Cultural Analysis


Because of its unique location between Asia and Africa and its proximity to Europe, in addition to its long coasts on the Red Sea and the Arabian Gulf, the Arabian Peninsula acquired special importance in world trade thousands of years ago.  Arab merchants played an important role in trade exchange between Asia and Europe and many Arab cities flourished as trad-centres for caravans carrying various goods to and from the two continents via ports on the Arabian Gulf, the coast of Oman and the Mediterranean. [1]

Thus owing to its unique geographical location, great importance to the Muslim world and huge oil wealth the Kingdom today enjoys considerable international weight and strategic importance in world politics. [1]

It is a Founder member of the UN and Arab League, a member of the Non-aligned Movement and of the, Gulf Cooperation Council, the Organization of Islamic Conference and several Islamic regional and international organizations. [1]

Modern Saudi Arabia today is internationally viewed as a major force of stability, peace and progress in the world, and an ardent advocate of Arab and Muslim solidarity and unity. [1]



The kingdom of  Saudi Arabia was founded on September 23, 1932 by King Abdul Aziz Al-Saud, who united the whole of Arabia under his leadership.  King Abdul Aziz commissioned a survey of the country’s natural resources, and in 1933 oil was discovered.  Commercial production of this precious commodity, of which Saudi Arabia has the largest known reserves (25 percent of the entire planet’s proven oil reserves, nearly one-third of the free world’s) , began in 1938.  Facilitated by increasing oil revenues, the country began its successful modernization, based on a series of five-year development plans. [2]

King Abdul Aziz developed international relations with the world’s great powers. Over the past 56 years, Saudi Arabia has developed a special relationship with the United States, based on mutual respect and common interests. [2]

After the death of King Abdul Aziz in 1953, his son, Saud, assumed leadership of the Kingdom.  During his 11 year reign, King Saud created the country’s welfare structure and was noted for his generosity to Islamic causes.  In 1964, King Saud was succeeded by his brother, Faisal.  It was during King Faisal’s rule that Saudi Arabia achieved a major breakthrough in industrial growth.  King Faisal died in 1975 and was succeeded by his brother, King Khalid.  Fahd Bin Abdul Aziz was named Crown Prince and deputy prime minister.  King Khalid oversaw the implementation of the Second Five-Year Development (1975-1980) and the creation of the Third Five-Year Development Plan (1980-1985).  Saudi Arabia began to diversify its economic base and edged toward completion of its infrastructure.  Crown Prince Fahd became the leader of the Kingdom in 1982 and his brother, Abdullah was named Crown Prince and deputy prime minister, when King Khalid passed away.  Since then, King Fahd and Crown Prince Abdullah have made a strong commitment to industrialization, agriculture and education, playing a major role in promoting the welfare of all Saudi citizens. floral and abstract designs and to calligraphy. [2]





Located in the Middle East, Saudi Arabia is bounded to the west by the Red Sea; to the north by Jordan, Iraq and Kuwait; to the east by the Arabian Gulf and the United Arab Emirates, Quatar and Oman; and to the south by the Yemen Arab Republic and the People's Democratic Republic of Yemen. [3]



Saudi Arabia is warm and dry.  Variations of climate occur between the coastal areas and the interior regions.  The coastal areas are cooler, with temperatures seldom going above 30? C, with high humidity.  The interior regions are warm most of the year with temperatures reaching 45-50? C at the height of the summer.  Nights are usually cool throughout the country most of the year.  Saudi Arabia receives erratic rainfall, with the exception of the Asir region which is subject to periodic moonsoon rains.  Average annual rainfall is four inches. [3]



The country has a varied topography besides the well-known deserts a green, mountainous area in its south-western corner.  Despite appearances, there is considerable life in the desert, especially after winter rains.  Plants such as desert camomile, scarlet pimpernel, heliotrope and wild iris are common as well as small animals such as lizards, porcupines, hedgehogs and rabbits.  Saudi Arabia's terrain is varied but on the whole it presents a barren and harsh appearance with salt flats, gravel plains and sand dunes but few lakes or permanent streams.  In the south of the country is the famous Empty Quarter, the largest continuos sand desert in the world.  It is linked to another sandy desert, the Nafud, in the north of the country. In the south-west, there are mountains rising to over 9,000 feet and rain is not uncommon here. [4]



The most important natural resource is petroleum.  Besides, there are natural gas, iron ore, gold and copper. [5]



1. Modes

By  the help of railways, highways, ports, harbours and airports, heliports.

2. Availability


Railways: Total: 1,390 km

Standard gauge: 1,390 km 1.435-m gauge (448 km double track)                         


         Highways: Total: 159,000 km

                           Paved: 67,893 km

                           Unpaved: 91,107 km (1995 est.)


Airports:  Total : 174  ( 1996 est. )

                         Airports - with paved runways :79

                         Airports - with unpaved runways :95


Heliports:  Total: 4  ( 1996 est. )                [5]

3. Usage Rates

The cities of Makkah and Madinah can be visited only by Muslims.


Although asphalt roads link most of the major towns, the best means of travel within the country is by air. All domestic services are operated by Saudia Airlines.  From Riyadh to Jeddah is a flight of just over an hour; from Riyadh to Dhahran on the east coast is a flight of just under an hour.  There are about 24 domestic airports in the Kingdom and charter flights are available for transportation to some of the more remote desert sites.

Saudi Arabia has three international airports:               

                 King Khalid Internatinal Airport in Riyadh

                 King Abdul Aziz International Airport in Jeddah

                 King Fahd International Airport in Dhahran

Besides serving Saudia, these airports also serve a large number of international airlines.  From all main airports there is a limousine service to traveller's destination. 

There is also a regular SAPTCO Public bus service from the airports to various hotels and centre of town. [4]


 SAPTCO (Saudi Arabian Transport Company) operates bus services with most towns and between the larger cities.  The buses are comfortable and the fares are reasonable, generally lower than in the US or Europe.  Each bus has a special section for women and children. [4]



 A train service with first-class air-conditioned carriages runs daily between Riyadh and Dammam on the east coast. [4]

4. Ports

Ports and harbours: Total: 11

                           Ad Dammam, Al Jubayl, Duba, Jeddahh, Jizan, Rabigh, Ra's al                  

                   Khafji, Al Mishab, Ras Tanura, Yanbu' al Bahr, Yanbu' al        


Merchant marine: Total: 79 ships (1,000 GRT or over) totaling 998,503

                                                     GRT/1,417,265 DWT

Ships by type: bulk 1, cargo 12, chemical tanker 7, container 3,

              liquefied gas tanker 1, livestock carrier 5, oil tanker

              24, passenger 1, regrigerated cargo 4, roll-on/roll-off

               cargo 12, short-sea passenger 9   (1996 est.) [5]




1. Types

Telephones, radio broadcast stations, television broadcast stations, telegraph, telex and postal services are available.[4]

2. Availability

Telephone system: Modern system

·Domestic: extensive microwave radio delay and coaxial and fiber

           optic cable systems.

·International: microwave radio delay to Bahrain, Jordan, Kuwait,

           Quatar, UAE, Yemen, and Sudan;  coaxial cable to Kuwait and

           Jordan;  submarine cable to Djibouti, Egypt and Bahrain; Satellite

           earth stations 5 Intelsat ( 3 Atlantic Ocean and 2 Indian Ocean ),

           1 Arabsat, and 1 Inmars ( Indian Ocean region ) [4]


Radio broadcast stations:  AM 43, FM 13, shortwave 0 [4]

Television broadcast stations: 80

Saudi Arabian Television has two channels: one solely in Arabic and the other in English with a news bulletin in French.  Television transmissions reach every corner of the Kingdom and are often received in neighbouring countries as well. [4]

Telegraph:  There is a very efficient telegraph service for overseas, as well as among towns within the Kingdom. [5]

Telex: Operative telex lines are spread throughout the country.  Telex facilities are available in most towns and hotels. [5]

Post:  Postal services have been considerably improved.  Air mail letters take five to seven days to reach Western Europe and about ten days to reach North America.  Privately owned courier services are available for international delivery.[5]

3. Usage rates

Telephones: 1.46 million ( 1993 est. )

Radios: 5 million ( 1993 est. )

Televisions: 4.5 million ( 1993 est. )  [5]





Social welfare in Saudi Arabia is traditionally provided through the family or tribe.  Those with no family or tribal ties have recourse to the traditional Islamic religions foundations or may request government relief, which is supported by the collection of zakat.   Social insurance provides health care, disability, death, old age pension, and survivor benefits for workers and their families.  Retirement is allowed at age 60, and benefits are provided at 2% of average monthly earnings times the number of years worked.  This system is founded by 5% payroll deductions from workers, and 8% of payroll contributions for employers.  The government provides an annual subsidy to the program.  This program is compulsory for employees of firms with 10 or more workers, and is voluntary for smaller enterprises.  A 1960 law requires employers to provide 100% of wages for two month of sick leave and 75% of wages for two additional months. [6]

