Reflection– Dubai Visit

Dubai - Modern Infrastructure, Traditional Businesses

Kunal Bindra (1611255) 12/14/17 Business Planning for International Markets

Kunal Bindra (1611255) Business Planning for International Markets - Dubai Reflection Paper

Contents
Executive Summary................................................................................................................................. 2
Dubai - Key Distinguishing Features....................................................................................................... 3
Visit to Abu Dhabi (Compare & Contrast) ............................................................................................... 4
Visits and Meetings ................................................................................................................................. 5
Food Processing (Visit to AKM Foods & Interaction with Mr Ravi) .................................................. 5
Interaction with Mr Sreeram (Technology Bases Start-up’s) ........................................................... 6
Visit to Green Bridge Contracting (Construction Industry) ............................................................... 7
Interaction with Mr Prasad Gokhale (Electronics Industry) ............................................................. 7
Visit to Gold Souk ............................................................................................................................... 8
Visit to University of Wollongong (Professor Prakash, Arijit)........................................................... 9
Visit to SP Jain Institute of Global Studies (Professor Abraham) ..................................................... 9
Interaction with Mrs Sujata (Luxury Goods Marketing) ................................................................. 10
References ............................................................................................................................................ 11
Kunal Bindra (1611255) Business Planning for International Markets - Dubai Reflection Paper

Executive Summary
With a local population comprising 15% of its total and floating population being higher than
the resident population, Dubai is, in the true sense of the world, a global city. Dubai is a city
where everything - luxuries, the labour, the accent, the providers, even the aspirants have
been flown in.
Reflecting on it as a city with modern infrastructure and traditional businesses is with a
reason: it is the fastest in terms of creation of infrastructure i.e. setting up of platform for
businesses to prosper. However, most of the businesses have been derived from other parts
of the globe.
According to me, the businesses in Dubai could broadly be divided into the following three
categories:

 Existing global majors across sectors that have branched out operations in Dubai, the
likes of Unilever, P&Gs, HSBC, Credit Suisse, IBM, TCS.
 Entrepreneurs who have moved into Dubai to setup business models catering to
needs of an evolving city. Lot of businesses in the foods and tourism sector have come
up.
 Government backed businesses like Emirates Airlines, EMAAR Developers, Jumeirah
Project
Having looked at the business side, the consumer side of the story is also an interesting one
when it comes to Dubai. The average age is 28 years signifying young a very young
population. The consumers could also be split into three broad categories each displaying
distinguishing behavioural patterns:

 The Moving Population – the largest subset; short duration visits; intention to travel
and explore the culture; temporary accommodation arrangements
 The Residents – also known as the expatriates; this subset has a very broad spectrum
in terms of demographics since it includes migrant labourers as well as senior
professionals working in Dubai; having UAE residency card; the average stay for
residents is quite low, say around 3 years.
 The Citizens – also known as the ‘Emiratis’ they are the smallest but the most
influential subset; they belong to the gulf region and are true citizens of the country;
having controlling stake in businesses but not involved in active management; they
create a huge market for ultra-premium products due to their spending power and
habits.
Tracing Dubai through its journey is also an interesting story. It signifies the foresightedness
and the breadth of the vision of its rulers. Dubai’s location at the mouth of Persian Gulf gave
it an enormous amount of trade-vantage and hence this was the most obvious starting point.
With a plan to connect surrounding regions, Emirates Airlines was launched in 1980’s and
soon it was catering to major hubs like London, Frankfurt, Singapore etc. primarily because
close to 60% of the world’s population was within a 3 hour flying distance from Dubai. With
Kunal Bindra (1611255) Business Planning for International Markets - Dubai Reflection Paper

