International Business Report: Vocus Group's Middle East Expansion

This report assesses the potential for Vocus Group Limited, an Australian telecommunications company, to expand its business operations into Iran and Saudi Arabia. It begins with an introduction to Vocus Group and provides a comparative analysis of the two countries, considering their economic conditions, international relations, domestic situations, and government support for international organizations. The report examines the economic statistics, political and economic support, and opportunities in both Iran and Saudi Arabia. It also highlights the implications of investing in each market, considering factors such as political instability, market competition, and the presence of terrorist groups. The report concludes with a recommendation for market entry, based on a comprehensive evaluation of the opportunities and challenges in both countries, offering strategic insights to assist in informed decision-making for international business expansion.

Running Head: International Business
International Business
Report
System04104
8/2/2019

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1. Introduction
Vocus Group Limited is one of the large telecommunication companies in Australia, which is
also known as ‘Vocus Communications’. This company wants to expand its business in
Middle East countries such as Iran and Saudi Arabia. However, the investment and
opportunities are limited in both the countries because of some political, global, and
economic conditions (Allard, Martinez, and Williams, 2012). This report helps to understand
the conditions of both these countries and tries to identify better opportunities to invest and
operate the business in one country where conditions are favourable. This report also helps to
understand and analyse various factors of these countries such as economic conditions,
international relations, and current domestic situation, and government support for the
international organisations. On the basis of these analysis, a best option will be selected for
the Vocus Group Limited that which country will be a good option to invest and operate the
business in Middle East.
2. About the Company
Vocus Group Limited is known for its global operations in telecommunication industry and
the Headquarter of the company established in Sydney, Australia. The company was founded
in 2008 by James Spenceley (Vocus, 2019). The company is currently operating its
wholesale, retail, and corporate telecommunication services in New Zealand and Australia.
Vocus Communication offers Data Fibre, Data Network Services like Internet, Broad Band
services, Cloud services, Dark Fibre, and IP WAN services in the selected states of these two
countries. The company has its own 18 Data Centres across the Australia and New Zealand
and company has its own engineers who work on onshore Network Operations Centre
(NOC). The reported profits of the company was AU$2.25 Million in 2016 and it has more
than 471,000 subscribers (Vocus, 2019).
3. Current Situation in Iran and Saudi Arabia
Both Iran and Saudi Arabia are two strongest countries in Middle East. However, these two
countries have strong rivalry with each other. While the terrorist attack in Iran is a common
issue for the people in the country, Saudi Arabia is facing strong challenges from across the
border where Iranian Soldiers continuously give strong challenges to Saudi Arabia. Both the

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countries are Islamic countries (Elahee and Gao, 2015). However, the economy of both the
countries is based on the oil export business. Role of USA in both the countries are also
considerable because USA supports Saudi Arabia from last two decades while the Iranian
government facing so many sanctions from both USA and European Union. However, unlike
the Saudi Arabia, Iran is politically isolated from USA and European countries and they face
strong economic and international challenges because of this isolation. USA almost controls
the economy of the world and its sanctions on Iran almost hit the economy of Iran at
dangerous level (Aarts and Van Duijne, 2016).
Iran is the second largest populated country in the Middle East. The population of Saudi
Arabia is 33,699,947 while the population of Iran is 81,800,269. However, the annual GDP of
Iran is $452,275M while the GDP of Saudi Arabia was $782,483M in 2018 (Reuters, 2019).
The economic statistics of both the countries are two strong and they are very rich in
economic resources such as oil and natural gases. However, the major problem is that both
the countries are not supporting international organisation to invest in the country. The
isolation of Iran from the other countries creates a major problem for the country because
they cannot export their oil to other countries. Even from last few months, the relationship
between Iraq and USA is not good as they both capturing the oil tankers of each other and
destroying the drones in ocean region. The sanctions of USA on Iran directly affect the
economy of Iran and living standard of people (Bazoobandi, 2012).

