Issuu on Google+

United Arab Emirates Trade Manual & Kubota Metal Corporation Expansion Plan By: Sanket Shah


Traditional Doors believed to have the power to stop evil from entering.


Table of Content United Arab Emirates’ Overview

4

Kubota Corporation’s Overview

9

United Arab Emirates’ culture, infrastructure and mistakes

16

United Arab Emirates’ Business Protocol

26

United Arab Emirates’ Logistics

28

Things to consider when opening

The arrival of messengers from the Prophet Mohammed in 630 AD forced the conversion of the region’s religion to Islam.

a company

32

Kubota Metal’s Financial Feasibility

34

Ease of doing business in United Arab Emirates

38


4

Kubota Metal Corporation Enters United Arab Emirates

United Arab Emirates Timeline c.5500 BC 5500–3000 BC

Evidence of extensive human occupation in UAE. Occupation by skilled groups of herders using finely made stone tools (so-called ‘Arabian bifacial tradition’).

2000–l300 BC

Wadi Suq period and Late Bronze Age – an era which is characterised by fewer towns and a change in burial customs to long, generally narrow collective tombs from short and wide ones.

1300–300 BC

Iron Age – introduction of new irrigation technology, which led water from mountain to lower-lying oases and gardens; explosion of settlement; first time writing, using South Arabian alphabet, to make contacts with Assyrian and Persian empires.

240 AD 6th/7th cent. AD

Rise of the Sasanian dynasty in south-western Iran, conquest of most of eastern Arabia. Introduction of Christianity and made contacts with inner Oman.

630 AD

Arrival of messages from the Prophet Muhammad, conversion of the people to Islam.

632 AD

Death of the Prophet Muhammad; outbreak of the ridda movement, a widespread rebellion against the teachings of Islam; however the rebellion later collapsed. Julfar was a major post for Islamic invasion of Iran. Julfar was a major post for Abbasid invasion of Oman.

637 AD 892 AD 1720s 1800–1819

1930s 1945–1951

Growth of English trade in the Gulf; increasing Anglo–Dutch rivalry. General Treaty of Peace between British Government and sheikhs of Ra’s al-Khaimah, Umm al-Qaiwain, Ajman, Sharjah, Dubai and Abu Dhabi. Collapse of the natural pearl market; first agreements signed by rulers of Dubai, Sharjah and Abu Dhabi for oil exploration. Oil exploration agreements finalised in Ra’s al-Khaimah, Umm al-Qaiwain and Ajman.

1962

First export of oil from Abu Dhabi.

1969

First export of oil from Dubai.

10 July 1971

Agreement reached amongst rulers of the emirates to form a union.

2 Dec 1971

Formation of the State of the United Arab Emirates.

2 Nov 2004

Sheikh Zayed, 1st President of the UAE, died.

3 Nov 2004

Sheikh Khalifa bin Zayed Al Nahyan elected as new President of the UAE.


United Arab Emirates’ Overview

75 5

General Information Abu Dhabi is one of the seven Emirates comprising the United Arab Emirates. The United Arab Emirates came into being as an independent foreign state on 2 December 1971. The economy of the United Arab Emirates is mainly oil-based –although diversification is greatly encouraged– and Abu Dhabi –capital city– has the majority of the United Arab Emirates’ oil and gas reserves. Each Emirate is ruled by its own Sheikh, commonly known as the Ruler. The Ruler in Abu Dhabi is HH Sheikh Zayed Bin Sultan Al Nahayan, who was the first and is the current President of the Federation. The Ruler is the ultimate governmental authority in his own Emirate. The Supreme Council is the highest Executive Authority within the Federation of the United Arab Emirates.

Abu Dhabi, capital city of the United Arab Emirates.


6

Kubota Metal Corporation Enters United Arab Emirates

An Overview of United Arab Emirates Facts: Flat, barren coastal plain merging into rolling sand dunes Lots of opportunities for development south of Abu Dhabi 25% of UAE’s GDP is depended on oil and gas production

Population:

Total: 4,798,491 0-14 years: 20.4% (male 500,928/female 478,388) 15-64 years: 78.7% (male 2,768,030/female 1,008,404) 65 years+: 0.9% (male 27,601/female 15,140) Population Growth Rate: 3.689%

Capital City: Currency: Languages Spoken:

Abu Dhabi Emirati Dirham (AED) Arabic (official), Persian, English, Hindi, Urdu

GDP Per Capita:

$40 000 USD

Time Difference VS Canadian East- UTC+4 ern Standard Time: 8 hours ahead of Canadian Eastern Standard Time Labour Force:

Total: 3.266 million agriculture: 7% industry: 15% services: 78% Unemployment rate: 2.4% (2001)

Post-secondary Institutions:

5 large centers for education funded by the government in which every child has the right to be admitted. Along with that there are 7 other privately funded institutions which have their head campuses in other countries.


