The value of sell ceramic tiles
(Million baht)
2005 2006
Domestic 2,565 2,023
International 162 180
Total 2,727 2,202
Inventory
- At Kronglong district , Prathom
- At Mung district, Prathom
- At Nongcare dirtrict, Saraburi
Research and development
More than 37 years of experience in ceramic industry. The policy of the company is to use the high-technology to produce the tile ceramic. The company will transfer the employees who specialize in technology, production, engineering, and management to go abroad in many countries like Italy, Spain, and Germany for training and learning. All the divisions of the company from designing the package, choosing the machines, the technical in producing, choosing the raw material, management of production and marketing are Thais. The company has the policy that company will bring the high-technology and technical from abroad, but use the ability and knowledge of Thai people. The company has invest a lots and set up the new building of research and development because the company know that this division is very significant to produce the best and innovative ceramic tiles. The company uses many high-technology machines in research and development a new product. The task of this division is from research and choosing the best raw material, adjust or modify the mixture, improve the production quality and quantity, control the production process, control the quality and guarantee, and create and innovative design. By doing this, the company can do the business without help form others.
The future project
The company plan to find and buy the resources of raw material. The company expects to increase the ability of production by constructing the new factory. Moreover, the company tries to increase production and reduce the cost of production and also increase the quality of products. In additional, the company plan to expand more agents in many provinces in Thailand in order to increase the available of the products.
The property and asset that undeveloped
Problem
First Problem – High expense on the Selling and Administration
The Income statement shows that the cost of S&A keeps increasing but the revenue remains the same.
- In 2004, the revenue was 2,181,968,000 Baht and the cost of S&A was 432,744,129 Baht.
- In 2005, the revenue was 2,654,715,363 Baht and the cost of S&A was 482,062,524 Baht.
- In 2006, the revenue was 2,127,795,718 Baht and the cost of S&A was 601,787,379 Baht.
In the year, 2006 the S&A has been increasing more than 100 million baht but the company lose sale of 500 million baht.
Campana has spent a substantial amount investing on Selling and Administration (S&A) hoping to get high returns in terms of profit. Unfortunately, this was not the case. According the balance sheet, it shows that the money that they put in the investment has brought back lower profit:
Return rate = Year 2004 profit after tax
Total asset
= -75,257,640 Baht
7,426,453,708 Baht = -0.01
Year 2005 = -0.025
Year 2006= -0.087
After finding this number which is unlikely to occur, we assume that the company has fail in the operation of S&A. we do more research about the operation of the company.
From analyzing the case from the company information, we have indicated that the problem had arisen because last year the company had stopped giving commissions to their sales teams. Before, the firm had a 5% commission for its sales force for every 10,000Baht they sold. This resulted in lower motivation of the sales force leading to lower sales, thus, lowering the firm’s profit. The sales person who are not belong to the company want to sell the brand that provide them the higher commission. This causes the company to lose sale and there are some fix cost that the company have to pay such as slot fees and transportation. These costs are the cost that the company has to pay no matter that the company can make the profit or not.
The company tries to communicate to the agent about the brand by doing niche marketing as we can see that there is no advertising in the mass media. This action leads to the lack of the communication to the end consumer. In Thai market, the consumers are the person who chooses the brand of the company for the tile. The company should using push strategy by motivate the consumers to have the demand on the products, not pushing the product through the builder, because the consumers are not likely to trust the builder. They try to search for the information by themselves and make the requirement to the builders.
The second problem- The stock inventory.
Year 2005 stock average = 365
757545432+80133345 =107
2
Year 2006 Stock average = 365
2006801333457+682848319 = 127.7
2
In the year 2005, the company has to hold the inventory only for 107 days. The shorter of the time period is the better so that means the company can convert the inventory to become the profit sooner. In this case, the year 2006 the company has to carry the stock for the longer time which is 128 days.
The balance sheet shows that the inventory has been in the stock for the longer time. Due to this, the company had to absorb the cost of holding more inventories. In addition, because the products were not selling as fast as they should, the company had no cash to pay back its debt, therefore, had to incur more debt to cover its current one. The reason why the products were not selling as well as they should which causing the inventory stock to increase can be caused by the strong emerging competitors or the products were not meeting the needs of its customers.
Third Problem – Increased Debt collected time period
Campana is facing the problem of their customers not paying back
= Revenue from sale and service
Net account receivable year 04 + net account receivable year 05
2
Year 2005 = 2181968000 =28.74
175085085+243695931
2
Year 2006 = 2127795718 = 41.52
243695931+241593221
2
Before the customers can pay back within 29 day but in the last year it takes longer time to collect the debt to be 42 days This problem can occur because So The Company has inefficiency system on collecting the debt so it cannot collect debt on time or the customers did not pay on time or the retailers has cash shortage problem due to the previous problem that the products could not sell. These problems can cause the company to has cash shortage problem and loan more money.
The forth problem- High interest rate
According to the balance sheet, the profit after interest paid in the year 2004 is - 75,257,640 so this means that the company did not make the profit since year 2004 and even worst in the year 2005 because it has been decreased to – 198,425,910 baht which is 37.9%. Moreover in the year 2006 the profit after tax has been decrease to- 669,313,682 Baht. This problem can cause by company now investing in the Nong Kae industrial estate so they have to loan more money and the interest rate has been increasing so this lead the company to had a lot of debt.
Since the interest rate is increase so the company should make it quick so it can turn to be profit faster
I think the first problem is the biggest problem that should be solve first because there is something wrong. The sale person did not sell our products. There are some fix cost that we have to pay such as slot fee and deliver the products the oil price increase. So it likely that that cost should be increase but not this high.
