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BBCG 3103
INTERNATIONALIZATION
1 INTRODUCTION : INTERNATIONALIZATION
3 INTERNATIONALIZATION 5-13
6 SUMMARY 18
7 REFERENCE 19
1 INTRODUCTION : INTERNATIONALIZATION
It is defined as the process of extending the business activities from domestic to any
foreign country with an intention of targeting international customers, It is also defined as
the conduction of business activities by any company across the nations. It can also be
defined as the expansion of business functions to various countries with an objective of
fulfilling the needs and wants of international customers.
RNZ Integrated Sdn. Bhd Asturi Metal Builders (M) Sdn. Bhd
Auto Friction Manufacturing Sdn Bhd is found by Mr. Chong Fah Ming and established
in 1997. As the population of the world continues to increase, naturally there would be an
increasing demand to automobiles and this pushes up the requirement for advanced
braking systems. New and strict regulations are always drafted to ensure that maximum
safety is met and this would lead to advancement of new technologies.
To keep up with this increasing demand, local manufacturer Auto Friction Manufacturing,
the manufacturer of AFI Brakes products, started off with the production of disc brake
pads and shoes for the automotive industry, with its headquarters located in the Malaysias
East Coast state of Terengganu. They are responsible for every single step of the
production of their brake pads, from the making of moulds, metal stamping, material
formulation, packing to research and development. In order to produce finer quality
products, they are also continuously updating their technology. Besides manufacturing
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BBCG3103 INTERNATIONALIZATION
their own products under their brand names, they were also provided customers brand
manufacturing service.
Stamping Department
They received the Golden Bull Award 2011, the award that recognizes Malaysia 100
outstanding SMEs and in 2015, their product quality as successfully earned them the
SIRIM product certification MS 1164: 2005 as well as world recognized E-Mark
certification (E11).
Coordinated marketing, product R&D, plus after sales services are keys to their success.
They have also gained the reputation for their innovative ideas. All these contribute to
AFIs good name in both the domestic and international markets.
3 INTERNATIONALIZATION
The company recently launched a range of disc brake pads and shoes made from
environmentally friendly bio-soluble fibre. This new range of product has received the
approval of American Society of Automotive Equipment as well as the Japanese Industrial
Standards as these products were made completely free from asbestos, a common
component in brake pads which is dangerous to health and the environment.
Their braking solution is produced for a variety of leading automotive manufacturers from
Europe which includes Mercedes Benz, Volvo, BMW, Volkswagen, Citroen, Renault,
Peugeot, Audi just to name a few. The company began their operation in 1995 to serve
Japanese car manufacturers such as Toyota, Nissan, Mitsubishi, Honda, Mazda and others
before branching into local manufacturers such as Proton, Perodua, Naza and Inokom in
Malaysia. They also service Chery of China as well as Daewoo, Hyundai, Kia and
SsangYong from Korea.
In recognition of their outstanding work quality, the company has been recently awarded
the title Asia Pacific Super Excellent Brand Awards from the Asia Entrepreneur Alliance
Worldwide and this was followed by the Golden Bull and subsequently Enterprise 50
Award. With this recognition, its objective now is focused to maintain quality output and
to spread out its wings by tapping into the huge potential of the export market.
Corporate governance in the UK started in the early 1990s. The corporate collapses of the
BCCI bank and the Robert Maxwell pension fund turned the attention of many towards
corporate governance issues. Since then, many initiatives, including the introduction of
the code of corporate governance, have been taken to ensure proper governance of
companies. To monitor the development of the corporate governance code in the UK, the
Financial Reporting Council (FRC) was established.
After several revisions, the current code of corporate governance for UK was created,
which is, the UK Corporate Governance Code (2010). This code applies to accounting
periods beginning on or after 29 June 2010.
This code applies the comply or explain approach. This approach requires companies to
comply with the rules and recommendations, otherwise, they need to explain their non-
compliance. It consists of principles (main and supporting) and provisions.
The five main principles of the code and the supporting principles for each main
principles:
LEADERSHIP
a The Role of the Board
Every company should be headed by an effective board which is collectively
responsible for the long-term success of the company.
b Division of Responsibilities
There should be a clear of responsibilities at the head of the company between
the running of the board and the executive responsibility for the running of the
companys business. No one individual should have unfettered powers of
decision.
c The Chairman
The chairman is responsible for leadership of the board and ensuring the
effectiveness on all aspects of its role.
d Non-Executive Directors
As part of their role as members of a unitary board, non-executive directors
should constructively challenge and help develop proposals on strategy.
EFFECTIVENESS
a The Composition of the Board
The board and its committees should have the appropriate balance of skills,
experience, independence and knowledge of the company to enable them to
discharge their respective duties and responsibilities effectively.
b Appointments to the Board
There should be a formal, rigorous and transparent procedure for the
appointment of new directors to the board.
c Commitment
All directors should be able to allocate sufficient time to the company to
discharge their responsibilities effectively.
d Development
All directors should receive induction on joining the board and should
regularly update and refresh their skills and knowledge.
e Information and Support
The board should be supplied in a timely manner with information in a form
and of a quality appropriate to enable it to discharge its duties.
f Evaluation
The board should undertake a formal and rigorous annual evaluation of its own
performance and that of its committees and individual directors.
g Re-election
All directors should be submitted for re-election at regular intervals, subject to
continued satisfactory performance.
