Global Strategic Management, International Strategic Management, Thai Sugar Industry With Processes, Value Chain, Five Forces And Swot Analysis

2853 words - 12 pages

1. Problem/Key IssueHow to maintain the competitiveness of the Thai Sugar Industry in a dynamic and volatile global market?Porter's Five Forces Analysis on Global Sugar IndustryThreat of new entrants - LOWThe industry requires sugar manufacturing firms to have necessary capital investments such as land and building, warehouses, factories, labor, etc. Moreover, these facilities can be utilized for sugar production including its by-products (i.e. molasses and bagasses) only. This represents the high exit barriers.Threat of substitute products - LOWSubstitutes to sugar do exist in the market. These substitutes such as artificial sweeteners, starch syrup are available but are not widely used all ...view middle of the document...

Thus, we should create our cost advantage by reducing the cost of individual value chain activities.The cost drivers that we attempt to manage are as the followings:Interrelationships among business unitsThe government should encourage players in sugar industry to expand their business unit to ethanol, fertilizer and power plant production. The interrelationships among business units offers us direct opportunities to create a synergy among business units as in sugar, ethanol, fertilizer and power plant products which require a particular raw material, the procurement activity of that material can be shared among the business units. The sharing of the procurement activity can result in cost reduction. However, the cost of coordination, the cost of reduced flexibility and organizational practicalities should be analyzed carefully when devising a strategy to reap the benefits of the synergies.Partial Sugar ProductionThe changes in procurement activities also affect the production activities by which we could synergize product operation in some processes, for example, raw sugar and biogases. As seen above, the diagram illustrates that sugar factories and bio-fuel factories can share the operation from cane unloading until cane milling and the raw juice of sugarcane will be moved on through the mill to be clarified. Then, further process will give us molasses to be used in ethanol factories and the by-product of ethanol such as fertilizer could be used to grow sugarcane.Degree of vertical integrationIn order to reduce the transportation cost; sugar millers can do the vertical integration with sugarcane growers. By becoming a single business, reduced transportation cost will also help save time. The problem that the sugar millers have bargaining power over sugarcane growers causing lower profit for the growers will also be eliminated.Geographic locationIn order to reduce the costs in geographic location; the Thai sugar industry should place attention on the two main perspectives, firstly is the distance between inbound logistic to operation through to outbound logistic and main export countries. From the grower to the miller, the distance should not be far from each other. The miller could set the factory near the grower, which would help reduce the transportation costs and maintain the quality of the sugarcane. The miller also can take over to be the grower; as a result, overall transportation costs from raw material to the miller will be reduced.For the second perspective, since nowadays, the main countries that Thai sugar industry exports to are US, Philippines, Cambodia, Laos, Japan, Myanmar, Germany. Some countries such as US and Germany are quite far from Thailand; thus, the transportation cost is high due to the long distance. In order to reduce the transportation costs, Thai sugar industry should more emphasize on other countries such as China and India which are located nearby Thailand.China has set its 2007 import quota for sugar at 1.945...

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