Alternatives
The study of the comparative advantage of the ceramic industry in Thailand had four objectives. Firstly, to study the structure of ceramic industry in Thailand and Lampang province in term of the production, the marketing, the international trade and the production costs. Secondly, to study the policies and measurement of Thai government that supported the industry in order to analyze and solve the problems. Thirdly, to study the comparative advantage of the ceramic industry by using Domestic Resource Cost Index ( DRC ) and Effective Rate of Protection ( ERP ) in three categories of the ceramic products namely, bowl, souvenir and railing ceramic products. The primary data were obtained by surveying the ceramic factories in Lampang province in A.D. 1997. Finally, to study the competition of Thai ceramic industry in major market and the effects of Asian Free Trade Area ( AFTA ) on Thai ceramic industry.
The study found that bowl ceramic products of small factory had low quality and most of them were produced for the domestic consumption while those from medium and large factories had higher quality and were produced for export in the world market. Souvenir ceramic products were labor intensive production process which most factories were small and produced for domestic market. However, some small factories could produce for export. Production of railing ceramic were depended on constructing conditions. There were excess supply of these kind of product when the economy condition slowed down. Therefore this kind of product faced with high degree of competition in term of both prices and quantities.
The government had highly supported and protected the ceramic industry. For example, collecting 80 percents of tax rate on imported ceramic products, supporting domestic investment and promoting the ceramic products which received GSP from developed countries. Those policies made the ceramic industry changes from import-substitute industry to export industry. Afterwards, government reduced the import tax rate down to 30 percents in order to make this industry performance more efficient so that it could compete with the world market.
The research result in Lampang province, showed that the industry had many serious problems such as unresponsibility of labors, low quality of inputs, expensive imported inputs and complicated export procedures. The solutions for above mentioned problems were labor training, supporting the production of import-substitute material inputs and improving export procedures.
The research results show that all products in every size of factories had the ratio of DRC/SER less than one . It meant that the industry had comparative advantage. The result of ERP also showed that all products in every size of factories had negative value of ERP in both Ballasa and Corden concepts. It meant that even the industry do not get any protection from the government, this industry could export the ceramic products to compete with the world market. Therefore, this results also confirmed that the ceramic industry had comparative advantages. The study found that bowl ceramic products had the most comparative advantages followed by railing and souvenir ceramic products, respectively.
The study of competition of Thai ceramic industry in major markets showed that Thai bowl ceramic products had higher market share in US market than rival Asian countries but lower than China and Taiwan. In EU and Japanese markets, Thai bowl ceramic products could not compete with EU products. Thai souvenir ceramic products had higher market share in US and Japanese markets more than the rival Asia countries except for china. Nevertheless, Thai ceramic products exported to EU must be improved their quality. Railing ceramic products had low value in the total market. However, if this kind of product can expand to neighbor countries, especially Asian market, Thailand will earn more revenue from those markets.
The study of the effects of AFTA found that although the value of exported ceramic to Asian countries was the least as compared to the total export value, the result of tax reduction would allow Thailand to expand its market share in Asian countries. However as compared to Indonesia and Malaysia, Thailand still had advantages in term of labor skill, input materials and technology but disadvantages in term of energy. Therefore, the desired trade pattern should be concentrate on materials and energy exchange among this three countries in order to increase competitive ability of Thailand.
The policy implications obtained from this study suggested that the domestic entrepreneurs should improve their technology to produce high quality of ceramic products due to the low quality of ceramic products could not compete with cheap products from China. The small industries should combine to medium and large industries in order to increase production capacity, in order to have economies of scale and to receive special privilege from B.O.I. or try to cooperate in term of ceramic association for decreasing production and marketing costs. Moreover, government should support private sector to find out new markets for substitution the lost market share in the existing markets.
First Problem Solution
There is the problem about the selling and administration
Last year the company stops giving the commission to the sale person
Less motivation on the sale person to sell the product
Some fix cost that still has to pay
The oil price increase according to the economic situation
Solution should give the commission to the sale person to motivate them or have its own sale person ( I don’t know whether the second choice would help)
Second Problem Solution
Should do market research on the demand of the customers and in the mean time look at the competitors’ action. Do the promotion as well. Decrease the price to get the old product out of the stock
The company should …cut out the customer that pay late bit maybe they pay late because they have problems we should help them…We should be nice.
…..donno
Have customer database to determine profitable customer.
The company should …cut out the customer that pay late bit maybe they pay late because they have problems we should help them…We should be nice.
…..donno
Recommendations
Action Plan
Reference
“Comparative Advantage, n.d.”, “The Comparative Advantage of The Ceramic Industry in Thailand”, Retrieve 24/11/08, From:
Campana, 2005, “About us”, Retrieved 24/11/08, From:
Appendix 1
Production process
There are 6 steps.
- Prepare for the mud: We will use the special mud and mix it with water in order to get the best raw material and meet the right standard.
- Producing dust: We will spray the mud that ferment in the pool into the hot weather therefore, we will get little soil in many different sizes. Then, we will keep it the silo for 24 to 48 hours for the moistness will be gone.
- Process to produce tiles: The soil in the silo will be use to produce the tiles. We put the soil into different design of the patterns to meet the need of customers.
- Decorate the tiles: The tiles that already pass the process of baking to get rid of moisture, then it will come to process of enamel the tiles. This process will enamel the tiles into different style and color by using the screen and sprinkle crystal on it.
- Baking the tiles: All the tiles that already decorated will be put into the oven for baking them. In this process, the soil tiles will change to be tiles ceramic. There are three steps of increasing the heat in the oven.
- Pre heating
- Firing
- Cooling
- Separating the quality of the tiles: We will separate each tiles into the best, moderate and low quality according to the company standard. Then, we will measure the size of each tile. After that, the tiles will be packed in boxes and keep it in the inventory.
Sample of the products
