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Hong Leong Group’s Internationalization Opportunities in the UAE Report

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Analysis of United Arab Emirates

The United Arab Emirates is a country that is a gateway to Europe, Africa, Asia and other parts of the world. They have industrious businessmen with international business connections. Most products pass through this vast environment with a lot of challenges. We have two types of environments that we shall deal with when analyzing the United Arab Emirates as an international market centre. To begin with, internal environment factors are those factors that deal with the strengths and weaknesses of a country. This comes down to the marketing elements, the income of households and other factors motivating companies to enter into the country.

A company that is willing to enter into the United Arab Emirates must make good decisions in areas of marketing in the internal environmental factors and manipulate them to achieve marketing objectives. That is the proper use of each factor.

There is also the side of external factors which we ought to take care of. To begin with, we shall analyze PEST, SWOT and five forces of the United Arab Emirates.

P.E.S.T

Political factors

Political factors will affect the company entering the United Arab Emirates because it will have to adjust and fit into the political position of the United Arab Emirates. Some of the political barriers will be valuable if the government has bad officials who award businesses to those people offering bribes, not the highest bidders. Also, there are some governments that will impose high tariffs to protect their home industries.

At times poor political environment will make countries make many regulations on countries entering and leaving countries; this will scare companies wanting to enter into the environment. The political environment is inclusive of tax laws, other government laws, government agencies, pressure groups that will form a barrier that bars entry into the country. There are also some good factors that offer opportunities for companies to enter the market.

For entering into the United Arab Emirates, one must be conversant with the law of the land, which will enable him to understand the market. This will assist in protecting competition, a system to understand the consumer patterns of the country and the type of the products which can be sold easily in the market. For the hospitality industry, it is easier to operate in the United Arab Emirates because the laws of the land have been lessened to allow operations of companies in the hospitality industry. This is because the United Arab Emirates is the centre for commercial activities linking Africa, India and some parts of the world.

This dates back to the period of Oman traders who traded from the united Arab emirates to the east Africa coast and India in the 17th and 18th centuries. The government has allowed countries to trade easily in their country.

Social

Social culture factors of the United Arab Emirates contribute greatly to the trading within that country. Some of the foods that are being marketed in the hospitality industry cannot be sold easily in the market of the United Arab Emirates; therefore, if you want with the United Arab Emirates, your must-have products will match the tastes and preferences of the citizens. Most people have different behaviour of buying goods and services in the United Arab Emirates. Some of the cultural factors will affect some companies from entering the market. People in the United Arab Emirates will perceive a foreign country that is entering into their market based on its origin. This is because of their beliefs and values.

There are other social factors that need to be considered by a company intending to enter the United Arab Emirates. These factors include family factors, social classes and subcultures. For example, in the United Arab Emirates and in general in the Muslim world, women are not supposed to expose themselves. At times they are not supposed to sit next to each other if they are not related. Such kind of belief affects the hospitality industry if targeting holidaymakers who are willing to mix with the local population.

These beliefs, values, norms of the United Arab Emirates should be taken care of before a new company thinks of entering into this market. These beliefs, values and norms are strong and are the basis of the core values and beliefs of a country. To avoid resistance, the company must, at all costs, ensure that they have complied with these beliefs.

With products that need the taboos and beliefs of residents of the United Arab Emirates, there is a greater opportunity for any company wishing to enter into the United Arab emirates.

Economic

Economic factors of a country are the measure of the ability of the citizens to purchase some goods or enjoy some services. Its majoring how people spend their money, their power to purchase goods and services and income distribution among people. People in the United Arab Emirates have different patterns of savings and borrowing as compared to people of Europe. This is because of their culture. For example, because of their culture, they spend less money on fornication (it is unheard of).

Therefore, any company wishing to enter into the hospitality industry in the United Arab Emirates must take care of the above-mentioned factors. The United Arab Emirates have low foreign debts, low inflation and a minimal unemployment rate of its people. This makes them among the best countries to invest in the hospitality industry so long as the company brands the product and services in the hospitality to suit the culture of the people. This country has a strong foreign exchange balance of payments that has led to their foreign economic stability and increase of their foreign currency values in the international market arena. With such kind of foreign income strength, the country is a good bet.

