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Positive Comments: Saudi Arabia’s Transformation Window Releases Multiple Opportunities, and Chinese Enterprises Usher in New Space for In – depth Cooperation
The national transformation driven by Saudi Arabia’s “Vision 2030” has opened an unprecedented cooperation window for Chinese enterprises. As can be seen from the news, Saudi society’s concept has shifted from being a “service provider” to a “co – operator”. Details such as the customs efficiency ranking among the top in the world and the addition of Chinese signs at the airport all reflect the significant improvement in its openness and business environment. This change in policy orientation enables Chinese enterprises not to be limited to the shallow – level cooperation of “technology for market”, but to participate in Saudi Arabia’s industrial upgrading through the in – depth binding of “technology + capital”. For example, the “short – list” mechanism of the Saudi sovereign wealth fund (PIF) for leading Chinese enterprises essentially precisely matches Chinese technology with Saudi capital and market demand, providing opportunities for Chinese enterprises with technological advantages to link up with Saudi Arabia’s core economic entities.
The deepening of political and economic ties between China and Saudi Arabia has created a unique market penetration advantage. Phenomena such as the increasing number of Chinese restaurants on the streets of Riyadh, the integration of Meituan’s keeta food delivery service into local life, and the cooperation model between Saudi manufacturing and Chinese production and research becoming the mainstream, as mentioned in the news, all indicate that Chinese elements have been deeply embedded in Saudi daily life. This two – way penetration of culture and business has significantly reduced the market education cost for Chinese enterprises. Taking keeta as an example, it quickly reaches the young Saudi consumer group through high – frequency food delivery services, which not only meets local needs but also lays a user foundation for the subsequent expansion of the local service ecosystem (such as community group – buying and instant retail). In addition, Saudi Arabia’s dependence on China’s industrial chain (such as building materials and electronic consumer goods) and China’s technology output to the Saudi market (such as logistics and e – commerce operation) are complementary, creating growth space for Chinese enterprises to become “hidden champions” in niche areas (such as overseas warehouses and agency operation).
What is more noteworthy is that the local demand in the Saudi market provides a differentiated survival path for small and medium – sized enterprises. The “comprehensive solution – based business” (such as indoor network coverage and home – scene services) mentioned by Lao An precisely targets the pain points of the Saudi market. Although European and American brands dominate the mainstream consumer categories, there are still gaps in niche areas such as enterprise services and home – scene services. By solving local practical problems (such as logistics customs clearance efficiency and enterprise office digitization), small and medium – sized enterprises can avoid direct competition with leading enterprises and establish customer stickiness through “small and beautiful” services. For example, Yitong Tianxia, a logistics agency operation enterprise, has been deeply involved in the Saudi market for 18 years, seizing the supporting service demand in the early stage of e – commerce development. This “rooted” service model provides a replicable success sample for small and medium – sized enterprises.
Negative Comments: High Thresholds, Cultural Conflicts, and Market Miscalculations – Three Realistic Challenges to Be Wary of When Going Global to Saudi Arabia
The high capital threshold and compliance cost for market access have blocked most small and medium – sized enterprises from entering the market. The news clearly states that a retail trade company with 100% foreign – owned shares needs an upfront capital of 30 million Saudi riyals (about 60 million RMB), and an additional 300 million Saudi riyals of investment is required within five years, which far exceeds the affordability of most small and medium – sized enterprises. Although “cooperating through a local sponsor” can reduce the initial cost, after the sponsor system was cancelled, the risks of capital transfer and legal compliance (such as the issue of nominal company ownership) have increased significantly. Lao An mentioned that “respectable local people are reluctant to be sponsors”, which means that reliable cooperation partners are scarce. Small and medium – sized enterprises may get involved in disputes due to improper selection and even face the risk of asset encroachment. For example, some entrepreneurs, eager to enter the market, chose sponsors with little business experience, and finally the cooperation broke down due to unclear capital flow, which is a profound lesson.
Management and cooperation difficulties caused by cultural differences are widespread. There are significant differences between Saudi society’s closed – nature, family concept, and work habits and those of China. In cooperation and communication, Saudis pay more attention to the emotional connection of “being friends first and then doing business”, while Chinese enterprises are used to the direct mode of “getting to the point”, which easily leads to difficulties in establishing initial trust. In employee management, Saudi employees have extremely high mobility (they may change jobs five times a year), and most regard Chinese enterprises as a “stepping – stone”, resulting in poor team stability. At the same time, Saudi employees’ resistance to “command – style” management requires Chinese enterprises to adjust their management style from “result – oriented” to “relationship – oriented”, which is a major challenge for Chinese teams used to efficient execution. In addition, some “relationship peddlers” exaggerate their resources (such as “knowing the royal family”), while those with real resources “do not show up easily”. If Chinese enterprises rely on “relationships” rather than actual business capabilities, they are likely to get involved in ineffective socializing and waste time and resources.
