V.   MARKETING U.S. PRODUCTS AND SERVICES

Distribution and Sales Channels

     There are 3 primary types of importers that act as agents or
distributors.  The first category includes large, well
established trading companies with strong financial resources,
large sales volumes, and extensive commercial presence in
multiple industry sectors.  This category includes the major
Japanese trading companies, Thai owned Berli Juker, U.S. owned
Louis T. Leonowens, and European based trading companies such as
B. Grimm, Diethelm, East Asiatic Company, FE Zuellig, and
Inchcape.

     In certain subsectors where the market is very specialized,
these large import/distribution companies will use sub-dealers or
agents who can concentrate their efforts.  This is the case, for
example, in the defense industry where personal relationships are
very important.  These large firms often will propose marketing
or production joint ventures when imports to Thailand reach a
sufficient level to justify a local investment.

     The second category includes smaller importers
(agents/distributors) who generally specialize in one line of
business in which they have well established contacts and market
knowledge.  The third category represents small, new companies
that are trying to expand into the import/distribution business.

Use of Agents/Distributors - Finding a Partner

     Agreements between suppliers and agents/distributors are
governed by the general contract law under the Thailand Civil and
Commercial Code.  The relationship between the two parties is
basically a buyer-seller relationship under the sale of goods
contract.  This arrangement avoids any tax exposure under the
Thai Revenue Code.  Importers must also obtain licenses for
certain products including food, drugs, and chemicals.  It is the
responsibility of the local agent or distributor to apply for any
necessary licenses.

     New market entrants should appoint an established
agent/distributor with good contacts in and knowledge of the
local market and strong technical expertise.  U.S. exporters must
invest sufficient time in selecting a qualified agent and in
start-up training for marketing and technical support staff.
Frequent contact is important, especially at the outset to build
a good working relationship and to ensure similar goals.

     The U.S. & Foreign Commercial Service office at the American
Embassy can provide valuable assistance in locating potential
representatives and partners and in obtaining preliminary market
information.  The Foreign Agricultural Service office at the
American Embassy can also supply lists of agricultural product
importers.  Several reputable local consultants exist who are
qualified to design market entry strategies and to select
partners.  Depending on extent of service and whether market
research is included, U.S. firms can expect to pay an average of
$10,000 to $40,000.

Franchising

     Many of the leading U.S. fast food franchisors are
established in Thailand.  Few U.S. or third country franchises
exist in other sectors however.  Thais are increasingly receptive
to franchising both as customers and partners.  Thai incomes are
increasing rapidly ($6,000 per capita GNP in metro Bangkok) and
strong preferences exist for popular American brands.  Thai
investors are seeking out franchisors but are concerned with
payback periods and high franchise fees, especially for unknown
U.S. franchises.   The best way to enter the market is through
joint ventures.  This arrangement will allow the franchisor to
retain more control and ensure uniformity with their system.  A
joint venture will also provide the franchisee with greater
comfort because the risk is being shared.

     Best sales prospects for franchising are:  automotive
services; education and technical training; operation,
maintenance and cleaning.

Direct Marketing

     Direct marketing is suitable to the Thai market and expected
to take-off in the near future.  The approach is culturally
conducive, and viewed as an excellent way to make money with
friends, expand one's circle of friends and contacts, and to
receive praise.  Direct marketing already is used extensively to
sell housewares, cosmetics, and car care products.


Joint Ventures/Licensing

     Joint ventures and licensing are important market entry
strategies to enhance export sales.  In many cases, adding value
locally through local production is the only means of overcoming
costly freight charges, import restrictions, and competition from
cheaper local products.  Increasingly Thai firms are moving up
the technological ladder to overcome rising labor costs and to
compete for regional markets in Southeast Asia, Indochina, and
Southern China.

     Many Thai firms actively seek U.S. joint venture partners
who will bring technical, technological, marketing, and
management skills to a business relationship.  In turn, the Thai
firms usually can offer plenty of capital, valuable local vendor
and government contacts, and regional relationships.  A number of
aggressive U.S. firms have joined Thai joint venture partners
(often positioned as overseas Chinese companies) in strategic
relationships in Indochina and China.

     The American Chamber of Commerce in Thailand has several
manufacturing and services committees to facilitate joint venture
operations.  American Embassy officers are active in these
committees.


