Business Report on Saudi Arabia: Opportunities and Challenges

This business report offers a comprehensive analysis of Saudi Arabia's business environment, examining its impact on international trade, cultural and economic diversities, and the opportunities and challenges faced by foreign investors. It explores the country's strategic location, economic growth, and Vision 2030 initiatives, highlighting key sectors for investment such as IT, renewable energy, and tourism. The report also addresses restrictions on foreign investment and cultural dimensions using Hofstede insights. It discusses the influence of the private sector, the role of the country in global trade, and the significance of its membership in international organizations. Overall, the report provides valuable insights into the Saudi Arabian market for businesses and investors seeking to understand and capitalize on its potential.

A BUSINESS REPORT
ABOUT AN ARABIC
COUNTRY

Table of Contents
INTRODUCTION.........................................................................................................................1
MAIN BODY................................................................................................................................1
Impact of Saudi Arabia on international trade..........................................................................2
Cultural Diversities...................................................................................................................3
Economic Diversities................................................................................................................5
Opportunities while carrying out business in Saudi Arabia......................................................5
Challenges while conducting business operations within Saudi Arabia...................................5
CONCLUSION.............................................................................................................................6
REFERENCES..............................................................................................................................7

INTRODUCTION
Saudi Arabia is a country situated within Western Asia comprising a large proportion of
Arabian Peninsula. In terms of geography, it is the biggest sovereign state located within Middle
East and is found to be the second biggest within Arab world. This country shares borders with
Iraq and Jordan in North; Kuwait in North-East; Qatar, UAE as well as Bahrain in East; Oman in
South-East and Yemen in South (Ramli, Hiendro and Al-Turki, 2016). This is a potential region
which attracts a number of potential investors and foreign entrants. This report is based upon the
opportunities as well as challenges posed by the entry of foreign companies and investors in the
nation.
MAIN BODY
Saudi Arabia is a nation which is a strategic location for businesses and individuals to
invest large sum of money in order to enhance the existing position in market place, thereby,
increasing the revenues as well as profitability. This is the only country which has both a Persian
Gulf as well as Red Sea Coast and majority of the terrain of this nation comprises lowland, arid
desert and mountains. As per the reports of October 2018, this national economy was the biggest
of the Middle East and 18th greatest of the globe. Further, nearly half of the population of this
country belongs to young generations with approximately 50% of its existing quantum of 33.4
million being under the age of 25 years. The geography that is now considered as Saudi Arabia
was historically the composite of a number of ancient civilizations as well as cultures. The pre
history of this nation illustrates some of the earliest marks of human acts across the globe. Islam,
second biggest religion of the global world, has its emergence owing to modern Saudi Arabia.
Within the primal 7th century, Muhammad, the prophet of Islam was the one to unite the masses
of this nation and to develop an individual Islamic religious polity. Following the demise of
Muhammad in 632, the followers under him quickly carried out expansion of the territory under
the confines of Muslim rule beyond the boundaries of Arabia, gaining control over the new
swathes of regions (Alshehry and Belloumi, 2015). Being such an excellent strategic location, it
is successful in gaining the attention of a large number of investors and individuals to put a lot of
money in this nation in order to earn huge returns owing to the massive development of this
nation and the strong economy. The infrastructural facilities in this place suffice the needs and
requirements of small as well as large scale business organisations.
1

In the year 1945, Saudi Arabia joined United Nations. It is a founding member of the
Gulf Cooperation Council, Muslim World League, Arab League and Organisation of Islamic
Cooperation). Further, this country has an important role to play in World Bank and
IMF (International Monetary Fund). Within 2015, this nation facilitated the creation of Arab
Customs Union and announced the development of an Arab common market before the end of
2020 at the Arab League Summit of 2009 (Mahalik and et. al., 2017). This reflects that the
prominent presence of this country in a number of important historical events have transformed
the phase of corporate world across the globe. This serves as an invitation for companies,
individuals and big corporate houses to tap the advantage of the lucrative opportunities and
facilities that are present within this place.
Impact of Saudi Arabia on international trade
Saudi Arabia's market is mainly a free market economy that goes through in
extraordinary change in a short period of time. Their market industry remarkably evolved in a
global and economic power from basic agricultural society. Saudi Arabia effectively put their
major contribution in international market via petroleum. Present country is world's largest
exporter and producer of oil and their kingdom in this sector keeps on diversified over recent
decades. Saudi Arabia effectively engage in the process of exporting and producing numerous
range of industrial goods in international marketplace. In addition with this, other sectors through
which Saudi Arabia contributes their role in international market include, agricultural, finance,
transportation and communications (Ramli and et. al., 2015). Main role that has been played to
increase Saudi economy is private sector as this industry mainly accounted for approx 48% of
total GDP. This sector continuously keeps on increasing with significant rate as Saudi Arabia
government opened their door for foreign investment. Country engage in the process of
exporting materials like, plastics, construction materials, electrical appliances and petrochemicals
to more than 90 countries.
Foreign Trade Indicators 2013 2014 2015 2016 2017
Imports of Goods (million USD) 168,155 173,834 172,252 139,390 130,825
Exports of Goods (million USD) 375,873 342,299 201,739 174,919 218,174
2

