Dubai Logistics City Management - Essay Example

Case Analysis for DLC Dubai is the second wealthiest largest of the United Arab Emirates which consists of sevenemirates with a population of one million and two hundred thousand people. It is referred to as Switzerland of these Arab countries. It is considerably stable and extremely neutral in its political external environment. It also has no income or corporate taxes. Because of the tax concessions and harbor development, Dubai attracts foreign traders to the use of the city as a linkage between India, the West and Persia. Oil discovery in 1966 resulted in the quick growth and development of infrastructure. Its administration consists of the loyal family which always pays close attention to their economic foundation diversification. The main business opportunities place considerable focus on manufacturing, trade, processing, and on the transport and distribution which became the regional’s leading trade hub serving around two million customers all over the world. Dubai media city, Dubai Internet city and the Jebel Ali free zone were also extremely favorable to foreign investors. Foreign companies were allowed to set up free of the local ownership and would benefit from the renewable fifteen years guarantee of the absence of taxation. Foreign companies can setup free of local ownership and benefit from a renewable 15 year guarantee of no taxation. Dubai Logistics City was afterwards built, to the already existing Jebel Ali Port, like a further free region and fraction of the future prospect Dubai World Central. The Jebel Ali port, standing in a free zone allowing expansion in the future, which is a paramount consideration to the Emirates’ leader. The Dubai World Central would be used to host the all-new airport. It would make it remarkably easy to revolutionize freight from sea, air or land transportation. Jebel Ali’s location as a free region does not pose any regulatory barriers to the logistics service providers.  Adding up to these, 120+ million passengers’ capacity and twelve million airfreight tones are projected to be handled annually. During the 90’s, Dubai presented and marketed itself as one of the finest tourist destination. It was characterized by the existing internationality and the ‘easy-living’ atmosphere. In addition to these, English is extensively spoken, which makes it more attractive to foreigners and the religious issues in the country are handled liberally. Up to present times, growth in tourism has led to the booming of construction. The latest ambitious project intended is Burj Dubai. It is planned to be the highest tower worldwide in completion. Just like the Burj al Arab Hotel, it is situated on a manmade island. Around 4.9% of its current GPD came from tourism and conferences. It was mainly from the tourists attracted by the world class accommodation and the duty-free shopping. Dubai palm island development was of one of the greatest projects. It was an island made by man in the resemblance of a palm tree. It offered villas, apartments and hotels. The island's large size made it even visible from the outer space. The major focus of every decision in the country has been its development and sustainable growth. Due to its monarchial system of governance, coordination and long time planning of policies and projects it is made exceptionally possible. However, adapting to the country’s way of doing business, i.e., the Arabian style is extremely difficult to many foreign investors. In most of the negotiations, these Arab partners do not have open discussions about the positive or negative impacts of a project in question. Instead of this, they just withdraw from the negotiations involved, consider the matter at hand private and inform the alien business partners concerning their private decision later. Nevertheless, life in the country – as a model of tolerance and with its variety of different cultures – is characterized by kindness, friendliness and also by ostentation of those who are just ‘shopping’ and ‘doing businesses.’ As a matter of fact, there are some variations in the handling of foreigners compared to the native. In expatriates, whether wealthy Western executives or Asian labourers, they do not have political representation at all. Muslims make up around 50 percent of the country’s population. However; its international inhabitants and commercial ethos prevent a stringent implementation of religious rules. Its high living standards equally seem to keep out radicalism. Because of this terrorist attacks’ risks are considered relatively low. In the year 1959, Sheikh Rashid bin Saeed al-Maktoum ordered the construction of Dubai International Airport which was the first airfield in the country. The airport had a key challenge which was its construction in the middle of the city. The airport currently handles 25 million passengers and still has the possibility of expanding it to 75 million passengers. In terms of air freight, Dubai International Airport has experienced tremendous growth. Since 1999, the quantity of air freight has doubled from around 480 000 tonnes in that year to roughly 1.2 million tonnes in 2004. The existing amenities in the Dubai cargo