Mr. Virgil McVicker
CEO of McVicker Aluminum
Dallas, TX, 78243
Prepared by
Mr. Michael S. Gordon
Dallas, TX, 78243
October 9, 2014
McVicker Aluminum, Inc.
555 Aluminum Way
Dallas, TX 78243
October 9, 2014
Mr. Virgil McVicker, CEO
McVicker Aluminum, Inc.
555 Aluminum Way
Dallas, TX 78243
Dear Mr. McVicker,
This document contains the report that you requested in September. I have provided pertinent information and made recommendations on the plan of action to expand McVicker Aluminum, Inc. to the Kingdom of Bahrain.
My analysis of the expansion into Bahrain covered four important areas that will help you decide whether or not McVicker Aluminum, Inc. should expand and build an aluminum plant in the Kingdom of Bahrain. I took an extensive look at the current political condition, the current economical condition, the current business condition, and the cultural aspects of working in a Muslim country. I strongly believe that McVicker Aluminum, Inc. can be a successful business in Bahrain.
I used several resources to create this report. The most helpful resources were the Bahrain Economic Quarterly June 2014, the book by Philip Dew, Bahrain's Business Environment, and Department of Defense Bahrain Country Handbook.
Thank you for choosing me to conduct the research into the Kingdom of Bahrain. If you have any further questions about the research or recommendations please contact me (michael.s.gordon.mil@mail.mil) and I will be happy to answer any questions referring to the possible expansion into Bahrain.
Sincerely,
Michael S. Gordon
Research Analyst
Aluminum Shining Bright
McVicker Aluminum, Inc. Expanding to Bahrain
Executive Summary
To continue growth and remain competitive on a global scale, McVicker Aluminum, Inc. should expand its business operations into the Kingdom of Bahrain. The country already has experience in the processing of aluminum and would provide a strong base for future expansion.
The research that I have done for this project indicates that this expansion will be profitable, primarily because the Kingdom of Bahrain’s economy is flourishing, especially outside of the oil market. The regulations and business structure is similar to those in the United States and in some ways it is even easier to incorporate.
To ensure a successful expansion, I recommend the following:
1. McVicker Aluminum, Inc. should establish its headquarters in Manama. * Purchase a building * Educate McVicker Aluminum employees on Bahrain culture and business practices
2. After one year McVicker Aluminum should determine the profitability of the expansion * Perform a customer satisfaction survey. * Compare and contrast first-year sales with a competitor.
Bahrain Flag Bahrain Royal Crest Introduction In order to keep up with the competition, global expansion is necessary. McVicker Aluminum has entrusted me to perform an analysis about expanding into the Kingdom of Bahrain. I have researched Bahrain to determine if McVicker Aluminum will be successful in its expansion into this foreign market.
This report will cover four main topics about Bahrain to include the current political condition, the current economical condition, the current business condition, and the cultural aspects of working in a Muslim country.
The information in my report comes from online sources and a couple of reference books. I found several good sources, but the best information that I obtained came from the Bahrain Economic Quarterly June 2014, the book by Philip Dew, Bahrain's Business Environment, and Department of Defense Bahrain Country Handbook.
The information in my report is limited to what I retrieved from my sources. I was able to spend some time in Bahrain while in the United States Army. However, the information I collected through the online sources and reference books are more relevant. The Current Economic Condition According to the June 2014 Bahrain Economic Quarterly (BEQ), the positive economic momentum is still going strong (pg 2). The Kingdom of Bahrain’s “Gross Domestic Product growth is led by the non-oil sector” (BEQ, pg 2). In fact, the growth is attributed mostly to the non-oil sector. There is no significant change to the output of oil, however, there are several new projects that are being started in the “oil and gas sector” (BEQ, pg 2). There was a 1.9% increase in GDP from 3.4% to 5.3% between 2012 and 2013. The “non-oil economy expanded by a fairly modest 3%” (BEQ, pg 19). There is an expected significant growth in the non-oil economy due to several infrastructure projects. The Shura Council approved four amendments to the Commercial Company Law that will be extremely beneficial. 1. There are no minimum capital requirements for different company types. This also includes Limited Liability Companies. 2. 100% foreign ownership of simple Commandite Companies is allowed. 3. An establishment of a joint stock company by a minimum of two persons is permitted. 4. Minority shareholder rights have been strengthened to include representation on the company board.
