paraphrase
( Pestle Analysis 15 )
PESTLE Analysis of Saudi Arabia and Justification
Introduction:
See appendix 1
Political Factors
The King leads Saudi Arabia, and the government is a constitutional monarchy, where the Sunnah and the Quran are the Constitution of the country (Dawn 2010). The KSA (Kingdom of Saudi Arabia) is the leading players in the Middle Eastern politics. Their stature has been built over the years due to their larger geographical size, prestige as the home of Islam where the religion was born, and their strong economy based on their burgeoning oil production industry. These factors have combined to provide a strong political environment in the country led by the King (BBC 2017). At present, the country has gone through a political transformation under the young prince who plays a major role in policy development, Mohammed bin Salman (Alhussein 2017), who came with Vision 2030 for economic reform and diversification.
Argument/Justification. Australia and Saudi Arabia have a close relationship. This is interpreted in commercial ties. there are both memberships in the G20. moreover, Australia engages with the GCC, that is headquartered in Saudi Arabia (Australian government n.g).
Saudi Arabia is Australia’s second biggest trading partner in the Middle East region. There is significant potential for economic ties to grow, given areas of complementarity in agriculture, education and construction. The launch in April 2016 by the Saudi government of a plan (Vision 2030) for economic reform and diversification also provides potential opportunities for Australian business. The establishment of the Australia-Saudi Business Council in 2013 also supports the promotion of bilateral business ties (Australian government n.d).
Economic Factors
Saudi Arabia's economy is one of the strongest in the Middle-East with per capita income of $54,078 in 2016 (Tasch 2017). The majority of the economic strength comes from their oil based economy. The Kingdom possesses around 16 percent of the oil reserves in the world, and they are the largest exporter of oil (Forbes 2016). Their large volume of production has made them one of the most powerful countries in the OPEC. More recently, the Saudi government has started to encourage investment in other industries and investors have been attracted to invest in the Saudi private sector industries such as textiles. The goals of economic diversification have become prominent in the last decade (Kerr 2015).
Argument/Justification. As Australia's second largest market in the Middle East, Saudi Arabia is an important trading partner for Australia(Australian government n.g).. In 2016, the two-way merchandise trade totalled $2.0 billion. Saudi Arabia is also a substantial market for accessories and jewelry(Australian government n.g). .it is the fifth largest country in use of jewelry and spend $323 Malians yearly (Algad 2016). Saudi Arabia's needs are well suited to Australian capabilities. According to U.S Department of state (2015), Saudi Arabia has a sound economy with a fast-growing and young population, a well-managed banking system, good infrastructure, and generally low import duties and barriers makes them suitable customer base for premium accessories and jewelry manufacturers.
Socio-Cultural Environment
The determinants such as cultural trends, norms, population dynamics, and demographics. The cultural trends and norms of Saudi Arabia point towards an Islamic society that follows Islam (CIA n.d.). In July 2016, the population of the Kingdom has reached 28.1 million, with around half of them under the age of 24 years. The majority of the population stays in urban areas such as Riyadh, Mecca, Jeddah, etc. (Index Mundi 2017). According to Commisceo Global , Arabic is the official language of Saudi Arabia, but English is widely spoken. It is used in business and is a compulsory second language in schools. Among the non-Saudi population, many people speak Urdu, the official language of Pakistan and other Asian languages such as Farsi and Turkish.The country is known as the birthplace of Islam and welcomes millions of Muslims all over the world as religious tourists that come to pay homage during Ramadan or for their Hajj (Soltani 2016).
Argument/Justification. Due to the large population in the Kingdom from deferent cultural and Women of Saudi Arabia are following latest fashion trends that evolve in the Western world, the demand for accessories and jewelry from foreign brands is high. Moreover, this demand remains constant throughout the year with season increases during the Ramadan as gift ( FoodeMag 2017)
. There is a growing population in the Kingdom, and the majority of them are under the age of 24 years whose are well educated, which many of them need to buy foreign sustainable brands to be modern (Gaurilcikaite 2014). Also, high tourist arrivals annually mean millions of customers can purchase accessories and jewelry as gift.
Technological Factors
Saudi Arabia has been investing heavily in technological innovation and research & development programs in the last decade (Alsodais 2013). The Kingdom has been investing heavily in developing a knowledge-based economy to shift from their oil dependence slowly. Online shopping is one the rise in the Kingdom, especially with the popularity of Souq.com and Wadi.com among the locals (King 2015). According to the latest statistics, the Kingdom had Internet usage of around 64.7 percent in 2016, and the numbers are growing annually (InternetWorld Stats n.d.). there are range ways of Internet connections including dial-up modems, ADSL, and even wireless connection and phone (Expat.com n.d.). The percentage of Internet users highlight how businesses can effectively use Online shopping and social media to retail their products and appeal to the masses.
