KOLEJ UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF ACCOUNTING, FINANCE AND BUSINESS

ACADEMIC YEAR 2015/2016
JANUARY EXAMINATION

ABDM5174 INTERNATIONAL BUSINESS STRATEGY

MARKING SCHEME
This marking scheme serves only as a guide. Any other reasonable answers that are relevant to
the question will be considered on their merits. Examiners are expected to exercise their
discretion to accept any answers that may be deemed acceptable. The suggested answers are as
follow:

Question 1
(a) As an International Marketing Manager for Felda Global Ventures Bhd., one of your
responsibility is to expand and market the companys product to China. Discuss the
critical factors that you should consider before investing in China.
(20 marks)
Suggested answer:

It is generally accepted that there are a large number of differences between domestic and
international environments, with the latter being substantially more complex.
Five contributing to this complexities:
1. The multinational corporation faces multiple political, economic, legal, social and
cultural environments as well as various rates of change with each of them.
2. Interactions between the national and foreign environments are complex because of
national sovereignty issues and widely differing economic and social condition.
3. Geographical separation, cultural and national differences, and variations in
business practices all tend to make communication between headquarters and
overseas affiliates difficult.
4. Multinationals face extreme competition because of differences in industry
structures.
5. Multinationals are confronted by various international environmentalist
organisations, such as the Green Movement that restrict a firms selection of its
competitive strategies.

The critical areas for FGV investment in China as below:

The threat under the S.W.O.T (strength, weakness, opportunities and threat should be
the major concern for FGV in setting up business in China.
Threat is external environment to FGV which is not controllable by the company.
Any of the factors of politic, economic, social, technology, legal at the home and host
country could jeopardise the FGV investment in China.

International environmental checklist

1. Political environment of the host country such as laws, regulations and policies and
their impact going to have on the business.
Socio-economic system such as non-governmental organization movement that
will affect the regulation/deregulation that will not in favour to FGV
investment in China.
Type of political system; political philosophy; national ideology.
Major political parties, their philosophy and their policies. The government
decision on FGV could be the target to the opposition parties that will leads to
the regulation which is not in favour to FGV investment in China.
Stability of the government such as changes in political parties and changes in
governments.
Assessment of nationalism and its possible impact on political environment and
legislation.

Tax policies and their impact on overseas business.

Investment guarantees, investment surveys, and other programmes to
encourage private investment in the host country.
Other changes in government policy that affect international business.

2. Economic environment. Economic variables likely to have on the operation of the

business
Monetary policy and fiscal policies and their effect on price trends, interest
rates, economic growth, and stability
Commercial policies, especially tariffs, quantitative import restrictions, and
voluntary import controls.
Exchange controls and other restrictions on capital movements, repatriation of
capital, and remission of earnings.
3. Social environment. What is the likely impact on the business of changes taking place
with respect to the following social issues?
Social changes discrimination, lifestyle, equality, population trends. In the
case, the NGO social movement targeted on the industry that they feel will
harm the general public health.
Living condition such as housing, amenities, pollution.
4. Technology environment.
Problems in obtaining the locations and methods of waste disposal.
Problems in obtaining supplies of raw material especially foreign sources of
medicine supply.

4
Marks
Descriptions

04
Exhibits few/no
explanation with
minimal supportive
elaboration points.
Weak & unclear or
no connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

59
Exhibits limited
explanation with
minimal
supportive
elaboration
points. Limited/
no connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

10 15
Exhibits fair
explanation with
supportive
elaboration
points. Fair
connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

16 20
Exhibits very
clear
explanation
with
supportive
elaboration
points. Good
connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

(b) Explain the possible reasons that attract Felda Global Ventures Bhd. to venture into China.
(20 marks)
Suggested answer:

Cost down strategy

Production facility diversification strategy
Close to the sources of raw material
Consistency of raw material supply
Avoid Green movement in their home land.
Close to the market place
Students are expected to elaborate further with examples.

