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Futurizing Futurizing ThailandThailand
Suvit MaesinceeApril 10, 2003
Futurizing Futurizing ThailandThailand
Looking Looking BackwardBackward
Thailand Thailand At the At the
CrossroadCrossroad
The New The New Competitive Competitive ParadigmParadigm
The New The New Competitive Competitive LandscapeLandscape
Futurizing Futurizing ThailandThailand
Looking Looking BackwardBackward
Thailand Thailand At the At the
CrossroadCrossroad
The New The New Competitive Competitive ParadigmParadigm
The New The New Competitive Competitive LandscapeLandscape
Looking Backward: Was There a New Economy?
The First New EconomyThe First New Economy
The Second New EconomyThe Second New Economy
The Third New EconomyThe Third New Economy
The Fourth New EconomyThe Fourth New Economy
1789-1815
Late 1840s-Early 1870
1890-1920s
After WWII-1993
Industrial revolution
The great railroad expansion
Basic technology growth of telephony and electrification
Massive industrialization and economic reconstruction
Source: Roger Cass
• 51 of the 100 Largest Economies in the World are
Now Corporations
--General Motors is bigger than Norway
--Ford is larger than Saudi Arabia
--Japanese Mitsui is bigger than Ireland and New
Zealand combined
• One Third of the World Trade Now Comprises
Inter-company Transactions
• While Countries are Fragmented and Getting Smaller,
Corporations Are Consolidating and Getting Bigger
The Specialization and Integration of Firms
Make It Possible to Increase Aggregate Wealth
New market
offerings Mass production
process
Low cost, consistent
quality, standardized
products
Servinghomogeneous
market
Long product cycles
Stable demand
Long product development
cycles
They Were Based on the Mass Production Paradigm
• Scale• Standardization • Replication • Efficiency • Hierarchy
Critical Driver
Over Over CapacityCapacity
Mass Market Mass Market ParadigmParadigm
Scale Driven Scale Driven EconomyEconomy
Tragedy of Tragedy of the Commonthe Common
Over Over InvestmentInvestment
The Consequence
Industry Rationalization and The Emergence of Global Deflation
IndustryIndustryRationalizationRationalization
Over Over CapacityCapacity
HyperHyperCompetitionCompetition
• # of mergers per year in the US has more than tripled over the past decade, while the value of those mergers has risen tenfold
• During 1997-2000, nearly $5 trillion in mergers took place in the US alone
19901991199219931994199519961997199819992000
2,0741,8772,5742,6632,9973,5105,8487,8007,8099,2789,602
108.271.296.7
176.4226.7356.0495.0657.1
1,192.91,425.81,395.5
#Transactions Value (in $ billion)
Mass Market Mass Market ParadigmParadigm
Scale Driven Scale Driven EconomyEconomy
Tragedy of Tragedy of the Commonthe Common
Over Over InvestmentInvestment
Futurizing Futurizing ThailandThailand
Looking Looking BackwardBackward
Thailand Thailand At the At the
CrossroadCrossroad
The New The New Competitive Competitive ParadigmParadigm
The New The New Competitive Competitive LandscapeLandscape
Is There a New Economy?
