Saturday 29 June 2013

Recruiting Selecting employees while considering legal and other considerable factors

Human resource managers have to face laws and regulations that protect employees’ legal privileges in term of equality and other legal issues and describe firms’ responsibilities in respect of recruitment and selection of an employee. Providing non discriminate equal employment opportunity (EEO) is the basic legal requirement while recruiting and selecting an employee. Individuals who came under EEO laws are protected from illegal discrimination that occurs when someone having common characteristics is discriminated based on those characteristics. Several acts and laws protect rights of non discrimination in this respect. Civil rights act 1964 prohibits discriminatory recruiting and selection on the basis of color, race, religion, sex, or national origin, Vocational Rehabilitation Act 1973 and Rehabilitation Act of 1974 protect the rights of disable persons and Immigration Reform and Control Act (1986, 1990 and 1996) punish the employers who hire illegal employee and prohibit selection on the basis of national origin.

1.1 Recruitment and its Legal Aspects:

Employers have to consider wording of advertisement for recruitment to ensure equal employee opportunity. Governing body of EEO has issued guidelines that any direct or indirect references in respect of gender or age connotations are not permitted while advertising for required job. Examples of such impermissible terminologies are recent college graduate, young and enthusiastic, and journeyman lineman (Methis & Jackson, 2007). Moreover, to ignore specific group of individual against employee having same characteristics can also lead to discriminate recruitment. For example, advertising for graduates from specific college or university while ignoring candidates from other colleges with same level of degree is a discriminate action. Moreover, job analysis is an essential component of recruitment while many acts such as American's With Disabilities Act (ADA 1990) prohibit ignoring qualified candidate with disabilities to recruit or select.

1.2 Selection and its Legal Aspects:

Legal constraint also affects the process of employee selection. Reference based selection leads to discriminate practices and can ignore the employees having equal or high characteristics with respect to selected one. Other illegal matters regarding selection are biased interviews where affected groups are asked more typical questions and interviewed strictly. On the other hand candidates have to pass several tests while managers have to ensure its reliability and validity.
Employee recruitment and selection process can be affected by organizational processes and procedures in different ways. Different personals are responsible for different activities of recruitment and selection and play various roles in this respect. At Punjab University of Gujranwala Campus (PUGC) there are two ways to select an employee i.e. internal and external recruitment and selection process. Internal selection processes meet organizational HR needs within the organization while external methods are relied on selecting employees outside the organization. While selecting new visiting faculty member at PUGC, head of department is responsible to execute the process and takes the decision of selection. Employees’ referrals and contacts plays important role in this respect and to meet current faculty needs personal contacts are used without any advertisement. However, for permanent selection both internal and external methods are used and full board is established to execute the process. That board made job analysis and write job description and job specification. For permanent faculty position a formal advertisement is publicized while media relation department is responsible for effective advertisement. Candidates from outside and within the organization can apply for the job while. A panel of specialists develop written test and also administer interview for passed candidates from written test. In conclusion selecting a permanent employee requires more formal and non discriminate selection as various personals and board members are involved in the process that lead to a fair selection process.
Today employees of an organization came from various backgrounds and regions with different demographic factors such as age, gender or race etc. such diversity can lead to discriminate actions and procedures. A number of laws and regulations protect employees’ right of equality not only at the time of recruitment or selection but also at the post selection instant. There is long list of organizations that are sued due to discriminate practices including Wal-Mart, Costco, Target, Walgreens, UPS, FedEx, Marriott, Disney, Abercrombie & Fitch, Microsoft, Apple, Google, Best Buy, Home Depot, and even the Equal Employment Opportunity Commission (Mathis & Jackson, 2007).

