International Management
Introduction
Middle East is a very vast region and consists of several Arabian countries that provide an attractive opportunity for international businesses. The region has fast growing population of over 300 million people, comprising of various cultures, nations, religions and people. The Middle Eastern countries have managed to gain maximum attention from the world’s top multinational companies and business groups for foreign direct investment. They have incorporated abundant natural resources, backed by governmental support to privatize and expand country industries that provided the basis for international trade. The region has become an economic hub due to globalization efforts for U.S companies who pursue to become global business leaders by ensuring their presence in the region. (Kiryakos, 2010)
The region seems to be an attractive source of revenue generation and also provides an effective platform for international businesses; however it is pertinent to do some research on the region’s cultural and industrial issues before investing in it. The region comprising of six member states of Gulf Cooperation Council (GCC), has provided market opportunities for U.S companies to become trading partners with the regional business forces. Therefore, considering the potential, we will analyze the market environment from the perspective of an IT firm in one of the region’s countries, offering maximum support to our business investment needs. The region is a multicultural entity comprising of various ethnic groups, nationalities and religions due to which the foreign companies like U.S businesses need to understand these basic differences before making a business move from an investment point of view. Without cultural understanding appropriate knowledge of their business styles, it would be difficult to sustain essential business growth in the region.
Analysis
Middle East has three basic dominant religions i.e. Islam, Christianity and Judaism. Although many countries in the region are flexible to adopt variations in social norms, but they do not compromise on their basic traditional values and the custom of conservative behavior still dominates them. According to Kiryakos (2010), Saudi Arabia, UAE and Israel were in the top trading partners list of U. S. There is various factors that contribute to the growth potential for U.S. companies in the Middle East market. Some of these factors were the acceptance of Western Culture among the locals, rise in demand for U.S. products, dependency of people on the usage of Western products or brands. There had been an economic shift from predominant oil industry towards the information technology services and privatization of state-owned industries. The author mentions that the World Bank in 2009 report ranked Saudi Arabia on #13 and UAE on #33 for the ease of doing business in 181 countries. In fact, UAE became one of the world’s 10 most active business reformers as they facilitated the business start-ups by eliminating minimum capital requirement and simplifying the registration process for the first time.
There had been certain political and civil risks involved in certain countries of the region, but the two main prosperous countries of UAE and Saudi Arabia have considerably reduced these risks associated with foreign direct investment. They have opened their policies for various industries like manufacturing, finance, technology and infrastructure. Also, the privatization of various sectors has also created a huge opportunity for U.S. companies like ours to make a profitable investment in the region. Similarly, UAE has been a role model for foreign companies as the financial district making it the best developed economies of the region. Although it seems to be an attractive package for investment with its modern skyline and immaculate amenities, the country do hold certain cultural and social barriers that need to be taken seriously before starting any business. The U.S companies must know that social interaction like shaking hands are common form of greeting in business meetings, and there are different ways for treating their women, unlike the Western culture. These cultural and management differences are highlighted below to get a deep understanding of the overall differences between the two societies. (Kiryakos, 2010)
Business Management Differences
The business culture of Middle East is also versatile and varies within countries. Usual business partnerships are developed on the basis of trust and friendship so it is important to polish your social skills for maintaining cordial relations with the local businessmen. Graham Yemm, managing director of Solutions 4 Training states “You should establish a relationship first. Always accept a drink. They will always be very courteous and polite because ‘face’ matters out there almost to the same extent as China and Taiwan.” Arabs are hard to bargain and formidable to accept a trade hence negotiations and deep understanding of the contracts and offers are essential when signing a deal with them. It is important to choose the right partner for building effective relationships to create a successful business venture. (Mathews, 2013)
According to Mathew (2013), there is a basic rule by local company law for foreign business to start an investment, and that is a requirement of the local sponsor/ shareholder who must hold 51% of shares in your company. Though it does not seem to be a threat to your business ownership but there is always uncertainty of pulling out the money by local investors. One can avoid this law by investment in free trade zone.
According to Irfan (n.d), the basic regional favorite contract is signing a partnership agreement or Memorandum of Understanding that makes some less reputable local companies instantly become your business partner without any proper understanding of your business requirements and products. You would receive loads of offers and deals from local companies, but you must make sure that your partner company is in compliance with your business operating standards.
