- August 28, 2018
- Posted by: Waqas Siddiqui
- Category: Others
Market Entry Strategies for Business Expansion in Gulf
A market entry strategy is considered to be the most important element while expanding in the Gulf region. There are number of ways through which an international company or brand can enter the UAE or Gulf market. However, the most preferred ones in UAE are foreign direct investment (licensing & setting up a business), Joint Venture, Distribution Partners and Franchising Model. The key elements in successfully entering 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 a market research. A detailed study can help in determining the prospects of business expansion in UAE and Gulf region. Market research study includes 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 21st among 190 countries in Ease of Doing Business Index thanks to the business friendly policies of UAE government. Today, the most preferred market entry strategy for international companies is based on taking the licensing route whereby they setup 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. 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).
* Research Konnection offers all the services necessary for successful expansion in UAE and Gulf region, from conducting market research to compiling a business plan. We are familiar with local market dynamics and can assist in recommending the best market entry strategy in UAE and the Gulf region.
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 UAE and Gulf market. JV is common in UAE and the Arab world as it allows mostly North American and European countries to capitalize from 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.
One of the forms of market entry in UAE and the wider Gulf markets is through a distributors / suppliers. Companies tend to find distributors / suppliers who represent them in Gulf markets and potentially play a role of distributor, wholesaler, retailer or a value-added reseller (VAR).
Franchising is one of the most common methods of market expansion in new geographic territories. Franchising works well for companies that have strong brand reputation in 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 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 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 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 UAE to leverage its upcoming infrastructure and favorable business environment to do business.
Research Konnection is a market research company in Dubai that assists local and international companies to setup or expand businesses in the Gulf region smoothly. At Research Konnection, we specialize in Market Research, Feasibility Studies, Market Entry & Business Planning. Feel free to contact us on firstname.lastname@example.org