Jay Jays: Fashion Outlets in the United Arab Emirates - Assignment Example

? International business United Arab Emirates (UAE) is a member of the World Trade Organization (WTO). The country has experienced high economic growth due to lenient business policies that have attracted high global trade and foreign direct investment. The business infrastructure in UAE including airports, shopping malls and port facilities are highly modernized. UAE is a preferred business and trade destination for most companies in the world. The financial system is liquid while the political environment is stable. Jay Jays will expand its market by forming a strategic alliance with fashion outlets in UAE. Table of contents 1.0 Introduction…………………………………………………………………p 4 2.0 Project description and progress…………………………………………….p 5 3.0 Business matching and networking…………………………………………p 5 4.0 Objectives of joint venture and strategic alliance……………………………p 6 5.0 Scope of business interests and details of business prospect in UAE………..p 7 6.0 Summary of opportunities and current business environment in UAE………p 7 7.0 Brief summary of doing business in UAE…………………………………....p 9 8.0 Lessons learnt…………………………………………………………………p 10 9.0 Conclusion…………………………………………………………………….p 10 10.0 Bibliography…………………………………………………………………p 12 International business 1.0 Introduction United Arab Emirates (UAE) joined the World Trade Organization in 1996 (Noack, 2007). UAE supports free trade and has maintained stable trade relations with most countries in the world. UAE has experienced high economic growth due to attractive business climate and its positioning as preferred international trade hub in the Middle East. UAE has world class airports and the busiest airports in terms of passenger traffic (Noack, 2007). More than hundred Airline Companies including British Airways, KLM, and United Airlines handle more than 50 million passengers that enter UAE years. Jebel Ali Port handles over 40 percent of cargo container and is served by more than 300 shipping companies (Noack, 2007). UAE has expanded its port facilities by 19 percent over the last few years. Several freed trade zones like Textiles and logistics in Jebel Ali Free Zone and Dubai Airport Free zone exist to serve the clothing industry (Durante & Boermeester, 2011). For instance, Dubai is the regional hub for investment in commodities like precious metals, fashion jewelllery and pearls that account for about 30 percent of UAE non-oil foreign trade. The financial markets are highly developed with many foreign banks entering the markets thus making UAE a Forex and Derivatives hub (Noack, 2007). This paper will analyze the international business environment in UAE. The paper will describe how Jay Jays can form strategic alliances with companies located in UAE through networking with companies in the clothing industry in UAE. The paper will discuss the business prospects in UAE and opportunities currently in the clothing industry in UAE. The paper will offer the advantages of doing business in UAE and recommendations for international businesses willing to venture in UAE. 2.0 Project description and progress Jay Jays is a fashion company that targets mainly the youth. The company is headquartered in Richmond, Australia and has branches in all major cities in the country and also New Zealand. The company philosophy is “freedom of expression” while the motto is to provide something new and fun. The company strength is its energetic and friendly staff that encourages the youth to push beyond the boundaries in their casual wear. The company offers pocket-friendly products like surf styles, casual basics, street wear and accessories. Jay Jays brand strives to be energetic and valuable clothing outlet. Jay Jay’s stores have increased from 116 in 2000 to 212 in 2004. The company has experienced consistent growth in revenues due to its competitive pricing model and market targeting. Jay Jays is interested in forming a strategic alliance with a major retail fashion distributor in UAE. The strategic partner will be licensed to distribute Jay Jays’ products and also produce the trademark. Jay Jays will receive a share of the profits and royalties from the license and franchise. 3.0 Business matching and networking Business matching and networking includes bringing together individuals and businesses in identifying, recognizing and creating business opportunities (Clegg, 2011). Business matching helps the company to find strategic partners, new markets and business opportunities that are unavailable within the particular country (Clegg, 2011). My role in business matching is to study the alliance’s feasibility in terms of current and prospective market share, technology and distribution network. I have to study the partner’s strengths and weaknesses including organizational structure, management styles and resource capabilities like quality of staff (Ghauri, Sinkovics & Cavusgil, 2009). I am also involved in strategic alliance contract negotiations including the terms of the alliance, the termination clauses, the payment of royalties, penalties for poor performance and arbitration procedures in case of business disputes (Clegg, 2011). I am engaged in budgeting according to the priorities of the strategic alliance and proper execution of the alliance. Business matching and networking helps companies to reduce costs in generating new prospects and integrate in new distribution channels (Todeva, 2006). The process helps the companies attain new distributors, new business landscapes and market expansion (Clegg, 2011). 