Individuals pose identical characteristics and given legal protections under equal employment laws are called protected group or class. Various federal laws protect rights of protected group and prohibit discrimination on following basis to the individuals having common required characteristics in respect of recruitment and selection.
1.      Race, ethnic origin, color (such as discrimination among African Americans, Hispanic Americans, Native Americans, Asian Americans)
2.      Gender (for example not selecting women due to their pregnancy issues)
3.      Age (such as individuals over 40)
4.      Individuals with disabilities (physical or mental)
5.      Military experience (for instance Vietnam-era veterans)
6.      Religion (special beliefs and practices)

3.1 Abercrombie & Fitch case:

Abercrombie & Fitch wanted to hire staff having white color and athletic nature. Carla Grubb was hired at the company and expects job at sales department but found her for the job of dusting, cleaning and vacuuming stores. Moreover, it was also found that minority applicants were hired at low visibility and back-of-the-store jobs such as cleaning up and stocking. Minority students having impressive records are also ignored while recruiting or selecting and the percentage of minority employees were very low at the company against industry average. Grubb sued on the company for discriminating regarding her color and settled at $50 million. EEO commission directs the company for better hiring without discriminating color and status of applicants (DeCenzo et al., 2010).
Human resources management was seen just as a function of staffing in past. However, today the scope has been expanded and practitioners view their workforce as an important resource of the company that can lead to competitive advantage through fulfilling firms’ current and prospective needs as suggested in resource based view. It is the human resource who executes strategies to meet organizational objectives. So, human resource plays an important role to achieve organizational current and anticipated goals and objectives effectively. Human Resource Information System provides insight information regarding strengths and weaknesses of your current staff resources to meet organizational current and proposed goals and objectives in this respect.

4.1 Meister Software UK:

One of subsidiaries of Meister Software is operating in UK. Meister Software is a German–owned worldwide network of software companies. Company provides solutions in respect of software to manufacturing firms and turnover of the company is at least of £50m. Rapid growth can be evidenced though increased no. of employees at British branch. Most of their workforce consist of graduates from computer, sales and finance background. Currently these employees are fulfilling organizational objective of gaining through providing effective IT solutions to their clients that is evidenced through its growth. However, market is becoming more competitive and strong interpersonal and negotiation skills are required to meet future objectives and gaining contracts worth more than £0.5 millions. This implies that in future company needs more efficient sales staff to deal with their current and prospective customers (Bratton & Gold, 2010).
Job description identify the activities and duties to be perform and responsibilities for a particular job while job specification list the required knowledge, skills and ability to perform those duties and activities. Both job description and job specification provides insight information to employees in term of their responsibilities and duties and also allow managers to recruit and select appropriate employee and to attract candidates in the process of recruiting and selecting an employee. Components of job description and specification are given below in the case of Meister Software UK.

JOB DESCRIPTION

Job title                       Sales men and women
Department                 Sales Department
Responsible to             Presentation and Negotiation to current and prospective customers for all matters regarding contracts
Relationships               strong relations are needed with other department to acknowledge them from needs and wants of their customers
Purpose of job or         purpose of the job is to cater the needs of competitive industry through
Overall objectives       effective presentation and negotiation skills
Specific duties and     1. Searching for new customers
Responsibilities           2. Presentations to their customer for their software products
3. Negotiation from customers to final the contract
4. Coordinate other department through acknowledging customers’ needs

PERSONNEL SPECIFICATION

Qualification               At least Graduate in sales and marketing
Experience                  At least 1 year of experience as sales man especially from same industry
Innate abilities             1. Good interpersonal communication skills
2. Be able to understand information available and predict patterns of their customers to develop strategies accordingly
3. Having excellent qualities to work and coordinate as a team member
Studying internal and external environment in term of staff requirements during HR planning process helps to identify required HR needed to execute business operations smoothly in order to achieve organizational goals and objective. It should critically analyzed that whether current demand of new vacancy can be filled through current employees by the mean of part time or temporary vacancy or a separate job should advertise. Moreover, other strategies such as providing flexible working hours to cover new responsibilities, using updated information technology and using internet can be used in this respect. These analyses will explore the case for additional staff required. For instance in the case of Meister Software UK company realizes the needs of efficient salesmen and women to survive in competitive environment. However, current workforce of the company from sales department is insufficient in this respect and develops the need to hire new staff.

Selection process can be defined as the process of selecting individuals having relevant qualification to fill the jobs (Mathis & Jackson, 2007). DeCenzo et al. (2010) have developed following framework to select an employee.

