailand are willing to work for as low as $4 per hour, which is extremely cheap as compared to Australian minimum wage of $17 per hour[Ian11]. Therefore, availability of cheap labor in Thailand makes the location an ideal environment for M&S textile Australia to open a production plant. Thailand is also shifting from an agricultural based to industrial based economy, which is vital for manufacturing industries seeking cheaper methods to produce their products[Jar11]. The Thailand government has also reduced its tariff regulations as Thai industrial sector continue to evolve in response to the inevitable relocation of labor-intensive industries. Therefore, there are more opportunities that M&S textile Australia can explore when shifting its production plant to Thailand. IV. Business strategies and organizational structure Business strategies Moving production abroad can prove to be one of the most challenging aspect for any business. M&S Textile Australia should come up with an ideal business strategy in order to maintain control of their production despite the shift in production facilities. In this context, there are various business strategies that M&S Textile industry should consider while making the decision to shift its production plant abroad. The main business strategy in shifting production facilities to Thailand is to shorten the supply chain for M&S Textile Australia[Mic131]. This will help M&S Textile to become more agile and flexible as the market changes, which reduces cost and risk. Risk sharing is crucial business strategies that can help M&S Textile shift certain production responsibilities to the external party. This means manufacturing team in Thailand will be responsible in mitigating risk factors therefore reducing the cost and risk exposed directly to the company. M&S Textile needs to boost its revenue and the only way to achieve this to increase its production volume in the market. M&S Textile has a ready market but high operating cost in Australia in its production line is limiting the company’s ability to generate enough revenue. In addition, the trading regulation as per the Australian regulatory standards is extremely expensive forcing the company to limit production levels. According to research analysis, Thailand offers a large production volume capability for M&S Textile due to their reduced labor cost and high number of unemployment[Meh101]. As a large manufacturing company in the world, M&S textile requires high volume production to remain competitive in the textile industry. Shifting production facilities in Thailand may prioritize a bigger order for M&S Textile than local production, which is suitable for small order quantities. According to research studies, the best way to enter offshore manufacturing it is through acquisition, which offers more control, options for the foreign company[Jar11]. The research study further suggests that other options such as mergers require relationship maintenance. On other hand, acquisition requires constant oversight, which is essential for understanding of local custom and culture of the foreign country. There are some disadvantages that M&S Textile can face when transferring production plants abroad. There are many textile companies operating in Thailand, which exposes M&S Textile to intellectual property risks. Thailand host approximately 2000 foreign manufacturing companies from around the world. Product knockoffs and imitations are constantly flowing out of the factories in Thailand[Jar11]. Therefore, M&S Textile is likely to face the challenge of protection of intellectual property, which is a recognized manufacturing brand. Organizational structure According to research studies, majority of the companies operating their production lines oversees find it effective to decentralize their decision making processes[Jea12]. This means important decisions and problems regarding company’s production line are solved at lower levels by employees who are closer to the problem or decision in question. This is because decision-making is a key aspect of the organizational structure when operating production lines oversees. Therefore, for M&S Textile Australia, it is essential to give more authority to lower level employees when it comes to decision-making process. According to many business management, it makes sense giving the authority to lower level employees because they understand the root of the problem and they are able to solve the issue more efficiently and effectively while meeting company’s objectives and goals[Jea12]. In the manufacturing sector, accurate and timely decision is crucial for the company’s success. Transferring decision authority to the lower level employees will increase competitive advantage of M&S Textile in the industry and increase revenue because decisions are made on timely basis. Formalization is also a key organizational structure element and is crucial for oversee operation. Many research studies have found that having formalized structure where all rules and regulations regarding employee behavior are written on a handbook have tremendous impact on how oversee production line operate[Jea12]. This allows employees to respond to problems in a similar way across the organization, which leads to consistency of behavior[Jea12]. V. Legal and political According to research analysts, Thailand has very complex political and legal structure despite the attractiveness of the country to foreign investors seeking to establish their manufacturing plants in Thailand[Ber11]. It is important to understand the political stability of the country before making any investment decision in the country. According to news sources in Thailand, the government has imposed martial law after a coup attempt that occurred recently[Ter12]. However, the Thai government has introduced policies and incentives that tend to encourage investment from foreign companies. The reduced tariffs and regulatory laws have increased confidence for investors encouraging foreign manufacturer’s establishment. The manufacturing regulations are mainly liberalize as foreign companies are allowed to make and sell products in Thailand with limited regulatory policies[Joe11]. However, foreign manufacturers are not allowed to buy products from other supplies and retail domestically. This is to reduce domestic competition, which can affect Thai companies from operating within Thai borders. Alternatively, foreign companies are allowed to export their products, which are vital for the operation of M&S Textile Australia[Amm11]. In Thailand, the government has little involvement in the business market and most of the involvement is mainly regulations through business laws and policies[Jac10]. According to World Bank, the government of Thailand has maintained a close relationship with foreign investor seeking to establish business investment in Thailand[Ann15]. This means that M&S Textile is less likely to be affected by