Gulf Cooperation Council (GCC)
Nowadays business conditions are not really supportive in the world. The main reason is the global financial crisis which began in 2008. The majority of experts believe that the crisis has ended already. However, the world still suffers the consequences of this crisis. These consequences are economic decline, disturbances in a global financial system, and lack of trust on international markets, among others.
All the mentioned factors have led to slowdown of the pace of the world’s economic development. According to the UN, the pace of growth of the world’s economy was 2.1% in 2013. Apparently, this pace is expected to be 3.0% in 2014 and 3.3% in 2015. Such pace is very moderate in comparison to the one that was 15 years ago. Also, it is quite difficult to predict when the situation is going to improve.
Respectively, it is difficult for businesses to perform in such conditions. The problem is urgent for almost all the countries of the world. However, there are regions and countries that demonstrate good pace of economic development, and the countries from Gulf Cooperation Council (GCC) are among them. They are characterized by supportive investment climate, cheap labor force and developed infrastructure. Moreover, they are open to world and ready to assimilate knowledge, financial and other resources from the whole world. In fact, these countries require such resources.
GCC is a union of six countries from Middle East. These countries are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The Council was founded in 1981. Its main goal is to conduct common and coordinated policy in economic, political, cultural and religious area. The main task of this research paper is to describe possible business operations strategies in GCC. The main attention is going to be paid to the United Arab Emirates.
In order to describe possible business operations strategies in the region, it is important to understand the main features of its business environment. Social, cultural and politic factors are also very essential.
All the countries from GCC depend on oil export. Thus, revenues from oil export contribute the most to the countries’ budget. Generally, these revenues are the main financial basis for development of other sectors of a national economy. However, there are some significant risks in such situation since GCC’s economic and social prosperity depends on conjuncture on the world’s markets. In fact, this conjuncture has been very unstable for the recent years.
GCC is characterized by an autocratic type of rule and leadership. In fact, all the GCC countries are monarchies. It means that governments interfere seriously in business performance in the countries. Consequently, such possible interference should be accounted in the process of development of a business strategy.
Apparently, all the states of the region are Islamic states. Islam is a dominant force in the countries’ social and business life since even legal rules are based on Islam. Companies are forced to build their business strategies and process, taking into account religious and cultural influence of Islam. Moreover, companies should be socially responsible in the whole world. Talking about the UAE, companies should think about the so-called cultural and religious responsibility.
GCC region is characterized by high pace of economic development. Apparently, GCC countries use financial resources from oil export in order to build business infrastructure and develop other industries of a national economy. What is more, they usually invite western professionals to realize business strategies and projects in the country. Talking about western investors, they enter the country with pleasure since it is possible to get significant financial bonuses there.
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It is essential to say a few words about business environment in the UAE in particular. The UAE is one of the most economically successful countries in the world. Its GDP per capita is more than $45 000. It has already been mentioned that the main contribution to such a high level of GDP is made by revenues from export of oil. Hereby, oil industry is the dominant force in a national economy of the country. Also, the country is characterized by developed infrastructure. Financial sector has been demonstrating the highest pace of development for the last years in the UAE. Nowadays the country is totally integrated into a global financial system.
Business environment is not the only factor that affects business strategy of a company since social and cultural factors are also very important. First of all, business relations in the UAE are based on considerable importance of relationship. Business relations in the UAE are usually established for a long period of time, and these relations are usually very strong. The UAE’s culture is quite formal with compulsory abidance of existing rules.
The UAE is a country with high-context culture, which means that context of intercourse and the abidance of informal rules of behavior are very important in the process of conducting business. If cultures with high context are characterized by a great amount of information in the context of intercourse, than the main source of information is words in the cultures with low context. For example, it is necessary to exchange handshakes only with right hand since left one is associated with dark forces in the UAE. Also, in the UAE, a man should not try to shake woman’s hand unless she offers it. Apparently, there are a lot of such informal rules of behavior in the UAE. Thus, all these rules must be taken into account in the process of development of a business strategy.
Business operation strategy is a strategy and a plan that describes how a company will use resources to reach production goals and overall goals of a company’s performance. Simply speaking, business operation strategy shows an optimal way from resources to a final product as well as from planning to the final goals of business. In fact, these goals can be quite different. Among them, one may mention profits, high shareholders’ value, high share on a market, well-being of employees, and realization of social goals, among others. Business operation strategy may also differ according to the industry. Hereby, there cannot be a universal business strategy in retail, IT and B2B. Business operation strategy is like a roadmap for a company showing how to reach desired goals.
