Comparative Analysis of Retail Industry of Malaysia & Saudi Arabia

Fig 1: shows an eXtra store, Saudi Arabia’s leading electronic retail. Source:  alroyya.com

Retail industry is the part of the economy, involved in selling finished products to the end users. Retail shops could be found in wide range of formats, ranging from large hyper markets and department stores, to small convenience stores and general stores. It primarily includes six sub categories: - food & general retail, fashion apparels, fast food restaurants, fast manufacturing consumer goods (fmcg), luxury products and electronic appliances & consumer durables.

All across the globe, both in the developed as well as developing world, retail industry plays a pivotal role in the national economies. It has a wide range of direct as well as indirect economic significance- ranging from mass level employment generation (both urban and rural) to bringing, speed and efficiency into the entire supply chain system.   

The given report intents, comparing retail sectors Malaysia and Saudi Arabia; one an emerging economy and a constitutional monarchy from South East Asia and other an oil rich Islamic Monarchy from the Gulf. Both the nation, share similarities across various socio-cultural as well as demographic parameter. Hence provide a good case to do comparative analysis. They will be compared across following parameters- economics, retail industry outlook, policy frame work, tourism, demographics and transportation.  

Economics, demographics & infrastructure

The following part compares Malaysia and Saudi Arabia, across few of the general economic, demographic and infra structure related parameters.

Fig 1: shows the GDP growth rate of Malaysia and Saudi Arabia vis- a-vis, world’s growth rate.

Table 1: compares Malaysia and Saudi Arabia across various economic parameters. Source: World Bank

Table 2: compares Malaysia and Saudi Arabia across parameters related to infrastructure. Source: World Bank.

Retail industry outlook

Malaysia

Malaysia, an upper middle income country according to World Bank, enjoys a robust and growing retail sectors. According to Business Monitor International, total retail sales in Malaysia were estimated at US $ 33 billion, in 2009.  Like other Asian countries it has penchant for gigantic malls and hypermarkets and is dominated by players such as Giant (domestic), Tesco (UK) and Care four (France). The retail sector in Malaysia is fueled by large proportion urbanized middle class (50% of the population) with high disposable income; a large proportion of youth (42% aged between 10 and 34, as on 2008) and high tourist arrival. Tourism accounts for 30% of retail consumption in Malaysia.  (RECON, 2008)

Fig 2: shows the growth in retail sales vis-a-vis GDP growth rate for 2010. Source: Thestaronline.com 

Fig 3: shows the number of outlet and total sales for major retailer in Malaysia for 2009. Source: Malaysia retail annual report, USDA Foreign Network.

Saudi Arabia

Saudi Arabia is the biggest Gulf country and the biggest economy in the Middle East and North Africa region (MENA) region. The region is marked by growth in retail space, young demographics, high tourist arrival and change of role of women in social sphere. Saudi Arabia, the biggest and one of the freest economies in the region, is considered as one of the most fertile market for the retail industry. Rapidly growing population, brand conscious young demographics (45 percentage of population aged 20-44) and high level of disposable income will be key drivers for the industry, in the kingdom. After oil, banking and telecom; retail is the fourth largest industry in the country, both in terms of number of, establishments as well as employees. It earned a total of US $ 55 billion, from retail sales in 2008, up from US $ 37 billion in 2004. (PR Log, 2009) The market is dominated by small retail stores, though big retailers, both domestic and international players, are trying to up their ante in the much fragmented retail industry.     

Table 3: shows values for various retail industry related parameters. Source: JONES LANG LASALLE, AMEinfo.com 

Fig 4: shows the retail sales of Saudi Arabia, in billion US $, over the last few years. Source: AMEinfo.com

Presence of major retail brands in Malaysia & Saudi Arabia

The following part of the report will compare the presence of few of the leading retail brands in Malaysia and Saudi Arabia. The no. of outlets, in some of the cases, has been described in brackets.

Table 4: shows the presence of some of the major retail brands in Malaysia and Saudi Arabia. Source: Mystore411.com and others

Policy   

One of the key pillars for the growth of any industry in a country is policy and regulatory framework. An open and market oriented policy framework are more likely to stimulate growth and development in the long run. The following part of the report will compare Malaysia and Saudi Arabia across general business environment as well as policy framework pertaining to retail industry.

Retail business environment

General business environment

Saudi Arabian economy is marked by liberal economic policies and free market mechanisms stimulating foreign investments. The kingdom has biggest oil reserve outside Soviet Union and USA and like other Gulf counterparts, aim at diversifying its economy into industrial and service sector. The state generally does not interfere with the inflow and outflow of capital. It incentivizes businesses by providing favorable tax exempts, subsidies, provision of land at low price, exemption of custom duties on export etc.  (Al A, 2007)

In line with Saudi Arabia, Malaysian economy is also marked with investor friendly business environment. During 1970s, when Malaysian economy was primarily based on mining and agriculture, govt. took diversification measures backed with centralized planning. During 70s to 90s, like other Asian Tigers, Malaysia recorded a strong economic growth. In the present time also govt. plays a pivotal role in the economy, but gradually it is reducing. One of the remarkable features of Malaysia economy is availability of easy credits.

