Essay: Khind Holding Berhad

1.0 INTRODUCTION
1.1 Khind Holding Berhad’s Background
Khind Holding Berhad established in year 1961. The synonymous of ‘Khind’ is value-for-money with high quality electrical home consumer appliances throughout the world. The company headquarter is located in Shah Alam, Malaysia. The founder for Khind Holding Berhad was King Fa Cheng who started a modest business in Sekinchan trading electrical goods. In year 2011, Khind Holding Berhad celebrated their 50th anniversary. Khind Holding Berhad is a marketer and producer of home consumer electrical appliances. In year 2013, it is also an industrial electrical company with revenue of RM325 million.
Since 12 August 1998, Khind Holding Berhad was listed on Bursa Malaysia (Kuala Lumpur Stock Exchange). They employed over 800 of employee in year 2014 with 11 branches of offices in Malaysia. Khind Holding Berhad manufactures and distributes the world class electrical home appliances across Malaysia and exports their product to over 50 countries worldwide which includes Hong Kong, Singapore, Brunei, China, Etc.
1.2 Khind Holding Berhad’s Management
The Board of Director of Khind Holding Berhad:
1. Mr. Cheng King Fa – He is the Founder or Chairperson for Khind Holding Berhad which commenced as a small family business 50years ago.
2. Mr. Cheng Ping Keat – He is the Group Chief Executive Officer for Khind Holding Berhad. He is responsible for the operation relating to marketing, financing, manufacturing, export management, brand building and overall strategic planning for the company.
3. Encik. Kamil bin Datuk Hj. Abdul – He is the Senior Independent Non-Executive Director and Chairman of Audit Committee. His specialization area is in corporate governance, corporate finance and risk management.
1.3 Khind Holding Berhad’s Product
Since Khind Holding Berhad established in 1961, they has always sought to be at the forefront of bringing affordable and great innovative products to consumers. Khind manufacturer distribute a wide range of home appliances with the best qualities such as air cooling fans, chillers, rice cookers, toaster ovens, washing machines, refrigerators and vacuum cleaners, typically white in color for consumers homes in Malaysia and in more than 60 countries around the world.
1.4 Performance and Develpoment
Khind Holding Berhad became the official marketing company for international brand. Ariston is the home water heating company and Honeywell is the air cooling devices in Malaysia. Through its subsidiaries, Khind is also the marketer for high-end home consumer appliance brand such as KitchenAid, Ariston and Bugatti. Their industrial electrical solutions subsidiaries help distribute brand such as Relite and Swisher which is a specialist for air cooling brand and industrial cleaning solution respectively.
Throughout many years, Khind has won many accolades and awards. Awards that they had achieved consist of SMI Achievers Award and Innovation Award 2004, the KLSE Corporate Sectoral Award 2003, the Prime Minister Quality Award 2003 and the industry Excellence Award 2003 by the Ministry of International Trade and Industry. Khind Holding Berhad won these awards which are the testimonies that drive for quality, product design, energy efficiency, innovation and creativity as well as compliance to SIRIM standards.
2. 0 Contents
2.1 History of Saudi Arabia
Saudi Arabia is an absolute monarchy ruled by King Salman bin Abdul Aziz Al Saud, who became king following the death of his half-brother, King Abdullah in January 2015. It is the world’s largest oil exporter and dominates the Organization of Petroleum Exporting Countries. Oil revenues account for about 90 percent of export earnings and about 80 percent of government revenues. Saudi Arabia joined the World Trade Organization in 2005 as part of an effort to promote foreign investment and economic diversification. Pro-reform Arab Spring demonstrations in 2011 drew few crowds outside of eastern Saudi Arabia, where the Shia minority population is concentrated. The kingdom faces a rising threat from ISIS and internal Sunni’Shia tensions.
First foremost, Saudi Arabia has highest reserve in oil and petroleum that outstands them as the second largest provider in the world. Saudi Arabia is not only plentiful but under pressure and close to the surface of the Earth. Thus, this makes it cheaper to and far more profitable to extract petroleum from Saudi Arabia than as compared to other countries. The petroleum sector contributes 92.6% of its total revenue, 97% of export earnings and 55% of Gross Domestic Product (GDP) into Saudi Arabia’s prospering development.
Over century, Saudi Arabia has revolutionized whereby more and more commodity is being produced in Saudi Arabia that makes it competent to put a stiff fight among its competitors. Saudi Arabia is the producer of energy, base metals, agricultural and precious metals to gigantic industries all over the globe. This has brought to a rise of USD 19,111 to USD 24, 451 over the period of 2010-2015 which lead to 27.94% increase in overall Gross Domestic Per Capita in Arab Saudi.
Saudi Arabia’s average tariff rate is 3.6 percent. Imports of pork, used clothing, and used cars that are more than five years old are not permitted. Foreign investment in many economic sectors is either prohibited or capped. There are minimum capital requirements for foreign investors. The financial sector has undergone gradual transformation, and some restrictions on foreign investment in financial services have been eased.
Generally, Saudi Arabia makes up 865,000 square miles. It extends from the Red Sea on the West till the Arabian Gulf in the East. Saudi Arabia has a typical desert climate, which it makes up with 95% sandy. Rub’ Al Khali which means Empty Quarter and is the largest desert in Saudi Arabia. The desert is entirely a harsh place and totally uninheritable. Finally, Muslim populates 95% of the population in Saudi Arabia. Bedouins and Arabs are the occupants in Saudi Arabia. The Bedouins are citizens that keep up to nomadic lifestyle.
Political factor
Saudi Arabia is ruled by monarchy based on Islam. The regime is headed by a King, whom is also the commander in chief of the military. The King governs with the help of Council of Ministers, also called the Cabinet. There are 22 government ministries that are part of the Cabinet. Besides that, Saudi Arabia is divided to 13 provinces, with a governor and deputy governer in each. Hence, its judicial system is based on Islamic Law (Shari’ah). The tax policy practice by Saudi Arabia is CIF (Cost,Insurance,Freight) , which means that the import and export duty and taxes payable are calculated on the shipping value, which includes the cost of the imported goods, the cost of freight, and the cost of insurance. Duty rates vary from 0 % to 5-%, with the average duty rate at 4.58% (e.g. books, laptops and electrical products) while some products can be imported free of duty. Based on the 2012 Corruption Perceptions Index, Saudi Arabia gave a score of 4.4 (on a scale from 0 to 10 where 0 is ‘highly corrupted’ and 10 are ‘highly clean’).
Economic Factor
After a surge in prosperity over the past decade fuelled by rising oil prices, Saudi Arabia’s economy is at an inflation point. Based on the McKinsey Global Institute report, Saudi Arabia beyond oil: The investment and productivity transformation, Saudi Arabia has significant opportunities to transform its economy to become more sustainable and less dependent on oil. Nevertheless, the current labor participation rate is 41% and the productivity growth of 0.8% annually from 2003-2013 trailed many emerging economies.
Globalization impact has penetrated Saudi Arabia that skilled worker comprises technical workers are Americans and Western European which are occupied primarily in defence and petrochemical industries. Nevertheless, domestic workers comprises from Africa, India subcontinent and Southeast Asia. Moreover, Filipinos works in the health, oil and manufacturing sectors. Additionally, most Egyptians have migrated to Saudi Arabia for a greener pasture, to take up professional jobs such as doctors, nurses, teachers and engineers.
