International Business

free essayDespite being a desert land, Saudi Arabia is one of the wealthiest nations in the world. Its economic success depends on such factors as the presence of oil reserves, robust economic policies, and large workforce. The government of this country strongly supports a free market economy based on competition to succeed in the global competition. Nonetheless, the relative decline in the country’s competitiveness calls for a re-examination of its competitive advantages. Saudi Arabia is a twelfth largest country in the world and the largest one in the Middle East.

Location

Location of a country plays a crucial role in determining the success of international business. The site strategy largely influences a firm’s ability to reach the consumers. Therefore, a good location provides an establishment with a competitive edge over other companies. As was mentioned earlier, the country is a hot desert land, and its capital is Riyal (see Figure 1). Saudi Arabia has the world’s largest and extensive sand desert referred to as the Rub’ al Khali. The country has four major regions including Najd, Hijaz, Asir, and the al-Ahsa. Najd, which is a central plateau, is 600 meters and 1500 meters in the east and west respectively. The capital Riyal is located in this region. Hijaz stretches from the Red Sea, and it hosts Mecca and Medina. Asir extends to the Yemenis border and includes fertile coastal plains. Inland mountains located in this region rise to 2700 meters. The al-Ahsa is in the eastern province that is the primary oil producing region (Jones, 2010).

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The country produces about a third of the world’s petroleum products. Saudi Arabia also provides metal resources like gold, iron, lead, zinc, tin, and copper. The country is also endowed with non-metallic minerals like fluorite, potash, silica sand, diatomite, and bentonite.

The competitive advantages of Saudi Arabia have continued to develop over time. Over a long period, its strength has risen to the current placement within the Middle East. The government of the country has developed excellent infrastructure, which has contributed to the flourishing business environment in the country. For the last twenty-five years, Saudi Arabia has allocated $1.2 trillion to infrastructure (Jones, 2010). The country has no foreign exchange controls and capital moves freely in and out of it. Arguably, the country has no personal income taxes, has ten tax holidays for raw materials, manufacturers, and commodities can be transported duty-free. It has also established legal structures protections of private ownership.

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Saudi Arabia has been the world’s largest producer and exporter of petroleum products. The natural resources comprise of the country’s ninety per cent exports. Bradley (2011) indicates that foreign companies participate in oil extraction. Saudi Aramco controls the production of petroleum products. The former is a state-owned company that produces approximately 95 % of oil products in the country (Wilson, Al-Salamah, Malik, Al-Rajhi, 2004). Saudi Arabia has dropped its RGI ranking from 34 to 48 of the 58 countries.

The rise in oil prices has resulted in the increase in the GDP per person early in 1973/74 and 1980/81. The economy of Saudi Arabia has been fairly steady in the face of declining oil prices. In comparison with other countries throughout the world, the government has brought the cost of living under control through strict control of money supply and subsidizing the prices of many goods and services. In addition, the country is determined to pursue stable macroeconomics policies to stabilize the internal and external values of its currency. The government is determined to adopt a rational financial policy that will pull investors to the country and boost the current investors’ aptitude to grow their financial asset.

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Though Saudi Arabia is a desert land, it has an economic presence in the Middle East and global arena as well. It has recorded a positive economic growth in the last decade ranging from 3.6 to 6.5 percent per year. However, the recent oil crisis, increased level of global terrorism, and financial crisis have significantly affected the Saudi Arabian economy. Despite this, the latter is recovering following robust economic policies.

According to Daḥlān (1990), the country’s antitrust legislation and general low trade barriers in many business ventures have contributed to competition in the countries strong industries. The contest, in return, has led to production increase. Additionally, the Saudi Arabia is working closely with the International Standards Organization (ISO). The country is also leading in developing standardized guidelines for the commercial exports. With the country’s export becoming more engrained, the country has greatly benefited. Saudi Arabia commitment to capital investment has enabled the country to maintain its position globally in the petrol-chemical industries. The country’s declaration to capital investment in technology and machinery has aided in creating powerful machinery industry. The infrastructure in Saudi has provided support for development and intensive industrial upsurge. The country is currently implementing its modernization programs.

Demographics

The population of Saudi Arabia has increased tremendously over the last two decades and provides a ready market for the goods produced. Also, it provides the labor needed in the industries. Today, there are more than twenty million people in Saudi Arabia. However, a quarter of the population comprises of foreigners from the US, Africa, Europe, and other Asian countries.

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Proportionately, the size of the Saudi Arabian market has attracted investors because it is the largest commodities market in the Arab world. In addition, the country has eased the accessibility to the market through participation in free-trade zones. One of the social factors, which have fortified Saudi industries, is a domestic market that requires quality. The demand offers the motivation for the leading industries today. A national market, which depends on superior production from the internal manufacturers, creates an atmosphere of expectations for high-quality exports globally. The economic factors can be used to discuss the key industrial strengths of the Saudi Arabia. The speedy evolution of its capital and human assets provides a pathway to growth in chemical production, engineering, banking industries, machinery, and strong anti-trust legislations (Faizi, 1998).

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Culture in business refers to the attitudes, behaviors, values, underlying assumptions, and beliefs that exist among individuals in a business environment. These are usually unwritten and unspoken rules shared by people in a group that help them to work smoothly together. Conducting business on a global front requires awareness of cultural differences. What is normal in one country could be shocking or insulting in another country. Islam is the main religion in Saudi and the primary language spoken is Arabic. There are stiffer penalties for wrongdoers including chopping off body parts. There are higher rates of illiteracy in this country, and both men and women do not have equal education opportunities. Women are discriminated, and this hinders them from achieving full potential.

In conclusion, Saudi Arabia is an ideal destination for investors wishing to carry out operations in foreign countries. However, the inhospitable nature of some state citizens may hinder persons who want to invest there. Recently, there have been many instances of foreigners being mistreated. Despite this, the country’s geographic position provides it with resources advantage. In addition, the large population provides a ready market and cheap labor.