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ESSEX Project: Moving into The Middle East

Meredith Miller, Abbey Ellis, Siyu Ren, Shelby Therme, Zhecheng Zhou

University of Northern Iowa

Essex Project: Move into the Middle East 1

Table of Contents


Entry Challenges………………………………...……….……....2

Tariff/Non-Tariff Barriers..……………….…………...…….…….3

Level of Competition in the Target Market……………………...5

Ease of Doing Business…………………………….……............6

Corruption Levels……………………………………….………..6

International Property Rights Protection Enforcement……....…...7

Privatized or Publicly Provided Healthcare….…………..………8

Recommendations on Logistics…………………………….……9

Distribution Partners…… …………………………….……….10

Building Market Awareness………………………….………….10

Recommended Trade Shows………………………….…………11

Promotional Activities……………………..………….…………12

Payment and Pricing Options………………..……………………12


Essex Project: Move into the Middle East

Essex Project: Move into the Middle East 2

The region decided that would be best suited for Essex to expand into is the Middle East,
specifically in the countries of Saudi Arabia, United Arab Emirates, and Egypt. This is first
based upon the knowledge of the area’s culture. A high percentage of the Middle East practices
the Islamic faith. Since Muslim people do not allow members of their faith to consume alcohol,
many choose to smoke tobacco instead. Smoking tobacco or being around people who smoke
tobacco, has been associated to many various lung diseases that require oxygen, therefore,
making a large market for Essex. Also, this population has an established production of oil,
creating a highly active economy. But, most of these countries are located in the desert, leaving
the country able to produce no more than oil, having to import almost all other goods.
Our team decided to not go into Latin America and SE Asia/Pacific due to several
reasons. A lot of Latin American countries have a majority of their populations being considered
indigenous. Therefore, their medical practices are mostly based on ancestral heritage. This was a
major factor in the decision to go into Latin America because due to the product Essex is selling;
lower sales can be expected due to the consumer base being smaller than the actual population.
SE Asia/Pacific is a very large market when it comes to medical devices and the
competitors have an advantage over Essex as they have been there for a long period of time and
know how the market works. Even if Essex were to expand into this market, they would face
challenges because of this. Essex is a smaller company compared to its competitors, they would
have to face a lot complications when it came to selling these medical devices.

Entry Challenges
The product design in the Middle East would not need to undergo any any specific
changes to implemented in this region.
Starting a business in the three countries, SAG has liberalized the wholesale, retail, and
franchise sectors, allowing foreign investors to establish joint ventures and retain a 51% share –
100% in the case for retail. The foreign partner’s capital requirement is set at $5.3 million (SAR
20 million) or more and its equity share can be increased to 75% after 3 years from the contract

Tariff/Non-Tariff Barriers
Essex Project: Move into the Middle East 3

Tariff barriers to Saudi Arabia are quite simple. According to Incoterm 2000, Saudi
Arabia takes a single-column tariff based on the Harmonised System, most duties are ad valorem
assessed on the cost and freight (C&F) value. The common tariff rate is about 5%, with an extra
20% being levied on commodities for goods which will be considered as domestic substitutes.
Shipments in transit are not subject to duty. Unlike a lot of other countries, Saudi Arabia
government charge no tariffs on equipment, ordinance, arms and munitions for military purposes
although these do require a trade letter.
Non-Tariff barriers of Saudi Arabia are mainly regulatory and bureaucratic practices,
which restrict the level of trade and investment. For example, we learned from our research that
consolidated shipments are not allowed and back-to-back shipments consigned to forwarding
agents are not allowed for duty exempted shipments. Customs clearance is completed at airports
and seaport customs warehouses. There are no bonded warehouse facilities. Consignee's
authorisation letter to broker is required. Moreover, commercial agencies are limited to Saudi
citizens and imports may be made only through such agents.
The United Arab Emirates maintains a free exchange and liberal trade system. The Gulf
Cooperation Council (GCC), consisting of the UAE, Saudi Arabia, Kuwait, Bahrain, Qatar and
Oman, has been discussing a common external tariff for some years. As a result of these efforts,
on the first of January, UAE acceded to the GCC Customs Union that equalizes the duties paid
upon entry of an item to any member state, regardless of the country of destination within the
GCC, which means imports into the UAE from Saudi is subject to the 5% duty once it enters the
UAE proper. However, some problems were reported during the transition period of the GCC
member countries are working to resolve these issues.
Besides that, imports of liquor are subject to a 70% customs duty on their CIF value
while imports of tobacco products face a 100% on their CIF value. Many essential items,
including staple foodstuffs and pharmaceuticals are allowed duty free status.
For non-tariff in order to do business in the UAE outside of one of the free zones, a
foreign business must have a UAE national sponsor, agent, or distributor. Once chosen, sponsors,
agents, or distributors have exclusive rights for non-food products only. Agency law does not
pertain to food products. Agents and distributors cannot be easily replaced without their
agreement. Federal tenders must be accompanied by a bid bond in the form of an unconditional
bank guarantee for five percent of the value of the bid.
Essex Project: Move into the Middle East 4

