Introduction
Economic growth in such developing countries as Vietnam and India has been rapid over the last few years, which provides aviation manufacturer Boeing with an outstanding opportunity to source the production of one of its key high-precision airplane parts.
However, several risks could detrimentally affect Boeing’s potential operations growth into these countries. The most significant problem that many enterprises within the aircraft market are currently facing is that the industry is ever-changing and complex, which in turn makes these companies reluctant to do business in or with countries that are still actively developing. A thorough evaluation of the internal and external environment in both India and Vietnam is paramount. The first step is the identification of possible risks, followed by the development of strategies to help minimize potential losses.
Therefore, it is reasonable to research to identify the option that would be the most appropriate. Peer-reviewed articles and books on this subject matter will be examined to get a better understanding of the sociopolitical situations and business climates of these countries. The most attention should be devoted to risks related to supply chains. From this research, it will be possible to develop a set of recommendations as to which country is better suited for airplane part production.
Discussion
Strengths and Weaknesses of India
First of all, most economists believe that India will become a leader in the aircraft industry in the future because of the country’s rapid economic growth and ready access to necessary resources. Moreover, the Indian government has recognized the need to modify current policies that limit the possibilities for business development. The political situation in the country is also stable and is not expected to change in the foreseeable future based on most predictions. The country’s police force has extensive control, and the risk of issues related to crime is relatively low (Bayley 377).
Several important factors could affect supply chains in India and the surrounding region. The fact that titanium block, a key raw material in aircraft part manufacturing, is sourced from Russia needs to be taken into account. India and Russia have built an outstanding relationship over the years, and the two countries are actively collaborating in the development of new technologies. In general, Russia’s trade openness levels are rather low (Tabata 39).
However, it can be seen that metals are exported to India regularly, so any complications that could affect the supply chain are highly unlikely. Another factor that could affect the supply chain is the fact that industries like online retailing are growing rapidly, and factories in India are willing to utilize the latest technologies (Mishra 113). This fact is crucial and should be considered by any enterprise that wants to do business with Indian suppliers.
Because Indian employees have related experience, companies can potentially implement software programs that would improve supply chain management. Another important aspect that should be highlighted is that the economy of India is developing rapidly and will outpace other countries in the region. On the other hand, government regulation may be incredibly problematic because the government is determined to protect native businesses. Another aspect that needs to be highlighted is the role of insurance, an industry that is well developed in India and helps protect enterprises from most complications. Terrorist threats should not be disregarded.
For example, it may be beneficial for companies to utilize such tools as high-pressure hoses to avoid complications related to pirates in the Indian Ocean (R. Crandall, W. Crandall, and Chen 320). Another critical risk to consider is the lack of education among the general population (Park et al. 350). An enterprise may invest enormous resources in Indian supply chains, but the introduction of new technologies that require a high degree of training or knowledge could harm business as workers may need additional time to adjust to such changes, which only adds complications to operations. Demand risk is not problematic in this case because this aircraft part is incredibly valuable. Another weakness of India is the underdevelopment and inefficiency of supply chain networks in the region (Park et al. 350).
Strengths and Weaknesses of Vietnam
Vietnam presents an intriguing situation; the country has been developing at a rapid rate, and many scholars suggest that it has enormous potential. Many enterprises in Vietnam have focused on the improvement of supply chain management, so many supply chains in the region are well developed. Their efficiency is not yet maximized because such processes are relatively new in the region, but the progress that has been shown is significant.
The business environment has become more supportive of foreign enterprises due to the government’s introduction of several business-friendly policies. Most factories work as suppliers for many firms at the same time, and there are no limitations that could affect Boeing (R. Crandall, W. Crandall, and Chen 245). Because Russia is an ally of Vietnam, problems during the sourcing of raw material titanium blocks are not expected (Elliott 260).
On the other hand, Vietnam also presents several weaknesses that may affect such operations as manufacturing and delivery. Terrorist threats are dangerous and could have a lasting impact on supply chains. Though the region is generally viewed as incredibly safe, a slim possibility of terrorism should be acknowledged. The major problem, however, is that the business environment in Vietnam is not stable, and suppliers may have to deal with numerous complications. The country’s banking system needs to be improved because banking inefficiency affects all business operations. Some transactions may also prove incredibly risky.
