Repositioning Strategy for Malaysian Companies Internationalization

ISMI RAJIANI

Universiti Teknikal Malaysia Melaka

Malaysia in Brief

Progressed socio economicallySince 1957

First-class network of infrastructure that is comparable to those

in developed countries

strategic location in the fastest-growing

region with a strong natural resource

endowment

Xavier, J. A and Ahmad, Z. U. (2012). Proposed scholarly research agenda for transforming Malaysia into a model developing nation. International Journal of Public Sector Management, 25 (3), 231 – 243.

Stuck in the middle-income trap

Cannot compete with Vietnam and

Indonesia in lower costs and labour-

intensive production

Unable to compete with high value-added

economies

Malaysian COMPANIES

Will they all adopt the

Overall Cost Leadership

Product Strategy co-

aligning with their

local competitive advantage?

Going Global

Proposition 1:

Malaysian exporting companies have a different initial position compared to that of Western companies when starting their export activities as form of internationalization.

Uppsala model

“psychic distance” companies expand

first to market which is psychically close

move further as their knowledge well-

developed

Uppsala’s model for Malaysia

culture language, religious customs

close distance

Indonesia as

potential market

Variables Definition

COI : buyer’s attitudes and feelings toward the country , developed through contact, association, or past experience with the country, its people, and its products (Sahin, 2010).

Animosity: the remnants of antipathy related to previous or ongoing military, political, or economic events"(Klein et al, 1998).

Ethnocentrism: believe that buying a foreign product or foreign brand is not patriotic, and they tend to choose local products or local brands, regardless price or quality considerations (Shankarmahesh, 2006).

Thus…

The case of Air Asia and Proton (Ahmad and Neal, 2006 ; Ahmed & Humpreys, 2008), and many firms believe that a low-price strategy is the main competitive advantage (Young et al., 1996, ; Ahmed & Humpreys, 2008).

Preposition 2:

There are 15 triggering cues for internationalization motives

15 triggering cues for internationalization motives

1. Gain international experience2. Explore own advantages on markets

abroad3. Increase profit4. Increase sales volume5. Gain access to internationally

experienced management or skilled human resources

15 triggering cues for internationalization motives

6. Gain international experience7. Achieve international reputation and brand

recognition8. Receive government support or finance9. Improve own-product development and

innovation ratio10.Increase technology content of own

products

15 triggering cues for internationalization motives

11.Improve customer service12.Improve quality of products13.Improve cost efficiency in production 14.Search efficient alliance15.Maintain domestic positioning

Proposition 3:

The 15 triggering cues can be allocated to and distributed

between four strategic positions, based on expected

importance in securing competitive advantage in each

position.

Four Strategic Position (Soderman et al., 2008)

3. High Price Low Volume

4. High Price High Volume

2. Low Volume Low Price

1.High volume Low Price

Volume

PRIC

E

Four Strategic Position (Soderman et al., 2008)

3. Focus on innovation

4. Focus on Growth

2. Start up company

1.Focus on cost efficiency

Volume

PRIC

E

Four Strategic Position (Soderman et al., 2008)

3. Focus on innovation

4. Focus on Growth

2. Start up company

1.Focus on cost efficiency

Volume

PRIC

E

None will be willing to stay in position 2!

3. Focus on innovation

4. Focus on Growth

2. Start up company

1.Focus on cost efficiency

Volume

PRIC

E

1.Focus on cost efficiency

1. Sales Volume2. Cost Efficiency in Production3. Explore own advantages4. Profit5. International Experience6. Government Support7. Opportunity

3.Focus on innovation

1. International Reputation & Brand Recognition2. Product Development and Innovation Ratio3. Technology Content of Product4. Searching Efficient Alliance5. Management and Skilled Human Resources6. Internationally Experienced7. Maintaining Domestic Position8. Profit

4.Focus on Growth

1. Customer Service2. Quality of Product

Proposition 4:

Most Malaysian companies will stay in position 1 because of their country-specific advantages, but will reposition by leaving position 1 and aiming for position 3, the

high-price/low-volume segment.

Data and Methodology

• The research questions were operationalized in a questionnaire adapted from Soderman et al., (2008) .

• The target population of this study is managers in manufacturing sectors in Selangor, Negeri Sembilan, Malacca and Johore Bahru states.

• The survey is targeted to obtain 100 respondents.

Conclusion

• Uppsala model concept of psychic distance by preference to start exportation to neighboring countries seems to apply also for Malaysian companies

Conclusion

• As competition increases in their domestic market, great numbers of Malaysian companies will consider Western markets attractive for their products and services thus make the company reposition their strategy

Conclusion

• Europe does not represent a neighboring or ‘home’ market, as do markets in South-East Asia making the Uppsala model concept of psychic distance and Porter’s overall cost leadership are no longer relevant.

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