(III) Situational Analysis

(III) Situation Analysis

PEST analysis

1. Political

As we all know the Thai politics seems a bit more stable than previous years (2009) or the year before (2008), but deeply behind the scenes, there are still many disputes that cannot be put off.

The conflicts in the political situation in Thailand are responsible by two parties, which are well known by the people here of “The Red Shirts” and “The Yellow Shirts”. These two parties are the supporters of the ex-government and the supporters of the infant government currently, where one supported Taksin (Ex-Prime minister) and the other rises from the dislike of Taksin.

It all had started when Taksin was asked to resign from the Prime minister chair due to the inappropriate act of corruption. Many people agree with the resignation (The Yellow Shirts) but in the other hand, many people also disagree with the resignation (The Red Shirts). So ever since, the conflict had remains and problems occurred from it seems to have no end to it.

However today, Thailand’s political status is recovering rapidly from the year of 2008 which was the year that the yellow-shirts had gathered and closed down Suwannaphumi Airport. But there are still some problems that occurred from the political crisis today as “The Red Shirts” are still unsatisfied with the new government. The latest act by “The Red Shirts” was the protest in Silom Road. They were there to protest about the confiscation of 70,000 million worth of Taksin’s personal wealth. The gathering had lead to many education sectors to close early and heavy traffic congestion in that area.

But no matter which group gets their action, the people that are suffering from the results and the outcome are by citizens like us and the country itself.

Despite the protest, the conflicts, and the disputes, the infant government still carries on with the management of the country itself. Lead by the new Prime Minister Abhisit Vejjajiva, the new government has been governing for more than a year now.

According to an article on BERNAMA1 (cf Appendix A, article 1) (Anon, 2009) and another article on BANGKOKPOST2 (cf Appendix A, article 2) (Anon, 2009), we can see that the government has approved the project proposed by the State Railway of Thailand and the Thai Ministry of Transport.

1 Appendix A – Article 1 (November 11, 2009)2 Appendix A – Article 2 (November 11, 2009)

The project consist of plans for several high speed rail lines linking Bangkok to Chiang Mai, Nong Khai, Chanthaburi, and Padang Besar. Allowing the project to be proceeded, the project itself is not fully funded by the government, the government also allow private sector to co-invest in the project which takes the form of “Private Public Partnership (PPP)”.

The investor known as the concessionaire has to take in the expenses that will be incurred from building, and in return, the concessionaire will get the right to operate for a period of time. After that, concessionaire will have to return the infrastructure back to the government. This is to share the risk with the private sector and help lower the burden that the government has to carry.

In general the political problems are becoming less aggressive. Our company might still be affected because the project itself might get delayed if any political problem surfaces in the future. Delaying the final decision from the government can put the whole development on hold and affect private sector that are in cooperate with the high-speed train project. So in overall, the political aspect does play an important role in affecting the possibility of the project.

2. Economic

First of all, let’s look at Thailand’s GDP growth rate:

Table 1 : Tradingeconomics3

From the graph, we can see that the economics of Thailand have recovered from the turnovers that had occurred during the end of year 2008. With the negative relation that the Thai economic had been put through, a clear improvement of the economic start at the middle of year 2009 and a great start at year 2010 with 3.6% increase which bring us to the highest growth percentage ever since 2006. The drop of the GDP during 2008 might most likely be because of the global downturn and the politic crisis that Thailand went through. As Thailand is a country that it’s economic is heavily depended on export, the political crisis might have stopped many exporters from exporting the products to other countries which lead to the drop. As the political crisis being less aggressive as it was in 2008, the increase in 2009 proves the decrease of aggressiveness and the increase of stability of the government management.

