Mist-spraying fans: Thai hot weather products
hit international markets (30-03-07)
By Jon Fernquest[Introduction|Vocabulary|Article]
[Reading Questions|Answers]
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With the Thai festival of Songkran and the hot season fast approaching many are anticipating hot days ahead.
Drenched in sweat at the height of the hot season, sitting down in a restaurant, how can restaurant owners make your dining experience more pleasant?
Mist-spraying fans are a solution to this problem.
Thai entrepreneurs have been hard at work on this problem.
Today's article takes a close look at how the Thai company MasterKool, one of the first innovators in this market, is managing the worldwide expansion of their business.
Reading Questions
Here are some questions to guide your reading (See answers at end):1. What kind of product does MasterKool make? How many different ways is the new fan product referred to and described in the article? (Make a list)
2. Is MasterKool's business seasonal? Why?
3. Where do people typically use MasterKool's fan?
4. Did the company experience initial cost overruns?
5. What was the original targeted market for the product?
6. Were there any problems in reaching this targetted market?
7. Why didn't they initially register a patent for their invention?
8. What problems have resulted from not registering this patent?
9. What other markets besides the Thai market is the company working on?
10. Why did they open a 100%-owned subsidiary in Dubai?
11. What countries are they targeting for expansion next? Why?
12. What proportion of their business will be outside of Thailand in the near future, according to their projections?
Bangkok Post Article March 17, 2007
Following Earth orbit, and profit
UMESH PANDEY
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"We had no option but to look for the international market to expand into. During the peak seasons we wouldn't have time to breathe but come the rainy and the winter seasons, we don't know what to do, as nobody in Thailand would be buying our product," says Noppachai Veeraman, the managing director and 20% owner of MasterKool International, a company he helped start.
MasterKool makes outdoor mist-generating cooling systems, for which Mr Noppachai drew inspiration from his trip to Universal Studios in the United States in 2001. Today his company is a known brand in many outdoor restaurants, events and new homes.
MasterKool, one of the country's most fascinating business stories in the past few years, has gradually transformed itself into one of the few local small and medium-sized enterprises to have ventured into areas that most Thai companies, especially smaller ones, do not even think about.
"We started the company in July 2002 after having invested nearly double what we initially budgeted for the research and development of this product," says Mr Noppachai, a man of modest tastes.
To make things worse, the product that was initially designed for general home use turned out to be so expensive that most household users would not be able to afford it. Priced at around 80,000 baht apiece, the mist-spraying fan that Mr Noppachai himself calls as "an alien standing" was not everyone's cup of tea.
"We had to change our whole concept, actually we were looking at simply abandoning the entire plan to start mass production due to the cost, and that is the reason why we (the four partners who are close friends) did not register the patent for the technology that was developed in-house," he says.
The move, which they now repent, has helped invite competition and there are more than 10 players in the Thai market alone who are using the technology to produce similar products at cheaper prices, although Mr Noppachai contends that the competitors' products do not provide the same quality of cooling without wetness as his system does.
"Despite the intense competition, we are committed to the quality of our product. We will not do anything to compromise our brand, as we want people to continue to think of us when they think about a quasi-air-conditioning system," Mr Noppachai says. "In the future we want people to think of air-conditioning, MasterKool and fan, and we want the outdoor cooling system to be synonymous with MasterKool."
It is this commitment and dedication by this engineering graduate and his friends that drove his firm to seek fortunes outside Thailand, something unimaginable for a company of his size.
With an annual turnover of just 130 million baht as of last year and expected to increase in this year, the burdens of international expansion was something that was unexpected in the company. But with little to do during the off-season period, Mr Noppachai says there are very limited options to play with.
"It is all about doing your homework right. We studied the markets where the weather is different from that of Thailand and by doing so we could concentrate our resources to that market when they are not busy in Thailand," he says.
Among the first markets that MasterKool tapped into was the prosperous Middle East and European Union. Now with a presence in Saudi Arabia, Kuwait, Qatar, France, Australia, India, Pakistan, Sri Lanka, and host of other countries, the firm last year took the bold decision to open a 100%-owned subsidiary in Dubai in the United Arab Emirates.
"This is the test pilot project for us. If the Dubai operations are successful, then we will emulate the success in other markets as well," Mr Noppachai says.
"We thought about it. Dubai is a booming market that has both the market potential and the purchasing power. So we thought to ourselves that if we have an agent, that agent may or may not be able to give the service and quality we want to deliver. With such an important market, we could not take any risk."
Within four months, the Dubai operation is now the brain centre for the entire Middle East and European market, with products being sent to Dubai before being shipped to other parts of that region.
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MasterKool has even grander plans going forward. It wants see higher contributions from its global operations.
"Currently, we see about 25% of our revenues from international operations but in three years we want it to be evenly split between domestic and international operations," he says.
To achieve this, the company is participating in various international organisations such as major sporting events and functions to help promote the brand.
"Branding and design are two issues that we really have to work on going forward, apart from the research and development," Mr Noppachai says. "We have to develop better techniques than what we already have for the product and that is why we do not have a limit on R&D expenses. The reason is simple. We missed the boat in registering our patent the first time around but we don't want to miss it once we get a better system."
