Team Capital Guest Blog by Javier Girones (CFO – El Seif Engineering Contracting Co., Saudi Arabia – a leading construction company in the Middle East) and James Brazier (Regional Head CRC MEA for BNP Paribas, Bahrain).
Senior executives working in the Middle East (ME) need an effective knowledge of regional business etiquette for productive negotiations and results orientated progress. Clearly no multinational organisation would be naïve enough to adopt the business colonialism approach of simply exporting their business model and practices without due attention to demographics. Managers and organisations that can adapt will flourish rather than face a costly flounder.
Of course, neither are all Middle Eastern countries equal when it comes to setting up business. For ease of entry you have Bahrain at one end of the spectrum where literally no distinction is made between foreign and domestically owned companies. Businesses in Bahrain also enjoy the lowest business and living costs amongst the more developed parts of the region. We would exclude of course the other end of the spectrum, such as Yemen and Syria, for obvious reasons beginning with security.
All sites in the ME present issues or opportunities waiting to be solved. Bahrain included. By way of a recent example the Gulf Daily News (GDN) reported last November the closure of UK supermarket chain Waitrose’s six stores in Bahrain. This was after the franchiser “Supa Save Bahrain” went into liquidation. Waitrose only opened in Bahrain two years ago. The Waitrose Communications Manager put this down to the fact that the sales required for a sustainable business were not achieved. Clearly Waitrose relied on unrealistic projections. However, Waitrose continues to do well in the ME, albeit in the UAE.
So what happened to Waitrose Bahrain?
As mentioned, Waitrose was a franchise / joint venture set-up in Bahrain, as it is in the UAE, though with a different partner. The operations in Bahrain were handled by the local partner, who also run the Costa coffee chain on the island, which may have created some issues from day one. There is no guarantee that wealthy local families would wish to avail themselves of the Waitrose experience for reasons not apparent to ME outsiders. Additionally, Bahrain is an island of 1.2m people and as any local would canvass it is saturated with supermarket chains. 300-400,000 of the populous wouldn’t be comfortable with Waitrose’s prices either, so clearly Waitrose’s business plan for 6 stores was unrealistic at best, and in hindsight unsound.
Waitrose, as stated, is already established in the region with its UAE enterprise, but even then it still failed spectacularly in Bahrain. In hindsight, we believe it took the wrong advice and should have done better due diligence and not have left any issue(s) unresolved. Fail to prepare for all eventualities in the ME, as with elsewhere and you prepare to fail.
Even with a sound business model and strategy, any business contemplating a footprint in the ME needs to become familiar with functioning within Middle Eastern business etiquette and cultural framework. Your way, to you, is the best way, is not necessarily the way for the ME. The Region has its own rhythm, which we will come onto.
Middle East business etiquette should not be under-estimated
Within the UAE you need to have a sponsor to set up a business. Your new Emirati partner will put more emphasis on the value of their status as your 51% partner, then on your product. In the West we value the product first and foremost, attaching less importance on the status of one’s business partner. Failing to grasp this early on will expose you to fruitless frustrations leading to an unlikely chance of deal closure.
Scheduling rigid meeting timings is also counterproductive. Quite the contrary with the west, allowing flexibility with time will usually work to your advantage. Also you need to be prepared for possible frequent changes in schedule and indeed venue. Accommodating these changes well and with a good spirit will normally lead to greater success. Remember not to become discouraged by this and remain focused on the bigger picture rather than on all the steps to get there.
While it will become readily apparent that negotiations will likely become long winded affairs with little headway, you must remain prepared and vigilant. Occasionally the opposite can happen and the pace is set sometimes unrealistically fast with excessive goals, but remain calm and explore all ideas. Even the most outlandish idea can by its very boldness work, take Dubai where you can now do Alpine skiing, in their indoor ski resort on manmade snow, while outside its 120+ in the shade.
Anglo Saxons want to highlight a plan, decide on the terms and legal documentation required, conclude the signing and move on. In the ME people will want to get to know you first, and several meetings over a period of time may be needed to even talk about a venture in anything more than high level terms. This beating around the bush can certainly frustrate western business protocol, with some successful westerner negotiators being unable to cope with it. This is only further exasperated if one is on a tight schedule. Prepare to stay in the ME for several weeks and offer to arrange for your target ME partners to visit your head office too. Do not expect to agree the commercial terms without several meetings. But remember, get it right and the sky is the limit literally, as Dubai now hosts the Burj Khalifa, the world’s tallest building.
Remember ME Heritage began long before US Heritage
In general decide before hand, when dealing in the ME, as to what is negotiable for you and what is not. Remember not to forget that many in the Arab world are, educated, many of them in the West, and have a long heritage as excellent and creative negotiators, and this from way back in the day when in Europe we were still clothed in animal skins, and in a time over two millennia before America was discovered.
As learnt from time in Japan, the very senior people in the ME, may well turn-up at key moments, such as at the signing ceremonies, and consider the antecedence mundane and best left to their junior staff, why have a dog and bark yourself comes to mind.
Always follow up with your potential and wealthy ME partners, as they may well not always respond. So try email, phone and of course face to face interaction, which is always preferable. Culturally, face to face discussions over lunch or dinner are more likely to yield results. Also remember, as mentioned above, to try to avoid discussing medium or lower level details; this comes later when they assign one of their more junior staff to work on these details with your team.
In oil rich ME countries, the local populations are small, thus, good, experienced, well trained local people are a limited supply. The local oil producing countries also have a system of generous state hand outs. Take Kuwait locals, who get material amounts of money from their government and more when they get married and have children, hence some, while committed, might work at a different rhythm to their western counterparts.
In ME, people must trust you before doing any business with you. The trusting process, usually, is long and drawn out, as they must feel that each party knows each other, in different situations and venues. It does not matter whether you represent the world largest corporation, if they do not trust you as a person, you will not be able to close anything. Probably customs will dictate that you will not hear “no” but either way you will NOT proceed with the deal. Customs will ensure extreme politeness to avoid saying “no”, but ambiguity can also mean “no”, at least in initial stages!
Also consider, outside of government departments, a good percentage of private enterprise while with international democratic corporate governance standards is family owned. Demographically these companies are also extremely multicultural with locals, Lebanese, Egyptians, Indians, Pakistanis, Filipinos, and Europeans amongst others. The lingua franca being English with a myriad of accents which can present, initially, challenges in comprehension for newcomers.
Finally remember to remove your watch and learn to appreciate coffee.
Thus to conclude, patience is the most useful tool you will require in ME. It is important to deal “face to face”, this is a must, not just once, but as many times as required. For companies to send senior managers to ME without experience in the region can be a costly, risky and tragic in experience. If a western manager is not flexible enough to adapt rapidly to this environment, and, or unable to understand the new situation, total failure is perhaps the only guarantee. Note that a meeting can still be deemed successful by your hosts even if the venture in mind never gets discussed! Remember to stay for the long haul, remove your watch and note a calendar is more than 1 day or 1 week. Learn also to drink a lot, by that I mean coffee!
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