1. Introduction

It is important to analyze the target country as well as the company before a business enters to the new market. In this writing, we shall analyze the international expansion strategy for Lifeway Kefir. The article is arranged as follow. Firstly, a brief discussion on the relevant literature related to international business and market entry modes selection will be presented. In this article, Malaysia has been chosen as the country for Lifeway Kefir to enter into. As such, Malaysia’s strategic environment as a potential country for international expansion purposes of Lifeway kefir will be presented. This will be performed through a detail PESTLE analysis on the macroenvironment in Malaysia. Then, the relevant information of Malaysia and Lifeway Kefir will be articulated. In order to understand the company specific conditions and the linkage of ‘strategic fit’ between the company to the environment, a SWOT analysis will also be performed. Under the SWOT framework, both the internal factors (i.e., factors related to the company, particularly about the strengths and weaknesses of the company) and external factors (i.e., the issues in the business or industry landscape in which Lifeway Kefir is operating in) related to Lifeway Kefir entrance to the Malaysia market will be performed. After considering the company details as well as the situation in Malaysia, the most viable market entry modes for Lifeway Kefir will be suggested.

2. Theoretical Framework Applied in this Article

International business is becoming ever important in the era of globalization. However, the venture to the international arena can be challenging, and if such a venture is not planned properly, the decision to venture to the international landscape may cause a firm to suffer huge financial losses, not to mention the time spent in planning, preparing and execution of the venture (Daniels et. al., 2008). Thus, it is important that proper analysis should be taken to minimize the risk of venturing into the wrong country. As such, practical theoretical framework such as the PESTLE framework is important for a firm to understand the macroenvironment in a country before the decision to enter the particular country for business expansion purposes is made. Beside, the selection of market entry strategy is also equally important. Without the correct market entry strategy, it is hard for a firm to capitalize on it strengths and to minimize its weaknesses in the foreign venture.

3. An Analysis of Malaysia with the PESTLE Framework

3.1 An Analysis from Political Perspective

A review of the political situation in Malaysia reveals that the historical of political development in the country is relatively stable. Many incentives and policies are taken to entice the foreign investors to the nation, which include tax cut, setting up of free trade zone, construction of infrastructure of the foreign investors as well as gradually liberalizing the various governmental policies to instill a competitive business environment in the nation. As such, many of the previous protective measures taken by the government are abolished. The country is indeed a viable choice for foreign investor (Multimedia Development Corporation, 2006).

Political related issues and its impacts to market entry selection. Viewing from the fact that the government in Malaysia is promoting business activities as well as is trying hard to attract foreign investors to the company, various market entry methods are viable. For example, foreign direct investment is possibly a good market entry method as such method is granted many types of sponsors as well as advantages from the Malaysian government. The foreign investors are welcomed, and thus, this makes entering the market with an FDI approach looks promising. Besides, as the government is also encouraging the foreign businesses to cooperate with the local partners to do business in that country, to enter the country through strategic alliance is also a viable option. However, it is observed that other market entry method such as exporting, licensing and franchising methods do not have significant benefits to be reaped from the pro-business government in Malaysia.

3.2 An Analysis from Economic Perspective

Its market-oriented economy, combined with an educated workforce and a well-developed infrastructure, has made Malaysia to become one of the largest recipients of FDI among developing countries (The Word Fact Book, 2010). The last decade has seen a deepening and widening of Malaysia’s industrial base as well as the further development of its services sector. As such, a strong foundation has been laid for the economy to move forward into the new globalize environment (Multimedia Development Corporation, 2006).

Economical related issues and its impacts to market entry selection. As the economy in Malaysia is booming, the risk of the various types of market entry mode is reduced. Since the economic environment in Malaysia looks promising, any types of market entry methods can be reasonably expected to earn the company profits. Exporting is viable as the consumers in Malaysia are getting wealthier as the economy grows, and thus they have more purchasing power to but the products. Licensing and franchising methods are also similar in that sense that if the economy is growing, there are more potential entrepreneurs that will seek out opportunity to start a profitable business in Malaysia with Lifeway Kefir. Not only that, both Foreign Direct Exporting and Strategic Alliances methods are also viable market entry method as long as the economic situation is booming in the country. Overall, no obvious conclusions on which market entry method is the best option can be drawn from economic analysis of Malaysia.

3.3 An Analysis from Social and Cultural Perspective

In the following section, a country analysis on Malaysia from the cultural and social perspective will be performed.

