DIPLOMA IN BUSINESS MANAGEMENT

INTERNATIONAL BUSINESS (PBS 3043)

SEMESTER 5 (0715) / SECTION 24 / AB101

EXPANDING BUSINESS INTERNATIONALLY

GROUP MEMBERS: AMY EZREEN BINTI SAZALEE (PTM 130715391)

FATIN NAJIHA BINTI AZMAN (PTM 130715380)

MOHD ZAKI BIN ZAINAL ABIDDIN (PTM 130715741)

MOHD FARIDZUAN BIN MOHD SUHAIMI (PTM 130715349)

HASBUL ASYRAF BIN MOHD YUSOF (PTM 130715740)

LECTURER : NURHABIBAH NAJWA ABIDDIN

COMPANY BACKGROUND
About Us

Established circa in 2010, Chillex Caf Sdn. Bhd. is rooted in humble beginnings.
What started as a family business has today grown into one of Malaysias most renowned
traditional dish producers.

Malaysia has always been well known for traditional food which are rich in flavour,
pleasantly aromatic, and irresistible in taste. Realizing worldwide growth and the increase
demand for traditional food. Chillex Caf has grown in leaps and bounds, becoming one of
Malaysias largest Nasi Kerabu Lobster producer.

With a strong focus on delivering quality, affordability and excellence in all of its
products, Chillex Caf uses only the finest raw materials in all its mixes. Chillex Caf strives
to provide premium quality in each dish, while keeping prices competitive and affordable so
that its products are readily available to every segments of the market.

The demand for Nasi Kerabu Lobster is ever-changing, and Chillex Caf has stapled
its products into the minds of consumers, Brand loyalty is paramount. Chillex Caf places a
strong emphasis on the end user. Being traditional food enthusiasts ourselves, we realize
the importance of a good dish. That is why every plate of Nasi Kerabu Lobster is made by
traditional food enthusiasts for traditional food eaters.

In diversifying its products, Chillex Caf has also expanded its offering to include
Chocolate Mixtures and Tea. Currently, Chillex Caf offers products from 4 major brands
which include Chillex Coffee, Bicaco White Coffee, Mixco Chocolate and Restea. Plans to
diversity further are underway as Chillex Caf looks to expands to horizons.

MARKET STRATEGY
 i) Basic of Entry Decision

Chillex Caf will be considered as an early entrance or a first-mover due to the United States
food culture is are generally bread, corn, beef, wheat and other western food. It is a definite
that they have never tried our traditional food especially Nasi Kerabu Lobster.

Definition of 'First Mover'

A form of competitive advantage that a company earns by being the first to enter a
specific market or industry. Being the first allows a company to acquire superior brand
recognition and customer loyalty. The company also has more time to perfect its
product or service.

We hope to gain a sustainable competitive advantage by establishing ourselves before any

competitors enter the market.

Advantages of Being a First-Mover

There are some advantages to being a first mover. Here are some of them:

We have the potential to make a lasting impression on customers, which can lead to
brand recognition and brand loyalty.
We have more time to refine our processes and to perfect our products or services.
We may have an advantage in controlling resources, such as a strategic location or an
exclusive contract with key suppliers or talented employees.
We may have a sustainable advantage when there is a high cost involved for
customers to switch brands at a later date.

Disadvantages of Being a First-Mover

There are also some disadvantages to being a first mover, such as:

We bear the economic burden of developing a new market that followers into the
market can exploit.
Followers into the market can learn from the mistakes of ours, allowing them to reduce
their risk and avoid making costly mistakes.
Followers may be able to examine the processes of ours and modify them for greater
efficiency and cost reduction.
 Followers can utilize newer technologies that become available, while ours may be
heavily invested in older technologies.
We sometimes rigidly adhere to their original path, even when it is not working, which
opens the door for followers to move in with a revised version of the product that better
serves the market's needs.
We may be driven by a fear of missed opportunities, leading them to launch a new
product or service before the market is ready.

Large Scale Entry

Definition : Requires commitment of significant resources and implies rapid entry.

Strategic Commitments:

Decision that has long-term impact and is difficult to reverse.

