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P&G, McDonalds and KFC Companies in the Saudi Arabian Market Coursework

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Management differs from one organization to another due to the differences in size and income. Multinationals, SMEs, and global organizations have different styles of management since they deal with different cultures, employees, and clients in various areas of investment.

At the global and multinational level, an organization has to adjust to international management standards in order to be successful in business.

Organizations like McDonalds, KFC, and P&G operate at global and multinational levels and this forces them to promote international human resource and ethics management (Shankar 12).

The purpose of this discussion is to analyze the position of P&G, McDonalds, and KFC in the Saudi Arabian market.

P&G’s Foreign Investment in Saudi Arabia

P&G is a multinational organization with branches in most parts of the world. Initially, it avoided Saudi Arabia due to the stringent business rules that the government had set on people.

After opening up the market to the rest of the world, many organizations, including P&G, showed interest in Saudi Arabia. P&G chose Saudi Arabia since the country is a key business hub for the Middle East.

Many people associate with Saudi Arabia when conducting oil deals, and they would probably take interest in other industries like P&G operating in the country. Secondly, P&G considered the availability of raw materials for its products.

Saudi Arabia has affordable materials extracted from crude oil to make candles, soap, and other products that P&G manufactures. Besides availability of affordable labor, ready buyers, and raw materials, P&G opted for Saudi Arabia due to the availability of distributors of its products.

Abudawood Trading Company Limited is a distributor of P&G products and the company formed a joint venture with Proctor and Gamble to increase awareness of P&G products in Saudi Arabia (Buckman 24).

Finally, Saudi Arabia promotes growth of many organizations in terms of publicity and income generation owing to its huge population.

Pepsis Improvement in Saudi Arabia

After entering the Saudi Arabian market, Pepsi identified various strategies of survival in the market that the government initially closed to foreign investors. After a conclusive SWOT and PESTEL analysis, Pepsi developed workable measures of remaining relevant in the competitive economy.

Pepsi invests in quality marketing, branding, and packaging since its greatest rival Coca-Cola equally provides similar services. In order to be unique, the company introduced Pepsi diet, which has fiber that helps in reducing weight gain, and improving health.

Health consciousness is a major concern in Saudi Arabia, which the Muslim religion strongly supports. In Saudi Arabia, Islam deters residents from consuming alcohol or pork, as they consider such foods as unhealthy.

The same applies to high calorie content foods and soft drinks that contain high levels of sugar, preservatives, and carbon.

Pepsi realized such concerns and developed Pepsi diet to increase consumer consciousness about health while enjoying soft drinks.

In its adverts, Pepsi uses Saudi locals and celebrities in order to increase consumer association with the products that it manufactures in the country (Cho and Moon 41).

Recommendations for KFC in Beating Competitors

KFC needs to learn the things that are unique to Saudi Arabians that other countries do not consider in order to provide better services as consumers expect. For instance, KFC should not ignore religion, dressing, language, and etiquette, as they are vital to Saudi residents.

KFC has strengths over competitors like Albaik since it has many branches across the world. Albaik has no branches outside Jeddah, which reduces its chances of gaining publicity over KFC.

Another strength that KFC needs to capitalize on is the fact that Albaik does not respond to concerns raised over fast foods. KFC equally sells processed fast food, but it serves portions of salads, non-alcoholic wines, fresh juices, and low calorie foods.

Albaik does not recognize the significance of changing the styles of manufacturing foods owing to transforming consumer demands. This gives KFC an advantage over rivals in the Saudi Arabian market, which the company needs to recognize.

KFC needs to employ many Saudi residents instead of importing workers from the US. Corporate social responsibility is about providing employment opportunities, tax payment, and ability to care for the social and geographic environments (Sims 32).

This will definitely make KFC trustworthy to prospective consumers and will enable it gain competitive advantage over competitors.

