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ASSESSED COURSEWORK
UB Number(s) 15014022
Module Leader Jace Nair
Module Code MAN 4139M
Module Name International Business Environment
Title of Coursework (please provide
whole question)
Individual Course Work
Word count (not including bibliography
and appendices)
2000
Date of submission 09/12/2015
Statement of Authenticity:
By submitting this assignment through Blackboard, I confirm:
• That this work is my own and that I have not plagiarised the work of others in
any form whatsoever.
• That I am aware of the University’s definition of Plagiarism and understand
how it can be avoided.
• That this work, or any part of it, has not been previously submitted to the
University of Bradford for assessment in any other module.
• That I have read and understood the information provided below.
Signed …NORIYUKI.DOCHI……………… Date ……09/12/2015………………..

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Executive Summary
This report provides an analysis and evaluation of operating business particularly in automobile
sector in Saudi Arabia (developing countries) from The US (developed countries) considering
three different aspects: the affection of National institution, the influence of International
institution, and the political risks in Saudi Arabia. The research draws attention to some positive
and negative impacts on operating in Saudi Arabia. Firstly, it can be found that Saudi Arabia has a
negative attitude toward the foreign automobile firms when taking a look at national institution.
Firstly, it can be found that Saudi Arabia has a negative attitude towards the foreign automobile
firms compared to automobile firms produced locally. However, the effects brought about by the
international institutions seem to be positive for foreign firms. Then, political risks surrounding
the automobile firms are relatively high when taking a look at the political relation Saudi Arabia
and the US as well as what has happened to Saudi Arabia. Therefore, it can be challenging for
foreign firms especially automobile sectors to operate in Saudi Arabia. Recommendations
discussed include the investment toward automobile market in Saudi Arabia from the US should
be postponed and the three means should be taken into consideration for new businesses in Saudi
Arabia.

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Contents
1. Introduction ..........................................................................................................4
2. National institutional systems in KSA................................................................4
2.1. General regulations for foreign investments in KSA .................................4
2.2. Ministry of Commerce and Industry (MOCI)................................................4
2.3. The Saudi Standards, Metrology and Quality Organization (SASO).........5
2.4. Informal institutions in KSA .........................................................................6
3. Implications of international regulations and institutions................................6
3.1. World Trade Organization (WTO).................................................................6
3.2. U.S.-KSA TIFA................................................................................................7
3.3. U.S. and Gulf Countries Cooperation (GCC)...............................................7
4. Political Risk.........................................................................................................7
4.1. U.S. and KSA .................................................................................................7
4.2. Domestic protests in KSA ............................................................................8
4.3. KSA and Iran..................................................................................................8
5. Conclusion............................................................................................................9
6. Recommendation .................................................................................................9
7. References............................................................................................................9

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1. Introduction
The importance of perception for business in the global environment is quite crucial as a
great deal of information and data needs to be considered and assessed before making a
decision whether a firm should enter global market or not. This report is evaluating DN
Motors (an automobile company based on USA) potential to enter the Saudi Arabian
(Western Asia) market.
Saudi Arabia, officially known as the Kingdom of Saudi Arabia (will abbreviated as KSA) is
the second-largest country in the Arab world and also the 5th largest exporter in the world
(CIN, 2015). Although Saudi Arabian economy growth is stagnant compared to previous
years, its economy has shown a tremendous improvement of 3.5% GDP growth rate in 2014
compared to -2.1% in 2009 (The World Bank, 2014). On the other hand, the United States of
America (USA) is located mainly in the east of Pacific Ocean and ranked in the 1st largest
economy in the world (The World Bank, 2014). Its top exports are Refined Petroleum that
estimates 7.18% of the total exports, and Cars that represent 5.23%(OEC, 2013)
This report is composed of the following topics. Firstly, the national institutional systems of
KSA will be discussed. Then, the implications of the international institutions such as WTO
and how business would be influenced when managing business in KSA are going to be
discussed. After that, the political risks of DN motors operating in KSA will be discussed.
Finally, the report will be finished with a conclusion and a suggestion for business in KSA.
2. National institutional systems in KSA.
2.1. General regulations for foreign investments in KSA
According to Clause 52 of Company Law, in KSA foreign investors are not allowed to
operate or obtain businesses unless they gain an investment license form the Saudi General
Investment Authority (SAGIA). When establishing joint stock companies, an approval
provided by the Minister of Commerce is required after the practical study of a proposed
company is reviewed. Also, the law requires the approval through a Royal Decree supported
by the permission of public sector businesses, receiving cooperation from the State, where the
State or other public institutions enter. Joint stock organizations must hold a capital of at least
SR 2,000,000 and have minimum five shareholders, each of whom will have to pay at least
25% of the amount of cash contribution when establishing companies under obligation. In
addition, Joint stock organizations must pay at least 50% of the total authorized capital at the
time of merger (SAGIA, 2015).
2.2. Ministry of Commerce and Industry (MOCI)
The Ministry of Commerce and Industry boosts the possibilities of both Commerce and
Industry sectors and conserve the interests of people receive profit by improving and

