Technological adoption challenges for small and medium enterprises in Thailand

Business Development of Start-Ups and SMEs with the use of Technological Advancement in Thailand

Factors affecting business success of small and medium enterprises (SMEs)

Definitions of key terms

Factors affecting business success of SMEs

Virtual and augmented Reality impact on SMEs

Challenges Faced by SMEs in a Virtual World

Selected research method

Scientific approach

This study aims to investigate both internal and external elements that hamper the growth and development of Small and Medium Enterprises located in Thailand. This study is critical, especially in present times, due to not only the economic turbulences created by global economic giants but also the vital role this section plays in the Thai economy. While Small and Medium Enterprises in the developed economies integrate and adapt well to changing technological interface, Small and Medium Enterprises in the developing economies, like Thailand, struggle to do the same. This study uses qualitative interviews to gauge the problems being faced by Thai Small and Medium Enterprises in terms of accessing loans and adapting to new technology, like Virtual Reality and Augmented Reality. The results indicate that accessing necessary finance is a problem for Small and Medium Enterprises in Thailand as is the case in other developing economies. Furthermore, adapting to new technology is also problematic for Thai Small and Medium Enterprises. Furthermore, there is lack of talented and skilled labor that complicates the problems further and reduces productivity and efficiency. Adoption to new technology like augmented reality and virtual reality requires new and innovative solutions to be implemented that can help reduce the problems of change and transformation at the organizational level.

Introduction

There are different definitions of small and medium enterprises (SMEs). This is because of the diversity of small business, thus every simple definition of what an SME is, is subject to criticism. According to Institute For Small and Medium Enterprises Development in Thailand enterprises have been defined in three broad categories:

1. Service sector

2. Trading sector (encompassing retail and wholesale)

3. Production sector (manufacturing and agricultural processing)

The types of small and medium sized businesses in Thailand have been defined based on the following:

1. Value of assets that each enterprise is worth

Service sector: small sized companies are those worth less than 50 million baht, while medium sized companies are worth between 50 and 200 million baht.

Trading sector: has been broken down into two: retail and wholesale. For retail small sized enterprises are those worth less than 30 million baht while medium sized are those worth between 30 and 60 million baht. While for wholesale small sized enterprises are those worth no more than 50 million baht while medium sized are those worth between 50 and 100 million baht.

2. The number of employees employed in each type of enterprise

Service sector: small sized enterprises are those with no more than 50 full-time employees while medium sized are those with no more than 200 employees.

Trading sector: for retail small sized enterprises are those with no more than 15 full-time employees while medium sized are those with no more than 30 employees. While for wholesale medium sized enterprises are those with no more than 50 employees.

Production sector: small sized enterprises are those with no more than 50 full-time employees while medium sized are those with no more than 200 employees (Norlaphoompipat, 2008).

Research reveals that small and medium sized enterprises play a huge role in the growth of the economy of any country. Subsequently, the growth of the sector is closely linked with the economic performance of the nation. In Thailand, for instance, SMEs form significant parts of various sectors of the economy. In the manufacturing segment, for example, SMEs account for 93.8% of all companies. Furthermore, of the total number of SMEs in this segment of the Thai economy, small enterprises account for 76% while medium enterprises account for 17.8% of all manufacturing companies. More than 90% SMEs in Thailand employed approximately 868,000 workers, or about 38.9% of the total workforce in the manufacturing segment. Past studies in the country like in many other growing economies have greatly focused on large firms and with little or no research being done in the SMEs sector. This is despite the fact that changes in the economy usually result in more severe impacts in the SME sector than in the large manufacturing firms (Chittithaworn, et al., 2011).

Problem statement

It is obvious to many observers that SMEs play a critical part in the economy of Thailand. In the year 2012, for example, Thailand had some 2.7 million small and medium enterprises which accounted for about 98.5% of all the companies in the country. Still, during the same year the SMEs generated about 37% of the Thai GDP (gross domestic product) and about 80.4 of its total workforce. In terms of total imports and exports, the SMEs accounted for 31.9% and 28.8% of the two respectively. In Thailand, the percentage of workers employed in the SME sector grew from 76% in 2007 to 80.4% in 2012. In the same year the number of people employed in the manufacturing, trade and service sectors of the SME segment accounted for about 30% workforce in the segment. During the same period of time, employment in the SME trading sector increased by approximately 5%, while the figure in the overall manufacturing segment of the economy were down by 6.2%, which was accounted for by a decline in the growth of SMEs in that sector. The total growth rate of small and medium enterprises in the Thai economy declined from a high of 8.3% 2010 to a low of 7.3% in 2012. According to the researchers, the contribution of the small and medium enterprises to the Thai total GDP stood at 37% which was far higher than that of its neighbor Malaysia where SMEs accounted for 32.7%. However, compared to Indonesia, the Thai SME sector lags far behind, since SME's in Indonesia accounted for a substantive 59.1% of its gross domestic product in 2012. The contribution of SMEs to the Thai GDP dropped by 1.7% from 2007 to 2012, while the two neighbors Indonesia and Malaysia saw a rise in the contribution of small and medium enterprises to their GDPs in the same period of time (Yoshino, et al., 2015).

