International business requires integration between the people and the organizations exposed to the different cultural environments. It is observed that marketing is the most at risk when it comes to the cultural error for any area in the business. Thus, international business occurs more on the marketing sense of each business. Considering the ascending globalization of business for many industries, the interactions for many companies are pushing through the reality and made an increase to the economic cooperation of countries. The increasing chances and opportunities in marketing the products and services in a global sense can not be capitalized upon unless the cultural sphere of influence of the purchasing cycle. Analyzing the business development of the United Arab Emirates and Venezuela should be highlighted in order to further evaluate the opportunities on the two countries. Also, identifying the business risks that the two countries are facing should then be discussed to be able to come up with a distinction on how certain companies manage the business risks.
The United Arab Emirates is known for being a country which is rich in oil and natural gas. UAE is a federation of seven states that are located in the southeast of the Arabian Peninsula on the Southwest part of the Persian Gulf. It borders Oman and Saudi Arabia. Accordingly, the seven states which are referred to as Emirates are as follows; Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah, and Umm al-Quwain. The country has become highly wealthy upon the acquisition of the foreign direct investment funding during the year 1970s. It has high Human Development Index for the continent of Asia and is maintaining its global competitiveness (Keane & McGeehan, 2008). The UAE was originally formed through the tribal organization of the Arabian Peninsula sheikhdoms on the southern coast of the Persian Gulf and the northwestern coast of the Gulf of Oman. Hence, the United Arab Emirates had been a part of Oman before and formerly called as the Oman’s Gulf. After its establishment as a united country, UAE developed into a modern and progressive nation with a profitable economy.
On the other hand, Venezuela is a country which consists of the mainland and a lot of islands that is located off the coastline of the Venezuela in the Caribbean Sea. Venezuela is formally the Bolivian Republic of Venezuela and a former colony of Spain. It is considered to be the most biodiverse countries in the world and the most urbanized countries in Latin America (Schuyler, 2001).
United Arab Emirates as known for its oil driven revenues, investment and rapid growth of the population maintained its growing economy. The sector of the non-oil sense of the country increased up to 10% during the year 2007 with the consideration of some slowdowns in the general economies that result from the lessening of production of the hydrocarbon. The vitality of the economy expands into most segments of the economy from the area of manufacturing and construction up to the services such as commerce, transport and finance. The economy of the country should maintain its upbeat in the present year, underpinned by the prices of high barrel with the consideration of producing oil in the process of recovery to be expected in contributing for the growth (Kapiszewski, 2001). And thus this is estimated to be in the 8.5% growth of acceleration. However, other industries outside oil are seen to be expensive and delay some large construction projects which may attribute to the negative affect for the growth of the economy. With that in mind, the pressures in the inflation rate are the main factor to the shortages and the rising costs of expenditures specifically in Dubai.
The process of implementing large programs which intends to help develop the infrastructures such as the ports, roads, airports and for the production capacity of oil has reinforced the outlook of the economy. This kind of program along with the vibrant upscale business environment should carry on stimulating population growth. The degree of property expansion in Dubai could eventually generate a price improvement that affects the weaker companies in a particular sector as well as the most banks which are exposed to the investors. A rapid market fall down does not emerge to be the possible scenario. The business environment remains floating though (Balabanis et al., 2001). In spite of the regional geopolitical doubts, the liberalism of the economy or taking account of the customs-free area and the property sector, and the domestic political stability have been encouraging investors and have concerned capital.
Strengths and Weaknesses
As prevailed in the context that United Arab Emirates emerge in the oil industry, strengths and weakness are then evaluated in order to come out with a different angle of comprehension on the business environment of the nation. The economy of the United Arab Emirates is said to be expanded and that Dubai has been an active emirate that develops the non-oil sector in the country (Davis, 2006). This basically pertains to other industries which are seen to be potential businesses that will expound the revenues of the country such as the aluminum, financial services and tourism. Abu Dhabi is capable with significant oil and gas reserves and Dubai has been improving its productive fabric (Peterson, 2002). The Emirates have the benefit of a solid financial condition. The country’s foreign debt has been rapidly growing but still possesses widespread financial holdings abroad the country and is benefitting from an outside net creditor position. Also, the banking system of the UAE is viewed to its efficiency.