Now looking at the GDP over the Purchasing Power:

Table 2 : TradingEconomics4

This graphs shows the growth of purchasing power of people in Thailand, despite of the political crisis, there are still an increase in the purchasing power of people in Thailand. The only problem would have been that the purchasing power had increase 3 Table 1 - http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=THB4 Table 2 - http://www.tradingeconomics.com/Economics/GDP-Per-Capita-PPP.aspx?Symbol=THB

in a decreasing manner. People might not be willing to spend as much as they would suppose to be due to the political crisis. This might be a problem in the sense of adapting new technology that will be introduced to the public. But if look at it generally, the creation of this new “High Speed Train” service will create an economic boost. The set-up of the service will allowed more jobs available for the people around Thailand. People get their jobs which mean now there are more people with money to spend. When more people spend their money, the economic will get the boost and increase even more then it will currently.

3. Social

In Thailand, or you can say in Bangkok, traffic congestion is a common issue and well known destiny for people who owns a car or people who travel by public transportation that have wheels. It has become a Thai lifestyle where you are so used to be stuck in traffic jam no way in the near future you will see a chance of improving.

The different modes of transportation in Thailand consist of the following:

Personal Car Many people here do own a car personally, maybe that is one of the

reasons why traffic is so bad in Bangkok. Also they do travel out of Bangkok with their personal car because it is very convenient.

Taxis Yellow, pink, green and lots of other color metered taxis can be found

commonly in the streets of Bangkok Buses

There are buses both with or without air-condition in Bangkok, other than the ones found on streets of Bangkok, there are buses that carry passengers to different cities in Thailand. Depend on the direction you want to travel, there are different bus station where you will have to depart according to the scheduled time.

To go North of Bangkok, buy your tickets at Mo Chit Station. To go East of Bangkok, buy your tickets at Ekamai Station. To go South of Bangkok, buy your tickets at Sai Tai Mai

Station. Air

In domestic flights, you can find Thai Airways, Asia Air, and Nok Air which offer trips between all major cities in Thailand. The flights are more comfortable and faster than Buses.

Motorbike Taxis This is a mode of transportation I believed that cannot be found in any

other countries other than Thailand. These motorbike taxis can bring us through the bad traffic swiftly but prices depend on negotiation.

BTS Skytrain or MRT A train running on a levitated rail above the main roads in Bangkok or

an underground train system running in a different route.

For people that would accept changes and doesn’t enjoy the time wasted in the sea of cars, they would turn to the alternative – BTS or MRT. It took quite awhile though

for Thai people to start adapting this sort of transportation. Thais have slow adaptation to technologies, sometimes it might be because of purchasing power doesn’t allow them to adapt to these kinds of spending. But there are people who are willing to pay more money and spend less time in traffic, these people tends to be those who are more educated and also those who are earning more incomes than the blue collars though.

Looking at the population structure, Thailand has 74 provinces which every province consist of different amount of population. The important cities ranking from their population, contributes to the GDP of Thailand too.

The Ranking Province Year

2003Year 2004

Year 2005

Year 2006

Year 2007

Year 2008

1 Bangkok 8,554,751 8,395,838 8,524,158 9,930,634 10,065,126 10,161,694

2 Nakhon Rachasima 2,591,050 2,539,344 2,546,763 2,555,346 2,552,894 2,565,117

3 Ubon Ratchathani

1,805,322 1,763,061 1,774,808 1,728,529 1,785,709 1,795,453

4 Khon Kaen 1,770,605 1,741,749 1,747,542 1,749,935 1,752,414 1,756,101

5 Chiang Mai 1,603,220 1,630,769 1,650,009 1,661,020 1,664,399 1,670,317

Table 3 : Table of population in each provinces with rankings5

Definitely these cities are connected by roads but it takes times to travel between provinces because transportations available are not that ideal according to either in time costing or the price costing. The time and price costing are inverse proportionally related. So if you want to save time, the choice would be travel by air which the cost will definitely be more than travel by land which is very time consuming.

So if these important routes are connected by high-speed train, the level of living standard of each province will for sure be increased due to the higher circulation of population between each province and easier access for investors. 4. Technology

5 Table 3 - http://th.wikipedia.org/wiki/ รายชื่อจงัหวดัในประเทศไทยเรยีงตามจำานวนประชากร

Transportation has evolved over centuries by the growth of technologies. Horses and other animals that are used as transportation had been replaced by cars, buses, and trains. The invention of airplane has replaced the use of steam boat in the past in travelling between countries and nowadays, it is also used for inbound travel between provinces.

