Structure suggestion for KHIND PDF

Table of Contents
No. Titles Page Number
1.0 Executive Summary 2
2.0 Introduction 3-4
3.0 Analysis 4
3.1 Challenges posed by ‘the four dragons’ of Asia. Ways on
how Malaysia remain attractive to investors given these
threats.
4-5
3.2 KHIND’s major export partners’ culture and implication. 5-6
3.3 Cultural sensitivity and societal culture definition.
Samovar-Porter’s cultural variables in the communication
process (Saudi Arabia).
6-8
3.4 KHIND’s entry strategy pros and cons. Suggestion of one
other possible alternative.
8-9
3.5 Structure suggestion for KHIND and the advantages and
drawbacks of this structure.
9-10
3.6 Suitable staffing orientation for KHIND. 10-11
3.7 Reasons for KHIND to go international and its
reactive/proactive reasons.
12-13
4.0 Recommendations 13-16
5.0 References 17-19
1

1.0 Executive summary
‘KHIND, Have you heard of it?’ elaborated how KHIND has grown from an OEC to
an MNC which has their own brand nowadays and it completely lies on how great
KHIND has adapted to the changing environments and challenges over 50 years.
(Cheng, 2008)
KHIND Holdings Berhad is a well-known company that is occupied with investment
holding and provision of management services. It was listed on the KLSE on 12
August 1998, and has 12 different subsidiaries that manufacture and distribute their
world-class quality electrical products in Malaysia, and of course, exporting to over
50 countries globally (Khind.com, 2010).
Despite KHIND’s high brand awareness and high quality electrical appliances,
Malaysia’s electrical and electronic market is flooded with other international brands,
mainly from Europe and Japan, for example Philips, Panasonic, Sharp, and Korean
brands like Samsung, LG, etc.(Khind, 2012) Fortunately, KHIND had outstanding
results in foreign markets as it is often the only Malaysian-made brand in those
markets, and their products are relatively competitive in those markets especially in
Africa and Middle East(Cheng,2008). Thus, exporting is a path for KHIND to arise to
a next level of success.
KHIND’s products are strong enough to stay in foreign markets, and KHIND has
already focused in West Asia, Asia Pacific and Europe. Therefore, a new market
should be attempted to seek for more room of development, for example, Vietnam.
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2.0 Introduction
KHIND Holdings Berhad is a Malaysia-based organisation occupied with investment
holding and provision of management services. KHIND is engaged in the
manufacturing, assembly and trading of electrical and home appliances and wiring
accessories through its 12 subsidiaries, including KHIND Customer Service Sdn.
Bhd., which is engaged in providing general repair and rework services and renting of
commercial properties; KHIND-MISTRAL Industries Sdn. Bhd., which is engaged in
the manufacture and sale of electrical home appliances and wiring accessories, and so
on (Khind.com, 2010). Operations are run in Malaysia and overseas, primarily in Asia
and Middle East. KHIND’s turnover in the past 26 years (1987-2013) was generated
from 4 million to 325 million in 2013. KHIND for the first time in it 40 years of
business suffered a loss in 2001, the internal problems and family disputes ruined its
constitution. (Cheng 2008) A separation was done between Cheng Ping Keat and his
uncle to not prolong the agony of loss and continue expanding their business. (Cheng,
2008)
There are three era of KHIND during its development. From 1961 to 1991, KHIND
1.0 had been run under traditional small family business model initiated by sales of
DC Ballast Choke to an established family-model enterprise. Since Mr.Cheng Ping
Keat joined KHIND in 1987, KHIND 2.0 (1992-2012) was introduced and injected
with professional management within the company. Starting from year 2013, KHIND
3.0’s main concept is ‘Deliver Happiness’ which has benefited all of its stakeholders,
and founded ‘Starfish Foundation’ as public welfare. It was the year when KHIND
changed its logo from ‘KHinD’ to ‘KHIND’. (Cheng, 2008)
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It was said that electrical industry is a sunset industry, because it has no substantial
profits simultaneously competing with international brands and China’s cheaply-
priced products. Yet, Cheng Ping Keat has long recognized the limit of saturated
market in Malaysia, and in 1988 he successfully conducted his first overseas business.
KHIND has then started to export to foreign markets and has got brilliant revenue
results especially in Singapore and Middle East.
