Introduction
Frito-Lay company must first do a survey of the UAE to establish environmental factors that may significantly influence the conduct of its business (Hamilton & Webster 99). Although Frito-Lay has been improving in terms of profitability in recent years, it has also been experiencing intense competition from companies producing related products, thus motivating or forcing it to expand internationally in order to diversify its risks and remain the leading snack company in production and distribution of snacks (Smith 129; Stalk, Lachenauer & Butman 28; Choi par. 1).
Factors affecting this international environment of business include the world’s economic, social, political, and legal forces. In entering the United Arab Emirates market, the company should be aware of different environmental factors that may be quite contrasting to what it is accustomed to.
Socio-cultural Forces
Assessment of socio-cultural components
It is important to note that different countries exhibit different cultural and social practices and beliefs, which may have a significant influence on business. One important aspect to consider is the fact that the UAE has cultural practices, consumption patterns, and beliefs that are different from those in Western countries, including the UK and the US. Although it may be a daunting task to convince the hardliner Arabs to accept products affiliated to the US or UK due to their perception on US’ war on terrorism, the diplomatic relations between the US and the UAE will play a significant role in creating positive change in a social environment (USA Ibp 25).
Indeed, its diversification to smart foods with low cholesterol is likely to go down well with consumers, thus enhancing its potential success in the UAE market (New Smartfood Delight Popcorn par. 1). In terms of language, Arabic is the national and official language of communication in the UAE, although recent trends have seen English being used increasingly in major cities. UAE is an Islamic country, thus Frito-lay would have to strategize on how to satisfy the needs of the wider Muslim community, who may have very strong and different beliefs from what the company is used to. This would allow Frito-Lay to maintain its leadership in the snack business (FritoLay par. 1).
Evaluation of the country using Hofstede’s four dimensions
Here, we analyze Hofstede’s theory of culture in relation to the United Arab Emirates (UAE). This theory has four cultural factors, which include power distance, individualism, masculinity, and uncertainty avoidance. According to this theory, the UAE commands high power distance, uncertainty avoidance, and masculinity; however, it scores lowly on individualism (“What about the United Arab Emirates?”, par. 1). For one to get a good understanding of what is accepted by a population, it is very important to conduct cultural research, which helps one to ensure the success of his or her company.
Therefore, Frito-Lay will have to face the challenge of power distance in the UAE, where the hierarchy of authority is maintained in all institutions. Here, inequality is evident in the distribution of power and wealth, as power is based on the position held in the organization or society, with juniors having to follow orders directly without questioning (Butler par. 3). In relation to individualism, collectivism is the trend, and as such, Frito-Lay will have to strategize on how to get accommodated in a loyalty group in order to succeed in the UAE. Frito-Lay will also be affected by masculinity in UAE such that it will have to face competition to succeed.
However, dominance in achievement and success is to some extent complied with quality of life that Frito-Lay will have to demonstrate; it also needs to understand that women have limited rights compared to men. Finally, Frito-Lay will have to avoid uncertainty as is the trend in the UAE. Here, the company will have to comply with rigid regulations coupled with a high degree of hard word work and punctuality. However, innovation is not important in the UAE, as most people prefer the status quo (What about the United Arab Emirates par. 8).
Impact of major issues a Response
One social problem is the difference in language used in communication, with the UAE predominantly using Arabic to conduct business, while Frito-Lay comes from a country where English is the dominant language. Another issue would involve the perception and treatment of women in Arab countries, whereby men always take a predominant role in business negotiations unlike what Frito-Lay is used to where women and men hold positions in the company without discrimination. In addition, UAE has faced social problems related to religious practices, with Islam being the dominant religion; however, recent developments have witnessed other religions being accommodated in the country (Ibp, Inc 99). There are also cases of human trafficking and human rights abuse.
During expansion, it is normal for any business to face different challenges. For the expansion to succeed, it is very important for one to take note of all challenges that might appear, and strategize on how to tackle them (Hamilton & Webster 99). Frit-Lay should be culturally sensitive and conduct a thorough stakeholder analysis when launching any campaign in order to eliminate any chances of alienating company stakeholders, especially from a social perspective (Berch, Montoya & Sawayda 5).
In response to these challenges, it would be important to conduct a survey of the UAE, including the socio-cultural norms of the community, in order to understand their consumption patterns and needs. Frito-Lay would also have to produce goods that are more inclined to the interests and preferences of the Muslim community. The company would also be ethical and socially responsible to the community, employees, and customers in order to ensure its operations are geared towards improving their lives (FritoLay par. 1). Finally, training would be important in order to ensure Frito-Lay’s corporate culture conforms to the culture demonstrated by nationals.
Economic and Socio-economic Forces
Assessment of all of the dimensions of the economic and socio-economic forces
The economic position of any business greatly depends on the economy of a country. If the country’s income is low or the money has low value, then it is definitely expected that the company shall have little economic value and power. The UAE predominantly relies on oil export as an indicator of its economic position, such that when prices of oil rise in the international market, the country’s GDP increases and vice versa.
In addition, the UAE is a demand-driven economy with a high consumption index (“Analytical Report on Economic and Social Dimensions in the United Arab Emirates 2009” 15) that contributes significantly to the economic viability of many investments in the country. This is an advantage that Frito-Lay will find favorable, as increased consumption would mean a high sales revenue and profitability. The UAE has also diversified to manufacturing and agriculture sectors in recent years, thus boosting its economic power and promoting small and medium enterprises.
Impact of major issues and Response
The UAE is one of the most economically stable countries in the Gulf region and the wider Asian continent. The growth of the economy has largely been enhanced by the exploration, extraction, and export of oil. In addition, the country has adopted modern agricultural practices, despite lying on a desert, and has managed to earn wealth through exports, such as wheat, horticulture, and dates.
