(III) Situation Analysis

PEST analysis

1. Political

As we all know the Thai politics seems a bit more stable than previous years
(2009) or the year before (2008), but deeply behind the scenes, there are still many
disputes that cannot be put off.

The conflicts in the political situation in Thailand are responsible by two parties,
which are well known by the people here of “The Red Shirts” and “The Yellow
Shirts”. These two parties are the supporters of the ex-government and the supporters
of the infant government currently, where one supported Taksin (Ex-Prime minister)
and the other rises from the dislike of Taksin.

It all had started when Taksin was asked to resign from the Prime minister chair due
to the inappropriate act of corruption. Many people agree with the resignation (The
Yellow Shirts) but in the other hand, many people also disagree with the resignation
(The Red Shirts). So ever since, the conflict had remains and problems occurred from
it seems to have no end to it.

However today, Thailand’s political status is recovering rapidly from the year of 2008
which was the year that the yellow-shirts had gathered and closed down
Suwannaphumi Airport. But there are still some problems that occurred from the
political crisis today as “The Red Shirts” are still unsatisfied with the new
government. The latest act by “The Red Shirts” was the protest in Silom Road. They
were there to protest about the confiscation of 70,000 million worth of Taksin’s
personal wealth. The gathering had lead to many education sectors to close early and
heavy traffic congestion in that area.

But no matter which group gets their action, the people that are suffering from the
results and the outcome are by citizens like us and the country itself.

Despite the protest, the conflicts, and the disputes, the infant government still carries
on with the management of the country itself. Lead by the new Prime Minister
Abhisit Vejjajiva, the new government has been governing for more than a year now.

According to an article on BERNAMA1 (cf Appendix A, article 1) (Anon, 2009) and

another article on BANGKOKPOST2 (cf Appendix A, article 2) (Anon, 2009), we can
see that the government has approved the project proposed by the State Railway of
Thailand and the Thai Ministry of Transport.

1
Appendix A – Article 1 (November 11, 2009)
2
Appendix A – Article 2 (November 11, 2009)
The project consist of plans for several high speed rail lines linking Bangkok to
Chiang Mai, Nong Khai, Chanthaburi, and Padang Besar. Allowing the project to be
proceeded, the project itself is not fully funded by the government, the government
also allow private sector to co-invest in the project which takes the form of “Private
Public Partnership (PPP)”.

The investor known as the concessionaire has to take in the expenses that will be
incurred from building, and in return, the concessionaire will get the right to operate
for a period of time. After that, concessionaire will have to return the infrastructure
back to the government. This is to share the risk with the private sector and help
lower the burden that the government has to carry.

In general the political problems are becoming less aggressive. Our company might
still be affected because the project itself might get delayed if any political problem
surfaces in the future. Delaying the final decision from the government can put the
whole development on hold and affect private sector that are in cooperate with the
high-speed train project. So in overall, the political aspect does play an important role
in affecting the possibility of the project.
2. Economic

First of all, let’s look at Thailand’s GDP growth rate:

Table 1 : Tradingeconomics3

From the graph, we can see that the economics of Thailand have recovered
from the turnovers that had occurred during the end of year 2008. With the negative
relation that the Thai economic had been put through, a clear improvement of the
economic start at the middle of year 2009 and a great start at year 2010 with 3.6%
increase which bring us to the highest growth percentage ever since 2006. The drop
of the GDP during 2008 might most likely be because of the global downturn and the
politic crisis that Thailand went through. As Thailand is a country that it’s economic
is heavily depended on export, the political crisis might have stopped many exporters
from exporting the products to other countries which lead to the drop. As the
political crisis being less aggressive as it was in 2008, the increase in 2009 proves the
decrease of aggressiveness and the increase of stability of the government
management.

Now looking at the GDP over the Purchasing Power:

Table 2 : TradingEconomics4

This graphs shows the growth of purchasing power of people in Thailand, despite of
the political crisis, there are still an increase in the purchasing power of people in
Thailand. The only problem would have been that the purchasing power had increase
3
Table 1 - http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=THB
4
Table 2 - http://www.tradingeconomics.com/Economics/GDP-Per-Capita-PPP.aspx?Symbol=THB
in a decreasing manner. People might not be willing to spend as much as they would
suppose to be due to the political crisis. This might be a problem in the sense of
adapting new technology that will be introduced to the public. But if look at it
generally, the creation of this new “High Speed Train” service will create an
economic boost. The set-up of the service will allowed more jobs available for the
people around Thailand. People get their jobs which mean now there are more people
with money to spend. When more people spend their money, the economic will get
the boost and increase even more then it will currently.

