The Advantages of M&S Textiles Operating in Australia - Case Study Example

M&S Textiles Australia Report By (Name) Name of Class (Course) Professor (Tutor) Name of Institution (University) City and State The Date Contents Executive Summary 2 Business Strategies and Organizational Structure 4 Advantages 5 Disadvantages 5 Legal and Political 5 Culture and Ethics 6 Market Entry Strategies 7 Recommendations and Conclusion 8 Reference List 9 Executive Summary M&S Textiles Australia is a leading manufacturer of quality cotton materials. The company is considering the establishment of a manufacturing plant in Thailand. This is move is intended to aid the company in staying competitive and reduce operational costs such as the costs of labor and raw materials. This report aims to determine whether this move will be feasible by examining the advantages and disadvantages involved. This will be done by taking various aspects including, cultural, political, ethical, legal and environmental aspects of Thailand into consideration. Thailand became an industrialized country mainly though the importation and exportation of goods and services. The general Thai labor force is known to have strong relationships with their shareholders and a positive work attitude. Some advantages of operating in this country include good logistical networks and the free trade agreement that exists between Australia and Thailand. As it will be discussed in this report, the advantages of M&S Textiles operating in this country surpass the disadvantages which are mainly in terms of gender discrimination and corruption. There is therefore a great potential for success if this company took its operations to Thailand. Introduction and Background M&S Australia has grown to become a global leader in the production of Australian Aboriginal designs on cotton fabrics like garments and quilts (M&S Textiles Australia, 2017). The company intends to expand into Asia so as to reduce the production costs in Australia. Before any company moves its production processes into another country, it is crucial for the company to assess the advantages ad risks involved in expanding to that particular country. Apart from outlining the advantages and disadvantages of M&S Australia operating in Thailand, this report will also discuss the history, population distribution, the legal and political position of the country, its culture and ethics, international human resource, global opportunities, company organizational structure and business strategy and eventually the market entry strategies. These will be followed by a final recommendation on whether the company should expand to Thailand and if so, the best strategies that would lead it to is successful and profitable operations in this country. Thailand, formally known as Siam, is a kingdom located in South East Asia; it has a constitutional monarchy and 700 years-worth of history and culture. The country has liberal economic policies put in place which ensured its rapid development between the 1980s and 90s (Friedman, 2015). The country attracted foreign investments during this period and its import and export trade swiftly increased. The country’s economy has also been significantly enhanced and transformed by agricultural developments. The country is rapidly transforming from a backward agricultural kingdom to an industrialized country in the 21st century (Friedman, 2015). The main economic sectors of the country are the agricultural, manufacturing and tourism industries; it is among the world’s major agricultural exporters (Friedman, 2015). Bangkok is the capital of Thailand and as such is the center of all political, cultural and economic activities of the country. The country is divided into five regions including the East, South, North, North East and Central Thailand. It is the world’s largest exporter of rubber and rice in the world. Its cultivable land is close to 41% of the total amount of land and as such, agricultural products are Thailand’s main foreign exchange earners (Donaldson, 2012). The total population of this country according to its statistics is approximately sixty-eight million people of over 30 different nationalities. Thais are the most accounting to 40% of the whole country. Buddhism is the most practiced religion in the country accounting to over 90% of the total population (Goodman & Spilling, 2013). The influence of this religion can be seen in their language, lifestyle, architecture and almost all aspects of the country’s culture. Business Strategies and Organizational Structure In order for successful operations, businesses always have to plan strategies beforehand in order to have a clear direction towards their visions, goals and objectives. A strategies are managers’ planned set of actions taken to ensure the company’s resources are used efficiently in order to achieve competitive advantage (Cavusgil, 2014). In the global environment, strategies aid in guiding companies in the incorporation of value-increasing products on the international scale and the allocation of company resources. For a company to be competitive internationally, it has to have and fulfill three business objective skills which are, Learning, Efficiency and Flexibility (Cavusgil, 2014). Having an effective international strategy will ensure M&S Textiles Australia successfully expand its operations to Thailand, reducing its liabilities and the general operational costs while at the same time increasing its assets and profits. As the company expands to Thailand, it should have a connection between the features and processes of the company and the relationship between all