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Doing Business In Saudi Arabia. Outline. Country’s Overview Challenges faced by Foreign Direct Investments Hofstede’s cultural dimensions Opportunities Strength of KSA Market Entry Strategies. Country Overview. Full name : Kingdom of Saudi Arabia Population : 28 million (UN, 2011)
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Outline • Country’s Overview • Challenges faced by Foreign Direct Investments • Hofstede’s cultural dimensions • Opportunities • Strength of KSA • Market Entry Strategies
Country Overview • Full name: Kingdom of Saudi Arabia • Population: 28 million (UN, 2011) • Capital: Riyadh • Area: 2.24 million sq km (864,869 sq miles) • Major language: Arabic • Major religion: Islam • Monetary unit: 1 Riyal = 0.26 US Dollar • Main exports: Oil, Natural gas, cereals • GNI per capita: US $17,820
The Kingdom is divided into four major regions • The Western Region ( Hejaz ) which lies along the Red Sea coast • The Central Region ( Najd ) the heart of the Kingdom • The Eastern Region ( Al Hasa ) the richest of all the regions in petroleum • The Southwest Region ( Asir ) in the southern Red Sea-Yemen border area
Challenges Faced by FDI sociocultural differences: • Body language or eye contact • Culture heavily influenced by Islam • Language • Boundaries between genders
Hofstede’s cultural dimensions http://geert-hofstede.com/saudi-arabia.html
Individualism / collectivism individualistic = look out for yourself and immediate family (United States) Collectivist = strong family ties and identity in groups (Saudi Arabia) • Saudis must establish strong relationship with outsiders before engaging in business with them. Common problem: • Take a long time to get to know someone or don't rush the beginning process
Uncertainty Avoidance • US does not avoid uncertainty • Saudi Arabia avoids uncertainty • Saudi Arabians: • Keep rules and rigid codes of conduct in place • Have desire to stay to the rules • Work diligently Common problem: • Americans suggesting new ideas / methods
Power Distance • Middle eastern societies are extremely bureaucratic • Decisions are not made as quickly as in western cultures • Nonverbal communication • Handshake: right hand and wait for host to draw and withdraw hand • Men: avoid touching / looking at women • Women: Dress conservatively
Masculinity / Femininity • Both countries are masculine • Working is a key part of a person’s life • High performance in work is crucial • Motivation to want to be the best in their work Common problem: • Lack of training on how to not overpower others in a disrespectful manner
Opportunities In Saudi Arabia • Stable political system. • Islam plays a large role in its citizens’ lives. • Cultivating solid business relationships before entering into business dealings is key to your success. • Safe and secure family environment. • Well-established infrastructure.
Strength of Saudi Arabia • Strong banking system. (Stable currency) • No minimum capital requirement. • No restriction on repatriation of capital. • The ability for foreign investors to sponsor foreign employees.
Market Entry Strategies In-house training: • Enables staff to have a prior knowledge of the Middle East and have a better success when entering the new environment • Prepares employees to face international business blunders • Encourages employees to continue to study various websites, pamphlets, and books that relate to the foreign country.
Work Cited • “GeertHofstede Cultural Dimensions”.Clearly Cultural, 21 April 2009. Web. 29 January 2013. <http://www.clearlycultural.com/geert-hofstede-cultural-dimensions/individualism/>. • “Training for Overseas Effectiveness.” Central Intelligence Agency. CIA Historical Review Program, 22 Sept. 1993. Web. 24 Feb. 2013. <https://www.cia.gov/library/center-for-the-study-of-intelligence/kent-csi/vol4no4/html/v04i4a07p_0001.htm>.