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ASEAN Free Trade Area (AFTA) is a trade bloc agreement by BruneiÂ , Myanmar, CambodiaÂ ,IndonesiaÂ ,LaosÂ ,MalaysiaÂ , PhilippinesÂ , SingaporeÂ , ThailandÂ and Vietnam supporting local manufacturing in all ASEAN countries. The aims of this agreement is to increase ASEAN's competitive edge ,so that it can compete as a world with EUROPEAN and USA, and attract more foreign direct investment to ASEAN.As a result, all restrictions and barriers among member countries those are relating with sector manufacturing are removed. During the last few decades, logistics developed from an unpretentious function to an significant set of activities that add value to firms. In fact, logistics had already become prominent and acknowledged as a critical factor of competitive advantage in other advanced countries like the United States and the United Kingdom (e.g. Bowersox and Closs, 1996; Bowersox and Daugherty, 1995; Christopher, 1993).
Rapidly changing in business environment and emerging new technology due to globalization. Therefore, the intensity of competition in many market was increased .The globalization of business and the increase in competitive pressures have encouraged a lot firms to develop logisticsas a part of their corporate strategy for service advantages and cost (McGinnis and Kohn, 2002) . The breath of logistics services related to products may play a significant role in the competitive scenario(Vandermerwe and Rada, 1988; Bailey, 1996 G. Bailey, Customer care-Making it work, Managing Service Quality 6 (1996) (3), pp. 36-38. Full Text via CrossRefBailey, 1996). Nowadays, the theatrical expansion in the external trade in Singapore, Thailand, Malaysia and Indonesia recently, has resulted in an increase in demand for more efficient and effective logistics services.
1.2 Background of logistics in Malaysia
In Malaysia, logistics industry has been an omission area of business activity. In the past few decades, logistics companies are not aware of the advantage of having an effective distribution system and consequently have not given sufficient precedence to the development of effective distribution strategies. However, the development of international trade within the last decade has stimulated awareness that logistics sector plays a crucial role in facilitating the country's economy (MIMA, 2004) when the transformation of Malaysia economy from agriculture-based to a trade-driven. In the study by Anonymous (2003), highlighted that Malaysia could ultimately stimulate further national growth as the World Bank has estimated that can increase trade by 20% with reduce 10% in transportation costs. On top of that, Anonymous (2003) predicted that logistics sector in Malaysia could generate 12.1% to the total GDP, which is equivalent to about RM9-11 billion over the next decade. Since then, the awareness of the contribution and importance of the logistics and transport industry in Malaysia became apparent in the early 2000.
Therefore, various incentives have also been adopted by the Malaysia government. One of the incentives is Integrated Logistics Services (ILS) incentives. The purpose of this ILS is to encourage logistics service providers to consolidate or integrate their activities to include other services as well as encouraging them to venture into business abroad (MITI, 2007, 2008).Besides that, 20 companies have been granted the Integrated Logistics Services (ILS) incentives at December 2007, which amounted to RM 4.1 billion (MITI, 2008). In 2005, the industry which comprises of transport, storage and communication services contributed 8.8% to the country's GDP after an active development of the industry.
Current Trends in Logistics Practice in Malaysia
Within the last decade, a number of changes have stimulated interest in developing logistics and supply chain management, in which several trends have taken place. First of all, companies realized that logistics management could play a prominent role as a strategic tool in gaining competitive advantage. As a result, the tendency towards keeping low inventories to reduce the cost of storage, as underlined by the production concepts such as Just-In-Time and Zero-Inventory became visible. Thus, logistics activities have become a concern of Chief Executives and Managing Directors of many companies, rather than the logistics managers previously (MIMA, 2008).
Second, Seminar on "Enhancing the Competitiveness of the Logistics Industry" was highlighted that there has been a key trend that many manufacturers outsource their production function worldwide to achieve cost competitiveness as well as to attain economies of scale. A cost-effective management of logistics and supply chain is extremely crucial among the companies in satisfying the demand of their customers as well as to obtain competitive advantage (MIMA, 2008).
