Entry strategies of Polish companies on the Arabic market
Which strategy should take Polish companies who think about the entry to the Arabic markets? How important are the cultural and religious differences, especially concerning the business culture? How do the Polish companies, operating in the Arab world, deal with this problem? Dr. Beata Śliwińska devoted her doctorate to this subject.
Her thesis was written at the Warsaw School of Economics, under the guidance of prof. Irena Hejduk. The author have examined 34 Polish companies operating in Saudi Arabia, Jordan and Qatar. Four of them were selected for more detailed analysis, and for conducting interviews with their representatives.
Most of the companies surveyed by the author believes that the most difficult for the company’s first contact with Arab countries was culture/religion of those countries. For 11 companies the most difficult was the legal system of the Arab countries. Nine respondents indicated that the biggest problem was the national economic policy, competition from Arab countries, as well as competition from other countries.
From the eneterprise’s point of view of not only entry to the foreign market is important, but also its ability to survive on the market. 35% of respondents believe that the main barrier to maintain on the Arabic market is an assumption that this is a very specific market. 20% indicated as the main barrier – a big number of competition.
The manufacturer of machine tools – Rafamet debuted on Arabic markets at the turn of 60’s and 70’s in the last century. Then, the company started supplies of equipment to Sudan, Syria and Iraq. In those days, the only high-speed connection device with the world was a telex. “That was a time, when the Polish Embassy helped to find a local partner” – said Andrew Rustanowicz, Export Director at Rafamet. The promotion then, meant the dispatch of catalogs and presence at the trade fairs. “Then it turned out that many traders graduated college in Poland and speak Polish. It really helped the company in the development of trade relations”- he added. Today, the company operates on the local markets through local representation, but it is carried out by agents. “A good agent should have knowledge about machines and their way of functioning. But the real point is that he should identify the opportunities and helps to open the right doors for his country” – said company’s specialist for export to the Arab markets.
The main challenge for Rafamet was to adjust their equipment for use in the tropical conditions. However, for more important, company executives considered building bilateral confidence in the development’s relations. They also had to equip themselves with a large dose of patience. “In the European condition response is an important issue, taking a day or two or three, but in the Arabic reality response may take three months or more. They want to have all the information right away, while their feedback sometimes takes very long” – describe the company’s representatives. They also point out for large differences in organizational discipline in comparison with European partners. Rushing them is absolutely not welcomed. As one of the other major barriers to mention is the need of obtaining a local bank guarantee.
As emphasized by Dr. Beata Sliwinska, we can not generalize any results when it comes to the observations of negotiations with Arab countries representatives. How she noted in an interview with Solange Olszewska, CEO of Solaris Bus & Coach SA, conversations differ not only across countries, but she also observed a completely different approach to their business in a different parts of the same country. She recalls that, at first she didn’t visit Dubai, assuming that a woman won’t be allowed to participate in business meetings. “It was a false assumption” – she said.
Solaris buses runs among other types in Dubai. A few years ago, the company from Bolechów won there the tender. The essential move turned out to be a recommendation from the Department of Public Transport in Berlin and participation in the trade fair in Hanover, where they met Arab guests. For the company, realization of the supply for the Management of Roads and Transport of Dubai meant the production of city buses with separate compartments for men and women, as well as the installation of more efficient air conditioning. It turned out that the necessary thing is setting up a company in Dubai, which could deal with its service.
Among the 34 companies surveyed for the dissertation in 2010-2011 were dominated entities from industry, construction, transportation and food. Fifteen of them run their businesses in the Arab countries from 2 to 5 years. Only 2 of them could claim the 30 – year history of trade relations with that region of the world. Decision to appear on these markets were usually made by receiving an offer of cooperation and by possible opportunities of development in these markets. The most preferred localizations were Saudi Arabia, and in the second place, United Arab Emirates. However, this choice was usually caused by coincidence, for example, winning the tender, inquiry, finding a contact at the trade fair. Despite of the several opportunities that each of the surveyed companies have, most of them (up to 32) to the first of the Arabic country entered through export. While choosing a proper entry market strategy for the Arabic countries, according to respondents, the most important issue is focusing on the cultural/religious differences (38 %). About 26 % of respondents draws attention to the needs of consumers. However, not only the entry strategy, but also the promotion of the products may be important for the new markets. As many as 62 % of respondents during the entrance to the Arabic markets didn’t use any other ways of promotion than in Poland (and other than in the other countries).
According to the research of Dr. Śliwinska, defining the criteria of selecting the companies, not only the culture and religion of the country should be taken into consideration. “Product, customer need or the industry in which it operates, must also be taken into account. Any company entering the Arab markets must also meet the need of being flexible and to adapt to the conditions prevailing at any given time in the market and rapidly changing legislation. You have to be prepared for modifications to the products that the company already has to be compatible with the culture and religion of the Arab countries”- author writes.
Dr. Beata Śliwińska notes that capturing the Arab-Muslim cultural characteristics into a single concept “Arabic countries” is very difficult. “It is a very varied world which, additionally, is constantly transforming. That makes the typology hard. Moreover, that’s a world full of contradictions and paradoxes: some women hide faces, others dress and comb according to the latest world fashion, men wear abayas and burnouses or Armani suits” – writes the author. Dr. Śliwińska points out that the change of the political situation in the Arab markets can contribute to positive changes in the legal system, which would make business contacts with these countries more effective.
The marketing strategies of companies depend heavily on cultural and religious factors. Of course, we need to keep in mind that the impact of these factors is dependent on the geographic region of the market entry. The other important factor is the type of industry in which it operates, and how the final product sales. All these characteristics of effective entry strategy, are determined by applying the selection criteria” – concludes the author. “With taking into account specific for customer both culture and religion the company can make a conscious orientation towards sales and customer. This factor must be always present when entering foreign markets. If you want to achieve the success you can not miss it” – Beata Śliwinska added.
The author is currently a member of the team performing at the Warsaw School of Economics one of the research grants of the Ministry of Science and Higher Education.
More info:
Dr. Beata Śliwinska , phone 607-656-323 , e- mail: bsli@poczta.fm