International Business Management

MGT402
Spring 2018-2019

Group Project

Group members

Submitted to: Dr. Syed Zamberi

INTERNATIONAL BUSINESS CASE 1

Table of Contents

Introduction ................................................................................................................................................... 2
Distinctive Features of doing business in UAE ............................................................................................ 5
Dubai: The Business Hub of the Middle East....................................................................................... 5
Economic conditions ............................................................................................................................... 6
Legal Framework .................................................................................................................................... 6
Advanced and well developed infrastructure ....................................................................................... 6
Human resource availability .................................................................................................................. 6
0% Taxes ................................................................................................................................................. 6
Import duty is very low .......................................................................................................................... 6
Trade agreements.................................................................................................................................... 6
Risk ............................................................................................................................................................... 7
Political risk ............................................................................................................................................. 7
Exchange rate risk .................................................................................................................................. 8
Intellectual property right risk .............................................................................................................. 8
Market risk .............................................................................................................................................. 8
Economic risk .......................................................................................................................................... 8
Market Entry Strategy ................................................................................................................................... 8
International Franchising for ITALFOOD FZC: ................................................................................ 9
Merger for ITALFOOD FZC: ............................................................................................................... 9
Marketing Strategy........................................................................................................................................ 9
Direct Marketing..................................................................................................................................... 9
Sales promotion ..................................................................................................................................... 10
Advertising............................................................................................................................................. 10
Price........................................................................................................................................................ 10
Conclusion .................................................................................................................................................. 10
References ................................................................................................................................................... 11
INTERNATIONAL BUSINESS CASE 2

Introduction
ITALFOOD FZC is a fresh cheese producing company operating in Italy; our team has
conducted an extensive market research showing rewarding business opportunities to expand our
operations UAE. Expansion to UAE market not only because of the dairy market in UAE is
growing tremendously as there is a rise in the consumption of packaged milk and cheese
products but because of the other factors we have included in this report. After a thorough
research on UAE market, the company has decided to produce and launch its cheese products
just according to Italian culture and technology by using fresh milk to provide clients with the
best quality cheese products without any preservatives. We have to decide further about what
strategy we have to use to expand our business in UAE. Our moto behind this expansion is to
target the right customers at right place to be a successful brand throughout the world.

Products

We are committed to fulfill our clients demand, working with them to develop market-leading
food products which can be enjoyed universally. We believe in providing our clients with high
quality products and excellent service. The Company has invested the main part of its capital in
Italian high technology machines, in order to provide best and real Italian mozzarella cheese
using milk from milk farms. The company aims to produce cheese according to Italian culture
and technology, using daily fresh local milk to provide clients with healthy and high quality
cheeses. Our main products include (Italfood products, n.d.)

 Fior di latte BRICK

It can be used in all the recipes. Use in sandwiches or in lasagna or for topping in pizzas
or in any other dishes. Rich in taste and this cheese product is having excellent melting
properties without releasing water.

 Fior di latte BRICK SMOKED

The ideal to be included in your recipes rich and healthier either you are making pizzas,
sandwiches, burgers or any other dishes. It’s a whole milk mozzarella cheese

 Fior di latte CUBED

Italfood mozzarella cubed again it is the most ideal product specially used in almost all
type of recipes. Whole milk Mozzarella is richer in taste and has excellent melting
properties thanks to its low moisture percentage.

 Fior di latte JULIENNE

It can be used in variety of dishes. Highly rich in taste and it’s having excellent nutrient
properties.

 Mozzarelline Fior di latte

INTERNATIONAL BUSINESS CASE 3

Our cheese product is best to be used in salads and appetizers due to its fresh and delicate
taste.it is naturally rich in calcium.

 Mozzarella buffalo
Our mozzarella buffalo is a fresh, soft, semi-elastic textured cheese. It is the most
common Italian cheese to be included mainly in salad’s, pasta’s, calzone’s, vegetables
and various side dishe but can also be used in lasagne and baked dishes.

 Burrata
“Burrata” means “buttered” in Italian. This cheese product is hand-formed and packaged
in water for an extended shelf life. It has sweet and milky flavour and a unique soft and
silky texture.

