Page 25 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

Introducing Dubai & Co. 11

beaches to oases to historic forts—quite unique among the GCC
countries.

Developing Corporate Strategies
The second half of this book provides perspective on how to craft
regional strategies for the GCC, taking a functional (that is, depart-
ment-by-department) approach to the challenge. To effectively cap-
ture commercial opportunities in the region, multinational firms
must be prepared to adjust their business models, building on the
elements that are well suited for the region and modifying those
that are not. Chapters 5 through 10 explore strategies for multina-
tionals across the range of functions and departments, providing
both thematic advice and specific examples of how other compa-
nies have approached the opportunities.
Chapter 5 discusses the complex issue of market-entry strate-
gies. As GCC markets have historically been protected by regula-
tory barriers and had relatively little commercial potential, the
norm for multinationals seeking to enter these markets has been
straightforward distribution agreements. Multinationals have
struck deals with local distributors to sell their goods—and manage
all the local issues—for a percentage of revenues. The world’s major
pharmaceutical and auto manufacturers, for example, have
adopted distribution models within the GCC. These distribution
agreements have allowed multinationals to profit from GCC mar-
kets with minimal risk; responsibility assumed almost entirely by
the local distributor. The drawback of this approach, however, has
been that it limits the foreign firm’s share of the profits and its abil-
ity to control local strategies.
As the GCC becomes more important to firms’ global strategies,
joint ventures with local partners will become increasingly important
for success. The financial sector offers an array of examples—includ-
ing the Saudi Hollandi Bank (ABN Amro), the Saudi American Bank
(formerly part of Citigroup), and the Saudi British Bank (HSBC).
Choosing the right partners and managing the relationship well can
be as important as capturing the right economics from the joint ven-
tures. Looking to the future, organic and acquisition-based market
entry strategies are becoming increasingly possible and attractive,
and we will explore benefits and drawbacks of this model as well.