Entering a new market is a serious and highly responsible and challenging task for a company. The new country often proposes additional possibilities for professional growth and development but also includes a number of pitfalls, which should be thought about beforehand. The purpose of this report is to consider the possibility of the UAE Company STRATA entering the Turkish market. The paper includes an analysis of the company, the target market and its demands, possible staffing policies, market entry strategies, and strategies for international business operation.
Strata Manufacturing PJSC, or STRATA is a composite aero-structuring manufacturing company in Al Ain, the United Arab Emirates. The company was originally established in 2009 and managed to develop considerably during the 7 years of its existence. Currently the company has strong partnerships with global leading aircraft manufacturers, such as Boeing or Airbus. The company also works as a supplier of the tier-one companies Austrian FACC and Belgian SABCA. It provides support to the economy of Al Ain and gives high opportunities for employment to the UAE residents. Currently, the Emiratis constitute nearly 35% of Strata’s workforce.
The company started its existence in 2008, when it signed a contract with FACC for production of details for Airbus. Starting from 2010, the company expanded its facilities and delivered the first shipset of A330/340 FTF to FACC. In 2011, the company signed an agreement with the Boeing Company. Today, the company occupies one of the key leadership positions in the UAE.
The products manufactured by the STRATA Company include details for Airbus, such as flap track fairings, ailerons, and spoilers, and products for Boeing, such as empennage ribs and vertical fin ribs. The company also produces special details for ATR that include vertical stabilizers and rubber.
The Strata Company might be called a relatively young enterprise, which has already managed to achieve a decent reputation on the national and international market. It is ready to expansion and further growth.
The Strata Company aims at expanding on the international arena. One of the most suitable countries for the company’s development is Turkey. The choice of this country is not accidental. Turkey is the country with strong aviation business, which is achieved by outward foreign economic policy, political stability and successful privatization of the transportation networks. However, it is necessary to make a detailed analysis of the appropriateness of this state for the Strata Company expansion.
- External factors: First of all, external factors will be analyzed. The current inflation rate in Turkey is 7.16. The analysis of the data shows that the inflation rate has slightly decreased comparing with the summer months (“Turkey Inflation Rate,” 2016). The Turkish government has recently declared about its decision to improve its capacity in various fields of advanced technologies and precision products such as automobiles, airplanes, instruments and devices (Pyka, Kustepeli, & Hartmann, 2016). It should be stated that Turkey is at the active stage of its development, and Turkish manufacturers currently produce nearly 70% of all parts of an airplane (Pyka et al., 2016). The company has a great potential but needs high-tech components for its success.
- Customer/Competitor based factors: The country provides products and consumer services that meet the consumers’ needs. There exist a number of competitors, but they are involved in different manufacturing services. For instance, the company TAI or TUSAS manufacture the wing and trail edge composite details. However, the Strata Company has a potential in this country because of a rather narrow spectrum of manufacturing. It could peacefully coexist with other companies in the country.
- Industry and business factors: It should be noted that there is no trade barriers in Turkey. The country has a high availability of workforce. Turkey has the sixth largest aviation market in Europe, and it creates a positive expansion rate. Moreover, the country is marked by the vertically organized centralized control. The country is also attractive from the business perspective due to its relatively low transportation and manufacturing facility establishment costs. Oxford Business Group (2013) has conducted a report and came to a conclusion that a number of European companies moved their production facilities to this country in order to obtain financial benefits.
The analysis of the suitability factors proves suitability of Turkey for Strata expansion. These factors include: relatively low inflation rate, political decision to improve the field of advanced technologies, small number of competitors, availability of the workforce, positive expansion rate, absence of trade barriers, centralized control, and low transportation and establishment costs. It should be admitted that Turkey in developing, and its political leaders take efforts in order to make it suitable for expansion of foreign companies. The decision to move the facility to this country is totally justified.
