Page 148 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

132 Dubai & Co.

Prince Khalid bin Abdul Aziz, who would later become king of
Saudi Arabia. Toyota vehicles—durable and well equipped for
rugged Saudi terrain—quickly grew in popularity and Jamil’s busi-
ness has thrived for half a century. 1
Not every company can count on Toyota’s good fortune. In
earlier chapters we discussed the factors that make the Gulf a
highly attractive place in which to do business today. The states of
the GCC are prosperous, growing fast, and evolving in ways that
make their markets very appealing to multinational businesses.
There is no shortage of reasons for companies to enter the GCC as
one of their main strategies, which should serve as an engine of
profitable growth far into the future. By now, we can see why the
Gulf should not be ignored by global firms seeking to expand their
worldwide presence. The question facing senior managers is not
whether to enter the GCC, but how to enter the market most
effectively.
There are three basic ways of entering a market. The first is
through simple distribution: a multinational firm desiring to enter
the market licenses a local firm to act as a surrogate and sell its
goods. This approach limits the multinational’s risk but also limits
its reward. The second approach is through a joint venture: a multi-
national pools capital and expertise with a local partner and they
manage the business together. This approach increases the multina-
tional’s potential reward but involves significant effort and attention.
The third approach is to enter the market directly: the multinational
either sets up shop itself or acquires a local business that becomes
its own. This, of course, is usually the most challenging and risky
method, but allows the global firm to fully control its local opera-
tions and fully enjoy the fruits of its labor.
Most major multinationals have approached the GCC through
simple distribution agreements. As the GCC market has become
more attractive, however, joint ventures with strong local partners
are increasing. Direct market entry has generally been limited due
to regulatory barriers and senior managers’ limited appetite for
Middle Eastern risk, but this approach is now becoming more com-
mon. In this chapter we will discuss how deeper engagement with
the GCC—which often means migrating from simple distribution
to joint ventures or direct market entry—can enable multinational
firms to access more fully the substantial business opportunities