Saudi family firms need specialist skills

17 October 2008
Globalisation is bringing change and specialisation is becoming a feature of the kingdom’s market.

Conservative business models remain strong in Saudi Arabia, particularly at family firms that work across a wide range of industries.

Trading in a bit of everything works well for many Saudi businesses because the activities of the different arms can complement one another - a family-run shipping agency, for example, will use a sister company to supply fuel.

But globalisation is bringing change and specialisation is becoming a feature of the market. Saudi Arabia’s entry into the World Trade Organisation (WTO) in 2005 has been the catalyst, building on the momentum that was created by the Foreign Investment Act in 2000.

Since 2000, foreign direct investment has climbed from $183m a year to $14.3bn in 2006, injecting significant competition into the market and giving Saudi Arabia’s family conglomerates food for thought.

The local businesses still have a huge advantage in knowing the market and having decades-old relationships with suppliers.

But the specialised skills and resources that new entrants to the market bring means they can be strong competitors.

Some prominent families are now co-investing with these new entrants as a way to tap into their expertise.

The Al-Fozan Group, for example, has taken a stake in a new financial services firm, Blominvest Saudi Arabia, which is being set up by Lebanon’s Blom Bank.

More family firms are sure to follow.

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