Global Food Industry Congregates in UAE - Research Paper Example

PESTLE Analysis Political UAE enjoys high political stability and a distinct combination of modern and traditional political system. The political success in the UAE economy has created a modern administrative structure and the seven emirates of UAE have consolidated their federal status to make more stable and powerful (UAE Interact). The companies operating in food industry and other industries of UAE are enjoying peaceful and stable political environment. Stable government is one of the major factors because of which UAE economy becomes one of the attractive markets for the investors. As reported by WAM, the UAE Economy Ministry is also promoting new laws to modernize the current legislative system of Gulf’s nation to make it more attractive for businesses (Xinhua). Government is actively focusing to increase food manufacturing plants in UAE and since 1994, government has invested $1.4 billion in the food industry and currently 150 plants are processing in UAE (Halliday). Halliday argued that food industry of UAE has become attractive for the supply local manufacturers and multinational companies. The strict government regulations and defined laws could be considered as a drawback however, these laws have been introduced to ensure the safety standards and they are not supposed to hinder the operations of food companies. The government of UAE does not interfere in the internal matters of the company as long as it follows the legislation. Since all government regulations are uniform for the food companies therefore, none of the company enjoys any sort of competitive advantage. Economic The business environment score of UAE has increased for 2010-2014 and the regional ranking of UAE is still at third however, global business environment ranking of UAE has declined from 27 to 25 because of the business environment of other economies have increased relative to UAE. Moreover, the projections of Economist Intelligence Unit highlighted that current economic expansion of 2010 and reforms will further improve UAE’s ranking (Zawya). Population of UAE is growing thereby, increasing customers for businesses. The current population of UAE is 8.19 million as compared to 8.07 million in 2008 and 81.9 percent of population falls in the age group of 15-59 (UAE Interact). Moreover, because of expatriate population, consumers usually like convenience food in UAE. Because of the limited agricultural industry, around 4.5 million population of UAE is relying on imported food and each year around US $3.5 to $4 billion is spent on food imports. Moreover, customers have to pay higher rates when they go to restaurants because restaurants have to use the imported material for example; executive chef of Murooj Rotana argued that hotel spends huge money to buy 5000kg to 8500kg on fruits and vegetables each month (Arabian Businesses). Income level of people in UAE has increased and it is now comparable to the income level of industrialized states however, thirty years ago, UAE was considered among the least developed nations (Shihab). Shihab also highlighted that number of working female in UAE is increasing. Therefore, the increasing number of working class has enhanced the demand of readymade food in UAE. The current financial crisis has affected UAE economy severely however, because of the naturally gifted resources, UAE has been always a hub of huge multinationals and businesses. The stable economy of UAE is being considered very attractive to operate a successful business. Sociological The increasing number of expatriates in UAE has increased the demand of convenience food. The lifestyle of consumers in UAE is also changing because the working class prefers easy-to-cook or readymade food. The increasing awareness among the consumers has increased the demand of healthy organic food (Lowe). Lowe also stated that Alyasra Food Co has started offering organic food on its 60 outlets in UAE because Mohammad Khataab, the sales manager of company believes that there is a growing demand of organic food in health conscious customers. Although the recent financial crisis has hit UAE market and spending power of consumers have also reduced however, health food is always a need and preference of consumers. The awareness of consumers to healthy life style is also encouraging the use of organic and healthy food UAE. Millions of dollars are spent to provide an excellent health care system however, still a major chunk of UAE’s population is overweight and facing obesity related problems (Saberi). To avoid such problems, the government is also motivated to promote healthy lifestyle among the people in UAE. As mentioned earlier that most of the population of UAE is between 15-59, which means that major chunk of the population comprises of people who will prefer healthy diet if get convinced. Technological UAE is an industrial economy and since the economy lacks agricultural products, therefore, it is spending huge amount of money to import food. Still more and more companies are willing to start food business in UAE. What is the reason because of which UAE food industry is very attractive for the foreign company though they know that they can face major raw material problems in UAE? Actually, the food industry of UAE is a well developed industry. The huge infrastructure and other resources along with large customer base attract the attention of foreign investors. Global Food industry largest exhibition took place in Dubai in 2009 and 75 countries participated in the exhibition with an intention to materialize opportunities in UAE food industry (Ameinfo). Government of UAE has been investing huge money to import latest technology for food processing. Food companies can find all latest food processing technologies in UAE. The restaurants and the service outlets of food companies are equipped with latest IT systems. Technology is also important when it comes to promote products and services. All kinds of Medias and communications technologies are frequently used in UAE such as internet. Legal Since Economy Ministry of UAE is planning to bring significant changes in legislation to improve business environment therefore, changes are expected in laws related to foreign investment, companies’ law, auditors’ professional regulation, arbitration, competition, certificate of origin and anti commercial fraud (UAE Interact). From the initiatives taken by UAE government, it seems that in the next few months, the legislative environment of UAE will further improve. Ministry for Agricultural Development is drafting Law No. 5 of 2009 related to organic food and it is expected that strict guidelines will be issued regarding the production of organic food in UAE, which will attract more businesses (Lowe). The current food legislation framework of UAE is very strict because most of the food consumed in UAE is imported