Family businesses in Thailand: decline across generations and economic impact

Strengthening traditional SMEs business in Thailand

On the family business trends in Thailand

The concept of family ownership of firms has raised a lot of focus of late since the common trend in the U.S. is the dispersed ownership which has a strong separation between the ownership and the control of the business. There is a growing trend of firms being part of the group of companies which are brought together by a common family bond or common ownership at some point hence having common control at the family level. Such family-controlled businesses largely employ the pyramid structures in ownership in order to exert the requisite control over the large networks of the business. It is apparent that the family ownership models are predominant in countries with low levels of protection of the minority shareholders. However, this trend is fast changing with the U.S. fast adopting such a model in the ownership and running of its businesses (Bertrand M., et.al., 2008: Pp 466-467). Apart from the fact that they are owned by families, the family owned businesses do not in any way differ at the administrative requirements by the government. Each registered business is required to file their annual financial statements that are audited by an authorized auditor to the Thailand Ministry of Commerce (Bertrand M., et.al., 2008: Pp 469).

One thing that remains factual about the Thailand economy is that the family owned and run businesses still hold a significant portion of the economic pillars and a large number of the listed companies are family owned firms with the owner family members controlling the ownership and management of the businesses. The family owned business significantly initiated and drove the industrialization of Thailand with a significant majority having their beginnings in the textile industry, commerce and trading then later on diversifying into other areas but still with a strong family ownership as their basis with all the accompanying characteristics of family controlled firms (Akira S. & Natenapha W., 2004: Pp82). The family businesses have over the years proven to be a force that cannot be ignored in Thailand with at some point contributing a significant 62% of the nominal GDP of the nation as was the case in 1997. It is however predicted that, as is the tradition in many developed nations, the third generation of the family owned businesses are often responsible for the decline in the viability and performance of the family businesses. This seems to be the case in Thailand where the family owned businesses are not as vibrant as they used to be two decades ago. The decline of the investment fund, insufficient accrual of the requisite production technology as well as lack of knowledge of the new markets for the new products accompanied by lack of a new team of well trained human resources are a contributing factors to decline of the family businesses from their previous glory with the first and second generations (Akira S. & Natenapha W., 2014:Pp 998).

The family owned businesses in Thailand have board of governors that are predominantly consisted of family members, with some percent of hired professionals meaning the separation between the ownership and control is to the minimum possible. The directors are mainly internally promoted and to an extent from the shareholders and founders who are deemed to be people who can be trusted with the decision making and running of the family businesses (Matin W.M., 2015:Pp3-4).

Importance of business plan

There are various reasons why a business needs to have a plan in order for it to run smoothly and have a prospect for growth. Weather it is a family business or corporate owned business, the business plan is bound to clarify direction of the business by defining the products/services involved and the customers hence giving the business a direction towards success (Jeras J., 1995:Pp1). According to Lawrence S. & Moyes F., (2004:Pp2) the plan will also help shape future vision of the organization with aspects like growth ac change well catered for within the plan with the future goals guiding the planning process. A business plan will also attract financing for the organization since it is the plan that will show whether a business has the potential to make profits. The statistics therein will guide the investors to make decisions on investing in the business. The plan will as well help lay out the structure of the business management hence forming a basis for regular cross reference to ensure the business is in the right course, meets the sales targets and achieves the strategic and operational goals (Clark T., 2012). The business plans are also known to be instrumental in ensuring that each individual in the organization is on the same page as far as the goals, vison and operational decisions of the organization are concerned. The plan gives a unifying congruence to both the employees and the management of any organization since the decisions of the management and the actions of the employees are dictated by the plan that has been drafted by the organization in a consultative and collective manner (Cole E. & Jay A., 2005:Pp1-2).

Family business future growth

In as much as there are challenges that the family businesses are facing in Thailand, there are prospects of having better and stable future for family businesses. The growth of family business in the future will greatly be hinged on technology and the relevant application of the new inventions to the production, processing and management of the supply chain of the goods that the business deal in (Ahola Corporation, 2015: Pp13-15). The business managers, who are currently the third and fourth generations in most businesses in Thailand and are widely educated in the developed Western nations need to implement the new technological advancements they have been exposed to and ensure that their businesses are at par with the rest of the world in terms of business edge. They have to embrace the international virtual markets that will allow them to harness orders online and engage in exports more aggressively. There will also be need to implement the contemporary trends in human resource management which will see the organizations attract wide ranging skills with diverse exposures and experiences which will see the upgrading of the businesses to the international standards. The family businesses will also have to adopt the corporate approach to their businesses since this will allow them to compete with the globalized business trends that are currently the prevailing business directions as indicated by Wayne R., (2009). As long as the businesses are confined to the traditional decision making and operations that are directed by the family, it is almost given that the fortunes will not be in favor of the family businesses. According to Visser W., (2015), the formation of partnerships, and in particular the disruptive partnerships that offset the status quo are instrumental in the future of any businesses that will survive the future. Partnerships will help the management to have insights that they would otherwise not have hence make the businesses more relevant in the face of globalization. This also means the family business in Thailand will in the future need to engage in external markets more in order to have franchises or branches in a global or even regional extent of business.

