The Specifics of Saudi Arabia for Business Development - Essay Example

Blake Jones, CEO of Namaste Solar. Client Export Director of Namaste Solar. Re: Business Expansion Strategy into Saudi Arabia. : 29th January, 2012. Overview of Saudi Arabia: Saudi Arabia has a rich religious legacy pertaining to Islam, with two major Islamic centers located within its lands. Saudi Arabia has rapidly evolved into an oil-based economy with over 90% export earning driven from oil and petroleum exports. Also, Saudi Arabia is known to have 20% of the world’s proven oil resources. Its political system reflects monarchy where the head of the state and the chief of the state are same and are elected by heredity. Its political system reflects numerous weaknesses whereby research is done and sponsored but hardly implemented. Efforts to modernize the government and its agencies have been observed in Saudi Arabia where the ideology of female representation in the Consulate Council is becoming popular. Its legal system has been developed around Shariah, the Islamic principles, and all business and court transactions occur in strict compliance with these laws. Punishments for noncompliance are also decided by Islamic codes of conduct. The flag of Saudi Arabia also depicts Islamic symbolism where the Arabic script of basic religious pronouncement is written on green backdrop portraying peace and Islam. Saudi Arabia’s educational policies seemingly lack long-term planning and implementation as its nationals lack expertise and knowledge necessary for several positions in private organizations. This therefore explains the extremely high number of immigrants working in the country. Also, Saudi Arabia has recently acceded to World Trade Organization which reflects their need and demand for foreign investments in the country. Although the infrastructure facilities are being adopted and built rapidly, the adaption of latest technology is relatively slow due to lack of expertise. Economic System of Saudi Arabia: Saudi Arabia is an oil-based economy where 45% of GDP is retrieved from the exports of oil and petroleum products. The income per capita of Saudi Arabian nationals is rapidly decreasing due to the increasing population strength. Furthermore, an unemployment rate of 10.8% persists in the region due to lack of expertise. Saudi Arabia seeks diversification in its economic and business activities to survive the future needs of the country. Even though Saudi Arabia has a vast natural resource of oil, the fluctuating oil prices in the global market do not allow for steady market and economic growth. Seeing this, increasing Saudi Arabia’s concern regarding developing alternatives to dependency on oil have been noticed with a special emphasis on power generation, telecommunications, natural gas exploration and petrochemical developments. The financial system of Saudi Arabia has numerous strengths with a 44% GDP contribution being done through taxes. Low inflation and interest rates prevail in the Saudi Arabian economy, posing attraction for foreign investors. The stocks and market values of Saudi economy are also exceptionally strong. The IT sector of Saudi Arabia demands attention as it lags in development and sustenance. The process of technology adoption is relatively slower in Saudi Arabia despite increased investments being made to improve infrastructure and IT facilities in the region. Saudi Arabia has also signed parties with numerous environment preservation agreements like Ozone Layer Protection, Hazardous Wastes and Law of the Sea etc. Saudi Arabia’s efforts to shift over from an oil-based economy are pronounced more than ever. Environment protection and going green policies will rapidly encompass the Saudi Arabian territories as industrialization and foreign investments peak. Social Issues: The most pressing social issues in the region are related to human trafficking, but it needs to be noted that human trafficking incidents have been fairly low as compared to other countries. Gangs and mafias also exist in Saudi Arabia, causing several socio-economic problems like forced servitude and, in some cases, forced prostitution. Another pressing concern of social and educational nature is the lack of interest in education. Even though a university by the name of King Abdullah University of Science and Technology has been inaugurated in Saudi Arabia, the outflow of experts and graduates is fairly smaller as compared to the market need. The high population growth and low survival/job opportunities also pose serious threat to raise the poverty stricken population of Saudi Arabia. Another pressing social issue is the absence of adequate medical facilities in the region. Hospitals and healthcare institutions need to be established in order to meet the required ratio between doctors and people. Currently, the distribution of healthcare facilitators per thousand people is less than 1. Also, the percentage of people affected by obesity is also increasing and has reached an alarming rate. Healthcare facilities require attention on urgent basis. Corporate Social Responsibility Programs: I propose our company should engage operations in Saudi Arabia as power generation is one of the leading concerns of Saudi Arabia’s government. Also, as the climate of Saudi Arabia is relatively dry and sunny, our photovoltaic systems are likely to provide hundred percent efficient returns. Environment Degradation is rapidly becoming a matter of disquiet on international level, and hence our power generation mechanism has an ultimate competitive advantage in Saudi Arabia. As corporate social responsibility has become a popular phenomenon over the past few years, I propose Namaste Solar can fulfill this responsibility by promoting education and nationals’ recruitment. I suggest Namaste Solar should head training teams in universities, provide them knowledge and understanding of our mechanism and also conduct on-campus recruitments when and if required. This will not only promote education itself but also develop students’ interest in renewable green energy resources. Also, Namaste Solar can organize events in engineering universities whereby students can put forth green energy plans. If Namaste Solar finds any plan attractive and potentially worthwhile, Namaste Solar can also invest in the plan and expand its operations. As it is, Namaste Solar is delivering Corporate Social Responsibility in the form of green energy with the utilization of renewable energy resource and minimum waste. It would also provide employment opportunities in Saudi Arabia during its setup and management. Additionally, Namaste Solar can also engage in the above mentioned activities to build goodwill and favorable outlook from Saudi Arabia nationals and government. Conducting events and competitions in engineering universities will also prove to cut down part of the costs of research and development. Cultural Implications: As mentioned, Saudi Arabia is an Islamic state with heavy cultural and religious inclinations adopted thereof. Drinking and abusive behaviors are strictly prohibited in Saudi Arabia. Morality and decency with respect to clothing, communication and interpersonal interactions holds special importance. Family structures and tribal relations are exceptionally strong. Islamic practices are enacted universally; for example, the call for prayer is delivered unanimously five times a day and during Ramadan, strict avoidance from eatables and drinks is observed. In Saudi Arabia, interpersonal communications are reflectors of hospitality and warm-heartedness. Meeting warmly and exchanging gifts is considered likeable. Regarding business, Saudi Arabia’s people and government are rather slow at decision making and exceptionally skilled at bargaining. Dress etiquettes also apply whereby revealing dresses are unlikeable and generally, coat suits for men are preferred. Legal structure of the country is strong and illegal activities are punishable, at times even with a death penalty. Early intimation regarding meetings and gatherings is likeable by most. Respect for their cultural values is important as Saudi Arabia’s culture is largely driven from religion which is of utmost value in their eyes. Read More