International business encompasses all commercial transactions between two or more countries. These transactions involve the exchange of services, goods, human capital, resources, information, and technology. International business can also be referred to as global business. International business can take place in various options, which include: export and import of goods and services, establishment of joint ventures, franchise options, branch establishment, and provision of technological advances and special expertise. Organization and countries operating international business are presented with a myriad of opportunities, which include economies of scale due to large-scale operations, integration of economies, availability of current information and technology, and competitive advantage over the companies operating locally. However, there are various challenges facing global business, which include subjectivity to different laws since each country and state operates under its own rules and regulations guiding import, export, and other business activities.
This paper will analyze the concept of establishing consumer electronics international business in the United Arab Emirates (UAE), which involves import and export of electronics. The basic target customers in the UAE will be of interest in this paper, since a customer is the determinant of how successful the company will be in the market. Identification of the target customer will help in establishing the promotional mix the company can use to reach the target customers. The legal environment that guides conduct of business in the UAE will be imperative for the company since non-compliance with these legal requirements lead to denial of operating license or fines, which may be costly to the company. The understanding of import custom duties in the UAE, especially those that affect electronics, will be of great importance to the company since their business revolves around importation of electronics. The culture and environment of trade in the UAE is also of great significance since the company will be able to adapt itself to these cultures, which will enhance success of the business in the market.
The company will also conduct strength, weaknesses, opportunities, and threats analysis, commonly referred to as SWOT analysis of electronics, and the political, economic, social, and technological analysis of the UAE market. It is important for the company to be aware of various legal factors surrounding registration and operations of multinational corporations and electronic business in the UAE. The procedure that the company should comply with in the licensing of imports is also significant to consider. The ethical issues of business in the UAE are important for any business that aims at achieving its objectives in the UAE market. The UAE presents myriad of benefits to multinational companies operating business in the country; therefore, the company should seek to understand the various benefits that can be accrued from conducting business in the UAE. To ensure successful entry into the electronic market, the company needs to understand the various marketing and communication strategies that it can employ to achieve the marketing objectives.
Culture of Trade and Target Customers of Electronics in UAE
Internationalization and globalization has affected the cultural norms of people in the world. The progressive approaches that have been adopted by the UAE government in attracting multinational companies into the country have attracted many multinational companies in the country. Advertisement as a tool of communication in marketing forms a good basis upon which people’s reactions and behaviors are influenced. Dubai is the major emirate in the UAE that deals with a variety of business practices since other emirates rely heavily on oil as the major source of income. The demand of electronics in the UAE has been increasing, especially with the introduction of high tech electronics such as 3G mobiles, smart phones, HD and LED TV sets, notebooks, and mp4 Bluray players. The UAE is predominantly Islamic, and the practice of sharia law is common; therefore, the company should aim at understanding the various religious factors that may affect the business operations, marketing and communications strategies to be applied. The government has also introduced economic free zones for multinational corporations, where the companies are tax exempted and allowed to expatriate their earnings to their countries of origin. The company should acquaint itself with the requirements of business operation in these economic free zones to reap the benefits associated with them. There are many electronic multinational companies operating in the UAE, which pose competition to the company. These companies are either operating as branches and joint ventures or as corporations and partnerships. The company should do an evaluation of all the possibilities to ensure the best market entry strategy is chosen to facilitate achievement of a competitive advantage of the company when entering the market.
The country is also composed of young population. Population structure of the country is essential in determining the communication strategies and the promotional mix that will ensure competitive advantage for the company. The UAE population is predominated by the young generation, who demand best technology and electronic gadgets such as Ipads, IPods, smart phones, and Bluray mp4 players. This presents an opportunity for the company to employ promotional strategies targeted at the young group. Identification of the target group will help the company to identify the current and future needs of the company’s customers, who are the basic determinants of the company’s profitability. Many multinational companies have been testing their new electronic gadgets in the UAE and especially in Dubai, since it represents a large portion of the global market for electronics. The UAE economic performance is also of great importance in understanding the current business environment in the region. The country has the highest per capita income, showing that income is available to facilitate continued purchase of the company’s products.
Customs Regulations for Importing into UAE
Import business is guided by licenses as only an organization with licenses can operate import business. For the company to operate import business in the UAE, it must be a registered company with 51% ownership by the UAE nationals. Therefore, the company needs to establish the necessary partnerships with local electronic companies to meet the requirement of 51% local ownership to obtain a license of importation. However, this does not apply to goods imported through economic free zones. The company should seek to meet the requirements required to operate in the free zones to reduce its compliance cost and maintain control of the operations of the company. Goods imported into the UAE also require authentication by the embassy in the country. There is a fee paid for this authentication by the importers. There are various import prohibitions maintained by the authorities in the UAE for various reasons, such as international conventions, environmental control and protection, religious and moral considerations, and health safety issues (Rehman, 2007).