Social Factors
Saudi Arabia populates 20,702,536 million netizen whereas total population growth rate as of 2014 is 2.1%. The cost of living marks up 130.1% and inflation rate is 2.7%. Whereas, the unemployment rate more than15 years in 2014 is 11.7%. Therefore, the infants mortality rate (per thousand live births) is 15.5%. Lastly, the gross enrolment rate in primary education is 108.17% and secondary is 97.39%. Subsequently, the society of Saudi Arabian is governed by firm religious beliefs, rules and traditions. The traditions and attitudes of local society have be mould by Islamic as well as Bedouin culture. Bedouin is a seminomadic group, descended from a nomad who has historically inhabited the Arabian and Syrian deserts. Their common culture is herding poultries and farming. The culture life in Arab Saudi solids strongly within the confines of strict interpretations of the Quran. Saudi Arabia prohibits alcohol consumption, theatre and public exhibitions for films. In accordance with Wahhabi doctrine, only two holidays are observed which are Eid Al-Fitr and Eid Al-Adha.
Technological Factors
Saudi Arabia is one of the Arab countries at the forefront of this modernization. It is a country that currently has 12% of its total government budget dedicated to upgrading its higher education system, arguably the highest level of funding in the world. The kingdom is now working towards being a Centre of research excellence. One by-product of this goal is the development of King Abdul Aziz City for Science and Technology (KACST), an independent scientific organization that is essentially the country’s national science agency and reports directly to the Saudi Arabian Prime Minister. KACST is primarily concerned with proposing, developing and implementing strategies for the advancement of science and technology within and beyond the nation. In addition to this they also conduct applied research and provide advice to the government.
Al-Faisal University in Riyadh is a non-profit research university with links to KACST, Harvard University, Oxford University and MIT, and offers science degrees which pay particular attention to biotechnology. King Saud University (KSU)’s College of Science offers a more diverse choice of degrees relating to many branches of science including biochemistry, enzymology, bioenergetics, chemical thermodynamics, quantum chemistry and geophysics. As is common with many Saudi Arabian universities KSU also hosts its own Centre of Excellence in Science, the main objective of which is the development of innovative programmers which aim to connect both students and teachers on all levels of research.
King Fahd University of Petroleum and Minerals (KFUPM) is not as specific an institution as its title would suggest – it runs degree programmers ranging from physics and chemistry to geology and geophysics. KFUPM also hosts its own Centres of Excellence including a Centre of Excellence in Nanotechnology (CENT). CENT’s objectives are varied and are dedicated to allowing students of the university to collaborate with scientists to help assist in their research. Currently the members of CENT are involved in the research of catalysis and photo-catalysis technology which, when completed, could be applied to the cleaning of gas and other fuels and also water purification. There is also a research group developing nanostructured materials for application as chemical sensors and a centre dedicated to the development of renewable energy technology. In addition to this, Honeywell UOP, a leading international supplier and licensor of petrochemical production, has announced that it will collaborate with KFUPM in the development of catalytic processes in the production of petrochemicals, allowing university professors and researchers to work alongside the company’s scientists.
2.2 PEST Analysis of Saudi Arabia
1. Political analysis
Saudi Arabia is a hereditary monarchy found in 1932 by Abdul Aziz bin Abdul Rahman Al Saud. The kingdom has been ruled by the Saud and the country has follow by Islamic religious traditions. King Abdullah has been the ruler in 2005 such as the introduction of a legislative council and local elections, but he has not deviated from the Saudi Arabia country’s traditional practices and seeks the approval of religious in the policy-making process. (Basri, 21 November 2013)
The Kingdom of Saudi Arabia is divided into 13 provinces administered by a provincial governor appointed by the King. Provinces are subdivided into governorates, districts and centers. The King’s Cabinet or Council of Ministers is appointed by the King every four years. There are 22 government ministries that are part of the Cabinet. The monarchy is hereditary, so there are no elections for the role and no political parties in Saudi Arabia. (Basri A. , 2013 )
The judicial system of Saudi Arabia has remained conservative without any separation of powers and the king is the final decision maker. The government takes measures for the effective implementation of environment regulations. The ongoing development plan has identified the major weaknesses of the country and the government has begun to take measures to transform Saudi Arabia into a diversified economy and a developed nation. (Novonous, 2010)
2. Economic analysis
Saudi Arabia has a mixed economy and has rich in oil reserves. Saudi Arabia has a quarter of world’s oil reserves and has a tremendous GDP growth that is primarily driven by rising oil revenues. Saudi Arabia’s economy looks at good growth and is expected to reach US $754.7 billion by 2017. The Saudi Arabia’s economy is high income and also is the largest one in Middle East. The stability of government is feared to get hampered due to high unemployment rate among its youth and the public sector corruption. Most of the Middle East countries are facing the same problem. Saudi Arabia has an edge with its strong economic strength and weak opposition pattern. (Novonous, 2010)
Another major issue of the Saudi Arabia is an unbalanced relationship between the public and the private sectors presiding together. The public sector economy can go unsustainable in long run. Oil industry economy accounts for more than 90% of exports and 80% of government revenue, although the share of the non-oil economy has been growing recently. There is Increasing need of private sector participation to secure the Saudis long term prospect. The Saudi government has taken measures to attract the private investment to promote the expansion of non-oil sector. The government plans diversification to focus on the power generation, telecommunication, natural gas exploration and petrochemical refineries to promote economic activity. But the income has not improved is the lives of majority of its population. Growing unemployment and income inequality have still challenges for the government. Furthermore, the educational policies are also based on religious principles, which have retarded the technological development of the country. (Novonous, 2010)
3. Social ‘ culture analysis
Saudi Arabia is ruled by the family of Al Saud and they also affirmed that they are committed to supporting the economic growth and be part of the developed nations. This objective is hard to achieve because fundamentalist Muslims refuse the idea of globalization, this involve moderate political risk on the regime. (Novonous, 2010)
Furthermore, the political situation affects the restaurant industry because the restaurant industry is still the major uncontested method of entertainment among Saudis. By law, all restaurants are required to have single-males section separated from the family section to adhere the tradition and religious requirements. Moreover, The Kingdom of Saudi Arabia is perceived as the leader of the Muslim world, because it is the home town of Makah which Muslims must visit at least once time to complete the 5th pillar of their religion. (Novonous, 2010)
(a) Clothing
The traditional costumes of Saudi Arabia for men consist of Shumag or Ghutra (triangle cloth wear over the head). On top of Ghutra, double black rope-like cord called Igal is wear in order to hold Ghutra in place. Then, a full-length, loose garment with long sleeved called Thawb. Thawb comes in different styles and colors. Next, Bisht or Mishlah (cloak) wear by men on the top of the thawb on special occasions like wedding.
As for the women, they are very fashionable but they do not appear in public. They are wear Abaya along with scarf on the top of clothes when they are go outside. The black Abaya covers the entire body and veil covers the head and hair but the face is open and visible.
(b) Communication style
In Saudi Arabia, an individual is addressed by his or her first name, and any title they possess. A “Dr. Ahmed Bin Al-Rahman” would be addressed as “Dr. Ahmed.” The word “bin” or “ibn” means “son of” and may be present a number of times in a person’s name, as Saudi names are indicators of genealogy.
Another common name structure is having “Abd” followed by an attribute of God with the definite article “al-.” Hence, “Dr. Abd-Al-Rahman Al-Haji” would be addressed as “Dr. Abd Al-Rahman” and not as “Dr. Abd” or “Dr. Abd Al.’ (Approved for Public release, 13 June 2014)
(c) Languages
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.
Besides that, Arabic is the language of the Qur’an, the Holy Book of Islam, and of Arab poetry and literature. Classical Arabic has remained unchanged for centuries. The dialects spoken in urban areas and in rural areas are differences between in Saudi Arabia. (The Languages spoken in Saudi Arabia, 1999)
(d) Greetings
Man greeting Man – Men greet one another with a handshake (right hand only) using, hug and possibly one to three kisses on alternating cheeks depending on the level of familiarity. For foreigners start with the handshake and follow the lead of your Saudi counterpart if kisses are offered. If greeting an older family member (father, grandfather) might kiss their forehead to show respect.
