Mercedes-Benz Company in the United Arab Emirates

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Introduction

The project focuses on exporting Mercedes-Benz to the UAE. Mercedes-Benz is a globally renowned company in the automotive industry. The official company’s website illustrates that the company manufactures cars for various segments, ranging from city cars, exclusive lineups to luxury high-speed cars. Thus, the company’s goal is to be innovative and electrify all vehicles on offer by 2022 (Mercedes-Benz).

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The UAE is known for its fast-urban growth, best in the world road systems, prominent car culture, modernity, and luxury visions (Qamhaieh and Chakravarty 1). Therefore, a car is an essential attribute in every citizen’s daily life. The passion for cars was established in the days of the UAE’s creation because after the country started to export oil, the automobile became a symbol of novelty and luxuries (Qamhaieh and Chakravarty 3). Nowadays, most of the UAE’s population is represented by migrant labor (Qamhaieh and Chakravarty 5). That is why it is crucial to consider both target groups, native citizens and labor migrants when exporting cars to the UAE.

It is essential to say that the United Arab Emirates is a suitable target market for Mercedes-Benz due to the incredible development of the automotive industry and the presence of several target groups that make it possible to offer the entire range of Mercedes-Benz Cars to residents. Furthermore, the UAE’s market has excellent potential for the export of various Mercedes-Benz car models.

Country assessment

Notably, the UAE is considered one of the most open countries for foreign companies due to its flexibility, low VAT level, financial and political stability, and high purchasing power (Mosteanu and Alghaddaf 18). The UAE market is favorable for foreign businesses due to the fixed exchange rate between the UAE dirham and the US dollar, the stability of the financial system, and the presence of a small number of taxes (Mosteanu and Alghaddaf 10). Needless to say, that the fact that the UAE dirham is pegged to the US dollar at a fixed rate is crucial for international trade (Baghestani and AbuAl-Foul 90). All these conditions for the entry of foreign companies into the UAE market and the improvement of international trade appeared due to the rapid development of the country’s economy and the profit from oil exports (Mosteanu and Alghaddaf 12). Besides, the essential feature of the UAE is its most minor restrictive conditions in terms of non-tariff barriers and trade procedures (Mosteanu and Alghaddaf 16). The minor restrictive business conditions are relevant to the project’s success because The UAE provides favorable conditions for exporting and trading Mercedes-Benz.

Demographics of the UAE states that the total population in 2021 is equal to 9.99 million, while 11.48% of people are Emiratis and 88.52% are migrants (UAE Population 2021). Additionally, most of the population is between 25 and 54 years old (UAE Population 2021). This demographics factor is relevant as it provides information on the key segments and target groups. Significantly for the project, approximately 75% of the UAE population focuses on Dubai and Abu Dhabi, the most significant commercial cities (UAE Population 2021). Thus, Mercedes-Benz should start exporting to the northeast of the country.

Project assessment

Entry mode

Joint Venture (JV) is one of the distinguished entry modes to enter markets, and it refers to strategic alliances. International Joint Venture (IJV) is more complex because it requires the knowledge of the cultural differences between companies collaborating (Parameswar et al. 688). The crucial idea of IJV is to demonstrate dynamic capabilities in response to the dynamic environment of a foreign market (Parameswar et al. 689).

Thus, Mercedes-Benz will have a headquarter in UAE to increase its market share and ensure smooth business operations. Collaboration between Mercedes-Benz and domestic firms will facilitate the market entry for Mercedes-Benz and also create market acceptance for local companies. Moreover, by creating a joint venture, the company will acquire new market knowledge and avoid barriers to entry in a highly competitive market. Strategic action is also the opening of joint production of cars, taking into account local preferences. Although, it is essential to say that Mercedes Benz will supply spare parts and original parts.

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Standardization vs. localization

Localization refers to a marketing process that enables acceptance of the commercial product or service in a foreign country (Weihong and Wei 51). Localization highlight the cultural differences and target customers’ preferences when entering the market. On the opposite side, companies implement standardization to maintain the brand image, core values, and information consistency (Weihong and Wei 55). The products, prices, promotion materials are the same in every market when applying standardization. Hence, localization will be used for the project since it is crucial to consider the interests and specific characteristics of the United Arab Emirates. Marketing managers should also design advertisements with local traditions in mind. It is vital to offer a competitive price for the product to attract customers’ attention in the local market. Mercedes Benz may launch an exclusive line of cars specifically for the UAE.

