Executive Report on Strategies in Saudi Arabia

Countries covered: Saudi Arabia 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 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 Relative Accessibility 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 an extremely detailed overview of factors driving latent demand and accessibility in Saudi Arabia. Latent demand is largely driven by economic fundamentals. But, latent demand only represents half of the picture. 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. Chapter 2 deals with macro-accessibility. 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 also covered in Chapter 2, which is presented from the perspective of an American firm, though it is equally applicable to most firms entering Saudi Arabia. This chapter has been authored by local offices of the U.S. Government. I have included a number of edits to clarify the provided information as it relates to the general strategic framework. In Chapter 3, I summarize the economic potential for Saudi Arabia over the next five years for hundreds of industries, categories, and products. The goal of this chapter is to report my findings on the real economic potential, or latent demand, represented by Saudi Arabia when defined as an area of dominant influence. The data presented are the result of various spatial econometric and time-series forecasting models which, for each category presented, are applied to forecast and allocate latent demand across all countries of the world and major distribution centers or centers of dominant influence within each country. This is accomplished knowing that economic fundamentals (e.g. income) generally vary from one country to another within a given country over time. In this chapter, I report the allocation for each category for Saudi Arabia as an area of dominant influence in the Middle East and, potentially, the world.

Additional Information

Product's ISBN number 049735764X. 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 in Saudi Arabia.

This report helps executives evaluate strategic investment and entry alternatives 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). The methodology decomposes a country’s strategic potential along two key dimensions: (1) latent demand, and (2) 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 a strategic profile of Saudi Arabia. It does so by compiling published information that directly relates to latent demand and accessibility. The reader new to Saudi Arabia can quickly understand where Saudi Arabia fits into a firm’s strategic perspective. In what follows, Chapter 2 is a general evaluation of the accessibility of Saudi Arabia, with particular focus on investment and business conditions. In Chapter 3, I report my findings on the real economic potential, or latent demand, represented by Saudi Arabia when defined as an area of dominant influence.

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