Internationalization and Cultural Implications for Joint Ventures in Saudi Arabia

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Table of Contents

Introduction
Literature Review
Conclusion
Reference List

Introduction

Brief Overview of the Topic

In this literature review, it is necessary to consider the connection between internationalization and cultural implications for joint ventures in Saudi Arabia. This question is especially urgent nowadays due to the process of integration and cross-cultural communication.

Due to the fact that the prevalent form of international business in Saudi Arabia is joint ventures, it is really significant for companies in Saudi Arabia, particular for the industrialization process because it provides immediate access to modern technologies and offers wider opportunities for the development and advancement of human resources (Mababaya, 2003a, p. 157).

The increased interest in business operations in Saudi Arabia can be explained by the emerging opportunity for foreign investors to participate in the Kingdom’s industrial ventures. But what is more important is that international business relations are enhanced by Saudi’s impressive track records, respect for traditions and history, and international law (Mababaya, 2003a, p. 157).

Hence, Saudi Arabia is considered to be an ideal place for creating joint ventures in cooperation with foreign investors due to many reasons, apart from the presence of abundant hydrocarbon resources.

Importance of Literature Review for the Proposal

Despite the fact that the country’s culture is homogeneous to some extent, Saudi people, particularly the representatives of young generations, have experience in cooperating with business partners from other cultures. Before the oil was discovered, Saudi Arabia has low rates of production and the core business operations were focused on trading (Katz, 2007).

The commercial culture, therefore, assist them in becoming shrewd bargainers. Hence, due to the process of globalization and internationalization, cultural environment of Saudi Arabia has become really significant for other cultures. World market, therefore, is now more concerned with internationalization and cultural influence of the Middle East.

In this research proposal, it is necessary to examine the core cultural implications for joint ventures in Saudi Arabia. The literature review presented below will prove that integration of cultural issues into the international business is very important, both for Saudi Arabia and for the foreign investors.

Literature Review

Cultural Features of Saudi Arabia and Importance of Culture for International Cooperation

In order to understand the process of globalization and cultural concerns related to it, it is necessary to study the peculiarities of Saudi cultures and traditions, particularly people’s strict adherence to them. Indeed, the mentality and history of the Saudi community should be taken in the deepest consideration. The importance of culture for the Saudi people and business world is proved by the researches presented below.

Hence, Moran et al. (2007) has identified that “Arabs are people of great emotions and sentimentality – and sometimes of excess and extremes. They hold in high regard friendship, loyalty, and justice, and, when events and behavior go against that sense of justice, they will likely to be morally outrages and indignant” (p. 339). All those features play a significant in building successful business relations, but still one should not adhere to the presented stereotypes to a full extent.

Walker et al. (2003) also agree with the assumption that cultural aspects should be carefully treated when it comes to the Middle East world. The researchers believe that the process of Westernization is rigidly confronted in Saudi Arabia, but this relates to Western culture only. In other words, Saudi culture reflects the ideas of accepting Western technology without impregnating Western culture and ideology.

In particular, the Arabs “are opposed to Western cultural influences, seeing them as corrupting and debasing and potentially undermining their religious, ethnic and tribal heritage” (Walker, 2003, p. 96). This opposition proves that the importance of culture can only be conceived on the rise of the globalization process.

The studies performed by Oxford Business Group (2008) have revealed that all issues connected with cooperation and trading in Saudi Arabia is closely related to Islam. It implies that all business transactions and joint ventures are initially based on conservative approaches to building relations. Hence, older generations of the Arab world adheres to strict social codes and discourages the participation of women in managing and concluding business agreements. At the same time, the research has also revealed that younger generations have different views on cultural issues.

Like Walker et al. (2003) and Moran et al. (2007), Mead and Andrews (2009) have attached importance to culture and religion in international cooperation with Saudi Arabia with the emergence of joint ventures. In particular, extreme conservatism of Saudi community still opposes to Westernization due to rigid loyalty to traditions and moral codes. In this regard, the management and human resource management system is not subjected to cultural democratization and socialization (Meat and Andrews, 2005, p. 74).

Shoult (2006) has also conducted research on joint ventures and importance of Saudi culture for establishing successful cooperation. In particular, the author notes that “if its performance has failed quickly to reach the Saudi partners’ expectations, it may even find itself treated as a distressed department of their own establishment” (Shoult, 2006, p.169). The knowledge of the Arab mentality and psychology is paramount for foreign partners to organize successful joint ventures.

One way or another, it is essential to have an enthusiastic and creative Saudi partner who is willing to cooperate. Arising from this fact, Mababaya (2003b) has found that the failure of leading British company to establish successful relations lies in their feeble attempt to understand cultural specifics of the Middle East world. Ignoring cultural context, the companies failed to cope with emerging problems.

Other researchers (Onkvisit and Shaw, 2008; Broways and Price, 2008) also agree with the idea that a cross-cultural factor should be a priority to the Western partners if they plan to organize a joint venture in Saudi Arabia. In particular, they should know the specifics of working hours and holiday differences.