 Ricotta
It’s a very versatile cheese product can be cooked or freshly eat. People use to eat our
product as fresh or they create fantastic sweets, cakes or salted dishes.

 Butter
Butter is mainly used by people in breakfasts or in many dishes, it is made with our best
ingredients. It has soft and creamy texture.
The company believes that the dairy products are considered to be most healthy ones not only in
UAE but all over the world. The unlimited variety of innovative dairy products like rich in
vitamins, low in calories, organic and lactose free are increasing demands for dairy products in
UAE market. As the awareness regarding healthy and balanced diet has been increased specially
among the youth has increased the demands for dairy products. The UAE dairy market is
growing tremendously as there is a rise in the consumption of packaged milk and cheese
products (UAE dairy products, 2017). After a thorough research in collaboration with our people
from UAE, we believe that we have enough skills to make it a successful business expansion by
offering best and healthy quality cheese products to satisfy the needs of the customers.

Market Resarch
Consumption of dairy products and future growth opportunities are being affected by
changes in demographic. Dairy products are being in used since historical time. The rate of
consumption of dairy products among GCC countries grew up to 4% and in UAE up to 15%
in 1990s (Bashir, 2011).
Doing business in UAE:
UAE has the open market with sizable trade surplus and high capita per income to attract
foreign investor they are offering free trade zones and zero taxes (Global Country report,
2013). The tradition of consumption, rapid population growth of migrants and health benefits
associated with dairy products are the factors for increasing its rate of consumption in the
market. A healthy diet and life style demands a healthy food contain most of the elements of
dairy products has become a priority of most of the people in the country. Many super marts
INTERNATIONAL BUSINESS CASE 4

are presenting their own cheese product with private labeling in order to attract more
customers through low prices. Branded cheese and local packaged cheese are most popular
among nationals due to its lower price. Dairy products are considered the most important part
of UAE traditional and other foods present in the country. A huge variety of dairy products
are available in the market and these include products that are made from camel, goat, cow
or sheep milk. The consumption habit varies country to country so a frequent change in the
consumption of dairy product has been developed by the number of migrants to UAE and
they have brought diversity in the selection of products and services ranging from national
milk products to international cheese brands. Market for dairy products in UAE grew rapidly
and projected to remain in future and market for cheese products rose by 10.8% last year.
People in UAE consider the consumption of dairy products as their primary food. Western
culture has a great influence that has brought many products to be launched in the market,
cheese products are one of them. Apart from the long tradition of consumption of drinking
milk and yoghurts, the market for Cheese has been reached to maturity level and maintained
well (The food and beverage, 2018).
Benefits of doing business in UAE
1. There is no restriction on currencies
2. Providing a flexibility to drive company from anywhere in UAE
3. A wide range of license types and business activities permitted
4. A profitable land “Dubai” has its market open to doing business within Dubai and
globally
5. No more company tax to pay.
6. No income taxes to be paid
7. Ability to repatriate 100% of capital and profits
8. Work permits are easily available
9. Easy and hassle-free legal procedures for licensing and registration (Advantages of,
2016).

Competitor analysis
Local and global competition in the industry pushes businesses to do well. The competition
among the organizations is typically based on quality, pricing and reputation. A strong
competition would be faced by the company in launching cheese product because of potential
local and international brands among which Al-marai is the well-known market leader in
manufacturing variety of cheese products (Dairy in UAE, 2018).
Imported products have putted a lot of pressure on local producer. Two key factors to face the
global or local competition in the market are quality and price. Consumers who are quality
focused won’t entertain low quality dairy products but those who are price focused do
compromise with product quality and would prefer low priced products according to budget,
taste, traditional consumption.
INTERNATIONAL BUSINESS CASE 5

Name of the Brand Description Type of Competitors Advantage/Disadvantage

French perfumes that Direct Competitor Biggest challenge for us

provide both for men due to having extensive

Al-Rawabi and women. range of cheese products

available and a market
of UAE dairy industry
Al-Marai Huge variety of Direct Competitor Again a strong
cheese products competitor deals in all
available to cater the variety of cheese
market products and having
excellent reputation in
the market.
May be challenging due
Almost having all Direct Competitor to having mostly Italian

Italian dairy products cheese variety tradition cheese

availability

Distinctive Features of doing business in UAE

Dubai: The Business Hub of the Middle East

Dubai has been changed itself from a local trading community into one of the most inspirational,
exciting and successful cities in the world even in less than 40 years. It has become the most
attractive destination not only for tourists but for businesses.