The First New EconomyThe First New Economy
The Second New EconomyThe Second New Economy
The Third New EconomyThe Third New Economy
The Fourth New EconomyThe Fourth New Economy
The Fifth New Economy
1789-18151789-1815
Late 1840s-Late 1840s-Early 1870Early 1870
1890-1920s1890-1920s
After WWIIAfter WWII-1993-1993
1993-2020
Industrial RevolutionIndustrial Revolution
The Great railroad expansionThe Great railroad expansion
Basic technology growth of Basic technology growth of telephony and electrificationtelephony and electrification
Massive Industrialization and Massive Industrialization and Economic ReconstructionEconomic Reconstruction
• Communication technology • Globalization of production and consumer markets
Source: Roger Cass
Complexity of Dialog Supported
One To One One To Many Many To Many
WritingWriting
PrintingPrinting
TelegraphTelegraph
TelephoneTelephone
FaxFax
RadioRadioTelevisionTelevision
InternetInternet
Source: Forth Generation R&D
The Evolution of the Mass Media
The New Communication Platform
• Individuals are interacting with the media to work things out
• It is about using the media in an active way, to form and revise our mental models
Tim
e
Industries and Businesses Are Buzzing With Changes
• Economic globalization results from recent revolutions in technology, information, trade, FDI, and MNCs
• Economic life takes place on the global scale, but human identity remains national
• The emergence of global lifestyles, global consumers, global products (e.g., Hollywood movies, pop music, Coca Cola, McDonald’s)
• A vast array of international and trans-governmental institutions and networks setting up the international governance structure and institutional framework
Globalization
Economic Globalization
Cultural Globalization
Political Globalization
Industry Based EconomyIndustry Based Economy
‘Make and Sell’ ‘Sense and Respond’
‘Goods for Elites’ ‘Goods for Everyone’
‘Mass Market’ ‘Markets of One’
‘Owning Assets’ ‘Gaining Access’
‘Corporate Governance’ ‘Market Governance’
‘Just in Time’ ‘Real Time’
‘Local Economy’ ‘Global Economy’
‘Asymmetry of Information’ ‘Democratization of Information’
‘Economics of Diminishing Returns’ ‘Economics of Increasing Returns’
Knowledge Based EconomyKnowledge Based Economy
The Major Shifts
The Major Changes
Source: Consumer Evolution
How we How we perceive time perceive time
and spaceand space
Revolutionary Revolutionary communication communication
technologytechnology
A shift in our A shift in our mental mental energyenergy
Changes Changes our our
behaviorbehavior
How we How we organize our organize our businessesbusinesses
How we How we structure ourselves structure ourselves
to interact to interact with otherswith others
The Way We Communicate
What and How We Know
What We Believe
What and How We Do
Physical
Emotional
Rational
Value Creation
Industry EconomyIndustry Economy Knowledge EconomyKnowledge Economy
Scarcity
Content
Given
Connectivity
Context
Created
Source: Consumer Evolution
We Are Coping With ‘Nanosecond Culture’
• There are a new patent issued in the US every
3 minutes• One hundred twenty-five new products arrive
in supermarkets every weekday
• Technology has always put us within reach,
anywhere, any time, and in multiple ways
• Most of the radical changes are
‘Intra-Generation Changes’• We have discovered how to learn as we go• From uncomfortable with change to
accustomed to big changes
Instance Instance
Obsolescence Obsolescence
Infinite Infinite
ReachReach
Intra-Generation Intra-Generation
ChangesChanges
Oxygen Bar
Organic Food Store
Natural Therapy Shop
Oriental Chinese Boutique
Buddhism Alternative Medicine
Alternative Therapy
Cooking/Painting Classes Natural Beauty Treatment
Zakka Boom
Exploring Local-Contemporary designed products
Exotic Boutique Hotels
Emerging Value
Source: Leo Burnett
People Make Up Their Own Life Stories Instead of Following Traditional Patterns
The Art of Living
The Age of Singularity
Source: McKinsey Quarterly
65% 66%
81%
% Share of Combined Advertising Spend
Geographic Media
Demographic Media
SingularMedia
• Radio• Newspaper• Yellow Pages
• Magazines• Broadcast TV
• Internet• Cable TV• Direct mail
The Alternated Consumers
• 68% research online, buy in store
• 54% research in store, buy online
• 47% research by catalog, buy online
• 38% research online, buy over phone
Source: Jupiter Research/NFO, May 2000, American Demographics, Dec 2000
Time to Mass Market
No.
