This arrived appeared originally in Gulf News: link to original article
In an attempt to find a footing in the business world, I travelled with my best friend to a country in East Asia to seek a franchising opportunity. We found a unique concept in the food and beverage industry, which was never franchised before except to relatively bigger markets in the same region.
After two days of rigorous lobbying efforts with the owner, he agreed to an exclusive dealership in Dubai, preferring us to a $10 million offer from a Dubai-based conglomerate. Such an astronomical figure was offered versus the eagerness of two university students, travelling coach on their parents’ dime.
There’s growing emphasis today towards nurturing and encouraging entrepreneurs to take risks and start businesses. Or even be able to source others that could eventually result in knowledge transfer and the transmission of information from one business to another that could spur other innovative solutions.
While I do not in any way disagree with the notion, I am of the opinion that entrepreneurship can only prosper in an economy that offers a fair market competition environment, for physical and online businesses alike. This is especially important, when taken in the context of the youth’s share of total population in the Gulf and how this demographic trend is not going to ebb anytime soon.
Young entrepreneurs and business pioneers hold the future for GCC economic growth.
Many family businesses in the Gulf were established around exclusive dealerships with no expiry dates. This is apparent in different industries, including goods and services, ensuring that owners of those businesses are at an advantage regardless of the level of quality being provided on the goods being sold or services being provided.
Such a result is a natural symptom of a semi-monopolistic aspect of the market, leading to future entrepreneurs and business pioneers, especially the youth, seeking alternative approaches to markets with high entry barriers.
I identify two approaches here by entrepreneurs who were left out of this existing market.
One approach was a pivot to Asia, and more specifically East Asia. The story that I started with in this article is one example of such trend, emphasising the growing interest among individuals to get additional business deals from that region.
With their presence in different exhibitions such as the International Hunting and Equestrian Exhibition in Abu Dhabi (ADIHEX), one cannot but notice the various Asian-based brands represented there.
Though the expansion seems modest by the standards of different exhibitions, it highlights a trend that may take hold of the market as consumers seek more moderately priced goods and services with improving quality and brought in by newly-minted entrepreneurs.
The second approach was to do without industries with a heavy presence of family-owned businesses for the sake of investments. And instead look at those that could be created domestically and managed as such, without the need to adhere to strict franchising and dealership rules.
The trend in local F&B in the Gulf is an illustration of the same, with this movement growing more rapidly than the one identified earlier, except that it keeps shifting from one type of F&B to another as each reaches a saturation point. Entrepreneurship thus became increasingly and unsustainably associated with businesses that add to the economy through consumption, which requires an ever-increasing populous to thrive.
The long-term diversification of the economy, with a healthy growth rate, requires more of the first approach and less of the second.
The two approaches of today’s entrepreneurs are the result of an exclusive, monopolistic legacy of decades-old businesses that have secured and expanded their hold of certain industries in the Gulf, and perhaps elsewhere in the region.
As populations in the Gulf get younger, there’s no alternative to opening up the market and allowing entry of young business pioneers into industries that are key for economic growth. This will require review and overhaul of decades-old commercial laws, along with various regulations that do not accommodate an evolving business world and a growing share of the gig economy.
Going back to the earlier story, the business owner had high expectations on sales targets that would have been feasible if our financials were more favourable. Unlike decades-old business that could afford high costs and demanding exclusive dealership rules, young entrepreneurs and business pioneers generally lack adequate financing to pull it off.
We didn’t get the business, neither did anyone else.
The last thought that I want to leave you with: what would it take to witness the establishment of a regional Amazon or Alibaba?