International business text has paid particular interest to the study of internationalization and entry mode approaches of companies in various segments. However, very little studies that consider cultural implications in internalization have been accomplished. This paper shall review different literatures on internalization and cultural implications for joint ventures in Saudi Arabia.
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First, a general explanation of the internalization process shall be presented followed by an in-depth review of joint ventures in Saudi Arabia and the cultural implications of doing business in Saudi Arabia, a nation dominated by the Islam, religion. A conclusion that summarizes the key points shall then be presented.
During the process of internationalization, companies increasingly spread their business functions and activities outside their national borders (Ahmad and Kitchen, 2008).
International extension compels companies to construct three tactical decisions including: which target markets to go into, the right time of entry, and the way to penetrate those preferred markets (Hill, 2008). Besides, a firm has to design a marketing plan with guidelines on how to enter the alien market and lay down a control mechanism to keep an eye on its business progress (Hill, 2008).
Foreign market choice is a compound process and is separated into four phases including: state recognition, preliminary viewing, thorough viewing and final assortment (Johansson, 2008). To emerge victorious, firms must identify market prospects and discern appropriate foreign markets. Kirzner (2005) reveals that the market can not be at equilibrium due to the gaps amid the demand and supply.
Hence, firms should identify these gaps and monitor the markets vigilantly for investment choices. According to Hohenthal et al. (2006), companies face diverse economic, cultural, political and organization’s situation from their home. As a result, firms may choose markets that are related to their state of origin to avoid insecurity in an alien nation (Johanson & Vahlne, 2006).
Time of entry is another significant decision that influences the cost and profits of investment (Kwon& Konopa, 2003; Sivakumar, 2004). Market information plays a very important role in entry timing (Mitra & Golder, 2007).
In case a company accumulates adequate information on the economic and cultural surroundings of alien markets; it is fitting to penetrate those markets. Deficiency of knowledge and risk evasion hinders several firms entering indefinite and risky borders (Griffin & Pustay, 2007).
An essential subject in international extension is that according to the timing of entry, companies face different stages of institutional insecurity, which influences the competence of the entry plan (Papyrina, 2007).
Entry manner is a type of strategy and dedication of resources that a company adopts when it settles on entering an alien market. The selection of the best entry mode is amid the vital strategic decisions for companies in the course of internationalization (Nakos and Brouthers, 2004).
Assuming appropriate entry modes can help a company to achieve enhanced performance and endurance in alien markets since it involves diverse threats (Ekeledo & Sivakumar, 2005).
Entry mode preferences are separated into two features: equity and non-equity modes. Equity entry modes incorporate joint ventures and sole ownership (Wild et al., 2008). According to Griffin & Pustay (2007), non-equity modes are further separated into market leaning modes and contractual modes.
When a company adopts an equity mode, it’s supposed to make a preference among establishing a business from the start, purchasing an established firm, or a blend of both approaches (Griffin & Pustay, 2007; Wild et al., 2008). Every entry mode approach has merits and demerits.
Companies may pursue a range of criteria to select an appropriate entry mode. To acquire elevated returns from alien operations, companies may necessitate high resource dedication. Nevertheless, this augments the threat of international venture. Hence, companies must exercise superior control over their alien operations and partners (Blomstermo et al., 2006; Ekeledo & Sivakumar, 2005)
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Theoretical Views of Internalization
As per the internationalization process theory, companies will pursue a regular process to internationalize their activities overseas (Johanson & Vahlne, 2006). A company’s deeds during the institution of international extension begin from little resources dedication to a following greater dedication and power. Companies chiefly enter the markets that are well-known and have less paranormal space with their local state.
According to Andersen ( 2003), this theory supposes that “for alien activities, a company moves via four phases starting with no consistent export deals, then export through host state mediators, followed by export via a foreign sales subsidiary, and lastly, foreign manufacture by an entirely owned subsidiary” (p. 57).