Technological

Being the centre of trade in the Middle East and a gateway to various parts of the world, United Arab Emirates have had internet connections among its citizens. There is also cheap technological equipment in the market. This makes technological equipment like mobile phones, computers, radios, TV’S, personal navigational assistance, modern motor vehicles find their entry to the country easily.

Being a fully computerized country, unlike their neighbour countries, the United Arab Emirates has better chances of customers who wish to travel to have country information on the internet. It’s known in Africa that if you want to get technological equipment, u will have to travel to the United Arab Emirates. This availability of cheap equipment makes the country. In view of the world’s trend, the majority of the consumers, travellers and holidaymakers are relying on the internet information which can be available anywhere because of wireless broadband connections which have made internet connections easier.

The SWOT Analysis

The United Arab Emirates as a country has many strengths, weaknesses, opportunities and threats that actually affect the performance of companies in a country.

Strengths

The United Arab Emirates is situated in the middle of the Middle East and is neighbored by countries that have huge financial resources which accrue from oil. All executives from the airbus to shell and BP executives rely on the products from the Middle East. Therefore, being the centre of a unique world resource, again offering a centre for international trade, it is a strength that each chief executive of a hospitality industry player will wish to be associated with. They also have a strong currency, low inflation rate, strong balance of payments and low unemployment.

Weaknesses

The United Arab Emirates has many companies operating in the hospitality industry because of their position. The citizens of the country are natural businessmen. Thus, they have assisted in putting up similar facilities in the country. They have strong cultural beliefs which hinder some companies from operating within the country. The United Arab Emirates is among the countries with the strictest rules over ownership of land property. Individuals outside the countries find it difficult to own property. The country also has strict citizenry laws governing the laws. The laws bar some people from entering the market. There is also a trend of terrorism, whether or imagined, in the area because of the said Alkaida network and other networks wishing to revenge.

Opportunities

There are many opportunities available in the Middle East, especially in the United Arab Emirates. This is because of the increase of businessmen wishing to trade from the United Arab Emirates. This makes the hospitality industry have a large and growing market. The instability in the neighbouring countries like Iraq, Lebanon, Kuwait and threats of terrorism in neighbouring countries has made united Arab emirates a safe haven for travellers, thus opening hospitality industry companies to be of great importance. The people of the United Arab Emirates have mixed with other cultures, and they are now becoming aware of other products and services available in the hospitality industry and are offered in other countries. This enlightenment is one way of enlarging the target market for the growing hospitality industry.

Threats

There are a number of threats affecting the United Arab Emirates hospitality industry. There is a trend of stability of the neighbouring countries, which may cause the exit of some companies to neighbouring countries. The instability in the southern part, that is, Afghanistan, is also contributing to the failure of some countries in entering the United Arab Emirates.

Five forces

Potter being the originator of the five forces, identified forces that drive competition within a country or an industry. This includes the threat of entry of a new competitor into the industry, the intensity of rivalry among the existing competitors, pressure from substitutes, the bargaining power of the buyers and the bargaining power of the suppliers.

In relation to the United Arab Emirates, five forces also work very well.

Buyer’s power

The United Arab Emirates faces the threat of buyers or visitors shifting their loyalty to other countries. This is because of the trend of terrorism or any other reasons. For the country to be able to succeed in fighting the shifting of loyalty, they must counter this trend through ensuring the safety of all visitors, reduction in price or ticket charges for any visitor touring the area either on business or holidaymakers. Lastly, they should also be able to adopt differentiation strategies by having many companies offering different types of goods and services from those offered in the neighbouring countries so as to keep the company ongoing. These companies that are developed should be economical and friendly to visitors.