The reason for not registering initially was the non-viability of commercial production due to high cost, he explains.
He and his partners tried to register later but with MasterKool's products already in the market, they were denied patents. Mr Noppachai and his friends had actually sold their first few units even before they registered the company, thanks to the 2002 Architect exhibition at Impact Arena.
"This has taught us a good lesson, we now know what it means to be innovative and a lesson in France taught us what it means to have a good design."
In France, where the company's products do sell, a company copied the product but with a good design, the selling price for the competitor's product was 2.5 times higher than MasterKool's.
"It's a good lesson for us, which shows that people in that area are not so much price-sensitive but are design-centric," he says.
But a plan to reach the masses in the local market is still in the pipeline, with a planned 200-million-baht investment in the near future in plant expansions.
"What we want is to have products that would cost less than 10,000 baht for the domestic market and this can only happen with innovation and investment in plant and equipment, which we plan to do sometime later," he says.
As part of the overall plan, the company is also looking at selling shares in a public offering to raise funds for plant expansion.
"In having a new and innovative product, we hope to be able to tap the other markets that are price-sensitive such as Asian countries," Mr Noppachai says.
He added that the market potential for this product would only be realised once all of these plans were functioning, but the sales from successful development could amount to billions of baht.
Vocabulary (in discussion above)
tucked in a quiet corner, tucked away in - hidden, located in a place that is difficult to find
bustling city - city with lots of movement (cars, motorcycles, crowds moving around)
shophouse office - the standard building found in Thailand, with area for a shop on the first floor and rooms upstairs for offices or a home
is a far cry from - is not nearly as good as
wouldn't have time to breathe - very busy
small and medium-sized enterprise (SME) - (See Wikipedia)
a man of modest tastes - doesn't like expensive or showy things
not everyone's cup of tea - not everyone likes it
register the patent for the technology - request permission from the government to have your invention protected
developed in-house - invented within your company
repent - wish you had not done it
compromise - when people accept slightly different from what they really want, so as to reach an agreement with other people
quasi- - similar in many ways, but not the same
be synonymous with - have same meaning as
commitment - continuing to do something, even if there are difficulties
turnover - revenue, sales
limited options to play with - not many different decisions and actions possible
doing your homework - doing the necessary preparation, reading, and research before a meeting or a presentation (so you know what you are talking about)
tap, tapped into - out a resource to use
with a presence in - (See glossary)
pilot project - project to see if an idea works
emulate - imitate something that was successful
is in full swing - complete and fully operating as planned
still in the pipeline - not yet complete, still being planned and worked on
plans are already afoot - actions are already being taken on plans
missed the boat - missed an opportunity
non-viability - plans will not succeed, not feasible
registered the company - do everything that the government requires to legally start a business
Answer Key:
1. What kind of product does MasterKool make? How many different ways is the new fan product referred to and described in the article? (Make a list)
a. mist-spraying fan
b. outdoor mist-generating cooling systems
c. quasi-air-conditioning system
d. outdoor cooling system
[Note: Good writing varies descriptions like this, so the reader is not bored.]
2. Is MasterKool's business seasonal? Why?
Yes, during the rainy and cold seasons no one buys their product, because it is not very hot.
3. Where do people typically use MasterKool's fan?
In outdoor restaurants, at events, and outside in the gardens of new homes.
4. Did the company experience initial cost overruns?
Yes, they "invested nearly double" what they initially budgeted for research and development.
5. What was the original targeted market for the product?
The product was "initially designed for general home use."
6. Were there any problems in reaching this targetted market?
Because the product was expensive to produce, they had to price it at 80,000 which was too expensive for general home use.
("...turned out to be so expensive that most household users would not be able to afford it. Priced at around 80,000 baht apiece...")
7. Why didn't they initially register a patent for their invention?
They were planning to abandon "the entire plan to start mass production due to the cost," so they didn't file for a patent.
8. What problems have resulted from not registering this patent?
Other companies are using the same technology that they didn't patent to produce similar products at an even cheaper price.
9. What other markets besides the Thai market is the company working on?
In the Middle East and European Union, the company has a presence in Saudi Arabia, Kuwait, Qatar, France, Australia, India, Pakistan, Sri Lanka, and Dubai in the United Arab Emirates.
10. Why did they open a 100%-owned subsidiary in Dubai?
a. Dubai is a pilot or test project to test to see if their business ideas can work outside of Thailand.
b. "Dubai is a booming market that has both the market potential and the purchasing power."
c. Merely employing an agent in Dubai would not have given them the degree of control that they desired.
("So we thought to ourselves that if we have an agent, that agent may or may not be able to give the service and quality we want to deliver. With such an important market, we could not take any risk.")
d. Dubai is closer to the Middle East and Europe, so it is an easier point to manage these operations from.
("Within four months, the Dubai operation is now the brain centre for the entire Middle East and European market, with products being sent to Dubai before being shipped to other parts of that region.")
11. What countries are they targeting for expansion next? Why?
Australia and South Africa are being targetted because they both countries are located in the Southern Hemisphere and "are hottest when it is winter in Thailand."
12. What proportion of their business will be outside of Thailand in the near future, according to their projections?
They project that the international share of their revenues will rise from 25% to 50% in three years.
