Analysis of Business Level Strategy and Generic Strategies in Kuwait

This report offers a comprehensive analysis of business-level strategy and generic strategies, focusing on the context of Kuwait. It begins by recommending and discussing five key policies designed to protect and support local companies. These include restrictions on foreign direct investment, the implementation of an open-door policy, participation in the International Monetary Fund (IMF), the use of import tariffs, and the establishment of effective employment and labor policies. The report then suggests and critically discusses four strategies aimed at enhancing the capacity of Kuwaiti firms to succeed in global markets. These strategies encompass subcontracting, leveraging demand conditions, fostering supporting industries, and developing effective firm strategy, rivalry, and structure. The report draws on various sources to analyze the economic landscape of Kuwait and provides actionable insights for businesses operating in the region.

Running head: BUSINESS LEVEL STRATEGY AND GENERIC STRATEGIES
Business level Strategy and Generic Strategies
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1BUSINESS LEVEL STRATEGY AND GENERIC STRATEGIES
Table of Contents
1. Recommending and discussing five policies to protect and support the local companies in
Kuwait..............................................................................................................................................2
a. Restriction of Foreign Direct Investment................................................................................2
b. Open-door policy.....................................................................................................................3
c. Participation of the International Monetary Fund (IMF).........................................................3
d. Import Tariffs...........................................................................................................................4
e. Employment and labour policies.............................................................................................4
2. Suggesting and critically discussing four strategies that can enhance the capacity of firms in
Kuwait to succeed in global markets...............................................................................................5
Subcontracting.............................................................................................................................5
Demand conditions......................................................................................................................6
Supporting industries...................................................................................................................6
Firm strategy, rivalry and structure.............................................................................................6
Reference List..................................................................................................................................8

2BUSINESS LEVEL STRATEGY AND GENERIC STRATEGIES
1. Recommending and discussing five policies to protect and support the local companies in
Kuwait
Kuwait is the fourth richest country based on per capita in the world as the GDP per
capita of Kuwait touched to $69,700 in 2017 (Kennedy 2016). The inflation rate in Kuwait is
2.5% and the unemployment rate in Kuwait was 2.1% in the year 2017. Most of the industries in
Kuwait are associated with petrochemicals, petroleum, shipbuilding, cement and food processing
and desalination and construction materials. Kuwait scores 62.2 in Economic Freedom and it is
the 81st freest economy in 2018 (Edris 2017). The competitive advantage of a country mainly
rests on the cheap labour and it is the ability of the nation to grow easily.
a. Restriction of Foreign Direct Investment
Kuwait government continued to encourage foreign direct investment with the
implementation of the laws of FDI. In Kuwait; the oil revenue has been declined and the
government is trying to diversify the economy; therefore, the government is trying to increase
the foreign direct investment by taking numbers of steps. Therefore, the local companies may
face the issue of competitive challenges from the foreign companies. The government has taken
the decision to allow the 100% FDI in foreign ownership in some of the industries; power, water,
water treatment and communications, IT, hospitals and insurance (Moore 2017). However,
Kuwait government has taken the decision of limitation of foreign control in some of the sections
and Right to Private Ownership and Establishment has been imposed. The foreign companies
cannot impose investment in the sectors of extraction of crude oil, natural gas, manufacture of
coke, manufacture of the fertilizers, real estate, public administration and defence and
investigation. In Kuwait, the government has provided the help through limiting the foreign

