International Marketing: Issues and Challenges Group Project

Program & Batch: PGDM – 2014-16

Term: V

Course Name:International Marketing: Issues and Challenges

Name of the faculty:Abhijit Biswas

Topic/ Title : Country Report of UAE

Original

or Revised Write-up:Original

Group Number: 4

Contact No. and email of Group Coordinator:

Divya Yerram

ft14divyayerram@imt.ac.in; 09177778755

Group Members:

Sl. Name Roll No.

1 Deepesh Aggarwal 140201041

2 Divya Yerram 140201044

3 Saloni Sehgal 140201058

4 Sanchita Sharma 140201117

5 Sukant Chaturvedi 140201165

ContentsINTRODUCTION...............................................................................................................................3

ECONOMIC ENVIRONMENT.........................................................................................................4

SOCIAL AND CULTURAL ENVIRONMENT IN UAE.................................................................6

POLITICAL AND LEGAL ENVIRONMENT IN THE UAE FOR BUSINESSES.......................8

BRANDING AND PRODUCT DECISIONS IN UAE....................................................................11

PUBLIC RELATIONS, ADVERTISING, MEDIA AND TRADE PROMOTIONS IN UAE.....14

REFERENCES..................................................................................................................................17

PARTS WRITTEN BY:

ECONOMIC ENVIROMENT - DIVYA YERRAM.140201044

SOCIAL AND CULTURAL ENVIRONMENT IN UAE – DEEPESH AGGARWAL,

140201041

POLITICAL AND LEGAL ENVIRONMENT IN THE UAE FOR BUSINESSES –

SUKANT CHATURVEDI, 140201165

BRANDING AND PRODUCT DECISIONS IN UAE – SANCHITA SHARMA,

140201117

PUBLIC RELATIONS, ADVERTISING, MEDIA AND TRADE PROMOTIONS IN

UAE – SALONI SEHGAL, 140201058

INTRODUCTION

The United Arab Emirates (UAE) is located in the southeast end of the Persian Gulf and

Arabian Peninsula. It shares its borders with Oman and Saudi Arabia, it shares sea borders

with Iran and Qatar. It is established in the year 1971 and is a federation of seven emirates.

The Seven emirates are Abu Dhabi, Dubai, Sharjah, Ras-al-Khaimah, Fujairah, Ajman and

Umm-al-Quwain.

The oil reserves are the seventh largest in the world and the natural gas reserves are the

seventeenth largest. It has a free market economy. It is also one of the most politically steady

and secure country in the region. This guarantees that the nation has a competitive edge as the

commercial hub of the region.

Economic development in the UAE is consistent even when the worldwide economy

wavered. Recuperation was helped by high oil costs, expanded government spending and a

resurgence in tourism, trade and transportation. Likewise, effective rebuilding of obligation

owed by prominent organizations, solidarity among the emirates and accommodative

financial and monetary approaches all assumed a part in conveying huge financial steadiness

to the business sector.

ECONOMIC ENVIRONMENT

The economy of the United Arab Emirates is the second biggest in the Arab world,

Saudi Arabia being the first. UAE has a total national output (GDP) of $570 billion in the

year 2014. UAE has been effectively differentiating its economy. 71% of UAE's aggregate

GDP originates from non-oil sectors. In spite of the fact that UAE has the most broadened

economy in the GCC, the UAE's economy remains greatly dependent on oil. Except for

Dubai, the greater part of the UAE is reliant on oil incomes, particularly in Abu Dhabi. More

than 85% of the UAE's economy came from the oil exports out in 2009. In 2011, oil fares

represented 77% of the UAE's state budget. Tourism sector is developing, with a world's

portion most luxurious hotels being situated in the UAE. A massive construction boom, a

growing manufacturing base, and a flourishing services segment are helping the UAE

broaden its economy. Across the nation, there is as of now $350 billion value of dynamic

development projects.

Since 1960s, exploitation of oil and gas reserves has empowered the seven emirates of

the UAE to accomplish substantial economic development. The economic activity depends

on the advancement in the modern infrastructure such as streets, ports, airplane terminals,

communication systems, electric utilities and desalination extends; the development of

private and business offices, schools, hotels, hospitals and the foundation of petrochemical

and assembling commercial enterprises. The UAE's dynamic economic environment and

diversification strategy, has been made possible due to the large investments in infrastructure.

Some of the salient features of both the economic and the business environment in the

UAE are a coordinated infrastructure which offers all necessary utilities to the key centres, an

excellent communications systems, well-structured financial sector with practically no

exchange control regulations, virtual absence of taxation, areas such as free-trade zones

which ensure ease of operating in the UAE, international fairs and exhibitions are held

regularly and an attractive social environment.