Woman greeting Woman ‘ A handshake (right hand only) is common and possibly one to three kisses on alternating cheeks (once on the right, then twice on the left) depending on the level of familiarity. Some women do both cheek kissing and hand shaking depending on the group of people and how familiar they are with each other. If greeting an older family member (mother, grandmother) might kiss their forehead to show respect.
Greetings between Men & Women – There is little to no touching between men and women during greetings in public, unless related by birth or marriage. (Approved for Public release, 13 June 2014)
4. Technological analysis
Although Saudi Arabia just adopted the Internet in 1999, the government has made advances to improve science and technology starting in 2000. The Saudi Arabian government implemented The New Science and Technology Policy to develop a more knowledge-based country. The companies and services previously under government jurisdiction are becoming privatized, which will promote further boosts in research and development. (Novonous, 2010)
With the growing private sector, systems with advanced and innovative technologies are being installed. Efforts are being made to make information technologic an integral part of the Saudi Arabia educational system. Many colleges and universities emphasize curricula in sciences and technology, religion, and medicine. Women typically receive college instruction in segregated institutions and spending on defense and security has increased significantly since the mid-90s and was about US$25.4 billion in 2005. In modern high-technology arsenal makes Saudi Arabia with its military equipment being supplied primarily by the United Stated, France and Britain. Saudi Arabia is a country that keeps technologically updated as it needs to attract more tourists and visitors from around the world. Saudi Arabia imports technological machinery from Japan and other countries which enables it to be established as well-technologically equipped country. (Novonous, 2010)
2.3 PEST analysis with the company profile to determine the prospect of development
Based on the PEST analysis, politically, Khind Corporation has opportunity to further strengthen their market development to set foot in Saudi Arabia. Based on the political factor, Khind Corporation is able to take advantage of the low duty taxes which is only 4.58% as compared to China of 13%-17% and which ranks 1stas the highest based on Central Intelligence Agency (CIA) in 2013 report. This will boost the returned profit per annum for Khind Corporation to boost their development and thus create job employment and lowering job unemployment rate among Arab Saudians.
Economically, Khind Corporation opportunity in developing in Saudi Arabia enhances labor participation rate higher than current 41% and a higher annual growth than 0.8%. This opens vast globalization for more expertise to contribute and increases the GDP Saudi Arabia. Khind Corporation is able to grab opportunity to further invest lower capital in research and development but the current existing products and enhance better in order to improve the lifestyle of consumers and attract new group of buyers and curb externalities that tarnishes the nation’s reputation.
Socially, Khind Corporation is able to accommodate the taste and preference alongwith the demand of the society for cheaper yet good quality electrical products in order to enhance the productivity and daily life chores. Khind Corporation is able to perform its Corporate Social Responsibility in terms of upgrading the loopholes of education, health and social sectors in Saudi Arabia. Khind Corporation is able to exchange knowledge scholars in the future fromthe younger generation to further contribute in the life cycle of Khind Corporation. The current socio-culture changes could also be revamped whereby more job opportunities will be given to females and not just only males. This will also evolve the metaphor of disallowing females to work but only the men.
Technologically, Khind Corporation is able to open up technology transfer and improve technology in increasing productivity of product and services. Moreover, the emerging of technology allows in house practical students to have hands on in real life industrial sector. This will create more creative and innovative individual in helping Khind Corporation to achieve maximum profit and sustaining credible manpower and technical expertise in their own field. Additionally, research and development activities can be further improved and more strategic plans to save cost can be introduced in order to sustain longer in the competitive competition among rivals.
3.0 Recommendation
3.1 Identify the business opportunities, risks and challenges to do business in the selected country.
Saudi Arabia is a faster growing economy country as it GDP growth reached over 6% in 2012. As the growing economy is create several opportunities for exporters, producers and investors. Investors in Saudi Arabia can enjoy increasingly well-developed business benefit. There are huge business opportunities in Saudi Arabia. We can see that the turmoil in several Middle East countries, Saudi Arabia still remains stable as become one of the most dominant oil producer and exporter in the world. Saudi Arabia attracts investor pay attention as one of the lucrative place to invest. Furthermore’Saudi Arabia try to diversify the economy and reduce its reliance on oil and committed to the development of other undertakings. Except oil, gas and petrochemicals, to develop diversity economy such as information technology (IT), education, training and human capital development, healthcare and life sciences, real estate and industry cities.
Khind Holding Berhad is an electronic industry that is a leading manufacturer and marketer of home electrical and electronic appliances; and industrial electrical equipment. It is a fast emerging sector in Saudi Arabia, which can generate employment. Saudi Arabia develop diversify economy that create more business opportunity for their business. The country growth is due to the low cost of the energy in the operations in the business. Subsidies and incentives on the industrial lands make things even better for the business. Khind Holding Berhad can produce electronic product and service in that country. For example, Saudi Arabia develop real estate that need to produce electronic product and service such as lamp, electricity and other. On the other hand, Saudi Arabia climate warm, Khind Holding Berhad can focus produce the air conditioning electronic product and service. Furthermore, the country each economy development also need these business product and service.
There are few risk when expand business to Saudi Arabia. The first is terrorism and security. Terrorism increasingly difficult places in which to do business. Transportation and insurance costs will increase because of security surcharges on cargo in a riskier business environment. Saudi Arabia remains a high threat of terrorism. ISIL claimed responsibility for two suicide attacks on Shia mosques in Eastern Province at May 2015.
Next is cyber security, Saudi Arabia have suffered a serious cyber-attack in 2012 and it affected almost 30,000 of its work stations being compromised by a simple self-replicating virus. Besides that, Saudi Ministry of Foreign Affairs was also subject to a cyber-attack and causes the release of classified documents in May 2015.
The last risk is commercial Disputes. Sharia law in Saudi Arabia allows private individuals and entities to form contracts as they see fit. Many foreign investors prefer to agree contracts according to laws in international arbitration or foreign jurisdictions but enforcement of foreign arbitration awards for private sector disputes has yet to be upheld in practice.
Besides that, there are few challenge when start a business in Saudi Arabia. The first challenge is language barriers. Arabic is the official language of Saudi Arabia. This is totally different with the language use by the Khind Holding Berhad Malaysia Company. Cultural and language differences can decrease effective communication and might lead to miscommunications.
The second challenge is gender communication issue. In Saudi Arabia, males and females who are not related should not have any direct contact with each other. In Malaysia, female staff and men staff of Khind Holding Berhad can work and interact together. This type of communication style between different genders should be prohibited in Saudi Arabia.
Legal barriers also become one of the risks. Import Prohibitions and Licensing in Saudi Arabia, the importation of certain articles is either prohibited or requires special approval from the appropriate authorities. The Khind Holding Berhad must to do research about the law in Saudi Arabia and such as import restrictions, tax laws, corporate organization, customs laws, and agency/liability laws in Saudi Arabia.
3.2 Provide recommendation to the company on how to enter the market, in what scale, and when is the strategic time to enter the market.
Khind Holding Berhad use small-scale entry enters the new market, it can be easy attractive because it allows the firm to learn about a foreign market. At the same time, it also can limits the firm’s exposure to that market. Because the company still young and new enters in the market, the companies do not know about the market in the period time.
Khind Holding Berhad can through exporting and joint venture enter the new market. Exporting is the most common overseas entry approach for small firm. Exporting has two types which are direct or indirect. In direct exporting, Khind Holding Berhad can directly sell the product and service to customer in the another country. While indirect exporting, Khind Holding Berhad can sell the product and service that place buyer who in turn exports the product. The company use exporting can easy to implementation of strategy, can minimal risks and less investment abroad which help small firm easy enter the international business.