Third, the outsourcing of the production function has also led to the outsourcing of logistics activities. Many multinational companies, such as the automobile, electronic and electrical companies have outsourced their logistics activities to third party logistics (TPL) service providers to enable the companies to focus on their core business (MIMA, 2008).
Accordingly, these changes create further opportunities for value creation that could significantly enhance the economic growth.
1.4 Problem Statement
In a study of Nordic, SMEs experienced the choice of channel of distribution as the largest barrier to exports (Lindmark, Eskelinen & Forsstrom, 1994). According to Hollensen (1998), if a company makes a poor selection of entry modes in the initial stage of penetrate foreign market, it may become a threat for future market entries and expansion. When making the decision to break into a new market, SME has also to decide the entry modes to penetrate the foreign market. The foreign entry modes can be similar with the one in the home market if the segment is presenting similar characteristics, or it can also differ and thus requires to be changed in order to adapt to the market.As a result, it is very interesting to investigate the knowledge of internationalization efforts performed by logistics company Malaysia on the Thailand market.
1.5 Research Objective
The general objective is to investigate how the internationalization process of SMEs when entering the foreign market.
The specific objectives are:
To understand the ways of Malaysia SMEs logistics company to penetrate the Thailand market.
To investigate the method of internationalization process SMEs in logistics company in Malaysia when entering the Thailand market.
1.6 Research Question
Do the Malaysia SMEs in logistics influenced by foreign entry modes for penetrate the Thailand market?
1.7 Organization of the Study
Chapter one of this study provides information about background of logistic management in Malaysia and the current trend in logistics practice in Malaysia.
Next, Chapter two follows to review that the past literature that had been conduct by other researcher on various issues related in this study.
Chapter three discusses the data and models used in this study to determine the most efficient way to enter Thailand market.
While we analysis the final result of various model used in this study in chapter four.
Finally, we summarize the paper and suggest the topics for possible further research in chapter five
The literature overview relates to the problem area occur when the penetration to foreign market presented in chapter one. Firstly, I will describe definition of logistics management and international logistics management. Second, I will thrash out the reason of a logistics management start international operations. Further, I will talk about theories regarding the market selection. Next, I will present the different types of channels of distribution and the process for choose a representative in the foreign market. Lastly, I will end this chapter with environmental of logistics.
2.2 LITERATURE OF LOGISTIC MANAGEMENT AND INTERNATIONAL LOGISTICS MANAGEMENT
Generally logistics refers to the inbound and outbound flow and storage of goods, services, and information within and between an organization (Gundlach et al, 2006). The Council of Supply Chain Management Professionals (CSCMP), which is the pre-eminent professional organization for academics and practitioners in the logistics field, formed in 1963, defined logistics management as " that part of supply chain management that plans, implements and controls the efficient, effective forward and reverse flow and storage of goods ,services, and related information between the point of origin and the point of consumption in order to meet requirements (see www.cscmp.org) This definition has resulted from numerous changes in the process to understand logistics (see Table 1).
Table 1: The Development of Logistics Management (source)
Prior to the 1980s
Logistics was primarily concerned with the outbound flow of finished goods and services, with an emphasis on physical distribution and warehouse management. As a managerial activity, logistics focused on its role to support an organization's business strategy and to provide time and place utility.
During the 1980s
The industry globalization and transportation deregulation led to the expansion of logistics beyond outbound flows to include recognition of materials management and physical distribution as important elements. In 1986, CLM (now CSCMP) defined logistics as "the process of planning, implementing, and controlling the efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods, and related information flow from point of origin to point of consumption for the purpose of conforming to customer requirements" (see www.clm1.org).
During the 1990s
Logistics was defined as "the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory and related information flow through the organization and its marketing channels". The definition was changed as a result of accelerated market changes due to shrinking product lifecycles, demand for customization, responsiveness to demand, and increased reliance on information" (Christopher, 1998).
During the 2000s
These years experienced further changes as to how logistics is defined. Development in international trade, supply chain management, technology and business process re-engineering generated a need to re-evaluate the logistics concept. As a result, in 2001, it was defined as "that part of supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customer requirements".