of
Yea
rs
60
50
40
30
20
10
01860 1880 1900 1920 1940 1960 1980 2000
Auto
Electricity
Phone
Radio
TV
VCR
Microwave
PCCell Phone
WWW
The Adoption Rate Has Been Speeded Up
The Compression of PLCR
even
ue
Time
SalesSales
ProfitProfit
Futurizing Futurizing ThailandThailand
Looking Looking BackwardBackward
Thailand Thailand At the At the
CrossroadCrossroad
The New The New Competitive Competitive ParadigmParadigm
The New The New Competitive Competitive LandscapeLandscape
Strategic Gap II“Our Competitive Position in the Global Economy”
Strategic Gap I “Get out of the Crisis”
Challenges Facing Thailand
HIGH PERFORMANCE
ECONOMY
CURRENTECONOMY
- 10
- 5
0
5
10
15
Q1/43 Q2/43 Q3/43 Q4/43 Q1/44 Q2/44 Q3/44 Q4/44 Q1/45
ThailandMalaysia
Singapore
South Korea
TaiwanHong Kong
%20002000 2002200220012001
GDP Growth
Thailand Has Relatively Outperformed in Recovering Its Economy From the Crisis
Source: Ministry of Finance
Short-term Loans
12,000
14,000
16,000
18,000
20,000
Q1 2000 Q1 2001 Q1 2002P
Mil US$
International Reserve
30,000
32,000
34,000
36,000
38,000
40,000
Jan. 43 Jan. 44 Jan. 45
Mil Bht
External Public Debt
19,800
20,000
20,200
20,400
20,600
Sept. 43Sept.44Sept.45
0
20
40
60
80
2000200120022003200420052006200720092010
%Public Debts/GDP
13,489
38,500
41.759.2
33,154
14,545
20,449 20,420
20,055
58.0
Mil US$
As Shown By Many Key Indicators….
However, While the First Strategic Gap Gets Closer and Closer, the Second One Gets Wider and Wider
Strategic Gap II“Our Competitive Position in the
Global Economy”
Strategic Gap I“Get out of the Crisis”
Can Thailand Compete in the New Competitive Landscape?
World Economy
Thai Economy
Industry BasedEconomy
Knowledge Based Economy
?
Resource and Labor Intensive
International Division of Labor
Investment Driven
Mass Customization Critical Mass Knowledge Intensive Economies of Skills Economies of Speed
Mass Production Standardization Capital Intensive Economies of Scale Economies of Scope
Gro
wth
in Im
po
rt S
ha
re
Growth in Export Share
Source: WTO International Trade Statistics 2001
- 1
0
1
2
3
4
- 1 1
US
ChinaIndia
Vietnam
Philippines
Malaysia/IndonesiaThailandThailand
Singapore
Japan
EU
Our Level of Internationalization
5
q1/ 96
q1/ 9
7
q1/ 9
8
q1/ 99
q1/ 0
0
q1/ 01
q1/ 0
2
Export Price Index
Export Volume Index
-13.8
8.8
17.1
-9.2
Baht Devaluation
Our Export Performance
Source: Ministry of Finance
Correlation of Structure of Manufacture Export
Our Major Competitors
Source: Lall et al (1999)
China
China
Hong Kong
Hong Kong
Indonesia
Indonesia
South Korea
South Korea
Malaysia
Malaysia Philippines
Philippines
Singapore
Singapore
Thailand
Thailand Taiwan
Taiwan
1
0.59
0.35
0.21
0.17
0.35
1
0.31
0.20
0.570.57
0.40
0.43
0.44
0.51
0.36
0.540.54
0.17
0.18
0.21
0.07
0.210.21
0.09
0.10
1
0.66
0.66
0.520.52
0.64
0.73
1
