GreenCo Water - Case Study
GreenCo Water, a small Australian business, developed an innovative product to solve water storage problems – a water tank that can be stored in a flat pack and requires minimal assembly. Thanks to their existing relationships with a large Thai plastics manufacturer they were able to get their award-winning product manufactured in Thailand and into Australian stores at the requisite level of quality, cost and speed.
No matter where you are in the world, relationships are a key part of doing business – and this has certainly been true for GreenCo Water and their Thai manufacturer, Srithai Superware.
Srithai Superware has been in business since 1963 and is a household name in Thailand. The company produces a range of products from car parts to plastic cups at its five factories in Thailand and Vietnam.
GreenCo CEO Simon McMahon and his business partners had a longstanding relationship with Srithai Superware, including knowing the owner and his family. Simon had toured their facilities and was impressed by what he saw. "A lot of the capital equipment and facilities are only a few years old. They are clean and well- maintained – the factory floors are clean enough to eat off," he says.
Without this relationship, Simon would have thought twice about manufacturing in Thailand. As it was, it not only made manufacturing their PAK FLAT water tanks in Thailand feasible, but also helped GreenCo Water avoid some of the pitfalls experienced by some Australian businesses that manufacture in Asia.
Srithai Superware's status as an ISO-certified manufacturer that makes products for international brands such as Toyota and Coca-Cola has made quality control easy. If GreenCo Water were dealing with a smaller manufacturer without such international experience, they would have to invest considerable time in making sure goods were produced to the standard required. "We would need to have someone there pretty much full-time," says Simon.
Key learnings
- Build a partnership with a firm that supports your strategic business interests – GreenCo Water's strong relationship with a reputable Thai company has helped them avoid some of the pitfalls experienced by Australian businesses that manufacture in the region. Having a partner that is familiar with international companies and trading across borders is essential to success.
- Proactively manage cultural issues when they arise – Understand and accept that there will be cultural and linguistic differences in your dealings with your Thai partner. Employing people with local knowledge can help, but also get on the front foot and actively manage these differences.
- Ensure you develop contingency plans to mitigate business risks – Know the risks that your business could face and take steps to manage them. Connect with people with Thai experience to understand exposures to your business on issues such as Intellectual Property infringement or risks around product supply and quality.
- Recognise the challenges of securing distribution networks in Australia – Finding a local distributor in Australia's small, risk-averse market can be difficult and take time. It's vital to develop good relationships, set realistic expectations and build trust.
- Go beyond profits, build CSR into your Asia strategy – Corporate social responsibility can take many forms, from running programs in communities where you invest, to forging links with NGOs that operate around the world.
Build a partnership with a firm that supports your strategic business interests
Having a partner that is familiar with international companies and trading across borders is another bonus. Srithai Superware exports to more than 100 countries for a variety of international brands, so they are used to the process and procedures of international trade. Simon recommends working with a manufacturer who has dealt with Australia or another Western country before. A partner experienced in trading across borders won't have to learn the processes from scratch, and won't be wrong-footed by things like filling out customs paperwork or logistics – which means you'll minimise the risk of unforeseen delays.
Simon advises that manufacturing in Asia does not have to be complicated. GreenCo Water has a straightforward manufacturing contract with Srithai Superware – it is not a joint venture and there are no complex structures or tax arrangements. The agreement ensures GreenCo Water do not need to set up their own factory, nor do they need to worry about hiring and training staff or dealing with the local bureaucracy – Srithai Superware takes care of all that for them.
Proactively manage cultural issues when they arise
While having a reputable partner has helped GreenCo Water avoid some of the difficulties of manufacturing in Asia, they still have to negotiate cultural and linguistic differences. These differences should not be underestimated: Australian firms identified them as the most significant barriers to doing business in Asian markets in the 2014 Australian International Business Survey.
Like other Southeast Asian cultures, Thais view time as cyclical, whereas Australians view time in a linear, sequential fashion. As a result, completion dates in Thailand may not be as strongly adhered to as in Australia. This can be a significant issue when products need to be produced and delivered by set dates. Simon recommends understanding this difference and building it into your operations, and not trying to force your Thai partner to adapt to your way of doing things. He explains: "We just account for 'Thai time' and build it into our operational plan. We allow for a couple of days in our schedule to account for it."
Even if your local counterpart understands English, they may find it difficult to convey complex issues in what may be their second language. Different communication styles also mean that key messages and nuances may be missed or misunderstood.