Joint venture is establishment of a firm that is jointly owned by two or more otherwise independent firms. Saudi Arabia by law and policy permit foreign investors to enter the market in many capacities through wholly owned entities and joint venture. Therefore, Khind Holding Berhad can through partnership or joint venture to enter the market. It can be smaller investment, better to understanding of the host country, reduce the cost and share the risk with partnership. Khind Holding Berhad can easy development in the country.
Timing of entry
The timing of entry that we suggest the Khind Holding Berhad use second mover strategy into the Saudi Arabia home appliance market. The advantage of second-mover is able to capture greater market share, despite having entered late occurs when a firm who follows the lead of the first-mover.
Second-mover firm can learn experiences from first mover and they may not need to expenses high development cost and research costs if they are able using existing technology to create their own similar product. Besides that, second-mover also not need to educate the public about the new project or product because the first mover has already done so. The second-mover can use its resources to focus on out-marketing the first mover or making a superior product. Second movers can also avoid the mistakes made by first mover and also improve upon the current offering.
4. DISCUSSION
Managerial implication and International business environment related issues that need to be concerned
Before Khind Holding Berhad expands the business to Saudi Arabia, there have certain issues that need to be concerned. First of all, we need to concern on natural disaster in Saudi Arabia. According to Yassar A. Alamri, natural disaster in Saudi Arabia has been increase. Floods has been caused 7 out of 10 most damaging natural disaster in the history of Saudi Arabia from 1900 to 2010. The reason behind floods is rains are quite scarce in Saudi Arabia. These lead to the less development of a proper drainage system in Saudi Arabia. According to Yassar A. Alamri, these cities are frequently having natural disaster are including Jiddah and Makkah. This is due to the cities are on low ground and surrounded by mountains. Once rains fall on these mountains, the water will runs in valleys towards those cities. With the poor drainage systems, this continuous flow of water can easily cause to a flash flood. Therefore, if the manager of Khind Holding Berhad want to do business in Saudi Arabia, they need to pay more attention regarding natural disaster issue especially floods. This is because natural disaster will cause damage their property. The manager of Khind Holding Berhad needs to do the location analysis before they do business in Saudi Arabia. For those cities are more frequent to having natural disaster, they should avoid it. It is better for the manager choose the location of business on upper ground rather than lower ground in Saudi Arabia.
Secondly, we have to consider the voltage and power socket in Saudi Arabia. In Saudi Arabia, the standard voltage that they used is 127/220 Volts and standard frequency is 60 Hz. While the standard voltage used in Malaysia is 230/240 Volts and the standard frequency is 50 Hz. This means that if Khind Holding Berhad wants to expand their business to Saudi Arabia, they have to use a converter or transformer to step down the Malaysia voltage from 230/240 Volts to 127/220 Volts in Saudi Arabia. Once they fail to do so this will cause damage to their product. In addition, the power socket used in Saudi Arabia is including type A, B, F, and G while the power socket that often used in Malaysia is type G. Therefore, Khind Holding Berhad has to change their adapter or provide multi-adapter to their customer when they want to expand their business in Saudi Arabia.
Thirdly, we have to consider corruption in Saudi Arabia. According to Sami Moubayed (2016), Saudi Arabia ranking at 63rd in the 2013 global Corruption Perceptions Index but the corruption ranking had been increase from 63rd to 48th in 2015 global Corruption Perceptions Index. The lower ranking means that a country is perceived highly corrupt and the higher ranking means that a country is perceived as very clean. This had been clearly shows that the threat of corruption had been increase in Saudi Arabia. Therefore, if Khind Holding Berhad wants to expand their business to Saudi Arabia, the manager need think the solution to prevent corruption happen in their organization because it will affect the company’s overall performance. For example, the manager can provide anti-corruption training and paying employee a living wages which is paying enough money for them to cover their daily life. According to the Mike (2015), once the employee are feeling satisfy with the salary that they are paid and not facing any personal financial problem then the issue of corruption will be reduce. According to the Petry (2015), the purpose of anti-bribery training is to help their employee to more understanding of corruption and know how various methods to avoid it.
Moreover, days and times also an important issue that has to take into a consideration for every business people when they are trying to do the business at Saudi Arabia. Since Malaysia’s weekend majority located at Saturday and Sunday, but the weekend in Saudi Arabia is Thursday and Friday. Besides that, according to Kwintessential, Saudi businesspeople pray five times a day; the exact time of the prayers are listed in the local newspapers each day. While Malaysian are not required to pray at those times, therefore, whatever business activities they are engaged in with Saudi businesspeople will get affected. As we knew that muslim have to celebrate the month of Ramadan. Therefore, during the month of Ramadan (the exact dates vary each year), businesses slow down noticeably. Businessman is not expected to fast during Ramadan; they should refrain from eating in public and in the presence of those who are fasting.
Lastly, people who tend to do business at Saudi Arabia, they have to adapt the Pace and Trust when doing business with Saudi Arabia’s businessman. Saudi culture has a less rigid concept of time and schedule: sometimes, there may be multiple people in the same office discussing multiple business matters. Saudi businessmen do not discuss hard details of business deals immediately in a meeting; instead, they first chitchat and ask about the each other’s welfare. To do business with a Saudi businessman, trust must first be established; it may be a while before he will feel comfortable discussing serious business matters. It is important to not rush a Saudi businessman into a business agreement. It is because they will only start the meeting when the both parties have the parted with the verbal understanding.
5.0 Conclusion
As concluded, Khind Sendiri Berhad started a modest business in Sekinchan trading electrical goods. Driven by his clear vision, the business succeeded and in the late seventies, developed to include the manufacture of electrical accessories and lamps. The next decade perceived Khind’s increasing venture into the increase export market and as we perceived has had come out a several opportunities, risks and challenges to do business in the selected country to further optimize the productivity of this company. As today, the Khind Group, which was listed on the KLSE on 12 August 1998, manufactures and distributes world-class electrical home appliances across Malaysia and exports to over 50 countries worldwide (Khind, 2015). We recommend as Saudi Arabia is a faster growing economy country as it creates a good opportunities for any investor to invest so investors in Saudi Arabia can enjoy increasingly well-developed business benefit as the middle-east countries, like Saudi Arabia still remains as one of the most dominant oil producer and exporter in the world.
Furthermore, as Khind Holding Berhard established in 1961, it has been a producer and marketer of home consumer electrical appliances and industrial electrical company with revenue of RM325 million in 2013. Listed on Bursa Malaysia since 1998, Khind employs over 800 staff with 11 branch offices in Malaysia and a manufacturing plant in Sekinchan, Selangor. With operations in the ASEAN region, Middle East, North Africa and Europe – Khind exports to over 60 countries around the world.
One of the main factors of the country growth is due to fact of low cost of the energy used on the process in the business. Indeed the subsidiaries provided by the government to the company’s investment holdings segment has made a huge contributor for the huge development for the company. The Company’s trading and service segment includes trading of electrical products and providing general repair and rework services. Khind Holding Berhad is an electronic industry that is a leading manufacturer and marketer of home electrical and electronic appliances; and industrial electrical equipment. It is a fast emerging sector in Saudi Arabia, which can generate great amount of employment. As for the Islamic law mentioned above, due to the fact that Malaysia is undergoing some same terms of Islamic laws as same as Saudi Arabia, so despite the risk and challenges, it’s convincing to be made as such as same company in Malaysia to maximize the advantages in our country with the minimum cons as we would face than we thought initially.
Compared to Saudi Arabia, our commercial advertisement due to the freedom of speech allowance in Malaysia, we could achieve much more attribution and contributions as compared to Middle-East countries due to the limitations of their civilian’s right to speak on public.
Thus Khind Holding Berhad would make a great success in Malaysia due to the various factors that mentioned and the positive recommendations that have provided previously, from different cultural background, open minded managerial style and better opportunity to collaborate with out-shore company to further expand the business in our country.