0.74
0.590.59
0.67
0.82
1
0.580.58
0.56
0.62
1
0.81
0.700.70
1
0.76
11
1
• Lack of Focus• Lack of Differentiation
Share in World Foods Export
1.3
2.12.4
Thailand VS. China
1.4
2.5
3.1
Top Three Share
32.2 32.3
26
1980 1990 2000
USA
France
Netherlands
1980 1990 2000
More for Less
Rice World Rice World Market ShareMarket Share
20002000
Thailand USA Vietnam India China Pakistan
24.9
12.710.2 10.0 8.8 8.1
$US/Metric Ton$US/Metric Ton
-12.9
-87.8 -91.4
-15.2
25.8
147.9
X = 279.7_
Rice Rice ProductivityProductivity
6.66
Japan
6.35
China
4.26
Vietnam
Indonesia
4.25
Bangladesh
3.593.24
Brazil
3.19 3.17
Philippines
Myanmar
India
2.962.57
Thailand
Lev
el o
f In
dust
ry A
ttra
ctiv
ene
ss
• Foods• Garment • Jewelry
• Metals• Petrochemicals• Machinery
HighLow
Thai Producers’ Competitiveness
Low
H
igh
• Leather• Electronics• Autos
• Rubber• Wood Products • Pulp & Paper
• Plastics• Ceramics & Glass• Chemicals
Thai Manufacturing Sector’s Competitive Position
Cluster III
Cluster II
Cluster I
% L
oc
al C
on
ten
t
% Export Share
• Frozen Shrimp80
60
40
20
1 2 3 4 5 6 7 8 9 10 11 12
• Frozen Chicken
• Apparel
•
• Precious Stones
• JewelryFabric,Woven
• Footwear
Passenger Car
• Pick Up•
• Computer Equipment
13
•
Electric Appliances
Zooming in the First Cluster
Le
ad
ers
Te
ch
no
log
ya
nd
De
sig
nF
ollo
we
rs
Low Cost
Competitive Advantage
Differentiation
Italy (2)
China (1)
Thailand (11)
Design /differentiation
basedcompetition
Low Cost-basedcompetition
Competitive Nutcracker: Apparel
Hong Kong (3)
Top ThreeTop Three
15,60015,700
16,400
18,500
1,044 1,080 1,105 1,259
ThailandThailand
ChinaChina
ItalyItaly
Hong KongHong Kong
1997 1998 1999 2000
Thai Service Sector’s Competitive PositionL
eve
l of I
ndu
stry
Attr
act
iven
ess
HighLow
Thai Producers’ Competitiveness
Low
• Distribution• Financial Services• Transports
• Business Services • Communications• Environmental Management
• Construction & Engineering• Education• Health & Social• Tourism &Travel• Recreation, Culture, Sporting
Hig
h
The World Top 15 Tourist Destination
# of Tourist Arrivals(Mil)
Receipts (Bil.$US)
30
45
60
75
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90
• •
•
•
• •
• • • • • •
• • • •
France
Spain
Italy
USA
UKChina
GermanyRussia
ThailandGreeceHong Kong
MexicoCanadaAustriaPoland
Hungary20
The World Top 25 Tourist DestinationGrowth in # of Tourist Arrivals(%)
Growth in Receipts (%)
20
30
35
-15 -10 -5 0 5 10 15 20 25 30 35 40 45 50
• •
•
•
•
•
•
•
•
•
• •
•
• FranceSpain
Italy
USA
UK
China
Germany
Malaysia
Thailand
Hong Kong
MexicoCanada
Austria
Turkey
25
10
15
-5
0
5
40
Food
Hong KongHong Kong
Soft Adventure
MalaysiaMalaysia
Asia’s Best Cities
Rank
Source: Asiaweek, Dec 15, 2000
City Country
12344....
FukuakaTokyo
SingaporeOsakaTaipei
.
.
.
.
JapanJapan
SingaporeJapan
Taiwan....