   

Malaysia

The key elements of retail industry (especially pertaining to foreign investments) policies of Malaysia are as follows (MDTCC, 2010)

·         Aims at modernization of the industry, ensuring growth of the local business at the same time

·         All foreign involvements in retail sector, including; acquisition & merger, expansion, relocation, buying, taking over etc; require permission from Ministry of domestic trade, cooperative and consumerism (MTDCC).

·          Work force should be reflective of over all racial composition of Malaysian population. It should ensure development of local inhabitants or Bumiputera.

·         Regulatory framework for Hypermarket-minimum capital required is US $15.95 million (RM 50 million), at least 30% stake should be provided to Bumiputera within 3 years of incorporation, minimum floor space should be 5000 square meters and 30% of space needs to be allocated for Bumiputera SME product.

·         Regulatory framework for Departmental store-minimum capital required is US $6.38 million (RM 20 million), and 30% of space needs to be allocated for Bumiputera SME product.

·         Foreign investment is not allowed in the following- super market/ mini market (<3000 square meters), provision shop, convenience stores, fuel station with convenience stores, etc.           

Saudi Arabia

The key elements of retail industry (especially pertaining to foreign investments) policies of Saudi Arabia are as follows:

·         Retail being one of the few sectors, in Saudi Arabia, where 100 percent foreign ownership is not permitted. As per the guidelines, last revised in 2004, the maximum limit for foreign ownership in retail sector is 49 percentages.

·         Any company in Saudi Arabia, with foreign investment, requires a foreign investment license.  

·         Franchising a popular concept used in the Kingdom. Franchise owners need to be local inhabitants and not 3^rd party. Many of the leading retail brands such as Baskin Robins, McDonalds, and Burger King Etc operate in the Kingdom in franchise arrangement.   

Tourism

Along with local inhabitants, tourism inflow also helps in boosting retail sales. Both Malaysia and Saudi Arabia are successful tourism destination. Religious pilgrimage is the key driver of Saudi tourism, whereas its Malaysian counterpart depends on exotic beachfront resorts, festivals and medical tourism. The following chart compares tourist inflow of Malaysia and Saudi Arabia.

 Fig 5: compares the annual inflow of foreign tourists in millions, for Malaysia and Saudi Arabia. Source: Tourism Malaysia and Indexmundi.

Demographics

Demographic profile is one of the key drivers of the retail industry worldwide. A young, vibrant and well aware population ensures high spending on retail.   

Table 5: compares Malaysia and Saudi Arabia across demographic parameters. Data are for the year 2010. Source:  CIA World Fact book.

Transportation

A good transportation network, especially high volume of private motor vehicles, ensures the growth and development of out of town hyper markets. In the absence of motor vehicle people tend to visit nearby retail stores only.    

A well developed transport and logistics network does not only help in sales but also ensures better functioning of big hyper market chains. In the absence of good logistic, big hypermarket chains are unlikely to import and circulate retail items in large volume, effectively. 

Table 6: compares Malaysia and Saudi Arabia across transportation parameters (most recent by year). Source: nationmaster.com, numbeo.com

Conclusion

The report has compared Malaysia and Saudi Arabia across various parameters- economics, retail industry outlook, policy frame work, tourism, demographics and transportation. As discussed earlier, both the nations offer a great case to study. They have their own share of agreements as well as disagreements. Some of the key conclusions drawn are as follows:

·         In both the countries, retail sector is important constituent of the national GDP and is witnessing high annual growth. The high growth of the retail sector is fuelled by higher disposable income, high percentages of youth and vibrant tourism sectors.

·         Malaysia is considered as a high middle income country, where as Saudi Arabia, on account of high oil and natural gas reserve, is one of the rich nations in the world. Marked with high per capita income, it is a more fertile ground for luxury retail.

·         Both are luring big retail brands to operate in their country. Saudi Arabia is a better destination than Malaysia in terms of a number of ease of doing business parameters such as – dealing with construction permit, getting electricity, registering property, taxation etc. Malaysia’s strength lies in the easy credits and high FDI in retail; 70 % against, 49 % in Saudi Arabia

·         Malaysia has better infrastructure, logistic as well as telecommunication infrastructure, both considered as a backbone for developing a vibrant retail sector. Saudi Arabian strength lies in availability of gasoline at dirt cheap price and high availability of electricity.