1.0 INTRODUCTION
1.1 Khind Holding Berhad’s Background
Khind Holding Berhad established in year 1961. The synonymous of ‘Khind’ is value-for-money with high quality electrical home consumer appliances throughout the world. The company headquarter is located in Shah Alam, Malaysia. The founder for Khind Holding Berhad was King Fa Cheng who started a modest business in Sekinchan trading electrical goods. In year 2011, Khind Holding Berhad celebrated their 50th anniversary. Khind Holding Berhad is a marketer and producer of home consumer electrical appliances. In year 2013, it is also an industrial electrical company with revenue of RM325 million.
Since 12 August 1998, Khind Holding Berhad was listed on Bursa Malaysia (Kuala Lumpur Stock Exchange). They employed over 800 of employee in year 2014 with 11 branches of offices in Malaysia. Khind Holding Berhad manufactures and distributes the world class electrical home appliances across Malaysia and exports their product to over 50 countries worldwide which includes Hong Kong, Singapore, Brunei, China, Etc.
1.2 Khind Holding Berhad’s Management
The Board of Director of Khind Holding Berhad:
1. Mr. Cheng King Fa – He is the Founder or Chairperson for Khind Holding Berhad which commenced as a small family business 50years ago.
2. Mr. Cheng Ping Keat – He is the Group Chief Executive Officer for Khind Holding Berhad. He is responsible for the operation relating to marketing, financing, manufacturing, export management, brand building and overall strategic planning for the company.
3. Encik. Kamil bin Datuk Hj. Abdul – He is the Senior Independent Non-Executive Director and Chairman of Audit Committee. His specialization area is in corporate governance, corporate finance and risk management.
1.3 Khind Holding Berhad’s Product
Since Khind Holding Berhad established in 1961, they has always sought to be at the forefront of bringing affordable and great innovative products to consumers. Khind manufacturer distribute a wide range of home appliances with the best qualities such as air cooling fans, chillers, rice cookers, toaster ovens, washing machines, refrigerators and vacuum cleaners, typically white in color for consumers homes in Malaysia and in more than 60 countries around the world.
1.4 Performance and Develpoment
Khind Holding Berhad became the official marketing company for international brand. Ariston is the home water heating company and Honeywell is the air cooling devices in Malaysia. Through its subsidiaries, Khind is also the marketer for high-end home consumer appliance brand such as KitchenAid, Ariston and Bugatti. Their industrial electrical solutions subsidiaries help distribute brand such as Relite and Swisher which is a specialist for air cooling brand and industrial cleaning solution respectively.
Throughout many years, Khind has won many accolades and awards. Awards that they had achieved consist of SMI Achievers Award and Innovation Award 2004, the KLSE Corporate Sectoral Award 2003, the Prime Minister Quality Award 2003 and the industry Excellence Award 2003 by the Ministry of International Trade and Industry. Khind Holding Berhad won these awards which are the testimonies that drive for quality, product design, energy efficiency, innovation and creativity as well as compliance to SIRIM standards.
2. 0 Contents
2.1 History of Saudi Arabia
Saudi Arabia is an absolute monarchy ruled by King Salman bin Abdul Aziz Al Saud, who became king following the death of his half-brother, King Abdullah in January 2015. It is the world’s largest oil exporter and dominates the Organization of Petroleum Exporting Countries. Oil revenues account for about 90 percent of export earnings and about 80 percent of government revenues. Saudi Arabia joined the World Trade Organization in 2005 as part of an effort to promote foreign investment and economic diversification. Pro-reform Arab Spring demonstrations in 2011 drew few crowds outside of eastern Saudi Arabia, where the Shia minority population is concentrated. The kingdom faces a rising threat from ISIS and internal Sunni’Shia tensions.
First foremost, Saudi Arabia has highest reserve in oil and petroleum that outstands them as the second largest provider in the world. Saudi Arabia is not only plentiful but under pressure and close to the surface of the Earth. Thus, this makes it cheaper to and far more profitable to extract petroleum from Saudi Arabia than as compared to other countries. The petroleum sector contributes 92.6% of its total revenue, 97% of export earnings and 55% of Gross Domestic Product (GDP) into Saudi Arabia’s prospering development.
Over century, Saudi Arabia has revolutionized whereby more and more commodity is being produced in Saudi Arabia that makes it competent to put a stiff fight among its competitors. Saudi Arabia is the producer of energy, base metals, agricultural and precious metals to gigantic industries all over the globe. This has brought to a rise of USD 19,111 to USD 24, 451 over the period of 2010-2015 which lead to 27.94% increase in overall Gross Domestic Per Capita in Arab Saudi.
Saudi Arabia’s average tariff rate is 3.6 percent. Imports of pork, used clothing, and used cars that are more than five years old are not permitted. Foreign investment in many economic sectors is either prohibited or capped. There are minimum capital requirements for foreign investors. The financial sector has undergone gradual transformation, and some restrictions on foreign investment in financial services have been eased.
Generally, Saudi Arabia makes up 865,000 square miles. It extends from the Red Sea on the West till the Arabian Gulf in the East. Saudi Arabia has a typical desert climate, which it makes up with 95% sandy. Rub’ Al Khali which means Empty Quarter and is the largest desert in Saudi Arabia. The desert is entirely a harsh place and totally uninheritable. Finally, Muslim populates 95% of the population in Saudi Arabia. Bedouins and Arabs are the occupants in Saudi Arabia. The Bedouins are citizens that keep up to nomadic lifestyle.
Political factor
Saudi Arabia is ruled by monarchy based on Islam. The regime is headed by a King, whom is also the commander in chief of the military. The King governs with the help of Council of Ministers, also called the Cabinet. There are 22 government ministries that are part of the Cabinet. Besides that, Saudi Arabia is divided to 13 provinces, with a governor and deputy governer in each. Hence, its judicial system is based on Islamic Law (Shari’ah). The tax policy practice by Saudi Arabia is CIF (Cost,Insurance,Freight) , which means that the import and export duty and taxes payable are calculated on the shipping value, which includes the cost of the imported goods, the cost of freight, and the cost of insurance. Duty rates vary from 0 % to 5-%, with the average duty rate at 4.58% (e.g. books, laptops and electrical products) while some products can be imported free of duty. Based on the 2012 Corruption Perceptions Index, Saudi Arabia gave a score of 4.4 (on a scale from 0 to 10 where 0 is ‘highly corrupted’ and 10 are ‘highly clean’).
Economic Factor
After a surge in prosperity over the past decade fuelled by rising oil prices, Saudi Arabia’s economy is at an inflation point. Based on the McKinsey Global Institute report, Saudi Arabia beyond oil: The investment and productivity transformation, Saudi Arabia has significant opportunities to transform its economy to become more sustainable and less dependent on oil. Nevertheless, the current labor participation rate is 41% and the productivity growth of 0.8% annually from 2003-2013 trailed many emerging economies.
Globalization impact has penetrated Saudi Arabia that skilled worker comprises technical workers are Americans and Western European which are occupied primarily in defence and petrochemical industries. Nevertheless, domestic workers comprises from Africa, India subcontinent and Southeast Asia. Moreover, Filipinos works in the health, oil and manufacturing sectors. Additionally, most Egyptians have migrated to Saudi Arabia for a greener pasture, to take up professional jobs such as doctors, nurses, teachers and engineers.
