As a follow-up to the information presented last week, the board of directors is asking for another brief presentation to help assess the economic, political, and legal environments of your selected country. The economy, along with political and legal issues, affect the viability of doing business in this particular country. While these are uncontrollable environmental variables, understanding these issues and how they impact the marketing plan is essential.
Develop a brief presentation assessing the economic, legal, and political environments of your country.
• Briefly describe the country’s history and its relevance to its current political, economic, and legal environment.
• Describe the country’s government and any recent political developments that could affect doing business in this country.
• Analyze the government’s activities regarding foreign investment in the country.
• Identify any potential formal trade barriers that can affect your marketing strategy.
• Identify any legal activities related to this country that can affect your business operations there.
• Analyze any government, finance, and tax considerations that affect doing business in this particular country.
• Evaluate the targeted country’s technological infrastructure and how this will impact your ability to promote, price, and distribute your product as efficiently and effectively as possible.
• Explain and justify the demand for your product in this country and why you believe it will turn a profit for the company.
• Write a final conclusion about why this country is the best choice for promoting your company’s product based on external factors related to the country’s economic, political, and legal infrastructure.
Legal and Economic Considerations
The United Arab Emirates (UAE) is made up of seven states that came together to form a single state. The seven states are Abu Dhabi, Furaijah, Sharjah, Ajman, Umm Al-Quaiwain, Al-Khaimah, and Dubai (Al-Suwaidi, 2011). The region’s history is hinged on trade. The region draws its culture from Islamic traditions. In the years around 630 AD, the region became an important trading center because of its central location between the Far East and Europe (UAE Embassy, 2017). As such, the region attracted traders from Europe, China, and India. As time progressed, the Europeans sought control of the region since it acted as an important trading zone. The rulers around the seven states sought protection against colonization from the British through a series of agreements. In the agreement, Britain would protect the region from foreign invasion (UAE Embassy, 2017). On the other hand, no state would enter into any agreement with other European countries without Britain’s consent. The signing of this agreement promoted peace in the region, which was key in promoting economic growth and development.
The leadership in the region combines the elements of a federal system and the traditional monarchical leadership. Choosing a president involves reaching of a consensus among the various Emirate rulers (United Arab Emirates (UAE), 2017). Nonetheless, Abu Dhabi and Dubai emirates have a strong role in influencing critical decisions such as the budget or choosing the president. The choosing of rulers in the emirates follows the traditional monarchical system. In 2006, slight changes affected the electoral process, with the introduction of Federal National Council (FNC). Its role was to increase public participation in the voting process. In 2011, further amendments were enacted allowing the FNC to increase eligible voters to 130,000, an increase from 7,000 in 2006 (“UAE”, 2017). In the future, more citizens will have the right to vote. The increased democratization of the state will strengthen the stability of the region. This will definitely improve business in the UAE region.
The region has adapted a unified foreign policy that also regulates foreign investment in the entire region. The UAE government has enacted attractive policies to foreign investment in the region. One of the key attractive policies is its soft position towards Islamic religious traditions especially with regard to women and non-Muslims. This has led to criticism by conservative individuals over the disregard of its traditions (Al-Suwaidi, 2011). UAE’s foreign policy aims at ensuring peaceful resolution of conflicts, improving trade especially oil exports, fighting terrorism, ensuring the sovereignty of the emirates, and ensuring peace in the Arabian Gulf. To improve its foreign relations, UAE is currently a mber of various international bodies including the United Nations, the Organization of the Islamic conference, and among others.
Some legal activities can affect exploration and marketing of petroleum on this region. Four major federal laws guide foreign investment in the UAE region. These laws are the Industry Law, the Companies Law, the Government Tenders Law, and the Commercial Agencies Law (“United Arab Emirates (UAE) Country Commercial Guide,” 2017). The Commercial Companies Law was enacted in 2015. The major issue addressed by this law concerns hiring of UAE nationals. The law requires that all companies operating within the region should have a 51% UAE citizen ownership. Nonetheless, appropriation of profits may vary depending on agreed terms. In addition, branches offices are required to have 100% UAE national agents and ownership (“UAE Country Commercial Guide,” 2017). This law will have an impact in marketing of petroleum because the company will have to ensure ownership of the various outlets complies with the Commercial Agencies Law.
The UAE government has established free zones where foreign businesses can set up businesses without any restrictions. Outside the free zones, the firm must have a national agent or distributor who must be a national of the region (“UAE Country Commercial,” 2017). Access to finance is easy since there are national and international banks willing to lend money. Since the supply of petroleum will require operating outside the free zone, the firm will have to look for a UAE national distributor. UAE’s tax considerations are among the best in the world. The country has maintained an almost tax-free trading environment for foreign nationals. In addition, there are very few trade barriers for foreign nationals wishing to start businesses in the region (Al-Suwaidi, 2011).
Innovation, research, and technology form the basic pillars of the UAE economy. Foreign direct investment inflows into the region have resulted in large-scale technology transfer. This has also led to spillover effects to local firms through appropriate linkages. According to Mina (2014), technology transfer has greatly touched on various areas including product technologies, process improvement, marketing, and advancement in distribution technologies. Through improved technology, it will be easier to market products. The company will leverage on increased social media access to target the young consumers. The UAE region has one of the most advanced technologies in crude oil production and distribution. For instance, the country engages in natural gas reinjection to boost crude oil production.
The UAE region is the best to invest in crude oil production and distribution of petroleum. One of the key attractions is the openness to foreign direct investment. The government has made significant efforts to improve foreign direct investment inflows in the region, with targets of achieving up to 5% of the Gross National Product (“UAE Country Commercial,” 2017). This means it will be easy to set up a business in the region due to the favorable foreign investment policy. Another point to note is that the UAE region enjoys relative peace and stability. This is a key consideration while investing offshores. The relative peace and political stability provides a favorable business environment. The UAE region is in a favorable location, allowing exportation of petroleum through the Strait of Hormuz. This will give the company easy access to Europe, China, and other markets.
The UAE region is the best in doing business because of the relative peace, stability, and cooperation it has with foreign states. UAE makes foreign decisions that seek to advance its economic, social, and political development. The region has steered clear of conflicts while showing cooperation with other states including the United States in the fight against terrorism. By combining a federal system and a monarchical system, the leadership has been able to bring peace and stability over the region. In addition, the region has increasingly moved towards adopting a more democratic form of leadership. For instance, in 2011, the FNC increased the Electoral College voters to 130,000 in a bid to increase the electorate democracy. The region boasts of skilled work force in oil exploration and distribution, with the application of the latest technologies. This is another reason for investing in this region.
Al‐Suwaidi, A. (2011). The United Arab Emirates at 40: A balance sheet. Middle East Policy, 18(4), 44-58. doi:10.1111/j.1475-4967.2011.00509.x
Embassy of the United Arab Emirates (UAE Embassy). (2017). UAE history. Retrieved from http://www.uae-embassy.org/about-uae/history
Mina, W. (2014). United arab emirates FDI outlook. The World Economy, 37(12), 1716-1730. doi:10.1111/twec.12169
United Arab Emirates (UAE) Country Commercial. (2017). United Arab Emirates – openness to and restriction on foreign investment. Retrieved from https://www.export.gov/article?id=United-Arab-Emirates-openness-to-foreign- investment
United Arab Emirates (UAE). (2017). Governance. Retrieved from https://chronicle.fanack.com/united-arab-emirates/governance/