people. M&S Textiles Australia is working towards an international strategy where the management of a structure that can connect the headquarters and local responsiveness throughout the other host countries is crucial (Hill & Hult, 2017). The global matrix structure is the most appropriate in this case as it is a combination of functions, location and the production system that enables the head office to control operations in every area and learn to respond to the requirements of each location (Cavusgil, 2014). For M&S Textiles Australia to be able to apply this strategy in its prospective manufacturing plant in Thailand, it has to organize the management responsible for the local operations and take into account the culture of the new business environment. Frequent reports to the headquarters would be important in order to ensure that the operations are in sync with the overall goals and objectives of the company (Hill, 2014). The company should hire a highly skilled management board that will be able to work between the plant in Thailand and the headquarters in Australia and be able to make important decisions. Advantages Thailand has an effective and cheap labor force for the textile and apparel industry. This industry has employed millions of people who are skilled in spinning and weaving, printing and dyeing and handmade fiber. The country reported $7.4 billion US Dollars’ worth of textile exports in 2014 (Phongpaichit & Baker, 2012). This shows that there is good textile business in the country and M&S Textiles will operate successfully if it moves its operations there. ASEAN countries including Thailand are working together to strengthen their textile industries by solving the lack of resources and the instability of currency. The country has also been developing its textile industries to make it attractive to foreign investors due to the high-tech fabric production machinery that is continuously developing. Thailand is growing to become one of the best ASEAN countries if not the best (Bhasin, 2012). Disadvantages The cost of cotton poses a major problem in the Thai textile industry. This is one of the reasons why the costs of production in this sector keep increasing. This therefore brings about the currency effect which is related to this industry; there is higher demand for materials if the country’s baht becomes stronger (Verbeke & Strange, 2013). Other disadvantages of operating in Thailand that M&S Textile Australia should put into consideration if they want to operate successfully in this country include lack of management knowledge, poor infrastructure, corruption and to some extent gender discrimination, more so against the females. Legal and Political Thailand has maintained a constitutional monarchy government system since 1932. The king has power as a formality but has no complete political authority (Phongpaichit & Baker, 2012). The country has experienced a number of military coups which has led to its political instability. The last coup was in 2014 where the military assumed power and as a result constraining the freedoms of association and speech. This instability has negatively affected the economy. This is one of the political factors that M&S Textiles Australia should be aware of as it plans to take its operations to the country. It is only the monarchy that has the ability to stabilize the country as it is the only institution that is above the country’s politics (Thak, 2017). However, democracy gives the right to limited government influence and private property meaning that in case M&S Textiles eventually takes its operations to Thailand, it will have the right to own property and grow their assets in the country. The intervention of the government in the country’s economic activities is quite low and therefore the companies operate freely due to democracy. Thailand’s economic freedom status is however still not fully free. This is because the judicial system is still under government influence and the property rights are still weakly protected (Jones, 2014). There is also the problem of corruption which is a big menace to the economy of Thailand. There is also very little control of foreign investments and the country’s government strives to uphold its principles of an open market economy in order to attract foreign investors and tourists (Jones, 2014). Thailand has a civil law system which is influenced by the common law. This could pose as a challenge for M&S Textiles since Australia’s system is only based on common law. In Thailand, business agreements are only enforced if they are properly registered or certified while in Australia only a proof of agreement is enough for a contract to be sealed. M&S can take its operations to Thailand and operate successfully if it is fully aware of these political and legal issues and deals with them accordingly. Culture and Ethics A number of ethical and cultural factors have to be considered when a company intends to globalize its operations. For M&S Textile Australia to successfully operate in Thailand, they must take note of the country’s culture and ethics as this will greatly affect its operations. The country is very religious in nature and close to 90% of them are Buddhists. The good thing about Buddhists is that they are positive thinkers and have less negative emotions (Williams, 2012). This type of attitude leads to good and fruitful relationships with stakeholders that are beneficial to the company. However, language barriers will pose a major problem for this company. The company will have to invest in translators or employ Thai’s with some knowledge of English for the higher posts, if