In the first quarter of 2014, KHIND’s overseas export business volume growth of
33% over the same period in 2013, which has exceeded 50% of its total business
volume (Klse.i3investor.com, 2015). This offsets the impact of a slowdown in the
local market and KHIND concluded that the growth of KHIND in the future lies
overseas.(Cheng, 2008)
3.0Analysis
3.1 Challenges posed by ‘the four dragons’ of Asia. Ways on how Malaysia
remains attractive to investors given these threats.
The Asia Four Little Dragon includes Hong Kong, Taiwan, Singapore and Korea,
which were all noted for maintaining high growth rates and rapid industrialization
between the early 1960s to 1990s(Vogel, 1991) . Their high labour costs and limited
resources in their own countries were far from solved. Thus Asia Four Dragons’
searches were expanded to south and in electrical and electronic sector, Malaysia
turned to be their destination (Deresky & Christopher, 2011). In 1978, China’s
economic reform changed the game (Naughton, 2003). China’s economy
liberalisation started allowing the Chinese companies, including Hong Kong and
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Taiwan companies to go abroad, this was when abundant Chinese-made consumer
electrical appliances flooded into the markets of Southeast Asia.
In 1997, ASEAN 10+3 (Kawai & Wignaraja, 2008) was formed and the thirteen
countries involved could enter each other’s markets on a multilateral free trade basis
to amplify economic advantages and minimise costs in individual nations and all
inclusive in the meantime.
This was happened while the time was right, geographical and social conditions are
favourable when Malaysia’s lower labour cost, language capability, appealing
government incentives, great framework, political strength and security were all taken
into account in their consideration. In addition, Tun Dr Mahathir Mohamad was
advocating ‘Look East’ policy which had attracted Korean and Japanese companies to
enter Malaysia. That was the time when Malaysia was an export-based economy that
stimulated overseas companies setting plants in Malaysia, and Malaysians started to
enjoy quality life with electrical products during that modernisation period. (Cheng,
2008)
3.2 KHIND’s major export partners’ culture and implication.
Cultures are differentiated by high- or low-context cultures. In high-context cultures,
feelings and thoughts are implicitly communicated (Deresky, 2014). Low-context
cultures on the other hand show the emphasis on personal and business relationships
by explicitly expressing the message (Deresky, 2014).
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Middle East is known as a high-context culture country where business information or
communication patterns are transmitted implicitly (Khatib, 2015). Similarly, Africa
region is a high-context culture because of its collectivist settings in the
communication process. Identity is not isolated from others, but is chosen with others
based on group necessities and opinions. Performance and responses are likely to be
mutually selected when conflict arises (LeBaron, 2003). For example, the first export
order from the Dubai in the Middle East in 1988 shows the potential to have
continuous business in that region (Cheng, 2008). To do so, it is important for
KHIND to build close personal relationships with the local people such as building
strong political strategies with their governments to continue receiving extensive
information networks. Conversely, Europe is a low-context culture region where
communication is direct and based on feelings or true intentions (Nishimura, Nevgi &
Tella, n.d.). KHIND has to note that Europeans practice individualism and therefore
more likely to see business terms as the results of specific agents (Deresky, 2014).
Local agents that have compatibility towards KHIND’s products are acquired by
KHIND and are expected to push the sales of KHIND products by having the correct
approach and attitude while dealing with European clients (Cheng, 2008).
3.3 Cultural sensitivity and societal culture definition. Samovar-Porter’s cultural
variables in the communication process (Saudi Arabia).
Cultural sensitivity is “the awareness of and an honest caring about another
individual’s culture”. Societal culture is “the culture of a society comprises the shared
values, understandings, assumptions, and goals that are learned from earlier
generations, imposed by present members of a society, and passed on to succeeding
generations” (Deresky, 2014).
6

Samovar and Porter’s cultural variables in the communication process consists of:
attitudes, social organizations, thought patterns, roles, language, nonverbal
communication and time. In regards of doing business in Saudi Arabia, KHIND has to
understand each cultural variable.