The customs and regulations governing the behavior of women are strict even by the standards of the Islamic world. Despite the shortage of Saudi labor the government is unsympathetic to the role of women in the work place; in 1993 only 5% of the labor force was female.  Extreme modesty of dress is required.  Women wear the abaya, a long black garment and they must also cover their face and head.  Women are not permitted to drive motor vehicles.  Women must enter public busses through a rear door, and sit in a segregated area.  Women may not travel without the written permission of a male member of her family.  The provision also applies to travel within the country. [6]

Segregation also occurs in the workplace, where women may only contact clients by telephone or facsimile machine.  In 1995, the Ministry of Commerce announced that business licenses would no longer be issued for women in fields that may require them to be in regular contact with government officials or male clients. [6]

The government does not recognize international standards on human rights.  Corporal punishment, including amputation of limbs, beheading, and stoning are used.  In 1995, executions were carried out for crimes including alcohol trafficking, armed robbery, adultery and the practice of witch craft.  Most of those executed were foreigners. [6]



Until the mid 1950s, Saudi Arabia’s educational system was primarily oriented toward religious schooling that stressed knowledge of the Qur’an (Koran) and Hadith (sayings of Muhammed and his companions).  Accept for basic arithmetic, reading, and writing, secular subjects were not taught in the schools.  There was a highly developed oral culture, however. [7]

Nearly all of the students were boys; education of girls was virtually nonexistent and took place in the home, if at all.  Of those attending public schools, 96.2% were boys.  The General Presidency for Girls’ Education administers girls’ schools and colleges.  The first school for girls was built in 1964, and now girls’ schools exist around the country.  By the mid 1980s, above 43% of students were female. [7]

As at 1985, attendance in primary school was required by law.  Education is free at all levels, including college and post-graduate study.  The literacy rate in the 1960s was 3%, by 1995 it was 62.8%.  However, literacy among women remains significantly lower than that of men.  In 1995, only 28.5% of men were unable to read and write, while 49.8% of women were illiterate. [7]

By 1993 there were 11,244 primary schools, with 2,110,893 pupils and 153,556 teachers.  Secondary schools had a total enrolment of 1,198607 students and 108,820 teachers. [7]

 Higher education was pursued in seven universities and 83 colleges.  The Islamic University (1961) at Medina is one of three universities stressing Islamic studies.  Secular universities include King Saud University (formerly Riyadh University, 1957), the King Fahd University of Petroleum and Minerals (1963) at Dhahran, and King Abdul-Aziz University (1967) in Jeddah. [8]

All higher level institutions had 201,090 pupils and 14,394 lecturers in 1993.  Women accounted for 45% of students in higher education. [7]



Saudi Arabia has a government system of “Monarchy”.  Thus, there is no political party.  Of all the agencies and organized bodies of the government of Saudi Arabia, the Council of Ministers is most potent.  It derives the power directly from the King.  Government of the Kingdom’s region is the direct responsibility of the Regional Governors.  The reforms in regional government had the precise purpose of enhancing the level of administrative and developmental work in the regions of the Kingdom, while at the same time preserving security and order and ensuring the rights of the citizens and their freedom within the framework of the Islamic Shari’ah.  [9]



Its legal system is based on Islamic law, several secular codes have been introduced; commercial disputes handled by special committees. [5] 

The Kingdom’s legal system is based on the Islamic "Sharia" law and on Decrees promulgated by the Council of Ministers.  Sharia is based on the provisions of the Holy Qur’an, the Sunnah (the teachings and deeds of the Prophet Muhammad), the consensus of the "Ulema" (religious scholars), and legal analogy [10]

The Basic Law, which incorporates the arrangements for the Consultative Council and for regional government, established in written form both a description of the essential structure and organization of government and, in effect, a bill of rights for the citizen. [9]

The Saudi Arabia Standards Organization has responsibility for determining and enforcing approved standards of services, facilities, utilities and products within the Kingdom of Saudi Arabia. SASO is a member of the International Standards Organization and is an active member of the Arab Standards and Metrology Organization (ASMO). [11]



There is a Bedouin society. They are divided into tribes. A Saudi’s loyalty belongs first to the family, then to tribe, and only then to the state. In some ways Saudi Arabia can be considered as a male-dominant society. Women in Saudia Arabia do not have the right to interact with men (except relatives), drive a car, work outside the home except in a few occupations. [10



Saudi Arabia is the home and the point of origin for Islam, which is the country’s official religion. The Saudi branch of Islam is a Sunni fundamentalist variant called Wahabi Islam. [10]

Wahabi Islam is even stricter and more fundamentalist than the Shiite Islam (there are small number of Shiite Muslims) practiced in Iran. It is enforced in public by the religious police, Matawain.  They claim the right to enforce their religious precepts on everyone, including foreigners.[10]

There is no allowance for other religions.  Islam influences family relationships, education, and many other aspects of life in Saudi Arabia; five daily prayers are performed.  Other religious rituals include fasting during Ramadan, the ninth month in the Muslim calendar.  Each year, more than one million Muslims from Saudi Arabia and other countries go to Makkah on religious pilgrimage. [12]



The nation’s cultural activity is dominated by strict adherence to Islam, although influences from more liberal Arab countries are filtering in and Saudi students who study abroad exposed to Western influences.  Poetry, formal propose, and oratory have been among the highest of arts since pre-Islamic days, and poets and peripatetic story-tellers abound.  Perhaps the most important Saudi writer has been ‘Uthman ibn Bishr’ , a historical  chronicler of the late 19th century.  Literary works now appear in newspapers and periodicals, though nomads and illiterate villagers still have their own body of folk literature.  Music and dance have always been part of Saudi everyday life, though the strict Wahhabi code forbids their public expression.  Visual arts are limited to geometric, floral and abstract designs and to calligraphy. [13]





Many of Saudi Arabia’s rural people live in farm villages or oasis settlements.  Since the 1960’s, may nomadas have become settled farmers or have moved to urban areas in order to work in the oil industry. [12]

Government gives loans for low-income people to build houses. There is a ministry, “Ministry of Rural and Municipal Affairs” related with public utilities.



1. National dress

The religion and customs of Saudi Arabia dictate conservative dress for both men and women.  Foreigners are given some leeway in the matter of dress, but they are expected to follow local customs, particularly in public places.  As a general rule, foreign men should wear long trousers and shirts that cover the upper torso.  Foreign women should wear loose fitting skirts and hemlines well below the knee.  Sleeves should be at least elbow length and the neckline modest.  The best fashion guideline is ' conceal rather than reveal '.  Teenagers are also required to dress modestly in public places.  Jeans should not be tight fitting and low necks and tank tops are not recommended.  Shorts and bathing suits should not be worn in public. [4]

2. Types of clothing worn at work

Whatever their job or social status, Saudi men wear traditional dresscalled a thobe.  Wearing the thobe expresses quality and is also perfectly suited to the hot Saudi climate.  During warm and hot weather, white thobes are worn by Saudi men and boys. During the cool weather, wool thobes in dark colours are not uncommon.  At special times, men often wear a bisht or mislah over the thobe.  These are long white, brown or black cloaks trimmed in gold.  A man's headdress consists of three things: the tagia, a small white cap that keeps the gutra from slipping off the head; the gutra itself, which is a large square of cloth; and the igal, a doubled black cord that holds the gutra in place.  Some men may choose not to wear the igal.  The gutra is usually made of cotton and traditionally Saudis wear either a white one or a red and white checked. [4]



Citizens like doing off-road by their 4x4 jeeps. They also give importance to go hunting.  Some of the most important achievements in the field of sport and youth in the Kingdom are:

·  The number of sports clubs in the Kingdom has increased to 153 from 53 in ( 1395 H ),with a membership of more than 100,000. The number of sports federations has increased to 21.

·  In the cultural and literacy field, the number of literacy clubs has increased to 12 with a membership of more than 3000.

·  In the social field, the Saudi Arabian Society for Youth Hostels supervises 19 youth hostels with a membership of about 57,000. Two permanent youth camps have been established in Taif and Hail. [14]



Almost all people of Saudi Arabia use Arabic, which is the official language of the country. English is taught in the intermediate and secondary schools and is widely used among educated Saudis in business dealings and international affairs. [12]



The Kingdom of Saudi Arabia was founded on September 23, 932 by King Abdul Aziz Al-Saud.  It is located in the Middle East.  The country has a warm and dry climate and a variate topography.  The most important natural resource is petroleum.  The available transportations are: railways, highways, ports, harbours, airports and heliports.  Types of communication systems are: telephones, radio broadcast stations, television broadcast stations, telegraph, telex and postal services.

Social welfare in Saudi Arabia is traditionally provided through the family or tribe.  The customs and regulations governing the behavior of women are strict even by the standards of the Islamic world.  Women are not allowed to drive cars.  But during our project, government gave permission to them for driving cars.The government of Saudi Arabia does not recognize international standards on human rights. Segregation also occurs in the workplace, where women may only contact clients by telephone or facsimile machine.

Nearly all of the students were boys, education of girls was virtually nonexistent and took place in the home.  Higher education was pursued in seven universities and 83 colleges.

