Firnaz - IOM - CW2
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Transcript of Firnaz - IOM - CW2
Coursework Two
Mohamed Firnaz Mohamed Firose Khan
MDX Student Number : M00501785
BA (Hons) Business Management
(January Intake 2014)
Individual Coursework Two International Operations Management
1 BA (Hons) Business management
Executive Summary
This is a follow up to the Coursework One, here it’s explained how the strategy will be applied
and how can Wijaya Products (Pvt) Ltd can be a successful organization in international market
through joint venturing.
Absorption capacity is the ability and strength to identify the importance of new information and
knowledge by adopting and apply it to its profit making. To carryout it company need to transfer
technology and knowledge to the foreign company.
It is also important that company implement an effective international supply chain. A good supply
chain will ensure the products are delivered on time with excellent quality. It is also important for
the company to outsource certain activities to minimize cost and to work effectively. The company
will outsource Transportation, packaging, marketing and Promotion, R&D and Recruitment and
Training to partnering company AL Rahma Group.
The organization need to use their knowledge, information, capability and resources well. If it’s
done well then it will be a successful organization in competitive global market.
Individual Coursework Two International Operations Management
2 BA (Hons) Business management
Table of Contents 1. Introduction ......................................................................................................................................................... 3
1.1 Joint Venture .............................................................................................................................................. 4
2. Absorptive Capacity and Knowledge Transfer ................................................................................................ 5
2.1 Social Context ............................................................................................................................................. 5
2.2 Organizational Context ............................................................................................................................. 6
2.3 Relational Context ...................................................................................................................................... 6
2.4 Technology and Knowledge Transfer....................................................................................................... 7
3. International Manufacturing Networks ............................................................................................................ 8
4. International Supply Chain ............................................................................................................................... 9
5. Outsourcing ....................................................................................................................................................... 10
6. Conclusion and Recommendation ................................................................................................................... 11
7. References .............................................................................................................................................................. 12
Individual Coursework Two International Operations Management
3 BA (Hons) Business management
1. Introduction
In the Coursework One, Told about Internationalization and it’s important for Wijaya Products
(Pvt) Ltd. The Internationalization will be done through FDI by partnering with an established
local company in Qatar. In the first coursework, it is mentioned how the internationalization will
take place. Wijaya Products (Pvt) Ltd is not new to the international market it is already exporting
to Australia, New Zealand, Japan, South Korea, Maldives, Cyprus, Italy and England through
export, but in this scenario it is going to collaborate with a local company in Qatar because it will
help to understand the market even better.
One of the main advantage that Wijaya Products having is the Spices in Sri Lanka are very rich in
standards (The Spice Council of Sri Lanka 2010) The Joint Venture strategy will minimize the risk
of Internationalization due to local company knowledge and competencies. There are lot of South
Asian people living in Qatar and in its surrounded Middle East countries and they prefer to have
spices in their foods. So there will be no burden for demand for spices in Qatar.
The joint venturing agreement will be made stating that the products will be produced in the name
of Wijaya Products (Pvt) Ltd but will be packed according the social and cultural differences in
Qatar. So the company will do the business in the name of Wijaya Products. It will own more
percentage of shares between both the companies. The internationalization will be made with the
help of partnering company.
Individual Coursework Two International Operations Management
4 BA (Hons) Business management
The Coursework Two will be explaining the way that recommended strategies will be
implemented through Joint Venturing in Qatar with a local company by Foreign Direct Investment.
There are some advantages which will be gain through joint venturing, such as
1. It will be politically acceptable.
2. Can be able to access local partner’s knowledge.
3. The risks and development costs will be shared.
1.1 Joint Venture
The Internationalization will happen through Joint Venture. Wijaya Products (Pvt) Ltd will
be partnering with “AL RAHMA GROUP” which was established in 1990 and it’s
currently in the food sector for the supply of Spices, Grains and Animal Feeds.
Al Rahma is focusing on bringing the best quality product to people in Qatar. They have
been specialized in rice and Grains. This Partnership will help the company to become
specialized in spice business too, because the quality of Sri Lankan spices is very high.
Wijaya Group has also got Halal certificate which is most compulsory in Qatar.
