HX05-INB10002-International Business Operations

Assignment 3 - Final AssignmentA Brief to CEO on

proposed project

NGUYEN BAO -103792025

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Abstract

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Introduction

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Legal, economic, political & cultural environment
1. Saudi Arabia

In 2021, analysts predicted that the fragrance market in Saudi Arabia will be worth $2,049.7 million, with
a CAGR of 6.1% between that year and 2030. The growing fitness industry is fueling the market, along
with the growing awareness of the importance of personal cleanliness and grooming. Cosmetics and
perfumes have a significant customer base in Saudi Arabia, making it a key market in the Middle East (P
& S Intelligence, 2022). The largest portion of the Saudi Arabian fragrance market is currently held by
the western part of the country, and this trend is expected to continue soon. Sales of fragrances are
increasing because of the increased urbanization and increase in the population's disposable income in
this region of the kingdom (Plus Company Update, 2022). According to the report of Plus Company
Update, the market's most powerful drivers are: firstly, the need to seem good in front of one's peers is
on the rise in the kingdom as a result of rising disposable income, a larger labour force, and more
individuals attending social events. Fragrances are becoming increasingly popular since they help many
individuals feel better about themselves just by being around them. Secondly, the growing fitness
industry in Saudi Arabia is also fueling growth in the perfume industry there. Gym memberships are on
the rise as people become more health-conscious. As a result, people are increasingly turning to
perfumes to cover up the unpleasant body odour that develops after a strenuous workout.

( Image source: P&S Intelligence, 2022)

In addition, Internet/E-commerce environment is one of the main factors contributing to the awareness
about perfume products among Arabian. Curty and Zang (2013) and Wang (2019) believe that social
commerce's explosive growth in recent years is indicative of the market's growing appreciation for the
advantages it offers over traditional forms of conducting business (as cited in Liu, Li, Dai & Guo, 2021).
Social commerce, as opposed to traditional e-commerce, focuses on commercial operations facilitated
by social media, and exhibits several novel technical traits, such as interactivity, stickiness,
personalization, and sociability. As a result, these traits encourage interaction and cooperation between
clients and businesses, particularly between clients, which influences client behavior.

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The potential of the fragrance industry can be clearly seen when compared to other countries in the
region, Saudi Arabia has the most Instagram, Facebook, Snapchat, and Twitter users. The market for
online sales of cosmetics and fragrances in Saudi Arabia is expected to grow at a CAGR of 9.72%
between 2016 and 2020 (Modor Intelligence, 2023). The Saudi e-commerce website Golden Scent has
launched an "Augmented Reality" feature called Virtual Try-On, which is available on the platform's
Android and iPhone app. With more people using the web comes more exposure to and demand for
cosmetics and perfumes sold online, which bodes well for the industry as a whole.

Kozubikova, Kotaskova, Dvorsky and Kljucnikov (2019, p. 62) argue that both the incentive to establish a
new business and the nature of the business itself are influenced by the business climate within a
country. The political (including legislative) factors and economic conditions in each country play a
crucial role. There are numerous ways in which a company's operations might be affected by politics. It
could be a potential source of disaster ( PESTLEANALYSIS CONTRIBUTOR, 2015). According to our
perspective, the two most prominent factors might affect foreign firms trying to enter international
market, or particularly 'Fragrance Ambrosia', are corruption level and tax policy.

It is important to reference the Corruption Perceptions Index (CPI) when discussing public opinion about
the state and specialized authorities' roles in liaising enterprise and government (Kozubikova, Kotaskova,
Dvorsky & Kljucnikov, 2019, p. 63). Corruption is defined as the "misuse of public (government) or
private (firms) officeholders' authority or power for private gain and benefit, financial or otherwise," and
includes acts such as bribery, fraud, financial crime, abuse, falsification, favouritism, nepotism,
manipulation, and so on (Bahoo, Alon & Paltrinieri, 2020, p. 2). There are typically three instances in
which a multi-national company engages in corrupt practices in a host country, but the instance that
mostly related to the provided case is a corporation is forced to pay bribes to start or finish a business
deal. Some businesses can thrive and expand because they bribe government officials to relax
regulations. These businesses thrive and expand not because of the value they provide to customers.
The “Corruption Perceptions Index” in Saudi Arabia showed 51/100 points in 2022 (Trading Economics,
2023). In comparison with other nations, this is considered as an average number. Therefore, foreign
firms, especially perfume brands are able enter this market, however, might counter some issues from
the host country.

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(Source: WorldData.info, 2023)