This year, when Sanet celebrates the 10th anniversary of its “Business Unit” (BU), it will look back on the support it provided to 25 mostly international large or medium-sized private companies when they entered the Thai market.
Sanet founder Dr. Gunter Denk resumes what still convinces many companies to start sales and service in Thailand through a “BU” at Sanet.
By Gunter Denk
After having spent 25 years as an entrepreneur of a manufacturing company with strong internationalization, I knew what makes entrepreneurs tick when expanding into new markets.
Medium-sized companies take risks with a passionate heart but a cool mind. One does not simply “put some money where one’s mouth is” and get started, but rather wants to learn first and, if possible, achieve some initial successes before increasing one’s financial commitment as the level of one’s own knowledge increases.
That’s why setting up a company quickly, with all the associated capital expenditure, fixed costs, personnel risks and bureaucratic duties, is hardly ever the most viable option. The risk is simply too high, and an exit, if necessary, is too difficult.
A conventional alternative would be partnering with a trade representative or importer. However, while the trade representative in Thailand fails due to legal regulations, the distributor has the downside that his expected margin usually represents a price surcharge, which has a negative effect on the competitive situation.
Also, importers quite often make it a practice to keep the manufacturer’s direct customer connections to a minimum, if possible. Even about the overall quality of sales and customer service, one can never be sure. “Will my partner really put a high priority on my products? How keen does he make it of his business to work for me?” the entrepreneur rightfully wonders.
The ultimate outcomes of both options on market entry, setting up one’s own business or selling through an importer, thus depend on many factors both difficult to predict and almost impossible to influence. Many factors remain uncertain and/or non-transparent. This applies especially to the costs.
So why not spend the saved profit on the importer’s margin on a customer service that focuses specifically on your own product, without immediately incurring the expense of setting up your own company?
That’s where the Business Unit comes in.
The special characteristics of the “BU” are simplicity, cost transparency, and a close cooperation between the service provider and the manufacturer.
In addition, initially it is usually agreed on a temporary basis (usually 2 years). After that, the BU allows for an uncomplicated transition to a start-up company at any time, without severance payments, unpleasant dismissals or customer confusion and discomfort.
In fact, Sanet is contracted to provide very specific services through this Business Unit in a Sales and/or Service Agreement. The costs and fees of these services are determined between the manufacturer and Sanet by open calculation and are fixed by contract. Additional expenses without consultation with the manufacturer or “Principal ” are at the risk of the service provider.
Sanet ensures the contractual services through its own management and the exclusive assignment of one or more “tailor-made” employees precisely and exclusively for this principal and his products.
As a result, the turnover of fluctuating employees at a contracted dealer is no longer an issue. The Principal, in turn, agrees to support the professional development of the Business Unit employee, for example, in technical support or sales preparation.
And thus a concentrated focus is placed on the manufacturer’s products.
And then work gets started.
If both sides perform their tasks as agreed, business relationships are created, expanded and deepened. Ideally, this becomes apparent already after the initial two-year term of the contract.
Soon it is assessable whether the market is big enough for the company, the products fit and if it is worthwhile to build up an own organization and presence in a medium-term perspective.
It goes without saying from this business concept that in such a case the Sanet Group will even help with its affiliated law firm to set up the Principal’s own company. This is nothing but the next step of cooperation.
And that cooperation goes on! A proper business plan that has now been realistically drawn up helps to smoothly obtain the necessary permits for an 100 % Foreign Owned sales and service subsidiary as well. Here, too, Sanet Legal supports the application process.
It is even not uncommon for employees to follow into the new company, whose customers and products they have gotten to understand at Sanet. The Business Unit scheme accepts this as well, since the employee has been specialized and trained in these products in the meantime and can continue to develop in the new company.
And also for the Sanet Group as a Full-Service Provider, the Business Unit in this manner often becomes the entry point for a new collaboration:
Sanet CREATING CAREERS is frequently commissioned to recruit top personnel for the new company. Sanet Legal Ltd. supports regulatory and contractual matters and Sanet ASEAN ADVISORS help with market analysis or sales issues.
And sometimes the trust between manufacturer and service provider becomes so close that Sanet even takes a stake in the new company at the request of the principal, thus supporting it further in its development. After all, one knows and trusts the other.
The “Business Unit” a ” Win-Win Relationship” of fine companies and Sanet as a one-stop service provider in Thailand.