KaohsiungChiangmai
MacauShanghai
BeijingBangkok
TaiwanThailand
ChinaChinaChina
Thailand
121314151617
Asia’s Top Brands
Rank Brand Category Origin
1 Singapore Airline Airline Singapore
2 Speedo Apparel Australia
3 Shangri-La Hotel Hospitality Hong Kong
4 Lee Kim Kee Food and Beverage Hong Kong
5 Foster’s Alcoholic Beverage Australia
6 Qantas Airline Australia
7 Sound Blaster I/T Singapore
8 Acer I/T Taiwan
9 Star TV Media Hong Kong
10 Cathay Pacific Airline Hong Kong
11 Mandarin Oriental Hospitality Hong Kong
12 Thai Airway Airline Thailand
Note: Not include JapanSource: Paul Temporal
The Silent War
Mass Market Mass Market Competitive Competitive
ParadigmParadigm
MassMassCustomizationCustomizationCompetitive Competitive
ParadigmParadigm
New market
offerings
Customization,customerization,
and personalization process
Low cost, high
quality, customized
products
Servingheterogeneous/
individual markets
Shortproduct cycles
Dynamicdemand
Short product development
cycles
Level of Customization
Lev
el o
f S
op
his
tica
tio
n
High Tech
Low Tech
Low Touch High Touch
Creative Industry Landscape
Video GamesVideo Games AdvertisingAdvertisingArchitectureArchitecture
ArtArt
CraftCraft
DesignDesign
FashionFashion
FilmFilmMusicMusic
Performing ArtsPerforming ArtsPublishingPublishing
R&DR&DSoftwareSoftware
Toys and GamesToys and Games
TV and RadioTV and Radio
The Emergence of Creative Industry
Sector Global US UK
AdvertisingArchitecture
ArtCraft
DesignFashion
FilmMusic
Performing ArtsPublishing
R&DSoftware
Toys and GamesTV and Radio Video Games
4540
920
14012577040
50654548955
19517
2,240
2017
42
505
1725
71372433252182
5
960
8231
271362
162156
281
157
Billion $US, 1999
• Demand not Supply
• Creativity not Capital
• Entrepreneurs not Professionals
• Time not Space
• Speed not Scale
The Shortage In the Creative Economy Falls In the Areas of
The Paradigm Lost
Scale Driven Scale Driven EconomyEconomy
Tragedy of Tragedy of the Commonthe Common
Over Over InvestmentInvestment
Shortage of Shortage of DemandDemand
IndustryIndustryRationalizationRationalization
Over Over CapacityCapacity
HyperHyperCompetitionCompetition
Mass Market Mass Market Competitive Competitive
ParadigmParadigm
MassMassCustomizationCustomizationCompetitive Competitive
ParadigmParadigm
Creativity Creativity Driven Driven
EconomyEconomy
New New Competitive Competitive Playing FieldPlaying Field
ParadigmParadigmLostLost
Strategic Traps
More More for Lessfor Less
CompetitiveCompetitiveNutcrackerNutcracker
ProfitlessProfitlessGrowthGrowth
World Market Share
Co
mp
etit
ive
Po
siti
on
Low High
Str
on
gW
eak Ditcher
Our Current Competitive Position
CURRENT ISSUES AND CHALLENGES
Lo
w
High
Operational efficiency
LowPol
icy
effe
ctiv
enes
s
Hig
hL
ow
High
Productivity
Low
Inno
vativ
enes
s
Hig
hL
ow
High
Competitive Advantage
LowCom
par
ativ
e A
dvan
tage
Hig
h
Government
Business
Citizen
Government Expenditure 1997-2001
Fiscal Year
Fixed Expense
Public Investment
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
1997 1998 1999 2000 2001
Mil Bht
Our Budgeting Constraint
International Comparison of R&D Investment
Our Investment for the Future Are Significantly Low
Source: Thailand Economic Monitor, June 2000
0
2.0
1.0
1.5
0.5
2.5
3.5
3.0
USAJapan Korea MalaysiaTaiwan Singapore Thailand
Gaps in Science and Technology (At Current Level of Demand)
We Still Deal With a Wide Manpower Gap in Science and Technology
Source: Lall (1999), Raising Competitiveness in Thai Economy, Country Employment Policy Review, ILO.
