Export and Import Industry and Business Culture in the Kingdom of Saudi Arabia - Literature review Example

Export and Import Industry and Business Culture in the Kingdom of Saudi Arabia Introduction Over the past few centuries, cross-cultural interaction has been heightened greatly by the fact that international business has increased significantly because of numerous factors of which one of them is globalization. Globalization is responsible for creating the current global business environment, of which according to Chang (2002), it can be substantiated by the fact that the current businesses’ organizational decisions are majorly influenced by factors that are external to their own environment. Chang (2002) further noted that with the continued integration of different economic blocks that is facilitated by international trade or export and import, it is imperative to perform quality business management from a cross-cultural perspective. This is because people from different cultures and countries are bound to conduct business with each other or work together, and hence for a smooth and successful business operation, cross-cultural perspective should be adopted while conducting the aforementioned business operations or interactions. This present research paper seeks to analyse the cultural perspective of doing business in a country other than the United States. The country that is selected for the analysis is the Kingdom of Saudi Arabia, which is widely revered for being the second largest Arab country in the world after Algeria, secondly it is the birth place of Islam, thirdly and most important is the fact that it currently posses the World’s largest oil reserves (House, 2012). The fact that Saudi Arabia is a key exporter of oil, of which 95% of its total exports are oil and related products, it means that American businesses as well as the government have a strategic interest in the country because of this ‘black gold’. The research paper will seek to determine the major elements and dimension of the business culture in Saudi Arabia, and how the Saudis integrate these elements and dimensions while conducting business. Thirdly, the research paper will compare the Saudis’ major elements and dimensions with those of U.S. Lastly, the research paper will determine the challenges for U.S businesses that wish to conduct business in Saudi Arabia. The major elements of the business culture in Saudi Arabia According to House (2012), the main element of the business culture in Saudi Arabia is the fact that the business culture is highly influenced and inclined towards Islamic teachings, which means that the culture mainly reflects Islamic principles that pertain to conducting business. House (2012) further added that religion is associated with every aspect of business as well as life and therefore, success in business is perceived as God’s will and failure in business is attributed to God’s own doing. Therefore, fatalism is part of the Saudis business culture. House (2012) stated that the other key element of Saudi business culture is that religious rituals are enshrined in every business process, for example, during meetings; the discussions usually refer to the Islamic teachings, and it is widely common for business premises to be surrounded with displays of Koranic texts. The major dimensions of the business culture in Saudi Arabia With reference to the studies conducted by Hofstede (2001), the Saudi Arabia dimensions of business culture are categorized into four groups that in include power distance, individualism, masculinity/ femininity, and uncertainty avoidance. According to Hofstede (2001), the dimension of power distance mainly deals with the fact that not all individuals in the society are equal and it seeks to determine the extent to which the less influential members of a society accept and expect the unequal distribution of power within the society. According to Hofstede (2001), the Saudi society has a high score of 95 on this dimension meaning that Saudi accept the hierarchical order in the business arena whereby inequalities exists, centralization is the norm, subordinates are obedient, and the preferred bosses are autocrats. The dimension of individualism expresses the extent of interdependence within a society. In individualistic societies, people tend to only show concern for themselves and immediate family members while in collective societies people show concern to the extended community. According to Hofstede (2001), the Saudi society score 25 in this dimension meaning that it is a collectivist society and members are highly loyal. The dimension of masculinity/ femininity denotes the fundamental issues that motivate individuals, the wish of becoming the best, and whether the particular society is masculine or it is feminine. According to Hofstede (2001), Saudi Arabia scores 60 on this dimension meaning that it is a masculine society and therefore, success, competition, and achievement are desired in business. The fourth dimension is uncertainty avoidance that expresses the way members of a society deals with unknown situations or the extent they feel disturbed with ambiguous situations, and whether the society has created institutions and beliefs to deal with such situations. According to Hofstede (2001), Saudi Arabia has a score of 80 for this dimension meaning that Saudis highly prefer to avoid uncertainties, and therefore, they adhere to strict behavior