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However, the budget revenue of Saudi Arabia is more than 4 time of Iranian budget revenue
and the budget surplus of Iran is -2.4% of GDP while it is 13.1% of Saudi Arabia . These
statistics shows the strong economic situation of Saudi Arabia in comparison to Iran.
However, the domestic violence in Iran is more usual than Saudi Arabia. The presence of
many terrorist groups in Iran directly affects the law and regulations in the country while
Saudi Arabia has good and prosperous domestic conditions in comparison to Iran
(Stephenson, 2014).
Political and Economic Support in both Countries
The fresh sanctions of Trump government on Iran make a challenge for investing as a new
business organisation in Iran. The political and economic conditions of Iran are not as good
as Saudi Arabia. The current trade relationship between UK and Iran is also not going in right
directions because Iran has seized an oil tanker of UK in its ocean region. The high-pressure
situation in Iran arises because of their bad political and economic relations with other
countries (Mabon, 2015). Especially the pressure of USA and UK government on Iranian

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government create a tough challenge for the Vocus communication to invest in Iran (Reuters,
2019). Although the poor communicational infrastructure and huge population of Iran is an
opportunity for the Vocus group to target a large customer base but the unfavourable
economic situation and poor support of government are two tough challenges for the
company. However, the Iranian government is trying to support the international
organisations and foreign investment across all the sectors in the country. The Iranian
government also tries to promote the technology transfer in all the sectors in the country, but
the current situation in the country is not as good as the Saudi Arabia, where both political
parties and economic situation is favourable for starting a new business. However, it is
considerable that both countries have large sources of natural resources and their economy
depends on export of oil and gases only. The support of Iranian people to terrorism is a
major reason that enables an organisation to avoid investing in Iran (Akbari and Hopkins,
2016).
Saudi Arabia is one of the growing economies in the world and the current economic changes
in the country and employment opportunity for people make it more convenient place to
invest as a new business organisation (Razalli, Abdullah and Hassan, 2012). The Saudi
Arabia government provide full support to the global organisation to invest and explore the
business in the country. However, the major issue in the country is that there are already so
many domestic telecommunication companies are still operating there business in the
country. The Saudi Arabian government supports the local telecommunication countries and
even the tax was very low. However, the support of Saudi Arabia for the international
business organisation is very restrictive. In other words, there are some strict rules and
regulations in the country for the foreign investor companies in the country. However, the
diplomatic relations of Saudi Arabia with Australian government is too good and it helps the
Vocus communication to invest its business operation in the country (Al Rajhi, Al Salamah,
Malik, and Wilson, 2012).

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4. Opportunities in Iran and Saudi Arabia
Despite being the political and diplomatic rivalry, both the countries have similar strategies
for regulating telecommunication companies. The strict rules and regulations of these
countries for the telecommunication companies and high taxes on the companies create a
tough situation for the Vocus Communication. On the name of national security, both these
countries intercept the emails, phone calls, and interfere in the business of international
organisations. However, the strong economic situation and high income of people in the
country can enable the organisations to charge high prices for the communication and
network services. The less number of competitors in the Iranian market and the support of
government to international organisation and foreign investors create possibility of
investment in the telecommunication sector. Although the poor diplomatic relationship of
Iran with two super powers USA and UK again make it uncertain for the Vocus group to
invest in Iran. The political instability in Iran is a great challenge for a new company to adjust
and operate the business. Although, the terrorist attacks, poor economic conditions of people
and fierce rivalry some of the great reasons that stop the Vocus group to invest in Iran.
However, according to a research of Akamai Technologies, Iran has slowest network
connection in the country and even the bandwidth speed is too slow (Al Tamamy, 2012).
However, the fast network connection, high Internet speed, and better communication and
facilities of Vocus group have opportunity to create its network in Iran and [provide best
communication facilities to the people. The absence of 5G services in Iran is the great
opportunity for the Vocus Group because the company has its own bandwidth and Fibre
optics that helps the company to invest in Iran as an international telecom company.
However, the demand of faster Internet connection and low competition in the country is the