It is useful to make initial screening through initial interview or written test accordingly to select appropriate candidates before collecting application form. This stage ensures that individual poses required characteristics needed for recruitment. For instance check and validate that whether candidates have required qualification, experiences and diplomas etc. Most of the organizations use application form to collect required information about candidate and also use to record information about those candidates. However, EEO and non discriminatory issues are critical while designing application form. After collecting information various tests are conducted according to the required job. Selecting appropriate testing technique is critical to choose. Testing techniques also depend on the job nature such as accounting and engineering based job require to test typing, data entry and proficiencies abilities. However, testing is not the only criteria to select an employee and should give weights accordingly in selection process. Again EEO issues are critical to manage and ensure non discriminatory while selection tests and appropriate predictors in this respect. After examining candidates through various tests organizations conduct in depth interviews identify information on candidates. It provides better picture due to high face validity and most of the selectors like to hire individuals through interviews. Overall, selection tests and interviews both provide insight information regarding candidates’ ability, skills and knowledge to perform required operations. Background investigation can be done before or after interviews to validate qualification, experiences and other information provided by employee. Though costs are associated with such investigations but it is useful as a survey reveals that most of time information regarding length of past experiences and former job title, past salaries and criminal records are misrepresented (Mathis & Jackson, 2007). Medical tests can be done to examine required physical ability of candidate to perform that job. However, many federal laws prohibit rejecting an employee with disabilities while having required characteristics to perform that job. After all these assessment overall scores will act as selecting parameters and candidates having highest overall scores are selected.

8.1 Initial Screening:

Different methods can be adopted during different stages of selection process that will help to select appropriate employee. Many firms such as Sony Corporation, Coca-Cola, IBM, Paine Webber, Nations Bank use computerized based initial screening and use artificial intelligence software in this respect. Moreover, electronic initial interview can be used as Coopers & Lybrand initially screen candidates through online test consist of 40 questions and estimates that it eliminates 25% of its 5,000 initial applicants in this respect.

8.2 Selection Tests:

On the other hand various selection tests are available that support the selection decisions for employers. Some useful and common tests are listed below.
Ability Test: Measures the current ability that already has learned by candidate.
Aptitude Test: It measures the ability of candidate to acquire a skill.
Work Sample Tests: Examine that how an applicant performs a simulated job task. Meister Software UK can use work sample tests and ask applicants to sale their products to them as their customer on demo basis. Moreover, many other organizations use such techniques as it describes persons’ ability to perform that job directly.
Mental Ability Tests: Measures the reasoning capabilities of candidates.
Assessment Centers: It comprises of multiple exercises and multiple raters conducted at assessment center where candidates go through a comprehensive interview, pencil-and-paper test and other tests to know how applicant response to certain situation.
Psychological/Personality Tests: Big Five factor of personality can be assessed as personality has strong affect on motivation, performance and job satisfaction.
On the other hand to conduct successful interview following methods can be adopted

8.3 Structured Interview:

All applicants are asked similar standardized questions. Such techniques allow setting job related questions and making it easier to compare candidates due to standardized structure and lead to better reliability. Research reveals that structured interview has found more reliable than other interview techniques (Campion et al., 1997).
Situational Interviews are similar to structured interview that composed of questions that how candidate might handle particular job situations. Expert made questions for content validation while for experienced workers it is more like a work sample test.
In such interviews candidates are given some problems to assess that how they have solve the problems in past. Similar to other interview techniques Behavioral description method also contain better validly (Brackey, 1998).
A special type of interview that tried to put pressure and create anxiety situation for applicant that how he cater such pressure situation.