The Society and Culture of Malaysia. Malaysia is a multi-racial country with a rich cultural heritage. The base of the national culture is Malay culture, which is native to this region. Islamic values are embedded in Malay Culture. The Malay culture emphasizes values on courtesy, moderation, tolerance, harmony and cordial relations among family members, neighbors and community. As Malaysian respect each other’s beliefs and faiths, cultural and religious festivals such as Hari Raya, Chinese New Year, Deepavali, Christmas and others One of the unique features of Malaysia is its multi-racial population which practices various religions such as Islam, Buddhism, Taoism, Hinduism and Christianity (The Word Fact Book, 2010). Each ethnic group has its own beliefs. Under the Federal Constitution, Islam is the official religion of Malaysia but there is freedom of worship. The Malay Language is the national language of the country. However, the people are free to use their mother tongue and other languages. English as the second language is widely used in business (My Malaysia Culture, n.d.; Ministry of Culture, Art and Heritage, n.d.).

Analysis of Malaysia Culture. Refer to Hall’s High and Low Context of Culture in Fletcher and Brown (2005, p83), Malaysian are more likely be the high-context culture group as we use to give implicit or non-verbal messages and instructions. The society status or “face value” to them are very crucial, therefore they tend to trust themselves more than the lawyers and in the event of any mistakes happen in the organization decision making, they will accept the responsibility. According to Hall’s the high context culture nation are more group conscious, they breathe on each other and often allow lengthy discussion before get into decision making stage. However, these culture group of people are polychronic and time is not so critical for them.

Alternatively, Hofstede’s Model of Culture Differences (Fletcher and Brown, 2005, p. 93) stated there are 5 major differences to a culture:

• Power Distance – Generally the Malaysia’s power distance distribution are fairly broad, there are large number of wealthy people in the country.
• Uncertainty Avoidance – Malaysian are more likely towards the weak uncertainty avoidance, they are thoughtful, passive, unemotional, tolerant, positive to change
• Individualism or Collectivism – as mention before they are more group by nature or collectivism, whereby the friend, member and family come first for any decision making process.
• Masculine or Feminine – Malaysian are pretty much in between as there are many Malaysian women are holding the high position in the multinational or large corporations here.
• Term of Orientation – Malaysian are thriftiness, perseverance, do things properly build market share instead of immediate returns, respect tradition, let others gain face in business deals. In other words, Malaysians are long term orientation.

Social and cultural related issues and its impacts to market entry selection. It is obvious that the social and cultural aspects in Malaysia are significantly different from that off in the Western countries. This makes to enter into the market is risky. For example, direct exporting to the country can be risky as if we do not understand the consumers’ tastes in the country, to blindly keep exporting goods to Malaysia is obviously not a smart business decision. To enter the market through licensing and franchising are also not viable options as to cooperate with people with different cultural background may results in problems in the future if it is not handled well. If the local partner selected is not performing nor have different opinions on how to manage the business in the region, the foreign expansion operations will be wasted, or worst, resulted in a failure. To immediately jump into foreign direct investment method is not prudent as well, as the company truly need a local partner in managing the various issues and potential problems in the country. Thus, it is apparent that to form strategic alliances could be the best option, as the company will have some say in the foreign venture, and yet can tap into the local talents and strategic partners to handle issues due to cultural differences in the foreign market.

3.4 An Analysis from Technological Perspective

Currently, Malaysia is still an emerging country, in which the technological advancement in the nation is still relatively backwards if compared to those countries in the Western world. Nonetheless, it is argued that Malaysia has a large pool of talented engineers and technicians, many of them English speaking, that able to contribute to foreign investors operating manufacturing or technological related business in the nation. It is argued that, the country has satisfactory amount of talents and technology in terms of engineering, programming and software development (Deraman, n.d.; National by National, 2006).

Technological related issues and its impacts to market entry selection. It is obvious that from the discussions above, Malaysia has sufficient English speaking knowledge workers that able to cope with the requirement from Lifeway Kefir possible operations in the nation. This make the market entry methods such as the Foreign Direct Investment and the Formation of Strategic Alliances with the local partners viable, as the language for communication purposes is no longer a huge barriers to do business directly in the nation.

3.5 An Analysis from Environmental Perspective

Malaysia is a country with lot so flora and fauna. However, for the case study in this article, such a factor is less relevant in our analysis.

3.6 An Analysis from Legal Perspective

Executive Authority & Legal Structure in Malaysia. Basically, the legal aspects of Malaysia are pretty similar to that of the British laws, judging from the fact that Malaysia was previously governed by the British before independence (The Word Fact Book, 2010).

Legal related issues and its impacts to market entry selection. As the legal related rules and regulations in the company is pretty similar to that of those laws in the UK and US, the company is indeed facing lesser risk to expand into Malaysia. As the laws of Malaysia are pretty similar to that of the Western laws, all of the market entry strategies are viable. However, it is less certain on which one is the best market entry method under such perspective.

4. SWOT analysis for Lifeway Kefir

To propose viable strategy for Lifeway kefir, the details and situation of Lifeway Kefir as well as the related position of Lifeway kefir in the industry should be performed. In this section, SWOT analysis will be performed, whereby the associated strengths and weaknesses of the company will be analyzed, and the associated threats and opportunities from the business environment in which the firm is operating will also be presented.