Reference

1>    RECON, 2008, Malaysia: a gateway to South East Asia,

2>    Al Amri, 2007, doing business in Saudi Arabia, available at < http://www.alamri.com/DOING%20BUSINESS%20IN%20SAUDI%20ARABIA.pdf>

3>    Doing Business, 2011, home page, available at http://www.doingbusiness.org/rankings

4>    MDTCC, 2011, Guide lines for foreign participation in the distributive trade, available at < http://www.kpdnkk.gov.my/kpdnkk-theme/images/pdf/WRT_Guideline.pdf> 

5>    Masterintelligence.com, 2011, Master card worldwide consumer confidence index, available at < http://www.masterintelligence.com/ViewRegionReport.jsp?hidReportTypeId=2&hidRegionId=1&hidUserId=null>

Comparative Analysis of the three rising stars of Asia- Hong Kong, Singapore & Dubai

        Fig 1: Skyline of Singapore. Source: Wikipedia                                                                    

Singapore, Hong Kong, and Dubai are three major city states, of international standing in Asia. All of them have undergone a phenomenal growth in the last few decades and plays a very pivotal role in the economy of their respective nations and even regions. Considered among some of the best marketed destinations in the globe; they bring in a huge amount of investments along with human capital. All these three city states constantly feature among the list of top 10, most visited cities in the world. The following blog will do a comparative analysis of the following places across a wide range of qualitative as well as quantitative parameters.

Introduction

·         Dubai: is one of the most well marketed destinations, across the globe. In the three decades, the small emirate has seen itself leapfrogging from a sleepy town to one of the biggest success saga of Middle East. Placed between the cross roads of East and West, Dubai is also sometimes known as the gateway of the Middle East to the world. The biggest strength of Dubai lies in its visionary and extremely efficient leadership and liberal culture, helping it attract expats from all over the world. It is among the very first Gulf States, that has successfully diversified its economy into various sectors such as-tourism, real estates, retail, trade, media, financial services etc.  The very first thing that comes to mind with brand Dubai is the state of art real estate constructions. Dubai boasts some of the biggest, most expensive, state of the art buildings, hotels and real estate assignments- Al Burj, Burj Khalifa, Palm islands etc. Other than these world famous  landmarks Dubai offers plethora of state of the art shopping malls, amusement parks, museums, resorts and spa, golf courses, sports stadiums, convention centers etc.

 

·         Singapore: the small city state which once got freedom in 1963 from Malaysia; is not only among one of the most visited cities across the globe; but also an epicenter of trade, commerce, finance, technology and innovation. Considered among the biggest success sagas of 20^th centuries, Singapore had witnessed an average growth rate of 7.9 percentages, since 1963.  The Singapore’s success story is based on four pillars- liberal govt. policies, skilled workforce, state of the art sea ports and strategic location. During the time of 60’s and 70’s when this tiny state was suffering from high unemployment, liberal policy frame work was put in place, along with investments in labor incentive industries. In the later stage, Singapore successfully transformed itself from a labor incentive industry to an innovation driven industry. Today it is home to around 500 financial institutions and most of the MNCs of the world. It also has a numero uno position in the “ease of doing business index”. (World Bank data, 2010) Singapore is also great tourist hub with state of the art hotels, resorts, shopping malls, casinos etc. In 2009, it received 9.7 million tourists and was among the list of most visited cities in the world. (annual report on tourism statistics 2009, 2011)

·         Hong Kong: it’s a place where East meets the West. Before being handed over to China in 1997, Hong Kong was under British Rule. Even today other than foreign relations and military defense, it maintains a high degree of autonomy. In contrast to mainland China, it enjoys a capitalist structure marked by free trade and low taxation. It is considered as one of the freest economies of the world. Famous economist Milton Friedman once described that if someone wants to see free economy, he should go to go to Hong Kong. Like Singapore it is a major trade and financial center. Like the other three Asian tigers (Singapore, Taiwan and South Korea) Hong Kong underwent industrialization during 60’s and successfully transformed into a service sector economy during 80’s. In 2010 service sector has accounted for 92.5 percentage of GDP, against Industry contributing just 7.4 percentages. (CIA World Fact Book, 2010). A blend of Chinese and Western culture, Hong Kong is also a fabulous tourist destination attracting tourists from all over the globe.     

Demographics

All these three places are trade centers and financial capitals of their respective regions, besides being great tourist destinations; there by attracting a large number of expats- businessmen, travelers, working professionals, academicians, celebrities etc. According to the survey conducted by Dubai Statistics Center in 2006, 17 percentages of the population consists of local Emiratis. 71 percentages of the population consist of Asian which mainly includes- Indian, Pakistani, Srilankan, etc. 3 percentage of population has been categorized as Western.  In contrast to this in Hong Kong, according to 2006 census 95 percentages of the work force is Chinese followed by Filipino (1.6 percentage), Indonesian (1.3 percentage) and others 2.1 percentage. (Index Mundi, 2011). In Singapore out of the total population of 5.08 million, 3.77 million are Singapore residents against 1.31 million foreign residents. (Comprising of tourists) Out of 3.77 million, residents 3.23 million are citizens where as 0.54 millions are permanent residents. Major ethnic communities include Chinese, Malay, and Indians etc. 0.3 percentage of the population can be categorized as Western.  (Department of statistics Singapore, 2011) 

 

Fig 2: compares the population of three states for the year 2010. Source of data: Dubai Statistics center, Singapore Statistics center and CIA World fact book.

