According to USDA Foreign Agricultural Service Gain Report (2008), until the mid 1990's Sainsbury's was the number one supermarket chain in the UK, but gradually lost ground to its main competitors - Tesco and Asda / Wal-Mart. Sainsbury is currently number 3 with 15.7 percent market share. The chain store started its Middle Eastern adventure in 1999 when it opened 100 stores in Egypt. But the brand encountered problems from Islamic activists who boycotted the stores, which led Sainsbury's to shut down the Egypt business in 2001 (Deshayes, 2008). Nonetheless, Sainsbury's still looks to longer term at diversifying outside the UK and has held talks with potential partners about launching again in the Middle East as it mulls additional revenue streams to fuel long-term growth (McDonalds and Thompson, 2008). The authors further noted, Senior Sainsbury's executives have spoken to possible franchise partners in the region over the past year, and that Sainsbury's interest in a regional venture was initiated before Delta Two - the Qatari-backed investment fund that has a 25 per cent stake in the grocer - attempted a takeover in 2007.
United Arab Emirates (UAE) is an interesting market and economically beneficial production site for foreign companies. According to eeBizGuides (n.d), With 11 state-of-the-art ports, 6 airports and satellite links with 230 countries, the UAE has become one of the leading enter port centers of the world, rivaling the emerging tigers of South East Asia, having long since consolidated its position among the top oil producing nations, the visionary leadership of the UAE is concentrating its efforts on industrial development in the country.
The potentials for Sainsbury's expansion in UAE include (eeBizGuides):
- The economy of the UAE, which is doing well and has swelled by more than six times over the past 26 years to become the fourth biggest economy in the Arab world. The recent years has witnessed the emergence of pioneer industries in view of the generous advantage and incentives granted to the investors along with the simplicity of procedures for practicing business in UAE. During the last decade, government has increased its investment in the local market from $3.47 billion to $4.93 billion, whereas, the investment in the business sector reached to $5.41 billion from $2.89 billion.
- The country offers lucrative investment incentives and opportunities to local as well as international investors that are not generally available internationally. Significant among these are absence of corporate and income tax, no personal income taxes, no foreign exchange controls, 100% repatriation of capital and profits.
- The free trade zones with a variety of incentives are also playing an important role in attracting investment. The most important attraction of these free zones is that a foreign investor can establish a legal activity fully owned by him. Other incentives are 100% repatriation of capital and profits, no corporate taxes for 15 years, which is renewable for further 15 years and no personal income taxes. Presently, there are 13 free trade zones in UAE and some new are at developmental stage.
Deshayes (2008) also noted that:
- British products are very popular with the Middle Eastern market. UK food and drink exports to the Gulf Cooperation Council members, which include Saudi Arabia, United Arab Emirates, Kuwait, Bahrain, Qatar and Oman - hit £228 million in 2007, an increase of 13 per cent on the year before.
- Dubai is already home to posh retailer Spinney's, which is known for its British brands. There is also a vast 64,000 sq ft Marks & Spencer's store (around double the size of an English supermarket) in the Festival Waterfront Centre, which is one of five in the UAE and nine in the Gulf region.
It is generally believed that, establishing a business presence in UAE is relatively easier and straightforward. Foreigners can participate in most of the available business activities in UAE. H.E. Sheikha Lubna Bint Khalid Al Qasimi, UAE Minister of Foreign Trade said:
... UAE continues to be a place to do business and capture growth opportunities. The UAE has taken several rapid and practical steps to cope with the implications of the global financial crisis; the Government guaranteed bank deposits and offered substantial financial facilities to banks amounting USD 32 billion in the fourth quarter of last year, boosting confidence in the UAE's economy and confirming the ability of country to deal rapidly, immediately and positively with the latest economic developments (Al Bawaba, 2009).
Sainsbury's therefore, has good potentials and expansion to UAE will be strategic and in the best interest of the business. Certainly, it will be a sensible, easy and low risk means of expansion. As Rehman (2008) concluded, "the UAE has become a beacon of change and a trendsetter for the region through its economic reforms and strategic development of core industries." UAE is in several ways the region's most admired economy, open both internally and globally. In a nutshell, it is a trendsetter with many prospects.
- Al Bawaba (June 2009). H.E. Sheikha Lubna Bint Khalid Al Qasimi, UAE Minister of Foreign Trade. Anonymous. Retrieved September 23, 2009 from ABI/INFORM Global database.
- Deshayes, C. (November 2008). The waiting is over for Dubai. Retrieved on September 21, 2009 from: http://www.themovechannel.com/news/d2f0407d-0308/
- MacDonald, G. and Thompson, J. (February 2008). Sainsbury's eyes Middle East for international comeback. Retail Week.
- eeBizGuide (n.d). Doing Business in UEA: Step by Step Business Formation Guide. Retrieved on September 21, 2009 from: http://www.eebizguides.com/downloads/pdf/BG-AE.pdf
- Vasquez-Nicholson, J. (2008). USDA Foreign Agricultural Service Gain Report: United Kingdom Retail Food Sector UK Supermarket Chain Profiles.