Tariff rates in Egypt have been reduced to a maximum of 40% except cars, alcoholic
beverages and certain luxury items. Most items are lower, with the average rate still in excess of
25%. In addition, Egypt government levies a service fee. For commodities subject to customs
duties between 5%-30%, it will be charged with a 2% fee on the value of imported shipments
and if the customer duties is over 30%, the service fee rate will doubled to 4%. Alcoholic
beverages, larger cars, tobacco and tobacco products are subject to duties up to 3000%.
Egypt has consistently supported reductions in trade barriers and the concept of open and
multilateral trading systems. The government has encouraged free trade by active participation in
the General Agreement on Tariffs and Trade (GATT) and similar forums.The General Authority
for Exports keeps a registry of all importers who issue an import card to registered importers.
The import card must be presented when an import transaction is undertaken. All import
transactions require a letter of credit to be issued from an officially registered bank.
A wide range of imported products is subject to inspection and approval by the Egyptian
Customs Authority upon arrival and after payment of established duties. A wide variety of food
products are subject to health and quality inspection by three ministries: health, supply and
agriculture. A health certificate is delivered if consignments comply with the regulations.
Certificates are issued for consignments which satisfy established conditions and
specifications. These products are subject to inspection fees, assessed in Egyptian piasters per
specified measure. Conditions and specifications must meet the standards issued and approved
by the Egyptian Organisation for Standardisation and Quality Control.

Level of Competition in the Target Market

Saudi Arabia, known as the "oil kingdom", is one of the world's largest oil reserves
making its economy the largest in the Gulf region. This large economy, creates a large interest in
international companies to expand into the region. Saudi Arabia has made a stance to protect
their local businesses, so they adopted a competition law in 2004. According to Dhabaan &
Partners, Competition Law sets regulations and competitive rules on the dominant position of
the markets, while including exemptions and exceptions to state-owned enterprises.() This law is
Essex Project: Move into the Middle East 5

a negative for Essex, because it has to abide by the law already set in place to protect the
domestic industries within Saudi Arabia.
The level of competition in the target market, United Arabs Emirates is to promote access
as they’re trying to find good partnerships with distributors through the use of agents. However,
in most of the businesses, companies trying establish their position in this market and are limited
to minority ownership leaving the decision making capabilities to local companies. The first step
of success is to find a good partnership with a local distributor. This is the single most important
step, because this partnership will control the product’s and companies image. The U.A.E.
government has established a precedent of encouraging international business within its country.
The U.A.E cultivates a very strong multinational competition that is expect to face high rivalry
from other competitors.
Egypt’s has spent a lot of money on its infrastructure in creating a secure market for fair
rivalry and ease of doing business. Egypt has had a problem with being corrupt in the past, so to
combat this issue, the government’s recent goal is to increase security of products and goods at
its airports and customs locations. This will help ensure products are getting to its customers and
will make the cost of insurance of sending this products to go down. The largest customer for
Essex in this market in to the government, similar to the interior ministry and the intelligence
service. The investment of Egypt’s has the very good technology of security, however, Egypt is a
very price-sensitive market. Their suppliers are from France, Russia, Germany, Italy, Britain and
the United States.

Ease of Doing Business

Saudi Arabia, according to doingbusiness.org states that the rank is set at 92. From just
this one number, realizing that because this ranking is out of 190, it isn’t the prime number that a
business would hope for. Regardless, there is a challenge here that lies ahead and while it isn’t
prime, it is still possible. In addition, the ranking of Saudi Arabia’s Distance to Frontier has
increased in recent years. An economy's distance to frontier is indicated on a scale from 0 to 100,
where 0 represents the lowest performance and 100 the frontier. In this context, a high ranking is
preferred. S.A.’s ranking from 2017 was 59.58 and this year is at 62.50. Therefore, an increase of
2.92 DTF points occurred and Essex predict that this ranking will increase in coming years.
Essex Project: Move into the Middle East 6

Egypt, however, has a current doing businesses ranking of 128. This is not the easiest and
it is more difficult than Saudi Arabia. Like mentioned previously, since this goal is not
impossible, Essex hopes to overcome despite these challenges because there are many countries
that have worse rankings. The DTF ranking shifted from 56.12 to 56.22, indicating a positive
increase of .10.
Lastly, the ease of doing business in the United Arab Emirates is at an overall ranking of
21. This is an excellent number and will assist incredibly in the startup of this operation. The
DTF ranking was also in the higher section, this year at 78.73; increased from last year by 1.87.
Other numbers that were impressive included paying taxes and getting electricity, which were
both ranked #1.