3. Social

In Thailand, or you can say in Bangkok, traffic congestion is a common issue

and well known destiny for people who owns a car or people who travel by public
transportation that have wheels. It has become a Thai lifestyle where you are so used
to be stuck in traffic jam no way in the near future you will see a chance of
improving.

The different modes of transportation in Thailand consist of the following:

• Personal Car
− Many people here do own a car personally, maybe that is one of the
reasons why traffic is so bad in Bangkok. Also they do travel out of
Bangkok with their personal car because it is very convenient.
• Taxis
− Yellow, pink, green and lots of other color metered taxis can be found
commonly in the streets of Bangkok
• Buses
− There are buses both with or without air-condition in Bangkok, other
than the ones found on streets of Bangkok, there are buses that carry
passengers to different cities in Thailand. Depend on the direction you
want to travel, there are different bus station where you will have to
depart according to the scheduled time.
 To go North of Bangkok, buy your tickets at Mo Chit Station.
 To go East of Bangkok, buy your tickets at Ekamai Station.
 To go South of Bangkok, buy your tickets at Sai Tai Mai
Station.
• Air
− In domestic flights, you can find Thai Airways, Asia Air, and Nok Air
which offer trips between all major cities in Thailand. The flights are
more comfortable and faster than Buses.
• Motorbike Taxis
− This is a mode of transportation I believed that cannot be found in any
other countries other than Thailand. These motorbike taxis can bring
us through the bad traffic swiftly but prices depend on negotiation.
• BTS Skytrain or MRT
− A train running on a levitated rail above the main roads in Bangkok or
an underground train system running in a different route.
 For people that would accept changes and doesn’t enjoy the time wasted in the sea of
cars, they would turn to the alternative – BTS or MRT. It took quite awhile though
for Thai people to start adapting this sort of transportation. Thais have slow
adaptation to technologies, sometimes it might be because of purchasing power
doesn’t allow them to adapt to these kinds of spending. But there are people who are
willing to pay more money and spend less time in traffic, these people tends to be
those who are more educated and also those who are earning more incomes than the
blue collars though.

Looking at the population structure, Thailand has 74 provinces which every province
consist of different amount of population. The important cities ranking from their
population, contributes to the GDP of Thailand too.

The Year Year Year Year Year Year

Province
Ranking 2003 2004 2005 2006 2007 2008

1 Bangkok 8,554,751 8,395,838 8,524,158 9,930,634 10,065,126 10,161,694

Nakhon
2 2,591,050 2,539,344 2,546,763 2,555,346 2,552,894 2,565,117
Rachasima

Ubon
3 1,805,322 1,763,061 1,774,808 1,728,529 1,785,709 1,795,453
Ratchathani

4 Khon Kaen 1,770,605 1,741,749 1,747,542 1,749,935 1,752,414 1,756,101

5 Chiang Mai 1,603,220 1,630,769 1,650,009 1,661,020 1,664,399 1,670,317

Table 3 : Table of population in each provinces with rankings5

Definitely these cities are connected by roads but it takes times to travel between
provinces because transportations available are not that ideal according to either in
time costing or the price costing. The time and price costing are inverse
proportionally related. So if you want to save time, the choice would be travel by air
which the cost will definitely be more than travel by land which is very time
consuming.

So if these important routes are connected by high-speed train, the level of living
standard of each province will for sure be increased due to the higher circulation of
population between each province and easier access for investors.
4. Technology

5
Table 3 - http://th.wikipedia.org/wiki/รายชื่อจังหวัดในประเทศไทยเรียงตามจำานวนประชากร
 Transportation has evolved over centuries by the growth of technologies. Horses
and other animals that are used as transportation had been replaced by cars, buses, and
trains. The invention of airplane has replaced the use of steam boat in the past in
travelling between countries and nowadays, it is also used for inbound travel between
provinces.

