International Business MGMT and Country Assigned: Kuwait - Research Paper Example

International Busienss MGMT 3607: 0 Summer 2014 Country Assigned: Kuwait Kuwait country profile Introduction Kuwait history stems from a small desert community in 1700s until Al-sabah family built the first settlement (fortified) in order to carry out regional trade with neighboring tribes and conduct productive fishing in the Persian Gulf. Due to tensions with powerful Ottoman Turks groups in 1899, Al-sabah family signed a pact with Britain to oversee defense and foreign relations. Kuwait was a British protectorate from 1899 until it attained independence in 1961. Kuwait is a oil-rich country in the Gulf region and borders Saudi Arabia to the South, Iraq to the North and Iran to the East. The geographical size is about 17,818 square kilometers and the country has a constitutional monarchy, and parliamentary system since the Amir is a hereditary position and Chief of the State (Casey, 2007, p 67). Kuwait has an estimated population of about 3 million people and main language is Arabic, but English is often spoken. The country currency is the Kuwaiti Dinar and main religion is Islam, but there are Christians, Parsi and Hindus. The main ethnic divisions comprise of Kuwaitians, Arabs, South Asians and Iranians. Kuwait has experienced border disputes with Iraq and was invaded by Iraq in August, 1990 due to claims of slant-drilling on the shared Rumaila oil field, but the US-led UN coalition forces staged aerial bombardments on invading Iraq forces in Desert Storm operation. The Amir has dissolved the National Assembly five times since 2006 and the Constitutional Court was forced to annul the 2012 elections due to gridlock between the government and the legislature. PEST analysis Political environment Kuwait is a constitutional monarchy that is headed by Amir as the Chief of State and Prime minister as the head of government (CIA, 2014, 98). The parliament approves or disapproves Amir’s appointments, but the royal family has the prerogative of dissolving the parliament and calling for early elections. The legislature comprises of 50 elected seats and 16 appointed cabinet ministers. The political environment is charecterised by nepotism and hierarchy of clans, since political parties and leaders are not available, but de facto parties like Sunni, merchants, Bedouins, nationalists and Shia activists have considerable influence on the elections (CIA, p 12). Women rights, recognisation of political parties, the need for private universities and protection of the immigrant workers from abuse and arbitrary deportation are central political issues concerning Kuwait. Legal environment Kuwait has a well functioning and independent judiciary that is based mainly on Sharia. law. The Emir assigns judges and has a constitutional right to communicate sentences and issue pardons and Kuwait has not ratified the International Court of Justice treaty. The country has limited enforcement of contracts and protection of intellectual property rights (Casey, 2007, p 34). Economic environment Kuwait’s economic environment is favorable due to the sustained GDP growth rate. The country is the fourth largest global oil producer and world’s fifth in term of proven oil reserves (CIA, 2014). The GDP is estimated at US $ 200 billion with an annual growth rate of 8 percent. The country has one of the highest GDP rate per capita (43,775). The country has invested in chemical and shipbuilding industry and desalination of water plants and is expanding in to tourism and transport sectors (Casey, 2007). Economic environment and activities The oil and gas industry accounts for about 60 percent of the total GDP. The current oil production is about 2.8 million per day, but the government has initiated plans of inceasing the production to 4 million barrels per day by 2020. The industrial sectors such as mining and quarrying and hydrocarbons manufacturing such as fertilizers have experienced high expansion. The leading economic sectors that contribute to the GDP include oil and gas industry, business services, financial sector, manufacturing, real estate and transport sectors (Mongabay.com, ). Exports and imports The leading exports are oil, gas and fertilizers to countries such as United States of America, EU, China, Japan and India. The leading imports include food, cars, construction materials and clothing from countries like Saudi Arabia, Germany, China, United Arab Emirates and Germany. (Retrieved from: http://www.tradingeconomics.com/kuwait/balance-of-trade). Balance of payments and exchange rates Kuwait has maintained a positive balance of payments due to impressive inflow of foreign direct investments. The exchange rate is 0.2479 Kuwaiti dinars (kd) per US dollar and balance of payments