Social Factors
Saudi Arabia populates 20,702,536 million netizen whereas total population growth rate as of 2014 is 2.1%. The cost of living marks up 130.1% and inflation rate is 2.7%. Whereas, the unemployment rate more than15 years in 2014 is 11.7%. Therefore, the infants mortality rate (per thousand live births) is 15.5%. Lastly, the gross enrolment rate in primary education is 108.17% and secondary is 97.39%. Subsequently, the society of Saudi Arabian is governed by firm religious beliefs, rules and traditions. The traditions and attitudes of local society have be mould by Islamic as well as Bedouin culture. Bedouin is a seminomadic group, descended from a nomad who has historically inhabited the Arabian and Syrian deserts. Their common culture is herding poultries and farming. The culture life in Arab Saudi solids strongly within the confines of strict interpretations of the Quran. Saudi Arabia prohibits alcohol consumption, theatre and public exhibitions for films. In accordance with Wahhabi doctrine, only two holidays are observed which are Eid Al-Fitr and Eid Al-Adha.
Technological Factors
Saudi Arabia is one of the Arab countries at the forefront of this modernization. It is a country that currently has 12% of its total government budget dedicated to upgrading its higher education system, arguably the highest level of funding in the world. The kingdom is now working towards being a Centre of research excellence. One by-product of this goal is the development of King Abdul Aziz City for Science and Technology (KACST), an independent scientific organization that is essentially the country’s national science agency and reports directly to the Saudi Arabian Prime Minister. KACST is primarily concerned with proposing, developing and implementing strategies for the advancement of science and technology within and beyond the nation. In addition to this they also conduct applied research and provide advice to the government.
Al-Faisal University in Riyadh is a non-profit research university with links to KACST, Harvard University, Oxford University and MIT, and offers science degrees which pay particular attention to biotechnology. King Saud University (KSU)’s College of Science offers a more diverse choice of degrees relating to many branches of science including biochemistry, enzymology, bioenergetics, chemical thermodynamics, quantum chemistry and geophysics. As is common with many Saudi Arabian universities KSU also hosts its own Centre of Excellence in Science, the main objective of which is the development of innovative programmers which aim to connect both students and teachers on all levels of research.
King Fahd University of Petroleum and Minerals (KFUPM) is not as specific an institution as its title would suggest – it runs degree programmers ranging from physics and chemistry to geology and geophysics. KFUPM also hosts its own Centres of Excellence including a Centre of Excellence in Nanotechnology (CENT). CENT’s objectives are varied and are dedicated to allowing students of the university to collaborate with scientists to help assist in their research. Currently the members of CENT are involved in the research of catalysis and photo-catalysis technology which, when completed, could be applied to the cleaning of gas and other fuels and also water purification. There is also a research group developing nanostructured materials for application as chemical sensors and a centre dedicated to the development of renewable energy technology. In addition to this, Honeywell UOP, a leading international supplier and licensor of petrochemical production, has announced that it will collaborate with KFUPM in the development of catalytic processes in the production of petrochemicals, allowing university professors and researchers to work alongside the company’s scientists.
2.2 PEST Analysis of Saudi Arabia
1. Political analysis
Saudi Arabia is a hereditary monarchy found in 1932 by Abdul Aziz bin Abdul Rahman Al Saud. The kingdom has been ruled by the Saud and the country has follow by Islamic religious traditions. King Abdullah has been the ruler in 2005 such as the introduction of a legislative council and local elections, but he has not deviated from the Saudi Arabia country’s traditional practices and seeks the approval of religious in the policy-making process. (Basri, 21 November 2013)
The Kingdom of Saudi Arabia is divided into 13 provinces administered by a provincial governor appointed by the King. Provinces are subdivided into governorates, districts and centers. The King’s Cabinet or Council of Ministers is appointed by the King every four years. There are 22 government ministries that are part of the Cabinet. The monarchy is hereditary, so there are no elections for the role and no political parties in Saudi Arabia. (Basri A. , 2013 )
The judicial system of Saudi Arabia has remained conservative without any separation of powers and the king is the final decision maker. The government takes measures for the effective implementation of environment regulations. The ongoing development plan has identified the major weaknesses of the country and the government has begun to take measures to transform Saudi Arabia into a diversified economy and a developed nation. (Novonous, 2010)
2. Economic analysis
Saudi Arabia has a mixed economy and has rich in oil reserves. Saudi Arabia has a quarter of world’s oil reserves and has a tremendous GDP growth that is primarily driven by rising oil revenues. Saudi Arabia’s economy looks at good growth and is expected to reach US $754.7 billion by 2017. The Saudi Arabia’s economy is high income and also is the largest one in Middle East. The stability of government is feared to get hampered due to high unemployment rate among its youth and the public sector corruption. Most of the Middle East countries are facing the same problem. Saudi Arabia has an edge with its strong economic strength and weak opposition pattern. (Novonous, 2010)
Another major issue of the Saudi Arabia is an unbalanced relationship between the public and the private sectors presiding together. The public sector economy can go unsustainable in long run. Oil industry economy accounts for more than 90% of exports and 80% of government revenue, although the share of the non-oil economy has been growing recently. There is Increasing need of private sector participation to secure the Saudis long term prospect. The Saudi government has taken measures to attract the private investment to promote the expansion of non-oil sector. The government plans diversification to focus on the power generation, telecommunication, natural gas exploration and petrochemical refineries to promote economic activity. But the income has not improved is the lives of majority of its population. Growing unemployment and income inequality have still challenges for the government. Furthermore, the educational policies are also based on religious principles, which have retarded the technological development of the country. (Novonous, 2010)
3. Social ‘ culture analysis
Saudi Arabia is ruled by the family of Al Saud and they also affirmed that they are committed to supporting the economic growth and be part of the developed nations. This objective is hard to achieve because fundamentalist Muslims refuse the idea of globalization, this involve moderate political risk on the regime. (Novonous, 2010)
Furthermore, the political situation affects the restaurant industry because the restaurant industry is still the major uncontested method of entertainment among Saudis. By law, all restaurants are required to have single-males section separated from the family section to adhere the tradition and religious requirements. Moreover, The Kingdom of Saudi Arabia is perceived as the leader of the Muslim world, because it is the home town of Makah which Muslims must visit at least once time to complete the 5th pillar of their religion. (Novonous, 2010)
(a) Clothing
The traditional costumes of Saudi Arabia for men consist of Shumag or Ghutra (triangle cloth wear over the head). On top of Ghutra, double black rope-like cord called Igal is wear in order to hold Ghutra in place. Then, a full-length, loose garment with long sleeved called Thawb. Thawb comes in different styles and colors. Next, Bisht or Mishlah (cloak) wear by men on the top of the thawb on special occasions like wedding.
As for the women, they are very fashionable but they do not appear in public. They are wear Abaya along with scarf on the top of clothes when they are go outside. The black Abaya covers the entire body and veil covers the head and hair but the face is open and visible.
(b) Communication style
In Saudi Arabia, an individual is addressed by his or her first name, and any title they possess. A “Dr. Ahmed Bin Al-Rahman” would be addressed as “Dr. Ahmed.” The word “bin” or “ibn” means “son of” and may be present a number of times in a person’s name, as Saudi names are indicators of genealogy.
Another common name structure is having “Abd” followed by an attribute of God with the definite article “al-.” Hence, “Dr. Abd-Al-Rahman Al-Haji” would be addressed as “Dr. Abd Al-Rahman” and not as “Dr. Abd” or “Dr. Abd Al.’ (Approved for Public release, 13 June 2014)
(c) Languages
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.
Besides that, Arabic is the language of the Qur’an, the Holy Book of Islam, and of Arab poetry and literature. Classical Arabic has remained unchanged for centuries. The dialects spoken in urban areas and in rural areas are differences between in Saudi Arabia. (The Languages spoken in Saudi Arabia, 1999)
(d) Greetings
Man greeting Man – Men greet one another with a handshake (right hand only) using, hug and possibly one to three kisses on alternating cheeks depending on the level of familiarity. For foreigners start with the handshake and follow the lead of your Saudi counterpart if kisses are offered. If greeting an older family member (father, grandfather) might kiss their forehead to show respect.