Now, looking at high-speed train, it is widely used in the world from countries like France, Japan, Taiwan, Germany, England, China, and lots of other developing/developed countries.

For our business, technology would play the major role in the quality of service that our company would be able to provide to the customers.

First of all, the tracks, the technology of the tracks must be smooth as in no gaps or rigid shape. Well electrified for the high-speed train to maneuver on it.

Conventional steel wheels trains

- With the technologies of these trains available in the world right now, highest test run speeds can reach over 500km/h. Can be run with a maximum speed of 250km/h commercially. These are the common choices of high-speed train installed.

Maglev trains (Magnetic levitated trains)

- Another technology of high-speed train but differs in the tracks they run on. The train itself doesn’t have wheels to run on but instead, rely on a magnetic technology in pushing the train forward via floating on the magnetic tracks.

Ticket system and security system for checking in/our passenger. Other than letting our passenger in or out from the station, this technology allows us to keep track of the correct distance our passenger had travel and make sure they have bought the correct ticket for the distance they have travel.

These are the technology that will affect the service if not carefully chosen. Hopefully it will replace the diesel-powered trains in Thailand.

5 Forces of Porter

1. Bargaining Power of Suppliers

Low Bargaining power since many companies existed and all wanted to sell their technology. Not many chances for them to perform the installation and construction of the train if not supported by the government. They have to bid for project to be able to start “supplying”.

Railway Maintenance specialist

Rail transportation provider

Provider of Rail systems & equipments

Provider of Rail solution

And many other providers such as countries like Japan and China, being the representatives from Asia.

2. Bargaining Power of Buyers

High Bargaining power:

Other than the diesel-powered train provides train services across provinces, there are services such as tour bus, airplanes, and mini-vans which provide other sort of inbound travel services. Nothing can guarantee that the consumers will turn to use our service out of all the alternatives. This is one of the risks that our service will have to bare with even if our company is the only high-speed train service. The buyers have many choices, especially for those who are in a hurry or those who don’t

want to waste most of their time on travelling would choose the mode of travel carefully. High bargaining power for the buyers.

3. Threat of Substitute product

High Threat of Substitute product:

There are 4 sorts of substitute products in general that can replace the high-speed train service.

Tour Bus:

Big tour bus at bus stations which can carry passengers to regions such as the north, north-east, and south.

There are both air-conditioned tour bus and non air conditioned tour bus available depends on individual taste. The price varies from 100B – 500B.

Strategy: Strategies used by the tour bus definitely wouldn’t be as specific as

strategies for airplanes. Even though so, they still keep up the service and make sure the passengers reach the destination in one piece with low expend.

Diesel-powered Train:

This is probably the slowest transportation mode available for travelling to other provinces.

Thailand has a complete railway system built and used since the time of King Rama V’s reign. No innovation have been made to this mode of transportation ever since.

Strategy:

No innovation in the service whatsoever, similar to tour bus strategy but has advantage of larger range of destination. Pricing is the double the price of tour bus.

Airplanes:

Inbound travelling provided by a few domestic airlines which sometime provide the tickets in a low price.

Nok Air

Bangkok Airways

Air Asia

One-Two-Go by Orient Thai

These are the airlines which can be used as alternatives for inbound travelling. Pricing would be different to tour bus and diesel-powered train, definitely more expensive but tend to not over charge the price.

Strategy: Most of inbound airlines because of their own competitions among the

airlines they are all striving for low-cost strategy to gain a piece in the market shares.

This is probably the most threatening substitute among all which the author believes that tactical promotions should be taken on carefully to tackle into the traveling service industry.

4. Threat of New Entry

Low threat of New Entry:

The threat of new entry would be very low since it would need government’s approval. The routes that each mode of transport would be providing services would need to be submitted to the government to acquire the license. Agreement given by the government isn’t that easy and also takes times because of the bureaucracy way of working in the government department. High investment too would depress the threat

of new entry down. These two factors would be the entry barrier to our service, therefore the “Threat of new entry” is Low.