Now, looking at high-speed train, it is widely used in the world from countries like
France, Japan, Taiwan, Germany, England, China, and lots of other
developing/developed countries.

For our business, technology would play the major role in the quality of service that
our company would be able to provide to the customers.

 First of all, the tracks, the technology of the tracks must be smooth as in no
gaps or rigid shape. Well electrified for the high-speed train to maneuver
on it.

 Conventional steel wheels trains

- With the technologies of these trains available in the world right now,
highest test run speeds can reach over 500km/h. Can be run with a
maximum speed of 250km/h commercially. These are the common
choices of high-speed train installed.
  Maglev trains (Magnetic levitated trains)

- Another technology of high-speed train but differs in the tracks they run
on. The train itself doesn’t have wheels to run on but instead, rely on a
magnetic technology in pushing the train forward via floating on the
magnetic tracks.

 Ticket system and security system for checking in/our passenger. Other
than letting our passenger in or out from the station, this technology allows
us to keep track of the correct distance our passenger had travel and make
sure they have bought the correct ticket for the distance they have travel.

These are the technology that will affect the service if not carefully chosen.
Hopefully it will replace the diesel-powered trains in Thailand.
5 Forces of Porter

1. Bargaining Power of Suppliers

Low Bargaining power since many companies existed and all wanted to sell their
technology. Not many chances for them to perform the installation and construction
of the train if not supported by the government. They have to bid for project to be
able to start “supplying”.


 Railway Maintenance specialist


 Rail transportation provider


 Provider of Rail systems & equipments


 Provider of Rail solution

And many other providers such as countries like Japan and China, being the
representatives from Asia.

2. Bargaining Power of Buyers

High Bargaining power:

Other than the diesel-powered train provides train services across provinces,
there are services such as tour bus, airplanes, and mini-vans which provide other sort
of inbound travel services. Nothing can guarantee that the consumers will turn to use
our service out of all the alternatives. This is one of the risks that our service will
have to bare with even if our company is the only high-speed train service. The
buyers have many choices, especially for those who are in a hurry or those who don’t
want to waste most of their time on travelling would choose the mode of travel
carefully. High bargaining power for the buyers.

3. Threat of Substitute product

High Threat of Substitute product:

There are 4 sorts of substitute products in general that can replace the high-
speed train service.

Tour Bus:

Big tour bus at bus stations which can carry passengers to regions such as the north,
north-east, and south.

There are both air-conditioned tour bus and non air conditioned tour bus available
depends on individual taste. The price varies from 100B – 500B.

• Strategy:
 Strategies used by the tour bus definitely wouldn’t be as specific as
strategies for airplanes. Even though so, they still keep up the service
and make sure the passengers reach the destination in one piece with
low expend.

Diesel-powered Train:

This is probably the slowest transportation

mode available for travelling to other
provinces.

Thailand has a complete railway system

built and used since the time of King Rama
V’s reign. No innovation have been made
to this mode of transportation ever since.
 • Strategy:
 No innovation in the service whatsoever, similar to tour bus strategy
but has advantage of larger range of destination. Pricing is the double
the price of tour bus.

Airplanes:

Inbound travelling provided by a few domestic airlines which sometime provide the
tickets in a low price.


Nok Air 
Air Asia


Bangkok Airways 
One-Two-Go by Orient Thai
These are the airlines which can be used as alternatives for inbound travelling.
Pricing would be different to tour bus and diesel-powered train, definitely more
expensive but tend to not over charge the price.

• Strategy:
 Most of inbound airlines because of their own competitions among the
airlines they are all striving for low-cost strategy to gain a piece in the
market shares.

This is probably the most threatening substitute among all which the author believes
that tactical promotions should be taken on carefully to tackle into the traveling
service industry.

4. Threat of New Entry

Low threat of New Entry:

The threat of new entry would be very low since it would need government’s
approval. The routes that each mode of transport would be providing services would
need to be submitted to the government to acquire the license. Agreement given by
the government isn’t that easy and also takes times because of the bureaucracy way of
working in the government department. High investment too would depress the threat
of new entry down. These two factors would be the entry barrier to our service,
therefore the “Threat of new entry” is Low.