* Adapted from Gundlach, G.T.; Bolumole, Y.A.; Eltantawy, R.A. and Frankel, R., (2006), The Changing Landscape of Supply Chain Management, Marketing Channels of Distribution, Logistics and Purchasing, Journal of Business and Industrial Marketing, Vol.21/7, pp 428-438.
The internationalization process of logistics is the best way that a supplier in one country are transferred procurement, transportation, storage, processing, collating, distribution, marketing and information are tied in and commodities to a demander in another country with the lowest cost and minimum risk, keeping goods quality, quantity and timely. The essence of internationalization of logistics is the principle of collaboration with the international division of labors in accordance with international practice, the use of international logistics networks, logistics facilities and logistics technology and achieve global flows and exchange of goods and services to promote regional economic development and the optimal allocation of resources in the world (YANG 2003).
2.3 CHANGE AGENT
A change agent is an event, organization, material thing and a person that acts as a catalyst for changes. TheÂ term change agents is used broadly in business era because it can be managers or non-managers, employees of organization or an outside consultants to bring a change in their organizational.
Corporate often hire senior managers or even chief executives because of their ability to change the effect of the organization and solve their own problem. This is because they have the ability to comprehensive knowledge of human behavior, supported by a number of intervention techniques
Change agents can broadly be classified as:
1. External Change Agents
2. Internal Change Agents
2.3.1 Internal Change Agents
Internal change agents is a catalyst for changing the otherwise hostile and indifferent environment into an environment where staff and inmates worked together to facilitate reintegration into the community. It addresses the limitations of change management by attending to the perceptions of managers, that is those actors who generally determine organizational priorities and make crucial resource allocation decisions. Problem will be solved by sending in the new employee. They will examine the problems and improved the situation by using their experience. The entry of new employee can be view as the possibilities of prolonging the life cycle for goods via internationalization.
2.3.2External Change Agents
External change agents are those who influenced on the organizational from the outside. They are outside consultants who are temporary employed in the organization to remain engaged only for the duration of the change process. External change agents usually do not implement plans or take responsibility for decision making. Supporting change leaders, programming and project teams in negotiating the transition between the current state and the desired future state is the preoccupation of the external change agent. External change agents facilitating, through coaching, mentoring and knowledge transfer, the development of new skills and behavior in others.
2.4 Motives for foreign expansion
There are many reasons for a company which is going expand to foreign country. Most of them are market related. The market related two motivations to expand their business which are divided to proactive and reactive motivations. Proactive motives are motives that stimuli organizations to attempt strategy change, based on the firm's interest in exploiting unique competences or market possibilities. They can promote motivation indirectly, however, by improving working conditions, adjusting and reassigning tasks as needed, and becoming more effective leaders. Reactive motives are motives which the organization not influence over the threat or pressures and adjust passively to them by changing its activities over time. Czinkota & Ronkainen indicate that proactive organizational go international because they want to, however, reactive organizational because they have to. Several disadvantages will occur when an organization operate in a foreign market compared to the domestic competitors. As a result, an organization must build some advantages to get established in the new market compared to the domestic market.
2.4.1 PROACTIVE MOTIVATIONS FOR SMEs
Accordingly to Ross (1995), proactive motivations occur when the enterprise make a decision to expand their operations into foreign markets. The proactive motivations are defined as
Economies of scale
Usually, an enterprise perceives the internationalization will provide a great opportunity of increasing profits, which is also the most well-known reason for internationalization. An enterprise will produce a product or service, which does not readily exist in foreign markets. The product or service may be very attractive on foreign market, due to technological advantages of the production process, which gives the enterprise to gain a competitive advantage over the domestic enterprises ( Czinkota &Ronkainen,1995). They realized the home market is too small and cannot afford to extend product at domestic market. So, they export it out to numerous enterprises. Besides that, an enterprise may also acquired knowledge about the foreign market than other competitor which does not have. Thus, enterprise will initiate steps towards the internationalization process. Furthermore, the domestic government may exploit the tax benefit to the enterprise when an enterprise starts to export. Lastly, an enterprise can obtain economies of scales as their advantage through export activities. The economies of scales means produce larger volumes then will diminish the cost per unit produced.
