Page 162 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

146 Dubai & Co.

minimize their risk and investment. These strategies also make
good sense when high-performing local distributors with good
track records are available. Protective regulatory regimes also
encourage such low-risk strategies. For multinational firms testing
the waters in GCC economies, the conditions described above, and
others, have pushed them toward the lower end of the Engagement
Spectrum of market-entry strategies. Recently, however, the
situation has been changing.

MODERATE-ENGAGEMENT STRATEGIES
FIT BETTER AS YOUR GCC BUSINESS
GROWS IN STRATEGIC IMPORTANCE
The goals of shallow-engagement strategies are modest: market
exposure at minimum risk. As the GCC becomes a more integral
part of a firm’s global strategy, however, senior executives will seek
to ensure maximum return on investment and to encourage more
aggressive growth in the region. In essence, they will seek more
control. Without a stronger measure of control, senior management
at the global level will struggle to make the GCC a genuine priority
in the business: How can we grow a market or create effective
strategies if we don’t actually run our business there?
There are three core goals of moderate-engagement strategies:
● More direct management of the business
● A reward of equity value created in the venture
● The benefit of knowledge and expertise provided by the
local partner

All of these goals reflect a multinational’s desire to take its Gulf
business to the next level and make the GCC countries areas of
greater focus overall. The typical mechanisms for moderate-
engagement strategies are joint ventures (JVs) and partnership
agreements by which both the multinational and the local
partner(s) invest capital and share ownership. Often the multina-
tional firm will also be granted a management contract under the
terms of which it is responsible for operating the business, in line
with its global standards, on a day-to-day basis. Oversight and
strategic direction are provided by a board of directors composed of
representatives of both the multinational and the local partner(s).