The author also examines the secrets of successful communication where a foreign partner should spend a considerable amount of time before proceeding with business issues. Onkvisit and Shaw (2008) state that trust is the basis of all business operations and a necessary condition for all joint ventures.

In general, the above-presented studies reveal several important facts about the Middle East world and Saudi Arabia in particular. First of all, the Arab people attach much attention to friendship and justice and have a great respect to older generations. Due to the fact that these people are of great sentimentality, they value a respectful and punctual attitude to them.

In business operations, they greatly oppose to the Westernization process and participation of women. Finally, they give credit to Islam and believe that trust is the basis of a successful cooperation. All these factors should be carefully tackled if foreign partners want to establish favorable relations with the Arab people.

Influence of Internationalization on Joint Ventures in Saudi Arabia

Saudi Arabia is known as the main world producer of oil and, therefore, it plays a huge role in oil market (Cordesman, 2003, p. 473). Supplying about 95 % of oil, Saudi Aramco provides strong strategic privilege to the country as well as international flexibility and acceptance among other world producers (Cordesman, 2003, p. 473).

The process of internalization that has penetrated to the country has given rise to the country’s cultural recognition and compromise on the part of leading world producers. Judging from the above-presented facts, it should be assumed that the process of internalization has increased the importance of the Arab culture and has introduced the Middle East on the world arena. On the one hand, it granted brilliant opportunities for the country’s development. On the other hand, the country has faced serious multicultural and international issues that are hard to overcome.

The process of globalization has greatly contributed to the advancement of economy in Saudi Arabia. Import and export activities carried out by family business houses haves changed their course to global business operations. As a result the world has recognized such international enterprises as SABIC, Kingdom Holding, and ARAMCO (Ali, 2008, p. 227).

In addition, the membership the WTO has also enables the country to advance their health care systems and improve the diary industry. According to Ali (2008), “globalization is more than business involvement and that the latter should not be divorced from its political and environmental concerns” (p. 227).

Ramady (2010) underlines the direct dependence of cultural concerns from globalization. With regard with this, the formation of an appropriate business and cultural environment is crucial for the Arab world to meet the challenges of Westernization. In his studies, the author insists on the idea that the major outcome of globalization is increasing concerns with preserving culture and religion and protecting them from outer invasion.

Therefore, although the process of internationalization providers wider opportunities for the economic development but creates challenges for traditions, ethnicity, religions, and moral codes. Aulakh and Schetchter (2000) have also provided evidence for ideological and cultural influence of globalization on Saudi Arabia and other countries with promising perspectives.

The authors provide arguments concerning the role of the countries involved in the process of globalization pertained to economic and cultural areas. Analyzing the studies presented by Ramady (2010) and Aulakh and Schetchter (2000), the process of globalization is also greatly influenced by the Middle East world whose traditions and customs are considered by other world agents structuring the stages of internationalization.

This point of view is also supported by Fox et al. (2006) who underline a huge role of the Middle East in forming the process of internalization.

Shifts in Culture Being the Result of Business Cooperation between the Western World and Saudi Arabia

A great number of studies have been devoted to multinational business operations all over the world, but few of them are connected with Saudi Arabia. Both foreign visitors and investors of Saudi joint ventures, and the Arabians should find a compromise in cooperating and building favorable business relations at the international level.

But the main task of this literature review is to analyze what how international culture influences the creation of joint industries in Saudi Arabia with regard to the Arab culture, religion, and firmly established traditions.

In studies presented by Moran et al. (2007), the researchers examine the cultural effects that the process of Westernization has on Saudi managers, which make them less paternalistic (p. 339). The scholars have also underscored that the increasing tendency in creating training programs in Saudi Arabia being the result of its cooperation with the United States.

The rapid integration of the Arab world to the international arena has led to rapid shifts in the Arab culture in terms of business operations and management. In particular, the country has faced a rigorous competition and increasing standards that resulted in some changes.

Rao (2001) in his studies of the globalization process emphasizes that lack of understanding of cross cultural relations and diversity can result in a serious failure to interact with the trading partners. The same concerns the Middle East world whose specific culture should be adjusted to the international culture and, vice versa, Western world should be more sensitive to Saudi managers and businessmen whose language involves both verbal and non-verbal communication (Rao, 2001, p. 154).

Studies by Adekola and Sergi (2007) also contribute to understanding cross-cultural relations between Saudi Arabia and other cultures. In particular, they investigate what the opportunities that the international business has created for the Arab worlds, how Western countries treat the Arab culture, and why cultural implications are tangible for the Arab community.

The rise of globalization has influenced many industrial areas of Saudi Arabia, particularly its dairy production. After the country has jointed the World Trade Organization, it has received access to free trade and many other benefits such as reduced tariffs, and the rise of joint venture organization with other foreign partners.

Fenn (1994) has conducted an independent research where the scholar has defined the specifics of carrying out business in Saudi Arabia. While discussing the peculiarities of Saudi culture and its influence on the international business, Fenn (1994) introduces some recommendations for foreign investors to follow before penetrating to the Arab world.