Corruption Levels
In terms of corruption, all countries researched showed information about this topic.
Saudi Arabia has lessened their corruption ranks in the past eight years but levels are high at this
time. According to TradingEconomics.com, in 2008, Saudi Arabia’s rank was 80 and in 2016, it
was lowered to 62 (2016). Currently, the ranking is at 57 and this was conducted in 2017 on a
yearly basis. According to the GAN Business Anti-Corruption Portal Saudi Arabia faces high
levels of corruption, despite the levels lowering since 2008.
Egypt is somewhat between the corrupt Saudi Arabia and UAE. Concern is present, but
the reason according to the anti-corruption report found on the GAN business portal is that there
is a “lack of framework in the area that prevents such crimes (2018).” Bribery is unfortunately
very common and under the topic ‘customs administration,’ it states that according to a report
through DoingBusiness.org, “The cost and time required to import goods are more burdensome
in Egypt than in the rest of the Middle East, while it is easier in terms of cost and time to export
goods (2017).”
United Arab Emirates is stated to be the least corrupt country in the Arab Nations. They
are pro-business and have public administration that is efficient. Despite having said this, new
businesses that are being hosted, must rely on local partnerships. The UAE Penal Code penalizes
individuals and organizations that enact any kind of bribery (active or passive),
fraud/embezzlement and abuse of functions. Therefore, gifts and other forms of hospitality are
regulated heavily under the anti-corruption work of the UAE.
Essex Project: Move into the Middle East 7

There is a wide variety of corruption levels to encounter in the three countries suggested,
but exporting Essex products is definitely possible.

International Property Rights Protection Enforcement

In Saudi Arabia, there are several general principals that are important for effective
management of intellectual property (IP) rights. Rights must be registered, protected and
enforced in Saudi Arabia (Saudi Arabia - Protecting Intellectual Property Saudi Arabia -
Protecting IPR). U.S. trademark and patent registrations will not protect you in Saudi Arabia.
Patent registration is generally granted on a first-to-file basis as is registering trademarks.
Companies may wish to seek advice from local attorneys or IP consultants who are experts in
Saudi Arabian law.
American firms that wish to sell products in Saudi Arabia should work through their local
representative to register their trademarks with the Ministry of Commerce and Investment,
copyrighted products with the Ministry of Culture and Information, and patents with King
Abdulaziz City for Science and Technology (Saudi Arabia - Protecting Intellectual Property
Saudi Arabia - Protecting IPR).
With respect to intellectual property rights, the U.A.E. legal regime is generally
considered fair and in compliance with international obligations. Same considerations are needed
in Saudi Arabia when pursuing patents and trademarks. Granting patent registrations are
generally based on first-to-file basis as well as trademarks. Company should consider how to
obtain patent and trademark protection before introducing product or service into United Arab
Emirates (United Arab Emirates - Protection of Property Rights UAE - Property Rights). It is
recommended that small and medium-sized companies understand the importance of working
together with trade associations and organizations to support efforts to protect IP and stop
counterfeiting (United Arab Emirates - Protection of Property Rights UAE - Property Rights).
Egypt’s IPR legislation generally meets international standards, but is weakly enforced,
which is a major hurdle to direct investment. Egypt was on the Special 301 Watch List in 2016
and has been recommended for Watch List status in 2017 (Egypt - 6-Protection of Property
Rights Egypt - Protection of Property Rights). Investors are given fifteen years of patent
protection under the law of Patents and Industrial Designs of 1949 where the Trademarks Law
Essex Project: Move into the Middle East 8

of 1939 gives ten years of protection from the date of application (Arab Republic of Egypt -
Legal Information).