(BEQ, pg 22)
Table 1. Bahrain Economic Outlook 2013 – 2016 The Current Political Condition Bahrain is a Constitutional hereditary monarchy. Sheikh Isa bin Salman Al-Khalifa became the prince of Bahrain in 1961. He was the first ruler to open the country to foreign investors to diversify the economy from depends on oil. He had to balance between Iranian, British and Saudi influences on his nation. Bahrain gained its independence on August 15, 1971 (from the United Kingdom). The constitution was approved and promulgated May 26, 1973. Prince Isa suspended the parliament on August 26, 1975 when they tried to vote his family out of power. The National Action Charter was approved by a national popular referendum on February 14-15, 2001, and a new constitution was issued on February 14, 2002. The executive branch consist of King (chief of state); Prime Minister (head of government); Council of Ministers (cabinet) is appointed by the King and headed by the Prime Minister. The Legislative branch consist of the bicameral parliament (al-Majlis al-Watani) consists of a 40-member elected Council of Representatives and a 40-member Shura (Consultative) Council appointed by the King. Members of both chambers serve 4-year terms. The Judicial- branch consists of the High Civil Appeals Court. The judiciary is independent with right of judicial review. There are 12 municipalities or administrative subdivisions (manatiq): Al Hidd, Al Manamah, Al Mintaqah al Gharbiyah, Al Mintaqah al Wusta, Al Mintaqah ash Shamaliyah, Al Muharraq, Ar Rifa' wa al Mintaqah al Janubiyah, Jidd Hafs, Madinat Hamad, Madinat 'Isa, Juzur Hawar, Sitrah. According to a press statement by Marie Hard from the U.S. Department of State, there has been a dialogue between the Bahraini government and opposition groups. There have been “recent developments” that have slowed this dialogue and reform process down (Harf). The Bahraini government has placed restrictions on rights to assembly, association, and free expression, to include the regulation of communication with international organizations and other foreign governments (Harf). The U.S. Department of State is also concerned with the imprisonment of the known Bahraini government opposition leader Khalil al-Marzooq (Harf).
Isa Bin Salman Hamad Bin Isa Sheikh Khalifa bin Salman The Current Business Condition The current business condition stems from the influences of the history within the Kingdom of Bahrain. Bahrain has been a trading point for 5,000 years (Dew, pg 15). The best word used to describe the business environment according to Dew is “friendly” (pg 15). For the indigenous population, working in government is the preferred career due to large salaries and excellent fringe benefits. The native and official language of Bahrain is Arabic. However, “the commercial environment is substantially simplified by an almost universal knowledge” of English (Dew, pg 16). The government is very bureaucratic. The simple solution to cut through red tape is to hire an “independent public relations officer” (Dew, pg. 16). Appointments and meetings may bit a bit different from those in the United States. Sometimes appointments are not made. Sometimes appointments are not kept. It is also common for Arabic families to meet during the business day. The business hours are quite different from United States normal business hours. There is a 5 ½ day work week that goes from Saturday to Thursday. Manufacturing and government hours are from 7:00 am to 2:00 pm, and the commerce goes from 10:00 am to 1:00 pm with a three hour break and then again from 4:00 pm to 8:00 pm (Dew, pg 17). Most major industries run 24 hours a day.