Change the competitive playing field and unleash number of changes.
Can limit strategic flexibility

We decide to enter a foreign market which is in the United States on a significant scale where
it is a major strategic commitment. Strategic commitments, such as rapid large-scale market
entry, can have an important influence on the nature of competitions in a market. For example,
by entering the United States financial services market on a significant scale, Chillex Caf has
signalled its commitment to the market. This will have several effects.

Positive Effects

It will make easier for our company to attract customers and distributors.
The scale of entry gives both customers and distributors reasons for believing that
Chillex Caf will remain in the market for the long run.
The scale of entry may also give other foreign businesses considering entry into the
United States pause, now they will have to compete against not only indigenous
businesses in the United States but also an aggressive and successful European
businesses.

Negative Effects
 By committing itself heavily to the United States, Chillex Caf may have a fewer
resources available to support expansion in other desirable markets, such as Japan.
The commitment to the United States limits our companys strategic flexibility.

ii) Mode of Entry

Chillex Caf has chosen Franchising to expand its offering.

Franchising :

A continuing relationship in which a franchisor provides a licensed privilege to the franchisee

to do business and offers assistance in organizing, training, merchandising, marketing and
managing in return for a monetary consideration. Franchising is a form of business by which
the owner of a product, service or method obtains distribution through affiliated dealers.

Advantages of Franchising

The risk of business failure is reduced by franchising. Our business is based on a proven idea.
We can check how successful other franchises are before committing ourselves.
Products and services will have already established a market share. Therefore, there will be
no need for market testing.
We can use a recognized brand name and trade mark. We benefit from any advertising or
promotion by the owner of the franchise.
The franchisor gives us support where it is usually as a complete package including training,
help setting up the business, a manual telling us how to run the business and ongoing advice.
No prior experience is needed as the training received from the franchisor should ensure the
franchisee establishes the skills required to operate the franchise.
A franchise enables a small business to compete with big businesses, more so than an
independent small business, due to the pool of support from the franchisor and network of
other franchisees.
We usually have exclusive rights in our territory. The franchisor won't sell any other franchises
in the same territory.
Financing the business may be easier. Banks are sometimes more likely to lend money to buy
a franchise with a good reputation.
 We can benefit from communicating and sharing ideas with, and receiving support from, other
franchisees in the network.
Relationships with suppliers have already been established.

Disadvantages of Franchising

Costs may be higher than we expect. As well as the initial costs of buying the franchise, we
pay continuing management service fees and we may have to agree to buy products from the
franchisor.
The franchise agreement usually includes restrictions on how we can run the business. We
might not be able to make changes to suit our local market.
We may find that after time ongoing franchisor monitoring becomes intrusive.
The franchisor might go out of business.
Other franchisees could give the brand a bad reputation, so the recruitment process needs to
be thorough.
We may find it difficult to sell our franchise where we can only sell it to someone approved by
the franchisor.
All profits are usually shared with the franchisor.
The inflexible nature of a franchise may restrict us.
Little ability to introduce changes to the business to respond to the market or make the
business grow.
 CONCEPT OF STRATEGY

Value
Important and lasting beliefs or ideals shared by the members of a culture about what is good
or bad and desirable or undesirable. Values have major influence on a persons behaviour
and attitude and serve as broad guidelines in all situations. Some common business values
are fairness, innovation and community involvement.

Profit

A financial benefit that is realized when the amount of revenue gained from a business activity
exceeds the expenses, costs and taxes needed to sustain the activity. Any profit that is gained
goes to the business's owners, who may or may not decide to spend it on the business.

1) Using Differentiation Strategy to Create Value and Profit

- Basically, Nasi Kerabu is one of Kelantans traditional food that is well-known in Malaysia.
However, to be different from the others, Chillex Caf has provided a new version of Nasi
Kerabu by add-on lobster to it which makes it Nasi Kerabu Lobster.

- Nasi Kerabu Lobster has been one of the highest demand from our customers since 2 years
ago. We would like to to promote and bring this Nasi Kerabu Lobster into the United States in
order to expand this dish further until it is gone worldwide one day.

2) Pressures for Local Responsiveness

- We have made research about United States culture, demands, taste, and preferences.
These are some information about the United States that we have gone through before
expanding our product there.

