How Gulf Companies Can Build Global Businesses

The McKinsey Quarterly recently commented on ‘How Gulf companies can build global businesses.’  This frank assessment references companies based in the Gulf Cooperation Council (GCC) states who are using the petrodollar windfall to expand strategically into global markets.  The piece also states that expanding globally for such companies will require the development of distinctive capabilities and skills.

Some of the referenced investments include DP World $7.1 billion acquisition of the British port and ferry operator P&O in 2006;  Saudi Basic Industries (Sabic) $2 billion acquisition of the petrochemical division of the Dutch chemicals and pharma group DSM in 2002; Dubai Aerospace Enterprise (DAE) paying $1.3 billion for the Swiss company SR Technics, the leading independent supplier of aircraft maintenance, repair, and overhaul services; and, Kuwaiti logistics group Agility (formerly PWC Logistics) buying companies in Singapore and the United States as part of a drive to become one of the world’s top logistics groups.

The commentary however points out that in order for such investments to bear fruit for GCC players, the advantages that drove margins at home—high-income customer pools, cheap labor, protected markets, and low energy costs—won’t be transferred to external markets, and they will need to become more efficient abroad to be profitable/competitive there.

Some of the areas of focus suggested include:

• A strong customer service ethos
• Integration skills - especially important when the acquirer is buying a company to gain its capabilities
• Finding and retaining managerial talent
• A change in corporate culture
• Working within the governance structures of other business environments, which may be quite different from the GCC norm

From our point of view, in addition to the above points, the positive momentum of these strategic global investments now needs to be directed to building a business culture that focuses on ‘customer needs’ in all aspects of business operations - from market research, innovation, branding, product development, design, to communication.   As global business leaders will attest, building a global business requires major investment in knowing and serving the global customer. 

In addition, just as the traders of Arabia did in earlier days, these GCC global business leaders would not only gain from global trade but also have the opportunity to contribute to global business thinking around corporate scandals, environmental concerns, and social responsibility by sharing the business ethics and value system of Islamic culture.

Comments

[Akram Ameer]

Alternatively, the key word for profts is brand name! Multinationals are minting money in the developing world just by selling their brand names. In Sri Lanka Unilever buys tea, grown by Sri Lankan farmers, sticks their brand name and sells to the Sri Lankans for double the price. They outsource almost the entire process, dominate the market without getting their hands dirty, and ship the profits home, that simple. Same way, in most of the lucrative consumer or industrial goods categotries, there is a dominant MNC sitting on the top raking in all the profits, leaving very little for the laggards.

My sincere advice to the would be MNCs of the Gulf is: build brand names based on quality, warmth and closeness to the consumers, and the world can be your football field.

Also try to learn and make use of the "Lovemarks" concept to evoke loyalty beyond reason. There are some excellent explanation at website:

http://www.lovemarks.com/index.php?pageID=20022&_fr_collectionid=9

May Allah help us.

Discussion welcome [email protected]

[mumby]

I always wish muslim to buy foreign companies and then rebuild those companies.Why not rich muslim buy food processing companies,IT companies,chemical companies,building substans companies,medical equipment companies,pharmaceutical companies,glasses companies,retail companies and so on and rebuild those companies.They can hire competence managers and competence officers from abroad to run companies.It is better they hire muslims in the west to cunduct companies.At the time they should train local people to run companies in the future,put them beside hire managers/people in oder they can learn in practical manner.

The companies that establish in the west should transfer to the low labor cost region and rich resourses region in muslim countries like Pakistan,Indonesia,Malaysia and so on.That transfer should go on gradually or partially

It is good for Muslim countries to send students to Japan,Korea,Taiwan and China to learn and get training in technologies, marketing and management.Muslim no longer need put eyes on the west in that knowledge and skill.They should turn eyes to east region which have bright performance in the future.They also should build new market in Asia instead of the west.That region have promise for good in the future.

[Rafi-uddin]

On the acquisition front there are certainly some healthy recent trends.

Saudi Basic Industries Corp (Sabic), a chemical manufacturing giant from Saudi Arabia, has recently purchased General Electric Co's plastics division, GE Plastics, for $11.6 billion in cash! There are many such investments emanating.

However, there is probably much to be desired in consumer product/service categories. 'Lovemarks' is indeed an excellent representation of the power of branding which is relevant mostly in consumer/ retail space. It speaks to how companies should focus on their customers and make them passionate about their products/ services.

There is certainly no reason why Ulker (Turkey based confectionary brand), Savola (Saudi based Food manufacturing company), Proton (Malaysian car brand) and other such consumer companies and brands can't add passion and personality to their products.

[Ghazzali Wadood]

The Sri lankan tea industry is a perfect example, I think there is ample products and services in the Muslim world (outside of Oil) that could be marketed in this flat global market place. I think education and sharing would be the need of the day. Major kudos to Sheik Mohamed of UAE for setting up an educational endowment that can help to educate young Muslims in the Middle East.