There is a number of key steps to take in order to successfully enter the UAE market. No matter if you are planning a start-up or considering international expansion into the region. In a complex economy where trends change quickly, the only way to develop and maintain a competitive advantage is with a solid business plan. Thus, you will be able to set up a business in the UAE successfully.
In this article, you will learn everything about some market entry tips to set up a business in the UAE. Let us observe:
- Why should you do business in the UAE?
- A market overview of the UAE
- How to create a successful market entry?
- How can Connect Group help you set up a business in the UAE?
1. Why should you do business in the UAE?
Trade tensions and security concerns continue to hamper business growth in the developed world. As a result, an increasing number of foreign investors are looking at the UAE as a place to do business.
It has rapidly transformed from an economy based on fishing and pearls to a financial powerhouse. It is accessible by two-thirds of the world’s population in an eight-hour flight. The country has a diverse economy, a stable political system, strong capital flow, a favorable taxation environment, and liberal trade regimes.
Hence, the UAE is now an appealing investment hub with a “2022 Vision” of becoming the economic, touristic, and commercial capital for over two billion people. These lofty objectives will continue to foster a welcoming, well-regulated, and secure business ecosystem.
1.1. Ease of doing business
The UAE is regarded as a prime starting point for countries seeking to enter global markets. Its geographical location and friendly time zone (GMT +4) provide an advantageous regional and business hub. Companies wishing to access markets in Africa, Asia and Europe can operate from this hub.
In addition, it has the world’s highest net migration rate (88.52 percent); with over 200 nationalities, and the UAE ranked 10th in HSBC’s 2018 Expat Explorer survey, which considered expats’ experience, family life, and economics.
2. A market overview of the UAE
The UAE has quickly established itself as a key player in the Middle Eastern region. International corporations and corporate titans prefer the country for establishing a presence in the region. It is due to the abundance of available business opportunities and the UAE’s relaxed entry requirements. Finance, tourism, entertainment, infrastructure, education, healthcare, and manufacturing are all expanding.
In addition, the country ranked 11th in the World Bank’s 2019 Ease of Doing Business Report; and it is the only Middle Eastern country in the top 45. International ventures are also encouraged in the UAE’s Free Zones. Businesses in these 45 Free Zones are governed by special tax rules, import regulations, and customs duties.
These UAE Free Zones also have the following advantages:
- The foreign entity has complete ownership.
- Import and export taxes are exempt.
- For a limited time, corporations are exempt from paying corporate taxes.
- Tax-free fund transfer.
- Leasing is advantageous.
3. How to create a successful market entry?
3.1. Conduct extensive market research
The UAE market is complex and unique in comparison to most other countries around the world. There is a diverse range of nationalities and a genuine culture of innovation being spearheaded by recent government initiatives. This means that trends evolve very quickly.
Naturally, this has important implications for companies seeking to establish themselves in the region. In addition, companies that are profitable in other countries may not be profitable in the UAE. As a result, market research is an important step when you set up a business in the UAE and plan your entry into the Middle East market.
They define market research, in its most basic form, as gathering, analyzing, and interpreting information about a specific market segment. The goal of market research is to determine how your product or service will fit into the current market conditions. Also, it will include research on your competitors as well as the needs and preferences of your target consumer.
3.1.1. Why is market research necessary?
Market research is necessary for:
- Determining the viability of a business.
- Improving your understanding of the market in which you wish to trade.
- Determining the competition and how your company can maintain a competitive advantage in the market.
- Identifying market opportunities
- Creating brand positioning and messaging.
- Determining and comprehending your target consumer.
- Improving your products and services.
There are an increasing number of low-cost market research options available, many of which can be completed relatively easily in-house, such as:
- Discussions in Focus Groups
- In-depth interviews.
- Online polls.
- Interviews and video conferences.
- Shopping and mystery surveys.
3.2. Create a business plan
You will be able to develop a clear strategy and plan for your business if you have a solid understanding of the market conditions. A business plan should include the following key elements, in addition to a high-level summary of your company’s products or services:
- A feasibility study. It will determine whether or not the business is likely to be profitable in the current market conditions.
- Cost analysis. Understand all of the costs associated with starting and running a business, and decide how you will raise funds if necessary; do you need to approach an investor? There may be costs associated with starting a business that you have not considered, such as trade license fees, visa fees, and government fees. Hence, it is always worthwhile to seek preliminary advice from a business setup specialist. There are also an increasing number of SME initiatives and incubation platforms available, particularly in Abu Dhabi and Dubai, which may assist with some of these costs.
- Forecast. A realistic business forecast will allow you to determine the business’s profitability over time and is a critical stage in securing investment.
