Cultural Issues That Influence the Success of New Ventures in Saudi Arabia - Research Proposal Example

Cultural issues that influnece the success of new ventures in saudi arabia Chapter Introduction /Background Entrepreneurs are considered as the backbone of an economy because these small and medium enterprises constitute a significant portion of the overall economy. The size and volume of these small and medium sized businesses may look insignificant individually. However, collectively these small and medium businesses play an important role in shaping the overall economy of a country (Hatten, 2011). There are a number of challenges that an entrepreneur faces in starting and managing a new venture or a businesses (Oviatt, and McDougall, 2005). Entrepreneurs that are able to manage and cope with these challenges are successful and their ventures yield high profits and rewards for the risk they have taken. However, the ratio of successful businesses is not very high; therefore, it is imperative for an entrepreneur to make sure that he or she has completed his or her homework before starting a new business, to minimise the risks and challenges (Kuratko, 2013). There are a number of factors that can become a challenge for a new business. Among these factors, the culture and values of the society are important. Culture is defined as the shared norms and values of the people living in a society (Peng, 2009). It is critical for entrepreneurs and managers to understand the values and norms of the people living in the society (Hofstede, Hofstede & Minkov, 1991). Organisations need to understand the cultural values in society in order to make sure that they are able to formulate strategies that could meet the local values and norms of the society and people living in the society (McManus, White & Botten, 2008). The culture of one country is different from the culture of another. Therefore for entrepreneurs and business managers, it is significant to know about the values and beliefs of the people in the society. This research study will aim to analyse and identify the cultural issues and challenges that entrepreneurs face when they start a new business. The focus of this research study will be aimed at the culture of the Kingdom of Saudi Arabia, and therefore the research study will focus on different cultural issues that an entrepreneur faces when they start their new venture in Saudi Arabia. The report will identify the cultural issues that the new entrepreneurs have faced when they started their venture in the Kingdom of Saudi Arabia and how they were able to manage and cope up with these cultural issues to make their business successful. Chapter 2: Research Problem And Research Questions Understanding the culture and values of the society is one of the most important aspects of managing the business (Adler, 2001). An organisation cannot flourish if it is not able to understand the cultural values and then formulate customised strategies to meet the needs (Hill & Jain, 2007). Therefore, this research study aims to analyse and identify the impact of culture on the success of new businesses. The culture of Saudi Arabia is very different from other countries, and therefore it is critical to understand the cultural values and norms of the society. This research study therefore aims to analyse the cultural issues that entrepreneurs face when they start their new business. The research study will aim to answer the following research questions: What are the cultural factors that influence the success of new venture? What are the cultural factors that influence the success of new venture in Saudi Arabia? How are entrepreneurs able to manage the cultural issues when they start their new venture in Saudi Arabia, and what strategies have they taken to make their business successful? Chapter 3: Literature Review Entrepreneurship Entrepreneurship is defined as the process of identifying opportunities and then starting a business to capitalise on these opportunities (Kontinen and Ojala, 2011). There are different processes involved in entrepreneurship or in starting a new business. For instance, the entrepreneur needs to accumulate different required resources and then organise and manage these resources in order to capitalise on these opportunities and to achieve the objectives (Storey & Greene, 2010). When an entrepreneur is starting a new venture, the element of high risk is involved. However, if the venture is successful, then it could yield high benefits to the entrepreneur. Therefore, it is important that the entrepreneur analyse the risk to reward ratio when starting a new venture (Baker, Gedajlovic and Lubatkin, 2005). Entrepreneurship and Saudi Arabia The government of Saudi Arabia has been placing much emphasis on entrepreneurship in the last few years. Because of the focus of the government on entrepreneurship, there have been different policies and reforms introduced and implemented in the country. These reforms and policies have helped the economy to attract investors from around the world. Jonathan Ortmas stated that entrepreneurship is highly supported in Saudi Arabia. The report presented by Doing Businesses (2014) has also highlighted the growth and ease of doing business in the country. The economic condition of Saudi Arabia is improving and this has also helped in not only attracting new investors but it has also allowed and encouraged existing entrepreneurs to expand their business in the country. The economy of Saudi Arabia is the largest economy in the overall region of GCC (Capitas