7

United Arab Emirates’ Overview

5

United Arab Emirates’ International Agreements: Currently, there is a Memorandum of Understanding between the Ministry of Economy of United Arab Emirates and the Department of Foreign Affairs and International Trade of Canada on Economic Cooperation, regarding Trade and Investment. This memorandum’s objective involves, enhancing economic relations, encourage and make trade and investment more transparent, and establish a higher level of standards. This memorandum has helped one of the world famous Cirque de Soliel which has operated in United Arab Emirates for more than five years. Cirque de Soliel has incorporated cultural aspect of United Arab Emirates into their performance to have a greater impact on the audience. United Arab Emirates has been a proud and neutral member of many worldwide organizations such as World Trade Agreement 1996, World Economic Forum-1998 and World Bank Group -1972. United Arab Emirates funds a lot of money into these organizations mainly because they are seen as a more developed country. Through these organizations, United Arab Emirates has been able to develop crucial trading partners and have reduced the security threats.

Arab Foreign Ministers and other international officials at the opening session of the Forum For The Future conference in Abu Dhabi on 19 October 2008.


8

Kubota Metal Corporation Enters United Arab Emirates

An Overview of United Arab Emirates

United Arab Emirates’ Competitive and Absolute Advantage:

The United Arab Emirates flag was first raised on 2 December 1971.

Though the country does not have an unique resource, it does have an abundance amount of a non-renewable resource that is in major demand worldwide. Since the discovery of oil, three decades ago, United Arab Emirates has faced a great economic boom. Recently, United Arab Emirates declared their oil reserve has reached 97.8 thousand million barrels, and this is about 7.9% of the world’s total reserve. Along with the reserve, United Arab Emirates’ government also encourages the development and the extraction of these reserves, and this cooperation from the government can prove to be a great advantage in the international market. Another advantage is the location of UAE and their lower cost of doing business. United Arab Emirates has direct access to the Indian Ocean, this greatly decreases the land transportation cost and harmful environmental emissions –this can be a deciding factor for many multinational corporations. Though United Arab Emirates has faced enormous economic growth, the cost of doing business –labour costs, land cost and legal agreements- is considerably lower than other Middle Eastern countries. United Arab Emirates’ economy is dominantly dependent on oil; the prime reason for the 6 nations to merge in the 70’s was to get an advantage in terms of the oil market, and along with that, most of the workers in UAE are in one way or another affected by the oil industry. For an established Canadian company like Kubota, United Arab Emirates offers an opportunity to get into the Middle Eastern market with ease. Kubota can enter the Middle Eastern market with a lot less capital funds, since the cost of doing business is considerably, this in return allows them to maintain the same level of quality while reducing their production costs.


United Arab Emirates’ Overview

Canada and United Arab Emirates’ Relations Canada has established an excellent trading history with the United Arab Emirates and it is proudly represented by a Canadian Embassy in Abu Dhabi. Canada continues to enjoy excellent cultural and political relationship with the United Arab Emirates based on mutual goals of increasing international trade, peace, security, prosperity, and fighting against terrorism. Due to this open minded attitude presented by United Arab Emirates, they have faced remarkable economic and social development just within thirty five years. These developments were partly contributed by the vast amount of Canadians who have assisted in the country’s education, design and construction of landmarks. Today there are over 115 well established Canadian Companies in United Arab Emirates. United Arab Emirates is Canada’s primary export market in the region of Gulf Cooperation Council, and 40% of these exports are then re-exported by Canada. These relations with United Arab Emirates will continue to increase due to the agreement signed by the International Trade Minister to promote trade opportunities with United Arab Emirates. United Arab Emirates’ top two exporters include Japan and South Korea; this is primarily because they were the first two countries to enter into UAE market when it first started to develop.

An abundant supply of water enabled development. Sheikh Zayed on Abu Dhabi Corniche in the 1970s.

9


Kubota Corporation’s Overview

11

Kubota Corporation Parent Corporation Profile: More than a century since its founding, Kubota Corporation and subsidiaries have continued to help improve people’s quality of life, by offering products and services—including farm equipment, pipes for water supply and sewage systems, environmental control plants, industrial castings, and building materials. The Corporation has its management principle that the Corporation contributes to the development of society and the preservation of the earth’s environment through its products, technology, and services that provide the foundation for society and for affluent lifestyles. While living up to this management principle, the Corporation is implementing management policies that are focused on prioritizing the allocation of its resources, emphasizing agility in its operations, and strengthening consolidated operations. Through these measures, the Company aims to improve its adaptability to respond with flexibility to the changing times, resulting in a high enterprise value.