Foreign Trade Indicators 2013 2014 2015 2016 2017
Imports of Services (million USD) 51,745 62,683 56,520 71,159 53,508
Exports of Services (million USD) 11,308 11,962 13,807 15,958 17,336
Imports of Goods and Services
(Annual % Change) 3.7 6.6 1.5 -18.9 -4.5
Exports of Goods and Services
(Annual % Change) 0.2 -1.9 0.7 8.0 -3.2
Imports of Goods and Services (in %
of GDP) 30.8 33.8 38.8 30.7 28.1
Exports of Goods and Services (in %
of GDP) 51.9 46.9 33.3 31.1 33.5
Trade Balance (million USD) 222,557 183,995 44,265 55,764 n/a
Trade Balance (Including Service)
(million USD) 157,750 95,966 -29,297 2,750 n/a
Foreign Trade (in % of GDP) 82.7 80.6 72.1 61.9 61.7
(Source: WTO – World Trade Organisation; World Bank, 2016)
Cultural Diversities
Saudi Arabia is an excellent location where the population has a number of
characteristics which can be depicted and explained with the help of Hofstede insights. Hofstede
cultural dimensions theory is defined as a framework which is utilised for cross-cultural
communication. This illustrates the effects of culture of society on the values of employees and
the ways in which they are associated behaviour by making use of factor analysis (Youssef and
3

et. al., 2016). There are various dimensions which are illustrated below with respect to Saudi
Arabia:
Power Distance Index: This specifies degree of inequality which prevails and is
accepted among people who possess power or are without this. Saudi Arabia scores high in this
aspect which means that people are open to hierarchical order in which each individual have
their own place. This reflects centralisation, inherent inequalities and subordinates expect that
they are given guidelines with respect to what they have to do (Almasoud and Gandayh, 2015).
Individualism vs. collectivism: The degree of interdependence is maintained by society
with respect to their members. It denotes self image of people in terms of I or we. In context of
Saudi Arabia, manifest is a close long term commitment to the group members along with
extended relationship and family (Alshehry and Belloumi, 2015). With this, society is
responsible for formulating strong relationships towards their fellow members within a group.
With respect to collectivism societies leads to loss of face and shame which affects relationship
in terms of moral values, hiring & promotional decisions.
Masculinity vs. femininity: High score indicates that society is driven by success,
achievement and competition along with success is defined by best or winner field. Low score
means femininity which specifies dominant values within society like quality of life and caring
for others. Saudi Arabia has masculine society, here people “live in order to work” where
managers are expected to be assertive, decisive, emphasise on equity, performance and
competition (Müller and et. al., 2015).
Uncertainty avoidance index: This identifies the way in which society handles the fact
with respect to future. This indicates that ambiguity brings anxiety in various cultures. Saudi
Arabia has high uncertainty avoidance to maintain rigid codes of behaviour and belief along with
intolerant unorthodox ideas and behaviour (Alwagait, Shahzad and Alim, 2015). With respect to
this, there is need for rules, people have inner urge to accomplish their work. Security is essential
component with respect to individual motivation.
Long vs. short term orientation: Every society have to maintain there own links with
respect to past while handling challenges with respect to future as well as present goals.
Normative nature of society of Saudi Arabia has low score, as people are more concerned with
establishment of absolute truth and they are standard within thinking (Niblock, 2015). They
possess high respect for traditions by which they aims at attaining quick results.
4

