Page 155 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

A Piece of the Action: Strategies for Entering the GCC Market 139

sector extends well beyond fashion: it distributes Ferrari, Maserati,
Jaguar, Land Rover, and other high-end automobiles; it even repre-
sents exclusive perfumes and cosmetics. 6
In 2006, Al Tayer secured a landmark agreement with Gap to
open 35 Gap and Banana Republic stores by 2010. The terms of the
deal are both remarkable and instructive. Unlike other distributor-
ship and franchisee agreements, this one involves multiple countries:
five of the six GCC states (the exception being Saudi Arabia). Further,
Gap has retained control of marketing, advertising images, and prod-
uct design—preserving the brand positioning worldwide that the
firm has always sought. Al Tayer is responsible for store operations,
finding real estate for store locations, and hiring staff. This agreement
is a noteworthy departure from Gap’s long-cherished strategy of
company-owned stores. Even Gap’s stores in the UK, France, and
Japan are company owned and not franchised—a policy choice that
7
some observers have seen as inefficient. That Gap chose to adopt a
shallow-engagement approach for its stores in the GCC, which pol-
icy deviated from its global norm, was most likely the result of the
Gulf opportunity being just too attractive to pass up. Regulations
would not allow Gap to own these stores, but the global firm saw it
as nevertheless worthwhile to engage a local franchisee.
Carrefour, the French hypermarket, has similarly, in order to
accommodate the GCC, made exceptions to its general practice of
having only company-owned stores. Of the nine countries in which
Carrefour operates exclusively through franchisees or partners,
four are in the GCC—in Saudi Arabia, the UAE, Qatar, and Oman. 8
Carrefour’s hypermarkets are very popular in the Gulf states,
where family units are large and grocery shopping can be an
important family event. Carrefour is an anchor tenant of Dubai’s
City Centre shopping mall, and its Muscat location is viewed by
many as the most useful place to shop in the entire city. It is
noteworthy that Carrefour—Europe’s largest retailer and the
second largest in the world, behind Wal-Mart—would take a keen
enough interest in the Gulf to fundamentally modify its business
model to enable market entry.
One factor that undoubtedly gives Carrefour comfort as it pur-
sues its aggressive market-entry strategy in the Gulf countries is the
strength of its franchisee, the Al-Futtaim Group of the UAE.
Al-Futtaim is Carrefour’s franchisee in the UAE, Qatar, and Oman