However, some weaknesses of the country have been tagged such as having an opaque public sector and the data of the private companies get in the way of risk analysis. Though the country is seen to be diversified, the economy relies on the oil revenues of the Abu Dhabi which basically depicts that the oil industry still prevails as the main source of business in the country. The regional geopolitical instability represents a risk for the economy that develops in to a center for the international business.
UAE in the recent time
Some articles showed evidence that the United Arab Emirates’ foreign investments are benefiting many people. Accordingly, it showed that foreign investments are more likely to be depicted on the construction services of the UAE and is doing very well as Los Angeles maintains a link for the construction sense of Dubai. This is revealed through the fact that Los Angeles is desperate for the off-shore investments in making projects pertaining to the said area. Taking account that United Arab Emirates’ companies are part of a traditional framework of foreign investors that looks for long-term commitments on projects in US puts a highlight on the business interaction of Dubai companies in California. The set up is like seeking an investment that will give back important profits where in at the end of the day will account for the domestic accomplishments. For many instances, the American development companies are not able to follow high-end development plans without the UAE finances. In relation to that, Japanese explicitly invested in US real state way back 1980 and China where in a lot of politicians and experts started losing their own identity to some Asian investors (Business Wire, 2008).
On the other hand, the criticism on the UAE investments has been widely muffled. There has been scarcely a flow of objection when the Manchester City football club was bought by the Abu Dhabi United Group for Development and Investment and other properties. The same scenario was depicted for Los Angeles. Thus, the officials of the country and city have presented their eagerness to tolerate the participation of Istithmar in a certain multi billion dollar development project. This is because of the help that Isthimar made. The investors in the Middle East venture into investing in the development of US projects which also suggests the wrong stereotyping of the Americans with regard to the threats in the Middle East as what the media illustrates. This is apparent to the views of the Americans upon realization that a help from outside countries should be seek in order to accomplish a development project. It is seen more important today that the economic climate of the UAE and other Middle East investment companies are becoming more competitive in the sense of developing real estate in the international business sense. It just not makes the local economies to be highly competent in the American cities through the formation of housing and commercial development but instead, advances and improves the large countries’ interests (Business Wire, 2008).
Venezuela’s business environment
On the other hand, the Republic of Venezuela somehow possesses a low business risk. in retrospect, this is expected to be low until the early times of 2005. The low business risk has already been discounted in the equities of Venezuelan which increased almost 250% higher in the year 2003. However, low business risk is nit accounted for the international bonds. The bonds are economical compared to other Latin American competitors and to other oil producing markets. The geopolitical, political and social factors are said to be low and as well seen to remain until 2005. The risk is viewed to be in connection with the emerging market in a global sense considering the dominance of the powerful country in the world.
It is viewed that the former president of the US, Bush, will strengthen the domination of energy security in the foreign policy US if he is still in the position. The ascending probability of the more forceful US integration in Venezuela is seen to be a factor. The integration can be viewed in reigniting political and social instability that has just subsided. Economic growth and the financial parity of the payment risks are tagged as low while the international oil prices are then expected to increase more. Thus, the outcome is related to the economic growth and a fiscal aspect considers the foreign exchange reserves that are emerging in Venezuela.
A business environment with many considerable weaknesses is viewed to have a vital effect on the behavior of the corporate payment which is generally seen as having a high probability of corporate sense. The oil wealth of the country keeps the growth of the country to have a strong impact on the development of businesses in Venezuela. Focusing on the redistribution of the oil export revenues nevertheless puts a risk on maintaining the growth of the economy. Businesses in Venezuela should keep on pursuing and improving the oil industry because a decline may impact on the deterioration of the business climate. The increase in the quasi-fiscal expenditures through the national development fund (FONDEN) or the oil company which is owned by the state, PDVSA, exposes the economy to the decisions which has discrepancies on the issues of sustaining the oil prices in the country (PDVSA, 2007).