Marks
Descriptions

04
Exhibits few/no
explanation with
minimal supportive
elaboration points.
Weak & unclear or
no connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

5 9
Exhibits limited
explanation with
minimal
supportive
elaboration
points. Limited/
no connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

10-15
Exhibits fair
explanation with
supportive
elaboration
points. Fair
connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

16 20
Exhibits very
clear
explanation
with
supportive
elaboration
points. Good
connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

5
[Total: 40 marks]

6
SECTION B (60 marks)
Answer any THREE (3) out of four questions.
Question 2
The degree to which an organisation is matching its resources and capabilities with the
opportunities in the external environment is known strategic fit. The matching takes place
through strategy and it is therefore vital that the company has the actual resources and
capabilities to execute and support the strategy. Strategic fit can be used actively to evaluate the
current strategic situation of a company as well as opportunities such as merger and
acquisition, and divestitures of organisational divisions. Illustrate the process of developing the
strategic fit.
[Total: 20 marks]
Suggested answer:

Strength and weakness is the organisation internal environments.

o Value chain analysis
o Three cycles analysis
o Resource-based view
o Generic strategy of cost leadership, differentiation and focus
o Blue ocean strategy
Opportunity and threat is the organisation external environments.
o PESTL (political, economic, social, technology and legal) model.
o Industry five force model (or industry analysis model).

Students are expected to explain the use of strategy model in relationship to SWOT analysis
(strategic fit).
Marks
Descriptions

04
Exhibits few/no
explanation with
minimal supportive
elaboration points.
Weak & unclear or
no connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

5 9
Exhibits limited
explanation with
minimal
supportive
elaboration
points. Limited/
no connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

10 15
Exhibits fair
explanation with
supportive
elaboration
points. Fair
connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

16 20
Exhibits very
clear
explanation
with
supportive
elaboration
points. Good
connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.
[Total: 20 marks]

8
Question 3
ABC Berhad is celebrating its 30 th anniversary in 2015. The company is one of Asias bestmanaged multinationals and is involve in hospitality business, entertainment, plantations,
technology, manufacturing and retailing across seven countries. In order to be effective and
efficient, ABC Berhad is currently adopting matrix organisational structures in managing its
international business. Discuss the advantages and disadvantages of matrix organisational
structures.
[Total: 20 marks]

Suggested answer:

International matrix structure same as a regular matrix structure, except that for
MNC the geographic distances for communication are greater and co-ordination is
more complex
The matrix works best when pressure for decision-making balances the interests of both
product standardisation and geographic localisation and when co-ordination to share
resources is important.
Matrix Structure is a hybrid organization of overlapping responsibilities it is used by
some firms but has generally fallen into disfavour recently

Advantages of global matrix organisation structure:

Communication
Expertise
Flexibility
Coordination
Substantial product and area diversification
Need to be responsive simultaneously to product and area demands
Constraints on resources requiring that they be shared by two or more product, area or
functional divisions
Significant problems created and opportunities lost due to emphasis on only the product
or area dimension
Formulation of corporate strategy requiring the simultaneous consideration of
functional, product, and area concerns

Disadvantages of global matrix organisation structure:

Limited use in firm with few products

Limited use in fairly stable markets
Involves more than one manager
Creates a paradox in authority
Tends to promote compromise

Marks
Descriptions

04
Exhibits few/no
explanation with

5 9
Exhibits limited
explanation with

10 15
Exhibits fair
explanation with

16 20
Exhibits very
clear

9
minimal supportive
elaboration points.
Weak & unclear or
no connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

minimal
supportive
elaboration
points. Limited/
no connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

supportive
elaboration
points. Fair
connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

explanation
with
supportive
elaboration
points. Good
connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.
[Total: 20 marks]

Question 4
(a) An organisation structure defines how activities such as task allocation, coordination and
supervision are directed towards the achievement of organisational aim. Some
multinational company adopted international product division organisation structure with
certain condition for the reason of the ability to segregate large sections of the companys
business into semi-autonomous groups. These semi-autonomous groups are mostly selfmanaged and focused upon a narrow aspect of the companys products or services. Discuss.
(10 marks)
Suggested answer:

A high level of product diversity, with the firm manufacturing products that require
different technologies and have dissimilar end users
Little use of common marketing tools and channels of distribution among the various
product divisions
A significant need to globally integrate production, marketing, and research related to the
product
Little need for local product knowledge and product adaptation as the firm expands into
new countries
A product-related need for continuous technical service and inputs and for a high level of
technological capability, requiring close coordination between divisional staff groups and
production centers abroad
Marks
Descriptions

02
Exhibits few/no
explanation with
minimal supportive
elaboration points.
Weak & unclear or
no connection
between the
principles,
illustrations

3 4
Exhibits limited
explanation with
minimal
supportive
elaboration
points. Limited/
no connection
between the
principles,