not handled carefully, language barriers could lead to misunderstandings and eventually conflicts. When it comes to ethics, Thailand is one of the leading countries where there is rampart discrimination against women. Women are entitled to less salaries than men even when they hold similar or higher posts than them (Williams, 2012). Most times, a woman cannot lead men and as such they are usually given the lower jobs. They are required to take care of their families and as such may often miss out on training and studying opportunities. This may come as a culture shock to the Australian based country that is civilized and treats all genders equally, employment may end up being a problem since Thai men may not want to work beside or below their female counterparts. Due to rampant corruption, there is widespread dishonesty as most of the people would present fake identities and documents in order to secure jobs (Jones, 2014). This also poses a problem to any company that intends to expand to that country since they cannot be sure of the authenticity of the labor force as much as it is cheap. Market Entry Strategies The best move M&S Textiles can take is Equity-based international business activity since by investing in a production plant and securing production, it allows for the gaining of knowledge and insight of Thailand’s culture and ethical values (Buckley & Ghauri, 2015). By supporting an already established ethical factory, the company would increase its revenue and reduce unemployment. Foreign direct investment would also be beneficial to M&S Textiles since it helps create a global presence. By providing a healthy and sustainable work environment and educating the workers, M&S Textiles can reduce their operational risks and improve the quality of their products making it easier to penetrate the Thai market. Since cotton is the main raw material for this company, it can use Fairtrade to protect the cotton farmers by buying it at fair prices (Fairtrade Australia and New Zealand, 2016). Apart from improving their living standards and protecting the production of cotton, it also ensures that they provide better quality of the raw material. The movement of M&S Textiles to Thailand could be a smart business move since if these strategies are put in place, it would be successful in reducing operational and production costs and earn revenue for the company. Recommendations and Conclusion In order for M&S Textiles to successfully operate in Thailand, it first of all should have a local manager, i.e. an international human resource manager with a good grasp of the company and the country’s organizational culture and ethical values. This will ensure that the workers get consistent instructions from someone that they can contact in case of any questions and get precise and accurate answers. This may not be the case if many different people are put in charge and have different instructions to give. Making this manager available to the workers would also ensure that information about any unhealthy or unsuccessful practices are communicated to the stakeholders and necessary changes are made. Management is crucial for any business that intends to operate internationally. Having good communication between the headquarters and the local management would be advantageous to the company. Since Thailand is working to improve its infrastructure in order to attract foreign investment. This also gives M&S Textiles the opportunity of getting high-tech machinery and a freely operating market since the government has very little economical involvement. If M&S Textiles takes into account all the important factors of international business, it would successfully expand and operate in Thailand since it is known for its various textile production companies and low costs of labor. It should take the opportunity to maximize its profits by reducing operational and labor costs. Reference List Bhasin, B. B., 2012. Doing business in the ASEAN countries. An International Trade Journal, 12 (2), pp 34-63. Buckley, P. J. & Ghauri, P. N., 2015. International Business Strategy Theory and Practice. Hoboken: Taylor and Francis. Cavusgil, S. T, Knight, G., Riesenberger, J.R., Rammal, H.G. & Rose, E.L., 2015. International Business: the new realities. (2nd Edn). Michigan: Pearson Australia Group. Donaldson, M., 2012. Thailand. Journal of world cultures and economies, 16(7), pp241-288. Fairtrade Australia New Zealand, 2016. Fair trade. [Online]. Available at: http://fairtrade.com.au/en-au/fairtrade-products/cotton. [Accessed 25 Apr 2017]. Friedman, M. 2015. Thailand. (2nd Edn). New York: Marshall Cavendish. Goodman, J. & Spilling, M., 2013. Thailand. (5th Edn). New York: Marshall Cavendish. Hill, W. L., 2014. International business: competing in the global marketplace. (10th Edn). New York: McGraw Hill Education. Hill, W.L. & Hult, T. M., 2017. International business: competing in the global marketplace. (11th Edn). New York: McGraw-Hill Education. Jones, R., 2014. Thailand. A world culture journal, 12(4), pp 111-142. M&S Textiles Australia, 2017. M&S Australia the World’s leading manufacturer of Aboriginal fabrics. [Online]. Available at: http://mstexaustralia.com/ [Accessed 25 Apr 2017] Phongpaichit, P., & Baker, C., 2012. Thailand: economy and politics. (2nd Edn). Kuala Lumpur: Oxford University Press. Thak C., 2017. Thailand, the politics of despotic paternalism. (7th Edn). Ithaca: Southeast Asia Program Publications. Verbeke, A. & Strange, R., 2013. International business and sustainable development. (4th Edn). Bingley: Emerald. Williams, C., 2012. Thailand. (24th Edn). Minneapolis: Lerner Read More