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achieving effective and efficient policies and mechanisms, which will resulted in the
contribution to developing sustainable economic growth in KSA. It issues licenses essential
not only for establishment of the commercial industrial chambers but also for development of
the foreign trade relations with all the countries regarded as sisterly and friendly. In addition,
it enhances procedures that encourage the non-oil exports to develop the trade balance with
all the countries around the world (MOCI, 2015).
Saudi business people are not allowed to take an action as commercial agents without
registering their names into the Register maintained by the Ministry of Commerce and
Industry. Also, the partnership between a joint venture and Saudi firm must be registered with
MOCI. The commercial registration is relatively simple (table 1), and every step can be done
online. However, companies are not allowed to start a business without the permission
(MOCI, 2015).
Company registration is very important since the regulation for the imports of motor vehicles
has recently been more restrained in KSA. Also, the submission of good document can result
in building the credibility of company, which means that company can smoothly gain a
company register in the Ministry of Economy and Commerce and operate in the automobile
sector in KSA effectively.
2.3. The Saudi Standards, Metrology and Quality Organization (SASO)
The Saudi Standards Metrology and Quality Organization, which is headed by the Minister of
Commerce and Industry, has responsibility for uniformity and technical adjustments as well
as for confirming that imported products that meet the technical agreements. SASO also
mandates that a Certificate of Conformity (COC) provided by MOCI is required when
importing vehicle parts with shipments into KSA (WTO, 2011).

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SASO has recently issued many industry standards and regulations for automobile import,
which can bring some difficulties to ND motors. Due to the regulations, the entrance barrier
of automobile market in KSA has been higher, which can make ND motors to struggle with
boosting the share. Also, competitor Toyota has already dominated the market with
approximately 40% market share in 2013. The increase of entrance barrier can promote the
domination of Toyota in automobile market. Moreover, SASO still provides many changes
into the regulation for automobile industry. It means ND motors may have to adopt with the
changes in regulations (ITA, 2015).
2.4. Informal institutions in KSA
The Kingdom of Saudi Arabia is one of the most religious countries that base on Islam and
the Bedouin tradition. As Friday is regarded as a holy day from Muslims perspective, it is
basically the weekly holiday. Also in the month of Ramadan, Muslims avoid eating and
drinking from dawn to sunset and working hours are usually lessened. Although women are
allowed to use cabdriver, they cannot drive by themselves. Loyalty, justice, generosity and
status are crucial in Saudi society. Generally, advancement of business depends on family or
friendship bonds rather than technical competence. In addition, junior level managers should
never participated in business meeting with more senior Saudi managers, as Saudis consider
status as influential factor. Moreover, decency is highly valued in Saudi society. In fact the
government encourage Saudis to wear their ethnic dress while in KSA. (Rice, 2004)
In order to be successful to operate in KSA, the firm should understand more intangible
aspects of Saudi society rather than tangible. Otherwise, the firm could have difficulty in
dealing with the Saudis customs and cultures. However, once they understand how to cope
with the uniqueness of Saudis, it can provide a great benefit to the firm as Saudi consider
these intangible values as significantly important.
3. Implications of international regulations and institutions
3.1. World Trade Organization (WTO)
WTO stands for decreeing the exchanging barriers between countries involved in WTO. In
order to be part of WTO, KSA was able to make a great improvement in reducing tariff and
opening service districts of the economy to larger foreign participation. According to the
trade policy review, in 2005 over 80% of the tariff line products were decreased subjects to a
5% of customs duty. There are mainly three parts (Table 2) that were brought about by
becoming a member of WTO. Though there is no single compliance or obligation to WTO
that significantly affects the economy, the participation of KSA into WTO is broadly positive
for economy (Brad, et al. 2006).