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great opportunity for the Vocus Group Limited in Iran. However, the current government is
also trying to reduce the level of censorship on the telecommunication channels also offers
opportunities for the company in Iran (Garver, 2013).
Saudi Arabia has largest telecommunication network and telecom market in the Middle East
region. There are huge number of mobile operators and internet service providers in the
company. It means there will be tough competition for Vocus Group in Saudi Arabia.
However, the CITC (Communication and Information Technology Commission) has released
updates that government want to regulate a quality and high-speed telecommunication service
facilities in the country (Moser, Swain, and Alkhabbaz, 2015). The support of Saudi Arab
government is so positive for the telecommunication companies and the good relationship
between Australia and Saudi Arabia can provide a greater platform for the Vocus group to
operate its business in the country. Another thing that creates opportunity for the Vocus
Group in Saudi is political stability in the country (Albassam and Ntim, 2017). The Saudi
Arabia has more political stability than Iranian government. The Saudi government also
provide so many facilities to the international organisations and it will be in favour of the
Vocus group. There are so many telecom operators operating the business in Saudi and the
economic and financial support of the government creates a tough competition in this
industry. The competition leads to better growth and expansion in the country for Vocus
group and it is really a great opportunity for the Vocus Group in Saudi. The Vocus Group has
its own 5G services and Fibre optics that help the company to operate its business on low
operating cost because most of the companies in Saudi Arabia still finding opportunities to
launch 5G services and provide better network and telecommunication facilities to people in
the country. Only few telecom providers are providing 5G services in Middle East and this is
really good news for the Vocus Group to launch its business in the Saudi Arabia (Al-Filali
and Gallarotti, 2012).
5. Implications of Investing in Both Markets
Iran and Saudi both depends on their natural gas resources and export of oil. This helps these
countries to grow and develop their economy. However, the instability in politics and poor
diplomatic relationship of Iran leads to many economic issues (Gause, 2016). Although the
company has more than 60% young population and highly educated workforce, but still it is
too risky to invest in Iran for Vocus Group. The current sanctions of USA and UK
government on Iran have created some adverse business environment for foreign investors.

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However, the government supports the international business organisations but the domestic
violence in the country and various terrorist attacks on mobile towers goring companies and
on corporate offices almost created a tough situation for the Vocus group to invest in the
country (Gause, 2016). Although the taxes are very low in compare to Saudi Arabia.
Investing in Saudi Arabia is comparatively better than Iran. The current government of Saudi
Arabia is finding new ways of generating income other than oil export. The government
provides better facilities to the foreign investors to invest money in the company and provide
them opportunities to deliver great services to the people of Saudi. Although, the Saudi
government increase the VAT at the rate of 5% from 2018 and also increase the service tax
on the global companies in the country (Meteb, 2015). However, investment in Saudi Arabia
is not a bad deal in comparison to Iran because Saudi Arabia has great telecom companies
that help the Vocus companies to think beyond the limit and expand the business in the
country. The Saudi government also invited the international companies to invest in the
country and provide all the facilities to the telecom companies to create strong and great
communication infrastructure in the country. The liberal policy of Saudi Arabia opens the
gate of economy for the telecom companies to invest and provide better services for the
people of Saudi Arabia. Saudi Arabia is also looking towards the fast GDP growth rate and
are focusing on building infrastructure for the foreign investors so this helps the global
organisation to invest in Saudi and contribute in the development of Saudi Arabia (Salem,
2014).
6. Recommendations for Market Entry
As per the above study, it can be said that both Iran and Saudi has same economic situation
and both these countries depend on oil export and natural resources. However, the political
and economic instability in Iran and poor diplomatic relationship with USA and UK has
created difficult situation for Vocus Group to invest in Iran. However, the company has some
opportunities to invest in Iran such as huge number of young and educated workforce, cheap
natural resources, low taxes, and support from government. However, political, economic,
and diplomatic conditions in Iran are not as good as Saudi Arabia.
Saudi Arabia provides all the economic and governmental supports to new foreign investors
in the country. The relationship of Saudi Arabia with Australia also helps the Vocus group to
invest in the country and looking for future business development in the country. The

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favourable conditions in the Saudi Arabia, political stability, economic stability, strong
diplomatic relationship with other nations, and liberal economic policy of Saudi Arabia can
give a better option to Vocus Group to invest and expand its business in Middle East.
Therefore, on the above analysis and study, it can be said that Vocus Group Limited should
invest in Saudi Arabia rather than Iran.

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