8.4 Hiring at Toyota:

To select auto worker Toyota uses “day to work” test and candidate work on simulated assembly line for almost 4 hours and then inspects defective parts for several hours. Moreover, group solving session and written tests are also conducted to assess candidate’s knowledge. Such work sample tests provide high quality labor especially when the job is technical and more practical.
Keeping records during selection process is critical as it provide guideline for subsequent selection process. Moreover, having records for potential applicants can also be use in future where firms need employees without wasting time and cost for selection process. Tests or interview for initial screening and information from application form are useful sources to collect and record required information such as contact information tests scores etc. These information also help to conduct interviews and coordinate in selecting an employee. On the other hand scores from all tests and interviews should also record to prioritize the list and also to call next candidate in future if found any vacant seat.
After completing selection process it is critical to evaluate the effectiveness of selection process and to know the people and resources that support or constraint the process. Evaluation is a continuous process that led the firms to change themselves according to environment. This can be done through post effectiveness of selected personnel through feedback from applicants and the staff who was involved in selection process as well. Moreover, keeping up to date from legislation changes and their affect on selection process is important.
Communication between applicants and organization and among the staff involved in process is required at all the stages of selection process. Firms should avoid long waits to candidates and communicate their status of selection or rejection as soon as possible after initial screening. On the other hand candidate’s performances at different levels should be communicated among panel members who will decide for selection. In the case of Toyota applicant spend hours at assembly line and checking defective parts. His performances are communicated to both department and selection panel. After making final decisions again respond to candidates quickly and also inform unsuccessful applicants. However, underlining positive aspects of rejected candidate create positive impressions and also encourage them.
Motivating and retaining selected personnel is important especially right after their selection as CIPD (2005) found that one from every seven newly selected employee leave the organization and all efforts and costs occurred at selection process can be in vain. Purpose of inducement plan is to feel employee that organization value for him and fulfill his needs. Firms can attract newly selected employee through offering attractive starting pay and compensations and career opportunities as tangible benefits and growth opportunities motivate employees especially for fresh graduates.

Infosys Technologies Limited:

Infosys Technologies Limited is a known software house that motivates their employees through treating them as partners, providing challenging assignments, allowing them flexible working hours, providing training opportunities to enhance their abilities and performance based reward system (Management Paradise, 2011). Such actions not only attract applicants for posed vacancies but also allow the company to retain their workforce.
New hiring is made to meet HR needs and wants to execute business strategies effectively as in the case of Meister Software UK or Toyota discussed above. Successful recruitment and selection process brings competent workforce in the alignment of organizational objectives. Employee performances and accomplishment of organizational objectives demonstrate the effectiveness of selection process and reveal positive affects of selection processes to the organizational goals and objectives. Employee selection on the basis of work assessment method successfully provides effective manpower that meets their objective of high quality at competitive prices. Moreover, at Meister Software UK work sample tests also bring competitive man power that can attract current and prospective customers to meet organizational goals and objectives.


  
Brackey H. J. (1998), “Job Hunters Face New-Styled Interviews”, Omaha World-Herald, G25—26

Bratton J. & Gold J. (2010), “Human Resource Management: Theory and practice”, Macmillan Press Ltd.

Campion M., Palmer D. K. & Campion J. E. (1997), “A Review of Structure in the Selection Interview” Personnel Psychology, Vol. 50

DeCenzo D. A., Robbins S. P. & Verhulst S. L. (2010), “Fundamentals of Human Resource Management”, 10 Ed, Wiley & Sons, Inc

Management Paradise (2011), “Inducement in Infosys”, [online] Available at

Mathis R. L. & Jackson J. H. (2007), “Human Resource Management”, 9th Ed, South-Western Publications



Friday 28 June 2013

TATA's Nano entry strategy in Malaysia

Abstract

Tata produced world’s cheapest car in 2008 with the name of Nano. However, Tata is looking to capture markets other than India due to limited sales in its local market. This decision primary requires deciding about country to be targeted and the entry method that should be selected. This study explored the second question of entry mode for Tata’s Nano. Tata is suggested to select Malaysia due to expected growth for ultra low cost cars and ease of doing business in Malaysia. Four entry methods of exporting, licensing, joint ventures and wholly owned subsidiary are addressed in this respect. Exporting and wholly owned subsidiary contain least risk of dissemination of technology. On the other hand licensing contains high technology risk. However, extent of control and resource commitment intensifies from exporting, licensing, joint venture to wholly owned subsidiaries. Tata is suggested to use combination of exporting and wholly owned subsidiary entry method. Since, cost of import is least and doing business is also easy in Malaysia. So, Tata should import parts of Nano and assemble in its assembly factories in Malaysia.

Table of Contents






1. Introduction:

            In 2009 Tata claimed that the company produced world’s cheapest car with the name of Nano. However, due to limited sales of Nano in local Indian market Tata is looking to target other markets beyond the boundaries of India. It is recommended that Tata should offer its Nano to Malaysian customers. The suitability of Malaysian market is due to increasing growth for ultra low cost cars, increasing GDP per capita, ease of doing business, urbanization, low cost of import, less inflationary threats especially for short term and low interest rates on lending. However, the important thing needed to explore is that how Tata should enter in this attractive Malaysian market. Lee & Lieberman (2010) argued that the success of multinational companies depends on the mode of entry in selected foreign country. So, the purpose of this study is also to investigate the available mode of entry for Nano in Malaysia and selecting most appropriate method while considering its pros and cons.

