Due to oil reserves discovered in Saudi Arabia, it changed from an underdeveloped and poor country to one of the wealthiest countries in the world (Central Intelligence Agency, 2011). Saudi Arabia is the homeland of Prophet Mohammed and Muslims. Leadership is majorly from a royal family which involves succession among the sons in the royal family. King Abdullah has been the leader of Saudi Arabia since 2005. Doing business in Saudi Arabia has reformed and become very easy provided one follows the correct procedures and pays the required amounts (Saudi Arabia, 2011). There are no officially recognized political parties in Saudi Arabia since it is a monarchy (Bureau of Near Eastern Affairs, 2011). Leadership is given to members of the royal family. The legal system is the sharia which is supposed to cater for all cases (American University, 2011). There other legal systems like royal orders, royal decrees, and council of minister resolutions, ministerial resolutions and ministerial clusters. A new legislation was also signed which to specialize the courts more.
Saudi Arabian culture is very conservative and sticks to Islamic teachings (Bureau of Near Eastern Affairs, 2011). Gender roles are defined and family relationships are emphasized. There are ethical issues in Saudi Arabia especially because women and men are not given the same respect, rights and values. There so many things which are denied to women which is unethical. Corporate social responsibility activities are practiced by organizations in Saudi Arabia (National Commercial Bank, 2009). This is associated to the awareness which was done throughout the country. CSR has improved relationships between organizations and their customers. Globalization and regionalization was accepted by Saudi Arabia despite their desire to keep their traditional practices (Jesperson, 2011). These two were accepted because Saudi Arabia needed to export its oil all over the world.
GCC was the unity of six countries with the aim of strengthening one another and confronting security threats they were receiving from other countries (Ramazani, R et al, 1988). It was very significant to Saudi Arabian business since it provided regional markets for its business products. It led to corporation of industries and integration of economies (Ramazani, R et al, 1988).
About Saudi Arabia
Saudi Arabia is in the Middle East and has tuned from being the one which is underdeveloped to a very wealthy nation due to availability of vast oil resources (Central Intelligence Agency, 2011). It is one country which is faced with extremist violence. It is the birth place of Prophet Mohammad and the cradle of island and that is why it is dominated by Muslims. Saudi Arabia was first established in 1932 by King Abd-al-Aziz. He took over Hijaz from Heshemite family and then united this country under his own family rule according to his perspective (Central Intelligence Agency, 2011). When he died in 1953, he was succeeded by his son and this has been happening.
Saudi Arabia occupies the largest part of Arabian Peninsula. It has Red Sea and Gulf of Aqaba to the west and Persian Gulf to the east. It is said to have the world’s largest continuous sand desert called Rub Al-Khali also known as Empty Quarter. It is rich in oil which is primarily found in the eastern province along Persian Gulf (Central Intelligence Agency, 2011). Saudi Arabia continued being an absolute monarchy up to 1992. In 1992, Saud royal family came up with the first constitution. It also came up with the legal system which normally Islamic law is also called Sharia.
Muslim is the second largest religious group after Christianity. Saudi Arabia is found to be the home for most Muslims. It is also the place of most Arabs as they are said to have originated from the Arabian Peninsula which is in Saudi Arabia. It is in Saudi Arabia where we find the two holiest shrines in Mecca and Medina. The Kuwaiti royal family was accepted in Saudi Arabia in 1990. There has been tension between the royal family and the public due to the presence of foreign troops in Saudi Arabia (Central Intelligence Agency, 2011). This ended in 2003 when the US troops left the country. There have been efforts which have led to peace in Saudi Arabia and acceptance of other religious practices in the world. Saudi Arabia is the leading oil producer and natural gas. It has over 20% of the world’s proven oil reserves.
Doing business in Saudi Arabia
When one is doing business in Saudi Arabia, it is crucial to put in mind that every thing is influenced by the Islamic religion. Be careful not to mention other gods in Saudi Arabia. They are very much committed to their God and put every happenings of their business to their God. They have displays from the Koran texts in their businesses. In Saudi Arabia, the businesses usually belong to the family and employees are from the extended family. They practice a high level of nepotism and do not trust every body. The reason as to why they do their businesses as a family is because the Islamic teachings emphasis more on family relationships, loyalty and respect for the older individuals.
