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International Strategic Marketing

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Question:

Discss about the Energy Strategy to begin First Business Operation in Kuala Lumpur.
 
 

Answer:

Introduction

The given assignment describes about entry strategy in Malaysian environment. Malaysia is considered as first preference for the companies to establish business by various entry strategies. The reason behind this is facility of easier trade. Malaysia is considered as a hub for producers and exporters of rubber, tin, palm oil. Besides this, the infrastructure, technological advancement is very high in Malaysia. The company planning to enter into Malaysian market can enter into service marketing, as it consists of 72% of total GDP of the nation.

Entry strategy to begin first business operation in Kuala Lumpur

For the company to enter into Malaysian market for the first time, it is preferable to opt for agency or distributor system. The reason behind this are as distribution system is responsible for dealing with wholesale and retailers, it becomes easy for the company to market its product, because in case of distribution system the product or services is marketed only to manufacturers and wholesalers, this helps the company in reducing the cost to a huge extent[1].

Now the point comes that how to establish distribution system in Malaysia that is by joint venture or opening a wholly owned subsidiary, by licensing and franchising, establishing export business or by acquiring an established business there. These factors need to be analyzed critically to analyze the impact on transport cost, trade barriers, political risk, cost, economic risk, and firm strategy. The optimal strategy need to be adopted by the company by analyzing that which strategy gives best cost advantage over another strategy[2].

In case of joint venture, it is considered as one of preferred choice to enter into a foreign market. As in the given case a company which is headquartered in UK, wants to establish its business into Kuala Lumpur, Malaysia. Joint venture advantages the partners in the form of sharing the expertise of each other, besides this it helps in expanding the personal capabilities. In this, the partners hold equal partnership[3].

In case of wholly owned subsidiary, the firm is allowed to operate its subsidiary in foreign market. The main advantage in this is the holding company holds 100% stock in subsidiary company, which reduces the restrictions of complying the rules and regulations of other company. Wholly owned subsidiary can be exercised by acquiring an existing company in foreign market that is Kuala Lumpur[4].

 


In case of exporting, it is advisable majorly for manufacturing business. While in case of licensing the company gets an intangible right to carry on the business for a specified period. While in franchising, the franchisee has to follow all the rules and regulations of franchiser, it is a specialized form of licensing[5]. Hence it is advisable for the company to opt for establishing an exporting unit in Kuala Lumpur.

Is it better to set up wholly owned subsidiary or to form a joint venture with one of the local companies

 By analyzing the above stated entry strategies it is said that company has a choice to opt for either joint venture and wholly owned subsidiary[6]. By establishing a joint venture with the local company or organization of Kuala Lumpur, it can be said that firm can be benefitted from sharing local market, language, culture, business and political system. This would result into reduction in cost in comparison to establishing business by own. Besides such advantages, joint venture also has some critics which are as: in case of sharing the business with other business, the company gives control to another company to share its resources, this plays a role of big threat for the company. The company would not have a major control over its location advantage and experience curve of its business. Besides these, joint venture gives more opportunity to conflicts and battles if the strategies, goals and motives differ between the partners[7].

Hence by analyzing both the aspects of joint venture a wholly owned subsidiary, it is advisable for the company to opt for wholly owned subsidiary. The reason behind this is in case of wholly owned subsidiary, the advantages that company would receive are as: risk of losing control would be reduced over the core competency of the company. The company would be having a tight control in the foreign market that is Kuala Lumpur to adopt any strategic coordination. Besides these, company would be aware of get the information about experience curve and advantage of location. However apart from such positive points, wholly owned subsidiary also lays some negative points which are as: the company has to bear all the risk and cost by its own because there is no other joint partner to guide the overseas business and plans to be taken[8].

 

Staffing approaches

To recruit and engage staff in an organization is considered as one of the considerable factor in an organization. The reason behind this is, as these are the only one who will help the organization in accomplishing the desired goals and objective. Hence an organizational management should employ staff in the basis of their talent and skills, that is the management should analyze that whether the employee has the required skills to work in the organization or not. An effective staffing policy is a tool to develop a corporate culture, value and norms in the organization. Besides this, it will contribute a major part to implement the organizational strategy[9].

