The government of the country is making significant efforts in building strong political and economic ties with other countries. The country is supporting the international community for the attainment of well-being and safety of people and has good relation with all countries almost. The political environment in the country for business is good, as the government has taken initiatives to diversify the economy at a higher level. In 2010, the government announced $130 billion monetary packages to spend until 2015 with the aim of boosting the private sector participation and foreign direct investment. The purpose of encouraging international trade is to meet the consumer goods’ demand of customers, as the local production abilities are not enough to meet the demand (Doronin, 2013). In term of financial development, the country comes at number 77 (Schwab, 2014).
The economy of the country is open, and it is expected that it will grow much faster as compared to the global economy. Even, it is estimated that the GDP will reach up to $201.3 billion until 2018 (Business Wire, 2013). Crude oil is the major source of income; if any vulnerability occurs in oils prices, it will pose a significant risk to the economy. However, it seems that the trend will remain stable. The GDP of the country is constantly improving (The World Bank Data, 2016). The economic development of the country is transacting from factor driven stage to efficiency driven stage. The country in the ranking of global competitiveness comes at number 40 out of 144 countries. The country in term of economic requirements comes at number 3 out of 144 and in infrastructure at number 66 (Schwab, 2014).
The social environment of the country is drastic, which is based on heredity and wealth. In Kuwait, a huge difference between classes exists that can be gauged easily by making a comparison of poor immigrants and wealthy Kuwaiti. People in Kuwait mostly go outside with families and having lunch and dinner is amongst the most favorite activities.
The internet users in Kuwait in 2015 were 3145559 with 78.7 percent penetration rate. However, the country had 1900000 Facebook users with 47.5 percent penetration rate (Internet World Statistics, 2016). The country has three international radio broadcast stations and 13 television broadcast stations with multiple satellite channels (CIA, 2016). In term of the technological efficiency, the country comes at number 74 (Schwab, 2014).
The climate of the country is very hot and recognized for the dryness. In summer, the temperature exceeds degree 50. The summer season with 50 degree starts from June and goes to the middle of August. However, from August to the mid of the September the temperature is more that 40 degrees and the level of humidity very high (Doronin, 2013).
According to the commercial law 68 of 1980 of the country, it is essential for foreign companies that they do business through local distributors or agents. The agent on the behalf of principle does all activities from purchasing to distribution as mentioned in the contract. However, for boosting the FDI, the government took several initiatives that include tax holidays equal to 10 years, duty import of equipment and land grants, ease in the entry of expatriate, repatriate profit right, ensuring compensation if any expropriation case happens, and protection of investment applications and property information. For having these facilities, businesses have to face some conditions from which the major one is the higher ratio of Kuwaiti employees in the organization. The law does not demand estate tax and does not obligate to disclose property matters. Some countries including the United States people do not need to acquire a visa prior to their entry they can take on arrival. The government does not allow people to work more than 8 hours a day. According to the law, employees can take 14 days leave per year and one day off in a week (Doronin, 2013).
Comparative risk, opportunity, and overall climate of Kuwait
As the oil is the major source of country’s income so in the case of oil price fluctuation the risk of economic vulnerability is high; however, it is expected that the prices of oil will remain stable for long. The country is not at innovation driven stage, which is an opportunity for the company. Because the company may not require investing more in technological advancement, due to which the investment will not be costly. However, the company with it technological advancements can secure the position of innovation leader and different itself from other organizations. The overall climate of the country for foreign direct investment is positive as the government has appropriate policies to encourage the FDI.
Comparative industry market potential and rationale of the country
The labor market efficiency is essential to enhance the competitiveness of the country. In Kuwait, the labor market efficiency is lower as compared to other countries and needed to be improved. For this purpose, the government is facilitating foreigners or foreign direct investments. This will offer the company with the benefit of financial support when setting up the operations in Kuwait (Schwab, 2014).
The company for meeting the local demands of countries hires local labor. This practice will benefit the company in Kuwait as it will gain tax holiday benefits along other several benefits. In term of goods market, the country is inefficient, which means the company will be able to gain the opportunity to satisfy the needs of the wider market in term of beverages, which is the amongst the major reasons to choose the country. The inefficient supply of goods to customers poses a huge potential for the country’s profitability. The climate of the country remains hot for the big time of the year; therefore, the chances of earnings are higher as the beverages are rapidly consumed in the warm season (Schwab, 2014).
The market size represents the number of sellers and buyers in the market. The country in term of market size comes at number 67, which means the company will not have to face tough competition, as the numbers of companies are few in the market (Mordor Intelligence, 2015). In case, if the production cost rise, the inability of the country to serve the goods’ needs of customers will allow the company to keep selling the products at an enhanced price. In global competitiveness index, the term of business environment the country comes at number 40, which means the country left the 104 countries behind in term of the good business environment. The overall business climate of the country is good for the Coca-Cola Company to make foreign direct investment in the country. The country highly developed economic environment, which means enhanced employment, and purchasing power that will contribute to increasing the sales of the company and, therefore, profitability. In term of the macroeconomic environment, the country comes at number 3 that represents the high growth opportunity for the company. It is expected that due to the infrastructural building and increased FDI, the economy of the country will grow further, and the growth is not limited to 2019. The overall analysis of the country reveals that the growth chances of the company in Kuwait are bright (Schwab, 2014).
Business Wire. (2013). Research and Markets: PESTLE Analysis of Kuwait 2013: The Government has Planned to Spend Huge Sums on Infrastructure by 2014. Retrieved February 9, 2016, from <http://www.businesswire.com/news/home/20131217005893/en/Research-Markets-PESTLE-Analysis-Kuwait-2013-Government>
Central intelligence agency. (2016). the world Factbook. Retrieved February 9, 2016, from < https://www.cia.gov/library/publications/the-world-factbook/geos/ku.html>
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Schwab, K. (2014). The global competitiveness report 2014-2015. Retrieved February 9, 2016, from < http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2014-15.pdf>
The World Bank Data. (2016). GDP, PPP (current international $). Retrieved February 9, 2016, from < http://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD>