UAE Market Entry Strategy for Business Expansion

A market entry strategy is considered to be the most important element while expanding internationally. There are many ways through which an international company or brand can enter the UAE or Gulf market. However, the most preferred UAE market entry strategy includes foreign direct investment (licensing & setting up a business), Joint Ventures, Distribution Partners and Franchising Models. The key elements in successfully entering the Gulf market are dependent on choosing the best market entry strategy.

The biggest mistake that many companies and brands make is to assume that what worked in other markets can potentially work in Gulf markets as well. Therefore, this article tends to provide an overview of different market entry strategies that international companies can consider before expanding. The article can potentially support in making strategic business decisions, ensuring that companies enter the Gulf region more efficiently and successfully.

How to enter a new market (Dubai, UAE & Gulf Countries)

The first step towards entering a new market is conducting market research. A detailed study can help in determining the prospects of business expansion in the UAE and Gulf region. The market research study includes an assessment of the current market conditions, size and trends apart from evaluating consumer needs & demand, competition and government laws & regulations. The study also indicates potential opportunities, barriers to entry, competitiveness and risk tolerance, hence enabling companies to determine whether it is worth expanding in the Gulf region.

If the research findings are positive, a detailed business plan can be formulated to explain the best market entry strategy, products/services offered, licensing regulations, location, operational & marketing strategies and the overall investment required (financial cost).

Licensing (Business Setup in UAE)

In 2018, the World Bank rated UAE 21^st among 190 countries in the Ease of Doing Business Index thanks to the business-friendly policies of the UAE government. Today, the most preferred market entry strategy for international companies is based on taking the licensing route whereby they set up their businesses in UAE and sell/offer products and services to the end users directly. It is considered to be one of the fastest and most profitable ways of expanding business in the UAE market. The majority of the companies make Dubai, the commercial capital of UAE the base to penetrate in the Gulf region, primarily to neighboring countries (KSA, Oman, Bahrain & Kuwait).

Joint Venture / Partnership

Joint ventures (JV) are a particular form of business partnership between two or more parties who agree to pool their resources and work together in the UAE and Gulf markets. JV is common in UAE and the Arab world as it allows mostly North American and European countries to capitalize on the knowledge and experience of local companies. Though JV reduces the risk associated with market and investment, it tends to reduce the flexibility of the parties and creates great imbalance, clash of cultures, leadership and identity.

Distribution Model

One of the forms of market entry in the UAE and the wider Gulf markets is through distributors/suppliers. Companies tend to find distributors/suppliers who represent them in Gulf markets and potentially play the role of distributor, wholesaler, retailer or value-added reseller (VAR).

Franchising

Franchising is one of the most common methods of market expansion in new geographic territories. Franchising works well for companies that have strong brand reputations in the country(s) of business expansion. In UAE, the franchising business model exists with Dubai and Abu Dhabi being the major franchise market. Franchising is very common in the UAE’s Food & Beverage Industry.

Investment Opportunities in UAE 

UAE has always been an investment-friendly destination, even after the introduction of Value Added Tax (VAT), which compared to other countries, is still minimal. Likewise, its attractive investment environment has been instrumental in its economic diversification making it the most preferred destination for international companies that are looking to tap into the MENA economy and wider regional economy that includes Africa and South Asia.

UAE has also developed world-class infrastructure in the form of top-quality airports, hotels, public facilities, and economic zones, which furthers its evolution as an international business destination. A robust existing framework in conjunction with such attractive rules ensures sustained economic growth of the country. It is expected that more international companies will come to the UAE to leverage its upcoming infrastructure and favorable business environment to do business.

Research Konnection is one of the leading market research companies in Dubai that assists local and international companies in setting up or expanding businesses. Contact us at hello@researchkonnection.com for research inquiries and business setup in Dubai.