government interruptions, which can increase operating cost for the company. Thailand has also faced major financial crisis and high government debt has crippled the economy[Amm11]. However, the policies put in place have improved economic growth enabling the government to pay off its debt from the international monetary fund. VI. Culture and ethics Culture In Thai culture, group welfare supersedes individual concerns, which is a valuable tool in the production sector. Despite this, Thais have a strong sense of self, dignity and pride which is a compromise in certain situations[Amm11]. M&S Textile is also able to benefit from cooperation with the Thai people. In Thai’s culture, harmony within the group is important which indicates that M&S Textile is less likely to face hostility from employees working in the manufacturing facilities. In Thailand, people try to avoid conflicts as competition amongst themselves may be viewed as disruptive[Amm11]. However, the lack of competition amongst employees may mean all productivity efforts from every member are likely to be the same. Ethics In Thailand, Thais are known to be easy going as they have a different way to shrug of the stressful unfairness. According to research studies, many people in Thailand are never in a rush and everyone seems to trust everyone[Bha10]. It is difficult to see anyone quarrel about anything, as people seem to be relaxed in many occasions. The Thais have a positive attitude approach when it comes to dealing with stressful conditions or unfair conditions. Many people try to avoid problems by shrugging stressful or unfair conditions. This kind of attitude is positive as majority of people keep themselves happy as they deal with difficult life conditions. However, many foreign companies seem to take advantage of this culture by reducing labor cost and operational cost[Amm11]. This kind of business affects the working conditions for the employees and reduces their living standards. Poor working conditions and low labor wages creates negative business ethics for M&S Textile. The rate of corruption in Thailand is extremely high according to World Bank research study[Ann15]. This is because of the reluctance of many Thai people to challenge their political system, which takes advantage of the complacent attitude that keeps many people in Thailand poor. However, the high corruption has little effect on the operations of most foreign manufacturing companies in the country. VII. International Human Resource Management Management of human resources in Thailand is a crucial aspect in maintaining high quality standards for M&S Textile Australia. International human resource management is the process of planning, recruitment, selection, training, development and evaluation of employees within the international setting. The human resources for productions plant operating in Thailand will have to be organized in such a way to ensure that M&S Textile standards are met. This means that a specific human resource management team will be selected to oversee the planning process of operations abroad as per the policy of M&S Textile Australia[Pay11]. Many foreign manufacturers, which shift to Thailand, tend to outsource labor to a recruitment agency, which is responsible in planning of human resources, recruitment, and selection of employees, training and development of employees on quality standards[Amm11]. Therefore, the human resource team in Thailand will have to ensure that the right staff is placed in the right job and at the right time. VIII. Global Opportunities There are numerous global opportunities associated with relocation of M&S Textile in Thailand. Based on statistics study, Thailand is located in a strategic position, as the country is the gateway into the heart of Asia[Amm11]. Shifting production plantation to Thailand is likely to benefit M&S Textile as easier access to Asia through Thailand exposes the company to the largest growing economic market[Ter12]. Thailand offers convenient trade with large markets such as China, India and countries of Association of Southeast Asian Nations (ASEAN). In addition, Thailand offers M&S Textile Australia easy access into newly emerging markets such as the Great Mekong sub-region where greater business opportunities exist[Amm11]. IX. Market entry strategies According to research studies, there is intense competition in Thailand’s from both global and domestic manufacturers. Majority of textile manufacturing firms are controlled by family generations who are highly educated and have gained enough experience of the manufacturing sector. Other research studies suggest that Thailand’s market is price sensitive and many local suppliers dominate the market[Bha10]. The best market entry strategy for M&S Textile is through partnership with local firms to undertake an extensive market entry strategy. Many studies indicate that majority of foreign manufacturers gain entry into Thai market through local partnership such as agent or distributor[Ter12]. This is method of market entry strategy has proved to be effective and efficient way to reach Thai market. Partnership with local firms is the most reliable way to enter the Thai market due to the extensive market knowledge and established networks of the firm. According to research studies, interpersonal relationships in Thailand are crucial business culture, which offers greater opportunity for successful business transactions[Ter12]. X. Recommendation and conclusion Based on research studies and analysis conducted for this report, M&S Textile has greater opportunity benefiting from the shift in production plantation to Thailand. Numerous advantages can help M&S Textile to improve operational cost and lower labor cost while operating their production activities in Thailand. Despite the political instability that exists in Thailand, the government in place has management to ensure that foreign companies are able to operate as normal with minimum limitation. The Thai culture offers numerous advantages that can help improve production cost and influence high revenues. The global opportunities that Thailand offers for M&S Textile can also be an opportunity to expand production process and gain entry into new emerging markets. Therefore, in order to gain competitive advantage in the Textile industry, shifting production line to Thailand is more beneficial than maintaining operations within Australia with high expensive regulatory guidelines. XI. References Kav12: , (Jegethesan, et al., 2012), Pay11: , (Payne, 2011), Jar11: , (Jarinto, 2011), Mat10: , (Kelly & Stazdins, 2010), Ian11: , (Baird, 2011), Mic131: , (Czinkota & Ronkainen, 2013), Meh101: , (Demirbag & McGuinness, 2010), Jea12: , (Hennart, 2012), Ber11: , (Meijboom & Vos, 2011), Ter12: , (Terpstra, et al., 2012), Joe11: , (Stiebale, 2011), Amm11: , (Siamwalla, 2011), Jac10: , (Pollock & Aung, 2010), Ann15: , (Triandafyllidou, 2015), Bha10: , (Nidhiprabha, 2010), Read More