Since the year 2010, the exports in the Thai SME segment have been far less than imports. Import growth, which stood at negative 8.8% further declined to negative 21% in 2009 but recovered to 3.5% in 2012. The greater number of imports recorded in 2012 were due to the decline in the number of manufacturing SMEs in the country. The growth rates of both exports and imports stood at roughly 3.5% in 2012. To stimulate growth the Thai government started looking into SME development plans and policies, they then identified and financed major SMEs mostly in the agricultural and manufacturing sectors. However, research has shown that such SMEs development plans and policies cannot achieve the desired economic growth; this is because based on the financial management theory only business investments of high risk result in high returns. The agricultural SMEs that were selected for the plan were low risk businesses and thus they could only bring about low returns. Thus, if the government of Thailand wanted to stimulate economic growth, there was a need for investments in high risk sectors. And thus the foundation of this research is based on one of such high risk investments i.e. high technology businesses. The discussion of high technology particularly IT SME development, performance and strategies will be the foundation of this research. Such information will be beneficial to the government of Thailand's SME development policies (Yoshino, et al., 2015).

The goals of this study are to: identify the strategies used by high --tech firms to innovate and; discuss and form a guideline that can be used by SMEs interested in gaining a foothold in the high-technology sector. The objectives of this study are to identify and discuss business start-up factors and performance via carrying out research in 5 of Thailand's top SME's in the high technology sector and to also investigate their growth patterns in the last three years. Case studies are helpful in cases like this one since they provide a comparative tool that allows us to compare the growth patterns and factors in one company against those of another (Intrama, n.d.).

These days augmented reality in smartphones attracts plenty of attention since the technology uses special software that allows users to turn their phones into virtual displays. Customers that use mobile applications anticipate a captivating experience that is attractive and useful. Leveraging augmented reality can improve existing businesses and even help develop fresh businesses (Infosys, n.d.).The lack of communication between enterprises and peripheral decision makers like the customers can be significantly reduced through the implementation of IVR (Immervise Virtual Reality). Studies indicate that IVR support SMEs in several areas of their external and internal decision making processes and IVR's superiority over 2D technology in carrying out communication (Eisenhardt, 2007; Nutt, 1998; Van Dam, et al., 2000; Brown, et al., 2006). In spite of the significance of computer simulation business, software applications have two core issues in SMEs application i.e. difficult user interface, and absence of real visualization method. Moreover, the applications are very complex and demanding for novices as well as casual users like worker to understand and use them (Seo, et al., 2014).

These days augmented reality in smartphones attracts plenty of attention since the technology uses special software that allows users to turn their phones into virtual displays. Customers that use mobile applications anticipate a captivating experience that is attractive and useful. Leveraging augmented reality can improve existing businesses and even help develop fresh businesses (Infosys, n.d.).The lack of communication between enterprises and peripheral decision makers like the customers can be significantly reduced through the implementation of IVR (Immervise Virtual Reality). Studies indicate that IVR support SMEs in several areas of their external and internal decision making processes and IVR's superiority over 2D technology in carrying out communication (Eisenhardt, 2007; Nutt, 1998; Van Dam, et al., 2000; Brown, et al., 2006). In spite of the significance of computer simulation business, software applications have two core issues in SMEs application i.e. difficult user interface, and absence of real visualization method. Moreover, the applications are very complex and demanding for novices as well as casual users like worker to understand and use them (Seo, et al., 2014).

