Business in the Saudi Economy - Introduction To Business - ثاني ثانوي
PART 1
Chapter1: Exploring the World of Business and Economics
Chapter2: Business Organization
Chapter3: Business in the Global Economy
Chapter4: Human Resources, Culture, and Diversity
Chapter5: Social Responsibility of Business
PART 2
Chapter6: Management and Leadership
Chapter 7: Entrepreneurship and Small Business Management
Chapter 8: Starting a Small Business
Chapter 9: Business and Technology
P RO J EC T Preparing a business plan
B siness, Management &Administration PLANNING A CAREER IN ... CORPORATE LEADERSHIP Rising to the top of one of the world's largest corporations seems like the dream job in business. The chief executive officer (CEO) of a corporation may make several million Riyals a year in salary and bonuses, have a large office with dozens of support staff, travel worldwide on a corporate jet, and make daily decisions that Related Job Titles • Chief Executive Officer • Chief Operating Officer • President directly influence the success of the company. Corporate executives also work long hours and face the competing expectations of stockholders, the board of directors, employees, and customers. While CEOs receive many perks and benefits, their success or failure may be determined more by economic conditions, government regulations, and the stock market than their own decisions and abilities. A corporation's goals and policies are established by the top executives. The executives meet frequently to set direction, review company performance, and establish policy. They then delegate work to the organization's managers and employees. They know that they are ultimately responsible and accountable for the performance of the company. Analyze Career Opportunities in ... CORPORATE LEADERSHIP Use library and Internet resources to learn more about careers in corporate leadership. Choose one of the job titles listed in the box above and answer the following questions. 1. How would you describe the physical work environment for jobs in this field? 2. Is this a career that interests you? Describe how you might use your talents, abilities, and skills in this career. What it's like to work as a... Corporate Executive Most days, a CEO's schedule is packed. It may start with an hour of reading before attending a conference with the heads of other companies and government officials. Lunch is eaten with the management team to review the company's financial performance, followed by a press conference. Half an hour is spent on the telephone talking to a member of the Shura Council about a communications law, discussing labor contract negotiations with the vice president of human resources, and speaking with a manufacturer in Japan about a proposed joint venture. After dinner, it is off to the airport for a flight from Riyadh to Abha to oversee the opening of a new manufacturing facility. The flight is spent studying reports, completing correspondence, and watching a video briefing on the Abha development. What about you? How would you prepare for the stress of being a corporate executive? Do you believe that the work justifies the high salary and benefits? وزارة التعليم Ministry of Education 2024-1446 Business Organization | 57
2.1 Business in the Saudi Economy Link to digital lesson www.ien.edu.sa Learning Outcomes Once you have completed this lesson, you should be able to: 2.1.1 Describe the transforming Saudi economy. 2.1.2 Discuss the role of business in the Saudi economy. 2.1.3 Describe three major types of businesses. Key Terms Intermediaries Service Business Focus on REAL LIFE Saamiya loves digital photography. Last year she turned her hobby into a professional photography business. She uses photo editing software to produce digital images. Saamiya has started to wonder if she might be able to expand her business. Saamiya has a friend who can help sell the images to newspapers, magazines, advertising agencies, and other businesses. Saamiya isn't sure if her friend should be an employee or a partner. To expand, the business will need to purchase new equipment and develop sales brochures. Saamiya expressed her feelings to her mother. "I love my photography business. Would I like it as much if I had to share control with a partner? I wonder if I can afford to purchase new equipment by myself?" LO 2.1.1 TRANSFORMING THE SAUDI ECONOMY The Saudi economy has witnessed a major transformation, since the 2016 announcement of "Saudi Vision 2030"; The Kingdom has begun implementing a wide range of initiatives and reforms in various sectors to prepare the country for a prosperous and successful long-term future. After King Abdulaziz Al-Saud, may Allah have mercy on him, established the Third Saudi State in 1932, and the subsequent discovery of significant natural oil and gas deposits, the country How would achieving Saudi Vision 2030's goal to improve youth readiness for the labor market impact the percentage of foreign workers in the Kingdom? transformed from an economy based largely on agriculture, cattle herding, and simple handicrafts to one dominated by oil exports. The kingdom's successful unification combined with this abundance of oil and other sought-after minerals helped Saudi Arabia to prosper and strengthen its global position. Saudi Arabia is one of the top 20 economies in the world. Over the years, Saudi Arabia's economic growth in the oil industry and expansion of its service sector have been largely supported by foreign workers, with expatriates accounting for a significant proportion of the Saudi workforce. 58 Chapter 2 | Business Organization وزارة التعليم Ministry of Education 2024-1446 GE44.PATHWAYS.G02.ITB.SB.PP1.indb 58 08/05/2024 09:13