4.1 Strengths of the Company

The key strength of the company is that it is a rather flexible and responsive company. Due to its small size, strategic directions and the associated strategic plans can be carried out in a faster pace as compared to those larger corporations. Besides, as the scale of the business is relatively smaller if compared to those larger corporations, the company is more flexible. Not only that, the products sold by the company is also attractive and in line with the consumer trend of focusing on healthier foods and beverages. The management in the company is also competent and experience, as they have strong and in-depth experiences in growing a successful business in United States.

4.2 Weaknesses of the Company

Although the smaller size of the company enable it to act fast and adapt easily to the changing environment, the company is lacking of economies of scale in production related issues. This will cause the company unable to maximize its profit margin by performing large scale production process in the firm. Besides, due to the relatively smaller size of the company, the company is also lacking of financial resources in growing the business. This will definitely limit the choices of the company in growing into the international market. Besides, the company is also lacking international business related experiences and knowledge. Not only that, the company is lacking of cultural and social related knowledge doing business in Asia. This will definitely affect the company’s expansion to countries located in Asia in the future.

4.3 Threats Facing the Company

In the globalization era, to not expand to the global market can adversely affect the competitiveness of a company. As Lifeway Kefir is a company that expand slower to the international market as compared to other larger or more established companies around the world, the company is slow in building its brand name in the international context as well as losing out in achieving economies of scale in the production flow of the company. All these threats are forcing the company to eventually expand to the oevrsea market to enhance its competitiveness in the international arena.

4.4 Opportunities Facing the Company

As the company is relatively flexible, coupled with the ambitious management team, there are many opportunities for the company in the international market. By expanding to the international market, the company can reach a larger market potential, to enhance its brand name in the global context, to seek growth and to enhance profitability in the international arena, to further enhance the economies of scale for the company, as well as to lower the costs of the company by outsourcing its production process to the emerging countries with cheaper labor costs.

5. Viable Market Entry Strategies to Malaysia

There are various foreign market entry strategies available for a firm. However, all of these strategies may differ in the level of risk and associated rewards from the foreign venture (Daniels et. al., 2008). Besides, the control of the firm as well as the involvement of the firm in the different market entry strategies may differ as well (Griffin & Brown, 2005). In the following section, five types of possible market entry strategies will be discussed.

5.1 Exporting

Exporting is the entry strategy of selling the goods or services produced in one country to other country (Stonehouse et. al., 2004). Generally speaking, exporting can be categorized into two different types, namely: direct and indirect exporting.

Under direct exporting, there are two main methods frequently used. First, it is to employ sales representative for the firm in the foreign country. The sales representative will then engage in marketing promotional activities on behalf of the firm as well as to provide support services to the customers in the foreign country. Another method will be to appoint importing distributors. The importing distributors will purchase the products from the firm and then to resell to the foreign market. Usually, such a method is suitable for inventory-based business, such as toys, prepared foods, and furniture (Morrison, 2006).

Possible advantages and disadvantages for Lifeway Kefir. With such a market entry mode, the company can have control on the selection of foreign market while receiving good information feedback from a particular market. Such a method will also offer a better protection on the company trademark, patents, and goodwill. Compared to the indirect exporting strategies, such a method may offer greater revenue. However, this method may incur higher start-up costs and higher risks as compared to indirect exporting (Morrison, 2006).

Under the indirect exporting mechanism, the firm export through a local based export intermediaries. Under such a method, the exporter will lose up the control over its products in the foreign market. Examples of parties relevant to indirect exporting include: export trading companies, export management companies, export merchants, confirming houses, and non-conforming purchasing agents (Morrison, 2006).

5.2 Licensing

Under this method, either an exclusive or non-exclusive licensing agreement is provided to a foreign firm, for the rights to manufacture a proprietor’s product for a fixed term in a specific market (Daniels et. al., 2008).

Possible advantages and disadvantages for Lifeway Kefir. Under such an arrangement, the company can obtain extra income for technical know-how and services. Not only that, the company can also reaches new markets, and quickly expands its revenue with minimal capital investment. The risk under such market entry mechanism is also minimal, as political risks are mitigated due to the fact that the licensee is usually 100% locally owned. Thus, such a method is appealing for companies that are new in international business. However, there are certain drawbacks from this technique. Firstly, the firm may derive lower profit potential from this mode if compared to other market entry methods. The firm may also lost control over the manufacturing and marketing process, in which if they found a wrong candidate for licensing, the reputation of the firm may be hurt (Lasserre, 2003). It is also possible that the foreign partner may become a competitor when they start to sell the similar products in the counties where the company is already in.

5.3 Franchising

Under the franchise mechanism, a semi-independent business owner (namely, the franchisees) will pay royalties fees to a parent company (namely, the franchiser) so that the franchisees obtain the right to become identified with the franchiser’s trademark (Griffin & Brown, 2005).