Several scholars have condemned the internationalization process theory (Root, 2004). The series of phases was constrained to a precise state market (Andersen, 2003).
The conjecture also ignored joint ventures and other contractual entry modes (Sharma & Erramilli, 2006). Besides, this conjecture is too deterministic in character and is only significant in the premature stages of internationalization as markets turn out to be homogenous and supernatural space decreases (Melin, 2006).
The networks method is usually founded on sociology of organizations. As Zacharakis (2005) proposes, the local state networks are initial point for the worldwide expansion of companies. Enduring competitive advantage is acquired via synergy.
When a company has an enduring competitive advantage, its potential and resources are long-lasting, hard to spot and recognize, imperfect, transportable and difficult to imitate. The, theory then stresses the impact of firm-specific resources and trade networks on the global tactics of companies.
In line with this theory, a system of interpersonal and inter-organizational associations that form the performance of firms to internationalize is the effect of the business and social systems but not via the internalization system of the market (Malhotra et al., 2005).
While the network theory presents a priceless approach towards the function of systems in internationalization, it fails to clarify the outcome of environmental aspects.
Eclectic Paradigm Theory
According to Dunning (1988), the eclectic paradigm also known as the ownership, localization and internalization model stresses that a firms’ global extension and entry tactic relies on a company’s resources together with relational and host state factors. Grounded on this perspective, if the local market has a location advantage greater than the target alien market, making sales to other countries is an appropriate entry mode.
In case the host bazaar has a position advantage, the contractual entry mode is likely to be considered by companies (Sharma and Erramilli, 2006). In case the risk of agreement with home partners is elevated, foreign direct investments become the most suitable mode; if not, licensing is assumed (Sharma and Erramilli, 2006).
This theory extended to joint venture mode (Agarwal & Ramaswami (2000). The theory was expanded by considering the abilities and potential of the partners, spatial amalgamation amid positions and joint organizations (Sharma and Erramilli, 2006).
Regardless of its experimental support, this conjecture is unable to offer an incorporated view for the elucidation and calculation of entry mode selection. It fails to explain why two companies operating in an identical business and with parallel rights internationalize.
The model also disregard the effect of local state and internal aspects like a firm’s assets and manufactured goods character on the preference of entering alien markets. Additionally, it presumes that in absence of market failure, foreign direct investment does not take place but companies are usually implicated in alliances to enhance their competitive pose (Ekeledo and Sivakumar, 2005).
Transaction Cost Theory
The evasion mode of action in alien markets is low-control modes, although when companies experience elevated transaction costs allied to bargaining, supervising and executing a contract, they will prefer high power entry modes. Transaction Cost (TC) theory, argues that when competition is perfect, companies are synchronized and resources can be relocated among companies (Ekeledo and Sivakumar, 2005).
Whilst a market is entirely aggressive, the market will control transactions by price system. This theory supposes that in the market where persons are usually investors, information will be unevenly shared among all trading firms, and asset exactness influences the character of the transaction (Cheng, 2006).
The TC is not capable of validating the selection of entry mode in the fresh global business scenery. It is not able to balance foreign direct investment (FDI) with exporting successfully as it focuses on market malfunction situations that outcome in FDI.
Besides, the theory does not acknowledge that strategic fears can inspire a firm to use a joint entry mode. Although this theory gives reasons as to why a company may favor FDI as its entry mode, it neglects the function of location benefits (Ekeledo and Sivakumar, 2005).
Resource-Based View to Resource-Advantage Theories
Barney (2005) deems that companies have a basis of competitive advantage rooted from their priceless resources like assets and abilities. Firms can battle and attain their long-term aims if they have adequate resources and employ them efficiently (Sharma and Erramilli, 2004).
The resource-based view (RBV) theory proposes that a company’s achievement in the market does not solely rely on environmental aspects but also on the company’s role and power on the environment (Barney, 2005). This conjecture argues that companies with precious capabilities and resources support high power modes, particularly when it pursues an international strategy (Ekeledo and Sivakumar, 2005).