M.Eng /D. EngB. Engineering B. Science MS/DS
4,520
10,963
5,874
7,015
180541
(113) (352)
1996
2001
...So We Cast Doubt on Our Ability to Compete
High
Singapore
IrelandThailand
Philippines
IndonesiaChina
France
GermanyUK
India
USA
High
Low
LowEntrepreneurial Capabilities
• Number
• Quality
HR Capabilities
• Number
• Wages
• Skills
Source: Nasscom 1999
Software Industry
The Catalysts for Future Growth Such As Venture Capital Have Lagged Behind Its Competitors
Singapore
Hong Kong
USA
India
Japan
Malaysia
Australia
Vietnam
South Korea
USA
Taiwan
HK/China
Singapore
Thailand
Indonesia
Philippines
South Korea
Australia
PR China
Taiwan
Indonesia
Philippines
Thailand
Malaysia
Venture Capital Assets Under Management (% of GDP)
0.10 0.21
9.173.16
1994 1999
The Same Is Also True for the Incubator Businesses
Incubator Growth
4,000 1,000
US
Germany
E. Europe
UK
France
India
Australia
Canada
Israel
Scan-dinavia
Japan
Thailand
Africa1980 1985 1990 20001995 2005
Incubator by Region/Country
Source: Incubators
Telecommunications Productivity
Our ICT
TFP31-57
Labor Productivity
34-51
Capital Productivity
30-60
Lines/Employee
64
Network Utilization
53-79
Subscribed lines/Unit of Investment
56-76
Installed lines/Unit of Investment
73-100
Subscription Rate76
Index of US (1999) =100; Thai data 1999Source: =McKinsey
+
X
X
X
Thailand’s Current Technology Position
Technology Achievement Index
Leader
FinlandUSSwedenJapanKoreaNetherlandsUKCanadaAustraliaSingaporeGermanyNorwayIrelandBelgiumNew ZealandAustriaFranceIsrael
PotentialLeader
SpainItalyCzechHungarySloveniaHKSlovakiaGreeceBulgariaPolandMalaysiaCroatiaMexicoCyprusArgentinaRomaniaCosta RicaChile
Dynamic Adopter
UruguaySouth AfricaThailandPanamaBrazilPhilippinesBoliviaChinaColumbiaPeruJamaicaIranIndonesiaIndiaSri LankaAlgeriaEgypt
Maginalized
PakistanSenegalNicaraguaGhanaKenyaSudanTanzania
Thailand At the Crossroad
First SphereFirst Sphere
Second SphereSecond Sphere
Third SphereThird Sphere
Political Disorder Mature/Stable Liberal Democracy
Mature/Stable Market Economy
Stagnant/ChaoticEconomy
•ThailandThailand
• SingaporeSingapore
• South KoreaSouth Korea• VietnamVietnam
• PakistanPakistan
Source: Tanaka Akihiko
Futurizing Futurizing ThailandThailand
Looking Looking BackwardBackward
Thailand Thailand At the At the
CrossroadCrossroad
The New The New Competitive Competitive ParadigmParadigm
The New The New Competitive Competitive LandscapeLandscape
From a Ditch to a Niche
World Market Share
Co
mp
eti
tive
P
osi
tio
n
Low High
Strong
Weak
Nicher
Ditcher
Four Strategic Thrusts
Cultural Based Competition
Value Based Transformation
Cluster Based Configuration
Global Local Integration
Cultural Based Competition
Value Based Transformation
Cluster Based Configuration
Global Local Integration
Strategic
Thrusts
Globalization is turning the world into a gigantic
supermarket where nations are nothing more than
products on the shelf, frantically trying to attract the
attention of each passing consumer
Source: Simon Anholt
Germany
France
Italy
Britain
Japan
USA
Engineering Culture
Chic Culture
Sexy Culture
Heritage Culture
Technology Culture
Youth Culture
Culture as the Root of Competency
Cultural OrientationCultural OrientationCountryCountry
Thailand Human Touch
Our Flagship Products
Finland
Switzerland
Ireland
Scotland
India
Singapore
Mobile Phone
Pharmaceuticals; Tourism; Foods; Watches
Wireless Technology
Whisky; Biotechnology; Energy
Software; Talents
Professional Services; Regional Financial Center
Source: Moving the Nation by Dr. Suvit Maesincee
Thailand
Lev
el o
f S
op
his
tica
tio
n
High Tech
Low Tech
FoodsFoods TourismTourism
FashionFashion
SoftwareSoftware
Auto industryAuto industry
Level of Customization
Low Touch High Touch
Potential Global Niches
Cultural Cultural InfluenceInfluence
