REPORT ON REDUCING JT’S TOO DEPENDENT

ON LOCAL TOURIST MARKET

INTRODUCTION
JT’s has recently encountered the competitive crisis that recent developments were
threatening to undermine its hard-earned success. Bangkok’s increasing adverse
environmental factors such as auto congestion, escalating air pollution, and soaring
AIDS infection rate were causing foreign tourists- JT’s primary customers – to avoid the
city as a travel destination that constitute a significant decline in its profit margin.
Furthermore, JT’s shops were all located in Bangkok, its revenue and profitability was
falling.

To restore its sales revenue and profitability, I strongly proposed that JT’s should adopt
the franchising system to prosper its business and expand internationally as well as on a
long-term plan including changes in the company’s culture, changes to daily operation,
employees hiring and training, store design, and so on.

Purpose, Scope, and Limitation

The purpose of this report is to evaluate the recent slowdown in sales and the
accompanying rise in sales, and suggest the necessary strategies for ensuring that JT’s
will offer the best solutions in restoring its sales revenue and profitability. Although the
report outline a number of options that could resolve the competitive crisis, the actual
impact of these measures is difficult to project, as it is just a theoretical win or “best
guess” view of what JT’s can expect to do in improving the customer service as possible.
Until the company actually implements these steps, however, we won’t know exactly
how much the competitive crisis can be resolved as it require the fully support and
involvement from all levels.

Sources and methods

In preparing this report, I have analyzed JT’s internal sales and transportation and
shipping department's reports for the past few years including the past few years (1984-
1993) that were being significantly affected by the competitive crisis. I also analyzed
trends and suggestions published in a variety of business journal articles to see how other
companies are coping with the similar competitive crisis.

Report Organization
This report analyze the possible strategies to improve its sales revenue and profitability as
well as strategic planning on improving the changes in the company’s daily operation,
employees hiring and training, and so on.

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 SWOT Analysis

A SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business venture. Strengths and
weaknesses are internal to an organization. Opportunities and threats originate from
outside the organization. The SWOT analysis of Jim Thompson (JT) Thai Silk Company
is as following: -

Strength

• JT’s has an outstanding reputation for design and quality of native silk and dyeing
craft, and transformed it into a world-class designer brand. It become Thailand’s
leading retailer of native silk in 1994, commanding an enviable 2/3 market share of
the premium tourist market.

• JT’s has sound management practices and ongoing support and hard work from all its
dedicated company management levels that yield favorable return.

• JT’s insisted on conserving many traditional elements of cottage industry silk

weaving but also emphasis continuous on innovations and technology advancement
that significantly raised the standard of silk production. This resulted in a substantial
improvement in the quality of the silk woven as well as in the volume produced.

• JT’s had own expansion production activities in sericulture, spinning, weaving,

printing, and sewing. It enable JT to meet the requirement of hotels, office building,
apartment, and condominium from time to time need to replace wall covering and
upholstery fabric and improving also its delivery capability.

• Frequent use of outside experts can be a source of competitive advantage, helping

the JT’s provide customers with better goods and services as well as improve
managerial decision making with variety of points of view and approaches to
problems and opportunities that diverse outside experts provide.

Weaknesses

• JT’s is too dependent on Bangkok’s tourist market. Thus, any dramatic drops at
Bangkok retail outlets may jeopardize the whole company.

• Sales to the domestic home furnishing market need to be further expanded and
marketing effort should also be intensified into this segment.

• In Bangkok, the business may be more emphasis on personal relationship and “under
table dealing”.

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• JT’s had neglected some major market such as the condominium market, that their
owner have plenty of money to pay for the very best, however, JT’s has garnered
very little of this market.

• JT’s too dependent on a few people on decision-making and it is not a healthy sign as
crisis may arise for the absence of them.

Opportunity

• The economy of Thailand is relatively free of controls on private enterprise that are
common in other developing countries. The Industries Promotion Act of 1962
provides companies operating in designated industries guarantees against
nationalization, and exemptions from import duties, export duties, and many taxes.
This is beneficial to JT’s on-going expansion.

• Degree of differentiation – JT’s serves a native silk and dyeing craft, and transformed
it into a world-class designer brand where their products can be differentiate from
competitors.

• The Thai “baht” is freely convertible into foreign exchange. Its value against the
dollars has remained very stable over a long period of time. For example: U.S. $ 1 =
25.28 baht (1993), 25.400 baht (1992), and 25.517 baht (1991). Thus, it is advantage
to the JT’s international investment and expansion.

• JT’s export sales throughout the globe was expected to increase due to initiative
planned for 1994 included international advertising program, larger than ever
mounted before; a new show room scheduled to open in London; and increased
effort in several growing Asian market including Korea, Taiwan, and the Philippines.

• Long-term marketing strategies may bring JT’s potential sales increase and
profitability in the long run.

Threat

• JT’s was threatened as in the rival companies that began to spring up all over
Bangkok. The entry of new competitors provides close substitutes for each other in
silk industry.

• Dollars sales at JT’s flagship retail outlet had declined 11% since the peak level
reached in 1990 and the company’s overall retail sales had dropped in recent year.
From the annual report (April 1993), the net profit was $ 181 (baht in million), it was
a decline compared with the previous years: $ 184 (1992), $ 195 (1991), $ 209

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 (1990). This may decrease its stakeholders’ confidence and reliability to the
company.