Therefore, Frito-lay will face an economically stable environment when it expands to the United Arab Emirates, which will promise the viability of an investment. Indeed, the market conditions in the UAE indicate a high propensity to consume or spend due to the high purchasing power of citizens resulting from low unemployment and high government support to social welfare (Oxford Business Group 35). According to Oxford Business Group, the UAE takes the position of the second wealthiest nation in the Middle East after Qatar and it boasts of per capita GDP almost equivalent to that of the US, Canada, and Australia (35).
Moreover, trade is enhanced by the emergence of Dubai as a low-tax trading center, which provides a favorable environment for conducting business. The best way that Frito-Lay can conquer this challenge is by making sure that products produced are those that the UAE market prefers, are perfectly manufactured, and can be exported with ease to earn income. As a result of this, the company gets to earn both external and internal income, thus increasing the resources of both the company and the country in general.
Legal Forces
Participation in patents, trademarks, and other conventions
An entrepreneur should make sure that the business conducted follows all legal procedures in order to avoid misunderstanding with the government of the host country. The UAE has strict laws governing patents and trademarks such that all companies have to register their patents and trademarks as a way of preventing counterfeit goods in the country (Manto 199). Here, Frito-Lay will have to comply with regulations by ensuring it registers its patent and trademarks.
Frito-Lay should also acquire all legal documents required for the conduct of business to avoid being on the wrong side of the law. Although there are restrictions on foreign firms in the UAE, such legal restrictions have been compromised to some extent by the country’s desire to attract foreign direct investment (FDI), which has seen an influx of investors into the economy (Oxford Business Group 48).
Impact of major issues on expansion effort
Frito-Lay’s aggressiveness in marketing and production of quality products as well as its strength in innovation would be enough to convince authorities in UAE to offer trading permits with little resistance (Lussier 501). Nevertheless, the different interpretations of company law in different emirates would have a significant effect on Frito-Lay’s freedom of conducting business in UAE, as what may be permissible in one emirate, may be termed illegal in another emirate (Hamilton & Webster 254).
Political Forces
Political structure and political parties
In the case of the UAE, the political system is unilateral, with emirates holding immense powers and the federal government is formed from representations from each emirate (Usa Ibp 24). Such devolvement of power in the UAE will significantly influence the entry and performance of the company, especially considering that each emirate is relatively autonomous to other emirates and applies company laws differently.
Stability of government
Just like most of the Arab countries, the UAE system of government is more authoritarian than democratic, with most powers lying with the president and rulers of emirates. This is likely to affect decision-making and freedom of trade in the country, save for Dubai. Moreover, as a member of the UN, the country provides potentially positive international relations that will work favorably for Frito-lay in establishing operations in the UAE (Usa Ibp 25).
Trade restrictions
One problem that Frito-lay will have to grapple with is the legal restriction imposed by the UAE government on foreign companies and the ambiguity in interpretation and implementation of company laws in different emirates (Oxford Business Group 32).
Impact of major issues
Any company intending to enter a new country should understand the political stability of that location or country. Political stability is very important since there are some countries where trading cannot take place because of a hostile environment or the possibility of facing war by one of the countries. In the event an organization intends to venture into the international market, it is advisable to conduct a background research of political systems and forces in the host country in order to understand their effect on the viability of the venture (Hamilton & Webster 223). The best option for an entrepreneur is to make a work plan that is future-oriented, in case of any enterprise disadvantages.
Labour Forces
Overall size and sector of the workforce
In the UAE, the labor force market has been growing significantly in the last decade as the country moves to capitalism. Fortunately, the absorption of the bulging workforce into employment has also shown significant growth due to improved economic conditions (Gibson 137). The workforce in the UAE is made up of a significantly higher percentage of foreigners than locals; for instance, in Dubai, only 2.4% percent of the labor force are locals, with the rest being foreigners, especially Asians (All About UAE – UAE workforce par. 1). Moreover, in 2010, the total labor force in the UAE was over 4 million people comprising people over the age of 15 years (Labor force – total in the United Arab Emirates par. 1).
Assessment of labor trends
Labor trends in the UAE show an increased movement of expatriates in the country due to its open policy and a growing GDP. For instance, the emergence of Dubai as a global business hub has attracted many foreigners to work in the tourism, manufacturing, hospitality, and services industries. This would be a significant motivation that Frito-lay will take advantage of, especially after realizing that UAE has a commanding 85% of non-nationals working in the country (Kloep 86).
Therefore, the idea that the company would be able to move with expatriates into UAE would be a significant contribution towards maintaining its corporate culture. In addition, a major challenge of human rights abuse of workers in the UAE has been reported, with some foreign workers being denied their salaries while others being disposed of their passports to prevent them from returning to their home countries.
Employer-employee relationships
The employer should maintain a good relationship with employees, which should incorporate fairness and justice, practical equality, and compliance with labor laws in accordance with the recently revised edition. An entrepreneur should also set rules that he or she should follow and live by in order to set a good example for employees. If faced with any challenges, such as strikes, it is advisable to consult all employees before making major changes that might affect them.
Impact of major issues
A good businessperson should consider the size of business in relation to the number of employees required in order to ensure efficiency and equality in the distribution of roles. However, one challenge that Frito-Lay would encounter when entering the UAE involves the deteriorating occupation safety and health conditions in many industries; this may be a problem, but it may also be an opportunity for achieving a competitive edge if proper health and safety strategies at work are initiated. Frito-Lay would also be aware of modern labor techniques in the UAE as well as comply with UAE labor laws, which specify various guidelines on employment, rights, and terms of engagement in employment contracts.
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