GDP: $53.97 billion; GDP real growth rate: 1.8%; inflation rate: 2.8%; unemployment rate: NA%
Per capita purchasing power parity $22,100 (2002 est.)
Total imports: $30.8 billion (2002)
Total Exports: $ 44.9 billion (2002)
Exchange rate: Emirati dirhams per US dollar - 3.67 (2002), 3.67 (2001), 3.67 (2000), 3.67 (1999), 3.67 (1998)
Exports include: crude oil 45%, natural gas, re-exports, dried fish, dates
Imports include: machinery and transport equipment, chemicals, food
D. POLITICAL AND LEGAL REGULATIONS
Government type: federation with specified powers delegated to the UAE federal government and other powers reserved to member emirates
Imports into UAE can only be undertaken by importers who have appropriate trade license issued by the respective Department of Economics/ Municipality of each Emirate.
The UAE practices a liberal trade policy with no protective tariff or non-tariff barriers on imports. All goods imported into the UAE are subjected to 5% import duty (only tobacco attracts 100% import duty) on c.i.f. value at any point in the UAE. C.i.f. value is normally calculated with reference to commercial invoices covering the relative shipment of the goods. However, the Customs Department of the UAE is not bound to accept the value as in the invoices. In such cases, an estimation of value by the customs will be used for calculation of import duty.
Food products must carry dates of manufacture and expiry dates and meat for the local market must have a certificate to prove compliance with Islamic law. No import duty is imposed for goods on transit or trans-shipment.
All import documents (invoices and certificates of origin) of industrial raw materials (exempted from duty) have to be endorsed by the Ministry of Foreign Affairs, Malaysia to be eligible for exemption.
Trade practices in Dubai are in line with normal international standards. All correspondence should be in English or Arabic. As a sophisticated market, full technical specifications should be provided with CIF Local prices with Middle East references.
Payments are normally effected by letter of credit.
The UAE is a signatory of the General Agreement on Tariffs and Trade (GATT) and World Trade Organization (WTO).
E. COMPETITION, DISTRIBUTION, AND PROMOTION:
1. COMPETITION:
The UAE is a fairly competitive market but highly receptive market for Malaysian goods and services.
Because the UAE (Dubai) market is smaller and does not benefit from the same economies of scale, local retailers have tended to seek a higher profit margin than is customary. Countering this tendency toward higher prices, the availability of similar goods throughout the Middle East market introduces competitive pressure to keep prices down.
2. DISTRIBUTION:
In UAE, there are seven emirates, however Abu Dhabi, Dubai and Sharjah are the leading centers in the UAE for importers and for manufacturers agents in many lines of goods.
Dedicated sales and distribution sales channels have evolved for most imported products and services, ranging from wholly owned subsidiaries of foreign manufacturers to independent trading companies that buy and sell on their own account. Between these two ends of the spectrum are independent resellers, sales agents, and stocking distributors that have contractual relationships with their suppliers.
The importers/factors provide shipping, forwarding and customs clearance services. They will also, on behalf of overseas manufacturers, warehouse goods, price them for the local market; deliver anywhere in the UAE.
3. PROMOTION:
It is advised that print and other advertising designed for the UAE market be reviewed by a local advertising agency to modify promotions for local legal, cultural and other differences.
About 60% of advertising expenditures go to press advertising. The main vehicle for press advertising is the national dailies in English and Arabic (Gulf News, Khaleej times) and also towards promoting goods in the hypermarket’s (Carrefour, Lulu Hyper, Discount Centre, Al Falah) in house flyers which are distributed every fortnight. Total circulation of national newspapers is approximately 15 million
About 31% of the annual advertising expenditures, goes to commercial television and billboard advertising exposure. Commercial television programs are delivered on a regional basis and advertisements may be run nationally.
INDIA
The Indus Valley civilization, one of the oldest in the world, goes back at least 5,000 years. Aryan tribes from the northwest invaded about 1500 B.C.; their merger with the earlier inhabitants created the classical Indian culture. Arab incursions starting in the 8th century and Turkish in 12th were followed by European traders, beginning in the late 15th century. By the 19th century, Britain had assumed political control of virtually all Indian lands. Nonviolent resistance to British colonialism under Mohandas GANDHI and Jawaharlal NEHRU led to independence in 1947. The subcontinent was divided into the secular state of India and the smaller Muslim state of Pakistan. A third war between the two countries in 1971 resulted in East Pakistan becoming the separate nation of Bangladesh. Fundamental concerns in India include the ongoing dispute with Pakistan over Kashmir, massive overpopulation, environmental degradation, extensive poverty, and ethnic and religious strife, all this despite impressive gains in economic investment and output.
- GEOGRAPHY:
- Location: Southern Asia, bordering the Arabian Sea and the Bay of Bengal, between Burma and Pakistan. The total area is 3,287,590 sq km land.