2. Mode of Entries:

            The mode of entry can be divided into two broad categories of equity based and non equity based contractual entry (Kumar & Subramanian 1997; Wild et al. 2008). Both the categories can also be segregated into several sub categories. Equity based entry contains three methods of joint venture, acquisition and Greenfield investment (Wild et al. 2008). While on the other hand ‘exporting’ and ‘contractual agreements’ are non equity based methods in this respect (Wild et al. 2008). So, Tata can introduce Nano through these modes of entry. However, to explore most appropriate entry method it is important to know the pros and cons of each entry method. Entry method that create best match between Nano and Malaysian market should be selected.

2.1 Non Equity Based Mode of Entry:

            The selection of equity based or non equity based entry mainly depends on three factors of control, resources and risk (Todeva, 2005). Ideally firms want to enter with highest control while deploying least resources and minimum risk. However, in practice it is almost impossible to enter with 100% control and least resources and minimize risk (Burgel & Murray 2000). So, it will be the control, resources and risk that will determine the mode of entry in international market. For instance non equity based entry is more suitable when firms are resource constraints. It is because no equity is contributed and firms can enjoy advantage of that foreign market without having resources. On the contrary firms can lose control over distribution channel as intermediaries or partners are hired to distribute final product to end customers (Madhok 1997). Exporting and Licensing are two main non equity based model.

2.1.1 Exporting:

            This is an entry method in which firms export the goods to host country without entering physically (Rhyne 2009). In other words final or partial product is manufactured somewhere else outside the host market and then transferred to it. Firms can use exporting further in two ways i.e. indirect exporting and direct exporting. Using home country intermediaries to transfer the goods in host market is called indirect exporting while on the contrary contacting host country middlemen is referred as direct exporting (Rhyne 2009). (Osland et al. 2001) provided useful framework to identify the pros and cons of different entry methods on the basis of control, resources and risk of transferring technology as shown in figure 1 and 2. Primary advantage of export is requirement of least resources. For instance if Tata transfer Nano is Malaysia then it requires least resources as no set up will be created in Malaysia for exporting. It is also believed that exporting is the quickest mean of entering in international market (Osland et al. 2001). So, to gain the first mover advantage Tata can uses exporting as many other car manufacturers are also expected to offer ultra low cost cars and can exploit the emerging opportunities before Tata’s entrance.
Figure 1: Resources and Control for Different Entry Modes (Osland et al. 2001)
Figure 2: Technology for Different Entry Modes (Osland et al. 2001)
Exporting is greatly affected by the cost of trade. High cost to import or export can result in to high prices. However, exporting to Malaysia is advantageous as Malaysia is ranked at 1st place in cost of import and even import (Doing Business, 2013). Overall Malaysia rank on eases of trading is 11th place. On average cost of import per container in Malaysia is only $435 and on average it takes only 8 days to import that container. So, ease of trade also prefers exporting as proffered entry mode. Another advantage of exporting Nano will be the least risk of transfer of technology as shown in figure 1. Since, operational control will remain with Tata and intermediaries will only transfer it so it is less likely that technology will be copied. Exporting in Malaysia is also suitable as cost of import and even time required to import are relatively less. However, the most critical thing is the control. Though operational control will remain with Tata but its marketing control will shift towards the middlemen. However, in case where firms are seeking new markets it is more important to gain control over distribution channel. In this way Tata can face such disadvantages of if selects exporting as mean of entry in Malaysia.

2.1.2 Licensing:  

            It is another non equity based mode of international entry. It is a kind of contractual agreement with some partner from host country (Osland et al. 2001). However, contrary to exporting some or all rights regarding company name, patent, copyrights etc are transferred to that selected partner against some initial fee and part of sales revenue to the licence provider. Licensing also contain some pros and cons. For instance technology risk is highest in case of Licensing as shown in figure 2. Since, company name or some patent are transferred to partner so licenser has to share technology information with that partner that can affect the ability of long run profit generation. This argument is more critical in case of high product differentiation.          It is argued that in case where product differentiation is high it is more appropriate to use high control. It is because in case of sharing product differentiation information with organizations from host market can result into loss of long run benefits (Osland et al. 2001). Cost differentiation is the primary source of competitive advantage for Nano and sharing information with partner can affect this sustainable source of competitive advantages. This argument is more important in case of operational control. Tata has to share information with partner from host country in case of licensing. So, this option of licensing can forgo the sustainable competitive advantages of cost differentiation for Nano. Despite this both marketing and even operational control are also low in case of licensing. So, Tata will face low control disadvantages if choose licensing as mode of entry in Malaysia.