Internationalization of businesses in Thailand

Globalization is one aspect that came with the explosion in information and information technology. The globe has been significantly condensed with communication channels opened up significantly in such a manner that information flow is instant and unhindered in many aspects. This pressure is evident in almost all spheres of life including the business sector where many businesses have been forced to go international in many aspects. In the contemporary meaning, internationalization of business simply implies using the global market to push your goods and services or to establish a business. This has been made simpler with the availability of internet since the accesses to the markets at the international levels are unlimited. The internet is the common resource that makes everyone equally exposed to the global market. The internationalization of businesses in this sense could mean the use of e-commerce platforms and opportunities (Panos M. 2011). With this, the businesses are able to market, sell as well as distribute their goods at the global platform. The internet also allows the entrepreneurs to outsource with much ease since the internet provides unrivalled access to the global resources. This means the possibility of not only having physical resources one may need for manufacturing, but also the employing of personnel from a distant country and still effectively carry out the requirements of the job assigned. The internet also allows for the ease in brand expansion since businesses are able to create brand communities and loyalty across the borders. This has allowed many businesses in Thailand and other parts of the world to have easy access to the markets in the U.S. And other European countries (Startup Overseas, 2015). Businesses are also widely defined and driven by the creation of networks at the global extent where ideas are exchanged, trends shared, challenges solved and opinions collectively and freely given with the help of internet platforms like the social media hence making most companies international in their approach to issues (Entrepreneur Media, 2015).

PESTLE analysis

When establishing a business in any country, there is need to study and understand various aspects and conditions that exist within that country. The PESTLE analysis is one of the strong tools that a business can use to better understand the new front that they are venturing into and in effect institute measures that will enable the business to thrive. PESTLE analysis is a method of strategic planning that is utilized in the analysis of the Political Economic Social Technological Legal Environmental and aspects that the business will encounter on a daily basis (Gupta 2013: Pp1).

Political issues such as taxation policy, stability of political environment law, deregulation, and international stability have been the major problems or political factors that affect the establishment of aby business hence the need to take such factors into consideration.

Economic factors that include economic growth, competitors pricing, globalization, exchange rates, unemployment rate and stabilization have been other issues that affects the business. A negative growth in a country might lead to fall in consumer income creating sales disposable income. High pricing from the competitors create pricing war for the business hence driving down the profit margins when increasing the market share.

The social factors such as; income distribution, standard of education, working condition, age distribution and consumer preferences that might shift from coffee to other beverages can be social factors that the business should take into consideration since all these factors demonstrates the ideal place for the aimed market.

Use of technology such as software upgrading, the rate of technology change are able to improve the operational efficiencies in most companies. For every business to shift to the new technology, they should make sure that the software they use is upgraded and the latest technological trends that are necessary for the running of the business cannot be ignored.

Legal factors involve the knowledge of the legalized amounts of contents in processed foods and products, the laws regarding production and consumption of products, the stipulated trade regulations, and the applicable customs will definitely affect the way a business operates hence needs to be taken into account.

The environmental factors will definitely affect the way that a business operates. Establishment and operation of a business will be affected by environmental factors such as environmental rules, global warming and environmental disasters that each business is predisposed to and these must be catered for before establishing a business (Oxford University Press,(2007).

SWOT analysis

SWOT analysis is commonly used in marketing analysis. It tries to look at the business and external environment in order to anticipate future actions the country may need to take so as to defend or to expand the market position. SWOT stands for the strength, weaknesses, opportunities as well as threats a given firm may have (Wayne G., 2010: Pp1-2). The market entry strategy on Middle East, Europe, and America can be developed by analyzing all the strengths, weaknesses, opportunities and threats of those countries also known as a SWOT analysis. Strengths are basically resources that a country or any organization could use effectively to achieve the set goals. Weaknesses in a country defines the competitive deficiency, it refers to something a country is lacking or does poorly at, putting a disadvantage in the market place. Opportunity on the other hand, is a major favorable condition the country's environment such as the political, economical, sociological, technological and physical ecological also known as (PESTLE) analysis. However threats are presently unfavorable situations in the country's environment (Goodrich R., 2015). Therefore, the following points explain how those countries can enter into the market strategy.

For any business to be effective in its operations, there is absolute need to take into account the realities that are existent within the business and the management as well as the surrounding environment. There is need to ensure that the essential factors covered in the SWOT above work in favor of the business hence having a well operational business and a profitable one.