Woman greeting Woman ‘ A handshake (right hand only) is common and possibly one to three kisses on alternating cheeks (once on the right, then twice on the left) depending on the level of familiarity. Some women do both cheek kissing and hand shaking depending on the group of people and how familiar they are with each other. If greeting an older family member (mother, grandmother) might kiss their forehead to show respect.
Greetings between Men & Women – There is little to no touching between men and women during greetings in public, unless related by birth or marriage. (Approved for Public release, 13 June 2014)
4. Technological analysis
Although Saudi Arabia just adopted the Internet in 1999, the government has made advances to improve science and technology starting in 2000. The Saudi Arabian government implemented The New Science and Technology Policy to develop a more knowledge-based country. The companies and services previously under government jurisdiction are becoming privatized, which will promote further boosts in research and development. (Novonous, 2010)
With the growing private sector, systems with advanced and innovative technologies are being installed. Efforts are being made to make information technologic an integral part of the Saudi Arabia educational system. Many colleges and universities emphasize curricula in sciences and technology, religion, and medicine. Women typically receive college instruction in segregated institutions and spending on defense and security has increased significantly since the mid-90s and was about US$25.4 billion in 2005. In modern high-technology arsenal makes Saudi Arabia with its military equipment being supplied primarily by the United Stated, France and Britain. Saudi Arabia is a country that keeps technologically updated as it needs to attract more tourists and visitors from around the world. Saudi Arabia imports technological machinery from Japan and other countries which enables it to be established as well-technologically equipped country. (Novonous, 2010)
2.3 PEST analysis with the company profile to determine the prospect of development
Based on the PEST analysis, politically, Khind Corporation has opportunity to further strengthen their market development to set foot in Saudi Arabia. Based on the political factor, Khind Corporation is able to take advantage of the low duty taxes which is only 4.58% as compared to China of 13%-17% and which ranks 1stas the highest based on Central Intelligence Agency (CIA) in 2013 report. This will boost the returned profit per annum for Khind Corporation to boost their development and thus create job employment and lowering job unemployment rate among Arab Saudians.
Economically, Khind Corporation opportunity in developing in Saudi Arabia enhances labor participation rate higher than current 41% and a higher annual growth than 0.8%. This opens vast globalization for more expertise to contribute and increases the GDP Saudi Arabia. Khind Corporation is able to grab opportunity to further invest lower capital in research and development but the current existing products and enhance better in order to improve the lifestyle of consumers and attract new group of buyers and curb externalities that tarnishes the nation’s reputation.
Socially, Khind Corporation is able to accommodate the taste and preference alongwith the demand of the society for cheaper yet good quality electrical products in order to enhance the productivity and daily life chores. Khind Corporation is able to perform its Corporate Social Responsibility in terms of upgrading the loopholes of education, health and social sectors in Saudi Arabia. Khind Corporation is able to exchange knowledge scholars in the future fromthe younger generation to further contribute in the life cycle of Khind Corporation. The current socio-culture changes could also be revamped whereby more job opportunities will be given to females and not just only males. This will also evolve the metaphor of disallowing females to work but only the men.
Technologically, Khind Corporation is able to open up technology transfer and improve technology in increasing productivity of product and services. Moreover, the emerging of technology allows in house practical students to have hands on in real life industrial sector. This will create more creative and innovative individual in helping Khind Corporation to achieve maximum profit and sustaining credible manpower and technical expertise in their own field. Additionally, research and development activities can be further improved and more strategic plans to save cost can be introduced in order to sustain longer in the competitive competition among rivals.
3.0 Recommendation
3.1 Identify the business opportunities, risks and challenges to do business in the selected country.
Saudi Arabia is a faster growing economy country as it GDP growth reached over 6% in 2012. As the growing economy is create several opportunities for exporters, producers and investors. Investors in Saudi Arabia can enjoy increasingly well-developed business benefit. There are huge business opportunities in Saudi Arabia. We can see that the turmoil in several Middle East countries, Saudi Arabia still remains stable as become one of the most dominant oil producer and exporter in the world. Saudi Arabia attracts investor pay attention as one of the lucrative place to invest. Furthermore’Saudi Arabia try to diversify the economy and reduce its reliance on oil and committed to the development of other undertakings. Except oil, gas and petrochemicals, to develop diversity economy such as information technology (IT), education, training and human capital development, healthcare and life sciences, real estate and industry cities.
Khind Holding Berhad is an electronic industry that is a leading manufacturer and marketer of home electrical and electronic appliances; and industrial electrical equipment. It is a fast emerging sector in Saudi Arabia, which can generate employment. Saudi Arabia develop diversify economy that create more business opportunity for their business. The country growth is due to the low cost of the energy in the operations in the business. Subsidies and incentives on the industrial lands make things even better for the business. Khind Holding Berhad can produce electronic product and service in that country. For example, Saudi Arabia develop real estate that need to produce electronic product and service such as lamp, electricity and other. On the other hand, Saudi Arabia climate warm, Khind Holding Berhad can focus produce the air conditioning electronic product and service. Furthermore, the country each economy development also need these business product and service.
There are few risk when expand business to Saudi Arabia. The first is terrorism and security. Terrorism increasingly difficult places in which to do business. Transportation and insurance costs will increase because of security surcharges on cargo in a riskier business environment. Saudi Arabia remains a high threat of terrorism. ISIL claimed responsibility for two suicide attacks on Shia mosques in Eastern Province at May 2015.
Next is cyber security, Saudi Arabia have suffered a serious cyber-attack in 2012 and it affected almost 30,000 of its work stations being compromised by a simple self-replicating virus. Besides that, Saudi Ministry of Foreign Affairs was also subject to a cyber-attack and causes the release of classified documents in May 2015.
The last risk is commercial Disputes. Sharia law in Saudi Arabia allows private individuals and entities to form contracts as they see fit. Many foreign investors prefer to agree contracts according to laws in international arbitration or foreign jurisdictions but enforcement of foreign arbitration awards for private sector disputes has yet to be upheld in practice.
Besides that, there are few challenge when start a business in Saudi Arabia. The first challenge is language barriers. Arabic is the official language of Saudi Arabia. This is totally different with the language use by the Khind Holding Berhad Malaysia Company. Cultural and language differences can decrease effective communication and might lead to miscommunications.
The second challenge is gender communication issue. In Saudi Arabia, males and females who are not related should not have any direct contact with each other. In Malaysia, female staff and men staff of Khind Holding Berhad can work and interact together. This type of communication style between different genders should be prohibited in Saudi Arabia.
Legal barriers also become one of the risks. Import Prohibitions and Licensing in Saudi Arabia, the importation of certain articles is either prohibited or requires special approval from the appropriate authorities. The Khind Holding Berhad must to do research about the law in Saudi Arabia and such as import restrictions, tax laws, corporate organization, customs laws, and agency/liability laws in Saudi Arabia.
3.2 Provide recommendation to the company on how to enter the market, in what scale, and when is the strategic time to enter the market.
Khind Holding Berhad use small-scale entry enters the new market, it can be easy attractive because it allows the firm to learn about a foreign market. At the same time, it also can limits the firm’s exposure to that market. Because the company still young and new enters in the market, the companies do not know about the market in the period time.
Khind Holding Berhad can through exporting and joint venture enter the new market. Exporting is the most common overseas entry approach for small firm. Exporting has two types which are direct or indirect. In direct exporting, Khind Holding Berhad can directly sell the product and service to customer in the another country. While indirect exporting, Khind Holding Berhad can sell the product and service that place buyer who in turn exports the product. The company use exporting can easy to implementation of strategy, can minimal risks and less investment abroad which help small firm easy enter the international business.
