Strategy for Siam Canadian Food Co - Case Study Example

Business Case Analysis Siam Canadian Food Co., Ltd. Analysis Siam Canadian Co., Ltd. was founded in 1987 by James Gulkin, Managing Director, with its main office in Bangkok, Thailand. The company delivers frozen seafood and other products to major buyers worldwide, and because Thailand has been able to produce agricultural products more cheaply than other Asian countries, this has been of benefit to the company. The following is an estimate of shrimp exports up to 1997: 1 Year 1990 1992 1994 Baht (Billions) 20.5 31.7 49.2 Over the years, however, the company has expanded by diversifying away from its traditional agricultural base toward industrial and service sectors. They have increased their output to include frozen poultry, canned and frozen fruit and vegetables, dehydrated fruit and juice concentrates. At present, it has inter-linked offices strategically located throughout Asia-including Thailand, Vietnam, Myanmar (Burma), China and India. Views In 1997/98 the Thai economy was in a deep recession as a result of the severe financial problems facing many Thai firms, particularly banks and financial institutions.2 Siam Canadian, in an effort to expand its bases, had to determine if opening a branch in Burma would be feasible at that time. It was important for the company to explore the possible risks of such a move, and a study of the country of Burma was necessary. One risk that needed to be addressed was the United States decision in April 1997, to clamp sanctions on Burma. It quickly became evident, however, that the United States had less economic leverage in Burma than in many countries around the world. And it failed to persuade Burma's neighbors in the region-- its primary trading partners -- to join in any form of sanctions.3 Effects of US economic sanctions also were offset by Burma’s admission into the Association of South-East Asian Nations in 1997. One Burmese official had already shrugged off the sanctions. "We have been surviving without any assistance from the US government for years, so I don't think these sanctions will have any effect on the Myanmar (Burmese) economy," he said.4 Another possible risk was the existence of a powerful military group, which in 1997 was renamed Union Solidarity Development Association and was recognized as the military junta’s political wing. Nevertheless, Siam Canadian was not affected by these risks. Thailand has never expressed openly what sectors might be at risk from market access, but it has had experience in agriculture and food sectors and the strategy has always been to conform to importing countries’ expectations. Arguments It must be noted that Burma (renamed Myanmar Naing Ngan in 1989), is an ethnically complex and diverse nation, which the UN in 1997 named a least developed country. Serious complaints about human rights violations appeared in the news, and this could cause market difficulties with other companies outside of Asia. A Human Rights Watch report dated July 1997 (Vol. 9, No. 6) documented the continued systematic violation of internationally recognized human rights by the Burmese military against ethnic minority villagers in Burma's Karen, Mon and Shan States during 1996 and 1997. It also catalogued the treatment by the Thai authorities of those who fled these abuses and sought refuge in Thailand. The growing hostility of the Thai authorities towards refugees from Burma grew in direct proportion to the increased economic cooperation between the Burmese and Thai governments.5 Because of its dependence on its Asian neighbors, Burma would be receptive to having Siam Canadian open a branch in their country, and would benefit greatly from the economic opportunities such an action would bring. Burma, at the time Siam Canadian was looking into the benefits and risks of moving into the country, was an agricultural economy with largely undeveloped industrial sector, and a small manufacturing sector dominated by food processing. This would encourage Siam Canadian to follow through, since their product is food-related. One of the most attractive features of Burma at the time was its supply of shrimp. Modern shrimp farming, the production of marine shrimp in impoundments, ponds, raceways and tanks, got started in the early 1970s, and in 1987, this was a bonus for Siam Canadian since Burma had many shrimp farms. Burma's shrimp farmers did and still do: rely on wild shrimp for the production of seedstock. They capture wild postlarvae, which are stocked into nursery or growout ponds, or they spawn wild females at a hatchery. Spawning requires raising young shrimp through several larval and postlarval stages. Once a growout operation is stocked with postlarval shrimp, it takes from three to six months to produce a crop of market-sized shrimp. Temperature has a lot to do with it. Shrimp like it hot, and most species prefer, but are not restricted to, brackish water.6 Recommendations When a company knows its weakness and identifies the threats in the market it can make decisions that will help it in overcoming the weakness and properly handle the threats. The strength which Siam Canadian Food Co. Ltd. enjoys is their experience in the frozen sea food business. They have good customers loyal to them and they are able to get good business deals. They have established their goodwill among the customers. Gulkin is a good entrepreneur with excellent decision-making skills, who wants to do business in an ethical environment. The first weakness of Siam Canadian Food Co. Ltd is availability of resources. The shrimp market in Burma was worth signing into. The opportunity was huge; the sea food sector is a promising sector, and Gulkin has already tasted success in this sector. The unstable political situation possibly could be a major threat for Siam Canadian Food Co. Ltd. if they choose to move into Burma, but considering the support Burma enjoys from Asian companies, it is probably not a concern. Even so, the majority of their customers are from Europe and the U.S., and the threat of getting black-listed and losing all business could be a concern. Gulkin should weigh this against the possible profits to be made if he opens an office in Burma. On the basis of above analysis we can see that though the market is lucrative, problem areas do exist. These are basically the concerns related to the economic restrictions and the poor infrastructure of Burma. Gulkin has already assessed the markets of other nations like Cambodia and Malaysia where he found several factors disturbing his business plans and decisions. He is more comfortable with Burma as it matches his business philosophy. His attitude towards entering to the Burmese market is positive though he is concerned about various factors like economic restrictions, infrastructure etc. As mentioned previously, Gulkin is interested in developing relationships and trust factors with the independents. He believes that economic empowerment will raise the hope of democracy. He feels on various parameters that Burma is better in the human rights and business environment than many other countries, even with the concerns expressed previously. In the business sector, a decision to enter Burma would be recommended, regardless of ethical concerns. On the basis of the facts presented in the case and analysis I would recommend taking the risk without concern that it will affect current business, and as a matter of fact, will open up a new entity all together. Gulkin has already started his business in Vietnam with a local Vietnamese partner. They have their separate company for distributing to the local market, and Gulkin can start his brokering business in Burma. The new entity will cater to the needs of the Asian, Canadian and other markets where there is less threat of economic restrictions. This will also identify the new markets and business opportunities within Asia. The company can be merged with Siam Food Co. Ltd, if required. This will be a future strategy once the threats of economic restrictions are over. This way Gulkin will neither lose the opportunity nor will he be black-listed by the countries he is already serving. He will be able to tap opportunities of the new market in Burma and utilize expertise in developing its business. At the same time, customers in the U.S. and U.K. market will be taken care by Siam Canadian Food Co. Ltd. This business strategy will benefit Gulkin and his business in a long term. Read More