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ACCOUNTABILITY
a Financial and Business Reporting
The board should present a balanced and understandable assessment of the
companys position and prospects.
b Risk Management and Internal Control
The board is responsible for determining the nature and extend of the
significant risks it is willing to take in achieving its strategic objectives. The
board should maintain sound risk management and internal control systems.
c Audit Committee and Auditors
The board should establish formal and transparent arrangements for
considering how they should apply the corporate reporting and risk
management and internal control principles and for maintaining an appropriate
relationship with the companys auditors.
REMUNERATION
a The Level and Components of Remuneration
Levels of remuneration should be sufficient to attract, retain and motivate
directors of the quality required to run the company successfully, but a
company should avoid paying more than is necessary for this purpose. A
significant proportion of executive directors remuneration should be
structured so as to link rewards to corporate and individual performance.
b Procedure
There should be a formal and transparent procedure for developing policy on
executive remuneration and for fixing the remuneration packages of individual
directors. No director should be involved in deciding his or her own
remuneration.
The Sarbanes-Oxley Act 2002 was enacted by the Senate and House of Representatives of
the United States of America. The purpose of this law is to protect investors by improving
the accuracy and reliability of corporate disclosure made pursuant to the securities laws as
well as for other purposes.
The following is the list of the 11 titles and its sub-sections as outlined by the Sarbanes-Oxley Act
2002:
Throughout the years, Nestl [Malaysia] Berhad and its Board of Directors has been
resolute in ensuring that the Groups business and affairs are in strict adherence to the
doctrine and principles of good corporate governance such as integrity, transparency,
accountability and responsible business conduct.
In Asian countries, the interest in corporate governance has been stepped up in the late
1990s. Subsequent to the outbreak of the Asian currency crisis in 1997, the flow of
capital from foreign investors had suddenly been dried up, leading to intense liquidity
problems in local capital markets and real impact in the economy due to insufficient
capital.
The promotion of good governance serves two important purposes in the development of
local and regional capital markets. First, local equity markets play an important role
amidst the lack of foreign capital. Good corporate governance promotes the development
of local equity market, and reduces the reliance in foreign debts. Second, institutional
investors represent the majority type of foreign investors. Improved corporate governance
provides a higher level of investor confidence from international investors, and increases
the stability of local equity and other capital markets.
There are numerous benefits of good governance are to the Asian corporate setting. The
most significant value is the reassurance of investor confidence, especially for foreign
institutional investors. In the long run, good governance leads to the stability of local
capital markets development since foreign capital becomes more patient.
Studies have stressed several factors that contribute to an environment that nurtures good
governance. The factors that contributes good governance practices includes law that
define and protect private property rights, laws that protect and enforce contractual rights,
such as contracts between lenders and borrowers, laws that protect against fraud and
unfair and deceptive trade practices, centralized banking laws, bankruptcy laws, and a
competent, ethical, politically independent judiciary system.
Other studies suggest that sound corporate governance enhances stable and low cost
capital formation. To preserve this benefit, measures taken should include corporate
management to prevent fraud, waste, and inefficient use of corporate assets, and
disclosure of relevant information using consistent and comparable according and
auditing standards.
Corporate governance systems are largely concerned with the relationship between a
companys management, the board of directors, shareholders and its other stakeholders. It
encourages transparency, disclosure and accountability, which would instil investors
confidence in terms of corporate management and corporate performance.
The Board believes that they are not only accountable to shareholders but also responsible
for managing a successful and productive relationship with the Companys stakeholders.
The Company recognises the importance of being transparent and accountable to its
stakeholders and, as such, maintains an active and constructive communication policy that
enables the Board and Management to communicate effectively with investors, financial
community and the public generally.
5.0 SUMMARY
The UK Corporate Governance Code (2010) applies the comply or explain approach.
This approach requires companies to comply with the rules and recommendations,
otherwise, they need to explain their non-compliance.
Whereas the Organisation for Economic Co-operation and Development (OECD) was
established to promote policies that will improve the economic and social wellbeing of
people around the world.
The Sarbanes-Oxley Act 2002 was enacted by the Senate and House of Representatives of
the United States of America with the purpose to protect investors by improving the
accuracy and reliability of corporate disclosures made pursuant to the securities laws as
well as for other purposes.
The importance of good corporate governance is widely recognised as an essential
attribute to attract investment in competitive companies and efficient financial markets. It
instils confidence and trust in companies and financial markets, it instils confidence and
trust in companies and financial markets which would attract the inflow of foreign direct
investment in a country.
Also corporate governance systems are largely concerned with the relationship between a
companys management, the board of directors, shareholders and its other stakeholders. It
encourages transparency, disclosure and accountability, which would instil investors
confidence in terms of corporate management and corporate performance.
REFERENCE
Dr Noor Afza A., Dr Basariah S., Dr Norhani A., Dr Hasnah K., Universiti Utara Malaysia, 2013,
BBCG3103 Corporate Governance, Open University Malaysia
Allen, Jamie, 2000b, Code Convergence in Asia: Smoke or fire?, Asian Corporate Governance
Association
Organisation for Economic Co-operation and Development (OECD), 2004, OECD Principles of
Corporate Governance
http://www.nestle.com.my/