2.4.2 REACTIVE MOTIVATIONS FOR SMEs
When the domestic industry outlook is not attractive, the enterprise will try to penetrate foreign market to decrease their resource commitments at domestic country. The reactive motivations are defined as:
Declining domestic sales
Saturated domestic market
The high competition on the domestic industry or overproduction during the economic decline, might affect the enterprise's profitability. Thus, the enterprise tries to seek new markets abroad. Declining domestic sales occur when a product reaching the declining stage of the product life cycle and a saturated domestic market will lead an enterprise to export their product to foreign market, in order to prolong the lifetime of a certain product. Additional, if the enterprise has excess capacity, internationalization may aid the enterprise in reaching the desired production level in order to reduce the fix cost per unit produced. ( Czinkota & Ronkainen, 1995). On top of that, some enterprises want to maintain or defend its position in a particular business network. Therefore, they may be enforced to face internationalization process. Last but not least, the enterprise may fits into exporting sector because of the unsolicited order.
2.5 FOREIGN MARKET MODE OF ENTRY
A foreign market mode of entry is a channel which enables the enterprise's product, human skills, management, technology or other resources, to enter into a foreign country. The choice of market entry mode is a vital strategic decision for firms intending to carry out business overseas. A number of definitions of different modes of entry exist. Hedman (1993) classifies the modes of entry as indirect, direct and alternatives to export. However, Hedman's model does not assumes joint venture as entry mode, which other authors such as Jeannet &Hennessey, (1988); Root (1994b); Ross (1995) identify as an entry mode. Joint ventures will be presented under heading 188.8.131.52.
Most models of foreign market mode of entry is due to limited resources, therefore, enterprises initially penetrate a foreign market through indirect export methods. Indirect paths to internationalization are those "whereby small firms are involved in exporting, sourcing or distribution agreements with intermediary companies who manage, on their behalf, the transaction, sale or service with overseas companies" (Fletcher, 2004). Export intermediaries play an important "middleman" role in international trade, "linking individuals and organizations that would otherwise not have been connected" (Peng and York, 2001). Small and new ventures use intermediaries' to overcome knowledge gaps, find customers and reduce uncertainties and risks associated with operating in foreign markets (Acs, Z. J., O'Gorman, C., & Terjesen, S. (2008)
The mode of entry will switches to direct export such as agents, distributors, and sales branches, when the enterprise becomes more dynamic in international business. Direct export known as the producer will conduct the distribution activities to a foreign agent or importer or to the end customer directly
Selecting the channels of distribution is a long-term strategic decision and need to build long-term relationships and the necessity of stimulating cooperation among distribution alliance partnersMehta et al., 2001 R. Mehta, T. Larsen, B. Rosenbloom, J. Mazur and P. Polsa, Leadership and cooperation in marketing channels: a comparative empirical analysis of the United States, Finland, and Poland, Int Mark Rev 18 (2001), pp. 633-666. View Record in Scopus | Cited By in S. Distribution channels defined as the external contractual groups that firms cooperation to accomplish their distribution objectives. (Rosenbloom, 2004) The chosen channels will affect the enterprise's effectiveness and efficiency for as long as it is operating (Doyle, 1994). As a result, the enterprise should plans a long-term strategy and evaluates the own enterprises' future economical abilities, before select distribution channel.
2.5.1 INDIRECT EXPORT
Indirect export is a chain that connect with the exporting enterprise with a domestic middleman in the target foreign country and link to the end customer as a final point (Akhter,1996). Export intermediaries often help their clients to identify customers, financing and distribution infrastructure providers (Balabanis, 2000). Intermediaries also help firms in overcoming knowledge gaps of the local market, reduce uncertainties and risks associated with operating in foreign markets. Firms may hire export intermediaries because they perform certain functions related to exporting without large investments, with low start up costs and few risks better than the firm itself could. Firms may hire export intermediaries because they perform certain functions related to exporting better or at lower costs than the firm itself could, for example because they possess country-specific knowledge that the firm lacks (Li, 2004) . For this reason Peng and Ilinitch (1998) argue that manufacturers may be more likely to use intermediaries when entering foreign markets. Export intermediaries can also help firms to save costs associated with searching new customers and monitoring the enforcement of contracts (Peng and York, 2001) as well as to help access intermediaries' contacts, experience and knowledge of foreign markets (Terjesen et al., 2008).