UAE did not go through the development stages that most developed nations appear

to have encountered. Maybe, its expansive oil incomes have permitted it to jump these stages

to the phase of high mass utilization. Large oil incomes have empowered the UAE to

alternate way the normally troublesome and long procedure of saving and accumulation of

capital for financial improvement. Given a plenitude of natural resources (oil and gas), they

have grasped resource based industries as an advancement methodology.

The currency of UAE is Dirham, which is isolated into 100 fils. The legislature has

altered the UAE Dirham to the US Dollar, at a conversion standard of roughly 3.67 UAE

Dirhams to one US dollar since 1980. Dirham notes are issued in categories of 1000, 500,

200, 100, 50, 20, 10 and 5.

The economic freedom score of UAE is 72.4, making it the 25th freest economy in

the world according to the 2015 Index. The score has expanded by a 1.0 point since the

previous year. It is determined by enhancements in speculation opportunity, the

administration of government spending, and opportunity from defilement that exceed a little

consolidated decrease in money related opportunity, exchange flexibility, and financial

opportunity. The UAE is positioned second out of 15 nations in the MENA region (Middle

East and North Africa region). The score is higher than the world and territorial averages. In

the recent years, UAE has progressed by 4.6 points, the region's biggest increment. Score

enhancements in seven of the ten have been driven by sizeable additions in the administrative

environment and financial opportunity.

Trade

Promotion of economic integration and establishment of long-term economic

cooperation with both the regional as well as the global economies have been the objectives

for UAE for which they have entered into several trade, investment, economic and technical

agreements with many countries. In the previous years, UAE has signed bilateral agreements

with Pakistan, Algeria, Azerbaijan, India, Kazakhstan, Argentina, Armenia, Maldives, South

Korea, Morocco and Netherlands.

UAE is a member of many international and regional organizations such as Gulf

Cooperation Council (GCC), Greater Arab Free Trade Area Agreement (GAFTA), Gulf

Cooperation Council and the European Free Trade Area FTA (GCC-EFTA FTA), GCC

Singapore Free Trade Area (GSFTA), Trade and Investment Framework Agreement (TIFA)

General Agreement on Tariffs and Trade (GATT), World trade Organization (WTO), World

Health Organization (WHO), World Intellectual Property Organization (WIPO), World Bank,

Arab League, International Monetary Fund (IMF), Organization of Petroleum Exporting

Countries (OPEC), Organisation of Islamic Cooperation (OIC), Organization of Arab

Petroleum Exporting Countries and the Non-Aligned Movement and the United Nations and

its affiliates (ICAO,UPU, ILO).

SOCIAL AND CULTURAL ENVIRONMENT IN UAE

The UAE is a burgeoning area in terms of being a preferred choice for foreign

investment and business interest as it is situated at a crucial transit point for world trade. The

UAE has diversified itself economically with plenty of financial and banking industries as

well as tourism to support its’ oil business (7th largest reserves in the world). However, the

social and business cultures and expectations in the UAE may surprise and alienate an

underprepared businessman or traveler. It is important to familiarize oneself with UAE’s

professional customs, culture and social expectations.

No other aspect pervades any other aspect of life other than the official religion of

UAE – Islam. Understanding the people and culture of UAE is impossible without

understanding Islam. Muslims do not separate their faith and beliefs and rest of their lives.

UAE has a hierarchal society due to the fact that Islam teaches submission to a higher

being. The governments tend to be led by individuals and small groups as the religion

professes that a just leader who makes decisions through consultation should govern the

temporal community.

The Islamic faith emphasizes on generosity, hospitality, respect and modesty. Arabs

emphasize on developing personal relationships. An Arab will want to get to know someone

before as a person before engaging in business transactions with them. While talking, people

leave less personal space as they value closeness. Stepping back maybe considered rude to

some people. Status is important and the most senior person is always greeted first in a group.

Arab men shake hands when meeting and departing, but Arab women are greeted with a

smile and no physical touch from men.

Communication is high context in UAE, which means that a great deal of emphasis is

on a person’s values and position in society. The personal reputation is a valued asset and

people do business in good faith. A lot of contextual information is known about the people

with whom Arabs interact and do business. There is less emphasis on paper work in UAE and

word of mouth is considered to be as good as a legal contract.

UAE has a group-oriented culture with focus on cohesive families where most

members live together or nearby each other like in a joint family. Young people generally

live at home until they are married and marriages generally are arranged.