1. Differences in Customer Tastes and Preferences

- Americans are expanding for ethnic cuisines as some flavors that were once considered
exotic have entered the mainstream, according to market research organization Mintel.
2. Differences in Infrastructure and Traditional Practices

- To meet this need, Chillex Caf may have to delegate manufacturing and production
functions to foreign subsidiaries. For example, in North America, consumer electrical systems
are based on 110 volts, whereas in some European countries 240-volt systems are standard.
Thus, domestic electrical appliances must be customized to take this difference in
infrastructure into account. Traditional social practices also often vary across nations.

3. Differences in Distribution Channels

- Our companys marketing strategies may have to be responsive to differences in distribution

channels among countries, which may necessitate delegating marketing functions to national
subsidiaries. The Distribution Network (TDN) has been selling quality product lines into North
Americas academic, retail and distribution channels for over 25 years. Established in 1988,
TDN was North Americas first nationwide manufacturer representative firm, selling consumer
electronics including software, hardware and accessories in the United States and Canada.

Retail Stores
Online Sales
Academic Sales
Distribution

3. Differences in Host Government Demands

- Among the ever-changing regulations in business are employment laws. These laws pertain
to minimum wages, benefits, safety and health compliance, work for non-U.S. citizens, working
conditions, equal opportunity employment, and privacy regulations and cover the largest area
of subjects of all the business regulations. Several employment regulations stand out as the
heavy hitters among the others.

- The Fair Labor Standards Act, applied by the Wage and Hour Division, set the minimum
wage for workers in the United States. As of 2010, decisions made by the division affect more
than 130 million workers, according to the Department of Labor.
CULTURE OF THE UNITED STATES

The culture of the United States is primarily Western, but is influenced by African, Native
American, Asian, Polynesian, and Latin American cultures. A strand of what may be described
as American culture started its formation over 10,000 years ago with the migration of Paleo-
Indians from Asia, Oceania, and Europe, into the region that is today the continental United
States.

The United States of America has its own unique social and cultural characteristics such
as dialect, music, arts, social habits, cuisine, and folklore. The United States of America is an
ethnically and racially diverse country as a result of large-scale migration from many ethnically
and racially different countries throughout its history. Differing birth and death rates among
natives, settlers, and immigrants are also a factor.

American culture includes both conservative and liberal elements, scientific and religious
competitiveness, political structures, risk taking and free expression, materialist and moral
elements. Despite certain consistent ideological principles.

American culture has a variety of expressions due to its geographical scale and demographic
diversity. The flexibility of U.S. culture and its highly symbolic nature lead some researchers
to categorize American culture as a mythic identity where others see it as American
exceptionalism.
 MARKETING STRATEGIES

Product

- Basically, Nasi Kerabu is one of Kelantans traditional food that is well-known in Malaysia.
However, to be different from the others, Chillex Caf has introduced a new version of Nasi
Kerabu by adding-on lobster to it which makes it to be as Nasi Kerabu Lobster.

Place

- We would like to distribute our product in Toronto Stakes, which it claims to be the 4th largest
city in Chicago.

Price

- At first, we will start selling the Nasi Kerabu Lobster with a lower price in order to attract their
attentions & to have a high awareness in our brand. We will sell it for RM35 where it will be
converted to $145

Promotion

- Promotion refers to the act of communicating the benefits and value of our product to
consumers. It then involves persuading general consumers to become customers of our
business using methods such as advertising, direct marketing, personal selling and sales
promotion.
 INTERGRATION OF REGIONAL ECONOMICS

North American Free Trade Agreement (NAFTA)

NAFTA is an agreement among the United States, Canada & Mexico designed to remove tariff
barriers between the 3 countries

U.S. exports to Canada and Mexico support more than 3 million American jobs and U.S. trade
with NAFTA partners has unlocked opportunity for millions of Americans by supporting Made-
in-America jobs and exports.

As the U.S. two largest export markets, Canada and Mexico buy more Made-in-America
goods and services than any other countries in the world. Since NAFTAs implementation,
U.S. states like Illinois, Ohio, Michigan, and many others have seen a surge in exports across
North American borders.

Some Facts on the NAFTA :-

1. NAFTA and American Jobs

For over 30 out of the 50 States, Canada or Mexico rank as the first or second largest export
market. Many American small business exporters first foreign customers are in Canada or
Mexico and under NAFTA, U.S. trade with Canada and Mexico have supported over 140,000
small and medium-sized businesses.