Their political system is based on monarchy.  There is no allowance for political activities.  The Royal Family has a huge influence on government and citizens.  Their judicial system is sharia law.  Islam is the dominant religion.

The nation’s cultural activity is dominated by strict adherence to Islam, although influences from more liberal Arab countries are filtering in and Saudi students who study abroad exposed  to Western influences.

Arabic is the official language of Saudi Arabia.  However, English is also used by businessmen for business dealings.  Saudi Arabia has a unique culture so in order to make business there, businessmen should understand their culture.

Economic Analysis



The economy is heavily depended on oil production, which provided over 90% of export value and 75% of government revenues in 1995. The country has the largest reserves of petroleum in the world (26% of the proved total).  Rapidly increasing oil income during the 1970s was used to increase disposable income, economic development, and defense expenditures.  However, the contribution of the oil sector to GDP has fluctuated.  Because of the diversification effort during the second and third development plans and the precipitous decline of oil prices, the contribution of the oil sector (crude oil and refined products) to GDP declined from 70% in 1980 to 35% in 1995. [1]





The preliminary results of the September 1992 census recorded the population as 16,929,294. The estimate for 1996 was 19,409,000. A population of 22,426,000 was projected for the year 2000, assuming a crude birthrate of 37.2 per 1,000 population, a crude death rate of 4.7, and a net natural increase of 32.5 during 1996-2000. In 1974, the last previous census year, the population stood at 7,012,642, of whom 4.9 million (73%) were settled and 1.8 million (27%) were nomads; it is estimated that proportion of nomads had fallen to about 5% by 1987. [1]


1. Age:

Under age 15


Age 15-29


Age 30-44


Age 45-59


Age 60-74


Age 75+




Life expectancy: 65 years male; 68 years female (1990) [2]

2. Sex:

At birth: 1.05 male(s) / female

Under 15 years: 1.03 male(s) / female

15-64 years: 1.49 male(s) / female

65 years and over: 1.08 male(s) / female [3]

3.   Geographic Areas:  Urbanization has proceeded swiftly.  In 1960, about 30% of the population lived in urban areas; by 1995 it had risen to 80%. The estimated population density in 1996 was 8.9 persons per sq km.  Estimates of the population of major metropolitan areas in 1995 were: Riyadh, the capital, 2,619,000; Jeddahh, the principal port, 1,492,000; and Mecca, 777,000.[1]

Distribution of total population [4]

(population more than 100,000)


% Living in metropolitan centers

… 42

% Living in small towns

… 12

% Living in rural areas

… 46


4.   Immigration: 

Emigration is limited.  Immigration of professionals, technicians, and others from the surrounding Arab states and growing numbers from outside the region has been spurred by the development of oil industry and by the lack of adequately trained and educated Saudi personnel.  Palestinian Arabs, displaced by the establishment of the state of Israel, are the chief immigrant group.  In the early 1990s there were significant numbers of expatriate workers from the US, European countries, Turkey, Jordan, Syria, Jordan, Kuwait, Yemen, the Republic of Korea, Pakistan, India, Sri Lanka, and the Philippines.  In 1990 when Iraq invaded Kuwait, Saudi Arabia reacted by expelling workers from Jordan, Yemen and Palestinians, for their countries’ support of Iraq.  The foreign population was 4,624,459 in 1992 (27% of total population).  After the Gulf War, 93,000 Iraqis were granted temporary asylum.  Since then, 60,000 Iraqis were returned under the POW exchange.  By April 1997, 20,800 had resettled in 33 different countries, 3,010 had voluntarily repatriated, and 9,000 are still in camps in Saudi Arabia.  In 1996, the net migration was 1.55 migrants per 1,000 population.





According to World Bank estimates, in 1995 Saudi Arabia had a GNP of 133.5 billion resulting in a per capita GNP of $7,040.  For the ten year period 1985 to 1995, the average annual real growth rate per capita GNP was -1.9%.  During that same period, the average annual inflation rate was 2.7%.

According to CIA estimates, the purchasing power parity of GDP inn1995 was $189.3 billion or $10,100 per capita.  The CIA estimates that in 1995 the inflation rate for consumer prices was 5% and that real growth rate of GDP was 0%.



1.   GDP- composition by sector:  [3]


2.   Private and Publicly- Owned Industries:

The government has tried to diversify the economy by development of industries utilizing petroleum, including steel and petrochemical manufacture, in the massive Jubail and Yanbu’al Bahr industrial complexes, which were largely completed by 1989.  The economy is generally open to private investors, but there is a large government sector and the government plays a significant role in influencing resource allocation within the economy. It was estimated that in 1996, the private sector accounted for 37% of GDP.  The government is considering privatizing the national airline, petrochemical industries, the telecommunication sector, and electricity companies to foster diversification, but no firm plans have emerged.  The government encourages growth in agriculture as a means to reduce Saudi Arabia’s reliance on food imports, but dramatic reductions in farm subsidies resulted in a continuing decline in agricultural output in 1996. [1]

3. Automative Parts & Service Equipment:

While Saudi per capita spending on automobiles is among the highest in the world, sales of new automobiles have taken a plunge in recent years. [5]

The trend will likely persist till 1996 when, according to some estimates, the Saudi economy is expected to recover following a slight increase in world oil prices. [5]

On average, the Saudi market for automotive parts continued to grow by 5 percent annually, reaching $2,340 million by 1996.  Imports which represent 82 percent of the market, increased by an average 6 percent annually, from $1,730 million in 1994 to $1,850 million in 1995, reaching an estimated $1,940 million in 1996.  Local production consists mainly of fast-moving items, but is expected to become more varied as more licensing arrangements are being formulated.  Local production increased more than two percent, from $411 million in 1994 to $420 million in 1995, and will continue at that level in 1996.  By the same token, exports from local facilities will also remain flat at $20 million during 1995 and 1996, a slight increase from 1994. [5]



The Saudi government generally encourages direct foreign investment.  This is particularly true of foreign investment in joint ventures with Saudi partners, though Saudi Arabia allows wholly foreign-owned firms to operate.  The government and the private sector actively promote investment oppurtunities in Saudi Arabia.  The government hopes to attract investment in infrastructure, but has yet to make such investments financially attractive.  The foreign capital investment code specifies three conditions for foreign investments:

·The undertaking must be a development project.

·The investment must generate technology transfer.

·Saudi partner should own a minimum of 25% equity(though this can be waived)

Foreign investors are denied national treatment in the following sectors: catering, cleaning, maintenance and operations of facilities, power generation, trading, transportation, and business that affect national security. [2]

Wholly foreign-owned firms are guaranteed the same protection accorded Saudi nationals in the Foreign Capital Investment Code. They are also eligible for a wide range of investment incentives, including advantageous utility rates, land in industrial estates of nominal rents, treatment as domestic producers for government procurement contracts, and custom duty exemptions on capital goods and raw materials.  One of the leading obstacles for foreign investors are restrictive Saudi visa requirements.  Investors or potential investors  wishing to visit Saudi Arabia must have a Saudi sponsor to obtain the necessary business visa. [2]

Total direct investment in Saudi Arabia was estimated at $13.3 billion in 1995; up from $11.3 billion in 1994 and $7.1 billion in 1993.  Principal foreign investors include the US (41% of the total), Japan, the UK, Switzerland, France and Germany. [1]


Oil and oil products predominate Saudi Arabia’s exports. [6]



%Change over previous year




















































Table is completed from Us-Saudi Business Web Pages and [6]

Except from 1978 the SA’s exports expanded continuously. Due to drop in petroleum exports and prices, Saudi exports took a downtrend.

When we analyze Imports of the Saudi Arabia



%Change over previous year




















































Table is completed from [6]


The fall in imports is attributable to a number of factors, the most important of which are reduced government expenditure and competition of infrastructure projects whose implementation had required substantial quantities of imported materials. Other factors contributing to lower imports include the growth in import substituting industries and agriculture, the continuous draw down of merchandise stocks accumulated in previous years, increase in the cost of foreign products, and the rise in exchange rates of major foreign currencies against the Saudi Riyal. [6]


Balance of Payment:

Due to the fall in the Kingdom's oil export revenues in response to an over supply in the international oil markets, Saudi Arabia has been faced with the problem of a current account deficit since the mid 1980s. The balance of payments’ current account deficit during the period 1986-1989 were SR-43 billion (U.S. $11.5 billion), SR-36.6 billion (U.S. $9.8 billion), SR-27.5 billion (U.S. $7.3 billion), and SR-35.7 billion (U.S. $9.5 billion) respectively. [7]

The Desert Storm war, coming at the start of the fifth development plan (1990-1994), had contradictory effects on the Kingdom’s foreign trade and balance of payments. The sharp increase in the value of oil exports at the start of the fifth plan period resulted in an average annual trade balance surplus of SR75.1 billion (about U.S. $20.00 billion) during the period from 1990 to 1993 (see table 11). On the other hand, The substantial cost of the war and the immense outflow of related payments had a substantial negative impact on the overall balance of payments' position. Thus, the average annual current account deficits during the years 1990 to 1993 were SR15,6 billion (U.S. $4.2 billion), SR103.3 billion (U.S.27.5 billion), SR78.1 billion (U.S. $20.8 billion) and SR54.7 billion (U.S. $14.6 billion) respectively. [7]

Exchange Rates:

Saudi Arabia currently uses a fixed exchange rate. 1 US dollar is fixed to 3.75 Riyals.  It is fixed since June 1986.



