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Rivers already established a old foundation in Australian, it starts to expand its business into the international market. Its target market is the Saudi Arabia, which is locating in the Arabian Peninsula. In this essay, economic and financial environment in the Saudi Arabia will be primary analyzed. Then the debate will moves to culture environment in the Saudi Arabia. Thirdly, political and legal environment will also be outlined. At last, conclusion about whether Rivers should enter into Saudi Arabia market would be given based on the previews market research.
Economic and Financial Environment of Saudi Arabia Saudi Arabia is known as an oil kingdom, and it causes Saudi Arabia has an oil-based economy with strong government controls over major economic activities. It possesses about 17% of the world’s proven petroleum reserves, ranks as the largest exporter of petroleum and plays an essential role in OPEC. From CIA World Fastback, the revenue of the oil sector accounts for 80 percent of budget revenue, 45 percent of gross domestic product and 90 percent of export profit (Keyed ; Kabuki, 2011).
However, because of strong petroleum industry, Saudi Arabia kept a particular economic structure n a long time. Comparing with the petroleum industry, the lack of spending on agriculture and the limited natural conditions of Saudi Arabia lead to its agriculture developed slowly. As the economic system in Saudi Arabia is a mixed, there is no genuine market allocation or command quota system as market system has a command sector which is the government.
In order to change the fact of single economic structure, the Saudi Arabia government implemented economic diversification policy, focusing on developing its modern industry and basic industry gradually change the ordinary dependent n oil income situation and establish a diversified system of the national economy. According to Hang’s (2011) report, in the power sector, the Saudi government established 25 years development plan, by 2023, generating capacity will reach 60 million kilowatts, a total investment of 1 . 55 billion US dollars. In the field of communications, 2001 to 2005, the Saudi Communications Company will invest 10 to 15 billion dollars for the expansion and improvement of the fixed telephone, mobile telephone network. In the desalination of water area, the next 20 years will invest 12. 4 liars, and an average annual investment will reach 620000 million dollars can help to promote its development of agriculture. Furthermore, for attracting foreign investment, Saudi Arabia acceded to the WTFO in 2005.
Also, the government has established six “economic cities” in different domestic regions to promote foreign investment and plans to spend 373 billion dollars between 201 0 and 2014 on social development and infrastructure projects to advance Saudi Rabbi’s economic development. Economic environment is the factor that marketers must consider when deciding to market globally. Analysis in the economic environment can help arresters aware of how powerful the target market is and what it is like.
In recent decades, the development of international trade is quite rapidly. For a clothing company Rivers, how to catch opportunities from Saudi economic advantages and avoid the threat from Saudi economic disadvantages are key points to run its business in Saudi Arabia. Kinkajou, Romaine, Brady ; Bella (2011) highlight that population; income, consumption pattern and infrastructure are general indication of market size. The number of people in a particular market provides one of the most basic indicators attention demands for that market.
According to the International Monetary Fund released the top ten list of global economic growth forecast in 201 2, Saudi Arabia got the eighth with 6 percent in economic growth rate ranked. The International Monetary Fund believes that, although the Saudi economy due to the European debt crisis and the drop in oil prices affect the signs of a slowdown, but growth is still strong. Although the real growth rate Of GAP declines from 7. 1 percent in 2011 to 6 percent in 2012, purchasing power parity increases from 698. 8 billion dollars in 201 1 to 740. 5 billion dollars in 012 (Squishier teal. , 2013).
However markets require not only the number of the population but also purchasing power, in other words, people’s ability to buy products and services. High income allows high purchasing power. Kinkajou et al. (2011) note that income is the most influential variable affecting market potential; it helps screen markets. Countries are often classify according to levels of income and measured by annual gross national income (IN) per head. In 201 1, the IN per capita in Saudi Arabia was 24,870 dollars, which is much higher than high income countries level, 1 1 ,906 dollars per capita (Keyed amp; Kabuki, 2011).
High income causes high purchasing power that Saudi Arabia is one of the largest consumer of luxury goods. Economists point out that the Saudi’ consumptions have three characteristics. The first one is their high income result them prefer high-grade goods. In addition, the Saudi pay more attention to quality of the product. Therefore, the third characteristic is their spending habits are more conservative with a higher brand loyalty. Based on these characteristics of Saudi’ consumptions, the clothing company Rivers can use the high quality strategy to improve its business.
For example, Rivers can develop high quality clothing custom business. High quality product with a high price can satisfy the Saudi’ high level consumption and also get profits from it, on the other hand; high quality strategy is helpful to establish a brand image and get more market share in Saudi Arabia. In addition to high quality product and high price of four-As strategy, Rivers also can provide high quality service, such as after-sale service and customer feedback, to promote operated business in Saudi Arabia. Population is the other characteristic of Saudi economic environment.