- Climate varies from tropical monsoon in south to temperate in north
- Terrain is upland plain (Deccan Plateau) in south, flat to rolling plain along the Ganges, deserts in west, Himalayas in north.
- Natural resources: coal (fourth-largest reserves in the world), iron ore, manganese, mica, bauxite, titanium ore, chromite, natural gas, diamonds, petroleum, limestone, arable land.
- Land use: arable land: 54.35%, permanent crops: 2.66%, other: 42.99% (1998 est.)
B. DEMOGRAPHIC FACTORS
Population: 1,049,700,118 (July 2003 est.)
Ethnic groups: Indo-Aryan 72%, Dravidian 25%, Mongoloid and other 3% (2000)
Languages: English enjoys associate status but is the most important language for national, political, and commercial communication; Hindi is the national language and primary tongue of 30% of the people; there are 14 other official languages: Bengali, Telugu, Marathi, Tamil, Urdu, Gujarati, Malayalam, Kannada, Oriya, Punjabi, Assamese, Kashmiri, Sindhi, and Sanskrit; Hindustani is a popular variant of Hindi/Urdu spoken widely throughout northern India but is not an official language
C. FINANCIAL AND ECONOMIC FORCES
India's economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of support services. Overpopulation severely handicaps the economy and about a quarter of the population is too poor to be able to afford an adequate diet. Government controls have been reduced on imports and foreign investment, and privatization of domestic output has proceeded slowly. The economy has posted an excellent average growth rate of 6% since 1990, reducing poverty by about 10 percentage points. India has large numbers of well-educated people skilled in the English language; India is a major exporter of software services and software workers; the information technology sector leads the strong growth pattern. The World Bank and others worry about the continuing public-sector budget deficit, running at approximately 10% of GDP in 1997-2002. In 2003 the state-owned Indian Bank substantially reduced non-performing loans, attracted new customers, and turned a profit.
GDP: $2.664 trillion (2002 est.); GDP real growth rate: 4.3%; inflation rate: 5.4%; unemployment rate: 8.8%
Per capita purchasing power parity $2,600 (2002 est.);
Total imports: $53.8 billion f.o.b. (2001)
Total Exports: $44.5 billion f.o.b. (2001)
Exchange rate: Indian rupees per US dollar - 48.61 (2002), 47.19 (2001), 44.94 (2000), 43.06 (1999), 41.26 (1998)
Exports include: textile goods, gems and jewelry, engineering goods, chemicals, leather manufactures
Imports include: crude oil, machinery, gems, fertilizer, chemicals
D. POLITICAL AND LEGAL REGULATIONS
Government type: federal republic
There has been a consistent decline in the import tariff over the past seven years – the peak tariff is down from 350% in 1991 to 25% in 2003, and the Government is committed to reduce the peak tariff rate progressively to 20% by 2004.
Trade Facilitation: In the budget for the FY 2003/04 measures have been taken to put customs clearance procedures in line with best international practices, including a self-assessment scheme for importers and exporters. Physical examination of imports will henceforth be done on a computer-selected random sample basis rather than on the orders of customs examining staff. Customs documents will henceforth be scrutinised after clearance rather than concurrently as at present.
E. COMPETITION, DISTRIBUTION, AND PROMOTION:
1. COMPETITION:
India has a strong competitive advantage in processed food. There are numerous manufacturers such as MTR Foods Limitied (with distributors in Bangalore, Madras, Hyderabad and Vijayawada), Tasty Bite, Gujarat Co-op Milk Marketing Federation Ltd (GCMMF), Hindustan Lever and Britannia Industries
2. DISTRIBUTION:
While the distribution of packaged food in India is conducted mainly through kiranas and street vendors, value sales through these traditional retailing formats were increasingly cannibalised by mushrooming of supermarkets over the review period. The retailing scene in India is evolving, and the emergence of these modern retail stores is gradually shaping changes in the shopping habits of the Indian population.
Offering a one-stop shopping experience within an air-conditioned and comfortable environment, these new retail stores have been able to capture the attention of urban households, who seek value added products away from the no-frills service and products offered by traditional food stores. More importantly, these upmarket retail stores offer consumers a wider range of products, as well as premium goods not typically found in kiranas.
India is moving slowly towards the organised retailing concept of supermarkets; especially in South India.
A further impediment, however, is the retail structure with a very large number of small local shops, which makes distribution more complex.
3. PROMOTION:
The typical Indian consumer is discerning, and just using the brand name of the product is not sufficient. The consumer wants real value for money as India is a very price sensitive market. A number of well known foreign brand names have failed, whilst others have done well. A popular way to introduce new types of goods in the market place is to participate in Trade Fairs, which are now being held regularly in metros like New Delhi, Mumbai, Chennai and Kolkata.
