Introduction
Critical analysis of the history of Saudi Arabia indicates that it has undergone great changes, which have contributed to its current stance in the global arena. As a monarchical state, Saudi Arabia remains under the rule of royal families that dominate political, economic, and social spheres. A comparative analysis of various regimes over time indicates that the reign of Abdullah bin Abdul-Aziz Al Saud (2005-2015) experienced unpreceded modernization. Challenges such as the global economic crisis, terrorism, unemployment, fluctuating oil prices, social pressure, and human rights prompted King Abdullah to institute overarching reforms in various sectors. Therefore, this report analyzes Saudi Arabia and examines how leaders and Westernization have contributed to reforms and development, compares and contrasts the global management practices, and discusses business sustenance in the Middle East.
The Role of Leaders
The analysis of the case study of Saudi Arabia shows that great leaders meaningfully contributed to reforms and development experienced over the decades. As the most influential leader, King Abdullah made remarkable advancements during his reign. In promoting good governance, King Abdullah promulgated succession law (Bay’ah law) in 2007 to ensure that there is a transparent process of choosing kings based on competence rather than seniority. Besides, the law prevents an incapacitated king from staying on the throne (Vietor and Forrest 2). The Bay’ah Council, composed of senior members of the royal family, had the mandate of choosing a successor from three candidates presented by the king.
The predecessor of King Abdullah, King Fahd Abdullah Abdul-Aziz Al Saud, also contributed significantly to reforms in Saudi Arabia. In 1992, King Fahd formed the National Consultative Council as a fundamental unit of governance that collects information from society and scholars for the king to get appropriate advice regarding budget, legislation, and governance. The media had permission to cover weekly meetings of the council, and the king gave a formal address once a year. To improve governance, the king also created the Forum for National Dialogue, which provided a platform for people to discuss and present their views on required reforms (Vietor and Forrest 3). Through the Forum for National Dialogue, spiritual leaders, liberal reformers, intellectuals, and elders deliberated on the crucial reforms that would benefit the youth, women, and the education system. In 2003, King Fahd promoted the use of elections in the selection of municipal councils in Saudi Arabia (Vietor and Forrest 3). The introduction of elections paved the way for democracy in the governance structure of Saudi Arabia.
The creation of Saudi Arabia as an independent state emanated from the collapse of the Ottoman, the Sassanid, and the Byzantine empires. These empires strived to control Mecca and Medina, the two Islamic pilgrimage sites in Saudi Arabia. As one of the influential leaders that led to the formation and growth of Saudi Arabia, the Prophet Muhammad established Islamic religion and spread it across the Arabian Peninsula. Moreover, Ibn Abdul Wahhab strengthened Islam since he led a conservative Islamic movement, which mobilized religious leaders, scholars, and believers to advocate for traditional religious practices (Vietor and Forrest 2). Given that one of the five Islamic pillars requires all Muslims to visit pilgrimage sites, Mecca and Medina attract millions of Muslims annually (Vietor and Forrest 2). In this view, Mecca and Medina have become the heart of all Muslims and Islamic nations across the world. King Abdullah’s support for the unity of Muslims in Islamic countries demonstrated his commitment to sustaining peace in the Middle East. For instance, King Abdullah reinforced the establishment of the Palestinian state as he mediated peace talks and used over one billion dollars in the reconstruction of the Gaza Strip and West Bank (Vietor and Forrest 8). Hence, Islamic leaders played a critical role in the establishment and transformation of Saudi Arabia.
Role of Westernization
In modern society, where globalization is the driver of economic growth and development, it is impossible for countries to remain isolated and avoid Westernizing. In this perspective, the Arabian Peninsula cannot develop without Westernizing. Before becoming the king, Abdullah Abdul-Aziz Al Saud realized the essence of Westernization when he stated that Saudi Arabia could not exist in isolation from the global system and remain a spectator (Vietor and Forrest 1). Hence, from the onset of his regime, King Abdullah was rooted in the development of Saudi Arabia through international trade and connections. During his reign, King Abdullah faced economic challenges, which required the input of other nations or the global efforts to overcome.
