MKTM028 Strategic Marketing | Analysis of External Environment

Answer:

Introduction

Skycart is a San Franciso based company, which was established by Aaron Frank (CEO), Lukas Wrede (Founder and CRO), and Simon Yuen (Founder and CTO). Company deals in self-flying drones, the core idea behind establishing the company is making the logistic easy and quick. Skycart designed the drones such a way, which will enable the delivery of goods and parcels at desired places (Skycrat, 2018). The delivery through drones is less expensive in comparison to the other modes of logistics. The other mode of logistics expenses includes heavy trucks to deliver goods, toll and other fares, annual DOT taxes, fuel expenses and many others. While the delivery through drones includes very less amount of operating cost and in addition, it will cut down the delivery time very dramatically and more importantly it provide services 24/7/365 and it is location independent (Skycrat, 2018).  With self-flying delivery drones, Skycart addresses a US $120B global market for last mile logistics. After the successful launch of self-flying delivery drones in US market now company is planning to expand its business, for expanding the business the company has chosen UAE market. The reason behind choosing a UAE market is, it is the most advanced market moreover they always make their efforts to become a world’s smartest city and decision of making entry in UAE market will not let down the efforts of company. Before making entry in the country the company want to analyse the external environment factors of UAE market. This report is developed with the purpose of analysing the external environment with the use of three components of PESTAL analysis model and after analysing three components, recommendations are designed.

Analysis of External environment 

PESTEL

Three components that can provide benefit to Skycart while entering into UAE market are:

1. Political
2. Economic
3. Technology

Political analysis of UAE

The UAE consist of seven Emirates constitutional Federation, it is located in Persian Gulf on the Arabian Peninsula. The seven states also known as ‘emirates’, seven states includes Fujairah, Umm Al Qaiwain, Ajman, Ras Al Khaimah, Sharjah, Abu Dhabi, and Dubai. The uppermost constitutional power in UAE is Federal Supreme Council (FSC). The main function perform by FSC are establishing federal legislation, general policies, sanctions and elect the President. The FSC is composed of seven leaders of seven emirates. The FSC seven rulers have the power to employ 20 members to the Federal national council, who function as the judicial body.

In last decades the UAE have enlarged their income since many foreign countries have move to UAE to invest in the economy, the reason behind entry of companies to UAE insisted of moving to North Africa and middle east are, because the government of UAE have succeeded to remain free of the insurrections connected to the Arab Spring.    

The UAE is generally open to foreign direct investment. The limitation which the UAE government apply to control the foreign investment is, the individual or foreign companies are restricted to 49 percent control or ownership in any fragment of the UAE, the free trade zone are not included in this limitation for free trade zone the UAE government peruse other law. The government provide waiver of the request of this law approved on a case by case basis. In 2015, the government introduce Commercial company law, which permits full possession to GCC nationals.

As an entire country, the UAE certainly has a few dissimilar features, which disturbs its standing which include all seven emirates themselves have separate government associations agreeing for elastic administration across the country. On the adverse side, the government of UAE has to face governmental conflicts with its nearby nations the conflicts arise because of ownership oil reserve and land. However, the country has strong trade relations with many nations across the globe.

Dubai is the financial capital of UAE and is the best place for business. Dubai is the second leading emirates in area after Abu Dhabi, and has the highest populace. Dubai’s key sources of income are hospital services, financial services, real estate, and petroleum and natural gas the company can introduce their product in the Dubai market so it can provide their benefits to the various sectors. Dubai parts the political, ecumenical, and legal tasks with the other emirates with in a federal framework, even though each emirate has a jurisdiction over functions (Export.gov, 2018).

Due to elastic rules for both expatriate and local population, introduce by UAE government, UAE attracts world attention through many of its large sports events and advanced projects. The improved attention UAE arises as a global country in the world.  

Economic analysis of UAE 

THE authorities of UAE have reduce their dependency on oil export by bring diversification in economy, the UAE now focusing more on construction and tourism sectors. The data released by UAE ministry of Foreign trade states that 71% of the total GDP is come from non-oil sectors. The Economy Ministry of UAE is planning to lower down the oil division contribution to GDP to 20% by 2025 and want to focus more on increasing service and industry sectors (Export.gov, 2018).

The vision develops by the UAE for 2021 is to increase the Gross National Product by 5% from the flow of foreign direct investment. The UAE is evolving their law and regulation to increase the entre of foreign direct investment still the current framework favour native over distant investors. The recent rationalised laws validates that the practiced of foreign possessed free zone businesses functioning onshore in some occurrences, and permit majority of Gulf Corporation Council ownership public joint stock companies. At free trade zone the UAE restrict the entry of foreign ownership and investors.

