Saudi Arabia’s market

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Description

 

This proposal seeks to give a researched preview of Saudi Arabia’s market with regards setting up an international brand and in this case, how viable it is for Nike’s brand extension. A few pointers will be analyzed such as the ethical considerations and the main issues to consider while setting up the business. In the proposal, I will look at previous researches that have been carried out with regards to Saudi’s market. I will also look at the previous international brand extensions in Saudi and how they fared. I will also, forecast the expected costs to be incurred in setting up the Nike brand in Saudi as well as the projected budget and ultimately the profits.

Saudi has a promising market for businesses and in particular apparel and footwear. The increasingly diversified culture brought in by the foreigners working here would make a great target. In addition, the country’s vision 2030 which aims to shift from an entirely petroleum depended industry will open chances for other investment vehicles and thus, our plan as Nike comes at an opportune moment.

 

INTRODUCTION

Saudi Arabia is an Arab sovereign state in Asia which has an oil based economy which is quite strong. The dessert country majors in oil products related industries and thus, they have to import most of their clothes, shoes and other commodities.  Apart from the native Saudi Arabians, the country also boasts of a large foreign work force. The country’s strong economy has also made doing business quite a lucrative deal, having been rated as the 22nd most economically competitive country in the world. In alignment with the country’s vision 2030; reducing their dependence in oil, the country is working towards a diversified economy which would automatically make business investments a mega jackpot.  The focus on strengthening the country’s tourism sector also provides a wider market scope for the businesses being set up. Saudi’s economic muscles have also made her citizens’ taste for international and well known brands a major consideration for their purchases (Rodrigues, Mazzola, Sutter,Miyahira,& Fleury, 2017).

Nike is a sportswear brand with a strong history and reputation backing up their game. It was started in America during the 1950s out of passion by the founders for great running shoes. The company has grown from strength to strength with new innovations in the fabric industry to become what it is today. It is evidently one of the most famous brands in the footwear, apparel and accessories industry with more than seven hundred shops the world over and over forty five countries outside the United States of America.  Its clientele cuts across all generations with both the old and young willing to be identified with the otherwise presumed prestigious brand considering its marketing strategy which involves promotions by sports personalities.  Albeit an encroachment of other footwear and sports lines such as Puma, Nike still holds its prestigious place at helm of the industry. The company has heavily invested in its marketing strategy as well as in conducting informed research on their product designs which makes the products a cut above the rest in the industry. The financially able Saudi population as well as the large foreign work force, would make a great market for Nike products and thus, opening a Nike sport brand would be opportune a moment.

PROBLEM

The footwear and apparel industry has in the recent experienced a steady growth. This has been occasioned by the ever growing economy and population in the entire world. Worth noting however, is the sports department. More people are becoming privy of sports as well as steadily growing their engagement in sports. Unlike in the past, most sporting activities have been introduced in many countries which apart from tapping the raw talents for the youth, it has also become a major entertainment mainstream in the entire globe. Companies like Nike and Puma for instance, have enjoyed an increased client base in the recent past. For the case of Nike, not only do we  specialize in sporting oriented footwear and apparel, but also in other leisure products just to mention but a few; the Nike Airmax shoes, the Nike sweat suits among many others.

The ever increasing market in the untapped regions has indeed provided good business for Nike over time. Tapping into these markets has thus become a major priority not only for us Nike but also for the other competing firms. The ever stiffly growing competition in the already established markets has also necessitated research into opening additional outlets in other countries with promising business capabilities.

PROBLEM FOR YOUR COMPANY

In a bid to combat the competition from our able competitor companies, we are working towards expanding our business into the untapped markets. Besides having online shops, shipment options and deliveries across the globe, we have met some drawbacks with regards to wrong items delivered, goods and services not delivered on time and the general mistrust and skepticism of the people on over internet purchases. Study has shown that the ever growing diversity among the Saudi populates, both the citizens and the foreigners, has shifted the country’s paradigm shift in the general taste from the normal preserved one to a trending fashion sense. Sports have also been adopted in Saudi Arabia, with many people becoming soccer fans and even many other worth mentioning sports and also with several personalities in the country being actively involved in sports.  This shift is expected to work positively towards cementing our influence which would resultantly favor our business endeavors.