Only Saudi nationals are permitted to engage in trading activities.  All industrial enterprises are open to non-Saudis, and they can also trade in the products they manufacture.  The Saudi Arabian Monetary Agency, the Saudi central bank, regulates and controls the banking sector.  Saudi Arabia has a different set of trade barriers, mainly regulatory and bureaucratic practices, which restrict the level of trade. Among these are:

·      Commercial Disputes Settlements: Saudi Arabia has signed the New York Convention on the Arbitration of Commercial Disputes. [8]

·      Business Visas: All visitors to Saudi Arabia must have a Saudi sponsor in order to obtain a business visa to enter Saudi Arabia. [8]

·      Delayed Payments: Lengthy payment delays, especially from government ministries and agencies have delayed payments from 6 to 15 months. [8]

·      Intellectual Property Protection: The Saudi legal system protects and facilitates acquisition and disposition of all property rights, including intellectual property. [8]

·      Arab League Boycott: The primary boycott against Israeli companies and products still applies. [8]

·      Protective Tariffs and Non-Tariff  Trade Barriers: A number of Saudi infant industries now enjoy 20 percent tariff protection as opposed to the general rate of 12 percent. [8]

·      Import Licenses: The importation of certain articles is either prohibited or requires special approval from competent authorities.  In addition, import of the following products requires special approval by Saudi authorities: agricultural seeds, books, chemicals, alcohol etc. [8]

·      Customs Duties: Most of the consumer's basic products are duty free. Customs duties imposed on some imported commodities for the purpose of the protection of national industries are 20%.  Import duty on other items is 12% ad valorem on the C.I.F.  A limited number of items are subject to customs duties calculated on the basis of metric weight or capacity rather  than ad valorem. [6]



Foreign Aid Received

?  Saudi Arabian  relations with the United States of America:  The inter relationship between oil supplies, military sales and the extensive banking activities between the two countries has served to cement mutual interests over an extended period of time. [9]

?  Saudi Arabian relations with Western Europe:  Britain, amongst a number of other developed  nations, supplied a large number of skilled expatriate workers to assist the Kingdom in the implementation of its development plans. [9]

?  Saudi Arabian relations with the EU : Just as the Kingdom is able to supply the Union with much needed oil, so the Kingdom has been able to call on the expertise and advanced technology of Europe to help it achieve its development goals.[9]




5 million by occupation with government 34%, industry and oil %28, services 22% and agriculture %16. [3]

2. Unemployment Rates:  6.5 % (1992 est.) [3]



The inflation is 5%. [3]



King Abd Al-Aziz City of Science and Technology:

It is an independent scientific establishment administered by the Council of Ministers. It was established in Riyadh under the royal decree ( no.60/M ). It is run by a higher committee chaired by the Custodian of the two Holy Mosques, the Prime Minister with H.R.H the Crown Prince and the Deputy Premier and a number of Ministers and Scholars are Members of the Committee. The goals of the establishment are:

1)To propose the national policy for advancing sciences and technology. And to forge strategy and the necessary plan to execute it.

2)To implement scientific and applied research programs to promote the development in the Kingdom.

3)To support the private sector in developing industrial and agricultural products research.

4)To promote joint research programs between the Kingdom and international scientific institutions to keep up with international scientific progress either through scholarships or joint research.

5)To offer scientific and training scholarships to qualify the individuals needed to prepare and execute scientific research programs. Also to provide scholarships for individuals and scientific institutions to carry out applied scientific research.

6)To coordinate with government organs, scientific institutions and research centers in the Kingdom in the field of research and exchange of data.

The city includes a number of research institutes and scientific centers. [10].



There are three major marketing regions in Saudi Arabia: the Western Region with the commercial center of Jeddah; the Central Region where the capital city Riyadh is located; and the Eastern Province where the oil and gas industry is most heavily concentrated. Each has a distinct business community and cultural flavor, and there are few truly "national" companies dominant in more than one region. [11]

Many companies import goods solely for their own use or for direct sale to end-users, making the number and geographical pattern of retail outlets a factor of potential significance. U.S. exporters may find it advantageous to appoint different agents or distributors for each region having significant market potential. Multiple agencies and distributorships may also be appointed to handle diverse product lines or services.[11]

Many Saudi companies handle numerous product lines making it difficult to promote all products effectively. Saudi agents typically expect the foreign supplier to assume many of the market development costs, such as hiring of dedicated sales staff. [11]

Foreign suppliers often detail a sales person to the Saudi distributor to provide marketing, training, and technical support. Absent such an arrangement, firms should expect to make at least four visits per year to support their Saudi distributor. [11]

Direct marketing is not widely used in Saudi Arabia. Personal relations between vendors and customers play a more important role than in the West; furthermore, many forms of direct marketing practiced in the United States are unacceptable due to Islamic precepts regarding gender segregation and privacy in the home. Limitations in the Saudi postal system are also a constraint: No home delivery or postal insurance is available; only post office boxes are used. [11]

Direct marketing has been conducted on a very limited basis using unsolicited mail campaigns and fax, catalog sales (with local pick-up or delivery arranged), and commercials on satellite television providing consumers in many nations (including Saudi Arabia) with a local telephone number to arrange delivery.  [11]



Postal, telephone, cable and wireless services are regulated by the Ministry of Communications.  Saudi Arabia is directly connected by radiotelephone with the US, other Arab countries, and Western Europe, and automatic internal lines connect most of the major cities.  The telephone system was greatly expanded in the late 1970s, and in 1995 some 1,615,000 telephones were in use.  Broadcasting emanates from the government-owned Saudi Arabian Broadcasting Service, Saudi ARAMCO FM stations, Saudi-Arabian TV, and an ARAMCO channel in Dhahran.  The number of radios was estimated at 4.8 million and the number of television sets at 4.3 million in 1995. [1]

The first newspaper in what is now Saudi Arabia was Al-Qiblah, the official publication of King Hussein of Hijaz, founded in 1915.  With the end of the short-lived Hijaz kingdom in 1925, a Saudi- sponsored paper, called Umm al-Qura (The Mother of Towns, Mecca), was established.  Newspapers are privately owned; criticisms of fundamental principles of Islam and of basic national institutions, including the royal family, is not permitted.  The largest arabic daily papers (with 1995 circulations) are Asharq Al-Awsat (175,000); Al-Jazirah (90,000); and Al-Bilad (75,000). Leading English language dailies are the Arab News (50,000). [1]

The government is said to severely limit freedom of speech and the press, punishing any criticism of Islam, the ruling family, or the government with detention and arrest. [1]

As of 1996, there were 438,000 personal computers and over 260 internet hosts in Saudi Arabia. [1]



For Saudi Arabia, estimated 2000 year population was 22,426,000.  Very little proportion of Saudi population is 65 years and older.  Immigration of professionals, technicians and others from the surrounding  Arab states and growing numbers from outside the region has been spurred by the development of oil industry and by the lack of adequately trained and Saudi personnel.

According to World Bank estimates in 1995 Saudi Arabia had a GNP of 133.5 billion resulting in a per capita GNP of $7,040.  The CIA estimates that in 1995 the inflation rate for consumer prices was 5% and that real growth rate of GDP was 0%.

The economy is generally open to private investors, but there is a large government sectorand the government plays a significant roe in influenceing resource allocation within the economy.  The Saudi government generally encourages direct foreign investment.  Total direct investment in Saudi Arabia was estimated at $13.3 billion in 1995.

The major exports of Saudi Arabia is oil and oil related products.  However, export value of Saudi Arabia is declining through years; due to the reductions in oil prices.  But also, their imports are declining because of government’s cost cut and efficiency increasing plans.  They use flexible exchange rate system which gives the international firms a stable environment.  The firms are not affected from fluctuations in exchange rates. 

Only Saudi nationals are permitted to engage in trading activities.  All industrial enterprises are opened to non-Saudis and they can trade in the products they manufature.  The Saudi Arabian Monetary Agency (SAMA), the Saudi Central Bank regulates and controls the banking system.  In terms of foreign aid received, Saudi Arabia has relations with USA, Western Europe, EU.

Unemployment rate for 1992 was 6.5%.  King Abd Al-Aziz City of Science and Technology is important for the development of science and technology.

There are three major marketing regions in Saudi Arabia, each has a distinct business and cultural flavor.  Most of the companies use direct sales to their customers by using retailers.  However, direct marketing is not used in Saudi Arabia.  Personal relations with firms and customers play a more important role than in the West. 

There are limitations in Saudi postal system.  No home or postal insurance is available.  Usage of mail campaigns, fax, catalog is limited.

The largest arabic daily papers are Asharq Al-Awsat; Al-Jazirah; and Al-Bilad.  Leading English language dailies are the Arab news.