Cultural Cultural InfluenceInfluence
Craftsmanship Craftsmanship SkillsSkills
Peace of MindPeace of Mind
Delicate LivingDelicate Living
Flavorful SenseFlavorful Sense
Cultural Based Competition
Value Based Transformation
Cluster Based Configuration
Global Local Integration
Strategic
Thrusts
Value addedValue addedPotentialsPotentials
Focus of Focus of Thai ProducersThai Producers
A Nation Orientating Toward a Knowledge Driven Platform Will Consider Outsourcing Much of Its Capital Intensive Production Related Processes
Production MarketingR&D
Production Marketing
Low Cost LeadersLow Cost Leaders
DifferentiatorsDifferentiators
...And Freeing up Capital to Focus on the Parts of Their Industries That Can Be Globally Differentiated
Knowledge based companies will focus on building brand, capturing ‘ownership’ of the customer, end market leadership and investing in knowledge-based core competencies
R&D
Value Created
Dollar
Value
CostCost
PricePrice
Profit
Profit Increases With Value Created
Thai
Testing and Support
Coding
Low-Level Design
High-Level Design
Requirement Analysis
Conceptualization
Ireland
Israel
India
Example: Software Industry Value Created
More for Less
More for More
Less for More
Source: Software Park
1948-1970Self Sufficient
1970-1980Export Agricultural
ProductsProductivity Improvement
1980 upExport Know-How
and Technologies
Exp
ort
Lo
cal
Co
nsu
mp
tio
n
Value addedValue added
Agricultural Output
‘000 ton 1967 1982 Growth
Vegetable 70 165 6%
Citrus fruits 98 160 3%
Other fruits 30 80 7%
Field crops 30 60 5%
Beef 10 40 10%
Source: Israel Ministry of Agriculture and Rural Development
Example: Israel’s Agricultural Industry
Upgrading Our Entrepreneurs From Being Subcontractors to Being Brand-Owners...
Mar
ket
Product
OEM
Loca
lR
egio
nal
Glo
bal
ODM OBM
Fly
No
wF
ly N
ow
Pen
a G
rou
pP
ena
Gro
up
Sen
ada
Sen
ada
AII
ZA
IIZ
Apparel AvenueApparel Avenue
Heart & MindHeart & Mind
KaritaKarita
Toffy BoutiqueToffy Boutique
X-ACTX-ACT DapperDapper
Thai Fashion DesignThai Fashion Design
To Reap More Value Added and Growth Potentials
OBMOBMODMODMOEMOEM SHOP BRANDSHOP BRAND
10-35%
35-40%
50-75%
75-90%FashionFashion BusinessBusiness ValueValue SystemSystem
Transforming from Investment Driven to Knowledge Driven Platform
Investment Driven Platform
Job Creation
Wealth Investment
FinancialCapital
Physical infrastructure as an enabler
ICTas an enabler
ConstructiveEnvironment
Talents
Value Created
Knowledge Driven Platform
Wealth
Cultural Based Competition
Value Based Transformation
Cluster Based Configuration
Global Local Integration
Strategic
Thrusts
Clustering Clustering DevelopmentDevelopment
Knowledge Driven PlatformKnowledge Driven Platform
Emerging
Extending
“Lift-off”
A Cluster Provides a Conducive Platform for the Creation, Diffusion, Adoption and Interaction of Innovation
Creation
DiffusionInteraction
Innovation CycleInnovation Cycle
Adoption
Pro
cess
Rel
ated
Market Related
Local
Loca
lN
atio
nal
Inte
rnat
iona
l
National International
Rural Enterprises
FamilyEnterprises Traditional
Subcontractors
Industrial Districts
Medium SizedNiche Enterprises
SME Networks
Global Subcontractors
Source: Bianchi and Tommaso
Most of Thai Industry Clusters Are Still in the Emerging Stage
ClusteringFormation
Physical Capital
Human Capital
Social Capital
Financial Capital
ConnectivityInteractivity
Key Success Factors For Clustering Formation
Creativity Liquidity
Co-Prosperity
Making Thailand Globally AttractiveCharacteristics Old New
Labor Low cost, unskilled Quality, Higher skilled
Low tax, low service Modest tax, high service
Least cost production, cheap land and labor
Value-added adaptable labor force, professionals
Housing and Transportation
Culture, recreation, museums, shopping, airport
Availability Quality Schools
