2.3.1 Overview
The potential for economic growth and the increase in the available labour force (Kaur 2010) have led to many Asian countries being embraced by what could be termed as
‘hungry investors’ who are yearning to conduct overseas business operations to increase their profitability. Evidence from a range of studies reveals that:
From an almost isolated economy in late 1970s, China has become the largest recipient of FDI among the developing world and globally the second only to the U.S. since 1993 (Zhang & Song 2001, p. 386).
In recent years Viet Nam has been pursuing the twin goals of promoting inward foreign direct investment (FDI) and regional development in the context of the Association of Southeast Asian Nations (ASEAN) ... Viet Nam has now largely achieved its initial objective of being a major FDI recipient (Mirza & Giroud 2004, p.66).
Since the late 1980s, Indonesia experienced a surge in foreign direct investment (FDI), particularly in export-oriented FDI, which lasted up to the onset of the Asian economic crisis (Wie 2005, p.219).
Developing countries are major targets for multinational companies (MNCs).
Thailand is one of the countries that have attracted many MNCs from around the world, especially since the Thai government is supporting Thailand’s effort to become an industrialized country (Boonsathorn 2007, p.197).
In the above context, it appears that spreading business into Asian marketplaces has become a growing trend among enterprises that no longer want to depend completely on their national economies contained within their own borders. Furthermore, escalating levels of world trade associated with endeavours to improve the competitiveness of all industries have created superior opportunities for many novel market channels and replacement product choices (Basu 2009; Tempel & Walgenbach 2007; Yeniyurt et al.
2005; Ernst & Kim 2002). This is one of the main forces motivating international business options, whether through being a foreign investor or a recipient of FDI.
Moreover, related factors such as local market competition and government demands also push and propel businesses to globalise (Czinkota et al. 2005; Edgington & Hayter
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2000; Johansson 2000; Osman-Gani 2000). For these reasons, global markets have grown exponentially, whether through investing in or forming international corporations. The Asia-Pacific countries particularly have been considered as a desirable place to invest, due to their support through favourable government policy, stabilised political systems, a large human capital resource, and other related issues (Burton, Tseng & Kang 2006; Mirza & Giroud 2004; Ryan 2000).
With supportive government policies and political systems, a study by Osman-Gani (2000) demonstrated that even the Singaporean entrepreneurs, who had relatively little experience in expanding their international performance when compared with their Japanese, South Korean and other counterparts, had achieved success. Throughout the past few years, Singaporean MNCs have speedily been founded in many areas by applying a policy of regionalisation. This was confirmed by Pangarkar and Klein (2004) who explained that although Singaporean entrepreneurs are new entrants in the global business world, they have performed as successfully as the more experienced entrepreneurs.
Clearly, the influence of overseas subsidiaries in and their business activities on the ASEAN is an undeniable fact. Investors in turn benefit from the foreign investment recipient countries, not only in the form of cheaper labour costs, but also through expanding their distribution channels. These benefits are supported by the study by Buckley et al. (2002) in which many U.S.A. companies such as IBM, Intel, Lucent Technologies and Microsoft, have recently opened laboratories in China. This approach has been driven by the lower costs of hiring Chinese scientists and technologists.
Similarly, Thailand is situated in a favourable geographical location in the heart of Southeast Asia. Therefore, it has been one of the countries in which foreign investors have preferred to locate their manufacturing operations to establish more efficient distribution channels for their regional markets (BOI 2008b; Nopprach 2006; Swierczek
& Onishi 2003).
Economic, geographical, political and cultural aspects have created an infrastructure that allows investors into Asian countries to operate in a relatively uncomplicated process (Hoffman & Preble 2004). However, operating a business and achieving
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success are two different things and they remain a challenge to overseas investors.