UAE and other Arab countries usually have strictly defined gender roles. Men are

expected to be educated and be the bread-earner for the family, while the women are raised

with the sole goal of being married. However, with increasing urbanization, a number of

females can be found in professional positions. After marriage, a woman is responsible to

bear and raise children. The male is still seen as the family’s prime authority figure.

UAE follows Sharia Law which is influenced by the Islamic religion. Islam prohibits

alcohol and in emirates like Dubai, it is illegal to have alcohol without a license. Any acts of

drunkenness in public are grounds for arrest, as is adultery, premarital sex and public display

of affection. Punishment can be in terms of flogging (whipping or lashing with whips, rods,

switches, etc.), fine or jail. Apostasy and homosexuality are capital offenses in UAE.

Friday being the religious day for Muslims, Friday and Saturday are weekends in

UAE. The working days are from Sunday till Thursday with office timings generally being

from 8 in the morning till 6 in the evening with morning and afternoon tea breaks, long lunch

followed by periods of rest and several breaks for prayers in the afternoon. Major holidays

include Eid al Fitr (end of Ramadan) and National Day (2nd December).

The UAE is the most cosmopolitan and westernized country in the Middle East. 21 st

century economic expansion has changed the once traditional culture into a multicultural

environment. The mixture of traditional and modern and of Western and Eastern cultures has

made working and doing business in UAE a unique experience.

POLITICAL AND LEGAL ENVIRONMENT IN THE UAE FOR BUSINESSES

As per the trade law in UAE suggests, the foreign multinationals that want to invest and

start a business in the country needs to currently have one of the five options stated below.

They can either create a permanent establishment

They can also set up a branch office

They can form an entity in the Dubai free trade zone

For only Sharjah and Dubai they can also create a civil company

CCA of the commercial agency agreement is the last option

For all the companies being established in UAE there is a mandatory norm of having one

or more local business partner/s who are liable for at least 51% of the capital of the company.

The UAE Commercial Companies Law (CCL) also states that certain companies like those

who deal with oil & gas, electricity, waste water treatment etc. are exempted from this law.

Apart from this the foreign banks and the companies established in the free zone are

exempted from the 51% rule of the CCL.

Every emirate has its each chambers of commerce which are useful sources of past

investment data and also can tell about all the current licenses needed to take in order to start

a particular type of business. IT also provides arbitration facilities and other facilities like

conference hall, meeting rooms etc.

Free Trade Zones

There are total of 37 free trade zones across UAE out of which 23 alone are in Dubai,

which makes Dubai the most attractive destination to attract foreign business in UAE.

Opening a business in the FTZs means full ownership of the business with the foreign party.

They have different tariffs, trade barriers and quota from the rest of the places in the country.

The companies operating the free trade zones have 100% repatriation of the

capitalsandsprofits. They are also exempted from personal income taxes and corporate taxes

for 50 years. However there are limitations to free trade zone, which are basically the

boundaries it sets. The company can only function within its set limit and only those trades

which are there mentioned in their licenses. IMT’s Dubai campus is situated in the free zone

called as DIAC (Dubai International Academic City).

So it clearly looks like Oil & Gas sectors and banks are exempted from the taxes too?

But no, these sectors have to pay corporate taxes. The companies in the free zone however

enjoy the tax free for 50 years can also extend their period by 15 years every time. Although

other GCC countries have opposed this kind of special tax exemption treatment from the

FTZs companies even when there are expats. And UAE comes into direct observation

because Dubai has the highest number (23) of free trade zones.

Apart from the free zones, HCSEZ which is an industrial cluster in Abu Dhabi is a

major hub for manufacture, supply chain and logistics and it sells across many sectors and

provide opportunities for achieving standard marketing services and other govt. supports.

However the businesses in this area are again subject to the 51% rule of the CCL.

Since UAE has sharia law, the banking is very different from the conventional form

of banking. The banking laws have to be compliant according to the Islamic finance guide.

Anything considered as haram is not practised in the Islamic banking. A lot of multinational

banks like Citibank also functions in the UAE and as we learnt earlier that banks and

financial institutions are exempted from the 51% rule by the CCL.

No matter how unconventional Islamic might be, the expats still shouldn’t complaint

simply because of the tax free environment in which they work. 77% population of Dubai are

expats and the remaining are the nationals. Since then also the country doesn’t have banking

laws as per the traditional norms but then again there is no income tax. So anyone complains

of the banking systems should clearly remember the tax in their country. For an MBA

graduate and average starting salary in Dubai would be 120k Dirhams pa. Which converts to

around 1750000 p.a. here. To earn such an amount in India one will need to have a job that₹

gives at least 25lac. ₹

Employment Laws

The employment laws in Dubai are basically divided into two parts. For normal

MNCs running the federal law is liable for the employment laws and for free trade zones it is

separate. FTZs have their own employment laws, however the laws moreover covers all the

basic rights an employee must possess. All the wages are to be paid via govt. authorised

financial institutions and is backed by the Wages Protections Act. The employment laws of

the FTZs precedes the federal law in the zone. There is also a preference list given by the

federal law to various businesses to appoint a minimum number to nationals in accordance

with the “Emiratization” policy of the government. .