• Bangkok’s increasing adverse environmental factors such as auto congestion,

escalating air pollution, and soaring AIDS infection rate were causing foreign
tourists- JT’s primary customers – to avoid the city as a travel destination that
constitute a significant decline in its profit margin.

• Since mulberry leaves constitute a silkworm’s chief diet, the Chinese government, in
the 1980s began to allow silk producers to cultivate other crops, led to reduction in
output of raw Thai silk that increase the native silk’s cost of production that may
affect the JT’s overall sales.

• With the advent of industrialization in the early twentieth century, ever-rising

demand for cheaper machine-made textiles from factories in Europe and Japan, dealt
a devastating blow to traditional silk weaving that JT always insisted.

Problem Solutions

In light of the SWOT analysis and further development, the following four options for

improvement were under reviewing on its pros and cons: -

1. Develop a mail order catalogue displaying accessories such as neckties, purses,

blouses, etc. It is an economical but effective way to distribute latest information to

the current and potential customers. The customer may have chances of vision

sensory of latest JT’s silk products that would stimulate and provoke their desire to

buy those products. However, through mail order, some customer may feel that they

don’t have the chances to inspect the products and sometimes the mail order

catalogues may fail to reach the customers due to uncertain circumstances.

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2. Open a retail store in a major foreign city such as New York, Paris, or Tokyo. It is

no doubt a good platform to expand into international market making JT’s silk

product internationally renowned and of course gaining favorable profit margin to

the company if successful. However, when enters a new market, the first issues

faced are building brand awareness and learning about potential customers’ buying

preferences and custom in order to meet local preferences. It is a challenging task to

be completed especially the cross cultural issues in international business such as

communication pattern, decision making approach, management style, approaches

to complete task, attitude towards conflict and so on. Moreover, the project

managers may feel tension and pressure when dealing with international cross-

cultural business issues.

3. Open a retail shop at a Thai beach resort such as Puket, Samui, or Pattaya. All

these three locations were growing very rapidly. The natural beauty of these three

locations may attract many visitors both from local or foreign countries. This has

served a mass market for JT’s to penetrate. Also, it may prosper the economy of

these three locations and improve the living standard of these areas. However, these

three locations, especially Pattaya was beginning to experience its own brand of

environmental degradation and the potential tsunami may pose a threat to many

foreign visitors as well as an alarming proportion of the bar girls, many of whom are

in fact transvestites, are HIV positive.

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4. Expand sales to the domestic home furnishing market. It is a “safe and sound”

way to prosper JT’s business because to penetrate a market that JT’s familiar with is

always less risky in comparison with penetrations a foreign market as proposed in

option 3. Meanwhile, it is save cost as less capital involved on in-depth

investigation and exploration on international cross-cultural issues and marketing

research that is essential in opening an international market. However, it may lead

JT’s management board content with and dependant on the domestic home

furnishing market in the long term, and thus limit JT’s further expansion into

international market.

Best Option I Prefer

Personally, I prefer the last option that expand sales to the domestic home furnishing

market as this option no doubt is a most appropriate solution as refered to the earlier

SWOT analysis. The domestic home furnishing market experienced little adversed effect

from the city’s traffic congestion. Indeed, the market may have actually benefitted from

such congestion, since an increasing number of people were moving from the outskirts of

Bangkok to downtown condominiums near their work locations to avoid traffic jams

during commuting hours. A heady construction boom was taking place in the city, and

new units being built need furnishing. And JT’s reputation for creative design and good

quality were highly prized by interior decorators who acted as prime decision makers in

the market.

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 Moreover, the home furnishing market presented JT with a major challenge, most

home furnishing sales consisted of relatively low-priced cotton fabric produced by

suppliers utilizing high-speed mechanical looms. JT’s weaving expertise, by contrast, lay

in hand weaving. To compete more effectively in the home furnishing market, JT would

need to significantly improve its skill in high-speed mechanical weaving. In an effort to

improve its ability in this area, JT may purchase high-speed mechanical looms and

sending its operators to Germany to receiving training from the firm which had sold it

the equiptment. The technology transfer and frequent use of outside experts can be a

source of competitive advantage, in improving JT’s effectiveness and effieciency.

Additional Recommendation

I personally suggest JT’s should adopt the franchising system to prosper its

business. Franchising System is concept that franchises the business to keen investor. JT’s

may use franchised owner-operator to expand internationally as every franchised

owner/operator in the JT’s system, he/she will benefit from systematic procedures to

ensure successful opening of franchise store in the areas of site selection, building design

and décor, purchasing, marketing, employee training and ongoing operation. Also, every

owner/operator restaurant is locally owned and operated and thus the owner-operators

have such a strong commitment to their community and they feel a responsibility to give

back to their hometown communities and through their hard work. With franchised owner

operator system, the numbers of franchised shops will be unlimited, and it may help JT’s

to eclipse other competitors as the largest silk chain company in the world and to be the

fastest growing quick service silk company made possible through the efforts of

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dedicated franchisees, sound management practices and ongoing support for its entire

franchised owner operator.

Conclusion

In conclusion, any effective strategic planning must include Competitor Analysis. JT’s

needs to determine both the nature and extend of competition and appraise relative

strength and weakness, in this assessment and it is little doubt that having systematic

procedures and for collecting analyzing competitor intelligence is essential to strategic

planning as competition continues to intensify. Also, we should always bear in mind that

our customers are revolting! They are demanding more for less. They want world-class

products and services. They want it all and they want it now. If we cannot provide what

they want, they will find some one who can.