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MARKETING AND SALES STRATEGY
There are very good prospects for U.S. companies who want to export their products to
the Saudi Arabian market. However, there are certain marketing procedures and sales
techniques which have to be observed in order to develop and sustain business
relationships over a long period of time.
- The Saudi market should be constantly reviewed for product adaptation and change.
- Exporters should ensure regular supplies as per specifications, at the specified time
and place already agreed upon and at the stipulated prices.
- Any subsequent and sudden price changes, even pertaining to after-sales services, should
be avoided.
- Exporters' contacts with importers in Saudi Arabia should be direct and regular.
- Complete product lines, rather than single products, should be introduced into the Saudi
market whenever possible in order to benefit from greater demand stimulation and cost
reductions.
- Exporters are required to check with Saudi importers or directly with the Saudi Arabian
Standards Organization, (see appendix I for address) on the precise implementation of
Saudi Arabian Standards pertaining to their exported products to the Kingdom. Saudi
Standards can be purchased from SASO or the American National Standards Institute, ANSI
(11 West 42nd Street, New York City, NY 10036, telephone number (212)642-4900 or fax
number (212)302-1286).
- Exporters to Saudi Arabia should display their products regularly in the major
commercial urban centers of the Kingdom. Necessary permission is obtained by writing or
contacting directly the Director, Exhibitions Department, Ministry of Commerce (see
appendix I for address).
- Efforts should be made to improve the appearance of exported commodities by means of
attractive packaging.
- Products to be exported should be properly branded and labeled both in English and
Arabic.
- In the case of machinery and equipment; after-sales service, including warranties,
maintenance and the provision of spare parts, should be prompt and efficient.
BUSINESS OPPORTUNITIES IN THE KINGDOM
In pursuit of the policy of free market enterprise, economic diversification,
structural shift from building the infrastructure to the production of goods and services
and the subsequent increasing reliance on the private sector as the major economic force,
the Kingdom of Saudi Arabia invites American companies to participate in the following
areas which are essential to its current and future economic growth:
In most of the industrial joint ventures, the foreign partner supplies the management,
technical expertise, and part of equity resources, if they are desired, depending on the
collaboration arrangements. The Saudi partner provides local supervision, local skilled
and unskilled labor, and handles local business contacts, apart from participating in the
equity resources. For further details on establishing joint ventures in the Kingdom, see
Chapter 5, Industrial Licensing Regulations and Procedures.
With a foothold in the Saudi Arabian market, there will be numerous business
opportunities for:
- Companies providing labor-saving equipment and services.
- Training services either directly delivered or as part of a product package.
- Managerial services either directly delivered or as part of a product package.
- Nearly all areas of health, personnel, and services.
In addition to the section on growth targets during the sixth development plan that we
discussed in Chapter Two of this guide, the following list of principal growth areas of
the Saudi Arabian economy provides tips on prospective commercial opportunities in the
Kingdom:
Export oriented industries such as petrochemical, papers, glass plastics, etc. are
expected to do well during the sixth plan period. Over the next few years the
petrochemical industry is expected to grow at an average rate of more than 8 percent
annually. Thus foreign investors are invited to join the Saudi Arabian private sector to
invest in new industries that utilize modern technology, and to expand investment in
import substitution and export-oriented industries including basic, supporting and
downstream metal and petrochemical industries
- Mining and quarrying: The Saudi government has prioritized the diversification of the
Kingdom’s economy and the utilization of the country’s extensive mineral wealth.
The mining industry is promising in the next few years, especially with the initiative of
the Ministry of Petroleum and Mineral Resources to develop new mines to produce phosphate,
iron, bauxite and other precious and non-precious metals. In 1993 Petromin extracted
189,353 tons of ore. Net gold production amounted to around 670,000 ounces between
1989-1993. The Directorate General of Mineral Resources (see appendix I for address) is
currently pursuing the exploitation of the mineral fields throughout the Central and
Western regions of the Kingdom. The government’s investment in this sector has
already exceeded seventeen billion Saudi Riyal (more than U.S. $4.5 billion). Foreign
investors are offered tax exemption, long term extraction concessions and other incentives
to invest or establish joint ventures in this growing Saudi industry.
- Transportation, telecommunications and information technology: During the fifth
development plan (1990-1994) the Kingdom’s main road network increased by about 2,100
kms, to about 43,000 kms. Rail freight volume grew by 36 percent to about 2.1 million
tons. Air passenger volume grew from 20.3 million departure and arrival to 25.1 million.
The cargo handled in the Kingdom’s major ports rose from 63.7 million tons to 83
million tons.
In addition to upgrading the road network and domestic airports in the Kingdom during
the sixth development plan, the government is planning to link Dammam and Jubail
Industrial City with a new railroad. Furthermore, to enhance and modernize the fleet of
Saudi Arabian Airlines, the government has already purchased from two American companies
(Boeing and Mcdonnell Douglas) commercial airplanes worth more than six billion dollars.
The Saudi Ministry of Post, Telephone and Telegraph awarded the U.S. firm of AT&T four
billion dollars contract to upgrade and expand the telephone network in the Kingdom.
- Electricity: Saudi per capita consumption of gas, water and electricity is one of
highest in the world. Over the past two decades electricity consumption rate increased by
more than 20 percent annually. Power generation expanded from 4,214 megawatts in 1979 to
18,238 megawatts in 1994. Over the sixth development plan period (1995-1999) electric
generation capacity will be raised by more than seven thousand megawatts.
- Other important areas of growth prospects during the sixth development plan (1995-1999),
include banking and insurance, leasing, travel, and consumer products such as food and
beverages, clothing, soap, cosmetics, etc.
A further consideration for business opportunities is the procurement of government
contracts. Government contracts are often offered through tenders. There is no central
tenders’ board in Saudi Arabia, and every government agency may extend contracts.
Bids for tenders must be applied for by local agents. In most cases, government contracts
awarded to foreign companies require 30 percent of the total work to be subcontracted to a
Saudi Arabian contractor.
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