Owing to overreliance on oil, the global financial crisis of 2008 severely affected Saudi Arabian economic growth and development as oil prices declined by over 70% (Vietor and Forrest 1). Despite having the Saudi Arabian Monetary Agency and being a member of the World Trade Centre, Saudi Arabia could not influence oil prices and stabilize its economy. The promotion of foreign direct investment through the Saudi Arabia General Investment Authority allowed the establishment of giant American companies, namely, Chevron, Shell, and ExxonMobil. These companies enhanced the influence of Westernization on the oil industry, strengthened the formulation of suitable legislation, and supported the diversification of businesses.
The emergence of terrorism as a global issue has compelled Saudi Arabia to cooperate with Western countries such as the United States. Although Saudi Arabia imposed an oil embargo in 1973 because the United States supported Israel during the Arab-Israel War, the need for mutual dependence overrode the imposition. The essence of mutual dependence became evident in 1992 during the Gulf War when the United States mobilized 600,000 troops to protect Saudi Arabia and liberate Kuwait from the invasion of Iraq (Vietor and Forrest 8). Additionally, conservative Islamists, represented by students and professors, petitioned the government to lobby for anti-West extremisms, but King Fahd declined and backed up the United States in fighting terrorism. Following the terrorist attacks of 11 September 2001, Saudi Arabia and the United States collaborated in arresting terrorists and annihilating terror groups across the world (Vietor and Forrest 9). Therefore, the anti-terrorism support that Saudi Arabia received from the United States has enhanced political stability and boosted economic development.
In the labor sector, Saudi Arabia needs Westernization because it still lacks adequate skilled labor. Statistics show that over 50% of employees in the public sector are expatriates due to lagging education and low literacy level (Vietor and Forrest 6). In educational reforms, King Abdullah planned to improve the standard of education at the college and university levels. To improve the quality of education in the King Abdullah University of Science and Technology, Saudi Arabia has to develop strategic and beneficial relationships with universities in Western countries such as the Massachusetts Institute of Technology (Vietor and Forrest, 6). In essence, Saudi Arabia ought to Westernize to generate adequate and skilled labor that is required to stimulate economic growth and development.
Global Management Practices and Business Life Cycle
Comparison and contrast of the management practices of Saudi Arabia highlight its position in the global arena. Differences in culture, religious beliefs, political systems, and economic activities have made Saudi Arabia apply unique management practices when compared to Western countries. Culture has a marked influence on the way individuals interact in organizations and society as they undertake social and economic activities. When compared to Western countries such as the United States and the United Kingdom, Saudi Arabia has a higher power distance. The existence of a higher power distance implies that Saudi Arabia is a hierarchical society where people expect and accept the unequal distribution of power. Respectively, royal families and men belong to a higher rank than ordinary families and women in Saudi Arabia. Monarchical and patriarchal values and principles dominate Saudi Arabia, whereas equality and equity dictate the distribution of resources and opportunities in Western countries. Members of the royal family control private and public organizations, while men dominate workplaces (Vietor and Forrest 3). In this view, even though culture has a strong influence on the business cycle in Saudi Arabia, it has no significant influence in the United States and the United Kingdom. The business cycle in Saudi Arabia tends to fluctuate more when compared to the ones of the Western countries.
A religious belief is another factor that has a marked influence on the business cycle in Saudi Arabia when compared to other countries across the globe. As the only religion in Saudi Arabia, Islam has penetrated the private, social, cultural, economic, and political aspects of life. Royal Degree and Islamic Law emanated from religious teachings and doctrines, which form the basis of the Saudi Arabian constitution. Since one of the Islamic pillars requires one to pray five times a day, Muslims have to close their businesses and dedicate their time to prayer (Vietor and Forrest 3). Such religious practices affect the business cycle, for it limits the ability to grow and expand in competitive global markets. Whereas most businesses in countries such as the United States open for more than 12 hours, businesses in Saudi Arabia open for reduced time for a considerable time is spent on observing religious practices. Moreover, while in Saudi Arabia, religious beliefs restricted women to workplaces with female-only clients, women free to work in an organization of their choice in the United States.
