Coping with Threats in Kuwait's Small Business Market

The document provides an analysis of the challenges faced by small businesses in Kuwait, including complex government policies and a preference for product variation among customers. It suggests strategies such as cost reduction, market analysis, and digital marketing to cope with these threats and gain competitive advantage.

Running head: GENERIC STRATEGY
Business Level Strategy
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2GENERIC STRATEGY
Table of Contents
Critical analysis and discussion the impact of internet and digital technology on each five
competitive force.............................................................................................................................3
Critically discuss four threats of entry to new entrants in small-scale entrepreneurship in Kuwait
and suggestions to overcome these threats......................................................................................6
References........................................................................................................................................9

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Critical analysis and discussion the impact of internet and digital technology on each five
competitive force
Five competitive forces refer to Porter five forces. The five competitive forces are threat
of new entrants, threat of substitute, bargaining power of customers, bargaining power of
suppliers and industry rivalry. As commented by Wang and Zhang (2015), these five forces are
associated with competitive advantages. In order to gain competitive advantages in a new or
existing marketing, an organization need to analyze these five forces based on which they can
develop their strategies. In the recent years due to rapid enhancement of internet and technology
the business becomes dynamic in nature and this emerging technology leaves a big impact on
Porter Five Forces model.
Impact of internet and digital technology on Threat of new entrants
The nature of competitors is being changed due to emerging technology. By using the
digital technology the new entrants are able to bring in state of value proposition and art of
business model. By using, social, mobile and cloud technology the competitors can easily make a
platform for them in a new market. Therefore, the cyber security reinforces their entry as a result;
it is difficult for an existing organization to get any information regarding their new competitors.
In the recent years, Kuwait becomes popular for emerging technology (Eskandari et al. 2015).
Kuwait has been transformed into a global city by incorporating new technology in business
sectors. This country attracted skill talent around the world. However, the hospitality and tourism
sectors also started to follow modern technology to compete in global market. As for example,
Oriental Restaurant is a small hospitality sector of Kuwait. In the recent years, this organization
has been facing a great threat of new entrants due to emerging technology in this country. As

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commented by Mavimbela and Dube (2016), the nature of competition is changed by digital
business. Today the existing business organization needs to focus on the new entrants in the
industry as the new competitors are equipped with digitally-based value proposition and business
model. As argued by Fung (2014), digitalization is good for new entrants while it brings threat to
existing business. On the other hand, e-business model enables the competitors to get easy entry
as the companies take few activities in-house and value chain. As a result, the complexity in
management becomes decreased and the threat of new competitors may go up. In the context of
Oriental Restaurant, new entrants may use the digital technology and get an easy entry in Kuwait
hospitality industry. This will accelerate the new entry for this organization.
Effect of digital technology and internet on threat of substitute
Digital technology and internet enhance the threat of alternative product in similar
industry (Mavimbela and Dube 2016). For an organization, the switching cost is low due to use
of digital technology. Therefore, the customers have a tendency to switch from traditional model
to a new model. As for example, Oriental Restaurant provides home delivery by taking order via
phone. However, if another organization offers more advanced option to the customers by
utilizing digital technology then it will bring a big challenge for this organization. In the recent
years the hospitality sectors in Kuwait and other countries focus on the mobile app, which is a
big aspect of digital technology. Hence, the competitors of Oriental Restaurant may offer the
mobile app to the customers via which they can place their order quickly. This affects the
traditional service model of hospitality sectors and facilitates the threat of alternative product in
the similar industry (Sutherland 2014).

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Impact of digital technology on bargaining power of customers
Bargaining of customers is one of the major forces among the five competitive forces.
The main focus of the digital business is need and expectation of the customers. As stated by
Zhang (2017), internet and digitalization allow a business to identify their customer needs by
checking their feedback on social media and company website. However, in the recent years,
customers have increased their bargaining power through the rapid use of internet. As criticized
by Weiss et al. (2018), customer gets easy access to information via internet, which enhances
price sensitivity. In Kuwait hospitality sectors by using the social media and websites of the
restaurants through search engine the customers are able to find the substitute of products. On the
other hand, internet allows the customers to compare the price of different organizations in a
similar industry, which enhances their bargaining power. In the context of Oriental Restaurant,
their customer can compare the price and service of this organization with other organizations
via social media by checking the information regarding the service. This will bring a big threat to
this organization and increase industry competitiveness.
Effect of digital technology and internet on bargaining power of suppliers
At present bargaining power of suppliers is increased as the accessibility of information
increases. As mentioned by Zaroki and Owliaiynasab (2018), digital technology may increase or
decrease the bargaining power of the suppliers. However, suppliers those follow the digital
business model are able to accelerate their bargaining power by utilizing information via internet.
On the other hand, suppliers those want to follow traditional business model may use their
bargaining power slow down. Development of smart products by using technology is

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revolutionizing the bargaining power of suppliers. Therefore, the software replaces the physical
components as well as physical tailoring. As a result, the significance of traditional suppliers to
total service or product cost often declines; as a result, their bargaining powers can fall.
Effect of internet and digitalization on rivalry in the market
The rivalry is the great player among the competitors in the global market. Hence,
digitalization and internet just add fuel to fire in recent years, which allows the existing
competitors to give more focus on digital technology (Schmidt 2018). Hence, the rivalry is
growing as the existing barriers are going down due to the low cost of digital business model. In
the context of Oriental Restaurant, it has been found that it is a small organization and always
under the threat of rivalry in Kuwait hospitality industry. Thus, emergence of internet and digital
technology may bring a big challenge for this organization. The rivalry can be connected easily
with the stakeholders by applying digital technology, which influences this competitive factor
positively.

