UAE Business Environment Analysis: British Business Group

Abstract

Analysis of business environment is one of the most important aspects for implementing the business strategy, which is required for the successful performance in every particular business sphere. British Business Group is regarded to be one of the largest performers of the UAE business region, thus, its activity and environment will be analyzed.

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Introduction

Management of the business sphere is one of the most important aspects of business success factors, as contemporary business practice is impossible without proper implementation and management of the business strategy. The aim of this paper is to analyze the business environment, and evaluate the principles of business management in the context of business environment.

The list of tasks for this report entails the review and in-depth analysis of the business environment, the principles of business management, which are implemented in the analyzed company. The scope of the research is the business activity of the British Business Group on the territory of UAE. The time frames are restricted with the nowadays, and the latest events in the Arab world business sphere.

Methodology for performing this research is based on the collection and analysis of the business environmental factors. Moreover, financial data will be analyzed and represented in a graphic form as an important aspect of the analyzed environment.

Company Background

The company, which is analyzed is regarded as one of the largest transnational business corporations, represented on the United Arab Emirates business sphere. British Businessmens’ Group Dubai & Northern Emirates was arranged in 1987 with the main aim of encouraging the development of British business in the UAE. In order to achieve its main aim, and extend the cooperation with other business companies, represented on the UAE business area, BBG undertakes numerous activities from communicating with various business decision makers, and participates in the network projects. There is no specialization of the company, as it is engaged in various business directions, and is aimed at promoting most of the British goods and services in the countries of the Arab world. Nevertheless, the directions of the highest priority are the following

  • Communications
  • Construction
  • Education
  • Energy
  • Entrepreneurs
  • Finance
  • HR
  • Insurance
  • IT
  • Legal
  • Real Estate
  • Young Professionals (Hudson, 2005)

The fact is that, focus groups are appointed for developing each direction. In accordance with the accepted business practices, the members of the groups meet monthly, and actually they are open not only for the members, but to any, who are interested in participating in the business development process. The fact is that, these meetings regarded as the progressive approach towards decision making, which indicates the innovative principles of business management. In the light of this consideration, it should be emphasized that the original value of such meetings is not only in discussing the current issues and problems, but sharing management ideas with the CEO, thus, adequate decisions may be taken not only in the corporate scales, but also local departments may rely on adequate support.

The business mission of the company is required for the adequate assessment of the business environment, and stating, whether the selected mission objectives are suitable for the operating environment. Thus, the mission entails the following statements:

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  • to promotes and develop business relations in and between Abu Dhabi, the UAE and the UK and to display the commitment of British business to the region;
  • to provide a forum for the British business community in Abu Dhabi and others who are interested in promoting trade between the UK and the UAE, by way of regular meetings to exchange information and ideas;
  • to provide advice and help to British trade missions, business groups and other visitors to Abu Dhabi and assist British enterprises who have formed or who are contemplating business in and with Abu Dhabi;
  • to provide networking and social opportunities for members, associates and guests, to assist their business and support them and their spouses;
  • to provide a link with other organizations with similar aims. (Beer, 2009)

As for the working practices of the organization, work system triangle should be represented

work system triangle

In accordance with this triangle, the Infrastructure is generally regarded to be the basis of the entire business practice. Considering the fact that Participants Information and Technologies factors are the components which form the basis of the business system triangle, it should be emphasized that the entire business practice. The focus groups of the BBG company may be regarded as the participants, as these are the business experts and coordinators of the cooperation processes within the regional departments. Information is the data on the matters of consuming trends, the social prerequisites of the consuming behavior, business information as well as the requirements of the parties for the cooperation. Technologies – are the business practices and particularities of the business strategy, which are required for the successful business performance.

Processes and activities factor entails all the necessary activities, which form the business practice: these are the market studies, negotiations, technical maintenance of the business infrastructure which generally entails the communication technologies, required for keeping the departments in touch with each other.

Products and services are listed in the directions of the preferred spheres of cooperation. Customers are the representatives of the Arab world business sphere.