- Strategy for sales and marketing. You must decide in which way you will successfully market and sell your product or service to your target consumer.
At Connect Group, we are a company formation firm. Hence, we can help you set up a business in the UAE.
3.3. Determine the best commercial structure for your needs
In the UAE, your company can choose from a variety of commercial structures, including:
- An on-shore Limited Liability Company (LLC).
- A foreign branch.
- Or an FZ LLC.
In most cases, the cheapest way does not mean that it has to be always the best option. Therefore, it is best to work with a local consultant who has experience in the UAE. As a result, they will be able to advise you on business setup options that are relevant to your industry, service, or product.
3.3.1. Branch and representative office
Foreign firms may conduct business in the UAE through a branch or a representative office. The distinction between these two legal structures is that a branch may engage in the business activity for which it has obtained a license; whereas a representative office may only market and promote the products and services of its parent company.
As a result, a representative office is not permitted to conduct business or sell products in the UAE. It should be noted that both the representative office and the branch must appoint a local services agent who is a UAE national.
Hence, this person benefits from the same protections as the commercial agent; apart from the payment of commissions as the local service agent is not engaged in any business activity.
3.3.2. Zones of free trade
Each Emirate provides foreign investors with the option of establishing operations in a free trade zone, whether it is in Abu Dhabi, Dubai, Sharjah, or any other. In the UAE, approximately 30 free trade zones have been established. Foreign investors who choose to establish a wholly-owned entity in a free trade zone can avoid having to contract with a local sponsor.
They are exempt from all import and export duties, profit and capital repatriation are expressly permitted, and there is no exchange control regulation.
Companies established in a free trade zone, on the other hand, are considered “offshore” companies; they may not conduct business on UAE territory and may only have business relationships within the free trade zone. Indeed, free zones have been established in order to group activities and create competitive clusters.
If foreign investors want to expand beyond their free trade zone, they will be subject to UAE corporate law and will need to set up a legal structure with a local sponsor.
3.3.3. Business licensing
The most common strategy used by international businesses to enter the UAE market is business licensing. In this case, you can set up a business in the UAE to sell your products or provide your services directly.
Obtaining a business license, on the other hand, is a time-consuming and complicated process that may be out of reach for small businesses or startups.
3.3.4. Local partnership
Another option for entering the UAE market is to form a partnership with a local entity. You can pool your resources and expertise with the local partner in this manner. The local partner can also assist you in comprehending the relevant laws, customer demand, and culture.
However, you become completely reliant on your local partner, and your very existence is dependent on the partnership. Though this business structure reduces market risks, it increases the risks associated with your investment, profits, and leadership.
3.3.5. Model of distribution
Another UAE market entry strategy is to collaborate with local distributors or vendors. You can find and hire distributors, suppliers, wholesalers, online sellers, and retailers to distribute your products on a small scale in the market. This way, you avoid establishing a legal entity and instead rely on distributors to carry out your sales.
3.3.6. Entrepreneurial franchise
Large corporations or brand chains can franchise their operations to local entities in order to expand globally. Business franchising entails drafting a Franchise Agreement with local entities, and franchising is yet another popular method of entering the UAE market. However, this model is most common in the food industry.
While there are numerous business structures to choose from when entering the UAE market, partnering with an international PEO is another option.
3.4. Recognize the applicable laws and regulations
The laws and regulations governing businesses in the UAE differ greatly from those in the rest of the world. Hence, getting them wrong can be extremely costly. Working with a specialist, such as Connect Group, will make the setup process easier and eliminate the risk of noncompliance.
At this stage, it is critical to consider business etiquette, which is, once again, very different in the Middle East. In a country where the majority of business is done face to face, it is critical to understand and respect the UAE culture.
3.5. Consider VAT implications
The full impact of VAT is still unclear. However, for new businesses planning to enter the UAE market, it is critical to developing an effective VAT implementation strategy. This is in order to be well-positioned in terms of compliance, risk reduction, and cash flow management.
4. How can Connect Group help you set up a business in the UAE?
The UAE is an extremely promising market with limitless potential for success. You can start a business and reap the benefits of a free trade zone if you have a proper strategy in place. Connect Group provides business consulting services to assist your company in growing and expanding in the UAE. Our highly qualified team of financial, commercial, and business analysts assists foreign investors in entering the UAE market.
We will walk you through the process and advise you on the compliances and regulations you must follow in order to do business successfully in the UAE. Set up a 45-minute free online or offline consultation session with our experts to learn more about how we can assist you.
Would you like to contact us to obtain more information about setting up a business in the UAE? If you have any questions, call us on + 971 43 316 688. You can also email us at firstname.lastname@example.org. Following, you will talk to one of our representatives who will answer your questions.
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