Introduction
Companies use different strategies to accelerate their growth and increase market share in other countries, for example, the expansion of operations. The strategy requires the top management team to discuss viable oversee markets. The essential points discussed are the country’s culture, politics, laws and regulations, infrastructure, and others that influence business operations. The management agreed to expand the company to the United Arab Emirates (UAE) after proposing it. This paper aims to evaluate the UAE’s history, cultural taboos, demographics, system of government, competitive environment, transportation network, and other factors that can affect business.
The UAE Brief History
The United Arab Emirates (UAE) is a country in the Middle East that has experienced an increased economic, political, and population growth rate for the last 20 years. The country is comprised of seven emirates, including Abu Dhabi, Fujairah, Ras al-Khaimah, Umm al-Quwain, Dubai, Ash Shariqah, and Ajman. The UAE’s economic growth is attributed to oil, which is the major source of revenue. The government focuses on technology development in major cities attracting international investors and immigrants and leading to its population growth. The country is ranked among the most developed countries globally because of its technology and well-established infrastructure which promote businesses.
Current Business Climate
Cultural taboos, business practices, protocols, and appointments are important factors that influence the UAE’s current business climate. Meeting with new partners and coworkers is common practice in businesses. In the UAE, one has to use the right hand to shake other people’s hands, eat, and make gestures. Emiratis consider the left hand unclean and discourage its use interpersonally. Finger-pointing in the UAE is not taken kindly unlike in the western culture where only in certain situations the habit is considered rude (Global Negotiator). Swearing or spitting is unacceptable when talking to people in the country or walking in the streets. Speaking with respect is valuable among the UAE citizens and helps establish a strong relationship with them. Equally, they can interpret spitting behavior as very offensive behavior directed at them. Emiratis do not eat, drink, or smoke during the day when it is Ramadan. Even non-Muslims in the country are encouraged to fast and break after the sunset. Moreover, alcohol consumption is only permitted in licensed places or at home.
The day of worship in the country for all residents is Friday, regardless of whether an individual is a Muslim or not because Islam is the national religion. Therefore, business days in the UAE are from Sunday to Thursday. Private companies in the UAE adopt split or straight shifts in their operations. Issuance of business cards and networking are notable features in the country’s business environment (Global Negotiator). Parties exchange business cards during their initial contact using their right hands. Emiratis accentuate personal connections’ strength, and they acknowledge that it takes considerable time to establish lasting relationships.
It is essential to be on time in case of an appointment, even though punctuality is not deep-rooted in the UAE, like in the western business culture. Chances of appointment cancellation without prior notice in the country are very high (Global Negotiator). When a business appointment is honored, one should observe the status and address people using their appropriate titles when greeting them. A short and light handshake is a common form of greeting among men when introducing themselves (Global Negotiator). However, the protocol does not encourage any physical contact with women, which is a courtesy gesture.
Negotiation is inevitable in businesses, and the first goal of the UAE’s process is to establish trust. The approaches used should be clear and reliable to generate confidence. Emiratis focus on large orders’ unit value when negotiating prices, and when they get it, they try to apply that even to small quantities. Emiratis can take time to make a decision when negotiating something. They prefer a faster execution of everything once they have made decisions.
Distribution Channels
Companies operating in the UAE have various options for distributing their products to customers, ranging from e-commerce to direct sales. Nevertheless, the case is different for foreign companies because most of them use local commercial partners for distribution. E-commerce distribution channels in the country are growing at a high rate because of increased mobile device proliferation, internet accessibility, and more social media sales channel (International Trade Administration). Notably, Emiratis are increasingly shopping online for their day-to-day products.
An e-commerce alternative uses agents or distributors with resources and potential to sell and distribute their goods to consumers. A strategy is an instrumental tool for avoiding costs needed to establish a country’s physical presence and leverage expertise. Local agents must be UAE nationals or companies established in the country and owned by Emiratis as required by law. Foreign companies can also sign an agreement with local distributors to ensure that their products reach consumers. Direct marketing and joint venture are also options that foreign companies can use to sell and distribute their products to customers. However, these channels are highly regulated by the government to protect local businesses.
UAE Technology
The UAE is among the countries advanced in technology in the world. According to Arafat et al., the country is ranked among the top 20 most advanced digital economies in the world (95). Automation of activities and artificial intelligence play a significant role in how the UAE economy operates. UAE launched the Digital Wealth Initiative and Dubai Internet of Things (IoT) strategy to be the most advanced IoT ecosystem internationally.