The data flow process is outlined in the following chart

data flow process

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Thus, it should be stated that the data flow process is closely linked with the cooperation practices, as data and business performance are the two closely associated with business, economic and social data, and, in accordance with the awareness level, the business practices are implemented.

The business performance experience of the British Business group is extensive enough, so the data flow is divided into several periods (as shown in the chart), moreover, the data flow process is arranged in two parallel directions for accelerating the process, and providing a clearer and more detailed analysis of the business process, as well as the incoming data.

Business Environment

First of all, before making the in-depth analysis of the business environment, there is strong necessity to give the words of Mark Beer – the chairman and CEO of the British Business Group:

The BBG founded in 1987 and now, with more than 1300 members; we believe we are the biggest business group in the region. We are certainly one of the most active with a program of events that includes monthly luncheons with guest speakers, networking nights, focus groups bringing together members from specific industry sectors, as well as social events throughout the year. You will find full details of all these events, together with pictures from past events, as you peruse the site. (Beer, 2009)

In the light of this fact, it should be stated that the adequate estimation of the management practices of the British Business Group is generally performed with the estimation PEST and SWOT analysis matrixes.

PEST

Political

Political aspect of the business environment in UAE is generally regarded to be favorable enough, as the government is interested in developing the business partnership with other countries. Thus, UAE supports the innovation of the free trade zones, and in accordance with Cordesman (2003, p. 451) “the government requires at least 51% local citizen ownership in all businesses operating in the country as part of its attempt to place Emiratis into leadership positions”, thus, BBG may rely on the favorable political situation for extending its activity. Nevertheless, this legislative initiative is reviewed at the moment, nevertheless, it indicates the favorable situation for the business development. In the light of the fact that business legislations are adjusted in accordance with the requirements of the World Trade Organization, there is strong necessity to mention that business development is encouraged, and international cooperation is regarded to be the task of a high priority. Originally, this factor presupposes the extensive development of the activity by the BBG

Economic

Economic aspect of business environment is probably one of the most favorable in the world, as UAE is the country with the highest national income. Originally, the analysis of the economic background should be provided from the perspective of the economic indicators and facts. Thus, the GDP of the UAE is Dh729.73 billion for the year 2007and Dh929.4 billion for the year 2008. Thus, the GDP growth rate is 5.2% and 7.4% correspondingly. (Entelis, 2001) The non-oil sector of these rates is close to 65%. From the economic perspective, UAE is interested in petrochemicals, aluminium, aeronautical, iron & steel, cement, ceramics, ship repair, pharmaceuticals, tourism, transport, real estate, financial services. (Kavoossi, 2000) Thus, the business activity by BBG in the economic environment of the UAE is generally described as the activity within the most favorable conditions, maintained by the governmental necessity to keep the economic indicators high.

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Social

Originally, this aspect may be regarded as the least favorable due to the fact that Great Britain and Saudi Arabia are too far from each other in the cultural perspective. Various cultures, two different religions, absolutely different social norms and customs. Nevertheless, successful business practices presuppose the openness of the mind for the things, people from different cultures can not understand, consequently, this aspect is not favorable for those who are not opened for, and do not tolerate something different. As British Business Group is originally oriented for the cooperation with the Middle East region in general and United Arab Emirates in particular, there is strong necessity to mention that the company does not challenge this problem, as all the specialists are trained for working in the business sphere of the Middle East. As Obay (2009, p. 291) emphasizes:

The UAE is a highly cosmopolitan well-educated society, familiar with the methods and means of doing business worldwide. However, there are a few points that people new to the Arabian business environment should keep in mind. Hospitality is a way of life in the Arab world and business is frequently conducted over lunch or dinner – more than likely in a hotel or restaurant. It is also considered polite to return the invitation.

