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In light of the impact of globalisation on the world economy, a type of the entry mode selected in establishing an effective international development strategy is quite critical for a successful entry in a foreign market. Nonetheless, any appropriate type of entry strategy comes with associated challenges and costs and could lead to eventual success or failure of a multinational corporation. This report analyses Dyson’s market entry strategies and the motive to explore the “less volatile” Singapore market. This analysis reveals that Dyson’s decision to place its e-car manufacturing plant in Singapore was strategic. This is despite immense criticisms from various quarters including its home country concerning the viability of this decision, taking into account the high cost of its operations, and the unfriendly business environment. However, it is evident that Dyson has specific ownership advantages that reinforce its capability to succeed in this volatile market. Apart from unique technological and innovation ability, propelled by its founder, Dyson has already a wide presence in different parts of the world creating a popularity that will be beneficial when selling its new product. Furthermore, there are specific location advantages exhibited by Singapore that will certainly work for the benefit of Dyson. Among these include availability of expertise, supply and raw materials, and access to markets. What remains for Dyson is to deploy its competitive advantages, innovative power and effective management of cultural diversity for the success of the proposed idea.
In light of the impact of globalisation on the world economy, a type of the entry mode selected in establishing an effective international development strategy is quite critical for a successful entry in a foreign market (Hollensen, 2014). This report analyses Dyson’s market entry strategies and the motive to explore the “less volatile” Singapore market. Dyson is a United Kingdom-based company best known for its vacuum cleaners and fans. Currently, it plans to spend £2bn developing a "radical" electric car. Accordingly, it has been decided that the company will break ground on its new factory in Singapore later this year with the first car scheduled to roll off the production line in 2021 (BBC, 2018). The analysis seeks to address the following questions, 1), how can the “eclectic paradigm’ be applied in Dyson’s case, 2), how Dyson can explore its competitive advantage across forein markets, 3), how Dyson can manage cultural diversity in Singapore, and 4) Dyson’s innovation Strategy. This is then followed by 5), a discussion on why Dyson is likely to succeed in its e-car innovation business and 6), benefits and limitations of building a local innovation network. The last part is the conclusion which summarizes the analysis.
2.0 Application of the “eclectic paradigm’ (OLI)Model in Dyson’s Case 2.1 OLI Model The OLI Framelwork also known as the eclectic paradigm (OLI stands for Ownership, Location, and Internalization) is a theory in economics that was first proposed by John Dunning in 1979. The ownership advantages are those particular competitive advantages harbored by an organisation that seeks to venture into an international market. On the other hand, Location Advantages refer to the advantages inherent in the identified region or country in order to undertake the value adding operations of the multinational firm. International Advantages on the other hand, refers to firm’s core competencies that reinforce its ability to internalize cross-border intermediate product markets (Ruhl, 2016). 2.2 Specific Ownership Advantages that are unique to Dyson and Underpinning its internationalisation
Indeed, Dyson has unique ownership advantages that would ultimately enhance or facilitate its success in new markets. Dyson has specific innovation and technological advantages which it has encompassed in its business to gain a technological advantage. Despite being a newcomer in the domestic appliances industry, innovation abilities have enabled Dyson to become a force to recogn and key market player in the manufacturing industry (innovation-portal.info, 2018). Through this innovation capability, Dyson has endeavoured to seek different ways of adding and creating value through design, thus changing the industry (Dyson.co.uk, 2015). Therefore, Dyson’s endeavour to produce an electric car well aligns with its mission of maintaining an innovative spirit, as well as the focus to sustain the manufacturing of different innovative products.
Kilburg, and Donohue (2011) argue that in any business, a leader plays a crucial role in determining the success or failure of the businesses’ goals. Sir James Dyson who is the founder and proprietor of Dyson Company is in himself one of the most critical resources in his firm. His agility for novelty and innovativeness has enabled to the company to cling the top position in market share while also being able to design and sustain innovative products. Innovation Portal (2018) affirms the necessity of firms to innovate, not just once but on a consistent basis for them to maintain a competitive edge. It should also be noted that currently, Dyson has a presence in more than 50 countries across the world and still maintains a 32% and 46% share in the US and UK vacuum cleaner market respectively (Innovation-portal.info, 2018).
What is more, brand image is also a critical factor in the success of new markets. Accordingly, Dyson enjoys strong brand recognition, not just in Britain but also in many other parts of the world considering that it has a presence in over 50 countries around the globe. The brand’s vaccum cleaners, fans and other electric products can easily be identified by brand name, owing to their innovative design. Interestingly, Dyson which mostly uses word of mouth in its marketing claims to sell about 70% of its products through customer recommendations and referrals (Dyson.co.uk, 2015).