Individual Coursework Two International Operations Management
5 BA (Hons) Business management
2. Absorptive Capacity and Knowledge Transfer
The organization ability and strength to identify the importance of new information and knowledge
by adopting and apply it to its profit making is defined as Absorptive capacity. Kostova (1999)
defined it as, the success of transfer as the degree of institutionalization of an organizational
practice in the recipient organization.
Joint Venturing will enable the organization to acquire new knowledge from the partner and most
importantly learning is a major objective for the formation of Joint Venture (Hamel, 1991; Makino
and Delios, 1996). These alliances will shorten the learning cycle and expediting its response to
the needs and wants of its customers. The most important measure of Absorptive capacity is R&D
investment but in this scenario it is not very complex because the partnering company already have
done it.
Implementation and Internationalization are the factors which determine effective organizational
practices. It is categorized into three context, which are Social, organizational and relational.
2.1 Social Context
It analyses about the country which is Sri Lanka. In this case Wijaya Products (Pvt) Ltd going to
do internationalization through partnering. Which will break down the entry barriers and increase
the market reach. According to Commonwealth Alliance Program, joint venture/ alliances
accounted 25% of all revenues in 2005 (CAP, 2005). Under Psychic distance pattern the entry
rules and regulations will be minimum and it can be done easily when compared to opening an
own sales subsidiary.
Under regulatory framework there is a vast differences in culture and laws. In Qatar Islamic law
is followed but in Sri Lanka they are following British law, Sinhalese law and as well as Islamic
law. The major strength to Wijaya Products is that they have gained Halal Certificate which is very
important to carryout business in Qatar and Middle Eastern countries. In both Sri Lanka and Qatar
the culture is more or less same and also there are lots of south Asian people living in Qatar to
work and all the peoples taste and style are same. The major drawback is language because the
national language in Qatar is Arabic but English is widely spoken. Since it’s a joint venture it will
be much easier to maintain it.
Individual Coursework Two International Operations Management
6 BA (Hons) Business management
2.2 Organizational Context
Wijaya Products needs to transfer its successful strategies and practices to new sales subsidiary
and make needed to make changes according to the current location and people. The company’s
R&D department in Sri Lanka has been doing many activities to make the products a successful.
The company also motivating the employees well and making them comfortable to work and sense
them that they are working to the organization who respects and listen to the idea in further
developments.
Wijaya Products needs to take it forward to the partnering company which is Al Rahma Group
with collaboration. In any organization in any part of the work every employee’s dream is to feel
that organization is valuing them. So the strategy needs to be followed in Qatar as well.
2.3 Relational Context
It is very important that cooperative relationship is maintained well and strong boding is formed.
In Wijaya Products (Pvt) Ltd always make the employees feel good and motivated in very friendly
environment. It is very important to respect and every employee of the organization in in order to
generate loyal employees and as well as profit. These types of traits should be transferred into new
sales subsidiary. Since the most of the workers in the company is south Asians people, organization
can follow same or little changed strategy to motivate and satisfy employees.
In Sri Lanka there are Sinhalese, Christians, Hindus, Muslims etc. religious peoples are working,
and it is used to celebrate each and every religions festivals as a whole. These emotional bonding
needed to be transferred to the new sales subsidiary too. These strategies will ensure the success
of the organization
Individual Coursework Two International Operations Management
7 BA (Hons) Business management
2.4 Technology and Knowledge Transfer
The technology which is used in Sri Lanka needs to be transferred and as well as need to adopt to
the technology which is available is Qatar. The best technology needs to be carried out in
manufacturing and packing. Since the national language in Qatar is Arabic and also English is also
there, the organization need to re-design the packing of the product to suit the current location
because in Sri Lanka most of the packages are designed according to Sri Lankan Peoples tastes
and styles and it’s in Sinhalese and also in English language. But it needed to be changed here and
the package needs to be in Arabic and as well as in English to cover all segment.
The controlling part will be done by both the companies but Wijaya Products (Pvt) Ltd need to
transfer best practices and technology from home country. The home company has different style
of handling customers, which was very successful in Sri Lanka and it also needed to be transferred.
This strategy will make customers loyal and emotionally touched to the product.
