Global Trade and Strategy: A Comprehensive Impact Analysis

This report provides a comprehensive analysis of the impact of global trade on business strategy, focusing on the Riyadh Airport Company as a case study. It evaluates the effects of globalization and international trade on organizational behavior, considering factors such as increased competition and the role of the airline industry. The report examines measures used to restrict trade, including tariffs, quotas, and local content requirements, and assesses their impact on the company's operations. Furthermore, it discusses the influence of the internet on global trade and individual companies, particularly in the context of the GCC countries. The report also explores the impact of political and ethical considerations on global brands, and identifies policies companies use to protect themselves against shifts in national, trade, and international barriers. Finally, the report analyzes how international trade regulations affect the supply of products, labor, services, and materials, providing a detailed overview of the complex interplay between global trade and business strategy.

Running head: GLOBAL TRADE AND ITS IMPACT ON STRATEGY
Global trade and its impact on strategy
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Table of Contents
Task 1:.............................................................................................................................................2
1.1 Evaluating impact of international trade and globalization of business on the
organizational behavior...................................................................................................................2
1.2 Evaluating the success and measures of economic group aiming to restrict trade...............3
1.3 Evaluating the impact of international trade and regulations on the supply of products,
labor, services and materials:...........................................................................................................5
Task 2:.............................................................................................................................................6
2.1 Discussing the impact of internet on global trade and individual companies and different
industry sectors:...............................................................................................................................6
2.2 Discussing the impact of politicization of issues and ethical consideration on the global
brands and other companies.............................................................................................................8
2.3 Identification of policies used by the companies for protecting themselves against shift in
national, trade and international barriers.........................................................................................9
References:....................................................................................................................................11

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Task 1:
1.1 Evaluating impact of international trade and globalization of business on the
organizational behavior
This section seeks to evaluate the impact of globalization and international trade on the
organizational behavior of Riyadh Airport Company. Firms are being driven by the
intensification of competition at both international and domestic levels and they gain new
opportunities by looking beyond their domestic markets. The emergence of global economy is
supported by the significant role played by the airline industry and they form the basis of
international trade and global transport system. Saudi Arabia being an Islamic country remained
chained to traditions and Islamic culture for a long time and hence was close of globalization and
the international trade in general. Significant growth is achieved by the aviation industry in the
country over the past few years in terms of both freight figures and passengers. The
establishment of Riyadh international airport came as the privatization of the program of
privatization of the aviation sector, which is engaged in operating and managing King Khalid
international airport in the country (Unescap.org 2019).
The country is transforming into a global hub that helps in connecting Europe, Asia and
Europe that helps in gaining accessibility to the emerging market and enjoying geographical
competitive advantage. The efficiency and success of the Riyadh Airport company is dependent
upon the range of factors and the examination of environmental consideration and management
of airports affect the performance of industry. The process involved help in contributing to
unlock the hard infrastructure such as the airports and ports. Furthermore, the evolution of
infrastructure and the engagement of the government with the private sector at both international
and domestic level would help in improving the cross border links and internal transport
capacity. This creates an impact on the custom system, streamlining process and catalyzing
higher performance of the Riyadh airport company. The capacity of the airports served by the
Riyadh airport company and there are upcoming projects such as expansion and development of
terminal 3 and 4 and upgrading of airfield capacity (Guan et al. 2016). However, the company is
feeling the impact of current global economic weakness and this creates a noticeable impact on
the volumes of air cargo.

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1.2 Evaluating the success and measures of economic group aiming to restrict trade
A group of nation that work in conjunction with the trade bloc of the particular country
creates barriers with the specific objectives of protecting the economy from the perils of
international trade. Various measures are used for restricting trade and protecting the economic
well-being of a nation. The volume of cargo that is transported and managed by the Riyadh
Airport Company can be restricted using several measures such as Quotas, tariffs, administrative
trade policies, subsidies, exchange rate controls and local content requirements. All these
measures to restricting trade are discussed in the below mentioned points.
Import tariffs- An import duty of 5% is imposed on most of the goods and there are
higher import duties on some chosen processed food products. The import duties is tied to the
production level of the similar products and when the level of agricultural product and local
production of food exceeds a self-sufficiency level, then a maximum import tariff rate of 40% is
applied (Fransen and Burgoon 2017).
Units of measurement- Goods meant for selling in Saudi Arabia must be in container,
which is labelled in the measurement of metrics and the manufacturing if the articles that is not
based on the weight, length, area and volume need not be marked.
Quotas- There is no tariff quota requirement imposed by Saudi Arabia, there is no duty
imposed on the products such as tea, coffee and fresh red meat, and imports of items such as
animal feed, baby milk, sugarcane, alfalfa, molasses, oats, and sunflower meals are subsidized.
Anti-dumping regulations- Any person suspected of practicing dumping might be
subjected to anti-dumping duties for five years by investigating anti-dumping committee.
Local content requirement- Local content requirement for the foreign firms are
increasingly introduced by the government-controlled enterprises in Saudi Arabia. This can be
explained with the help of instance, the purchase of goods and services by the local supplier is
strongly encouraged by Aramco that is intended to double the percentage of locally
manufactured goods and services. The policies and procurement for incorporating localized
production goals and Saudi employment is being reformed by the military of country (gov.uk
2019).