Firstly, it is observed that the attitudes of Middle Eastern believe that all aspects of
life in Saudi are overseen by the educations of Islam and an adherence to its tenets
(Worldbusinessculture.com, 2015). No business deal will ever be discussed without
reference to the Almighty and His Prophet Mohammed. Transportation of exported
KHIND products has to be made in respect of Islam prayer times so that it does not
offend the local people. In the Saudi Arabian social organization, business is usually
family-based with all senior positions filled by family members
(Worldbusinessculture.com, 2015). Certainly, the family-orientation brings out the
growth of solid hierarchies with the oldest male relatives being the senior of the
organisation. Conversely, the role of women in the business life is minimized and it
can be very difficult for women to even get a visa to enter the country on business. If
KHIND sends female expatriates over to Saudi Arabia, they must understand where
women stand in the local society and not get offended because that is the culture of
Middle Eastern. In relation to thought patterns of managing ideas, studies show that
complexity of speech is part of challenging intercultural communication in Saudi
Arabia (Adelman and Lustig, 1981). KHIND managers have to understand the level
of formality or informality in a discussion with Saudi Arabian managers. Muslim faith
plays a significant role in Saudi Arabia and so KHIND should be cautious when
touching on any sensitive religious topics in meetings. The written language of Saudi
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Arabia is Arabic and is read from right to left (Saudinf.com, 2015) and so KHIND’s
instruction manuals for the products has to follow this culture variable accordingly.
Also, avoid touching Saudi Arabians with left hand as this is seemed as extremely
rude non-verbal communication (Worldbusinessculture.com, 2015). Time is very
flexible in Saudi Arabian culture and therefore shows a challenge to schedule a series
of meetings on the same day (Worldbusinessculture.com, 2015). KHIND managers
would just have to give in when meetings are delayed or cancelled.
3.4 KHIND’s entry strategy pros and cons. Suggestion of one other possible
alternative.
The pros of the entry strategy of exporting and contract manufacturing for KHIND
will be taxation deduction. KHIND is a Malaysian brand and established to overseas
so it is qualified for double taxation deduction on the expenses (Cheng, 2008). Fees
incurred for employing local professional suppliers for packaging design and services
are able to be deducted as KHIND saves more money to invest on their technology
while promoting their brands and products in other country. KHIND collaborates with
Haier Group (China) as it reduces risk and is a popular way of entering the country’s
market. This helps them to achieve their goals faster. KHIND acquire more
knowledge about local market and able to avoid restrictions on foreign investment.
The cons for KHIND of the entry strategy will be the taxation because the
government of the country (for example, China) will tax them by importing their
product and also to protect their locally-produced brands. Therefore, they will be
having the pricing issues (Cheng, 2008). This will affect consumers’ buying decision
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and the sales profit of KHIND. KHIND is forced to employ local agents to help them
to promote or handling the management issues due to cultural differences. Thus, they
have to pay more to local agents to monitor and develop KHIND based on their local
knowledge. Collaboration often goes wrong as it is difficult to exit from the market
when having potential conflicts with distributors.
Another possible alternative for entry strategy will be joint venture. It is an entity
formed between two or more parties to undertake economic activity together (Robert,
M., 2015). KHIND is a well-known brand in the world, joint venture brings low
development costs and risks because KHIND is able to share with partners while
having greater chances of business success. However, it helps to minimize political
risk as well. Partners provide knowledge of local market which helps KHIND to avoid
some culture issues. Banks are more willing to assist with the local partner and
expansions can be done more rapidly. KHIND has to ensure that partners are doing it
well, keep up-to-date and have an agreement with them on the management.
3.5 Structure suggestion for KHIND and the advantages and drawbacks of this
structure.
Most of the employees want to have a good working environment as it will affect
their performance daily. Though attractive benefits and allowances have been
provided, the issue of employee turnover still occurred because they were unhappy at
work. Therefore, it was a tough time for employers to recruit and maintain employees.
KHIND understood the situation and offered them a comfortable working
environment and therefore reduced the employee turnover. For example, KHIND set
up karaoke equipment in the factories so that employees could relax and have
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appropriate leisure entertainments during their rest time (Cheng, 2008). This is
because they want employees to enjoy with their jobs and look forward to coming to
work every day. When management understands the needs of employees, they will
have a higher proclivity to perform better for the company.
KHIND believes that employees are the most valuable assets for organization. They
offer employees training and benefits as to show them appreciating good and talented
people. They also give motivation by planning activities or trip for them when they
accomplish the goals. To restructure the working environment, KHIND may provide a
massage chair for employees to rest. Employers have to communicate and interact
with employees more often so they can understand each other to work hard together
for the organization. By listening to their concerns, it is able to improve the condition
of working environment and employers are able to settle the complaints instead of
restricting them to follow the order of the superiors. When employees receive
feedback in real time, this could help to increase the effectiveness of sale performance
management and be sure to acknowledge their accomplishments (Carolyn, J., 2013).
