Question

You are a newly appointed employee at Cumiciki Berhad as Senior Manager for Special Function in CEO Office. This company is generally based on healthy drink product. On the first day reporting to Chief Executive Officer (CEO), you are informed that the company experiencing decline in revenue. This is because of certain factors including domestic market has saturated. As part of your special task force, you are required to come out with analysis to identify what are the issues and to find a new market opportunity on the international market. Give some recommendations on the current problem and what kind of entry strategy to international market.

Your assignment should follow the guideline below:

1. Introduction [10 MARKS]

• - General idea about multinational corporation

• - How business in global market environment?

  2. Body [60 MARKS]

• - What do you understand by “Go global”?

• - Explain how globalisation impact on your company.

• - Elaborate about entry mode of your choice.

• - Describe about the challenges of multinational company in international

  market by using Porter’s Five Forces Model.

• - Recommend several strategies on how to compete at international level.

  3. Closing [10 MARKS]

  - Conclusion
  

Answer 1

A multinational company/organization (MNC) has offices and different resources in more than one nation other than its nation of origin. A MNC has workplaces as well as industrial facilities in various nations and a concentrated administrative center where they arrange worldwide administration. These organizations, otherwise called global, stateless, or transnational corporate associations will in general have spending plans that surpass those of numerous little nations.

The historical backdrop of the MNC is connected with the historical backdrop of imperialism. Huge numbers of the first multinationals were dispatched at the command of European rulers so as to direct endeavors. A large number of the provinces not held by Spain or Portugal were under the organization of a portion of the world's most punctual multinationals. One of the first emerged in 1660: The East India Company, established by the British. It was headquartered in London, and participated in universal exchange and investigation, with exchanging posts India. Different models incorporate the Swedish Africa Company, established in 1649, and the Hudson's Bay Company, which was consolidated in the seventeenth century.

In order to enter the global business environment, the company can choose any one of the following ways;

1. Importing and Exporting

Importing (purchasing items abroad and exchanging them in one's own nation) and trading out (offering residential items to outside clients) are the most seasoned and generally pervasive types of universal exchange. For some, organizations, bringing in are the essential connect to the worldwide showcase. American food and drink wholesalers, for example, import for resale in U.S. markets the packaged waters Evian and Fiji from their sources in the French Alps and the Fiji Islands separately.

2. Licensing and Franchising

An organization that needs to get into a universal market rapidly while taking as it were restricted monetary and legitimate dangers should seriously think about permitting concurrences with outside organizations. A universal permitting understanding permits an outside organization (the licensee) to sell the results of a maker (the licensor) or to utilize its protected innovation, (for example, licenses, trademarks, copyrights) in return for what is known as eminence expenses.

3. Contract Manufacturing and Outsourcing

Many companies today produce their products in such countries where the production costs are lower when compared to their country of origin. And this is called as contract manufacturing which is again a form of outsourcing.

4. Strategic Alliances and Joint Ventures

It is an agreement or arrangement between two companies to pool resources in order to achieve business goal that would benefit both the Partners involved in the contract. And when these alliances are more of an informal cooperative nature, then these are joint ventures.

By saying ‘Go Global’, what I have understood is to make our products and services available to the customers who belong to the market outside our country of origin. This would award the company with opportunities worldwide and the revenue also can be earned from various other countries and its markets without being limited to one country and one market. This would also provide the company with more recognition as a brand among the world customers and that platform.

Globalization has impacted our company both in a positive and negative manner. In a positive manner as it gave us an open platform outside the country without the barriers of different country being a problem. Today we know that a product from a small village in Philippines can also be made available in the NYC or any such high end cities around the globe. But at the same time it is due to globalization that the market in our country for our product got saturated as it was filled with global brands also which made it difficult for the domestic players to compete and exist in their own market.

Now coming to the entry mode that we are choosing for moving to another country and its market would be exporting our products by finding out and communicating with a good intermediary partner who have enough knowledge of the market of that country and the extent to which our product can be catch the market.

The challenges that the company would have to face in the international market by using Porter’s 5 forces model would be as follows:

1. Competition in the industry

When considering the international market, the competition would be tough as there would already be other global and worldwide players with similar or better products ruling the market. So competing and being in line with them would not be an easy task.

2. Potential of new entrants in the industry

Considering the markets in certain countries we can see that it won’t be much welcoming for the new entrants as there would be enough problems to be solved before we enter this market. So this might again be a challenge or hindrance that we would have to address.

3. Power of Suppliers

In a country where there are multiple players from around the globe, the suppliers would be demanding as they have enough buyers ready to buy from them. So we as a new entrant in the market would not be a big grab for them as our future is not certain still. Hence this would pose a challenge again.

4. Power of Customers

Today customers are the king and this is because they have many options to choose from. It will depend on how well we induce them that they choose our products. Thus we should be ready with such ads and inducement programs with the capacity to win them over the other players.

5. Threat of Substitute Products

Substitutes are available on a large hand and most of them would be available at a lower or economy price. This would also be a challenge if we are not well aware of the substitutes available in that market for our product.

Several strategies for competing in international market would be same as stated before regarding the competing in international market i.e.

a. Export Strategies

b. Licensing Strategies

c. Franchising Strategies

d. Joint Venture and Strategic Alliance Strategies.

Thus we can conclude that going global would definitely help us earn more revenue and profit but a proper plan and study should be conducted before hand regarding the manner of entering the global market and the customers we would want to win.