Investing in the Future While oil production remains a considerable source of economic strength in the Kingdom of Saudi Arabia, a large reliance upon any one resource can inevitably present challenges as a result of fluctuations in the international market. During a global downturn, such as the worldwide Covid-19 pandemic, for example, international demand for oil can decrease and prices can fall. Saudi Vision 2030 has therefore determined a need for building a strong economy that does not bet on price fluctuations or the economic crisis in external markets." NET KNOWLEDGE Q The General Authority for Statistics collects and reports detailed information on the status of the work force nationwide. Access the www.stats.gov.sa website. Locate the 'Labor Market Statistics' section in the 'Social Statistics' menu to find out information about employment. How can you use that information to make education and career decisions in the next few years? Saudi Vision 2030 states that diversification of the Saudi economy "is vital for its sustainability”, noting: "Although oil and gas are essential pillars of our economy, we have begun expanding our investments into additional sectors”. The “ambitious yet achievable blueprint" for Saudi Arabia's future is underpinned by a range of measures to facilitate economic reform. Saudi Vision 2030 aims to reduce the unemployment rate from 11.6% to 7%. In support of this goal, the government is addressing the balance between domestic and foreign workers. Initiatives include the establishment of the Job Creation and Anti-Unemployment Commission, to encourage and prepare Saudi citizens to enter employment. The Saudi nationalization scheme, Nitaqat, requires private sector businesses to employ a specified ratio of Saudi nationals according to their particular category and relevant criteria. Another key facet of the employment plan is "to increase women's participation in the workforce from 22% to 30%.” This is already taking effect, with many Saudi women entering new professions in the business world. Saudi Vision 2030 recognizes that success ultimately relies upon engaging and incentivizing the next generation to play their part, highlighting that "more than half of the Saudi population is below the age of 25 years. We will take advantage of this demographic dividend by harnessing our youth's energy and by expanding entrepreneurship and enterprise opportunities." Resources are being invested into education, including the National Labor Gateway (TAQAT) to ensure that Saudi students and graduates are equipped with the necessary skills, knowledge, and expertise to compete successfully with other candidates in the global employment market. LO 2.1.2 BUSINESS AND THE ECONOMY CHECKPOINT List several initiatives that will transform the Saudi workforce in the next decade. Businesses make the goods and services you use each day. That includes the products and services used by other businesses as well as those needed by individual consumers. Nature of Saudi Business The nature of business is changing in Saudi Arabia. As part of its diversification strategy and to promote a healthy business environment, the government is in the process of privatizing many state- owned assets, including, for example, selling shares in the energy company, Saudi Aramco. Equally, enterprise is encouraged with a target set to "increase SME [small- and medium-sized enterprises] contribution to GDP [gross domestic product] from 20% to 35%." According to the Saudi Vision 2030 statement, "We will improve the business environment, so that our economy grows and flourishes, driving healthier employment opportunities for citizens and long-term prosperity for all." وزارة التعليم Ministry of Education 2024-1446 2.1 Business in the Saudi Economy | 59
Roles of Business Businesses play several key roles in the Saudi economy. The most important role of businesses is to make and distribute raw materials, products, and services needed by consumers, government, and other businesses. Businesses produce the oil, energy, technology, clothing, food, and other items you use every day. Businesses provide employment for millions of people. Employee wages are used to purchase goods and services. Profits earned by businesses are used to compensate owners and investors. Impact on a Community A business can have an important impact on the community in which it operates. When a new business opens, it pays wages to its workers. It also buys goods and services from other businesses in the area. This results in additional money being introduced