ANSWER BOOKLET

MATRIC NO MC201012517
PROGRAMME Bachelors in business Administration HONS(Online)
COURSE CODE BABG2023
COURSE TITLE International Business
SEMESTER Semester 5
SECTION MCO11
DATE 5 March 2022

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International Business (BAGB2023) CONFIDENTIAL
Final Examination January 2022

Matric No:MC201012517
Type or insert your scanned answer on this answer booklet.
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Section A:

1. Competitive Advantage:

- When we discuss about the competition of Nestle, Nestlé Company has a strategic advantage over their
competitors because they will increase Nestlé value by ensuring long-term availability of raw materials
and water, ensuring a more secure supply of higher-quality raw materials, producing products with
improved environmental performance, profitable growth, and consumer preference.

- These are the examples of competitive advantages that Nestle:

1.) Bolstered Research & Development

2.) Partnership with Big Companies

3.) Plant-Based Meals

4.) Product Availability

2.) Foreign direct investment

Most commonly, nestle is using Horizontal FDI. It is involving fund investment. Other than that, they have
strategies that are Big Middle Class and Lengthy Negotiations.

3.) Globalization

- Nestle is a well-known company that has been running successfully for over 150 years. In this case,
nestle has been providing plenty of training to women and enhancing their lifestyles. Moreover, due to
this globalization, nestle has decreased the cost of manufacturing and offered goods at a lower price.

4.) Pull Strategy

- Since Nestle has produced plant-based products, the company has used a pull strategy. The pull
strategy is really working because it will influence all the customers around the world by providing
rebates, discounts, and vouchers. This will increase the quality of the product and the productivity too.

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International Business (BAGB2023) CONFIDENTIAL
Final Examination January 2022

Matric No:MC201012517

Section A:

Question 2:

For decades, McDonald's has been a fast-food market leader, with one of the most recognisable brands,
products, and mascots in the United States. Owning a McDonalds franchise can be safer than owning a
lesser-known franchise because the McDonalds name and operational model come packaged with its
own legion of devoted customers and industry-best practises for restaurant success. Owning a franchise
is a dream come true for many entrepreneurs. A franchise store, such as McDonald's, can help business
owners achieve financial independence by partnering with a global behemoth that almost guarantees
success.

Some critics may be unaware that McDonald's franchisees, who own and operate nearly 95 percent of
the chain's stores in the United States, have complete control over employee compensation, hours, and
benefits. Misconceptions about McDonalds and other fast-food franchises explain why hundreds of
thousands of employees are denied benefits like paid sick leave. McDonald's paid sick leave policy
exemplifies how the franchise structure can result in disparities in benefits among employees who appear
to work for the same corporation. They have more employees who do not have paid sick leave than any
other restaurant or retailer studied by the Shift Project, which has prompted criticism of the fast-food
behemoth.

One of the benefits of a McDonald's franchise in Malaysia is the people paradox. The relationship
between a franchisee and the franchisor is intended to be that of a "independent contractor," in which
both parties are free to pursue their goals without interference from the other. The only common
denominator in the relationship is the brand. Both the franchisor and the franchisee benefit when the
brand's value rises, so it is in both parties' best interests for that to occur; however, it is the franchisor's
responsibility to ensure that it does. It is most visible in the hiring, training, and management of
individuals at the local level. This is neither simple nor practical for a franchisor to do from their corporate
headquarters. Due to the franchisee's local sphere of influence, the franchisee has a clear competitive
advantage over the franchisor in this regard. I've worked with franchisees who have had great success
identifying personnel through their church, neighbourhood, social circles, and towns' connections. I've
also known several franchisees who try to rely on the franchisor to help them identify, train, and, in some
cases, manage their franchise's staff. However, the franchisees' local presence and influence should give
them an advantage in this area.

The franchisor will, without a doubt, provide guidance on the training protocols connected to the
operations of the business standards, but make no mistake: they will not be present to monitor how well
they are being applied daily. That is the franchisee's job, and it should be a deliberate and ongoing
emphasis to capitalise on this evident competitive edge.

