STEP has been one of the profitable firms in the Kingdom of Saudi Arabia in the plastics industry. The products of this company are not only important in the local economy, but also in other markets globally. With the increasing globalizations taking place, this firm cannot afford to restrict its operations to the borders of this country.
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This firm should be ready to explore other markets outside this country in order to increase its market share. With the liberalized market in Saudi Arabia, it is obvious that at any moment, there may be a very strong challenger in this industry. These firms should therefore be ready for this, by expanding its scope of operations to include the entire Middle East. This market will be easy to patronize because its characteristics are almost similar to that of the home market in Saudi Arabia.
Going to the Middle East will require a new approach to managements and operations of this firm. It is a fact that the Middle East market has close relationship with the market back in Saudi Arabia (Rickard 112). It is important however, to appreciate the fact that this firm will be getting into the territories of other firms in those countries.
Given that these new competitors are already established in these markets, STEP will have to define marketing strategies that will make its products attract a substantial market share in these regions. The firm can use a number of strategies, including pricing strategy, to attract the attention of the market in the new regions.
Should step export its products to the Middle East region?
There is a very attractive market for STEP in the Middle East regions. The product it sells locally has an attractive market in this region. This research is therefore, trying to analyze the attractiveness of this firm exporting its products to the Middle East.
The Current Market for STEP
STEP is currently having its major operations in the Saudi market. In order to understand this market, a SWOT analysis would be appropriate.
It would help bring more insight to the opportunities and threats that this firm would face in the external environment. It would also help in understanding the strengths and weaknesses that the firm has.
Strength of this firm that would translate to increased profitability is a positive image in the market due to its environmental friendly projects. The world is increasingly becoming sensitive of the impact of various business units on the environment.
The concern is emanating from the fact that it has been confirmed beyond any reasonable doubt that various multinational companies are polluting the environment at a very dangerous rate (Travis 56). Various environmental conservation projects are expected to give this company a different image in the market.
This company has been seen as a firm that is smarter in its environmental strategy. The market will be convinced that this company is not just interested in making profits, but also turning the society into a better place.
The firm will easily attract additional customers who are determined to make a positive difference in their society. This is because they will view this firm as one that helps in conserving the environment. They will consider the purchase of the firm’s product as part of environmental conservation. As a result of this, the firm will develop a strong base of loyal customers.
The firm has a team of dedicated and qualified staff who are able to front all the interest of the firm both in the local and regional markets. This team also manages all the material resources that are allocated to them in order to achieve best results for the firm.
Despite the above strengths, this firm has some weakness. The first weakness that this firm has is the fact that it has not been able to maintain a base of loyal workforce. Although this firm is one of the most preferred employers of this country, it has also experienced a high rate of employee turnover per year (Shechter 113).
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When a firm is not able to retain its employees, it forces the firm to incur extra costs associated with education a new team of employees. This firm has also failed to come up with strategies to use the social media, which is one of the emerging trends. This may make this firm be outsmarted by others which are more sustaining to the emerging technologies.
The firm has a number of opportunities in the external environment. In the local market, this firm has managed to build a large base of loyal customers, especially in the cities of Riyadh and Jeddah. The government of Saudi Arabia has strongly appreciated the move of this firm to help improve the environment of this country, a fact that has earned it a large base of customers.
The Saudi government has maintained a very stable political environment. This means that the business environment is free from any political unrest that may disrupt normal business operations within the market. This has created a business environment that is very peaceful to various firms in the country.
The firm also enjoys an economic growth in this region that has increased the purchasing power of the consumers. This increased purchasing power has helped the firm to increase its operations to regions beyond its borders. The emerging technologies have also helped the firm in its operational strategies. The firm has adapted the emerging technologies in its operations, a fact that has helped it increase it efficiency.
This firm faces a number of threats in its operations. Threats may not be predictable in this industry, though the firm may try to reduce the possibility of occurrence. The first threat that this firm faces is price wars in the market. The strategy of the firm to charge lesser prices for its products, especially to those consumers who are considered as loyal customers may not pass unnoticed by the local firms.
There is a possibility that the competitors may consider this move as a strategy that this firm uses to charge cheap for their products. The impact of this is that the competitor may respond by equally lowering their prices in the market. Such price wars are always dangerous to the prosperity of a business.