into the community. Employees and businesses in turn spend much of the money to purchase things they need. The money spent may result in the need for more employees in the community. They will need housing, automobiles, food, and other community services. When a large business opens in an area, other businesses will often locate there to support the larger business. Small businesses may be started to meet the needs of the residents and other businesses. Successful businesses contribute to more jobs, more income, and a thriving economy in the communities where they operate. Business Activities Businesses may be large or small, simple or complex. A business might operate in only one community. It may have many locations across Saudi Arabia or around the world. Although there are many types and sizes of businesses, all firms perform six basic activities. Generating Ideas A business begins with a new idea. Someone must have an idea for a new product or service or a new way to carry out a business process. A business must continue to improve and develop new ideas in order to remain successful. Businesses must remain competitive with other firms that sell similar goods and services. Many companies have research and development departments that works full-time to discover new product, service, and operating ideas. Raising Capital Businesses need financial resources to operate. They use these financial resources to buy buildings and equipment, hire and train workers, and complete day-to- day business operations. A large amount of capital is needed to start most businesses. Some capital comes from owners. Most is obtained through loans from financial institutions or from investors. Initiatives are in place to support small and medium enterprises. A business needs more capital as it develops and grows. Some of that capital will come from reinvested profits. A business will need to continue to borrow from banks and attract additional investors to have enough money for ongoing operations. Employing and Training Personnel Businesses need human resources. Even businesses that begin with no employees other than the owner will add part- and full-time employees as they grow. Businesses have procedures for recruiting, hiring, and training employees. They pay wages and benefits. New employees receive training in order to perform their jobs correctly. Further training will be necessary when procedures change, new tasks are added, or technology is introduced. ليم 60 Chapter 2 | Business Organization Ministry of Education 2024-1446
Buying Goods and Services All businesses buy goods and services. Businesses use many of the purchases for their own operations. Other purchases are resold. Manufacturers of automobiles must buy steel, aluminum, and plastics to be used to form the frame and body of new cars. They will also purchase tires, batteries, airbags, and air conditioning units that will be installed on the production line. Work as a TEAM Monshaat is the Small and Medium Enterprises General Authority. As a group, visit Monshaat's website (https://www.monshaat.gov.sa/) and locate some of the financial assistance available to you as a business owner. Digitization Business Insight Today it is noticeable that many of our transactions have become digital. The digitization revolution has contributed to bringing products and services directly to our smart devices and facilitating communication through various modern digital channels and means. The launch of Saudi Vision 2030 has stimulated a significant investment in 'e-government': the use of websites and portals to enable both government employees and citizens to access vital services and systems online. E-government is helping to improve the efficiency of many services, by enabling them to be accessed remotely and at more flexible times than would be possible in standard business opening hours. Digitization is also helping to level the playing field for small- and medium-sized enterprises. It enables access to online tools, services, and resources that might otherwise not be available to smaller businesses with less capital to invest. Web-related services enable businesses of any size to operate in an international marketplace and hence expand into new territories with relatively little outlay. Doctors engage in telemedicine, teachers digitize lectures and courses, and businesses save money by teleconferencing. Think Critically 1. Identify a product or service that is accessed digitally through a device. Research how this product or service was accessed before it was digitized. How does digitization change the delivery of this product or service? 2. Describe a product or service that you believe will be digitized in the future. Explain how users will benefit from this change. وزارة التعليم Ministry of Education 2024-1446 2.1 Business in the Saudi Economy | 61