McDonald Company

A multinational company operates in more than one country in terms of establishing different branches across the world. A global company has a single headquarter, but uses technology to respond to consumer needs.

In essence, McDonald is a global multinational company headquartered in the US, but with many branches across the world. It has over 34,000 outlets operating in different countries in the world.

Moreover, it has franchises in the US and communicates to other clients through social media, its website, and online marketing tactics. This makes it a global company that uses technology to interact with consumers from different parts of the world.

McDonald has branches in the US, the UK, parts of Africa, Asia, and Middle East (Pride, Hughes, and Kapoor 84). Physical investment and the ability to learn new cultures by paying for licenses in countries of investment make it a multinational corporation.

Companies combine both global and multinational techniques in order to acquire the highest number of consumers willing to purchase products from the company.

Being a multinational company is more costly as opposed to being a global company per se (Pride, Hughes, and Kapoor 82).

A global company spends limited resources in marketing, tax payment, and shipping. On the other hand, it becomes difficult to develop trustworthy relationships with the target population.

Companies and Internationalization

Internationalization links SMEs to multinationals making it easy to share information, resources, or even form mergers. P&G entered the Saudi Arabian market in 1955, and this expanded its international connections.

It merged with Abudawood Trading Company Limited, which expanded its market share in the country. Saudi Basic Industries Corporation (SABIC) is an example of an organization that benefits from internationalization.

It established a strong presence in the Gulf region and Asia even though the corporation does not deal in oil. Saudi Arabian Aramco is another example of an organization that strives to attain international recognition (Shankar 42).

These organizations realized that cultural barriers deter effective trade between Saudi Arabia and the international countries. Such corporations deal with foreign countries in Europe and America differently since cultural appreciation is an important element of business management.

FDI vs. Portfolio Management

Foreign Direct Investment (FDI) refers to the possibility of an enterprise to own 10%+1 of an overseas business investment. On the other hand, portfolio management refers to a company’s investment in its own business.

For instance, when P&G trades with Abudawood Trading Company Limited, it has investments in a foreign company, Saudi Arabia.

FDI Advantages

Companies easily develop mutually beneficial relationships with other countries through FDI.

This enables them to brand position their commodities in the country given that the other company that understands the prevailing market conditions can always market their commodities of the foreign company.

Increase in international relations promotes sales, which increases profits for an organization (Pride, Hughes, and Kapoor 61).

FDI makes it easy for a foreign organization to understand the political, social, and political environments of the target market before opting to invest in the country completely.

Corporations get competitive advantage over rivals that operate independently. FDI is important for the local and foreign companies involved in the agreement.

FDI Disadvantages

FDI involves interactions between different organizational cultures, which might cause conflicts between the involved organizations. The corporation that owns over 10% of the foreign company’s assets may dominate the group while adding no value to the union.

FDI is about risk taking in comparison to portfolio management that many organizations from advanced countries use.

Under portfolio management, people who understand the organizational culture including financial organizations and the government play a role in ensuring that the invested money is safe. Finally, through FDI, it can be difficult to transform some assets into cash when emergencies occur.

P&G’s FDI in Saudi Arabia

Proctor and Gamble realized that Foreign Direct Investment (FDI) is a responsibility and an opportunity at the same time. In essence, while taking an advantage of the investment opportunity, it needed to exercises various precautions.

First, P&G assessed the environment of investment, which included Saudi Arabian political, social, technological, and economic position.

This enabled the company to understand that the negative environmental factors were fewer as opposed to the positive elements. Notably, the study gave P&G good reasons to seek a distributor (Shankar 33).

Secondly, P&G made an individual entry into the new market and assessed all other organizations, but settled on Abudawood Trading Company Limited. This follows its ability to trust the other company after assessing their performance in the market since inception.

Additionally, P&G officials met with Abudawood Trading Company Limited officials for negotiations. P&G trusted Abudawood Trading Company Limited after working with it as a distributor for a long time.