2. NAFTA and Manufacturing

Since its entry into force, U.S. manufacturing exports to NAFTA have increased 258% and the
United States maintains a growing manufacturing trade surplus with Canada and Mexico.
American exports of computer and electronic products, furniture, paper, and fabricated metals
have all more than tripled since NAFTA implementation.

3. NAFTA and the Trans-Pacific Partnership

The Trans-Pacific Partnership allows us to bring NAFTA into the 21st Century for the benefit
of working families in America. Following the great progress in U.S. trade policy since NAFTA
was implemented, the TPP will help the U.S. address environmental challenges like wildlife
trafficking and illegal fishing, respond to new developments in global trade, such as the growth
of the digital economy, and reinforce the U.S. commitment to upholding cutting-edge labor and
environmental standards to level the playing field for American workers.

4. NAFTA and the Trade Balance

For services and many categories of goods, the United States maintains a trade surplus with
the NAFTA countries. The largest factor affecting the trade balance with NAFTA countries is
the importation of fossil fuels and their by-products. If those products are excluded, there is
no deficit. In fact, the United States has a large and growing trade surplus in goods, including
agriculture and manufactured goods, as well as in services.

NAFTA imports have increased the competitiveness of American businesses. Nearly 60

percent of US total goods imports from Canada and Mexico are used in the production of
Made-in-America goods and services.

Benefits of NAFTA to the United States

NAFTA boosts U.S. economic growth by as much as .5% a year.

1. Boosts U.S. Farm Exports

- U.S. farmers were really helped by NAFTA. Food exports to Canada and Mexico grew
156%, compared to an increase of 65% to the rest of the world. To put this into perspective,
farm exports to Canada and Mexico alone were greater than exports to the next six largest
markets combined. It totalled $39.4 billion. NAFTA increased farm exports because it
eliminated high Mexican tariffs. Mexico is the top export destination for U.S.

2. Creates Trade Surplus in Services

- NAFTA boosted U.S. service exports to Canada and Mexico from $25 billion in 1993 to a
peak of $106.8 billion in 2007. However, the recession hit financial services hard, so services
haven't quite recovered. NAFTA eliminates trade barriers in nearly all service sectors, which
are often highly regulated. NAFTA requires governments to publish all regulations, lowering
hidden costs of doing business.

3. Lowers Oil Prices

- NAFTA eliminates tariffs, oil prices are lower. This also reduces U.S. reliance on oil imports
from the Middle East and Venezuela. It is especially important now that the U.S. no longer
imports oil from Iran.
4. Lowers Food Prices
- NAFTA lowers food prices in much the same way. Imports totalled $39.4 billion in 2013. This
particularly helps lower the prices of fresh vegetables, chocolate, fresh fruits and beef.

5. Steps Up Foreign Direct Investment

- Since NAFTA was enacted, U.S. foreign direct investment (FDI) in Canada and Mexico more
than tripled to $452 billion in 2012. This helps boost profits of U.S. businesses by giving them
more opportunities to develop, and markets to explore. Canadian and Mexican FDI in the U.S.
grew to $240.2 billion, up from $219.2 billion in 2007. That means this much investment poured
into U.S. manufacturing, insurance, and banking companies. NAFTA reduces investors' risk
by guaranteeing they will have the same legal rights as local investors. Through NAFTA,
investors can make legal claims against the government if it nationalizes their industry or takes
their property by eminent domain.

Disbenefits of NAFTA to the United States

1. U.S. Wages Were Suppressed:

Not all companies in these industries moved to Mexico. The ones that used the threat of
moving during union organizing drives. When it became a choice between joining the union or
losing the factory, workers chose the factory. Without union support, the workers had little
bargaining power. This suppressed wage growth. Between 1993 and 1995, 50% of all
companies in the industries that were moving to Mexico used the threat of closing the factory.
By 1999, that rate had grown to 65%.

2. Maquiladora Workers Were Exploited:

NAFTA expanded the maquiladora program, in which U.S.-owned companies employed
Mexican workers near the border to cheaply assemble products for export to the U.S. This
grew to 30% of Mexico's labor force. These workers have "no labor rights or health protections,
workdays stretch out 12 hours or more, and if you are a woman, you could be forced to take
a pregnancy test when applying for a job," according to Continental Social Alliance.

