United Arab Emirates Modes of Entry free essay sample

Exporting – Indirect exporting means that the company does not deal with foreign customers or companies by itself but uses intermediates such as export companies, export agents, or export partner network to take care of all export activity. Indirect exporting should be taken into consideration if a company’s own prerequisites in international business are not enough and if the intermediate’s resources as well as the know-how benefit the company. This entry alternative has quite low risks for the exporter. In direct exporting the company takes care of the exporting activity by itself. The company is in contact with the intermediates in the target market such as import agents, retailers, or brokers. It is essential for the company to know the markets, pick the agent or distributor carefully and posses the knowledge in marketing as well as exporting routines. Benefits in direct exporting are shorter distribution channels, smaller distribution expenses as well as closer connection to the end user and greater potential return. We will write a custom essay sample on United Arab Emirates Modes of Entry or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page 2. Joint Venture A second method of entering a foreign market. Joint venture differs from exporting in that the company joins with foreign companies to produce or market a product or service. This includes modes such as licensing, franchising, management contracting, project operations, and joint ownership. ?Jointly owned subsidiaries Joint ownership is the mode of joint venturing in which a company joins investors in a foreign market to create a local business in which they share joint ownership and control. The foreign countries’ regulations may require joint ownership as a condition to enter the country, or company’s financial, physical, or managerial resources are not enough to undertake the venture alone. 3. Licensing International licensing means that the manufacturer sells the right to use the company’s immaterial rights such as manufacturing process, trademark, patent, trade secret, or other valuable information to a licensee in the foreign market for a fee or royalty. The company expands to the market with little resistance and the licensee gains the production expertise or well known product or name as agreed in the contract without having to start from scratch. However, the company has less control over the licensee than it would over its own operation. 4. Franchising Franchising s another option, in which the company sells the right to the franchisee (independent businesspeople) to produce its products or provide a service in a foreign market. Mainly franchising has been prominent in fast foods, fitness centers, hotels, real estate, and dozens of other product and service areas. The benefit is to start internationalization faster with fewer assets. The company will gain v aluable information and experience from the target country for later usage. 5. Turnkey projects Contract manufacturing is beneficial when manufacturing costs are cheaper abroad than in the home country. Project operations include selling a specific project abroad such as equipment installation, implementation of the factory investments, or community building project. Projects can be partial projects, turn key projects, and turnkey plus projects or consortiums. Suggested Modes of Entry for UAE Limited Liability Companies Doing business in the United Arab Emirates When entering the UAE a company can either establish a permanent presence in the UAE or use a commercial agent. The permanent presence may be pursued by: ? Incorporating a Limited Liability Company (LLC) ? Establishing a Branch office or Representative office Establishing a wholly owned entity in one of the UAE Free Trade Zones 1. Operating as an LLC in the country permits the company to engage in all activities as licensed in the UAE. However, a foreign entity can only operate in those activities licensed by the relevant UAE authority such as contracting, providing services, and possibly manufacturing. Certain activities, such as commercial agency activities, are reserved for wholly UAE owned enterprises. 2. Establishing a Branch or Representative office affords a company permanent presence in UAE as well as commercial agency activities. As long as fifty-one percent of the company is being owned by the UAE nationals the foreign investors are permitted to hold an equity ownership in the country. Limited Liability Company is preferred among foreign investors due to its flexible management structure, and protection of minority shareholders. 3. In the UAE there are 38 Free Trade Zones (FTZ) with over 20,000 companies operating in them. The main benefit of launching a branch in a Free Trade Zone is to be able to have 100% foreign ownership. Nonetheless, conducting business in other parts the UAE market is forbidden. The Free Trade Zones were launched to attract foreign investors and capital by offering: ? 100% foreign ownership ? 100% import and export tax exemptions ? 100% repatriation of capital and profits ? No corporate taxes for 15 years, can be renewed for an additional 15 years ? No personal income taxes ? Assistance with labor recruitment, as well as other additional help, such as sponsorship and housing UAE Available Modes of Entry Advantages ?No taxes of any kind whatsoever are imposed on either onshore or offshore activities ? Companies do not have to file any accounts No taxation information exchange agreements with other countries ? There are no public records kept of the directors and shareholders of a corporation ? Highly confidential and sophisticated banking system ensures financial matters are private ? Strong legislation in place protecting the confidentiality of investors in the country ? Foreigners can own 100% of their companies in Free Trade Zones ? Foreigners have the fre edom to send home their capital and income tax free ? Businesses have full immunity from import duties ?Also there are no currency restrictions in Dubai Disadvantages ?All foreign business should allocate a minimum of 51% equity to a UAE national ? A registered office must be maintained in Dubai ?Companies must appoint a qualified auditor to examine and report corporation accounts ? No business can carry out trade with a UAE resident in the UAE or in the Jebel Ali Free Zone unless they have first obtained the relevant licenses to do so ? Region is not an English common law jurisdiction ?The registrar has the power to appoint inspectors to investigate the affairs of any offshore company or business Facts, Statistical Data, and References ?Shortening the time for delivering building permits by improving its online system for processing application. ? Business start-up was made easier by simplifying the documents needed for registration, abolishing the AED 150,000 minimum capital requirement, and removing the requirement that proof of deposit of capital be shown for registration. ? Trade process has been eased by greater capacity of container terminals, elimination of the terminal handling receipt as a required document, and an increase in trade finance products.