In cent years, because of political stability, high growth of fiscal revenue and the encouraging government policy, population of Saudi Arabia maintains a high growth. It can be predicted that in the future ten years, a quarter of the population will be twenty to thirty years old young people. Grief, Anne and Corrals (2006) that the pool of consumers in every leading product category includes groups of people with a variety of wants, needs and personal characteristics. A firm’s marketing challenge is to identify one or more of these groups as a potential target market.
For Rivers in Saudi market, young people can be one of its potential target markets in the further. In order to satisfy young people needs, Rivers can product some high quality and fashionable clothes, but also high quality traditional clothes. However, high growth of the population also leads to some problems, such as unemployment. Government is busy creating more jobs and work opportunities to unemployed people, if Rivers can invest in Saudi market, it will provide some work opportunities to local people which is government preferred. There is an opportunity to Rivers to enter the Saudi market with local government encouraging policy.
Otherwise, weak agriculture of Saudi Arabia cannot support its increasing and high consumption population. The Saudi government released data shows that textiles and clothing are the seventh largest import products of Saudi Arabia, so export or investment to enter the market both can be chose by Rivers. The financial environment is the second major environment that influences the development of an enterprise. Saudi Arabia has strong economic strength, embodied in its financial stability, financial market scale and depth, and a sound banking and non-banking financial services.
According to the Saudi stock institution data show that, because Of the financial crisis, the stock market fell sharply in 2011, but in 2012, the securities and exchange experience a quick recovery and sustainable growth (Richard & Heather, 201 1). All of this relies on its strong finance and sound financial system. Base on this strong and positive financial environment, Rivers can operate it business with low financial risk in Saudi market. However, the exchange rate system of Saudi Arabia is the floating exchange rate system.
It means government allows the currency to float independently in response to market forces. Rivers should clear how to manage foreign exchange risk to avoid loss in its business, such as transaction exposure, translation exposure and economic exposure. In order to avoid foreign exchange risk, foreign companies usually use forward contract, futures contract and currency swap to protect their profits. Furthermore, the influence of Economic Globalization becomes to stronger and stronger, Rivers should improve its risk prediction to reduce loss in financial crisis, such as global financial crisis in 2008.
Culture and social Environment of Saudi Arabia When it comes to culture environment, culture plays a vital part in the internationalization process. It is a comprehensive system of learned behavior patterns that identify characteristics of the members of any given society. Acquainted with a particular market culture can help marketers develop strategies correctly and ensure that implementation by local operations is essential (Kinkajou et al. , 2011). The major elements of culture are language, religion, values and attitudes, aesthetics, manners and customs and material elements.
The official language of the Saudi Arabia is Arabic, and English is speaking widely, especially in business and trade (Shed & Aluminum, 2010). Even though English can be used in Saudi Arabic, the Saudi who only have the opportunity to attend an institute of higher education can learn English. Kinkajou et al. (2011) highlight that use the local language may cause a significant difference; people are feeling more comfortable using their own language.
Hence, when Rivers trying to promote it apparel products in Saudi Arabia, the promotional materials and information should be translated into Arab, showing the virtues and spirits about Rivers. Moreover, marketers should also be aware of that people in the Saudi Arabia read and rite routine is from the right side to left side, therefore, when Rivers do promotion, the subsequence of words needs to be done in accordance with local culture. The official religion of Saudi Arabia is Islam. Saudi Arabia is the birthplace of Islam; Mecca is the Muslim pilgrimage city in the world.
The Muslim population takes up 98% of the total population. Muslims are expressly prohibiting from changing to other religions. Muslims regard pigs as taboo; they think pork is filthy vile thing (Masseur & AY-Saran, 2001). Despite Muslims treat pig as an evil thing, there are three other taboos should also be aware. The first one is Rivers should not advocate entertainment. In Saudi opinion, entertainment is extremely degenerating their soul; thus, they cannot talk about leisure, entertainment or invite Saudi to the nightclub (Rice, 2004). The next restriction is Saudi Arabia against idolatry.
In accordance with Shari-compliant, Saudi Arabia prohibits idolatry. Therefore, they did not see the movie; do not wish to take pictures, video, sculpture, dolls and other gifts (Antennas, 2009). The last taboo is Saudi are strict with color. Saudi Arabia advocating white (represents purity), green (represents life), and avoid use yellow (means death). Except forbidding yellow, pink and purple are also representing negative things. As a consequence, the Rivers should avoid cartoon that broadcasting other religion taboos like pigs or idolatry elements in their products (Schneider, 2001).
Identically, Rivers should avoid producing merchandises with colors represent negative impact, like yellow, pink or purple. The next gambit will turning to the value system from Saudi. Value stands for sharing belief and internalizing by individuals. It usually has a religious foundation. Attitude is an assessment of alternative based on these values (Kick Knott et al. 2011 According to Akers point if the view, in the Saudi Arabia, consumers’ buying decisions are positively affecting by the country itself (2007). Consumers’ perception of the country Of origin is influencing by the values distinctly, norms and expectations.