Argument/Justification. jewellery business can make use of the growing popularity of Online shopping and social media in Saudi Arabia by selling their products Online and partnering with the e- commerce stores. They can also sell their products through their website and handle the logistics themselves. It is logical to make use of the technological options in the Kingdom as there are several alternative means to make the brand popular. Also, there is growing support from the government to businesses that help create growth opportunities in the Kingdom and jewellery business can work with local businesses to make their brand popular through the Internet. jewellery business can make use of the growing popularity of Online shopping and social media in Saudi Arabia by selling their products Online and partnering with the e-commerce stores. They can also sell their products through their website and handle the logistics themselves. It is logical to make use of the technological options in the Kingdom as there are several alternative means to make the brand popular. Also, there is growing support from the government to businesses that help create growth opportunities in the Kingdom and jewellery business can work with local businesses to make their brand popular through the Internet.The SIDF will grant additional incentives and better loan terms to foreign investors who set up their manufacturing facilities in the underdeveloped provinces of Jizan, Hail, and Tabuk. American and other foreign firms are able to participate in SAG- financed and/or -subsidized research-and-development program (u.s .Department of state 2015)
Legal Factors:
The Kingdom follows the Sharia law and the words of the Quran and the Sunnah in their legal practices (Billionbibles n.d). Under the Islamic law, every aspect of the Saudi life needs to comply with the Sharia law and Saudi citizens are expected to follow the code (see appandex2). There are times when the Saudi Government has to supplement new regulations that are in accordance with the Islamic law, but such needs arise rarely. In case there is a conflict between the government and the Islamic law, the government has to submit to the values of the Islamic law. Businesses operating in the country must follow the taxation, import regulations, and ownership risks of operating and selling products in the Saudi market (Clifford Chance 2014).
Argument/Justification.
Considering the legal structure of the Kingdom, there is strong support for commercial as Islam support. sustainable Products will always be in demand. the legal structure is in place to help sustainable jewellery manufacturers to sell their products ethically and remain protected under the Islamic law from unethical business practices of partners and retailers. The Sharia law also affects corporations as they need to comply with the expected standards regarding product quality. sustainable jewellery could generate millions in turnover from the Saudi market, but they would need to comply with the taxation and import regulations. As the Kingdom, a member of the Gulf Cooperation Council (GCC), Saudi Arabia applies the GCC common external tariff of 5 percent for most products, with a limited number of GCC- approved country-specific exceptions. The Saudi government also applies a 12 percent tariff on 207 products, in some cases to protect local industries. however, Saudi Arabia’s exceptions include 758 products that may be imported duty-free. according to Saudi Customs, jewellery and parts thereof have a different tariff that between 0% to 5%(see appendix3)
Environmental Factors
Climate change is a major concern for the Saudi government, and the government has been spending millions annually to reduce their carbon emission. The Kingdom of Saudi Arabia (KSA) has one of the highest per capita use of freshwater resources globally, despite having one of the driest countries in the world. As one of the leading producers of fossil fuels in the world, waste management, and air pollution are major concerns for the Kingdom (Fanack Chronicle 2016). Several manmade threats arise out of the oil production such as oil spills and coastal pollution that affects the country (Chakibi 2013).
Argument/Justification. Due to the strengthening of the climate change initiatives in Saudi Arabia, sustainable jewelery could enter the market and position themselves as an environmentally conservative business that places significant efforts to reduce carbon emissions from their operations. The message would help in building a positive image of the company and would assist them to set higher prices in the long run by combining their environmental conservation with their premium recycled product.
( Pestle Analysis 11 )
References
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Alsodais, S 2013, Science, Technology & Innovation in Saudi Arabia, WIPO,viewed 30 August,< http://www.wipo.int/wipo_magazine/en/2013/05/article_0006.html.
Algad 2016, Saudi women spend $323 million on jewelry, Algad, viewed 30 August,< http://www.alghad.com/articles/933283-99>.
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( Pestle Analysis 6 )
3?IR=T/#15-the-netherlands-gdp-per-capita-50846-41485-16>.
Appendixes:
Appendix 1: interdiction about Saudi Araba.
Appendix 2: explaining of what is Sharia law. (click on the image for more details )
Appendix 3 : jewellery and parts thereof
( Pestle Analysis 8 )