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Dangote Group Nigeria PLC: Internationalization into Malaysian Market - Iloka Benneth Chiemelie, Richard Krakue

COMPANY BACKGROUND
BRIEF HISTORY
Dangote group was established in 1981 as a trading company within cement as their core business product. The company later diversified into a multi-national industry trading cement, sugar, flour, salt and fish. Within the earlier 1990s the conglomerate has grown into the biggest industry in Nigeria. After the Nigerian civil war, the group sent experts to Brazil in 1999 to study the increasing manufacturing sector in the country. The experienced gained from Brazil lead the path to the transition of Dangote from a trading company into a manufacturing industry (Dangote Group, 2011).
Haven acquired the needed skills, Dangote group embarked into a big construction and manufacturing programme. The group acquired Benue cement industry from the Nigerian government in 2000, and by 2003 commissioned the largest cement plant within the Sub-Saharan Africa (Obajana Cement plant).  Currently the largest construction and manufacturing company in Africa, the group continues to spread its wings within the region by acquiring new companies across African in their bid to become the biggest African conglomerate (Dangote Group, 2011).
COMPANY OVERVIEW
Dangote is one of the most successful and diversified businesses corporations in the African region, and hold high reputation for excellent business and quality services. The company is headquartered in Lagos, Nigeria in West Africa. Dangote Group businesses and industries includes as listed below:
Table 1: Dangote Group's business and industry lines
Refining
Manufacturing
Port management and haulage
Milling
Other
  • Salt
  • Cement
  • Sugar
  • Pasta
  • Noodles
  1. Logistics
  • Flour and Semolina
  • Real estate
  • Dangote foundation
 DANGOTE GROUP'S VISION
To be world-class enterprise that is passionate about the standard of living of the general populace and high returns to stakeholders.
DANGOTE GROUP'S MISSION
Touch the lives of people by providing their basic need
DANGOTE GROUP'S CORE VALUES
Customer service: being a world-class organisation, Dangote group understands that they exist to serve and satisfy their customers. Indeed, their customer orientation reflects intimacy, learning and integrity.
Entrepreneurship: another core value of the group is entrepreneurship, and this is behind their constant development of new business ventures, while deploying innovative strategies to maintain their market leaderships.
Excellence: as a big group working together to satisfy their customers and return high values on investment, Dangote group demonstrates teamwork, respect and meritocracy as their third core value.
Leadership: as Dangote group thrives to being leaders in their business, markets and customers, another focus is on continuous improvement, partnership and professionalism which have made the Group a credible leader.
DANGOTE GROUP'S RECENT ACHIEVEMENTS
  1. Best African initial Public Offer for 2007 as awarded by African investors' index series.
  2. Presidential merit award for the best quoted company in the Food and Beverage sector 2007 as awarded by the Nigerian Stock Exchange.
  3. Presidential merit award for the best quoted company in the Food and Beverage sector 2008 as awarded by the Nigerian Stock Exchange.
  4. International quality award in mining sector 2009, as awarded by renowned Business Initiative Directions – Madrid, Spain.
 OBJECTIVES FOR INTERNATIONALIZING DANGOTE INTO THE MALAYSIAN MARKET
Internationalization has been considered to be the process by which firms move from operating solely in its domestic market to foreign markets (Rasheed, 2005). It is principally based on firm's ability to isolate, decide best market to penetrate, and develop entry mode for the selected market (Driffield and Love, 2007; Dunning, 2000). They have been numerous studies over the years on factors that influence internationalisation and best ways to select new international market for penetration (Moen et al., 2004; Johanson and Wiedersheim-Paul, 1975; Johanson and Vahlne, 1977). Based on some of the factors highlighted in academic research, we then propose the reasons for internationalization to be as discussed below.
Increases market shares: Dangote Group will be able to increase their market shares through internationalization and new market penetrations.  This is because, compared to their present sales and market size, they can attract new customers from new markets when they penetrate these international markets; thus, generate more sales and increase their market shares. This is one of the main rational why internationalisation is considered essential for Dangote group.
