Saks Off Fifth is primed for expansion into Saudi Arabia. Supporting evidence stems from both current characteristics of the rapidly modernizing country, and the specificities of your company itself. The synergy between the two, then, justifies the international venture now.

From a global comparative standpoint, both Saudi Arabia and the region it belongs to have undergone significant changes which have made them more attractive for international apparel companies than parts of the world. When it comes to economics, not only is the Middle East enjoying stable GDP growth, but the region is also diversifying into other industries outside of oil. Saudi Arabia, in particular, is focusing on developing its apparel, technology, and hospitality sectors - three realms of commerce which are not only supportive to one another, but to the desires and tastes of two important target customer segments: global travelers and native Saudis. In contrast, other countries, such as China, may not continue to avidly participate in international business as they instead channel their energies and resources to only domestic consumption.

Demographic and psychological shifts in the Middle East also support the introduction of Saks Off Fifth. Such trends include overall population growth (with substantial growth coming from the youth segment), heightened consumer interest in joining the global conversation via foreign brand patronage, and an increasing of the population’s tech-savviness. On the other hand, countries in Europe are seeing their population numbers decline, and the citizens of nations such as Bangladesh are still struggling with their country’s backwardness. Markedly, Saudi Arabia’s female population - Saks Off Fifth’s main target customer - is enjoying more freedom, and, as they increasingly participate in the public sphere of society, they will continue to shed traditional, restrictive values in favor of experimenting with personal style and self-expression.

Infrastructure developments ranging from road improvements and the establishment of better school curricula, to the creation of FDI-supportive institutions and new laws which make setting up foreign entities even easier, reveal that Saudi Arabia’s government itself would support a Saks Off Fifth entry.

Now of course, no opportunity comes without risk. Foreign firms may still hold a negative perception of Saudi Arabia, due to the country’s corruption-riddled history. But significant improvements - in counterterrorism, information transparency, banking safety, etc. - have been made, thus equipping MNEs with the necessary instruments for effective risk management. Saks will therefore be able to cut costs not only through taking advantage of Saudi Arabia’s cheap real estate and vacant malls, but also through cementing protection from future problems from the get-go. For example, although continuing cultural and religious differences between Americans and Saudis differ will require Saks employees to modify certain aspects of behavioral conduct, an increasing number of Saudi business people are learning English, obtaining degrees from US institutions, and, in general, are simply more culturally open and accepting than ever. Establishing an honest and sustainable joint partnership, then, has never been easier, though initial partner selection should still be carefully undergone.

In short, the specific characteristics of Saudi Arabia which perfectly fit into Saks Off Fifth’s existing strengths and brand position are (a) its substantial market of tech-savvy and image-conscious citizens who can be primed to be both avid customers as well as loyal employees; (b) the low rents and high vacancies of its malls; (c) the modernizing of infrastructures which not only support foreign firm entry, but permanent success; and (d) the modernizing of Saudi mindset, as evident from the government’s avid utilization of funds in pursuit of securing a strong place as the global business arena for its country.

PUDM4050 Spring 2014 Executive Brief: Business Recommendation for Saudi Arabia by Anne Chen