As one of the wealthiest regions in the world, the Arabian Gulf has almost half the world’s oil reserves and around 40% of global gas reserves.
Between them, Saudi Arabia, UAE, Kuwait & Oman produce over 16m barrels of oil per day (bpd) and Qatar produces around 90,000 bpd of Liquid Petroleum Gas (LPG). It will therefore come as no surprise that this region, with a combined population of approximately 54 Million people, has a total GDP of around $US 3.5 Trillion.
For the last 50 years this revenue has been reinvested, fueling the regions carbon economies. Construction has been in overdrive; outstripping and overshadowing much of the rest of the world. The rate of development has been impressive, to say the least, and has unsurprisingly encouraged many international companies to set up a regional base, or export directly to eager buyers.
However, for every company that finds success, there are many that fail to make their mark. While there are many reasons for this, in this article, I want to highlight the 6 most common reasons.
With over 35 years of international business development in Asia and the Middle East, I have been privileged to work with many big British brands and I am delighted to have had a modest hand in their successful access to these lucrative markets.
The biggest reason that companies fail is a
LACK OF PREPARATION
Many business owners often base their initial decision to conduct business in the Gulf on a TV programme they have seen, or articles they have read, or in some cases, a holiday to Dubai. Sitting by the pool, enjoying the Arabian sunshine and seeing the scale of development taking place around you can be mesmerising. It is easy to believe that the Gulf offers huge business opportunities – across all sectors of industry.
And, Why Not!! Others have been successful. Cities such as Dubai, Abu Dhabi, Doha and others, have all thrived on international brands being present and available in these vibrant and exciting markets.
But, the lack of any detailed analysis, market research, or the failure to develop a fully costed strategy can lead to disaster.
Visiting the region on Government supported trade missions, or attending exhibitions as part of the UK’s country pavilion can be a great introduction. Business visitors will spend a lot of time talking to prospective clients, exchanging and collecting business cards.
The business language throughout is English and after a long day at the exhibition there are plenty of outlets to ‘networking and socialise’ into the early hours – all good so far?
Not really! Pitching up with brochures, marketing materials and business cards – all in English, with no Arabic at all, can be a huge cultural mistake, resulting in the loss of business. Local companies will often make a judgement based on cultural awareness and respect.
With a multitude of nationalities from over 180 different countries living and working in the region, the Arabian Gulf is truly multicultural and exhibitions are international events. Businesspeople will travel from Saudi Arabia, Kuwait, Bahrain and other parts of the MENA region looking for new products.
Courtesy and respect for local tradition is highly valued, so it is important to have some Arabic translation within brochures, or on the reverse side of business cards.
APPOINTING THE WRONG AGENT OR PARTNER
Many agents and distributors visit every exhibition on the circuit, searching for products or services to add to their portfolio. The bigger the brand, the better. Companies are often approached by representatives from influential business families, or even a local enterprising Sheikh. How to identify ‘who’s who’ and determine whether they are the best representative for your company, are questions that are often overlooked.
Agents will work hard to sign new companies and brands, promising everything in the process.
Unfortunatley, too many companies sign agency agreements during their first visit to an exhibition, without ever visiting the agent’s offices or conducting any due diligence, believing that business will soon start to flow. When this doesn’t happen, they can be trapped in an agreement for several years, eventually starting the process again, having missed significant opportunities and allowing their competitors to flourish. It is difficult to extract oneself from a contract signed in haste. English may be the language of business but it is usually conducted under Sharia law.
Supporting a product or services is essential and companies often rely solely on the newly appointed agent to “bring in the business”. Agents will work hard – if supported by the principle. But if potential buyers don’t know that your product/s or service/s are available, then they won’t be buying what you’re selling.
It is very easy to fall between the cracks if your marketing is ineffective – or, worse, non-existent.
The region is very competitive and price sensitive, so it is crucial to make sure that people know your USPs.
RUNNING BEFORE YOU CAN WALK
Believing that this is a region where “dreams come true” and “the streets are paved with gold” can be a costly mistake.
Many businesses pour vast amounts of money into creating local ventures without doing their homework, or really knowing the true facts and figures.
There is an abundance of very impressive commercial and residential real estate available for companies and their staff and, of course, the lifestyle can appear to be great – just look at all of those people driving a Bentley, Porsche, Ferrari or impressive 4x4 Lexus. There are also plenty of people trying to attract business investors – often with impressive promises and incentives.
It is important to develop an export strategy that will take your company, slowly and steadily towards success - before taking that critical decision to invest in an overseas office.
LACK OF INVESTMENT & RESOURCES
With projects valued at over US$2.5 Trillion across the region, there are certainly many opportunities. It is crucial to dedicate time and resources in order to receive a slice of the pie and build a long-term profitable pipeline of business.
Visiting the region once in a blue moon, or once a year, will never deliver the results that companies need to succeed – or indeed, to survive.
A strategic approach is the key to any success; identifying the most lucrative markets and prioritising activity. It is advisable to allocate sufficient funds to visit your agent, partner or clients at least 3 or 4 times a year.
LACK OF CULTURAL UNDERSTANDING
Although the Gulf States share some similarities, they are all very different and it is important to recognise and understand this. Although English is the business language it can be difficult to obtain written responses to emails and it is easy to feel neglected or ignored.
A common error that we have seen over the years, is the failure to ‘follow up’ or maintain ‘business relationships’. Despite advancements in digital technology and the ability to connect via various ‘Apps’, the best way to conduct business in this region is still personal, face-to-face contact, or via telephone.
To watch an organisation, invest time, money and effort at the outset of their export journey, gain a foothold in the market and then sit back, lose interest, or do nothing, is frustrating. As in any part of the world, a buyer in the Gulf will only deal with people who can be trusted. If a supplier fails to deliver, or lets them down, the competition will happily step in. Buyers will simply find a new source and all the initial effort and good will counts for nothing.
It is perhaps more important now, than ever before, for exporters to seek new markets outside of the EU. For many years now British exports to the Arabian Gulf have continued to grow. Competition is fierce and buyers do not wait around for long. However, for companies with sensibly priced, innovative products & services, this region is open for business.
We have just launched a series of free guides that can be downloaded, providing handy hints and tips about conducting business successfully throughout the Arabian Gulf. If you would like access to our free guides, just contact me at: firstname.lastname@example.org and I will send you a link.