COSTS

Setting up the brand in Saudi Arabia would cost a fortune but still, it is within our means and can comfortably afford. Our initial total costs will include; leasing the business premises, equipping the business premises and stocking the shop which include shipping costs from our production plants to the new shop. Acquiring the necessary licenses as per the country’s , Saudi Arabia’s regulations on businesses will cost quite a fortune. In addition to these costs, we will also to cater for operational costs for a minimum of three months assuming there shall be no profits realized in this period.  The operational costs would include; hiring and training employees, paying their monthly wages for the three months, paying rent and other utility bills for the premises in those three months. We would also need to consider medical insurance for the employees, insurance cover policy for the business in case international insurance policies are not acceptable in Saudi Arabia. Marketing the brand in a new region would also require a hefty capital. Considering the region’s dressing habits, few people, especially the natives would not easily adopt. Setting up the right marketing strategies such as Television adverts and billboards would therefore come in handy. Last but not least, we would also set aside contingency costs besides the petty cash in cases of any arising issues.

LAWSUITS

There are no potential law suits looming our way for a start, but we might end experience such especially from the internal competitors or even our clients with time. The government and our regulatory bodies may also find issues with our establishment and decide to pursue the law. In a bid to address this, we have put down the necessary measures with regards to statutory licensing and the necessary documentation according to the standards of the various control boards. However, in the case that we ever find ourselves facing a lawsuit, then we also have a competent legal team to address us on the way forward.

 

LOST OPPORTUNITIES

Presently, we cannot say we have lost any opportunities considering that we are still at the tentative stages of our project even though I wish we had started this earlier.

RESEARCH RELATED TO THIS PROBLEM

The country’s sports sector has greatly changed in the recent past, with many of its citizens being involved in both domestic and international sports. Some of these personalities who are greatly idolized by their fellow countrymen have had the opportunity to be sponsored by Nike both within and without the confines of the country which has helped build an image already for the corporate brand.

Besides the sports oriented purchases, people with the economic power that Saudi citizens boast of, have been found to have certain peculiar purchasing habits. Most of the Saudi citizenry fall under the middle class and first class earners, otherwise the affluent cohort. Such a people, tend to go for the already established, tested and proven brands. The underlining controlling factor many of them have been found to provide for this habit is quality products but research also adds social class as another major building block.

There is however, a prevailing stumbling block in our Saudi market. The country being mostly an Islamic nation, there are guidelines towards consumption of any product. To begin with, does our company recognize the ethos of Islam? Do we proactively engage their faithfuls?  Do we as a company have a preview of the expected dos and don’ts of the said country with regards to their religion? Again, the country at the moment is looking at imports for their apparel and footwear commodities for now, but what happens if they delve into producing their own? Would the citizens’ allegiance and loyalty to each other surpass their quest for already established products? (Archer, Hollingworth, & Halsall, 2007).

PREVIOUS APPROACHES TO SOLVING THIS PROBLEM

Converse to what most foreigners belief, the Saudi market is quite accommodative even to the foreign investors provided they respect the rules and respect the citizens of the country. Many people have also been made to belief that, in Saudi Arabia any selling brand should be Islamic which actually a lie is. The country is in fact a quintessential destination with a plethora of luxurious international brands. Apple for instance, is one of the leading brands in the country in technology despite its foreign roots.  Their main surviving pointer was identify a market niche, researching on the socio-cultural environment of the people and then setting shop in accordance with the expectations of the country. Like in any other sovereign state, they faced backlashes first bordering on morality issues but after making clarifications on the said issues, they were well accepted and have gone ahead to become one of the most formidably strong forces to reckon with in the market (Rodrigues, Mazzola, Sutter,  Miyahira, & Fleury, 2017).

FEASIBILITY AND PRACTICALITY

Saudi Arabia is definitely one of the strongest economies in the world with a vast and flexible room for growth and new inventions. Their vision 2030 also aims at shifting a petroleum based economy and thus such businesses would work perfectly well.  This proposal is indeed fiscal and has the potential of gaining us good returns.

BUDGET

Our initial budget will focus on hiring employees and setting up our premises as well as our operational plan. For a start, the expenditure is anticipated to exceed the income but with time, they will balance each other out and hence, attaining a breakeven point. An approximate 70% is expected to cater for the salaries, 25% to cater for operational costs while the remaining 5% is expected to cover miscellaneous costs.