Factors affecting business success of small and medium enterprises (SMEs)

There is quite a difference in criteria used to determine success in most of the previous studies. These are some of those studies that have focused on the factors that affect performance in the SME sector. According to authors, Indarti & Langenberg (2005), the key components required for the success in the SME sector are; the contextual components of SME development, the characteristics of the SMEs and the qualities of the entrepreneurs. Westhead (1995) on the other hand in his study investigated about 227 SMEs in the high-technology sector. The study by Ghosh and Kwan (1996) made an intersectional study to investigate the key success factors of 164 SME's in Australia and 152 SMEs in Singapore. Yusuf (1995) investigated the factors that were necessary for success in small firms across different sectors based on the viewpoints of some two hundred and twenty entrepreneurs in the South Pacific. Wijewardena and Cooray (1996) investigated the significance of crucial factors for success by looking into some 300 SMEs in the Japanese manufacturing sector. Gadenne (1998) explored the impacts of several management practices on the success of small firms by studying 369 small business in the manufacturing, service and retails sectors in Australia. Bracker & Pearson (1986) investigated the practices and financial performance of small but established firms in the laundry business. Pelham (2000) investigated the link between performance and market orientation of SMEs in the manufacturing sector across 8 different industry sectors. Based on these studies, the factors affecting the success of small and medium sized business can be classified into the following:

The characteristics of an entrepreneur (Kristiansen, et al., 2003; Rutherford & Oswald, 2000; Chittithaworn, et al., 2011)

The characteristics of the enterprise (Kristiansen, et al., 2003)

Management and know-how (Swierczek & Ha, 2003)

The services and products (Hitt & Ireland, 2000)

The manner of doing business and cooperation (Hitt & Ireland, 2000; Jarillo, 1988)

Finance (Swierczek & Ha, 2003; Kristiansen, et al., 2003)

Policies and strategy (McMahon, 2001)

External factors (Huggins, 2000; Indarti & Langenberg, 2005

IT (Hesselmann, et al., 2002)

Despite the huge number of factors only six of them namely, the characteristics of the enterprise, management and know how, services and products, the manner of doing business and cooperation, finance and external factors were considered for the purpose of this study based on their suitability in the Thai context. Thus the success of SME companies is based on the following (in)dependent variables: the characteristics of the enterprise, management and know how, services and products, the manner of doing business and cooperation, finance and external factors (Chittithaworn, et al., 2011).

Significance of the problem

Since, small and medium sized enterprises are crucial to the Thai economy, it is important to find ways to increase their resilience. One of the ways to do this is to give them adequate funding. Credit given to SMEs totaled to about 32.8% of total money loaned out by commercial banks in 2012, a proportion that was still significantly small in scale. However, the scale is somewhat justified since, the total non-performing loans in the SME sector were at 3.4% compared to the overall non-performing loan rate of 2.2% in the second quarter of the country's financial calendar in 2013. While the strong demand for credit by SMEs has somehow shifted the lending practices of commercial banks in favor of the SMEs rather than large companies, lack of collaterals and other form of guarantee still hinders access to credit for most of the SMEs (ADB, 2014; Yoshino, et al., 2015). This study additionally sets its goals to assess the utilization of virtual reality as well as augmented reality in SMEs decision making and use or adoption of these two technologies in Thailand SMEs. This research aims to evaluate the use of virtual reality and augmented reality in supporting innovative SMEs in tackling issues.

Overview of the methodology

The success of the business is the dependent variable while independent variables are: the characteristics of the enterprise, management and know how, services and products, the manner of doing business and cooperation, finance and external factors. A self-structured questionnaire was utilized to collect research information and data. The questionnaire was made up of three segments. The first dealt with profile information, demographic and characteristics of the respondents. The second part was made up of forty questions which were meant to determine the success factors required for SMEs success. The factors were the characteristics of the SME, management and know how, services and products, the manner of doing business and cooperation, finance and external factors (Chittithaworn, et al., 2011).

Delimitations of the study

This study investigates the limitations and challenges associated with the development and success of SMEs in Thailand. The information and data was gathered and analyzed via the interviews with executives of top small and medium sized companies that received financial support from NIA (National Innovation Agency) and literature reviews. The result of the research is that the barriers that are hindering the growth and success of innovation in the small and medium sized businesses in Thailand are: 1) lack of adequate support from the government, 2) high research and developments (R&D) costs and, 3) difficulty in accessing funding (Sukasiriwat, n.d.).

