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THAI FURNITURE INDUSTRY CLUB : Road Map: Strategic Implementation
 
for Complete in Global Market for Furniture Industry of Thailand Year 2009-2010

  Reviewed by Dr.Luckxawan Pimsawadi

In order to provide strategic directions, Thailand's furniture business operators from Federal Thailand Industry together with The Thai Furniture Industries Association have formed a working team, so called Working Committee for Thai Furniture Industry Master Plan (CFM) to discuss and brainstorm to develop master strategic plans for the industry in the next decade (2009-2017). These strategic plans are translated into a short term operating plans based on their important priority thought a working committee. This working committee includes member form a Furniture Industry Group within The Thai Furniture Association. Dr.Luckxawan Pimsawadi, a strategic planning specialist is an advisor to the group. This is also in accordance with the Furniture Industry Group's vision of “ Thailand is the furniture hub of Southeast Asia” and within the same direction with Thailand 's strategic plans than focus on Economic and social improvement, a vision on internal trade offensively but within a concept of sufficient economy .

Because of dramatic down-turn of the world's economic situations during the second half of 2008, we need to re-evaluate implementation priority. This economic crisis has a direct impact on Thailand 's export business especially, furniture business. Our major customers such as the USA , Japan and the UK are experiencing a recession, with growth in 2009 expected to be at - 2 to - 1 percent.

Factors influencing theirs situations are:

Negative Impact :

Economic Crisis : Today's crisis is much more severe than the crisis experienced in 1997 call Tom Yum Goong Crisis. A root cause of the problem 10 years ago was our own internal economy. Our customers: USA , Europe and Japan buying power are still going strong. Exporting goods is one of major reasons of very fast recovery. Today's problem is caused from outside, especially from our major customers such as, USA , UK and Japan . IMF has recently estimated that the word's economy growth in 2009 will be only 2.2 percent compared with 3.7 percent in 2008. Our there major customers will experience a growth of 0.7 percent in the USA , a - 0. 5 percent in Europe and a -0.2 percent in Japan .

Political Stability : This is an on going problem started since 3-4 years ago, it reaches the worst point. It is estimated that at least 50 million baht of exporting business was lost during that period. But most importantly our reliability to do business is damaged resulting in cancelled orders and reduced orders, open opportunities to our competing countries.

Exchange Rate and Cash Flow : A volatile and uncontrolled exchange rate adds to high risk in doing international business. Seventy percent of business owners also indicate a cash flow problem. Customers delay payments and asking for longer payment trem. Bank are move stricken in lending especially to furniture business owner for they see a declining business opportunities. Government assistant is their matter's urgently required.

Marketing Problems : Major customers such as USA , European countries, UK and Japan steer to create new market and regulations to make exporting into these countries become much more complicated, especially environmentally related issues.

 

Positive Impact:

World Economy Stimulation Programs : Many countries has injected cash flow into the system. The USA has already injected USD trillion to it's own economy. This will produce a positive impact to the world's economy during the second half of 2009.

Decreasing Crude Oil Price : There is a trend that the crude oil price will remain low throughout 2009. Office of the National Economic and Social Development Board estimated a 60 - 65 USD per barrel of which is in line with a Commerce Ministry's estimate of 60 - 70 USD per barrel. Business operators in Thailand should be able to take advantage of this lower operating cost. Also by openning up a trade agreement such as Free Trade Area (FTA), Thailand will get the advantage bi-literally and multi-laterally with less tax and/or no tax at zero.

Raw Materials Sources: Thailand still has a strong point in having over abundance of good quality raw materials, for example rubber woods. Thailand is the world's third rank in forestation. Our Furniture operators should have an advantage lower grating cost than our neighboring countries. Our major competitors; China , Vietnam and Malaysia use raw material partly from Thailand .