Fig 3: shows the population of the three city states in millions, over the period of time. Source of data: Hong Kong year book, Dubai Chamber of Commerce, Department of Statistics Singapore

Table 1: compares the three city states across various parameters. Reference year: 2010; Source of data: US department of State, Index Mundi etc

.

                Table 2: compares the three city states across geographical parameters.

Economics

The following section will compare the three city states across some of the economic parameters- Gross Domestic product (GDP), Foreign Direct Investments (FDI), Cost of living Index etc.

Fig 3: showing the GDP of the three city states, US $ billions, for the year 2010. Source: CIA Fact Book, Al Arabia news.

Fig 4: showing the GDP growth rate of the three city states in the past few years. Source: World Bank, Dubai Statistics Center.

Fig 5: showing FDI inflow of the three city states in US $ billions, over the last 6 years. Source: World Bank, Dubai Statistics center.

Table 3: compares the 3 city states across various cost of living indices. Source: NUMBEO

Tourism statistics

Other than being epicenter of trade, commerce and financial activities, the three states are also considered among some of the greatest tourist destinations in the globe. Constantly featuring among the top 10 most visited cities in the globe, they have some of the most magnificent hotels, resorts, casinos, convention centers, amusement parks etc. The following line graph of the report will compare the 3 city states in terms of annual tourist arrivals

Fig 6: showing annual arrival of tourists in millions. Source: Dubai Tourism and Commercial Marketing (DTCM), Press releases by Hong Kong tourism board, Singapore Tourism Board. The comparatively higher figure for Hong Kong is on account on Chinese travelers, which account for approximately 2/3^rd of tourist arrival. 

BRAND ESSENCE

This part of the report will try figuring out one word, which can describe the brand of these city states.

Dubai had successfully ventured into wide range of activities ranging from various forms of tourism (leisure, shopping, sports, cultural, dessert, business etc); trade, businesses, industries etc; but one word describing brand Dubai can be luxury. It’s a place where modern day dynamism blends well with traditional Arabic tranquility. Be it the state of the art hotels or resorts; shopping malls or villas; everywhere Dubai reflects luxury. For Singapore, that one word could be innovation. Singapore is the hub of high tech innovation. According to Global Innovation Index 2011, Singapore has been ranked as 3^rd most innovative nation in the world and 1^st in Asia. (Sgentrepreneurs.com, 2011). Similarly one word that can reflect the brand essence of city state Hong Kong could be liberty. Hong Kong is one of the most free and liberal states in the world. It practices liberty in almost every sphere of life- economic, social, political, etc. It offers a top notch living conditions or its residents. Ranked 13^th on the Human Development Index, it is one of the best places to live. Singapore has a rank of 26, whereas Dubai (UAE) has a rank of 30. (Human Development Index and its Component, 2011)

Fig 8: Shows the brand essence of the three city states in one word.

ANALYSIS & conclusion

The given report had tried analyzing the three city states of Asia across various parameters related to demography, economy, tourism etc. With the help of various charts it could be seen that Dubai is still catching up with the Singapore and Hong Kong and will take some time to reach their level. Dubai is an Emirate with extremely big ambitions. For instance by 2015, the Dubai Tourism and Commercial Marketing aims at reaching an annual tourist arrival of 15 million. Though time will tell how far Dubai will excel to realize this ambition; but if realized Dubai will be the most visited tourist destination in the world. Similarly in other spheres also the 2nd largest emirate of UAE holds huge ambitions. Exp: Jebel Ali, the largest man made harbor is also undergoing expansion and once completed in 2030, it is expected to be the biggest container port in the world.



The social and economic structures of these three city states have their own similarities as well as differences. Singapore and Hong Kong are quite synonymous to each other in terms of knowledge economy, high degree of social freedom & liberty and international trade centers; Dubai offers a slightly different case. Though Dubai has successfully diversified its economy (presently Hydrocarbons account for only 2.1 percentage of GDP, contrary to 1985, when it had a giant share of 55 percentages) into real estate, trade and tourism; it is still far behind from becoming a knowledge economy. Similarly in terms of demographic break up, Dubai’s economy is completely dependent on expats, in contrast to local Emiratis which constitute only 17 percentage of population. (Dubaidreams.net, 2011). It is the other way round in Hong Kong and Singapore.