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Animal products- There must be the tag of expiration and production dates on all the
fresh meat and poultry along with the necessary requirements of storage, temperature range and
attestation indicating that the production has been done by meeting the requirements of the Halal
slaughtering. The labels of poultry products and the processed meat must be able to identify the
components of pork including lard and must include net weight, address and name of
manufacturers (Unescap.org 2019). All the animal and food products require the certificate of
halal and the animal products should be labelled as special for feeding animal only and unfit for
human consumption.
From the discussion on all the above listed measures of restricting trade, it can be inferred
that the import and export of the products in Saudi Arabia is regulated by the adoption of all
these measures. Other forms of restriction comes in the form of ethical and cultural barriers
imposed by a particular section or group of society. All such measures are intended to regulate
the trade for the benefits of the country and considerably creates an impact on the operation of
the Riyadh airport company.
1.3 Evaluating the impact of international trade and regulations on the supply of
products, labor, services and materials:
The contribution of the modern trade on the growing retail sector of the Kingdom helps in
attracting the local, regional, modern and international brands and at the same time helps in
facilitating the development of necessary sectoral regulation and regional flow of goods. The
transport operator such as Riyadh Airport Company will be encouraged to make the most of their
capacity by opening new trade routes and achieving durable link between the existing trade hubs.
The establishment of Saudi Arabian General Investment authority by the government was
done to assist the foreign investors in the process of approval for the operations that facilitate
obtaining the labor visas and license. It is the liability of the employer to pay the fees of
residence visa, immigration and together with the renewal of work permit and fines that might be
incurred due to final departure tickets, delay and reentry visas (Tidd and Bessant 2018). AS per
the KSA labor law, there is no minimum wage standard in the country.

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The supply of products by non-KSA sellers can be done by appointing the agents of country
as their representatives and whether such representatives acts as sales agents, distributors and
otherwise with such arrangements governed by commercial agents of Saudi Arabia. A direct
relationship is required to be created between the originator company abroad, product distributor
and business agent as per the law and there is prohibition on the non-Saudis from engaging in
any commercial agencies, export and import business. For most of the national goods originating
from the member countries of Greater Arab free trade agreement and other GCC member states,
there is duty free imports granted by the country (Omri et al. 2019).
The foreign investor cam make investment in the industrial sector for which the minimum
capital required is SAR 1000000 for all the types of entity except scientific and technical office
for which no minimum capital is required. The fast track service of SAGIA helps in facilitating
the foreign direct investment into the targeted sectors of economy of Saudi such as downstream
petrochemical, mining, information technology and communications, infrastructure and
transportation, life science and healthcare, human capital development and infrastructure. The
investment activities are prohibited in the service sector of the country and therefore the supply
of services are restricted to the domestic investments. Residents companies of KSA receiving
services from nonresident foreign investors are subjected to withholding tax at the rate of either
5%, 15% or 20% (Manova and Yu 2016). Therefore, it is inferred that the supply of labor,
services and products is regulated by the imposition of several regulations and the international
trade agreements of the country with other countries.
Task 2:
2.1 Discussing the impact of internet on global trade and individual companies and
different industry sectors:
With the expansion in internet accessibility, the transactions of trade has moved to
cyberspace as against physical interaction between buyers and sellers as the base of marketplace
is facilitated by online activities. For some specific goods, internet has the potential to create
large global markets both directly and indirectly through organized exchanges between the
parties and through search engines respectively. A possible causal relationship is suggested