is approximately 90.78 billion. However, the county has a 6.8 percent public debt and yield of its one-year bonds has declined to about 1.25 percent thus leading to a AA credit rating. Foreign exchange reserves stand at $ 26 billion and inflation rates are at less than 5 percent. Social environment and demographics Kuwait has an estimated population of 3.2 million people including the non-citizens. The welfare and salaries are high and citizens have favorable attitudes towards work. The country has a high number of immigrant workers and Arabic is the main language while Islam is the main religion (O’Shea and Spilling, 2010). The literacy levels stand at about 82 percent. The population growth rate is 1.88 percent while death rate stands at 2.13 people for every 1,000 people ( UN Data, 2014). The country has high social structures based on wealth and hereditary. Education is free and attendance is compulsory up to the age of fourteen years and 82 percent of the population is literate. The government has subsidy programs for services like electricity, gasoline and water (Casey, 2007). Kuwait customs divide labour according to gender, but women have started participating in meaningful employment. Technological environment Kuwait has invested heavily in modern and innovative technologies such as fossil fuels and cleaner energies. The country has initiated a metro transport system with 69 stations and has four state-owned broadcasters and satellite channel. There are private channels and implementation of electronic commerce. Cultural environment The cultural environment consists of the beliefs, norms, values, religion, language, customs and traditions to influence interactions and relationships in the society. Kuwait has a high-context culture that is conservative in nature due to observance of the traditional values such as role of women, respect for elders. The business meetings are timely and entail close relationships and greetings start with a handshake. The dress code is conservative and taboos are followed since it is inappropriate to drink or eat during Ramadan. Kuwait’s Hofstede’s country characteristics Power distance index It is extent to which citizens, and institutions accept power is unequally distributed and Kuwait a high power distance of 90 meaning that there is a high hierarchical order (Hofstede Centre, 2014). Individualism/collectivism It is the degree to which interdependence between the society members is maintained and Kuwait has a collectivism culture since there are close family relationships and major decisions are made at the family level. Kuwait has individualism score of 25, thus it is collectivism since loyalty to family, employer, and societal rules is paramount (O’Shea and Spilling, 2010). Masculine/feminine Its degree to which there is competition, sense of achievement and success in the society. Kuwait score is 40 thus meaning it is feminine since members of the society care for each other and quality of life. Conflicts are resolved through negotiation and comprise (Casey, 2007). Uncertainty avoidance index It is the extent to which members feel threatened by unknown future situations and the score is 80 thus meaning members avoid uncertainty. This means people are busy and innovations may be resisted (Hofstede Centre, 2014). Long-term orientation In this dimension, Kuwait culture has a short-term orientation since the society attaches more value to the past and present, respect for the traditions and customs and fulfillment of social obligations (Hofstede Centre, 2014). Conclusion and business suggestions on Kuwait Kuwait has an impressive economic environment, but the political environment is not stable. The country legal framework has failed in enforcing contracts and protecting intellectual property. The country must stop overreliance on the oil economy and diversify in to other sectors like fiancé, tourism and manufacturing. The country must remove its business laws in order to attract high foreign investments and increased regional commerce. References Central Intelligence Agency. (2014). ‘Middle East: Kuwait’, (web). Retrieved on 27th may, 2014 from https://www.cia.gov/library/publications/the-world-factbook/geos/ku.html. Mongabay.com. (2014). ‘Kuwait-ruling family-political system’, (web) Retrieved on 27th May, 2014 from http://www.mongabay.com/history/kuwait/kuwait- ruling_family_kuwaitpolitical_system.html. The Hofstede Centre. (2014). ‘What about Kuwait’ Retrieved on 27th May, 2014 from http://geert-hofstede.com/kuwait.html. Casey, Michael. The history of Kuwait. Cheltenham: Ashgate. 2007. O’Shea, Maria and Spilling, Michael. Kuwait. New York: Routledge. 2010. UN Data. (2014). ‘Kuwait’, (web). Retrieved on 27th may, 2014 from http://data.un.org/CountryProfile.aspx?crName=KUWAIT. Read More