Table 4: shows the diminishing percentage of oil in Dubai’s GDP. Source: USA Today, AME info.com, Dubai Chamber of Commerce

Dubai has its own advantage. It is yet to realize its full potential and hence has a long way to go. In the form of its ambitious 2015 plan, it aims at implementing strong social and economic reforms and transformations. It is one of the fastest growing Emirates and prior to the economic crisis that led to real estate bust; it was enjoying a double digit growth rate. Considered as an epicenter of trade, finance, investments, culture and tourism in the Middle East region, it had help attracting a lot of investments, trade and human capital for the region.

If IT and Technology defines Singapore and Hong Kong; real estate defines Dubai.  It is marked by luxury, which gets reflected in the wide range of high profile construction projects incubated by the Emirate. One of the reasons, it can accommodate such projects, is the availability of large amount of free space. While Singapore and Hong Kong are becoming vertical cities, Dubai still enjoys a population density of 408 per square Kilometer, much lesser than most of the major cities in the world. It is also comparatively economical in comparison to the other two cities. (as shown in table 3). In a nutshell, Dubai has carved a unique niche for itself. Created amidst a dessert, it has successfully transformed itself from a sleepy oil rich emirate, where once hydrocarbon accounted for more than 50 percentage of GDP to one of the most economically diversified and socially liberal state in the region.

In terms of political structure Dubai and Singapore share a similar kind of structure. Both of them are blessed with visionary political leadership, which played a pivotal role in their exorbitant growth. They have got an extremely efficient political and bureaucratic apparatus, known for executing big projects swiftly. Contrary to this in Hong Kong, govt. has a minimal role to play in the economic ambit. In fact Hong Kong has one of the most liberal economies across the globe.   


In spite of having differences across various economic and social parameters, there are lots of things common in the three states. On Economic front, all of them have liberal economic policies marked by low tax and tariff rates, helping them attract a large amount of investments and top notch human capital. All of them have shown phenomenal growth rate in the recent past. They share a lot of similarities in terms of landscape and geography. They are islands, have extended coastlines, and are situated in strategic locations, which helped them morphed into excellent trading centers. Not blessed with much of exotic natural landscapes, they made huge investments in developing state of the art hotels, beach resorts, golf courses, convention centers, shopping malls; there by transforming into magnificent leisure and business tourism destination. High tourist arrivals have also been very advantageous for their retail sector. On social front, all three of them are marked by open and liberal cosmopolitan culture, attracting expats from all over the globe and providing a platform to grow and flourish. This ability of attracting diversified human resource from various parts of globe had eventually been very beneficial to them.



The three city states converges as well as diverges across different parameters; but one thing that is common to all is the phenomenal success story they have scripted for themselves in such a small interval of time. They came from nowhere and today are destinations of international standing. These city states, developed from scratch, are product of- strategic planning, die hard entrepreneurial spirit and openness towards change. Hong Kong, Singapore and Dubai-these are the rising stars of the East, without any substantial past, but definitely with an illustrious present and future.
 

Analysis of digital media in the Middle East and North Africa Region

                                                                   
    Fig 1: logos of various social media. Source: http://www.middleeastsocialmedia.com/

Introduction

The competitive dynamics of the media industry is being transformed throughout the world. All across the world, the popularity of traditional media channels such as print media, TV broadcast and Radio broadcast are depleting and is being replaced by the digital media. Not only is the digital medium encroaching upon the space of the traditional media; but also changing the dynamics of revenue model- so far enjoyed by the traditional media. Even in the digital media itself, lot of changes are happening. The traditional boundaries, between media companies, telecom operators, handset manufactures and internet service provider is getting blurred. Everyone is trying to encroach upon each other’s space.

The digital media in the Middle East and North Africa (MENA) is still in its nascent stage, as compared to other developed parts of the world such as Western Europe and North Africa; but given the fact that huge investments are made in ICT infrastructure, internet and mobile penetration are increasing at a rampant speed and a new wave of political change is happening all across the region, digital media seems to have a huge potential to grow in the region. The following research article will do an analysis of Digital media, its present state and its future prospect; in the MENA region. It will take help from reports from sources such as: Booz and Company, PWC, Arab Media Outlook, Spot On PR, Neilson etc.  

Advantages of digital media:

Digital media offer some unique advantages, which traditional media such as TV & Radio broadcast and print media cannot offer.  Some of the unique advantages are:-

·         Economical: digital media is very economical. Having a brick and mortar shop will cost a lot; in contrast to this having a web presence is much cheaper. It does not cost much to develop and market a website.

·         Curtails geographical barriers: a very remarkable feature of digital media is that, it could be accessed from any part of the globe. Geographical barriers often create challenge for traditional media sources such as newspaper and magazines in disseminating information, but digital media, which has a virtual presence, could be accessed from any part of the world.   

      

Convenience: Digital media is always convenient to use. With the help of a laptop,i-pad or other hand held device plethora of content could be consumed. 