The second benefit is Grassroots Marketing. The franchisee's other advantage in the franchise
agreement should be in marketing the brand promise locally, but franchisees frequently wait for the
franchisor to "grow their business." The franchisor oversees increasing brand value for all agents working
under the trademarks, although this does not always happen at the same rate or have the same influence
on each franchisee. This should motivate franchisees to concentrate on the things they can control and to
become successful and persistent grassroots marketers. Franchisees have an obvious competitive edge
over the franchisor in terms of local marketing efforts, but they rarely use it by developing a purposeful
public relations plan, linking their firm with a local community cause, and sponsoring local teams,

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International Business (BAGB2023) CONFIDENTIAL
Final Examination January 2022

Matric No:MC201012517

activities, and events. These are low-cost ways to connect the brand locally, and they can pay off
handsomely in terms of brand loyalty, superior pricing tactics, and expansion potential. At the end of the
day, the local storey is about you and your connection to your community, not the brand. I'm sure most
franchisees do "newsworthy" things, but they don't capitalise on it; instead, they wait for franchisor
backing, which isn't a fundamental driver of the franchise model. Begin by creating a local marketing plan
from the ground up, with you and your team at the core. The local journalist and blogger will then have
something to talk about, and you will be the one who benefits.

The third benefit of McDonalds franchising in Malaysia is that it is a two-way street. A mutually
advantageous relationship exists between a franchisor and its franchisees, in which both parties’ profit.
Most people believe that the primary benefit of franchisors is monetary profit; however, this is not the
case, as franchising provides much more to franchisors than just money. Expansion can be beneficial to
a company since having a global presence will aid in branding because the company will be able to reach
a larger client base with its brand and products. Not only is franchising a quick way to expand, but it also
reduces financial risk because the franchisees, rather than the founding company, are responsible for
supporting the expansions. Furthermore, the reduced financial burden and consistent stream of royalty’s
income not only fills franchisors' wallets with internal funds, but also makes it easier for them to secure
financing from financial institutions to fund additional commercial activities and operations. Advocates for
franchising may even argue that expanding through franchising allows franchisors to focus on their core
businesses and innovation while reaping the benefits and profitability of having a global presence and a
steady stream of revenue.

Brand recognition is the fourth benefit. McDonald's can boost their brand and commercial performance by
improving their environmental programmes and sustainability, such as the Macrocycle effort. This
programme intends to seize opportunities that have developed because of increased interest in corporate
environmental initiatives and a growing focus on sustainable business practises. Changing weather
conditions also had an impact on the availability and consistency of McDonald's food suppliers. As a
result, McDonald's will need to increase their supply chain to counteract this effect. These ideas could be
beneficial to McDonald's in Malaysia. In terms of local customs, marketing strategies, client loyalty, and
technical breakthroughs, they are each completely unique. McDonald's also has its own website and
uses other online social media channels to spread information about deals and events in different
countries. However, it falls short in several areas where its competitors have a significant advantage.
McDonald's, for instance, has only recently launched an online ordering system. However, the delivery
service is inadequate, and the majority of Kuala Lumpur and other big cities are not usually served. As a
result, to thrive in the dynamic business climate of the twenty-first century or the internet era, McDonald's
will need to devise the best strategy for adapting to changing consumer demand.

Finally, being named Malaysia's Most Improved Healthiest Workplace for Large Organizations validates
McDonald's ongoing efforts to promote workplace health and provide a healthy atmosphere for its
workers. Through the McDonald's employee value proposition, which focuses on treating employees as
extended family and friends, the corporation is constantly striving to listen to their people.

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International Business (BAGB2023) CONFIDENTIAL
Final Examination January 2022

Matric No:MC201012517

Section B:

Question 1:

a.) Geely can help Proton to improve their quality, reduce cost and develop new products. The
main key initiative is to help achieve this by pairing Proton with China supplier through a
technical assistance agreement.

Coming from a country where the steering wheel is on the left side of the vehicle, Geely's
partnership with Proton gave them access to right-hand-drive markets, which include Malaysia
and Brunei. Naturally, this allowed the Chinese automaker to acquire majority ownership in Lotus.
With the Evija electric hypercar on the way and the Emira in the works, it appears that the Hethel-
based sports car manufacturer is thriving under new management.

b.) Geely has helped Proton to expertise in producing right-hand drive vehicles. In this case,
Geely will get the automotive market through aggressive export strategies.