5. Competitive Rivalry

Looking at all the forces, it consist of low bargaining power of supplier, high bargaining power of buyers, high threat of substitute product, and low threat of new entrees. Definitely, the truth that everyone cannot deny would be that there are lots of existing services that provide inbound traveling in Thailand. It would be a very competitive environment due to the aggressive strategy from each service. With knowing all these risks, the author still foresees a market that could be taken over by the company’s service. We can conclude that the company would face moderate-high competitive rivalry. Though there are some threats from the existing substitution products, the author thinks that with the relative advantages that our service beholds, this can assist the company in building a strong threshold to withstand the existed risks of the competitive market.

Company Analysis

1. Human Resource Analysis

Our company definitely will need many major categories of employees ranging from janitors to maintenance engineers.

Since this business is a transportation service business and many people have to be involved. The employees of the company must all be qualified to ensure proper and positive services can be delivered to the customers. Positions that would be needed to operate the service are as follows:

Service aspect

- Station operator- Provides passenger with the purchase of tickets and

exchange of coins, also responsibility for collecting money, giving the information, and taking care of all passengers.

- Train-attendant- Taking care of the passengers onboard

such as guiding to seats and also provide catering services. Needed to calm disputes onboard too if situation forces so.

- Security- Monitor the station watching out for the odds.

Watch over the passengers and take actions if needed when safety issues being crossed.

- Station janitor- To keep the station clean at all times so a hygiene

environment can be provided to the passengers.

Technology aspect

- Train Driver- Professional drivers that have been properly trained to overlook the

ride of the train.

Maintenance aspect

- Engineers- Large groups of engineers would be

needed in the maintenance aspect. This is to keep the rides always safety and keep tragedy away. Engineers will be needed in looking after:

Circuit and safety system – they are to keep the rails in good conditions and also making sure the alarms/signals in the systems will work when they need to.

Depot – maintenance of the train itself is also important. Daily checkup would be required to keep the train in good shape.

Platform – engineers needed here for looking after the elevation systems of the platform and also other technology systems such as ticket machine, ticket approval entry machine, lighting systems of the platform, broadcast system, safety system, and etc.

Training aspect

- Professionals & Consultants- Qualified professionals and consultants from abroad to collaborate

with the trainings. They are to help with the technology learning for the employees in all aspect and also give consult to what should be the most appropriate trainings for the employees.

So in general, the author believes that not only the employees for the service aspect are important but the engineers in the maintenance aspect are also important. Employees should be well trained together as a whole so the company can provide the safest rides for the passengers along with the best service.

2. Financial Analysis

The company will take on the project with the investment method in the form of “PPP – Private Public Partnership”. Under this model, the company will be cooperating in the form of “Build – Own – Operate – Transfer” which all feasible studies will be done by the government. Our responsibility is to come in and “Build” the rails and platforms, “Own” the service, “Operate” the service, and then later on “Transfer” the properties back to the government after the concession period expired. So these would be what our company has to invest in with the cost estimation done by the government.

Detail of High Speed Rail Project

Amount / Unit

Time Construction /

Year

Total Cost of Investment

Project A 196 KM 3 years and 6 month US$ 3,901,129,956

Project B 1,550 KM 5 years US$ 25,004,916,280

Project C 1,815 KM 6 years US$ 39,293,439,868

Project D 72 platforms 11 years US$ 800,513,896

TOTAL Total distance of 3,165KM and 72 points of platforms. US$ 69,000,000,000

(Please refer to Appendix B6)

Period of Concession : Total of 40 years and 1 day.Period of Construction : Total of 11 years.

As you can see, the cost of investment is not a small sum, in fact it is a very large amount where collecting revenues from passengers only would not help. Not even close in helping with reaching break-even.

6 Appendix B – An overview of the project

Definitely the company’s revenue would have to be generated from other aspect such as advertisement, platform renting fees, logistics, catering onboard and other services.

3. SWOT Analysis

Strength Weakness- High speed, able to travel in speed

ranging from 250KM/H till 300KM/H.

- Save time, no traffic or road congestion in the way.