The UAE’s readiness for e-commerce is significantly high because of the Internet coverage, digital devices such as smartphones, and social media use. The increasing usage of smartphones can be attributed to the devices’ dropping prices, making them more affordable. The country has among the fastest internet at very low prices globally, contributing to the rise in social media use. More than 96 % of the UAE population uses different social media platforms, including Facebook, YouTube, Twitter, Instagram, and others (International Trade Administration). Most companies in the country use these platforms for marketing their products and services.
Infrastructure
The UAE has a well-developed and extensive road network that links major cities. It is ranked among the countries with the most advanced infrastructure and was ranked number one during the 2017-2018 World Economic Forum (Tabrez). Major highways in the UAE are assigned the prefix “E,” standing for Emirates. E11, E311, and E611 are three roads that are parallel, and the one you chose depends on the particular city are you want to go to. E11 is the longest highway in UAE, with more than 558 kilometers, going through all Emirates apart from Fujairah. E311 begins at Al Shamkha in UAE capital city and passes through Dubai city’s outer area, Ajman and Umm Al Quwain. E611 is approximately 110 kilometers and bypasses active regions of major cities in the country. Other important highways in the UAE include E84, E44, E66, E77, E55, E20, E22, and others.
The UAE has numerous ports that facilitate sea transportation of goods in and outside the country. Its major ports include Port Rashid, Port of Jebel Ali, Port Saeed, Khalifa Port, Port Khalid, Zayed Port, and Port Khor Fakkan. Other ports that help in water transportation are Umm al-Qaiwain Port, Fujairah Port, Das Island, and Ajman Port. Infrastructure for air transportation is also vital for businesses (Miller and Verhoeven 15). The major airports in UAE are Dubai International Airport and Abu Dhabi International Airport, the home of Etihad Airways and Emirates, the largest airlines in the region. UAE has several railway networks such as Dubai Metro for heavy rail transportation, the Dubai tram, which operated in Dubai Marina, and Dubai Trolley, running a tourist attraction (Miller and Verhoeven 15). Etihad Rail is a major railway network in UAE that stretches for about 1200, linking all of the Emirates.
The UAE Government and Legal System
The type of government in the UAE is complex, comprising presidential, federal, and autocratic monarchy. Seven different monarchies, including the Emirates of Abu Dhabi, Fujairah, Ras al-Khaimah, Umm al-Quwain, Dubai, Ash Shariqah, and Ajman, constitute the UAE federation (Miller and Verhoeven 7). The head of state is the president, who is also Abu Dhabi’s ruler. The prime minister, who also rules Dubai, heads the UAE government. The federal powers in the country are divided into three branches, legislative, executive, and judiciary (Aly Khedr). The UAE government’s key responsibilities include defense and security, education, public health, labor relations, banking and currency, and foreign affairs.
The legal system comprises Sharia, civil as well as common laws. Codified legislations in the country are a mixture of civil laws and Islamic laws and are used to meet evolving local and international business needs that constitute the civil law system. Sharia laws are derived from the Holy Koran, Ijma, Sunah, and analogous Qiyas (Aly Khedr). The laws influence businesses in the UAE because of such principles as profit and loss sharing, and interest prohibition. The government respects the rule of law and allows courts to handle all cases fairly without executive or legislative interference. The president, and the constitution, assure respect for judicial bodies and judges and value the pursuance of justice.
Required Documentation
Most businesses in the UAE operate as a Limited Liability Company (LLC). A company must provide an operating LLC operating agreement when multiple parties are involved. LLC document has to outline operational and financial decisions, including the sharing of losses and profits and member rights and obligations. Company bylaws, meeting minutes, and employment agreements are other documents a company operating in the country must-have. Additionally, a company should have a license and business permit, which differ from one emirate to another.
The UAE Banking System
The UAE banking system comprises the Central Bank as well as local and foreign financial institutions. The Central Bank is a well-established financial structure that executes vital functions of the country’s economy (Aly Khedr). It provides a strict conditions for licensing local and foreign financial institutions and the scope of services they provide. The financial institutions issued with limited licenses can be classified as commercial or investment banks. An additional feature of the UAE’s baking is the Hawala system’s use, designed to regulate financial settlement rules.