Technological

This aspect presupposes the uninterruptable communication process, which is required for discussing the current business issues in the real time regime, the constant analysis of the business situation, comparing the exchange rates etc. Originally, technological aspect is the basis of any business activity. Thus, the BBG group resorts to the up-to-date communication technologies, all the departments are united in a single communicational network, and discussions of the business environment or the burning problems are resolved in the on-line mode. Consequently, the company requires solid technical maintenance strategy, and the professional IT team that will be able to follow, technically maintain and extend the technological base of the communicational process. Moreover, there is strong necessity to emphasize the development of the infrastructure in the national scales. Thus, as Taecker (2008, p. 65) states:

Infrastructure in the UAE is second to none. Telecommunications, including mobile and fixed telephony as well as internet access is on par, if not better, than the world’s largest international business hubs. To date, the Government has invested heavily in infrastructure development, but it has also opened up its utilities and other infrastructure to greater private sector involvement, so much so that public-private partnerships are now the norm.

SWOT

This type of analysis is aimed at providing the joint analysis of the internal and external factors of business environment. Originally, one is impossible without the other, consequently, this analysis is more full, nevertheless, PEST and SWOT are complementary.

Positive Negative
Internal Strength
  • Internal Stability
  • Innovative approach towards decision making
  • Solid communicational base
  • Professional Teams
  • Strong business strategy
  • Clearly defined goals, mission and spheres of interest
  • Openness of the CEO for the necessary changes
Weakness
  • Language barrier for some employees
  • Inability of the technical team to maintain the constantly growing company (frequently opening new departments)
External Opportunity
  • Openness of the Arabian market for the external investments
  • The high interest of the UAE market for the services, which BBG offers
  • Perfectly developed national infrastructure, which is suitable for the business running
  • Legislation, which is based on WTO principles and norms
Threat
  • Development of the Arabian business companies, which fill the market, and create extended competence levels

Problem Analysis and Solution

In accordance with the results of the provided analyses, there is strong necessity to mention that weaknesses and threats may be regarded as the problems, and company should direct its efforts for resolving these matters.

The first problem, which is stated, is the language barrier for the employees. The fact is that, the employment policy of the British Business Group presupposes the employment of the people, with the sufficient knowledge of the Arabic language, and awareness of the cultural and social norms. Nevertheless, these requirements are not applied to technical team, and for some department specialists, who are working in the departments, located in Great Britain. Originally, this barrier can not create essential problems for the successful business performance, nevertheless, the capabilities of the company could be extended, if every worker knew at least the basics of the language, especially taking into consideration the fact that part of the working mailing is arranged in Arabic. (Mckee, Garner, Mckee, 2000)

Thus, in accordance with the Principle Based System Analysis practices, it should be stated that there are two possible solutions for this problem: the first is to employ workers with the knowledge of Arabic language; nevertheless, essential efforts will be spent for the training of the new employees in accordance with the missions, aims and business performance principles. Another way is the qualification improvement of the present workers: fewer efforts will be spent for teaching Arabic language for the employees, then hiring new workers. (Nemetz, 2002)

The next problem is associated with the technical matters, and the maintenance of the communication network. Originally, the necessity of communications for the entire BBG has been already stated, nevertheless, the present capabilities of the technical team are essentially restricted, and the new departments are not maintained properly from the technical point of view. Considering the fact that IT specialists are not rare in the countries of the Arab world, the solution is obvious: there is strong necessity to extend the technical team of the Company, for all the departments of the organization were technically maintained. Thus, the extra budget should be created which will be assigned only for the technical maintenance of the company’s infrastructure. As the technical base is constantly extending, thus, causing the extension of the technical team, a separate budget should be assigned for resolving the IT related problems. (Entelis, 2001)

Finally, one of the most burning problems will be analyzed. While the previously discussed problems were of internal nature, the problem of the increasing competence is of the external nature, and requires in depth analysis of the allover economic situation and business environment for providing a reasonable solution.

