Introduction:
In this newspaper we will discuss the restaurant Industry in Saudi Arabia which is growing faster than anywhere else in the region; it is growing at a rate that is exceeding its infrastructure wwith different range of prices and classes, starting form as low as $1. 00 USD and going up to $75. 00 USD if you're into fancy restaurants.
The restaurant industry is very divers and large including: cafes/pubs, full-service restaurants, fast food, home delivery and streets stalls, all sorts of restaurants have a variety of food specialization from cultural, international, and local.
There are also three main types of buyers: self-employed owners, international franchise, and local restaurant chains.
A restaurant chain is a couple of related restaurants, typically with the same name in various locations either under shared corporate possession e. g. Al-Baik and Herfy. Typically, the restaurants in a chain are built to a typical format and give you a standard menu.
A franchise is the right granted to an individual or group to advertise a company's goods or services in just a certain territory or location. A few examples of today's popular franchises in Saudi Arabia are McDonald's, Subway, and Domino's Pizza.
In order to analyze the attractiveness of the restaurant Industry in Saudi Arabia we will employ three different analytical tools, Porter five forces, analysis of the macro market environment known as (PESTLE Analysis), and SWOT evaluation. Predicated on our research we will offer you an advice to any new organization considering entering the restaurant industry in Saudi Arabia.
PESTLE Analysis
The effect of the Saudi politics on the restaurant industry
Saudi Arabia is ruled by the category of Al Saud who because the establishment of their kingdom declared that it's ruled by the Islamic rules. The Al Saud family also affirmed they are committed to supporting the economic expansion and be part of the developed countries. This goal is very challenging to accomplish because fundamentalist Muslims refuse the idea of globalization, this lay a moderate politics risk on the routine. Alternatively, this politics situation impacts the restaurant industry favorably because the restaurant industry remains the major uncontested method of entertainment among Saudis. Especially, for legal reasons, all restaurants are required to have single-males section segregated from the family section to adhere to the traditions and spiritual requirements.
Moreover, The Kingdom of Saudi Arabia is perceived as the leader of the Muslim world, since it is the home town of Makah; which Muslims from all over the world must visit at least once in their life to complete the fifth pillar of their faith. This makes Saudi Arabia is suffering from a pressure in its international associations mainly after the event of 9\11 because a few of the european countries are retaining the kingdom partly accountable for 9/11.
This politics situation is one of the main power of the restaurant industry in Saudi; with no cinemas or night clubs, eating out becomes the main source of entertainment for most of the population. There can be an desire for food for new restaurants that exceeds another region on the globe.
The aftereffect of the Saudi laws and Rules on the restaurant industry
The recent ruler of the Saudi Arabia, ruler Abdullah, is well known internally and internationally for his work to deal with terrorism and his large amount of public shelling out for reform programs have helped the united states to overcome almost all of its economic obstructions.
The kingdom's major step toward reform was the application form for regular membership of the World Trade Firm (WTO) and making steady legal changes to meet with its requirements, but still there may be mistrust from the Privet sectors toward the government, due to unnecessary bureaucratic practices and inappropriate laws that have emerged as difficult for the competitive market. Some areas are over controlled while others are under regulated. It requires almost half a year to register a business, and the company must provide a proof that it has substantial amount of cash to invest, no less than $10, 000.
However, the regulatory changes manufactured in recent years appear to have been of most beneficiaries to people Saudi companies which would like to expand through alliances with international investors. Nevertheless, the law requires foreign investors to have a Saudi partner and the Saudi spouse, individual or company, will have nearly all control over the business.
Over all, the legal process is highly complex and financially dangerous whether you are opening a tiny business or a significant enterprise. The government should amend these procedures to encourage international investments.
The ramifications of Saudi monetary on the restaurant industry
The Kingdom is experiencing accelerated growth scheduled to recent oil price spikes. The positive effect has been a surge in per capita GDP from roughly $8100 (1999) to $9575, or 18%, by 2005. Combine this with the fact that the Kingdom has one of the world's fastest growing populations (3. 5% per season) and you are confronted with an increasing market with good throw-away income levels.
