NKS Textile Ltd is a US- based textile manufacturing company. This company is very well established since 1992 in the international market.NKS ltd started first in the New York City with a small scale manufacturing set up with an objective to make a remark on international market. The broad objective of the company was to enjoy highest market share through expansion, so mangers of company adopted all possible ways like mergers and acquisitions and export- import to achieve their organizational goal.
According to the survey 2008-09 company has 17% market share among textile manufacturers worldwide. Now, Mr.Nitin, CEO-NKS Textile Ltd is planning to expand their manufacturing company in any of ASIAN countries like Thailand, Sri Lanka, and India. As India is facing heights of recession these days so the chief analysts of company has prepared a strategy to compare the business environmental situation (PEST ANALYSIS) of Thailand and Sri Lanka. Their strategy is to expand their company through either joint venture or entering the national market as a new entrant.
COUNTRY ONE - THAILAND
a. Political Stability: Thailand is officially known as the "Kingdom of Thailand," Thailand is a constitutional monarchy. Although the head of state is the King, king is provided with very less direct powers but he is a symbol of identity and unity.
b. Environmental Regulation and Protection: The rise of environmental protection programs in Thailand was brought about due to the Promotion and Enhancement of Environmental Quality Act of 1975. Its main issues include water pollution due to organic and factory wastes, air pollutions from vehicles, deforestation, erosion, and the nation's wildlife that is being threatened by illegal hunting.
c. Taxation: Thailand's corporate taxation is set at a maximum rate of 30%, where its value-added tax comes in at 7% which is low in comparison to other countries.
d. Employment Laws: Written employment agreements are highly suggested in Thailand's labor force. By law, employees are entitled to thirteen holidays per year, six vacation days after serving for one year, and an annual sick leave of thirty days with full pay. Aside from salary, the benefits are considered assessable income to the employee.
e. Corruption: The main type of corruption that happens in Thailand is between business and politics. Bribery among businesses and officials is a common act that is done to get a desired service or contract.
a. Economic Growth: The overall economy has been nothing but improving since the 1997-1998 Asian Financial Crisis. In 2003, the economy grew by 6.9% and dropped .8% in 2004 but still showed improvement. To maintain its growth Thailand has established many trade agreements to increase exports.
b. Exchange Rates: The current exchange rate, although it changes frequently, is 1 US Dollar = 31.83422 Thai Baht. The effect a country's exchange rate has on the demand by overseas customers such as the United States is it makes it higher. Having products imported into the United States from where the dollar has more power allows importing more.
c. Geographic Location: Being located in Southeastern Asia, bordering the Andaman Sea and the Gulf of Thailand, it makes trade by sea accessible. Although being located so far from the United States does make trade more expensive and time - consuming.
d. Financial System: Thailand's financial system is controlled by the Ministry of Finance and the Bank of Thailand. Their operations include supervising banks, finance firms, and housing loan officials. Thailand's finance system also includes a stock and bond market.
e. Policy towards Unemployment: Social Security Programs do cover the unemployed in Thailand and do come a few unemployment benefits. Six months before one claims unemployment, they receive contributions. Although, they must be registered with the Government Employment Service office and must be able to accept any job that is offered. If one is involuntarily unemployed then their benefit is 50% of the average wage of the best three months in the nine month period before unemployment. If voluntarily unemployed then it is 30%.
f. Inflation: For Thailand, the inflation has slowly been going up since 2003. According to CIA World Fact Book, its biggest percent change occurred from 2003 to 2004 with a change of 200%. In the years of 2006 to 2007 a 13.33% increase had occurred.
g. International Trade: When it comes to international trade, Thailand's export procedure can vary among the products being exported. Its major exports include textiles, footwear, fishery products, rice, jewelry, automobiles, rubber, and computers. Its major imports include capital and intermediate goods, raw materials, fuels, and consumer goods.
a. Income Distribution: According to the CIA World FactBook, Thailand as Gini Index rank of 42 meaning that its income distribution is near to equal.
b. Demographics: Thailand's population is around 65,068,149 with an age structure of 0 to 14 years old at 21.6%, 15 to 64 years at 70.1%, and 65 years and over at 8.2%. When looking at the population in terms of gender a sex ratio can be considered of the total population: 0.98 male(s)/female.
c. Education: The average years of schooling for adults are 6.5 years with a total school life expectancy of 10.8 years. With a population of over 65 million, 92.6% of it has the ability to read.
d. Fashion: When it comes to Thai fashion it is all about the detail. Thai fashion mixes together traditional garments with modern trends but always focuses on detail, whether it be beading or embroidery.
e. Attitudes towards Work and Leisure: Work and leisure are two different worlds in developing countries such as Thailand. Work is necessary to keep their economy growing, whereas leisure is not very popular among the Thai population.
a. Internet: Thailand is the home of 973,941 Internet hosts and 13.416 million Internet users. Broadband Internet is available in available in all the major cities but the majority of Internet users in Thailand rely on dial-up connection.
b. Energy: Thailand's total energy production is 124.6 billion kWh with a total of 117.7 billion kWh in consumption.
c. Technological Focus: Technology is the second largest investment in the Thai economy. The main exports in the technology field for Thailand are computers, printers, electronic parts, TVs, and stereo equipment.