5 7
Exhibits fair
explanation with
supportive
elaboration
points. Fair
connection
between the
principles,
illustrations

8 10
Exhibits very
clear
explanation
with
supportive
elaboration
points. Good
connection
between the

10
literature
references &
theoretical
concepts with
relevant case.

illustrations
literature
references &
theoretical
concepts with
relevant case.

literature
references &
theoretical
concepts with
relevant case.

principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.
(10 marks)

(b) A joint venture (JV) is a form of foreign invested enterprise (FIE) that is created through a
partnership between foreign and host country investors and share profits, losses and
management of the JV. Discuss the advantages and disadvantages of formation of an
international joint venture company.
(10 marks)
Suggested answer:

Joint venture (JV) is a corporate form and joint ownership by more than 2 or more
company.
The managing of a joint can be forms share management, one form takes responsibility or
independent managers are hired to manage the JV.
The characteristics of JV compare to other non-JV are that the purpose and scope are
broader and longer duration.

Advantages of Joint Venture Company

Ease of market entry to overcome entrenched competition.
Relatively easy to deal with government regulations particularly JV with host country
government.
Synergy effect and to get economies of scale and scope
Are able to manage costs of doing business in host country.
JV provides risk sharing for both parties.
Possibility of sharing knowledge and expertise in terms of products and services, resources
and government regulations.
Disadvantages of Joint Venture Company

Incompatibility of partners
Access to information
Distribution of earnings
Loss of autonomy
Changing circumstance
Marks
Descriptions

02
Exhibits few/no
explanation with
minimal supportive
elaboration points.
Weak & unclear or
no connection

3 4
Exhibits limited
explanation with
minimal
supportive
elaboration
points. Limited/

5 7
Exhibits fair
explanation with
supportive
elaboration
points. Fair
connection

8 10
Exhibits very
clear
explanation
with
supportive
elaboration

11
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

no connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

points. Good
connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.
(10 marks)

Question 5
(a)

Porters theory of national competitive advantage is basically an evaluation of how

competitively a nation participates in international markets. With the aid of a diagram,
examine Porters theory of national competitive advantage.
(10 marks)
Suggested answer:
Demand Condition: Ability to satisfy tough domestic customers may make it more
successful to deal with less demanding overseas customers. A sophisticated domestic
market drive companies to add new design features to products and to develop entirely
new products and technologies. Example: Sophisticated U.S. market for computer
software has helped give companies based in U.S. an edge in developing software
products.
Factor endowment /Factor conditions: Considers a nations basic factors, such as a
large labour force, natural resources, climate or surface features, as paramount factors
in what products a country will produce and exports. Porter also discuss on advance
factors which include the skill levels of different segments of the workforce and the
quality technological infrastructure nation. Advance factors are result of investment in
education and innovation, including training workers and technological research and
development.
Related and supporting industries: Provide the foundation upon which key industries
can excel. Supporting industries spring up to provide the inputs required by the
industry. This happens because companies that can benefit from the product or process
technologies of an internationally competitive industry begin to form clusters of related
economies activities in same geographic area.
Firm strategy, structure & rivalry: Competition leads to constant improvement. The
strategies of firms and the actions of their managers have lasting effects on future
competitiveness. Essential to successful companies are managers who are committed to
producing quality products valued by buyers while maximising the firms market share
and/or financial returns.

12

(4 points with explanation x 2 marks = 8 marks)

(Diagram = 2 marks)
(Subtotal = 10 marks)
(a) One of the purposes of direct investment in a foreign country by a business organisation is
to improve their turnover. The business organisation requires having certain advantages to
be successful in their foreign country investment. Discuss above statement with the use of
Eclectic Theory.
(10 marks)
Suggested answer:
Conditions for foreign direct investment
Ownership advantage
Location advantage
Internationalisation advantage
Note: The above major points are require to interprets by the students
Marks
Descriptions

02
Exhibits few/no
explanation with
minimal supportive
elaboration points.
Weak & unclear or
no connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

3 4
Exhibits limited
explanation with
minimal
supportive
elaboration
points. Limited/
no connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

5-7
Exhibits fair
explanation with
supportive
elaboration
points. Fair
connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with
relevant case.

8 10
Exhibits very
clear
explanation
with
supportive
elaboration
points. Good
connection
between the
principles,
illustrations
literature
references &
theoretical
concepts with

13
relevant case.