Factors that Influence pricing in the middle east markets Essay
Consumer Behavior Consumer behaviour in Islamic states has some limitations when compared to Western countries. For Muslims, the goal in life and work is always associated with traditions and religion. These practices are in turn, reflected in many aspects of business and the consumption patterns of consumers in the Middle East.
Kavoossi (2000) outlined the Consumer behavior in an Islamic society based on four general principles: the belief in the last day (Akhira); the Islamic concept of success; the Islamic concept of wealth (Kavoossi, 1988); and the moral dimensions of consumer behavior, such as limitations placed on consumption, or principles of caring for others ( Kahf, 1981) (qtd in Kavoossi 2000,p. 26). Shariah also sets the protocol for consumer behaviour in Islamic societies. Some important moral dimensions of consumer behavior include “defining Halal (lawful), Haram (unlawful), and Makrough (conditional) articles” (Kavoossi 2000,p.29).
Given the restrictions, the investor should first determine whether the business or goods that he plans to establish in the Middle East conforms to the cultural and traditional constructs. In the study of Ford, Nonis and Hudson (2005), it revealed that most Middle East countries were group oriented. The collective was far more important than individual opinions. Social interaction are
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Lebanese consumers were ““followers” and support common welfare, protect the interests of their members and expect respect and loyalty in return”. (p. 43). Competition Prices in Bahrain could also be influenced by the presence of other similar American fastfood chains operating in the area together with Dairy Queen’s restaurant. It should also be reasonably priced for the type of products offered. Both local and international fast food chains compete for Bahraini customers both local and expatriates. Bahrain This Month (2007) listed several fast food chains that have approximately the same price ranges (below 5 BD).
(See Table 2) The presence of many American-based fast food chains explained the Bahraini investors willingness to invest in American brands. In 2005, there were over 40 U. S. franchised restaurants that operated in Bahrain. Most franchise owners financed the business through bank loans, personal or family resources (p. 24) Table 2 – Selected Fast Food Chains in Bahrain (Bahrain This Month 2007) Others Pricing is also influenced by other factors such as shipping and importation costs. Although US products face stiff competition from Europe and Asia, the exchange rate shifts in European and Asian currencies counterbalance the costs.
Usually, importers impose a mark-up of 10-15 percent while retail food prices are usually 25-30 percent above their import prices (US Foreign Commercial Service and US Department of State 2004, p. 39). The distance from US mainland to Bahrain also required on the average four to five weeks’ travel from US ports to Arabian Gulf ports (AgExporter 1996). Power, water, communication and gas are subsidized by the state and therefore cheaper than usual. In the United States, Dairy Queen had ceased using discount prices on its products. Instead it focused on introducing new products to the menu to whet up the appetites of their customers.
It not only attracted new customers, it also helped build their brand (Garber 2004, p. 4). Analyzing Business Processes SWOT Analysis SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis technique is often used as a key tool in strategic planning of business processes. This analysis tool is employed to examine the areas where the organization can be improved and enhanced. Table 1 lists some of the possible areas for consideration. (See Table 3) Table 3. SWOT Analysis (Possible areas for consideration) Strengths 1. Human Resource The company’s value is in its human resource. (i. e. strong technical staff).
2. Organization Competence of managers is reviewed. 3. Budget Are there available funds for upgrade? 4. Project Management Cycle Product Life-Cycle; end-of-life cycle 5. Vision and Mission Company initiative to implement improvements. Weaknesses 1. Human Resource Attitudes towards change 2. Organization Monitoring and evaluation tools Scheduling Project tracking and review 3. Budget Costs of Projects are questionable 4. Project Management Priority settings 5. Customer service Opportunities 1. Business reputation clearly established 2. Strong marketing strategy – 3. Customer base 4. Strong financial foundations.
5. Technology enabled Threats 1. Economic down-turn 2. Rapid technological development might overtake their technological infrastructure improvement 3. Legacy system migration might be too costly. 4. More competitors. Using the SWOT analysis can show the current state of the company and the initiated efforts to improve their operations. The lack of coherent project implementation and improvement plans weakens the company’s position. Given that the customers are the ones suggesting to the company that they improve their business processes, the company must heed the advice of their customers.
The customers are quite concerned about incurred costs. Porter’s Five Forces Michael Porter proposed a model to evaluate a company’s opportunity within the industry. The five forces that shape competition within an industry are: “(1) the risk of entry by potential competitors, (2) the intensity of rivalry among established companies within an industry, (3) the bargaining power of buyers, (4) the bargaining power of suppliers, and (5) the closeness of substitutes to an industry’s products” (Hill & Jones 2004, p.
40). Porter’s five forces analysis is used to evaluate the competitive advantage of the company. Porter’s five forces would help IDQ identify its competitors outside the United States. With more and more foreign fast food businesses opening in Bahrain, it is important for the company to carefully size up its competitors.