Question

Report Writing

Select any publicly listed Saudi Company that operates in GCC, and write a (minimum of 1000 word) report covering the following points:                               

1. Present the study report with clear Introduction and Conclusion including your own views.

2. Using SWOT analysis, analyze the external and internal environment of your selected company.

3. Analyze the political, economic, cultural and legal challenges the company currently faces in any of the country it operates (select one country in which the company operates for this analysis).

with references please

Answer 1

The current research focuses on evaluating the standard of corporate governance (CG) in countries that use traditional and non-conventional indices in the Gulf Cooperation Council (GCC). This paper has a triple function. Extension to include both financial and non-financial entities listed in the GCC bourses, since the previous study confined their application to Non-Financials firms, of the conventional equally weighted Corporate Governance Index (CGI), developed at Al-Malkawi, Pillai and Bhatti (2014). Besides the computerization of the CGI for all GCC firms, this work refers to the unorthodox CGDI index – the first such attempt in Fan and Yu's 2012 GCC system to further endorse the results of the CGI and add another dimension to understandings of the governance qualities of the GCC nations. Ultimately, the paper also makes an attempt to examine whether any disparities between financial (FIN) and non-financial (NFIN) companies exist in CG adherence rates. The result shows that most of the companies operating in the GCC countries adhere to factors considered ideal to ensure proper disclosure, board effectiveness and shareholder rights. The outcome of the unweighted CGI indicates that, among the GCC countries, the UAE tops the position as the country that best adopts the internal governance structures studied followed by Oman and Saudi Arabia. The CGDI result further states that a higher governance score contributes to a lower deviation index and vice versa.

As the corporate titans reiterate their resolve to introspect the underlying causes for the recurrence of a global financial crisis in 2007 shortly after the 1997 Asian Crisis, their post-crisis work clearly shows an obvious inability to implement sound corporate governance (CG) practices as the central reason for these financial woes. In addition to the concerns, the unexplained fall in oil prices once considered a powerful universal shield against any financial instability, forced the Bloc countries to turn their attention to non-oil sectors such as finance, telecommunications, infrastructure and services, once again commanding a vigilant emphasis on good governance to attract investment. The corporate arena is now firmly persuaded that implementing sound governance structures at all levels will not only guarantee them a level playing field with other foreign rivals but on the contrary, provide them with self-defensive mechanisms to protect themselves from inevitable financial or economic dilemmas. Nevertheless, although the definitions of the CG vary widely, a general consensus is evident in the countless benefits accruing to the company and the country from good governance in the form of operational efficiency, improved and easy access to capital, risk mitigation, stimulation of foreign direct investment, a high public image and a long- increase in the company's value resulting in income Given these inherent benefits from equal governance, Schnyder (2012) states that one of the greatest deterrents in governance research to date has been formulating an acceptable concept for good CG steps. Looking back, following a series of numerous unexpected events in the business arena, the priority for CG in the GCC began to gain traction as of the year 2000. The Muscat Securities Market (MSM)'s sudden staggering in 1998 seriously disturbed a number of investors and disrupted the relative calm prevailing on financial markets. Analysts attributed this major slide to undue equity speculations, uninformed investors and lack of transparency due to the GCC's prevailing averse culture of disclosure. While the markets slowly started to recover, a wave of distrust and confusion crept into the minds of companies. The Institute of International Finance and the World Bank recently discussed the fact that, while the GCC area has experienced three inflexion points in the last fifteen years, namely the lowest oil price in 1998, the global financial crisis in 2008 and the rapid decline in oil prices in 2014, they are well-positioned to survive the storm and have gained global prominence and pace. Such positive externalities generated by the former two countries called for reinforcement of existing CG policies and further adoption of prudent CG policies to improve their competitiveness across parameters such as economic development, FDI and economic growth. Furthermore, while the financial markets of the GCC control are less than 1 per cent of total global assets, their young and infant status gives them significant scope for growth and expansion, but by international standards, these markets still face obstacles in competing with well-established American and European markets as well as other competitive peers in the developing world. In addition, the output disparity between the GCC countries and other emerging markets has all declared the GCC countries a safe haven for investment. This investment flow in the regional stock markets would in effect call for more stringent disclosure requirements. A new study published in 2014 by Institutional Shareholder Services reports that only 15 per cent and 12 per cent of companies in the UAE and Qatar engaged in CG study disclosure while only 82 per cent and 84 per cent of companies in the two countries delivered their annual report in a timely manner. Given the fact that prior work has concentrated on developing countries such as Malaysia, India and Thailand, the findings obtained do not apply to the GCC economy as the studied emerging countries belong to the upper stratum when it comes to adherence to CG. It should also be noted that emerging markets represent significant differences in terms of low market and knowledge quality, greater volatility and smaller size compared to developed countries (Al-Malkawi, 2008). The CG system embedded in emerging economies also reveals significant differences relative to developed economies, with CG in the former economies in its embryonic stage. While in the sense of the emerging economy, the GCC countries are now called a transitional economy that is rapidly evolving and seeking to concentrate on a creative oriented framework while seeing it as the key hub for FDI 1. In addition, the GCC's continued boom has sparked many new problems and obligations, along with closer cooperation with foreign investors and global stakeholders, both calling for greater focus on enhanced CGs. Here is where good CG takes a centre stage in competing with the best global players.Therefore, in addition to the facts stated in the preceding paragraphs, the perceived gap in information literature relating to GCC governance adherence acts as powerful motivators for the researchers to undertake a first-hand analysis on how the idea of CG is viewed by the listed companies in the GCC as part of materializing the vision of the countries in competing with global players.While our companion paper was the first of its kind to establish a GCC countries CGI to examine the degree to which countries adhere to some of the most influential internal governance frameworks, the index was applied only to 222 non-financial companies in the GCC. The current paper is significant in applying the CGI to 355 listed financial and non-financial companies in the GCC (about 60 per cent increase in sample size) in order to provide the most updated comprehensive report on the CG state of affairs in the GCC. In addition, this paper investigates whether any discrepancies in the CG adherence rates between FIN and NFIN in the GCC exist with a preconceived notion that FIN demonstrates higher levels of compliance with CG factors than NFIN. This is likely due to FIN being custodians of public funds and having an implicit duty to uphold public trust and preserve honesty. Therefore, their susceptibility to macroeconomic shocks leads them to imbibe concepts of good governance that, in the form of responsible boards, committees and robust policies that foster openness, rank the respective organization as credible. The governance index formulated in the paper, returning to CGI, merges the numerous dimensions of a company's governance system into one number that serves as a vital precursor to investment decisions in the GCC region. Such indexes also serve as a benchmark against best governance practices of the world-class (Bhagat et. al, 2008), and aid in evaluating governance efficiency. In fact, such indices persuade companies to commit themselves credibly to improving governance standards in order to retain their market position (Becht et al., 2002). The authors assume that the CGI built in this paper is capable of organizing, summarizing and disclosing the interconnectivity and convergence of the CG regimes and expectations that prevail in the GCC, which are currently wide and contrasting. Although the index is prepared after a thorough analysis of country-specific corporate laws in the GCC and can be effectively used to meaningfully evaluate GCC countries 'CG positions over a particular period of time, it provides sufficient room for future GCC researchers with varied objectives to tailor the factors to their needs. The GCC's CGI will serve as another reference measure to take into account prior to portfolio diversification, and annual structures of these indices will help monitor development if any is in CG adherence. Examining disparities in CG adherence between FIN and NFIN should concentrate attention on prevailing gaps and assist in taking corrective and improvement steps to address the gap. This study will also contribute to the literature on governance by constructing the CGDI, which is the first of its kind to be formulated to the best of our knowledge for the GCC as well as the MENA regions.