village are well thought-out to be the best in the area, because they enable fast handling of goods and are remarkably flexible. A major advantage for developments in the country in comparison with European countries is the Sheikhs’ position to have their center of attention as the long term investment. They do not have to focus on the short term success in order to guarantee a re-election, thus, look at the long term and decide on the solutions which are most beneficial for the country in the long run. Based on the supply management institute, there are a number of relevant issues, which arise based on the development of Dubai Logical City. One is the country’s location and its historical development. Dubai’s historical development used to be slow but has now enormously accelerated in the second half of the last century. As a result of the development of the harbors and of tax concessions, the city has encouraged a lot of foreign traders, which has led to the tremendous growth in the city’s trade. In 1930s, English plane carriers were introduced to the city, extending the harbor further and adding to the city’s importance as a leading trading point. With a boom in trade, there rose a need to create new wharfs, port facilities and warehouses. These were followed by the development of more harbors in the south. In 1966, oil was discovered, leading to fast growth and infrastructure development. The rulers knew the oil would be depleted at a given point, and so diversified the country’s economic foundations. One of the diversification approaches was investing in tourism which has yielded high returns. The greatest business opportunities place considerable focus on manufacturing, trade, processing, and also on the transport and distribution, which became the region’s leading trade hub serving around two million customers all over the world. Dubai Media City, Dubai Internet City and the Jebel Ali free zone were also extremely favorable to foreign investors. Foreign companies were allowed to be set up free of the local ownership, and to benefit from the renewable fifteen years guarantee of the absence of taxation. Dubai Logistics City was afterwards built, to the already existing Jebel Ali Port, like a further free region and fraction of the future prospect Dubai World Central. Another issue is political stability. The country’s political system is neutral and stable, thus companies can be able to pursue their business, without the risk of terrorist attack or being shut down due to political instability. Transport infrastructure is also a vital issue. Transport plays another vital role in pursuing business and should be considered by the company. With the presence of large airports, suitable roads and ports at the coast, business is abundantly favored. Taxation and business restrictions are another consideration. With no taxation and conditions for foreign investors, Dubai provides a superb venue for large business. The company should consider the country’s future plans. Dubai focuses on diversifying their source of wealth and thus has a brilliant future plan. This is tremendously positive to the company because the country’s growth will also impact its growth. The suggestions based on these issues are giving a go-ahead on putting investments in the Dubai Logistics City. The factors favoring its development and growth largely outnumber those holding it back. On its implementation, the city will contribute immensely to the growth of the country, which is its principal aim. Solution for any issue which would hinder its development has been offered. The expansion space limitation issue has been tackled by proposing its location in a free region. This location ensures the city will have a place to allow its expansion even in the future. PART II 1. With the high rate of development and growth of Dubai, there rose a need for the development of Dubai Logical City. One of the reason for the development of the city was the significant operational constrains faced by the logistics service providers in cargo handling. There was an enormous growth in the amount of a cargo handled in Dubai Cargo Village Since the year 1999 the quantity of air freight has doubled from around 480 000 tonnes in that year to roughly 1.2 million tonnes in the year 2004. The existing amenities in the Dubai cargo village are well thought-out to be the best in the area, because they enable fast handling of goods and are remarkably flexible. Another reason is there is no, or just limited, capacity to handle the increasing demand for value-added logistics services. The unusual location of the airport i.e. in the heart of the city resulting to space limitation. Dubai Logistics City was afterwards built, to the already existing Jebel Ali Port, like a further free region and fraction of the future prospect Dubai World Central. The Jebel Ali port, standing in a free zone allowing expansion in the future, which is a paramount consideration to the Emirates’ leader. The Dubai World Central would be used to host the all-new airport. It would make it very easy to revolutionize freight from sea, air or land transportation. Jebel Ali’s location as a free region does not pose any regulatory barriers to the logistics service providers. Adding up to these, 120+ million passengers’ capacity and twelve million airfreight tones are projected to be handled annually. 