Situation In Describing The Major Theories Of Interna 916238

Situationin Describing The Major Theories Of International Business A

In describing the major theories of international business and relating them to doing business in a foreign country, select one local company in Oman. Assume the role of the company’s manager preparing to invest in China. Your task is to collaborate with a consulting firm to design an investment strategy that minimizes risks related to exchange rates, chooses suitable modes of international market entry, and determines optimal international staffing policies. Your investment strategy should cover the following areas: (1) background of Oman Air, (2) currencies used for trade, (3) current exchange rate of those currencies, (4) appropriate risk hedging strategies—spot, forward, or currency swap, (5) most suitable mode of market entry, (6) the staffing policy best suited for managing international staff, and (7) a comprehensive international investment strategy based on theoretical frameworks, news, academic literature, and credible media sources.

Paper For Above instruction

Oman Air, the national airline of Oman, is a prominent player in the aviation sector known for its expansive route network, commitment to service excellence, and strategic positioning within the Gulf Cooperation Council (GCC). Established in 1993, Oman Air has grown rapidly, serving numerous international destinations and fostering strong bilateral trade and diplomatic ties, making it an influential entity in Oman’s economic landscape. Its operations exemplify a company deeply embedded in the globalized economy, with a focus on expanding its international footprint, notably through partnerships and alliances, aiming to tap into new markets such as China.

Engaging in international business, particularly investment ventures into China, necessitates thorough consideration of currency use. The Omani Rial (OMR) is internally stable within Oman, but Oman Air’s cross-border transactions primarily involve the US Dollar (USD), Euro (EUR), and regional currencies like the Saudi Riyal (SAR). For trade and investment in China, the Renminbi (RMB or CNY) becomes crucial. The RMB has undergone significant internationalization, becoming a preferred currency for bilateral trade, especially after China’s inclusion in the IMF’s Special Drawing Rights basket. As of the latest data, the USD to CNY exchange rate fluctuates around 6.4, reflecting China's economic policies and global trade dynamics.

To hedge against exchange rate risks, Oman Air must evaluate financial instruments. The spot rate provides immediate currency exchange, suitable for short-term needs but exposes the company to volatility. Currency forward contracts allow the airline to lock in an exchange rate for a future date, offering predictability and risk mitigation for planned transactions. Alternatively, currency swaps can be used for longer-term hedging, involving exchanging principal and interest in different currencies, thus managing risk over extended periods. Given the volatility of currency markets and the need for stability in large investments, forward contracts are often the most appropriate for handling transactional risks associated with entering the Chinese market.

Choosing an entry mode involves assessing control, risk, investment cost, and market profitability. Oman Air's entry into China could leverage joint ventures or strategic alliances with local Chinese airlines such as Air China or China Eastern Airlines. Such partnerships afford shared resources, local market knowledge, and reduced regulatory hurdles. Alternatively, establishing a wholly owned subsidiary is desirable for full control but entails higher risk and capital investment. Given the complexity of the aviation industry and regulatory environment in China, forming a joint venture or alliance aligns well with a risk-sharing strategy, facilitating smoother entry while managing corporate controls effectively.

Managing an international workforce requires careful staffing policy selection. For Oman Air’s China operations, a polycentric staffing policy—hiring locally to manage daily operations—would be advantageous in understanding cultural nuances and regulatory contexts. Expatriate managers from Oman can oversee strategic decisions, ensuring alignment with corporate standards. This hybrid approach minimizes cultural clashes, reduces costs associated with expatriate deployment, and enhances local acceptance. Additionally, cross-cultural training can support expatriate managers and local staff, fostering collaboration and operational efficiency.

In developing a comprehensive international investment strategy for Oman Air’s entry into the Chinese aviation market, applying theories such as the Uppsala Internationalization Model underscores the importance of gradual commitment. Beginning with exporting and licensing, then progressing to joint ventures and fully owned subsidiaries, aligns with experiential learning and risk reduction over time. Additionally, the Eclectic Paradigm asserts that ownership-specific advantages (technologies, branding), location-specific factors (market size, regulation), and internationalization benefits must be jointly considered to ensure successful market entry and sustainable growth (Dunning, 1988).

Furthermore, aligning with Porter’s Diamond framework, Oman Air should capitalize on its competitive advantages—superior service, brand identity—and leverage China’s market potential, favorable government policies, and infrastructure to build a competitive positioning. Strategic alliances with local airlines can further enhance operational capabilities, optimize routing, and coordinate marketing efforts, thus improving market penetration.

News sources, such as recent reports from the International Air Transport Association (IATA), indicate China's aviation market is experiencing rapid growth driven by increased domestic travel and expanding middle-class disposable income. The Chinese government’s policies support foreign investment in aviation, notably through liberalized ownership rules and open skies agreements, which can facilitate Oman Air's entry. Academic literature emphasizes the importance of market adaptation, emphasizing cultural understanding and compliance with China’s regulatory environment. Media reports highlight that sustainability initiatives and digital transformation are increasingly vital in the airline industry, influencing strategic planning in market entry, branding, and operational practices.

In sum, Oman Air’s strategic entry into the Chinese market involves a multifaceted approach incorporating currency risk management through forward contracts, forming joint ventures for market entry, employing polycentric staffing policies, and adopting internationalization theories to minimize risks and maximize rewards. Carefully aligning institutional and market-specific factors ensures the airline’s growth and sustainability in China’s competitive landscape. Implementing such a strategy requires constant environmental scanning and flexible adaptation to regulatory, economic, and cultural changes, ensuring Oman Air’s successful expansion and risk mitigation.

References

  • Dunning, J. H. (1988). The Eclectic Paradigm of International Production: A Review and Further Development. Journal of International Business Studies, 19(1), 1-31.
  • International Air Transport Association (IATA). (2023). China’s Aviation Market Outlook. Retrieved from https://www.iata.org
  • Porter, M. E. (1990). The Competitive Advantage of Nations. Free Press.
  • China Ministry of Commerce. (2022). Foreign Investment Policy in Aviation Industry. Retrieved from http://english.mofcom.gov.cn
  • Wang, Y., & Yu, S. (2022). Strategies for International Market Entry in Aviation. Journal of Business Strategies, 37(4), 45-59.
  • International Monetary Fund (IMF). (2023). World Economic Outlook. Retrieved from https://www.imf.org
  • United Nations Conference on Trade and Development (UNCTAD). (2022). World Investment Report. Retrieved from https://unctad.org
  • Singh, R., & Sharma, M. (2020). International Business Strategies in the Aviation Sector. Journal of International Business, 15(2), 123-137.
  • Ghemawat, P. (2001). Distance Still Matters: The Hard Reality of Global Expansion. Harvard Business Review, 79(8), 137-147.
  • Li, J., & Zhou, L. (2021). Cultural Challenges and Opportunities in Entry into China. Asian Business & Management, 20(1), 75-98.

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