The home company which is Wijaya, need to closely look and handle whether the technology and
knowledge has been transferred effectively and efficiently. If there is any lack of performance then
needed to provide training facilities to make it better.
Individual Coursework Two International Operations Management
8 BA (Hons) Business management
3. International Manufacturing Networks
Spices which are available in Sri Lanka are very rich in standard and qualities and have enough
demand in local and world market. Which can’t be produced in Qatar with same quality so the
manufacturing plant will be in Sri Lanka. The production will be done in Sri Lanka because the
resources are available nearby and it will reduce huge costs.
Since the company is aiming to form a series of Internationalization to various Middle Eastern
countries, in future there will be a huge demand so mass production is needed. If it happens Wijaya
has a plan to open up a manufacturing plant in India which is geographically close and also the
spices in India is very rich in standards.
Organization is sufficient enough to meet the demand for the people in Qatar. The raw materials
are available enough to carry out internationalization in Qatar by joint venturing with Al Rahma
Group.
Individual Coursework Two International Operations Management
9 BA (Hons) Business management
4. International Supply Chain
The Products (Spices) will be exported directly from Sri Lanka to Qatar through Cargo services
from “Transco – International Cargo Services (Pvt) Ltd”. It is one of the pioneer company in
freight forwarding and custom clearance services in Sri Lanka and across the globe and they are
established as competent and reliable service providers. It has freight forwarding by Sea and Air.
They have partners worldwide. It also provide at low cost with maximum efficient and cost
effectiveness without compromising the quality of the service.
Original copies of goods which are shipped into Qatar are essential. Which are commercial
invoices, shipping document, packing list and certification of origin must accompany goods
entering into Qatar. Transco (Pvt) Ltd has agent (Sealine) in Doha, Qatar and they will guarantee
that all necessary arrangement will be made to successfully ship goods to Qatar. The general
custom duty for cargo which entering Qatar is 5%, custom clearance will happen 1-2 days for air
cargo and 2-4days for sea cargo.
The spices which are produces in Sri Lanka can be kept for more than 3 to 4 years without any
reduction in quality, which is a major boost for international trade where any unfortunate technical,
natural disasters interruption will cause some delay in delivery but it won’t affect the goods when
it late for some days. But the goods need to be delivered before stocks become out of stock in
Qatar, which is more important. Because customers’ needs anything when it’s really needed if it
is not delivered on time they will switch to any available substitute, which will be a huge drawback
to Wijaya products and to its reputation. It will be delivered directly to Wijaya (Pvt) Ltd sales
subsidiary in Qatar without any third party involvement, which will reduce the transportation cost.
It will be stored in warehouse safely.
Supply Chain will be,
Wijaya Products (Pvt) Ltd (In SL)
Transco Pvt Ltd (Shipment) End Customer
Sales Subsidiary (In Qatar)
Individual Coursework Two International Operations Management
10 BA (Hons) Business management
5. Outsourcing
Outsourcing is one of the most effective strategy if it is used well. It is used to reduce costs and to
save money. Wijaya Products (Pvt) Ltd will outsource few areas to its partner Al Rahma Group.
The company will outsource Transportation, packaging, marketing and Promotion, R&D and
Recruitment and Training.
Transportation is a major factor is sales of products because the products need to be delivered on
time with safely handling the goods. It costs very huge money for transportation alone so
outsourcing will be a key here to minimize cost. The packaging needed to be done in suitable to
the customers in Qatar by taking their styles and tastes and designing the package. In the package
it need to be in both Arabic and English languages. By outsourcing it to the local company, they
will know much better about it than new company. It’s same for the marketing and promotion
strategies, because Al Rahma Group is been doing business successfully from 1990 and they know
which strategy will attract the customers.
R&D team will find out how the products are moving around customers and whether they are
satisfied or not, and also identifying market opportunities and working in line with sudden market
changes. Recruiting qualified employees to further improve the sales and work towards long term
success and stability.
There is also drawbacks in outsourcing, the own company might lost managerial control because
it will be given to outsource company. Another major disadvantage is important and secret
information will be shared with outsourced company. The outsourcing might try to decrease
expanses so it may reduce the quality as well.
It is must to have a very good relationship with outsourcing company to avoid such issues and
build a strong relationship.