·         Content can be consumed as well as produced at the same time: with the help of web 2.0 platforms, content can be viewed/consumed as well as produced at the same time. Web 2.0 provides two way communication platforms. Not only does it communicate directly to the end users, but also allow the consumers to share their opinion, feedbacks etc.

·         Consumer Insights: with the help of web based analytics, digital media can give a lot of detailed insights, pertaining to consumer behavior and demographics- consumption pattern, duration, geography etc. One remarkable feature is that, all such valuable data could be obtained at a negligible cost.

 ·         Target Marketing: digital media helps in capturing the target audience.

Disadvantages of Digital Media:

Along with advantages, digital media also has some disadvantages such as 

          

·         Revenue from advertisements is not easy in the digital media. It’s easy to have a web presence/ digital presence, but it is as difficult to generate revenue out of it.Monetization of digital media is a challenge, through out the globe.  

·         Generating revenue always takes a large amount of time. Revenue can follow only, after creating a sizeable customer base. For instance, even Facebook took five years to break even. The revenue from marketing could be generated only after securing huge customer base.  

·         Not everyone is very comfortable with digital media, especially when it comes to money transaction. A large number of individuals are wary of transferring money over the internet. More over the web medium has also been the source of lot of frauds.

·          Consumers expect a lot of free content on the web. When it comes to paying for the content, many individuals are not very willing to pay. They just want stuffs for free.    

DIGITAL MEDIA: global trends

Globally more than 50% of the internet consumption comprises of 5 nations: USA, China, India, Brazil and Russia. As described earlier a lot of creative rearrangements are happening in the media sector, all across the globe. Some of the major global trends in the digital media are as follows (Morgan Stanley, 2009)

·         E-commerce: major products which are purchased online globally are- computer products, electronic items, event tickets, hotel bookings, tour packages, books, music/video etc, toys etc.

·         Consumptions of internet on mobile are catching up fast with consumption on desktop. According to Morgan Stanley report, by 2013-14 more users will be consuming internet via mobile devices, rather than desktop computer.

·         Social Media: social media users are surpassing the regular email users. People refer spending more time on social media rather than on regular emails.

·         Adoption of newer and better telecom services such as 3G will further consolidate the stronghold of mobile medium.

·             

Digital media in Middle East

In contrast to other parts developed world, digital media in MENA region is still not very matured but is surely one of the sectors, which is poised for a high growth in the coming time. As a region, MENA has its own advantages and its own challenges. Presently there are 65 million internet users in the MENA region, which is expected to increase to 80 million by 2012. (AMIR, 2011) Other than global heavyweights such as Google, Yahoo, Facebook and regional players such as Kooora, Maktoob etc; the region is also witnessing the arrival of online marketing firms such as Al click, Eastline Marketing etc.         

   

Advantages of Middle East

The Socio Economic structure of the entire Middle East has lot of inherent advantages, which can boost the growth of online media companies in the region. Some of them are (Booz & Company, 2009):

·         A uniform, homogeneous market: the Middle East might have many small nations, across the region but, all share the common Arab heritage and enjoy high degree of commonality across various socio-cultural dimensions. Hence the Middle East could be considered as a homogeneous mixture of around 300 million individuals. The idea of uniformity becomes more apt in case of digital media because; unlike regular media such as print and broadcast which are restricted to national boundaries due to regulatory barriers; online media can have a pan Arab presence.

     

·         High mobile penetration: these days a large amount of digital contents are being viewed with the help of mobile devices. MENA region enjoys a high degree of mobile penetration with states like UAE and Saudi Arabia enjoying a mobile penetration of 200 and 125 percentages.

·         High literacy rate: Many of the MENA states are taking education, high up on their agendas. Some of the MENA states enjoy a high degree of literacy. For instance: collectively the six gulf state enjoys a literacy rate of more than 75 percentages.

·         Several MENA nations are extremely rich: many of the oil rich MENA nations, especially Gulf States are extremely rich and enjoy high per capita GDP. For instance: Qatar, where per capita GDP is around US $ 78,000.  By 2015, Gulf States and Egypt are expected to have 13 million households in middle to high income brackets.

·         Investments in the ICT infra structure: rather than depending on oil MENA nations are realizing the urgency of economic diversification. One thing which is high up on their agenda is ICT infrastructure. All across the MENA huge investments are being made to develop state of the art ICT infra structure.

·         Demographics: the younger generation is more inclined towards the digital media. Somewhere around, 55 percentages of Arab population, is less than 25 years of age, which shows that there is a huge potential for the digital media to flourish in the Arab world.

  Challenges for digital media in Middle East & north africa

Along with advantages, MENA also has lot of challenges, providing hindrances to the growth of digital media in the sector.

·         Low broad band connectivity: it is expected that broadband connectivity will increase in the coming years; but the present penetration of 12 percentages is much lower than other developed parts of the globe. 

