Sales & Services

Sales in Thailand – this is how it works!

At Sanet you advise entrepreneurs with sales experience

Sales thrives on experience. Sanet consultants have not only gained decades of experience themselves as entrepreneurs in sales. Rather, for almost 20 years now, Sanet has helped countless companies from a wide variety of investment and consumer goods industries get on the right track in Thailand.

The German-Thai Sanet team understands and combines the business culture of both Western companies and Thai partners.

Entrepreneurial thinking and an analytical approach are the hallmarks of Sanet’s consulting services.

Prohibition of own distribution company

In Thailand, the Foreign Business Act prohibits foreigners from trading or offering services under threat of punishment. In this way, the government protects domestic traders and distributors as well as domestic service providers.

An exception is made for trading companies that can prove a paid-in capital of at least 100 million THB or obtain a “Foreign Business License” from the Thai Ministry of Commerce. The latter is rarely successful. The process is lengthy and the outcome uncertain. It must be comprehensively demonstrated that the license will be of overriding benefit to the economic and social development of the country.

Service companies have it somewhat easier: they can obtain special licenses by applying to the Board of Investment (BOI) for funding. Again, however, this does not come without investment. However, a minimum capital of THB 3 million to set up a TISO or an investment of THB 1 million for certain IT service providers, for example, is more feasible than THB 100 million for trade approval.

For those who cannot or do not wish to take advantage of these opportunities, the only option available to foreigners for distribution is a contractual arrangement with Thai partners.

Illegal or “gray” circumventions must be warned against. All parties involved are threatened with both criminal and considerable tax consequences. Hiring a Thai employee or a commercial agent is also not legally permissible as a rule.

An importer or the business unit at Sanet as a contractor?

Due to legal restrictions, the classic distribution channel in Thailand is through an importer and distributor. Advantages and disadvantages are well known. On the one hand, the Western manufacturer has a locally well-connected partner who knows the market and customers if he makes a good choice. On the other hand, he has to finance an additional margin of the importer through the price. Also, he will often not be able to maintain direct contact with the end customer of his products.

Therefore, the professional search for the right partner is crucial. Simple recommendations, trade fair contacts or chance encounters remain a gamble.

Sanet offers with its market experts a highly qualified search and selection process, through which numerous well-known companies of the capital goods and consumer goods industry have found their long-term partner in Thailand.

Details and references can be found on our Distributor Search page.

An innovative, contractual alternative to a distributor is the establishment of a business unit at Sanet Sales & Services (STS) as a sales and service partner. The unusual concept of this business approach is that the business unit generally does not import goods and sells them on its own account. This eliminates the typical trade margin of importers.

Instead, the BU focuses on offering the customer’s or “principal’s” products in the marketplace and arranging orders. In addition, it provides on-site technical support to distributors or end users before and after the contract is signed, which customers enter into directly with the manufacturer and “principal.”

For the sales and service activities, the BU uses specialists who work exclusively for a particular business unit and are technically supported by the principal.

The remuneration is completely transparent. It is based on a proposed budget for the BU, which also discloses the service provider’s projected profit.

The joint venture with Thai partner

You already have business partners in Thailand, but you want to control and shape the business locally? With at least 51%, one percent Thai partners, your distribution company is free from all restrictions as they apply to foreigners. You are a Thai company.

Particularly in a joint venture, it is important to balance interests fairly and to draft the rights of the minority shareholder wisely in the contract. The composition of the management, the requirements for shareholder resolutions and also the “veto rights” are only some of the regulations that must be made. Cultural aspects and the ability of the manager to function in the day-to-day business are also prerequisites for the success of the joint venture.

Sanet has in its team the ideal mix of specialized lawyers on the one hand and experienced practitioners in sales and management on the other hand to provide competent advice on the design of the joint venture.

Sanet also acts as an intermediary for investors who, for example in the case of 49:49 % shareholdings, can act as a valuable strategic partner if he has a basic knowledge of the market and the management.
In any case, however, you should avoid so-called “nominees”, i.e. straw men as Thai partners. The authorities check very reliably whether the Thai business partner actually has an economic interest or management role corresponding to his shares. Violations are being prosecuted with increasing severity under economic and criminal law.

By founding a business unit at Sanet with six employees today, Rutronik GmbH was able to assert itself against our competitors in Thailand in just two years. Today, we are firmly established in the market.

Peter Klöpfer

Head of Rutronik Business Unit

More about sales consulting at Sanet ASEAN ADVISORS

Write or call us if you would like more information on the subject.

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