Globalization has resulted in stiff rivalry in the business world as more companies have access to the global market. Currently, a majority of the international companies have branches across the globe. Some companies have been compelled to partner to overcome competition. An example of such joint ventures is between Boeing and Strata. The joint venture has both merits and demerits to the companies. This paper will discuss the risks that Boeing is likely to face for partnering with Strata. It will also address the risks that it is liable to suffer for not partnering. The paper will also conduct a Political, economic, socio-cultural, technological and demographic (PEST-D) analysis of Abu Dhabi and explain why Boeing opted to partner with Strata.
Risks of Partnering
One risk that Boeing is likely to encounter is ruining its reputation in case the partnership goes sour. Many clients regard Boeing as a reputable company. Its partnership with Strata will lead to changes in the way that the company is managed, which might have adverse impacts on its operations. The joint venture might result in Boeing losing its autonomy (Mohr and Spekman 137). Once the partnership is agreed, the two companies will have to be involved in decision making. It means that Boeing will no longer implement projects, no matter how productive they might be, without seeking consensus from the management of Strata. Managing the daily activities of the corporation will be difficult. The partnership entails extra tracking, supervision, assessment, and reporting, which slow operations within a company.
Risks of not Partnering
Failure to partner with Strata would deny Boeing the opportunity to have access to an extensive team of technical experts. Strata is renowned for developing superior airplane components. Furthermore, Boeing will risk compromising its efficiency. The joint venture will help Boeing improve its processes by cutting down on operations expenditures and eliminating duplications. It will also be hard for Boeing to innovate (Mohr and Spekman 141). Today, a company needs to be innovative for it to compete in the airline industry. Failure to partner with Strata will reduce Boeing’s innovativeness, thus affecting its competitiveness.
Reasons Boeing Ignored the Risks of Partnership
One of the reasons Boeing chose to ignore the risks of partnering with Strata is the desire to innovate. Strata is popular for originality. Thus, the Boeing sought to benefit from the partnership by leveraging Strata’s innovativeness (Boeing.com par. 4). Another reason for disregarding the dangers of the partnership is the desire to attain a lasting steadiness. The partnership would enable Boeing to reach a wider market and enhance its operations, thus being stable (Daghestani 7). Boeing knew that the partnership would assist it to equip its workers with requisite skills. Through the partnership, the employees of Boeing would acquire skills on how to develop airplane components. Despite Strata being a new player in the advanced composite aero-structure industry, the company manufactures superior products (Haq par. 4). Thus, the employees of Boeing are likely to gain skills from their colleagues at Strata.
The government of United Arab Emirates (UAE) has implemented fiscal reforms that have enhanced economic development making the country suitable for business. Besides, UAE is celebrated for its political stability, which promotes commercial activities (Zoubir 217). Indeed, political stability in UAE has led to numerous companies opening their subsidiaries in the country.
The UAE does have not only a steady but also the second largest wealth among the Arab nations. In 2012, the country’s gross domestic production (GDP) stood at $348 billion. The economy is predicted to continue to develop in the years to come (Zoubir 221). Tourism is vital to the economy of the United Arab Emirates. Nevertheless, the country continues to divert its wealth to other areas like assembly and services divisions.
The populace of the key towns in the AE comprises emigrants. For instance, almost 80% of the people in Abu Dhabi are expatriates (Zoubir 223). Therefore, the labor is easily accessible. Additionally, the level of crime is very low in the United Arab Emirates making the country suitable for business.
The UAE has a network of numerous industrial regions. Besides, the country is dotted with multiple business parks. The UAE has modern telecommunication infrastructure, which facilitates communication between trading partners (Zoubir 225). The nation is connected by numerous airlines as well as shipping lines. Thus, it is possible for companies to reach the international market.
The United Arab Emirates is one of the nations with high population growth. The country’s population comprises foreigners from different countries worldwide. In 2010, 16% of the inhabitants consisted of foreigners who moved to the nation in search of jobs (Zoubir 227). Most immigrants hold university degrees. It means that companies can readily procure labor in the UAE.
Boeing chose to partner with Strata due to the easily available team of experts who could help it enhance its competitiveness. Additionally, the available labor market meant a reduction in operations costs. Besides, the political stability and steady economic growth in the UAE meant that Boeing would operate in the country with minimal interferences. The Boeing aimed at exploiting the development in the airline industry in the UAE to its benefit.
Boeing.com, 2012. Boeing Awards Direct Contract to Mubadala Aerospace’s Strata Facility to Produce Composite Aerostructures for 777 and 787 Dreamliner. Web. 05 March 2016. <http://www.boeing-me.com/en/featured-content/boeing-and-mubadala-announce-10-year-contract.page?>
Daghestani, Fakher 2012, Boeing in the United Arab Emirates. PDF file. 05 March 2016. <http://www.boeing.com/resources/boeingdotcom/company/key_orgs/boeing-international/pdf/UAE_backgrounder.pdf>.
Haq, Robeel, 2012. Mubadala Unit to Produce Parts for Boeing 777 and 787. Web. 05 March 2016. <http://www.arabianindustry.com/aviation/united-arab-emirates/news/2012/apr/17/mubadala-unit-to-produce-parts-for-boeing-777-and-787-1204567/>.
Mohr, Jakki and Robert Spekman. “Characteristics of Partnership Success: Partnership Attributes, Communication Behavior, and Conflict Resolution Techniques.” Strategic Management Journal 15.2 (2006): 135-152. Print.
Zoubir, Yahia. “Doing Business in … The United Arab Emirates.” Thunderbird International Business Review 41.2 (2012): 215-229. Print.