By allowing employees to voice out their suggestion, it results in more growth for the
company.
3.6 Suitable staffing orientation for KHIND.
Staffing orientation is concerned with the selection of employees who have the skills
required to perform a particular job. At present, KHIND has entered the third stage
whereby they penetrate the market on their own and set up sales offices to promote
KHIND products directly. Apart from employing local employees, they also send
their own professionals to manage these sales offices. (Cheng, 2008)
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Firstly, They have entered an era in which the profit margin for electrical products is
very low. Circumventing the middle man (agent) contributes a great deal in reducing
costs, making the products more competitive. Secondly, they are able to come in
contact with consumers directly, gaining their feedback and understanding their tastes.
Thirdly, they are flexible to meet demands in different countries or markets based on
the needs of local consumers. They established KHIND sales offices in Singapore and
Jebal Ali, United Arab Emirates in the Middle East in 2001.(Cheng, 2008)
Nowadays, almost everyone has a degree in hand. Working abroad such as Singapore,
Hong Kong, Shanghai, even as far as Middle East, Europe and USA is considered
common. Also, the new generation are able to possess the ‘marketability’ required by
the human resource market. Having knowledge or proficiency in multiple languages
and major computer language as well as specialised skills coupled with an ability to
think and analyse independently, complemented by one’s flexibility and adaptability
to an environment, all contribute to a higher level of marketability (Cheng, 2008).
Therefore, the ethnocentric approach is the best staffing orientation that suits
KHIND, which has been able to expand their market in different countries by sending
their professional employees to adapt to abroad business environment.
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3.7 Reasons for KHIND to go international and its reactive/proactive reasons.
There are four main reasons for KHIND to boldly step forward beyond national
boundaries:
Firstly, the export business had given us insight on the challenges of trading overseas
as well as an understanding of changing trends in the macro environment.
(Cheng,2008)
Secondly, with a population of 26 million in the country, coupled with the influx of
foreign- made products into the local market, sales within the local market were
largely limited. Besides, with close to 200 countries and about 6 billion people in the
world, globalisation made the flow of products and information across national
boundaries very easy, presenting a huge potential in the international arena (Cheng,
2008).
Thirdly, the export business is conducted based on a “Letter of Credit’ (LC) or cash.
KHIND only begins production after receiving confirmed orders from overseas
clients. The exports markets are a big plus to the cash flow of the company (Cheng,
2008).
Fourthly, the export business deals with large quantities of orders which provide
economic of scale in production. This in turn lowers manufacturing costs, which helps
enhance company competitiveness while benefiting the consumer (Cheng, 2008).
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The proactive impetus means change that is advocated by the management of an
enterprise on its own accord, also driven from within the enterprise for its own good
(Cheng, 2008).
KHIND is often the only Malaysian-made brand in the export market, which presents
room for development. More so, KHIND products are especially competitive in
Africa and the Middle East. All these positively support the Company’s lead to
actively open its overseas market in the future.(Cheng,2008)
As for reactive impetus, change is forced upon and enterprise due to external forces.
As such, the change is normally carried out under great pressure (Cheng, 2008).
KHIND in the Malaysian market has reached a saturation point, and the market is
flushed with too many foreign brands. At the same time, KHIND is just one of the
many Malaysian brands in the country. As such, KHIND really has no special
advantage in the local market. (Cheng, 2008)
4.0 Recommendation
Through all the strategic planning KHIND decided that its strong strategy is
increasing its export business. KHIND has been exporting its products to more than
fifty countries (Khind.com.my, 2015). The company has been successful and is
planning to focus more on expanding its business in all parts of the world. KHIND’s
major markets have been West Asia, Europe and Asia Pacific. The company could
focus more on the Asian market as they see more opportunity in this region. Some of
the countries in the Asian region are Indonesia, Myanmar, and Vietnam etc. which
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could be profitable markets due to several reasons. Vietnam being a Southeast Asian
country will be a successful market for KHIND in the future.
From when Vietnam became a member of the World Trade Organization, the
Vietnamese government has been encouraging foreign owned businesses in the
country. This country has been a growing consumer market with an advantageous
geographical location being closer to the global supply chains. Hence it would be an
advantageous location for KHIND. The Hofstede’s value dimension is a cross cultural
study by Dr. Greert Hofstede which covers five main areas that are important in
analysing the starting up of a business in a foreign country. The five areas are power
distance, uncertainty avoidance, individualism, masculinity and orientation.