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3.2. U.S.-KSA TIFA
Trade & Investment Framework Agreement (TIFA) has been assigned in July 2003. It aims:
(1) expand trade in products and services between U.S. and KSA (2) take proper ways to
encourage trading and preserve positive conditions for longstanding development between
two countries (3) encourage a favourable trade and investment situations and promote
developed contacts between the two countries (ustr.gov, 2003).
3.3. U.S. and Gulf Countries Cooperation (GCC)
Agreement, a Framework Agreement for Trade, Economic, Investment and Technical
Cooperation, between the US and GCC was signed in September 2013, which was the first
compliance conformed between the US and the GCC as a group (Arabia News, 2013). Also
the success of first forum committed between the US and GCC led to the agreement that
similar forum is held once a year. Also, the US has currently established mutual agreement
with all six of the individual countries that combine into GCC, which can improve the
relationship between the US and GCC (usuaebusienss.org, 2012).
ND motors can receive a great benefit from these agreement mentioned above as an
assurance when investing in KSA. Also, ND motors can use any GCC countries as an
alternative place for expanding business. However, ND motors has to recognize the updated
information of agreement between the US and GCC as it still has been on the recovery
process from the difficult period since 1992 (Arab News, 2013).
4. Political Risk
4.1. U.S. and KSA
From diplomatic perspective, the relationship between the US and KSA has never been in
perfect harmony due to the lack of the US support for many issues such as Iran’s nuclear

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program and the Arab Spring. However, the business ties between these countries are still
relatively strong (CFR, 2015). According to OEC, the US was the second largest destination
in 2013 that KSA exported ($54.2B) and the second biggest importer to KSA ($18.5B).
4.2. Domestic protests in KSA
Saudi Arabia is a kingdom ruled by the Al Saud royal family. Under a monarchy system, the
level of human rights and liberty of citizens are relatively low. This causes a several alarming
situations in KSA. Protestors who were inspired by the Arab Spring have brought about the
conflicts against government in KSA since 2011 (CIA, 2015). These protests brought some
changes to Saud society such as the right of local election for Saudi women by the statement
of King Abdullah on 25 September 2011(BBC, 2015). However, the situation of human
rights and liberty is still intense.
4.3. KSA and Iran
The relationship between KSA and Iran has been intense due to the differences in faith. They
have supported conflicting political parties with promoting adverse armies in Middle East.
Although the two countries have not created the crises, they have provoked those conflicts
considerably. Iranian Revolution, the nuclear program and most recently alleged Iran
assassination plot committed in 2011 resulted in worsening the relation between KSA and
Iran (The Guardian, 2015).
Whether the business operation will be successful can depend on the internal and external
situation of the country. Current environment in KSA seems to be insuring, which can result
in the growth of risk to loss of profit. Although the relation between KSA and Iran is
precarious, the change of the insight for women in KSA can bring about the great opportunity
for ND motors. In other words, automobile firms could obtain additional profit if women
would be able to drive a car in KSA.

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5. Conclusion
The Kingdom of Saudi Arabia has a sustainable economy in the world. KSA has recently
changed regulations for imports restrictedly. Also Saudis are very concerned about their
intangible values such as loyalty and decency. Therefore, both formal and informal national
impacts on foreign firms can be problematic. However, International agreements and
institutions would bring positive influences on DN motors. This is because entrance barrier to
market was made low by WTO. Also the agreements assigned between the US and KSA as
well as GCC can enhance the trade and investment in the two countries. In terms of political
risk surrounding this business, it seems to be relatively high. The relation between the two
countries is positive in business but severe in political term. In addition, movements
surrounding KSA are unstable. In domestic situation, the protests against government for
rights of liberty and women have frequently happened in current years. In the foreign
situation, the relation between KSA and Iran is also becoming worse after 2011.
6. Recommendation
The automobile market in KSA seems to be a challenging for DN motors It is generally
recommended that DN motors’ investment toward KSA should be postponed until the
situation surrounding KSA is stable in terms of policies for trade and political situations.
Moreover, three aspects would be greatly advantageous when operating in KSA: (1)
understand the customs and implications of Saudis (2) create a relationship to Saudi citizens
especially upper class family and (3) beware of internal and external political situation in
KSA particularly the law for Saudi women.
7. References
Abdel, A, A. (2013) GCC and US make up for lost time. [Online] Arab News. Available at:
http://www.arabnews.com/news/454422 [Accessed 29 Nov 2015]
BBC (2015) Saudi Arabia Profile-Timeline. BBC. Available at:
http://www.bbc.co.uk/news/world-middle-east-14703523 [Accessed 28 2015]
Brad, B. John, S. and Gasim, A. (2015) Saudi Arabia and WTO. [Online] Samba Financial Group.
Available at: http://www.jeg.org.sa/data/modules/contents/uploads/infopdf/38.pdf [Accessed 28 Nov
2015]
Central Intelligence Agency. (2015) The World Factbook Saudi Arabia. [Online] Central Intelligence
Agency. Available at:
https://www.cia.gov/library/publications/resources/the-world-factbook/geos/sa.html [Accessed 23
Nov 2015]
Central Intelligence Agency. (2015) The World Factbook United States. [Online] Central Intelligence
Agency. Available at:

