Introduction
Alfaparf Milano is one of the most famous Italian brands worldwide in the professional hairdressing sector. The enterprise works in caring for face, body, and face with enormous technological equipment and products, production, and distribution of their products, integrating research and development, and offering training in cosmetology, hairdressing, and beauty products. In addition, the enterprise is committed to its daily workouts as its laboratories prepare advanced cosmetic techniques and develop crucial equipment for professional aesthetics (Podiotis, 2020). Consequently, the corporation’s collaboration with the high profiled cosmetic research institutes guarantees that the results of their beauty products are certified with safety effectiveness and are valued for their aesthetic performance (Confente and Kucharska, 2020). Having their offices and branches worldwide ensures that their brand is highly valued globally as their products are considered one of the best beauty and cosmetic brands. However, in the recent past, the corporation opened a regional operation in the Gulf region, where they are facing pressure from the Saudi Arabia Ministry of Trade. They are pushed to relocate their Gulf office from Dubai to Riyadh as the biggest market for their products. Therefore, this paper aims to examine the impacts of economic decisions in the global business environment.
Economic Indicators a Company Should Consider While Relocating
There are several factors that a business enterprise should consider while deciding to relocate either its branch or office. Therefore, Alfarparf Corporation should consider the economic indicators before relocating its office from Dubai to Riyadh in Saudi Arabia (Mazouz, Alnaji, Jeljeli, and Al-Shdaifat, 2017). The enterprise should consider some of the factors, including the site selection, the market, policies, and the costs associated with the relocation process. Thus, the corporation should think about whether the economy of Dubai and that Riyadh, which is one, is more favorable to its business operations. Despite having a bigger market in Riyadh, Dubai fits as a better business hub because of its high-profile infrastructures, promoting trade, and making it more efficient (Balawi, 2021). The United Arab Emirates’ employment figures are also high, indicating that the country enjoys a favorable economic environment, contributing to its higher GDP per capita than Saudi Arabia (Shadab, 2021).
Additionally, in Dubai, it is easy to do business, which makes it stand out in the Middle East as the leaders consistently implement favorable policies to promote trade in the region. As a consequence of the profitable trade environment in Dubai, there are economic free zones where the services and goods are traded near-zero customs and tax rates (Alotaibi, 2019). These free zones allow corporations to acquire foreign ownership ultimately.
The Economic Stability between the United Arab Emirates and Saudi Arabia
The United Arab Emirates has a system that operates using a fixed exchange rate regime in which their dirham currency is predominantly anchored to the United States dollar. Consequently, this has helped the nation to maintain enormous stable money that, in return, has consistently kept attracting foreign investors (Shadab, 2021). Therefore, UAE has seen an economic rebound due to a growth rate that has brought out improved performance in the tourism and construction sectors, increasing the country’s GDP (Asl, Leylanoğlu, Bahremani, and Zabardastalamdari, 2021). The main contributor to the increase in the GDP is the service sector which includes real estate and business services, wholesale and retail trade services, and financial and logistics services (Faheem, Azali, Chin and Mazlan, 2021). The other main contributors to the increasing UAE GDP are the oil and gas and industry sectors, which involve manufacturing and construction (Balawi, 2021). These sectors specifically ensured that the economy rebounded after the financial crisis when the exchange rates and the GDP had fluctuated due to the reduction in oil prices and the fall of Dubai’s real estate markets.
The diverse economic sectors in the United Arab Emirates have driven the consistently growing economy, ensuring a stable exchange rate. Having anchored its currency to the US dollar, in particular, has enabled the country to reduce the temporariness of its earnings from the hydrocarbon carbon exports because the gas and oil products are valued in dollars (Alsheikh et al., 2020). In addition, having a fixed and stable exchange rate has ensured that the nation attracts more investors because they are assured and confident that the exchange rate risks are eliminated.
On the other hand, Saudi Arabia and a fixed exchange rate regime attributed to the dollar peg. The exchange rate has been dominant for several decades as government agencies offer domestic financial institutions dollars to meet the economic and commercial demands in the private sector (Abdelnabi, Abobaker, and Badawey, 2020). The Saudi Arabian agency’s policy of pegging the riyal to the United States dollar strategically contributes to economic growth. It drives the stability of the finances and maintains sustainable economic growth. However, the global pandemics, including the coronavirus and the oil revenue plunge, led to its currency fluctuations. Consequently, despite the oil exports contributing to the most significant revenue, the Saudi Arabia government maintains crucial reserves and maintains enormous untapped borrowing abilities.
The Vulnerability of the United Arab Emirates and Saudi Arabia and the Possible Threats to the Economies
The United Arab Emirates is vulnerable to external changes such as the impacts of climate change from the rising sea levels. Therefore, climate change poses some threats to the growing economy of UAE as this would affect the developed infrastructures, such as the power stations and desalination projects, and destroy the habitats situated in the coastal regions (Abdelnabi, Abobaker, and Badawey, 2020). In addition, changes in climate affect the agriculture sector. Therefore, climate change would threaten the United Arab Emirates economy to poor economic growth and thus bring the economy to its knees.
Saudi Arabia is also vulnerable to external changes such as climate change and natural hazards. In particular, Saudi Arabia is prone to climate change as its ecosystems are sensitive because its renewable water resources are limited. Its economic growth mainly depends on fossil fuel exports (Bello and Ndioti, 2020). The natural hazards that could threaten the economy include volcanic eruptions and earthquakes in the northern region. In contrast, the central and western areas of the kingdom are exposed to floods during heavy rains. Consequently, climate changes and natural disasters could affect the economy’s growth and thus scare investors away from investing in the region.
Conclusion
Basing my recommendation on the economies of both the United Arab Emirates and Saudi Arabia, I recommend that the Dibilimano brand maintain its Gulf region’s headquarters in Dubai rather than relocate it to Riyadh. Dubai is the most influential business hub in the Middle East due to its favorable business environment. Dubai, for instance, have some laid out policies that favor the investors due to the free economic zone, which ensures that the businesses are not highly taxed and enjoys low custom and tax rates. In addition, the United Arab Emirates maintains its exchange rates by anchoring its currency to the dollar, ensuring a stable economy and low exchange risks. The developed and high-profile infrastructure in the United Arab Emirates makes it smooth and easy to carry out trading activities and reach clients efficiently and reliably. The high population of the citizens and foreigners boosts trade activities. Therefore, I would recommend the Alfaparf maintain its Gulf headquarters in Dubai.
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