Thailand's golf ball manufacturer:
International OEM contracts,
Japanese outsourcing,
and dominance in the Thai market
By Jon Fernquest |
Thailand is home to a world class golf ball manufacturer: Toppoint Corporation.
The Bangkok Post interviewed the company's founder and owner today in the business section.
Little is heard of the sporting goods industry in Thailand.
Today's article provides a profile of one Thai sporting goods company and reveals how it does business.
Like many businesses, the company makes money from many different markets, fulfilling the different needs of different kinds of customers and market segments.
The company's main business is manufacturing golf balls for export under OEM contracts for 120 brands internationally.
A full 80-90% of the company's sales are from such golf ball exports.
The company does not put all its eggs in one basket, however. The company also has a 60-70% market share in the local Thai market for golf balls. Such diversification is essential to protect the company when a strong baht is depressing exports as it was last year.
Finally, the firm will soon be managing the manufacturing operations in Thailand for a Japanese golf ball producer, presumably a business opportunity enabled by the Free Trade Agreement between Thailand and Japan signed last year, known as the Japan-Thailand Economic Partnership Agreement (JTEPA).
Read past Bangkok Post articles on Japan-Thailand Economic Partnership Agreement (JTEPA) including professor Pasuk Phongpaichit's of Chulalongkorn Unversity's analysis of how the FTA should be evaluated.
Here is the article in full:
SPORTING GOODS
Toppoint tees up as global supplier
KRISSANA PARNSOONTHORN
Friday April 18, 2008
When Tiger Woods putts a ball into the 18th hole to win a major championship, few people might know that the ball he used might actually come from Thailand. Yet made-in-Thailand golf balls from Toppoint Corporation, the country's largest golf ball producer, are used by both professional and amateur golfers around the world.
Wichai Khurewattanakul, the CEO of Toppoint, said the company has produced golf balls for more than 10 years. About 80-90% of the output is exported and the rest is sold locally. Toppoint now produces about one million balls a year at its four-rai factory in Rayong.
"I like playing golf with friends and we always hit the balls into the water. One day, when we were on a course, one friend asked me whether I could produce golf balls or not. I looked at the ball and asked myself, 'Why not?' It was just rubber and plastic," he recalled.
Mr Wichai, 48, spent two years studying golf ball manufacturing, leading to the creation of Toppoint in 1994. The company bought world-class production technology from the United States.
Toppoint began producing golf balls for some international brands and then established its own brand name for the local market. Today, the company has its own research and development team for new products. It can make a variety of products, including distance-control, driving-range, light, and tour golf balls with two- or three-piece covers.
"Do you know it's very difficult to convince local golfers to use our golf balls? They always think that Toppoint is a toothpaste," he says.
"I spent seven or eight months on many golf courses around the country and explained to golfers about the quality of our balls. It's lucky that some tried Toppoint golf balls."
The Toppoint brand now controls about a 60-70% share in the local market. The company, which is among the world's 20 top producers, has manufactured golf balls under OEM contracts for 120 brands. For contractual reasons, it declines to identify the companies.
Mr Wichai said golf ball manufacturing was an attractive business as the number of golfers was rising and the sport's lifespan was long. "You can start playing golf when you're four or five and play until you can't walk, probably 70 or 80. Most professional soccer players retire at about 35," he says.
Toppoint is now in talks with a Japanese golf ball producer to relocate its production lines to Thailand. The Japanese company aims to hire Toppoint to manage its manufacturing with capacity of 700,000 to 800,000 balls a year. The majority of the output will be exported back to Japan. The deal is expected to be finalised over the next few months.
Mr Wichai said that Toppoint also had seen an impact from the strong baht since the company exports most of its balls to international markets such as the US, the UK, Canada, Spain, France, Japan, Korea and China. Last year, its sales value fell 20% to 120 million baht due to currency fluctuations.
"We have to adjust our policy by producing more premium golf balls for niche markets as these can generate higher margins," he said.
(Source: Bangkok Post, business, page B1, 18-04-08, KRISSANA PARNSOONTHORN, temp-link)
Vocabulary:
Golf Vocabulary
golf - a sport in which a player, using several types of clubs, hits a ball into each hole on a golf course of 9 or 18 holes in the lowest possible number of strokes (See Wikipedia)
a golf course - the grassy tree filled park where golf is played (See Wikipedia)
a hole - 9 to 18 on each golf course, the golfer tries to hit a ball from the tee to a small hole located on the green in the lowest number of strokes
golf ball - the small white ball used in golf (See Wikipedia on golf balls and golf equipment in general)
the tee - the start of a hole on a golf course, the first shot is taken here
tees up - preparing for the first shot on a hole
a driving-range - a place where golfers can practice their swing, can practice hitting golf balls with golf clubs (See Wikipedia)
sporting goods - sports equipment used for sports including badminton, baseball, basketball, softball, football, golf, racquetball, soccer, squash, tennis, and volleyball (including balls, rackets, cubs, clothes, etc) (See Wikipedia on sports equipment and Wilson Sporting Goods for an example of a large sporting goods company)
outsourcing - doing tasks and producing products for another larger company, often a foreign company from a country where labout is more expensive like Japan
a profile - a short article describing a person or company
market segments - a subgroup of customers sharing the same characteristics with similar product needs, market segmentation is the practice in marketing of breaking a market into distinct subsets (segments) that behave in similar ways or have similar needs (a true market segment meets all of the following criteria: it is distinct from other segments(heterogeneity across segments), it is homogeneous within the segment(exhibits common attributes); it responds similarly to a market stimulus, and it can be reached by a market intervention) (See Wikipedia)
fulfil needs - meet needs (See glossary)
OEM contracts - when a company sells the product of another company under its own brand, or uses parts from another company (See Wikipedia and Google definitions)
put all its eggs in one basket - having only one approach to doing business or solving a problem and therefore vulnerable if this one thing fails (diversifying with a variety of businesses or problem solving methods protects from failure in any one of them)
market share - percentage of company's customers as a percentage of the total available market for their product, expressed as the company's sales revenue from the market divided by the total sales revenue available in the market (See Wikipedia)
controls about a 60-70% share in the local market - has a 60-70% local market share in Thailand
depressing exports - causing exports to decrease
presumably - think it is likely to be true, but not sure
Free Trade Agreement (FTA) - an agreement between two or more countries to reduce tariffs and other "barriers to trade" over time
Japan-Thailand Economic Partnership Agreement (JTEPA) - formal title of the free trade agreement between Japan and Thailand (See Wikipedia)
Research and Development (R&D) - new product design and development by a company (See Wikipedia)
the tour - a series of golf tournaments for professional golfers with large amounts of prize money to be won (See Wikipedia on professional golf tours)
for contractual reasons, it declines to identify the companies - the contract with the brand it is producing for, states not to reveal the name of the brand, in order to protect the brand name
lifespan - length of life (the period of life that golf can be played)
production lines, assembly lines - a manufacturing process in which parts (usually interchangeable parts) are added to a product in a sequential manner using optimally planned logistics to create a finished product much faster than with handcrafting-type methods (See Wikipedia on assembly line)
capacity - the maximum amout that can be produced if all available resources (labour, machines, parts) are used
majority of the output - most of the output
currency fluctuations - when the value of the baht goes up and down (the priice of exports also goes up and down, making export prices high or unpredictable, and exports difficult to sell)
premium golf balls - special golf balls for which customers pay a little more (a premium)
niche markets - small specialised markets satisfying customers with special needs
generate higher margins - get greater profits