AC Nielsen research reviews that the Saudi market is likely to develop 8. 7% this year, mainly fuelled by the high olive oil prices as well as strong private sector growth Saudi remains the greatest market in the whole Gulf. Many view Dubai as the display but Saudi shows to be the sales room and cash generator.
Due to idea that Saudi Arabia is a third world country, it is determined by imported goods and technology, the government commitments to the financial expansion creates job opportunities for professional trained foreigners and depend on them to satisfy the country's ambitious development strategies. Relating to HSBC Lender Saudi Arabia is categorised as the next in the prosperity of professional trained foreigners. Saudi Arabia is positioned twenty-two among other countries in the tourism sector.
Moreover, Saudi Arabia hosts over five million pilgrims annually from around the globe arriving for Hajj and Ummrah. Hajj is one of the five pillars of Islam which all Muslims must perform at least once in their life. The restaurant industry is one of the major Beneficiaries from such advantages.
Therefore, the federal government has been actively considering to expand what is thought to be billions of us dollars worthwhile of income in the tourism sector by getting international travelers to the Kingdom's ancient sites, in the mid-2008, a package deal of new laid back visa rules were released allowing many teams from Europe to visit the Kingdom with an organization tourist visa, which years before was unheard of. This policy has created a new segment for the Saudi restaurant industry.
Also, the large number of foreigners, approaching as staff or as vacationer and pilgrims, with the ethnic background are considered the back again bone for the restaurant industry.
The effect the social characteristics on the restaurant industry
Tradition and faith encourage Muslims to be hospitable and sociable. Inviting guests and friends to banquet in their home is typical in Saudi Arabia.
In Saudi Arabia Segregation between contrary gender exist generally in most sectors of community eservices, schools, universities, finance institutions, this segregation unlocked job opportunities for large numbers of Saudi females. Within the last couple of years it became much easier to entertain friends and family to a restaurant for the occupied working females or have even the restaurant food and personnel to amuse them at home.
Dining out became a habit among all sociable classes in the Kingdom with having less other entertainment locations due to religious issues. Therefore the trend of eating dinner out is constantly growing among them.
This social attribute will have a blooming and flourishing effect on the restaurant industry in Saudi Arabia where the key entertainment is certainly going out restaurant.
Perhaps the most pronounced feature of the demography is its young human population where more the 59% are under 24 years. And part of the Saudi federal or reform is to build up its workforce; to do this goal the government sends over one hundred thousand young students to peruse their advanced schooling in highly developed countries each year. These many young people live abroad for almost five to seven years comes home with food and restaurant likes that they adopted during their scholarship or grant. This opened the entranceway widely for international franchise in Saudi Arabia A number of the franchises that are currently present in Saudi Arabia, McDonalds, Hardee's, Burger King, Popeye, Chilies, TGI, Fuddruckers, Pizza Hut among many others and are extremely popular among this young inhabitants along with overseas workforce, visitor, and pilgrims.
The aftereffect of technology and the surroundings of the restaurant industry
The previous of the two macro marketing environment pushes are the technical and environmentally friendly:
In Saudi Arabia Technology in the restaurant industry is not limited to basic appliances for the kitchen and tools. However, one may not expect some intricate equipments are being used in the restaurant industry. Many restaurants are at the forefront in regards to credit card handling and point-of-sale technology, producing new ways to provide their customers and improve the overall capability of the dining experience. Of course, restaurants chains and franchise are the key benefactors of this development in communication
In Saudi Arabia there is no significant consciousness from the federal government or almost all of the population to the environmental issues. All of the restaurants that uses recycle paper or renewable energy are largely international franchise making use of their Owen commercial policy as part of their responsibility
Porter's 5 Forces Analysis
Threat of New Entrants. The restaurant industry is easy and simple to enter quite simply anyone who can prepare food, with the minimize capital amount can get into the business. Barriers to get into this industry are mainly in the bureaucratic rules that might take time but this isn't considered a significant barrier.
