Why Should Network Manufacturing Company Get into a Joint Venture with a Company in Singapore - Research Paper Example

Business Research Table of Contents Introduction 2 Environmental Analysis 2 Entry strategy and Ownership Structure 4 Organizational Structure 5 Organizational Structure (including all the Departmental heads) 6 6 Risk Analysis 7 Recommendation 8 References 9 Introduction The multinational company which is chosen for this assignment is Network Manufacturing Company. It is an American company which started its operations in the year 1982. It is headquartered in New York. The company manufactures shipping equipments and sells these products to the countries dealing with these equipments. More than 30000 employees are employed in this company. The revenue earned by the company in 2012 is $4.2 billion. After doing a market research on different countries the company decided to extend its operations to Singapore. Environmental Analysis An environmental scanning of the new market chosen for expansion of Network Manufacturing Company is being done using PESTEL analysis. PESTEL analysis helps to analyse the macro economic factors which are used in the environmental scanning (Lorat, 2009). Factors Analysis Political The political structure of Singapore is headed by the President at the top, who is the Head of the State. It is followed by the Prime Minister who is the Head of the Government and then the cabinet which consists of the executives who are also controlled by the President. The political structure of the country allows many foreigners to come and reside in Singapore and carry out their businesses without the fear of any political barrier. Thus the company will not face any threat from the political environment of Singapore. Economic The Gross Domestic Product of the country in 2012 is $239.7 billion. The Gross National Income per capita is 59380 (in Euros) and the present inflation rate is 5.2 per cent (Singapore Economic Development Board, 2012). It is a well developed country and is highly successful for carrying out businesses. The country has an open business environment and is free from corruption. Therefore, the chosen company does not possess any threat from the economic scenario of the country and can carry out its business in the new market chosen freely and successfully. Social Singapore is a place of various cultures. The country possesses a strong social responsibility and allows different foreigners from all parts of the world with diversified cultures. The country is also known as a nation of many languages as the residents here speak in different languages. Thus the social environment of the country allows many outsiders to reside in the country and continue their business operations. The chosen company is free from the barriers related to the social and cultural dimensions of the country. Technological The country is full of new technologies and allows many foreign investors as well as many foreign companies to continue their operations in the country under the controlled administration of the government. Environmental The environmental factors of the country support foreign investors as well as foreign businesses to start and continue their operations in the country. The country possesses a code of ethics for the businesses running there. It includes transparency; coordination among the managers, the directors and the investors and professionalism in the business. A business following these ethics will have no environmental barrier from this country. Legal The regulatory business of the country helps to encourage the businesses that are operating there. The regulatory framework of the country favours the businesses running there. The investments that are made by the foreign investors are supported by the law of Singapore. Entry strategy and Ownership Structure A company expanding into a new market involves a lot of risks. The company may possess several threats from the new market. Thus it is always beneficial for the company if it goes into a joint venture with an existing company in Singapore. It will reduce the level of risk for the company (Hill & Jones, 2009). As both the parties entering into the joint venture will have to provide resources as well as equity, the risk involvement in case of any future losses being incurred by the new company formed after joint venture will be reduced. If Network Manufacturing Company enters into a joint venture with an existing company in the new market then it will help the company to acquire knowledge about the new market, its customers and the investors. The technological changes that will occur in the country will not affect the company as it will adapt new technologies along with the changing technological environment. There may be many legal barriers affecting a company entering into an international market for the first time. If the company enters into the joint venture, it will have no barrier from the regulatory framework of the country. It will be easier to follow the government regulations in the new market. The expenses for starting a business in the new market will also get reduced as this is a partnership business and all the expenses should be made equally. The individual share of profits made in the business will go to the owners. The owners will have to show their individual share of profits when filing their personal income tax returns. In a joint venture, it will be easier for the company to attract investors from the new market to the share offerings. After a thorough study of all the factors that will affect the business and the new technologies and changes that will be adapted by the company in the new market for some years, the company can shift to a single ownership business. It will help the company to survive in the new market for longer period. Organizational Structure Organizational Structure (including all the Departmental heads) Risk Analysis Diamond model is very useful to determine the competitive advantage of different countries (Walker, 2004). An analysis of the risk involved in expanding the company into the market of Singapore will be done by using Porter’s Diamond Model. The conditions to be considered for the analysis are: Factor Conditions: - The country possesses strong technological power. The country also has financial stability which will support the chosen company to start its operations there. It possesses strong infrastructure capability and capital resources which will support the company to flourish its business in the new market. Demand Conditions: - The demand of shipping equipments in Singapore will be high. Singapore is a land surrounded by water. It is a port area and is favourable for carrying out the business of shipping equipments. Related and Supporting Industries: - There are a large number of supplier industries that will support the business of the company and will provide inputs that will help in the innovation of new technologies and internationalisation. This will help the company to achieve competitive advantage over its competitors. Firm strategy, structure and rivalry: - The country has a code of ethics for the businesses running there. Any business running in this country and following these ethics is allowed to continue its operations in this land. The entry strategy of the company as well as the organisational structure is favourable for starting the business in Singapore. The political environment of the country is stable and allows many foreign investors as well as companies to start their operations in this land. The investments made by the financial institutions are highly encouraged here. The investors trying to invest in the Asian market should invest in this country. This country encourages businesses from other countries to start their operations here and achieve success. Recommendation The company should get into a joint venture with an existing company in Singapore. This will reduce the risk related to the environmental factors of the new market. It will also reduce the expenses and initial investment required to start the business in an international market. The company should shift from focus strategy to focus differentiation strategy and aim at generating the loyalty of the customers by tailoring the business strategies to the needs of the customers in that focussed group. It should provide quality products to its customers so that it can achieve competitive advantage over its customers in the new market. References Hill, C., & Jones G. R. (2009). Strategic Management Theory: An Integrated Approach. Connecticut: Cengage Learning. Lorat, N. (2009). Market Audit and Analysis. Berlin: GRIN Verlag. Singapore Economic Development Board. (2012). Facts and rankings. Retrieved from http://www.edb.gov.sg/content/edb/en/why-singapore/about-singapore/facts-and-rankings/rankings.html. Walker, G. (2004). Modern Competitive Strategy. New York: McGraw-Hill International. Read More