The emergence of new markets, internationalization, and economic globalization are key areas in contemporary business. Currently, multinational corporations do not have a monopoly on international business, although it may have been the province of organizations having enough reach and scale. An increasing and varying number and scale of firms are confronted with reasons which are compelling for the expansion of their activities across the boundaries of multiple nationalities.
In certain cases, the kind of motivation received is inclusive of the knowledge that succeeding in global markets is a pre-requisite for surviving in various markets, whereby the success of a competitor in an international market may lead to their gain of a sustainable competitive advantage. However, scrutinizing the international expansion empirical experience is suggestive of the apparent potential that is practically not easy to achieve (Keller & Yeaple, 2009, p. 827).
Background of the Company
Incorporated in 21st February 1952, General Dynamics Corporation is a global defense and aerospace company offering a portfolio of services and products in business aviation including ship repair, shipbuilding, C4ISR (surveillance, intelligence, computers, communications, control, command) solutions, Information Technology (IT) solutions, weapons systems and munitions, and combat vehicles (Platzer 2009, p. 8). The company’s various business groups include Marine Systems, Information Systems and Technology, Combat Systems, and Aerospace.
The company manufactures various types of Gulfstream aircraft, performs the completion of aircraft of various manufacturers, and provides aircraft services. The group offers design of aircraft, product support and service, and technologically advanced cabin systems and cockpits. Through Gulfstream Aerospace, General Dynamics Corporation supports, services, manufactures, develops and designs business-jet aircraft of varied spectrum of performance in the mid and large cabin business-jet market (Spreen 2016, p. 98).
The organization operates in the Defense/Aerospace Industry, serving the Aerospace and Defense market. The Aerospace market comprises of the service, sale and production of commercial aircraft, while the defense market is dependent on the need of nations for systems and military weapons designed for the operation on air, sea and land. Space vehicles and general aircraft production for both commercial and military use are also included in the industry.
Problem Identification and Analysis
Building an aircraft requires a huge investment, capital, and technology and has many risks associated with the trade. Building an aircraft which is incompetent can wholly subject the manufacturing company to jeopardy. General Dynamics Corporation faces issues with fleet complexity which has been attributed to the increased cost of different parts inventories and operating procedures, maintenance personnel and training programmes. Low carriers and deregulation have led General Dynamics Corporation to seek strategies for venturing into new markets for international growth and expansion.
The strategies would assist the company in the achievement of rapid growth, minimization of costs and the movement to different sectors of the economy. In addition, the company faces a challenge of economies of scale which is a critical aspect in the industry. Through international expansion, the company will be in a position for breaking even in mass production and launching of new programmes. In addition, the company faces distribution channels which are unequal for its services and products.
Businesses’ defense side has constantly declined, with the commercial side which represents one-third of the whole industry carrying the remaining side of the industry. Therefore, the commercial side is taking off while there is a shrink in the defense side. The results of the first half-year for General Dynamics Corporation shows that revenue is flat and that there has been a global shrink. Commercial aerospace has taken off with a level of expected record of the production of airplanes. The major producers of airplanes have as of mid-year more than a hundred airplanes out of their organizations thus being a record year.
The process of the order of sales as opposed to the process of production has been history’s second highest, from 2012 through June 30 (Griffis et al. 2012, p. 282). General Dynamics Corporation has been experiencing supply chain hiccups which pose a great risk to the organization. In addition, the organization faces stiff competition and a period of execution risk which is high. As General Dynamics Corporation increases its production, its suppliers play an integral role hence problems have a great impact on the organization. The company therefore needs to pursue international growth so as to explore new markets and trap a pool of new clients.
Key Issues, Interrelationships, and Implications
In the traditional big markets, military budgets continue to tighten. Emerging nations have been seeking to protect themselves and their economies which are growing. Therefore, contractors of defense who mostly have roots in Western Europe and the United States look to venture into new markets to acquire more customers (Schwartz 2010, p. 27). To thrive in a new economy and environment, the contractors of defense cannot rely on a single framework and market, for example, where a defense company based in the U.S. does business with an international country only as an exporter of products.
Therefore, General Dynamics Corporation should manage their customer relationships and approach new businesses and venture into new economies through the adoption of the best strategy for international expansion. The company should strive to build closer relationships with various countries through the assessment of individual markets, deciding on the best market for doing business and designing and tailoring programs to specific countries for the development of business, long-term investment and local businesses’ industrial participation.
The defense acquisition system should be improved and reformed for the creation of an agile enterprise which is a continuing process and requires partnering the congress with the department. Various methods of achieving this include incentivizing defense contractors for the submission of proposals which are responsive in a maximum of sixty days’ period and the implementation of electronic department-wide streamlining tools.
American products have become increasingly expensive as compared to similar equipment produced in countries which are not dominated by the dollar. Defense companies in America usually sell United States military devices and collaboration as benefits which are valuable, affordable and worthwhile for the access of technology and to foreign customers (Oxenstierna & Westerlund 2013, p. 22). Ministries of defense have relaxed the constraints of foreign direct investment and asked international contractors to be committed to their countries of origin that well goes beyond relatively mild offset and traditional short-term agreements.