Thus, there is strong necessity to analyze the current economic situation, which is favorable for the extensive business development. In accordance with Chan, Makino, Isobe (2006, p. 394) the following statement should be emphasized:

Despite the impact of the global financial crisis, resulting in an inevitable contraction in 2009, the UAE economy remains robust, shielded by significant overseas financial assets garnered during the era of high oil revenues. Substantial public expenditure, made possible by those assets, allied with strong fundamentals and sound fiscal policies, has served to minimize the impact of the crisis and receding petrodollar income on the UAE’s economy, and is expected to speed up its recovery in 2010.

In the light of this consideration, it should be stated that the economic indicators reveal the favorable conditions for the economy development. Considering the possibility of business development, the following fact should be emphasized: the sources of the income of the BBG company are regarded to be the following

Incomes %
Interest Income Cemmercial 46
Interest Income Treasury 30
Fees and Comission 11
Income from foreign currencies 2
Gains from Trading Securities 5
Gains from disposal of available for sale securities 5
Other income 1

(See the graph in Appendix A)

Such sources of income as Interest Income Treasury, Gains from Trading Securities and Gains from disposal of available for sale securities are generally regarded as the indicators of the economic freedom development.

Nevertheless, in spite of the robust economy, and steady development of the economy, the consumer price inflation was observed. (see appendix B) Originally, the peak of this inflation was in 2008, nevertheless, this year was featured with the peak of new business companies appearing on the market of goods and services in UAE.

Originally, these rates are closely associated with the range of services, offered on the market, as, the more services are offered – the higher is the consumer price inflation. Moreover, political issues are closely associated with these rates. Thus, as Taecker (2008, 32) emphasizes:

Since its establishment in 1971, the UAE has enjoyed an enviable degree of economic stability, unequalled in the region. This has enabled the implementation of consistent sound economic policies and the reinforcing of the country’s social structure to produce one of the most tolerant, prosperous, secure and safest societies in the world. Dubai and Abu Dubai have been ranked the top two cities in the Middle East region for quality of life, according to the latest edition of a global survey. Long-time investors include a wide range of multinational companies headquartered across the globe.

From this perspective, it should be stated that the issue of the increased competence is the matter, which is deeply rooted in the history of the economic development of UAE. Consequently, it may be resolved either by the means of external influence, such as restriction of the foreign capital investment, nevertheless, it will discourage the development of business in UAE, and cause the economic regression. On the other hand, regulation may be performed by the means of setting standards. Thus, the setting of the Free Trade Zones may be regarded as one of these means, as setting of the standards is required for the implementation of fair play principles in the business sphere. Thus, as Thomas and Tétreault (2003, p. 176) state:

The massive Jebel Ali Free Zone (JAFZ) has become one of the largest industrial complexes worldwide which, together with the adjacent port, the world’s largest manmade harbour, has continued to attract investors. Fujairah Free Trade Zone (FTZ), which was awarded an ISO 9002 certificate in 1999, offers businessmen the location advantage of an east coast port as well as the benefits of partnership with the Fujairah Government. FTZ has been growing at a rate of 20–22 percent annually and currently has over 125 projects registered at the zone, representing sector investment worth Dh 750 million. Arab, Gulf and international capital investment in Sharjah’s Hamriyyah Free Zone had exceeded Dh 2.5 billion by the end of 1999, with local investment accounting for 50 percent.

Another fact, that should be emphasized from the perspective of legislative regulation of business issues is closely associated with the matters of intellectual and industrial property. The fact is that, UAE is the member of the Paris Convention, which states the principles of Intellectual Property Protection. Thus, as Richards and Waterbury (2004, p. 318) claim:

The UAE is a member of the Paris Convention for the Protection of Industrial Property, the World Intellectual Property Organization (WIPO), and a signatory of the WTO Agreement on Trade – Related Aspects of Intellectual Property (TRIPS) with which it must comply by the year 2000. The latter deals with such issues as copyright, trademarks, patents, industrial designs and trade secrets. The country also acceded to the International Patent Cooperation Treaty in 1998, which protects inventions registered with the International Bureau at WIPO and local patent offices.

