MARKETING AND SALES
STRATEGY
There are very good prospects for Foreign
companies who want to export their products to the Saudi Arabian market.
However, there are certain marketing procedures and sales techniques which
have to be observed in order to develop and sustain business relationships
over a long period of time.
- The Saudi market should be constantly
reviewed for product adaptation and change.
- Exporters should ensure regular supplies
as per specifications, at the specified time and place already agreed upon
and at the stipulated prices.
- Any subsequent and sudden price changes,
even pertaining to after-sales services, should be avoided.
- Exporters' contacts with importers in
Saudi Arabia should be direct and regular.
- Complete product lines, rather than single
products, should be introduced into the Saudi market whenever possible in
order to benefit from greater demand stimulation and cost reductions.
- Exporters are required to check with Saudi
importers or directly with the Saudi Arabian Standards Organization, on
the precise implementation of Saudi Arabian Standards pertaining to their
exported products to the Kingdom. Saudi Standards can be purchased from
SASO or the American National Standards Institute, ANSI (11 West 42nd
Street, New York City, NY 10036, telephone number (212)642-4900 or fax
number (212)302-1286).
- Exporters to Saudi Arabia should display
their products regularly in the major commercial urban centers of the
Kingdom. Necessary permission is obtained by writing or contacting
directly the Director, Exhibitions Department, Ministry of Commerce.
- Efforts should be made to improve the
appearance of exported commodities by means of attractive packaging.
- Products to be exported should be properly
branded and labeled both in English and Arabic.
- In the case of machinery and equipment;
after-sales service, including warranties, maintenance and the provision
of spare parts, should be prompt and efficient.
BUSINESS OPPORTUNITIES IN
THE KINGDOM
In pursuit of the policy of free market
enterprise, economic diversification, structural shift from building the
infrastructure to the production of goods and services and the subsequent
increasing reliance on the private sector as the major economic force, the
Kingdom of Saudi Arabia invites Foreign companies to participate in the
following areas which are essential to its current and future economic growth:
- Import-substitution and export-oriented
joint ventures.
- Projects contributing to technological
progress in the Kingdom and the development of established factories
through improvement of production methods and minimization of production
costs.
- Projects directly related to the current
economic development in the Kingdom which include, but are not limited to,
the following:
a) Industries utilizing locally
abundant raw materials from petrochemical or petroleum products.
b) Food industries utilizing locally abundant agricultural products.
c) Specialized industries in the fields of maintenance and the
manufacturing of spare parts and equipment.
In most of the industrial joint ventures, the
foreign partner supplies the management, technical expertise, and part of
equity resources, if they are desired, depending on the collaboration
arrangements. The Saudi partner provides local supervision, local skilled and
unskilled labor, and handles local business contacts, apart from participating
in the equity resources. For further details on establishing joint ventures in
the Kingdom, Industrial Licensing Regulations and Procedures.
With a foothold in the Saudi Arabian market,
there will be numerous business opportunities for:
- Companies providing labor-saving equipment
and services.
- Training services either directly
delivered or as part of a product package.
- Managerial services either directly
delivered or as part of a product package.
- Nearly all areas of health, personnel, and
services.
In addition to the section on growth targets
during the sixth development plan that we discussed in Chapter Two of this
guide, the following list of principal growth areas of the Saudi Arabian
economy provides tips on prospective commercial opportunities in the Kingdom:
- Industry: Most industrial activities in
the Kingdom are carried out by the energetic Saudi private sector. The
structure of the Saudi Arabian industrial sector is composed of three
distinct sub-sectors: petrochemicals, oil refining, and other
manufacturing. The main objectives of the Kingdom’s industrialization
are:
a) To reduce the Kingdom’s dependence
on the export of crude oil as the major source of income
b) To increase Saudi Arabian private sector participation in the
economic development of the country
c) To create new job opportunities.
d) To establish an advanced industrial and technological base.
Export oriented industries such as
petrochemical, papers, glass plastics, etc. are expected to do well during
the sixth plan period. Over the next few years the petrochemical industry is
expected to grow at an average rate of more than 8 percent annually. Thus
foreign investors are invited to join the Saudi Arabian private sector to
invest in new industries that utilize modern technology, and to expand
investment in import substitution and export-oriented industries including
basic, supporting and downstream metal and petrochemical industries
- Mining and quarrying: The Saudi government
has prioritized the diversification of the Kingdom’s economy and the
utilization of the country’s extensive mineral wealth. The mining
industry is promising in the next few years, especially with the
initiative of the Ministry of Petroleum and Mineral Resources to develop
new mines to produce phosphate, iron, bauxite and other precious and
non-precious metals. In 1993 Petromin extracted 189,353 tons of ore. Net
gold production amounted to around 670,000 ounces between 1989-1993. The
Directorate General of Mineral Resources is currently pursuing the
exploitation of the mineral fields throughout the Central and Western
regions of the Kingdom. The government’s investment in this sector has
already exceeded seventeen billion Saudi Riyal (more than U.S. $4.5
billion). Foreign investors are offered tax
exemption, long term extraction concessions and other incentives to invest
or establish joint ventures in this growing Saudi industry.
- Transportation, telecommunications and
information technology: During the fifth development plan (1990-1994) the
Kingdom’s main road network increased by about 2,100 KM, to about 43,000
KM. Rail freight volume grew by 36 percent to about 2.1 million tons. Air
passenger volume grew from 20.3 million departure and arrival to 25.1
million. The cargo handled in the Kingdom’s major ports rose from 63.7
million tons to 83 million tons.
In addition to upgrading the road network
and domestic airports in the Kingdom during the sixth development plan, the
government is planning to link Dammam and Jubail Industrial City with a new
railroad. Furthermore, to enhance and modernize the fleet of Saudi Arabian
Airlines, the government has already purchased from two American companies
(Boeing and McDonnell Douglas) commercial airplanes worth more than six
billion dollars. The Saudi Ministry of Post, Telephone and Telegraph awarded
the U.S. firm of AT&T four billion dollars contract to upgrade and
expand the telephone network in the Kingdom.
- Electricity: Saudi per capita consumption
of gas, water and electricity is one of highest in the world. Over the
past two decades electricity consumption rate increased by more than 20
percent annually. Power generation expanded from 4,214 megawatts in 1979
to 18,238 megawatts in 1994. Over the sixth development plan period
(1995-1999) electric generation capacity will be raised by more than seven
thousand megawatts.
- Other important areas of growth prospects
during the sixth development plan (1995-1999), include banking and
insurance, leasing, travel, and consumer products such as food and
beverages, clothing, soap, cosmetics, etc.
A further consideration for business
opportunities is the procurement of government contracts. Government
contracts are often offered through tenders. There is no central
tenders’ board in Saudi Arabia, and every government agency may extend
contracts. Bids for tenders must be applied for by local agents. In most
cases, government contracts awarded to foreign companies require 30 percent of
the total work to be subcontracted to a Saudi Arabian contractor.
|