Hunt (2006) built on the thoughts of RBV in his resource advantage (RA) conjecture. He asserts that since firm resources are varied and comparatively still, a number of firms may benefit from competitive advantage and improved performance. In addition, the specific manner of function in indefinite markets relies on the sort of resource advantage (Malhotra et al., 2005).
Though some scholars view the resource based conjecture as the most outstanding clarification for the international development of companies, it fails to account for the selection of some entry mode policies including joint venture. Additionally, gauging some insubstantial assets seems tricky (Malhotra et al., 2005).
Factors Affecting Internalization of Firms
In general, business organizations do not pursue any exclusive model to internationalize their processes since they face diverse environmental surroundings. They may go into an exacting target market via different entry approaches based on their definite resources, abilities and tactics.
Two sorts of factors control the international tactic, market choice and the selection of entry mode that is external and internal aspects (Quer et al., 2007). Internal aspects incorporate tactical considerations and firm-specific resources which can be controlled by companies.
External aspects like industry factors and country factors are typically outside the power of the company (Ekeledo & Sivakumar, 2005).
Koch (2004) recommended that market choice and entry mode selection are influenced by several internal features, for instance the tactical concerns, a company’s resources , alien business practice and networking, and external features including latent and risk, target market and comparison amid host and home markets.
Joint Ventures in Saudi Arabia
Joint ventures are the leading type of multinational business in Saudi Arabia. Besides, joint ventures are commonly favored by most industrial investors in Saudi who are in search for foreign allies. A joint venture in Saudi Arabia normally involves a business amid a company that has superior business and technical abilities and a company that boasts superior local acquaintance and broad commercial potency (Mababaya, 2002).
One of the toughest pleas of joint ventures is that they significantly decrease, by the sum of the partner’s input to the business enterprise, the fiscal and political threats which are the chief barriers to direct foreign investment.
Most entrepreneurs feel that the existence of a home partner in a business enterprise overseas safeguards absolute expropriation in the more wobbly nations in the globe. Similarly, some other emerging nations do not allow a subsidiary run by an alien licensor to pay royalties.
An additional benefit of joint ventures is that they ease admission into a novel market and access to market data. Joint ventures are also beneficial in pooling the required capital, knowledge and skills, which are feasible amid local and alien partners (Ali, 2009).
Jointly, the partners provide capital which either one solely would not afford or fear to risk. With the increasing demand for private investment among other motives, most people believe that the all-inclusive joint business venture will eventually turn out to be the most vital means of private foreign investment in the world.
In the emerging world, Saudi Arabia included all types of joint ventures lead international activities (Mababaya, 2002). Actually, joint ventures are employed four times more often in less industrialized nations than in industrialized nations. Nevertheless, all these does not mean that joint venture in the less industrialized nations, counting Saudi Arabia, does not pretense any possible disadvantage.
From the stance of multinational businesses, one general problem they encounter is finding suitable partners in the alien nations, who have both administrative talent and funds (Ali, 2009).
Some global companies favor totally owned subsidiaries overseas as they are not ready to sacrifice sovereignty of action in their fabrication and marketing actions either locally or overseas. For them, joint ownership means joint administration, takings and control.
A number of companies may try to evade joint venture due to the complexities occurring from disparities in cultural values and principles of business, which force them to compromise so as to persist and do well (Ali, 2009).
In some emerging nations, joint ventures may equally be negatively affected by detrimental business environment occurring due to substandard communication services, poor infrastructure and bad market projections.
Apart from the need to deal with cross-cultural disparities, the abovementioned problems of cross-region joint ventures do not exist in Saudi Arabia.
Actually, a joint venture amid an alien entrepreneur and a Saudi partner is deemed the best, in addition to being the most common method of doing business in Saudi Arabia (Mababaya, 2002).Multinational organizations having joint ventures in the territory profit from the accessibility of first-class infrastructure, up to date communication amenities and low-priced public services.