Definitions of key terms

GDP- Gross domestic product

NIA- National innovation Agency

SME- small and medium enterprise

IT- information Technology

NPL-Non performing loan

Organization of the dissertation

This study is organized in the following manner:

Statement of the problem

Introduction

Problem statement

Significance of the problem

Overview of the methodology

Delimitations of the study

Definitions of key terms

Organization of the dissertation

A Review of the Literature

Chapter organization

Review of empirical and theoretical literature

Summary of what the past studies say and imply and how they relate to this study

The methodology of the study

The general methodology

The research context or site

The respondents

The materials utilized

The procedures followed

Analyses made

A summary of the methodology

The results of the study

A chapter overview

The presentation of the results, organized in the manner that the problem statement was stated in the first chapter

A summary of the results obtained

Summary and discussion

A summary of the results, organized in the manner that the problem statement was stated in the first chapter

A discussion of the findings

Literature Review

The term enterprise has been utilized in a variety of different meanings and contexts (Bridge, et al., 2003). According to Salminen (2000) an enterprise is a controlled system that is made up of three components: a selector, a detector and an effector. The detector is the component through which the system collects the information on its environment; this information is then utilized by a different component (selector) as a basis for its behavioral response. And lastly, the behavior is carried out by the effector. There is an assessment system that collects data on the performance and the environment of the enterprise. This data is then utilized together with the values of the management and the company policies to produce decisions on the actions that were required. Consequently, the enterprise's outputs - services, products, financial performance and operational performance -- are changed. Firm performance refers to a company's success in the market. The success of a company in the market may have its own different outcomes. Firm performance is one of the most studied phenomena in business and financial studies. In spite of it being a focal point in these studies, it is also a complex and multifaceted phenomenon. Firm performance can be conceptualized as a company's ability to create desirable actions and outcomes. In general, success is the achievement of objectives and goals in whatever area of human life. In the area of business, success is one of the most significant parts of management, even though it is not usually explicitly stated. Failure and success are interpreted as measures of indifferent or good management respectively. In business studies, the concept of success is frequently utilized to refer to the financial performance of a company (Chittithaworn, et al., 2011).

However, in spite of this use, there is no single globally accepted definition of the idea of success, many different people and entities define it in different ways (Foley & Green, 1989). However, there are at least two important aspects of success:

Financial versus other success; and Long-term versus short-term success.

Thus success in business can take many different forms such as return on investment, profit, survival, reputation, employment stats, happiness, sales growth and so on. Stated differently, in spite of these many different forms of success, many different individuals have the same idea of the concept i.e. what kind of firm is successful.

Thus as mentioned above an enterprise can only be regarded as a SME based the number of full-time employees and the value of its assets. In terms of the total number of small and medium sized enterprises in Thailand, the 2002 census conducted by the country's National Statistics Office, revealed that there were 817, 691 SMEs in the country. Of this total number 35.3% were in retail trade, 14.5% were in the manufacturing sector, hotels and restaurants accounted for 14.3%, recreation and related services accounted for 10.2%. Sales, maintenance and repair SMEs formed 8.2% of the total. Real estate and wholesale trade and commission accounted for 4.3% and 4.1% respectively. Renting of equipment and machinery, transport activities, construction and computer and associated activities accounted for 3.8%, 3.6%, 1.2% and 0.5% respectively (NSO, 2007).

Analyzed in a different perspective, the largest proportion of small and medium sized enterprises were in the food and beverage sector at 19.85%, followed by textiles which accounted for 15.05%, apparel 13.8%, wood and its products accounted for 9.51%. Furniture, fabricated products, non-metallic mineral goods accounted for 5.07%, 4.89% and 2.16% respectively.

Factors affecting business success of SMEs

There are several differences in the criterion used to classify business success in the previous studies. Empirical research into the factors affecting business performance can be divided into two broad groups based on whether they concentrate on a limited variables set or they attempt to capture more holistic characteristics of successful small and medium sized companies. Previous empirical studies have utilized both case studies and surveys. There are also quite a number of collections of the results of previous research of the factors affecting the success of SMEs. For example, Storey (1994) has compiled a collection of several studies on the start, growth and death of SMEs, which form the ground for which he gives some critical "do's and don'ts" with regards to small businesses. Authors Islam, Mian & Ali (2008), in their study of small businesses in Bangladesh found that the management's know-how, the manner of doing business, external factors and the products and services were the most significant aspects in determining the business success of small business. Researchers Indurti & Langenberg in their 2005 study identified the key components required for the success in the SME sector are; the contextual components of SME development, the characteristics of the SMEs and the qualities of the entrepreneurs. Westhead (1995) on the other hand in his study investigated about 227 SMEs in the high-technology sector. The study by Ghosh and Kwan (1996) made an intersectional study to investigate the key success factors of 164 SMEs in Australia and 152 SMEs in Singapore. Kauranen (1996) conducted a study of 37 new manufacturing businesses in Finland and investigated the factors that influenced long-term and short-term success of the companies. Yusuf (1995) investigated the factors that were necessary for success in small firms across different sectors based on the viewpoints of some two hundred and twenty entrepreneurs in the South Pacific. Wijewardena and Cooray (1996) investigated the significance of crucial factors for success by looking into some 300 SMEs in the Japanese manufacturing sector. Gadenne (1998) explored the impacts of several management practices on the success of small firms by studying 369 small businesses in the manufacturing, service and retails sectors in Australia. Bracker and Pearson (1986) investigated the practices and financial performance of small but established firms in the laundry business. Gibb et al. (1995), delved into the planning and practices of successful small businesses that had constantly recorded high growth. Pelham (1996) investigated the link between the performance of SMEs and market orientation across eight different industries (Chittithaworn, et al., 2011).

