International Joint Ventures in Saudi Arabia: Competitiveness and Culture

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Table of Contents

Introduction
Research background
Importance of Research
Research Question
Research Objectives
Research Methodology
Scope and Limitations
Conclusion
Reference List

Introduction

There are numerous dimensions of the globalization process that are presented in various forms, processes, and interconnectedness. Such diversity, multidimensionality, and complexity become clear when considering the concept of culture (Hopper, 2007, p. 2). Indeed, the globalization process cannot stand aside cultures; rather, its formation directly relates to them.

At the same time, different cultures remain immune to the affects of globalization. However, the relation between culture and globalization can become even more complicated when both aspects are involved in the international business relationship.

Specific concerns with culture and internationalism are closely connected with the creation of joint ventures in Saudi Arabia, the leading producer of oil in the world. Being the dominating form of international business, the existing joint ventures in Saudi Arabia are primarily predetermined by cultural and ethical considerations from both foreign investors and the Arab business families.

It should also be admitted that internationalisation process has allowed the Middle East to ascertain its position on the global arena and receive an access to Western technologies and innovations (Mababaya, 2003a, p. 157). However, the world community in its turn should find a compromise and specific cultural approaches to understanding the Saudi culture, which is essential for further fruitful cooperation.

They should not omit the fact that cultural environment in Saudi Arabia is also important for other cultures because its strong economy strongly influences the world market and integration processes. Hence, the importance of integrating culture into the international business is really enormous and, therefore, multinational companies should reconcile cultural diversity and gain a tangible competitive advantage.

Research background

Before the discovery of oil in Saudi Arabia, the country did not have impressive levels of production and the major focus in business was made on trading (Katz, 2007). A well-developed commercial culture has a considerable effect of further business operations in the Kingdom, which influences the creation of future strategies, values, and approaches to carrying out business and to organizing joint ventures in cooperation with foreign investors (Mababaya, 2003b, p. 38).

One way or another, an in-depth research on cultural implications for joint ventures in Saudi Arabia has revealed that Eastern and Western world have a number of differences in conducting business that are primarily predetermined by existing discrepancies in mentality and traditions (Moran et al., 2007; Rao, 2001; Adecolar and Sergi, 2007).

Aside from cultural discrepancies, the process of internalization has led to mutual interaction of the cultures engaged into business relations.

This particularly concerned the relations of Saudi Arabia with the United States and Great Britain where the Westernization process has inevitably penetrated to the Islam world and, vice versa, commitment to customs and traditions and extreme feeling of justice and loyalty have been introduced to the globe community (Fenn, 1994).

Therefore, an urgent need occurred for more consistent information on identifying the importance of cultural environment and its contribution to organizational and managerial strategies and approaches to a decision-making process.

Aside from exogenous influences of the internationalisation process, the Middle East world also plays an important role in structuring the stages of integration through the introduction of their custom, traditions, and moral codes of conduct. Ramady (2010) and Aulakh and Schetchter (2000) also believe that Saudi culture has provided shifts in the Westernized world community highlighting the strengths of negotiating international business.

However, a rigid opposition to alien cultures result in emergence of conflicts and performance problems that are analyzed in the context of Saudi – U.S. and Saudi – U.K. joint projects (Yavas, Eroglu, and Eroglu, 1994, p. 62). The problem is that cultural concerns are more complicated in joint ventures organized in countries with less developed economy (Yavas, Eroglu, and Eroglu, 1994, p. 62).

While investigating the research problems, many concerns are connected with religions issues in their role in cooperation and trading in Saudi Arabia. All business operations and joint projects are initially predetermined on conservative and ideological approaches to constructing relations.

The point is that older representatives of the Saudi society strictly observes social and moral codes of conduct and discourages to presence of women at business meetings. However, younger generations have difference outlook on cultural issues. Adherence to traditions and extreme feeling of justice has also been researched by Mead and Andrews (2009) how have attached importance to religion and cultural in global cooperation with foreign partners, which also explains their hostility to the process of Westernizations.

Viewing this problem objectively, their apposition to other cultures should be considered as aspiration to preserve the purity and originality of their culture. At the same time, just as they strive to preserve their identity, Arab society also express respect for other cultures and considers the concept of cross-cultural communication with great tolerance and diligence.

Finally, the analysis of cultural implications also involves the necessity to distinguish between such notions as universal culture and national cultures to understand the cultural implications for joint ventures in Saudi Arabia. In this respect, Rosenhauer (2009) investigates the concept of universal business culture.

In particular, the researcher states that “individuals in an international environment develop an international business culture in addition to their national culture or even could ‘lose’ their cultural identity by replacing it through a universal interculture” (Rosenhaurer, 2009, p. 48). The same view on global culture is hold by Martin and Chaney (2006) that assign importance to this definition.

Importance of Research

Taking into consideration the rapidness of integration processes, one cannot ignore cultural variability as the core for establishing successful cooperation between different economies, particularly those of the Eastern and Western world (Mababaya, 2003b, p. 121). Cultural values are essential for a fruitful continuation of international projects in Saudi Arabia are not an exception.