12

Kubota Metal Corporation Enters United Arab Emirates

Kubota Corporation’s Products and Services


Kubota Metal Corporation’s Overview

An Overview of Kubota Metal Corporation Kubota Metal Corporation Profile: Located in Orillia, Ontario, Fahramet Incorporated was founded in 1935 to supply metal castings to the mining industries in North America. In 1990, Fahramet Incorporated became a division of the Kubota Corporation –parent company in Japan- and changed their name to Kubota Metal Corporation, Fahramet Division. Kubota Metal Corporation now is the leading North American supplier of steel casted products -used by the petrochemical industries- in both quality and reliability. KMF’s 50-60% of the total sales revenue comes from international markets, and of which a major customer is the Exxon Mobil Corporation. Currently, manufacturing casting for mining industries remains an important activity for KMF. Furthermore, their growth has allowed them to develop and specialize in casting and production of heat and corrosion resistant alloys for steel and petrochemical industries.

13


14

Kubota Metal Corporation Enters United Arab Emirates

An Overview of Kubota Metal Corporation Market Research:

Kubota leads the manufacturing of heat resistant alloys and furnaces used for the extraction of many petrochemicals throughout the world.

United Arab Emirates has many geographic aspects that make it more favourable for Kubota Metal to start a plant there than anywhere else in the Middle East. There is plenty of available land a couple of kilometres away from Abu Dhabi -major industrial citywith easy excess to an international airport, major roads and the harbour. Along with the encouraging site location, the weather in Abu Dhabi is also consistent and ideal for the manufacturing of the alloy castings. Furthermore the key element –water- in the production of these alloys is in abundance and fairly close to the proposed site for the manufacturing site.

Mission/Vision: Exxon Mobil Corporation –leading oil and gas extracting corporation– and many other major petrochemical companies are planning to expand –even during this recession- their production over the next five years, due to the growing demand for oil and petrochemicals throughout the world. The main objective of this new plant is to sustain our most valued client’s growth while maintaining the quality of our products. This new site will follow the same production standards to insure quality is never compensated for. This new plant will also be able to double the current production rate, thus giving Kubota an opportunity to expand its client list in a country most suited for our product.

Objectives: During this economic recession the major concern for Kubota is to maintain positive relations with our clients. Kubota has shown dominance in the field of manufacturing petrochemical related products in North America, and now it has a chance to expand with their clients in the foreign markets. This opportunity is ideal for Kubota Metal to take a stab at primarily because Exxon has already confirmed it plans, and shown budgets, to expand and has proposed Kubota to be their primary alloy producer. Kubota Corporation has a whole has always looked to expand their market but making sure their quality and reputation is never jeopardised.


15

Kubota Metal Corporation’s Overview

An Overview of Kubota Metal Corporation

5

Products and Services: This marketing plan involves the opening of a new manufacturing plant –identical to the one in Orillia– in United Arab Emirates. All of the products currently manufactured by Kubota Metal would also be manufacture at this new plant to meet the growing demands of the petrochemical industries. One of the main products that will be assembled is the alloy tubes used in the furnace for extracting and refining compounds like Ethylene. These tubes are a mixture of nickel and chromium alloys and are designed to maintain high strengths, withstand extreme temperatures –over 1100°C–, and resist carburization –a process in which carbon compounds deposit around the alloy causing it to malfunction. They also contain pyrolysis coils that trap the harmful chemicals from entering the atmosphere, while increasing the efficiency of the refining process. Another recognized product of Kubota Metal is the Catalyst reformer tubes used to produce hydrogen from steam and natural gas. This hydrogen gas is later converted into methanol, ammonia or purified to be used directly. These reformers operate under extreme pressure and lower temperature. The most important aspect of these reformers are their strength and creep resistance because in the production of hydrogen gas, carburization does not occur. Some of other Kubota Metal’s include steel alloys for the steel industries that improve industrial furnace reliability and performance, winding spools that outlast any other competitors’ performance and life, and wear resistant and abrasion resistant castings used by the mining industries.

Cracking Tube: MERT (Mixing Element Radiant Tube)


16

Kubota Metal Corporation Enters United Arab Emirates

United Arab Emirates’ Currency Dirham –code AED– is the official currency of United Arab Emirates and the value in relation to Canadian dollars as of May 30, 2009 is 3.28 Dirham per Canadian Dollar. The Dirham is definitely a hard currency because of its strong value and demand in the world and furthermore it continues to face a strong economic growth; hence, Dirham will only get stronger. The import duty in United Arab Emirates is 4% for countries outside the GCC and no export duties. The 4% is going to be lowered for Canadian companies because of the recent agreement signed with the Middle Eastern countries. This is considerably lower that Canada’s import cost because in Canada you have to pay duty fees plus taxes. Like with all countries there are possibilities of hidden costs, since they are hidden they can not be found by the general public; hence, it is advised to call the UAE Ministry of Finance prior to shipping. Al Zorah, a self contained master planned city with free zone and freehold status, intends to keep its ecological footprint to a minimum.