   Fig2: broad band penetration in different geographies. Source: Arab Media Outlook 2009-13

·         Dissimilarity in ICT infrastructure across the region: even though the region shares socio cultural heritages, there is a high degree of economic asymmetry across the whole region. There are cash rich small Gulf States; North African bigger states like Egypt and Morocco which are comparatively more integrated with the world economy; developing states like Jordan and Syria with almost no oil and reserve and states like Libya and Algeria with high oil deposits but high population as well. This asymmetry is also reflected in a wide range of economic parameters such as mobile penetration, internet penetration, broad band connectivity, kind of network technology being used etc. For instance, in emerging markets like Syria and Sudan broadband penetration is less than 1 percentage; in Morocco and Jordan it is 12 and 15 percentages respectively where as in rich Gulf States like UAE and Qatar it is 69 and 84 percentages respectively. This inherent heterogeneous nature of the ICT infrastructure across the region makes it difficult for organizations to adopt a single digital marketing strategy. (Arab media outlook 2009-13, 2009)

·         Gap between presence and revenue: any business model does not make any sense, until unless it cannot generate constant stream of revenue. In the MENA companies are finding it tough to en cash their digital presence. For instance: 85 percentages of Arab newspapers have digital presence as well, but digital media constitutes just 2 percentages of their advertising revenue.                       

Fig 3: shows the breakup of digital media revenue (in US $ million) in the MENA region, for 2009.  (Source: Booz & Company)  

Fig 4: percentage wise break up of online advertisements in MENA region. Source: Booz & Company, 2009.

 Fig 5: percentage wise break up of mobile advertisements in MENA region. Source: Booz & Company, 2009.

·         Online shopping activity is abysmally low: according to a research conducted by Neilson (comprising of 1,246 individuals from four countries- UAE, Egypt, Lebanon and Saudi Arabia) less than 1 percentage of individuals prefers engaging themselves in online shopping. (Arab Media Outlook 2009-13 , 2009)

·         Monetization of the online content, which is somehow a challenge all across the globe, is quiet challenging in the MENA region. The prevalence of a cash based culture and low penetration of credit & debit card penetration makes it more difficult. (Arab Media Outlook 2009-13 , 2009)  

       Internet consumption behavior of MENA users

In order to analyze the prospect of digital media in MENA region, it will be helpful to have a brief overview of internet consumption behavior of people from the region. In order to understand this better, the blog will be taking the help of a research conducted by, Effective Research in conjunction with Spot on PR, in July 2010. The research has been conducted over a base of 2587 individuals, out of which 69 percentages comprised of Egyptians and 20 percentages comprised of individuals from GCC. 

Fig6: shows the common activities on internet in the MENA region. Source: Neilson, the survey comprised of 1,810 individuals from 4 countries- Egypt, Saudi Arabia, UAE, and Lebanon. 

Education level of individuals surveyed:

 Fig7: shows the education level of respondents surveyed, in terms of percentages. Source: Effective Research and Spot on PR.

Place of internet access

Fig8: shows the place of access of internet, for the respondents, in terms of percentages. (Source: Effective Research and Spot on PR, 2010)   

Respondent’s, Usage of Social Media Platform:

Fig9: shows respondent's usage of various social media platforms.(Source: Effective Research and Spot on PR, 2010)  

Respondent’s daily consumption of other  media channels.

Fig10: shows percentage of correspondents consuming various media channels on a daily basis (in case of magazine, weekly figures have been taken). Source: Effective Research and Spot on PR.

Disposition towards Internet Marketers:

Fig11: respondent's disposition towards internet  marketers. Source: Effective Research and Spot on PR. 

Important Conclusions:

Important conclusions, drawn from the report are as follows:

·         Majority (more than two third) of internet users from the region seems to be, graduate or above.

·         Internet is primarily used from home.

·         Facebook seems to be very popular across the region. The tremendous popularity of Facebook is followed by other local brands such as Kooora, Maktoob etc.

·         Internet users from the MENA region simultaneously use a wide range of other media channels as well, such as newspaper, magazine, radio, TV, mobile applications etc 

   Challenges for Digital Media:

·         Less ad spending on digital media: so far digital media contribute a miniscule share of just 2 percentage of overall ad spending in the MENA region. In 2008, the digital advertisement investments per capita in the MENA region was just US $ 2 compared to the global average of US $ 27. (Booz & Company, 2009) 

Fig 12: shows per capita digital ad spend across various countries in 2008. Source: Booz & Company, 2009.   

·         Internet penetration is comparatively low: internet penetration is increasing in the Middle East region at a very fast pace and the present penetration of 28.8 percentages is higher than the global average of 26.6 percentages. Although when compared with other developed parts of the globe; it appears to be very low.

