PART A

QUESTION 1

1. a) Explain why many firms fail to conduct sufficient research before entering a
foreign market.

Many firms fail to conduct sufficient research before entering a foreign market.
Firstly, the lack of planning where one motive of firms to go beyond local boundaries
is access to new capital and customers. Trying to keep up with competitors, some
firms jump into foreigner markets without a solid plan of action. They don’t research
markets, as like don’t ponder the variance in costs in doing business globally. The
firms, sometimes pulled out of global markets or foreign markets because we they
went in without a good strategic plan to management.

Secondly, the firms have poor communications. Communications is a major

for business domestically, and the burden becomes even greater when you enter the
markets where the native language is different from your own. Global firms must
consider affects of communication in hiring local talent, creating global workplace
and virtual teams and interacting with local customers. Human resources is a major
strategic concern as you enter foreign market.

People who can speak the local language are vital success in doing market and
serving customers. The firms that fail to plan for these communication challenges
rarely get a second chance.

After that, the lack of adaptability, an inability to adapt to the needs of the
local marketplace and culture also can lead to market foreign failure. The firms that
enter foreign markets and fail to use local talent, suppliers and business partners can
easily become outcast in the local community among residents and government
officials. Cultural influences also greatly affect businesses. Customers or clients view
the products and business models differently around the foreign markets. Firms
sometimes fail by not getting to know the markets they enter.
 Finally, the firms just plan and have good solution doesn’t means all foreign
markets will accept it. In some the cases, customers or prospects, they don’t buy into
certain brands or product concepts are consumers in other parts of entering the
foreign markets. Some firms have struggled to develop promotional campaigns that
hit on the benefits that appeal the local attitudes, way of life and people.

b) For many Malaysian-based electrical and electronic product manufacturing

firms, exporting is the most widely use method for selling their products. Explain
how these firms can benefit from export operations.

How these firms can benefit from export operations for selling their products is the
expansion of technology where developments in communications and transportation
technology have enable people in one part of the world. Increasing demand for these
new products and services developed has increased the number of international
business transactions.

The internet phenomenon has not only facilitated businesses-to-customers

transactions. Several major innovations have also occurred in transportation
technology since World War II. The development of commercial manufacturing have
made trans-shipment of good simpler and more efficient. Although the costs of
improved communications and transportations have increased, it has risen more
slowly than the operating of cost of international business.

Secondly, the government deregulation which every country restricts the

movement of goods and services, as well as resources such as labour and capital
across its borders. Many of these barriers are in the form of tarrifs on the imports of
manufactured goods, which are imposed to protect domestic industries from foreign
competition. Such restrictions make international business more expensive to
undertaken. As regulations may be changed at any time, international business is also
risky.
 Generally, governments today have gradually reduced these trade barriers and
allow greater movements of trade and investments into their countries for several
reasons. The citizen’s desire for access to greater variety of goods and services at
lower prices, the increased efficiency of domestic producer as result of foreign
competition and the need to encourage other countries to reduce their trade barriers
have lead to deregulations of restrictions. This has manufacturing firm to gain access
to more markets.

After that, the manufacturing firm has supporting services where the
developments of banking, insurance and postal services by governments and firms
also helped to ease international business. Through banks, payments to exporters for
the good and services sold abroad and arrangements to convert currencies can easily
be made. Insurances firms convert to damage en route or non-payment by the buyer.
Postal agreements among countries enable us to mail a letter to any place in the world
using stamps from the country where mail it.

Lastly, increased in global competition which foreign competition can also

persuade the manufacturing firms to expand its business into international markets to
maintain competitiveness. The firms today can respond quickly to take advantage of
foreign sales opportunities. International manufacturing firms can be shift production
among countries quickly because of their experience in foreign markets and their
ability to transport goods to many places efficiently. When a few the firms respond to
foereign market and production opportunities, other companies also follow suit.
QUESTION 3.