BRANDING AND PRODUCT DECISIONS IN UAE

Catering to 65 million visitors in 2012 it is understandable that Dubai is one of the

favourite shopping destinations for many people all over the world. The famous shopping

festival that takes place every year has huge discounts on all the leading brands of the world

and the Gitex week, biggest sale on electronic goods are one of opportunities that no one

would want to miss.

Right from Armani, Louis Vuitton in apparels to Electronic gadgets being sold that a

price that is unresistable to any common man. Thus, Branding and the decisions taken to

showcase the product becomes very vital so as to stand out thus the product design whether to

let the product have the same look like in every other part of the globe or give a new look to

the packaging to attract the customers is very important.

A recent survey conducted by community agency BPG Cohn & Wolfe can into

conclusion regarding the “anchors of authenticity” those were the honesty that the company

maintained regarding their products, integrity, transparency regarding their supply chain,

services, environmental impact, service provided by them and most importantly the brand

story. According to the study, the consumers in UAE found the French retail company

Carrefour to be the most authentic brand followed by Etisalat, Samsung, Lulu and Du.

Reports said that 86% of consumers in UAE valued products that are unique. The customers

are also sensitive towards their religion, traditions and customs followed so as to reach to the

local customers it is preferable to adapt Arabic way of packaging alongside their own.

It is very important to position the products carefully according to the country they are

targeting. For instance in UAE, 75% of the participants in a survey stated that they would

never accept and be dejected if they get to know that a company had been manufacturing

food in unhygienic way or that would be unsafe for their consumption. So the quality factor is

very important among the UAE consumers and they are very particular about it.

More than any other country in the world UAE consumers are very inclined to know

the brand story, what the brand tells them about the attributes and benefits of the product and

what the company says and to what extend the product delivers that to the consumers.

The success of Carrefour is because it maintains relationship with its consumers on

daily basis and they deliver their promise day after day thus winning the hearts of the

consumers in UAE and leading ahead of the local retail stores.

So for the local brands who aim to have a grip in the market and have their place in

the top list instead of the big international brand they will have to reach out to the people with

a true brand story and let the people know how they are connected to UAE, explain their

heritage and tell them what they are aiming to deliver to them. Some other brands that also

have UAE consumers trust are Apple, Emirates airlines, McDonalds, KFC, Sharaf DG and

Dubai Electricity and Water Authority.

If we sit and look into each of these brands all these brands are known for their

transparency, efficiency and their services. These brands have very strategically occupied a

strong position in UAE. Example: In case of Apple, it has a different edition for the UAE

consumers in which there is no FaceTime, as Voice over Internet is against the law in UAE

so they follow the regulations and launch iPhone at lower price without the feature of

FaceTime. Apple being a global brand has same name, similar image, similar positioning

with a bit of variation in price and product.

UAE is a conservative company so the companies need to be careful to understand the

general culture and then have the packaging and logo displayed so that they do not hurt the

sentiments of the local people. Example: Nike had to change their logo on a new range of

shoes they had launched as the way it was written resembled that of Allah in Arabic. So these

are an example of global products who sometimes have to change from that of their original

image so as to suit the country.

There are few conditions that should be met before exporting goods in UAE market

like the Halal slaughter and health certificates by the UAE embassy or consulate as they are

very particular about halal meat.

As UAE has a young population who believe in living the luxurious way making

UAE a big market for all the luxury brands and they have a huge customer base to cater to.

People are very brand conscious and they are loyal towards the luxury brands especially in

footwear, clothing, jewellery and time pieces now the luxury travel goods and accessories are

catching up. The increasing interest towards good quality products are increasing affinity

towards luxury products. Social recognition is another factor that is attracting the consumers

in UAE towards the luxury market. UAE has distinctive population that has Emiratis,

Westerners and Asians and all of them have their inclination to different kind of products and

brands thereby making the market a home to almost all the brands be it local and national

brands or big international brands

PUBLIC RELATIONS, ADVERTISING, MEDIA AND TRADE PROMOTIONS IN UAE

Middle East, especially UAE is the target of many multinational companies as they have

identified the potential of the upcoming market which is unaffected by the global economic

meltdown, but establishing in UAE has its own challenges. UAE is a country that has more

than 80% of population dominated by expects coming from different nations and who have

different cultural backgrounds and beliefs. The diversity poses an issue in identifying the

target segments and communicating value to prospective consumers.

