Internationalization of SMEs: Case Study of Al-Jaber Engineering in Qatar

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Table of Contents

Management
Projects
Strategic Reasons for New Market Entry and Strategy
New Market Entry Strategy: Partnerships
Reference List

Various small and medium enterprises (SMEs) in world nations engage in different businesses. Some of the firms have their presence in the international arena but some are only operating within the borders of the parent nations. An example of such an enterprise that has its presence in more than one country is Qatar’s Al-Jaber Engineering (JEC) which is only active in Persian Gulf countries (Al Jaber Engineering, 2021). The firm is affiliated to other SMEs which when jointly assessed can make a large multinational, Al-Jaber Group. The companies that cooperate under Al-Jaber Group operate in sectors such as engineering and plant machinery, building and construction, trading, manufacturing, motor vehicle sales, security systems installation, polyclinics, hotels and food supply chain, and manpower supply (Al Jaber Engineering, 2021). The group also addresses key customer needs in the fields of infrastructure, power and process industries. Al-Jaber Engineering owes its success to its highly motivated team, fully functional infrastructure, and the latest equipment which the company uses in tackling simple and complex undertakings (Al Jaber Engineering, 2021). Indeed, the company has grown since its inception in terms of assets and financial strength.

Management

JEC is a family-owned business and therefore the top management positions are occupied by related family members who are the key stakeholders. The enterprise’s chairman is Mr Mohammed Sultan Al Jaber (Al Jaber Engineering, 2021). After concluding his civil engineering education from the United States (US) Mohammed joined their lineage’s business (Al Jaber Engineering, 2021). Mohammed has provided effective leadership, management, and supervision to the company, enabling it to be a key provider of gas, petrochemical, oil, gas and electricity services to clients. Also in the top management is Jaber Sultan Al Jaber who is the vice-chairman and supervising human resource department in addition to the whole group’s administration. Jaber possesses an enormous understanding of leading human resource practices, industry trends, and government’s policies and procedures (Al Jaber Engineering, 2021). Another vice-chairman of Al-Jaber Group is Salah Sultan Al Jaber who is responsible for the company’s finance and business development management (Al Jaber Engineering, 2021). As a matter of fact, the management skills of the top leaders of JEC have pushed it to greater levels of excellence.

Projects

The success of JEC lies in the numerous projects it has been able to oversee their completions. For instance, JEC was contracted by Lusail Real Estate Development Company in 2015 to deepen the South Marina channel in Malaysia and also dredging the additional isolated areas, including deepening the Central Lagoon entrance (Al Jaber Engineering, 2021). Earlier in 2012, Qatar Petroleum engaged JEC in the reconstruction of the existing roads and construction of new roads with all associated services and infrastructure including the upgrade of existing utilities at the Mesaieed Community Area (Al Jaber Engineering, 2021). Also, the company has worked for RasGas Company’s project of early site earthworks by removing marine deposits for Barzan onshore project at Ras Laffan and completed the work in July of 2011(Al Jaber Engineering, 2021). Remarkably, JEC’s completed projects not only elaborate on its immense engineering knowledge pool but also speak clearly of the great financial investment and the firm’s ability to complete every single particular assignment it undertakes.

Strategic Reasons for New Market Entry and Strategy

Firstly, JEC should enter a new international market because the market has some emerging economies that depend on inward foreign investment to accelerate their growth. When JEC enter into such markets, it means that the foreign direct investments it brings to the nations will not only provide additional employment but also the transfer of technical skills to the locals (Apetrei, Horodnic, and Kureshi, 2015). Additionally, the existence of emerging economies is also important to JEC as it may able to acquire local business partners in the new international markets and as such becoming a multinational corporation (Boersmaa, Ghauri, and Buckley, 2003). The business collaboration between JEC and the indigenous enterprises makes the companies acquire strategic assets such as the brands, managerial expertise and distribution channels hence expanding the market for the two businesses (Buckley et al., 2020). Through the collaboration, JEC stands to gain a lot from the emerging economies and the benefits are also applicable to the local firms in such economies.

Secondly, JEC should seek new international clients that are outside the Persian Gulf because market drive factors are pushing the internationalization of all economies. In this particular era of the information age, many customers around the world are having similar needs in oil and petroleum products among other services that can be offered by the JEC (Udomkit and Schreier, 2017). As such, the clients’ needs are becoming a compelling factor for the internalization of many commercial entities. With technological progress and global communications, many people around the world are exposed to similar messages, products and services (Lobo et al., 2020). Free trade and unrestricted travel are some of the factors that have led to the homogenization of customers’ around the world (Ahi et al., 2017). Indeed, preferences for different products are becoming less localized to an international approach to products and services acquisition. Therefore, JEC is at an advantage because the services it provides are needed all over the world since globalization has created comparable clients’ in the international market.