The government is trying to resolve issues like bribery, and though progress has been impressive, it is still a significant problem. Access to required information may also be complicated because of current government policies and guidelines. The world’s growing focus on sustainability also needs to be mentioned as a potential issue, as the need to comply with international regulations may harm many factories in the long term (Aboelmaged 146).
Additionally, weak infrastructure is an enormous problem because it leads to increased delivery times, and logistic channels are not currently optimized. It may be reasonable to send an external professional to examine the situation in the region, but that would require many resources, and the expense may be hard to justify. Another problem in Vietnam is the fact that ports and airports have quite limited capacity. New ones will be built in the future, but their construction will require a lot of time (Hult, Closs, and Frayer 13). Employees are also viewed as inexperienced because they lack the necessary training, which would undoubtedly have an enormous impact on the quality of products.
Beyond the business climate specifically, energy shortages can be extremely problematic in Vietnam as well. However, enterprises are investing in renewable resources on an ongoing basis, a factor that is expected to address the bulk of the problem eventually. Though these are positive steps, such changes are not yet fully implemented and, once again, are expected to remain incomplete for some time. An enterprise that relies on Vietnamese supply chains may suffer during such periods as summer because blackouts are quite common. Political instability is also a significant issue that affects most of the operations in the region.
Production levels in Vietnam are relatively low, and many firms lack the necessary resources to invest in research and new technologies. Indeed, supply chains in other Asian countries are much more developed than those in Vietnam (Kim Dung, Hai, and Hieu 178). However, the government has proven that it is willing to focus on the development of supply chains because the logistics market in the country is enormous and could lead to significant profits (Hult, Closs, and Frayer 13).
Comparison Between India and Vietnam
There are several notable similarities between India and Vietnam. Two of the most significant similarities between these countries are their tremendous growth over the last few years and their great potential as parts suppliers. Both regions have also established outstanding relationships with Russia. Moreover, it is an excellent opportunity to get access to some of the most innovative technologies. Another similarity that should be highlighted is that both of these regions are susceptible to natural disasters, and they are particularly exposed when it comes to some operations because any incident may lead to critical supply shortages. Also, both countries may present complications related to scheduling. Therefore, Boeing should not be too reliant on these regions and must consider other options.
Of course, many differences exist between India and Vietnam as well. Though the techniques utilized during the manufacturing of parts are relatively the same between the two countries, Indian factories are still viewed as much safer because employers pay enormous attention to the overall quality and precision. The natural climate in both of these countries is unique, but it is not expected that it would have a significant impact on supply chains. For example, intense rains can be quite problematic, but this issue may be addressed if forecasts are taken into account during the development of schedules.
The political systems in India and Vietnam are also very different: communism is quite prominent in Vietnam, while a focus on democracy is of utmost importance in India (Gainsborough 209). Both countries contain poverty-stricken areas, which itself may well be perceived as a tremendous risk. Sizeable demographic shifts in these countries may also have an impact on supply chains.
Justification of the Selection
Based on this research, India is the better choice for aircraft part production because the country has many advantages over Vietnam and has much more potential. Both regions present significant supply chain risks, but a company may minimize these risks by developing appropriate strategies and paying close attention to environmental factors. India is also a good choice because the country has proven to be a reliable partner, as many of its organizations are willing to do business with foreign enterprises.
Moreover, another factor that should not be overlooked is that the Indian workforce is believed to be much more skilled, which is particularly critical because precision and quality are of utmost importance in the production of airplane parts. Moreover, the Indian workforce is advantageous because the language barrier is unlikely to be a problem as India’s population becomes increasingly proficient in English (Park et al. 350). Managers and employees will be able to discuss all of the aspects related to logistics and come up with solutions without wasting any time.
The cost of manufacturing should also be mentioned; though production in India requires much more funding than in Vietnam, other factors make this higher cost worthwhile in the long term. India holds a strategic location that would allow companies to explore new possibilities related to supply chains. Moreover, the higher level of economic stability in the Indian sub-continent is one of the most important factors in the decision (Reddy 93). The political situation in the country is satisfactory, and such complications as protests are not likely. The Indian legal system is also well developed, so any problems related to policies and regulations may be solved promptly.
