Five keys to business success in the Middle East
By Paul Kinsinger
Political unrest and uncertainty persist in some parts of the Middle East more than two years after the initial Arab Spring uprisings. Discouragement has replaced optimism in many countries, yet business opportunities abound for multinational corporations willing to invest long-term in the region.
Things might get worse before they get better, but companies cannot afford to wait for things to settle down. Other foreign investors already are making their moves in the Middle East, home of nearly 385 million consumers.
Market entry teams can minimize their risks by remembering five keys to doing business in the region.
Business in any region hinges on people, but relationships take an especially important role in the Middle East. Potential partners in the United States or other Western cultures might exchange pleasantries, share dinner or even play a round of golf before getting down to business. Even these activities are sometimes optional.
Relationship building moves at a much slower pace in the Middle East. Business developers must think beyond the transaction and become personally invested with potential suppliers, customers and partners.
They should send birthday cards, learn the names of their counterparts’ children and accept home invitations when they come. At the same time, they should avoid paying too much attention to female members of the household. In more conservative societies such as Saudi Arabia, even asking about the well-being of a counterpart’s wife or daughter can be taboo.
The Middle East business process requires patience, but managers who invest the time to build genuine relationships of trust will find strong allies in a society that values loyalty.
Part of the relationship building process involves negotiation. The Middle East is built upon ancient trading civilizations that put almost everything on the table. While a flat price might signal confidence in the product at home, the tactic can backfire in the Middle East. Managers who refuse to negotiate creatively might send the wrong message, such as: “We don’t understand you, and we don’t believe relationships are important.”
Although certain commonalities bind the region together, managers in the region must remember that markets vary widely from one country to the next and even within the same country.
Market researchers must weigh factors such as population density, level of corruption, central government control, wealth gaps, supply chain logistics, distribution channels, tax and customs implications, and legal barriers.
They must understand local preferences and needs. And they must consider the availability of local partners who understand how to navigate all these variables. Companies that thrive in the Middle East understand that one size does not fit all.
No matter which country a company chooses for market entry, teams on the ground should come prepared with a basic knowledge of local history. People in the Arab world value their history and refer to it frequently as a point of reference. Managers in the Middle East should know about periods of occupation, civil wars, shifts in power and other major events that impact the local business environment.
Brand identity also plays an important role in Middle Eastern markets. Arab consumers need to trust the brands they purchase in the same way that Arab managers need to trust their suppliers, customers and partners. Everything comes back to the importance of relationships. Retailers in the region must look beyond the immediate transaction and focus on earning the trust and loyalty of potential consumers. This is even more important than in the Western world, where fickle shoppers are more willing to abandon a brand to try something newer, cheaper or different.
Multinational companies that follow these guidelines and move quickly in region will look smart in 10 to 15 years when their competitors are racing to catch up.
Paul Kinsinger is a Thunderbird professor of business intelligence. He worked extensively on the Middle East as a CIA intelligence analyst. At Thunderbird he has directed Executive Education programs for participants from all over the Arab world, especially Saudi Arabia.