POTENTIAL PROFITS

We expect that after three months in operation, we would be able to realize profits and hopefully, manage a profit margin of around 15% with time.

ETHICAL DILEMMAS AND DIMENSIONS

The Islam culture has been under scrutiny for a long time with regards to rules on the dressing modes and activities people can be involved in. There is certain attire that would easily pass to defy the religion and thus are not allowed to be won. Again, the different sexes have specific modes of dressing that are acceptable according to their religion. Getting the culturally befitting products for these people therefore becomes a hectic task.

Sometime back in 2015, ISIS decreed a ban on US based sports apparel in all Islamic states.  The sect has for a while held contrasting views with regards to many products and it happens that anyone found not adhering to the decreed ban would be considered to be in bed with the infidels and thus would face the full force of their law in the name Allah. In the case of Nike for instance, they claimed that the name “Nike” sounded like an Arabic slang word for sexual intercourse. They also claimed that the name of the sport brand was similar to the name of the Greek goddess of victory whom according to them is a pagan.  It would therefore be hard thriving in such a business environment. It is important to note however, that there are also non Muslims in the country who would be our immediate market. Moreover, albeit the decree by ISIS, the government’s official position is contrary to that of ISIS which makes it still viable for business.

CONSEQUENCES OF NOT ACTING

ISIS are famous for taking stern actions against those deemed to be infidels with their mode of operations ranging from basic torture, terror attacks and worse still, deaths. Their threats should therefore be seriously taken into consideration. We plan to work with the relevant authority and find out the exact situation on the ground and how we can handle it to ensure sales for our products.

RECOMMENDATIONS

Vast research on the Saudi Arabian market has shown that there is a promising potential of doing business. Before implementing the business idea however, there are several issues that need to be addressed to make the operations smooth. To begin with, reconnaissance should be carried out to get a preview of the of Saudi Arabian business environment both the micro and macro. We should also familiarize ourselves with the laws of the country governing business operations. We should also do a comprehensive research on the marketing strategies that have worked positively in Saudi Arabia and design a plan on how to approach our marketing (Vollmer, & Precourt, 2008). Considering the antagonism between the Muslim communities and anything American, we should immediately embark of community social responsibility programs which would enable us to create a good rapport with the society (Akou, 2007).

CONCLUSION

Brand extensions have previously worked and some other times failed terribly. An informed research and is therefore important in setting up a successful business. In our case, venturing in a non-friendly environment is a deterring factor which calls for a careful consideration. Our advantage however, is the fact that we will not be starting something completely from scratch but rather establishing a replica of our already existing units. The only thing that may require a complete overhaul is maybe the specific modes of operation. With the an excellent strategy, Saudi Arabia provides an ideal business destination and therefore, if the right analysis is done with regards to trends then the brand Nike would definitely do quite well here.
References

Akou, H. M. (2007). Building a new “world fashion”: Islamic dress in the twenty-first century. Fashion Theory11(4), 403-421.

Archer, L., Hollingworth, S., & Halsall, A. (2007). University’s not for Me—I’m a Nike Person’: Urban, Working-Class Young People’s Negotiations ofStyle’, Identity and Educational Engagement. Sociology41(2), 219-237.

de Chaves, T. J., Rocha, T., Reuther, J., & Galhanone, R. F. (2017). Social business in multinational corporations: an analysis of marketing practices. Apresentação12(1), 62-75.

Khan, M. R. (2013). Role of social media in brand development in Saudi Arabia. European Journal of Business and Economics8(1).

Lash, S., & Lury, C. (2007). Global culture industry: The mediation of things. Historian403.

Mandurah, S., Khatib, J., & Al-Sabaan, S. (2012). Corporate social responsibility among Saudi Arabian firms: An empirical investigation. Journal of Applied Business Research28(5), 1049. Al Saud, A. A., &

Müge Arslan, F., & Korkut Altuna, O. (2010). The effect of brand extensions on product brand image. Journal of Product & Brand Management19(3), 170-180.

Rodrigues, J., Mazzola, B. G., Sutter, M. B., Miyahira, N. N., & Fleury, M. T. L. (2017). The corporate branding in international operations. Apresentação12(1), 1-15.

Vollmer, C., & Precourt, G. (2008). Always on: Advertising, marketing, and media in an era of consumer control. McGraw Hill Professional.