A Case Study On Jim Thompson Thai Silk Company

RAB 8 Barisal

OVERVIEW OF THE CASE :

          Jim Thompson Silk Company started its operation as a retail shop of silk produced by local weavers at Bangkok under the direction of Mr. Booth, the Company expanded into each successive stage of silk production process––– sewing, printing, spinning, weaving as well as sericulture. JT underwent joint venture for sewing and printing and for the rest processes, it established its own plants. JT expanded its production to weaving to meet the color of fabric as demanded by customer as well as to meet delivery schedules. It went to production also to have secure sources of supply of silks and to improve technology JT established joint venture for printing with a German textile printer company Rohleder by name. It also tried to Obtain technology from abroad by bringing foreign experts to Thailand to train its own employees. JT has established production capacity in the field of sericulture, weaving, printing and sewing. It is also well-known for its creative design for neckties, purses and pillow covers. Its sales capacity includes retail sales at five outlets at Bangkok and it export its products to U.S. Japan, Europe and Hong Kong and Singapore. It has grown to undisputed leader of Thi Silk industry with approximately two-thirds share of the entire silk market. Recently, JT faces a threat to its hard-earned success. Bangkok’s increasing auto congestion, air pollution and AIDS infection were causing foreign tourists to avoid Bangkok as a tourist destination. Its shops were all located at Bangkok, so its sales and profitability were falling. Mr. Booth, amusing director of It, has to develop a strategy to solve this decline is sales and profitability by seducing its decadency in Bangkok’s tourist market.

INTERNAL ANALYSIS:

    STRENGTH:  It as a market leader has enormous strength in silk industry. In production process, it established weaving and spinning operations on a wholly owned basis. It established a printing plant in joint venture with Rohleder, a German Textile printer. Its sewing venture is with a Thai business Partner. For state of the art technology JT formed joint venture with Rohleder. To train its own employees it brought foreign experts form china. For financial strengths, it divided was averaged at 30% of earnings recent years. It occupies almost two-third of the local silk market and its export soles belong to more than two dozens of continues. It has no long there debt and it had issued very few shares since its inception.

WEAKNESS:

It suffered weaknesses in the area of marketing since It never had to look too hard for customers, its marketing skill is not yet well developed. Another weakness of JT is that its weaving expertise lay in hand weaving. But to compete efficiently in home furnishing market JT has to improve its skill in high-speed mechanical weaving.

EXTERNAL ANALYSIS :

     OPPORTUNITIES: The home furnishing market presents JT with a major opportunity. New units such as hotels, Office buildings, condominiums and housing projects need home furnishing fabrics. JT has commissioned agents at more than two dozens countries who promote its sales. JT has dedicated manpower, a member of outside experts from china and Germany and a dynamic leader, Mr. Booth. It has purchased most appropriate machinery, which are adapted to its own need. JT has to consider the synergistic effect resulting from its joint venture with Rohleder Company.

THREATS: Recent threat JT suffers is decline in sales in its retail market at Bangkok. Another threat of JT is that it has no diversified product line other than silk. So, if any decline occurs at silk industry it will be difficult for JT to survive. According to the architecture of strategy the following points are identified for JT silk company.

FINANCIAL PERFORMANCE:

Until recently JT’s financial Performance was satisfactory. Its dividend was 30% of earnings in recent years. It has excess amount of earnings each year and no long-term loan. But recently it suffers from decline in sales and profitability because foreign tourists – JT’s primary customers are by-passing Bangkok city for a member of reasons.

                   The growth of JT is from retailer of silk produced by local weavers to a fully integrated silk manufacture. It achieved significant growth in the field of sericulture, weaving, printing and sewing.

                   Financial risk JT undergoes encompasses silk plantation project. It was hard to justify this project on ROI criteria but this facility provided JT important intangible benefits when raw silk prices suddenly rises.

COMPETITIVE ADVANTAGE:

JT has entered into weaving to ensure its product differentiation in terms of product features. Home furnishing market at Bangkok sometimes need wall covering and upholstery fabric. They ask for replacement fabric that precisely matches the color of the original fabric. Contract weavers can’t meet their requirement. So, JT developed its own weaving capacity. Creative design by JT serves to differentiate its product from competitors.

PROCESS EXECUTION: JT develops silk fabric products such as neckties, headscarves, printed cushion covers and printed silk napkin by transforming delicate filament produced by silkworm. It has to follow the spinning, weaving, printing and sewing steps.

WEAVING :

JT’s weaving is largest hand driven weaving in the country; it also operates a satellite-weaving mill, which contains 277 hand looms. For weaving cotton fabric JT operates a few power looms.