Public Relations

The Middle East Public Relations Association or the MEPRA was established in UAE

(Dubai) in the year 2001. The main objective of the body was to create awareness about the

PR industry, to highlight its importance and also to standardize and educate PR practices.

Today, UAE’s PR market has both global and local companies, many global players have

also affiliated themselves with local companies. The following table shows the status of the

PR industry and its growth in various countries in the Middle East

As seen, the overall growth in this sector has been tremendous.

Advertising

Advertising in UAE generally takes place through multiple channels. UAE

government is strict about what is being advertised and owns most of the media channels. All

advertisements done should follow certain standards that also are in sync with the legal

system of the country.

Some of the advertising standards to be followed include:

Respect for political and religious institutions

No advertisement for products that are banned in the UAE- example- alcohol,,

cigarettes

Use of content that can breach public morals is prohibited.

Compliance with the legal system of UAE

Advertising content should not be misleading and must not portray incorrect

information.

In case of non-compliance to the above standards, penalties can be levied on the

advertiser or the agency or the media channel by the authorised body known as the National

Media Council. Advertisement for such a diverse country is a struggle but brands have

become more local in their communication. In doing so, some companies have signed

Emiratis as the face of their brand, example, the French fashion company- Nina Ricci has

made Dubai socialite Lina Samman as the face of the brand. This has helped in making brand

communication more relevant to the locals.

Focus of advertisement still remains more on the traditional media channels with more

than 69% of the advertisement spending focusing on Television advertisements.

Media

UAE has very few privately owned radio stations and newspapers. Most of the print

and broadcast media is owned and regulated by the government. To expand the existing

system and to establish UAE as a communication hub, Abu-Dhabi and Dubai have worked to

build centres that are specialised in the media sector. One of the example of this is Dubai’s

Media City project- the project was started in 2001 and caters to the various needs of

businesses. Some of the services provided by the media city companies’ are- Broadcasting,

Media, Marketing, Publishing and Printing et al. UAE is progressing towards a setup which is

more liberal and gives freedom to organizations to communicate better with the consumers.

CONCLUSION

UAE has strong economy with well-structured financial sector and there is absence of tax in

the country. Tourists as well as big companies are attracted towards the country as the

country hosts many big exhibitions, international fairs and shopping festivals. The country is

cosmopolitan and has both the Eastern as well as Western Culture which makes working and

doing business an UAE a different experience altogether.

UAE follows the Sharia law making the laws and regulations very strict and all the people

residing, working and doing business have to strictly abide by it. Different sectors have

different laws.

In UAE people are very proud of their culture and they always abide by the norms so the

companies doing business have to follow their norm and understand the rich culture of the

country. They have to understand that people here are very sensitive to certain issues and so it

needs to be looked after like if women are there in advertisement then their presence should

make some relevance and they should be wearing full clothes.

People in UAE put high emphasis on Value, background and societal status so be it domestic

brands or the internal companies they must be very clear with their aesthetics and they should

make sure they are follow what they advocate in their advisements and promotions.

REFERENCES

http://www.hermanmiller.com/MarketFacingTech/hmc/research/research_summaries/assets/ wp_Culture_Workstyles_Dubai.pdf

http://www.lonelyplanet.com/united-arab-emirates http://www.bobriel.com/pdf%20files/cultural%20context%20-%20uae.pdf

http://www.uaeinteract.com/docs/International_brands_are_going_local_/45826.htm

http://www.dubaimediacity.com/about-dmc/history-and-milestones-of-dmc

http://www.researchgate.net/publication/ 229244720_Public_relations_in_the_United_Arab_Emirates_The_emergence_of_a_profession

http://www.uaeinteract.com/docs/ National_Media_Council_issues_advertising_content_regulation/52933.htm

http://www.ipra.org/itl/03/2013/the-pr-industry-in-the-uae-a-missed-opportunity

http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1007&context=meme

http://www.uaeinteract.com/docs/ UAE_tops_in_Arab_world_advertisement_spending/55663.htm

http://www.euromonitor.com/luxury-goods-in-the-united-arab-emirates/report http://www.khaleejtimes.com/article/20150204/ARTICLE/302049857/1037 http://www.alqasimifoundation.com/Files/Pub1-paper(Calvert.Jones).pdf https://www.uaeinteract.com/uaeint_misc/pdf/perspectives/12.pdf http://emergingmarkets.ey.com/wp-content/uploads/downloads/2012/05/Doing-

Business-in-UAE-2011.pdf