Market Audit And Competitive Market Analysis:



The firm is founded by Aylin B. Kula, Ceren Arslan and Onur Baser.  In order to operate in Saudi Arabia among the candidate firms, we chose to make business with a Saudi Arabian man who is so close with the royal family. 

For making business in Saudi Arabia, we first have to give advertisement to a governmental periodical that indicates “our demand to export Goodyear Tires from Turkey to Saudi Arabia”.  After it was published, we took lots of invitations.  As you can guess our main motive is proactive. According to commercial laws, AOC gave 51% of the shares to Arabian partner, so we established an export sales subsidiary in Jeddah.  Also we gave 5% shares to Goodyear.



Goodyear brand name has a loyalty due to its global structure.  When we enter Saudi Arabian market we have some advantages compared with our competitors.  First of all GT2 is produced by the latest technology (which USA holds the leadership of innovation of tires).  In addition to these supporting services of this product such as warranty is more advanced when compared with other products.

Saudi Arabia people likes American and Japan automobiles.  Goodyear GT2 is designed for these cars.  It will have a high compatibility with them.

There is no complexity in our product.  Its label related to the size is written on it.  Moreover the customer do not bother with the details, because when the customer comes to retailer, the service stuff will suggest the best-fit tire to the customer.  Having no complexity will increase our diffusion into the Saudi automobile market.

Although people may not be able to trial GT2, we can use promotion mix to compensate the weakness in this situation.  Especially publicity and word-of-mouth can balance the effects of unavailability of trialability.

We use lots of stands in the show rooms for displaying tires, so people can observe the tires and can be sure about its quality.  Flexibility and softness are very important for a tire.  Thus, they can understand the quality of our tires by checking these two features.

There is not really a major problem or resistance to product acceptance.  Because tire is a must for automobile market.  Therefore, there’ll be always a demand for the product.





1. Geographical Regions

The three primary regions of the country- Western, Central and Eastern Provinces- exhibit strikingly different characteristics. The most populous of the three market segments, the Western Province, is the traditional center of commercial activities in the Kingdom. [1]

The strong aspects of the Central Province is its political affluence. Riyadh, the capital city of Saudi Arabia, is situated in this geographic market , and all of the government's foreign embassies have completed their relocation from Jeddah to Riyadh. As the government is a major buyer of goods and services, having sales representatives in the proximity of Riyadh is important exporters targeting the government market. [1]

The Province is characterized by the large numbers of expatriates living in and around Dhahran, Al-Khobar, Arabian American Oil Company facilities, and Jubail industrial complex. Saudis located in this geographic market segment exhibit the most liberal tendencies. In addition television plays a bigger role in this market since transmissions from at least fourteen different television stations are received from around the Arabian Gulf countries. [1]

2.   Forms of Transportation and Communication Available In Saudi Arabia

Transportation: Since the mid 1960’s Saudi Arabia has expanded its transportation and communication networks. [2]

An excellent network of 41,651 kms asphalted roads and 80,965 kms of agricultural roads now links the various parts of the country.  The country had no asphalt roads in 1951. [2]

The Saudi Public Transport Company (Saptco) a public-private joint venture operates the Kingdom’s inter-city and urban bus services. [2]

A modern railways system links the capital Riyadh to the port city of Damman on the Arabian Gulf.  The Saudi Railways Organization operates passenger and freight trains on this double-track line. [2]

The government owns and operates Saudi Arabian Airlines(Saudia).  The country has three international airports-King Khaled International Airport in Riyadh, King Abdul Aziz International Airport in Jeddah and Dhahran’s International Airport in addition to a number of airports in several towns for domestic air transport. [2]

Regarding marine transport, the Saudi Ports Authority operates Jeddah’s islamic port, Yanbu Port on the Red Sea and King Abdul Aziz Port of Damman, as Tanura Oil sea terminal which handles most of the Kingdom’s oil exports on the Arabian Gulf, in addition to a number of smaller ports. [2]

Communication: Saudi Arabia’s telecommunications network ranks among the most advanced in the world. It has managed to achieve this remarkable progress by implementing transmission, national microwave network, and partaking in international telecommunications projects such as King Fahad Satellite Communications city, The Arab Telecommunications Satellite Programme (Arabsat) and the continental Singapore-Marsailles Sea-Cable Project. [2]

The country today has a total of about 1.5 million telephone lines, more than 15,577 car telephones, 6,521 coin telephones, 8,156 telephone booths for direct international calls and direct telephone links with more than 703 countries in the world. [2]

Efficient telegraph, telex and facsimile services are available round-the-clock in 322 centres.  While ordinary, express, domestic and international mail services are provided by about 700 post offices in the country. [2]

2. Consumer Buying Habits

A combination of two factors, cultural and climate, necessitate that products exported to Saudi Arabia and intended for the Saudi or the Muslim market segments be adapted. One cultural aspect that effects consumers' product choice is religious belief. Any product having traces of alcohol or pork cannot sell in the Kingdom. All meat products exported to Saudi Arabia must contain meat that was slaughtered according to Islamic rules. As the religion calls women to cover themselves including their arms and leg, the miniskirt was never popular in Saudi Arabia. Ladies fashions exported to the Saudi market should have long sleeves and floor-length hemlines. The market for statues and paintings of human forms are very limited because they would not be used as decorative pieces in Moslem households. Religious beliefs also limit the place of music, especially Western music, in a Moslem household. [1]

  There are other traits of the Saudi consumers that are culture related and will affect their product choices. For example, it could be observed that Saudis prefer white, black and red colors. As it reflects the sun's heat better than other colors, white is the color of choice for cars. The extended family structure of the Saudi household where the family unit might contain parents and close relatives of both the wife and the husband will also influence product decisions. The large size of the extended family requires larger size packaging. For this reason, the spaciousness of US cars has always been a distinct advantage in the Saudi market. [1]

  The climate in Saudi Arabia influences product decisions also. During certain times of the year, humidity could reach 100% in many coastal areas. For this reason air conditioning is a vital part of life in Saudi Arabia. [1]

  Packaging should protect the product in the harsh Saudi climate. This would mean a more liberal use of air space and polystyrene plastic in packaging. Package labels must be written in the Arabic language. As Saudi Arabia uses the metric system, all label information pertaining to weight and volume should use this system. [1]

  Product innovation, specifically for the Muslim market, is the ultimate product strategy that wins loyal customers. Experiences of some innovators support the fact that this could be a rewarding strategy. [1]

  Saudi consumers have developed a sophistication in their selection of products. Awareness for service warranty has grown rapidly along with the demand for after-sale service. Guarantees and warranties have also become important incentives in today's Saudi market. The pilgrims and other expatriates who come to Saudi Arabia for short durations carefully search for products that provide worldwide guarantees. [1]

3.   Distribution of the Product

The distribution system in the Saudi market exhibits a number of characteristics which should be considered.  First, marketing intermediaries in Saudi Arabia do not specialize in one aspect of channel functions such as wholesaling or retailing.  These firms are complex organizations that can function as importers, wholesalers, exclusive distributors, retailers et al.  Larger ones also operate in other fields including construction, manufacturing.  Because of their size and economic influence, these marketing intermediaries play major roles in the channel of distribution.  Many times they function as channel captains by organizing and leading their channels.  Therefore, signing up with the proper conglomerate or the channel captain is imperative for successful distribution in the Saudi market. [1]

Second, the extent of market coverage by even the largest marketing intermediaries is limited.  There are no wholesalers who can profess Kingdom-wide market coverage.  There are some chain stores, but the largest chain will have less than ten stores.  Under these circumstances, exporters seeking extensive and intensive market coverage should appoint separate distributors in each of the Kingdom’s three provinces.  These distributors should be given exclusive sales rights within their respective territories. [1]

Finally, Saudis warm up to business relationships slowly.  First meetings rarely produce orders.  They use the initial occasions to test suppliers’ commitment and to develop personal friendships.  Even after a supplier-distributor connection is established, the continuity of the business relationship will depend on the continuity of the personal relationship and trust.  Saudi middlemen also prefer to deal face-to-face with their suppliers.  Left alone, they will rarely take the initiative to place orders.  For all of these reasons, it is imperative to maintain a permanent sales office in Saudi Arabia.  An order-getter by nature, the exporter’s salesman in this office would continue the personal contacts in order to keep the friendship and the trust ties alive.  In addition, the permanent representative of the exporter should use a liberal dose of trade promotion to motivate the distributors to push exporter’s products through the marketing channels towards customers. [1] 

5.   Advertising and Promotion

Improved sophistication of the marketing communication channels and the supporting industry have led to an increasingly significant role for advertising in Saudi Arabia.  In most cases, the advertising practices exporters were accustomed to in their home markets will require adaptation to the cultural requirements of the Saudi market.  Comparative advertising is not approved.  Also, exporters must plan their advertising message with utmost care so that they will not clash with the moral and social values and beliefs.  Any allusion to sex, nudity, propaganda of their religions, or alcohol drinking is not permitted. [1]