Geely announced a strategic relationship with PROTON, gaining access to the Malaysian market
and PROTON's expertise in creating right-hand drive automobiles. Around 35% of the world's
population is said to drive right-hand drive vehicles. Geely will have access to this right-hand-
drive market, which is made up of around 75 countries, thanks to its partnership with PROTON.

c.) Geely can gain business strategies with DRB-Hicom if they partner with Proton.

This state-of-the-art development includes a new production line and paint shop that will allow
PROTON to produce its newer range of vehicles based on Geely's technology, such as SUVs and
crossovers.

The third will be that Geely's production footprint will grow as a result, with more cars imprinted
with its technologies reaching previously unreachable parts of the globe. Therefore, it's always
referred to as a "strategic partnership": it's a two-way connection that benefits both parties. If
Geely joins forces with Proton, they will be able to strengthen their sales and marketing efforts.
To attract other manufacturing industries, Geely can produce a wide range of automotive
machinery and high-quality engines.

d.) Geely also can improve their sales and marketing industry if they partner with Proton. Geely
can produce a variety of automotive machines and quality engines to attract other manufacturing
industries.

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International Business (BAGB2023) CONFIDENTIAL
Final Examination January 2022

Matric No:MC201012517

Section B:

Question 2:

Proton competes in areas such as research and development, manufacturing, and marketing.
Geely intends to merge the two automakers, transforming Proton into Malaysia's most
competitive brand and a leading nameplate in Southeast Asia. The agreement brings an end to the
automaker's lengthy sale process, which was mandated as part of the terms of a government
bailout loan.

An investment would enable Geely to enter the ASEAN market with a ready-made after-market
network at a low cost." Geely's design studios and the Boyue sport-utility vehicle platform will be
available to the Malaysian automaker.

Section B:

Question 3:

Aspects of international pricing strategies that related to the automobile industry

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International Business (BAGB2023) CONFIDENTIAL
Final Examination January 2022

Matric No:MC201012517

1.) To gain a great market share, the automobile industry will embrace the penetration pricing strategy.
Most companies will aim to set up a customer-based price in the market.

There are so many pricing strategies that the automobile industry can obtain.

a.) Competition pricing

b.) Product Line pricing

c.) Penetration Pricing

What is an example of a penetration pricing strategy?

Market penetration pricing is based on the strategy of initially charging low prices to make many
customers aware of a new product. Examples of penetration pricing include an online news website
providing one month of free service for a subscription-based service or a bank providing a free checking
account for six months.

What is an example of a penetration pricing strategy?

Market penetration pricing is based on the strategy of initially charging low prices to make many
customers aware of a new product. Examples of penetration pricing include an online news website
providing one month of free service for a subscription-based service or a bank providing a free checking
account for six months.

For a given time, the penetration pricing strategy prioritizes market share over profits. In a short period of
time, the goal is to generate demand, rapidly build a customer base, and maximize brand loyalty.

Penetration pricing occurs when a company introduces a low price for a new product or service. The
initial price undercuts competitors, forcing them to match the offer or implement alternative strategies
quickly. Customers of competitors may switch to the cheaper offer, and new customers may join as well.
Following a period of expansion, the company's prices are typically raised to increase profits and reflect
the rising value of the product.

Competition Pricing

Competitive pricing analysis enables businesses to manage competition by limiting customer and market
share losses. Using a competitive pricing strategy can also help your company's positioning.
Furthermore, a competitive pricing analysis enables businesses to respond to competitor price changes
and control the competition by preventing market share loss. As a result, businesses can adjust their
strategies to match those of their competitors and avoid losing customers.

In a competitive marketplace, the effectiveness of any element of the marketing mix is determined not
only by its absolute value but also by its relative value with respect to the competition. For example, the

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International Business (BAGB2023) CONFIDENTIAL
Final Examination January 2022