Power distance is where the members of an organisation accept the fact that power is
distributed unequally in the organisation (Clearlycultural.com, 2015). Vietnam scores
a high percentage in this area. 70% of the people in Vietnam accept hierarchical order
where all the members of an organisation have a position and accept the various levels
without needing any justification (Vtown.vn, 2015). This will be advantageous for
KHIND Company as they can have full control over the foreign branch. The company
can employ Malaysian officials for higher post in order to lead the co-workers in the
chosen country.
Uncertainty avoidance is when the people of an organisation are willing to take risk or
accept changes that they have never faced in the journey of their work (Vtown.vn,
2015). The country having a high percentage in this area depicts that they are not
ready to take risk or accept changes. The percentage of uncertainty avoidance in
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Vietnam is 30 which is a low. Low uncertainty avoidance countries provide a more
relaxed attitude. This will help KHIND to run the company with more ease. The
change in rules and strategies of the company will be easy and the members of the
company will adopt faster. This will also help the company to earn its profit and
develop the company in a faster pace.
The bonds between the members of the organisation explain individualism. That is if
a country focuses on each individuals and his rights then the country is more focused
on individualism (Geert-hofstede.com, 2015). If the country think working as groups
is important then they focus more on collectivism. Vietnam scores 20% being a
collectivistic society. A main element which helps in the success of a company is the
unity of its members. Since Vietnam encourages collectivism it will be helpful for the
company to work united in order to achieve its goal.
Accepting the power of men in the society is masculinity. Vietnam has a percentage
of 40 which is a low score (Geert-hofstede.com, 2015). This shows that there is no
gender discrimination in the country or organisations. This will avoid problems in the
company and help the company to choose people according to their talents and
knowledge.
Orientation talks about the perspectives of the people’s long term future. When
considering the above areas Vietnam scores the highest percentage in this area being
80%. This shows that the country is more organised and focussed. Hence the
15

company will be able to be successful since the workers will be more focused and
organised in their work.
Therefore when analysing Hofstede’s dimension theory, Vietnam seems to be a
profitable market for KHIND. Hence expanding their business in Vietnam in the
future will help KHIND to earn high profits.
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5.0 References
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perceived by Saudi Arabian and American managers. International Journal of
Intercultural Relations, 5, 349-364.
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Cheng, P. (2008). KHIND-have you heard of it?. Kuala Lumpur: Institut Pengurusan
Malaysia.
Clearlycultural.com,. (2015). Power Distance Index | Clearly Cultural. Retrieved 31
August 2015, from http://www.clearlycultural.com/geert-hofstede-cultural-
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Deresky, H. (2014) International Management: Managing Across Borders and
Cultures (8th edition), England: Pearson Education Limited.
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Kawai, M., & Wignaraja, G. (2008). EAFTA or CEPEA: Which Way Forward?.
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Khatib, H. (2015). The Middle East Enjoys a High-Context Culture While Europe
Does Not. MPC Journal. Retrieved 31 August 2015, from http://mpc-
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not/
Khind.com,. (2010). KHIND Holdings Berhad. Retrieved 1 September 2015, from
http://www.khind.com/
Khind,. (2012). Khind @ 企企企企 Start A Biz Astro Part 企. Retrieved from
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https://www.youtube.com/watch?v=jno4o0i-6xw&list=PLPCD9Ae2dq5-
9aOjqbCZgDAhlG5-Hhory&index=1
Khind.com.my,. (2015). Khind. A World Brand...From Malaysia :: News & Events.
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Klse.i3investor.com,. (2015). I3investor File Server - Khind Annual Report 2014.pdf |
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Lau J, L. (2003). The Impact of Economic Development of East Asia, Including
China, on Japan. Presentation.
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from http://www.beyondintractability.org/essay/com.munication-tools
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Press
Nishimura, S., Nevgi, A., & Tella, S. Communication Style and Cultural Features in
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and India.
Robert, M. (2015). Five Modes of Entry Into Foreign Markets. Retrieved August 28,
2015, from http://budgeting.thenest.com/five-modes-entry-foreign-markets-
25303.html
Saudinf.com,. (2015). Arabic Language - SAMIRAD (Saudi Arabia Market
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environment.html
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Worldbusinessculture.com,. (2015). Top Tips on Saudi Arabian Business Attitudes
and Doing Business in Saudi Arabia :: World Business Culture. Retrieved 31
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