Group International (n.d.). Although the economy of Saudi Arabia is mainly based on oil and gas (Mongabay, 2013), however, the government has faith in the growth of new small and medium businesses. The government of Saudi Arabia identifies and analyses significant growth in the small and medium enterprises (SMEs). According to Abdulzaher (2014), the SMEs in Saudi Arabia will achieve an overall market of more than 70 billion USD by the end of 2015. Moreover, he stated that the contribution of this segment to the overall economy would grow up to 35% by 2015. The number of licensed SMEs in January, 2014 is 1.97 million. The government anticipates growth in this segment, and it is predicted that this figure would grow up to approximately 2.5 million by 2015. Therefore the government expects growth of around 0.5 million new small and medium sized businesses (Abdulzaher, 2014). Culture and its importance in international business Culture, in simpler words, is a combination of elements that has been passed down from one generation to another (Harris, Moran, & Soccorsy, 1991). The elements that are passed down include knowledge, beliefs, values, experiences, traditions, customers, ideas, and the way to look at the world i.e. perception. Culture not only plays a dominant role in the life of an individual but also in the lives of potential customers in the foreign markets. Understanding the importance of culture can significantly help an organisation to make big difference between failure and success (Ricks, 2009). A common mistake that most of the businesses make in today’s shrinking world is to assume that cultural difference does not play an essential role or is no longer significant. This faulty assumption eventually becomes a hurdle between an organisation and its desired success. Culture plays a dominant role within an organisation and can significantly impact the overall operations of an organisation. Some of the prominent impacts of culture includes; The lifecycle and phases of business Communication with the target audience Decision making process and negotiation Human resource management as well as Project management Marketing and advertisement campaign (Verbeke, 2013). There are several organisations in the world that still assume that an organisation exists to make money. To organisations that exist to make money have no consideration or importance of culture; as it does not matter to them. But in reality, culture can either help an organisation to achieve its desired goal and objective, or can become a dominant hurdle to make survival difficult (Schwartz, 1999). According to Ricks (2009), “failure to understand the culture while operating in international borders can result in serious hurdles for the survival of an organisation”. This is often the result when organisations tend to ignore culture while operating within the international borders. A million or billion dollar organisation that tends to keep culture aside can make blunders in naming a product as well as international marketing campaigns. The business decisions taken into consideration by such organisation always result in embarrassing situation and ultimately results in huge budget (Johnson, & Turner, 2010). Hofstede Cultural Hofstede Cultural analysis is used to analyse the cultural differences among countries (Hofstede, 1980). The six dimensions of Hofstede cultural analysis of Saudi Arabia are presented below: (Hofstede, 2014) The above figure shows that KSA scores high on power distance and therefore people accepts hierarchy among other members of the society. The country scores low on individualism and this shows that it is a collectivistic society and people cares for each other. The country scores above average in masculinity and therefore the society is dominated by man. It also shows that people in the country live to work. People in Saudi Arabia would like to avoid uncertainty as their score is high. Arabs score high in pragmatism and this shows that they strongly believe in their tradition and focus on achieving quick results. The country scores average on indulgence (Hofstede, 2014). It is important for an entrepreneur to understand these dimensions in order to make sure that the business or venture is successful. If the entrepreneur is not able to understand the cultural values of the society and country, then it could influence the success of the business (Hollensen, 2007). CHAPTER4: Theoretical Framework This research study aims to analyse the cultural issues that entrepreneurs face when they start a new business. The research study will be aimed to analyse and identify different factors that become hurdle for the new ventures and their success. Therefore the two variables for this research study are: Chapter5: Research Methodology It is critical to formulate a research strategy in order to answer the research questions and achieve the aims and objectives of the research study (Sekaran, 2006; Saunders, Thornhill, and Lewis, 2009). The researcher, therefore, has already formulated a research strategy to conduct this research. The researcher will use a combination of primary and secondary data collection method to collect data for this research study. The researcher will be using secondary data sources to collect information regarding the culture of Saudi Arabia and how the culture impacts the business and their success. Secondary data will also be helpful in knowing about cultural issues faced by entrepreneurs when they setup their business in KSA. Secondary research will be helpful in laying the foundation