Conducting business in a foreign market opens up to many risks that are not present in the domestic market. Such risks include political, currency/financial, commercial, and cross-cultural risks. It is more difficult to anticipate risks in foreign countries because you are not likely a citizen and therefore not familiar with the country and its idiosyncrasies. When planning to conduct business in a foreign market, it is prudent to carefully anticipate the various risks you may face in that market. Understanding these potential pitfalls helps you develop strategies to address or mitigate the risks.
To prepare:
- Select a type of business that you would like to launch in a foreign market
- Select a foreign market (one in which you do not reside and are not highly familiar) to launch your business
Introduction
In international business, there are several risks, which can be emerged. The most important thing for the management of the company is to identify, analyze, and mitigate these risks in an effective manner. First, there is a need to choose the business, which seems pertinent to the specific county. Some marketing insights are also to be derived from starting the business in the specific country (Saudi Gazette, 2017). When identifying some risks, the management intends to have some good risk mitigation strategies to initiate and sustain the business process efficiency.
The Business: Retail
The retail business is in the limelight, as the company can emerge in the competitive market through differentiated products for customers. The retail business is the best choice in the country.
Country: Saudi Arabia
Retail business in Saudi Arabia is a good initiative, as this market is containing the potential for the retail business. However, there are some risks for the business management, which should be analyzed and mitigated.
Analyzing the Business Risks
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Cultural differences
The biggest risk that the retail business can face in this country is the cultural difference. The country depicts the traditional culture, which may contradict with key business objectives and strategies of the company. People may not accept different products due to their traditional values, buying patterns and perception. In a broad culture, the retail business is easy to execute. However, in his traditional culture, some complications may occur (Reuters, 2017).
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Political Risk
The Saudi political system is not democratic, as business legislation is usually done at the top level. The retail business can be triggered by some tough or complicated rules and policies in this country, which can hit the sustainability. The country has its quality measures, which may also create barriers to developing some new products (Scott, 2016).
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Intense rivalry
Making a successful entry in this market is not difficult. However, there are many international retailers, which have been emerged in this region. These firms are looking to differentiate products for customers, which leads towards the stronger brand image. Thus, starting the business in this country is risky, as it seems tough to convert customers (Saudi Gazette, 2017).
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Labor
People in Saudi Arabia like to own the work, as many firms are operating with foreign labor in this county. Thus, the increase in the labor cost is also a big risk, which is to be mitigated by the company management to enable the business sustainability (Bloomberg, 2018).
Strategies to Develop Risks
The cultural integration is the best strategy to mitigate the first risk. The retail business may come up with some attractive advertising campaigns, which depicts culture, values to target or attract customers. Also, regarding the political risk, the company should reshape its policy in this market, which can be aligned with the Saudi business rules. Cost leadership strategy and differentiation are two powerful strategies to beat competitors and emerge strongly in the Saudi retail market. Finally, to mitigate the labor risk in this region, it is necessary for this business to target young people only. The risk of high labor cost can be minimized (Reuters, 2017).
Conclusion
In the end, it is to conclude that the management must be aware of the different risk, which can occur in the business process in the foreign market. These business risks are quite different from the original country, and of course, the management has to redesign some strategies to make the successful entry and ensure the business sustainability. Along with the risk analysis, some risk mitigation strategies are good to develop in the foreign country to reduce the visibility of the impact. It is the best approach to start and make the business secure.
References
Bloomberg. (2018, january 18). Saudi retailer eXtra eyes profits rebound in 2018. Retrieved from http://www.arabianbusiness.com/retail/387159-saudi-retailer-extra-eyes-profits-rebound-in-2018
Reuters. (2017, October 16). Online retail comes to Saudi Arabia. Retrieved from https://www.iol.co.za/business-report/international/online-retail-comes-to-saudi-arabia-11589392
Saudi Gazette. (2017, October 21). Saudi Arabia holds 70% of $170bn Gulf retail sector. Retrieved from http://saudigazette.com.sa/article/519891/BUSINESS/Saudi-Arabia-holds-70-of-$170bn-Gulf-retail-sector
Scott, A. (2016, January 19). Saudi retail sector is its success story. Retrieved from https://www.thenational.ae/business/saudi-retail-sector-is-its-success-story-1.171520
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