3. a) Discuss Hume’s arguments that exposed the weakness of the Mercantilism

Theory

Mercantilism emerged in England and was propagated during the period 1500-1800,
when gold and silver were the medium of exchange of considered as a measure of a
nation’s wealth. Gold and silver could be earned by exporting goods.

It advocates the countries should therefore encourage and maintain more

exports than imports which would then result in a trade surplus position. A country
could then accumulate wealth and prestige.

As a result, governments would practise in to achieve a surplus balance of

trade. Exports were subsidised while tariffs and quotas were imposed on imports.

According to Hume’s arguments, by the weakness of resulting inflow of gold

of gold and silver would increase domestic money supply and cause inflation in
England. In France, to which England exports, money supply would decrease, thus
demand and prices of goods would also fall.

This change in relative prices would cause France to buy fewer English goods
(because they are become cheaper). England’s balance of trade would deteriorate and
France’s balance of trade in the long run by accumulating gold and silver, as
advocated by the mercantilist.
3. b) Describes the basics strategies in international business. Provide suitable
company as an example for each strategy.

Firstly, the International Strategy where the company centralise the development of
products their home country and offer differentiated products to new overseas
markets, which competitors do not possess those skills and products. This face little
pressure for local responsiveness, such that they not need to customise their products
to meet local requirements, as well as pressures for cost reduction. Although the
companies may establish manufacturing and marketing facilities in foreign markets, it
is rather limited. Some examples of these company are IBM, Microsoft and Toys “R”
US.

Secondly, Multidomestic Strategy, strives to achieve maximum local

responsiveness. The products they offer and marketing strategies are customised to
match the different country conditions. Thus, they establish subsidiaries in produce,
market and conduct Research and Development (R&D) activities independently in
each major market that they do business. These company usually face weak global
coordination capabilities being highly autonomous. Unilever and Petronas previously
strategy.

Thirdly, Global Strategy is a low cost strategy, where company concentrate

production, marketing and R & D activities in a few favourable locations. They are
able to enjoy the benefits of economies of scale. Global firms tend to look similarities
between differents markets and offer a standardised product to customising their
products because customisation increase costs. Company employing this strategy,
such as Intel, Texas Instruments and Motorola in the semiconductor industry, faces
strong pressures for cost but pressures responsiveness are minimal.

Finally, Transnational Strategy where encounter strong pressures for a cost

reduction and pressures for local responsiveness simultaneously which is typical of
some industries in today’s competitive environment. Such company need to utilise
and the transfer skills and competencies developed in any of their worldwide
operations in order to simultaneously achieve cost and differentiation advantages.
 Caterpillar, for example, had to compete with low-cost procedures Komatsu
and Hitachi. Caterpillar needed to obtain economies of scale to reduce their cost. At
the same time, construction practices and government regulations which differ
between countries meant that Caterpillar had to remain locally responsive.

Caterpillar reacted redesigning its product features, tailoring the finished the
product to suit different local needs. By pursuing this strategy, Caterpillar was able to
reduce costs through large scale manufacturing while simultaneously responding to
pressure for local responsiveness.
PART B.

1. International firms operate to different extents of vertical integration to

obtain the parts and components of their final products.

Compare between the advantages of the ‘make’ decision with the advantages of
the ‘buy’ decision for sportwear firms like Nike and Puma.

The advantages of ‘make’ decision is efficient in productions of the component

parts than any any other firm. For example Puma is becoming the fastest growing
brand and now they are on the verge to stand out with Nike. Their sales in past
years increased significantly and when they continue their progress this is a huge
threat for Nike. One stronger Puma is suit of the firms that give discounts and
promotions for the benefit customers, more than Nike.

Secondly, Facilitates specialised Investments asset refers to investments in

equipment that can be used for specific purpose in the manufacturing of a
uniquely designed component. For example, Nike makes the sportswear collection
are huge. They often come up with unique styles that become the trend in the
market and their technologies serve the footwear industry very well, more than
Puma.

