Thai businesses in the ‘Red Ocean’ era: SMEs at risk of being left behind

Krungthep Turakij partners with Sustainability Expo 2025 (SX 2025), the largest sustainability event in ASEAN, to host the seminar "A Call for Adaptation: Sustainability in Trade & Industry" on Friday, October 3.

Visit Limlurcha, Vice Chairman of the Thai Chamber of Commerce, said in a Special Talk: "SMEs and Business Chains Towards Sustainability" that Thai entrepreneurs are currently facing a "downturn" period, a global phenomenon affecting not just Thailand but the entire world. Key pressures come from global economic shifts, geopolitical conflicts between major powers, and changes in supply chains due to the ongoing trade wars.

Thailand is grappling with significant challenges in trade and the economy, including currency volatility. In the past month, the appreciation of the Thai baht has remained a central issue in the news.

Currently, investigations and checks are underway to understand the root causes of this volatility, which include factors like gold trading, cryptocurrencies, and Thailand’s competitive edge. 

The Thai economy relies heavily on exports, about 60%, and competitiveness is not only about efficient production or cost-effectiveness; it also requires the ability to "compete on price" in the global market.

Private sector players are actively seeking raw materials and components to continue producing goods that can be exported to major markets, such as the United States, despite increasing competition. In the short term, maintaining existing markets (like the US) remains a key priority.

Thailand places the highest importance on markets within ASEAN, followed by Asia and Europe. Currently, negotiations are underway for a Free Trade Agreement (FTA) with the European Union (EU), which is expected to conclude in early 2026. The EU typically maintains strict sustainability (Sustainability) standards, but due to the economic pressures it is facing, there has been a shift towards "relaxation," with the EU expressing willingness to discuss trade before finalising sustainability terms.

Visit views this period as the "best time" to push forward FTAs with several countries, as there is an urgent need for cooperation within various frameworks.

Challenges and Issues Affecting SMEs

Visit further revealed that one of the major challenges is the disparity in standards. Competitive standards must consider product quality, and global standards are clear on which can be met by small and medium enterprises (SMEs) and which are more suitable for larger corporations. While SMEs can meet various standards if they have the funds and if it’s cost-effective.

Visit also pointed out the disparity in standards.  Global standards are relatively clear on which ones can be met by small and medium-sized enterprises (SMEs) and which are more suitable for larger corporations. SMEs can meet any standard if they have the financial resources and the cost-effectiveness to do so.

Cost Barriers to Certification

One of the biggest hurdles is the high cost of certification for certain products, such as organic foods, which make up only 1% of Thailand's Future Food exports but are in growing demand. The process of obtaining certification is costly, as it requires hiring external bodies for the verification, and standards vary by destination country (e.g., US Organic for the US and EU Organic for Europe).

The high costs are a significant barrier. The certification process alone may cost between 100,000 and 200,000 baht. SMEs, especially those with monthly sales below a million baht, face great difficulty in covering such expenses.

Visit further emphasised that when setting new standards in the country, it is essential to consider SMEs to reduce the "gap and disparity" between large corporations and smaller businesses, ensuring that SMEs can still produce and sell products that meet these standards.

Thai Businesses Must Adapt to Compete in the 'Red Ocean' and Face Price Wars

He continued by stating that Thai entrepreneurs must constantly adapt to survive in the increasingly fierce global market competition, which has now become a "Red Ocean." Survival depends not only on finding new markets but also on addressing demographic challenges, the transformation of the automotive industry, and the country's weakness in creating a strong "story" to communicate to the world.

1. Market Expansion Strategy and Product Adaptation

The term "new market" covers a broad scope, including introducing new products to existing markets, bringing existing products to new markets, or introducing new products to new markets. Additionally, it involves finding ways to increase sales in markets where businesses have already operated, potentially requiring government-led negotiations.

As every successful product attracts competitors, businesses must adapt to address shifts in societal trends.

Convenience and Product Size

Consumer goods must become more convenient, and product sizes (SKUs) should change according to the smaller family sizes that are becoming more common. 

Currently, many families consist of only two people, or some individuals choose to remain single, a trend that is growing more widespread.

Opportunities from an Ageing Society

Thailand's birth rate is rapidly declining, which will result in a missing generation in the next 10 to 20 years. Meanwhile, the population aged 60 and above continues to grow, creating opportunities to develop products and services catering to this demographic.