5. Competitive Rivalry

Looking at all the forces, it consist of low bargaining power of supplier, high
bargaining power of buyers, high threat of substitute product, and low threat of new
entrees. Definitely, the truth that everyone cannot deny would be that there are lots of
existing services that provide inbound traveling in Thailand. It would be a very
competitive environment due to the aggressive strategy from each service. With
knowing all these risks, the author still foresees a market that could be taken over by
the company’s service. We can conclude that the company would face moderate-
high competitive rivalry. Though there are some threats from the existing
substitution products, the author thinks that with the relative advantages that our
service beholds, this can assist the company in building a strong threshold to
withstand the existed risks of the competitive market.
Company Analysis

1. Human Resource Analysis

Our company definitely will need many major categories of employees ranging from
janitors to maintenance engineers.

Since this business is a transportation service business and many people have to be
involved. The employees of the company must all be qualified to ensure proper and
positive services can be delivered to the customers. Positions that would be needed to
operate the service are as follows:

Service aspect

- Station operator

- Provides passenger with the purchase of tickets and

exchange of coins, also responsibility for
collecting money, giving the information, and
taking care of all passengers.

- Train-attendant
- Taking care of the passengers onboard
such as guiding to seats and also
provide catering services. Needed to
calm disputes onboard too if situation
forces so.

- Security
- Monitor the station watching out for the odds.
Watch over the passengers and take actions if
needed when safety issues being crossed.

- Station janitor
- To keep the station clean at all times so a hygiene
environment can be provided to the passengers.
Technology aspect

- Train Driver
- Professional drivers that have been properly trained to overlook the
ride of the train.

Maintenance aspect

- Engineers

- Large groups of engineers would be

needed in the maintenance aspect. This is
to keep the rides always safety and keep
tragedy away. Engineers will be needed
in looking after:

 Circuit and safety system – they

are to keep the rails in good
conditions and also making sure
the alarms/signals in the systems
will work when they need to.

 Depot – maintenance of the train

itself is also important. Daily
checkup would be required to keep
the train in good shape.
  Platform – engineers needed here for looking after the
elevation systems of the platform and also other technology
systems such as ticket machine, ticket approval entry machine,
lighting systems of the platform, broadcast system, safety
system, and etc.

Training aspect

- Professionals & Consultants

- Qualified professionals and consultants from abroad to collaborate

with the trainings. They are to help with the technology learning for
the employees in all aspect and also give consult to what should be the
most appropriate trainings for the employees.

So in general, the author believes that not only the employees for the service aspect
are important but the engineers in the maintenance aspect are also important.
Employees should be well trained together as a whole so the company can provide the
safest rides for the passengers along with the best service.

2. Financial Analysis

The company will take on the project with the investment method in the form of
“PPP – Private Public Partnership”. Under this model, the company will be
cooperating in the form of “Build – Own – Operate – Transfer” which all feasible
studies will be done by the government. Our responsibility is to come in and “Build”
the rails and platforms, “Own” the service, “Operate” the service, and then later on
“Transfer” the properties back to the government after the concession period expired.
So these would be what our company has to invest in with the cost estimation done by
the government.

Time
Detail of High Speed Rail Amount / Total Cost of
Construction /
Project Unit Investment
Year
Project A 196 KM 3 years and 6 month US$ 3,901,129,956
Project B 1,550 KM 5 years US$ 25,004,916,280
Project C 1,815 KM 6 years US$ 39,293,439,868
Project D 72 platforms 11 years US$ 800,513,896
 Total distance of 3,165KM and 72
TOTAL US$ 69,000,000,000
points of platforms.
(Please refer to Appendix B6)

Period of Concession : Total of 40 years and 1 day.

Period of Construction : Total of 11 years.

As you can see, the cost of investment is not a small sum, in fact it is a very large
amount where collecting revenues from passengers only would not help. Not even
close in helping with reaching break-even.

Definitely the company’s revenue would have to be generated from other aspect such
as advertisement, platform renting fees, logistics, catering onboard and other services.