Market cognitive biases may lead to strategic miscalculations. Although the Saudi market is highly popular, Lao An emphasized that “Saudi Arabia is a mature market rather than an emerging one”. Its population of 35.3 million (only 19.6 million Saudi citizens) is much smaller than that of Europe and the United States, and consumer categories have been occupied by European and American brands in consumers’ minds (such as beauty and household appliances). Some Chinese entrepreneurs still have the illusion of a “profitable paradise” and blindly copy the “bulk – stocking” model, ignoring the reality of Saudi Arabia’s operating costs (rent, labor, and logistics are more than twice as high as those in China) and profit margins (the net profit margin of leading enterprises is only 7% – 10%). For example, some entrepreneurs entered the market without researching the costs. Although the product selling price was three times that in China, the profit was meager or even in the red after deducting costs. In addition, most Chinese products are concentrated in the trading market, with a low degree of branding, and it is difficult to compete with European and American brands. If enterprises ignore brand building, they will remain at the low end of the value chain for a long time.
Suggestions for Entrepreneurs: Deeply Root in Localization, a Three – Step Strategy from “Exploration” to “Rooting”
First, the preliminary research should be “in – depth” rather than “sight – seeing” to establish an accurate understanding of the market. It is recommended that entrepreneurs spend 1 – 3 months focusing on analyzing three aspects: First, the channel structure (such as the proportion of e – commerce platforms and traditional supermarkets) to clarify the target customer group (such as young consumers and enterprise customers); second, the cost structure (the specific figures of rent, labor, and logistics) to calculate the break – even point and avoid the miscalculation that “high selling price equals high profit”; third, the competitive landscape (the market share of European and American brands and local blank areas) to choose a “small and refined” niche track (such as home smart devices and enterprise digital services) and avoid direct competition with leading enterprises. They can cooperate with local chambers of commerce and associations of Chinese enterprises to obtain real market data instead of relying on online rumors.
Second, the cooperation model should be “gradual” rather than “rash” to reduce initial risks. Small and medium – sized enterprises can first choose the model of “local partner + hidden operation”: Find local people with a good educational background and business experience to cooperate with, and use their resources to reduce the costs of registration, account opening, etc. (for example, the registration fee is only 1000 Saudi riyals compared with 10,000 Saudi riyals for foreign – owned enterprises). However, it is necessary to note: First, sign a clear legal agreement to clarify the capital flow, equity ownership, and risk sharing; second, set a cooperation period (such as 1 – 2 years), and gradually transition to a joint – venture or wholly – owned company after the business is stable to avoid the legal risks brought by long – term reliance on sponsors.
Third, management and culture should be “adapted to” rather than “transformed”, and a local team should be built. In employee management, adjust the Chinese “result – oriented” thinking, pay attention to the emotional connection with local employees (such as daily greetings and team activities), and provide them with a clear promotion path (such as setting the proportion of Saudi – nationality executives) to enhance their sense of belonging; in cooperation and communication, accept the rhythm of “being friends first and then doing business”, avoid rushing to promote business, and establish trust through long – term interaction. At the same time, be vigilant against “relationship peddlers”, and judge their reliability by observing their actual business results (such as whether they can solve specific problems) instead of relying on “relationship” promises.
Fourth, the business direction should be “focused” rather than “diversified”, and replicate the mature model relying on domestic advantages. Prioritize the tracks that have been verified in China (such as e – commerce, logistics, and building materials), and adjust the details according to Saudi Arabia’s needs. For example, logistics enterprises can learn from J&T Express’s experience of “high delivery success rate” to optimize the local delivery network; e – commerce agency operation enterprises can design service plans according to Saudi consumers’ preferences (such as high customer unit price and emphasis on brand). Avoid “starting from scratch” in unfamiliar fields (such as high – end manufacturing and finance) to reduce the cost of trial – and – error.
In summary, the Saudi market is both a land of opportunity and a place full of challenges. Chinese entrepreneurs need to abandon the fantasy of “exorbitant profits” and deeply root in localization with a “long – termism” mindset. By balancing policy dividends and cultural adaptation, they can find a sustainable path for going global.