Possible advantages and disadvantages for Lifeway Kefir. The advantages of pursuing an international franchising mode is the company can mitigate the political risk, and require only a small cost in undertaking such business venture. This in turn enables the firm to undertake simultaneous expansion to other nations around the globe. However, it is also acknowledge that the candidates for franchisees selection may be limited, can the entire international venture can go awry if the candidate selected is wrong. Not only that, it is common also that the firm may need to spend huge amount of money on marketing to attract franchisees prospects (Lasserre, 2003).

5.4 Strategic Alliance

Strategic alliance can be defined as any form of strategic cooperation between two or more corporations to achieve certain objective or benefits between the corporations (Stonehouse et. al., 2004). There are many other forms of strategic alliances between companies, such as partnership in terms of research and development, joint ventures, cooperation for cross-manufacturing operation, joint marketing, or any forms of joint ventures for attainment for strategic reasons (Daniels et. al., 2008).

Possible advantages and disadvantages for Lifeway Kefir. There are many possible advantages for the company from formation of a strategic alliance with foreign partners. Strategic alliance may enable the firm to share resources with a foreign company, to engage in technological or knowledge exchange, to reach economies of scale or to tap into the foreign market (Griffin & Brown, 2005). However, the drawbacks of such method are that it is lengthy and it is not easy to find a proper and successful strategic partner. Not only that, the formation of a strategic alliance may demand some degree of financial investment as well. If the strategic partner selected is not correct, then the firm may suffer in the long term (Lasserre, 2003).

6. Conclusion

After considering the various discussions presented from the PESTEL and SWOT analysis, it is discovered that strategic alliances is the best possible entry strategy for Lifeway Kefir to Malaysia. The various reasons and discussion on the reasons that such market entry strategy is the best option for Lifeway Kefir is presented in the following section.

According to the PESTLE analysis, it is discovered that Malaysia is a viable country for Lifeway Kefir to venture into. Most of the PESTLE factors look promising for Lifeway Kefir. However, Lifeway Kefir may lack competency in handling the cultural or social factors in the country – as it is observed that the demographics structure, races, cultural beliefs and social structure in the nation is highly different from that of in the United States. Thus, a local partner may be relevant to the company. This is important as a local partner may guide the company to deal with difficulties in the nation, and to cope with the different consumer tastes and behaviors in the company.

It is also discussed in the paragraphs above that as the cultural issues can affect the operation and profitability of the company in Malaysia, the company should pay more attention on avoiding mistakes related to wrong judgment or mis-interpretation on how the local market situations are. This indicates that to directly export the products to Malaysia may not be a viable choice. Direct exporting can be risky, if without the feedback, guidance and the contribution of knowledge from local partners, the management of the company may be relying on wrong assumptions in making business decisions.

At first glance, to perform Foreign Direct Investment may be a viable choice for the company. However, this may not be the case, considering that although various governmental incentives as well as the bonuses are available, the company will still be struggling to go through their learning curve in handling the foreign market. Time wasted can be huge, and that make the company prone to making wrong decision especially operating in an unfamiliar market.

Besides, from an analysis of Lifeway Kefir, it is discovered that the size of the company is intermediate and it is lacking of strong financial backup for taking very high risk investment. Not only that, the company is pretty new to international business. Thus, the company is lacking of human capital or experiences in handling the potential issues that may arises from foreign business expansion. Thus, it is probable a good idea for the company to find local partners for international business venture. Besides, considering the need of huge financial capabilities and vast international experiences to become successful in the international context, it is probable that the company should find a strategic partner in Malaysia. By having a strategic partner, it is also possible for the company to share the required initial outlay in expanding to the region. Not only that, the associated risk can be reduced significantly as the local partners will surely look after their investment together with Lifeway Kefir seriously as well.

Considering the products of Lifeway Kefir, it is an inventory-based business. Furthermore, the firm is operating in a competitive industry, whereby there are a lot of choices in the market place on beverages, be it organic or not. Also, the brand name of the company is not famous in the international context. Thus, it may not be easy to enter the foreign market under a franchising mode. In fact, it may also hard for the company to select a proper candidate for the licensing entry strategy. As such, licensing and franchising market entry strategies are not viable for the company.

Thus, it is reasonable to say that the current best strategy for Lifeway Kefir to expand to Malaysia, and then later to other countries is to find a strategic partner in Malaysia. This will enhance the financial capabilities of the combined forces of a strategic alliance. Besides, formation of a strategic alliance will also enable the company to acquire relevant market knowledge in Asia in the long term. Not only that, as the details of strategic alliances can be flexible and customized by Lifeway Kefir, such a market entry strategies may be relevant for a firm that are new in international business, but yet wish to expand globally.

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