Doing Business in Saudi Arabia - Assignment Example

? Doing Business in Saudi Arabia Xxxxxx Essentials of Importing and Exporting June 16, Introduction This present researchpaper is a follow up of a previous research paper that analyzed the cultural issue for American businesses doing business in the Kingdom of Saudi Arabia, which has a very distinct culture as compared to the American culture. In this regard, this present research paper will emphasize on recommendations that are based upon the analysis of Kingdom of Saudi Arabia’s viability as an opportunity for export/ import business for American businesses. The research paper will begin with a brief analysis of the significance of culture in the international business environment. Secondly, the research paper will speciffy the cultural determinants of the Kingdom of Saudi Arabia that would be important for an American business as it makes the decision as to whether or not it will do business in the country. Thirdly, the paper will specify governmental, compliance management and security requirements concerning the Kingdom of Saudi Arabia, which will feature prominently while making the decision of whether or not to do business in the country. Thirdly, the research paper will create actions steps that would be taken by an American business to initiate export/ import activities in the Kingdom of Saudi Arabia. The last part of the research paper will recommend on the governmental and private assistance and resources that an American business would utilize to streamline the initiation of the business into the Kingdom of Saudi Arabia. Significance of culture in the international business environment According to House (2012), cultures has a great influence on what kind of business can be done in a particular country and even the manner through which a business can conduct itself or the manner with which transactions can be done. For example, there a various cases whereby companies have been forced to adjust their business model in order to fit with a certain target market that has distinct culture, this is because the previous business model did not conform well to the cultural preference of this foreign country. Recent media news in the past weeks has talked about how United Kingdom’s Advertising Standards Authority, which is that advertising regulator, has banned advertisements of foreign companies for containing sexual images. One of the advertisements that were banned belongs to the American Apparel Company and it was banned because of containing inappropriate photos, which were described as overtly sexual, moreover, they objectified women, and contained images of women in vulnerable positions (Moran, 2013). The second advert that was banned was made in Australia and it featured Pamela Anderson, who is a well-known celebrity. The advert was banned in Australia and in the UK for being degrading to the female gender and sexiest (news.com.au). In general, these adverts were banned because they provoked the cultural beliefs of people in the UK and in Australia, and therefore, certain American cultural beliefs can be detrimental to an American business if it seeks to transfer the same cultural belief to another foreign country that practices a different culture. Moreover, news reports have stated that numerous companies have been forced to rebrand because of use of words that were deemed provocative and abusive to people of a different culture. House (2012) further added that in the international business environment, culture affects the way negotiation and even conflict management can be conducted. This is because different cultures promote different styles of communication, which equally affects the process of negotiation and conflict management. Key cultural determinants for the Kingdom of Saudi Arabia While making a decision as to whether to do business in Saudi Arabia or not, an American business organization would consider whether it is capable of adhering to the strict Islamic principles that not only guides the lives of the Saudi people but also the manner through, which they can conduct their business activities or commercial transactions. For example, House (2012) stated that for a company to be able to import or sell foods and drinks within the borders of Saudi Arabia the products have to receive the Halal certification, which is a mark of quality for foods and drinks that fits with Islamic principles. In the first part of the research, it was noted that Saudi people prefer to avoid uncertainties as well as unorthodox behavior, and therefore, they will be unreceptive to business organizations that import products and services that are deemed to contravene their moral standings, which are guided by Islamic principles. Therefore, the decision as to whether to do business in Saudi Arabia or not, will be determined by the nature of the products and/ or services that the American business intends to import to the country. If it contravenes Islamic teachings then Saudi officials will not even register the company. Another cultural determinant about Saudi Arabia that will influence the decision as to whether to do business in the country or not, is the fact that the Saudi culture recommend that women should at all times be below men in the hierarchical level within the society at large and within an organization. In this regard, Ali (2008) suggested that if a business organization does not entirely specialize in women products then men should take