and beliefs, and they are intolerant to unorthodox behavior. The bar chart below presents the graphical representation of Hofstede’s cultural dimensions of Saudi Arabia. Figure 1: Graphical representation of Saudi Arabia cultural dimension scores How Saudis integrate the elements and dimensions in their business practices It was noted that the main element in Saudi’s business culture is that it is mainly entwined with Islamic teachings and the Saudis have integrated this element in their business practices by putting less pressure on their business to success because they believe in fatalism, which dictates that God decides upon the success or failure of a business. Secondly, Saudis have integrated this element of Islamic teaching in their business practices by ensuring that their practices do not violate the Islamic teachings. The dimension of power distance is integrated in the business practice of Saudis since the control of business is limited to the senior managers or the owners of the business and businesses usually have a well-established chain of command. Because of the fact that Saudi Arabia is a collectivist society, which means that Saudis are highly loyal to each other, consumers tend to show high loyalty towards specific businesses or products that are developed or sold by one of their own. Consequently, businesses apply various strategies in a bid to win customers’ loyalty and trust (Chang, 2002). It was noted that Saudi Arabia has a masculine society and this has been integrated in the Saudis business practices whereby businesses are expected to aggressively compete against each other, since achievements are highly valued and winners have a significant standing in the society (Chang, 2002). Saudis high preference of avoiding uncertainty is reflected in their business practices by the fact that they majorly prefer to deal with business that they familiar with and therefore, they are unlikely to invest in unfamiliar ventures or innovations (Chang, 2002). Secondly, Saudis businesses can easily achieve corporation because of the fact that they follow the same tents of Islamic teachings. Comparison of the major elements and dimensions between Saudi Arabia and the United States It was earlier noted that Saudi Arabia is a highly religious country that strictly adheres to Islamic teachings and therefore, Saudis business practices are inclined towards the Islamic teachings. However, according to Hofstede (2001), the United States is a multi-cultural country, which despite been majorly dominated by Christianity, it is not highly a religious state since there is a lot of secularism within the American society. Therefore, American businesses operate in an independent manner that is devoid of any religious influence. In regards to cultural dimension, Hofstede (2001) stated that the U.S has a power distance score of 40, which means that Americans do not accept hierarchical order unlike the Saudis. Moreover, they prefer equality, decentralization of power and they prefer bosses who are democrats. In terms of individualism cultural dimension, Saudi Arabia score 25 and according to Hofstede (2001) the U.S has a score of 91 meaning that it is highly an individualistic society where people have deep concern for themselves and immediate family members only, while the Saudi society is collectivistic. In regards to the dimension of masculinity/ femininity, Hofstede (2001) indicated that Saudi Arabia has a score of 60 while the U.S has a score of 63, meaning that both countries are masculine society and therefore, they have high preference for competition, success, and achievement. Pertaining to uncertainty avoidance, Hofstede (2001) indicated that Saudi Arabia has a score of 80 while the U.S has a score of 46. This means that while Saudis highly prefer to avoid uncertainties, the Americans prefer uncertainty meaning that they are open to new ideas, love unfamiliar challenges, and are willing to invest in innovative ideas and new business ventures. The bar chart below presents the graphical comparison of the U.S and Saudi Arabia’s cultural dimensions. Figure 1: Graphical comparison of the U.S and Saudi Arabia’s cultural dimension scores Challenges for U.S businesses that wish to venture in the Saudi Arabian market One of the main challenges that U.S businesses will face in the Saudi Arabian market is the strict adherence of Islamic teachings to business practices, since it will be hard for such businesses to integrate the Islamic teachings because they are not enshrined in the American culture and even business practices. Secondly, Americans business will face challenges in meeting the management requirements in Saudi Arabia, which calls for an autocratic leadership style while Americans normally practice the democratic leadership style. Thirdly, since the Saudis prefer avoiding uncertainties, it means that U.S businesses, which are not common to the Saudi community, will face numerous difficulties while seeking to prosper in the market due to low acceptance by the Saudis. References Chang, H. (2002). Globalization, Economic Development and the Role of the State. London: Zed Books Publications Hofstede, G. (2001). Culture's Consequences: Comparing Values, Behaviors, Institutions and Organizations across Nations. (2nd edition). U.S: SAGE Publications, Inc House, K. (2012). On Saudi Arabia: Its People, Past, Religion, Fault Lines and Future. New York, U.S: Knopf Publications Read More