ارامكو السعودية Saudi Aramco How does marketing affect a consumer's decision to purchase a product? A retailer buys an assortment of products to sell to customers. It must also buy the display equipment, computers, and cleaning supplies used to operate the business. Businesses purchase an array of services from other companies. These include advertising, legal and accounting services, lawn care and building maintenance, and security. Marketing Goods and Services Marketing refers to the activities directed at providing the goods and services wanted by a business's customers. Without marketing, even the best products and services may remain unsold. Businesses need to understand and perform many marketing activities. They must satisfy customers who usually can choose to buy from competitors offering similar products and services. Maintaining Business Records All businesses must have some type of record-keeping system. Owners and managers need records to track performance and make decisions. Customers need information about orders and payments. Businesses are required by government to keep records and submit information. Today, technology helps make record keeping easy and accurate. With computer technology, business owners and employees can quickly access information needed to understand business performance and solve problems. LO 2.1.3 TYPES OF BUSINESSES CHECKPOINT What are the six basic activities completed by all businesses? You use a variety of businesses to buy the things you want and need. There are typically three major categories of businesses-producers, intermediaries, and service businesses. Producers Producers create the products and services used by individuals and other businesses. They are responsible for using resources to make something that is needed by others. Businesses that take resources from nature for direct consumption or for use in developing other products are extractors. Extractors pump oil, mine coal, or cut timber. Farmers cultivate land and use other natural resources to grow crops and raise livestock for consumption. Manufacturers get supplies from other producers and convert them into products. They sell their products to consumers and other businesses. Business activities start with producers. A builder obtains glass, cement, steel, carpet, and paint to construct a factory or office building. A cereal manufacturer buys wheat and oats, sugar, and dried fruit as well as cardboard, glue, and ink to process and packaged food. Intermediaries Intermediaries are businesses involved in selling the goods and services of producers to consumers and other businesses. The most common types of intermediaries are retailers and wholesalers. Many other businesses focus on one or a few activities that assist in distributing and selling products and services. Specialized intermediaries include transportation companies, advertising agencies, storage centers, sales offices, and data-processing centers. P62 Chapter 2 | Business Organization Ministry of Education 2024-1446
Service Businesses Many businesses do not make products. They offer something that is intangible, meaning it has no physical qualities. A service business is a business that provides services requested by customers. It does not offer products for sale. Service businesses include dentists, physicians, and lawyers as well as painters and furniture movers. New types of service businesses are Internet service providers, web designers, and online travel agents. Businesses as well as final consumers use services. A customer might contact an international trade specialist to help it set up a sale to a new customer. A communications firm could design and install a new phone system for large telemarketing businesses. Service businesses are a fast growing part of the economy. More than 70% of all Saudi employment is now in service-producing businesses. While you often hear about low-pay and low-skill service jobs, there are many new businesses offering professional and technical services requiring highly-educated employees, such as lawyers, doctors, professional accountants, and financial analysts. CHECKPOINT How does a manufacturer differ from an extractor? 2.1 ASSESSMENT Key Concepts Determine the best answer. 1. Which of the following is not an official objective for transforming the Saudi economy? a. diversifying into a wide range of business sectors b. reducing unemployment c. ceasing oil production d. increasing women's participation in the workforce 2. Which of the following is not one of the common activities of all businesses? a. producing goods and services b. employing and training personnel c. marketing goods and services d. maintaining business records 3. A retailer is an example of a(n) a. extractor b. producer c. intermediary d. service business وزارة التعليم Ministry of Education 2024-1446 2.1 Business in the Saudi Economy | 63
Make Academic Connections 4. Culture Visit the Saudi Vision 2030 website (www.vision2030.gov.sa). Explain the role that Saudi culture is playing in shaping the Vision and its goals. 5. Visual Arts Select a product that involves all of the types of businesses in its production and marketing. Draw an illustration that shows each business and its role in the successful production and sale of the product. Title your illustration and label the component parts. ليم 64 Chapter 2 | Business Organization Ministry of Education 2024-1446