Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Factors Influencing the Success of Local Product (SMEs)
in Northeast, Thailand
Phetphrairin Upping* and Thanit Kasorn**
The objective of this research is to study the factors
influencing the success of local product development at
Tambol HaiYong, Phangkhon Sakon Nakhon in Northeast of
Thailand. The result of this study showed key success factors
are both internal and external factors. The main external
factors are government policy and network. Secondly, internal
factors indicate that family group management, strong
leadership, professional skill of member and corroboration
and networking of local product development groups are key
success factors. Coupled with this was the push for local
product development success.
Introduction
Prior research recorded that small and medium enterprises (SMEs) play a significant
role in the Thai economy (Chittithaworn et al., 2011). Consequently, the efficiency of the
small and medium enterprises are closely associated with the efficiency of the country.
In Thailand, small and medium enterprises account for the great majority of the total
businesses in the various areas.
Chittithaworn et al. (2011) revealed that Thai SMEs comprise 93.8 percent of all
establishments. Moreover, of the total number of SMEs that are increasingly seen as
creation of new jobs (Swierczek & Ha, 2003) and Vietnamese SMEs employ 64% of the
industrial work force. SMEs in Thailand play an important role in the country’s economic
development. According to statistics provided by NSO (2012), SMEs accounted for
76.1% of all establishments in the manufacturing sector in the year 2012. The largest
numbers of SMEs concentrated in Thailand are the food and beverage sector, textiles,
wearing apparel and wood products (NSO, 2012).
The intention of this paper is to study factors influencing the success of local product
(SMEs) development at Tambol HaiYong, Phangkhon district Sakon Nakhon province in
Northeast of Thailand. This paper focused only on the textile sector.
*Phetphrairin Upping, Faculty of Industry and Technology, Department of Business Administration,
Rajamangala University of Technology Isan, Sakon Nakhon Campus phetphrairin_u@hotmail.com
**Thanit
Kasorn, Faculty of Industry and Technology,
Administration,Rajamangala
University
of
Technology
Isan,
Thanit_123@hotmail.com
Department of
Sakon
Nakhon
Business
Campus,
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Literature Reviews
The Definition of SMEs in Thailand
The definition of small and medium sized enterprise (SMEs) varies. Thai SMEs have
been defined to 3 board sectors:
1. Production Sector: Agriculture Processing, Manufacturing and Mining
2. Trading Sector: Wholesale and Retail
3. Service Sector
However, type of SMEs in Thailand has been defined according to value of assets of
each type of enterprise and number of full-time employees of each type of enterprise.
1. Value of assets of each type of enterprise
1.1 Production Sector: medium size not exceeding 200 million baht and small size not
exceeding 50 million baht.
1.2 Trading Sector: medium size not exceeding 100 million baht and small size not
exceeding 50 million baht.
1.3 Service Sector: medium size not exceeding 200 million baht and small size not
exceeding 50 million baht.
2. Number of full-time employees of each type of enterprise
2.1 Production Sector: medium size not exceeding 200 employees and small size not
exceeding 50 employees.
2.2. Trading Sector: wholesale medium size not exceeding 50 employees, retail medium
size not exceeding 30 employees and small size not exceeding 15 employees.
2.3 Service Sector: medium size not exceeding 200 employees and small size not
exceeding 50 employees (Norlaphoompipat, 2008).
SMEs Financial and Non-Financial Success Measures
Walker & Brown (2004) defined that SMEs can be measured by financial and nonfinancial criteria. Traditional measures of business success have been based on either
financial performance such as profit, turnover or return on investment. However, it is
known that not all business owners may want to grow their business and there are
some SMEs that deliberately refrain from taking on employees. Therefore using
employee numbers as a measure of business success is neither accurate nor
applicable to all businesses.
Factors Influencing Business Success of Smes
There are many survey studies which examine SMEs success (Chittithaworn et
al.,2011; Qureshi M.H. et al.,2012; Storey, 1994; Salaheldin, 2009; Walker & Brown,
2004). Storey (1994) has been studied on the birth, growth and death of small firms.
Qureshi M.H. et al. (2012) investigated the factors that influence the performance of
SMEs using gender based analysis. A total of five variables were identified as factors
affecting SMEs performance: motivation, social networking, family support, personal
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
characteristics and cultural influence. The result revealed that both genders assume the
same level of motivation and receive equal family support. However, the study shows
that males and females differ on the social networking, cultural influence and personal
characteristics.
Chittithaworn et al. (2011) identified factors that affecting the success of SMEs in
Thailand. Total of eight variables were tested to see the relationship to the success of
Thai SMEs: SMEs characteristics, management & know-how, products & services,
customer & market, the way of doing business & Cooperation, resources & finance,
strategy and external environment. The findings of Chittithaworn et al. (2011) revealed
that SMEs characteristic, customer and markets, the way of doing business &
cooperation, resources and finance and external environment have had a significant
positive effect on the business success of SMEs in Thailand. However, management
know-how, product and services, and strategy were found to have no significant effect
on the business success of SMEs in Thailand.