Therefore, the research under consideration is really significant for multinational firms because it can greatly contribute to working out more effective and consistent strategies for cultural organizations of company’s structures and better awareness of business ethics within a cross-cultural context. In addition, a deeper consideration of cultural concerns can also assist in managing conflicts on the basis of cultural hostility.

Research Question

The process of internalization allows multinational ventures to gain experience and accumulate specific skills and assets that are acquired via cultural communication. In this regard, the creation of joint ventures in Saudi Arabia has caused cross-cultural interaction and communication, which is a very challenging and difficult process.

In spite of the fact that both foreign partners and Saudi business agents gain valuable experience while cooperating, it still creates a lot of problems for reconciling the frictions between cultures.

Research Objectives

Considering internationalism as an exogenous factor affecting cultures and national competitive advantage, the case of joint ventures in Saudi Arabia should carefully tackled from the viewpoint of competitiveness and cultural reconciliation. To begin with, it is necessary to recognize a tangible role of culture in building international relations and constructing multinational organizations.

Second, it is necessary to define the mutual dependence between the globalization and culture through integration processes in the sphere of production, marketing, and selling. Third, it is vital to identify the cultural affect on the leading joint venture in Saudi Arabia on the part of the global community.

Finally, once the influence has been identified, it is also paramount to define how Eastern culture has contributed to the improvement of organizational and managerial strategies of business conduct. All these objectives can be defined more clearly in this research proposal when analyzing Saudi joint ventures with other leading agents in the world, such as the United States and Great Britain.

Research Methodology

Due to the fact that trust, decision-making, and cultural are key components of successful joint ventures in Saudi Arabia, this research proposal seeks to identify the strategies that can be inherited and accepted in the world community. In this regard, several steps should be taken to investigate these issues and to find out major approaches to cultural globalization through the identification of the nature of this process.

With regard to the above-presented research questions and research objectives, this research proposal implies to use a mixed-method to analyzing the problem.

In order to analyze the importance of culture and cultures in constructing business international relations and organizing multinational companies, it is necessary to analyze all existing international strategies in conducting business. Using qualitative approach in understanding human behavior within social and cultural context, it is purposeful to collect theories and methods related to the study of internationalisation process and its effect on cultures.

In order to analyze the influence of integration process on Saudi Arabia, it is planned to carry out an empirical research on the biggest international companies in the Kingdom, such as SABIC, ARAMCO, and many others (Mababaya, 2003b, p. 39). When studying their organizational goals and missions, it is possible to attain them to existing international strategies.

This will allow to discover whether these strategies have been subjected to Westernization. Through synthesizing theoretical and empirical data, it will be possible to outline the major strategies used by Saudi ventures and the degree to which they conform to international standards.

Hence, SABIC’ mission is narrowed to provision of high-quality goods and services via learning, innovation, and operations excellent while sustaining value for the company’s foreign investors (Saudi Basic Industries Corporation, 2010).

Judging from the case, the company is more attained to a broad-based differentiation strategy where the priority is given to presenting unique features of product and service instead of introducing pricing policy (Grunig, 2010, p. 227).

In order to identify the connection between globalization and culture at various stages of international business, it is necessary to analyze production, marketing, and selling process of a joint venture located in Saudi Arabia and the one located in the country with alien culture.

For example, investigating the organizational and human resources management in Saudi’s companies, such as SABIC, a greater accent is made person-oriented approaches where managers strive to work out efficient methods to fact cultural diversity (Saudi Basic Industries Corporation, 2010). It should be stressed that a major focus of investigation organization strategies and cultural diversity issues should be made on analyzing the role of Saudi women in doing business internationally.

A qualitative and quantitative research can reveal a solid underpinning for discussing differences of local cultures in a globalized community. According to Onkvisit and Shaw (2008), “almost 80 percent of Saudi purchases of luxury watches are men, and about 20 percent are women” (p. 504). Gender aspect in business relations will also be crucial in defining the differences between cultures. At the same time, this aspect also unveils problems for Saudi business families to conduct business at the international level.

While examining cultural effect on the leading joint ventures in Saudi Arabia, it is purposeful to utilize the data obtained from the literature review via synthesizing the pertinent information and making relevant assumptions. In particular, it is possible to analyze cross-cultural barriers occurred between British multinational companies and Saudi organizations that plan to create a joint project. This research aspect can be investigated with the help of literature and statistic search, interviews and questionnaires, being the basis of a qualitative research (Silverman, 2004).

In order to define the extent of cultural changes contributed by Saudi managers to the globe community, it will be appropriate to work out a qualitative model in accordance to which it will be easy to identify the basic characteristics of each culture and what contribution it made to international business relations.

In this regard, the first step it is necessary to review the literature that analyzes the major cultural features of the Arab world, including mentality, behavior, and human psychology. The second step will be searching for evidence that culture itself is the main condition for building successful joint ventures. Judging from the researches, many Saudi ventures’ strategies impose much changes to their foreign partners.