4.0 Objectives of joint venture and strategic alliance A joint venture is a contractual agreement between two or more parties for the purpose of conducting a particular business (Reuer, 2004). The parties to the joint venture agree on their responsibilities and duties in the business relationship (Lamont, 2002). Parties share profits, losses and duties in the joint venture. Joint ventures allow companies to extend their market share, share their competitive strengths, access new markets which are inaccessible without partners, minimize business risks and attain tax advantages (Lamont, 2002). Strategic alliance is a business relationship between two or more companies but the companies remain independent units (Reuer, 2004). In strategic alliances, the companies agree to share resources like distribution channels, manufacturing capabilities, and technology, expertise and capital equipments. In joint ventures, the companies form a new legal independent unit. Jay Jays should enter in non-equity strategic alliance with clothing companies in UAE in order to share resources like distribution channels and expertise (Lamont, 2002). Licensing and franchising is the best entry strategy that Jay jays need to use in UAE market. Licensing agreement allows one company to market another company’s products or utilize the distribution channel in return for a fee (Reuer, 2004). Licensing will allow Jay Jays reduce the shipping costs and overcome market entry barriers. Franchise agreements allow one company to duplicate another company’s products while the company selling the franchise obtains royalty fees (Lamont, 2002). International licensing and franchising will allow Jay Jays to utilize UAE companies that clearly understand the local market. Jay Jays will receive royalties and profits from the license to UAE clothing companies. The objectives of the licensing and franchising are to expand the global market share, reduce shipping costs, overcome the entry barriers and access distribution channels in UAE (Lamont, 2002). 5.0 Scope of business interests and details of business prospect in UAE Global marketing activities are greatly influenced by the international economic environment, the cultural environment and political activity of the particular economy (Green & Keegan, 2012). The UAE clothing companies that will purchase Jay Jays license and franchise will have the autonomy to determine the pricing, distribution and promotional activities to undertake (Green & Keegan, 2012). The companies will advertise the products through televisions, newspapers and magazines that are popular with the youth market (Reuer, 2004). The companies will distribute the products in their shopping malls and outlets that are mainly located in major business cities like Dubai (Green & Keegan, 2012). The companies will have to adopt a market penetration pricing strategy in order to attract customers for the casual wear in UAE. There are few substitute products in Dubai while the purchasing power of the buyers is low due to few companies that deal in casual and funny wear (Green & Keegan, 2012). The rivalry of the established firms in Dubai is still low due to many buyers while the threat of new entrants is high since UAE is preferred by many multinationals as the best foreign investment destination (Reuer, 2004). 6.0 Summary of opportunities and current business environment in UAE There are numerous business opportunities that are not exploited in UAE. The current business environment is attractive for foreign companies wishing to enter the market. UAE has attracted more than $ 76 billion in FDI over the last 40 years. UAE is the second largest destination of FDI in Arab countries after Saudi Arabia. UAE accounts for about 12.6 percent of the total FDI in the Arab countries (Noack, 2007). UAE capital markets comprise of international banks, foreign owned banks, insurance companies, investment banks and derivative markets. The capital markets have maintained an upward trajectory despite the recent global economic crisis. The capital markets trading volume reached $ 15 billion in 2008. Capital markets liquidity is boosted by oil profits, government investments and foreign direct investments. Establishment of Dubai Regional Exchange and Dubai International Financial Centre have made UAE and emerging and attractive financial hub. UAE has a neutral foreign policy to all countries and is committed to UN principles of non-interference with sovereignty of other countries. UAE is a member of UN and Arab League of Nations (Oxford Business Group, 2010). UAE is a member of the OPEC and Gulf Cooperation Council (GCC) (Noack, 2007). UAE has cordial trade relations with many countries. Dubai Chamber of Commerce and Industry has opened many free trade zones like Jebel Ali Free Zone Authority. UAE promotes its business opportunities in foreign countries by establishing centers that provide advice of available trade opportunities to