Rising levels of inflation could begin to erode retail prices as there is little room for price increases
ENTRY MODE CHOICE
There are numerous market entry strategies that we can adopt when setting up offshore. Each has differing levels of risk, legal obligation, advantages and disadvantages. Following is an overview of factors that we considered when assessing our options.
Exporting
Exporting is the marketing and direct sale of domestically-produced goods in another country. Exporting is a traditional well established method of reaching foreign markets. Since exporting does not require that goods be produced, no investment in foreign production facilities is required. Mosts of the costs associated with exporting take the form of marketing expenses.
Exporting commonly requires coordination among four players:
- Exporter
- Importer
- Transport provider
- Government
Strategic alliances
If we are interested in going beyond the simple export of goods, licensing, joint ventures (JV) and offshore operations should be explored. While direct exporting may be a profitable method of market entry for some businesses, licensing manufacturing rights to your product to a foreign company or setting up a foreign manufacturing JV may be viable alternatives. Strategic alliance partners are often identified through bankers, accountants, business consultants, industry associations and networks, and government contacts.
Joint venture
A market entry option which the exporter and a domestic company in the target country join together to form a new incorporated company. Both parties provide equity and resources to the JV and share in the management, profits and losses. The JV be limited to the life of a particular project. This option is popular in countries where there are restrictions on foreign ownership, e.g. China and Vietnam.
Selection of new market analysis
After conducting the foregoing risk assessments of the 2 countries, the United Arab Emirates and India, several factors were screened as a basis for recommending which market to pursue.
The United Arab Emirates rose to the top, for the following reasons:
- Geographically and demographically: Of the two countries screened, the UAE maintained its status as having one of the highest per capita incomes in the world. It stood at Dh72,800 ($19,835) in 2001 and around Dh69,260 ($18,870) in 2002.
- The UAE people have also remained among the biggest spenders in the region, with the private consumption which covers mainly purchases of consumer products and services by individuals surging to around Dh124.3 billion ($33.8 billion) in 2002 from nearly Dh117.2 billion ($31.9 billion) in 2001.
- Financially and Economically: The UAE has the second largest economy in the GCC and has the highest per capita income in the GCC.
- The UAE has experienced seven straight years of economic growth with very modest inflation. With virtually no unemployment and registering over ten straight years of positive trade balance, the UAE economy has out performed nearly every economy in the world.
- The UAE has become the third biggest economic power in the Arab world as massive by the public and private sector nearly doubled it's GDP in the past decade
- Politically, the bilateral trade between UAE and Malaysia has increased substantially over the past years. Total trade which amounted to US$ 475.96 million in 1995 increased substantially to US$ 989.02 million in 2002 an increase of 107.7 percent.
- In terms of competition, distribution, and promotion:
- Due to lack of local production UAE will continue to be a major importer of foodstuff. In recent times UAE has seen many value added food processing industry coming up. Malaysia has been a major supplier of confectionery and confectionery preparations in the UAE market. However, opportunities lie in the canned and ready to eat food sectors. Also given the predominant Muslim population of the country, demand and opportunities for halal food is high in this region.
- Numerous dedicated sales and distribution sales channels have evolved for most imported products.
- Similarity to Malaysia advertising practices, the UAE is a very positive factor when entering a market where the advertising system is highly developed.
In a further effort to qualify the outcome of the country risk assessment, VM Pastry Manufacturing desires to determine the strength of the current recommendation and the possibility of additional business opportunities in the Middle East marketplace. As consumers are greatly influenced by promotion and advertising, personal contact is also important. Therefore, we will work with a local Dubai based distributor to conduct in-store promotions, handouts, and other forms of promotion. Market surveys (see Exhibit A) will be randomly performed where product samplings are offered, in populated supermarket test sites. Consumers will be greeted with a cooking demonstration of Roti Paratha and will be asked to take a few minutes to try some samples ant to answer a few questions regarding their tastes and shopping habits, as well as their reactions to the products sampled.
The company’s growth in the Middle East (United Arab Emirates) will be dependent upon quality relationships with the distributors who will adhere to VM Pastry Manufacturing’s prompt inventory placement and quality product standards.
EXHIBIT A
Consumer Survey
Have you ever purchased a product of this type?
Who uses the product? Please mark all that apply.
How often do you purchase the product?
Do you like the taste of Roti Paratha (provide sample)?
Would you purchase the product?
Thank you for taking time to try Roti Paratha.
(Provide consumer with a sample of Roti Paratha)
REFERENCES
- European marketing data and statistics 2003, 38th edition. (2002). London: Euromonitor International.
- Middlebrook, A.L., Nardone, A., Kozelnik, S., McCarthy, M. (2003) Official export guide, 2003 edition. East Windsor, NJ: Commonwealth Business Media.
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