Websites for investors: http://www.eebizguides.com/eguides/uaeguide/ index.htm http://www.wto.org/english/thewto_e/countries_e/ united_arab_emirates_e.htm. http://www.onada.com


17

United Arab Emirates’ culture, infrastructure and mistakes

5

United Arab Emirates’ Standards and Regulations The United Arab Emirates production companies strongly implement and strive to meet the international ISO 9000 certification. Furthermore, all of United Arab Emirates’ government strongly believe in regulations that favour the employee more that the employer. Another important standard a company should keep in mind when entering United Arab Emirates’ market is their ethical standards. They strongly disagree and strive to abolish child labour because they are trying to maintain a positive look in the international market. They also aim to provide better working conditions for the employee, this is also important to note because this can greatly add cost to the company’s operating costs. United Arab Emirates is also trying to create an equal and fair field for the women in the profession world. Women are treated equal and have many opportunities to excel. There are a few other marketing regulations that a company should keeping mind and they listed in the “Marketing” section of this manual. Websites for investors: http://www.rakftz.com/en/section/business-in-uae http://www.uaefreezones.com/ http://www.uaeinteract.com *search for articles regarding ethics*

Arab First Ladies attending the Arab Women’s Organisation conference in Abu Dhabi in November 2008.


18

Kubota Metal Corporation Enters United Arab Emirates

United Arab Emirates’ Marketing Standards The preferred language for advertisements and packaging is the official language of United Arab Emirates –Arabic. However, most foreign company advertise and label their products in both Arabic and English. Some companies may chose to advertise in Hindi, 3rd official language, in order to connect with other target market. On the packaging itself, foreign companies are required to state: 1. proper storage temperature; Example: "Keep frozen store at or below ___ degree C; Keep chilled (or refrigerated) - store between ___ degree C and ____ degree C. " 2. Expiration date; Day/Month/Year for products with a shelf life of six (6) months or less and Month/Year for products with a shelf life of more than six (6) months. Dating should be in numeric format. 3. Meat Products; have to be slaughtered according to Islamic principles 4. Country of origin 5. Weight must be labeled in metric net 6. All ingredients –including allergic ones- must be clearly label and must be readable from an elbows length

A sales representative is crucial when trying to enter a new market.

As for Kubota Metal Corporation, a new sale’s division will be formed to represent Kubota in the United Arab Emirates. The representative will be in charge of building and maintaining relationships with current and future clients. The packaging on the steel pipes, in United Arab Emirates, is similar to that of Canada. On the pipes the following is required; date of build, percent composition, official name and its heat and crack resistance rating. Websites for investors: http://www.fsis.usda.gov/regulations/ United_Arab_Emirates_Requirements/index.asp http://www.uae.gov.ae/Government/trade.htm


Developing Infrastructure


Economic Development

Despite the steadying of economic growth to 5.2 per cent in 2007, the UAE remained one of the fastest growing economies in the world.


In a financial turmoil rocked world markets, the UAE Government moved quickly to ensure that there was sufficient liquidity in the UAE’s banking system.


The UAE banking sector enjoyed an extremely active year in 2007 with the balance sheet of banks operating in the UAE increasing by 42.3 per cent reaching Dh1223.07 billion. However, by August 2008 it was clear that UAE banks that had experienced strong profit growth in recent years would be affected because of the decrease in the property sector.


United Arab Emirates government’s new city development plan


The UAE is reforming its educational system in order to produce employable national graduates.


25

United Arab Emirates’ culture, infrastructure and mistakes

5

Type:

Description:

Transportation Systems

22 paved international airports Over 4000 km of paved road Pipelines stretching over 2000 km 5 heliports 58 merchant marine with ports and terminals High speed internet available throughout most cities and dial-up throughout the smaller ones Telecommunication services –landlines, cell phones- available throughout the country Over 200 different newspapers and magazines distributed Owning a TV is a common thing in UAE Development in Abu Dhabi is extremely supported by the government of UAE They provide similar services and support as Canada does when it comes to investment within the country Very well developed areas in terms of residence Still some areas south of the major cities –Abu Dhabi– are rural and Kubota can quite easily open a plant there Lots of traditional and religious food is available, along with that most of the western food –McDonald, pizza, KFC, and etc.- is also available Very comprehensive government-funded health services and a growing private health service Fairly stable country, crime rate is significantly lower than other countries in the Middle East and it has continued to decrease over the past five years Public school is fully funded by the government English enforced as a second language Encourages higher level education and innovation in varieties of fields Many Investment groups assisting business getting settled in UAE e.g. FCS Dubai Over 29 different well settled banks e.g. RAKBank, First Gulf Bank, Emirates Islamic Bank, Abu Dhabi Commercial Bank, Dubai Islamic Bank Canadian Embassy in Abu Dhabi promoting and assisting with investment in UAE 5 day working week begins on Saturday instead of Monday Importance is more attached to courtesy and hospitality, therefore can delay a strict schedule so it is advised to schedule meeting on the time of day rather than precise hours Secretaries do not have the authority to book an appointment