According to Hedman (1993), indirect export may work in three ways: through a trading firm, an export merchant and an export agent.
184.108.40.206 Trading firm
An export trading firm is an alliance among a few local small and medium enterprise (SME) to export their product to a target country. They will do export as teamwork to developing and penetrating a target country rather than do it single-handedly. Those firms cooperate to reduce export costs and risks while can develop market research to find new export business opportunities Firms that team-up for exporting can negotiate favorable rates on transportation, insurance and other export services .However ,a trading firm is independent when it operate in a foreign market(Hoagland,1996)
220.127.116.11 Export through an export agent
Export agent is buyers in foreign countries who will buy products from enterprise and sell it abroad in their country. The agent usually awards the lowest bidder with the order and sell it with receives commission as compensation for their effort. Normally, the payment for export agent is received almost immediately plus there is very little effort required to complete the sale. Therefore, the manufacturer can get access to a larger market with minimum cost and risk. The manufacturer's reputation is the largest risk when the manufacturer choosing export agent in foreign market. The manufacturer absolutely looses their control of the export activities after they select an export agent to help them sell their product in foreign market.
18.104.22.168 Export through an export merchant
An export merchant acts as a kind of international wholesaler (Ross, 1995). An export merchant seeks out needs in foreign markets and negotiates with a manufacturer. After makes purchases from manufacturers, the goods are exported to the waiting buyer. After having the merchandise packed and marked to specifications, the export merchant resells the goods in its own name. The export merchant normally specializes in a particular line of products or in a particular geographical market area where they have been operating during a longer a longer period. Sometime it sells the goods with the original supplier's labels or puts its own label.
2.5.2 Direct export
Direct export may be conducted in three ways: (1) directly to the final customer,(2) with the help of a representative or (3) through the exporting enterprise's own establishment (Hedman, 1993). The enterprise will confront with higher investment risks when they conduct export their product through direct link to foreign country. On the other hand, the enterprise may gain potential profit margin and the cost for transaction between home country n host country will drop.
22.214.171.124 Export directly to the final customer
When conduct direct export without going through an intermediary in the home country to develops an overseas channel so that it deals directly with a foreign party, the exporting enterprise takes hold of all exporting activities. Therefore, they have to conduct their marketing research, investigations, transportation and documentation (Young et al .,1989 ). The advantages of directly to final customers is to active market exploitation and greater control to the transaction in the host country. On top of that, the channel also improves communication and consistency. However, it is a difficult channel to handle if the manufacturer is unfamiliar with the foreign market and causing time consuming and expensive.
126.96.36.199 Export through a representative
Export through a representative has played a crucial role in the development of the internationalization process. A representative is an intermediary in the foreign market which has their own market organization that separated from the exporting enterprise. The company can determine to adapt the quantity of the home-based sales representative travel abroad at certain times to take orders or find business. Those enterprise want to penetrate the foreign market but afraid of the risk can find an experienced intermediaries to help them start their operation in foreign country. This is because those intermediaries obtain the knowledge about the country and may efficiently locate the product to the final customer.
An export agents, is an intermediary or trading company that acts on behalf of a company to open up or develop a market in a foreign country. However, the agent does not take title to the products and gives the exporter to take part in the planning and monitoring of the marketing activities. Export agents usually paid a commission on all sales and may have exclusive rights in a particular geographic area. A good agent will know or get to know local market conditions, which the exporting enterprises lack. An agent just carrying out part of the operations on behalf of the exporter, the exporter owns the product until it is sold to the final customer. The exporter has responsible for the customers risks because of the agent does not do not handle the products .The role of the export agent is to evaluate the export potential of the local manufacturer's products, advertise them abroad, look for foreign buyers, place orders with the manufacturer, or arrange for, the documentation, take care of shipments and insurance once a sale has been made.
