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Entry Strategies for Middle Eastern Markets

Situation Analysis

By virtue of its geographical location, the Middle Eastern market has proved to be of great investment potential. The huge energy reserves and the incessantly growing population contribute towards the advantages of this region. But despite such bright prospects, the region is unable to attract major international investors due to the prevailing political unrest.

In an endeavour to overshadow the drawbacks of the political unrest, most of the Gulf countries are introducing investor friendly legislation. The energy resources within the Middle Eastern countries act as an enticement for the international investors. The Middle Eastern countries have an Islamic culture where, during earlier years, women were not encouraged to participate in public life. But over the years the situation has changed and these countries are now following the global feminism movement. Women have started getting freedom of speech and education. There are several instances where the Middle Eastern countries have women occupy senior portfolios. By virtue of its geographical location, the region acts as a link between the East and the West. The availability of free trade zones, better transport and communication system, and business expansion across various segments have boosted the region’s reputation. Several local businesses have gone global in major sectors such as air transport, logistics, petrochemicals, and construction.

Having a favourable location is the prime concern of international investors. As such, the Middle Eastern countries are trying to remodel their cities to make them compatible with the investors’ choice. Better taxation system and low cost of running a business are the key features that are being considered by the countries. The generally used entry modes differ in their level of commitment.

Problem identification/Research questions

There are different problems pertaining to investment in the Middle Eastern countries. Some are related to the investors and the others pertain to the host countries. The investors want to invest their money in countries where there are great business prospects but minimum risk factors. Investing in any country would mean being in contact with the local people. So, the investors have to think with a social perspective as well. Considering the host countries, in order to attract the international investors, they have to offer better investment opportunities and a favourable business environment. Favourable business environment includes better taxation system, living standards, communication system, and above all, easy approach. In spite of the fact that the host countries try their best to offer the best possible services, the investors do have their own constraints.

Another problematic angle could be the entry strategies being adopted by the international investors to enter the Middle Eastern markets. There are different opportunities with different investment requirements and risk levels that can be adopted by the international investors. There are times when it becomes difficult for the investors to ascertain the risks associated with any particular entry mode. The political instability within the region is also a point of concern for the international investors in the Middle Eastern countries.

From the above discussion, and in order to have a better understanding of the problems, the following five research questions need to be answered:

  • What are the constraints that the investors have while deciding to invest in any of the Middle Eastern countries?
  • How can the Middle Eastern countries make the business environment investor friendly and beneficial for the international investors?
  • What are the different entry modes available for the international investors in the Middle Eastern countries and what are the risks associated with each of them?
  • How does the geographical location of the Middle Eastern countries contribute towards the great opportunities for international investors?
  • How can the political instability in the region hamper the Middle Eastern countries’ endeavours to attract international investors?

Objectives

Considering the aforementioned research questions, the objectives of this study will be as under:

The objectives of this study.
The objectives of this study.

Challenges/Issues/Limitations

Most of the Middle Eastern countries have Royal families at the helm of affairs. There is no such thing called ‘right to information’ in such countries. As such, most of the important information (especially the financial aspects), that might be needed for a research study like this is not available through official sources. So the researcher will have to rely on scholarly articles and journals in order to get the required information. Moreover, since the free availability of such journals and articles will be limited, the researcher will have to subscribe to some online libraries to access the literature. Considering this, the time available to complete the study might be a constraint.

Strategy/Framework

The initial research will be on the goods and services available in the Middle Eastern markets that could attract international investors. Previous experiences of investors will also be considered and if any negativity is noticed, the steps taken by the respective government in order to take care of that particular negativity will also be assessed. The role of the local organizations is also an important factor for investors. There are several local businesses (from Middle Eastern countries) that have stakes in global projects in different segments. This mounts to competition and investors will always consider this aspect. So, the researcher will also assess the competitive environment within the Middle Eastern countries. There might be a lot of opportunities being provided by the Middle Eastern countries but it is necessary to ascertain the stage of such business opportunities in the product life cycle. So, a study on the product life cycles of various goods and services will also be conducted.

The researcher will also conduct SWOT analysis to understand the strengths, weaknesses, opportunities, and threats associated with investing in the Middle Eastern countries. PESTEL analysis of the Middle Eastern markets will also form a part of the research because it is essential to ascertain the political, economic, social, technological, environmental, and legal factors that might have an impact on the businesses in the Middle Eastern countries.

The marketing mix of some of the major products and/or services will be studied in order to understand the success ratio. The importance and scope of such products/services will influence the investors’ decision.