During negotiations, P&G considered the importance of signing agreements that favor both firms. The greatest element of consideration for P&G was sustainability in Saudi Arabia and the possibility of increasing the consumer base.

P&G considered a growth opportunity in Saudi Arabia, and since Abudawood Trading Company Limited understood clearly the market conditions, it definitely provided the best guidance to P&G.

Finally, P&G looked at diversity, availability of affordable raw materials, availability of human resources, and costs of production (Dunning 18).

Egypt’s Economic System

Closed economic systems normally prevent foreign investors from establishing corporations in their countries. Egypt is the exact difference of a closed system since investors can easily establish brands in Egypt, but the challenge is that nobody cares about investment activities.

Political instability and poor trade policies make it difficult to trust Egypt, especially when dealing with FDI cases. Egypt has a laissez faire system in which nobody really controls the economy (Kaplan 74).

Studies indicated that it has the unrestricted system in which many government bureaucrats use taxes for personal gain. Many middle class residents pay taxes, but few rich people benefit from such efforts.

Egyptians need thorough knowledge on financial management so that they can take control of the economy instead of leaving it to a few bureaucrats.

Uncontrolled markets have significant impacts on Egyptians including increase in unemployment rates, increase in taxation, inflation, and increase in national debts.

Egypt’s Benefits by Gaining Admission to GCC

Gulf Corporation Council (GCC) consists of oil producing countries that invest within the Gulf area, Europe, and Asia. GCC provides rules that govern member states in order to establish high discipline levels.

GCC ensures that the involved countries ensure that conflicts within a country do not interfere with trade. This helps in stabilizing the economy even in moments of conflict or inflation. Egypt needs to join GCC in order to acquire the status of other states like Kuwait, UAE, and Saudi Arabia.

GCC sets clear standards concerning management of oil reservoirs and companies, and this reduces confusions over ownership of various oil fields. Hazem al-Beblawi, Egypt’s deputy prime minister, displayed interest in the proposal that seeks to incorporate Egypt in GCC.

He understands that Egypt needs to interact with countries that will support it with financial information. Such levels of empowerment will help the country reduce its budget deficit and promote self-employment in order to reduce the unemployment gap (Kaplan 74).

Risks of FDI in Egypt

As mentioned earlier, FDI is a risk measure, but a corporation needs to assess the political and socio-economic environments. The past political unrests in Egypt made the country economically unstable.

Government bureaucracy and budget deficit in Egypt make companies unstable and a merger with such companies poses a threat to foreign corporations. Companies that apply portfolio management may succeed in their operation.

For instance, when inflation occurs, a company can sell its assets quickly and recover the funds (Dunning 47).

An unstable economy like Egypt keeps changing and FDI becomes risky since it would be impossible to recover invested funds in another corporation that might be experiencing losses (Kaplan 19).

FDI is only possible in closed and capitalist markets that have certain levels of control. The Egyptian economy lacks proper management, thus posing security risks for investment-oriented institutions.

Works Cited

Buckman, Greg. Globalization tame it or scrap it?. Dhaka [Bangladesh: University Press ;, 2004. Print.

Cho, Tong, and Hwy Moon. From Adam Smith to Michael Porter evolution of competitiveness theory. Singapore: World Scientific Pub., 2001. Print.

Dunning, John H.. Multinational enterprises and the global economy. Wokingham, England: Addison-Wesley, 19921993. Print.

Kaplan, Leslie C.. Economy and industry in ancient Egypt. New York: PowerKids Press, 2004. Print.

Pride, William M., Robert James Hughes, and Jack R. Kapoor. Business. Sixth ed. Mason: South-Western Cengage, 2012. Print.

Shankar, Venkatesh. Handbook of marketing strategy. Cheltenham, UK: Edward Elgar Pub., 2012. Print.

Sims, Ronald R.. Ethics and corporate social responsibility why giants fall. Westport, Conn.: Praeger, 2003. Print.

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