New Potential Markets : Prospective markets can be expanded, especially, contract segment such as India , United Emeritus and Middle East are our targets. However, those countries also are experiencing in economy. In 2009, growth is estimated as 8.5 percent in China, 9.7 percent in India, 6.3 percent in the Middle East 2.5 percent in Eastern Europe, 4.7 percent in Africa and 4.2 percent in ASEAN, (Source : Bank of Thailand, December 2008)

Revised Operating Plans : From the above mentioned factors together with a new leader in the USA and Thailand current political situation, working committee is now adjusting short team implementation priority for the next two years (2009-2010) as follows:

 

Master Strategy 1: Suppliers

Key strategies to be implemented in 2009

•  Set up directions and communicate contingency plans in order to rapidly respond to our member on own cash flow and stricted lending criteria from the banks problems.

•  Reset priority by focusing on research and development of raw materials; rubber woods for improved quality. Only get started on finding alternative resources.

•  Focusing on environmentally friendly sources of raw materials. One hundred percent of our rubber woods comes from natural forestation. Government will be asked to assist in issuing Green Certificate.

•  Discuss with major suppliers to supply center as alternative source for members.

 

Master Strategy 2: Manufactures

Key strategies to be implemented in 2009

•  Ask for assistant from the Government and Private sectors that receive word wide accreditation to set up Quality Testing Institute in Thailand . Academic Institutes will be asked to set up standard testing in Physical, Chemical and ISO. Investment will be asked from government support. Green Label program will need to be implemented by the end of 2009.

•  Initiate projects focusing on reducing operating cost in manpower and raw materials to be competitive advantages over other countries. Machine fund will be implement to reduce machinery cost.

 

Master Strategy 3: Export

Key strategies to be implemented in 2009

•  Organize Business Mission /Trade Fair to potential markets such as United Emeritus, India , Kuwait focusing on customized products in general, designer and project (resort, hotel) markets.

•  Organize Business Mission/Trade Fair to existing markets over countries to maintain market share focusing on customized products in general, designees, and project markets.

•  Set up directions and communicate to member on Trade Fair Strategy. Members therefore can adjust to fluctuated exchange rate, export insurance and shorter letter of credit (LC).

 

Master Strategy 4: Marketing

Key strategies to be implemented in 2009

•  Focusing on offensive marketing through Trade Fair Strategy. Improve Thailand International Furniture Fair (TIFF) to stress on quality and design.

•  Focusing on public relations campaign on design furniture fairs such as Thai Designer to the World, and also give supports to new designer competition program.

 

Master Strategy 5: Human Resources

Key strategies to be implemented in 2009

•  Focusing on competencies development for workforces both local and foreigners. This should include communication skills, operating efficiency and continuous learning in order to reduce operating cost, and support operator needs.

•  Encourage academic institutes to produce workforces for local business such as carpenters for furniture industry in the eastern part of Thailand .

•  Initiate short development programs with local projects academic institutes to basic and special skills of workers for local manufacturer requirement.

Master Strategy 6: Basic Framework on Logistics

Key strategies to be implemented in 2009

•  Cooperate with Government agencies and university to develop program to provide supply chain knowledge to SME's. Also provide knowledge to add value to the product and at the same time reduce operating cost.

 

Master Strategy 7: Basic Foundation of IT, Communication, E - manufacturing and E – commerce

Key strategies to be implemented in 2009

7.1 Encourage business owners in utilizing software and technology in production processes such as container loading, cutting operation, design, management and human resources management

Master Strategy 8: Tax and Government Support

Key strategies to be implemented in 2009

8.1 Ask the government to reduce raw material taxes to zero percent and give tax incentive on order to enhance lower cost.

8. 2 Request the government to allow double tax deduction of import tax for the business owners who join trade show and trade mission with the government or organization certified from the government.

   
   
   
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ASEAN Furniture Industries Council
 
 
Thai Furniture Industry Club The Federation of Thai Industries
Queen Sirikit National Convention Center, Zone C, 4th., 60 New Rachadapisek Rd., Klongtoey, Bangkok 10110 Thailand.

Tel : (66) 2345 1269-70  Fax : (66) 0 2345 1296-97 Email : furniture@off.fti.or.th