Joint venture is establishment of a firm that is jointly owned by two or more otherwise independent firms. Saudi Arabia by law and policy permit foreign investors to enter the market in many capacities through wholly owned entities and joint venture. Therefore, Khind Holding Berhad can through partnership or joint venture to enter the market. It can be smaller investment, better to understanding of the host country, reduce the cost and share the risk with partnership. Khind Holding Berhad can easy development in the country.
Timing of entry
The timing of entry that we suggest the Khind Holding Berhad use second mover strategy into the Saudi Arabia home appliance market. The advantage of second-mover is able to capture greater market share, despite having entered late occurs when a firm who follows the lead of the first-mover.
Second-mover firm can learn experiences from first mover and they may not need to expenses high development cost and research costs if they are able using existing technology to create their own similar product. Besides that, second-mover also not need to educate the public about the new project or product because the first mover has already done so. The second-mover can use its resources to focus on out-marketing the first mover or making a superior product. Second movers can also avoid the mistakes made by first mover and also improve upon the current offering.
4. DISCUSSION
Managerial implication and International business environment related issues that need to be concerned
Before Khind Holding Berhad expands the business to Saudi Arabia, there have certain issues that need to be concerned. First of all, we need to concern on natural disaster in Saudi Arabia. According to Yassar A. Alamri, natural disaster in Saudi Arabia has been increase. Floods has been caused 7 out of 10 most damaging natural disaster in the history of Saudi Arabia from 1900 to 2010. The reason behind floods is rains are quite scarce in Saudi Arabia. These lead to the less development of a proper drainage system in Saudi Arabia. According to Yassar A. Alamri, these cities are frequently having natural disaster are including Jiddah and Makkah. This is due to the cities are on low ground and surrounded by mountains. Once rains fall on these mountains, the water will runs in valleys towards those cities. With the poor drainage systems, this continuous flow of water can easily cause to a flash flood. Therefore, if the manager of Khind Holding Berhad want to do business in Saudi Arabia, they need to pay more attention regarding natural disaster issue especially floods. This is because natural disaster will cause damage their property. The manager of Khind Holding Berhad needs to do the location analysis before they do business in Saudi Arabia. For those cities are more frequent to having natural disaster, they should avoid it. It is better for the manager choose the location of business on upper ground rather than lower ground in Saudi Arabia.
Secondly, we have to consider the voltage and power socket in Saudi Arabia. In Saudi Arabia, the standard voltage that they used is 127/220 Volts and standard frequency is 60 Hz. While the standard voltage used in Malaysia is 230/240 Volts and the standard frequency is 50 Hz. This means that if Khind Holding Berhad wants to expand their business to Saudi Arabia, they have to use a converter or transformer to step down the Malaysia voltage from 230/240 Volts to 127/220 Volts in Saudi Arabia. Once they fail to do so this will cause damage to their product. In addition, the power socket used in Saudi Arabia is including type A, B, F, and G while the power socket that often used in Malaysia is type G. Therefore, Khind Holding Berhad has to change their adapter or provide multi-adapter to their customer when they want to expand their business in Saudi Arabia.
Thirdly, we have to consider corruption in Saudi Arabia. According to Sami Moubayed (2016), Saudi Arabia ranking at 63rd in the 2013 global Corruption Perceptions Index but the corruption ranking had been increase from 63rd to 48th in 2015 global Corruption Perceptions Index. The lower ranking means that a country is perceived highly corrupt and the higher ranking means that a country is perceived as very clean. This had been clearly shows that the threat of corruption had been increase in Saudi Arabia. Therefore, if Khind Holding Berhad wants to expand their business to Saudi Arabia, the manager need think the solution to prevent corruption happen in their organization because it will affect the company’s overall performance. For example, the manager can provide anti-corruption training and paying employee a living wages which is paying enough money for them to cover their daily life. According to the Mike (2015), once the employee are feeling satisfy with the salary that they are paid and not facing any personal financial problem then the issue of corruption will be reduce. According to the Petry (2015), the purpose of anti-bribery training is to help their employee to more understanding of corruption and know how various methods to avoid it.
Moreover, days and times also an important issue that has to take into a consideration for every business people when they are trying to do the business at Saudi Arabia. Since Malaysia’s weekend majority located at Saturday and Sunday, but the weekend in Saudi Arabia is Thursday and Friday. Besides that, according to Kwintessential, Saudi businesspeople pray five times a day; the exact time of the prayers are listed in the local newspapers each day. While Malaysian are not required to pray at those times, therefore, whatever business activities they are engaged in with Saudi businesspeople will get affected. As we knew that muslim have to celebrate the month of Ramadan. Therefore, during the month of Ramadan (the exact dates vary each year), businesses slow down noticeably. Businessman is not expected to fast during Ramadan; they should refrain from eating in public and in the presence of those who are fasting.
Lastly, people who tend to do business at Saudi Arabia, they have to adapt the Pace and Trust when doing business with Saudi Arabia’s businessman. Saudi culture has a less rigid concept of time and schedule: sometimes, there may be multiple people in the same office discussing multiple business matters. Saudi businessmen do not discuss hard details of business deals immediately in a meeting; instead, they first chitchat and ask about the each other’s welfare. To do business with a Saudi businessman, trust must first be established; it may be a while before he will feel comfortable discussing serious business matters. It is important to not rush a Saudi businessman into a business agreement. It is because they will only start the meeting when the both parties have the parted with the verbal understanding.
5.0 Conclusion
As concluded, Khind Sendiri Berhad started a modest business in Sekinchan trading electrical goods. Driven by his clear vision, the business succeeded and in the late seventies, developed to include the manufacture of electrical accessories and lamps. The next decade perceived Khind’s increasing venture into the increase export market and as we perceived has had come out a several opportunities, risks and challenges to do business in the selected country to further optimize the productivity of this company. As today, the Khind Group, which was listed on the KLSE on 12 August 1998, manufactures and distributes world-class electrical home appliances across Malaysia and exports to over 50 countries worldwide (Khind, 2015). We recommend as Saudi Arabia is a faster growing economy country as it creates a good opportunities for any investor to invest so investors in Saudi Arabia can enjoy increasingly well-developed business benefit as the middle-east countries, like Saudi Arabia still remains as one of the most dominant oil producer and exporter in the world.
Furthermore, as Khind Holding Berhard established in 1961, it has been a producer and marketer of home consumer electrical appliances and industrial electrical company with revenue of RM325 million in 2013. Listed on Bursa Malaysia since 1998, Khind employs over 800 staff with 11 branch offices in Malaysia and a manufacturing plant in Sekinchan, Selangor. With operations in the ASEAN region, Middle East, North Africa and Europe – Khind exports to over 60 countries around the world.
One of the main factors of the country growth is due to fact of low cost of the energy used on the process in the business. Indeed the subsidiaries provided by the government to the company’s investment holdings segment has made a huge contributor for the huge development for the company. The Company’s trading and service segment includes trading of electrical products and providing general repair and rework services. Khind Holding Berhad is an electronic industry that is a leading manufacturer and marketer of home electrical and electronic appliances; and industrial electrical equipment. It is a fast emerging sector in Saudi Arabia, which can generate great amount of employment. As for the Islamic law mentioned above, due to the fact that Malaysia is undergoing some same terms of Islamic laws as same as Saudi Arabia, so despite the risk and challenges, it’s convincing to be made as such as same company in Malaysia to maximize the advantages in our country with the minimum cons as we would face than we thought initially.
Compared to Saudi Arabia, our commercial advertisement due to the freedom of speech allowance in Malaysia, we could achieve much more attribution and contributions as compared to Middle-East countries due to the limitations of their civilian’s right to speak on public.
Thus Khind Holding Berhad would make a great success in Malaysia due to the various factors that mentioned and the positive recommendations that have provided previously, from different cultural background, open minded managerial style and better opportunity to collaborate with out-shore company to further expand the business in our country.