Additionally, internationalization has created many global customers who are not only living in Qatar, the Kingdom of Saudi Arabia or any Gulf country but also in the emerging markets and developed nations. The international clients may range from individual businessmen and governments in need of engineering products and energy services. Naturally, these specific international clients may want to get their services from international firms with a global presence, implying that JEC may be disadvantaged if it focuses on the Gulf countries alone (Castagna et al., 2020). The primal reason for engaging global clients is that they have spurred the development of the huge multinationals that are currently in the international market scene (Alon et al., 2020). Accordingly, the market share that is represented by the global clients cannot be ignored by JEC if it wants to internationalize.

Global channels that have been developed by the existing multinational corporations can also be relied upon by JEC in its internalization pursuit. Currently, the distribution and logistics firms that offer seamless transportation and storage services around the globe are making it easier for firms to globalize (Hollensen, 2020). These companies have established requisite developments in the channel infrastructure. The integrated networks have therefore made it possible for companies to trade in many parts of the world because of the multinational integration of transport systems (Lasserre, 2018). As a matter of fact, the storage facilities that JEC may need for its large pieces of machinery can then be found in the overseas countries it intends to undertake its operations.

Moreover, there exists a transferable marketing strategy among many SMEs that allows for the usage of the same marketing approaches in different nations. The stratagem that JEC uses in the six Persian Gulf countries should also be extended to other market spheres because it has a transferable marketing strategy in those areas (Hill and Hult, 2019). JEC has the financial ability to package, brand and advertise itself in countries other than Qatar, Kuwait, Saudi Arabia, Oman, and United Arab Emirates. The company stands to be successful in employing a transferable market approach because it has proven to be successful in the Persian Gulf region and they can still apply the same method or use a slightly different scheme in the new international market. Clearly, internationalization is the best way for JEC to get its good business ideas leveraged.

Also to be born again global increases JEC’s competitive advantage over other local firms and international business competitors. Being an engineering firm, the examples that JEC sets on the international market platform provides a strong incentive for local companies to follow suit and this is ideal for business operations for JEC itself because it will consequently grow (Solopova, 2019). Such competitive drivers will energize JEC to match its moves to those of its business rivals or lose market share to them. Also, there is legitimacy in trying to match a competitor’s move because it eases the task of convincing doubtful shareholders and reluctant subsidiary management which may exist within the JEC’s management ranks (Alam, 2018). Undoubtedly, venturing into the foreign markets by JEC enables it to compete with the international firms that have already entered JEC’s domestic market by counterattacking them in overseas markets (Alam, 2018). On that account, the emergence of strong global competitors strengthens JEC’s business operations and goals hence leading to its expansion.

Being in the engineering sector, JEC requires internationalization to be efficient because the industry as it is does not generate economies of scale in the Persian Gulf countries only. Scale economies entail the unit cost reductions made possible by long series of project undertakings within a given JEC’s subsidiary and to achieve this, an ancillary needs to serve more than one foreign market (Arora and Kaur, 2019). Plunging into a new international market can enable the engineering firm to enjoy the economies of scope by offering a wide selection of building and construction services (Green and Keegan, 2020). In essence, the economies of scope should make JEC offer uniform services across the world. Nevertheless, JEC stands to benefit from economies of scale and scope only if it internationalizes but with central management of the distribution of its services.

Technological advancements that have been brought by the internet also make it desirable for JEC to venture into more foreign markets. It is inarguably true that the internet is inherently global (Humphrey et al., 2020). Anyone in any part of the world can access the World Wide Web and its homepages. With this knowledge, JEC can develop its foreign presence without actually being there through an office establishment (Vahlne, 2020). JEC can receive the construction contracts abroad, get paid via credit card and ship its equipment or partner with any local engineering firm to do the project (Soares, Farhangmehr, and Shoham, 2007). As appropriate, through e-commerce JEC can increase its global business presence and reduce the costs that may be incurred in establishing physical business premises.

Government policies across many states and international trade regulations are presently favourable to JEC and can propel the firm to the highest expansion levels in the international market. For instance, in Qatar within which JEC is operating, it is a government policy for every foreign company to find a local partner within the country (Hill and Hult, 2019). Being a domestic company in the nation, JEC may choose to partner with another foreign firm and such collaboration be reciprocated by the same company in its domestic market. As evident, the government of Qatar is encouraging business partnerships between the local enterprises and foreign commercial entities thereby promoting internationalization (Hill and Hult, 2019). Another guideline that promotes the internationalization of SMEs is the origination of Industrial Standards of Operation (ISO) 9001, which is a global standard mark of certification. This is important because the return on investment in improved operations to acquire certification is much higher as the number of countries in which a company does business increases. Notably, the government policies and regulations serve to encourage uniformity of business operations everywhere in the world.