However if one needs to do business in Saudi Arabia, there are certain procedures which they have to follow. The first procedure is to register at the unified registry or ministry of commerce and pay the required fee (Saudi Arabia, 2011). This takes three days. Second is to open a bank account which is free of charge and takes one day. Fourth is registration of employer and employee for the general organization of social insurance contributions online. This is also free of charge and takes one day. This is a summery of all the procedures one requires to follow in order to start a business in Saudi Arabia.
Despite all the problems which existed in Saudi Arabia as pertaining doing business, it has become very easy to start and do business in Saudi Arabia (Saudi Arabia, 2011). It has been found that the number new businesses in Saudi Arabia are increasing a clear indication that, terms and conditions of doing business have become favorable. Saudi Arabia has been ranked thirteenth in the over for starting of new businesses. Out of 183 economies, Saudi Arabia is ranked at number eleven according to ease in doing business (Saudi Arabia, 2011). Although Saudi Arabian business owned by the real Saudi Arabian citizens cannot employ other people from outside, it has become easier for other people to start and run businesses in Saudi Arabia provided they follow their culture.
Political Environment
According to the basic law of 1992, Saudi Arabia is a monarchy and the leaders should be sons and grandsons of King Abdul Aziz Al Saud (Bureau of Near Eastern Affairs, 2011). The Holy Qur’an is seen as the constitution and the laws which govern the country are the Islamic law or the Sharia. The county does not recognize any political parties. All the political powers in the country are given to al Saud since 1932. There are approximately 22000 members from this royal family and are said to own the most influential businesses, government, military and judicial positions (EDC Economics, 2011). King Abdullah has been the ruler of the Saudi Arabians since 2005. Political succession is fraternal in order of seniority among the sons and not daughters of the founder of the modern Saudi Arabia (EDC Economics, 2011).
There is a still debate on how power will be passed after King Abdullah’s term is over. It was in October 2006 when King Abdullah formed Allegiance Council whose responsibility is to choose future leaders. There have been no disputes lately regarding the policies which Saudi Arabians have established regarding their political practices (EDC Economics, 2011). So the political structure of Saudi Arabia is majorly the monarchy and the ruling family gives religious support to its people by use of ultra conservative clerical. The political environment in Saudi Arabia is a bit poor and weak since they rely on succession from the royal family. This does not put in to consideration that there are other people from other families who could be better leaders than those from the royal family (EDC Economics, 2011). Due to their emphasis on succession on the royal family, their political reforms are likely to proceed at a slower phase as compared to those of other countries.
All political leaders in Saudi Arabia must adhere to the Islamic law or the Sharia. The country or kingdom of Saudi Arabia has been split in to thirteen provinces (Bureau of Near Eastern Affairs, 2011). Each of these provinces is governed by prince or a very close relative to the royal family.
Legal Environment
The legal environment in Saudi Arabia describes the legal systems in the country. The legal system majorly uses the Islamic law or the Sharia (American University, 2011). This has its origin from the Qur’an, Sunna and Ejtihad. There are some differences between the commercial legal systems and the civil legal systems. Commercial legal system is different in a way to accommodate the international businesses in the country since the discovery of oil reserves. This system has been changed in such a way that it accommodates both local and global practices (American University, 2011). The copyright and intellectual property law had existed on paper for a very long time but with increase in global trade in Saudi Arabia, a lot of enforcements and reforms were done regarding this law (American University, 2011).
In addition to Sharia, the legal environment also has some enacted legislation (Latham & Watkins, 2010). The legislations include; royal orders, royal decrees, council of minister resolutions, ministerial resolutions and ministerial clusters. However, all laws and legislations in Saudi Arabia should be in line with Sharia (Latham & Watkins, 2010). The legal environment also has courts and adjudicatory bodies including Sharia courts, board of grievances and other committees for solving conflicts (Latham & Watkins, 2010). Sharia courts mostly deal with family issues, property matters and other criminal cases. The specialized committees are used for settling disputes related to banking, labor and negotiable instrument offices. These committees do not depend on Sharia courts or board of grievances (Latham & Watkins, 2010).