Dubai’s ideal location gives easy access to billions of consumers, from a unique centralized time
zone that combines East and West business hours. It is considered to be the most perfect or
attractive hub for the region’s trade – one of the most profit-making in the world.
INTERNATIONAL BUSINESS CASE 6

Economic conditions
UAE government has decided to diversify its economy so they would not only dependent on oil
and gas sector. Due to which UAE has faced stable inflation rate and impressive growth in the
rates of GDP. According to the UAE Ministry of Foreign Trade, 71% of the UAE’s total GDP
depends on non-oil sectors. The authorities plan to lower the oil sector’s contribution to GDP to
20% by 2025 by increasing the services and industry sectors. The UAE is considered to have a
stable economy in Middle East and not directly affected by any global crises at the moment
(Economic conditions, n.d.).

Legal Framework
Foreign investment is being encouraged in UAE due to continuous improvement in legal
investments rules and regulations includes the introduction of foreign ownership of land and
stocks – Dubai is now the first emirate in UAE to open its own property market to foreign
ownership.

Advanced and well developed infrastructure

The infrastructure of UAE is extremely advanced and it is considered to be a king of having
world class facilities available that have shown positive growth in the economy and enabled the
development of business.

Human resource availability

Work visas are easily available due to its liberal labor policy so companies have the facility to
recruit employees from anywhere in the world.

0% Taxes
In UAE, companies are enjoying the best tax framework in the work as they have to pay 0% in
terms of corporate tax. There is no tax to be paid to Government by individuals from their
personal incomes

Import duty is very low

The charges made on importing products to UAE are very low whereas the products imported to
be consumed in free zone imply zero import duty charges.

Trade agreements
UAE is enjoying free duty charges on imports and exports between all the GCC including KSA,
Kuwait, Bahrain, Oman, and Qatar. The negotiation regarding free duty on trading is being in
process with other countries as well like Pakistan, EU, and China etc (7 Reasons, 2013)
INTERNATIONAL BUSINESS CASE 7

Situational Analysis

 Internal Factors: As depicted through market research, the competition for cheese
products in UAE dairy market is very high and we have identified the potential market
for ITALFOOD FZC shown the demand for our cheese products in this region. Also,
availability of work permits due to liberal labor policies in UAE can be a driving
component for our strategy that would benefit the company to hire best force from
anywhere in the world.
 External Factors: According to the market research, external factors of UAE including
taxes and political environment are very positive. This is already shown, in UAE, the
political environment is stable with 0% taxes.

Risk
International expansion or investment is the best way for growth and diversification of
company’s portfolio but business expansion in international market is more risky than domestic
investment that varies country to country. Political risk among all is considered to be a most
important factor affecting international business as in many countries political condition is not
stable influencing the foreign investments badly (Christy, 2018).
UAE is based on seven emirates: Abu Dhabi, Sharjah, Dubai, Ras Al Khaimah, Ajman, Fujairah,
and Umm al-Qaiwain. Every state is enjoying its self-independence under its own Emir. Among
all Abu dhabi is the largest state and considered to be a political capital of UAE having more
than 90% oil reserves (Overseas business risk, 2017).
Risk assessment is considered to be a most important part of business plan either for continuity
of business operations or expanding business in local or international market. The purpose of risk
management is not to eliminate risk but to minimize it for survival in the industry (Spacey,
2015). Risks can restrict the business operation and limit them to achieve their target. Foreign
investors must analyze the country risks before starting operations in UAE. The higher the
country risk the lower the foreign investments (Hamdan, 2012).

