Thailand distinguishes itself from other ASEAN markets in a variety of ways: a unique culture and a history of recurring coups, to name a couple. It also stands out in the way in which multinationals typically choose to go to market. Executives display a stronger preference for a hybrid channel structure in Thailand than they do in most other emerging markets in Asia. An FSG survey found that 57% of multinationals’ revenues in Thailand come via the indirect channel, the lowest among the ASEAN-5 markets (see below).
I spent some time recently studying the channel landscape in Thailand and speaking with executives on-the-ground, and found three main reasons why MNCs prefer a hybrid channel strategy in this market:
- First, most multinationals are at a medium stage of maturity in terms of their presence in Thailand, and so a mix of a direct and indirect models is the most effective way for these companies to reach customers and increase sales in the market
- Second, recent macroeconomic factors such as heightened uncertainty and political risk in Thailand have discouraged MNCs from increasing resources and moving to a more direct channel model in the country, leading them to maintain their hybrid channel as status quo
- And finally, certain market characteristics, such as a skills shortage and mismatch, consolidation of economic activity, high logistics costs, and cultural nuances, make having a hybrid model more suitable in Thailand
My research also revealed another interesting distinction in MNCs’ channel strategies in Thailand. In most other APAC markets, companies have a tendency to work with partners of a certain size and coverage (e.g., executives display a strong preference for national distributors in the Philippines). In Thailand, however, MNCs display no such preference. Some choose national, Bangkok-based distributors, while others prefer working with more regional distributors. The Thai market also has a relatively good mix of large, well-established players and smaller, more flexible partners to choose from, giving executives the ability to decide on a partner based on more strategic objectives.
As executives re-evaluate their go-to-market strategy in ASEAN, they need to pay special attention to their channel in Thailand. Managing partners can be challenging in the country because of the unique hybrid structure that distinguishes it from other ASEAN markets. Keeping this in mind, FSG’s recent report on Distribution Management in Thailand provides executives with insights, a framework, and tactics, tailored specifically to the Thai market, to improve their channel performance and succeed in the Kingdom.