SWOT Analysis

Strength

~Strong brand with high-quality products

~Market leader in diary market in GCC

~Strong distribution network

~Hot climatic conditions conducive for beverages market

Weakness

~High operating costs pressurizing pricing

~Over dependence on diary and juices segment

~Major dependency on imports for raw materials

Opportunities

~Growth of milk market in Gulf Cooperation Council (GCC)

~Product diversification with major opportunity in infant nutrition

~Increasing number of pilgrims visiting Saudi for Hajj and Umrah to propel demand

Threats

~Political situation in the Gulf region

~Feedback supply disruption will increase the cost

An overview of the company's political, economic, cultural and legal problems:

Political

Form and stability of the government.
Political equality, rule of law, bureaucracy and corruption rates.
Tendencies to control and de-regulate.
Legislation on social relations and education.
Tax policy and restrictions on trade and tariffs.
Legislation on the environment and consumer safety.
Modifications in the political climate are possible.

Economic

Business cycle level.
Economic growth, inflation and interest rates, current and project production.
Jobs and sources of labour.
Costs of labour.
Available income levels and distribution of income.
Globalization effect.
Perhaps the effect on the economy of technical or other shifts.
Modifications in the economic climate are possible.

Cultural

Level and age profile of population growth.
The wellbeing and behaviours of individuals, schooling and social movement.
Work patterns in the population, freedom of the labour market and attitudes towards work.
News, public opinion, attitudes towards current affairs and current tabuism.
Tools and attitudes towards lifestyle.
Changes socio-cultural.

Legal Challenges

Choose the wrong type of company.
Shareholders 'differences.
IP and trade secrets stealing.
Legal disputes with workers.
Contracts are wrongly drawn up.
Demonstrate a lack of regard for the market.