Derogatory scenes of Saudi Arabia or any insult of the Arab character will have devastating effects on the exporters’ posture in Saudi Arabia.  It happened  in the past that some exporters were compelled to take full-page ads in the local and foreign newspapers to apologize for the bad message choices.  For example, a tire company has dismissed its campaign agency and publicly apologized for an advertisement that angered the Arab World.  The advertisement depicted an ugly Arab holding a knife to the company’s tire, apparently enraged by its fuel-saving qualities.  A motor company published apologies for picturing an Arab kicking one of its smaller models for fuel economy and lamenting the fact that such savings would adversely affect his extravagant lifestyle. [1]

Messages should use simple and directly expressed ideas.  As all non-Saudis speak the English language, the messages should be in English if they are targeted for this market segment.  However, simple translation of messages prepared in English into Arabic will not be effective for the Saudi market segment.  Also, taking commercials prepared for American or British audiences and dubbing them over in Arabic will fall short of the level of commitment required to be successful exporters to Saudi Arabia. [1]

Media outlets can be split into three categories: print media, outdoor media, and audio-video media. [1]

There are four different types of print media: handbills, yellow pages, newspapers and magazines.  Handbills, including brochures, pamphlets.  This medium is used to announces  special promotions such as contests and games, and to describe recipes for food products that are new to Saudi customers. [3]

As an advertising medium, the yellow pages of the telephone directories are useful for advertising company information including company addresses and telephone numbers. [3]

Because of the limited use for handbills and the yellow pages of telephone directories, print media in Saudi Arabia consist primarily of newspapers and magazines.  It is estimated that around 80% of advertising expenditure for print media go to newspapers and the remaining 20% to magazines.  In addition, about 80% of the expenditure for print media is for advertisements that are placed in Arabic language print media and the remaining 20% goes to English language print media(Shehadi, 1984). [3]

There are a number of serious problems with Saudi newspapers and magazines as an important media alternative for international advertisers.  Considering the fact that the cultural and traditional character of Saudi society does not permit the use of several media for advertising (ie. cinema, radio and video), several problems in the print media make media selection a more difficult decision for advertisers.  The problems will be presented in four general categories.  These are circulation, distribution, readership, and cost issues. [3]

1)  Circulation: The top-selling newspaper can muster a circulation of only about 260,000. The most popular magazine sells around 185,000 copies.  For a country  thought to have a population of 13 million people, the print media are estimated to reach less than 5% of the adult population.

2)  Distribution: In many rural areas of the Kingdom, newspapers and magazines are difficult to find or they are not available at all.  Some of the distribution problems can be tied to size of the country.

3)  Readership: Advertisers have no access to reliable readership profiles for the newspapers and magazines in which they advertise.  Most publishers do not bother to study their readers to find out about their geographic, demographic, psychographic, and behavioral characteristics.

4)  Costs: It must be pointed out that the cost of reaching 1,000 readers through advertising in newspapers and magazines published in Saudi Arabia is substantially higher than the similar cost advertisers would accrue in Western markets.

Ideal climatic conditions give excellent visibility to outdoor media.  Outdoor advertising is available through lamp-pole signs, sport stadium displays, billboards, highway “unipole” signs, bus panels, three-dimensional street posters, and “rota-signs”.  Low cost and high repeat exposure make outdoor media ideal to create awareness for products that are recent entrees into the Saudi market. [1]

The audio-video medium is a relative newcomer to the advertising scene in Saudi Arabia.  In the past, television advertising was possible using television broadcasts of Arabic Gulf countries which could be picked up in the Eastern Province and Egyptian television which could reach certain areas of the Western Province.  Recently, exporters to Saudi Arabia were given access to channels 1 and 2 of the Saudi television for limited advertising spots.  Availability of television advertising presents an additional opportunity for the media planners of exporters or their advertising agencies.  Video advertising has been available as an additional vehicle for the last few years. As most Saudi households own at least one video set -separation of women’s living areas necessitate multiple numbers of equipment gadgets such as video sets- this advertising vehicle is very effective to achieve quality exposure for persuasive advertisement. [1]

Finally, the tribal nature of the Saudi society and the strong communication bonds within the different nationality segments of the expatriate society make word-of-mouth a major factor in Saudi market.  Products satisfying the needs and wants of the initial buyers will soon get many customers as their reputation spreads within the different market segments. [1]



6. Pricing Strategy

The Saudi market is a buyers market where exporters need to scramble hard to find enough buyers to make profits.  The price element has emerged as an important factor influencing the purchase decision.  There are a number of factors in support of this contention.  First, Saudi Arabia is tax free.  There are no taxes on the sale or on the purchase of products conducted within the country.  Second, the distribution channels in Saudi Arabia tend to be vertical marketing systems.  The typical importer-wholesaler also operates at the retail level.  This system keeps the retail prices lower than the normally detached distribution channel where separate ownership at wholesale and retail levels exists.  Third, Saudi importers prefer to import directly from the manufacturer, thus bypassing foreign exporters.  Fourth, Saudi middlemen keep tight control on their operating costs.  Finally, the import duties are very low.  On most imported items, the import duties will vary between 4 -7% ad valorem. [1]

There are two other factors that will influence pricing decisions.  One is the beginning of credit use in Saudi Arabia for certain durable goods including cars and furniture.  A typical installment plan would require a 30% down payment followed by up to 15 monthly payments.  Another factor is the level of inflation, which has registered a moderate 3% deflation during 1986[1]

The laws regarding price reductions are within the domain of the Ministry of Commerce and the application of these laws are supervised by the Chamber of Commerce.  By law, every company is allowed to conduct price deals for their products no more than twice a year. In the same manner, companies are authorized to give seasonal discounts also twice a year: one starting during the

middle of March and the other during the middle of September. For both periods, the duration of the price promotion campaign cannot exceed 45 days. [4]

For the holy cities of  Makkah and Madinah, the period for seasonal discounts is six months covering the pilgrimage season which varies according to the Arabic calendar.[4]



When we search the tire companies web page about their operations in Saudi Arabia there is no manufacturing plant of the manufacturing companies.(

Existing products have no differences with GT2 in terms of packaging.  Michelin, Firestone, Yokohoma, Bridgestone and other non global tire brands (Syrian brands) exist in the Arabian market.

The prices are similar, prices are determined in the market. 


1. Industry Sales

In ' The Automobile Market in Saudi Arabia ' article, Secil Tuncalp indicated that ‘In Saudi Arabia the ownership of car is 21 per 100 people. After taking population into consideration (14, 435, 000), we estimated that 3, 031, 350 cars were used in Saudi Arabia. As a result, every car has four tires, we multiply car number with four, we came to market size of 12, 125, 400.’ [5]

2. Estimate Sales

Goodyear's sales manager Mr. Ibrahim Goknar, suggested that target sales of 15% is appropraite as we enter the market for the first time. 1, 818, 810 is estimated to be the maximum possible sales.



1. Agencies that can help

*     Ministry of Commerce: Foodstuff quality control, consumer protection, companies and commercial agents' registration, labeling regulations and standards.

*     Customs Department: Custom duties

*     Ministry of Interior: Traffic department

*     Ministry of Communications: Coordination of surface transport including railroads and bus system.

*     Directorate General of Zakat and Income Tax: Tax collection

*     Jeddah Seaport, (Jeddah Islamic Port): Port development, port stevedoring, regulations & documents.

*     Saudi Arabian Standards Organization (SASO): Development, publishing and distribution of standards ( for a change )

*     Saudi Arabian Monetary Agency ( SAMA ): Central Bank [6]


2. Regulations

Import regulations and procedures:

*Commodities imported under Chapters Two and Three of the Brussels Tariff Nomenclature ( BTN ) are exempt from duty. Moreover, imports or machinery, spare parts, and raw materials by approved industrial enterprises ( both foreign and domestic ) are exempted from custom duties.

*Import duty on most other items is three per cent ad valorem on the c.i.f. ( cost, insurance and freight ) value.

*A limited number of items are subject to custom duties calculated on the basis of metric weight or capacity, rather than ad valorem. However, the rates for these items are fairly low.

*Members of the Arab League who are signatories to the Agreement to Facilitate Trade and Exchange and to Organize Transit between the Arab League States are granted special concessions.

*Imports from the Arab states with which Saudi Arabia has bilateral trade agreements are entitled to further reductions of duty.

Shipping Documents

*     Five copies of the commercial invoice must be submitted.

*     Certificates of origin are also required.

*     The bill of lading should list the gross weight, volume, measurement, identification marks, and name and address of the consignee in Arabic.

*     A packing list should be submitted with the bill of entry.

*     The insurance certificate, when required, must be authorized in duplicate by the Saudi Consulate in the exporting country.[7]



On the product side, we have opportunities when we compare with the market.  Having Goodyear brand name gives a relative advantage, because Goodyear perceived as a qualified American brand.  Moreover, most of the Saudis use American cars, this’ll bring a proximity to US based products.  Saudi Arabia’s telecommunications network ranks among the most advanced in the world.

There are three primary regions of the country :Western; Central and Eastern Provinces, which exhibit different characteristics.  An excellent network of 41,651 kms asphalted roads and 80, 965 kms of agricultural roads now links the various parts of the country.