Dubai becoming the cross-over destination, many of the businessmen who travelled through
Dubai, decided to stay (owing to the favourable location and regulatory policies).
Further in the 1980’s, Jebel Ali was established, which now is the largest manmade port in
the world, owing many other ports across the globe. However restriction around 51% local
ownership was coming in the way of gaining traction to port movement. That’s when Sheikh
Mohammed played a master-stroke in terms of introducing Free Zones in Dubai and
declaring Jebel Ali as one. Much like an SEZ, the free zone was essentially an exemption from
the laws that applied in other parts of Dubai (Shariah law). With the success of Jebel Ali Free
Zone, Sheikh Mohammed saw an opportunity and immediately started carving free zones for
other businesses that could thrive in Dubai. Dubai International Financial Centre (DIFC) free
zone opened in 2002 which is now filled with global banking majors like Citibank, HSBC,
Credit Suisse etc. This was followed by Internet City (to attract budding technology), Media
City and lastly, the Education City. The free zones in Dubai were also in contrast with those in
China owing to the intention of making it a global investment hub. For instance, in China, if
you are in a free zone, the law that applies to you would differ based on your nationality.
Such a structure would have only created more confusion in Dubai, in terms of the legal
structure because of the huge number of nationalities present. Hence, Dubai answer to this
was simple: every establishment in the free zone will have a common governance which
would not be the Shariah law as it applied to other parts of Dubai.
The growth in Dubai is despite it being in a disaster to live for 7 months in a year. It is the best
example of visionary leadership and relentless execution combining to deliver something this
huge.

Dubai - Key Distinguishing Features

Having discussed how Dubai has grown to become what it is, the paper ahead reflects upon
key characteristics that define Dubai and distinguish it from India or other states of the world:

 Craving for Ultra-Premium products creating a huge Luxury Goods market

o The luxury goods market in emerging economies like UAE, China, Russia is
beating that in developed markets like US, Japan, Europe. While 70%
consumers in emerging markets have increased spending on luxury brand
shopping, corresponding number for developed markets is 53%.
 The fascination for records
o There is a big craze around having the biggest, the tallest, the largest – all in
Dubai. Dubai is home to the tallest building in the world, the world’s tallest
hotel, world’s longest handmade gold chain, world’s largest mall, largest
screen inside a mall etc. etc. Not surprisingly it also has the Guinness World
Record for having the maximum number of records registered in its name.
 Shariah Law
o Shariah is a religious law forming part of Islamic tradition. Shariah law is what
applies in Dubai. Even the businesses setup in Dubai are governed by these.
For one, the Shariah law is also responsible for the low crime rates in Dubai
Kunal Bindra (1611255) Business Planning for International Markets - Dubai Reflection Paper

since it has severe penalties for various crimes. Islamic Finance too is
governed by Shariah law. It prohibits exchange of commodity for the same
commodity, which ultimately prohibits charging interest on money because it
is ultimately trading money for money. Uncertainty is also prohibited in the
law and so are activities like gambling, instruments like derivatives etc.
However uncertainty has been distinguished from risk and hence funding of
new ventures is permitted.
 Free Zones
o This is a counter to the restrictions that the Shariah law brings in for outsiders.
Entities set up in the free zones essentially are exempted from the Shariah
law. The free zone worked as Sheikh Mohammed’s trump card to attract
businesses from across the globe to Dubai. Dubai currently hosts Media City,
Education City, Jebel Ali Port, Finance Hub and many more free zones.
 LLCs & 51% Local Ownership Pattern
o Though few other forms of organizations are permitted, Limited Liability
Companies (LLCs) are the most common form of registration in the UAE.
However, 100% foreign ownership in the entity is not permitted. 51% equity
must be held at all times by one or more UAE nationals.
 Introduction of VAT from 1 January 2018 (No more a tax free nation)
o From 1st January 2018, VAT is expected to be introduced at a rate of 5% with
some limited exceptions including basic food items, healthcare and education.
Till now Dubai has been a tax free nation and introduction of VAT will have
some effects in terms of increased cost being passed on to the consumer
(since it ultimately is a consumption tax). While in short term it may lead to
the shrinking of GDP of Dubai, in long term it will be beneficial since it would
promote legal businesses and weed out fake businesses.
 Ministries for Happiness, Tolerance and Artificial Intelligence
o While glancing through the newspaper on the National Day of Dubai, I came
across this interesting factoid of Dubai having Ministries for Happiness,
Tolerance and Artificial Intelligence. This is great move towards making the
city a better place to live and work. The ministry of tolerance promotes
harmony amongst different nationalities in Dubai while the ministry for
happiness has been measuring the happiness quotient of the population
(moving and living both) to come up with measures for continuous
improvement. The Ministry of AI is focussing on how AI based technology
could be used to transform the city and the experience.