Majority people in the Saudi Arabia believe that foreign products are better than their local products. As a result, the Rivers positioning should not focus on the cheap price but rather on the products quality. Therefore, in the promotion of the apparel products, marketers need to enhance the perception that, this costume designed and manufactured by Australian company. Regards to aesthetics, this type of abstraction can be refers to the ideas in a culture concerning grace and taste. Aesthetic differences affect design, colors, packaging brand names and media messages of products.
Man in Saudi Rabbi’s traditional clothing is a long vertical and places gowns. The gown is Baggy, long-sleeved and collarless. Usually, they wear robes of white. TO participate in the funeral activities, they will wear a black robe. In accordance with the Shari-compliant, the woman’s body is requires to be a robe and veil to cover up. Therefore, Saudi Arabia women are usually wearing a black robe; her whole body will wrap stuffed straightly. Wearing a black veil their heads have a variety of shapes such as triangles, squares, pentagons, but must be closely cover the face, allow only the eyes exposed (Durbin, 2002).
Therefore, Rivers may be able to put it interior design into Saudi Rabbi’s style. It seems that Rivers gets stuck in the limitation unless it can transfer it concentration on shoes. Because of the hot arid natural environment, Saudi prefer wearing slippers or sandals in their daily life. Luckily the Rivers now consider manufacture fashionable anodal as it selling plan, and sandals have enormous potential market share in Saudi Arabia. Marketers can spend more attention to sandals market in Saudi Arabia fifths want Rivers gain more profits.
In regards to material elements, Rivers requires using better clothing materials to make clothing. According to Shall and Lashing’s analysis, Saudi textile import in recent years has expanded each year. Especially the production of men and women in traditional costumes fabric imports increased demand for high-end products to expand, but the low-grade fabric imports declined (2009). After a rueful study of the Rivets products list on the official website, it is obvious found that most of Rivers’ clothing are making up with Elastic, Viscose, Polyester and other synthetic fibers.
Therefore, combined with Shall and Lashing’s statement, marketers should pay more attention on the dress and personal adornment products’ raw materials to gain Saudi Arabia consumers dependent and loyalty. Political and Legal Environment of Saudi Arabia Overall political and legal environment are tremendously prominent in international marketing. Understanding of the Saudi Arabia market’s political ND legal environment can help us make a business plan correctly there. In regards to the political environment, Fleming (1997) State that, the political environment affects opportunities at a local and international level.
Saudi Arabia essentially operates as a near-absolute monarchy. It has no national legislative body, political parties, or democratic elections. The king does not have unfettered power, however. The Basic Law, which was introduced in 1993, articulates the government’s rights and regulations and sets forth the civil rights, system of government, and administrative divisions by which the Tate run. Saudi Arabia is a member of the Gulf Cooperation Council (ICC), the United Nations and the World Trade Organization. It promotes Saudi Arabia enter into the world market to reduce the element of foreignness.
Bilateral relationship be;en Australia and Saudi Arabia are warm, multi- faceted and growing rapidly. In last three years, Saudi Arabia has hosted a number of high-level Australian visitors, including former and current Governor-General. Besides, Saudi Arabia is Australia’s largest trading partner in the Middle East. Two-way merchandise trade between Australia and Saudi Arabia was worth more than $4. 25 million in 2009, which also includes clothes industry. What is more, Varies (2009) highlights that, Australia and Saudi Arabia signed many bilateral agreements, which covers a range of issues.
Therefore, for further strengthen trade and investment relationship between Saudi Arabia and Australia, Saudi Arabia stated clearly support for the early conclusion of a comprehensive Free Trade Agreement between the ICC and Australia. A long-standing economic cooperation agreement reduced the political risk for the Rivers Company sold their products in Saudi Arabia. Turning to the legal environment, it is a set of basic rules about business operation in society. Laws and regulations that set by government in the host and home country can affect the viability of a company’s international operation.
According to Hefted (2001), the structure of the legal system in Saudi Arabia is adapting to the changing needs of society. Most changes in commercial law liberalized legal regimes and created a more open and understandable environment for foreign business and investors. Hefted (2001) states that, Riyadh, the capital promotes foreign investments by setting p specialized economic zones. Companies located in these economic zones may be 85 percent foreign-owned. Therefore, Saudi Arabia government views the establishment of these trade zones as an effective way of management for foreign investment as well (Varies, 2009).
What is more, Fishbone and Zen (2009). Suggest that, because the foreign principal may have to litigate in courts of the agent’s country, one of the most influential factors for successfully working in Saudi Arabia through an agent is the proper selection of a local agent, as litigation is often not a viable solution for disputes. Regards of mangers should dedicate much of their time and efforts to establishing good personal relationships with local business partners who are a key factor to achieving a satisfactory outcome of any business venture in Saudi Arabia.