up senior positions within the organization to avoid provoking the Saudi people and their culture. The governmental, compliance management and security requirements about Saudi Arabia Among the governmental and compliance requirements that American businesses should consider while deciding as to whether to do business in Saudi Arabia or not, is the fact that they are required to establish a contact with a person or a company that will facilitate the American business representative to obtain a business visa. This is because the governmental and compliance requirements stipulate all visitors in Saudi Arabia must have a Saudi sponsor (Ali, 2008). In order to establish a company with a 100% foreign ownership, an American company will be required to obtain a license from the Saudi Arabia General Investment Authority, which issues the foreign capital investment license that allows a foreign company to invest in the country (O'Kane, 2010). Another governmental and compliance requirement for doing business in Saudi Arabia is that foreign companies should not infringe on the Intellectual Property Protections. Furthermore, imports are only limited to original or genuine products (O'Kane, 2010). In regards to security requirements, O'Kane, 2010 stated that a foreign company should not pose a danger to the security of the country through its operations, products, and/ or services. O'Kane, 2010 further stated that as part of maintaining the security of Saudi Arabia, foreign companies are not allowed to engage in businesses that deal with the manufacturing of military equipments, uniforms, and devices, manufacturing of civilian explosives, and catering to the military sector. Action steps for initiating export/ import activities in Saudi Arabia With reference to the studies conducted by Ali (2008), the first step for any company to undertake if it seeks to establish its presence in a foreign country is to conduct a market research and gauge whether their business proposition is viable in the foreign market or not. In this regard, an American company wishing to initiate export activities in Saudi Arabia should conduct a research to find out whether there is demand for the products and/or services that it intends to export to the country. Equally, an American company intending to import from Saudi Arabia should do a research and establish whether the products and/ or services it intends to import from the country are available. After conducting the market research, the American company should seek to establish contact with a local Saudi or a local Saudi company that will sponsor the business visas of the company representatives. Thirdly, the company should make a written submission to the Saudi Arabia General Investment Authority that it is willing to commit 75% of its employees will be locals. In addition, the company must show that a Saudi national owns 25% of the local company. After completing the above-mentioned steps, the American company can then begin to start looking for a convenient business location and then begin recruiting local employees. After which it can commence with the marketing process. Governmental and private assistance and resources that would be selected to streamline the initiation of business in Saudi Arabia Through the Saudi Arabia General Investment Authority, a foreign company can get government assistance as well as utilize Saudi’s government resources to obtain information about the country more so during the phase of conducting market research. Secondly, depending on the nature of the product and/ or service, the Saudi government may issue the foreign company with incentives in terms of reduced tax rate or subsidized registration fee. Ali (2008) further added that at times government allocates a portion of its land resource to foreign companies that wish to do business in Saudi Arabia. Ali (2008) stated that under that the Royal Decree M/11 of 1962, the import of goods that are intended for resale in Saudi Arabia is reserved only for Saudi Arabian businesses that are wholly owned by Saudi Arabians. Therefore, foreign companies that wish to engage in the business of import products and/ or services in Saudi Arabia can get private assistance by seeking the service of a Saudi distributor or agent that will enable the company to sell its import into the country. Additionally, foreign companies also receive assistance from private companies that help them in hiring local staffs and even conducting marketing campaigns on behalf of the foreign company. References Ali, A. (2008). Business and Management Environment in Saudi Arabia: Challenges and Opportunities for Multinational Corporations. London: Routledge House, K. (2012). On Saudi Arabia: Its People, Past, Religion, Fault Lines and Future. New York, U.S: Knopf Publications Moran, L. (2013). American Apparel slammed by Britain's ad watchdog over ‘vulnerable poses’ of website models. Retrieved from: http://www.nydailynews.com/life- style/fashion/american-apparel-ads-slammed-uk-watchdog-article- 1.1312673#ixzz2WHdm04UM. Accessed on [15.06.2013] News.com.au. UK bans raunchy, Australian-made Pamela Anderson ad; previously banned in Australia. Retrieved from: http://www.news.com.au/entertainment/uk-bans-raunchy- australian-made-pamela-anderson-ad-previously-banned-in-australia/story-e6frfmq9- 1226658189601#ixzz2WHdPjVTr. Accessed on [15.06.2013] O'Kane, M. (2010). Doing Business in Saudi Arabia. Saudi Arabia: Al-Andalus Publishing Read More