Distributor is a firm located in the foreign market that purchase goods, re-label them with their own name, brand or trademark and then sell them as their own products. Foreign distributors are the backbone for many export manufacturerBello, D.C. and Lohtia, R., 1995. Export channel design: the use of foreign distributors and agents. Journal of the Academy of Marketing Science 23 2, pp. 83-93 Full Text via CrossRef | View Record in Scopus | Cited By in Scopus. These export intermediaries possess crucial contacts with foreign buyers, strong local-market knowledge, and the ability to provide sophisticated marketing services. Distributors usually have a close relationship with the exporter and given the exclusive right to sell the product. They typically provide complementary services to their buyers, such as maintenance, parts sales, and technical assistance. On top of that, the distributor will assist the export enterprise by running processing orders, stock foreign inventories, grant buyer credit n delivery. Entering foreign market with using distributors is less risky and payment will get directly after transaction. This method allowed SMEs with limited resources to operate in major markets and companies with significant resources to offer their products and services in smaller markets.
188.8.131.52 Export through an own establishment
Export through an own establishment usually is a company-owned export department for a enterprise sells their product directly to companies or final customers in the foreign market.The enterprise has full control over export activities such as the marketing and distribution of its goods and services, and coordinates research, distribution, sales, marketing, pricing, and legal. This department usually consists of an export sales manager with some clerical assistants. Export through an own establishment is an expensive way but very effective for enterprise to conduct their business in foreign market.
An enterprise starting a sales office in a foreign market have to be establish new relationships in the foreign business network .Enter a foreign market with sales office is very costly n time consuming. This is because establish a sales office in foreign market required a high level of resources n effort into the market. , however, it is the best way to enterprise to obtain the knowledge of the local market.
A branch office established facilitates sales in the foreign market. They is an intermediary who selling products and providing support services to the manufacturer's sales force .A sales branch allows the manufacturer to achieve greater presence and program control in the foreign market. The role of sales branch handle sales is distribution product and managing warehouse and promotion. It often serves as a display centre and customer service centre in the foreign market. However, there are no manufacturing is done at this location.
An export sales subsidiary basically removes the export function from the parent company and places the function in a separate wholly owned subsidiary. The export subsidiary purchases goods from the parent company, and resells it on their country. Export subsidiaries is able to add products from outside the parent company in order to round out its product line, and is able to separate out costs and expenses more efficiently than an internal department. On top of that, export subsidiaries can also develop into centre of excellence, controlling critical resources that other parts of the MNE depend upon Holm and Pedersen, 2000 U. Holm and T. Pedersen, The emergence and impact of MNC centres of excellence, A subsidiary perspective, Macmillan Press Ltd, Houndsmills (2000)..
2.5.3 Alternatives to export
A lot enterprise realized the importance of expanding their business internationally. However, there are several obstacles to internationalization for firms in the developing world. One of these is a lack of information and knowledge about foreign markets. In such case, licensing or franchising might be the right choice (Czinkota&Ronkainen, 1995).
184.108.40.206 License manufacturing
Licensing is another easy way to for a manufacturer to involve in international marketing with a limited degree of risk. Licensing occurs when an enterprise within the foreign market, the licensee, make an agreement with the licensor who offering the right to use a manufacturing process, trademark rights, patent rights, or trade secret of value for a fee or royalty. The licensee will produce the licensor's products and market these products in his assigned territory. After that, the licensee will pay the licensor royalties related to the sales volume of the products. The producing enterprise hereby escapes expensive toll and other trade barriers, exchange fluctuations, high transportation costs and political risks (Root, 1987). The disadvantage of licensing is the firm has less control over the licensee than if it had set up its own production facilities. After few years, once the know-how is transferred, the foreign firm may begin to act on its own and the international firm may therefore lose that market. Therefore, the licensor must establish a mutual advantage in working together, and a key to doing this is to remain innovative so that the licensee continues to depend on the licensor.