The ministries now want extensive, explicit and broad-based knowledge and skills transfer so as to build up their personal military and industrial capabilities for the diversification of their economies. The goal is evolving from technology importers to have the capability and resources of exporting and developing their own defence services and products. Extensively cooperating with other contractors and governments will assist the company in gaining access to new customers. Localized and strong relationships in developing economies will ultimately assist the company in playing a role in the determination of where the capabilities of defence can be spread, improving competitiveness and lowering global supply chain costs.
Barriers and Opportunities in China’s Market Entry
Political factors have been huge barriers for the company to expand its products to China. The country has good macro-economies that are favorable for any company to invest in the country. However, political uncertainty has remained a great market entry barrier. For example, China has experienced political uncertainty for some time resulting in a civil war in some regions (Heilmann 2009, p. 450). These political unrest situations have hindered the company’s ability to venture into China’s market and merge with other aviation companies. Economic factors have been another barrier as China’s economy has been indifferent and unpredictable.
The economy factors like inflation and the rise and fall in GDP have facilitated the shrinking of markets as the industry still remains sensitive for any economic changes that are taking place around the world. For example, in the 2018 global economic crisis, many people canceled their orders and the aviation market encountered significant losses within a short period. Furthermore, high corporate taxation imposed on foreign corporates, low business confidentiality, unfree trade markets, higher tariffs on imports and exports and high government spending in the country has posed a great challenge for companies willing to expand their operations in the country.
Social-cultural factors like wars have created a good opportunity for the company. For example, when countries engage in war the market for the aerospace and defense industries increases (Millar & Salt 2008, p. 25). General Dynamics Corporation gets contracts to manufacture and provide support to military aircraft and other machines during the crisis period. Furthermore, the company has enjoyed an opportunity of thorough support by legal systems of the US in the expansion of its operation. The growth in traffic, costs reductions, increase in frequencies and environmental responsibilities have also created an opportunity for the company to capitalize the profits in global markets and minimize training costs. Furthermore, the new airline business model is diversifying airplanes demands (DaSilva & Trkman 2014, p. 379).
Identification and Evaluation of Strategies Adopted By General Dynamics Corporation to Pursue an International Growth Opportunity Related To Emerging Economies
Product differentiation is a strategy which has been adopted by General Dynamics Corporation for international growth. According to Animesh et al.(2011, p.153) a product differentiation strategy is an approach used by business and firms to develop a product or service that is unique and customers find it better than those of competitors. Generally, the threat of new substitutes in the aerospace industry has forced companies to change or improve their existing products. The threat of substitute products is considered to be high when values preposition look different from the current offering products in the market (Fenwick et al. 2009, p. 1055).
General Dynamics Corporation has differentiated its products and services by manufacturing a wide range of products, increasing the engine capacities and increasing the capacity of its air jets. Furthermore, the company has developed a culture of developing new products when demand patterns are shifted by markets. Their products are of high quality and low prices and globally recognized. Furthermore, to handle the substitute’s threat, General Dynamics Corporation has adopted techniques of not only being services oriented but also product oriented. The corporate has also understood the core need of customers but not what customers are buying. Finally, the company has increased switching costs for its customers.
The new entrants in the aerospace industry bombards the market with innovations and pressurises General Dynamics Corporation through provision of new value prepositions to the customers, cost reductions and pricing strategy. To counter attack this force of entrant of new products in the market, General Dynamics Corporation has adopted an innovation strategy for safeguarding its competitive edge. The innovation strategy involves the use of advanced technologies in the existing products or services in order to make them attractive in the market. According to Stark (2015, p. 25) the use of modern technology has been utilized by diverse companies to develop new products that satisfy the need of customers and make the organizational operations easier.
General Dynamics Corporation has been using advanced technologies to develop new products. For example, during the Cold War period in America, the company was involved in the development of a missile that was believed to intercept enemies’ aircraft. Furthermore, their advanced features have been developed by the use of advanced technologies as the company has employed many qualified professionals to research and develop new products that are reliable and convenient for use. The research and development department has been very active in identifying new market growth and researching new technologies trends that have entered the market.
The technologies have seen the company producing services and products that adhere to the ethics of Corporate Social Responsibility (CSR). Technologies have conserved resources and the environment at the same time. For example, in 2007, airlines encountered a waste of 740 million gallons of fuel because of congestion delays (Zhang & Batterman, 2010 p. 1). The problem forced the company to innovate bigger aircrafts that emit low carbon dioxide. Furthermore, in the last 5 years, the sizes of aircraft have increased by 3 percent and General Dynamics Corporation predicts that by 2030, the aircraft will grow by 26 percent. Furthermore, the technology has assisted the company to build effective economies of scale and lowering the fixed cost per unit.
General Dynamics Corporation also adopts alliances and cooperation strategies. According to Zott & Amit (2008, p. 25) alliances and corporation strategies reduce the competition level in the market and define market segmentation. The rivalry between the existing competitors has pushed the organisation to form alliances. According to Porter (2008, p. 78) if there is intense rivalry in an industry the overall profitability in the industry decreases and prices fall.