Reforms by the King led to establishment of a new law of judiciary. This new law assisted in specializing courts to include criminal courts, commercial courts and labor courts. Board of grievances was now supposed to be an administrative court (Latham & Watkins, 2010). This new law was first enacted in 2007 and will soon be fully implements.
Cultural Environment
When the cultural environment in Saudi Arabia is considered, one can clearly see that the environment is very conservative (Bureau of Near Eastern Affairs, 2011). It is strongly in line with Wahhabi interpretation pertaining the Islamic religious law or Sharia. According to the Saudi Arabian culture, men and women are not supposed to mix in whatever circumstance (Bureau of Near Eastern Affairs, 2011). They are not supposed to attend public meetings and one venue and are divided according to gender in their work places. They are very committed to respect for the elder members of the family. Family relations are very crucial and no one is supposed to treat a member of another family better that members of their own family. There has been a coexistence of different cultures in the kingdom of Saudi Arabia.
Their cultural environment mostly puts in to emphasis the practice of ethics. Most of the Saudi Arabians are seen to be ethically Arabs while others are from mixed ethnic groups (Bureau of Near Eastern Affairs, 2011). The ethnic groups which most of Saudi Arabians have originated from include; Turks, Iranians, Indonesians, Indians, African among others.
The cultural practices in Saudi Arabia are mostly Muslim related where gender roles are very highly observed. There are defined roles for men and women and each of them must adhere to these set roles. In addition to gender roles, dressing codes are very specific and women are suppose to cover every part of their body and only leave a small part of the face. Women are supposed to show respect to men and the same is expected for children (Bureau of Near Eastern Affairs, 2011). Decisions made in the family should follow a particular hierarchy with men and older members of the family getting the top priority in making decisions. Any other person who comes to do business, work or for any other purpose in Saudi Arabia should adhere to the cultural practices.
Ethical Environment
The ethical environment involves the code of contact in a particular community which is considered morally acceptable. There is some times a question about the ethical practices in Saudi Arabia. For instance there was one particular time when a woman was arrested for driving in Saudi Arabia. This was unethical practices since there is nothing wrong by having a woman drive. It was banned for any woman to drive in Saudi Arabia. This is unethical practice as it is discriminating against women. Women were supposed to hire drivers or if they cannot afford this, they were supposed to relay on their male relatives to drive them.
The Islamic law and the Muslim practices are sometimes very unethical especially when it comes to women and children. Women in Saudi Arabia are not given the same rights as those given to their male counterparts. For instance when we look at the work places, men were given management posts even if there is a woman who is more confident and qualified than they are. Women were given roles which do not have any respect with considerations that some of them are more knowledgeable than men. There was segregation between men and women in work places with men getting the best and respectable jobs. In addition to this, men are given all the priority when it comes to making decisions. Sometimes, women may be in a better position to make the best decision but they will not get a chance before their counterpart males.
Despite all these unethical practices, ethics was observed in cases of medical treatment. The sick are entitled to getting adequate medical care and good treatment. Respect is also given to them and their opinion should be sought pertaining the kind of treatment they would like to receive. The ethical environment in Saudi Arabia is not very conducive especially when we put in to consideration that they follow the Islamic law. They expect every body doing anything in Saudi Arabia to follow the Islamic law even if they are not Muslims.
Corporate Social Responsibility
Corporate social responsibility (CSR) involves the activity of putting social, environmental and economic aspects when decisions are being made. It was King Abdullah who came with the idea of having both public and private sector to join hands in promoting social responsibility. This was a massage from the king during the corporate social responsibility conference which was to be held for three days (National Commercial Bank, 2009). Saudi Arabia is committed to ensuring that social responsibility is a particle aspect but not something which is only mentioned. After this three days conference, there was supposed to be supposed to be another meeting/conference which was to be held with the main aim of coming up with steps which were to be practical in developing of social responsibility (National Commercial Bank, 2009).
CRS awareness has been done in Saudi Arabia and many organizations have been involved in activities which are related to it. This has improved consumer trust, community improvements, employee recruitment and retention, and even improvement in financial performance. CRS related activities are much valued in Saudi Arabia since they are associated with serving the less and medium fortunate individuals in the society which is in line with their religious teachings (National Commercial Bank, 2009). However, there have been some arguments that CSR activities should not be so much grounded in to religious basis. Practice of social responsibility has been found to significantly lead to improvements in the business organizations in Saudi Arabia.