However, some of the studies have focused on empirical case studies about the
success of SMEs in Asia (Yeb, C. & Lin, Y. 1998). The result of the Yeb & Lin study
revealed that five factors effected the success of SMEs in Taiwan. First of all, in
progressing toward success, activities related to structure, technology, and people
should be inter related. Secondly, successful SMEs in Taiwan place a greater emphasis
on “soft” rather than “hard” issues. Soft “people” events were reported much more
frequently than hard “structure” and “technology” events. Third, the management skill
and management concepts of business founders are deemed much more important
than their technical skills and their concern about production, which has resulted in an
overall positive organizational performance. Fourth, employee skills are of crucial
concern and can be most effectively developed in a nurturing working environment.
Although the impact of business foundering on organizational success remains the
leading factor, employee skills come in as shy as fifth in determining organizational
success. Fifth, the relatively successful entrepreneurs in Taiwan are sensitive to market
trends and aggressive in resource creation and utilization.
According to Ghosh, B.C. et al. (200) who have studied the factors contributing to the
success of local enterprises in Singapore, This survey revealed that Challenge,
personal need for growth, greater personal freedom and an opportunity to use their own
knowledge ranked high in citing reasons as to why they started their businesses.
General management, marketing, engineering and human resource management was
among the chief areas from which leading entrepreneurs originated. The main sources
of finance seemed to be personal savings and family support. Shortage of finance,
strong competition and marketing were cited among the chief problem areas faced by
entrepreneurs. Ability to satisfy customers, finding a market niche, good service, a good
management team and good networking are among the chief success factors quoted.
High cost of operation, shortage of labor and a too-competitive environment was cited
as the main constraints to success.
This paper adds to the literature by focusing qualitative method and Participatory
Learning Appraisal (PLA) research method to fill the gap in the literature. SMEs in
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Thailand were seen as an interesting research focus on the textile sector, as the textile
sector also have been supported by the Queen Sirikit. The Queen Sirikit promoted local
textile production to international trade. As part of this process, it is necessary for the
textile sector to improve their business to assist in achieving better financial
performance.
Methodology
The objective of this research is to study the factors influencing the success of local
product development. The case study was carried out at Tambol HaiYong, Phangkhon
district, Sakon Nakhon province in the Northeast of Thailand. Data collection was
gathered by observation, in-depth interviews and discussion groups. This data was then
analyzed and conclusions derived by qualitative research methodology. Data was also
derived at participatory meetings and discussions. SWOT analysis has been analyzed
by group interview participation. Finally, the research was analyzed and conclusions
drawn from forums within those meetings.
The Findings
The analysis of this paper was divided into two parts. The first part has been reported
by SWOT analysis. SWOT analysis was categorized into two analyses of internal and
external factors. Internal analysis is strength and weaknesses. External analysis is
opportunities and threats. SWOT analysis is one of the most respected and prevalent
tools of strategic planning. Secondly, this paper discussed the factors that effect and
influenced the success of textile SMEs in the Northeast of Thailand.
SWOT Analysis for Textile Local Product Development of Smes in Thailand
Internal Analysis: Strengths
The government of Thailand has encouraged privatization and policy reform of SMEs in
Thailand since the economic crisis in1997. Government policy has supported one
tambol one product (OTOP) as a new venture creation.
Thailand is a small country with many natural resources that make it unique in local
production to the world such as textile local product. The local product is presented by a
green and healthy local production concept. This also is good for Family support.
Internal Analysis: Weakness
In Northeast of Thailand, textile sector SMEs tend to have lower use of information
technology. Technological investment and training are also needed to support the
continued growth of textile sector for SMEs in Thailand.
A lack of professional and workforce skill lead to a lack of new product development for
the textile sector in the Northeast of Thailand. A lack of consultant and lower level of
research and development are the key weaknesses for the textile sector. The need for
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
research grant and other means of support can lead to improvements in key sectors
that are unproductive now. This also can lead local product to the export market.
An improvement in public financial transparency is a key success factor of SMEs in
Thailand. This is because the members of the textile SMEs process the business, not
only leader of groups. Therefore, role models and entrepreneurial leaders are needed to
change the culture. The improvement of entrepreneurial teams is needed for textile
SMEs in Northeast of Thailand.
Another frequently mentioned weakness in business networking is the need for
collecting data production, management and local product networking is the main
improvements. IT system can help for the process of business creation of textile sector
SMEs in Thailand.
External Analysis: Opportunities
SMEs and entrepreneurship education programs in Thai universities are growing and
this represents an opportunity for new ventures. Entrepreneurship and Innovation
programs are an example at Thummasart and Chulalonggorn Universities.
Low cost business and new product development tend to have more interest in local
production of textiles in the Northeast of Thailand.
Tourists have more benefit from the varied geography and topography of Thailand.