Supplier’s power

The United Arab Emirates is faced with the threat of entrepreneurs being able to control the capital inflow to the country. This is because the majority of visitors in their hospitality industry happen to be holidaymakers who majorly come from Europe. Most countries, if not on good terms with the United Arab Emirates, may issue travel advisories to their citizen to the United Arab Emirates. These advisories will affect the hospitality industry of the United Arab Emirates. To counter this force, the country has extended its hospitality and international relationship to other countries. They have also decided not to engage in any activity that affects the country’s international relations, thus providing a good environment for the inflow of capital to develop the industry and din flow of tourists.

Barriers to entry

The other force that is challenging the hospitality industry in the United Arab Emirates is the entry of new companies with similar services in their country. This could pose the threat of neutralizing the company’s profits as well as a reduction in market share. For any company to be able to succeed in this environment, they should be able to adopt the generic strategy of cost leadership.

Rivalry

There are many companies operating in the industry which poses a threat to the company in question, Hong Leong Group. The threat here is that there is constant swift of loyalty of customers from one company to another. This threat is countered through the reduction of prices which in turn forces some weak companies to leave and allow the prices to stabilize. Hong Leong Group has also adopted this strategy of switching costs.

The threat of substitutes

There is a threat of substitutes, and from the economics point of view, a threat of substitutes arises when demand for that good is likely to be affected when price changes. This elasticity of price has formed a reinforcement that the company has to fight with if t have to be sustained in the near future. To reduce the strength and danger of this force, a company wishing to trade with the United Arab Emirates hospitality industry will have to adopt a generic differentiation strategy as their framework. Customers will then be loyal to the uniqueness of the brand name of the company’s services.

Review of the Hospitality industry

Competition analysis

There are many established competitors of the hospitality industry in the United Arab Emirates. These companies include companies from Italy, Malaysia, the USA and Britain. These companies are operating in many countries, but their products and services have a greater advantage as compared to new companies that are entering the market now. Since the industry where the company will be operating with companies that have already achieved their objectives, a new entrance into the market will have difficulty in attaining their objectives. There are competitors from within and without. These companies include those from Europe, Asia and Africa.

This provides great competition to any entrance in the market. This will call for a company to use differentiated marketing that is operating several markets segments and designs and using different marketing programs for different customers. They will analyze the potential of the market for more profits in future by looking at factors like size of the population, the purchasing power of the population, the growth rate of the population, the profitability of companies operating there, the economics of scale and the risks involved. The potential of competition will be analyzed on the basis of long-term profits that can be attained by the company.

Government policies

As mentioned, political factors affect business in the industry. The government taxes, laws affecting licensing of new businesses in the United Arab Emirates and laws relating to land affect the hospitality industry. It is common knowledge that it is difficult to acquire property in the United Arab Emirates. That kind of law also affects the business of the area.

Consumers

The population of the United Arab Emirates has their beliefs and values. To enter such a market, one must understand what they consume and what they don’t consume. For example, an industry player will find it difficult to include pork as part of their menu. This is because of their practices, culture and influences of customs which creates attitudes towards food products. Their cultural activities, desires and likes, as well as preferences, equip the individuals of the communities with certain value systems which compels them to act or consume the certain product. These will also affect the demand in the same direction. Therefore, customers’ beliefs, attitudes, culture and customs affect the performance of business regardless of the purchasing power.

Risk factors

There are many risks that need to be countered. This has been analyzed among other analyses above. This includes a risk of terrorism, which can be mitigated by the government, the risk of entry of new competitors, which will be mitigated through cost leadership and differentiation of products and services. The United Arab Emirates has attracted many companies to come to their hospitality industry and these companies use various promotional mix which attracts the local population as well as international clientele to their population.

Market servicing strategies

These strategies that have been made possible by the government enable the entry and exit of new industrial players possible. New players come to the industry but find it difficult to be sustained with the type of competition that is prevailing in that market. Some opt out of the market while others enter into strategic alliances with companies that are already in the market enabling them to survive. With the industry’s environment prevailing in the United Arab Emirates, no company can opt on standing on its own while succeeding in the same market.