In particular, they prove that trust and respect should be a priority in conducting business (Mababaya, 2003a, p. 122). In addition, empirical studies of particular joint ventures in Saudi Arabia, the analysis of ARAMCO for instance, can reveal other useful features and strategies applied in the country.

What is more important, although Saudi community has respect for its culture and traditions, it willingly introduces approaches borrowed from international business strategies. For instance, in order to attract more buyers of its product, ARAMCO has launched a number of environmental programs for meeting the global concerns about the world’s ecological situation (Saudi Arabian Oil Co, 2011).

Finally, once the major Saudi joint ventures have been analyzed from the cultural viewpoint, it is imperative to define the major variables within a cross-cultural context. In this matter, the research proposal can be focused on comparing mission and goals of two leading Saudi companies acting as world’s producers.

In particular, it is necessary to identify the key aspects of their successful exploration to the market, including the analysis of their missions, production process, and approaches to technology and innovation introductions. Such an analysis should also reveal discrepancies and strategies that have been borrowed from the Western companies and the one that have been assimilated from Saudi joint ventures.

In general, most of methodologies used in the research proposal should be based on empirical information about the Saudi joint ventures and theoretical approaches used to identify cultural shifts in international communication. The implementation of qualitative methods is considered to be the most appropriate ones in examining the internationalisation and cultural implication for joint ventures in Saudi Arabia.

All stages of research proposal are based on date collection where the primary focus is made cultural effect of the internalisation on Saudi joint projects. In particular, the research included the study of cultural peculiarities of conducting business in Saudi Arabia, influence of internatiolisation on joint ventures, and contributions of the Arab world to the organizational management.

Scope and Limitations

The research program at issues is designed to analyze the organizational culture of existing joint ventures in Saudi Arabia and how they are affected by the process of globalization. The creation of Saudi joint ventures also implies the influence of the Westernization process, which is the leading one in cultural interaction and communication.

In addition, the scope of this research also involves the study of methods and strategies that foreign partners address when cooperating with their Saudi managers. The problem of the research also covers the problem of reconciling two different cultures and religions in analyzing the priorities existing in two oppose worlds.

Data collection and qualitative analysis of information cannot be considered to be reliable in terms of objectivity and validity of the presented researches because most of the assumptions concerning cultural peculiarities of Saudi society are based on personal observations.

Therefore, the presented stereotypes are generalized images about the Arab world. This limitation becomes especially tangible when it comes to younger generations of Saudi people whose views on conducing business are more democratized.

Another limitation to the research proposal lies in insufficient attention to economic factors influencing cross-cultural communication. Cross-cultural communication can be hampered by ignorance of social and economic realities presented the country. In this regard, it is necessary to consider in more detail the concept of regional cultures and universal culture.

Theses notions should be defined because the connection between globalization and culture. Considering these notions, the concept of universal business culture can be perceived as “set of principle for organizing modern institutions” (Hopper, 2007, p. 91).

Judging from this interpretation, global culture is oriented on constant progress and advancement whereas national culture is more focused on sustaining traditions and conservative methods. In general, the presented limitations will not present this research proposal from being accurately conducted.

Conclusion

Considering and analyzing the information obtained in the course research, it should be stressed that cultural aspect plays an important role in international business relations. This specifically concerns cultural implications for joint ventures in Saudi Arabia, which is the result of the internalisation process.

The point is that integration activities enable multinational ventures to acquire experience and gain specific skills for coping with cross-cultural context. The formation of joint project in the Middle East has caused much interaction and cultural frictions, primarily because of rigid difference between the Western and Eastern cultures. Such a challenging situation makes both foreign partners and Saudi business families adjust to changes quickly to achieve high results in business.

However, in this research proposal we seek to define that those differences can greatly contribute to the creation of an advanced model of business management and improve the existing approach to decision-making that will be more oriented on trust, loyalty, and culture. Moreover, the young generation of the Arab world is less resistible to the occurred changes, which also enables to create globalized and integrated society.

Reference List

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

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

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

Grunig, R. (2010). Process-based Strategic Planning. US: Springer.

Hopper, P. (2007). Understanding cultural globalization. US: Polity.

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.

Martin, J., and Chaney, L. H. (2006). Global Business Etiquette: A Guide to International Communication and Customs. US: Greenwood Publishing Group.

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: Strategies: Strategy and Vision 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.

Rosenhauer, S. (2009). Cross-Cultural Business Communication: Intercultural Competence as a Universal Interculture. US: GRIN Verlag.

Saudi Arabian Oil Co (2011). Environment. Saudi ARAMCO. Web.

Saudi Basic Industries Corporation (2010). Our company: Our vision. Web.

Silverman, D. (2004). Qualitative research: theory, method and practice. US: Sage Publications.

Yavas, U., Eroglu, D., and Eroglu, S. (1994). Sources and Management of Conflict: The Cases of Saudi-U. S. Joint Ventures. Journal of International Marketing. 2(3), pp. 61-82.

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