The initiative may fail to make any serious sense. This firm also faces the threat from the emerging technologies. The emerging technologies are beneficial to the firm. However, they can pose serious challenge to the firm if the firm fails to select the appropriate technology to apply. Applying a wrong technology may cause serious negative consequences to the firm. Late application of the emerging technologies may also render such a firm less competitive in the market.
The Market in Middle East
The Middle East region forms an expansive market that includes a number of countries. Of importance in this region is the United Arabs Emirates. This country, and specifically its city of Dubai, has become an international trading center, attracting people from all over the world. This city exports various products to the emerging markets, especially in Africa.
With its products in the market, this firm can access international buyers for its variety of products. The companies in the region will also need the products of this firm. The plastic bags and other containers it manufactures will be important to other firms in this region. Getting organizational buyers for its products will hasten its expansion rates.
The market in the Middle East is not very different from that in Saudi Arabia. Most of these countries are Islamic countries. The challenges that this firm faces currently in the home market are the very challenges it may face in the Middle East. The SWOT analysis done above in the Saudi markets will apply in this market after this firm takes time to establish itself in this market.
Approaches STEP should Use to Enter Middle East Markets
It is important for this firm to come up with proper approaches that it plans to use in the Middle East markets. The first approach that this firm should use in this market is awareness campaign in this new region. The products should be known in this new market. This firm should develop an awareness campaign similar to that when it is commercializing a new product in the market. The firm should organize an awareness campaign both for its brand, and for its individual products to run hand in hand
The firm should also be ready to both the mass media and the social media for marketing its products. Another approach that can help this firm is to develop a special niche for its products in this market. This firm should ensure that it creates a strategy that will make its products be considered as substitutes to other existing products other than direct competitors. This will reduce the level of competition that may come against its products in this market.
Possible Challenges STEP May Face in the Middle East
Moving to the Middle East region will come with a number of challenges. The following are some of these challenges that STEP should be ready to face.
- There will be new competitors in the international markets.
- The costs of operating regionally will be higher than the current costs of operation in the local market.
- The firm will have to understand the socio-economic and political environment of each country.
- There will be increased taxation in these regional operations.
- The firm will be forced to expand its logistic unit, and other units within the firm, which will be an extra cost to the firm.
Benefits of STEP Taking its Products to Middle East Markets
There are some benefits that this firm may have by entering into this market. According to Martins (95), going to the international market always come with some obvious benefits. The following are some of the benefits that this firm will stand to benefit with its entry into this market.
- Increased market for its products which will translate into increased sales hence increased profitability.
- This expansion will help STEP spread its risks so that when they occur in one market, the effect does not become devastating.
- This move will over it opportunity to patronize the world market with its products.
- Middle East market will enable this firm expand its scope to global levels in management given the fact that it will be operating regionally.
Since its inception in 1980s, STEP has always experienced growth within the Saudi economy. This firm has been able to expand its operations within the Kingdom of Saudi Arabia. Although the firm has experienced a number of challenges, including threats from competitors and other challenges from other sectors, it has managed to overcome them with a lot of effort.
Currently, this firm is experiencing a massive growth in its capital base. The Saudi government has liberalized the Saudi market. This means that this firm can easily find a stronger competitor in the economy. It is therefore, very important that this firm expands its operations to go beyond the borders of this country.
The Middle East market is one of the most attractive markets that this firm can easily venture into. The management should come up with strategies that will help it enter these larger markets with its products. When doing this, the management should realize that the international market is different from the home market back in Saudi Arabia. It should be ready to face the dynamics that are present in the international market.
Martins, Jeanette. Global Business Etiquette: A Guide to International Communication and Customs. Westport: Praeger, 2008. Print.
Rickard, Cat. Going Global: Managing the Hr Function Across Countries and Cultures. Farnham: Gower, 2009. Print.
Shechter, Relli. Smoking, Culture and Economy in the Middle East: The Egyptian Tobacco Market 1850-2000. London: Tauris, 2006. Print.
Travis, Thomas. Doing Business Anywhere: The Essential Guide to Going Global. Hoboken: John Wiley & Sons, 2007. Print.