3BUSINESS LEVEL STRATEGY AND GENERIC STRATEGIES
investment in some of the sectors which have simplified the process of registering the new local
companies in reduced wait-time associated with the starting of the new business. The Companies
Law No.1 2016 maintained the requirement that Kuwaiti national must own 51% of the local
companies unless the foreign investors apply via KDIPA (Lizondo 2016). Restriction of FDI in
the country like Kuwait will provide benefit to the local companies which will contribute to the
good flow of exchange of money. FDI mainly is the reason behind the exchange crisis and with
inflation, it has contributed to the dwindling the exports. Low FDI in the industry can also help
country's politics not to corrupt as FDI can also influence the political set up also.
b. Open-door policy
Through open door policy; one country can have the protection of equal privilege from
the trading countries. The principle of open-door policy is to have equal access to maximum
ports open in the trade (Wei 2017). Great economic power must maintain the free access to the
ports and the country can collect the taxes. Therefore, the open-door policy will allow Kuwait to
have the free trade between the nations. Kuwait can take the open door policy as it will make the
nation trade with many of countries, drawing major economic growth. Therefore, Kuwait will
have the benefits of attracting the foreign investors who will invest money in Kuwait to grow the
local companies. Local companies will use the best mechanics to produce or manufacture the
products so that their qualities will be better. The best products can be sold to the foreign markets
easily. In addition, open door policy will help the local companies to fight against the
competitors; however the country many loss the part of their tradition and culture.
c. Participation of the International Monetary Fund (IMF)
International Monetary Fund was founded in the year 1944 and it included the Bretton-
Woods system to manage the exchange rates. The primary objective of IMF is to assist stabilise

4BUSINESS LEVEL STRATEGY AND GENERIC STRATEGIES
the exchange rates and provide loans to the countries in need. Most importantly, Kuwait is one of
the richest countries in the world and Kuwait does not need any loan or monetary help from IMF.
However, in order to improve the condition of the local business is to make the function of the
international monetary cooperation. IMF makes an adjustment to help with the balance of
payments. In case of the local business financial crisis; IMF can provide international
coordination with advice and loans (Crystal 2016). The local businesses in Kuwait can have the
benefits of economic monitoring and surveillance along with conditional loans from IMF.
d. Import Tariffs
Import tariff can raise the price of the products in Kuwait market and local businesses
have to import the raw materials or the supply items with a higher price due to the import tariff.
Import tariff makes the products more expensive and it can make the volume of the products
reduced (Manning 2002). Import tariff can provide a source of revenue for the countries levying
upon them. Kuwait approves the single customs tariff and it sets the official tariff rate is just 5%
on most of the goods. However, Kuwait exempts custom duty on the certain set of products like
foodstuff and medicines. Kuwait must lower the import tariff so that the goods must cost less in
Kuwait and taxes are calculated on the complete shipping value. Kuwait does not charge GST
and any other charges on the products and it helps the products to sell less in price.
e. Employment and labour policies
Kuwait country has diverse labour source and in Kuwait almost 84% labours are the
expatriate (2.68 million). However, Kuwaiti citizens mostly occupy the top management in both
public and private sector (Muhammad 2017). The entrant in expatriate is unlikely to enter the
private sector. The unemployment rate in Kuwait is increasing as the rising of young Kuwaitis
are trying to enter the labour force. Underemployment is another problem in Kuwait and the

5BUSINESS LEVEL STRATEGY AND GENERIC STRATEGIES
workers from the OECD countries hold the top position in the Kuwaiti local companies. Local
companies must hire the local young generation in the management as it would be low paid
labourers than the expatriate. In addition, local companies can also recruit the majority of
expatriate in low-paid wages from the South Asia and Middle East sections. Kuwait government
needs to eradicate the sponsorship system so that visa trafficking can be solved. Government of
Kuwait has started the labour tracking to allow the companies work under the permit of pre-
verified positions by the government.
2. Suggesting and critically discussing four strategies that can enhance the capacity of firms
in Kuwait to succeed in global markets
Recent article stated that business condition for local business in Kuwait is positive and
almost 94% of the business leaders stated Kuwait’s current tax condition is competitive on the
global scale (Justlanded.com 2018). The firms in Kuwait can take a few strategies so that they
can be successful in the global market.
Subcontracting
The local organisations in Kuwait can take the strategy of subcontracting as the
companies can outsource the work to other businesses so that local organisations may be able to
assist the organisations to achieve the production objectives. As stated by Oshri et al. (2015),
outsourcing work for the other organisations can allow valuable space when the companies allow
for the limit. The local companies in Kuwait can do the practice of assigning the part of tasks
under contract to another party known as a subcontractor. In addition, subcontracting is prevalent
in Kuwait based companies where the organisations work on complex projects, construction and
technology. Subcontracting helps the organisation in helping with large projects and it is cost-