The distribution system in the Saudi market exhibits a number of characteristics which should be considered.  First, marketing intermediaries in Saudi Arabia do not specialize in one aspect of channel functions, such as wholesaling or retailing.  Second, the extent of market coverage even the largest market intermediaries are limited.

Improved sophistication of the marketing communication channels and supporting industry have led to an increasingly significant role for advertising in Saudi Arabia.  Media outlets can be split into three categories: print media, outdoor media, and audio-video media.  There are four different types of four media: handbills, yellow pages, newspapers and magazines.

The Saudi market is the buyers market where exporters need to scramble hard to find enough buyers to make profits.  The laws regarding price reductions are within the domain of the Ministry of Commerce and application of those laws are supervised by the Chamber of Commerce..


Marketing Plan




Target market is chosen according to geographic regions. As Saudi Arabia is divided into three geographic regions, which are Western, Central and Eastern Provinces, Western Province is the best alternative for establishing permanent sales offices for exporters to Saudi Arabia. Because the Western Province is the traditional center of the commercial activity in the Kingdom.

After considering industry and company sales, expected sales for 1999 is estimated to be 1,818,810 tires, in dollars $138,229,560  (list price of GT2 is $76).

Expected gross profit for 1999 is estimated to be $27,645,912. Because our objective profit margin is 20% of sales.

As the market is very heterogeneous and disjointed, the Saudi market is difficult to penetrate. We believe that targeting one segment should be considered as the initial entry strategy, so concentrated marketing strategy is chosen. Also in case of failure, because of conservative nature of this strategy, our losses will be relatively low.



GT2 is the core product. It is standard summer tire. GT2 is for dry and hot climates which is extensively used in hot regions of Turkey, so adaptation or modification isn't necessary. Because packaging is not needed ( tires don't need to be packaged because it's not like food or car. However, for storage purposes we should protect them from direct sunlight ), on the tire there are information about features of GT2 such as the size of the tire, suggested air pressure (psi) and weight capacity (kg), max. speed limit (‘T’ for 180 km/hr, ‘H’ for 200 km/hr), safety warning and the origin of manufacturing.  Finally, the brand level of the tire.

ACO uses warranties for supporting services.  Warranties are the most important component of after sales services.  ACO gives one year full warranty to all of the tires that exported from Goodyear.  These warranty includes the manufacturing and labor-related defects.  The procedure is when the customer goes to our retailers in Saudi Arabia, the customer should leave the tire to the retailer and complete a warranty form.  Every month a tire defect expertise visits our retailers inspect the defective tires with their attached complaint forms.  The result of these inspections are sent via mail to the customers.  If the defect is our fault, we refund it by 100%, however, we don’t pay in cash.  Instead customer can buy the new tire from our retailer again.

For increasing the service quality of our retailers, ACO will train employees of our retailers, ACO will train employees of our retailers, encourage them to purchase new and highest technology service equipment or meet some percent of the cost when they are buying equipment.



In order to create brand awareness and highlight our products quality relative to other competitors in Saudi Arabia, we should use extensive advertising activities.

1. Advertising:

Three categories of media are available in Saudi Arabia; print media, outdoor and audio-video media.

Print media is preferred by exporters because of its high quality and professional services. There are four different types of print media; handbills, yellow-pages, newspapers and magazines. Among these, ACO chooses to use newspapers and magazines.  Since handbills are used to announce special promotions like contests and games.  In addition, yellow pages are useful for advertising company information.  As a result, these two are not considered.

In Newspaper Advertising Practice in an Arabian Gulf Country, Secil Tuncalp claimed ‘There is not a single newpaper which can provide advertisers with an intensive market coverage and give them an ability to reach most of the members of their target markets with their advertising appeals.  All of the fourteen dailies published in Saudi Arabia have limited circulations and regional distribution qualities.  This condition requires advertisers to scramble the newspapers they use with their advertising activities in order to maximize the reach of their ads.’ [1].  In the light of this information, ACO choses to give advertisements according to the newspapers’ estimated circulation.  We give advertisements to Asharq Al Awsat which has the highest estimated circulation (260,000) and Al Muslimoon which has the highest estimated circulation (135,000).  



Region of pub.

City of pub.



Asharq Al Awsat






Al Madina












Al Bilad






Al Muslimoon












Ad Dahira






Al Nadhaw






Saudi Gazette






Arab News






Al Jazirah






Al Riyadh






Al Massaeyah






Riyadh Daily






Al Youm






Source: The Middle East and North Africa 1991 (1990), 37th eds, Europa Publications, London, pp. 763-4  

 After observing this table, as our target market is Western Province of Saudi Arabia; Al Jazirah, Al Riyadh, Al Massaeyah, Riyadh Daily and Al Youm are not taken under consideration.  For the other newspapers we made the following analysis:

As can be seen from the chart above, Asharq Al Awsat and Al Muslimoon have the highest circulations in Western Province of Saudi Arabia.

Moreover, ACO selects two magazines for advertising again according to the estimated circulation and their editorial climate.  First choice is Asharq Al Awsat, its editorial climate is general interest, which has the highest circulation of 184,000.  Our second choice is Al Majalla, its editorial climate is social/political, which has the second highest circulation of 172,000.  ACO prefers to choose Arabic language magazines and newspapers because only non-Saudis can speak English.


Location of pub.

Estimated Circulation





Al Yamamah




Al Majalla








Asharq Al Awsat

Jeddah, Riyadh




Jeddah, Riyadh



Al Faisal




Saudi Economic Survey




Source: The Middle East and North Africa 1991 (1990), 37th eds, Europa Publications, London, pp. 763-4

By taking these circulations under consideration the following chart is observed:

  So it can be observed from the above chart that Asharq Al Awsat and Al Muslimoon have the highest circulations in Werstern Province.

On the other hand, there are some problems with print media. Firtly,  distribution of newspapers isn’t so efficient because of the country’s size.  In addition, there can be large distances between population centers.  Another problem is readership.  This is mainly because of the publishers’ lack of information about their readers.  Third problem is their costs.

Taking these disadvantages under consideration, ACO decides to include outdoor meida to support our media mix.  As mentioned before, Saudi Arabia has ideal climates for outdoor media.  ACO gives advertisements through lamp pole signs, sport stadium displays, billboards, highway “unipole” signs.

Message: Our motto (slogan) is “We promise… you’ll reach where you want”.  As Saudis prefer white, black and red colours, we decided to use these colours in our advertising message.  Same advertising message is used in print media and outdoor.  Our message consists of a man driving a black Chevrolet on the dessert  with a smiling face, and a self confident manner, because he is sure of his tire, it’ll never let him down.

Cost:  For newpaper ads, in Asharq Al Awsat and Al Muslimoon the colour ads are not available.  The cost of inside full-page ad (riyals) is 35,000 riyals for advertising in Asharq Al Awsat.  The same type of ad is 17,000 riyals for Al Muslimoon.  Once a week, ACO gave advertisements to these newspapers because instead of giving advertisements daily through one month, we advertise once a week through a year.  As a result, ACO will achieve cost efficiency and create more brand awareness, in addition it has a long run effect of memorizing.


Costs of inside



full-page ad(riyals)

Asharq Al Awsat



Al Madina






Al Bilad



Al Muslimoon






Ad Dahira



Al Nadhaw



Saudi Gazette



Arab News



Al Jazirah



Source: The Middle East and North Africa 1991 (1990), 37th eds, Europa Publications, London, pp. 763-4

For magazine ads, we choose Asharq Al Awsat and Al Majalla.  These two are weekly published magazines.  Again ACO gave full-page colour ad.  The cost of iy in riyals for Asharq Al Awsat is 17,500 riyals and for Al Majalla is 21,500 riyals.  ACO gives advertisements to these magazines once a week.


Costs of inside



full-page ad(riyals)




Al Yamamah



Al Majalla






Asharq Al Awsat






Al Faisal



Saudi Economic Survey



Source: The Middle East and North Africa 1991 (1990), 37th eds, Europa Publications, London, pp. 763-4

Low cost and high repeat exposure make outdoor media ideal to create awareness. ACO estimated its cost to be 20,000 riyals.

2. Sales Promotion:

To speed up our entrance and to gain attention of the Saudis, we use sales promotion.  For sales promotion our sales slogan is “Buy four tires pay for three.”  This is actually equal to 25% discount. ACO use this sales promotion mainly because of the Saudis’ shopping habits.  While shopping free gifts encourage them to buy.

Publicity: Because we are partners with a loyal Arabian , all of the newspapers, televisions, magazines, in short all media talked about our firm and our product in our favour.  Publicity is free advertisement and customers’ trust to our product and services increase with the help of publicity.



1. Mode of Selection





·      Cheap

·      Weak railroad network connects Eastern Province to Riyadh

Air Carriers

·      Fastest

·      Very expensive

Motor Carriers

·      Cheap

·      Motor vehicles have to pass at least three countries(Syria, Jordan, Iraq) so delays and extra custom duties

Ocean Carriers

·      Relatively cheap

·      Jeddah is a port city

·      Ease of transportation

·      May take long



When we analyze the pros and cons each type of transportation, we selected ocean carriers.

