1.0 Introduction In this assignment the Krafts processed cheese is chosen as a product to be marketed in Malaysia. Kraft Foods Inc.

is the largest confectionery, food, and beverage corporation headquartered in the United States. It markets many brands in more than 155 countries. 11 of its brands annually earn more than $1 billion worldwide. Kraft is an independent public company, it is listed on the New York Stock Exchange and became a component of the Dow Jones Industrial Average on September 22, 2008, replacing the American International Group.

Table 1: Kraft Co. Balance sheet 2010 fiscal year, (source: www.wolframalpha.com)

Figure 1: Kraft stock price 2010 fiscal year, (source: www.wolframalpha.com)

2.0 Entry Mode Entry mode strategy can be classified into three broad groups: Group 1: non-equity/indirect exporting mode: Indirect exports Direct exports Licensing and franchising Turnkey project Franchising management contract contract manufacturing

Group 2: equity-based modes of entry: wholly owned subsidiary join venture strategic alliances

Entry mode decisions are based on comprehensions considering international risk of entering a new market. Each entry mode incurs the management with a trade-off. At the very beginning, the management can possess a full control of its operations via high commitment of resources (completely owned subsidiary), causes an exposure to total risk. Secondly, the management can scatter or share control and resources with another firm (joint-venture arrangement) and evade from some of the risk. Finally, the management can move some control and risk to another firm and evade from most of the risks involved in the prospective market (in this case, Malaysia) by choosing for exporting (Naumann and Lincoln, 1991). Since Krafts processed cheese product is chosen and with an assumption that made about the company (the company does not reach the economy of scale), the Kraft Inc. could optimize a strategy by entering Malaysia through direct or indirect exporting. As mentioned before, in order to obtain an economy of scale as well as economy of scope, the firm should minimize the risk as much as possible. Hereafter, we explain both direct and indirect exporting approaches in detail.

2.1 Direct Exporting Mode

Direct exporting refers to export goods directly to a customer interested in buying the goods. In this mode of entry, the firm is responsible for the shipment of the goods as well as collecting payment. This approach has some advantages. For instance, the company can enjoy from a greater profit duo to eliminating the intermediaries. The firm has a great deal of control over the transactions taking place. However, the company can have a better understanding of marketplace as well as obtaining more flexibility in developing marketing strategies. There are some disadvantages involved as well. For instance, this mode of entry is costly and requires more time to be settled. Servicing is a difficult issue regarding this mode of entry and that is why the company is responsible for whatever happens (source: http://www.scribd.com). Kraft by choosing this method of entry will reduce the risk of entry because of high level of control on malysian market.Also,it would be able to have better understading of malysian market and environmental risk which,would be face in the future.

2.2 Indirect Exporting Mode

Indirect exporting refers to selling the goods to an intermediary (middle man) who sells the goods either directly to customers or indirectly to retailers or wholesalers. The best method in this approach is to sell to an intermediary in the domestic country in which the company is not responsible for shipments and collecting payment. There are some advantages regarding this mode of entry. For instance, this mode of entry is almost a free-risk approach. It requires a low degree of involvement. It has a benefit to allow the company to concentrate more on the domestic market. The company is not liable for logistics and shipment procedure. There are some disadvantages involved as well. For instance, the company will have a lower profit due to the existence of intermediaries. The company will have a low degree of control over its foreign market.Kraft gain little experience from this transaction.(source:international business book,by:McGRAW-HILL,page:488) If Kraft wants to choose this entry mode firstly, should be considered that by choosing this method of entry low profit gain by the company.On the other hand,Kraft can be lost if exporters decide to change their source of supply.But,The advantages of this modes of entry is more than disadvantages.Kraft could be able test the market and have some special exporters which they specialized in malysian market.This mediator,can show the special way that would be lead the company to the get acqunted to the malysian market.

3.0 Michael Porters Five Forces In order to analyze the market within which the company is operating, one should perform the industry analysis to perceive the forces dominating and controlling the industry. Figure 2 depicts schematically the five forces of Michael Porter i.e. bargaining power of buyers, bargaining power of suppliers, threat of substitute products, threat of new entrants, and rivalry among the competitors. In fact, all these forces have some effects of hindrance to enter Malaysia. But between these forces, the threat of potential entrants and the intense rivalry among the competitors seem to have a great deal of effect on the decision whether to choose Malaysia as a prospective market or not. In following both of these forces are going to be elaborated more in detail.

Figure 2: The five forces that shape strategy, a model for industry analysis, By Michael E. Porter, Harvard business review, 1979. 3.1 Threat of New Entrants (Barriers to Entry) Since the company is operating in the food industry, the company might have been dealt with great difficulties to enter the market. For instance, Malaysian government, for the sake of supporting domestic producers and manufacturers, could pose some tariffs to restrain the Kraft Inc. to enter Malaysia or discouraging the company by through shrinking the profit by imposing taxes. Furthermore, Kraft Inc. should expect retaliation from companies operating in Malaysia via reducing the price of the goods to deter the company from entering to Malaysia.Moreover,some famous canned food brand name such as lady choice,nissin food and some local food industries would be a powerful competitors for Kraft.Because they enter to this market place before the Kraft,consequently ,they have competitor advantages in camparison with Kraft.