New Market Entry Strategy: Partnerships

Based on the projects that have been undertaken and completed by the JEC and also its reputation in the engineering sector, a partnership is the market entry strategy that should be preferably applied. For countries with strong business competitors in construction and engineering, the general partnership should be employed by JEC with the firms. The would-be business partner and JEC sign a partnership agreement without having to form a new business entity (Schweizer, 2010). The general partnership stratagem works to the advantage of JEC because it can penetrate the domestic market of its partner and also partake in the sharing of the profits as stipulated in the partnership agreement (Sahebia, Nickel, and Ashayeri, 2015). A general partnership is a core to the internalization of JEC in areas that it has formidable business competitors but it needs to establish a prolonged presence.

Apart from the well-established companies, JEC can still partner with those upcoming SMEs in the foreign market through a limited partnership. In this case, a partnership is still valid but it needs to employ limited partnership with such firms. JEC and the local firms should identify another general company that is fully responsible for the business while they contribute monies to the managing of the business (Miller and Yang, 2016). The limited partnership enables JEC not to lose its invested money but gain returns in addition to mitigating risks associated with losing all the investments as a result of collaborating with a foreign startup.

The partnership strategy of market entry is also important in all countries if JEC wants to succeed in the internalization process because all economies are covered. Emerging economies require limited liability partnerships because JEC and its business partner continue to actively manage the business but each partner’s liability for another’s action is limited (Mc Cormick and Somaya, 2020). Better still, this market entry scheme still allows JEC and its all partners to bear the full responsibility of the debts and legal liabilities of the business (Arora and Kaur, 2019). Ostensibly, a limited liability partnership is to foster discipline and professionalism among business partners.

Before choosing which form of partnership works well in a specific market sphere, JEC must ascertain the best structure that works well for the engineering sector. Prior to entering into a partnership with any foreign firm, JEC should check the websites of that particular country to find out which available types of partnerships are allowed within certain countries and the ones permitted for the building and construction industry. Besides, JEC can share its mission of being the premier contractor to gauge contribution and expectations from the partnership (Al Jaber Engineering, 2020). Depending on each company’s goals the best structure of partnership that befits the business is at last chosen.

The next important step in partnership is the drafting of the agreement. Compared to a corporation article of corporation, the agreement serves to establish how the business will be managed, sharing of the profits and the losses, and dissolution of the partnership (Castagna et al., 2020). The agreement is then signed and kept in a permanent file for future reference by both the JEC and its business partner (Lobo et al., 2020). Most importantly drafting of the agreement may call for the inclusion of attorneys to help with the formulation as the need may be.

At the base of the partnership process lie naming and registering the business. Before filling the paperwork, JEC needs to find an available, permissible name. In search of business identity, JEC consults partner name regulations (Hollensen, 2020). As well, JEC should check corporate designator regulations and the availability of names to choose among (Arora and Kaur, 2019). Once a name has been proposed, it is also the responsibility of both JEC and its partners to ensure the name is not taken. With the name of the business, JEC and its business partner goes further to the last step of business registration (Hollensen, 2020). The licenses that are required to conduct business are also applied for and obtained during the registration process. Essentially, the market entry strategy of partnership is effective for JEC which is presently internationally active in Persian Gulf countries.

Reference List

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Al Jaber Engineering, (2021) Company profile, Web.

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Arora, N. and Kaur, P. (2019) SME internationalization: problems and prospects. Beau Bassin-Rose Hill: LAP Lambert Academic Publishing.

Boersmaa, M., Buckley, P., and Ghauri, P. (2003) ‘Confidence in international joint venture associations’, Journal of Enterprise Research, 56(12), pp.1031–1042.

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Castagna, F. et al. (2020) ‘Assessing SMEs’ internationalization strategies in action’, Applied Sciences, 10(14), pp. 1- 28.

Green, M. and Keegan, W. (2020) Global marketing, 10th edn. New York: Pearson Education Limited.

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Mc Cormick, M. and Somaya, D. (2020) ‘Born globals from emerging economies: reconciling early exporting with theories of internationalization’, Global Strategy Journal, 10(2), pp. 251-281.

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Soares, A., Farhangmehr, M., and Shoham, A. (2007) ‘Hofstede’s measurements of habits in global marketing studies’, Journal of Enterprise Research, 60(3), pp. 277–284.

Solopova, Y. (2019) Accelerated internationalization of a SME in the EU: business case studies. Beau Bassin-Rose Hill: AV Akademikerverlag.

Udomkit, N. and Schreier, C. (2017). Tie the ties: the importance of the irrevocable connections in SMEs’ globalization process’, Journal of Asia-Pacific Business, 18(1), pp.4-20.

Vahlne, J. (2020) ‘Advancement of the Uppsala paradigm of global process: from globalization to evolution’, International Strategy Journal, 10(2), pp. 239-250.

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