Communication Systems

Government Services

Accommodations Food Health Care Safety Education

Business Support Services Financial Services Foreign Embassies Etiquette


26

Kubota Metal Corporation Enters United Arab Emirates

United Arab Emirates’ Business Protocol Negotiation Styles

Language

Bargaining is not just common but a part of their lifestyle. Decision are either made lightening fast or at snail’s pace. Major decisions are mostly always made after dinner. Official language to deal with foreign companies is English.

Silent Language

Silence is considered quite awkward. Eye contact and proper posture can make or break deals.

Forms of Greetings

Start with Ben, followed by their first name not the surname. Shake hand with the eldest then work your way clockwise around the room. Business cards are common but not essentials, and if used they should have Arabic on one side of the card. Be forthcoming but always polite, more feedback that is provided – without the use of anger– the higher one is thought off. If the room is carpeted then it is necessary to remove shoes before entering. It is inappropriate [in some places even illegal] for foreigners to wear local garb. Dress for Men: shirt and trousers during day collar and tie in the evening Bush suits are also popular and suitable Dress for Ladies: not as modest as elsewhere in Arabia but s should not wear anything too revealing. Any gift must be the best affordable. Nothing cheap like a pen or a mug, and nothing extravagant like jewelry made of gold. Things like perfume, small accessories and silver/platinum item are appropriate. It is costume for the receiver to open and minutely examine the gift in the presence of the giver. Meetings usually scheduled for time of day rather than exact time, but it is considered a custom to call an hour before popping in.

Style of Dress

Gifts Giving

Punctuality Scheduling of Meetings

First meeting is usually held at an international hotel’s lobby. Secretaries have no authority in scheduling meeting.

Business Entertaining

Usually the dinner is done at the host’s home, however hotels and restaurants are also appropriate. Lavish hospitality is looked down on. Never eat with left hand. Sharing a mean is advised. The inviter is expected to pay for the meal.

http://www.executiveplanet.com/index.php?title=United_Arab_Emirates:_Appointment_Alert%21


7

United Arab Emirates’ Business Protocol

5

Kubota Metal Corporation’ Gains Contract with the Biggest Oil Company


28

Kubota Metal Corporation Enters United Arab Emirates

Target Market Profile: The target market for Kubota Metal Corporation is the local oil companies of United Arab Emirates. Some of the local oil companies include: ADNOC - Abu Dhabi National Oil Company: - state owned oil gas exploration company Contact: , Phone: (+971) 26 02 00 00, Fax: (+971) 26 02 33 89 Abu Dhabi, UAE, Middle East www.adnoc.com

TAQA - ownstream, midstream and upstream energy company Contact: , Phone: +971 02 691 4900, Fax: +971 02 641 3286 Abu Dhabi, UAE, Middle East www.taqa.ae

Dragon Oil - is an independent oil development and production company Lamprell Energy Ltd - development of the offshore industry in the Arabian Gulf RTE Group - Drilling Fluids bentonite barite lime mica starch sodium chloride

Over a longer period, forming positive relations with these companies will deem extremely profitable for Kubota Metal Corporation. The reason being, these companies have claims over a major portion of the United Arab Emirates’ total oil reserve. Becoming the sole supplier for anyone of these companies, preferably ADHOC, will make the transition of entering another market that much easier and quicker.

Kubota Metal’s Competitors in United Arab Emirates: Unique Wellube - Specialist Engineering Services Victory Drilling Equipment Limited - Drilling Equipment and Well Head Control System Specialist Services - one of the foremost engineering and fabrication companies in the United Arab Emirates Likpin LLC - turnkey offshore pipelay, marine construction, services, vessel and project management for the offshore oil and gas industry

Though there are a few local competitors, Kubota Metal Corporation still has the edge when entering their turf. Kubota Metal Corporation has been able to snatch a contract with the biggest company in the oil industry, thus giving then great stability.

Media Opportunities: Kubota Metal Corporation does not have a major need for advertisement because Kubota deals on a contract base and it already has a contract, with one of the most influential corporation -Exxon Corporation- in the oil industry, large enough to justify their expansion into the United Arab Emirates’ market. However, in order to get a better recognition in the community, Kubota Metal Corporation will be hosting the local weather forecast, everyone looks at this station at least once a day, and will advertise in the Middle East Plant and Equipment Magazine, the leading magazine for industrial size equipment, to get noticed throughout the Middle Eastern market.