3. Mexico's Environment Deteriorated:

In response to NAFTA competitive pressure, Mexico agribusiness used more fertilizers and
other chemicals, costing $36 billion per year in pollution. Rural farmers expanded into more
marginal land, resulting in deforestation at a rate of 630,000 hectares per year.
 GLOBAL HUMAN RESOURCES

Polycentric Staffing

A multinational staffing energy whereby each satellite office is managed as a unique national
entity. Managers and employees are hired locally to minimize communication and cultural
challenges.

Advantage of Polycentric Staffing

Operating under a polycentric approach affords companies several advantages. One

advantage is that prospective customers in each country often identify the products as local,
not foreign. With a well-marketed product, this often leads to greater sales and reduces or
eliminates nationalistic backlash. Another advantage: Companies reduce or eliminate
marketing faux pas that arise from cultural misunderstandings. In addition, a skilled country
manager can greatly increase sales and profitability locally.

Disadvantages of Polycentric Staffing

Most of the disadvantages of a company operating under a polycentric approach arise from
the level of decentralization. Multinational companies typically have reduced economies of
scale because products tailored for each country market require localized marketing efforts
and smaller productions sizes. The cost of tailoring products for each market drives product
costs higher. In addition, because each country division operates autonomously, companies
often replicate functions in each market.
 EXPATRIATE PAY

MALAYSIA UNITED STATES

Basic Salary (per month) RM 2,500 $ 10,371.75

( RM2,500 x 4.1487 )

Income Tax 0% 15%

( $10,371.75 x 15% )

= $ 1,555.80

Foreign Service Premium RM 7,500 $ 20, 743.50

( 3 months )

Benefits ( RM2,500 x 13% ) $ 1, 348.30

( EPF,SOCSO ) = RM 325

Allowance - - House ( per month )

$ 5,000

TOTAL RM 10, 325 $ 39,019.35

Income Tax in Malaysia
A total of 300,000 individual tax payers are no longer subject to pay income tax as the
government has announced a reduction in income tax rates by 1 to 3 percentage points for
all taxable income groups. For example:

a) 11% to 10% for the taxable income group of RM 35,001 to RM 50,000 which will result
in a tax savings of RM 150
b) 19% to 16% for the taxable income group of RM 50,001 to RM 70,000 which will result
in a tax savings of RM 600
c) 24% to 21% for the taxable income group of RM 70,001 to RM 100,000 which will result
in a tax savings of RM 900

TRAINING AND DEVELOPMENT GIVEN TO THE MANAGER

1. Cross Cultural Communication Training

This training assists your staff to work more effectively within a cross cultural communication
setting by employing appropriate knowledge and various communication strategies when
dealing with people or clients from culturally and linguistically diverse backgrounds.

The learning outcomes will include key aspects of culture, understanding of how culture and
value orientations impact on communication, the barriers to effective cross cultural
communication and discussion around the key principles to effective cross cultural
communication.

We also provide a range of other workshops which can be tailored to suit the needs of our
organization. These include:

Working with Culturally Diverse Clients

Planning for a Culturally Competent Service
Achieving Cultural Competence
Writing for Effective Translations
 2. Practical Training

- The Practical Toolbox for Managers is an experiential seminar suitable for those foreseen
for promotion to a management or team leader position, those recently promoted or those who
have been active in their role for up to 3 years.

Identifying the skills and behaviors of an effective manager

Reflecting and valuing his own personality (SDI)
Building trust and credibility
Applying action-centered leadership
Building emotional bank accounts
Sharpening impact through effective communication
Setting goals and managing performance
Delivering effective feedback
Influencing others
Being effective and not just busy
Knowing your rights and responsibilities

3. Culture Training
- By providing 2 types of intercultural training :

Culture-General training

- introduces him to the mindset and perspectives of interculturalists which is similar to the
mindset and perspectives of anthropologists.

Culture-Specific training

- Addresses the day-to-day interactions among people from 2 or more cultural

backgrounds who are purposefully interacting, such as the cultures in the United States.
This training will enable him to develop new behaviors and skills for productive
interactions with counterparts from abroad.