Saturday, January 26th, 2008

Pensée - Doing Business in Cambodia and Thailand

As promised: The takeaways from the trip (:

The crux of “Business Study Mission (BSM) to Cambodia and Thailand” is in understanding both aforementioned countries’ business environments, chiefly through participant observation. Indeed, this BSM has not only provided key insights in the differences between both developing countries and ‘developing’ Singapore, but also successfully illustrates the innate distinctions between the 2 countries themselves; such learning opportunities would otherwise not be realized in any Prentice Hall or McGraw Hill textbooks. In other words, this was a fruitful BSM trip which would be analyzed in the following aspects.

People, Culture and Consumer Behavior
The fact that the most Cambodians that I have met can speak decent English has impressed upon me deeply, though I have been informed prior to my visit. These include the average Tuk Tuk drivers, roadside stall vendors, masseurs, security guards, etc. Comparatively, I could not recall a similar English standard in other South East Asian nations such as Malaysia, Indonesia and Thailand, all which I had visited. This, of course, is largely attributable to Cambodia’s tourism industry where linguistic ability in English translates economically. Nonetheless, as a businessman, I would be encouraged by this trait since communication is a critical module of any operations, and operations-related skills can be imparted much more effectively. Needless to say, it was frustrating communicating with the locals in Bangkok, especially after arriving from Siem Reap.

I also noticed that Cambodians are generally enthusiastic, friendly and honest. Albeit the slow delivery of services (especially in dining) occasionally, some of the Cambodians I have encountered are witty, quick thinking and are able to “connect” to the tourists. For example, while in a massage centre near our hotel in Phnom Penh in the second night, I witnessed how the female masseurs teased our Indian chief, Prof Tan and how they act promptly in giving Timothy a free 5 minutes massage after they learnt he had waited for 1 hour. I also observed that the locals in Siem Reap were able to exchange banters when we bargained in buying their items such as books (for USD$1!). In contrast, during my stay in Bangkok, I was disappointed with the service level. Many times, I had faced rude Thais who quoted over-the-mountain prices for selling items. Fair enough, this could be due to Thailand’s lower poverty rate

As compared to both Phnom Penh and Siem Reap, it is apparent that the Thais in Bangkok are much more ’savvy’. New phone models are easily noticed on the streets while the music aired in the night spots are current chart-toppers in US and Singapore. Thus, a Singaporean entrepreneur intending to sell to Thais can promote most products that which serves non-basic needs and are concurrently or were recently popular in Singapore. However, in tapping the consumer base in Cambodia, primary products that cater to basic needs would be more feasible and marketable, as the level of sophistication is still relatively low. This may explain why products such as can drinks and snacks in Cambodia’s supermarkets are unexpectedly priced similar to that of Singapore’s.

Infrastructure
Definitely, no business entity can have the best of both worlds - low cost of labor force and facilities, and an efficient infrastructure. Thus, one can expect complaints on the infrastructure during company visits in both countries. As shared, the key to profitability is in finding the balance and formulating a win situation. For example, while in Cambodia and Thailand, one has to consider how the risk of power failures and cost of starting up a production run weigh against cheaper normal operation costs (as PMC Label had learnt), and the low wage costs against under-the-table transaction costs and over zealous union forces (which Berry Garment had informed us).

In particular, a company rep shared how the government procrastinates in solving the failures from power generating plant by assuring “soon, soon”. Rather than depending and pressuring the local authority especially when capital is low, companies should derive their own contingency plans to combat the problems. Also, by tapping on existing infrastructure, companies can make the best out of the worst, such as using Tuk Tuks as a cheap delivery transport medium to squeeze through traffic jams.

Distribution Channels and Opportunities
Quite rightly for a third world country, most food and retail business in Cambodia are not franchised nor are part of a chain. Aside from fast food restaurants, most stores operate as standalones as observed. Such independent distribution channels create additional costs for suppliers as they had to negotiate and transact with more parties, as compared to a single chain. Likewise in Bangkok, though shopping malls can be found sparingly, most businesses are not part of a retail or food chain, and thus the same problems are being posed to suppliers. Also, more independent businesses would represent more varieties of products for consumers and therefore more competitions among suppliers in securing retailers.

Opportunities in the tourism industry, however, are aplenty in Cambodia and Thailand. As discussed earlier, the hospitability of Cambodians is well coupled with many tourism spots in history-rich Cambodia. Currently, Phnom Penh’s Sisowath quay is underdeveloped and is a state of slumps. However, it has much potential as a tourist hotspot. With careful nurturing, it can emulate Singapore’s boatquay’s success within the next few years. An astute entrepreneur can thus await a good timing to enter this arena for a slice of the pie. Of noteworthy also is the Russian market (which locals have affectionately termed the Thieves’ market because of the rampancy of stolen goods sold). In fact, the romance of such an association is attractive to curious tourists, and has its own flavor compared to Bangkok’s Chatuchuk. Finally, Siem Reap boasts Ang Kor Wat as one of the wonders of the world, and again, distinguishes war-torn Cambodia from its neighbors as a place to visit for historical experience in the competitive and lucrative tourism industry. With familiar depreciating USD as the functional currency, Cambodia becomes even more enticing.

Bangkok, on the other hand, provides a different set of experience as a shopping bargain paradise and exotic tasting food. It is truly fascinating how the low costs of items are arrived, and how the huge number of stores in each mall and Chatuchuk differentiates themselves from their competitor with a different variety and complementing each other as partners. In a nutshell, both countries provide vastly different tourism packages compared to Singapore. It would be an interesting tour package that encompassed all of the 3 countries for a tourist wishing to experience different flavors of SEA.