Business, The Du "Bhai" Way

The best of the brands are available in the Gulf like in any developed country. But there lies a difference. In Gulf the product owners do not decide on their strategy, they are just observers to the entire game that is run by the local exclusive agents.
Decades ago when the Gulf was not developed like the way it is now, but still then the rich locals had enough money to afford the luxuries, the companies in the name of spreading their reach gave exclusive distributorship to local companies. By decree it was also not possible to sell anything in the Gulf without a local partner – the rulers wanted to protect the interest of the locals, ala India till eighties.
All companies whether selling pins or luxurious automobiles had to have a local partner. And that agreement stuck to them like a constricted leather jacket till now. Look at Siemens, Toyota, Mercedes, BMW, GE all big guns in their own rights are now pawns to their local agents.
Toyota does not decide how many cars they should sell in Dubai; it’s decided by their agent Al Futtaim.
Al Gargash decides the marketing strategy of Mercedes in the Gulf, the promotions they should run and the prices they should offer in the market.
Can anyone believe that one has to wait for months to get hold of Honda Civic or Toyota Corolla in Dubai? While the fact is that if you drive down to the bordering country Oman, you can get it off the shelf.
It’s more of a sophisticated monopoly in all segments in the name of protecting the interests of the locals.
I believe Dubai or for that fact UAE is losing its competitiveness.
Take for example telecom, throughout UAE there is only one player – Etisalat like our own MTNL. They provide landline, mobile & cable service. Just relate to the services you can derive out of Etisalat, Its painful. Since Etisalat only had the rights to televise World Cup Football, they made the interested viewers cough out AED400 for a month and guaranteed a year’s viewer ship along with the deal.
This year after much criticize & public frustration a new provider has emerged, Du. But both Etisalat & Du are controlled by the rulers of Abu Dhabi & Dubai respectively. So one has to wait and see how competitive they are, given the fact that Du is using the existing infrastructure of Etisalat.
Moeller, one the renowned electrical & electronics product manufacturers from Germany in represented in UAE solely by Juma Al Majid. The products are available only for their consumption, that’s the way it is. Full stop. ABB had the same fate with Al Gandhi. It took them 8 years court battle and 30 million AED in compensation to get out of this exclusive agreement. Siemens is still trapped in the same fate.

But all distributors do not have the same philosophy. If they are business minded they can make fortunes. For example Jumbo, the sole distributors for Sony, They have taken the brand to such heights that they lead the market in most of the product segments they are present in. Jumbo has made the art of distribution to near perfect. They have a vast network of retailers and a huge logistics & distribution system. Jumbo has its own store in most localities but its more of brand promotion, new product introductions and the stuffs. Their prices are always higher than the retailers and the promotions always focus on the retailers.
The same is true for Nokia. No one knows the name of the sole distributor for Nokia. The market share for Nokia is more than 55% in UAE. It boasts of an excellent after sales service in every nook and corner of the city and has created an entry barrier to most of the competitors in terms of pricing & service.

So every coin has two sides, the heads & the tails. WTO has set a dateline for 2010 and most companies are waiting for that. UAE has also realized that it has to be competitive to make it in this competitive world. The government is trying to implement a law by which multinationals can open companies in UAE without a local partner. We all hope it’s for the betterment of the economy and the customers.