Introduction
Freeways Aviation Parts Inc. is a company that trades in parts for aircraft. It is a middle size company with a net worth of about $ 10 million. The company has become a major supplier of aircraft parts to major airlines in the GCC countries for the past four decades, and as a result, it has created a brand of quality for itself in the aviation industry for the supply of high-quality products.
With the success that Freeways Aviation has experienced in the Arab region, the management is looking into expanding operations to other regions globally. Having been in the business for over four decades, the management feels that it is time to broaden its business territory and set the business on the global map. They want the company to be a well-known mark of quality.
The history of Freeways Aviation Parts Inc. dates 40 years back in the year 1974. Freeways Aviation Parts was incorporated in February 1974 and was founded as a family business. The family decided to start the business, having developed an interest in aircraft from the early years. Two of the family members studied aeronautical engineering in different institutions and worked for a number of aviation companies before they decided to venture into their own business. One of our siblings is a financial analyst and assists with the financial component of the business. This includes giving financial counsel, bookkeeping, investment appraisal, and sourcing for finance when needed, among other activities.
Freeways Aviation Parts Inc. would like to penetrate the global market by getting into joint ventures with other like-minded organizations in different parts of the world. This study will look into the issues pertinent to this new expansion project and help the management of Freeways Aviation to know what to expect with this movie. Some of the issues to be discussed are; the company’s strategy of choice for going global, international strategy, marketing products, hiring and managing employees, cross-cultural, political, and economic issues, government relations of target markets as well as foreign direct investments that are likely to affect the business.
Globalization Strategy
The management of Freeways Aviation Parts Inc. hopes to expand operations across the world by establishing businesses in Asia, Europe, Africa, North and South America. The main strategy for entering the global market is to get into the export market by use of specific contacts in these regions. The company intends to start with Asia and SE Asia by making use of the contacts the family has already made. Venturing into this business using the export strategy is the least risky compared to forming partnerships, joint ventures, and establishing subsidiaries. It will, however, take the company time to grow with this strategy. The other strategies mentioned above can be used later once the company has been introduced into the global market.
Additionally, the management intends to make use of e-commerce as a marketing strategy for Freeways Aviation’s products (Cadogan, 2009). The company’s website will be modified to capture the global market and to attract more customers.
International Strategy and Organisation
As explained above, the company entry strategy into the international market is to export its products. This will be less risky for the business because it only involves sourcing for a market overseas and making sales there. It does not have the complications that other strategies have like joint ventures, licensing, the establishment of subsidiaries, and franchising. Since this is a new market doing the latter would not be a good idea, especially if the business is not well received by those new markets. Using the internet to market the company’s products will also play a vital role in putting the company on the global map. Therefore, these two strategies, exporting and e-commerce, are the instruments to be used to enter the international market.
International Opportunities Affecting the Business
Market analysis: E-Commerce rationale
E-Commerce in this context can be defined as a form of business transaction that will connect the company to its customer, thus lowering the communication and transaction costs. The main purpose of E-Commerce here is to market Freeways Aviation’s products in the international market. They need to identify and develop new markets globally. A good website that clearly tells the company’s story will be a powerful marketing tool for the company’s potential customers as well as a valid platform for carrying out transactions. It is also cheaper to market, given the interest in the international arena. It will assist the company in understanding who wants to buy what and who has to sell what.
E-Commerce critique and recommendations
There are opinions put forward saying that e-commerce is likely to be ineffective if they do not follow laws and regulations that guide the use of e-commerce that are in tandem with international laws culture regarding the same subject. There may be issues with e-commerce in developing countries where the use of the internet to do business is not well exploited and advanced. The company must be careful and be aware of the countries whose internet system is not well advanced and think of more appropriate methods or strategies to use in these areas.
Another issue is to know. If e-commerce isn’t part of Freeway Aviation’s culture, then this strategy is bound to face serious challenges. The staff of the organization should be willing to embrace e-commerce and make use of it as required. This is the responsibility of the management to ensure that they inculcate this and make it a culture within the organization.
Selection and Management of Entry Modes
The selection of entry modes to be used by Freeways Aviation Parts Inc. into the international market is based on some peculiar instances:
First, they should consider the need to make use of an affordable mode of entry. This is important as the organization is venturing into a new market, which is unpredictable. The management would, therefore, want to take a fairly affordable approach in the selection of the entry mode. Close attention is required here so as to ensure that the strategy is working in favor of the company.