Political risk
Money is considered to be a political tool. Political risk means there is a loss in terms of money
due to unstable political and economic conditions. There are two political risks that involved in
international business are macro and micro risks. Micro risks are those impacting only certain
industries and minor in nature whereas macro risks are major concern for international business.
Countries having currency devaluation and border issues usually face macro risks (Grishko,
2018).
Political risk is low when it comes to do business in UAE. The term “Heaven” is being used for
investments in UAE due to its political stability and the country is expected to be remain same in
future and will continue to attract foreign investments (Major macroeconomic, n.d).
INTERNATIONAL BUSINESS CASE 8

Exchange rate risk

Exchange rate risk is considered to be very important factor in international business as negative
exchange rate fluctuations between the currencies of countries where the individual resides and
where they operate their business have significant effect on profit margins (Exchange rate risk,
n.d.).
Dirham represents the currency of UAE that is remained relatively constant since 1980s and it is
unreservedly exchangeable (Hamdan, 2012).

Intellectual property right risk

UAE is the leader in protecting Intellectual property right (PR), stakeholders are being ensured
that UAE will fight more for piracy to deal with the problems of transshipping of counterfeit
goods (Hamdan, 2012).

Market risk
Market risk refers to a risk of losing the value of an investment due to changes in market factors.
Sometimes it is referred as systematic risk due to its relevance to the factors like economic
recession; impact the whole market (Market risk, n.d.). Trade barriers in UAE are relatively low
than other countries. More entrepreneurs are being attracted by the country due to favorable
climate of business, its open market policies and political stability (Hamdan, 2012).

Economic risk
Economic risk is the risk of investment loss due to macroeconomic factors like Government rules
and regulations, political conditions and exchange rate of foreign country (Economic risk, n.d.).
UAE is strongly dependent on its oil sector as its contributing more in economy. High oil prices
are the biggest support for the country. Except the construction sector almost all non-oil sectors
are contributing well to boost economy. 70% of GDP contribution is made by Dubai which is
showing stability. The risk of operating business in UAE is moderate to low (Hamdan, 2012).

Market Entry Strategy

A successful international expansion is a result of choosing best market entry strategy. Market
research must be conducted before entering a new market would help to analyze the size, the
traditional consumption trends, risks that will affect the business apart from consumer needs and
demands and legal laws in the dairy industry of UAE. The consumption of dairy products is
considered to be healthy by its population. With rapid increase in population growth, the stability
of economy and tourist inflow, the dairy market is set to have smooth growth. Risks associate
with the business and the stability and openness of the economy due to political stability and
cultural tolerance is showing the positive sign to expand the business in the country (Global
market entry, n.d).
INTERNATIONAL BUSINESS CASE 9

International Franchising for ITALFOOD FZC:

As the company is a well-known Italy brand and we have studied there is a rapid increase in the
consumption of cheese products so we believe that there are potential market opportunities
available for us. After successful and positive market research we have made our decision to
expand through decided strategy. Geographical expansion is our strategy for business growth.
International Franchising is the decided strategy to enter to new market.

Keeping these factors in mind while choosing franchising for business expansion

1- Lack of control: brand image can be damage through lack of control as ITALFOOD is a
well-known Italian company with a reputation of having fresh quality cheese products. To
overcome the risk the company has decided to import all Italian ingredients from the same
vendors we used to purchase in Italy.

2- Resources availability: excellent resources are available at UAE market too but as decided to
import all the material from Italy it will not harm the company more but hiring unexperienced
labor or outside the UAE will increase labor cost for the company

3- Ownership advantage: the sole ownership will remain maintained through franchising will
help in maintaining quality of our products.

4- Location advantages: UAE has considered the best place where dairy industry is rapid
increasing will give boom to our business. In addition, number of expats is increasing due to
which the consumption of cheese is also rapidly increasing in the country

Merger for ITALFOOD FZC:

As we have introduced our business in the market through the international franchising strategy,
we will then expand through merging with Al-Bustan farm group, one of the largest farms that
provide the finest quality of fresh products to the hyper and super markets in UAE. It is a
multinational, a well-known and largest group which will help us to expand and reduce the risks.