Gain competitive advantage: through internationalization, Dangote group can increase their competitive edge by satisfying more customers. This is because, compared to their domestic competitors, they can generate more revenue through internationalisation and divert these revenues into new product development and marketing, which will in turn increase their competitive advantage both in domestic and international markets. On the other hand, it can increase their international reputation which will indirectly or directly influence consumers purchasing decision as they seek for high value brands.
Improve supplier and distributor networks: the company can improve their networks of suppliers and distributors through internationalization. The main concept of business revolves through availability of raw materials and ability to get the finished products to the final consumers. Internationalization makes this concept much easier and Dangote group can benefit from it. Through internationalization, the company will have broader and more productive networks of distributors and suppliers to enhance their business process and generate more profits.
NEW MARKET ENTRY
Malaysia
ANALYSES OF NEW MARKET
Political environment
Malaysia is a federal state with 13 states and one federal territory (Wilayah persekutuan) with three components, Kuala Lumpur city, Labuan, and Putrajaya. The chief of state is the King who is chosen among 9 sultans at the Sultan's conference based on the principle of rotation. The King's tenure is 5years and his position is ceremonial. The head of government is the Prime Minster who much is a member of the lower house.
The Malaysian system of government is closely modelled after the Westminster parliamentary system, which is a direct influence of British colonization that ended in 1957. The government operates a bicameral system with a nonelected upper house and an elected lower house. In the lower house ever since Malaysia's independence in 1957, the UMNO (United Malays National Organisation) has been part of the ruling coalition (now called, Barisan Nasional (BN) which has been in power for over 30 years) (Michelle, 2009).
Malay favouritism has been the case over the years as the government granted itself to abolish human rights (Sensitive Matters Amendment in 1971), which makes criticism of the Malay Monarchy, the special position of Malays in the country, or the status of Malay as the national language illegal. A clear example is the arrest and imprisonment of Deputy Prime Minister Irahim Anwar in 1997, for violating peace preservation law by criticizing the Mahathir's policies. This marked the stake of Malay Authoritarianism in the Malaysian government (Michelle, 2009).
However, Prime Minister Badawi Abdullah who succeeded Mahathir's regime in 2003 was quick to find solutions to the high corruption by establishing a corruption unit to probe and arrest all top officials who have been involved in bribery and other sorts of corruption. Prime Minister Razak Najib followed the same root when he was elected in April 2009, by removing the ban on opposition newspapers (Suara Keadilan and Herakdaily). Nevertheless, Malaysian government can be concluded to be a pseudo-democracy with a Malay-dominant political regime backed by constitution, enduring suppression of civil rights for government criticism, and de-facto one-party system (Michelle, 2009).
Although it can be fair to say that Malaysia is slowly moving towards democratic system with the policies implemented by Mr Adullah and Mr Razak, it must be understood that on a business phase this pose a big threat to Dangote's success in Malaysia. Business strategies that could aim the conglomerate profit by competing against big Malay companies could be waved out by the government and any criticism will be deemed illegal. The government also allows indefinite detention without trial and for Dangote employees, this could be used against them if they company interferes with the government system in any form. Thus, it must be stated that the political atmosphere is a big challenge and should be critically reviewed before investment.
Economic environment
Following the Asian Tigers footstep and coupled with Japan's economic assistance, Malaysia transformed itself from an exporter of raw materials such as palm oil, natural rubber, and tin into an industrialized country. The country continuously recorded annual economic growth of above 8 percent between 1980s and the Asian economic crisis in 1997. As of 2008, its GDP was expected to be 385.2 billion USD which is the 31st largest in the world (Michelle, 2009).
The level of GDP per capita of Malaysia is estimated to be US$ 8,118 per year by IMF (2008), US$ 7,221 per year by the World Bank (2008), and US$ 8,800 per year by CIA Factbook (2008). It has been argued that democracy is expected to survive if the level of GDP per capita is over US$ 6,000 per year. Based on the estimated, Malaysia is well above the threshold level for survival of democracy and it can be said that the country has the potential to increase its democracy from its current pseudo-democracy (Michelle, 2009).
The above economic atmosphere provides a good room for investment as the high purchasing power the general Malaysian populace have with their GDP per capita is destined to yield high sales and profit with the implementation of a proper business strategy. This GDP also offers possible change to the government system into full democracy which could provide a much better business atmosphere in the near future. Thus, it can be concluded that the economic environment offers great room for profitable investment.