The business climate tagged by comparative randomness have been observed through the administrative red tape which is linked with the exchange rate mechanism that is supervised by the specific currency commission though this has not yet resulted to a serious dilemma so far. Together with the comparative randomness, some sectors that are affected by a more limited imports policy such as for the cars, tobacco, maintenance services, technical assistance and the like, the frequent delays on payment are also accounted for the same result. The slowdown that is linked with the high oil prices is nevertheless pointing out to the relative strong foreign financial condition of the country that should be maintained though some moderate debt ratios should be taken account of. The large existing accounts excess should reduce in size a bit more in the middle of rust oil production and the booming of consumer-goods imports, as well as the growing financial needs. Even though a descending exchange rate alteration may exist because of the inflation disparity between Venezuela and its main trading partners, the government officials have required the deferring action with regard to the issue.
Strengths and Weaknesses
As to the determination that Venezuela is also a country that provides a large oil production and primarily constitutes the business environment of the country, strength is seen to fall under this category. Venezuela’s business industry widely takes the part of extensive oil, gas and mining resources that has considerable reserves certainly the heavy oil in the Orinoco River Basin. The oil-export revenues benefit the country the things that extends the country’s regional political influence specific to the part of Caribbean area and within Mercosur. In addition to, Venezuela takes the market of the United States for the oil products and the international position of the country is viewed to have a good marking.
In spite of its sustaining economy, it still continues to rely on the sector that generates the 90% of export business and over half of the financial profits. The opacity in the management and unrestricted use of the oil revenues somehow spread a dark covering for the business environment of the country. The insufficiency of the investments is seen to limit the production of the state-owned oil company (PDVSA), taking account for the portion of its revenues allotted for other social programs (PDVSA, 2007). The state integration and widespread corruption have impacted the confidence in business circles and discourage some private investment which slows down the diversification of the economy that is vital for accomplishing a more balanced progress and development (Watson. 1996). Hence, a stable and effective business environment however considers a room for improvement and the corporate sense possibilities are viewed to be not as competent as the UAE possesses.
Venezuela in the recent time
In contrast with the scenario happening in the UAE, in the third quarter of 2008, Venezuela somehow reveals a disinvestment of USD 572 million. The fact that the economy of Venezuela is going in a downward slope, the balance of payments, foreign investments and other related factors have contributed for the degrading level of its economy. Taking account of the outcome of the first half of the year, the country’s foreign investments have totaled USD 1.94 billion through the end of September which is seen to be a small figure compared to other investments in the region though in the middle of the economic disparities due to the global fiscal crisis. Thus, Venezuela is somehow on the lower economic position when it comes to the foreign business issues. This should be improved more and develop a portfolio for the sustainability of its market competitiveness in a global sense.
In general, the business development of the United Arab Emirates and Venezuela are similar when it comes to the oil production in the global market but the level of UAE is highly competent than what Venezuela possesses in the context. As of now, UAE emerges on the construction services in the United States and contributing for the wide development of its progressive economic condition. Risks are seen to be depicted on the business sense of Venezuela because of its weak foreign business stabilization unlike the UAE, though media threats come along the way of UAE due to the misconceptions that UAE is not a country where everyone could freely and safely invest. Thus, UAE should maintain its foreign investments with the large countries and improve more on tourism to attract more investors as well as Venezuela. Venezuela should try to use its resources and balance the domestic and international revenues in order to achieve a profitable economy externally.
- Balabanis, G., Diamantopoulos, A., Dentiste, R. and Muellerand M. T. C. (2001) ‘The impact of nationalism, patriotism and internationalism on consumer ethnocentric’. Journal of International Business Studies, Vol. 32, No. 1 p. 157.
- Business Wire. (2008). FindArticles.com “Investment Risk in Venezuela is Low and is Expected to Remain Low Through Early 2005”.
- Davis, M. (2006) Fear and money in Dubai, New Left Review 41, pp. 47-68.
- Kapiszewski, A. (2001). Nationals and expatriates: Population and Labour Dilemmas of the Gulf. Garnet & Ithaca Press.
- Keane, D. & McGeehan, N. (2008) “Enforcing Migrant Workers’ Rights in the United Arab Emirates”. International Journal on Minority and Group Rights. Vol. 15,I.
- Peterson, JE. (2002). The United Arab Emirates: Economic Vibrancy and US Interests. Asian Affairs. Vol 34, Issue 2.
- PDVSA. 2007. Gestión y resultados 2006.
- Schuyler, G.W. (2001). Health and Neoliberalism: Venezuela and Cuba. p. 10.
- Watson, T. (1994). In search of Management. London; Routledge.