Based on these studies and previous research done earlier, it was found that success in the SME segment was determined by the following:

Despite the huge number of factors only six of them namely, the characteristics of the enterprise, management and know how, services and products, the manner of doing business and cooperation, finance and external factors were considered for the purpose of this study based on their suitability in the Thai context. Thus the success of SME companies is based on the following (in) dependent variables: the characteristics of the enterprise, management and know how, services and products, the manner of doing business and cooperation, finance and external factors (Chittithaworn, et al., 2011).

Challenges Faced by SMEs in a Virtual World

This advanced way of doing business is quite complicated. The literacy level of three key entities: company owners, consumers and employees has slowed down the adoption of new technologies. Lack of exposure of top executives to the benefits of adopting ICT particularly in making decisions has made the adoption of such technologies even more difficult. SMEs have not yet realized the significance of ICT particularly in the current environment, especially in the growth and development of businesses. Many SMEs have not yet even adopted basic computer processes and thus are not yet willing to take the risk of adopting virtual reality technologies to help them gain a competitive edge. Employees will also have an issue if a business decides to adopt the utilization of IT in their day-to-day operations. Costly training to familiarize the new employees with the new systems might be required. The consumer knowledge level of IT is however, something that is beyond the control of the provider. However, internet usage is exponentially increasing in Thailand. Thus the prospect of using ICT in making day-to-day business decisions is increasing by the day in small businesses and it is just a matter of time before SMEs are able to fully adopt such technologies (Anon., n.d.).

Security is the biggest challenge when it comes to doing business online. The aim of making a transaction private and secure is not only of importance to the client, but it will also determine how efficient and/or effective the website will be as an interface. Financial services providers, for instance, have engaged web security firms to protect their websites from unauthorized access. Certification from web security companies can enable users of these websites to have more faith in a company's website thus enable them to carry out more transactions online (Anon., n.d.).

To make sure that small and medium sized enterprises are moving rapidly towards the adoption of e-commerce, the government itself should spearhead the adoption of ICT. The government of Thailand has brought about quite a number of initiatives to speed up the process of ICT adoption in the country. The government itself has established in the recent past an e-procurement system that accelerates its purchasing process. The system also enables transparency within the procurement process and thus cutting wastages and corruption. This can help SMEs to see directly the advantages of adopting such systems. To ensure growth and prosperity through ICT adoption, there is a need to provide a regulatory framework within which SMEs can operate. A legal framework will help protect these small businesses from uncertainties and provide them with standards which promote the organization and sharing of information between businesses (Anon., n.d.).

CHAPTER 3

Methodology

The goal of this chapter is to describe and discuss the methodology and the research method utilized in this study (Grimsholm & Poblete, 2009).

Research strategy

So as to find the most accurate and relevant answers to research questions it is important to utilize methods and strategies that enable valid and reliable data and information to be gathered. The research strategy of this study begun by collecting and analyzing some background information on the small and medium sized businesses in Thailand, after the analysis of this background data, research questions were formulated and structured based on the literature (Grimsholm & Poblete, 2009).

The results from both the primary and secondary data sources were gathered, analyzed and discussed in order to identify the most meaningful results. Furthermore, the answers from the questionnaires will also be analyzed. The interview questionnaire was made of eighty eight questions all of which were for the purpose of determining factors that were linked to business issues. These 88 questions were sent to 4 different interviewees.

The first interviewee received 32 questions; the second received a questionnaire with 16 questions; the third had to answer 22 questions; the forth received 18 questions. A self-structured interview questionnaire was utilized to collect research information and data. Each of the 4 interview questionnaire was made up of two segments. The first dealt with profile information, demographic and characteristics of the respondents. The second part was meant to determine the success factors required for SMEs success. The factors or questions focused on the characteristics of the SME, management and know how, services and products, the manner of doing business and cooperation, finance and external factors.