Similarly, Saudi Arabia’s strategic position being in the middle of West and East allows it to be an excellent base for supply in the close bazaars of the Middle East and other places.
Joint ventures with Saudi partners are as well striking due to the existence of an established economic and political atmosphere; knowledgeable personnel in marketing and administration; good fiscal, credit and borrowing services from banks; as well as tax holidays (Ali, 2009).
Fresh incentives to alien investors have additionally been established in the Foreign Investment Act. Under this fresh act, alien investors are permitted have complete ownership of ventures and to enjoy liberty to send back profits and capital (Mababaya, 2002).
Similarly, a licensed business venture mutually owned by a Saudi resident and an alien partner or entirely owned by an alien investor shall have all the motivations, benefits and securities of a national venture consistent with all relevant policies and orders.
In every joint venture, the alien partner should be set to realize and consider the desires of his local complements in the business. In fact, practicing a joint venture across state borders requires trust, thoughtfulness, taking several risks, setting-up connections, conciliation skill and tolerance on both parties concerned.
Trust is an essential requirement for the collaborating group to fruitfully pursue their joint aims. Equally, partners’ dedication must be there for the joint venture to thrive.
Alien companies should also consider investment guidelines of the regime in the host nation. In several Asian states and in many other places, foreign direct investment is permitted but foreign impartiality is limited to less than 49%.
In Saudi Arabia, the regime does not bar the institution of a 100% alien controlled company, although pursuing it will deny the global business a chance to get incentives that are typically given to joint ventures in Saudi Arabia.
Generally, joint venture agreement or the wider notion of coalition capitalism is regular with the concept that synchronization is made on an arm’s length center or inside the open market structure.
Joint ventures match with liberated private enterprise economies, where harmonization of fiscal activities takes place through non-coercive deliberate collaboration, so that the parties concerned can take lead of the recent science and knowledge.
Joint venture in Saudi Arabia is registered as a disconnect joint-stock business, which is take care of just like other home joint-stock businesses with both collaborating firms fairly embodied in the board of executives (Mababaya, 2002).
Concerning tenure, decision-making and management, the capacity of the alien colleague to manipulate the joint venture is directly relative to its capital contribution to the enterprise (Ali, 2009)..similarly, the costs of commodities delivered from the joint venture to the collaborating firms are resolved freely in relation to the market relations of supply and demand.
Depending on the contract amid the joint venture partners, experimental prices may be used to ease smooth stream of goods and services amid the joint venture and the collaborating firms.
Similarly, experimental prices may be made rigid for the supply of production from the joint venture to some contracted cross-boundary market channels, including associates of any of the two partners. In reality, the experimental prices will later be outmoded by final prices dogged in relation to some pricing formula that is grounded eventually on the open market price method.
Following this logic, the survival of joint ventures cannot be explicated via the presumption of international production or internalization theory of multinational activities (Ali, 2009). This is the case since the internalization theory deems the propensity of multinational companies to internalize a market, for instance through vertical integration, as a way of overriding the price system or the free market system.
A joint venture can also be preferred in Saudi Arabia as a subsidiary of the Saudi fiscal counterbalance program. Counterbalance programs are types of counter-trade actions used by growing economies usually in an attempt to decrease the heavy load of contract-founded imports (Mababaya, 2002). The counterbalance scheme amid contracting members may entail joint ventures, skill transfer and goods exchange.
In addition, it could also contain foodstuff importation, building projects, arms procurements and supply of administration services. For instance, the Peace Shield I, a pact signed amid Boeing Co and the Saudi government is a counterbalance project.
The verdict by any multinational firm doing or preparing to do trade in Saudi Arabia relies on several factors. Generally, these factors consist of: the charisma of the host nation’s location-specific advantages, the want to develop market shares and the want to make more gains (Ali, 2009).