  PRINTING : JT uses both hand printing and high-speed  machine printing Most of the printing is for JT’s internal use.

SEWING : JT has 350 skilled seamstresses at its sewing joint venture.

JT manages its demand through its retail shops at Bangkok city and through commissioned agents located at more than two dozen countries. JT understands customer needs by observing its sales frequently.

STRUCTURAL POSITION:

SUPPLIERS : JT procures 34% of its sericulture and 78% of its yarn from suppliers.

 CUSTOMERS: JT’s customers mainly are foreign tourists at Bangkok. Recently home furnishing market terms out to be major customer of JT.

 SUBTITUTES: JT is a market leader in silk industry. It occupies almost two third of the market share. So, its substitute products occupy only one-third of local silk market.

 ENTERPRISE SYNERGIES: JT certainly have core competency in every area of silk processing like weaving, printing and sewing. Requirement at these there sections are supplied internally. It has also competency in sericulture and spinning. Rohleder, JT’s German partner, proposes JT to establish a weaving mill in Thailand on joint venture. Rohlader makes this proposal because JT has operating experience in Asia and JT knows how to use low-cost Asian labor. On the other hand, JT knows Rohleder is skilled in mechanical weaving. So by this joint venture, which they co-own, both of them can gain synergistic effect.

           JT is such a big market power in silk industry that it occupies almost two-third of the total domestic market. JT’s export sales are handled by commissioned agent located at more than two dozen countries. Demand of JT’s produced was so strong that It did not have to worry about marketing until   recent fall in sales.

ORGANIZATIONAL CAPACITY:

LEADERSHIP: JT has become a fully integrated producer of native silk under the leadership of Mr. Booth, its managing director. Booth very frequently holds meeting with key people in the firm whose interaction could benefit the company. As Booth knows both German and Thai language, he even works like a interpreter at the discussion among Tamrong. Surinder and Czerny regarding company’s printing joint venture. Another feature of Booth’s role is maintaining good relation with day-to-day visitors at the company’s head officer.

          Booth was able to establish himself as a role model for the rest to follow. He spend much of his time visiting different operations, raising questions and providing information everywhere he goes. He helps everyone understand the situation JT now faces and makes them think of it clearly. Booth exercises much power and his communication skill was perfect for optimal decision making.

EVALUATION OF THE OPTIONS FOR IMPROVEMENT:

As foreign tourists are by-passing Bangkok, JT has to develop a strategic planning to reduce its dependence on Bangkok’s tourist market. The evaluation of the four options to do so is furnished below  ––

1) Sending the mail order catalog to foreigners who already purchased JT products is a weak strategy. Because it can address only a limited number of customers Relative to other competitors in silk industry this attempt can’t produce any sustainable competitive advantage.

2) Opening a retail store in major foreign cities can improve JT’s sale there. But this effort cannot be an alternative to Bangkok’s tourist market because tourists actually come from different parts of the world. JT’s marketing experience is not very rich. So, it will be difficult to face varieties is competitors in different foreign cities. The marketing structure of the foreign cities, the relative position of the competitors are not known to JT. So opening retail store there certainly bears a significant risk.

3) Opening retail shop at Beach resorts (Puket, Samui and Pattaya) bears some merit. Because JT’s target customers i.e foreign tourists especially Japanese visitors. are increasingly liking Puket. Also infrastructure at Puket is getting momentum. So opening retail shop at Puket is a good strategy for JT. At samui JT can open retail shop as well but opening retail store at Pattaya will not be a wise strategy because it faces serious environmental degradation that sweeps out foreign tourists from there.

4) Domestic home furnishing market shows a great opportunity for JT. Bangkok’s traffic congestion which appeared adversely to JT’s sales, helps to grow the home furnishing market. To avoid traffic congestion people prefer living downtown and as a result new buildings are constructed there. New buildings need furnishing. So, traffic congestion opens a new market for JT. JT’s strategy should be to capture this market by quick response to changing events, use its competence here to build competitive advantage and build and maintain good relationship with interior decorators who acts as prime decision makers in the market. JT should take the synergistic advantage resulting from joint venture with Rohleder to build up its skill in high-speed mechanical weaving. High-speed mechanical loom is a required capacity to capture the home furnishing market.

          So, JT’s strategy should be to render top priority to capture the home furnishing market first. Next priority should be to build retail shops at puket and samui sea beaches. Then JT should observe that how far these two steps can reduce its dependency on Bangkok’s tourist market and increase sales and profitability. If the financial performance shows development then JT should not look for other options. If not, then JT has to rethink its strategy and focus on the first two options seriously.

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