29

United Arab Emirates’ Logistics

5

United Arab Emirates’ Logistics Retailing: Retailing does not concern Kubota Metal Corporation, primarily because their products are manufactured based on orders and are shipped directly to the clients. There is no need for a middle man; however a local representative, one with the knowledge of how business is done in the United Arab Emirates, will be hired to make the transitions easier.

Advertising Laws and regulation: These laws and regulations regarding advertisement do not affect Kubota because there are not any restrictions as pertained to running a local forecast. However, the government of United Arab Emirates does have some restriction when it comes to advertising. United Arab Emirates are completely against showing profanity in ads; ads should not attack a race or culture; ads should not show the cleavage or stomach of women, and most importantly ads should not attack the government or ruler.

In United Arab Emirates, there are hundreds of companies that assist to make the transition of products from one country to the next much simpler. One of which is Al-Futtaim Logistics, they have been in the logistics market for over 25 years and they are the largest logistics company in United Arab Emirates. Main office Al-Futtaim Logistics PO Box 61450, Jebel Ali, Dubai, UAE Tel: ++ 9714 8818288 Fax: ++ 9714 8819157 Email: contact@aflogistics.com

Within its first year of operations, Dubai Cares provided education to over four million underprivileged children in 13 countries across Africa and Asia.


30

Kubota Metal Corporation Enters United Arab Emirates

Logistics: Planning for, implementing, and controlling the flow and storage of raw materials, inventory, finished goods, and related information, from the origin to final consumption point are all important aspects of logistics. In general term, logistics involves the planning and implementation of the quickest and most cost-effective way of getting the inventory to the end consumers.

Four basic components of logistics are: 1.

2.

3.

4.

Sourcing: materials supplied by foreign countries. This is done because product may not be available locally or local products might be too expensive. Warehousing and Storage: the storage of goods in a company’s manufacturing location and movement of the product from company to end consumer. Private Warehouses: a division of the company Public Warehouses: company that offers storage services for 30 day contracts. Contract Warehouses: company that offers storage services for long-term clients. Physical Distribution: Actions required to move and transfer ownership of product from producer to customers. Company needs to make sure that if they are promoting a “Green Self Look” then all of their producers should transfer the product harmlessly, otherwise it could jeopardize the company’s reputation. Transportation by truck, rail, ship, and air are most commons modes of transportation. Information Management: the movement of information. Suppliers, producers, wholesalers, and retailers use electronic data interchange to make the communication and transmission of data much quicker and efficient.

Kubota Metal Corporation’s Supply Chain:

These logistics are generic in the business world and United Arab Emirates is no exception. Another important aspect of logistics is inventory. An ideal inventory method for Kubota Metal Corporation is the “Just In Time” (JIT) method. In this the inventory arrives as they are needed for the manufacturing stage. This greatly reduces the storage cost and liquidates the company’s assets because the money invested in inventory, at a given time, is greatly reduced.


31

United Arab Emirates’ Logistics

5

Kubota Metal Corporation’s Distribution Method

Kubota Metal Corporation’s future manufacturing site

As seen from the diagram, this new site has direct access to the major highways of United Arab Emirates. This site is about 20 km from the main harbour of Abu Dhabi making transportation to other country cost effective and convenient. Furthermore, this site is about 25-30 km away from two of the biggest international airports in Abu Dhabi. This location is about 15 km away from major residential areas, this is far enough as stated by the construction laws of UAE, yet its close enough for future employees to commute to. Another important aspect of this location is that, Kubota Metal Corporation needs large amounts of water, for the manufacturing process, and being beside a major sea really reduces the cost of transporting the water. One might expect the cost of this prime estate to really expensive. However, this land is currently barren and the government is really encouraging growth in this area of the city. Though Kubota will mostly use trucks as their main form of transportation however this location provides accessibility to all major forms of transportation, ship, truck and air. The following information was obtained from Canada Post, and it pertains to the cost of transportation section of logistics. For the calculation a 10kg package, 80 cm x 30 cm x 30 cm, was used.

Method

Cost (CND $)