- Operate in eco-friendly manners.

- Hi-tech, no trains in Thailand can compare to the technology of the high speed rail.

- More safety then airplanes, no crashing.

- Cheaper than inbound air travel (unless it is a low-budget airline)

- Not reachable for all classes of people, more expensive than tour bus or diesel-powered train. People with low disposable income might not turn to our services.

- High investment, have to operate aggressively to balance out the investment and operating cost.

- Lack of experience. Sometimes if abroad technology being handled locally, disorders can incurred.

Opportunities Threats

- The Increase of traveling trend, with the development of the country, people tends to get more leisure time which initiates the traveling.

- First and only high speed rail service across the nation.

- Passengers who are in a hurry will be willing to use our service.

- People might turn to our company for Logistic service. (Inbound logistic)

- Eco-friendly trend might caused passenger to use our service because our service consumes on clean energy unlike airplanes, tour bus, and diesel-powered train.

- Low-budget airlines, dangerous substitute product which is a competition for us.

- The slow adaption of Thai lifestyle. Takes times for Thai people to turn to new technology due to switching cost.

- Pricing higher than every modes of transportation except air travel (exclude low-budget airlines)

- High investment leading to long period of time for the return of investment.

SWOT-matrix

S-O situation

With the opportunities of the increase trend of “eco-friendly” move, passengers that are “eco-friendly” sensitive would be aware of our clean energy usage. This might lead to the acknowledgement of our service and in the end, the acceptance in using our service.

S-T situation

Using our strength, we can overcome the threats of substitute products. With the advantage of high-speed travel and no traffic factors influencing the ride, this can aid our service in competition with other modes of transportation. Hopefully being a new technology in Thailand can lure the attraction and increase the speed of adaptation for the Thais in using high speed rail.

W-O situation

Even if the service cannot be reachable to all classes of people, opportunities such as people who are in a hurry would turn to our service no matter how high the switching cost would be. So no matter how low their income is, if they are in a hurry to reach their destination, our service is always available for everyone.

W-T situation

Having a high investment and the threat of slow adaption can damage our company largely; hence the company would watch out this point carefully and in the mean time, promote the usage of high speed rail to make sure the adaptation wouldn’t take longer than it should.

Customer Profiling

With the increase of population, transportation usage increases too. This means there must be a possibility in the expand usage of transportation. The company would have to focus on these increases of usage and make use of it, therefore we should reach in a step deeper to analyze and identify who are our customers. As a transportation service served to the whole nation, passengers using our services will vary through different age level, also vary in the purposes too. The company would categorize the passengers into groups as follow:

Main customers: Office workers

People from the countryside who are educated would mostly come into big cities for jobs since the earning is more fruitful than working in smaller cities. These people tend to have the trend in traveling back to their hometowns during holidays or long-breaks. Our company will offer these people less tiring rides and also less time consuming too. This means they can spend more times with their family instead of spending it on the traveling part.

Demographic: Low middle-level income and above, age 22 and above, bachelor degrees and above.

Businessmen Businessmen who have to travel across regions for dealing with

businesses are also one of our main target customers. With the short time span in the traveling, businessmen are able to travel to more destinations and get more things done per day.

Demographic: Low middle-level and above, no personal car, age 22 and above, bachelor degrees and above.

Tourist Thailand is famous for its attractions across the nation, many tourist

come to spend their holidays in Thailand. These passengers will definitely uses our service widely since we have stations set up at famous provinces around the nation.

Demographic: high-level income, lots of leisure time, lots of disposable income.

Sub-customers Retired couples

This group of passengers also has potential in using our service. Easier rides provided by the comfortable seating can be enjoyed.

Demographic: age 55 above, lots of savings. Young guns

At the stage of growing and might want to explore around the nation. Might even use the service for traveling into big cities for higher education.

Demographic: age 14 to 19, middle class.

In general, our service actually can be used by most of the people that have disposal income. People who actually came over to use the service would definitely benefit from it. As long as our service contribute positively to the lifestyle of everyone, one day our service will merged into everyone’s life and become irreplaceable when come to long distance inbound traveling .