How Can Midsize Western Companies Tackle The Gulf Market?

 

The Challenge

You are a midsize company with a reasonably stable home market looking to expand internationally and the Arabian Gulf keeps popping up on the radar. But what do you do? It seems like a million miles away and a very foreign culture to get you head around. How do you start?

It’s a good question because the region has proven to be highly rewarding for innovative products and services from all parts of the world.  Recent economic transformations in GCC countries including Saudi Arabia, Qatar, and the United Arab Emirates are the result of ambitious development plans and massive long term infrastructure investments intended to diversify these economies for future generations beyond petroleum export.

These efforts have created new opportunities for any number of businesses to tap into growing markets and capitalise on the region’s strategic location and vision at the crossroads of Europe, Asia and Africa.

Yet, despite the attractive prospects, many midsize companies face significant challenges finding early traction in the Gulf markets.  A lack of regional prior knowledge increases the uncertainty involved with evaluating each set of options as they appear.  Who will make the better long term partner?  Which opportunities are worth the effort ?  How do you navigate the challenging decision tree of possibilities with complex dynamics of the Gulf markets?  Cultural nuances, special business practices and regulatory requirements are but a few of the possible hurdles to surmount.   

 

What Are Some Options?

When considering expansion into the Arabian Gulf, companies have several options to choose from, each with its own set of advantages and disadvantages.

Option 1: Surf the Internet, Send cold emails, Visit the Region and Attend Trade Shows.

One approach is to do your own research then visit the region, attend trade shows and hope to build traction for the new product or service remotely.  While this approach can provide some visibility and networking opportunities, it is unlikely to yield significant results.  One of the first questions asked by trade show attendees is, “Do you have a local office? Can we meet up next week to discuss your offering further?”  If the answer to these questions involves setting up a Zoom meeting and coordinating time zones, the prospects have just diminished greatly.  Foreign companies will struggle to establish meaningful relationships with potential customers, partners, and suppliers.  Furthermore, the lack of regional expertise can lead to misunderstandings about local business and cultural practices, ultimately reducing the chances of success. 

 

Option 2: Mobilise an Employee from the Home Office.

Another option is to mobilise an employee from the home office who may or may not have local experience and who could take weeks or months to acclimate to the region.  Anecdotally, we have observed that over 50% of first-time western expats depart in the first six months of arrival, mostly due to an inability to appreciate cultural and business nuances.  The cost of maintaining a western expat in the region approximates at least $20k per month when factoring in salary, housing, school and relocation allowances, office space, flights, insurance and corporate setup charges.  Many of these expenses must be paid upfront like office and residential rents as well as school tuitions.  If the parent company is not familiar with the GCC, how does it know if it is choosing the right person to send to the Gulf in the first place? 

 

Option 3: Hire A Local Employee

Hiring a local employee can provide valuable insights into the market and business environment.  This approach, however, almost always requires the international company to have an established legal and banking presence in the particular Gulf country.  Ironically, the situation of having a local entity in order to fulfill this immediate hiring requirement is exactly what the midsize company is exploring in the first place.  Putting the cart before the horse, so to speak.  Without a local presence, companies will struggle to navigate the complexities of local labor laws, tax regulations and other requirements. Furthermore, hiring a local employee can be a time-consuming process, requiring significant effort to identify, recruit, and train the right candidate. 

 

Option 4: Retain the Services of a Global Consulting Firm

Global Consulting firms provide lengthy reports and generic template recommendations, typically based on broad industry trends and best practices.  The limitations of this approach may soon become apparent.  The reports often lack specific, actionable guidance on how to move forward, leaving companies to navigate the intricacies of the local market on their own.  Furthermore, the costs associated with hiring these brand-names multinational consultancies can be prohibitively high, especially for companies with limited budgets.  Generic consultant recommendations may not be tailored enough to the specific needs of the company or the local market, potentially leading to missteps and missed opportunities.  In some cases, the standard advice provided may even be counterproductive, failing to account for the unique cultural, regulatory and business nuances and current market conditions.

 

Stay Home Or Push Forward?

Without the requisite human capital and financial resources, many midsize companies give up without even trying.  But what if there is a way to accomplish the necessary strategic evaluation and representation without breaking the bank? 

The Build-Operate-Transfer (BOT) Concept

Instead, midsize clients should seek a more collaborative and iterative approach to business expansion in the Gulf.  Work closely with local experts, be prepared to be flexible in your ideas and then make the jump to the right location with the right personnel and the right corporate structure!  This paradigm is best synthesized by the Build-Operate-Transfer (BOT) concept.  The right BOT consultant for midsize international companies will:

 

Step 1: Build A Strategic Understanding. 

Work closely with clients to develop a comprehensive understanding of the local business environment.  This involves:
– Market and regulatory research: Conduct in-depth research to identify market trends, opportunities, and challenges in the region.
– Cultural insights: Provide clients with valuable insights into local business culture, including customs, etiquette, and communication styles.

By building a strategic understanding of the local business environment, clients are better equipped to make informed decisions and develop effective growth strategies.

 

Step 2: Operate and Implement Growth Options

Once a solid foundation has been established, work with clients to operate and implement growth options.  This involves:
– Identifying opportunities: Help clients identify optimal opportunities for growth of their specific product, possibly including new ideas and services.
– Developing strategies: Develop tailored strategies to capitalise on these opportunities, including market entry, partnerships and product development.

Experienced professionals work closely with clients to implement growth options, leveraging local expertise and network of contacts to drive success.  In effect, a “one-stop shop” for the client’s entire business needs.

 

Step 3. Transferring Operations To A Permanent Basis

When clients are comfortable and ready to make an informed commitment to the region, transfer operations to a permanent basis. This involves:
– Establishing a local presence: Help clients establish a local presence, including setting up offices, hiring staff, and registering businesses.
– Ongoing support: Offer ongoing support and guidance, ensuring that clients continue to thrive in the region.

By transferring operations to a permanent basis, clients can focus on long-term growth and success in the Arabian Gulf region, confident in their ability to succeed in the local business environment.

Your Local Gulf BOT Team

 The BOT International Team.  Nick Van Loan and Mike Campbell, the American principals of BOT, are second generation expats with over 40 years of work experience bridging Western and Gulf business cultures.  As business owners, General Managers or outside consultants, we have familiarised ourselves intimately with the required success factors in the corporate and government sectors.

Our Methodology.  After video chats, phone calls or in-person meetings, the parties will determine if there are ways in which BOT can help the client realise its regional goals.  Our services are straightforward, flexible and easy to understand.  Through monthly retainers, milestone success fees and / or bespoke charges for travel and meetings, we have solutions to meet your requirements. 

Domain Specialisation.  While we are industry-agnostic, our expertise spans various sectors, including: Construction, Contract Negotiations and Settlements, Corporate Partnering, Financial Analysis, Logistics, Targeted Investments, Technology and AI.  Moreover, clients can benefit from our network of local tax, legal and other business and industry experts. 

Next Steps.  To explore how BOT International can facilitate your success in the Arabian Gulf market, please contact us via phone (+971 50 572-9509) or email.  We look forward to hearing from you!