Visit to Abu Dhabi (Compare & Contrast)

Abu Dhabi heads the seven emirates in terms of being the capital of UAE and the Ruler of
Abu Dhabi being the President of United Arab Emirates.
Our visit to Abu Dhabi was fruitful in terms of comparing and contrasting the culture of two
places. Abu Dhabi’s population differs significantly from Dubai in terms of having much more
Kunal Bindra (1611255) Business Planning for International Markets - Dubai Reflection Paper

local population. In terms of the revenues and net income level, Abu Dhabi significantly beats
Dubai however its revenue mix is still coming primarily from oil.
Ferrari World and Yas Island have become attractive tourist destinations however most of the
tourists still arrive to visit Dubai and then go to Abu Dhabi. Abu Dhabi has some way to go in
terms of becoming the prime tourist destination.
Ferrari World model presents a good opportunity for luxury brands to adopt similar models for
marketing themselves. The whole feel around the place is based around what two things that
signify Ferrari: Red and Speed.
A mini island has been created around Yas, along with various attractions in order to further
promote it as a tourist destination. Many new initiatives should come up in that zone in the
near future, if Abu Dhabi targets itself as the tourist hub.
The Sheikh Zayed Grand Mosque, largest mosque in the country, also presents itself as a key
tourist attraction. Constructed between 1996 and 2007 it is a key place of worship for Islam
devotees, however its structure and grandeur has become an attraction for everyone. This
again demonstrates the focus of UAE into grand structures.

Visits and Meetings

The paper further reflects on the interactions we had during the week from 3rd to 7th of
December 2017. This section has been split into the following parts:
i) Food Processing (Visit to AKM Foods & Interaction with Mr Ravi)
ii) Interaction with Mr Sreeram (Technology Bases Start-up’s)Electronics market
iii) Visit to Green Bridge Contracting (Construction Industry)
iv) Interaction with Mr Prasad Gokhale (Electronics Industry)
v) Visit to Gold Souk
vi) Visit to University of Wollongong (Professor Prakash, Arijit)
vii) Visit to SP Jain Institute of Global Studies (Professor Abraham)
viii) Interaction with Mrs Sujata (Luxury Goods Marketing)

Food Processing (Visit to AKM Foods & Interaction with Mr Ravi)

 The food industry, throughout its value chain, has immense opportunities.
 AKM Foods and Olam are success stories of Indian entrepreneurs who have made a
mark in Dubai through interventions in the food processing value chain. We had a
chance to interact with both these businesses.
 The reason for choosing Dubai as an investment destination:
o The need arises out of Dubai being a food deficient country
o Ease of doing business
o The expected return on capital invested by a venture capitalist or a PE partner
would be around 5% which is much lower compared to other parts of the
globe.
 For AKM Foods, the intervention was across the food processing value chain,
customers being charged for different services availed. Starting small in a rented
Kunal Bindra (1611255) Business Planning for International Markets - Dubai Reflection Paper

office and cold storage AKM Foods is now dealing in ~ 360 SKUs, importing 80% of the
supplies while procuring 20% locally. The need/ market arose from the fact that on
one hand there were citizens from a lot of nationalities in Dubai, craving authentic
home food while on the other hand small quantity exporters from countries like
Holland etc. looking for someone to manage the warehousing, transportation and
clearances for their produce. It acts as a consolidation agent and arranges C&F agents
 The warehousing facilities operated by the company, claimed to be state of the art,
were still away from the global warehousing best practices and safety standards but
nevertheless catered to the needs of the business pretty well.
 Olam, started in 1989 by Sunny Verghese in Nigeria, it is now the third largest agri
business in the world. It replicated its farm gate to factory model in many countries
and Dubai due to the above stated factors could not be left out. Olam primarily dealt
in imports of edible nuts, coffee, cocoa and grain among other products.
 Further in 2006/07, it also did mid-stream integration and got into manufacturing /
value-add processing activities for existing products.
 Keeping in mind, nature of the market, innovative ways of tackling the market were
discovered - since in this market, the price points at which the customer was willing to
buy was significantly lower and it wasn’t possible to lower the production cost to that
extent, Olam innovated with a new grain altogether, having slightly lower
specifications and hence matching the required price point. This helped benefit the
customer as well as the company.
 The most important challenge in this industry as bought out by Mr Ravi Pokhriyal, was
managing counter party risk since there are a lot of smaller parties involved and risk
assessment should involve operational, quality and financial factors.