The effect of the political system on the management practice and business cycle in Saudi Arabia contrasts that of other countries across the globe. Vietor and Forrest describe the political system of Saudi Arabia as monarchical and autocratic because the royal families rule and issue decrees (1). In the global circles, there are elaborate systems of governance where democracy prevails as rules and regulations determine management practices and the business cycle. Due to the monarchical political system, royal families dominate business opportunities and determine rules and regulations that guide the establishment of businesses. For example, Saudi Arabia supported the establishment and nationalization of Aramco and made a formula for earning profits as taxes, royalties, and dividends (Vietor and Forrest 9). Given that king’s issue decrees, they make Saudi Arabia an autocratic nation where business regulations are dependent on the influence of royal families. In essence, royal families have the upper hand when engaging in businesses. Thus, management practices and the business cycle are subject to an autocratic and monarchical system of governance.
In the aspect of economic activities, Saudi Arabia contrasts with other developed countries, for it relies heavily on oil production and expatriate labor. Overreliance on oil production makes Saudi Arabia experience fluctuations in economic growth and development. In essence, the business cycle in Saudi Arabia is more volatile than in other countries that do not rely on oil production. Since oil is a global product, it is subject to economic forces in the global markets. For instance, although prices of oil have been fluctuating over the decades, the global financial crisis of 2008 destabilized the business cycle. According to Vietor and Forrest, the global financial crisis caused oil prices to decline by over 70% from $147 to $33 per barrel in 2008 (Vietor and Forrest 1).
The volatility of the business cycle in Saudi Arabia is due to dynamic oil prices. Comparatively, the business cycle of Western countries such as the United Kingdom and the United States is stable because they have diversified their economic activities and products. King Abdullah strived to stabilize the business cycle by diversifying its economic activities and oil products. Additionally, the labor sector of Saudi Arabia is unstable because over 50% of employees are expatriates. In labor reform, Saudiinization requires the private and public sectors to encourage the employment of Saudi Arabians in the workplace. Therefore, unpredictable oil prices and the dominance of expatriates in the labor market contribute to the volatility of the business cycle in Saudi Arabia.
Role of Saudi Arabia in Business Sustenance in the Middle East
Saudi Arabia plays a significant role in the sustenance of business in the Middle East, owing to its strategic location. In 1981, six Middle Eastern countries met in Riyadh, a strategic location, and formed the Gulf Cooperation Council (GCC) with the objective of creating an integrated government since they share political, social, cultural, and economic identities. The inception of the GCC in Riyadh makes Saudi Arabia the leader of the member states. In this view, Saudi Arabia has the responsibility of ensuring that the GCC countries attain their goals of coordinating and deepening relationships and formulating regulations to stimulate economic, scientific, and technological advancements.
As the heart of Islamic religion, Saudi Arabia has a considerable impact on the spread and evolution of Islam. Saudi Arabia hosts religious cities, Medina and Mecca, in which millions of Muslims across the world visit annually in line with their Islamic doctrines. Mecca and Medina have become centers for Islamic revolution, learning, and trade in the Middle East. Vietor and Forrest describe Medina as an economic city of knowledge because it hosts centers for Islamic and learning institutions (12). Given that terrorism and religious extremism threatens the stability of the Middle Eastern countries, Saudi Arabia is leading GCC countries to overcome these threats. Vietor and Forrest report that Saudi Arabia has helped GCC countries fight terrorism and pacify Islamic extremism that threatened economic growth and development in the Middle East (7). As the most influential power in the GCC, Saudi Arabia has strengthened the unity of member states and enabled them to pursue a common agenda. Therefore, sustenance of business in the Middle East is dependent on the efforts that Saudi Arabia places in creating a peaceful environment and unifying GCC countries.
Conclusion
Saudi Arabia has a rich history because it is not only the center of Islamic religion but also the hub of trade in the Middle East. Great leaders such as King Abdullah, King Fahd, King Ibn, and religious leaders contributed significantly to the growth and development of Saudi Arabia. The analysis of business environment shows that Islamic culture, religious doctrines, monarchical political system, and oil economy are some of the factors that influence business management practices and the business cycle. Overall, Saudi Arabia influences business sustenance in the Middle East because it is the most influential member of GCC countries and hosts the center of cultural and religious civilization.
Work Cited
Vietor, Richard, and Nicole Forrest. “Saudi Arabia: Modern Reform, Enduring Stability.” Harvard Business School. 2009. Case Study.