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https://www.cia.gov/library/publications/resources/the-world-factbook/geos/us.html [Accessed 23
Nov 2015]
Ian, B. (2015) Iran and Saudi Arabia ramp up hostile rhetoric to new levels. The Guardian. Available at:
http://www.theguardian.com/world/on-the-middle-east/2015/oct/23/iran-and-saudi-arabia-ramp-up-ho
stile-rhetoric-to-new-levels [Accessed 30 Nov 2015]
International Trade Administration. (2015) Large, Growing Market; Medium Share. [Online]
International Trade Administration. Available at:
https://www.wto.org/english/tratop_e/tpr.../g256_e.doc [Accessed 26 Nov 2015]
Michael, R. (2011) Iran and Saudi Arabia’s ‘hate-hate’ relationship. CNN. Available at:
http://security.blogs.cnn.com/2011/10/11/iran-and-saudi-arabias-hate-hate-relationship/ [Accessed 30
Nov 2015]
Ministry of Commence and Industry – Saudi Arabia. (2015) About Ministry. [Online] Ministry of
Commence and Industry. Available at: https://mci.gov.sa/en/AboutMinistry/Pages/default.aspx
[Accessed 24 Nov 2015]
Newsteam, S. (2015) U.S.-Saudi Relations. [Online] Council on Foreign Relations. Available at:
http://www.cfr.org/saudi-arabia/us-saudi-relations/p36524 [Accessed 30 Nov 2015]
Office of the United States Trade Representative (2003) Trade Agreements. [Online] Office of the
United States Trade Representative. Available at:
https://ustr.gov/sites/default/files/uploads/agreements/tifa/asset_upload_file304_7740.pdf [Accessed
28 Nov 2015]
Office of the United States Trade Representative (2012) Trade Agreements. [Online] Office of the
United States Trade Representative. Available at:
https://ustr.gov/sites/default/files/uploads/agreements/Trade%20Investment/U.S.-GCC%20TIFA%20
Final%20Text%20--%20English%209-25-12.pdf [Accessed 29 Nov 2015]
Rice, G. (2014) doing business in Saudi Arabia. Thunderbird International Business Review 46 (1)
59-84
Saudi Arabia General Investment Authority. (2014) Law and Regulations. [Online] Saudi Arabia
General Investment Authority. Available at:
http://www.sagia.gov.sa/en/Investment-climate/Some-Things-You-Need-To-Know-/Laws/ [Accessed
27 Nov 2015]
The Kingdom of Saudi Arabia. (2011) Trade Policy Review. [Online] World Trade Organization.
Available at: https://www.wto.org/english/tratop_e/tpr.../g256_e.doc [Accessed 28 Nov 2015]
The Observatory of Economic Complexity. (2013) OEC Saudi Arabia. [Online] The Observatory of
Economic Complexity. Available at: http://atlas.media.mit.edu/en/profile/country/sau/ [Accessed 22
Nov 2015]

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The Observatory of Economic Complexity. (2013) OEC United States. [Online] The Observatory of
Economic Complexity. Available at: http://atlas.media.mit.edu/en/profile/country/usa/ [Accessed 23
Nov 2015]
The World Bank. (2014) GDP growth (annual %) [Online] The World Bank. Available at:
http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/countries/1W-SA-US?display=graph
[Accessed 27 Nov 2015]
The World Bank. (2014) Gross domestic product 2014. [Online] The World Bank. Available at:
http://databank.worldbank.org/data/download/GDP.pdf [Accessed 22 Nov 2015]
U.S.-U.A.E. Business Council (2012) U.S & GCC sign Framework Agreement for Trade and Economic
Cooperation in NYC. [Online] U.S.-U.A.E. Business Council. Available at:
http://usuaebusiness.org/u-s-gcc-sign-framework-agreement-for-trade-and-economic-cooperation-in-n
yc/ [Accessed 27 2015]
World Bank Group (2015) Starting a Business in Saudi Arabia. World Bank Group. Available at:
http://www.doingbusiness.org/data/exploreeconomies/saudi-arabia/starting-a-business/ [Accessed 24
Nov 2015]