To recruit and engage the staff in case of foreign country like in the given case Kuala Lumpur, the management should consider following approaches:

Ethnocentric approach: in this approach, the employees are appointed of the parent company or the main company. That is there will be no or very few number of employees would be recruited from outside.

Polycentric approach: in this approach, the management of the company appoints employees of the country in which the company wants to operate. Like in the given case of Kuala Lumpur, the company will appoint managers of Kuala Lumpur.

Geocentric approach: this is considered as one of the best and costly approach. The reason behind increase in cost and its preference is, it seeks to appoint those people who are expert in their field. This approach ignores the nationality of its employees.

Advantages and disadvantages and condition under which one approach is chosen over another

In case of ethnocentric approach, it is perceived by the management of the company that there is lesser number of employees or professionals in the foreign market that is Kuala Lumpur so to manage the subsidiary. One of the main advantages in this approach is that, the company does not need to train the employees about the corporate culture of the organization. Besides this, by transferring the core competency of the company, value of the branch or subsidiary in Kuala Lumpur will increase. Hence by all this advantages it is said that to excel in international market, ethnocentric is a preferred choice. However there are some disadvantages in this approach which are as: it restricts the opportunity in foreign market. The reason behind this is, the employees recruited in foreign branch would not be able to cope up with the change in culture and marketing environment. Besides this it leads to culture myopia that is the company would be least interested to understand the culture of Kuala Lumpur. This can result into failure of the company in longer run[10].

 


In case of adopting polycentric approach, the company decides to follow localization approach, that is the employees and professionals would be recruited from Kuala Lumpur. This would lead to increase in confidence of the general public to connect with the company. Besides these it leads to minimize the cultural myopia for the company. Polycentric approach has some critics also which are as: this approach is quite expensive as comparison to ethnocentric approach. It might be possible that Kuala Lumpur people do not possess specialization as the company requires. Hence it can lead to disasters in the organization if the management could not find the able employees hence it will result into not attaining the basic goals of the company. Besides this, it can lead to arising of conflicts if there are some difference in the opinions of host country professionals and company management strategies[11].

In case of polycentric approach, it can lead to some advantages to the company in the form of: it builds a unique culture in subsidiary organization, which helps a lot in building competitive advantage for the subsidiary and creating value for the business. This creates an informal system in the organization which leads to arrive at early solution to the problems. Hence it is said that polycentric approach provides opportunities for the company to follow global strategy. Besides this, it helps the company in utilizing all the potential of its human resource capital. It builds a different environment for the company having different cultures. Apart from such positive points in adopting polycentric approach, it also poses some negative points which are as: immigration of other country like in the given case of Kuala Lumpur can restrict the company in employing their citizens in the organization. Besides this, polycentric approach is costliest approach in comparison to ethnocentric and geocentric approach[12]. The reason behind this is, the person recruited on local basis, would lead to rise in cost in making them understand about the corporate culture and corporate ethics as of United Kingdom.

Recommendations

By analyzing the approaches it can be said that the given company should opt for geocentric approach, the reason behind this are as: it is provided that company is a global organization, which means that company has sufficient resources to excel in the foreign market like in Kuala Lumpur by employing professionals of various sectors in the company structure[13].

Does Malaysia belong to a high context or low context culture?

High context culture is just opposite to low context culture. These play a considerable role in exchanging the information in the management. In high context culture, many information are in the form of codes and implicit. This approach follows less formal or written information, multiple interactions are done here, focuses on long term information, all the activities and decisions are taken in the basis of personal relationship. While in case of low context culture, the information is presented in a physical context, hence there are very less information which is in the form of codes. In this approach, rules and regulations are given preference, mostly information is external and written, and it focuses in completion of task. Hence it can be said that high context culture is a flexible approach, while low context approach is a stringent approach[14].

By applying the above study on Kuala Lumpur, it is said that Malaysia belongs to high context culture. The reason behind this is, population of Malaysia, prefer on implicit information that is they usually avoid written or formal communication. The people of Malaysia, focuses on what is said to them, rather than on focusing on what does it actually mean.