As per the report of UNCTAD, the UAE presently having 48 mutual investment treaties, out of which 34 are in working and rest 14 are at other universal investment contracts, from which seven are in working. However, there is currently no mutual investment agreement between UAE and US. The UAE signed a Trade and Investment Framework with United States to deliver a formal framework for trade liberalization and discussion on economic reforms. The GCC framework contract for trade, investment economic and technical cooperation was signed in 2012 as a participant of GCC the UAE is also party to the US.  UAE is an international finance centre it ranked 34 in global financial countries. The import source of UAE is China, Japan and USA and its top exporting countries are India, Iran and Saudi Arabia (Export.gov, 2018).

The global crises not do directly affect the UAE, it measured as a steady economic growth market in the Middle East. In present, the UAE currency (Dirham) is pegged to US dollar. Due to fall in US dollar the purchasing power of UAE increase and imported good are available to UAE at reduced rates. The inflation rate continuously dropping and of UAE is government is aware about the problem and annoying to tackle it by taking creativities by freezing prices of chosen consumer goods, electricity and water (DUAE, 2015). By introducing initiatives, the government get success, the inflation rate of country has improved or under control over last two years. The control of inflation rate is very essential for the company so they can make investment in the country.   

Technology analysis of UAE

The company want to launch the product in the market is fully technology bases the component of technology will let the company know how much the UAE is technology friendly. The population of UAE is collected of huge number of young professional who are very talented, and technically well informed. The IT sector of UAE mainly deals in innovating hotels and tourism. The amount of internet users in the UAE has enlarged. The number of IT software and internet solution companies has increases in UAE. In present the UAE contain double IT companies than Europe. The growth of 12% is been noticed in sale of computers. The UAE has the most specialised satellites, internet and mobile phone users. To get specialization in the field of implementation and supply of transport system, the technology of UAE grown as a unrivalled leader by installing and supplying display system, Automatic fare system, electronic taximeters and route and destination display board. As per data the UAE is planning to make investment in space technology and the government already state the amount of investment that is 20 billion (John Everington, 2018). The investment includes investment made in television broadcast company, satellite data and mobile satellite Communication Company.

The UAE is very keen on developing their capability in field of communication and information technology and continuously undertaking measure to achieve the target. The first step toward the communication and information technology is establishing free zones such as Dubai Media City, Dubai Silicon Oasis and Dubai Internet City. These free zones are established to support companies in the UAE and to boost the technology advancement and economic growth in the UAE.

Recommendation to management 

The Skycaft want to launch their product in the UAE market the key features of drones are the company is delivering the drones in UAE market, which will reduce the cost logistics by 30-40% less than the traditional modes of delivery here are few recommendations made here:

1. Appoint an agents and distributors: if the company want to make investment in the economy of the UAE it is recommended that, the company should appoint agent or distributor at UAE. Because the foreign companies cannot supply their products to the customers directly to supply product among the customers the company need to appoint an agent or distributor. The foreign companies cannot apply directly to the tender for government project, for that it is important to appoint an agent or obtain a licence for their own.
2. Follow the UAE Commercial Company law: The rules and regulations in UAE are followed very strictly if the government of country find out that any company is not following the rules and regulation they put huge penalties on them in addition they punishes the company in other terms. The UAE has introduced a new Commercial Companies Law in 2015. After 2015 all foreign companies need to follow rules as per Commercial Companies law.
3. Capital requirement: to establish the business in UAE has decided that companies need to invest at least AED 150,000 and to obtain the licence from authorities minimum capital was decided is AED 300,000. It was recommended to company if they are willing to invest in UAE market, they should have at least minimum amount.
4. Professional partnership and Sole professional proprietorships: to establish professional partnership or sole proprietorships the company need to take special approval from concerned ministries/government departments.
5. Establishing an entity in UAE free Trade Zone: The administration of UAE provide distant investor a chance to establish their business in free trade zone in Middle East region, which offers 100% foreign ownership. For that, the company need to obtain a suitable licence for their own to Department of Economic Development/relevant Emirates licencing authority.    

Conclusion 

To conclude, the Skycaft is a technology-based company, which mainly deals in the self-flying drones. The self-flying drones are developed to solve the problem of logistics the self-flying drones were used to deliver goods and parcels to their desired address. The new concept of self-flying drones involves very less cost and it is quick and easy. The company want to launch the product in the UAE market. This report is developed to understand the external environment factors, which can affect the entry of company in the UAE market.  

References

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Export.gov, (2018). [Online] Available from:  https://www.export.gov/article?id=United-Arab-Emirates-foreign-trade-zones [Assessed on 04-08-2018].

Export.gov, (2018). Foreign Investment  [Online] Available from:  https://www.export.gov/article?id=United-Arab-Emirates-openness-to-foreign-investment [Assessed on 04-08-2018].

John Everington, (2018).technology has transformed every aspect of life in UAE [Online] Available from:  https://www.thenational.ae/business/technology/technology-has-transformed-every-aspect-of-life-in-uae-1.722171 [Assessed on 04-08-2018].

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