Thus, summarizing all this up, it should be emphasized that that the business environment, which entails political, economic and international relations factor is considered to be favorable enough for the business development. British Business Group, which is one of the largest international business organizations, represented on the business market of United Arab Emirates faces numerous challenges, which are closely associated with business strategy implementation, employment practices (and Human Resource Management in general), financial strategy and international cooperation practices. In the light of the fact that the business environment in general encourages the development of medium and large business, it should be emphasized that these opportunities are open for all the participants of the business sphere, consequently, the level of competence and market density is constantly increasing.

As for the internal solution factors, it should be stated that these are the production improvement, increase of the goods and services quality, extension of the cooperation etc. Thus, implementing all these actions, the British Business Group will be able to conquer the large part of the market.

Conclusion

Finally, there is strong necessity to emphasize that the business sphere of one of the richest countries of the world presupposes he solid maintenance of business development, encouraging the appearing of new companies and promoting the extension of international cooperation. Considering the fact that United Arab Emirates is the state-participant to the Paris Convention for the Protection of Industrial Property and the World Intellectual Property Organization, it should be stated that business development process is arranged in accordance with the global standards of fair competence.

As for the business environment, in which the British Business Group operates, it should be stated that in accordance with PEST and SWOT analyses the company has extensive opportunities for the further horizontal and vertical business development, including the qualification improvement among workers, improvement of the business practices in accordance with the world technical, financial and business standards.

Considering all these factors, it should be stated that the regarded problems may be easily resolved, if proper solution and strategy is applied for resolving. These are the problems of insufficient qualification of the employees, insufficient infrastructure development and technical maintenance of this infrastructure, and the extended increase of the market density levels. In accordance with the offered solutions, the company needs to create an additional budget for maintaining the technical infrastructure of business activity, arrange the language teaching courses for the workers, and improve the quality of business performance for challenging competence.

Reference List

Alnasrawi, A. (2004). Arab Nationalism, Oil, and the Political Economy of Dependency. New York: Greenwood Press.

Beer, M. (2009) “Chairman’s Message” British Business Group. Web.

Chan, C. M., Makino, S., & Isobe, T. (2006). Interdependent Behavior in Foreign Direct Investment: The Multi Level Effects of Prior Entry and Prior Exit on Foreign Market Entry. Journal of International Business Studies, 37(5), 642

Cordesman, A. H. (2003). Bahrain, Oman, Qatar, and the UAE: Challenges of Economic Security. Boulder, CO: Westview Press.

Entelis, J. P. (2001). Sonatrach: the Political Economy of an Algerian State Institution. The Middle East Journal, 53(1), 9

Hudson, M. C. (Ed.). (2005). Middle East Dilemma: The Politics and Economics of Arab Integration. New York: Columbia University Press.

Kavoossi, M. (2000). The Globalization of Business and the Middle East: Opportunities and Constraints. Westport, CT: Quorum Books.

Mckee, D. L., Garner, D. E., & Mckee, Y. A. (2000). Offshore Financial Centers, Accounting Services, and the Global Economy. Westport, CT: Quorum Books.

Nemetz, P. N. (2002). Bringing Business on Board: Sustainable Development and the B-School Curriculum. 9.

Obay, L. A. (2009). Corporate Governance & Business Ethics: a Dubai-based Survey. Journal of Legal, Ethical and Regulatory Issues, 12(2), 29

Richards, A., & Waterbury, J. (2004). A Political Economy of the Middle East. Boulder, CO: Westview Press.

Taecker, K. (2008). UAE Exploring for Growth in a Troubled Global Economy. Middle East Policy, 6(2), 29-35.

Thomas, K. P. & Tétreault, M. A. (Eds.). (2003). Racing to Regionalize: Democracy, Capitalism, and Regional Political Economy. Boulder, CO: Lynne Rienner.

Appendix

Rates of the incomes
Rates of the incomes
Consumer price inflation
Consumer price inflation
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