Research methods

There are two main types of methods used in data collection: qualitative and quantitative methods (Ghauri, et al., 1995). According to Bryman and Bell (2007) the best-fit approach to do research on business, management and administration aspect is through qualitative research, since qualitative research enables observation, understanding and interpretation of data from an insider's point-of-view.

Data collection

The primary data was collected via qualitative research methods through the use of close-ended questions and interviews. Thanks to SIDA's funding, the authors of this study had an opportunity to travel to Thailand to gather the primary data in the actual environment. To increase the validity and the reliability of the data it was decided to make arrangements for interviews with managers of small and medium sized businesses in the country. These interviews also enabled us to have a deeper understanding of the business culture in the country and the factors that could impede growth and development at a firsthand level. This approach is known as interpretivism according to Bryman & Bell (2007), which means the studying of the problem or object, in its natural environment by the researcher to get a practical view of the theory, in this case the factors impeding growth. For more understanding, interviews with companies that do business with SMEs were also conducted (Grimsholm & Poblete, 2009).

Selected research method

The research questions focused on the general situation in the SMEs in the country to identify not only internal but also external factors that hindered their growth. Thus, the questions had to be qualitative to enable insight into these factors. Hence, a qualitative method was chosen and combined with a few quantitative features (Grimsholm & Poblete, 2009).

Scientific approach

There are two general theories of the nature between research and theory and these are inductive theory and deductive theory, where, in the former, conclusions are derived from researcher's empirical observations which lead him or her to hypotheses and theories, while in the latter approach, theory is considered so as test hypotheses using data, therefore rejecting or accepting the same (Ghauri, et al., 1995; Bryman & Bell, 2007).

Interviews

Due to the numerous factors being studied there was a need to collect as much relevant data as possible from the targeted managers. Interviewing was the best way to do this. However there are two different ways of doing research: semi-structured and unstructured. The semi-structured type of interviews follows a checklist of questions and issues that the researcher intends to cover during the interview (Darmer, 1995; Bryman & Bell, 2007). Thus, this (semi-structured) type of interview was chosen for this thesis. The semi-structured type of interview was chosen also because there was an objective of trying to get the interviewees to speak as freely as possible about what was hindering the growth of the firms. The features of this interviewing method allow open-ended questions that can be modified to suit the specific environment of a particular firm given the specific problems it faces. According to Darner (1995), the semi-structured interview is neither a highly-structured questionnaire nor a free conversation. It provides an opportunity for the researcher to regulate the structuring of the questions; the participants too have the flexibility to speak their minds in detail (Grimsholm & Poblete, 2009).

Chapter 4: Results

Chapter Overview

The research study proposes to explore and undertake an analysis of the major factors that have an adverse and limiting impact on the growth of Thai SMEs. This section analyzes the results of the interview and survey questionnaire summarizing the results obtained.

Presentation of results

One of the questions in the problem statement is which of the external factors in particular impede the growth of Thai SMEs. As perceived and later established in the interview results, there are several external factors that adversely impact the growth of SMEs in Thailand. To start with, one of the major external factors is the lack of funding and accessibility to finance for the SMEs. According to the opinion of the managing director of STS Consumer products, it is quite challenging for SMEs to obtain loans and funding for use given the difficulties faced by them in providing surety and collateral required by banks and other financial institutions. In addition, start-up SMEs barely have any solid financial results which are almost mandatory to be revealed to financial institutions in order to obtain funding. Thus, the growth of SME sector face challenges on the financial front. For instance, the businesses are not able to expand and extend their business operations and are unable to invest in important aspects such as technology and also research and development, which can assist in the growth of the company. New technologies like AR and VR are out of reach of Thai SMEs and most do not find it adaptable to their conditions. The Assistant Manager of International Relations Division also acknowledges that another factor influencing growth for SMEs is the platitude of competition. To start with, the SMEs in Thailand compete against each other solely on the basis of price and not quality. This is possibly, largely due to the insufficiency in the level of competency and proficiency of the management of the business entities. In addition, the SMEs face intense competition from cheaper products from companies based in China as well as India. This is also because the businesses are not cost effective enough and do not have proper procedures that control the cost of production in order to have competitive prices in the market place.