In a study carried out by the national commercial bank on how corporate social responsibility is perceived in Saudi Arabia, around 62 percent of respondents argued that activities related to CSR have led to development of stronger relationships between consumers and organizations (National Commercial Bank, 2009). There has been a lot of awareness on CSR which has led many organizations to adopt and practice it. Therefore, Saudi Arabia is one of the countries which puts a lot of emphasis on CRS and encourages all its organizations to adopt activities related to CRS.
Globalization can be described as the way in which societies, economies and cultures have been put together and integrated through global networks of transportation, communication and trade (Muccheielli, J et al, 1998). Globalization has made it possible for people to shop/purchase or sell their products all over the world. As started earlier, Saudi Arabia is one country which has been found to be very conservative. It has tried its level best to resist any changes affecting their traditional practices. Global economics and technology has made it necessary for the country to change. Especially with discovery of oil, Saudi Arabia had to adapt to globalization since it could sell its oil and natural gas all over the world (Muccheielli, J et al, 1998). Globalization has changed the lives of individuals in Saudi Arabia.
The main reason as to why Saudi Arabia accepted globalization was due to the discovery of the oil since the whole world was in need of it. Countries like the OPEC developed interest in the oil. To accommodate them, Saudi Arabians had to be globalized. Americans stayed long in the eastern province where oil was being extracted. People from this place had an American influence (Muccheielli, J et al, 1998). This influence is portrayed in shopping mails, highways, and their clothing which are made outside Saudi Arabia. Globalization in Saudi Arabia is happening through the natural resources which are oil and natural gas. Today due to globalization Saudi Arabia has control over its oil.
Despite the conservative nature of Saudi Arabians, globalization occurred at a very high rate due to availability of oil and natural gas. Since many nations depended on the oil from Saudi Arabia, the country decided to open up its closed society in order to meet the global demand of its oil. It also decided to accept foreign influence since exportation of oil generated a lot of money (Muccheielli, J et al, 1998). Although Saudi Arabia desire to continue being a strict traditional society, the large amounts of money generated from oil made it necessary to deal with the western world. Dealing with the western world brought a lot of influence on the Saudi Arabians.
Positive Effects of Globalization
Although Saudi Arabian government thought that globalization came with negative impacts which destroyed the traditional practices of the country, globalization has come with a lot of positive effects. It has opened up the society which has enabled influence from the foreign countries like the United States. Globalization has reduced the oppression which the Saudi Arabian women suffered. It gave women freedom of doing things which they were not allowed to do like reading an American magazine. Globalization also made it possible for the country to make money. Saudi Arabia was initially described an underdeveloped desert but it became wealthy when oil was discovered. It was through globalization it was able to make money through exports of its products to other countries (Muccheielli, J et al, 1998).
Some of the positive effects are also seen in those considered as holy cities since they are also able to generate money from sales of Islamic idols outside the mosques. In addition to these globalization has led to improvements in health and education. For Saudi Arabia to serve global countries, it required educated personnel this promoted improvements in education systems. Globalization has adversely affected higher education in Saudi Arabia but the good thing is that it has led to its improvement and increased its quality. The role of women in the Saudi Arabian society is now very much valued and is well educated. Women are also involved in active participation in building of the economy.
Globalization has made it possible for Saudi Arabians to make choices regarding their way of life rather than blindly following Islamic practices. Although Saudi Arabia is majorly dominated by Muslims, globalization has brought about freedom and flexibility (Muccheielli, J et al, 1998). People can also learn from others in other countries on new ways of doing business. Globalization has also contributed greatly to the growth of the Saudi Arabian economy through involvement of other countries.
Negative Effects of Globalization
Despite the fact that globalization comes with a lot of positive impacts, it also has several negative impacts. For instance, Saudi Arabia had very strong culture which it valued so much. Due to globalization, it was able to dilute its culture and accept influence from other countries like United States. It is due to globalization that the behavior of Saudi Arabians changed in that they no longer stuck to the observation and practice of Islamic law and practice (Muccheielli, J et al, 1998). They could get access to information which was initially considered a taboo in Saudi Arabia.