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Figure 1: Impact of digital technology on five competitive forces
(Source: Schmidt 2018)
Critically discuss four threats of entry to new entrants in small-scale entrepreneurship in
Kuwait and suggestions to overcome these threats
A new business has to face major threats while entering in a small scale ownership in
Kuwait. One of the major threats is the government policy. However, it is important for the
foreign company to follow the rules of regulatory body while entering into a new market (Zaroki
and Owliaiynasab 2018). The domestic business organizations do not have to follow the foreign
policy. Kuwait government does give scope to the new entrant easily while entering into a small
business chain. There are several contradictory policies which resist the new entrants to get an
entry in a market. Kuwait government has inconsistent policy based on which the organization
only recruits the employees for only pre-verified position. As per the Council of Ministers
Decision No.75 of 2015 foreign investors are not allowed to invest in oil, gas, real estate and
coke manufacturing zone (Export.gov 2018). This is a big threat for new entrants in Kuwait
small chain market.
Lack of proper resources and capital is another major threat of new entrants in Kuwait
market. However, Kuwait is an expensive place thus, the new entrants need to have more capital
to get entry in any small market. In Kuwait non-petroleum related manufacturing zone and
agriculture sectors are limited. As for example, in food packaging sector new entrants need more
capital and more workforces. However, the labor law is complex in Kuwait thus; it is difficult for
a new organization to manage the workforce and capital while entering in small chain market in
Kuwait (Export.gov 2018). Threat of existing competitors is another barrier to entry to new

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entrants in small-scale entrepreneurship in Kuwait. However, food packaging industry is a small
sector of Kuwait hence; already many competitors are present in this sector, which resists the
entry of new organization.
Apart from this product differentiation is another big threat of new entry in a small
market. However, for a start-up business, it is difficult to create product variation as their budget
is low and Kuwait is an expensive country. In the recent years, transit packaging is most
preferable packaging as it is one type of e-commerce packaging and most consumers like to do
online shopping. Hence, the customers in this country want more variation in product characters,
which creates a big threat for a new organization to get entry in small chain entrepreneur market
in Kuwait (Export.gov 2018).
In order to cope up with above threats, the start-up business should follow cost
reduction, market analysis, and promotional strategy. In order to deal with complex government
policy the new organization, Kuwait needs to make transparency in their business and to
comply with legal requirements. Therefore, the small business has a tight margin and low
capital thus; they need to follow lower marketing cost strategy. This can be done by replacing
the traditional marketing with digital marketing. The small business should leverage the power of
internet, which will reduce their operation cost. To gain competitive advantage and deal with
existing competitors in a new market a business needs to develop unique product by using
product development strategy. This will also help to reduce the pressure and cost of product
differentiation. However, the customers of Kuwait market prefer new product. Hence,
introduction of new featured product will help the entrepreneur to deal with the threat of product
differentiation and existing competitors.

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References
Eskandari, M.J., Miri, M., Gholami, S., Reza, H. and Nia, S., 2015. Factors Affecting The
Competitiveness of The Food Industry by Using Porter's Five Forces Model Case Study in
Hamadan Province, Iran. Journal of Asian Scientific Research, 5(4), pp.185-197.
Export.gov. 2018. Kuwait - 1-Openness to & Restriction on Foreign Investment. [online]
Available at: https://www.export.gov/article?id=Kuwait-Openness-to-Foreign-Investment
[Accessed 23 Mar. 2018].
Export.gov. 2018. Kuwait - Market Challenges. [online] Available at:
https://www.export.gov/article?id=Kuwait-Market-Challenges [Accessed 23 Mar. 2018].
Fung, H.P., 2014. Using porter five forces and technology acceptance model to predict cloud
computing adoption among IT outsourcing service providers.
Mavimbela, R. and Dube, E., 2016. Can an Internet Adoption Framework be Developed for
SMEs in South Africa. Journal of entrepreneurship and innovation in emerging economies, 2(2),
pp.120-135.
Schmidt, A., 2018. Strategic Reorientation Due to Competitors’ Disruptive Innovation. In
German-Turkish Perspectives on IT and Innovation Management (pp. 89-108). Springer Gabler,
Wiesbaden.
Sutherland, E., 2014. Lobbying and litigation in telecommunications markets–reapplying
Porter’s five forces. info, 16(5), pp.1-18.
Wang, F. and Zhang, X.P.S., 2015. The role of the Internet in changing industry competition.
Information & Management, 52(1), pp.71-81.

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Weiss, J., Stephan, A. and Anisimova, T., 2018. Well-designed environmental regulation and
firm performance: Swedish evidence on the Porter hypothesis and the effect of regulatory time
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Zaroki, S. and Owliaiynasab, M., 2018. An Investigation of Effective Factors in the Growth of
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