Therefore, if the company collaborates in expanded markets rather than dwelling in small markets it curbs the challenge completely. General Dynamics Corporation has experienced success in different countries through cooperation and collaboration with competitors. Ideas and resources from different participants have assisted the company to come up with new products. The aircraft industry has used the corporation as a strategy among the competitors to encounter the contracts constraints (Holmström et al., 2010, p. 687).
This was evident during the Cold War and World War II when General Dynamics Corporation cooperated and collaborated with different competitors to create bombs. Furthermore, it is extremely technical and costly in manufacturing and designing new technologies in an aircraft. Therefore, the company has created alliances and joint partnership with other international aerospace firms in order to reduce its operating and financial risks (Garrett et al., 2009, p. 885). For example, General Dynamics Corporation has proposed to buy government IT CSRA for $6.8 billion in order to expand its Information Technology units (Cnbc 2018, p.1).
Through the decentralization and risk sharing, the company has divided various sub-assemblies to many suppliers in the market so it can increase professionalism in production. Furthermore, the company has become cost-effective and specialized in the production of a greater experience and learning curve that enhances high production capacity. For example, General Dynamics Corporation is aware of other countries with a high interest in the market and conducts various negotiations with new entrant manufacturers to have their subparts or assembly production of aircraft outsourced to them.
The formation and corporation strategy has posed a threat of being costly in terms of coordination and negotiations. Furthermore, some of the partners have used the company as a benchmark and later on implement the strategies in their companies posing a competition threat to the company. However, despite the drawbacks, the company has enjoyed reduced uncertainties, risks and have gained access to complementary resources.
General Dynamics Corporation’s Sales and Growth Opportunities
The strong bargaining power of customers has pushed General Dynamics Corporation to diversify its products. Furthermore, the more powerful and smaller the customer base of General Dynamics Corporation, the higher the ability of the company to increase offers and discounts and the higher the bargaining power of customers. For General Dynamics Corporation to tackle the bargaining power of customers, the company has strategized on building a strong customer base that will provide the firm with an opportunity of streamlining the product process and its sales.
The product lines of General Dynamics Corporation Company have been diversified. In the 1900s, the company produced its first navy submarines. For example the SS1 and Adder class or A-class submarines were developed. Furthermore, despite the rapid growth of other companies in the 1950s the company continued to improve their products to meet the demands and needs of the customers. According to Pleshko & Heiens (2008, p.108) diversification of products is determined by diverse strategies and its through Ansoff model where a company can be able to strategically devise strategies for future growth, plan and identify the growth opportunities in the competitive market.
Ansoff model matrix covers market segmentation factors and markets. In terms of products, General Dynamics Corporation has strategized on both future and current products as the company has already developed a variety of products that offer options for the customers to consider their desired products. Furthermore, cost differentials have played a great role in profit maximization and decision-making. Materials, taxes and labor costs have become cheap because of resources allocation.
The company is still in the production growth phase and has a high product development. In terms of market penetration, General Dynamics Corporation has built a good relationship and trust with the company having a good market access globally. Furthermore, General Dynamics Corporation has explored all customer segmentation strategies. The company has a strong customer base and has recently built positive consumer experience as it is ranked as the 5th defense contractor.
Conclusion
Market entry into another country requires the company to weigh between the opportunities and risks. The expansion of the company faces a lot of demands and opportunities and similar threats and risks as the aviation industry is very sensitive. A small change in economic or political climate can lead to the firm’s bankruptcy. Venturing into new economies by growing its markets and business also requires the company to take risks and develop differentiated products. Due to the increase in competition in the market, the company must increase its creativity and innovations to enhance developments of new products.
For General Dynamics Corporation to maintain the market share and expand rapidly, it must merge and collaborate with all business partners in the industry. General Dynamics Corporation is forced to collaborate by strategic alliances and joint partnership with a new entrant in the market in order to increase its market size and have a significant market share in new countries which it may decide to enter. With a great focus on capabilities and resources, General Dynamics Corporation has an ability to bring its operations on large-scale.
Furthermore, the ability to be ethical and different has increased the customer base and customer loyalty in particular. The brand trust has allowed the company to adopt high market share in the segmented industry and develop an ability to predict future market trends and plans against rivals. General Dynamics Corporation will have highly flexible expansion only if it will provide current customer demands in the industry such as high credibility, less operating costs, carbon footprints and fuel-efficiency.
References
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CNBC, 2018. General Dynamics to buy government IT contractor CSRA for $6.8 billion.
DaSilva, C.M. and Trkman, P., 2014. Business model: What it is and what it is not. Long range planning, 47(6), pp.379-389.
Fenwick, D., Daim, T.U. and Gerdsri, N., 2009. Value Driven Technology Road Mapping (VTRM) process integrating decision making and marketing tools: Case of Internet security technologies. Technological Forecasting and Social Change, 76(8), pp.1055-1077.
Garrette, B., Castañer, X. and Dussauge, P., 2009. Horizontal alliances as an alternative to autonomous production: Product expansion mode choice in the worldwide aircraft industry 1945–2000. Strategic Management Journal, 30(8), pp.885-894.
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