2.2 Equity Based Mode of Entry:

            Equity based mode of entry requires high resources to incur marketing expenses, copy rights and other expenses to gain economy of scale (Wild et al. 2008). So, resource constraints firms are less likely to enter through equity based mode of entry. However, cheap financing cost in host country enhances the probability of multinational corporation entry even organizations have low resources (Burgel & Murray 2000). It is because firms can use external financing to acquire required resources with low cost of capital. On the other hand international experience of firm is also an important factor that should be considered while selecting entry mode (Aganval & Ramaswami 1992). For instance firms having high experience at international can choose equity based entry while with less international experience the selection of non equity based method is more appropriate. Despite this market potential also plays an important role in determining mode of entry in international markets (Aganval & Ramaswami 1992). It is argued that firms enter through equity based mode gain long term profits when the growth and potential of host market are significantly high. It is because such situations lead to low marginal costs due to high volume and firms can gain economy of scales in this respect. Three famous approaches of equity based entry are Joint Ventures, Strategic Alliance and Greenfield investment.

2.2.1 Joint Venture:

            A joint venture is a result of formation of new entity through participation of two or more partners who share risk, benefits, cost and management. The required resources or equity are shared by each participant that could be in the form of cash or some technology or fixed assets in the form of plant (Rhyne 2009). Resource based view explains the selection of joint venture. Resource based perspective believes that firms go for joint venture when they need resources (such as information, skills or knowledge etc) specifically related to host market environment. In other words firms collaborate with those partners who could provide those resources. Figure 1 demonstrates that joint ventures require high resources and also firms can gain high control as compared to equity based entry models of exporting and licensing. Tata is a multinational organization and contain strong financial position. Moreover, getting credit is very easy in Malaysia as the country is at top of ease of getting credit (Doing Business, 2013). So, Tata can use its resources and external financing against low cost of capital to form joint venture with high control. This option is also suitable in Malaysia as the country is ranked at fourth place in investor protection index and more specifically first in disclosure index (Doing Business, 2013). So, the potential discrepancies with partner with whom equity is shared will be least. However, risk of transferring technology is high in case of joint ventures as compared to exporting and Greenfield investment. (Osland et al. 2001) argued that experienced multinational firms do not prefer this option of joint ventures because of dissemination of technology to the other partner.

2.2.3 Greenfield Investment:

            In this entry method firms open a wholly owned subsidiary is host country. However, the investments, management, risk and operations are fully manages by the parent company. This can be done through acquiring some company from host country or starting wholly owned subsidiary. Primary advantage associated with Greenfield investment method is full control and no less risk of dissemination of technology. Figure 1 indicates that the wholly owned subsidiary contain highest control. Similarly, figure 2 also demonstrates that the risk of dissemination of technology is least in case of wholly owned subsidiary as compared to other options. So, Tata can avoid the risk of transferring technology through opening its subsidiary in Malaysia. However, it requires highest resources as shown in figure 1. Since, Tata has strong financial position and getting credit with low cost is easier in Malaysia is easier so this problem of high required resources is not critical in this respect. However, the disadvantage of wholly owned subsidiary is the high risk. As wholly owned subsidiary is manage and operate by parent company so the total risk is also associated with parent company. In other words Tata has to bear all the losses if it fails to create value in Malaysia. Sohn, (1994) found that using wholly owned subsidiary is more appropriate when investing in host country is less risky. Wholly owned subsidiary is also appropriate as inflation is less and also the chance of economic crises. It is also consistent with Osland et al. (2001) who also found that wholly owned subsidiary is not appropriate in case of hyperinflation and economic crises.

