In recent years, the Middle East (particularly the Gulf Corporation Council (GCC)) has become a magnet for international companies seeking growth opportunities due to internal and external factors. Within the Middle East, massive investments have been made in all industry sectors, including healthcare, transportation, and real estate. In addition, the Middle East has seen changes such as the deregulation of state monopolies and the privatization of state companies. Added to the attractiveness of investing in the Middle East is the lack of growth in Western economies, as well as the accession of some Arab countries to the World Trade Organization (WTO), which makes it easier to do business in the region.
Companies with a presence in the Middle East have an advantage over newcomers as they are not only better placed to take advantage of new opportunities, but are also familiar with the system. However, this is not to say that newcomers cannot be just as successful; they also have the advantage that they can bring something new to the market.
Despite the change in the rules and regulations for investing, there is still a need for local partners, such as deep knowledge of the market, clients, laws, etc. it is of utmost importance. An ideal partner would be a company that has previous experience with international companies in the relevant sectors and not just a local sales agency or representative. Western organizations and government agencies can also help introduce Western companies to the Middle East by providing market data, matchmaking and the opportunity to participate in exhibitions.
Governments in the Middle East strive to attract foreign direct investors in support of national goals, such as supporting diversification efforts, technology transfer, self-sufficiency, creating job opportunities, and ultimately supporting the economy. overall national. Preference may be given to companies that agree to manufacture their products locally and use services provided locally. Some Middle Eastern governments offer incentives to foreign companies to attract foreign direct investment, including the provision of low-cost industrial land, raw materials, and energy.
Doing business in the Middle East can feel like you are taking a big leap, as the business culture is very different from that of the West. However, this applies to conducting business on any other continent and an appreciation of how things work will make the experience exciting and rewarding. It is worth mentioning that connections, whether business or family, are vital when conducting business in the Middle East. This further highlights the need to have a partner that is already well established in the region.
Some of the key challenges newcomers may face include:
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Understand business culture and market dynamics.
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Ensuring the confidence and trust of customers
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Configuring local operations
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Attract qualified talent, particularly considering the new legislation for the nationalization of the workforce
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Address the high level of competition, especially in commodity areas, and the need to have clear differentiators
To ensure a smooth entry into the Middle East market, companies must do their homework. Primarily, they should understand the region of interest from multiple perspectives (cultural, legal, political, economic, etc.) and should aim to build alliances with well-established national market players/experts. It is essential to visit the destination region at least several times to meet potential partners and carry out the necessary checks before making any contractual commitments. Extreme care must be taken in your business dealings; be tired of scrupulous businessmen or companies that claim they can work miracles.
For smooth and effective market entry, you must have:
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A complete understanding of the target market, as well as customer expectations and demands.
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A clearly defined product with after-sales support that is available locally
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A clearly defined business model
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Willingness to transfer technology and invest in the local economy
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A well-established and credible local partner with a proven track record
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A clear exit strategy
Short-term commitments are strongly discouraged, as the market favors long-term (and aspiring local) investors.
It is highly recommended to refrain from making large investments or entering into legally binding joint ventures before testing the market. It is best to take a gradual approach with calculated risk. Once engaged, remember that getting in can be easy, but getting out can be more of a challenge.