The company should ensure understanding of all import prohibitions on any electronics to ensure compliance. All imports from Israel according to table 3 of the imports regulations are prohibited. The company should understand all aspects of import prohibitions to ensure avoidance of importing prohibited goods. There are various import provisions such as the temporary entry imports, which provide an exemption of customs for any goods that will be re-exported within six months (Al Abed et al., 2006). There are several duty free zones in the UAE where goods can be imported; duty is only payable only if the goods leave the free zones. In these frees zone, majority local ownership is not required.
There are also other requirements regarding moving goods from one emirate to the other since each emirate operates its own tax system. The business company, therefore, needs to acquaint itself with the tax system in each emirate to successfully do business in those emirates. Various business sources suggest that it is difficult to do import business in the UAE without local agents. Under the UAE Commercial Companies Law, trading license which encompasses import business can only be given to corporations which are owned by the majority of UAE nationals or fully owned foreign branches of foreign companies. However, most of the import businesses operate under Trade Agencies Law where commercial agencies exclusively hold the trading licenses. The company should identify local agencies, which will provide a good network of connections with experts of local customs and market to facilitate distribution of goods in the market (Oxford Business Group, 2010).
SWOT and PEST Analyses
A SWOT analysis for the company evaluating its entry into the UAE encompasses all the strengths, internal and external, weaknesses, opportunities, and threats that the company will face as it establishes itself in the market. The strengths that the company will determine will facilitate identification of the critical success factors that will offer the company a competitive advantage (Williams & Green, 2000). The company should consider finding experts who have good knowledge of the customs and the UAE electronic market. These agents will be essential in facilitating market entry and successful distribution of the company’s products in the market. The tax regime in the UAE is relatively low, reducing operating cost of the company; this presents an opportunity for the company to improve its profitability (Balakrishnan et al., 2012). The economic and political environment encourages the establishment and growth of multinational companies in the UAE, which creates an enabling environment for the company to compete successfully.
The firm faces various weaknesses in its establishment in the electronic market in the UAE. As a new firm, the company has limited knowledge of the electronic market in the UAE; this presents a weakness as other established companies dealing with electronics have perfect knowledge of the market, which act as a competitive advantage for them and can lead to losses for the firm. However, the market of electronics in the UAE has been growing, and as predicted, it will continue to grow due to the flourishing UAE economy and incorporation of new technology in new electronic gadgets. The company, therefore, has an opportunity to offer high quality goods to the potential customers. Besides, the company faces threats of stiff competition from already established companies (Ibp Usa, USA International Business Publications, 2007).
PEST analysis of the UAE market includes examination of the political, economic, social, and technological aspects that produce competitive advantage for the company. The political environment in the UAE has been stable, which enables establishment and growth of business. For example, free zones have been introduced to encourage establishment of foreign companies in the country. The economic status of the UAE has been stable since it has been experiencing trading surplus due to increased exports of oil and other products. The employment level is high, with a very small rate of unemployment. In addition, the country has the highest per capita income, showing that the citizens have a high purchasing power. The Islamic religion and the sharia laws shape the social setting of the UAE. The company should make efforts to understand the social factors that can be used to create a competitive advantage, while avoiding factors that will damage the image of the company in the social settings. Development of technology in the UAE has been progressive, and modern technology has been adopted in infrastructural development. The country has developed various innovation centers to encourage inventions and innovations and adoption of new technology (Al Abed et al., 2006).
Benefits of Electronic Investments in UAE
Investing in electronic industry in the UAE presents a myriad of benefits to multinational companies planning to establish business in the country. Political, economic, and social environments have been conducive to the establishment of local and multinational corporations. The country has created an enabling political environment to encourage foreign multinational corporations to establish business in the country by introducing free zones and low tax regimes as incentives. The company has also the highest per capita income in the world. This shows that purchasing power of the citizens is high for business to prosper in the country. The electronic industry has recorded increased growth in the history, and the projected revenues from the industry show that it still has potential to grow (Oxford Business Group, 2010). Many multinational companies have identified the UAE as the best market to test new electronic gadgets acceptability in the market. This shows that the market has high potential to grow and organizations can increase their profitability by exploring this market.
Ethics represents what is morally right when one is faced with decisions that require personal judgment. In business, the issue of ethics is broad and represents the relations between a business organization and all the stakeholders in the business. These include customers, employees, government, and shareholders. The organization should ensure safe working environment for the employees and provide proper enumerations. The company should guarantee the quality of goods sold and offered to the customers at a fair price. The company should also ensure returns to the shareholders who have invested in the company. In addition, the company should comply with all government requirements, since non-compliance could be costly to the company.
In conclusion, multinational companies and corporations enjoy a myriad of benefits such as large economies of scale, integration of economies, and benefits relating to availability of modern technology. Investment in the UAE in the electronic imports presents opportunities to the organization due to the economic, social, and political factors. The company should also make various analyses such as SWOT and PEST analyses in the internal and external environments to facilitate identification of the critical success factors. The country’s political and economic environments encourage foreign direct investments through various incentives. The company should also comply with the set ethical standards to create an enabling environment to conduct its business.