The foregoing analysis of the political and legal environment shows that, Saudi Arabia provides the clothing company Rivers a liberalizing foreign investment regulation. In order to be successful on Saudi Arabia market, managers in Rivers Company need to study mere knowledge of the laws and regulations of the country. The product strategy would be influenced by foreign law seeking to protect heir customers. Such laws might include safety and performance standards (Fletcher and Crawford, 2011 For example, consumers are allowed to use patch boards with two holes in their daily life within domestic China.
When Chinese patch board companies want to export their product to Australia, Australian government refused the request because they only allow citizens to use patch boards with three holes, and the patch board should also be added some small switches to ensure a higher level safety. So Rivers Company needs to make changes in their product by considering the situation in Saudi Arabia, as well. In Saudi Arabia, women usually have their face covered by a piece of silk mask, because they are not allow to show their faces to other people by the law.
They consider the face is a reflection of their soul, and they need to keep their souls clean, pure, and tidy (Hefted, 2001 In this way, Rivers’ product would be better accepted by Saudi Arabian market if the product has a design combining the clothes and the silk mask together. Moreover, as Saudi Arabian people prefer white color clothes as the meaning of pure in the soul, the product of Rivers should be white rather than any other colors. The place strategy would be another aspect which influenced by foreign laws.
For instance, sales person Often make door-to-door selling introduce new products to customers in many countries, such as the USA and Australia, but Chinese government forbid this kind of sell by publishing several laws because it might lead to an insecurity living environment, robbery would happen more frequently in this way. While Rivers Company advertises their clothes, door-to-door selling should not be used as well because Saudi Arabian women are usually jobless housewives, and they are not allow to talk to strangers (Handful, 201 1).
When these housewives need to buy some daily necessities, their husbands would go shopping for them. So the company could open shops equipped by female sales person in large shopping centers, and which male customers are not allow to enter. As a result, female customers would feel more comfortable by communicating with saleswomen and positive brand images would be remembered by them. Referring to the pricing strategy, foreign laws might influence them to protect their consumers, as well. The host government may intervene to ensure a balanced competition between domestic companies and foreign companies.
For instance, China, as one of the largest export countries, has a lower price of raw materials of the product than European countries, and even plus the transportation fees, the total cost of every single product is still much cheaper than those produced in European countries. When these products enter to the European market, consumers will undoubtedly choose to purchase Chinese product than European product. European government usually considers this situation as product dumping (Fletcher and Crawford, 2011 So they have to increase the taxes for Chinese companies to make the competition fair to domestic companies.
Considering that, Rivers Company should also pay attention to the price war which would surely happen if they intend to enter Saudi Arabian clothes market. Unfortunately, price of raw materials in Saudi Arabia such as labor and cotton is much cheaper than that in Australia. So it is strongly recommend setting up factories in domestic Saudi Arabia, employ local people work for the company, then seek for a lower price cotton suppliers. Referring to the promotion strategy, it should be a highly considered element affected by foreign laws.
As most countries want to protect their members room misleading or deceptive information, Rivers Company should try their best to avoid these mistakes when they advertising their product to Saudi Arabia. For instance, clothing advertisements would usually use sexual themes to obtain customers’ attention, like nudity, people sometimes show up with no clothes to present their excellent shape of body, attract consumers’ focus to the brand or product. This is banning in Saudi Arabia because people would not be pleased according to religion reasons.
Another interesting aspect in promoting products in Saudi Arabia would be consumers refer information which is wholly factual in these advertisements. As an Australian company, marketers of Rivers Company would be more likely using some “Australian Humor or exaggerated rhetoric in their advertisements, which may promote their product effectively but contain some inaccurate descriptions about the product. Unfortunately, according to a survey conducted by Fishbone and Zen (2009), more than 82 per cent customers in Riyadh and Make refused to accept these descriptions.
Obviously, when Rivers Company making printed ads, they need provide true descriptions rather than those with exaggerated descriptions. Conclusion To sum up, this essay mainly analyzed the Saudi Rabbi’s potential market for a clothing manufacturer Rivers. The large population, high gross national income per capital per person, high degree of arbitration, good condition of infrastructure makes the Saudi Arabia become a promising potential market. Saudi Arabia government spends pools of money to encourage foreigner companies invest here.
The culture environment in the Saudi Arabia provides the River company some instruction in the process of promoting and product their products. Although female’s apparel style will be the limit by Muslims elision, researcher found produce sandals is another way to broad Saudi Rabbi’s market. And the political and legal environment in the Saudi Arabia suggests that, the open market in the Saudi Arabia and the stable relationship between Australia and the Saudi Arabia allow the Rivers enter into the Saudi Arabia market freely and safely.