3. Preferred Method for Tata’s Nano:

            Previous discussion explored the four modes of entry in Malaysia for Tata’s Nano along with their pros and cons. Since, Nano competitive advantage lies with its low cost so it is more important to use that mode of entry that lead to sustainable competitive advantages for long term. However, using non equity based mode of entry i.e. exporting and licensing can affect the marketing control or disseminate the technology advantages to other partner. Though such methods are more useful where firms are resource constraints but in Malaysia getting credit are most easy with low interest rate and Tata’s financial position is also reasonably good. So, it is recommended to use equity based mode of entry. Equity based options are also right options as Tata has reasonable international experiences and investment based entry is more appropriate in this respect. Tata is suggested to use wholly owned subsidiary to enter in Malaysia market. It is because doing business in Malaysia is much easier as in ease of doing business index Malaysia is ranked at 12th place. Though, joint venture is another option that could be use by Tata but investment risk is reasonably low and getting marketing control is important that makes the wholly owned subsidiary more appropriate option in this respect. Tata should seek Malaysian market for long run that requires more control over distribution channel. Moreover, economic conditions and inflation are also under control in Malaysia and less expected to affect businesses in Malaysia. Moreover, Tata is also producing other automobile products such as trucks and buses. Controlled marketing and operational activities can also create overall value for Tata.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

4. Required Practical Steps:

            Though Tata is recommended to choose direct investment rather than exporting but still truth is that Tata’s Nano is cheapest car due to its efficient supplier management in India. Tata is recommended to import only parts of Nano and assemble them in Malaysia. Doing this will not significantly affect the prices of Nano and Tata will achieve required quality as well. Moreover, effective supplier management as Tata did in India is less likely to be implemented in Malaysia. So, exporting only parts and assembling them in Malaysia is seems to be more appropriate option. As it is found earlier that cost and time of import in Malaysia is very low that indicates that exporting only parts will not affect the price and even supply chain for Nano. Tata already has assembly factories in Malaysia and previously Tata practiced similar strategy i.e. exporting parts and assembling them in Malaysia. So, its experience and current distribution channel will assist in assembling Nano for Malaysian customers. Tata should use direct distribution channel and open its showrooms in big cities of Malaysia. However, it is important that Tata use appropriate promotional activities in this respect. Exporting and assembling in Tata’s factories in Malaysia will result efficient output but after that selling them requires more efficient marketing activities. Tata’s profit from Nano lies with volume. In other words has to increase its volume to cross breakeven point to gain reasonable profits and these objectives are contingent with strong marketing. In short Tata is recommended to imports only parts of its Nano to assemble in its current assembly canters in Malaysia and sold Nano through direct channel with strong promotional activities.


References:

Aganval, S. & Ramaswami, S., 1992. Choice of Foreign Market Entry Mode: Impact of Ownership, Location and Internationalization Factors. Journal of International Busines Studies, pp.1–27.
Burgel, O. & Murray, G., 2000. The International Market Entry Choices pf Start-Up Companies in High-Technology Industries. Jourenal of International Marketing, 8(2), pp.33–62.
Kumar, V. & Subramanian, V., 1997. A Contingency Framework for the Mode of Entry Decision. Journal of World Business, 32(1), pp.53–72.
Lee, G.K. & Lieberman, M.B., 2010. ACQUISITION VS . INTERNAL DEVELOPMENT AS MODES OF MARKET ENTRY. Strategic Management Journal, 31, pp.140–158.
Madhok, A., 1997. COST , VALUE AND FOREIGN MARKET ENTRY MODE : THE TRANSACTION AND THE FIRM. Strategic Management Journal, 18(April), pp.39–61.
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Rhyne, B.W., 2009. Entering the Global Market Place of the 21 st Century : Strategies , Risks , and Modes for International Expansion of Chinese Businesses.
Sohn, J., 1994. Social Knowledge as a Control System: A proposition and Evidence from the Japanese Behavious. Journal of International Studies, 25(2), pp.295–324.
Todeva, E., 2005. Foreign Market Entry and Internationalisation of Business Network. In International Conferences on Economics and Management of Networks. Budapest, Hungary,: EMNet, University of Vienna, pp. 53–68.
Wild, J.J., Wild, K.L. & Han, Y., 2008. International Business: the Challenges of Globalization 4th ed., New Jersey: Pearson Education Inc.