2. There are various factors which should be put into consideration before setting up a branch of Schmidt & Partner Logistics Solutions Inc in Dubai. One factor is political stability. If the political system is neutral and stable like the case in Dubai, the company can be able to run its business without the risk of terrorist attack or being shut down due to political instability. Transport plays another vital role in pursuing business and should be considered by the company. With the presence of large airports, suitable roads and ports at the coast, business is abundantly favored. Taxation and business restrictions are another consideration. With no taxation and conditions for foreign investors, Dubai provides a superb venue for large business. The company should consider the country’s future plans. Dubai focuses on diversifying its sources of wealth and thus has a brilliant future plan. This is tremendously positive to the company because the country’s growth will also impact its growth. 3. ADVANTAGES Good political system. Having a neutral and relatively stable political system, Dubai provides an excellent working environment for foreign companies away from terrorist attacks and political instability. Geographic location. The country is located in a very great place which is remarkably close to India, some parts of African and many other Asian countries. These provide a solid platform of doing business with the rest of the world. Great transport infrastructure. Dubai provides a tremendously beneficial transport hub for cargo and passenger air traffic and also suitable roads within the country. This allows fast transportation of both cargo and passengers within the country and with the other external regions. Easy transport mode switch. It also provides easy switch between sea, road and air transport within the free trade zone allowing easy transportation. Reduced transport time. The customers can be able to respond more flexibly to arising demands and changes. Lower stock levels. This facilitates improvement of their overall resource allocation. Providing enough space. Dubai Logistics City provides enough space to establish services necessary for processing and conditioning of goods. DISADVANTAGES Stiff competition. Being aware of the enormous advantages involved in starting a logistic firm, other companies from other locations, e.g., Hong Kong or Shanghai, could develop similar logistics platforms causing high or even unhealthy competition. Extremely high temperatures. These temperatures cause a significant negative effect on horticultural products, pharmaceuticals, foods and even other goods which are temperature-sensitive. 4. Opportunities. The demand in favor of value added services as a result of a variety of customers is an immense opportunity for companies settling in Dubai Logistics City and Dubai at large. This dictates that firms will be capable of serving a better and wider market. There is also easiness in accessing these airports and thus operations are made easier. This poses a great opportunity to the companies. The absence of controls in the foreign exchange sets up another big opportunity. This is because it becomes easier and more convenient to trade using a variety of currencies making trade easier, much faster and more efficient and effective. Income tax absence is another key opportunity. It facilitates the ability of companies to save on cost of labor resulting in a great increase in profitability. Presence of advanced and improved technology offers another opportunity to companies. It means that companies can be capable of having a more advanced and automated process, thus being able to offer high standard services to clients. Risks Even with the location of Dubai Logistics City considering the presence of expansion space, there is still a very considerable potential risk in the future when one day the space gets filled so that expansions can no longer take place. This should be greatly considered as it may hinder the companies’ growth ambitions. The company might be growing and willing to expand, but the space factor is limiting them. The UAE being an Arabic country, the foreign companies may find it difficult to adapt to their Arabian styles of conducting business when they settle there. This is a significant risk that the company Schmidt and Partners’ Logistics Solutions Inc should consider putting in mind before it negatively affects their business. 5. Based on the broad review analysis provided from the research done, I would tell Peter to advise his boss to open a branch at the logistics city. Because Dubai is a liberal city without restrictions, the firm should take advantage of the standards of service to acquire an effective share of the market. Schmidt & Partner Logistics Solutions Inc should open a new branch at Dubai Logistics City. Because of these, the company will harness all the potential business opportunities lying in it and take advantage of the available services for its growth, expansion and profit optimization. Read More