Importance of International Business

International business is commercial transactions that take place between two or more countries. The commercial transactions, also referred to as global business, involve exchange of goods, services, human resources, capital and technology. This business can also include export and import of goods and services, establishment of joint ventures, franchising, establishment of a branch and provision of technology and special expertise. International business presents myriad of opportunities to companies and countries dealing internationally, such as facilitation of large-scale operations, integration of economies, availability of information technology and competitive advantage over the upcoming companies. However, international business is subject to many laws, since each country has its own rules and regulations of controlling business activities.

This paper seeks to explain the unique features of conducting business in the United Arab Emirates by providing a company wishing to set up business operation in the UAE with a comprehensive analysis of the various business opportunities, legal environment, various options of establishing business, competition, technology, political stability and specialization of the company, if it has already established business in other parts of the word. The company also needs to study the people of the country, as well as their customs and needs, to ensure that it meets specific needs of its potential customers. The new company also needs to establish the mode of market entry. The firm will have to consider establishing joint ventures with the local companies producing similar products or partnership. In advising the company, we will have to access the unique environment of conducting business in the UAE (Rehman, 2007).

Importance of International Business

International business presents myriad of opportunities to business and countries undertaking international business. Global business has enabled countries and companies to obtain higher profit margins. The country benefits from foreign exchange, since it facilitates achievement of balance of payments through increased exports. International trade has also facilitated economic integration of economies; this has led to improved relations between the countries and increased business activities. Improved business relationship between the countries make the activities of companies flourish by increasing their profitability.

International business has also led to optimal utilization of resources due to large-scale production of goods and services, which enable the company to benefit from the economies. The company is also able to access and acquire technology that facilitate production at low cost, as well as hire human resources where they are cheaply available. International business enables the companies to achieve their objective of earning higher profits. Optimal utilization of resources enables the company to achieve higher profits and production of high quality products. For the company to remain competitive in international business it has to ensure that global customers are satisfied. This is only achieved through production of high-quality products (Vaghef, Paulson, & Tomlinson, 1991).

Multinational companies are able to diversify their risks due to the wide area of conducting business. Thus, a loss in one country can be offset with profits in another, while unsold products or products that are not performing in one country can be transferred to another country where they are in demand. Global business has facilitated achievement of high levels of efficiency and effectiveness due to use of modern technology and management techniques. Highly-skilled staffs who are highly motivated, since they can get international transfers, run these organizations. This increases their competitiveness in the global market. International companies are able to expand and diversify their activities due to their high profits (Vaghef, Paulson, & Tomlinson, 1991).

Business Environment in the UAE

The United Arab Emirates is a Middle East country; it is a federal government with seven emirates. The country is predominantly Islamic and the Muslim Sharia laws are in operation. Being reach in oil, the country is the fourth largest producer and exporter of oil and oil products in the word. The UAE has the richest per head population, and it is the commercial hub in the Gulf Cooperation Council and Middle East in general. that the country is most attractive to foreign investors due to the introduction of free trade zones. Having a well-developed financial system, the UAE is also a leading real estate developer. Its valuation of real estate is the highest in the world (Oxford Business Group, 2008).

The company that wants to set up business operation in the UAE is to offer insurance services to businesses and individuals. The firm may consider setting up its business in the country as a corporation, joint venture, partnership, branch or representative office. If the company wants to establish business as a joint venture, its local partner must own equity of at least 51%. It is not an obligation to register a joint venture, since the company can deal with third parties in the name of the local partner. The joint venture may facilitate the company’s entry into the market.  However, the law stipulates that any company engaging in insurance and financial services should be run as public. Since this company has branches in other countries, the law allows foreign companies to establish their presence in the country as foreign branches or representative offices. To work effectively as a branch, the firm will need to look for local agents, who are the UAE nationals or represent a company fully owned by the UAE nationals (Rehman, 2007).

The UAE Islamic insurance, also known as Takaful, is one of the smallest in the financial system of the Persian Gulf. This presents the company with an opportunity of potential growth. However, there are other international and local firms, which are offering insurance services; therefore, the company will require an innovative and strategic plan of entering the market. The citizens of the UAE have started embracing the importance of risk management and diversification of corporate risks. Saudi insurance companies dominate the market; compliance to Sharia laws will facilitate offering of life and medical insurance to UAE citizens. The growth of real estate and home ownership schemes presents opportunities in the market, as firms and families seek to reduce their mortgage risks (Oxford Business Group, 2007).