In the food industry, the focus has shifted to Future Food and health-oriented products, which are also linked to environmental sustainability. The trend is to encourage greater plant-based consumption (though not necessarily complete elimination of meat). The key, however, is that health food still needs to be "delicious" and bring happiness to consumers, as very few people can truly adhere to a 100% clean diet.

2. Adapting to Price Wars and Industry Changes

The automotive industry provides a clear example of rapid adaptation, from traditional engines to hybrids and now electric vehicles (EVs).

The most alarming factor is the "price war." In the past, it was unthinkable for cars priced at 1 million baht to be reduced below that figure.

Visit compared the rapid price changes to "mobile phones that are bought, used, and discarded." Any business that does not prepare for such fast changes will undoubtedly face challenges.

3. Weakness in Storytelling and Reputation Management

Thailand excels in many areas, including agriculture, food, and industrial development in certain sectors. However, one key area we are lacking is creating and promoting a strong "story" to share with the world. Some countries manage to make even small products globally recognisable.

What is concerning is how quickly bad or fake news spreads. For instance, negative news can impact tourism, with a single piece of bad news being shared widely on social media, leading many potential tourists to believe Thailand is unsafe. The problem is that such negative stories persist and have lasting effects, which must be addressed. The lack of skills in promoting and storytelling is a critical area that needs improvement.

Wirit Wisetsin, Deputy Permanent Secretary of the Ministry of Industry, discussed the challenges and opportunities for Thai entrepreneurs, particularly SMEs, in the context of the volatile global economic environment. These challenges include financial issues, standards, market access, and attracting foreign investment, alongside the roles of both the public and private sectors in addressing these challenges.

Challenges and Issues Facing SMEs and the Role of the Government

According to Wirit, three major issues facing SMEs are:

• Lack of Capital: This remains a barrier to growth. Even for those SMEs that have grown, there is often no constant need for capital.
• Lack of Standards: SMEs often develop and follow their own standards, which may not align with international standards or be accepted by larger corporations.
• Lack of Opportunities/Information: SMEs often do not know what large corporations require in terms of supply chains, nor are they aware of global regulatory changes.

Government Measures to Address These Issues:

Regarding Capital: The government has set up specialised banks and funds (such as the Pracharath Fund), but banks typically prefer lending to businesses with low risk and guaranteed profits. However, banks are adjusting to look towards the future and are reducing their reliance on collateral.

Regarding Standards: The Ministry of Industry is working to implement international standards for SMEs.

Regarding Opportunities: Both the government and large businesses are striving to communicate global trends to SMEs, but it is crucial for SMEs to be able to adapt and apply these trends effectively.

Protection vs. Promotion:

Protection: In the past, it was possible to set Local Content Requirements (LCR). However, with the current global trade rules (WTO, FTA), protection measures have become more difficult to implement.

Promotion: The focus now is on incentivising businesses (e.g., the BOI encourages large companies investing in Thailand to consider using Thai SMEs in their supply chains). The goal is to increase productivity and standards to help SMEs become competitive.

Regarding Standards for Thai SMEs: Thai SMEs can meet international standards if they have access to sufficient capital. However, the high cost of certification (e.g., Organic Certification for the US and EU) is a significant barrier, often costing hundreds of thousands of baht. This makes it difficult for small SMEs or farmers with revenues below a million baht to afford such certifications. The government should consider the capabilities of SMEs in meeting these standards to reduce disparities.

How to Raise SMEs to Global Standards and Promote Them:

Wirit stated that Thailand has also established its own standards through the Office of Industrial Standards (ISO), which issues approximately 600 standards annually. Currently, there are over 3,000 standards across 144 product categories. Standards, in some ways, can also serve as subtle barriers, which is a practice seen globally. Therefore, we must create our own product standards, testing methods, and processes.

We need to further elevate these standards. For example, the recent introduction of community product standards is important, as trade wars will continue, and regulations and standards will increasingly govern trade.

Adapting Thai SMEs: Thai SMEs must continue to adapt. While everyone has a way to manage on their own, if they want to expand internationally, they will inevitably face these standards. The challenge lies in how to structure standard creation and testing processes, which come with costs. To meet these standards, more tools and resources will be needed, and the government is providing support in this area.