The government regulations such as the need for proper certificates that cost a lot, also prove prohibitive to growth of SMEs, as they are unable to trade more extensively thereby stifling the activity of trading. Majority of the interviewees have given responses to the effect that the SMEs experience quite a number of challenges and issues with reference to the FTA and also regulations in the trading. One other prevalent factor that is gathered from analyzing the four different interviews is that the businesses are, in fact susceptible due to economic volatility. Their small size and limitations of operation render them incapable of surmounting the market turbulences in the same manner and ease with which larger entities cope. Other financial aspects such as the exchange rate fluctuations within the marketplace also have a dominant impact on the Thai SMEs.

There are also comparable responses when it comes to internal factors that impede the growth of the SMEs. For example, one of the aspects that affects the entire SME sector in Thailand is the lack of highly skilled and educated employees as such employees have a preference for large entities and corporations. The main cultural reason why the educated people have a preference to work for LEs rather than for SMEs is simply due to the fact that LEs are bigger in terms of size and status and have the capability to offer higher salaries and better future prospects compared to SMEs. In addition, the educated people consider that they have higher job security in LEs than in SMEs.

There are also other internal factors that hamper the growth of Thai SMEs. The level of competency of the SME management is one significant factor impeding growth of the businesses. From the interview, it is apparent that the SMEs do not have the knowledge to optimize their manufacturing and production systems and to use them to full capacity. Another factor is the inability of the SMEs to market themselves effectively. This is largely because, several of these enterprises find it challenging and difficult to establish distribution channels that are effective, ineffectiveness in conveying and sharing product features and also are not proficient enough in properly pricing their services and products. This implies that, the SMEs will not have the ability to not only increase their sale revenues but will also fail to expand their consumer bases, which play a great part on the growth of any business. This is largely owing to the low-level of competency of the management and administrative teams of the enterprises. For instance, lack of proficiency brings about a lack of suitable provision for marketing infrastructure and lack the ability for innovation. This creates a limitation in the SMEs capacity to market their products to greater expanses of consumers and consequently to growth and expansion of their businesses.

Another internal factor that these SMEs face is that they do not have accessibility to novel technology. The enterprises do not have the knowledge and expertise to seek out technological information and progressions. As a result, for most of the part, the businesses fail to understand, what is the optimal option to pursue and hence, instead follow general trends adapted by others in the industry.

However, it is also imperative to point out that these business have restricted and inadequate resources and do not have the funds for investing in new technology. A further issue is that SMEs devote minimal time and resources on modernization and Research and Development. It is also pointed out that there are opportunities and prospects for the SMEs to link up with research centers run by the government and also universities and technological firms to make use of advanced technology in the different fields of operation.

It can also be seen from the third interview that there is a lack of proper training and education and this adversely impacts Thai SMEs as a majority of enterprises and entities are established by the founders before they attain the proper knowledge that is required. When these SMEs are founded, the owners' perceive a certain demand that they can fulfill in the market and therefore begin with the manufacture of goods and production of services. However, the main issue is that they have no understanding of how they can grow the business utilizing proper management, making the most of the size and demand of the market and also by investing in the new technologies that is on offer. This becomes a large problem because majority of the SMEs have the understanding of producing the goods and services but fail to know the other important areas such as marketing, development of the different SME departments and also investment in research to understand the niche of the market or industry. Therefore, running the business, which is a major element of growing a firm, is missed in most of the SMEs in Thailand.

Summary of Results

All growing economies face economic turbulence and uncertainties when trying to compete with established overseas players. However, ICT is fast rendering the business world a level-playing field. The only requirement thereto is adaptability, thorough understanding, and integration with traditional and regional undercurrents for local SMEs in Thailand.

Such an outlook will make the local entrepreneurs a viable force to reckon with and surmount most of the problems it faces. AR and VR carry with them the dual capability of low cost, yet quality exploration of ideas even as they help the SMEs to visualize future course of action. They, thereby substitute the traditionally costly test-marketing exercises that SMEs can hardly afford. Ironically, and in fact most big companies use such techniques adroitly to make the most of their own resources, thereby saving valuable time and resources. Thailand offers natural resources in abundance in addition to hosting disparate multinational companies and cultures. The nation has potential for consistent growth in many fields as the thriving foreign companies have proven. This augurs well for the new generation to absorb new technology to either help the homegrown industry or startups, or start their own ventures, given the advantage of local consumer reach and knowledge. One of the ways in which Thai SMEs could take advantage of the situation is by leveraging the advantage of proximity to multinationals and their use of AR and VR for their own benefit. Working with the foreign companies will help them learn faster, with increased adaptability and at a low cost (often at the expense of the foreign companies!).