Matric No:MC201012517
effectiveness of a price cut in increasing demand is critically related to competitors' reaction to the price
change. Managers, therefore, need to know the nature of competitive interactions among firms. In this
paper, we take a theory-driven empirical approach to gain a deeper understanding of the competitive
pricing behavior in the U.S. auto market. The ability-motivation paradigm posits that a firm needs both the
ability and the motivation to succeed in implementing a strategy (Boulding and Staelin 1995). We use
arguments from the game-theoretic literature to understand firm motivation and abilities in different
segments of the auto market. We then combine these insights from the game-theoretic literature and the
ability-motivation paradigm to develop hypotheses about competition in different segments of the U.S.
auto market. To test our hypotheses of competitive behaviours, we estimate a structural model that
disentangles the competition effect from the demand and cost effects on prices. The theory of repeated
games predicts that firms with a long-run profitability objective will try to sustain cooperative pricing
behavior as a stable equilibrium when conditions permit. For example, markets with high concentration
and stable market environments are favorable for sustaining cooperative behavior and therefore provide
firms with the ability to cooperate. The theory of switching costs suggests that in markets in which a firm's
current customers tend to be loyal, firms have a motivation to compete very aggressively for new
customers, recognizing the positive benefits of loyalty from the customer base in the long run. As
consumer loyalty in the market increases, the gains from increasing market share by means of
aggressive competitive behaviours are more than offset by losses in profit margins. Firms, therefore,
have the motivation to price cooperatively. Empirically, we find aggressive behavior in the mini-compact
and subcompact segments, cooperative behavior in the compact and midsize segments, and Bertrand
behavior in the full-size segment. These findings are consistent with our theory-based hypotheses about
competition in different segments. In estimating a structural model of the auto market, we address several
methodological issues. A particular difficulty is many car models in the U.S. auto market. Existing studies
have inferred competitive behavior only in markets with two to four products. They also use relatively
simple functional forms of demand to facilitate easy estimation. Functional forms of demand, however,
impose structure on cross-elasticities between products. Such structure, when inappropriate, can bias the
estimates of competitive interaction. We, therefore, use the random coefficients logit demand model to
allow flexibility in cross-elasticities. We also use recent advances in New Empirical Industrial
Organization (NEIO) to extend structural estimation of competitive behavior to markets with many
products. We use the simulation-based estimation approach developed by Berry et al. (1995) to estimate
our model. A frequent criticism of the NEIO approach is that its focus on industry-specific studies limits
the generalizability of its findings. In this study, we retain the advantages of NEIO methods but partially
address the issue of generalizability by analysing competitive behaviours in multiple segments within the
auto industry to see whether there is a consistent pattern that can be explained by theory. Theoretical
modelers can use our results to judge the appropriateness of their models in predicting competitive
outcomes for the markets that they analyse. A by-product of our analysis is that we also get estimates of
demand and cost apart from competitive interactions for the market. Managers can use these estimates
to perform a "what-if" analysis. They can answer questions about what prices to charge when a new
product is introduced or when an existing product's characteristics are changed.

What is product line pricing?

Product line pricing involves the separation of goods and services into cost categories to create various
perceived quality levels in the minds of consumers. You might also hear product line pricing referred to as
price lining, but they refer to the same practice.

The goal of product line pricing is to maximize profits by positioning new products with the highest
number of features or with the most cutting-edge individual features at the highest price point. At the
same time, you’ll be keeping a base product (i.e., one with fewer or older features with lower performance
expectations) on sale as a lower-priced alternative.

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International Business (BAGB2023) CONFIDENTIAL
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Matric No:MC201012517

Why do companies use product line pricing?

We couldn’t help but allude to it earlier—product line pricing helps make your company more appealing
across the board. Unless you have a particularly narrow-use product, tailored intimately to a certain buyer
persona, the more needs your product can satisfy, the more popular it’ll be.

Price differentiation

Price gaps create perceived quality differentials—quality-level establishment is important in cultivating the
public’s image of your company. Moreover, keeping your pricing strategy distinct and simple enables you
to create better sales narratives, giving your sales team a better foundation to work from.

Price differentiation also reduces the likelihood that your products will cannibalize each other. Companies
can maximize sales of different products by creating complementary products, not competitive products
that are likely to displace each other. Instead, the price-differentiated products work together to increase
market share. Think of the way in which Toyota offers a durable, low-priced alternative to their high-end
Lexus model.

Larger variety of customers

A product line with low-end, mid-range, and high-end pricing means you’re likely to pull in an array of
customers with various needs who’ll be catered to by different cost categories. Not everyone will have the
need for your most high-end offering, not to mention the spare cash to pay for it—but if you’re smart with
your product line pricing, those customers who are looking for a simpler solution will still find a plan that
works for them.

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