Local Textile production has become a more traditional business practice. Every part of
Thailand has individual styles of traditional textile production. Therefore, it allows new
venture start-ups to capitalize on opportunities in tourism and new traditional business
services which are the most important opportunities.
External Analysis: Threats
Thai economic crisis 1997 caused the country’s industrial base to experience a drastic
restructuring, layoffs, and changes in many corporate practices. Therefore,
improvement in personal income and changes in consumer-spending patterns are
needed in Thailand. Government policy, regulation and rules to promote new ventures
of SMEs are needed for change.
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Strengths
Table 1 SWOT Analysis for Textile Sector
Weaknesses
- Strong leadership of SMEs group
- Lower level of research an
- Family supporting
development
- Government policy supporting
- Lower use of information technology
- Resources and product (green of - Lack of professional and component
local and healthy product)
workforce skill
- lack of new product development
- lack of product networking
- lack of textile technology
- lack of financial transparency
- Lack of entrepreneurial teams
- Lack of consultant
- lack of production data management
- Lack of IT
Opportunities
Threats
- SMEs education and program
- High level of competitions
- Lowcost and new product - Regulations and rules of production
development
standard
- Tourism
The key Management Practices of Successful SMEs in Thailand
Based on previous studies, Chittithaworn et al. (2011) have made a conclusion that
factors influencing SMEs business success were: (1) an entrepreneur characteristics
(Kristiansen, Furuholt, & Wahid, 2003; Rutherford & Oswald, 2000) (2) characteristic of
SMEs (Kristiansen, Furuholt, & Wahid, 2003) (3) management and know-how
(Swierczek & Ha, 2003) (4) products and services (Wiklund, 1998,; Hitt & Ireland 2000)
(5) customers and markets (William, Janes & Susan, 2005) (6) the way of doing
business and cooperation (Hitt & Ireland, 2000; Jarillo, 1988) (7)resources and finance
(Swiercaek & Ha, 2003) Kristiansen, Furuholt & Wahid, 2003) (8) strategy (McMahon,
2001) (9) external enviornment (Huggins, 2000; Nurul Indarti & Marja Langenberg,
2005) and (10) internet (Henriette Hesselmann, Comcare, and Peter Bangs, 2002).
As previously discussed SWOT analysis, the SWOT analysis is a shot picture in this
time. This is because the environment is constantly changing and new strategies also
change internal strengths and weaknesses environmental. However, this paper is also
recommended to extend the SWOT analysis methodology by in cooperating ten findings
of previous research to promote SMEs management practices as follows.
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Table 2 Key Success Factors of SMEs in Textile Sector, Thailand
Internal factors:
Key SMEs success factors
(From previous research)
Strengths
- Strong leadership of SMEs group
- management and know-how
- Family supporting
- entrepreneur characteristic
- Government policy supporting
- government supporting
- Resources and product
- resource and finance
(green of local and healthy product)
Weaknesses
- Lower level of research and development
- Lower use of information technology
- Lack of professional
and component workforce skill
- lack of new product development
- lack of product networking
- lack of textile technology
- lack of financial transparency
- Lack of entrepreneurial teams
- Lack of consultant
- lack of production data management
- Lack of IT
External environment factors
Opportunities
- SMEs education and program
- Low cost and new product development
- Tourism
Threats
- High level of competitions
- Regulations and rules of production standard
- resources and finance
- resource and finance
- management and know-how
- customer and markets
- the way of doing business
and cooperation
- management and know-how
- resource and finance
- entrepreneur characteristic
- management and know-how
- products and services
- internet
SMEs success factors
- external environment
- product and service
- external environment
- external environment
- external environment
Conclusions
The purpose of this study was to identify the factors influencing the success of local
product SMEs in textile sector in Northeast of Thailand. The result of this study showed
key success factors are both internal and external factors. The main external factors are
government policy and network. Secondly, internal factors indicate that family group
management, strong leadership, professional skill of member and corroboration and
networking of local product development group are key success factors. Coupled with
this was the push for local product development success.
This paper has provided factors influencing the success of SMEs textile sector in the
Northeast of Thailand. The contributions of this study are threefold. First, it has
expressed quantitative research methodology that had described the complexity of the
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
SMEs study. Secondly, this paper has integrated internal and external factors that can
be barriers to and facilitators of the success of SMEs. Thirdly, it has revealed key
success factors of SMEs in the textile sector. These results may provide helpful frames
of reference by means of which both large and small companies will be able to examine
and strengthen their competitive position in the global economic environment.
Limitations of the Study
This study provides only one case study of evidence that those factors are influencing
the success of SMEs in Thailand. However, the result of this study may not be
representing all textile SMEs in Thailand since the study was for only one case in the
textile sector in Northeast of Thailand. The SWOT analysis is also a short picture. This
is due to the environment is constantly changing and new strategies, also constant on
going changes in internal strengths and weaknesses to the environment. The analysis
could be expanded with the inclusion of a broader scope of viewpoints including
interviews with key SMEs stakeholders, governmental leaders and other policy makers.
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