Companies need a way to focus and stay focused. They need, in effect, a well-defined and well-executed strategy and action plan. No strategic plan in and of itself can help a company change and move ahead to capture more market share, improve products, increase customer satisfaction, or whatever is recommended within the context of a strategy.
Business operation strategy should include such elements as strategic goals, improvement objectives, action plans and performance measures. A company must define its desirable strategic goals, decide what steps should be taken, what processes must be improved, what resources are needed to reach the goals, and what performance measures have to be implemented in order to evaluate the process of realization of a business strategy.
Despite the fact that the UAE and GCC region have survived the global financial crisis quite successfully, companies still suffer its consequences in these countries. Respectively, they are forced to develop business strategies in complicated financial conditions. In fact, a lot of companies have already reconsidered their development plans.
Apparently, the global financial crisis has shown one significant problem of the country and its businesses, which is the problem of diversification. The country’s national economy is heavily dependent on revenues from export of oil. As a result, all the countries from the region are vulnerable to fluctuations on global markets. The oil prices have stabilized a bit after the global financial crisis. However, their fluctuations have forced local governments to think about diversification. The opinion can be proved by the following words:
Prices have since rebounded but the shock served as a reminder of the fragility of the global economy and, with it, the region’s fortunes. The Arab Spring that rocked several regional countries further focused officials’ attention in a different way.
Nowadays governments of the countries and business try to develop new industries. Apparently, such industries are going to have the highest priority in the next decades as aviation, production of renewable energy, tourism, health care, manufacturing, education, media, and financial services, among others.
Another important factor that affects business operation strategy in GCC factors is possible lack of resources. First of all, lack of knowledge is meant. The problem is that these countries do not have a required experience in building business, for example in financial area. Hereby, this industry is new for the region. That is why local governments and companies are forced to invite western specialists to help them to establish effective business. In fact, such services are very expensive. However, the final benefits are going to be much higher than the initial expenses. In the end, the local companies will get needed experience in a few years and will be able to develop business independently.
It has already been mentioned that the main goal of business operation strategy is to show the way how to use resources in order to reach company’s goals. Alas, goals of the companies in local countries are quite limited. Usually the growth of profits is the most popular business goal for the local businesses. In fact, they usually do not talk about social responsibility, prosperity of employees, growing shareholders’ value. However, focusing only on profits is not the most effective approach to business. Western businesses believe that financial resources are the only instrument to reach other more important business goals. For instance, higher share on a market will lead to higher profits in the end. That is why companies must focus on more global goals, and money will come. In fact, this approach is partly implemented in the local companies. Such attitude to business is going to be dominant in business operation strategies in the Middle East.
In conclusion, the analyzed region is probably one of the most promising in economic and social perspective. That is why it is not surprising that business develops at a really high pace in the countries from GCC region. Companies enter the local market seeking for high profits. However, the region is quite specific, and companies should take it into account in the process of development of a business strategy. Companies should be ready to cooperate with autocratic governments. They should be socially and even religiously responsible since religion is a dominant force in the countries. Companies must enter new industries but not only oil production. The countries require diversification in order to become less vulnerable to fluctuations on global markets. Furthermore, business strategy must take into account possible lack of resources, especially knowledge and business experience. In the end, all the initial efforts will be compensated by high profits and other bonuses in the future.
- Arnold, T, Vision 2030: Abu Dhabi focusing on growth strategy, Abu Dhabi Media, 2013, retrieved 11 October 2014
- Donovan, M, Connecting business strategy and operations, Noria Corporation, n.d., retrieved 11 October 2014
- United Nations Department of Economic and Social Affairs, World economic situation and prospects 2014: global economic outlook, The United Nations, 2013, retrieved 11 October 2014,
- United Nations Department of Economic and Social Affairs, World economic situation and prospects 2014: global economic outlook, The United Nations, 2013, retrieved 11 October 2014
- M. Donovan, Connecting business strategy and operations, Noria Corporation, n.d., retrieved 11 October 2014
- Arnold, T, Vision 2030: Abu Dhabi focusing on growth strategy, Abu Dhabi Media, 2013, retrieved 11 October 2014