Interaction with Mr Sreeram (Technology Bases Start-up’s)

 Mr. Sreeram gave a rich insights into some factors that made Dubai the global centre
of trade while also drawing a contrast between Abu Dhabi, Dubai and Saudi Arabia.
 He also bought to notice the industry shifting trends in the Middle East. Middle East
initially used to be a services based industry and it still largely is. However the trend
started to change when the services base realized that their revenues had been
eroding and the country had to come up with new business models for their
revenues. Hence the shift happened to production based businesses. Dubai slowly
became a flight and shipping hub which contributed immensely to its attraction as a
trade platform between the east and the west.
 Contrasting Dubai and Abu Dhabi, Mr. Sreeram mentioned that Abu Dhabi
conventionally as a more conservative country with deeper oil reserves. Saudi Arabia is
a closed economy opening gradually and has immense scope of potential in coming
future.
 Change management played a very important role in an economy like Dubai. Mr
Sreeram stressed on the same. 5 year plans are a thing of the past. What needed to
be done is to set a direction and then keep revising the track basis a change in the
industry or the competitive landscape which is exactly what he did while his different
roles in the rapidly changing scenario of the Middle East. Another key thing to
Kunal Bindra (1611255) Business Planning for International Markets - Dubai Reflection Paper

building a successful enterprise is to know your customers, their needs and what
exactly do they want to build great products and services. He mentioned how Chinese
were taking great interest in Middle East and bought all major National infrastructure
projects, a step direction which Indian government will take a long time to follow.
 Also discussed about the concept of Free Trade Zones and Jebel Ali being the
prominent port in Dubai. Dubai Government had an agenda and businesses that align
itself with the national agenda had more chances of succeeding in the coming future
and 100 billion $ projects like the NIOM smart city project or the space travel were
the big bets, something which an entrepreneur can look forward to while thinking of
entering in Dubai.

Visit to Green Bridge Contracting (Construction Industry)

 With the vision of becoming the most preferred EPC Company in the MENA
construction industry and a focus on green solutions, Green Bridge Contracting was
founded in 2008 by Dr Harshad Mehta.
 It was interesting learning about the industry dynamics of the construction industry in
Dubai. With over 6000 companies having a construction licence in Dubai, 3% of them
had a ‘G+ unlimited’ licence, Green Bridge being one of the 3%.
 Out of ~7000 buildings in Dubai, 15% i.e. >1000 are high rise (>15 storie), which is
very high compared to the global average.
 The industry net margins hovering around 8% have declined to 5% or below in the
recent years due to increased competition.
 Key Challenges for the Industry
o Increased competition from smaller players who beat the market purely basis
the lower cost structure
o High fluctuation in terms of residential property prices.
o Shortage of skilled labour for more than 50% of the companies
o With Dubai’s increasing focus on the people welfare and happiness quotient,
the cost of operations has significantly gone up due to structures now
demanding a high standard accommodation including facilities like
gymnasium, swimming pool etc.
o Sub-contractor management comes as a key task due to any project having
~20-30 sub-contractors to be managed who complete practically 50-70% of
the work. Hence there is increased importance of the quality assurance team.
o The last 10% of the payment is always difficult to collect since it is held back
due to construction quality issues or other similar reasons.
o Commodity price variation
o Introduction of VAT from January 2018, would again affect this industry. For
Green Bridge, it’ll mostly be a pass on but it will ultimately get reflected in
terms of increased consumer cost hence affecting demand.

Interaction with Mr Prasad Gokhale (Electronics Industry)

 Mr. Prasad Gokhale, post graduate from the Symbiosis University, currently working
with Telecom Fze previously worked with the Eros group that worked closely with
Kunal Bindra (1611255) Business Planning for International Markets - Dubai Reflection Paper

companies like Samsung for consumer electronics distribution. In the most candid
way, Mr Prasad shared insights about the Electronics Market in Dubai.