Many researchers have found that the effectiveness of MNCs largely depends upon each individual expatriate who is selected to fill host country positions (Shen & Lang 2009;
Caligiuri 2006; Harvey & Novicevic 2002). This finding indicates the need to understand the distinct characteristics or attributes that are essential for MNC expatriate managers to operate subsidiaries effectively in the host country. Moreover, the finding highlights the necessity to define the skills, knowledge and attitudes that MNC expatriate managers need to possess in advance of their overseas assignment in order to be capable of efficiently resolving potential cultural conflicts on site (Caligiuri 2006).
2.3.2 FDI and Change in Thailand
Change has occurred in Thailand both driven by government policies to attract and support FDI and as a flow on effect of changes in the economy linked to MNC operations and the increased job opportunities they bring. Thailand has been a country that foreign investors have favoured for relocating their manufacturing operations, because it is positioned centrally in Southeast Asia and provides efficient distribution channels as discussed earlier (BOI 2008b; Swierczek & Onishi 2003). According to the FDI Confidence Index 2001, Thailand has been considered an acceptable location for foreign direct investments, ranking14th out of the 25 top investment destinations in 2001 (A.T. Kearney 2001), 20th in 2002 (A.T. Kearney 2002), 16th in 2003 (A.T. Kearney 2003), 20th in 2004 (A.T. Kearney 2004) and 20th in 2005 (A.T. Kearney 2005).
Thailand did not appear in the index during the years 2006, 2007 and 2010 (A.T.
Kearney 2010, 2007). However, Thailand’s investment outlook over the years to 2011 showed a positive value according to the ‘World Bank’s Doing Business’ rating. Based on the World Bank Report in 2008, Thailand ranked 13th of the 183 business friendly countries of the world as a country with which it is easy to do business. This was determined based on parameters such as the ease of starting a business, registering assets or properties, enforcing contracts, hiring and terminating employees, protecting investors, and closing or liquidating a business (The World Bank 2008). Thailand’s ranking remained unchanged in 2009 and 2010 (The World Bank 2010).
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In spite of the difficulties Thailand faced in 2011 and 2012 when its ranking receded a little, investors remain positive and have confidence in the country’s future prospects. A study by Maliwan and Mujtaba (2012) indicates that Thailand has remained in a strong economic position with an unemployment rate of less than one per cent. Moreover, based on the A.T. Kearney FDI Confidence Index in 2012, Thailand has since climbed up four places from the previous year to rank 16th of the 25 top investment destinations (A.T. Kearney 2012). Impressive economic growth of the Thai national economy has therefore attracted foreign investors to invest in and relocate their operations to Thailand (Warr 2007).
According to Trade Economics (2012d), Thailand’s Gross Domestic Production (GDP) grew at an impressive rate of 11% in the first quarter of 2012. This growth was supported by well-developed infrastructure and by pro-investment policies that encouraged foreign investment, resulting in Thailand becoming one of East Asia’s best performers in 2012. This situation contrasts with that of other developing countries, such as India, Indonesia, the Philippines and Vietnam, whose GDP only increased by 5.3% (Trading Economics 2012a), 1.40% (Trading Economics 2012b), 2.5% (Trading Economics 2012c) and 4% (Trading Economics 2012e) respectively. In addition, Thailand’s FDI growth showed a positive trend confirmed by the number of investment incentive applications submitted to the Thailand Board of Investment which increased in value by more than 130%, from 66.1 billion Baht in 2011 to 154.2 billion Baht during January and February 2012. This positive trend coincides with evidence of growing investor confidence in Thailand as a desirable destination to do business (BOI 2012c).
Essentially, it is the level of confidence that investors have in a potential destination that drives investment decisions. Confidence is increased by knowledge of location as well as the existence of investment returns. As highlighted by the World Bank Report (2008) and A.T. Kearney FDI Confidence Index between 2001 and 2012, Thailand reflects an attractive investment spot, further strenghtened by positive economic prospects. Hence, investors hold a positive view toward investing in and setting up subisidiaries in Thailand. This triggers the question: What cultural obstacles might an investor face when transferring operations from a host country to Thailand?
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