Indulgence vs restraint: It denotes extent up to which people can manage their impulses
as well as desires. With respect to Saudi Arabia there is no clear preference for this specific
dimension. Indulgence identifies weak control whereas in case of restraint there happens
opposite (Coleman, Gregory and Brown, 2016).
Economic Diversities
While investing in Saudi Arabia, the investors as well as foreign investors have to take
into account the economic diversities so as to ensure that they gain high profits from market
place. Further, the economic diversities if used in an effective manner can act as a lucrative
opportunity for investors and otherwise it is a factor that must be considered by individual, large
corporate houses to take a control over the ill outcomes (Ouda and et. al., 2016).
Opportunities while carrying out business in Saudi Arabia
The Vision 2030 of Saudi Arabia as well as the National Transformation Program (NTP)
imply a epitomic shift from a public sector-oriented economy to the one operated with the forces
of private sector. This serves as the routeway for facilitation of overall growth of economy and
generation of employment opportunities. The areas where investors stand the chance as well as
the opportunity to invest in areas such as training and development facilities, IT/ geospatial/ big
data/ information systems, electricity generation inclusive of renewable energy, healthcare
amenities, distribution or transmission, entertainment, mining and tourism (Al Zahrani and et. al.,
2018). All of these are the investment areas that serve as strong and effective business
opportunities for foreign entrants to gain access to this exceptional market and enhance the
existing share in market place.
Challenges while conducting business operations within Saudi Arabia
While doing investment in a country, the foreign entrants as well as investors have to
ensure that they comply by all the laws and legislations that fall under the confines of nation. In
this regard, within Saudi Arabia also, there are various restrictions upon foreign investment by
companies and individuals that act as challenges while carrying out business operations and
functions. Some areas of corporate world are restrained from being invested into. Such areas are
classified into two categories, such as Industrial Sector and Service Sector (Dickson, 2015). Here
the industrial sector comprises of oil exploration, manufacturing and drilling, production of
civilian explosives and military device, equipments and uniform where investment can not be
5

made by any corporate house. Further, the service sector is inclusive of detective and security
facilities, real estate funding in Madina and Makkah, catering services for military sector,
recruitment as well as employment services, fisheries where no individual or company can
feasibly invest. All such restrictions as well as procedures and policies have to be taken into
account by potential investors to suitably gain advantage of getting access into Saudi Arabia.
CONCLUSION
From the above discussion, it has been concluded that foreign entrants as well as
potential investors pose both opportunities and threats for a country. In addition to this, it has
been analysed that the aspects that tends to have both positive as well as negative impacts for the
company are economic and cultural diversity, ethical challenges etc.
6

REFERENCES
Books and Journals
Dickson, H.R.P., 2015. The Arab of the Desert (RLE Saudi Arabia): A Glimpse into Badawin
Life in Kuwait and Saudi Arabia. Routledge.
Coleman, R.G., Gregory, R.T. and Brown, G.F., 2016. Cenozoic volcanic rocks of Saudi
Arabia (No. 83-788). US Geological Survey.
Ouda, O.K.M. and et. al., 2016. Waste to energy potential: a case study of Saudi
Arabia. Renewable and Sustainable Energy Reviews, 61, pp.328-340.
Alshehry, A.S. and Belloumi, M., 2015. Energy consumption, carbon dioxide emissions and
economic growth: The case of Saudi Arabia. renewable and Sustainable energy
reviews, 41, pp.237-247.
Müller, M.A. and et. al., 2015. Presence of Middle East respiratory syndrome coronavirus
antibodies in Saudi Arabia: a nationwide, cross-sectional, serological study. The Lancet
Infectious Diseases, 15(5), pp.559-564.
Almasoud, A.H. and Gandayh, H.M., 2015. Future of solar energy in Saudi Arabia. Journal of
King Saud University-Engineering Sciences, 27(2), pp.153-157.
Alwagait, E., Shahzad, B. and Alim, S., 2015. Impact of social media usage on students
academic performance in Saudi Arabia. Computers in Human Behavior, 51, pp.1092-
1097.
Niblock, T. ed., 2015. State, Society and Economy in Saudi Arabia (RLE Saudi Arabia).
Routledge.
Mahalik, M.K. and et. al., 2017. Does financial development intensify energy consumption in
Saudi Arabia?. Renewable and Sustainable Energy Reviews, 75, pp.1022-1034.
Ramli, M.A. and et. al., 2015. Optimal sizing of grid-connected photovoltaic energy system in
Saudi Arabia. Renewable Energy, 75, pp.489-495.
Youssef, A.M. and et. al., 2016. Landslide susceptibility mapping using random forest, boosted
regression tree, classification and regression tree, and general linear models and
comparison of their performance at Wadi Tayyah Basin, Asir Region, Saudi
Arabia. Landslides, 13(5), pp.839-856.
Ramli, M.A., Hiendro, A. and Al-Turki, Y.A., 2016. Techno-economic energy analysis of
wind/solar hybrid system: Case study for western coastal area of Saudi
Arabia. Renewable energy, 91, pp.374-385.
Al Zahrani, M.H. and et. al., 2018. Cross-border movement, economic development and malaria
elimination in the Kingdom of Saudi Arabia. BMC medicine, 16(1), p.98.
7