Cultural environment
Malaysia claimed independence from British colony in 1957 as a multi-racial Federation. The population then included large numbers of the second non-indigenous people, mainly from Southern part of China and India, who were brought to the region as manpower for labor at british owned plantations, mines, mills, and docks. The main languages in Malaysia are English and Malay. The country is dominated by Islam which is compulsory for all Malays, Buddhism, Hinduism and Christianity. The government continues to mark its mark on human right by obligating all Malays by law to be Muslims and practice Islamic religion (Michelle, 2009).
Being Malay, Chinese and Indian dominated nation, Malaysia's culture can be classified into fatalism, Confucianism and Hindustan believes. The Malays prior the act of saving their face by not doing things that will bring embarrassment to their family, and the Chinese also practices this cultural belief in a Confucian style by believing in business success through long-lasting relationship and treating each other as one. There are also traces of this believe in the Indian Hindustan believe that what goes around comes around (what you to do other will be done to you), which is commonly referred to as karma (Michelle, 2009).  
This cultural environment is favourable for investment in Malaysia as it present an atmosphere where businesses value understanding, dedicated and commitment by believing that the best way is to find a means that favours everybody as they seek to protect their faces (Malays), maintain long-lasting relationship (Chinese), and avoid nemesis that arises from doing wrong to other (Indians). Nevertheless, the Malaysian culture that values protecting personal image (fatalism) could be argued to be of negative influence on business, as the populace could possible undertake negative actions against businesses just to ensure that their image is not dented in the public.
Human resource planning
Organisation decision makers are rapidly being challenged with the task of saving expenses and resources. It has also been indicated that the future will present less money for personal selection and development (Quin˜ones and Ehrenstein, 1997), mainly due to economic downturn; thus, human resource departments are expected to work strategically (Cascio, 2000).
Malaysian HR practices, systems and regulations are high influenced by the British colonization. It has been viewed that the country's HR practices are legacies derived from an integration of indigenous and western practices (Chew, 2005). Chew and Basu (2005) classified this HR practices into British-oriented values and ethical-oriented values.
Current trend in Malaysian HR is performance-based rewarded system where executive are paid based on their productivity level as found by MEF research on 233 companies in Malaysia (Malaysian Employment Federation, 2007). As for training, most Malaysian firms perceive that it is expensive to train employees beyond basic skills needed for them to undertake their contractual work scope (Rowley and Rahman, 2007).
This led to government intervention by promoting training and development in the workforce, and establishment of industrial training institutes that provide skills training program at basic, intermediate, and advanced level for job entry level (Malaysian Industries Development Authority, 2009). Only 15 percent of Malaysian workers are unionized(Gross and Minot, 2007), only 5 strikes occurred between 2005 and 2007, indicating that relations between labor and management are harmonious.
The human resource atmosphere with no doubt is a favourable scene for any organisation willing to invest in the country. Malaysia adopts an advanced system of tertiary education integrated into British formula that ensure graduate are equipped with employability skills, and the government investment in training and development father ensure that theses graduates will offer companies advanced and profitable workforce through mufti-tasking and multi-skills integration. Therefore, it can be concluded that the Malaysian market will provide Dangote group with an efficient and effective workforce and the company can utilize this benefit to yield profits.
PROPOSED MODE OF ENTRY AND JUSTIFICATIONS
Direct foreign investment – Greenfield investment
As defined by Hill (2007), foreign direct investment is a direct investment of business operations in another country besides country of origin. Numerous researches have be done from different focuses and perspectives, to examine the determinants of foreign direct investment (Solocha et al., 1990; Woodward and Rolfe, 1993; Rolfe et al., 1993;Kumar, 1994; Olibe and Crumbley, 1997; Anand and Kogut, 1997; Kuemmerle, 1999; Zhang and Why, 2000; Chandprapalert, 2000; Calliano and Carpano, 2000).Porter (1990) highlighted the model of national competitiveness which influences FDI to be  related with country's endowment with human, physical, intellectual, financial and infrastructure resources.