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Marketing Mix and Staffing Strategy
In this situation, the mix of standardization and adaptation marketing strategies should be applied. Standardization strategy presupposes executing the original marketing strategy in a foreign country (Keat, 2015). In other words, it is considered that the Strata Company should not change the already approved marketing technique, which it uses in the UAE. However, standardization must be supported by the strategy of adaptation. It presupposes detailed consideration of price, place and promotion decisions. Product features should not be changed until specific demands appear. For instance, if the Strata Company manages to sign a new contract in Turkey, which will result in the production of innovative aero details, it could diversify the spectrum of its products. Otherwise, any changes seem to be unnecessary. The pricing strategy will have to be altered. Moving to Turkey could involve obtaining financial benefits because of lower transportation, establishment and workforce costs. It provides a possibility for reducing prices and thus making products more attractive to the consumer. The details produced in Turkey could have the same high quality and meet the international standards, and attractive price could assist Strata in increasing its revenue. Price cutting could become a part of the promotional strategy. It is quick and easy to implement. Furthermore, price reduction evokes immediate response from the potential consumers. Moreover, it enhances creation of an additional competitive advantage. While considering the place and distribution strategy, it is necessary to assume that TAI is one of the company’s major competitors in Turkey, which is located in Ankara. Therefore, Strata could establish its production facility in Arifiye. In addition, the Toyota Motor Manufacturing is situated in the neighboring area. It will make the location known for the potential consumers. The company could apply the same distributional strategy that it currently applies in the UAE.
While discussing the HRM approach, it is necessary to note that the geocentric approach seems the most efficient in this case. This approach presupposes that the policies are worked out to meet the initial goals of the global network of the home country locations and foreign subsidiaries (Sims, 2007). It will be beneficial for the company to adopt a transnational orientation and recruit employees based on their skills and experiences irrespective of the nationality.
Market Entry Strategy
Exporting strategy: This is one of the simplest market entry strategies. It presupposes sending domestic products to a foreign country. The major advantage of this strategy is reduced risks while entering the foreign market and acquiring extra knowledge about the market. However, the exporting strategy will make the Strata Company vulnerable due to tariffs, logistical challenges, and possibility of conflicts with local distributors. Therefore, this strategy is inefficient for such a strong company as Strata.
Turnkey Project: It presupposes the process when a company builds a project from the start to an end and provides it to the financing company. The advantage of this entry mode is acquiring of additional knowledge about the country, consumers, market, etc. However, the disadvantage is dependence on the financing company. For such a strong enterprise as the Strata Company, this entry mode is inefficient since it needs to have total control over the business of its foreign facility.
Licensing: this market entry strategy presupposes leasing the right to use the intellectual property of the company to a foreign firm in the international market. The main advantage of the strategy is its cost-effectiveness. However, this strategy means dependency on the foreign company and lack of autonomy. As a result, this strategy also seems to be unfavorable for the Strata Company.
Franchising: It is a particular form of licensing when a company licenses its products to partners for specific remuneration. Cost-effectiveness is the major advantage of this strategy. However, the disadvantage is that the company cannot have total control of the working process. This mode of entry is used by restaurants, but it is not suitable for the manufacturing facility.
Joint Venture: This strategy is based on an agreement between the companies aimed at combining their value chains. Possible benefits include facilitation of technology, transfer, and provision of access to markets and resources. They assist in dealing with codified knowledge. The disadvantage lies in the fact that the company has to deal with another enterprise. Such mode of entry could deprive Strata of autonomous ruling.
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Wholly Owned Subsidiary: Entering the Turkish market by setting up the wholly owned subsidiary seems to be the most appropriate solution in this situation. Its advantage is total control of the foreign-based facility, its products, and contracts. It gives the company hierarchical control over the decision-making. It helps to preserve the high quality of the manufactured products and serve to the cultural sensitivity. This strategy presupposes preservation of all strategies that are initially applied in the company’s country of origin.
Strategy for International Business Operations
Transnational strategy could be used to enter the Turkish market. The best mode of entry will be setting up the wholly owned subsidiary. This strategy will allow the Strata Company to combine the advantages of the global scale efficiencies and simultaneously adjust to the Turkish market environment. The Strata Company could continue relying on the standardization of its products with global distribution but also consider creating a new design. It was already mentioned that the Strata Company should continue manufacturing its products but preserve a niche for a new agreement, which will demand the creation of new details. This strategy presupposes implementing a democratic design and catering for the needs of different consumers. One of the drawbacks of this market entry strategy is implementation difficulty and high costs. However, it proposes a so-called mix of centralization and decentralization, which might be useful for the company’s efficient development in the country under analysis.
In conclusion, it should be assumed that analysis of the company, target country, marketing mix, entry strategy and international business strategy proves that starting business in Turkey seems to be a favorable option. Despite certain problematic issues, such as summer bombings and the existing corruption problems, this country could be efficient for the Strata Company.