Marketing mix

The marketing mix, or 4P – product, price, place, promotion, is a set of strategic decisions to meet customers’ needs and achieve the company’s core goals (Išoraitė). The company’s products are cars of different categories and characteristics, ranging from city and family cars to exclusive high-speed vehicles. During the project, existing models will be supplied to the Arab Emirates market.

Still, over time, together with local partners, the company will develop a line of exclusive cars, considering the requirements and desires of local customers. The prices of existing cars should remain the same because the currency of the United Arab Emirates is fixedly pegged to the dollar. Although in the future, for the exclusive range of innovative vehicles, the company will develop a new pricing policy referring to the competitive market and the ability of native residents to pay for extra comfort and elegance. Since most of the population is migrant workers, dividing the market into two segments is essential. The migrant workers’ segment will be offered standardized cars, while the native residents will be provided with exclusive vehicles at a high price. The third significant marketing mix element is the place. Thus, the two largest cities such as Dubai and Abu Dhabi, will be selected for business development.

Consequently, it will be easier for Mercedes-Benz to find cooperation and business development partners in these cities, and almost the entire population is concentrated. As a result, the brand promotion will take place according to the localization strategy. That is, Mercedes-Benz will carry out advertising and brand promotion strictly according to local preferences and traditions.

Global production and supply chain issues

The project includes dispersed manufacturing plants; for instance, Mercedes-Benz will open plants in different locations to cover more market segments and ensure practical production activities and flexibility of business operations. Nowadays, the companies’ manufacturing role has shifted from focusing on home markets to establishing local plants in foreign markets (Cheng et al. 91). To enable successful geographical dispersion, the companies should focus on the management development of sales, engineering, and R&D (Cheng et al. 94). The project involves joint production, so it is vital to conclude contracts with local companies and factories to assemble the cars. Therefore, it is possible in the future to produce an exclusive line under the clear leadership of Mercedes-Benz.

Bargaining

The UAE is open to foreign companies as it has the world’s most enormous expatriate population and almost all global brands (Bose 27). The state’s official language is Arabic, but English is the language of international communication, bargaining, and negotiations. According to the Hofstede model, the country was analyzed to better integrate into society and conduct successful negotiations (Hofstede insights). The power distance dimension of the UAE is 90, which means that employees accept an organizational hierarchy. Therefore, the positions and business roles played are crucial when considering someone’s opinion. Secondly, the individualism dimension equals 20 and refers to the fact that the UAE is a collectivistic society, which appreciates loyalty and commitment to the group. Hofstede states that in a collectivistic culture, every employee takes responsibility for the team’s actions and consequences. Thirdly, the country scores 50 on the masculinity dimension; therefore, the values are concentrated on competition and quality of life. In addition, the United Arab Emirates has a high level of uncertainty avoidance, which means that the society has a rigid code of belief, rules, and guidance. Therefore, when entering UAE, the company’s management should strictly appreciate and respect the traditions and follow business ethics rules.

Corporate social responsibility

Corporate social responsibility will be a factor in Mercedez-Benz’s strategy because, in order to maintain a company’s brand image, it is important to be accountable for the public consequences of its operations. The project implies that the company will take into account ethical, environmental aspects and finance social projects in the United Arab Emirates. Importantly, the company is committed to helping its employees in any moral matter, killing discrimination at its root, and supporting each company member’s development and further growth. The company is obligated to respecting its partners, their traditions, and business preferences. Also, Mercedes Benz will pay great attention to the environmental issue to avoid environmental pollution. The social responsibility of the company is the key to its success.

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Human resources management issue

Most of the UAE’s population is foreigners. Western norms determine business etiquette, rules, and corporate culture. Despite that, Human Resources Management in the UAE is still dependent on Islamic principles and traditions (Haak-Saheem and Festing 17). Consequently, when working in the UAE, the company should remember short working hours during Ramadan, which is a fasting month for Muslims, or the rights of Muslim workers to participate in the Hajj, namely a duty to visit Makkah. It is essential to accompany Arab females when they travel abroad. It is also important to remember that the hierarchy in society is accepted, and decisions are made strictly according to the position’s ranking. All these cultural aspects and traditions affect HRM practices.