 


In case of United Kingdom, it follows Low context culture. The reason behind this is, people of United Kingdom used to follow stringent rules and regulations, and they prefer to communicate in a formal manner in the organization. They focus on building short term relationship, they are very task oriented[15].

Will it cause unnecessary misunderstanding in the cross cultural communication between staff of UK and Kuala Lumpur

By analyzing culture of Kuala Lumpur and United Kingdom, it is said that, there will be misunderstanding in communication between subsidiary and parent company. In case of global or international businesses companies come across with cross cultural communications. In case of cross cultural communication, companies face problems such as: language barrier, personality traits, non verbal differences and many more[16].

Measures the company could use to rectify issue in communication

The measures which company can adopt to overcome these barriers are to firstly communicate with the people of Kuala Lumpur and describing them all the rules, regulations, and conditions that parent or United Kingdom Company adopts, negotiating with the people of Kuala Lumpur on the culture context. This might be very complicated, it may be possible that very few number of employees wishes to opt for the profile of company, hence in such case it is advisable to firstly recruit own country members that is United Kingdom citizens. This will help the company as well as employees to understand the communication message and interpret accordingly[17]. Besides such, company can adopt strategies like; it can organize activities, and seminars to train the employees regarding company culture, how the information has to be transferred, providing workshops and tips regarding the communication, and appointment of employees which reduces the percentage of cultural misunderstanding[18].  

Conclusion

By analyzing the assignment over international management, it can be concluded that, to establish a new business operation in Kuala Lumpur, the company has chosen wholly owned subsidiary. The company management has decided to opt for wholly owned subsidiary due to its independence and more control in the hands of parent company.  In case of staffing approaches, the company has a choice among ethnocentric, polycentric and geocentric approach. The assignment has chosen geocentric approach, because of appointment of expert from all over the world. This will bring efficiency in the business. In case of difference in cultural context between Kuala Lumpur and United Kingdom, it is suggested that the company must comply with the strategies like communication in advance, making them aware of the rules and regulations of the company. The parent company is a global company, hence it can adapt to such strategy and that would also not lead to increase in cost to a high extent due to existence of competitive advantages in the company.

 

References

Asgari, M and Ahmed, S, Z,. International of Malaysian service firms: business strategy and choice of foreign market entry mode, [website], 2010, https://eprints.um.edu.my/3120/1/Internationalization_of_Malaysian_Service_Firms.pdf, (accessed on 30th March, 2017).

Aswathappa,. International business, India, Tata McGraw hill education, p 99-129.

Bijaouji, I,. SMEs in an era of globalization: international business and market strategies, New York, Springer, p 1-61.

Capon, N and Go, F,. Frameworks for market strategy, New York, Routledge.

Export. Gov,. Doing business in Malaysia, [website], 2017, https://2016.export.gov/malaysia/doingbusinessinmalaysia/index.asp, (accessed on 30th March, 2017).

Freeth, M et al,. A cross- cultural comparison of Autistic traits in the UK, India and Malaysia, [website], 2013, https://www.researchgate.net/publication/236119949_A_Cross-Cultural_Comparison_of_Autistic_Traits_in_the_UK_India_and_Malaysia, (accessed on 30th March, 2017).

Ireland, R, D et al,. Understanding business strategy: concepts and cases, United States of America, Cengage Learning, p 157-168.

Kowal, A and Szumiel,. United Kingdom: communication, negotiations and cultural background, [website],n.d., https://works.adamkowol.info/UK.pdf, (accessed on 30th March, 2017).

Maclachlan, M,. Cross-cultural communication styles: high and low context, [website],2010, https://www.communicaid.com/cross-cultural-training/blog/high-and-low-context/, (accessed on 30th March, 2017).

Menipaz, E and  Menipaz, A,. International business: theory and practice, London, SAGE, p 393.

Moseley, A,. Improving cross-cultural communication skills: ask- seek-knock, Leadership advance online, vol 17, 2009, pp 1-7.

Neelankavil,. Basics of international business, United States of America, M.E. Sharpe, p 57.

