Internationalization of New Sales Subsidiary

Executive Summary

This report has done in order to propose the appropriate strategies for the implementation of the internationalization which is establishing a sales subsidiary of Nimali garment which is located in Si Lanka.

The main purpose of this is to identify the ways of transferring the knowledge and technologies effectively and efficiently to the new sales subsidiary which will be located in Mumbai India.

The report is included what should be transferred to the new sales subsidiary from the parent company as well as the most appropriate ways of transferring them effectively and efficiently.

This report is included the identified opportunities with the proper distribution channels in order to enhance the security as well as ensure the goods are delivered on time.

Out sourcing is well known as a cost effective option which is available for organization to get the activities done at a lower cost as well in a lesser period of time. This report has identified the areas to be outsourced as well the procedures to follow in order to select best out sourced service providers.

Finally better conclusions and recommendations have been provided for the further development of the international markets as well as to the development of the organization in order ro achieve the ultimate objectives of the Nimali Garment. The Garment will be able to be the one of the leading, successful and highly profitable organization by implementing the strategies which are provided in the report.

Table of Contents

1.0 Introduction

2.0 Absorptive capacity and Knowledge transfer

2.1 Social context

2.2 Organizational context

2.3 Relational context

2.4 What needs to be transferred?

2.5 How to transfer?

3.0 Supply chain for the global standardization strategy

4.0 Outsourcing

5.0 Conclusion and recommendations

6.0 References

7.0 Bibliography

1.0 Introduction

In the first course work, it has clearly mentioned the advantages if internationalization as well the processes which should be done in order to enhance the effectiveness and efficiency of the internationalization of the firm. First course work mainly based on new appropriate strategy identification for the company. Since the Nimali garment had enough experiences on the current internationalization process, where the garment is exporting shirts via sales agents to Bangladesh, the garment has decided to establish a sales subsidiary in India since the psychic distance is very low. It has identified a very profitable as well as the most suitable strategy which is available to the organization.

This report is mainly based on the implementation of the proposed strategy which is establishing a sales subsidiary in Mumbai. India. This sales subsidiary will be fully controlled and observed by the headquarters which is located in Katugastota, Sri Lanka. The appropriate ways to implement the strategies are clearly explained throughout the report.

2.0 Absorptive capacity and Knowledge transfer

Figure: 01 Absorptive Capacity (Kostowa. T, 1999)

Accordingly to the Academy of management Review (Kostowa. T, 1999), there are three stages can be identified in the success of the transnational transfer.

• Social context.
• Organizational context
• Relational Context

2.1 Social context

This explains the institutional distance country of the parent company (Head Quarters which is located in Sri Lanka) and the recipient unit (which is the subsidiary in Mumbai, India). Simply it explains the characteristics of the countries as well as the people in two countries. When it comes to the Sri Lanka and India, the psychic distance is very low since the both countries are very closer to each other geographically as well as demographically. When it comes to the regulatory frame work both countries are having similar kind of rules and regulations since the both countries are following the British low. The governance also consisting with similar characteristics to each other since the life styles of the people is very closer to both countries. Since the both countries rules and regulations with the cultural backgrounds, the people who are in both countries are similar in the attitudes as well in believes. The clothing habits and trends are very closer due to the similarities in mindsets. The trade laws and other regulatory frame works are similar and the employees are addressed in a same manner in both countries.

2.2 Organizational context

The company is always welcoming the new ideas and innovations (for cost reduction & etc.) and also the company is always giving reward for the best ideas which are helpful for the organization. The Nimali garment is always allocating tasks by creating groups and the members are changing frequently where every employee gets an opportunity work with everyone. The individual tasks are hardly found within the organization and this should be transferred to the new sales subsidiary since the Indians are also more towards for the group working. It will help to increase the performances of the new sales subsidiary within minimum time period.

2.3 Relational context

The Nimali garment is always use the open door policy where it motivates the employees to work as well as it help to make loyal employees to the organization. the friendly working environment help the organization to create a mutual bound with the employees. These qualities can be seen in the manufacturing plant as well as in the sales outlet in Home country. The senior are addressed by showing the respect for them s on the other hand employees are also addressed in the same way. These qualities can easily be transferred to the new sales subsidiary due to the very similar characteristic of the countries and most importantly it will help to build a better relationship between the origination and the employees who are in the new destination. The common ceremonies are celebrated together as a one family and also sympathies are also shared as a one unit because of that the company and the employees are emotionally attached a one unit and that has become a key driver for the success of the company. These qualities should be transfer to the new sales subsidiary for the long term success of the company and for employees’ development. Finally it help to make a trust about the company in employees’’ minds and Vic versa.

2.4 What needs to be transferred?

As discussed above in the absorptive capacity, the parent company should transfer its’ best practices and technologies which are fully owned by the company in order to make the new sales subsidiary to have similar service and characteristics since the controlling part is done by the parent company. Then the employees will adapt to the company procedures as well as the customers will be attracted easily. The parent company has its own unique showroom management system with the selling patterns in order to make customers feel that they are getting more value than they are expecting. It will create an emotional bond among the employees and the customers with the organization. These should be transferred to the new sales subsidiary as well as to the employees horizontally to the parent company.

2.5 How to transfer?

After the identification of the areas to be transferred, next process should be to identify the ways to transfer them to the new sales subsidiary. The garments inventory management system should be introduced to the new sales subsidiary to manage the inventories effectively in order to control as well as to monitor it from the parent company. It will help to minimize the wastages as well as to make the garments available from the customers always. This system can be establish by giving a proper training program to the new Indian staff by sending well experienced and educated team of trainers who has a good knowledge about the systems from the parent company to Indian subsidiary. This will help to transfer the system as well as the knowledge together. It will be a very effective strategy for the organization.