Conclusion

To conclude, the United Arab Emirates market is open to international companies due to its low tariffs, low taxes, easy business start-up procedures, and fixed exchange rates.

It is recommended for the company to consider Dubai and Abu Dhabi because virtually the entire population is concentrated in these cities. Residents of the Arab Emirates are divided into native citizens and labor immigrants who make up the majority of the people. That is why Mercedes should sell standardized cars to labor immigrants and create an exclusive line for locals who are willing to pay more for luxury.

One of the most important recommendations about the project is to enter the United Arab Emirates market through joint ventures. A joint venture with local companies will facilitate acquiring knowledge of local legislation, market and competition, and business culture. When implementing a marketing mix strategy, Mercedez-Benz needs to focus on localization, especially when it comes to brand promotion and advertising.

Society is known for its long-standing traditions and strict rules, so Mercedes-Benz must consider cultural differences to succeed in the market. In addition, the demographic situation in the UAE is stable for human resources management; the working-age population percentage significantly prevails in the United Arab Emirates. The UAE is an attractive market for Mercedes Benz due to the high quality of life and high per capita income; therefore, potential customers have the opportunity to buy not only high-quality standardized but also exclusive cars. Finally, Mercedes-Benz should pay attention to corporate social responsibility to promote its brand and take into account the interests of society in the United Arab Emirates.

Works Cited

Baghestani, Hamid, and Bassam M. AbuAl-Foul. “Dynamics between Oil Prices and UAE Effective Exchange Rates: An Empirical Examination.” Review of Economics & Finance, vol. 16, no. 2, 2019, pp. 89-103.

Bose, Indranil. “Business Ethics and Consumer Buying: An Ethno-Regional Study in UAE.” Ushus Journal of Business Management, vol. 18, no. 4, 2019, pp. 23-30.

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Cheng, Yang, Sami Farooq, John Johansen, and Chris O’Brien. “The management of international manufacturing networks: a missing link towards total management of global networks.” Production Planning and Control, vol. 30, no. 2-3, 2019, pp. 91-95.

Haak-Saheem, Washika, and Marion Festing. “Human resource management–a national business system perspective.” The International Journal of Human Resource Management, vol. 31, no. 14, 2020, pp. 1-28.

Hofstede insights. United Arab Emirates, 2021.

Išoraitė, Margarita. “Marketing mix features.” Ecoforum Journal, vol. 9, no. 1, 2020.

Mercedes-Benz. Mercedes-Benz Company, 2021.

Mosteanu, Narcisa Roxana, and Carla Alghaddaf. “Smart economic development by Using Foreign Direct Investments–UAE case study.” Journal of Information Systems & Operations Management, 2019, pp. 9-20.

Parameswar, Nakul, Sanjay Dhir, and Viput Ongsakul. “Purpose of international joint venture and interaction post termination.” Journal for Global Business Advancement, vol. 11, no. 6, 2018, pp. 687-705.

Qamhaieh, Abdellatif, and Surajit Chakravarty. “Drive-through cities: cars, labor, and exaggerated automobilities in Abu Dhabi.” Mobilities, vol. 15, no. 6, 2020, pp. 792-809.

UAE Population 2021. United Arab Emirates Population Statistics, 2021.

Weihong, Zhou, and Wei Wang. “On Localization and Standardization in Brand Name Translation.” Studies in Literature and Language, vol. 17, no. 2, 2018, pp. 51-56.

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BusinessEssay. (2022) 'Mercedes-Benz Company in the United Arab Emirates'. 12 September.

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BusinessEssay. 2022. "Mercedes-Benz Company in the United Arab Emirates." September 12, 2022. https://business-essay.com/mercedes-benz-company-in-the-united-arab-emirates/.

1. BusinessEssay. "Mercedes-Benz Company in the United Arab Emirates." September 12, 2022. https://business-essay.com/mercedes-benz-company-in-the-united-arab-emirates/.


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