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Transcript of Saudi Arabia
Saudi Arabia - Medical Equipment Inc. - PESTLE Analysis
The “Constitution” is the Islamic Law (the Quran and the Sunna)
The "civil code"
(Basic Law of Governance)
on the moral code of the Islamic Law (Sharia)
No separation of religion and the state
There is no parallel civil legal code
The King is the Prime Minister and he appoints the legislative body (Majlis-ash-Shura)
High legal uncertainty -> The decisions of the courts have no binding authority with respect to other cases
Lack of transparency in public budgets
Human rights are violated
Internet users: 10% of the total population
Global R&D spending grew by about 5.2% to more than $1.4 trillion in 2012
Spending risen by 21% on education over 2012 and provides $54 billion for public education sector
A USD$100 bn investment is planned for transportation infrastructures
Saudi Arabia has 4 ports
Life expectancy: 73.9 years
Education system has gone through an astonishing transformation
Enrolment ratio > Secondary level (most recent) by country. Saudi Arabia 51.1% below average (59.4%)
Education, primary completion rate (most recent) by country: on average
Foreigners occupy 90-95% of highly qualified jobs
Saudiization and punishments for Western lifestyles
Mix of culture, Indian diaspora.
Islamic values and maintenance of social stability
Women continued to face severe discrimination both in law and in practice
Source: Amnesty International Report 2012
1. Does Grover understand the local culture?
Even if Grover lived in Saudi Arabia, he is Hindu and studied in the U.S. -> May not be familiar with social norms in business
Grover should have known better than to go through all the hierarchical levels in the hospital and approached directly the Purchasing department
Lack of experience when it comes to the business field, as Grover has lived but not worked in Saudi Arabia before
He apparently does not understand how the business culture in Saudi works as mentioned before
3. What should Grover do? Why?
Grover should take Al Humaidi to U.S./France as this could be justified under the company's code of conduct and it is related with the business
Grover should also try to invite Al Humaidi to a social dinner to build long term relationship with him
Long term speaking Grover should have a business culture assessment of Saudi Arabia in order to understand fully how the business works
Medical Equipment INC
Mission: To serve healthcare professionals and their patients in more than 80 countries by providing innovative medical technology products
- 23-26 million
- 66% Saudi National
- 90% Sunni Muslims
- 10% Shi'a Muslims
- 33% Foreign workers
45 major cities: the largest:
- Riyadh: 3.6 million
- Jeddah: 2.7 millon
- Mecca :1.5 million
83 % live in urban areas
25 years old
Nationality: India, Hindu Background
Bachelor's Degree in U.S.
Position: Cardiology Sales Department in Saudi Arabia
Has he understood correctly the Saudi Arabia market?
Health Care Industry
2. Grover considers the option of sending Al Humaidi to a Medical Equipment showroom in France or the U.S.. How does that compare to paying Al Humaidi a bribe?
Grover should get upper management to approve flying Al Humaidi out to see the showrooms. Also, he should ask for more ideas that would help Grover close the sale
By doing that Grover is determining whether flying him would be under the companies code of conduct or not
Finally, this solution is considered to be a bribe and it is an unethical persuasive method as to close the deal flying Al Humaidi to France or the US is not an obligation
Maximum: 48 hours per week and 36 hours during Ramadan
Saudiisation requires that private sectors employ Saudi nationals and that some job positions can only be filled by them
Companies also need a Saudi local in the board
Objective: Selling Cardiology equipment to Wester-Southern region of Saudia Arabia Why?
Medical Equipment Inc.
Monarchy built upon the tenants of islam
The king must comply with the Sharíah and Sunnah (Sayings and traditions of Muhamed PBUH)
No division of powers
Lack of politics due to very high living standards
WTO member since 2005
One of the biggest members in OPEC
Since the discovery of oil in 1938 has grown to be among the wealthiest nations.
Saudi Fund for future generations
Saudi Arabia, 2013 Article IV Consultation
Saudi Economic Outlook 2013
Saudi Arabia: Voice and Accountability: Estimate
Human Rights Watch: http://www.hrw.org/news/2011/12/30/saudi-arabia-renewed-protests-defy-ban
Diplomacy in Action, Bureau of Democracy, Human Rights and Labour,
Al Jadaan & Parnters, Overview of Saudi Domestic and Foreign Corporate Laws: http://www.aljadaan.com/files/file/Overview_of_the_Saudi_Arabian_Legal_System.pdf
Saudi Arabia General Investment Authority,
Democracy Index 2010
Royal Embassy of Saudi Arabia (US),
The Basic Law of Governance:
Setting Up a Business:
Foreign investment is completely allowed but the Saudi Arabian General Investment Authoriy (SAGIA) has to approve it first
Saudi Arabian Companies Law: the most appropriate corporate form for foreign companies is the LLC
Shares are not public and not permitted to undertake activities such as insurance or banking
Payment dispute -> companies need 635 days (ranks 127 out of 189 according to the variable "Enforcing Contracts", DB 2014)
Insolvency -> Claimants have to wait for 2.8 years and only recover 28.3% (in the OECD: 1.7 years and 70.6%, DB 2014)
The goal of Medical equipment INC
Make sale to Wilsons account "Prince Khalids Hospital"
Potential sale is worth aprximately 725,000
Grover's Sale Approach
Obtain initial approval from departments
Purchasing "Final Decision"
Big retail sector with total expenditure of $68 billion
High increase in young population with high spending power gives Saudi Arabia
High imports of military equipment
Bee'ah organization is promoting best environmental management practices in KSA, also manages the hazardous wastes of Saudi industry
King Abdullah bin Abdulaziz Al Saud