Highway Leading to Bahrain Financial Harbor
Manama Skyline Cultural Considerations and Business Etiquette Greetings are usually quite long and include discussing one’s family and well-being. It is considered extremely rude to ask about another man’s wife. When someone enters a room, it is also general practice for everyone else in the room to stand up. The individual that entered the room will then proceed to greet everyone that is in the room. For the men, they will usually shake hands and then place a hand to the heart as a sign of affection. A man will only shake a woman’s hand if it is initiated by the woman. There will usually be tea or coffee served when someone is visiting. It is considered extremely rude to decline the tea or coffee. The next thing to consider is business etiquette and protocol. In our culture maintaining personal space is very important. This is not the case in Bahrain. Bahrainis would much rather do business with individuals that they have close personal relationships with. The best way to gain their trust is to have someone that they know send a letter of introduction on your behalf. Once there is an introduction, they will spend an enormous amount of time building the relationship with you. There is a great deal of patience required with business dealings and it is considered rude to be impatient. When presenting ideas and making decisions, in public, Bahrainis will usually tell a person what they think they want to hear as to not offend anyone. It is better to communicate privately to confirm any decisions made. When presenting ideas and making decisions it is also a best business practice to defer to the most senior person. As in all business, meetings are absolutely necessary. When arranging meetings, it is of the upmost importance to make an appointment. In Bahrain, a morning meeting is the general preference. As a caveat, it is not a good idea to schedule meeting in the months of July and August. These are usually vacation months to avoid the hot weather. It is also during the most important Islamic holiday, Ramadan. Punctuality, as in usual business practice, is always important. It is not uncommon for a meeting to start after the general greetings, as discussed in the beginning of this letter. It is also common for meetings to be interrupted. You may have to refocus individuals often. Business dress is conservative. Med will wear suits. You will be judged by how you dress, especially during the initial introduction. Women will always wear extremely conservative clothes as to not offend the Islamic culture. When referring to Bahrainis, it is also important that they are addressed by their title unless they explicitly tell you to use their first name. The last point to consider is your business card. Business cards are expected to be given to everyone you meet. You should have one side in English and the other side should be translated in Arabic. You should hand your card over so the Arabic side can be read first. Business cards are given and received with two hands.
Conclusions and Recommendations All of the research that I have done supports the decision to expand into the Kingdom of Bahrain. The current economic condition, current political condition, current business condition, and cultural considerations are all favorable and support the expansion of McVicker Aluminum, Inc. Therefore, I believe that McVicker Aluminum, Inc. will be profitable when it expands to Bahrain. To ensure a successful expansion, I recommend the following:
1. McVicker Aluminum, Inc. should establish its headquarters in Manama. * Purchase a building * Educate McVicker Aluminum employees on Bahrain culture and business practices
2. After one year McVicker Aluminum should determine the profitability of the expansion * Perform a customer satisfaction survey. * Compare and contrast first-year sales with a competitor.
Bibliography: About Bahrain. Ministry of Foreign Affairs. Web. 13 Sept. 2014. <http://www.mofa.gov.bh/AboutBahrain/tabid/76/language/en-US/Default.aspx>.
Bahrain Economic Quarterly (2014): 1-34. Bahrain Economic Quarterly. Web. 13 Sept. 2014. <http://www.bahrainedb.com/en/EDBDocuments/BEQ-June-2014.pdf>.
"Bahrain - Language, Culture, Customs and Business Etiquette." The Translation Agency for a Complete Professional Translation Service. Kwintessential. Web. 5 Sept. 2014. <http://www.kwintessential.co.uk/resources/global-etiquette/bahrain-country-profile.html>.
Department of Defense. Bahrain Country Handbook. Washington DC: U.S. Government Printing Office, 2002. Print.
Dew, Philip. Bahrain's Business Environment. London: GMB Pub., 2008. Print.
Harf, Marie. "Political Situation in Bahrain." U.S. Department of State. U.S. Department of State, 19 Sept. 2013. Web. 13 Sept. 2014.
"Hello." Bahrain.com. Web. 13 Sept. 2014. <http://www.bahrain.com/en/Pages/default.aspx#.VBRztfmSxyI>.
Kingdom of Bahrain. Kingdom of Bahrain. Web. 13 Sept. 2014. <http://www.bahrain.gov.bh/>.
Locker, Kitty O., and Donna S. Kienzler. Business and Administrative Communication. Eleventh ed. New York: McGraw Hill, 2014. Print.
Stanford, Eleanor. "Countries and Their Cultures." Culture of Bahrain. Advameg Incorporated. Web. 5 Sept. 2014. <http://www.everyculture.com/A-Bo/Bahrain.html>.