Irfan (n.d) argues that Businesses usually depend on friendships and personal contacts hence it is very essential for a new firm to find certain reliable contacts to get a suitable business partner. For that matter, Arabic language is the key to breaking the ice since Arabs are fond of their language. Thus learning their language would also help you to develop cordial relationships with them.
It is difficult to penetrate the Gulf market as their organizations are many-tiered. Without a professional intermediary or a personal business associate, you won’t be able to mark the relevant suppliers and vendors for business deals. Another barrier of doing business with Gulf is the need of patience and consistency. You need to make your schedules flexible to be adjustable with time as decisions might take longer than you expect.
Other than that certain small gestures like body language or non-verbal gestures also enable you to figure out what the opponent is depicting. It might be difficult initially to coordinate with their non-verbal attitude, but personal instincts on such matters might be helpful. You must be able to deal with their body language in person because Arabs usually prefer to deal face to face, and there is less value to your letters, documents, or emails. If not possible try to follow up with phone calls. Considering the business communication with Arabs, the key to winning a project or acceptance of your proposal is to make it simple, clear, understanding and to the point. It is because Arabs have a habit of using vague terms, depend on generalities, stories and metaphors thus you must ensure that your potential business partner understands you completely without any doubt. (Irfan, n.d)
The Middle Eastern culture is engraved in their business environment and hence needs a better understanding for effective business contacts. Islam is the building block of this society and is engraved in all the values and rules of personal, social and business relations as well. Therefore, one must conduct a basic research into the religion before doing business in the Middle Eastern Countries. For example, there are fixed prayer times during the day and if not all but many Muslims take prayer breaks during work, so you must not plan a business meeting during that time. Similarly Ramadan (an Islamic Month) is not recommended month for doing business deals since work load is less during that time. (“Doing Business”, n.d)
There is a very cordial Islamic style of meeting and greeting with “Asalamu alaykum”, but non-Muslims are exempt from saying this. Hand shake for a longer time or holding hand among men is a common gesture. Also, Arabs use informal names even in businesses and address with first name only. Similarly, the gender differences are quite defined as there is limited interaction (specifically physical) with Arab women.
Arabs always keep their personal and professional life together. There are more of family ties, personal relations, trust and honor involved in doing business. They might prioritize personal matters over a crucial business deal which might be frustrating for you. The favor must be reciprocated and not forgotten since business relationships depend on mutual trust and friendship.
An unusual cultural barrier is that Arabs give more value to someone’s spoken word rather than a written document. Word is a person’s honor whereas contracts are more of MOUs instead of fixed agreements. So you must promise what you can deliver otherwise it would ruin your relationship.
Meetings are not restricted to schedules and might take several turns. There might be no pattern or structure and punctuality is merely expected by them but they do want it from foreigners. Arabs are very good negotiators and might take time to get convinced as bureaucratic formalities might come on the way.
(“Doing Business”, n.d)
Conclusion
The Middle Eastern countries specifically Saudi Arabia and UAE are successful examples of U.S. investments. The Arabian Peninsula still holds strong grounds of economic prosperity and thus continues to allow expansion of its markets to foreign investments. The key to successful business here is adherence to the countries’ atmosphere of legal and cultural environment. There are strong growth prospects which can be utilized effectively through expert assistance and deep understanding of the cultural and traditional norms of the region. It is essential for U.S or any foreign firm to demonstrate sensitivity to cultural and social norms in order to explore business opportunities for business relationships.
References:
Doing Business. (n.d). Doing Business in the Middle East. Retrieved from
http://www.kwintessential.co.uk/etiquette/doing-business-middle-east.html
Irfan, M (n.d). 12 Tips for Doing Business in the Middle East. Retrieved from
http://www.businessknowhow.com/manage/middleeast.htm
Kiryakos, Z. (2010, Feb 22). Doing Business in the Middle East. Illinois Business Law Journal. Retrieved from http://www.law.illinois.edu/bljournal/post/2010/02/22/The-Future-of-Doing-Business-in-the-Middle-East.aspx
Mathews, D. (2013, Nov 25). Doing Business in the Middle East. Retrieved from
http://startups.co.uk/doing-business-in-the-middle-east/