The insurance market in the UAE and the Middle East has remained relatively small, as compared the global insurance market. The lack of insurance penetration in the market caused by the lack of sufficient insurable assets and generous pensions provided by the government are to blame for this. Cultural and religious beliefs have also been a great barrier to penetration of insurance in the market. However, the recent infrastructural growth and investment have increased insurable assets in the country; therefore, growth of insurable assets is tremendous. Increased growth of local companies and awareness of the benefits of insurance have led to increased demand for insurance in the UAE. The government has also encouraged its citizens to save through their own pension and retirement schemes. This has led to increased market opportunities for pension and life insurance businesses. With the growing population and increased investments in the UAE, the new growth trend in the insurance industry looks promising (Oxford Business Group, 2010) (Oxford Business Group, 2007).

Therefore, the company has the potential to develop and grow in the UAE, if it formulates a strategic entry and products that meet the specific needs of the UAE nationals and corporations, since they represent the target market. The insurance market is fragmented according to regions in the UAE. Competition is high, with well-established local insurance companies, such as Oman insurance, Abu Dhabi national and Arab Orient, having strong positions in the market. The mjority of foreign insurance companies are offering their services to expatriate companies; therefore, the company should consider offering competitive services to the expatriate companies to exploit the whole market. The insurance industry is divided into local, also referred to as ‘onshore’, and non-local, also referred to as ‘offshore’. The local regulation authorities regulate onshore, while Dubai international financial services authority regulates offshore insurance operators. The company’s operations will be regulated by Dubai international financial services; therefore, prior to commencing operations, it will have to consider the requirements of the relevant authorities (International Business Publication, 2002).

Economic Religion and Population Structure

The company will have to consider the economic strengths and regulations of international companies operating in the UAE prior to making a decision to invest in the country. The country operates as an open economy and has the highest per capita income in the world. The country major source of income is oil industry, and with the increasing demand for energy and growing oil prices, the country is continuing to enjoy trade surplus. The UAE has formulated many policies to diversify the economy, but the oil industry still dominates in terms of GDP contribution, which is close to 40% of the GDP. The country is running expansion programs aimed at increasing employment opportunities and expanding infrastructure and incentives for the growth of the private sector. This led to the signing of the Trade and Investment Framework Agreement in 2004, which authorized free trade zones, where 100% foreign-owned companies can operate. In these free trade zones, the companies are exempted from taxes, and they can expatriate their income to their countries of origin. This shows that the country policy towards foreign investments is attractive, and the company should consider the requirements of operating in the free trade zones to enjoy the associated benefits. The rate of inflation has been high and the rising prices for real estate and consumer products have increased the cost of operating a business (Rehman, 2007).

Being a service-based company, it will have to consider the population structure and religious beliefs of the citizens of the UAE. According to the 2010 census, the population of the country is estimated at 7.512 million, with an expected annual growth of 3.5% .The country is predominantly Islamic, and it is guided by the Sharia laws, which form the basic values of the religion. In studying the population structure and religion, the company will have to understand the proportion of the educated and skilled population. It particularly concerns the skills that the company will require during the start-up phase or in the future. This will enable the company to evaluate the kind of expertise it will have to deploy from other countries and the one readily available in the country. However, the country’s education framework is well-structured, and various institutions of higher learning are internationally recognized. The economic integration of the country is an important factor to consider when establishing a business, as it presents opportunities for the company to expand in the integrated economies. The islamic religion and application of the Sharia laws in offering the service is a major factor that the company should consider, especially in the UAE and Gulf Cooperation Council (GCC). This will enable consumers to obtain risk protection and diversification without having the perception of compromising their religious values (Oxford Business Group, 2008).

Infrastructure and Technology

The insurance industry in the UAE has experienced a growth trend, with the current growth rate being 20% per annum. The growth was due to the increased awareness of the importance of insurance and risk diversification by companies and individuals. The increased growth of real estate and infrastructural development have increased insurable assets in the country. This has led to increased demand for insurance services from corporations and individuals. The infrastructural developments have opened the country, which has led to increased demand for home ownership in the country. These houses are purchased through mortgages. In order to reduce the risk arising from natural events, such as death, individuals seek insurance companies to reduce the risk of loss. The infrastructural developments in the country, such as ports, modern airports, modern highways and railway lines, have attracted massive foreign investment and facilitated growth of local companies. This growth reflects an increasing demand for insurance services from growing local and foreign companies. Therefore, the company’s consideration of the infrastructure of the country should be favorable and such that will facilitate the company’s growth (Oxford Business Group, 2010).