"Sometimes you just have to do the face-to-face."
For example, when developing the costings section of the manufacturing contract, GreenCo Water's Thai partner kept quoting a very high cost for the plastic to be used in production. Simon and his team couldn't figure out how the Thai firm had come up with the number – and the manufacturer couldn't understand why GreenCo Water kept questioning it. After weeks of negotiation, the issue was no closer to being resolved, and both sides were getting increasingly frustrated. Simon decided to jump on a plane to Bangkok to sort it out. "Once I got in the same room with the chief engineer it was actually quite simple," he says. "Sometimes you just have to do the face-to-face."
It turned out that the inclusion of an additive to improve the UV resistance of the plastic was the cause of the misunderstanding. While it increased the cost of the plastic, this additive was vital for the quality and durability of the finished product. Srithai Superware were doing the right thing by including it and being upfront with GreenCo Water about the cost – they were just unable to communicate why it was necessary and how it affected the price.
Australian businesses can get on the front foot and actively manage these cultural and language differences. GreenCo Water did this by employing an Australian engineer who had worked extensively in Thailand and elsewhere in Asia. They sent this engineer to train Srithai Superware staff and suggest process improvements – a role that would have been challenging for someone without cultural understanding. Simon has a simple philosophy on who to send overseas – "send good people".
He extends this outlook to his whole approach to dealing with markets and companies outside of Australia. "When you are going into another country, you have to be accepting of their culture, their way of doing things. Even if it seems strange to you, it is normal to them. You just have to go in there and be a guest."
Ensure you develop contingency plans to mitigate business risks
Manufacturing overseas does not come without risk. Natural disasters can halt production and stop shipments, currency volatility can eat into your profits, and political unrest can add uncertainty, potentially increasing costs. When Simon and his business partners at GreenCo Water decided to manufacture in Thailand, they knew the risks and took steps to minimise their potential impact.
Simon did have concerns about the political risks GreenCo might encounter if manufacturing in Thailand, but Srithai Superware assured him that political unrest and military coups do not really impact business. On a subsequent trip to the country, Simon found his local partner to be correct. "Yes, there were protests going on but the factory was running fine and goods could get to the port easily," he says. Both sides of Thai politics support foreign investment and international trade, so even if there is a sudden change of government, foreign businesses are unlikely to be affected. Simon advises treating political risk just like other types of risk – account for it and manage it.
Like other countries – including Australia – Thailand is affected by natural disasters, but choosing your location carefully can reduce the chances of problems. GreenCo Water's PAK FLAT water tank is produced at Srithai Superware's Amata plant, which sits on high ground just outside Bangkok. This means that in the event of severe flooding, production is unlikely to be affected.
While Simon and the GreenCo Water team are confident that risks from political unrest and natural disasters can be successfully managed, they have set up contingency plans for worst-case scenarios. Their Thai partner helped them identify a manufacturer in a third country who can take over production temporarily in the unlikely event that production is halted in Thailand, ensuring that GreenCo Water can still fulfil retailers' orders.
Consider IP
Australian businesses looking to manufacture in Asia do need to consider issues around intellectual property (IP). Thailand does have some challenges in addressing IP protection, and while overall protection of IP rights in Thailand has improved in recent years thanks to the passage of new laws, there is still room for improvement.
GreenCo Water took early steps to safeguard the IP of their innovative, award-winning product. Early in the product development stage they applied for a patent and were careful to protect the details of the PAK FLAT water tank. As with many things in Asia, having the right relationships can make this task easier. As GreenCo Water's partner has international experience and been in business for 50 years, they understand the importance of protecting IP. Srithai Superware's prominent position in the Thai market also helps them manage IP risk in Thailand, with Simon describing them as "like a big brother for us in Thailand – they will fight any infringements on our IP for us".
GreenCo Water's journey from product development to overseas production and importation into Australian stores has been made easier by working with a reputable partner. Following the successful launch of the PAK FLAT water tank in Australia, GreenCo Water is now assessing additional markets.
In a potential joint venture with Srithai Superware, they are looking to sell their innovative product in Thailand. In addition, with production conveniently located near some of the fastest-growing markets in the world, they are considering expanding sales into Indonesia and the world's second-largest economy, China.
Despite their commercial success, they have not lost sight of the humanitarian potential of their product and look forward to seeing it being used where it is most needed by NGOs around the world.
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