Most economical (surface) 4-6 weeks

~ $500

Air 2-3 weeks

~$850

Expresspost 4-7 days

NA

Purolator Courier 2-3 days

NA


32

Kubota Metal Corporation Enters United Arab Emirates

Other Important Aspects to Consider Approvals: In order for a foreign company to establish a branch in Abu Dhabi it has to be approved by the Executive Council and the Federal Ministry of Economy and Commerce. Along with that, the company has to be granted an appropriate license from the Abu Dhabi Municipality and be accepted as a member of the Abu Dhabi Chamber of Commerce. Appointing an agent: Foreign companies wishing to establish a branch office in Abu Dhabi must appoint a local agent. The role of the national agent is usually administrative only, e.g., obtaining (and renewing) the necessary licences which are required to enable the branch to carry on its business. The national agent may agree to provide additional services. Procedures: Beside the necessity of the documentation, foreign companies must also deposit AED 250,000 in a local bank account to serve as the “capital” of the company –even before it can be registered. This capital is frozen until the branch is registered and after which the company can use the fund at their discretion. Free zone: Abu Dhabi has established a free zone on Saadiyat Island as an incentive to encourage development. Banking: The United Arab Emirates’ Central Bank was established in 1980 and is situated in Abu Dhabi. Its primary objective is to manage the national currency to ensure stability and regulate banking policies to support the national economy. One of the other main activities of the Central Bank is licensing and regulating foreign and local banks. The Central Bank also licenses and regulates financial consultants and advisors. The interest rate charged by local banks on loans is not regulated, however, the rate can not exceed 12%. Governing Law: United Arab Emirates’ labour law governs all employment related matters and is administered by the Federal Ministry of Labour and Social Affairs. The law protects employees in general and any contract positions which is contrary to the labour law is voided, unless it is beneficial to the employee. Foreign personnel may only be employed after obtaining the approval of the Federal Ministry of Labour and obtaining a work permit. Visas Visiting visas must be obtained in advance. Citizens of the European Union, USA, Canada, Australia, New Zealand and a few other countries do not require a visa to visit Abu Dhabi, although their passports must have been valid for at least six months. On entry to Abu Dhabi, qualifying visitors will have their passports stamped with an initial one month visit visa. This may be extended for a further two months without the need to leave the UAE.


33

Other things to consider when starting a new business in United Arab Emirates

5 Holidays Employees have a right to thirty days’ paid leave for each year of completed service. There are also entitled to sick and maternity leave and Haj and Umrah leave for Muslim employees. Termination Service contracts may be terminated in a number of ways: by agreement, at the end of a fixed term contract or, for an unlimited term contract, on thirty days’ notice. Contracts may also be terminated without notice for several reasons, including intoxication during working hours and conviction for criminal offences concerning honesty, public morals, etc. Termination of employment contracts without reasonable reason could force the employer liable to pay compensation to the employee to a maximum of three months’ salary. At the end of an employee’s employment contract, his employer is generally responsible for repatriation –pay for way home– of the employee. Work and residence permits: Applications for residence permits must be made within thirty days of arrival in Abu Dhabi. If the purpose is to take up employment, foreign nationals must obtain in advance an entry visa and a work permit having been sponsored by an Abu Dhabi company or individual. Residence and work permits are valid for three years and may be renewed. Work permits issued in one Emirate are not automatically transferred to another Emirate although there are ways to work in another Emirate for the same employer. Land Ownership: Foreign companies or individuals cannot own land in Abu Dhabi. All land in the Emirate is owned by the Ruler, HH Sheikh Zayed, except that which he has gifted to individual citizens, government departments or companies. All sales of land require the consent of the Ruler. Generally only Abu Dhabi nationals can own land in the Emirate. Lease interests: Foreign companies and individuals may lease land from Abu Dhabi landlords for any period up to a maximum of eight years for the purpose of construction. Leases of buildings must be registered with the Registrar of Lands. Any build structure becomes the property of the landlord at the end of the Lease, unless otherwise stated. Taxation: Although Abu Dhabi has an income tax decree which is stated to apply to all types of business concerns, it is not enforced, with the exception of oil companies and banks. Oil and gas producing companies pay corporation tax at a flat rate of 50% on their taxable income. Foreign banks pay a 20% tax on profits. There are no personal income taxes in Abu Dhabi. There are no withholding taxes, value added or sales taxes.


34

Kubota Metal Corporation Enters United Arab Emirates

Financial Feasibility The current Kubota Metal Corporation manufacturing plant in Orillia has total assets worth $40 million. The estimated capital investment required to open a metal manufacturing site in United Arab Emirates is $71 million. The new site will be a carbon copy of the original site in Orillia. Asset

Estimated cost

Land (approximately 180,000 sq ft)

$12 million (2008)

Building

$9 million

Plant/equipment Working Capital

$30 million (used estimated cost of equipment and plant for the Orillia site, plus the cost of transportation) $5 million

Other (inventory, legal fees, intangible assets etc.)

$15 million

Ways to finance

Estimated amounts

Issuing Kubota Metal Corporation stock (2.5 million shares, $10 per share) Loan Term Loans

$25 million

Short Term Loans

$5 million

$41 million

Forecasted Net Income: Category:

Estimated amounts

Sales

$50 million

Cost of Goods Sold

$30 million

Gross Profit

$20 million

Fixed Overhead cost Depreciation

$15 million

Interest/dividends

$2 million

Net Profits

$2 million

These estimates were based on the contracts made with Exxon and the cost of manufacturing was determined using the ratios of the site in Orillia. The net profits were set at a lower rate (4%) because the prime object of Kubota should be get expand and get a larger client base in United Arab Emirates. There is an expected growth of 10% per year; Kubota’s past ventures were used to estimate the percent growth.