The organization’s propensity towards shielding and utilizing its personal company-specific advantages, such as the ownership of a relatively advanced techno logy, also manipulates its plans and resolutions to invest in a foreign country. similarly, the strategic powers and core values of a company, particularly the one that merits the title of a futurist firm, pressures the success of its policies, strategies and activities at home or globally.
In Saudi Arabia, international business activities cover all types of commercial, value-adding actions outside the boundaries of global production (Ali, 2009). Some of these include: setting up global marketing agencies, appointing managers, comprehending direct import/ export, planning project administration, and seeking certification.
In Saudi Arabia, main multinational car manufacturers enter the market through their selected local distributors or via opening their individual marketing and maintenance agencies. Car producers such as Chrysler, Mercedes Benz, Ford, Toyota, Nissan and General Motors are all embodied in the Saudi market via their individual sanctioned local agents or brokers (Mababaya, 2002).
Famous multinational businesses such as Mitsubishi, Shell and Mobil have chosen to form joint ventures as a way of acquiring shares in the Saudi bazaar and close area markets.
These multinational firms do not have their individual manufacture subsidiaries in the realm, despite their personal ownership-specific advantages such as machinery, administration expertise and profuse capital (Ali, 2009). Some multinational firms have diverse sorts of businesses in Saudi Arabia. For example, some firms offer consulting and technology services while still serving as suppliers for government ventures.
Key multinational firms have practically no wholly industrialized subsidiaries in Saudi Arabia, since the state policy does not actually support it. What the regime encourages is for alien firms to have mutual business enterprises with Saudi firms or Saudi habitats.
In isolation, multinational firms select other business paths other than worldwide production. However, this does not imply that alien companies are banned from having entire subsidiaries in the realm. As revealed before, the Saudi administration adopted the Foreign Investment Act which permits alien investors to have full tenure of ventures and grants them freedom to send back capital and labors.
It is important to note that alien firms, covering no direct foreign investment in Saudi Arabia, can typically export their goods to the realm without major hurdles (Ali, 2009). Thus it is quite usual to see key brands of eminent American firms such as Hewlett Packard, IBM and Compaq in Saudi Arabia.
These goods are neither formed in Saudi Arabia nor in America, but in South Korea, China or in other places. These firms choose to export their goods to Saudi Arabia from their subdivisions in other places, rather than internalizing the Saudi souk.
In theory, internalization happens only if the profits outpace the equivalent overheads (Janssen & Sandberg, 2008).Foreign government rules and boundaries need to be reflected on also while internalizing a market. Internalization is the practice of creating a market inside a company. The interior market of a firm takes alternates for the missing customary or peripheral market.
Economic allotment and sharing inside the internal market occurs via executive fiat, together with transfer pricing. The internalization method accounts for the rationale behind internal and domestic fabrication. Also in theory, when the business costs of the usual market are extreme, a strong incentive for firms to make interior markets will come to existence (Janssen & Sandberg, 2008).
Similarly, firms institute entirely owned subsidiaries across state borders so as to conquer or reduce qualms and instabilities in the provision of expected raw materials. They also wish to reduce transaction costs implicated in looking for and procurement of unrefined resources; to reduce qualms related to post- procurement sustenance; and to reduce overheads of organizing inputs.
Global firms can be enticed to invest in an alien state, if the alien state has competitive advantages proportional to other states (Hamilton, 2009). In the instance of Saudi Arabia, competitive advantages include: existence of up to date airstrips and seaports; existence of outstanding inter-city public roads and good road network; and enhanced communication amenities. These benefits are quite inspiring and among the finest in the globe.
Actually, Saudi Arabia has many determinants of state benefits. For example, with respect to the factor surroundings, current fundamental industries in Saudi Arabia have in past years attracted key multinational firms to venture in the realm. Big international companies such as, Mobil, Shell and Exxon formed joint ventures in the kingdom (Johanson & Vahlne, 2006).