2. Port Selection

Origin port is Adapazari. Destination port is Jeddah, because of its high volume of commercial activites and its proximity to our sales subsidiary. ACO's transportation firm is Tekkar Sea and Land  Transport Inc. [ Appendix G-12 ]

3.   Packing:

As mentioned before, ACO will use containers to carry tires. But for labelling Arabic alphabet is required.

 4. Insurance Claims

In the agreement, we used C&F ( Cost and Freight), so insurance is not included.  ACO firm has to pay for damages. [ Appendix G14 ]

5. Documentation Required

When mother company ( Goodyear ) takes the order from ACO, Jeddah the first thing is to have an acceptance from SASO ( Saudi Arabian Standards Organization ).

When Goodyear apply SASO for ensuring GT2 has qualified standards of Saudi Arabia, they give a reference number, as can be seen in [Appendix G3A].  After receiving order confirmation by using reference number, Goodyear is ready to load. Tekkar Company loads tires to trucks and carry them Adapazari  Plant to Adapazari port by trucks.  Tekkar receives ' Sevk Irsaliyesi ' from Goodyear that indicates the number of tires [Appendix G4].  Then Tekkar Company loads GT2 to pallets of the container [Appendix G5].  This is the end of the loading process.  The export documentation that Goodyear includes are; invoice of the product [Appendix G6], packing and weight list[Appendix G7], certificate of origin [Appendix G8], and the business order documents that is given to customs of Turkey [Appendix G9] and another required custom document [Appendix G9]

Goodyear pays a 7% commission to 'Uludag Ihracat Birligi' which Goodyear is a member.  The other document is about shipment details. [Appendix G12]

Bill of lading presents the ownership of the exported good.  Goodyear sends a copy of bill of lading to ACO.  Without having this document we can not receive tires from Jeddah Port [Appendix G13].  Finally, ACO  received the invoice[Appendix G14].  Invoice includes payment terms, delivery terms (CFR), freight costs.

Our trucks go to Jeddah Port and unload the containers and pay the custom duties.  Then load them to  our trucks and carry them to ACO's warehouse.

6. Retailer Distribution:

            In Jeddah, ACO has a headquarter and a warehouse for storing tires. ACO wil use direct exporting channel as follows:

Domestic &







Importing Firm












ACO will not use wholesalers. We will directly sell to retailers. In order to establish a retailer there must be a showroom and service place, which will provide necessary servicing. ACO provides sign which indicates name of the firm and Goodyear logo, stands for holding tires in the show-room, stickers and brochures. Furthermore, ACO gives financial aid for purchasing service equipment and computers.

            Before establishing retailers in all the possible locations, ACO will open a big showroom in Jeddah which we have a 100% ownership. Then ACO will expand its sales by opening new retailers in Makkah, Medina, Yanbu, Taif and Baha.

            The profit margin of retailers in Turkey is 15%, on the list price. In addition to this, we’ll use discount system and give discounts to retailers according to the number of retailer’s purchase. By this way, they will able to increase their profit margins.



Cost of shipment of GT2 is as follows (for 1330 tires) [Appendix G-14];

Inland freight (from Adapazarý Plant to Adapazarý Port)


Freight Charge (C&F)


Outland freight (from Jeddah Port to ACO Warehouse) – estimated


Insurance Costs


Import Duties ($50*1330*0,05[1])







            We use 1,330 tires in our calculation, because the invoice [Appendix G-14] taken from Goodyear includes 1,330 items.  And also according to our contract with Goodyear (they are currently owning 5% of ACO), we will also meet shipment costs.

            Thus 6,798.80/1330= $5.11. This is the total cost of shipment from Adapazarý to Jeddah per tire. ACO purchase GT2 at a cost of $50. We have a cost of $5.11. So, the total cost of GT2 is $55.11. We have set a profit margin of 20%, which results $11. Our retailers have a profit margin of 15%, so the retail price of GT2 in Saudi Arabia is $76.

Cost of GT2


Cost of shipment


Profit Margin


Retailers’ Margin






Our method is CRF. It was the most suitable method of transportation. If we choose other methods such as EX WORKS, FOB, FAS, CIF, they'll be either on behalf of exporter or importer. By choosing C&F, we give responsibility to Goodyear until the point of shipment from Adapazari. Then the transportation company Tekkar takes responsibility from the point of shipment to Jeddah Port. After responsibility transfers to AOC.



If  AOC uses cash in advance as a method of payment, the buyer nay think we don't trust them. In addition, consignment business, in many countries, can be dangerous for three reasons: first, the laws are not always clear on the ownership of the consigned merchandise; second, it is difficult for the seller to keep a watchful eye on the consigned merchandise when it is physically in a far country; and third, exchange controls may preclude payment by the consignee. Consignment, open account, and sight draft, D/A involve the extension of credit by the seller to the buyer. With any of these three the seller loses complete control of the merchandise and places it in the custody of the buyer.Using sight draft, D/A, the seller does not lose possession  or control of the merchandise because the buyer must pay for it before taking possession. At a conclusion, letter of credit seems to be the best method of payment. [2]

In International Marketing and Export Management book, letter of credit is defined as an instrument, usually issued by a bank, at the request and for the account of its client, which indicates that the bank agrees to pay to the named beneficiary a sum of money upon the transportation of certain documents or written representations as stipulated in the letter of credit.

In the letter of credit, a sales contact between Goodyear and ACO is required.  Secondly, ACO makes application for exporting GT2 to Saudi Arabia to our bank  Saudi Credit Bank for the letter of credit. Letter of credit is forwarded to Kocbank, which is Goodyear's bank, who verifies it and informed Goodyear of its arrival.  If Goodyear can comply with letter of credit, Goodyear ships the goods.  Goodyear draws a draft and presents it along with other required documents to Kocbank.  After all the letter of credit conditions are met, Kocbank seeks reimbursement from Saudi Credit Bank.  When reimbursement in received by Kocbank, they'll pay to Goodyear. Kocbank forwards negotiated documents to Saudi  Credit Bank.  Then, Saudi Credit Bank releases title documents to ACO upon receiving payment from us.  Finally, with these documents we can go to port and take our tires.[2]




Advertising & Promotion expense ……………………$1,261,860/year

Product Cost ($55.11*1,818,810) ………...………$100,234,619/year



For the 1st Year

Revenue (1,818,810*$76)                      $145,504,800/year

Profit (before costs, 20% of revenue)       $27,645,912/year

Advertising and promotion costs:            ($1,261,860/year)

Other Costs:

      Labor & Personnel                               ($420,000/year)

      Retailer supporting costs ($50,000*6)   ($300,000/year)


NET PROFIT for December 31,1999       $25,664,052/year

For the 5th Year

In the fifth year our target is capturing 30% of the market. So our sales should be 2,728,215. But we expect an increase in labor costs by 15%, and retailer supporting costs by 45%, because after operating five years the competition will increase so much that we need to increase quality of our retailers to capture the market.

After considering 5% inflation rate we calculated fifth year’s price (cumulative) will be 91.4


Revenue (2,728,215*$91.4)                      $249,358,851/year

Profit (before costs, 20% of revenue)          $49,871,770/year

Advertising and promotion costs:               ($1,261,860/year)

Other Costs:

      Labor & Personnel                               ($483,000/year)

      Retailer supporting costs                      ($435,000/year)



NET PROFIT for December 31, 2004       $48,827,584/year






The Saudi Credit Bank was established in 1391H. It has 24 branches throughout the kingdom. We need $150 Million credit, which our Saudi partner provided $80 Million of it. The rest of $70 Million was financed by ACO ($30  Million) and  Saudi Credit Bank ($40 Million).



Our target market is Western Province.  Our expected sales for 1999 is $1,818,810 and our profit expectations for the same year is $27,645,912.  We use concentrated marketing strategy to penetrate our target market.

ACO’s core component is GT2.  We don’t need an adaptation for packaging.  As a support services component, we give importance to warranties.  Our warranties are for one year. 

For our media mix we choose Asharq Al Awsat, Al Muslimoon for newspaper ads, Asharq Al Awsat, Al Majalla for magazine ads.  Also, Saudi Arabia has ideal climate for outdoor media.  So ACO gave ads to billboards and highways ‘unipole’. For sales promotion our sales slogan is “Buy four tires pay for three.”

ACO chose ocean carriers as the distribution method because of its relative advantages, and our origin port is Adapazari, destination port is Jeddah port.  For packaging we don’t do any adaptation, but in terms of labelling we used Arabian alphabet.  ACO has one warehouse in Jeddah and 6 retailers in Western Province.

For terms of sales ACO uses C&F, and for methods of payment letter of credit is used.  For the first year expected profit will be $25,664,052 and for the fifth year expected profit will be $48,827,584.



[1] Ad Volarem taxes

[2] * Commercial atesche, internet, library didn't have enough information about tire industry so we estimated the size with the information on hand.

* Our claims are based on Columbia Strategy Planning in Export Market: The case of Saudi Arabia, by Secil Tuncalp, p.72