Marketing Strategy
Direct Marketing
It’s a technology based world. Todays, everyone is socially active on social media websites like
Facebook, Instagram and twitter etc. our strategy is not only to promote through social media
websites but also make easier for consumers to order our products online without wasting their
time.
INTERNATIONAL BUSINESS CASE 10

Sales promotion
The best way to increase our sales is to give discounts on the products so the company will do
the same by putting 20% discount on all cheese products for limited time. Not only this, the
company will provide free samples of our products door to door. Another strategy would be the
deal of our products like one cheese product will absolutely free on the purchase of two or more
products.

Advertising
Advertisement would be done by the company through proper channels like TV, Radio,
pamphlets etc.

Price
Due to tough competition in the newly entered market, the prices must be low at first as compare
to other international brands. Our prices will start from a minimum of 5.00 AED.

Conclusion
Geographical expansion to UAE market is the ideal one because of its stable economic and
political conditions, excellent level of competition, low inflation, zero tax rates that all are
indicated a positive outlook to start up a business in the country. The market for cheese products
in UAE is highly demanding and favorable where a lot of international and western products
available to fulfill consumer demands.

Considering all the factors discussed thoroughly in this report, we concluded to expand our
business operations to UAE with the strategy of international franchising and then join hands by
merging with Al-Bustan farms group to increase our market share and reduce risk.

.
INTERNATIONAL BUSINESS CASE 11

References
Italfood products (n.d.). Retrieved from http://www.italfoodcheese.com/products-3/

Advantages of starting a business in UAE. (2016). Retrieved from

https://www.commitbiz.com/blog/advantages-starting-business-uae

7 Reasons of doing business in UAE. (2013). Retrieved from

https://cbbcglobal.wordpress.com/2013/04/25/7-reasons-for-doing-business-in-uae/

Bashir,A,K. (2011). Consumption of dairy products in the UAE: A comparison of nationals and
expatriates. Journal of the Saudi Society of Agricultural Sciences, 121-125.
doi:10.1016/j.jssas.2011.04.002

Dairy in the United Arab Emirates. (2018). Retrieved from https://www.euromonitor.com/dairy-

in-the-united-arab-emirates/report

Hamdan,Y. (2012). The UAE country Risk Analysis. European journal of business and
management, 4(18). Retrieved from

Dairy Farm International Holdings Ld PESTEL & Environment Analysis. (n.d.). Retrieved from
http://fernfortuniversity.com/term-papers/pestel/nyse4/6751-dairy-farm-international-holdings-
l.php
Global market entry strategies. (n.d.) retrieved from
https://nscpolteksby.ac.id/ebook/files/Ebook/Business%20Administration/Global%20Marketing
%20Management%205th%20edition%20(2010)/9%20-
%20GLOBAL%20MARKET%20ENTRY%20STRATEGIES.pdf

UAE dairy products market analysis 2017-2018. (2017). Retrieved from

https://www.techsciresearch.com/blog/uae-dairy-products-market-analysis-2017-18/64.html

Christy, J. (2018). An international investor guide to political risk. Retrieved from

https://www.thebalance.com/understanding-and-managing-political-risk-1979066

Overseas business risk-United Arab Emirates. (2017). Retrieved from

https://www.gov.uk/government/publications/overseas-business-risk-united-arab-
emirates/overseas-business-risk-united-arab-emirates.

Dairy market in the United Arab Emirates: Analysis of Dairy Products, with Consumption,
Production, Trade & Retail Strategies & Trends (2016 - 2021). (n.d.). Retrueved from
INTERNATIONAL BUSINESS CASE 12

https://www.mordorintelligence.com/industry-reports/dairy-market-in-the-united-arab-emirates-
industry

Grishko, E. (2018). 4 ways to identify and mitigate the political risks of global business.
Retrieved from http://www.tradeready.ca/2018/topics/international-trade-finance/4-ways-
mitigate-political-risks/

Exchange rate risk. (n.d.) Retrieved from https://www.kantox.com/en/glossary/exchange-rate-

risk/

Market risk. (n.d.). Retrieved from https://www.syndicateroom.com/learn/glossary/market-risk

Economic risk. (n.d.). Retrieved from

https://www.readyratios.com/reference/analysis/economic_risk.html

Economic conditions. ( n.d.). Retrieved from http://fae.um.dk/en/the-trade-council/the-united-

arab-emirates-as-market/key-economic-indicators/