prospective investors (Oxford Business Group, 2010). UEA GDP growth has averaged 16 percent and it’s the fastest growing economy in the world (Durante & Boermeester, 2011). The country is the fourth largest in gas reserves and third largest in oil reserves. UAE is the third best re-export center after Singapore and Hong Kong since the logistics industry experiences 15 percent growth annually (Noack, 2007). Middle East fashion is experiencing a growth of 15 percent annually. The Gulf clothing market is estimated to be worth $12 billion. UAE is attracting more clothing brand and becoming more fashion conscious (Durante & Boermeester, 2011). The traditional Arab fashion sector is declining due to the new “shopping mall” culture and new commercial centers. UAE spend heavily on fashion and accessories. Most of the UAE residents live in the cosmopolitan urban centers that are characterized by global fashion culture. Other flourishing industries include banking and finance, media, transport, tourism and information technology industries (Noack, 2007). 7.0 Brief summary of doing business in UAE There are numerous reasons for doing business in UAE. The governance rankings of UAE are high since corruption in business is strictly prohibited (Alexander, 2003). There are no restrictions on capital repatriation and transfer of profits to the foreign countries (Campbell & Campbell, 2007). The labor costs are low due to availability of many qualified professionals and the international business schools that have opened campuses in UAE. The government control and regulation of the private sector is minimal (Noack, 2007). There is no direct taxation on personal incomes and corporate except for some foreign owned banks and oil companies. The custom duties are the lowest at only 4 percent while travelling and visa policies allow companies to outsource labor from other countries (Alexander, 2003). There are no trade barriers and trade quotas to restrict the level of foreign business in UAE (Campbell & Campbell, 2007). The banking system is characterized by high liquidity and competitive financing costs. The country has high living standards and embraces cosmopolitan lifestyle and cultural diversity. The political environment is stable since the government is committed to lenient economic polices. Foreign businesses are allowed 100% ownership of the professional businesses and up to 49% ownership of the limited companies registered in Dubai (Campbell & Campbell, 2007). Dubai International Financial Center offers services such as reinsurance, Islamic finance, fund registration, asset management and both investment and corporate banking (Alexander, 2003). 8.0 Lessons learnt I have learned that UAE is an attractive destination for foreign direct investments and strategic alliances due to attractive business environment. Jay Jays can expand its market share and reduce costs of entering UAE market by forming strategic alliances with retail fashion outlets in UAE. UAE government trade policies are geared at attracting foreign investments since no direct taxation of the companies. The economy of UAE will remain on the growth path due to attractive port facilities, liquid banking system and high inflow of foreign direct investments. UAE embraces cultural diversity and cosmopolitan lifestyle thus fashion spending will remain high. 9.0 Conclusion Jay Jays is a fashion company headquartered in Australia. The company is planning a global expansion in UAE. Strategic alliance with UAE fashion partners will allow the company to expand its market share and attain more profitability. Jay Jays’ competitive strength lies in its welcoming staff and new products. Jay Jays will form strategic alliances through licensing and franchising its products to major fashion companies in UAE. The business environment in UAE is attractive due to high economic growth, limitation government intervention in trade and lenient trade policies on taxation and business registration. Clothing fashion business in UAE will remain lucrative due to cultural diversity and cosmopolitan lifestyle of the population. Jay Jays will be able to increase its market share, reduce costs and attain new distribution channels through the strategic alliance. 10.0 Bibliography Alexander, N. (2003). Dubai investment & business guide. Washington, DC. International Business Publications. Campbell, D & Campbell, C. (2007). Legal aspects of doing business in the Middle East. Salzburg. Yorkhill Law Pub. Clegg, S. (2011). Strategy: theory and practice. London. Sage. Durante, L & Boermeester, S. (2011). Best of Dubai: United Arab Emirates. London. Prentice Hall. Ghauri, P., Sinkovics, R & Cavusgil, T. (2009). New challenges to international marketing. Bingley. Emerald Group Publishing Limited. Green, M & Keegan, W. (2012). Global marketing. New York. Prentice Hall. Lamont, D. (2002). Global marketing. New York. John Wiley & sons. Noack, S. (2007). Doing business in Dubai and the United Arab Emirates. New York. John Wiley & sons. Oxford Business Group. (2010). The Report Abu Dhabi 2010. Oxford. Oxford University Press. Reuer, J. (2004). Strategic alliances. Oxford. Oxford University. Todeva, E. (2006). Business networks: strategy and structure. London. Taylor & Francis. Read More