Crime increased in Saudi Arabia due to globalization. This was due to the fact that, foreigners came to the country and influenced the young people sometimes to the wrong. Saudi Arabians got the chance to purchase what they wanted in any place of the entire world. This was no longer controlled. Due to this reason, they could buy items which were not initially accepted by the accepted by the Saudi Arabian culture. Access to information became easier. This is a positive effect on one side and a negative effect on the other side. Individuals were able to access information which was not accepted by the indigenous Saudi Arabia culture. Money comes with a lot of evil did (Muccheielli, J et al, 1998). The level of drug abuse increased among the youth. Due to availability of money and an improved economy, Saudi Arabians are able to hire domestic workers from other countries where they mistreat them which are against human rights. Extraction of oil also comes with pollution of the environment and accidents which could rather not be happening. Islamic idols were considered as holy and it was not allowed to display them in the open. Globalization has led to abolishment of this. This is seen by the fact; the Islamic idols are being sold in the open outside Mosques.
Regionalization involves integrating markets with those others in a particular region. It is important since it helps individuals meet their needs and receive help any time they require it. It like saying that unity is power. When markets in a particular region are integrated, they are able to support one another. It is just the same as globalization but in regionalization, individuals are limited to a particular region. Economies of different countries in a particular region have been involved in collective regionalization decisions (Muccheielli, J et al, 1998). Sometimes people or particular countries may not like the involvement of outsiders but involving them has proved to be very beneficial.
Saudi Arabia is one of the countries which have accepted globalization. Having a large amount of oil reserves in Saudi Arabia does not mean that they can do everything for themselves. They have been able to include other countries in the region. The main aim of accepting regionalization in Saudi Arabia was to be able to sell their oil and natural gas (Jesperson, 2011). In addition to this, they also needed help in the extraction of oil and natural gas. Many countries in the region were interested in the Saudi Arabian oil. For Saudi Arabia to successfully export oil to these countries, they had to be regionalized (Jesperson, 2011). Saudi Arabia was also making a lot of money from oil and it sometimes needed to involve foreigners in order to invest the money successfully.
Initially, Saudi Arabia was afraid to lose its autonomy and wanted to continue practicing its traditions. With time, Saudi Arabian leaders were able to notice that, if they do not accept globalization, they will not be able to optimally benefit from their natural resources.
About GCC
Arabia is the area which is described as comprising Arabian Peninsula. According to political perspective, Arabian Peninsula comprises of countries like Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates, Sultanate of Oman and the republic of Yemen. When these countries are put together excluding republic of Yemen, they make up the Gulf Cooperation Council (GCC) (Ramazani, R et al, 1988). The main aim why GCC was created was to facilitate coordination among all the members which will in turn improve their unity. Saudi Arabia was the main contributor towards the formation of GCC in 1981.
GCC strengthens corporation and has facilitated economic integration among the member states. GCC was created to respond to the Iran-Iraq war and it took the responsibility of forming Gulf Standards Organization in 1982 and Gulf Investment Corporation in 1984 (Ramazani, R et al, 1988). It has its headquarters in Riyadh, Saudi Arabia and its presidency is supposed to alternate among all member states. GCC countries have similar objectives and follow Islamic beliefs. It is a form of a regional market for the member states. There are security threats along the Gulf and GCC helps in putting the efforts of member states together and mobilize their capabilities in fighting the threats (Ramazani, R et al, 1988). They aimed at collectively facing security threats especially from Iran-Iraq war and Iranian-inspired activist Islamism.
GCC countries are responsible for supplying up to one third of oil in United States and have been found to own around $500 billion of the U.S capita. These countries have improved their standards of living and have decided to diversify their economies and stop relying on oil only (Ramazani, R et al, 1988). The problem with GCC is that; it is ruled by family based sultanates that are not for education since it is likely to change the way of leadership.