2.3 Location-specific advantages that Dyson seek to exploit from Singapore
There are various location specific advantages that could have attracted Dyson into making the decision to set its plant in Singapore. Dyson’s assessment of the market revealed that Singapore was settled at due to availability of expertise, supply, and access to markets which offset the prevalent costs. The land has skilled scientists and engineers who will help the company achieve its innovative goals. Singapore has also one of the busiest ports in the world (Economic Development Board, 2017). This is a great advantage to Dyson because it can roll a car off its production lines in Singapore and within few minutes, that car would be already in the China market, Japan or Korea where the market size for electric vehicles are also significant. Furthermore, the company will be as well using the port to not only transport its electric car products but also its diverse range of products such as air purifiers, bladeless fans, vacuum cleaners to its newfound markets in China and Asia. (Geddie and Aravinda, 2018).
What is more, Despite Singapore itself not a manufacturing zone, it surrounded by neighbors who are regarded to be manufacturing hubs such as the case of Malaysia, and Philippines. Singapore’s high-tech infrastructural systems have been able to connect these manufacturing hubs with roads, railways lines and even air. Being at the center of Asia, Dyson will be at a better position to source its raw materials/components and other supplies from neighboring countries and manufacturer and assemble the electric car there (Geddie and Aravinda, 2018). Last but not least, Singapore is known to have a stable government, thus Dyson will avoid challenges associated with political instability that may disrupt business operations and economic wellbeing. Furthermore, Singapore is devoid of corruption, another advantage for Dyson since it will be able to maintain a fare working conditions.
2.4: How Dyson can explore its competitive Advantage across foreign Markets
Dyson is better known for its vacuum cleaners; however, the company has diversified in various innovative high performance products. According to Resource Based View, firms need to look inside the company for sources of competitive advantage rather looking at the environment around it (Rothaermel, 2013). RBV proponents argue that there is feasibility in exploiting external opportuning using a firm’s extant resources in a new, different way rather than trying to achieve new skills for every new opportunity. In RBV framework, a company’s existing resources plays a critical role in facilitating success and organizational performance (Jurevicius, 2013). In this regard, Dyson need to look into its capabilities and competitive advantage and how these can propel its success in the Singapore market rather than focusing on the costs, or environmental conditions of this region in its strategic decision. Subsequently, the sale of these products gives the company abnormal high returns per annum (Dyson.co.uk, 2015). Consequently, the consistently high returns have enhanced the company’s dynamic capability and or agility to venture into potential markets such as Singapore despite the cost of doing so. In other words, the company has a substantial level of resources and capabilities to move into potential but high cost markets (Sepherd, 2018).
From this analysis, it is clear that Dyson’s decision to place its e-car manufacturing plant in Singapore was strategic. This is despite immense criticisms from various quarters including its home country concerning the viability of this decision, taking into account the high cost of its operations, and the unfriendly business environment. However, it is evident that Dyson has Specific Ownership Advantages that reinforces its capability to succeed in this volatile market. Apart from unique technological and innovation ability, propelled by its founder, Dyson has already a wide presence in different parts of the world creating a popularity that will be beneficial when selling its new product. Furthermore, there are specific location advantages exhibited by Singapore that will certainly work for the benefit of Dyson. Among these include availability of expertise, supply and raw materials, and access to markets. What remains for Dyson is to deploy its competitive advantages, innovative power and effective management of cultural diversity for the success of the proposed idea.
3. Q2 How national cultural differences can bring either barriers or competitive advantages for Dyson when venturing into Singapore
3.1 National culture differences (use a model such as Hofstede between UK and Singapore)
The cultural differences between Singapore and the UK can be analysed from Hofstedes 6-D model. The findings from the model are illustrated in figure 1.1 below.
Source: Hofstede Insights (2018)
Regarding individualism vs Collectivism, Singapore scores high on collectivism (score of 89). This implies that the “we” approach is critical where people belong to families, clans, in-groups, organisations who look after each other in exchange for loyalty. This is unlike London where individualism scores high. Hierarchy is important and those below have to respect those above (Hofstede Insights, 2019). This is the same case with Long Term Orientation aspect which has a score of 72. However, unlike London, it is not easy; it is not easy for Singaporeans to strike a conversation with a total stranger (InterNations, 2018).