On the other hand the company can send a manager who has a better knowledge about the company as well as the company operations to Indian new subsidiary as the manager will help to transfer the qualities of the parent company effectively. That person will be able to closely monitor as well to mentor the new employees in order to make them use to have the qualities of the parent company.

3.0 Supply chain for the global standardization strategy

The company has selected the global standardization strategy since it the most appropriate strategy accordingly to the garment’s current situation. The company can achieve the economies of scale with this strategy by getting more advantages.

When it comes to the supply chain and the supply chain management of the Nimali garment, the garment has a exporting agent who is exporting garments to the Bangladesh. When it’s come to the new market which is Indian market the company has selected an export agent who is operating in India since it cost effective for the organization. The Prepared supply chain for the new sales Subsidiary as follows,

As mentioned above the company has its domestic transport agent who is working with the organization from the start and has a good relationship between the companies by having a better understanding about the garments’ operations. After conducting better analysis about the export agents, the company has selected General Export Enterprises which is owned by the Raj brothers in Mumbai India. This is a well reputed company where it provides a secured service at a lower cost. This will add more value to the Nimali garment and its new sales subsidiary since it has a good image on the Indians.

After exporting the garment the garments, the company will outsource a anther Indian domestic transport provider in order to trans sport the garments to warehouse of the Sales subsidiary safely and efficiently.

These distribution channels of the Nimali garment and its new sales subsidiary will add more value to the organization and it will help the effectiveness and the efficiency of the transportation of the garments to the new sales subsidiary.

4.0 Outsourcing

When it comes to the new internationalization process of the Nimali garment, outsourcing is playing major role since the company is controlling all the activities from the headquarters which is located in Sri Lanka. Since the garment is a medium scale organization, out sourcing of the activities always giving more benefits to the organization by reducing the risks as well as the responsibilities because outsourced company is liable for the activities as agreed with the organization.

When it comes to the new sales subsidiary the company should outsourced activities such as,

• Indian domestic transporter.
• Export service agency.
• Indian promotional and marketing agency.
• Showroom infrastructure provider.
• Research agency.
• Employee recruitment and training agency.

The company should select an Indian domestic transporter who is trustworthy at a lower cost since the garment doesn’t have the capability to have own transportation section. This will be more beneficial to the company to minimize the costs.

Another major agency which should be out sourced is the export agency since the garment doesn’t have its own agency.as mentioned above the garment has selected the most suitable export agency for the requirement.

The company won’t be to conduct the marketing and promotional activities by being in the home country and due to that the garment should outsource a professional marketing company to go to the customers effectively and efficiently. This is essential to attract customers to the new sales subsidiary.

Those are the three main services which should be out sourced by the company and other than the above services the company should have infrastructure provider to fulfill the requirements of the new sales subsidiary, a research agency to conduct researches about the progress of the new sales subsidiary as well as to identify the new trends to react before the competitors in order to get more competitive advantages and finally a employee recruit and triang agency to recruit and train the employees for the further development of the sales subsidiary.

5.0 Conclusion and recommendations

The implementation of the new sales subsidiary in Mumbai, India will help to the organization to go for a new set of customers as well as to increase the market share while achieving the garments’ objectives.

A sales subsidiary in India will can be easily implemented with the company’s resources and the capabilities as well as the core-competencies. The minimum institutional distance between the home country and the recipient unit helps to the Nimali garment to reduce the risks of going to the new Indian market by putting a sales subsidiary.

The identified knowledge and the resources should be transferred with the technologies effectively and efficiently since the controllability of the sales subsidiary is in the home plant. Transfer of the above mentioned factors will help to the employees as well as the new sales subsidiary to well establish in the Indian market as a strong competitor.

The continues evaluation and the analysis should be done in order to eliminate the risks and the mistakes of the new sales subsidiary to be profitable as well as to grow in the Indian market by building good reputation. The uniqueness of the processes and the products should be further developed in order to get more competitive advantages y getting the maximum use from the opportunities.

The organization should always look for the new opportunities as well as for new growing options for the garment. The garment should try to open a new plant in India with the growth of the sales as well as the market. It will help to reduce the costs further more my eliminating the exporting and transportation costs. On the other hand it will be helpful to go to another destination where it has similar institutional characteristics. It will help for the continuous development of the garments as well as finally to achieve its vision and the mission by being leader in the market as well as in the industry.

6.0 References

• Kostova, T., (1999). ‘Transnational Transfer of Strategic Organizational Practices: A Contextual Perspective’, The Academy of Management Review, Vol. 24, No 2, pp. 313

7.0 Bibliography

• Kostova, T., (1999). ‘Transnational Transfer of Strategic Organizational Practices: A Contextual Perspective’, The Academy of Management Review, Vol. 24, No 2, pp. 312-319
• Paulina,J.(2013) The role of absorptive capacity [Online], Available: http://onlinelibrary.wiley.com/doi/10.1002/tie.21554/abstract [05 May 2014]
• Malhotra, A., Gosain, S., and El Sawy, O.A. 2005. “Absorptive Capacity Configurations in Supply Chains: Gearing for Partner-Enabled Market Knowledge Creation,” MIS Quarterly (29:1), Mar, pp. 145-187
• Chen, Ch. J., 2004. The effects of knowledge attribute, alliance characteristics, and

Absorptive capacity on knowledge transfer performance. R&D Management Vol. 34,

pp. 311-321.

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