By Greenfield investment, it implies that Dangote group will have to start up their business organisation in Malaysia from the scratch. This strategy was suggested following the fact that has been the company's mode of entry in other markets across the African continent and it has been successful for the thus far. Being a multi-billion conglomerate, it is also believed that the company has the financial backup of such business entries. The import barrier implemented by the Malaysian government through high taxes on imported goods is the main reason for proposing this entry model as it will allow Dangote group to price their products fairy as a means of ensuring competitiveness in the Malaysian market. Through foreign direct investment, Dangote group can also penetrate the neighbouring markets such as Thailand, Indonesia and Singapore by exporting into these countries.
MERITS OF FDI AND IMPACTS ON DANGOTE IN MALAYSIA
Greater knowledge of local market through localization(NetMba, 2011) – foreign direct investment can help Dangote group to better understand the Malaysian market in terms of consumer behaviour and factors that influence purchase. Through this way they can develop better strategic business models that will ensure high sales and return on investment.
Better application of specialized skills and minimization of knowledge spillover (NetMba, 2011– since this is originally the entry mode adopted by Dangote in their other international markets; it is believed that the company is equipped with intellectual capitals to better that will yield success. Foreign direct investment can ensure that some of these intellectual capitals are investment in Malaysia instead overloading it in one business sector in their already penetrated markets.
Full profit ownership – foreign direct investment will offer Dangote group the opportunity to enjoy full profits from their business as they are not sharing their profit with other parties as is common in partnership, licencing and franchising.
DEMERITS OF FDI AND ITS IMPACTS ON DANGOTE GROUP
High risk compare to other mode of entry (NetMba, 2011) –compared with other mode of entry, foreign direct investment comes with higher risk in terms of change in government policy or business failure, and this is an advantage to Dangote group as they will be obliged to bear full responsibility (100%) or any arising risks.
Maybe difficult to manage local resources (NetMba, 2011– considering the difference in terms of culture of Dangote group's place of origin and organisation as compared with the Malaysian culture, it can be easily seen that it might be difficult for the company to manage local resources (intellectual, natural, and manpower) as they will be dependent of these resources to ensure productivity.
Require more commitment and resources (NetMba, 2011– the form of business entry mode proposed (Greenfield investment) requires more resources to as the company will need to build up from scratch in terms of infrastructure and management system. This is a disadvantage as the company will possibly lose millions of their assets (financial) to ensure that this business becomes a success in Malaysia. Commitment on the other hands is also necessary due to its new entrance in the Malaysian market.
CONCLUSION
As globalization continues to spread its wings in business, it can be seen that internationalization of business is the new trend in terms of expansion and new market acquisition. They have been numerous success stories like Coca-Cola to name but few. The above business proposal designed a strategic business model which Dangote group can use to expand their ever increasing market and gain more profits.
Dangote group a company founded and owned by Aliko Dangote, a Nigerian business name has slowly turned into an African icon with foreign direct investments in over eight African nations, and products and services widely distributed across the African continent as illustrated in appendix (1) below. Please see appendix (1) for illustration.
This research paper proposed foreign direct investment as an entry mode for Dangote group for entrance into the Malaysian market. The advantaged and disadvantages where further highlighted too to justify the business proposed. Nevertheless, the economic, cultural, and human resource planning factors provided as discussed above reveals that Malaysia will prove to be a successful market entry for Dangote group. The advantages highlighted above are that it will ensure full ownership of profits, better competition through fair pricing as import taxes will be eliminated by foreign direct investment and reduce knowledge spillover by utilizing their intellectual capital stream to ensure success in Malaysia.
This proposal can therefore be termed viable if the benefits are considered, because the high purchasing power offered by the Malaysian market with their GDP and mode of businesses operation will bring about high sales, and revenues in return which the company can reap full benefits of by being a foreign direct investors in Malaysia. Although they are reasons to be confident, the other side of the story presented the disadvantages of this form of business to be expensive and risky. Considering the influence of the Malay-dominant ruling party and un-interference of any external body in the government policies as regulated by the Malaysian law, it can also be argued that the government could develop policies that will directly or indirectly reduce Dangote group's profits in Malaysia or possibly lead to their collapse with the pseudo-democratic system of government that favour Malays and their business over other race and business by law.
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