The technological advancement of the country is an important factor to consider when establishing an insurance business in the UAE. The country’s technological advancement is unquestionably ultra modern. The general awareness of technology is reasonably high among corporations and consumers. The country has experienced massive growth of companies due to adoption of modern technology. The consumer behavior has also changed significantly, with more consumers making inquiries and purchasing products and services online. Therefore, the company should consider diversifying and adopting various methods of advertising its services; this would enable the company to reach more customers, while reducing cost. Investing in modern technology will be essential for achieving customer satisfaction and development of frameworks that will ensure secure customer experience. The country has established an innovation center to tap into the new technological advancements. The major world brands experiment with their new products mainly in the country (Rehman, 2007).                

Regulations and Politics

The company will have to learn the various laws and regulations governing the operations of insurance companies and corporations in the UAE. These laws include the companies’ law, labor laws, protection of intellectual property, trademarks, protection of industrial property onshore and offshore regulations authorities. The basic requirement is to obtain a license from Dubai Economic Department to insure a business. However, it will have to seek approval from the Ministry Economics and Commerce. This license will enable the company to run the business by offering insurance services to people and corporations in the UAE.  The company will also be under the regulations of Dubai International Financial Authority, which controls operations of offshore companies in the UAE; offshore companies are foreign companies that are in operation not only in Dubai but internationally. The property laws guide ownership and use of property in the UAE. Since property is essential in operations of the business, it will be vital for the company to study and understand rules relating to ownership and use of property by the company (International Business Publication, 2002).

Long-lasting political has enabled the UAE to flourish and develop its economy. The country’s per capita income is the highest in the world, with the majority of the population having high standards of living. The country is a federal state comprising seven emirates. There is no federal tax legislation; instead, each emirate operates its own tax system, where income tax, value added tax and corporate taxes are remitted. The country’s tax system offers an incentive to foreign companies due to a fixed flat rate. The company will have to look into the operations of each emirate tax system and regulations to understand the mode of conducting business in the UAE (International Business Publication, 2002).

Benefits of Investing in Insurance Industry in the UAE

Growth potential for companies operating in the UAE is tremendous. The insurance industry has experienced a sluggish growth in the past, which was due to religious and cultural values of the community. The government also offered a pension scheme system that made people reluctant to purchase insurance. The slow growth of insurable assets also inhibited the growth of the insurance industry. However, the recent growth in the real estate and massive infrastructural investments by the government have turned around the demand for insurance. There has been increased awareness on risk prevention and diversification by individuals in the country, which has created growth opportunities for the insurance industry.

Investing in the UAE has countless benefits for any company wishing to establish its operations in the country. The country has created favourable environment not only for local, but also for foreign investors. The creation of free trade zones has facilitated growth of foreign companies in the UAE. Free trade zones offer tax exemption to companies operating in these zones. The companies are also allowed to expatriate their incomes to their countries of origin. This has facilitated the growth of the private sector and increased employment in the country. The country has also an expansive ultra modern infrastructure, which enables companies to operate efficiently and effectively. The road transport, modern airports and railway transport facilitate movement of goods and people (Oxford Business Group, 2008).

The country’s political stability and wise leadership have improved relations with other countries. It offers a good framework, in which companies can increase their global presence in the insurance industry, as well as its competitiveness. The availability of modern technology in the country has enabled improvement of management of the companies in the country. The company has also entered into trade agreements with other countries, such as the Gulf Cooperation Council; this creates opportunities for these companies to expand their influence to these countries. It also creates avenues, through which these companies can expand their operations


International business is business transactions of a country with other countries. It is diverse and may involve goods, services, human resource, and technology, among others. In conclusion, we can affirm that international business has countless benefits to companies doing business internationally, as well as countries where such firms operate and originate. Companies are able to enjoy benefits of large-scale operations, such as economies of scale, optimal utilization of resources, availability of modern technology and competitive advantage in the global market.

In our case study, we were offering advice to an insurance company that wants to set up  its business operation in the United Arab Emirates. The company has a variety of decisions to make regarding its market entry in the UAE. The available option is to enter the market as a corporation, a joint venture or a branch. After reviewing all the possibilities, the best option is to start its operations as a branch, since only two options are available under the UAE laws. The law stipulates that a business offering financial and insurance services, can only operate as a public company or a branch of a foreign company.     

To begin operations, the firm will require learning and understanding the business environment in the UAE. It also has to evaluate the availability of opportunities it can exploit. In our discussion, we have been able to identify the major factors that the company will have to consider before it begins its operations, such as political factors and regulatory authorities. The benefits associated with doing business in the UAE have also been discussed in the paper. If the company considers all these factors prior to making entry into the market, it will be able to formulate strategic policies, which will ensure its success in the insurance industry of the UAE.

Order now

Related essays