Significance of GCC to Saudi Arabian Business
GCC has a very great significance towards Saudi Arabian business. This is based on the fact that GCC offer regional market for all businesses in Saudi Arabia so they do not have to struggle very much looking for market. Saudi Arabia is sure that even if other countries do not buy from their businesses, member states of GCC will buy from them. Wars and security threats can adversely affect businesses (Ramazani, R et al, 1988). However, GCC is aimed at combining efforts to confront security threats. This is an advantage to Saudi Arabian business since they are sure that their businesses will not be affected security threats. The other main aim of GCC was to strengthen coordination among different industries in the member countries. Some of these industries included agriculture, transport and textiles among others. These played a very significant role towards the Saudi Arabian business (Ramazani, R et al, 1988). Oil is very important in all these industries, therefore as far as corporation among the industries was made oil business was booming in Saudi Arabia.
The other objective of GCC was to integrate economies of the member states. This also played a significant role towards Saudi Arabian businesses because economies from different countries help to boost each other (Ramazani, R et al, 1988). The major businesses in Saudi Arabia are oil based and GCC was aiming at diversifying the economy to include other products. This means that businesses in Saudi Arabia will diversify also a situation which is likely to improve business conditions and income from businesses. Businesses in Saudi Arabia were able to expand since there were readily available markets which Saudi Arabians were very sure of. Joining of efforts by GCC countries played a very key role not only to Saudi Arabian business but also to businesses from all the other countries (Ramazani, R et al, 1988).
Issues Concerning GCC
There are so many issues which concern GCC especially those related to its objectives. The first issue is about strengthening relationships between the citizens of member states. There is also an issue of strengthening corporation among different industries of all the member states. This is an important issue as it will help different industries to support one another which are an advantageous issue to all the member states. This is a difficult thing to do but GCC has been committed to achieve it (Ramazani, R et al, 1988). The major and difficult issue which concern GCC is about is leadership. Although the presidency rotates annually among the member states, there is a problem in that leaders are from family based sultanas.
GCC has the desire of diversifying its economy and to stop entirely relying on oil. However to achieve this objective GCC countries need educated citizens. It has been noticed that GCC countries rely mostly on foreigners to supply them with optimally qualified labor. To put to a stop their dependence on foreign labor, they need to educate their citizens. However, this has been a problem because the leaders are afraid. Leaders think that if citizens are educated, the form of leadership will change and the family based sultanas will no longer be in power (Ramazani, R et al, 1988). The other major issue concerning GCC countries is security threats. These countries are always faced with security issues from their neighbors. This is one concern to GCC as it aims at confronting all these threats. Security threats and war can affect the business system of any country. Therefore, GCC countries have to actively join efforts in order to confront these security threats.
From the discussions in this paper it can be concluded that, Saudi Arabia a country which was once considered as underdeveloped and poor is now considered as one of the wealthiest countries. This is after the discovery of oil reserves in the country. It is mostly dominated by Muslim since prophet Mohammed was born there. Kuwait is the royal family in Saudi Arabia and leaders are basically his sons and grandsons. It is very easy to start and do business in Saudi Arabia. However, there are particular procedures to follow and charges to pay before setting up a business. Saudi Arabia is a monarchy and the leaders should be sons and grandsons of King Abdul Aziz Al Saud. There no officially recognized political parties in Saudi Arabia. King Abdullah has been the leader of Saudi Arabia since 2005 and there have been concerns on how leadership will be passed to the young generations.
The legal environment in Saudi Arabia mostly involves the sharia which is the Islamic law. Other kinds of legal systems are royal orders, royal decrees, and council of minister resolutions, ministerial resolutions and ministerial clusters. Saudi Arabians are very conservative about their culture. They mostly rely on Muslim teachings where elders and men are given a lot of respect. Gender roles are clearly defined and every one is supposed to stick to them. There have been a lot of questions pertaining ethical practices in Saudi Arabia especially when it comes to treatments given to women.
There has been a lot of awareness about corporate social responsibility in Saudi Arabia. It has succeeded because many organizations are using it and have confirmed that it has strengthened the relationships with their customers. Globalization was accepted in Saudi Arabia because of availability of oil. There needed to export oil to other countries and therefore globalization was a must. Globalization brought both positive and negative effects. Regionalization was also another aspect which Saudi Arabia accepted in order to find market for their oil. GCC countries which Saudi Arabia is one of the member states came together with the aim of strengthening relations among their citizens and improving corporation (Ramazani, R et al, 1988). They also aimed at confronting security threats which the member states were receiving.


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