From promotional activities experienced, there is evidence that most tools which are used comply with the company’s and country’s ethics. No company will survive in the market without the involvement of local partners and stakeholders in the success of a company within the industry. Like many other companies, Hong Leong Group teamed u with local entrepreneurs in setting up their business which enabled them to succeed.

There are many challenges that face Hong Leong Group before succeeding in entering in United Arab Emirates. This calls for important decisions relating to the type of products, a place to invest (location) and amount of capital that will be input. They should make a decision on how to enter into the country, whether strategic alliances, vertical integration, product differentiation or geographical expansion. All these pose serious challenges that a company has to overcome in order to survive. They are also facing a challenge of the citizens of United Arab Emirates adapting their products and services. They also face the challenge of pricing that is how to price their products. The people of United Arab Emirates have different negotiation styles while purchasing consumer goods. This is another challenge that this company has to face.

Although there is enough population, the method of advertising will also affect the company. Like in china, advertising through the TV and other media may work very well for the company while United Arab Emirates, personating of advertising may be of higher value as compared to in china. This is because of the culture of the population.

Strategies used

The company should adapt the four P’S. That is positioning, promotion, price and place in marketing themselves in the United Arab Emirates.

Position

The company should create a niche in offering a wider array of hospitality products in the United Arab Emirates. However, the product should not be against the values and beliefs of the people of the United Arab Emirates. This is because there are most competitors offering the same product in the same country and they have managed to keep the culture of the people intact.

Promotion

The use of internet in marketing their products abroad. Television adverts, promoting social activities like the co-sponsoring rugby tournaments, golf tournaments, use of fliers and other things a promotional activities will give the company higher market share. They should also use product differentiation which is important in promotion. The products and services offered should stand out and should not be among equals with other companies.

Place

The company should look for a strategic point within the United Arab Emirates grounds to enable them do business.

Pricing

The pricing strategy used should match with those of competitors but with unique products. This will be important at the start of operations within the country. If they put a lower price than the competitors, their products may be viewed as inferior causing them a lot of harm.

Products

The products offered should be able to match with the needs of the people of United Arab Emirates. They should be viewed as healthy products capable of providing a three cause meal as per the standards of the population. The company should also offer franchising of their activities in the Middle East.

Summary

Companies operating in the United Arab Emirates have succeeded in one way or another regardless of the challenges they are faced with. The major challenge of the company that it has to overcome while entering the United Arab Emirates is the rise of competition. There are many companies operating in the market and this offers real competition. Another challenge a company is facing while entering the United Arab Emirates market is the challenge of foreign laws. The government taxes registration and other license laws pose a challenge to a company planning to enter into United Arab Emirates market.

There is also the challenge of cultural religion and traditions of the people of United Arab Emirates. The type of food they will market must comply with the requirements of the country’s citizens. For example, the company cannot go to market pork as part of the menu available for citizens. Even if they decide to cook for foreigners who are coming in, it will be very difficult for them to get labor force that will assist in cooking. This is because of the culture. Therefore, culture is the major factor that has a great impact on the type of media to use in advertising products of diverse culture like in the United Arab Emirates.

The success of companies in the united Arab emirate sis mostly attributed to elements of integrated communication after understanding the target market, their products and their objectives. Most companies in the hospitality industry have integrated communication after understanding the target market thus they are able to succeed. In the united Arab emirates, majority of the population will want slogans that will actually praise prophet Mohamed or the youths may also be captivated by slogans associated with power, energy and other forms of energetic activities thus in succeeding in the market, there is need to understand those activities.

In order for successive market entry and achieve better market results within the country, there is need for proper market planning for the company in question. And a good market plan should entail a broad marketing objectives and strategies based on the analysis of the current market situation and opportunities. Then the analysis of strategic opportunities available in the United Arab Emirates and the setting of the market. The market analysis consists of analyzing the current marketing opportunities, researching and identifying the target market (United Arab Emirates).Then the process of organizing and implementing the strategy of entries follows. After entering the market, the issue of controlling the activities of the company to ensure that they are consistent with the objectives of the company.

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