Doing Business in Saudi Arabia

Group 11

Facts and Figures•Saudi Arabia is the birthplace of Islam and home to Islam's two holiest shrines in Mecca and Medina.The history of the Kingdom of Saudi Arabia dates back to about 1747.•The foundation of the modern Kingdom of Saudi Arabia took place on September 23, 1932, a day that is commemorated as National Day•The Kingdom of Saudi Arabia, with an area of about 865,000 square miles, located in Middle East, bordering the Persian Gulf and the Red Sea, north of Yemen•Population of 26.5 million with growth rate of 1.532 %(90% Arab, 10% Afro-Asian)•Saudi Arabia possesses 18% of the world's proven petroleum reserves, ranks as the largest exporter of petroleum•Saudi Arabia is a monarchy based on Islam.

• The country is nearly 100 per cent Muslim (85% Sunni, 15% Shia). • Major industries include petroleum mining and refining, petrochemicals, cement,

construction, fertiliser and plastics

Business Environment

Indicators for Starting a Business

Cultural Value Dimensions

• Power Distance (PDI)• Individualism versus

collectivism (IDV)• Masculinity versus

femininity (MAS)• Uncertainty avoidance

(UAI)

Value Analysis• PDI (95)

– High level of inequality of power and wealth– Rule-oriented society– Leaders separate themselves from the group

• IDV(25)– A collectivistic society. Close long-term commitment to the member

'group', be that a family, extended family, or extended relationships. – Loyalty is paramount, and over-rides most other societal rules

• MAS(60)– Males dominate society and power structure– Managers are expected to be decisive and assertive– Limitation of rights to women mainly due to Muslim religion

• UAI(80)– Strict rules, laws, policies, and regulations to minimize uncertainty. – Society does not accept change and is risk averse

Culture, Values, and Norms• Saudi culture has effect of Bedouin values and Islam.

– Loyalty, Status, interpersonal relationships, approximate time

– Establishing trust is an essential part of Saudi business culture

• Restrictions on women

– Can’t drive a car, sail a boat , fly a plane

– permission of a close male relative to travel, to work, even to have some types of surgery.

– Women must wear a burka which fully covers her body except face and palms

• Business Meeting

– Appointments seldom begin at scheduled times

– Interrupt meetings to discuss other business matters

– People are more important than business

• Folkways

– The “ thumbs up” gesture is offensive

– Common to remove shoes before entering a building

• Norms

– Consumption of Alcohol and Pork

– No Public exhibition of films

– Public expression of opinion about domestic matters is not encouraged.

Social Structure

Saudi Arabia has a medieval social structure, comprising four classes of people:– The royal family is on top: It includes all the descendants

of the original Saudi rulers and their tribal allies. – Second comes a smaller group of businessmen dependent

on the patronage of the Royal Family,– followed by government employees. – At the bottom are the majority of commoners who are

supported through the welfare state.

Religion• Saudi Nationals preserve the religious value and ancient

traditions of the Islam religion, which affect the way business is dealt with– Investing in businesses that provide goods or services

contrary to Islamic principles is sinful and prohibited – No unjust profit through the exploitation of others– Live up to contractual obligations and no deception

• Closing stores for prayer five times a day.• Weekends in the Kingdom are set on Thursdays and

Fridays• Fixed or floating payment or acceptance of specific

interest or fees on loans of money is prohibited

Education• The great weaknesses of the Arab world are the lack of

freedom, the lack of knowledge and the lack of women’s empowerment.

• In Saudi Arabia male and female students are educated in separate classrooms. Interestingly, male teachers can teach female students and vice versa.

• Women comprise 58% of Saudi Arabia's college students but only 14% of its labour force

• Among conservative families, teaching is one of the few approved professions for women.

• In Saudi elementary schools, nine hours per week (out of 28-31 teaching hours) are devoted to Islamic studies

Language• Verbal– Saving Face

• To avoid confrontation and conflict

– Verbal Expectations• To address elders, use their correct title, such as Mr., Mrs, Dr., etc.• When members of the same sex greet one another, a handshake or kiss on

each cheek is accompanied by saying: As Salaamukum

• Non Verbal– High Context

• Non-direct communication cues such as body language and eye-contact, tone of voice, facial cues, and the use of silence.

– Haptics• Deals with the sense of touch. Left hand is considered unclean and right

hand is used for shaking hands, eating, drinking

Cultural Changes• Relaxing Restrictions on Women

– Commercial Business licenses– Right to Drive– Female shop assistants in cosmetics shops– Vote in municipal elections– Work as teacher and doctor

• Saudiazation Program– Transforming cultural attitude toward work for Modern

manufacturing and business– To replace foreign workers with Saudi Nationals– To stop remittances of foreign workers

Thank You