Deep Shah MMS Finance Roll no.

: 142

CASE: The Java Lounge Adjusting to Saudi Arabia Culture

Q.1 Comment on the influence of Saudi Arabias location on its Political Risk and Legal Systems. Ans: Saudi Arabia is a land of contrasts and paradoxes. In this country strict religious convictions and ancient social customs often clash with the reality of the modern world. Standards of observance vary substantially by industry and geographic area, both Saudis and foreigners are often perplexed about personal and business behavior. Foreigners often find Saudi laws and customs at odds with their own value systems. Talking about the type of government, it is a monarchy where the king handles all the matter of the country, so it is a Rule of Man and not a Rule of Law. Due to this type of government, there are more chances of having systemic risk (which is one of the types of political risk) as a change in king can cause change in political ideology which can affect the MNE or also any industry. But the chances of having ethnic discord or frustration are less. But the location of the country is such that it is surrounded by the countries of high volatility and due to this factor the political risk of the country can be considered high as it is a country which is surrounded by countries like Iraq, Iran, Israel etc. which have past history of wars. Also as it is one of the major oil producing nation thus chances are always there of having higher political risk. Thus we can say that the catastrophic risk factor is higher in this country due to its location. Now talking about the legal system of the country, it can be said that it follows Theocratic law system. It means that the laws and legal system is based upon the religion which is the religion of Islam. Thus the laws are Islamic laws, also it has rule of man which means the judiciary system is under the influence of the ruler that is the king of Saudi Arabia. Some rules and regulations are very strict in this country and due to it many companies find it odd to enter this country and have their business. Also the rules are different for men and women. Although the government ratified an international agreement eliminating discrimination against women in 2000 but still rules governing what women can and cannot do remains quite rigid and to outsiders it may also seem paradoxical. For example, women in this country are not allowed to drive, also although women outnumber men in Saudi universities but they comprise of only 7 percent of total workforce. Although women own 20 percent of businesses but they cannot operate private law or architectural firms, nor can they be engineers. Also they can work alongside with men only in few professions like medicine and recently banking and hotels. Also they are compelled to wear robes called abayas. Also due to these religious proscriptions the Java Lounge is prevented from serving pork products or alcohol and also live music is prohibited in the lounge. Also during holy period of Ramadan when people fast during day, the restaurant is allowed to serve only in the evening. Also there are cases and instances in which the company had to change their logo or trademark so as to avoid public display of womens face etc. But some companies voluntarily adjust to Saudi rules as a matter of customer goodwill. 1

But during certain situations these rules also have been rendered. For example, Islamic law forbids charging interests and selling of accident insurance but the government simply eliminated the prohibition because Saudi businesses need coverage. Also flexibility is particular common when it comes to dealing with foreigners and foreign companies. For instance, they are more lenient toward visiting female executives than they are toward Saudi women. These kind of differences between men and women and also between Saudi women and other women can be seen in this country with respect to laws. Thus it can be said that the country is influenced mainly by their religion in terms of their legal system and also their political system.

Q.2 Explain briefly any 10 aspects of Saudi Arabia's culture & the variation in cultural norms across various locations within Saudi Arabia. Give your rationale for each of the 10 aspects. Illustrate how foreign companies in Saudi Arabia have modified their business practices accordingly. Ans: About the aspects of Saudi Arabias culture we can say that it is totally influenced by the Islamic religion. The culture of this country is very conservative and particularly in case of women of Saudi Arabia. Some of the peculiar aspects which can be highlighted are as follows: 1. The women are compulsorily made to wear robes over their dress when they go outside their houses. These robes are called abayas. Also men customarily wear robes called thobes. But at some places the dress code is more relaxed as in the city of Jeddah, unlike other places of Saudi Arabia where women traditionally wear garhas that cover their faces, where they dont cover their places. It is due to the fact that it is a port and enjoys more contact with foreigners compared to other places of the country. 2. The women are not allowed to drive, as they believe that mobility increases the opportunity for improper behavior. 3. Also women outnumber men in Saudi universities but the total workforce comprise of only 7 percent of women. Also they r prohibited from operating private laws, and architectural firms. Also they are not allowed to become engineers. 4. Women can work alongside men only in few professions like medicine and recently added banking and hotel industry. If they work where men also works then they have separate entrances and they are separated by male co workers by partitions.

5. The hotels and restaurants cannot serve pork products and alcohol as their religious proscriptions prevents them from doing it.

6.

During the holy month of Ramadan when people fast during the day, the restaurants are allowed only to serve in the evening.