Franchising is an entrepreneurial activity that plays a crucial role in the creation of new jobs and economic developmentFalbe et al., 1998 C. Falbe, T. Dandridge and A. Kumar, The effect of organizational context on entrepreneurial strategies in franchising, Journal of Business Venturing 14 (1998), pp. 125-140.. In franchising, an exporting enterprise collaborates with a franchisee-entrepreneur to create economic value in a prescribed manner. The franchisee obtains the right to use franchisers, brand name, and marketing techniques to market goods or services. In return, the franchisee pays an up-front fee and ongoing royalties to the franchiser. Franchisees usually operate in local markets and communities, therefore, they can provide local knowledge to penetrate the foreign market. Thus, franchisees bring to the franchise system not just financial capital, but also a knowledge of geographic locations and labor markets, and their own managerial labor, that is they represent an efficient bundled source of financial, managerial and information capital Dant, R.P. and Kaufmann, P.J., 2003. Structural and strategic dynamics in franchising. Journal of Retailing 79, pp. 63-75. Article | PDF (157 K) | View Record in Scopus | Cited By in Scopus (24) ( Dant, R.P. and Kaufmann, P.J., 2003. Structural and strategic dynamics in franchising. Journal of Retailing 79, pp. 63-75. Article | PDF (157 K) | View Record in Scopus | Cited By in Scopus (24)Dant and Kaufmann, 2003). The franchising tends to be more directly involved in the development and control of the marketing program. The main disadvantage of franchising is the level of the standardization of the product and service. Without the standardization there might be a risk of losing transferred know-how (Hackett, 1979).
220.127.116.11 Foreign direct investment (manufacture)
Foreign market investment is the direct ownership of facilities in the foreign market. There are two ways for enterprise to enter foreign market through investment. The first option is make a direct acquisition or merger in the host market. The second option is develop its own facilities from the ground up. The reason that the firm invest in the foreign market may be the production in the foreign market is much cheaper. On top of that, the firm develops a deeper relationship with government , customers and local suppliers, so that make a better adaptation of its products to the local marketing environment.Glass and Saggi, 2002b A. Glass and K. Saggi, Licensing versus direct investment: implications for economic growth, Journal of International Economics 56 (2002), pp. 131-153.
18.104.22.168 Joint venture
Joint venture is a contractual agreement between an international enterprise and foreign enterprise to execute a particular business. According to Fletcher and Brown (2004), joint venture is a second broad method of entering a foreign market to set up production and marketing facilities in common with licensing. In joint ventures, the international firm has an equity position and a management voice in the foreign firm. Therefore, international firm better control over operations and also access to local market knowledge. The international firm has access to the network of relationships of the franchisee and is less exposed to the risk expropriation thanks to the partnership with the local firm. Previous studies (e.g., Blodgett (1992) & Geringer &Hebert,1989; Merchant & Schendel, 2000) have shown that equity ownership in a joint venture is an important determinant of its performance. This is because if the partner has different strategy than the international enterprise, it may lead to conflicting interests.
This chapter describes the research methodology use throughout the study. The topic that include in this chapter is the overall research design which consists of research purpose, research approach, research strategy, data collection, sample selection and data analysis. After that, the means of how to enhance validity and reliability are discussed.
3.2 Research Purpose
This study mainly used the exploratory research, descriptive research and explanatory research to find answers to our research questions and explain the research area. This is based on the purpose of this study being to provide a better understanding of the Malaysia SME's choice international market entry strategies. Exploratory research is conducted when a problem is only a few studies to refer to or when is difficult to limit. According to Denscombe (2000), exploratory research will gather a lot of information through different sources. According to Foster (1998), descriptive research is adopted when studying problem area with existing theories or information. The main goal of this research is to carefully describe the data and characteristics about what is being studied. According to Yin (1994), the function of explanatory research is to explain the causal relationships between cause and effect.
3.3 Research Approach
As the purpose of this study is to gain a deeper understanding of the internationalization process and the specific phenomena relating to SMEs, I have assumed that my research approach will be qualitative method. This is because my study mainly descriptive about the foreign entries mode. Foster (1998) states that qualitative method emphasizes processes and meanings that are not rigorously examined or even measured in terms of quantity, intensity, amount, or frequency. The qualitative method is flexible thereby can correct possible weaknesses, incorrect formulations, and add lacking questions. According to Bryman(2001), qualitative research mainly based on words when researcher collect and analyze data.
