Construction Equipment and Building Products in Saudi Arabia: A Strategic Reference, 2007

Countries covered: Saudi Arabia INTRODUCTION & METHODOLOGY What Does This Report Cover? The primary audience for this report is managers involved with the highest levels of the strategic planning process and consultants who help their clients with this task. The user will not only benefit from the hundreds of hours that went into the methodology and its application, but also from its alternative perspective on strategic planning relating to construction equipment and building products in Saudi Arabia. As the editor of this report, I am drawing on a methodology developed at INSEAD, an international business school (www.insead.edu). For any given industry or sector, including construction equipment and building products, the methodology decomposes a country’s strategic potential along four key dimensions: (1) latent demand, (2) micro-accessibility, (3) proxy operating pro-forma financials, and (4) macro-accessibility. A country may have very high latent demand, yet have low accessibility, making it a less attractive market than many smaller potential countries having higher levels of accessibility. With this perspective, this report provides both a micro and a macro strategic profile of construction equipment and building products in Saudi Arabia. It does so by compiling published information that directly relates to latent demand and accessibility, either at the micro or macro level. The reader new to Saudi Arabia can quickly understand where Saudi Arabia fits into a firm’s strategic perspective. In Chapter 2, the report investigates latent demand and micro-accessibility for construction equipment and building products in Saudi Arabia. In Chapters 3 and 4, the report covers proxy operating pro-forma financials and macro-accessibility in Saudi Arabia. Macro-accessibility is a general evaluation of investment and business conditions in Saudi Arabia.

Additional Information

Product's ISBN number 0497824051. How to Strategically Evaluate Saudi Arabia

Perhaps the most efficient way of evaluating Saudi Arabia is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to construction equipment and building products are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries

Demand/Market Potential Driven Firm





















Relative Accessibility



Accessibility/Supply Averse Firm























In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm).

Latent Demand and Accessibility in Saudi Arabia

This report provides a detailed overview of factors driving latent demand and accessibility for construction equipment and building products in Saudi Arabia. Latent demand is largely driven by economic fundamentals specific to construction equipment and building products. This topic is discussed in Chapter 2 using work carried out in Saudi Arabia on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for construction equipment and building products in Saudi Arabia. I use the term “micro” since the discussion is focused specifically on construction equipment and building products.

Chapter 3 is also a stand-alone report that I have authored. It covers proxy pro-forma financial indicators of firms operating in Saudi Arabia. I use the word “proxy” because the provided figures only cover a “what if” scenario, based on actual operating results for firms in Saudi Arabia. The numbers are only indicative of an average firm whose primary activity is in Saudi Arabia. It covers a vertical analysis of the maximum likelihood balance sheet, income statement, and financial ratios of firms operating in Saudi Arabia. It does so for a particular Standard Industrial Classification (SIC) code. That code covers “construction machinery and equipment”, as defined in Chapter 3. Again, while “construction machinery and equipment” does not exactly equate to “construction equipment and building products”, it nevertheless gives an indicator of how Saudi Arabia compares to other countries for a proxy adjacent category along various dimensions.

Chapter 4 deals with macro-accessibility and covers factors that go beyond construction equipment and building products. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Saudi Arabia:
Openness to Trade in Saudi Arabia
Openness to Direct Investment in Saudi Arabia
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks

Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in the Chapter 4, which is a general overview of investment and business conditions in Saudi Arabia. Chapter 4 is also presented from the perspective of an American firm, though is equally applicable to most firms entering Saudi Arabia. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier.

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