food. To ensure halal and high quality food and to avoid unsafe practices and misleading information in UAE, companies have to consider all legislations in Health Law for example, Bylaw No 1, 4, 6 and Federal Law No 10 etc (Lexadin). If a company considers all Health Laws whilst operating in UAE, it does not face any other legal problems. The law system of UAE Food industry is uniform for all the firms operating in the industry such as all companies follow labeling, food safety and shelf life laws. On the other hand, a few differences exist when GCC countries make new agreements with UAE. UAE food industry is an attractive market for companies because UAE has no federal corporate tax and only provincial taxes are imposed. However, according to KPMG report, UAE has been ranked as having the highest statutory tax rate of 55 percent within 85 countries (Tax Foundation). Environmental Ensuring food safety and security is one of the major environmental challenges faced by the food companies in UAE. The environmental regulations related to food are imposed by the government agencies, ministries of UAE and the private sector. The major investments in UAE food industry are being made to ensure high quality and food safety standards in UAE. Bin Fahad argues that food safety warnings are increasing worldwide because of the strong association between health and food and important steps should be taken at international level to ensure food safety (UAE Interact). Ensuring high safety standards have been made necessary for the companies at every level of operation. At local steps, UAE municipalities are involved for pest control for example, in Abu Dhabi, Food and Environmental Control Centre looks after the actions of municipalities. The individual emirates agencies and the government agencies which ensure ethical and moral environmental practices in UAE include Federal Environmental Agency, Ministry of Agriculture and Fisheries, Environmental Research and Wildlife Development Agency, Department of Environment and Protected Areas and many others (Aspinall). Therefore, all food companies operating in UAE has to ensure that they are following strict social responsibility guidelines. Conclusion The PESTLE Analysis shows that UAE appears to be an attractive market to start a Diet Restaurant. The political environment of UAE is very stable and strong. Government does not interfere in the internal matters of the businesses however; industries are regulated by ministries of government. The economy of UAE is very strong however, agricultural products are very limited because of which UAE spends millions of Dirham to import food. However, the increasing population, working class women, young age group consumers and economic growth are the positive signs. The socio-cultural analysis has shown that people in UAE are facing obesity complications and awareness of people on healthy diet and food is increasing. The infrastructure and technological developments are also significantly benefiting the food companies in UAE. However, food companies have to following strict health laws and legislative framework. In addition, all food companies operating in UAE have to show social corporate responsibility by following environmental protection laws and ethical and moral values. Based on the attractive opportunities available in UAE food industry, a venture with the name HealthPoint has been proposed to run in UAE Food industry. The goal of launching this venture in UAE is to improve healthy lifestyle in UAE and to run a profitable business. Unlike other indirect competitors, we aim to offer only healthy and diet-plan based products especially to professionals, working people and those who are health conscious and avoid commercial food. Therefore, HealthPoint with its distinctive products and services will be a new business venture in UAE. Proposed Venture The UAE Food industry can be segmented into three segments including Food Retail, Food Services and Food Processing (Austrade). Company The name of the proposed company is HealthPoint. The business will be launched in UAE because UAE food industry appears to be the most attractive market. The company will be started as a partnership among the three partners. Each partner will have the same percentage of ownership in the business. In the beginning only one outlet will be opened, however, company will pursue a marketing penetration strategy and in future we have plans to open more outlets. The designed logo of the company is as follows: Products/Services HealthPoint will offer only healthy and fresh products to its customers. The goal of starting this business is to promote healthy eating life style in UAE, thereby, improving the quality of life. Although the awareness of organic food and healthy diet is already expanding into UAE however, our company aims to offer only healthy and diet-plans based products to people who always avoid commercial foods as they assume they are fattening and harmful. Our services will be unique of its kind because of the following reasons: HealthPoint is not offering food services but the value proposition of the company is to offer exclusively health and fresh products Our business aims to offer weekly diet plan packages to customers and free home deliveries will be offered to target professionals and working people The ingredients that will be used in our products will be healthy and to meet the labeling standards, all ingredients and the calories will be labeled. HealthPoint also aims to offer packaged healthy products by opening a retail outlet with the restaurant. Customers will be able to buy fresh and healthy diet like green salads, boiled vegetables etc. Bibliography Ameinfo. Global Food Industry Congregates in UAE . 25 February 2009. 3 October 2010 . Arabian Businesses. Food imports could hamper UAE development. 3 April 2008. 2 October 2010 . Aspinall, Simon. Environmental Development and Protection in the UAE. 3 October 2010 . Austrade. Food to the United Arab Emirates. 11 June 2010. 3 October 2010 . Halliday, Jess. Global food sector looks to Middle East. 19 February 2010. 3 October 2010 . Lexadin. Legislation United Arab Emirates. 2010. 3 October 2010 . Lowe, Aya. UAE: Organics taking firmer root in UAE. 24 August 2010. 2 September 2010 . Saberi, Mahmood. Fast food culture and unhealthy habits are targets on health day. 7 April 2010. 3 October 2010 . Shihab, Mohamed. Economic Development in the UAE. 3 October 2010 . Tax Foundation. Tax Policy Blog. 5 May 2006. 3 October 2010 . UAE Interact. Bin Fahd: We need to face food security challenges. 25 February 2009. 3 October 2010 . —. Government and Political System. 2010. 3 October 2010 . —. Population leaps to 8.19 million. 30 May 2010. 2 October 2010 . Xinhua. UAE mulls new laws to improve business environment. 11 April 2010. 1 October 2010 . Zawya. UAE Business Environment. 5 March 2010. 2 October 2010 . Read More