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between the exports and internet by the cross-country correlation (Pwc.com 2019). It has been
found from the literature review that there exist positive correlation to developed countries from
developing countries and the vice versa not hold true. The technology marketplace in the GCC
countries within the last five years has evolved and grown to an ecosystem of service, product
and solution provider offering data analytics, artificial intelligence and smart solutions from a
highly fragmented market of consulting, reseller and firms of system integration service. The
main acquisition target in the Middle East countries like Saudi Arabia is the telecommunication
services, internet service providers and the platforms of online communication (Iata.org 2019).
The common IT services and hardware of Saudi are becoming increasingly
commoditized and the specific niche requirements of the industry are being met by the strong
value proposition in the form of strategic solution or products. With the increase in larger
customer install base due to the technological development brought by the industry along with
the building of customized solution helps in increasing the value and revenue growth of
enterprise. However, as the market of GCC countries continue to develop, the companies that
take opportunistic approach to growth of sales face challenges. In addition to this, an active
interest an active interest are taken by investors and corporates which has dramatically reshaped
the competitive landscape for various industries along with driving the fundamental rethinking of
the business model. Fiercely competitive sector is required to build strong customer relationship
and the technological companies helps such sector in guiding through an increasing complexity
environment of technology by driving the value of investment made in the technology (Deloitte
2019).
The travel agency market of the country has been significantly impacted by the internet in
terms of their operations by utilizing the networking with the suppliers such as hotels and airline.
They are able to quickly communicate externally, formally and informally using the e-mail
system and internet has been found to be an effective tool of marketing that helps in enhancing
the communication channel and self-promotion. Digital transformation has been found to be
relevant to the transformation of the process, organizations and systems with the artificial
intelligence, efficiency and analytics lying at the core of transformation (Baylis et al. 2017). The
telecommunication companies operating in Saudi such as Zain, Mobily and Saudi Telecom
company offers customers with different range of services and they reinstate the prices of

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packages to the visitors. However, such companies have been accused of engaging in the unfair
trade practices.
2.2 Discussing the impact of politicization of issues and ethical consideration on the global
brands and other companies
Globalization of the economy leads to generation of contradictory results and important
loopholes are created in the socio economic dynamics of the world. It is not considered an easy
process because of the established fact that it implies about multicultural populations and
cohabitation of non-heterogeneous. The stability of the economy and local business sustainability
of Saudi Arabia can be majorly impacted by the politicization of issue brought by the
globalization. The politicization issue is witnessed among the advertising companies in Saudi
Arabia in the content of conservative segment of Islam and advertising messages. The social
media can polarize the political views and for the government propaganda; the risks are being
manipulated (Crane et al. 2019). The political environment of Saudi encompasses the
pathologies of quintessential Gulf and each end of the regional spectrum is represented by it.
Social media create any political engagement required to invert the political manipulation back
to the regimes and there is a respond of the political reform on the middle classes. Furthermore,
there are several facets of globalization and ethics being one of them, which has been found to
considerably affect the performance of companies. Companies are driven by the responsibility
principles towards sustainability of resources and conservation of environment. The procurement
of raw materials from different market by the companies might poses them to face challenge of
being socially and environmentally responsible (Amador and Cabral 2016).
2.3 Identification of policies used by the companies for protecting themselves against shift
in national, trade and international barriers.
The companies protect themselves against the shift in trade and international and national
barriers by devising appropriate strategy such as content and brand, Saudization, counterfeiting
and unsolicited contracts. The market of Saudi can be sensitive to materials and branding content
and the companies investing in the Kingdom are encouraged to familiarize themselves with the
customs, traditions and strict observances of Islamic faith. It is ensured by the companies that the

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local practices and norms are not unintentionally offended by the branding adopt such policy. In
addition to this, stricter quotas are adopted by the companies for hiring the nationals of Saudi as
they are increasingly facing difficulties in obtaining visas for professional employees. Challenges
are also faced by the firms in ascertaining sufficient number of qualified nationals of Saudi to fill
the particular job. The proliferation of counterfeit products by the companies operating in the
Kingdom is combatted in recent years with an imposition of stricter penalties for the violation of
trademark and copyrights increased devotion of resources to marketplace. Moreover, the
particular concern of manufacturer of automobile spare parts and consumer products is the cheap
counterfeit products availability in the country that is often produced in China (Export.gov
2019).
Some strategic industries such as water, energy, armaments, steel and food can be
protected by erecting the barriers and any unfair competition creating a shift in the trade barriers
can be deterred by adopting the policy such as dumping by the foreign firms at the prices below
costs. For the identification of any risks associated with the shift in trade, companies take
comprehensive approach for estimating the likely cost attached with restriction imposed on the
trade. For the policy restricting the supply of material and labor to the country, company
considers the prequalification and identification of the suppliers in the new locations such as
exploring the agreements of the suppliers with that of manufacturers in different countries.
Companies when protecting themselves against the shift in the trade sometimes postpone the
expansion of capacity in risky location (Saudiembassy.net 2019).

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