Analysis

Answer # 1

In spite of the political turmoil within the region, some of the Middle Eastern countries are making efforts to improve their business environment. Various measures such as introducing new investor friendly legislation are being taken by such countries to woo the investors. The availability of huge energy resources is a great opportunities for the Middle Eastern countries. Considerable improvement in segments such as women education, living standards, healthcare, and infrastructure has been done to match the investors’ expectations.

The region’s geographical location is a boon for the countries as it serves as a transit point for trade between the East and the West. Better taxation system and availability of free trade zones add to the advantages for the investors in this region. The prevalence of Islamic banking in this region is yet another advantage that the investors would appreciate. A steady growth in the population can assure great prospects for the investors. The competitive environment in these countries might provide greater transparency and better technology.

Answer # 2

Advantages for products

The region is a hub for trade between the East and the West and as far as the domestic market is concerned, there ought to be a demand for various products. The region is rich in energy resources and so, oil based products might have an encouraging global demand. Due to shortage of water, most of the food products are imported and as such food products can have a good market in this region (Kumar, 2014).

Disadvantages for products

The local companies are already into the global markets and this might be a threat to the new investors because it will be tough for them to be at par with their magnitude.

Advantages for services

The growing population of the Middle Eastern countries suggests that there is a great need of better services such as private hospitals and schools. Since the population in these countries includes people from all over the world, there is a great necessity of good private schools (Adkins, 2012).

Disadvantages for services

The Middle Eastern countries follow the Islamic culture and as such, the investors might have to adopt a complete new strategy to enter the markets. Like for example, the businesses in the food industry should offer only ‘halal’ food.

Answer # 3

Due to the presence of local players, the marketing environment in the Middle Eastern countries is very competitive. But such competition also acts as an advantage for the investors because there will be transparency and equal opportunity. Most of the countries are laying stress on providing better opportunities and investor friendly environment to the investors. Even the quality of life is getting better in these countries (Rogmans, 2012).

International airports complying with the international standards make transportation easy for the investors. Better communication system in these countries is also an advantage for any investor. Since businesses require some infrastructure, these countries provide the best possible infrastructure such as homes and offices for their staff. Better taxation system and the prevalence of Islamic banking system assure good financial dealings.

Education has played a major role in the appreciation of the marketing environment. Over the years, the youth (males and females) in these countries have acquired substantial education. Investors prefer local staff (educated) so that they can have a direct link with the consumers. Moreover, the local staff will be well aware of the social culture and preferences of people. The presence of international schools guarantees better education for the children of the investors and their foreign staff. The availability of excellent entertainment facilities is also a plus point for attracting foreign investors.

But the most significant of all the factors is the political stability that these countries can offer. It is understood that the region is going through a lean patch as far as the political stability is concerned but most of them are trying their best not to allow such factors hinder the business prospects and performance.

Answer # 4

Integrated Marketing Communications (IMC) is a worldwide accepted formula for better and overall business growth. Various promotional methods are used (in synchronization) to make a marketing campaign successful. When all the departments work together towards achieving a single aim i.e. success, the results can be encouraging. Such a system can boost competitive advantage and since the Middle Eastern countries have a competitive market, the investors can benefit from such a system. IMC also helps in improving sales and profits. Today’s consumers are very smart and they need to know details of the company whose products/services they are using. IMC facilitates communication with the consumers and as such the investors can have a direct link with them and remove all inhibitions. IMC also helps in saving money because no duplication of records is required. So, IMC can definitely help the investors in their marketing ventures.

Recommendations

First of all, the investors should adopt a strategy of employing local staff so that a better rapport can be built with the consumers. The local staff will have a better understanding of the prevailing socio-cultural aspects. The local staff can even be instrumental in building awareness for the company’s products/services among the local people.

It has been observed that during political or other problems, some international companies tend to windup their business. On the contrary, it is recommended that they should face the problems and try to survive because problems don’t persist and they are bound to be solved. But once the problems are over and a company is still into business, it means that it cares for the consumers and this will leave a positive impact on their minds.

The best option during such problems is that the company should try and avoid such business that might be affected due to the prevailing problems. In other words, they should mould their strategy according to the prevailing problems. Moreover, in order to avoid any conflicts with the Islamic culture, the investors should adopt a strategy that is in accordance to the Islamic laws and beliefs.

References

Adkins, S. (2012). The Middle East market for self-paced eLearning products and services: 2011-2016 forecast and analysis. Web.

Kumar, K. (2014). Tapping Middle East potential. Web.

Rogmans, T. J. (2012). The emerging markets of the Middle East: Strategies for entry and growth. New York: Business Expert Press. Web.