$1 million

Kubota Metal Corporation is in an ideal position to expand. Their largest client –Exxon Mobile- has announced a $5 billion expansion budget for the next 5 years. There has been a drastic increase in demand from Exxon and it is more than ready to give this contract to Kubota. However if Kubota decides not to expand then they will not be able to meet the demand therefore stand to loss a major client. While on the other hand, if this venture is a complete bust, Kubota will able to come out unharmed. It will not lose client face because the only reason for their failure is if Exxon decides to retrieve their contract. Kubota will be able to get back most of their investment by selling off their assets, while the rest of the debt can easily be picked up by the multibillion dollar parent company –Kubota Corporation.


35

Kubota Metal’s Financial Feasibility

5

How Kubota Metal will gain majority of sales

Pricing: Initially Kubota Metal Corporation will price their products just so they cover the operation cost and provide a 5% profit. Kubota Metal can afford to do this because of the strong contract already established with Exxon Mobile. This will also allow Kubota Metal to provide exceptional products at competitive price, thus giving a major competitive advantage –crucial for entering another country.

Competitors: Though Kubota has contracts with the big dogs in the oil industry, it is still faced with many respectable competitors. Some of them are Metal Tech and Manoir, which offer similar products and services as Kubota Metal. However, the major advantages that Kubota Metal Corporation has over their competitor are their financial support, quality of product and public recognition. Kubota Metal, unlike its competitors, is part of a multi-billion dollar corporation, this provides great financial stability. Another advantage is Kubota Metal’s exceptional quality and continuous innovation of their product line to meet the consumer demands. Lastly, as a result of Kubota Metal’s 70+ years of outstanding services and products, it has been able to form exceptional relations with their clients. This client base in business is always a major advantage as it adds to the Goodwill. One other advantage Kubota Metal receives being a division of a multi-billion dollar corporation is their resources. The parent company specializes in the forming of equipments used in commercial construction and farming. This provides Kubota Metal Corporation the list of suppliers who offer both competitive products and prices. This also provides a major advantage to Kubota Metal, when compared to their competitors who are paying market value for their raw materials.

Foreign trade, hospitality, exploitation of natural resources, an appreciation of nature and the importance of cultural heritage are all recurring motifs in the history of the UAE and continue to be vital building blocks of twenty-first century development.


7

United Arab Emirates’ culture, infrastructure and mistakes

5

An Overview of United Arab Emirates


38

Kubota Metal Corporation Enters United Arab Emirates

Ease of doing business in UAE when compared to other economies After examining the economy of 181 countries, Doing Business magazine concluded with the following rating for United Arab Emirates for the year 2009.

One being the Easiest and 181 being the hardest and close to impossible to do business.


39

Ease of Doing Business in United Arab Emirates

5


40

Kubota Metal Corporation Enters United Arab Emirates

Summary of approximate time frame: Starting a Business

Procedures (number)

Duration (days)

Cost (% GNI per capita)

Paid in Min. Capital (% of GNI per capita)

8 17 13.4 311.9 21

Dealing with Construction Permits

Procedures (number)

This section is most crucial for Kubota Metal as they will be constructing a manufacturing site.

Duration (days)

125

Cost (% of income per capita)

1.5

Employing Workers

Difficulty of Hiring Index

0

Extremely easy to hire very skilled professionals.

Rigidity of Hours Index

40

Difficulty of Firing Index

0

Registering Property

Rigidity of Employment Index

13

Firing costs (weeks of salary)

84

Procedures (number)

3

Duration (days)

Cost (% of property value)

Getting Credit

Protecting Investors

6 2.0

Legal Rights Index

4

Credit Information Index

5

Public registry coverage (% adults)

6.5

Private bureau coverage (% adults)

7.7

Disclosure Index

4


41

Ease of Doing Business in United Arab Emirates

5 Protecting Investors

Director Liability Index

7 2

Shareholder Suits Index

4.3

Investor Protection Index

Paying Taxes

Payments (number)

14

Time (hours)

12

Profit tax (%)

0.0 14.1

Labor tax and contributions (%)

0.3

Other taxes (%)

14.4

Total tax rate (% profit)

Trading Across Borders

Documents for export (number)

5 10

Time for export (days)

618

Cost to export (US$ per container)

7

Documents for import (number)

10

Time for import (days)

587

Cost to import (US$ per container)

Enforcing Contracts

Closing a Business

Procedures (number)

50

Duration (days)

607

Cost (% of claim)

26.2

Time (years)

Cost (% of estate)

Recovery rate (cents on the dollar)

5.1 30 10.2



ISU UAE