Not Key Quality schools and research facilities
Minimum Compatible quality of life and business flexibility
Cost/Availability Dependability/reliability
Assumed Technology access
Aggressive chamber of commerce
Partnership
Tax Climate
Incentives
Amenities
Schools
Higher Education
Regulation
Energy
Communication
Business
Source: Kotler, 1999
Strategic
Thrusts
Cultural Based Competition
Value Based Transformation
Cluster Based Configuration
Global Local Integration
Leveraging Geographical Collaborative Network
Local Local LinksLinks
Interregional Interregional BondsBonds
Global Global ReachesReaches
DomesticDomestic TiesTies
The New Geopolitical Equation
Thailand• US
• Japan
• Europe
• India
• Russia
• China
Existing Triad
New Triad
• Japan
• Korea
• ChinaASEAN +
3
Regional Development Strategy
Greater Maklong Sub-region
Source :Marketing of the Nations
• Population 4 millions
• 90,000 SMEs covering 40%
of employment
• Stand alone and subcontractors
SMEs
• Supporting infrastructure:
transports, research center,
financial institutes, university,
laboratories
• Gain advantages of economies of
specialization
• Export-oriented and has capacity
to respond to market changes
and compete globally
Key Features
Emilia-Romagna
Northern Italy
Exam
ple
ATSME
CCC
Northern Network of Service Providers for SME
NOHMEX
FTI
IPC1
NSTDA
NNSPSMENNSPSME
CMU
Service Provided
Information FinanceTrainingMarketing
• Investment Advisory Services
• Business Management Training
• R&D for SME• Market Information• Product Design• Trade Fair
• Financial Advisory Service• Financial Support Service
Community-RegionalCommunity-RegionalTradeTrade
Community-GlobalCommunity-GlobalTradeTrade
Inter-CommunityInter-CommunityTradeTrade
Intra-CommunityIntra-CommunitySelf-SufficiencySelf-Sufficiency
SurplusSurplus
SpecializationSpecialization
Local Links Global Reaches
Social Cohesion
International Competitiveness
Efficiency Cost effective Productivity Innovation
Sufficiency Community Building Cultural Identity Family Value
Final Word
Talent
Conducive Environment
Value Created
Wealth
Job-Wealth Cycle
Job
Wealth Investment
Capital
Knowledge Wealth Cycle
Higher Education Agenda
Source: Modified from Plowing the Sea
• System thinking, results form mental models• Integrative, interdisciplinary approaches• Team oriented
• Create wealth through innovation and distribute to most productive people• Law and regulatory framework as enabling investment in innovation• Informal producers increasingly integrated
The Old Direction A New Direction
Social Capital
Human Relations
• Paternalistic• Hierarchical organizations• Individual oriented
• Trust oriented• Interdependent• Meritocratic• Team oriented
Human Capital
• Labors and managers are fungible• Viewed as input costs• General education
• Source of competitive advantage• Source of increasing return on inv.• Education as specialized, focused
Learning
• Linear learning, results form strategy choices and organizational design (single loop learning)• Reductionist strategies• Technical and compartmentalized
Justice and Social Equity
• Redistribute finite wealth• Law and regulatory framework as constraints• Informal producers are marginalized
New Direction of Investment in Human and Social Capital
Value addedValue addedPotentialsPotentials
Focus of Focus of Thai ProducersThai Producers
Strategic Focus
Production MarketingR&D
Community-RegionalCommunity-RegionalTradeTrade
Community-GlobalCommunity-GlobalTradeTrade
Inter-CommunityInter-CommunityTradeTrade
Intra-CommunityIntra-CommunitySelf-SufficiencySelf-Sufficiency
SurplusSurplus
SpecializationSpecialization
Strategic Coverage
Social Cohesion
International Competitiveness
Efficiency Cost effective Productivity Innovation
Sufficiency Community Building Cultural Identity Family Value
Innovate or Die