3.4 Research Design
The research consists of seven steps which are literature review, proposal, development of interview questions, data collection, data analysis, discussion and conclusion, and write up (figure 3.1). The research took about 10 months to complete and has show by a Gantt chart below (figure 3.2). Each process had be further explains in this chapter.
Figure 3.1 Flowchart of research design
Development of Interview Questions
Discussion and Conclusion
Figure 3.2 Gantt chart of the research
Interview question development
Discussion and conclusion
3.5 Literature Review
This section took about one month time to complete. Inside the literature review, it has been cover the related information of this research. The researcher did the literature research base on the finding of journal article and also referring to the books that are related to this research.
After that, a proposal has been drafted which consists of three chapters. Chapter 1 included the background of study, problem statement, research objective, research questions, background of consumer behavior and also the significance of study. Chapter 2 presented literature on understanding the consumer behavior in international perspective. The research theoretical framework also formed in this chapter. Chapter 3 proposed the research methodology used in this research.
3.7 Development of Interview Questions
The interview questions had taken about one month to develop and are base on the research question and the framework that has been developed. The interview questions had have five main sections which are internationalization barrier, international stimulus, international drivers, process of international development and also the entry mode strategies. Sampling is very vital for later analysis in chapter four. It is essential to select the relevant sample to gather empirical data. The selection of the sample can be conducted through judgment, quota, convenience and probability. In this study, I have chosen to use non-probability sampling to collect the relevant sample through convenience sampling. The sample selection will based on Malaysia small and medium sized company, logistic company, heavily dependent on international sales.
3.8 Data collection
Lekvall & Wahlbin (1993) stated that the researcher has to determine the investigation should be based on secondary data or primary data. According to Eriksson & Wiedersheim -Paul(1997), secondary data is data which has been collected by someone such as annual report and enterprise's homepage. However, primary data is collected directly by the researcher for a specific purpose through interview or inquiries. I have used the personal interview to gather the primary data that will conduct more than one hour. According to Denscombe (2000), interview is the best used, when the researcher have answer question that the complex or contain emotion or experience from a specific subject. I write the questions in English and ask the question in Hokkien when the interview the enterprise. Before conduct the interview, I was test the question on my supervisor and some students of faculty economy and management to ensure the comprehensibility of the question.
3.9 Data Analysis
The process of data analysis was started after finished gather the empirical data from the logistic company. Every investigation should include a general analytic strategy which will treat the evidence fairly, to produce trustworthy analytic conclusion and rule out alternative interpretations. I have used theoretical propositions that the theory chapter led to the problem discussion, the research question, the data presentation, the data analysis, and the conclusion. I have used within-case analysis to compare the collected data against the theory used.
3.10 Quality Standards
According to Saunders et.al. (2000), it is not enough to collect and analyze data for researcher to maximize the aspects of the quality. Therefore, two research method measures, that is the validity and the reliability has to be aware to reduce the possibility of getting the wrong answers.
Denscombe (2000) states that the purpose of validity is to extent the research data and a specific method for obtaining data are considered precise, correct and accurate. I have developed the questions in the interview guide from existing theories to increase the validity of my study. When conducting the interviews, I asked for clarification of the answer since the respondent's answer was unclear. After the personal interviews, I called the respondent to get supplementary details.
According to Denscombe (2000), reliability is a measurement can be repeated several times and the results are same or almost same. I have personal contacts with the respondent but I have been a part of the internationalization process myself, therefore, the risk for objectivity bias is decreased. I used a recorder during the interview to get accurate material and avoid misinterpretations.
3.11 Discussions and Conclusion
After interpreting all the findings, a discussions and conclusion of the research had be writing up. In this section, the researcher, I had examined whether the entire research objective has been met. After that, by refer to the comments of the research supervisor, the researcher, I had then revise and rewrite the chapter that are comment by research supervisor.
3.12 Write Up
Finally, I had continued with the write-up after collecting data I choose to draw a schema to facilitate the comprehension of the analysis; this schema is a summary of the analysis. The conclusion had be an answer to mine objective.