Fig 13: shows internet penetration in various geographical regions (Source: Internet World stats, 2010)

Social media angle

The understanding of digital media in the MENA region will be incomplete without understanding the “Social Media” angle. Social Media is one of the fastest growing segments of media in the MENA. Not only does it make sense for business in present as well as in future; but also plays a pivotal role in socio-political sphere of the region. The best exemplar could be the latest Arab revolution, which started from Egypt & Tunisia and spread across the entire region. Social Media sites such as Facebook and Twitter played a major role in the revolution, eventually forcing the incumbent governments to step down. In a wide range of activities such as; creation of popular pages such as “We are all Khalid Said”, meant for addressing the political concerns of the common people; communicating across the user network to stage a mass protest on 25^th January to post revolution analysis and public opinion building on key issues; everywhere social media has been the key player.

Facebook

Facebook or FB is the most popular, social media in the MENA region, very much in line with the general popularity, which it enjoys across the globe. The region has somewhere around 15 million FB users, with GCC countries accounting for some 5 million users (Spot On, 2010) Other than English, other popular versions of FB are French and Arabic.

Fig14: shows the percentage wise break up of FB users in the MENA region. Source: Spot On

The Arabic interface has been added in March, 2009. It helped FB capturing a whole new range of user segment. With a year of its inception, it added 3.5 million users to the existing base. The French version of FB has a total of 3.7 million users and is more popular in francophone countries such as- Algeria, Morocco and Tunisia etc. The top five user communities of FB in the region are- Egypt, Saudi Arabia, Morocco, Tunisia and UAE. These five countries, comprise of 70 percentages of FB’s market in MENA region.

Fig 15: percentage wise break up of FB using population of various MENA nations. Source: Spot On

Conclusion

As discussed earlier, the online media/digital media segment in Middle East is in its nascent stage but the future seems to be bright. The following factors will drive/influence growth of digital media in the future:

·         Young Demographics will influence growth: one of the biggest advantages that MENA is having is its young demographic. More than 55 percentage of population is aged less than 25. This young generation will be heavily influencing the growth of digital media in the region.

·         Broad band penetration: broad band penetration, especially in comparatively bigger states like Egypt and Saudi Arabia will drive growth of digital media in the region.

·         Europe could be a role model: though digital media has enough presence in both social as well as economical spheres of the region, the advertisement revenues are still not very high. In this regard Europe of 2000s could be perfect role model, when the advertisements revenue where low there as well. But with the growth of more and broadband and mobile penetration, it got emancipated. With increasing broadband penetration and adoption of better mobile technologies; MENA can undergo the same growth trajectories.

·          Arabic and local Content: in order to digital media (as well as other media sources to an extent) to succeed, one area that needs to be addressed is developing local content. According to survey conducted by Neilson, 62 percentages of respondents prefer browsing the web in Arabic rather than English; but the region has dearth of Arabic/local digital content. (Unlike newspaper, where 90 percentages of content are local in nature). In spite of the fact that international brands like Yahoo and Facebook enjoy a high degree of popularity in the region due to their brand value and 1^st mover’s advantage; the fact cannot be discounted that there is a penchant for local content both on and off the web. Hence in order to succeed in the coming future, it is essential to emphasis on the development of more and more local content. This requires funding, govt. support as well as developing local talent. (Arab Media Outlook 2009-13, 2009)

·         Creating right cultural environment for web entrepreneurs to succeed: in order to develop the online media sector in Middle East, a possible step could be developing something similar to Silicon Valley. This will help nurturing young talents to develop web based start ups. In the MENA region one possible role model could be Jordan, which is taking similar initiatives. Jordan is transforming itself into a knowledge economy by- generating 6000 ICT graduates every year, attracting venture capital for web based start ups and taking a comparatively tolerant stand on media sector including the blogosphere. (Arab Media Outlook 2009-13, 2009)

·         Nurturing Talent: one of the most essential pillars for developing the digital media in the region could be having the right talent base. Though many of the Arab/ Gulf countries are taking initiatives, but there is further room for improvement. The students from the region need to be trained on a wide range of subjects such as- digital media, gaming, animation etc.           

·         

Reference

1>    Morgan Stanley, 2009, Internet trends report

2>    Arab Media Outlook 2009-13, 2009, simulating local content in Arab Media Industry, p-169

3>    Arab Media Outlook 2009-13, 2009, simulating local content in Arab Media Industry, p-172

4>    AMIR, March 2011, P-3

5>    Booz & Company, 2009, Winning in MENA new media scene

6>    Booz and Company, 2009, Winning in MENA new media scene,  p-17

7>    Arab Media Outlook 2009-13, digital media, p-68

8>    Spot On, 2010, Middle East and North Africa Facebook demographics. 
9>  Arab Media Outlook 2009-13, digital media, p-169 

1>    Arab Media Outlook 2009-13, digital media, p-181