In addition, the swiftness with which management wants to penetrate the market. For instance, in this case, the use of direct marketing by use of the internet will assist Freeways Aviation to sell their products to the international market much faster, compared to, say, establishment of partnerships such as joint ventures which are bound to take a longer period of time.
However, one thing that one needs to bear in mind is that whatever entry mode is chosen by the management must be accepted by the employees of the organisation because they are the ones to carry out the implementation of the chosen strategy.
Development and Marketing of Products
As the company ventures into the global market, considerations have to be made regarding the appropriateness of the part products to all regions that the company plans to establish businesses (Grimwade, 2000). The management must check that their products are readily acceptable in all regions. To maintain the customers and avoid competition, they have to ensure a constant supply of products. However, this being the aviation industry, it is highly unlikely that a lot of modifications will be needed for the products to be sold.
Management of International Operations
This involves management of customers, payment modes as well as ways of marketing products. In this case the use of e-commerce will go a long way into managing the international operations well. The management needs to create a department that would specifically deal with all international businesses. The department should have highly qualified staffs that have enough experience in international trading to be able to handle matters in the new office.
Hiring and Managing Employees
The company need a highly skilled team of employees who would oversee the implementation of the new project. The human resource department should be well prepared to have the capacity to hire the right staff to the organisation for the purpose of the new venture (Hall, 2003). If management feels that the company lacks the capacity to hire the appropriate persons to work at the new international trade department, then they may outsource human resource services from a human resource consultant.
Cross-Cultural Business
Having been used to operating within the GCC countries, Freeways Aviation has become accustomed to the Arabs’ way of doing business. The management must now understand that they are to encounter cultural differences, given that they want to have operations in every other continent of the world. Two major cultural differences that may be faced are language and religion. Management must properly assess the different cultures and find ways of working around them for the success of the new business venture.
Politics, Law and Business Ethics
The management of Freeways Aviation must assess the political, legal and ethical environments in which they want to set up shop. For the safety of their business, for instance, they should ensure that they operate in fairly politically stable countries where their country of origin has good relations with the governments of these countries. Freeways Aviation should ensure that they abide by the international laws set forth regarding international trade to avoid unnecessary litigations. Lastly, the company should adhere to appropriate international ethical standards in all their operations so as to sell themselves as an international brand.
Economic and Emerging Markets
As the management enters the international market, they should take into consideration the changing economic environments of the different countries in which they are to carry out operations (Zou and Fu, 2011). They should consider how fluctuations in inflation rates would affect the company’s business. The management should also be aware of any economic conditions set forth by the respective countries so that they know if it would be profitable to invest there or not.
As for the emerging markets, the management should study the current market for the aviation parts very carefully and watch out for any other emerging markets and take advantage of favourable opportunities that may present themselves. They should also be prepared to know what to do in case they cannot take care of these emerging markets.
International Market
The company should also assess the international market and take note of other emerging markets. It is realization that people around the world want different products as their needs are not the same. The company should understand the differences in values, custom and currencies of the customers, therefore, it is important to understand the regional differences. They should find the relevant information such as competition, potential market size and barriers. They should decide whether these markets would be a threat to their current business or an opportunity for expansion.
Business- Government Trade Relations
It is important for the company to maintain good relations with the government for the sustainability of the business. The management should ensure that they adhere to all statutory requirements for them to operate legally. It would also be easier and even cheaper to operate in a country whose government has good relations with Freeways Aviation’s host country. The company could take advantage of the different partnership agreements entered into between countries for the good of the business.
Foreign Direct Investments
This refers to the establishment of a business by an organisation in another country other than the mother country (Weigel, Gregory and Wagle, 1997). This could be establishing a subsidiary by buying a smaller company in the new country or establishing a business from scratch. Freeways Aviation could make use of this strategy at a later stage when the business environment in specific areas has been established.
References
Cadogan, J. W. (2009). Marketing strategy. London: SAGE.
Grimwade, N. (2000). International trade new patterns of trade, production & investment (2nd ed.). London: Routledge.
Hall, A. (2003). Managing people. Maidenhead: Open University Press.
Weigel D. R., Gregory N. F., and Wagle, D. M. (1997). Foreign direct investment. Washington, D.C.: International Finance Corp., Foreign Investment Advisory Service.
Zou, S., and Fu, H. (2011). International marketing emerging markets. Bingley: Emerald.