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MNE Expansion Strategies

 

MNE Expansion Strategies

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Strategy and Structure

Traveling across the world has become an easy task thanks to the development of technology. The world has been reduced to a global village and transportation plays a key role in this. Air transport, in particular, is the fastest and perhaps the most convenient means of crossing from one continent to another easily. Aircrafts offer business opportunities that will continue to grow especially in countries that attract a lot of tourists. Australia and Singapore have the potential for lucrative business in airplanes considering revenues from tourism and trade in the countries. In 2016, Asian economies had the highest recorded growth in terms of international tourist arrivals. Australia also had strong increases in terms of international tourists. Both countries show great potential for enterprises dealing in aircrafts as they have a steady stream of travelers.

Growth in the Asian air transport economy was mainly due to increased air connectivity and airfares that are traveler-friendly. Air connectivity offers business for aircrafts to service the growing demand. Singapore is considered a very advanced developing country despite an economy that is highly advanced. Their status is due to inequality in the country. Singapore is a member of the Association of Southeast Asian Nations (ASEAN) which along with the European Union (EU) and the North American Free Trade Agreement (NAFTA) contributed to 58% of trade worldwide (WTO, 2017). One Singaporean dollar is about 0.75 U.S. dollars, and the country has an abundant supply of natural resources and readily available labor. Asian economies reduced significantly in regards to the ratio of employment-to-population and the company will ensure that it maximizes on the open market space. Further, Chinese travelers have played a vital role in growing the economies of neighboring Asian countries and that of Australia as well. Australia has had a surge in the number of international tourists visiting which makes prime business for airlines. About 15% of the international tourists were from China (WTO, 2017). Therefore, expanding the business into the Asian continent in Singapore and Australia is a perfect strategy to ensure continuity of business over time. One Australian dollar is 0.76 U.S. dollars and also strongly competing with the Singaporean dollar.

 

 

(World Trade Statistical Review, 38)

 

(World Trade Statistical Review, 38)

Australia and Singapore are also a good fit for the organization’s structure. The company employs a model based on area division. Divisions in the company are based on geographical region and each region has responsibility over all the products it sells. The structure takes into consideration the fact that Australia, Singapore and the U.S. are indeed different in terms of the market operations, resources, labor and finances and operating the regions separately allows for easier management. Additionally, it will give the organization a chance to evaluate which is the most successful market between Singapore and Australia. Area divisions also mean that each country will carry out its distribution of merchandise for effective management. This takes into consideration the differences in spoken language between the two countries as Singapore has four official languages including English. It also considers the different cultures in each country particularly in the customers. While Singaporeans values price and value above everything, Australians are more likely to support local businesses. Foreign investors in Australia often need to secure a customer base first before they put an area division as it heavily determines business success.

Entry Strategy and Strategic Alliances

The most successful entry strategies for Singapore are using distributors or agents or setting up operations within the country. Considering the aggressive nature of the Singaporean market, the most effective strategy for an aircraft enterprise would be to first send distributors to assess the market. Establishing a good market base before setting up operations in the country would be effective in ensuring the company has a steady stream of clients. After a predetermined period of time, a thorough assessment will be carried out regarding the Singaporean aircraft market based on the distributor’s first-hand point of view. Results from the analysis will determine whether the company will establish an area division in Singapore or perhaps only increase the number of agents. The culture in customers’ is that they consider price, quality and service as the major factors when purchasing items. In terms of service, after-sales services are particularly most appealing to maintain a customer base. Intra-trade in ASEAN contributed to 24% of total trade showing that the countries are highly willing to trade with non-member countries such as the U.S (WTO, 2017). A democracy governs Singapore with the president being the head of state and the prime minister the head of government. It is considered one of the most accessible countries to carry out business and has a trade agreement with the U.S. referred to as the U.S.-Singapore Free Trade Agreement (USSFTA).

For Australia as well, the establishment of local presence is important through a distributor or agent. The continent emphasizes on the need for Australian companies to support each other locally and for prospective international investors, gaining local support is vital for business. Encouraging local travel, for example, would be a good strategy for an aircraft enterprise as it would align with the continent’s culture and relate with the citizens.Australia has significant differences in terms of culture and the market from America and due diligence is important before setting up a division there. The Australian government is quite different from the U.S. as it combines elements from the British and the North American governments. It is governed by a federal government and is also under a constitutional monarchy. The political influence of the government in the Australian trade union is strong, a factor that causes concern for many citizens. It is also considered to be in a remote area, a factor which might be considered as a barrier but encourages local support. Australia receives a significant number of tourists who form the core for the Australian air travel industry. While the continent is considered remote, aircraft enterprises present a solution to this problem especially between the U.S. and the continent.

Expanding a multinational enterprise dealing with aircrafts from the U.S. to other Singapore and Australia promises great income from reports by the World Trade Organization (WTO). Some key elements need to be taken into consideration for each country and adherence to the procedure is crucial for success. However, the procedures should not take away from the trade interactions between Singapore and Australia and how the U.S. would stand to benefit from these interactions. Air transport is here to stay and these countries offer the best advantages for expansion.

 

 

 

 

 

References

WTO., (2017). World Trade Report. World Trade Organization. Retrieved from: https://mail.google.com/mail/u/0/#inbox/FMfcgxvwzHxRzkGzgxcZDfsPkxNhxdGb?projector=1&messagePartId=0.2

WTO., (2017). World Trade Statistical Review. World Trade Organization. Retrieved from: https://mail.google.com/mail/u/0/#inbox/FMfcgxvwzHxRzkGzgxcZDfsPkxNhxdGb?projector=1&messagePartId=0.2

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