of this research and in knowing about important variables that could influence the research study. Primary data will be collected by the researcher in the form of questionnaire and interviews. The researcher aims to collect primary data from approximately 50 entrepreneurs and business managers from different industries to identify and know about the cultural issues that they face in their new business. Moreover, interviews will be collected from 3-4 entrepreneurs to know more about the research topic under study. Therefore, a combination of primary and secondary research will be used by the researcher to answer the research questions in the research study. Chapter6: Significance Of Research This research study will be highly significant for a number of users and groups. This research will identify the cultural issues that different entrepreneurs face when they setup their new business particularly in KSA. Therefore, this research report will be important for new entrepreneurs, existing entrepreneurs and investors as it will help in identifying strategies and policies that the entrepreneurs adopted in order to make their business successful. The report will also be important for the economists and business students as it will help in identifying the role of culture in the success of businesses and new ventures. Chapter 7: Timeline The research study will be completed within three months. The research expects to start this research study from April, 2014 and then it is expected to be completed by the end of June, 2014. The timeline for different works and tasks included in the research along with their expected starting date and duration are presented below: Task Duration Starting Date Ending Date Proposal 15 days 15th March, 2014 End of March, 2014 Chapter 1 : Introduction 10 days 1st April, 2014 10th April, 2014 Chapter 2: Literature Review 30 days 11th April, 2014 10th May, 2014 Chapter 3: Research Methodology 7 to 8 days 11th May, 2014 18th May, 2014 Primary data collection 30 days 1st May, 2014 30th May, 2014 Chapter 4: Analysis Chapter 15 days 1st June, 2014 15th June, 2014 Chapter 5: Conclusion 15 days 16th June, 2014 30th June, 2014 References Abdulzaher, M. (2014). Saudi Arabia sees potential in SME growth. ZAWYA, Available from http://www.zawya.com/story/Saudi_Arabia_sees_potential_in_SME_growth-ZAWYA20140223050551/ [Accessed 24th March, 2014] Adler, N.J. (2001). International Dimensions of Organizational Behavior, 4th edition. Cincinnati, South-Western College Publishing. Baker, T., Gedajlovic, E., and Lubatkin, M. (2005). A framework for comparing entrepreneurship process across nations. Journal of International Business Studies, vol. 36, pp. 492-504 Capitas Group International. (n.d.). Importance of an SME Authority for Saudi Arabia. Available from http://www.capitasgroupintl.com/Commentaries/Commentary_ImprotanceSME_KSA.pdf [Accessed 24th March, 2014] Doing Business. (2014). Saudi Arabia. Available from http://www.doingbusiness.org/data/exploreeconomies/saudi-arabia/~/media/giawb/doing%20business/documents/profiles/country/SAU.pdf [Accessed 24th March, 2014] Harris, P. R., Moran, R. T., & Soccorsy, J. (1991). Managing cultural differences. Houston, TX: Gulf Publishing Company. Hatten, T. S. (2011). Small business management: Entrepreneurship and beyond. Cengage Learning. Hill, C. W., & Jain, A. K. (2007). International business: Competing in the global marketplace. New York, NY: McGraw-Hill/Irwin. Hill, C. W., & Jain, A. K. (2007). International business: Competing in the global marketplace. New York, NY: McGraw-Hill/Irwin. Hofstede, G. (1980). Cultures Consequences: International Differences in Work- elated Values. Gulf, Houston. Hofstede, G., Hofstede, G. J., & Minkov, M. (1991). Cultures and organizations. London: McGraw-Hill. Hofstede. (2014). Saudi Arabia. Available from http://geert-hofstede.com/saudi-arabia.html [Accessed 24th March, 2014]  Hollensen, S. (2007). Global Marketing: A Decision-Oriented Approach (4rd edition). London: Pearson Education Johnson, D., & Turner, C. (2010). International Business: Themes and issues in the modern global economy. London: Routledge. Kontinen, T., and Ojala, A. (2011). International opportunity recognition among small and medium sized family firms. Journal of Small Business Management, vol. 49, no. 3, pp. 490-514 Kuratko, D. (2013). Entrepreneurship: Theory, process, and practice. Cengage Learning. McManus, J., White, D., & Botten, N. (2008). Managing global business strategies: A twenty-first-century perspective. Oxford: Chandos Mongabay. (2013). Saudi Arabia - The Economy. Available from http://www.mongabay.com/reference/country_studies/saudi-arabia/ECONOMY.html [Accessed 24th March, 2014] Oviatt, B., and McDougall, P. (2005). Toward a theory of international new ventures.’ Journal of International Business Studies, vol. 36, pp. 29-41 Peng, M. (2009). Global Strategy. Mason, OH: South-Western Cengage Learning Ricks, D. A. (2009). Blunders in international business. London: Wiley-Blackwell. Saunders, M., Thornhill, A., and Lewis, P. (2009). Research Method for Business Students. London: Financial Times Prentice Hall. Schwartz, S. H. (1999).A theory of cultural values and some implications for work. Applied psychology, vol. 48, no. 1, pp. 23-47. Sekaran, U. (2006). Research Methods for Business. NJ: John Wiley & Sons, Inc. Storey, D. J., & Greene, F. J. (2010). Small business and entrepreneurship. Financial Times Prentice Hall. Verbeke, A. (2013). International business strategy. Cambridge: Cambridge University Press. Read More