The UAE Geography and Topography
The UAE’s geographical position is on the eastern side of the Arabian Peninsula. The country is part of the Middle East that shares borders with Oman and Saudi Arabia and has a vast coastline with numerous ports along the Persian Gulf and the Gulf of Oman. The country’s topography varies significantly in the eastern part, and the other parts consist of large desert areas, dunes, and flat land. Jabal Yibir Mountain, the highest point in the country, exists in the eastern part of UAE. The average highest and lowest temperatures reported in the UAE capital city, Abu Dhabi, are 39 degrees Celsius in August and 12.2 degrees Celsius in January.
Competitive Environment
The UAE is among the most competitive economies in the world. The competitiveness of the UAE’s business environment is attributed to low gas and oil prices, allowing it to implement reforms that promote heavy digital investment, diversification, and technological infrastructure. Therefore, the country attracts business from all corners of the world, increasing the level of competition. Many market players are competing on the quality of products and services offered to the customers, and market penetration is easier. Nevertheless, the government has regulations that protect local businesses and require locals to have a significant share in all companies.
UAE Membership in International Organizations and Institutions
The UAE joined the largest organization globally, the United Nations, allowing the country to develop a diplomatic relationship with approximately 60 states in Asia, Europe, Africa, and other world regions. As one of the leading oil producers, the UAE is a member of the Organization of Petroleum Exporting Countries (OPEC) and the Organization of Arab Petroleum Exporting Countries (OAPEC) (AU Department of Foreign Affairs and Trade). Other organizations that the UAE has subscribed to are specialized agencies of the UN such World Health Organization (WHO), the International Labor Organization (ILO), and the World Intellectual Property Organization (WIPO).
UAE is also an active member of IMF, World Bank, Non-Aligned Movement, Organization of Islamic Cooperation (OIC), and Gulf Cooperation Council (GCC). Further, the UAE capital city is the International Renewable Energy Agency’s headquarters.
Ethnic Makeup, Demographic, And Language
According to Central Intelligence Agency, the UAE population is approximately 9,992, 083, comprising 59.4 % south Asia immigrants, 11/6 % Emirati, 10.2 % Egyptians, 6.1% Filipino, 12.8% of other ethnic groups. The population can further be classified in terms of the region; 76% are Muslims, 9 % are Christians, and the rest are Hindu, Buddhist, and others. More than 80 % of the country’s population is comprised of aging between 15 and 64 years. The country has more than 5 TV stations and not less than 20 radio stations. Additionally, two major mobile phone network service providers in UAE, Etisalat, and Du, are based in Abu Dhabi and Dubai. The official language in the UAE is Arabic, while English is used for business transactions.
Recommendation
The company should expand business operations to the UAE because the country provides a good environment for growth. The UAE’s stable economy and government, advanced technology, and legal system can help resolve any disputes. Additionally, it has a well-established transportation network that makes the shipment of goods easier. Further, Internet speed is one of the best globally, and more than 90 % of residents use social media and several TV and radio stations. All these are channels that the company can use to reach its customers. Moreover, the company can sell its products online since people in the country are increasingly embracing e-commerce. Indeed, the UAE is a market that opens and a great opportunity for company growth.
Works Cited
Aly Khedr, Dr Ahmed. “UPDATE: Overview of United Arab Emirates Legal System – Globalex”. Nyulawglobal, 2018.
Arafat, Weal et al. “Infrastructure Developing and Economic Growth in United Arab Emirates”. Business and Economic Research, vol. 8, no. 1, 2017, pp. 95-114.
AU Department of Foreign Affairs and Trade.United Arab Emirates Country Brief Overview. DFAT, 2019.
Central Intelligence Agency. “Middle East: United Arab Emirates — the World Factbook – Central Intelligence Agency”. Cia.Gov, 2019. Web.
Global Negotiator. Business Culture and Etiquette Guide in United Arab Emirates. Web.
International Trade Administration. “United Arab Emirates – Distribution & Sales Channels”. International Trade Administration | Trade.Gov, 2020.
Miller, Rory, and Harry Verhoeven. “Overcoming Smallness: Qatar, the United Arab Emirates and Strategic Realignment in the Gulf”. International Politics, vol. 57, no. 1, 2019, pp. 1-20.
Tabrez, Huda. “UAE’S Road Infrastructure: All You Need to Know”. Gulfnews, 2019.