7. Also as per the Islamic law the country forbids charging of interests and selling of accident insurance as it is believed as per the strict Islamic doctrine holds that there are no accidents but only preordained acts of God. 8. Saudis are strict in case of their own women when it comes to dealing with a foreign company or foreigners and particularly a visiting female executive they are more lenient. 9. They do not allow their women to work as flight attendants on Saudi Arabian airlines (where they would work alongside men), but they permit women from other countries to do so. 10.Also there are stores in the mall on upper floors which are specially for women where they can shop whatever they choose to but the problem is that the male managers can visit these floors only when store is closed so there is limited ability to observe operations. Some of the foreign companies have modified their business practices according to Saudis culture and legal systems. For instance, Harvey Nichols has converted revenue generating space into an area for prayer. Also during five times per day when Muslims men are called to prayer, McDonalds dims its lights, closes its doors, and suspends service. Then during Ramadan, many stores shift operating hours to evenings etc. Also Java Lounge restaurant and other restaurants do not serve pork products, alcohol and live music. These are some ways in which companies have voluntarily changed their business practices so as to adjust to Saudi rules as a matter of customer goodwill. Q.3. What were the key assumptions of the business model of Java Lounge? Outline the key actions taken by its promoters before and after the launch. Was Java Lounge successful & why? Ans: The main basic idea and assumptions of the owners of Java Lounge were that they assumed that there are enough Saudis like themselves who would like to have experience of foreign restaurants and nightlife which they had experienced outside. But they were not 100 percent sure whether there are enough people in the country who really are willing to have that experience and so they took some major steps before and after launch of the Java Lounge and due to this their plan was successful. The business model of them was 1 st to research about the demand of the services they are willing to offer and if there is large amount of crowd to take and use that service then only launch it so that it has high chances of succession. To achieve this, the steps which they took before the launch of the Java Lounge were that they hired a firm of Lebanese consultants to research their business concept. Ordinarily market research can be difficult in this country but these Lebanese researchers managed to 3

interview families who belonged to different classes by approaching them in restaurants. They, along with interviews also noted their clothing style, their manners and the general way in which they comported themselves, also their accessories etc. After doing the whole research it was found and concluded by the researchers that there was indeed sufficient potential for the kind of business their client had in mind. Then about choosing the location these four partners chose the city of Jeddah as it was a port and which enjoyed larger contact with foreigners as compared to other parts of the country and thus the people in this city were less conservative then rest of the country. After starting of the Java Lounge also some key actions which were taken by the promoters are that, they had entire staff as male, then during the day, men coming to Java Lounge without female accompaniment must use a separate entrance and sit upstairs, out of sight of families and female groups on ground floor. Also in the evening both floors are for families. Also promoters took care that they do not serve any pork products, alcohol and live music as per religious proscriptions. Then during the holy month of Ramadan, when people fast during the day, the restaurant is allowed to serve customers only in evening. These are some of the major or key actions taken by promoters of Java Lounge before and after the launch. It was reported that the business was successful from the start. Primarily because the entrepreneurs who started it suspected that Saudi Arabia was home to an affluent niche of potential consumers who wanted a restaurant offering certain Western style amenitiesand who spent the time and money to do the research necessary to find out if they were right. Also the owners of Java Lounge realized that, as more Saudis interact with foreigners and the country strives to economic growth, there will be changes in domestic cultural and social values. Right now, conditions are rewarding the foresight of the Java Lounges entrepreneurs, but they remain carefully attuned to a variety of cultural and social norms that still characterize life in Saudi Arabia.
Q.4 Prepare a comprehensive dossier (Do's & Donts) for guidelines to an MNE executive (US

based) deputed with family for 3 Years in Saudi Arabia. Explain your rationale for each guideline. Ans: In general, the Dos which the MNE executive family has to follow is that they have to follow the strict rules and regulations which are prevailing in the country. They have to adjust themselves to the Islamic rules and regulations. The female members of the family are to maintain strict discipline with respect to conversation with people and also with respect to their dress code and their language. In Saudi Arabia, unlike US, men and women are not treated equally and particularly the Saudi women are having different code of rules and regulations which they have to follow it strictly like wearing those robes, not talking with outside men, using other entrances in restaurants, malls etc. also not allowed to enter in specific field or professions etc. These rules and regulations might appear to awkward and odd as compared to their own value systems. But the stay in that country they are 4

expected to follow certain rules related to women like not talk with other women, also in Saudi Arabia there are no cinemas as to watch movies is not allowed. Also satellite dishes are not allowed by law but many houses do have them. They must also take care of their clothing and all as in Saudi Arabia clothing having faces of girls or having something bad written is considered as serious offence. Also gambling and such other activities are not allowed. Also as per their rules the punishment is given by cutting hands or heads of the people and that to in public and the passers are expected to see the execution of the punishments, and these crimes are such that they do not constitute offenses in other countries like US. For this MNE executive family it would be really a bad thing to follow that is to see the that execution as they must have never ever seen such a thing in their own country but they have to make up their mind and do that so as to follow the rules of the country. There are many such other rules like using separate entrance in restaurants, also in malls there are places which are exclusively for women so men cannot enter that etc. Now talking about the Donts which they must take care of as their rules are strict. The donts which they must take care of is the men must never stare or talk with a outside women, specifically the Saudi women without any adult male member between them as it is considered as an offense. Also they must respect their holy month of Ramadan in which Saudis keep fast during the day and they mostly work only at night and thus this executive and his or her family must see to it that they also shift their working hours during that time. Also it is seen normally that Saudis like to spend time in idle chitchat even in an official meetings and also they prefer talking to personal acquaintances to get down to business, which is quite opposite to US style as in US people directly come down to the point and they do not like to spend time in chitchat as they think time is money. Thus the MNE executive family must accept this ideology of Saudis and adjust themselves to it else it can cause problems for them. Also in Saudi Arabia there are no interests paid by banks and also no accident insurance is provided which is also quite opposite to US style. Thus these are some dos and donts which the MNE executive family must follow and stick to it as they are deputed to that country for 3 years and thus must try and get adjusted to this scenario which is quite different to the lifestyle which they were living in US.