6BUSINESS LEVEL STRATEGY AND GENERIC STRATEGIES
efficient and adverse to the risks. In Kuwait based local organisations; maximum organisations in
petrochemicals, constructions and real estate sector; the subcontracting can increase the
productivity. The external providers check the progress of the work so that the organisations can
make sure to complete the work with the best quality so that the companies can compete in
global market.
Demand conditions
In Kuwait, local market of the product is larger and the products have demand at home.
Therefore, the local firms put emphasis on the development of the foreign companies. Therefore,
the local companies will increase the global competitiveness. Kuwait based local companies
need to improve the demand in the local market as a high demanding industry in home country
can be observed as the driver of growth, quality improvements and innovation. The local
companies in home market produce something which has market values and the price reductions
can improve the demand as well (Rouibah et al. 2015).
Supporting industries
Local companies in Kuwait must have the supporting industries so that the suppliers can
deliver products in competitive pricing. Home country firms can get cost efficient supplies and
the local companies get the more innovative parts (Dunning 2013). Therefore, the companies in
Kuwait can lead to greater competitiveness. Therefore, the government needs to make the
supporting industries of the local firms so that the highly competitive pool of related businesses
can strengthen the competitiveness.

7BUSINESS LEVEL STRATEGY AND GENERIC STRATEGIES
Firm strategy, rivalry and structure
The local firms in Kuwait need to maintain structure and management system which
would help the companies affecting the competitiveness. The structure of Kuwait based firms
can be hierarchical so that the communication can flow from top to bottom. The local firms can
take the strategy low-cost leadership or the differentiation of the products so that the firms can
have the competitive advantage from the rivalries in the market. Differentiation of the products
helps the local companies to beat the barriers to entering the global market. Kuwait based
companies can take the strategy of innovation.

8BUSINESS LEVEL STRATEGY AND GENERIC STRATEGIES
Reference List
Crystal, J., 2016. Kuwait: The transformation of an oil state. Abingdon: Routledge.
Dunning, J.H., 2013. Internationalizing Porter's diamond. MIR: Management International
Review, pp.7-15.
Edris, T.A., 2017. Services considered important to business customers and determinants of bank
selection in Kuwait: a segmentation analysis. International Journal of Bank Marketing, 15(4),
pp.126-133.
Kennedy, P.D., 2016. Doing business with Kuwait. Kogan Page.
Landed, J. and Landed, J. 2018. Starting a Business. [online] Just Landed. Available at:
https://www.justlanded.com/english/Kuwait/Kuwait-Guide/Business/Starting-a-Business
[Accessed 3 Jul. 2018].
Lizondo, J.S., 2016. Foreign direct investment. Readings in International Business: A Decision
Approach, pp.85-114.
Manning, A.D., 2002. Making sense of strategy. AMACOM/American Management
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Moore, P.W., 2017. Doing business in the Middle East: Politics and economic crisis in Jordan
and Kuwait (Vol. 20). Cambridge University Press.
Muhammad, A.H., 2017. Antecedents of organizational politics perceptions in Kuwait business
organizations. Competitiveness Review: An International Business Journal, 17(4), pp.234-247.

9BUSINESS LEVEL STRATEGY AND GENERIC STRATEGIES
Oshri, I., Kotlarsky, J. and Willcocks, L.P., 2015. The book of Global Outsourcing and
Offshoring 3rd Edition. Berlin: Springer.
Rouibah, K., Lowry, P.B. and Almutairi, L., 2015. Dimensions of business-to-consumer (B2C)
systems success in Kuwait: Testing a modified DeLone and McLean IS success model in an e-
commerce context. Journal of Global Information Management (JGIM), 23(3), pp.41-71.
Wei, S.J., 2017. The open door policy and China's rapid growth: evidence from city-level data.
In Growth Theories in Light of the East Asian Experience, NBER-EASE Volume 4(pp. 73-104).
University of Chicago Press.