Abstract
Thailand features the most comprehensive system of industries and components among the ASEAN countries. Domestic demand is fuelled by a population of 65 million, and Thailand features the geographical advantages of neighboring the potential markets in Myanmar, Laos, and Cambodia while also being in close proximity for the supply of the Malaysian and Singaporean consumer markets. In 1997 Korean giant LG Electronics set up factories in Thailand. It constructed a localized production system and established localized marketing strategies, while also supplying markets worldwide. Thailand has become LG Electronics' third largest home appliances production base in the world after Korea and China. This report analyzes LG Electronics' development strategies in Thailand.
Thailand Has Become LG's Third Largest Production Base Worldwide
LG Electronics adopted the strategy of moving its production lines overseas because of the declining competitiveness of producing domestically in Korea. It has gradually established a component supply chain locally within Thailand and raised the quality of products it supplies to the global market. Since LG set up factories in Thailand in 1997, its main products have been home appliances such as washing machines, air conditioners, compressors, and television sets. These appliances have been supplied to nearby countries Singapore, Malaysia, Indonesia and the Philippines, in addition to exporting products to China, the United States, Central and South America, and Australia. Thus Thailand has become LG's third largest home appliances production base worldwide after Korea and China. At the same time, LG has lowered some of the risk associated with operations in China.
Polarization of Thai Consumer Market Demand
For LG, Thailand not only serves as a manufacturing base for home appliances; it also heavily regards the potential for the Thai consumer market. In order to expand the market share of its products in Thailand, LG has combined the advantage of low manufacturing costs locally with high quality products and localized marketing strategies, expanding sales in the Thai market. But as other large international companies moved into Thailand the competition only grew more fierce, causing the price of home appliances sold in Thailand to become cheaper - 21" television sets in Vietnam cost about US$150, where as in Thailand they cost about US$85.
Recently, Korean companies Samsung and LG are launching high-end Smartphones, and high-end LCD (Liquid Crystal Display) TVs and PDP TVs in Thailand. Using local production advantages, they are also continuing to supply affordable quality home appliances such as washing machines, air conditioners, and refrigerators. Companies intending to expand sales in the Thai market must therefore pay attention to income gaps that cause the polarization of consumer spending.
Thailand to Become a Center for Electronic Products Innovation and Design
The Thai economy continues to grow, with GDP (Gross Domestic Product) per capita at about US$3,166.40 in 2006. Compared to newly emerging countries in Southeast Asia , Thailand is no longer a prime choice for low manufacturing costs. Under this predicament, Thailand is working hard to leave its low-cost positioning behind and to raise the value of its industries. The country is mixing in its unique oriental culture and creative elements to develop itself as a design and R&D center.
As there are no great breakthroughs in the functions of electronics products, consumers tend to focus on design and aesthetics. This design trend has prompted Thailand to focus on the development of the design industry in the hope of becoming the development cradle for Asian design and creativity. In response to this trend and the characteristics of Thailand's industry development, several large global companies are setting up R&D centers in Thailand for home appliances, mobile phones, and game software. In the future, Thailand could rediscover its positioning in the Asian industry, and become a development stronghold for the culture, innovation and design industries.
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