COUNTRY TWO - SRI LANKA
a. Political Stability: Officially known as the "Democratic Socialist Republic of Sri Lanka," Sri Lanka goes by executive presidency based on the French model. The president is the head of state with executive powers and is elected for a period of six years.
b. Environmental Regulation and Protection: A National Environment Policy (NEP) is now being established in Sri Lanka to maintain and improve the natural resources and living environment of Sri Lanka.
c. Taxation: Sri Lanka's corporate taxation ranges from 20% to 35% and its personal income tax rate is 35%.
d. Corruption: When compared to other Southeast Asian countries the level of corruption in Sri Lanka is not very high. Some examples of the types of corruption going on are the giving of gifts to acquire licenses to the point where they are expected and also the act of bribery is common among businesses and officials.
a. Economic Growth: Sri Lanka's economy has grown by focusing more on market-oriented policies, export-oriented trade, and encouragement of foreign investment. Its new economy also wants to reduce the amount of poverty by using its investments in areas that are more in need. Sri Lanka's overall economic growth is slowly becoming better seeing a 7% growth in 2006 but a drop of 1% in 2007.
b. Exchange Rates: The current exchange rate, although it changes frequently, is 1 US Dollar = 107.994 Sri Lanka Rupees and 1 Sri Lanka Rupee = 0.009260 US Dollars. The effect a country's exchange rate has on the demand by overseas customers such as the United States is it makes it higher. Having products imported into the United States from where the dollar has more power allows us to import more.
c. Geographic Location: Being located in Southern Asia and being its own island in the Indian Ocean does make transport by sea accessible as well. Just like Thailand, since it is located so far away from the United States trade can be expensive and take longer.
d. Financial System: Sri Lanka's financial system is operated by the Central Bank of Sri Lanka. The central bank is then in charge of smaller institutions which include licensed commercial banks, licensed specialized banks, registered finance companies, specialized leasing companies, primary dealers, and employee funds.
e. Policy towards Unemployment: Unemployment insurance is trying to be introduced to developing countries such as Sri Lanka. This program would include insurance, severance pay, and unemployment insurance savings accounts.
f. Inflation: According to the CIA World FactBook, from the years of 2003 to 2004 Sri Lanka's inflation rate went down from 9.6% to 6.3% resulting in a -34.38% change. It continued to drop into 2005 but had a 100% change going into 2006 and slowly went up 4.31% in 2007. In the years where inflation rates dropped, the cost of good and selling prices also dropped.
g. International Trade: When it comes to foreign trade Sri Lanka's main export trading partners include the United States, UK, India, Belgium, and Germany specializing in exporting textiles, tea and spices, diamonds, rubber, and fish. In terms of importing, Sri Lanka does most of its business with India, Singapore, China, Hong Kong, Japan and Malaysia. The major products being imported are minerals, textile fabrics, petroleum, machinery, and transportation.
a. Income Distribution: According to the CIA World FactBook, Sri Lanka has a Gini Index rank of 50 which means that its income distribution is equal.
b. Demographics: Sri Lanka's population is a growing number around 20,926,315 with its age structure being 0 to 14 years old at 24.3%, 15 to 64 years old at 67.9%, and 65 and older at 7.8%. Considering gender distribution it can be expressed through the sex ratio of the total population: 0.971 male(s)/female.
c. Education: The average years of schooling for adults in Sri Lanka is 6.9 years with 90.7% of its population being literate.
d. Fashion: In relation to the fashion industry, Sri Lanka is one of the main exporters of garments in the world today. Although when it comes to fashion and trends, Sri Lankan designers are starting to team up with Indian designers to create a trend that is unique to their culture.
e. Attitude towards Work and Leisure: Sri Lanka's attitude in similar to that of Thailand's in the sense that they are both developing countries that need work to help maintain their economy and also help it expand.
a. Internet: Sri Lanka contains 6,198 Internet hosts and 428,000 Internet users. The country relies on broadband connection. ASDSL was introduced to Sri Lanka in 2003 and is available in the Greater Colombo area.
b. Energy: In Sri Lanka the total production of energy is 8.411 billion kWh and a total consumption of 7.072 billion kWh.
c. Government Spending: Sri Lanka's high budget deficit and high government spending only leads to a higher inflation rate. The volume of money is being expanded just to reduce the budget deficit in Sri Lanka.
In the above mentioned table we have done the analyses of strengths and weaknesses of both the countries in different fields in very useful in determining which one is the best. Taking our two high potential countries of Thailand and Sri Lanka, there are fields where one did better than the other. For example, each country's income distribution was completely different, one being unequal and the other being close to equal. A country with an equal distribution is more appealing to do business with than the other. Another field that can help in making our decision would be their focus on technology. Thailand's focus was far greater than that of Sri Lanka. Having good technological advancements can only better business. Factors that did make our decision hard to make were ones that received the same score of attractiveness. Taxation is very important when it comes to trade and both countries scored the same. Another field was transportation, in which both scored very high due to many options of transportation that is available. Overall, the table reflects that Thailand has scored 101 and Sri Lanka has scored 88 so it's simple that Thailand has scored highest and is best.
After analyzing the political, economical, social, and technological or we can say that we have done PEST Analysis of both Sri Lanka and Thailand, our company has decided to go forth and do business with Thailand. Thailand is a better country in terms of Political, Economic, Social as well as Technological Factors. It is more open to International trade and the prospects of work there is higher than that in Sri Lanka. Thailand overall attractiveness was very high and scored well in all the major categories. Already being one of the United States' top trading partners, Thailand is the best choice for our company.