The SIS Middle East Journal

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Entries in sis international (3)


Analysis of Carrefour's Dubai Market Entry

We are posting an in-depth case study on this blog for only the interest of our readers. Important notes:

  1. This internal training report does NOT reflect the typical report composition of an SIS International's report. It was never and never will be submitted to any client nor used for commercial purposes. SIS makes no representations as to the quality, factuality or timeliness of the information.
  2. SIS never discloses client names or contents of its commercial reports, and has adhered to strict ethics since its founding 25 years ago.
  3. None of the article's information contains advice for decision making, as part of this site's privacy policy.


Carrefour's Market Entry Into Dubai in 1995

I. Executive Summary
In 1995, Carrefour expanded its European hypermarket concept that it had originally pioneered decades ago into Dubai, United Arab Emirates. Following a cautious country-by-country expansion strategy into Emerging Markets, Carrefour saw potential in the Dubai emirate. The emirate had a flourishing retail industry and exhibited strong fundamentals in its flourishing economy. Carrefour’s objective was to find a mode of entry that would allow it to reduce risk of failure and maintaining profitability, while offsetting its longstanding global rival Wal-Mart.

Dubai presented many advantages for companies considering market entry into Dubai in 1995. Despite a small population relative to other markets it served, Dubai offered an unusual composition of Expatriates and local residents in an economy with one of the highest standards of living and income in the world. The market was extremely business friendly with many advantages like zero corporate taxes in conjunction with very few barriers to trade. It had superior transportation networks, a well-defined legal system, positive retail conditions, strong economic growth, low political, and transfer risks. Carrefour reviewed the laws and determined that a joint venture would be best to minimize the risk of failure while having a qualified partner to aggressively seek growth and manage operations. It partnered in a joint venture with Majid Al Futtaim, a pan-regional conglomerate with retail experience in the Middle East. The joint venture adapted to the market by changing the place of its stores to the shopping mall, adapted its food to socio-cultural norms, promoted mostly non-food items because of higher profit margins, and was very careful in discounting amidst double-digit inflation.

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Islamic Banking update

At the end of the first quarter of 2008, Islamic banks comprised 13.4% of UAE’s banking assets, according to Kuwait’s Global Investment bank. The sector is on the move with strong growth, rising share of the total banking market, new products and strong deposits. According to this report, the sector is introducing innovative products to account for new market needs. Among these products are Ijarah and Murabaha.

Many banks in the Middle East already have an Islamic banking unit or even converting existing non-Islamic subsidiaries into Islamic ones. The report goes on to mention that compound annual growth rate of deposits at Islamic banks has risen 44% over the past 5 years.

A previous report by SIS International indicates that Islamic Banking has attracted a key market of banking clients, high net-worth individuals (HNWI’s), particularly in the Gulf. While Bahrain is traditionally known as a hub for Islamic banking, banks in the UAE and Qatar are making in-roads into the market by creating Islamic Financial Services subsidiaries.

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Information Technology: Challenges Abound

A major issue affecting the IT industry in the Middle East is software piracy. The piracy rate in the Middle East and Africa reached 60% in 2006. Most of the piracy happens in Egypt and Yemen. Piracy in Africa has reached a higher level where most countries exceed the 80% mark. The reality of piracy in this region then poses a problem for many software developers who wish to maximize profits in the region. Microsoft has already made a move addressing this matter, by creating educational campaigns and strengthening relations with local dealers.

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