 Stressed further on the ease of doing business in Dubai, how the regulatory
framework is sorted between region and the nation. The Immigration laws in Dubai
are managed under the UAE laws and the police handles the state laws. The fact that
the floating population in UAE is very high played a big role in development and scope
of new businesses. Mr. Prasad stressed on the cosmopolitan nature of Dubai throwing
out facts on how Indians with 25% share were the major population group and had a
strong influence in business spheres.

 The consumer electronics market in UAE is $11.8bn industry with $5.8bn being Dubai.
Out of this given configuration mobile and i-pads were the dominating segment with
$2.8 billion, television being the next with$1 billion, followed by the Information
technology accessories. The market for personal viewing is increasing by the day and
market for group viewing is reducing. The mobile has grown rapidly and the gap
between mobile and TV viewing is increasing.

 To protect the interests of local dealers in India, Indian government has put
restrictions on the import of Television sets into India from UAE. This is because people
were heavily capitalizing on cheap rates in Dubai and exporting TVs to India.

 Dubai being a home to multiple nationalities, the spending patterns differed across
those. While Philippines were considered amongst the high spenders, Indians were
classified as a low-spending group as their major income earned was to be sent back
to India to support their family expenses. This sharp contrast also throws up a
business opportunity. A result of this is designated places like Dragon Mart that
specialize in selling Chinese products to masses.

 Samsung market share in Dubai is ~62%. Dubai is majorly distributed through

organized retail market. The share of unorganized retail in Dubai is very less,
Companies like Samsung invest more in opening big grand stores in malls to have a
good organized retail presence.

 Two key challenges for the electronics industry as of date:

o Introduction of VAT starting 1 Jan 2018

o Takeover of souk.com, a key e-commerce channel for marketing
Mr. Prasad also touched upon how it was wiser to buy a house in Dubai rather than renting it
since the EMIs paid con to rent and the EMI’s paid were less than the rent.

Visit to Gold Souk

The gold souk market, located in the business district of Dubai hosts about 300+ traders most
of whom trade in jewellery. It boasts as one of the largest gold markets in the world. The first
thing we notice on entering the market is it’s grandiose. Some of the heaviest / largest in
terms of gold content ornaments have been prepared here (rings weighing 10 kgs, 2.4 km long
Kunal Bindra (1611255) Business Planning for International Markets - Dubai Reflection Paper

gold chain were something unheard of!). The prices of the ornaments are determined by the
world gold prices, the craftsmanship and the type of gold (carat).
Interestingly however the traders are not affected by the gold price fluctuation. Their buying
and selling transaction happens at the same time. The larger SKUs of gold / jewellery are
mostly bought by the Arabs while tourists etc. take smaller SKUs as souvenirs. Though I never
intended to shop here however the visit to the Gold Souk was still enticing.

Visit to University of Wollongong (Professor Prakash, Arijit)

 During the visits to University of Wollongong, we had an opportunity to interact with
Professor Prakash, who was the Faculty in Marketing.
o Next dimension of marketing mix – the pace of marketing. In a rapidly changing
environment / geography like Dubai, the pace of your marketing initiatives is very
important. If the initiatives are not relevant they shall lose all purpose. Hence the
frequency with which initiatives are launched and what initiatives are to be
launched at what time period are important questions for a marketer to answer in
a scenario like Dubai.
o The subject of Luxury Marketing is very important in market like Dubai. Brand
Arrogance is an important part of luxury marketing in Dubai. The instances of
brand arrogance are prevalent everywhere we went in Dubai. B2B Servcorp, a
premium organization providing hiring and organization setup services, quoted
‘Customer should be privileged to have our services’. Further, during our casual
visits around the city, numerous boards could be seen marketing Jumeirah Beach
Residences. ‘Some places are not meant for everyone, 1 JBR’ ‘No dancing
fountains here, 1 JBR’ (a take on the population living around Burj Khalifa).
 We also had an opportunity to interact with Professor Arijit, and learn about the ease of
doing business and focus areas for Dubai. The following were the key pointers:
o UAE is 21st in terms of ease of doing business globally. Singapore is a typical
benchmark for Dubai when it comes to any policy decision because of the
similarities these countries share.
o However there are differences between the way expats can participate in both
these nations. While in Singapore, there are restrictions on what kind of
businesses can be given to non-citizens (one’s which cannot be done locally),
Dubai does not have such a policy however requires 51% local stake in a business
that is being setup.
o The key issue for UAE is protecting the interests of local population from the influx
of expatriates. This is currently being done through the 51% local stake in business
rule. The government is working on further measures to ensure the interest of the
local population (Emiratis) is maintained in a sustainable fashion.