Individual Coursework Two International Operations Management
11 BA (Hons) Business management
6. Conclusion and Recommendation
The Internationalization will make Wijaya Products (Pvt) Ltd products to reach global market. In
order to success in the foreign market and make profits, there is no better way than joint venturing,
which is much more risk free when compared to opening up a own sales subsidiary without having
information and knowledge about Qatar and its culture. By collaborating with a local company
which will make life lot easier but cannot guarantee the success. Therefore the company needs
transfer the knowledge which they gained in doing business in Sri Lanka (Home).
The organization need to transfer successful strategies and practices which were followed in Sri
Lanka. Joint venturing will further give strong support to Wijaya Products (Pvt) ltd because the
partnering company have enough experience and knowledge regarding the spice industry and the
market in Qatar. The company need to use the opportunities which is available and make it
successful.
Wijaya Products (Pvt) Ltd also need to analyze the successful and unsuccessful strategies which
is performed in Sri Lanka and make sure the right strategy is followed to make the company a
successful. If the Internationalization become successful it will open further more market to
internationalize to other Middle Eastern countries as well.
The organization need to use their knowledge, information, capability and resources well. If it’s
done well then it will be a successful organization in competitive global market.
Individual Coursework Two International Operations Management
12 BA (Hons) Business management
7. References
1. Shaker A. Zahraa, , James C. Haytonb, 2008, The effect of international venturing on firm
performance: The moderating influence of absorptive capacity, Volume 23, Issue 2, Pages
195–220.
2. Isabel Estradaa, Gabriel de la Fuenteb,Natalia Martín-Cruza, 2010, Technological joint
venture formation under the real options approach, Volume 39, Issue 9, Pages 1185–1197.
3. Kostova, T, (1999), Transnational Transfer of Strategic Organizational Practices: A
Contextual Perspective, the Academy of Management Review, Vol. 24, No 2, pp. 313.
4. Xiaobo Wu1, Xuefeng Liu2, 2009, Absorptive capacity, network embeddedness and local
firm's knowledge acquisition in the Global Manufacturing Network, Volume 46, Number
3-4/2009, pages 326-343.
5. John B. Houlihan, 1985, International Journal of Physical Distribution & Logistics
Management, Vol. 15 Issue: 1, pp.22 – 38
6. Douglas J. Thomas, Paul M. Griffin, 1996, Coordinated supply chain management,
Volume 94, Issue 1, Pages 1–15
7. Benita M Beamon, 1998, Supply chain design and analysis:: Models and methods, Volume
55, Issue 3, Pages 281–294
8. Varun Grover, Myun Joong Cheon, James T. C. Teng, 1996, the Effect of Service Quality
and Partnership on the Outsourcing of Information Systems Functions, Vol. 12, Issue. 4,
pp. 89-116.
9. Linda Argotea, Paul Ingram, 2000, Knowledge Transfer: A Basis for Competitive
Advantage in Firms, Volume 82, Issue 1, Pages 150–169.
10. V. Albino, A.C. Gravelly, M. Gorgoglione, Organization and technology in knowledge
transfer, Volume 11, issue 6, and pp.584 – 600.
Individual Coursework Two International Operations Management
13 BA (Hons) Business management
11. The Spice Council of Sri Lanka [Online] Available from:
http://www.srilankanspices.com/sl_spices.html [Accessed: 3rd July 2014].
12. Joint Venturing 101 - Should I start a joint venture? [Online] Available from:
http://entrepreneurs.about.com/od/beyondstartup/a/jointventures_2.htm [Accessed: 3rd
July 2014].
13. Al Rahma Group [Online] Available from: http://www.alrahmagroup.com/index.html
[Accessed: 3rd July 2014].
14. Transco – Our Services [Online] Available from:
http://www.transcocargo.com/index.php?view=services [Accessed: 4th July 2014].
15. Charles Hill, W. L. (2012) International Business: Competing in the Global Market Place.
9th edition. New York: McGraw-Hill Irwin
16. Charles Hill, W.L & Arun Jain, K. (2013) International Business: Competing in the Global
Market. 6th edition. New Delhi: McGraw-Hill Education (India) Private Limited