After that, Protect Proprietary Product Technology, this refers to technology

that is unique to firm and gives the firm a competitive advantage. The firm would
not want to technology to fall into the hands of competitors, thus the firm may
prefer to make such components part in house to maintain control over its
technology.

Lastly, Improved scheduling which the firm may be able to save costs because
its makes planning, coordination and scheduling of related process easier. For
example, Nike such it offers the Apple pay support and also provides the military
discounts, more than Puma.
 Meanwhile, the advantages ‘buy” decision is Flexibility by being able to
switch to other suppliers as circumstances require. The attractiveness of sources of
supply may change with changes in exchange rates, trade barriers and political
instability. The firm can avoid these risks by switching their orders suppliers from
other countries.

The lowest cost where vertical integration into the sportswear firms of
component parts may increase the firm structure, thus making it more
advantageous to outsources their supplier. They must have three ways, the sub-
units and their activities may bring greater problems coordination and control,
may lack control an incentive to reduce costs and pricing for products become
complex process.

Meanwhile, the securing orders from international customers by outsourcing

some firms to independent suppliers based in other countries, it may help the firm
to secure more orders from that country.
2. DeGemBerhad (DeGem) is engaged in the manufacturing and trading of a
gold and jewellery. The firm operates two design and distribution centres in
Hong Kong, which markets Diamond & Platinum brand of jewellery to
Europe, Asia Pasicific, the Middle East and South East Asia.

Discuss the various elements of culture and its impact on Degem’s

international business activities.

Firstly, Social Structure that determines the roles of individual members, the
stratification of the society (division of population into the classes) and individual
mobility within society. The social stratification systems exist because each
culture values some people more highly than others and distinguish a person by
their social class or status. Then, social mobility refers the ability of individuals to
move from one class to another within society.

Secondly, Religious and Ethics where the religious can be determined as a

system of shared beliefs and rituals that concerned with realm of the scared. The
Ethical systems are set of moral principles or values that are used to guide and
shape behaviour. More ethical systems based on religious princples.

Thirdly, the Religion a reason for being and legitimacy in the belief that they are
of a larger context. To define religion requires the inclusion of the supernatural
and the existence of a higher power. Religion defines the ideals for life, which in
turn are reflected in the values and attitudes of societies and individuals. Such
values and attitudes shape the behaviour and practices of institutions and members
of cultures.

After that, Values are shared beliefs or group norms that have been
internalized by individuals. Attitudes are evaluations of alternatives based on
these values. The Japanese culture raises an almost invisible yet often unusable
wall against all gaijin. Many middle aged bureaucrats and company officials think
that buying foreign products is downright unpatriotic.
The resistance therefore is not so much to foreign products is downright
unpatriotic. The resistance therefore is not so much to foreign products as to those
who produce and market them. Similarly foreign based corporations have had
difficulty in hiring university graduates or midcareer personnel because of bias
against foreign employers.

Meanwhile, Education either formal or informal, plays a major role in the

passing on and sharing of culture. Educational levels of a culture can be assessed
using literacy rates enrollment in secondary education or enrollment in higher
education available from secondary data sources. Global firms also need to know
about the qualitative aspects of education namely varying emphases on particular
skills and the overall level of the education provided. Education levels will have
an impact on various business functions.

Employee training programs for a production facility will have to take the
educational backgrounds of trainees into account. For example a high level of
illiteracy will suggest the use of visual aids rather than printed manuals. In some
cases global firms routinely send locally recruited personnel to headquarters for
training.

Finally, Language has been described as the mirror of culture. Language itself
is multidimensional by nature. This is true not only of the spoken word but also of
what can be called the nonverbal language of international business. Messages are
conversed by the words used, by how the words are spoken and through nonverbal
means such as gestures body position and eye content.

Very often mastery of the language is required before a person is a cultured to

a culture other than his or her own. Language mastery must go beyond technical
competency because every language has words and phrases that can be readily
understood only in context. Such phrases are carriers of culture they represent
special ways a culture has developed to view some aspect of human existence