However, the downside projected in the result of the study is that Thais have not taken to ICT vigorously. Lack of talent pool, lure of foreign companies and stability sought in well-paid and assured jobs has dominated the psyche of the educated populace. The local population has simply not embraced the skills required to exploit the power of VR and AR, thereby missing out on the opportunity to entrepreneurship through low cost strategies. Use of advanced and intricate workings of AR and VR require an in-depth knowledge of software tools that comes about by ingraining the basic skills and then exposure to the different advantages that VR has to offer. Thai populace and thereby their SMEs, are at present, not well prepared for such use of advanced technology, making it difficult for them to leverage their natural advantages.

Chapter 5

Summary of the Results

Taking into consideration all the responses from the four interviews, it can be seen that there are similar views and opinions regarding the aspects that have to do with SMEs in Thailand. One of these major opinions that are common encompass the internal and external factors that impede the growth of SMEs in the nation. One major aspect is that the SMEs did in fact experience a crisis with the Tsunami that took place, but thereafter went on to develop and grow. With reference to external factors that the companies face, one of the biggest factors is the inadequacy in financing. This in turn makes it much difficult for the SMEs to be in compliance with the regulations in trade. In addition, the lack of sufficient access to funding makes it much more difficult for the businesses to expand their operations and develop to their won liking and vision. There are also comparable responses when it comes to internal factors that impede the growth of the SMEs. For example, one of the aspects that goes straight across the board is the lack of highly skilled employees as such educated employees have a preference for large entities and corporations. Another factor is the inadequacy in proficiency with regard to the management of the SMEs. Small and medium entities largely depend on the competencies of the management in moving forward and therefore such aspects also adversely affect the performances of SMEs. One more aspect is the competition that the SMEs face. In Thailand, the SMEs have a habit of competing in terms of the pricing of their products rather than the quality of their products. This can be attributed to the flaws and incompetency in management and running of the SMEs. They also face external competition from products of Chinese companies who set very low process as they have low means of production. In totality, all of these aspects do have a negative and limiting impact with reference to the growth of the business.

Discussion of the Findings

This particular research paper has examined the status of SMEs based in Thailand during the period between 2000 and 2008 and especially with reference to the internal and external factors that impede the SMEs to grow. There have also been interviews undertaken of executive members of other organizations as well as institutions such as the World Bank and Institute SME bank in order to attain a much clearer perspective of the factors which act as obstacles to the growth of Thai SMEs. As discussed, there have been both internal and external factors which bring about the limitation to growth. There are a number of aspects that would be imperative for the study in future periods. First of all, it is important to make considerations and comparisons as to whether all of the SMEs that are situated in the nations, irrespective of which sector or industry the serve, face similar internal and external obstacles. In addition, these comparisons could be made with SMEs located in the region and also those in developed nations. For instance, it would be of interest to examine and understand whether SMEs in developed nations also face issues such as that of funding and financing. Another aspect would be why there is a great need to forge papers and bribery to appear as an SME yet there is not official or formal registration with the government. Is it a case of application fees, government regulations or plenty of corruption within the nation of Thailand

The aim of this paper is to explore the internal and external factors that impede the growth of SME sector in Thailand. The study revealed diverse limitations (both external as well as internal) that have inhibited the growth of this important sector, which is capable of posing as a resilient counter to the continuing economic slowdown. In spite of the fact that SMEs all over the world face obstacles much in the same way that Thai SMEs do, in most successful economies, the advantage lies in their general adaption of IT and ICT. The success of SMEs in modern times depend as much on use and deployment of the low-cost digital technology as on the financial and resource generation capability. The access to finance is further complicated by the statutory rules and regulations that make the process of acquiring funds from financial institutions very long and winding, which in turn makes the economy susceptible to corruption and bribery. Thai SMEs face obstacles on the other front, too, mainly owing to two apparent reasons- lack of access to finance and lack of talent pool to leverage the advantage of low-cost technology like AR and VR. This lack of talent pool is more worrying as even if ways to financial resources are worked out, inability to use them proficiently and competitively (owing to lack of skilled manpower) obliterates the advantage of access to resources. The growth of SMEs in Thailand requires that new, innovative, and specific solution be found to overcome the obstacles faced by dearth of acceptance of IT and ICT, which would hasten the march towards acceptability of VR and AR tools to counter the lack of access to finance and resources in Thailand.