Studying the findings carefully, it is possible to admit that the Saudi managers have certain cultural rules which make women’s intervention problematic. This factor plays a huge role in business relations, specifically in the international world where both men and women have equal opportunities for self-realization.

Like Fenn, Mead (2005) insists on the fact that the process of internationalization implies “the free movement of political, economic, and cultural resources between countries, each society influencing and being influenced by every other society” (p.72). The problem is that Western values still dominate on the world arena of business and commerce. This particularly concerns the United States that propagandize their cultural and politics, which is often perceived as an assault of other cultures and economies.

Kangari and Lucas (1997) have also admitted the fact that the discovery of oil in Saudi Arabia has imposed a cultural change on the Arab world. The Kingdom has been forced to adapt to abrupt shifts in culture to advance Saudi industries and economies. According to the scholars, “rapid progress in the material sense has resulted in a sort of cultural backlash, and old traditions have been strengthened” (Kangari and Lucas, 1997, p. 42).

With regard to those dramatic changes, they consider it necessary to work our important strategies for dealing with cultural shifts for the Middle East world to adjust to a new cultural background. One of the best strategies proposed is avoiding conflicts and preserving neutrality in business world.

A thorough consideration of cultural effects on joint ventures in Saudi Arabia leads to an assumption that Western and Eastern worlds have rigid differences in conducting business. Nevertheless, a compromise should be reached to succeed in advancing international business.

Conclusion

Although the culture of Saudi Arabia is homogeneous, the country’s population, particularly the younger generations, are experienced enough in cooperating with foreign business partners. Before the discovery of oil in Saudi Arabia, it has insignificant rates of production and the main focus was made on commercial operations.

However, this trading culture has played a decisive role in establishing relations with other countries and leading producers. With regard to this the process of globalization has considerably influenced the cultural environment of Saudi Arabia is carefully considered by other world agents. What is more important is that the Middle East world has faced with cross-cultural challenges as well.

In this literature review, we have found that much research has been made on studying the peculiarities of the Arab cultures and how it affects the global communities. However, little concern has been revealed concerning how the Saudi people deal with those challenges and who they adjust to the process of Westernization.

In addition, the literature has also disclosed the problem of inability of foreign partners to conceive the specifics of business relations with Saudi Arabia, including their cultural values, religion issues, and important customs. Arising from the above-presented considerations, a golden medium should be found between economic development, cultural aspects, and internalization to build successful joint ventures in Saudi Arabia.

Reference List

Adekola, A. amd Sergi, B. (2007). Global business management: a cross-cultural perspective. US: Ashgate Publishing. Ltd.

Ali, A. (2008). Business and management environment in Saudi Arabia: challenges and opportunities for multinational corporations. US: Taylor & Francis.

Aulakh, P. S., and Schetchter, M. G. (2000). Rethinking globalization(s): from corporate transnationalism to local interventions. US: Palgrave Macmillan.

Browaeys, M.-J., and Price R. (2008). Understanding Cross-cultural management. US: Pearson Education.

Cordesman, A. H. (2003) Saudi Arabia enters the 21^st century. US: Greenwood Publishing Group.

Fenn, D. (1994, January). Saudi Arabia: Veiled Opportunities. U. S. Department of Commerce, International Trade Administration. 16(1)

Fox, J. W., Mourtada-Sabbah, and al-Mutawa, M. (2006). Globalization and the Gulf. US: Taylor & Francis.

Kangari, R. and Lucas, C. L. (1997). Managing international operations: a guide for engineers, architects, and construction managers. US: Publications.

Katz, L. (2007). Negotiating International Business. US: Booksurge Publishing

Mababaya, M. P. (2003a). The Role of Multinational Companies in the Middle East: The Case of Saudi Arabia. US: Universal-Publishers.

Mababaya, M. P. (2003b). International Business in a Strange Cultural Environment. US: Universal-Publishers.

Mead, R. (2005). International management: cross cultural dimensions. US: Willey-Blackwell.

Mead, R., and Andrews, T. G. (2009). International Management. US: John Wiley and Sons.

Moran, R. T., Harris, P. R., Moran, S. V. (2007). Managing cultural differences global leadership strategies for the 21^st century. US: Butterworth-Heinemann.

Onkvisit, S. and Shaw, J. J. (2008). International Marketing: Strategy and Theory. US: Taylor & Francis.

Oxford Business Group (2008). The Report: Saudi Arabia: 2008. UK: Oxford Business Group.

Ramady, M. A. (2010). The Saudi Arabian Economy: Policies, Achievements, and Challenges. US: Springer.

Rao, C. P. (2001). Globalization and its managerial implications. US: Greenwood Publishing Group.

Shoult, A. (2006). Doing business with Saudi Arabia. US: GMB Publishing Ltd.

Walker, D. M., Walker, T. D. and Schmitz, J. T. (2003). Doing business internationally: the guide to cross-cultural success. US: McGraw-Hill Professional.

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