The investment income from these businesses has been extremely good. Plentiful low-cost materials are united with up to date infrastructure and low-priced skilled manual labor supply from Asia and other countries. Concerning demand situation, the Saudi bazaar for consumer and industrial commodities is the leading in the Middle East, and continues to expand every day.
There is also the existence of allied and sustaining industries in Saudi Arabia, which are globally aggressive. Similarly, the situation of competition in many consumer goods sold in the whole territory is enough to cause global firms to react competitively and sensibly.
In other words, how multinational firms function in Saudi Arabia and in other areas of the sphere is part of internalization practice which takes the shape of worldwide trade and joint ventures allowing entirely owned ventures among other elements (Janssen & Sandberg, 2008).
It is a practice where the groups of actors concerned have to pact with a dynamic atmosphere where the operation of change is the custom, but not exclusion. It also engrosses international co-ordination and combination of actions, if the condition dictates and there is receptiveness to market-specific necessities and circumstances.
Global business players require strategic views, tactical positioning and all kinds of appropriate management practices to tackle globalization inclinations and transformations (Hamilton, 2009).
They can not fuse to merely one cross-border trade option, similar to that of entirely owned global production. Sometimes, they have to make very hard choices, such as decisions related to: purchases, joint ventures, unions and licensing, for them to endure and developing the modern business environment (Hamilton, 2009).
Similarly, the matter of control and ownership of transnational business is a hard decision since it is not regarded as a monopoly. At times, business partners disintegrate and become rivals while at other times rivals turn out to be friends through joint ventures.
Key business players at times fight on the international face by distributing similar goods and services while other times they work as partners through joint ventures which creates and markets similar or different goods. Hence, in the current business globe, it is difficult to come across a global firm that lacks a joint business partner in the vicinity or globally.
Joint ventures constantly feature in business news. In prospect, the same tendency may persist, provided that the players find shared satisfaction and gains in their tactical decisions and dealings. Nevertheless, as nations stick to the globalization economies growingly, blockades to foreign investments may all ultimately vanish.
If international ventures do not have to fret about alien government intrusion together with host state nationalization force and policy restrictions in prospect, they may be lured to leave joint ventures and may turn to entirely owned business procedures ( Mababaya, 2003).
This situation may be coaxing, considering that joint ventures are not usually the best alternative for multinationals as it requires hard decisions regarding ownership arrangement, administration constituents and sharing profit. In Saudi Arabia, the joint venture course is still overriding, and is projected to stay so in the near future.
Cultural Issues and Implications
Saudi Arabia acts as the center for all Muslims in the world, since this is where the two holy cities of Makkah and Madinah are located. This implies that Islamic culture and moral values are considered central to be understood by multinational firms doing trade or preparing to venture in Saudi Arabia (Whetherly & Otter, 2011).
In the business area, multinational firms doing or preparing to do business in alien nations such as Saudi Arabia will have better competitive advantages and will be in a position to improve their competitive stances and benefits as they get more acquainted with the Islamic culture ( Mababaya, 2003).
On the trade and industry front, Muslims are directed by open cultural principles, which have significant implications to real business existence.
Allah instructs Muslims to be honest and not to leave justice in all interactions with people, including trades dealings. Business actions or transactions, particularly but not restricted to those bearing potential executions, are required to be documented into written agreements appropriately signed by them and their observers (Whetherly & Otter, 2011).
The subjects involved in the business must devotedly abide by the documented contracts and accomplish all commitments they have settled upon (Mababaya, 2003). Like a cost-effective man, committed Muslims exactingly adhere to these basic business-legal principles, and those who transact with them are required to act in a related manner.
This must be borne in mentality by those who have business concern in Saudi Arabia or in another place in the Muslim environment. Both vendors and buyers are required to be precise in weighing commodities (Mababaya, 2003).