Nymex consulting,. Market entry strategy-keys to success, [website], 2016, https://www.google.co.in/url?sa=t&rct=j&q=&edata-src=s&source=web&cd=6&cad=rja&uact=8&ved=0ahUKEwiqhazH1f3SAhUB1GMKHXBKBmwQFggoMAU&url=http%3A%2F%2Fwww.nymex-consulting.com%2Fpublication-though2016-29-07.pdf&usg=AFQjCNEWrGMInh1XkBMvzr436tjHf0ml_A&bvm=bv.151426398,d.cGc, (accessed on 30th March, 2017).

Shenkar, O and Luo, Y,. Internation business, London, SAGE, p 291-301.

Sinha, P, K and Sinha, S,. International business management, India, Excel books, p 335.

Stikin, A and Bowen, N,. International business: challenges and choices, United Kingdom, OUP Oxford, p 142.

Tielmann, V,. Market entry strategies, Germany, GRIN Verlag, p 1-28.

Whitehead, S,. Staffing policy & HRM issues in international business, [website], 2017, https://panmore.com/staffing-policy-hrm-issues-in-international-business, (accessed on 30th March, 2017).

Export. Gov,. Doing business in Malaysia, [website], 2017, https://2016.export.gov/malaysia/doingbusinessinmalaysia/index.asp, (accessed on 30th March, 2017).

Nymex consulting,. Market entry strategy-keys to success, [website], 2016, https://www.google.co.in/url?sa=t&rct=j&q=&edata-src=s&source=web&cd=6&cad=rja&uact=8&ved=0ahUKEwiqhazH1f3SAhUB1GMKHXBKBmwQFggoMAU&url=http%3A%2F%2Fwww.nymex-consulting.com%2Fpublication-though2016-29-07.pdf&usg=AFQjCNEWrGMInh1XkBMvzr436tjHf0ml_A&bvm=bv.151426398,d.cGc, (accessed on 30th March, 2017).

V, Tielmann,. Market entry strategies, Germany, GRIN Verlag, pp 1-28.

Ireland, R, D et al,. Understanding business strategy: concepts and cases, United States of America, Cengage Learning, pp 157-168.

N, Capon and Go, F,. Frameworks for market strategy, New York, Routledge.

I, Bijaouji,. SMEs in an era of globalization: international business and market strategies, New York, Springer, pp 1-61.

O, Shenkar and Luo, Y,. Internation business, London, SAGE, pp 291-301.

M, Asgari and Ahmed, S, Z,. International of Malaysian service firms: business strategy and choice of foreign market entry mode, [website], 2010, https://eprints.um.edu.my/3120/1/Internationalization_of_Malaysian_Service_Firms.pdf, (accessed on 30th March, 2017).

Aswathappa,. International business, India, Tata McGraw hill education, pp 99-129.

S, Whitehead,. Staffing policy & HRM issues in international business, [website], 2017, https://panmore.com/staffing-policy-hrm-issues-in-international-business, (accessed on 30th March, 2017).

E, Menipaz and  Menipaz, A,. International business: theory and practice, London, SAGE, pp  393.

Neelankavil,. Basics of international business, United States of America, M.E. Sharpe, pp 57.

P, K, Sinha and Sinha, S,. International business management, India, Excel books, pp 335.

M, Maclachlan,. Cross-cultural communication styles: high and low context, [website],2010, https://www.communicaid.com/cross-cultural-training/blog/high-and-low-context/, (accessed on 30th March, 2017).

A, Moseley,. Improving cross-cultural communication skills: ask- seek-knock, Leadership advance online, vol 17, 2009, pp 1-7.

 M, Freeth et al,. A cross- cultural comparison of Autistic traits in the UK, India and Malaysia, [website], 2013, https://www.researchgate.net/publication/236119949_A_Cross-Cultural_Comparison_of_Autistic_Traits_in_the_UK_India_and_Malaysia, (accessed on 30th March, 2017).

A, Stikin and Bowen, N,. International business: challenges and choices, United Kingdom, OUP Oxford, pp 142.

A, Kowal and Szumiel,. United Kingdom: communication, negotiations and cultural background, [website],n.d., https://works.adamkowol.info/UK.pdf, (accessed on 30th March, 2017).

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