Globalization and Business Practices - Franchising in Saudi Arabia

Franchising in Saudi Arabia

Joshua Fowler

Joshua Fowler

Professor Kardes

Globalization and Business Practices

4/20/2015

        Business Proposal

I am proposing that Generals, my super market chain, enter Saudi Arabia for franchising as one of the first international supermarket chains in the country. Saudi Arabia, being one of the top 3 petroleum producing countries in the world, is a great place for Generals to begin business in the international market.

Background

 Generals is a supermarket chain that rivals Target and a Walmart here in the United States by offering everything from food to electronic goods. There are three reasons that I would want to begin this business in Saudi Arabia.

Reason One

 The first reason that I would want to bring Generals to Saudi Arabia is because competition would be virtually non-existent. Saudi Arabia currently has less than 5 stores currently franchising in the entire country with none of them being supermarkets. Most of these chains specialize in different things, but don’t offer the all-around customer experience that Generals will give them. AngloInfo, a site about life in Saudi Arabia, breaks down the current state of supermarkets in the country by saying “Supermarkets in Saudi Arabia are particulary in and around Riyadh and Jeddah. In smaller towns there are smaller independently owned stores with limited choice and a higher price” (AngloInfo, 2015).
Currently, Saudi Arabian’s would have to go to one store to get your food, then another to get your toiletries, then another for pet supplies; Generals allows for access to all of those under one roof.

Reason Two

        The second reason that Generals would be a perfect fit in Saudi Arabia is because of our new fuel station that we are planning to add to most of our chains in 2016. Saudi Arabia is the number one oil producer in the world. OPEC, the Organization of Petroleum Exporting Countries, highlights the sheer volume of oil that Saudi Arabia has on their website; stating “Saudi Arabia possesses 18% of the worlds proven petroleum reserves and ranks as the largest exporter of petroleum” (OPEC, 2015). This abundance of supply, in addition to the business relationships we would build while in the country with an abundance of oil tycoons would help our Grocery Sector in Saudi Arabia but as well as Generals’ fuel stations. These relationships could possibly help us secure oil at lower prices increasing our profits.

        Reason Three

        The third and final reason that Generals move to Saudi Arabia would be beneficial is the sheer potential of Saudi Arabia. Saudi Arabia’s new direction that the country will take under its new King Salman makes it one of the fastest growing countries in the world. A CNN article speaks on his policies moving forward by saying that “the kingdom is modernizing; it’s changing, it’s reforming and it will continue to do so over the next several decades” (Mullen, 2015). With this modernizing period also comes a greater acceptance of new ideas and businesses. We not only give ourselves access to the international market, but also gain a great resource for our Stateside business. When we successfully implement our business plan in Saudi Arabia we prove ourselves and a serious international business and can begin to expand to other countries.

        Cultural Barriers

        Saudi Arabia provides many cultural barriers to our plan to start business, but none of extreme importance. Their culture is Arab and Islam and is very religious, traditional, and family oriented. This doesn't prove to be a problem seeing that Generals is a family oriented business that prides itself on customer service, being respectable and fair to all customers regardless of culture or religion. A big barrier that we will have to make sure to watch out for is their traditional dress. In Saudi Arabia the headpieces and clothing isn't just limited to women as it is in some other Islam practicing countries. Saudi Arabia’s royal embassy breaks down the different type of traditional dress; both men and women are required to wear traditional headwear and cloaks, though they are different in essence. “All women are required to wear an Abaya, a long black cloak that covers the body excluding the hands and the face while also wearing a veil, normally full faced. Men wear a long cloak called a thawb, with it being white during hot weather and dark during cool weather” (Saudi Embassy, 2015). They also wear a headdress called a Ghutrah. This won’t impact our business structure much except the promotion and availability of some of our clothing and hygiene products as well as the uniform that our employees must wear.