Visit to SP Jain Institute of Global Studies (Professor Abraham)

 We also had an opportunity to interact with Professor Abraham and learn about the
establishment and success story of SP Jain School of Global Management (SPJSGM).
 The success story is essentially built around establishing a global education business
model which could reasonably be termed as new. Dubai was the first campus to be
Kunal Bindra (1611255) Business Planning for International Markets - Dubai Reflection Paper

setup, which was followed by an opportunity being presented in Singapore. While

evaluating the opportunity in Singapore, a key question was how could we expand to
Singapore without affecting the existing Dubai campus. The answer to this question
was found by establishing a hybrid model with 6 months in Dubai and 6 months in
Singapore program. This model proved immensely beneficial in the following aspects:
o It resolved the issue of cannibalization of Dubai campus due to addition of
Singapore campus
o Students were exposed to multiple cultures and practices during the one year
which gave an added advantage to the program
o It gave SP Jain Institute a strategic advantage in terms of having itself in the
Top Global Ratings by virtue of a program style which was not too prevalent.
o The institute was able to tap into the faculty from both the regions and exploit
best practices thereafter.

 The key challenge to this however was that SPJIMR had an Indian registration and
only degree Indian colleges issued was PGDM and Diploma in other parts of the
world had different connotations. In order to become a truly global program, they
had to have an MBA accreditation which ultimately came through from Australia,
because of which they also had to set up a campus in Australia. The program now
runs a 3 country-one year course.
 A good mix of grabbing opportunities as and when they presented themselves and
fine execution has made this program thrive. Currently the program ranks
amongst the Global Top 20.

Interaction with Mrs Sujata (Luxury Goods Marketing)

 The interaction with Mrs Sujata (Al Habtoor Motors) threw light on the aspects of
luxury goods marketing with a backdrop of Bentley distributorship in Dubai.
 Dubai is an ~$10bn luxury goods market which can be broadly split into three types:
o Fashion, Accessories, Watches, Bags etc.
o Private Jets, Yatches etc.
o Apartments, Villas etc.
 Auto Distributors in Dubai can be characterized as follows:
o Primarily family owned businesses; many having connections with the royal
family
o Don’t have complete information from manufacturers about new models
being launched since it may affect their old inventory holding decisions
o KPIs for distributors control 50% of their dealership fees. This is made up of
factors like a) customer service ratings b) marketing activities etc.
 The Sheiks belonging to the royal family (Classic Luxury segment) are personally dealt
with by the owner and their family. The other customers are the ones who are
catered by the staff at the dealership.
 The key to marketing a luxury good is experience marketing. In terms of marketing a
Bentley, it meant making the whole experience, right from the tiles, to the coffee, to
Kunal Bindra (1611255) Business Planning for International Markets - Dubai Reflection Paper

the biscuits served with the coffee pitch perfect for the customer. Some of the other
techniques being used to enhance customer experience are:
o Experience the car for a week
o Exclusive golf events
o Exclusive networking events with guests being driven to the event in a Bentley
 Apart from this managing the post purchase experience is also a critical task for the
marketer. This is done by maintaining top notch customer service, driver trainings,
owner specific auto show events across the globe (many of the Arabs travel to Europe
during the summers), creation of a Bentley community.

References
1. Interactions and Visits as a part of BPIM Dubai classes
2. Visit to Ferrari World, Yas Island, Sheikh Zayed Grand Mosque
3. http://gulfnews.com/news/uae/government/uae-population-and-statistical-trends-
1.1931464
4. http://www.malloftheemirates.com/trends/dubai-tourism/
5. https://www.pwc.com/m1/en/tax/documents/2016/uae-to-implement-vat-on-1-
january-2018.pdf