Business Proposal: Taking Solar Solutions to Saudi Arabia

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Saudi Solar

Solar Solutions does not presently have much international experience. In order to succeed in a foreign market like Saudi Arabia, it will need to significantly upgrade its international management capabilities. The company will need to not only ensure that its principals have international business skills, but that the company has a plan to help bring its product overseas. Initially, the overseas expansion is likely to rely on exporting, necessitating only a foreign partner, but eventually the company will want to have its own representation in the Gulf region, given how lucrative that market is expected to be.

There are many techniques for building the international capabilities within the organization. Recruiting is the easiest shortcut. Doing business in Saudi Arabia is challenging -- this is not an overseas assignment for the first-timer, unless that first-timer is an Arab person well familiar with the business culture there. However, in addition to recruiting the senior management team will need to build its own international business skills before venturing into these foreign markets. Figueiredo and Mauri (2012) notes that cross-cultural exchanges are a good way to build such experience. The principals can, for example, gain experience while still in school by engaging in visits to the region, or even by hosting Arab students. The company after it is formed can engage Arab interns in order to help build the cultural capabilities of the senior management team prior to attempting foreign market entry.

It will also be necessary to form an alliance with a company that has the required skills to work in the Saudi environment. There is no requirement that a foreign firm must have a Saudi partner in order to operate in the country, but there are specific financial incentives that are provided by the Saudi government for investment that are only available to firms where there is at least 25% Saudi ownership (Saudi British Bank, no date). Moreover, having a local partner is critical for success in countries where the business practices are vastly different from those in America and where business culture emphasizes relationships (Hofstede, 2013).

The path to foreign market entry is expected to be gradual. The home market of Solar Solutions is Arizona, which is a great market for solar technology. The surrounding states -- Nevada, New Mexico, California, for example -- are all great solar markets as well. Thus, there is no immediate need to expand internationally. International growth, therefore, will come more organically, when growth in these vital domestic markets begins to slow. At first, exporting is the likely way to enter the Saudi market. This method is relatively low risk, and will provide us with important feedback about the likelihood of success in the different markets of the Arabian Peninsula and Persian Gulf region.

Once management of Solar Solutions has been in the Saudi market for a year or two, it will have a better sense not only of the market's potential but also of how to operate in the market. It is not uncommon for a company to enter a market with the help of a foreign partner only to fly solo once market expertise has been acquired -- Starbucks has done this with China, for example (Anderlini, 2013). The company will therefore transition from an exporting model to a joint venture model, and eventually will seek out the position of having a wholly-owned subsidiary in the Kingdom (QuickMBA, 2013). It is felt that this trajectory will allow the company to maximize economic opportunity in Saudi Arabia while leaving it the option of taking control of its operations at a later date, especially once its international competence has been well-established.

It is believed that once the company sets up its foreign subsidiary in Saudi Arabia that it will pursue a polycentric staffing strategy. A polycentric staffing strategy is one where the company hires management from the foreign country. By contrast, an ethnocentric staffing strategy is one where the company hires primarily from the home country (Johnston, 2013). The type of strategy that is optimal is dependent on the type of business. The polycentric strategy is predicated on the assumption that local talent knows how to do business in the local market. When the company is primarily in a sales function, this is especially true, because locals know how to sell to locals (Padala, 2010). An American, knowing little of Saudi culture, traditions, business norms or even of Arabic, would have no chance of succeeding in the Saudi market. Local Saudis are going to be the strongest sales representatives. Given that the company's operations in Saudi Arabia are expected to be primarily sales even when there is a wholly-owned subsidiary there, it is critical that local sales talent is utilized.

In order to succeed with a polycentric strategy, two things must happen from the staffing end. First, when the company goes overseas with a joint venture, the Saudi partner needs to supply almost all of the managerial talent and must supply all of the sales talent. This is necessary because Solar Solutions will at that point have little knowledge of the local market conditions. Over time, however, the local Saudi company may be bought out. When this occurs, Solar Solutions will need to have a plan for bringing in top executive talent into this organization. To do this will require fostering strong relationships in the country during the previous years of doing business there. It is important that there is a managerial talent pipeline, whether it arrives from the joint venture partner or whether Solar Solutions has used some of its time in the country to recruit this talent. Most likely, though, the recruitment of this top executive talent is likely to be in-house, as the creation of the wholly-owned subsidiary will derive mainly from the purchase of the joint venture entity.

There is likely to be an executive from the U.S. working on the Saudi project at all times. This is going to present an interesting challenge. On one hand, such an opportunity is tremendous because it will be one of the best opportunities in the country. However, working in Saudi Arabia is substantially different than working in the U.S. While other Arab countries have some access to Western life, Westerners in Saudi Arabia must live in enclaves, and only there can they have some semblance of normal life. Even in the wealthiest cities, life for an expat American can be a challenge (Einhorn, 2013). The challenge of working there should be coupled with a significant executive reward for someone who goes there to build the business and make that sort of contribution to the betterment of the company. Eventually, it will have to be considered that developing Saudi talent is going to yield positive results, so a program should be in place to take good Saudi candidates to the U.S. In order to help them build their careers within the company, eventually grooming them for a top position in their homeland.

Building the skills of workers is another element of challenge. Working at the sales level, it is important to understand that many key positions in the Saudi economy are actually held by expatriate workers from the Indian subcontinent, who account for 20% of the total population (CIA World Factbook, 2013). These workers may therefore relate better to subcontinental talent than they would to Saudi talent; the reverse is true for Saudi customers. There is high youth unemployment in Saudi Arabia, even among college graduates (Al-Mulhim, 2013). They only thing missing, apparently, is the work ethic. That is what must be fostered, but at least the government will be supportive of any effort to create good quality jobs for Saudis.

The local leaders of the firm will likely adopt an autocratic leadership style. There are two reasons for this. The first is that Saudi culture is a high power distance culture (Hofstede, 2013). Because of this, Saudis expect their bosses to be bosses, and respect hierarchy. In addition, the sales team members work with a high degree of independence so when they do interact with their managers, the managers need to be authoritative in nature. There is no need for collaboration on sales, although the managers should be available to help work out problems that the members of the sales force might have.

The organizational structure of the international organization will begin with an exporting agreement, but when we officially move over to the Saudi market it will be via joint venture. Even at this stage, it is important that Solar Solutions holds controlling interest in the subsidiary. This will allow decisions to be made in a centralized manner. That said, decision-making for the Saudi market should be centralized in Saudi Arabia, rather than in the U.S. The American leadership team will want to contribute a little bit, but must allow the Saudi operation to have some degree of independence in order to maximize the skills and experience of the Saudi management. The structure will otherwise be flat. It is important that… [END OF PREVIEW]

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Taking Solar Solutions to Saudi Arabia.  (2013, April 15).  Retrieved September 20, 2019, from https://www.essaytown.com/subjects/paper/taking-solar-solutions-saudi-arabia/2049407

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"Taking Solar Solutions to Saudi Arabia."  Essaytown.com.  April 15, 2013.  Accessed September 20, 2019.
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