Debtors are also compelled to compensate their debts. In case a Muslim passes on, his bequest can only be dispersed to his legitimate heirs upon compensation of any debts.similarly a Muslim lender is expected to be moderate to his debtor. He must give his debtor adequate time to reimburse him. However if he decides to decline the debt and regard it as a donation to him or her, that will be healthier for him.
Appreciating the Islamic veto of usury is vital for multinational firms doing or preparing to do trade in the Muslim environment (Mababaya, 2003). Parties implicated in trade must stay away from usury. In addition, the parties concerned in business must shun corruption, hoarding and monopoly (Whetherly & Otter, 2011).
A few Islamic guiding principles for commerce include: openhandedness of both the vendor and the consumer; evading going into a transaction when someone else is already undertaking the deal; common consent; support of importation of merchandise and restriction to hoarding; censure of taking vows in business; and promotion of income sharing and partnership (Beekun, 2008).
Islam forbids theft or burglary and regards it as a capital crime. Islam also forbids land seizure. Betting together with the buying, selling and use of liquors are all banned (Shoult, 2006). Selling of images with animated items is also not permitted in Islam. Selling of liberated individuals to slavery is as well prohibited.
Other prohibited commerce includes making prophecies in exchange for money and practicing prostitution (Whetherly & Otter, 2011). Islam bans all these and other illegal business dealings as they cause harms, differences and insecurity in the world.
They also unlock doors to wicked actions, which make people to commit more sins. When it comes to meeting the essential wants, a Muslim is obliged by Allah to eat just what is legalized and fine. For instance deceased meat, pork and blood are not legalized by Allah the Almighty.
In fact, the ban of flesh from swine in Islam is categorical and strictly observed by all practicing Muslims. Muslims should also not consume anything that is used for sacrifice or meat from any animal that is murdered by choking or by being blushed to demise (Beekun, 2008). Muslims are also not permitted to consume anything that undomesticated animals have partially consumed and any flesh alienated by raffling with bullets.
Prevention of smoking in Islam is founded on the fact that Allah counsels people not to let their own hands add to their annihilation and not to consume up their possessions in prides (Ali, 2009). A multinational corporation that is conscious of all these restrictions will have the benefit of not hurting the Muslim clients.
It will be in a position to shun mistakes and problems that it may encounter in trading with its Saudi ally on a cultural foundation. A global firm can augment its competitiveness by investigating on what the Muslim consumers’ desire (Ali, 2009). Any company that always holds to meeting consumer necessities will be successful in the long term. In fact, these restrictions in Islam have very significant implications to global firms.
Conversely, Islam requires people to do what is good and legitimate. It motivates fortification of the environment, planting seeds and trees, preservation of natural resources and the security of individual and other’s possessions (Mababaya, 2003).
To pass on while defending possessions is a form of martyrdom among the Muslims. This means that Muslims do not accept unfairness, treachery, scams, deceit, cheating, fraud, and other outlawed business dealings in their economic hunt.
Allah expects faithful Muslims to take pleasure in the rewards that He has given them in legitimate ways. Simultaneously, He cautions them not to be profligate or to commit overindulgence in their consumption of resources. The law is toward self-control in spending.
Islam stresses and pays hard efforts. A person has to labor hard to make his living. Islam also supports donations to the deprived and the disadvantaged. However, Islam dejects begging and stinginess (Beekun, 2008). Begging as vocation is forbidden.
Incentive and reimbursement programs must be proportional to worker’s pros, productivity and assistance to the enterprise. Managers are required to pay wages and salaries of workers on time.
The importance of time is also a component of Islamic experiences. Muslims are obliged to pray frequently; five times each day. They are also required to give Zakat occasionally in each year. They should carry out fasting and pilgrimage throughout the set periods. Time should be spent sensibly to do good deeds and bond to those who teach the traditions of Islam. Time must never be shattered in unlawful trading.
When commerce is carried out with extreme honesty, justice and impartiality, it turns out to be a kind of worship (Beekun, 2008). For Muslims, everything that delights Allah is a type of worship, provided that it is conducted earnestly for Him, and provided that it is conducted in agreement with the Sunnah and the Qur’an.
