The Rise of Saudi Arabia: Framework for Success in the Region
Part 5 of 5
The market in Saudi Arabia is large and can generate significant rewards for companies that successfully capture its value. There are three fundamentals to creating success in the KSA market: finding the right local partner, using a clear sales process, and creating tailored marketing for the region. The KSA market is unique. Businesses seeking to enter the region should acknowledge this through their operations and business strategy.
A Local Partner is Essential
Because the KSA market is so unique, a local partner is essential. Businesses should have criteria and strategies to utilize local partners effectively. Those may include the following:
- Clearly defined roles and responsibilities that rely on the local partner to develop new
relationships in the region.
- A clear sales process will ensure satisfaction on both ends and facilitate a fast and effective capital or commercial transaction.
- Rights such as exclusivity, rights of first refusal, rights of first notification, franchising rights, licensing rights, distribution rights, or reseller rights.
- Minimum order quantities needed to maintain or achieve certain rights.
- Ability and experience in localization to make sure key marketing messages can be tailored.
- State-level contacts for any compliance or regulatory hurdles in the future.
Customize Business Operations for KSA
Business operations should be customized for KSA. Deciding which operations to customize greatly depends on the business model. J&A recommends companies utilize the typical categories of market entry, sales and marketing, operations and support, and scaling and exiting. Market entry and sales and marketing are tactical while operations, support, scaling, and exiting are categorically strategic.
During market entry, the first month should be spent selecting and clarifying the role of a local partner, who can assist in developing a regional pricing strategy and investing in start-up infrastructure.
- Clarify the role of the local partner and assign KPIs to the relationship.
- Invest in setup infrastructure based on the business model.
- Develop a regional pricing strategy.
Sales and Marketing
The next two to four months will be spent setting the groundwork for sales and marketing operations that are tailored for the region. Operations and support are ongoing and businesses should localize only what is necessary, such as sales, customer service, and office functions.
- Identify customer personas and lead generation; always focus on top-level decision-makers.
- Develop a plan to continue building sales leads.
- Understand the consensus-driven decision-making associated with GCC culture.
Operations and Support
- Localize only the necessary business operations based on an HQ and subsidiary strategy.
- Maintain centralized hubs of product development, service development, innovation, and back-office functions.
- The most common localized operations are sales, account management, and customer service.
Scaling and Exiting
After the first two years, businesses can focus on scaling and exiting. Accurate reporting, leveraging the GCC presence, and showcasing a global business will help increase brand awareness for an exit or continued growth.
- Keep reporting precise and accurate to enable spinoffs and divestitures.
- Leverage GCC presence for cost and revenue synergies as much as possible.
- Capitalize on the relative strengths of the markets in which you operate based on growth or exit strategies.
KSA Pricing and Market Adoption Is Unique
Price elasticity is higher in KSA than in the USA. Because of this, companies entering the market must be prepared to negotiate.
Companies should not overprice their products or services in KSA, but they should give the buyer an opportunity to negotiate for value.
- Companies should understand market critical mass timing. Initial sales are difficult to achieve but adoption rates are faster than in markets like North America and Europe.
- The KSA market is significantly smaller than North America and Europe; companies should have an expansion strategy into other GCC and MENA markets after initial sales are created in KSA.
We hope you’ve enjoyed this series on the rise of Saudi Arabia. We reviewed the kingdom’s history, unique competitive advantages, anticipated economic changes through its Vision 2030 program, and a framework for utilizing this information to generate success in the region as a foreign company. KSA faces competition in the global top 20 economies, but there is no doubt the country will continue to expand and become an increasingly powerful player, both in MENA and across the globe.
Source: IAGS | The World Bank | IMF GCC Banking | IMF GCC Markets | IMF Trade and Foreign Investment | Saudi Arabia Vision 2030 | UAE Ministry of Finance | McKinsey and Company