On the aspect of power distance, Singapore scores high on this dimension (score of 74). Singaporeans usually harbor a syncretic approach to religion, which is dominant in Singapore. The culture is based on a Confucius teaching which is distinguished through five basic relationships; husband-wife, older-brother-younger brother, father-son, ruler-subject. Most of these relationships are based on complimentary and mutual obligations. Power is centralized while managers rely on rules and on their bosses. It is expected that managers direct employees on what to do. Attitudes towards seniors are formal while control is expected (Hofstede Insights, 2019).
3.2 Barriers and competitive advantages for Dyson when venturing into Singapore
Despite a number of similarities, there are a significant number of differences between UK and Singapore culture. Much of the inherent practices and beliefs reflect the mainly Confucian ethics of the larger Chinese (InterNations, 2018). Unlike Britons, Singaporeans, often trust non-verbal messages more than the verbal word. Alongside being group dependent, Singaporeans also rely heavily on facial expression, body posture and tone of voice to read ones feelings. Furthermore, the collectivism culture is preferred in Singapore due to the assumption of mutual security, harmony, and group security. This could be an issue for Britons who largely depend on verbal communication and individualism (Commisceo Global Consulting Ltd. 2019).
While most Britons are Christians, many Singaporeans are Muslims. Therefore, there could be a conflict of association between the Britons and Singaporeans since Muslims do not shake hands with men, respect to the elderly even if the younger is the senior in a workplace, and as earlier identified, extensive use of non-verbal communication. Contact with members of the opposite sex is prohibited (Commisceo Global Consulting Ltd. 2019). This could be a problem to foreign investors.
Considered to be UKs favorite appliance maker, Dyson has a reputation for smart engineering, often with unique products. It R & D department is expansive and well equipped. Further, its premium image of design experience and vacuum products has helped in improving the brand image, which would be a selling point for the new products. This aspect is also reinforced by Dysons vast experience with electric motors at different firms. James Dyson has worked with a number of automakers ranging from heavy machinery, air conditioners, and thus he will use the experience to make a more efficient and powerful car (Steward, 2018).
3.3 Cultural diversity as an issue for international business
As businesses plan to strategize on expanding across borders while global marketplaces are also becoming highly accessible for both small and large businesses, cross-cultural and multinational teams are likewise becoming more popular. What these imply is that businesses can greatly benefit from a new, diverse knowledge base to business problems. Nonetheless, alongside the expertise, and insights, multinational organisations also face potential barriers when it comes to international and cultural business. Among the potential cultural challenges multinationals encounter in foreign markets include communication and language differences, body language perceptions, workplace behavior and etiquette, organizational hierarchy, as well as attitudes towards management (Reynolds, 2017).
Singapore is a group oriented culture hence links are mostly based on education, ethnicity or working for a particular firm. Personal relationships are the basis for all business relationships. Rank is always respected while most Singaporeans believe that a calm demeanour and being soft-spoken is superior. In most Singaporean organizations, most key decisions are made at the very senior levels, with such delegations being handed down through a chain of command. Facial expressions and body language should be taken into account. Another consideration is informal dress code even in places of work. It is not uncommon for men to wear t-shirts and a tie, while women can wear lightweight business suits (netherlandsworldwide, 2018).
3.4 Intercultural strategy
Chin, & Vasu, (2012), reiterate that the quality of intercultural relations is underscored by three main principles. The first one is the mutual acceptance and respect towards cultural pluralism This practice which is better known as Multi-cultural Hypothesis is considered to be the cornerstone in building a cohesive and harmonious intercultural ties between the foreign multinational and the local society. The second principle entails that the host nationals and the immigrants (multi-nationals in this case), face the same issues in relation to intercultural contact and cultural maintenance. Therefore, a continuous engagement strategy with members of other ethnocultural groups is quite important for a harmonious relationship. Accordingly, Dyson must incorporate and embrace Singaporean cultural aspects in its practices and management. In other words, cultural differences, individual traits and general diversity must be treated in an emphatic and non-threatening manner (Ying-Chang, 2011).
In this regard, Dyson needs to employ a multi-culturalism approach in its employment and relation and practices with the locals. “Multiculturalism”is basically an ideology that recognizes and accepts diversity in terms of religion, race/ethnicity, culture, policies or programs in a particular context (Vasu, 2012). Dysons corporate culture should incorporate the diverse demographics and cultural orientation of Singaporean people (Ying-Chang, 2011).