3.2 Rivalry among the competitors Rivalry among the competitors plays a great role in discouraging the Kraft Inc. for entering Malaysia. The more intense is the competition, the less encouraging it is. However, an intense competition between companies will result in less profit. By entering to Malaysia other

companies will put some action strategies such as differentiating their products, innovating and investing in rigorous research and development to tackle back the new comer. In contrast with other forces participating in deterring the company, the intensity of competition will have a great effect on it. 4.0 The Most Suitable Entry Mode In this competitive arena with increasing levels of globalisation and international competition as well as rising of emerging markets, board of directors and managers are confronting ever more complex strategic decisions. Often, primarily among these are decisions pertaining to the choice of entry mode in foreign markets. Since emerging markets or international expansion promises profitable new markets, there are some risks involved facing firms in these strange new lands (Brouthers, 1993). Risk can be determined as the uncertainty related to disclosure to a loss occurred by some unpredictable events and ambiguity in the possible outcomes of an event based on chance. The international business misses a globally accepted definition of international risk (Miller, 1992).

Whereas risk commonly refers to unforeseen or negative change in revenue, cost, profit, or market share international risk commonly could be defined as the dangers firms confronted by virtue of limitations, restrictions, or even losses when involving in international business. Miller (1992) stated about a combination of international risk variables i.e. general environment uncertainty, industry risk and firm-specific risk. General environmental uncertainty applies to variables that have influences across all industries within a country, for instance political risk, policy and economic uncertainties, and social ambiguities. Industry risks refer to the risks pertaining to the distinctions in industrial or product specific variables, such as ambiguities referred to production inputs, special material and labour supply availability, product and market uncertainties, and competitive rivalry. These ambiguities might be occurred or worsen by shifts in supply or changes in demand within a particular country such as Malaysia. Eventually, firm-specific risk consists of operating uncertainties pertaining to labour and employee issues, liability ambiguities related to bad effects of products to users, credit uncertainties flowing from lack of ability to collect accounts receivables, and so on. These mentioned ambiguities diminish the certainty of corporate performance and, therefore, boost international risk. In the international environment, thus, risk is multidimensional (Miller, 1992). This more extensive conceptualization of international risk is pertinent to the choice of entry mode. Miller (1992) stated that

considering to distinct international risks, such as exchange rate risk or political risk, regardless of the other international risks could incur to a suboptimal entry mode. Brouthers (1993) inspected the relationship between international risk and entry mode strategy and came out with an opinion that the choice of entry mode varied pertaining to the perceptions of international risk. International risk can be managed through the choice of proper entry mode strategies. Each entry mode is followed with a different level of control (Calvet, 1984) and resource commitment (Vernon, 1979). Control refers to authority over operational and strategic decision making, while resource commitment addresses dedicated assets that cant be redeployed through alternative uses without loss of value. Hill et al. (1990) stated that whereas a proportionate high level of control and resource commitment could evaluate a wholly owned subsidiary, the opposite was true of indirect exporting. For joint ventures, despite the levels of control and resource commitment can change with the kind of ownership, the extent of control and resource commitment is commonly related to whether it is completely owned subsidiaries or non-equity/exporting modes. Brouthers (1993) established a risk strategy framework to delineate the relationship between international risk and choice of entry mode. Based on this framework, a firm adapt its entry mode in terms of its managements perception of whole international risk. For markets in which total risk is low, firms will take advantage of strategies that engage a high level of resource commitment. In markets that involve high level of risk, the management must adapt its entry mode strategy to diminish the effects of risk on the firms performance therefore; they will probably utilize a low resource commitment strategy. By considering all the risks and uncertainties discussed earlier, the best entry approach for marketing the Krafts processed cheese product in Malaysia is to choose export management company(EMC)to get rid of those 20 percent of remaining goods. EMC acts as a global extension of the Krafts sales and service on behalf of the company. EMC offers a wide range of services particularly in exporting a specific product to a well-defined customer base in Malaysia. By considering the fact that the chosen product is a subset of dairy products which requires a great deal of attention about the expiry date, therefore, choosing EMC will reduce the risks involved and put all the burden to the Kraft. Also Kraft can use internet which is much easier than indirect exporting .For the Kraft as an beginning exporter,the possibility of making availability of its product known abroad is dramatically increased.And although it is likely that a substantial international presence on the internet will require a significant

investment,the cost of trial is now very low.(international business book,by McGRAW HILL,page 488).

5)CONCLUSION:
To draw a conclusion,Kraft can choose these both entry modes for entering malysian market but it should be considered that indirect exporting result in more profit for the company and can demonstrate macro environmental risk which would face in the future.

References:
1. www.wikipedia.com 2. www.wolframalpha.com 3. http://www.scribd.com 4. Naumann E, Lincoln DJ. Non-tariff barriers and entry strategy alternatives: strategic marketing implications. J Small Bus Manage. 1991 4. Brouthers KD. The influence of international risk on entry mode strategy in the computer software industry. Management Int Rev 1993. 6. Miller KD. A framework for integrated risk management in international business, J Int Bus Stud, 1992. 7. Calvet AL. A synthesis of foreign direct investment theories and theories of the multinational enterprise, J Int Bus Stud 1984. 8. Vernon R. In: Vernon-Wortzel H, Wortzel LH, editors. Organizational and institutional responses to international risk, in strategic management of multinational corporations: the essentials, 1985.

9)international business book(McGRAW HILL)