Privatized or Publicly Provided Healthcare

Healthcare in Saudi Arabia has developed enormously over the last two decades, as
evidenced by the availability of health facilities throughout all parts of the vast Kingdom. The
Saudi Ministry of Health (MOH) provides over 60% of these services, free of charge, through 13
health directorates. The rest are shared among other government agencies and the private sector
(Journal of Family & Community Medicine). 20% of health services are delivered free through
other government agencies and the remaining 20% is provided by non-government sector, which
is growing rapidly (Journal of Family & Community Medicine).
Total expenditure on public health services come from the government and the services
for free-of-charge but because of growing population and demand for specific medical needs,
Saudi Arabia is starting to look at the privatization of hospitals to help assist in speeding up
decision-making, reducing the government’s annual expenditure on health care, which will
produce new financial sources for the MOH and improving health care services (World Health
Organization - Eastern Mediterranean Region).
United Arab Emirates healthcare is a top priority for their government. Healthcare is
regulated at both the federal and emirate levels. U.A.E. has a comprehensive, government-
funded health service and a rapidly developing private health sector that delivers a high standard
of healthcare to the population (UAE Embassy in Washington, DC). U.A.E. government
launched a new health insurance program in Dubai to support nationals not covered under any
other government funded health insurance scheme (United Arab Emirates - Healthcare Services).
The U.A.E. is wanting to boost the number of medical tourists coming to the U.A.E. by
establishing Dubai as a center of healthcare excellence in the region. Robust transportation and
logistics infrastructure in Dubai helps with positioning the city as the center of a transportation
network that links the economies of India and China to Europe and the United States (United
Arab Emirates - Healthcare Services). These factors help make the country an attractive location
for establishing a regional distribution center for medical devices.
Egypt offers a universal health care system although quality of care in public hospitals is
far lower than in private. The main government bodies governing Egypt’s health care system are
Essex Project: Move into the Middle East 9

the Ministry of Health (MoH) and the Health Insurance Organization (HIO) (Introduction). HIO,
today, only covers government employees and school-age children.

Recommendations on Logistics
As Essex is expanding into new locations, logistic recommendations need to be
considered to ensure the products get to there locations. Saudi Arabia has invested a lot in
creating a strong logistical infrastructure due to its economic and the geographic location. This
investment in its infrastructure, increased its ease of doing business and quality of life, increasing
its population by 21% and increasing the GDP of 38% (Saudi Arabia - Saudi Arabia’s big
logistics play). The United Arabs Emirates logistics has the leading freight management and is in
contracts with other logistics firms within the country. It focuses on achieving the most effective
work in the least amount of time, while achieving the maximum amount of profits with its five
different locations. DSV is the largest logistics company in Egypt where its mission is to handle
all global transportation logistics. Its supplies and transport globally, using the network
transportation to make sure they have the solid information. All of these companies have their
own way for the best logistics.

Distribution Partners
When looking at distribution partners within the Middle East, although not required to
have an agent located in that country or a local partner to ensure quality and distribution, it is
highly recommended when you are new to market.
The best distribution partner we believe would provide Essex with the largest market,
while still providing reliable services is to create a partnership with Amazon. We know in this
market, to truly be successful we will need to partner with a local company that can test and this
would provide Essex with a few added benefits. First, it would provide a 21st century way to
advertise and sell its products to an array of clients that, if they were trying to sell in a traditional
path they might not be able to reach. Also, Amazon is also already established services in Middle
Eastern market. Also, by selling these products on Amazon it provides a distribution network
that has already been established.

Building Market Awareness

Essex Project: Move into the Middle East 10

To build market awareness of the industries Essex has decided to go into, they must first
analyze each of the markets. Egypts health care sector has been relatively stagnant over the past
few years however, with a variety of investment opportunities, the Egyptian government is very
keen on expanding the health industry, especially relating to medical devices (Egypt - Medical
Equipment Supplies). This is a plus for Essex in helping increase its brand awareness. Egypt is
planning on opening 26 new hospitals which would be hugely beneficial for Essex. A key in
market awareness in the country of Egypt will be getting in contact with these new hospitals and
showing the strengths of its company and how easy it would be to use it’s product in those new
Another key factor for Essex is that Egypt’s medical device market is the second largest
in the Middle East (Egypt - Medical Equipment Supplies). The vast majority is supplied by
imports with just one Egyptian company producing a limited range of ultrasound scanners
(Egypt - Medical Equipment Supplies). This is a plus for Essex as they will be able to market to
Egypt fairly easy as competition in low for companies located in Egypt. There will have to major
pushes towards these new hospitals though as competitors from other countries will be trying to
get their product (possibly the same as Essex) into those hospitals as well.
Essex must take a different approach to increasing market awareness in Saudi Arabia.
Although American exporters are not required to appoint a local Saudi agent or distributor to sell
to Saudi companies, it is strongly recommended that all new-to-market U.S. companies consider
partnering with a local company for the purposes of monitoring business opportunities,
navigating import and standard testing regulations, and identifying public sector ales and
contract opportunities (Healthcare Resource Guide: Saudi Arabia). To increase market awareness
in Saudi Arabia, Essex must find a local Saudi agent to who knows the industry well and has
people to get into contact with in regards to purchasing Essex product.
The U.S. Department of Commerce in Saudi Arabia regularly assists U.S. product and
service exporters to identify opportunities and qualified business partners (Healthcare Resource
Guide: Saudi Arabia). This is also an option Essex can go about with increasing market
awareness by contacting the U.S. Department of Commerce.
U.A.E. has the same view of medical products as Saudi Arabia in regards to setting up a
manufacturing unit in the country or finding a local distributor to partner with. This would
decrease the price of the goods as it would save the import duties and margins of the importers.
Essex Project: Move into the Middle East 11