4. Q3 Innovation strategy adapted by Dyson
4.1 Innovation Strategy
Innovation is a process which at many times is frustrating and littered with backward steps and failures (Mazzaferro, 2018). In this regard, effective innovators are required to fuse ambition with patience in order to succeed in their endeavors (Mazzaferro, 2018). Dyson’s innovation strategy can be analysed from the perspective of a horizontal network theory. Horizontal networks connect production activities and organisation along a specific production process and or value-adding chain. Through this approach, Dysons systems and operations can be considered a hierarchical graph; fully connected and weighted graph. This graph depicts a one-dimensional structure with a long and wide range of interactions and connections between each other. The proportionality constant of the graph links does not depend on the topology but rather on the temperature, number of monomers or spring constant between the beads (Coolen, 2016). With the horizontal innovative approach, an ideal flows hierarchically, from the top, middle and then to the lowest point (Caldwell, 2017).
A long term vision over immediate expectations and determination are values have greatly helped Dyson to achieve success and competitive advantage (Board Effect, 2019). Despite the immense success of Dyson’s original cleaner, the company through its founder has continued to look for inspiration in designing new innovative products. In 2000, Dyson added another unique product to its Dyson range, a washing machine. This project turned out to be a huge commercial failure, especially in terms of production costs but as the innovator argued “each person gets knocked out” (Sepherd, 2018). Writing for the Wired, James Dyson himself spoke on the necessity for business owners to nurture a culture where failure is embraced. Dyson urged business owners that in order for them to succeed, they should not fear failure since it inspires the recovery (Caldwell, 2017).
4.2 Why Dyson is Likely to Succeed in its E-Car Innovation Endeavor
The automotive business is unfriendly especially to newcomers. In particular, there are many newcomers in the industry that have recorded failures and probably retracted. Good examples include Tesla, Fisker, Aptera, DeLorean, Elon Musks company even Apple whose automotive project flopped due to “high costs”. Producing a pro-totype that moves is one thing. Establishing an effective supply chain, building a worldwide supply chain, dealing with constant regulatory gobbledegook could be hardles to content with. Even successful automakers struggle to remain afloat (Perez, 2015).
Despite the anticipated high costs and challenges of the e-car project in Singapore, Dyson is projected to succeed due to a number of reasons. For instance, most of the firm’s products including tech-packed hairdryers, balde-free fans and vacuum cleaners are already high priced. Interestingly, people are willing to pay for them. This implies that innovative and high quality products will always find a market niche and innovative cars will be no exception. As long as the product will be unique in its kind, the company will always find willing people to buy for them. Furthermore, Dyson has a substantial number of engineers including those with automotive experience as well as an aggressive initiative to recruit experts on the same. These experts will certainly raise the prospects of the company’s goals being realised (Steward, 2018).
4.3 Benefits and Limits of Building a local innovation Network
Ahn and Kim (2017) explain that social capital is a key determinant of innovation in an organisation. According to Ahn and Kim, social capital is defined as the sum of the potential and actual resources available through, integrated within, and derived from a network of relationship exhibited by an individual or a social unit. In this regard, social capital constitutes both the assets and network which could be mobilized through a local network (Zheng, 2010).
Nevertheless, the diversity of knowledge inherent in local networks may not be sufficient for major innovations occurring with highly specialized entities such as Dayson. Specialised firms as such Dayson require occupational networks of practice consisting of experts engaged in the same operations but in different firms (Ahn and Kim, 2017). Stated differently, Dayson’s innovative project in Singapore may require input of external and even international experts and sources. Therefore, as much as local networks are critical for a firm’s innovation performance, reliance on the local network could be a disadvantage for a company such as Dyson.
The OLI Framelwork analysis shows that Specific Ownership advantages that are enjoyed by Dyson include specific innovation and technological advantages. Dyson has also massive resources and capital to enable it venture into new markets effectively. Furthermore, its diversification in different markets effectively cushions it against potential loss or failure for success in a particular new market. Dyson also enjoys strong brand recognition, not just in Britain but also in many other parts of the world considering that it has a presence in over 50 countries around the globe. Locationalise, Singapore’s advantages are mainly derived from its immense availability of expertise, supply, and access to Asian markets which offset the prevalent costs and presence of skilled scientists. Furthermore, Singapore has also one of the busiest ports in the world. This is a great advantage to Dyson because it can roll a car off its production lines in Singapore and within few minutes, that car would be already in the China market, Japan or Korea where the market size for electric vehicles are also significant. In this regard, Dyson need to look into its capabilities and competitive advantage and how these can propel its success in the Singapore market rather than focusing on the costs, or environmental conditions of this region in its strategic decision.
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