Power of Suppliers. While there are plenty of food supplies, however they depend on imported material because Saudi Arabia is not an agricultural country. The transfer of food and foodstuffs are approximated to exceed $7 billion annually and the Kingdom remains the primary market in the region. Except for time frame and milk all the recycleables are imported. You will discover big amounts of suppliers and prices are controlled by the government. Only international food chains franchise might be obliged to buy its uncooked materials from a certain provider.
Power of Customers. The total amount of ability is shifting toward purchasers. With so many restaurants your competition is high. Customers are always looking to discover the best quality and price. Going to restaurant is not an essential; people are always prepared to try something new. With Variety of products to choose from, local, cultural, and western few with powerful competition lead potential buyers seeks lower prices and better services. Throw-away income levels and an expanding retail center culture are helping this growth
Availability of Substitutes. Substitutes for the restaurant industry in general include alternate form of entertainment like cinemas or night club. The available entertainment replacement is the shopping malls, where people will shop, or windows shopping. Most fast food chains are demonstrating positive progress and are ever before present in all the new shopping malls
Competitive Rivalry. Even though there are no characters revealing how big is this lucrative market, a high industry progress rate is intensifying the competitive rivalry the occurrence of so many available substitutes are an especially challenging situation for some firms
SWOT: Strengths - Weaknesses - Opportunities - Threats
The Saudi restaurant industry is fragile in economies of size and labor production. Its durability is the ability to catch the attention of huge capital and labor with it openness to the earth market. The restaurant industry is showing significant growth, on the other hands, this wide open market has intensified an open up competition. The diversified culture of Saudi Arabia is the main element to exploit 'Economies of range'. Also, exploiting the economies of scale is also an opportunity.
The consumer preference for differentiated and healthy products is also another chance to exploit in boosting the economies of opportunity. Although, the expected low population progress in the foreseeable future is actually a major danger as it could decrease the quantity of demand in conjunction with the increase in the retail string the significant upsurge in small homeowners and working women will generate new opportunities for the restaurant industry.
Conclusion and suggestion:
In this assignment we carried out an research of the restaurant industry competitiveness in Saudi Arabia by using three different analytical tools, PESTLE Research, Porter Five Causes, and SWOT Evaluation. Based on our analysis we concluded with the following findings and tips to any new organization considering coming into the restaurant industry in Saudi Arabia.
The durability of the restaurant industry sits on its ability to entice huge capital and labor with it openness to the entire world market. The restaurant industry is demonstrating significant progress faster than anywhere in the world.
Many factors have contributed to this fast progress as such as the political, inexpensive, and low labor market and other socio-cultural factors.
The inexpensive and political view for restaurant industry in Saudi Arabia is very motivating, government shows determination and support to financial progress which is shown in its double-digit upsurge in government expenses on many aspects that are related to the restaurant business.
Furthermore, currently, the federal government economic plan stresses the conditioning the growing private sector business opportunities with focus on increasing the countrywide and foreign ventures as open public spending has increased by 15. 8% the federal government has increased the cover new jobs by 36%.
One of the very most appealing aspects for the restaurant industry is the cultural changes in Saudi Arabia. For example, the role of females in the interpersonal and financial life is considerably changing as women are now allowed to enter in the work pressure and also have huge impact on the purchasing electricity and certainly a change in women's lifestyle that is advantageous to the restaurant industry.
On the other side, the legal process in Saudi is highly complex and financially high-risk whether you are beginning a little business or a significant enterprise. The federal government should amend these processes to encourage further overseas purchases. Also, the Saudi restaurant industry is vulnerable in economies of scale and labor output.
Based on the above findings, we strongly suggest and encourage any organization to enter in the Saudi market keeping in mind the following factors:
The restaurant industry is highly competitive in conditions of price, service, location, and food quality and it is afflicted by changes in consumer fads, economic conditions, demographics, traffic patterns, and concerns about the nutritional content of foods.
shifting dietary preferences among consumers and only alternative foods can start the entrances for area of interest market
The expansion of the restaurant industry is expected to generally stay the same over the next few years and it could be considered a blue ocean.
The restaurant industry is influenced greatly by globalization and it'll continue to be.