Steps to Establishing An Office

     The primary business organizations are the sole
proprietorship, partnership, limited liability company, joint
ventures and the branches of a foreign corporation.  Partnerships
and limited companies in Thailand are similar to Western
concepts.  Limited liability companies are either private or
public, with private ones being the most common form of
operation.  Most foreign companies operating in Thailand do so
through private limited companies.

     The U.S.-Thai Treaty of Amity and Economic Relations of 1966
allows U.S. citizens and businesses incorporated in the U.S. or
in Thailand that are majority owned by U.S. citizens to engage in
business on the same basis as Thais.  They are exempted from most
of the restrictions on foreign investment imposed by the Alien
Business Law.  Consequently, a U.S. corporation may set up a
wholly owned subsidiary company or branch office in Thailand with
restrictions only in the fields of communications, transport,
banking, the exploitation of land or natural resources, and
domestic trade in indigenous agricultural products.  To register
under the Treaty, a U.S. company needs to file an application
with the Department of Commercial Registration, Ministry of
Commerce.


Selling Factors, Customer Service, Advertising, and Promotion

     To differentiate itself from local and third country
competition, U.S. firms should emphasize quality, new products,
technology enhancements and customer service.  American firms
should use their strengths and advantages to maximum effort.
Thai customers will expect U.S. firms to emphasize more and
better styles and designs, periodic products improvements, new
models and technology upgrades.

     American marketers should visit Thailand often and meet with
their local agent and customers as a way to build confidence in
the relationship with the rep as well as the client.  It is often
beneficial to rotate American engineers to work with the
representative to assist with training and accompany sales
engineers on client visits.  Successful firms provide ongoing
marketing and technical advice and assistance.
     U.S. firms also should extend credit and finance purchases.
The Europeans and Japanese often use aggressive credit terms and
financing to beat out U.S. competition.

     Advertising and promotion are important tools in Thailand.
Food and consumer products should be advertised and special
promotions should be conducted at local stores, hotels, and
entertainment centers.  To promote industrial products, it is
advisable to translate product literature and technical specs
into the Thai language, to advertise in trade journals, and to
organize technical seminars.  Successful firms also arrange
training for agents and customers back at the U.S. factory, and
donate equipment to promote training on their machines.

Pricing Product

     Market research will be needed to develop a pricing policy.
U.S. firms need to study the distribution/promotion process and
the competition.

Selling to the Government

     U.S. exporters have actively pursued government procurement
opportunities mostly in the power generation and transmission,
petroleum, refining, and petrochemicals, telecommunications,
transportation,environment, health care, and defense equipment
sectors.  For U.S. firms, the key to successful bidding on Thai
government contracts and supply tenders is to have a reputable
local representative with good access to the procuring agency and
knowledge of specific requirements and practice.  Without the
assistance of an effective representative it is very difficult to
sell to the government.  Local representatives are an accepted,
legitimate part of the bidding process.  Agents often alert U.S.
firms to attractive tenders and before tenders are issued, they
will work to ensure that the principal's product is specified.

     The "Prime Minister's Procurement Regulations" govern public
sector procurement.  The regulations specify non-discriminatory
treatment for all potential bidders.  The regulations, however,
do provide preferential treatment for domestic suppliers who
receive an automatic 15% advantage over foreign bidders in
initial round bid evaluation.  Regulations 87 and 89 apply to
most international tenders, and generally follow established
international procedures.

Protecting Your Product from IPR Infringement

     Inadequate protection in Thailand for U.S. copyright,
patents, and trademark holders remains a serious issue.  U.S.
firms should protect themselves by registering their patents and
trademarks.  Lawyers specialized in intellectual property
protection can be used to take legal steps to suppress piracy,
although this can be a lengthy process.  The Thai government is
taking legislative and administrative steps to increase
enforcement of the existing copyright law and to pass a stronger
copyright law.  The U.S. Trade Representative (USTR) continues to
monitor Thailand's progress in implementing protective measures.
Thailand remains on USTR's "Priority Watch List" at present.

Need for a Local Attorney

     Executing distributorship agreements and setting up offices
in Thailand are not complex tasks, but do require the services of
local lawyers.  The paperwork usually can be completed quickly
and easily.  Lawyers can be used to finalize a company's standard
distributorship agreement.  They can advise on the various types
of business organizations, register firms under the Treaty of
Amity, and obtain requisite permits.  Lawyers are also needed to
register patents and trademarks, and to take other legal steps to
protect a product from intellectual property rights infringement.
Contact the Foreign Commercial Service office at the American
Embassy in Bangkok for a list of Thai and American lawyers.