Challenges the Company Had Encountered During Their International Expansion

6.1 Discuss THREE (3) challenges the company had encountered during their international expansion

PappaRich company had encountered challenges such as the need to compete with other competitors in the food and beverage (F&B) industry. For example, Singaporeans favor fast foods a lot, which leads to a rapid growth in the expansion of fast food chains in Singapore. Today, there are already 86 KFC joints and 135 McDonald’s outlets being scattered across the island and it is said that one of the major market players Burger King, will be establishing its 50th outlet soon in Singapore in July 2019 (EDB Singapore, 2016). According to the Department of Statistics, the fast food outlets that are located in Singapore has generated operating receipts in a total of about S$1.1 billion in 2016. With the Singaporeans’ seemingly insatiable appetite and desire for fast foods, it has helped the sector to buck the overall trend of the food and beverage (F&B) industry (Lim and Neo, 2019). Research has shown that the overall sales of F&B industry has been declined by 10% from 2000 to 2018 in Singapore. The sales for restaurants dropped about 20% while there is a fall of about 13% in the sales of other dining areas such as cafes but surprisingly, the sales of fast food chains had rose by 29% (Lim and Neo, 2019), which indicates the high amount of interests of Singaporeans on the fast food category, and it acts as a challenge for PappaRich company as the company does not fall under the fast-food sector so there may be an affect in the overall sales of the company.

Another challenge that had been faced by PappaRich company during its international expansion is about the high labour costs in USA. The minimum wage of Peninsular Malaysia is RM900 per month, which means the hourly wage is RM4.33 in Peninsular Malaysia; while the hourly wage for Sabah, Sarawak and the Federal Territory of Labuan is RM3.85 per hour which leads to a minimum wage of RM800 per month (Daily Express, 2014). As PappaRich company plans to open one of its outlets in California, USA in 2014 (PappaRich, 2019), the company is required to make an in-depth research about the country, including the minimum wages of workers. According to Chilco (2013), the minimum wage for California is $9.00 per hour, and the average exchange rate of US Dollar to Malaysian Ringgit on that period is 3.50/MYR (Free Currency Rates, 2015). This leads to the high labour costs in California as PappaRich company is required to pay a minimum amount of RM31.50 per hour to the workers in US. With a high labour cost, PappaRich company faces high operating costs and thus, the overall profit of the company will reduce too, making it a challenge for PappaRich company in its international expansion to US.

Moreover, PappaRich faces the challenge of having different customer tastes and preferences during its international expansion to China. An international study on worldwide cuisines has been carried out by a market research company in UK, YouGov, to have a better understanding on the popularity of Malaysian cuisines among non-Malaysians. The final results shown that the people in China does not enjoy Malaysian cuisine much as the ones who choose “do not like at all” occupies a percentage of 6, which is the second highest country that does not enjoy Malaysian cuisine, with Thailand being the highest among all of the countries (Khor, 2019) (refer to Appendix 1). Moreover, China is also proved to be one of the lowest countries that enjoy Malaysian cuisine as results shown that there are only 41% of respondents in China indicating that they have eaten the cuisine before and actually like it, following by Thailand and Japan with 34% and 25% (refer to Appendix 2). Hence, it is a challenge for PappaRich company during its international expansion to China as less than half of the people there are not that fond in Malaysian cuisines compared to other Asian countries such as Singapore (91%) and Indonesia (66%) (refer to Appendix 2), where more than 60% of respondents said that they enjoy Malaysian cuisines (Lim, 2019).