3. SWOT Analysis

Strength Weakness
- High speed, able to travel in speed
ranging from 250KM/H till
- Not reachable for all classes of
300KM/H.
people, more expensive than tour
bus or diesel-powered train.
- Save time, no traffic or road
People with low disposable
congestion in the way.
income might not turn to our
services.
- Operate in eco-friendly manners.
- High investment, have to operate
- Hi-tech, no trains in Thailand can
aggressively to balance out the
compare to the technology of the
investment and operating cost.
high speed rail.
- Lack of experience. Sometimes
- More safety then airplanes, no
if abroad technology being
crashing.
handled locally, disorders can
incurred.
- Cheaper than inbound air travel
(unless it is a low-budget airline)

Opportunities Threats

6
Appendix B – An overview of the project
 - The Increase of traveling trend,
with the development of the
country, people tends to get more
leisure time which initiates the
traveling.
- Low-budget airlines, dangerous
substitute product which is a
competition for us.

- First and only high speed rail
service across the nation.
- Passengers who are in a hurry will
be willing to use our service.
- People might turn to our company
for Logistic service. (Inbound
logistic)
- Eco-friendly trend might caused
passenger to use our service
because our service consumes on
clean energy unlike airplanes, tour
bus, and diesel-powered train.
- The slow adaption of Thai
lifestyle. Takes times for Thai
people to turn to new technology
due to switching cost.
- Pricing higher than every modes
of transportation except air travel
(exclude low-budget airlines)
- High investment leading to long
period of time for the return of
investment.

SWOT-matrix

With the opportunities of the increase trend of “eco-friendly”

move, passengers that are “eco-friendly” sensitive would be aware
S-O situation of our clean energy usage. This might lead to the
acknowledgement of our service and in the end, the acceptance in
using our service.

Using our strength, we can overcome the threats of substitute

products. With the advantage of high-speed travel and no traffic
factors influencing the ride, this can aid our service in competition
S-T situation
with other modes of transportation. Hopefully being a new
technology in Thailand can lure the attraction and increase the
speed of adaptation for the Thais in using high speed rail.

Even if the service cannot be reachable to all classes of people,

opportunities such as people who are in a hurry would turn to our
W-O situation service no matter how high the switching cost would be. So no
matter how low their income is, if they are in a hurry to reach their
destination, our service is always available for everyone.
 Having a high investment and the threat of slow adaption can
damage our company largely; hence the company would watch out
W-T situation this point carefully and in the mean time, promote the usage of
high speed rail to make sure the adaptation wouldn’t take longer
than it should.

Customer Profiling

With the increase of population, transportation usage increases too. This means
there must be a possibility in the expand usage of transportation. The company would
have to focus on these increases of usage and make use of it, therefore we should
reach in a step deeper to analyze and identify who are our customers. As a
transportation service served to the whole nation, passengers using our services will
vary through different age level, also vary in the purposes too. The company would
categorize the passengers into groups as follow:

Main customers:
• Office workers
 People from the countryside who are educated would mostly come into
big cities for jobs since the earning is more fruitful than working in
smaller cities. These people tend to have the trend in traveling back to
their hometowns during holidays or long-breaks. Our company will
offer these people less tiring rides and also less time consuming too.
This means they can spend more times with their family instead of
spending it on the traveling part.
• Demographic: Low middle-level income and above,
age 22 and above, bachelor degrees and above.
• Businessmen
 Businessmen who have to travel across regions for dealing with
businesses are also one of our main target customers. With the short
 time span in the traveling, businessmen are able to travel to more
destinations and get more things done per day.
• Demographic: Low middle-level and above, no
personal car, age 22 and above, bachelor degrees
and above.
• Tourist
 Thailand is famous for its attractions across the nation, many tourist
come to spend their holidays in Thailand. These passengers will
definitely uses our service widely since we have stations set up at
famous provinces around the nation.
• Demographic: high-level income, lots of leisure time,
lots of disposable income.

Sub-customers
• Retired couples
 This group of passengers also has potential in using our service. Easier
rides provided by the comfortable seating can be enjoyed.
• Demographic: age 55 above, lots of savings.
• Young guns
 At the stage of growing and might want to explore around the nation.
Might even use the service for traveling into big cities for higher
education.
• Demographic: age 14 to 19, middle class.

In general, our service actually can be used by most of the people that have disposal
income. People who actually came over to use the service would definitely benefit
from it. As long as our service contribute positively to the lifestyle of everyone, one
day our service will merged into everyone’s life and become irreplaceable when come
to long distance inbound traveling .