FOREIGN DIRECT INVESTMENT IN SAUDI ARABIA; A CASE STUDY OF TWO SWEDISH FIRMS

Abstract: Background: In today’s business climate, a growing number of corporations have chosen to explore markets outside their national boundaries. There has been a shift in marketing strategies from a domestic perspective to a global one. Of all the methods available for firms to internationalize, Foreign Direct Investment possesses several advantages; it stimulates employment; raises wages, and replaces declining market sectors. It acts as a stimulant for infrastructure development and technology transfer. For Sweden Saudi Arabia is the most important export market in the Middle East. As Saudi Arabia is a country that presents both huge business opportunities and challenges for Swedish firms, it is important to study how some firms have succeeded in entering this market and what attracted them there in the first place. Purpose: The author’s intent is to identify the advantages and disadvantages for Swedish firms of carrying out FDI in Saudi Arabia. Method: this thesis is based on a case study of two Swedish firms with operations in Saudi Arabia. The author has chosen to use a qualitative research method. Empirical data was gathered by e-mails and phone interviews. Conclusions:  To author answers the research questions; Why did Swedish firms decide to establish themselves in Saudi Arabia? & How did they manage to establish themselves through FDI in that region?  Swedish firms get into the Saudi market because of advantages related the economy, the considerable market size and revenue, improved business climate, business opportunities, their global marketing strategy and their ownership specific advantages. As for how they succeeded to establish their FDI, it was through an incremental approach aided by a good knowledge of the market, the ability of the firm, proactive steps to reduce the impact of cultural differences and the country of origin effect. Suggestions for future research: Future research could focus on doing broader studies involving a larger sample, focusing on one or a few FDI determinants to investigate how they affect the investment decision as well as the managerial implications of cultural distance.