Moreover, awareness about the company and customer loyalty would also increase leading to
increase in demand for product (UAE Healthcare Market Size, UAE Healthcare Market Research
Report). The best option for Essex when looking at how to increase market awareness in U.A.E.
is to potentially set up a manufacturing unit in U.A.E. but because of the size of the company,
finding a partner distributor in U.A.E. would save money and help increase market awareness as
they will know the market well and when customers realize Essex is a partner with a local
distributor, awareness will rise.

Recommended Trade Shows

Aiming to meet our business goal, built the awareness and reach out the potential
opportunities at trade shows among all three market should absolutely be part of our plan. We
conducted research about medical equipment trade fairs in each of the country and selected the a
right fit accordingly. In Egypt, Mediconex is one of the leading trade conference in North Africa
for medical education and technology providing knowledge sharing, networking as well as
business opportunities. It provides an ideal platform for your business contacts and customers to
receive information about the latest healthcare products and solutions, participate in product
tutorials and witness new product and service launches. The exhibition opened its door to more
than 4,000 healthcare professionals and high level dignitaries and host 155 of the world’s leading
healthcare suppliers, manufacturers and service providers. Mediconex is accompanied by various
conferences, educational courses, workshops and other special events. The Mediconex in Cairo
this year and we believe this is a good opportunity. The Saudi Healthcare in Riyadh is a trade fair
for healthcare and one of the largest fairs of its kind in Saudi Arabia. This event provides
communications and information platform in the industry. Visitors can find comprehensive
information about the latest developments, trends, products and services. Businesses are also
offered with opportunities to present products to experts and other business in the Saudi Arabia
market. There are currently no good trade show matches in U.A.E. that would be beneficial to go
to for Essex.

Promotional Activities
Promotional activities Essex can participate include attending trade shows in the
countries stated to expand the presence and awareness of the products sold (Egypt, Saudi Arabia,
Essex Project: Move into the Middle East 12

and U.A.E.). A suggestion in regards to distribution was for Essex to partner with Amazon. This
would allow Essex to promote its relationship with the world-known brand and help attract
customers through Amazon’s promotions on their website. This could be promoted to accounts
that have Prime memberships where shipping is free and wouldn’t have to spend time reordering,
the company can just request a certain number of products for a selected time period.

Payment and Pricing Options for ESSEX to Consider

Comparable products are sold on Amazon as well and can be analyzed for further pricing
of Essex’s nut and nipple regulators. These are sold at competitive prices and CGA870
Regulators (CGA870) cost $20.25 plus shipping in US dollars. Other companies like Vitality
Medical, that sell products such as these sell them at higher prices; $57.00. Therefore, our team
suggests pricing the products at $75.00 on Amazon to be competitive with these similar products.
The nut and nipple regulator (CGA540) cylinder fittings for oxygen tanks that are three inches
are sold as pairs on amazon.com for prices of $10.99, $13.98, $17.59, and $23.99. Therefore, we
suggest these products to be sold as pairs on the site for a bundled price of $16.50. Factoring in
the 5% tariff addition stated previously, pricing these products at the listed amounts will increase
the margin of profit and create success for Essex.

When looking into international expansion, there is always going to be risks with the
markets an organization is going into. In Essex’s case, we believe that the best risk to take is with
expansion to the Middle East. By expanding into Saudi Arabia, United Arabs Emirates, and
Egypt, you are providing a large target market with a strong ease of doing business well within
the correct price point. We believe that starting this process through using existing distribution
channels such as Amazon would provide an idea of how our product will sell without investing
heavily in the market. This will also allow us the opportunity to attend trade shows and create
relationships with companies and members who could be our agents in these countries. With this
method, we believe that Essex will be able to expand its international presence and improve its
overall gross profit.
Essex Project: Move into the Middle East 13


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