Although trade restrictions can still be quite problematic, the government is trying to reduce most of the barriers India is relatively stable when it comes to natural disasters, and significant changes to the climate are not expected any time soon. However, the country is still rather vulnerable because of its geographical location, especially to disasters such as floods and cyclones (Bangay 64). However, the firm will have to deal with such risks because other advantages are significant.
One of the biggest problems in India at the moment is the underdeveloped infrastructure, but this situation will change in the future due to urbanization and overall economic growth. ICT disruptions are also not viewed as problematic at the moment because most professionals in India have experience and will address issues as soon as possible. A lack of focus on infrastructure is particularly problematic in Vietnam, and the planning is not aligned with overall goals (Dinh and Thu Hang 45).
Moreover, some scholars suggest that value chains are relatively underdeveloped in the country and that supply chain management still needs to be improved significantly (Witt and Redding 295). Although problems related to infrastructure are also severe in India, the situation is much better on the whole, and interest from investors suggests that solutions are possible. Alterations to current public sector policies are required in Vietnam because they complicate most business operations. On the other hand, such issues are not as problematic in India, and big cities have devoted enormous attention to the enhancement of logistics.
Recommendations
It would be reasonable for a company to analyze the suppliers in India to determine their strengths and weaknesses. The process may require additional resources, but it will lead to enormous profits in the future because the company may avoid several risks. The choice of the supplier should be justified from an economic perspective, and it is important to collect all necessary data to support the selection. Also, it would be beneficial for the company to establish long-term relationships with suppliers because India has enormous potential when it comes to the production of new parts. Moreover, it will be possible to expand the business if such connections are utilized and the understanding of logistics in the area is improved.
The company should keep track of the latest trends and developments to avoid possible complications, and it should be flexible and open to modifying supply management strategy depending on the situation. The business can also take advantage of the fact that the desired part output is a two-foot square with a one-foot circle in the middle, according to the specifications. An enterprise may use the additional space to purchase other parts, which would help use the resources much more efficiently.
The company should establish a set of methods to identify and minimize possible risks to ensure that the business is not damaged in the long term. Natural disasters are always possible, so an analysis of routes may be incredibly beneficial. Financial risks are particularly problematic, and it is necessary to provide suppliers with a set of benefits to ensure that they are loyal and are not vulnerable to economic crises. Also, it is paramount to focus on communication patterns between the company and the suppliers. For example, the company should be informed in the case of any complication occurring. Security is another factor that the enterprise should consider.
The level of crime in the area needs to be evaluated, which would help prevent burglaries (Burges 158). Enormous attention should also be devoted to an inspection of the parts. All of the parts should be thoroughly checked to avoid complications. Moreover, the company should ensure that all operations-related information stays confidential because it may be abused by competitors. Such methods as transcription should be used to protect data when communicating with suppliers. The utilization of modern technologies will be crucial, and all of these aspects should be combined into an integrated supply chain to achieve the highest level of efficiency.
Conclusion
In summary, the best possible solution, in this case, is to source a high-precision machine part from India. Vietnam is also a reasonable option because of its lower manufacturing and transportation costs and other benefits. However, a business relationship with suppliers in India is expected to be more beneficial in the long term. India’s economy is predicted to continue growing at a rapid rate, which will lead to better infrastructure and shorter delivery times.
Also, the country is more likely to adopt new technologies and methods of production. Furthermore, it will be possible to take advantage of previously established relationships, and agreements may also be signed. The risks in the region are not as significant as those in Vietnam, and the situation is expected to remain relatively stable. Once the company establishes a relationship with a supplier in India, it should keep track of the latest developments and analyze the situation in both countries to make appropriate alterations to the strategy and achieve the best possible results. The enterprise must understand that there are still risks, but that possible consequences can be minimized if appropriate measures are taken. Although India is the better choice at the present moment, Vietnam should not be disregarded because the region has enormous potential that is not yet fully realized.
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