Muslims are required to be vibrant and progressive, as Allah cannot transform their circumstances if they themselves have not agreed to change. Both consumers and vendors have to be precise in weighing commodities and must be solid in avoiding dishonesty.
The position of women in the whole Muslim humanity is actually intertwined with Islam (Shoult, 2006). In Islamic religion, sacred and moral responsibilities are similar for both women and men. A small number of exclusions subsist in this respect, although they favor the part of a woman.
For example, she is excused from some sacred responsibilities like fasting and prayer during her normal monthly periods. She is too not expected to attend the compulsory prayers held in the mosque. This happens because Islam religion considers a woman’s key roles to be that of taking care of the family and maintaining the homestead.
On the money-making face, Islam does not forbid women from laboring remote to the household setting. In contrast, it has given them the freedom to own and run their personal enterprises (Shoult, 2006). Regarding the matter of women in the Saudi Arabian labor force, a huge number of them are in employment.
The regime is also preparing to open the private segment so as to provide work for Saudi women aligned with the kingdom’s plan towards making employment public. In this view, constructing markets and shopping centers that are special for women are a few of the strategies to create employment prospects for women in Saudi (Shoult, 2006).
In conclusion, Joint ventures are the leading type of multinational business in Saudi Arabia. A joint venture in Saudi Arabia normally involves a business amid a company that has superior business and technical abilities and a company that boasts superior local acquaintance and broad commercial potency.
Among the benefits of joint ventures is that they ease admission into a novel market and access to market data and pool the required capital, knowledge and skills, which are feasible amid local and alien partners. Joint venture in Saudi Arabia is registered as a disconnect joint-stock business, which is take care of just like other home joint-stock businesses with both collaborating firms fairly embodied in the board of executives.
In assumption, internalization happens only if the profits outpace the equivalent overheads.Foreign government rules and boundaries need to be reflected on also while internalizing a market. Global firms can be enticed to invest in an alien state, if the alien state has competitive advantages proportional to other states.
In the instance of Saudi Arabia, competitive advantages include: existence of up to date airstrips and seaports; existence of outstanding inter-city public roads and good road network; and enhanced communication amenities. Actually, Saudi Arabia has many determinants of state benefits.
For example, with respect to the factor surroundings, current fundamental industries in Saudi Arabia have in past years attracted key multinational firms to venture in the realm.
Saudi Arabia acts as the center for all Muslims in the world, since this is where the two holy cities of Makkah and Madinah are located. This implies that Islamic culture and moral values are considered central to be understood by multinational firms doing trade or preparing to venture in Saudi Arabia.
In the business area, multinational firms doing or preparing to do business in alien nations such as Saudi Arabia will have better competitive advantages and will be in a position to improve their competitive stances and benefits as they get more acquainted with the Islamic culture. On the trade and industry front, Muslims are directed by open cultural principles, which have significant implications to real business existence.
For instance, Muslims are expected to be honest and not to leave justice in all interactions with people, including trades dealings. Islam also forbids theft or burglary, land seizure, betting, buying, selling and use of liquors, selling images with animated items, fortune telling and prostitution. When commerce is carried out with extreme honesty, justice and impartiality, it turns out to be a kind of worship.
For Muslims, everything that delights Allah is a type of worship, provided that it is conducted earnestly for Him, and provided that it is conducted in agreement with the Sunnah and the Qur’an. A multinational corporation that is conscious of all these restrictions will have the benefit of not hurting the Muslim clients.
It will be in a position to shun mistakes and problems that it may encounter in trading with its Saudi ally on a cultural foundation. A global firm can augment its competitiveness by investigating on what the Muslim consumers’ desire. Any company that always holds to meeting consumer necessities will be successful in the long term. In fact, these restrictions in Islam have very significant implications to global firms.
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