Kleber, Philipp
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Citation: Kleber, Philipp (2016) Entry and post-entry operations in the Saudi Arabian market: A qualitative study of German SMEs (Mittelstand) in the metal-forming machine tool sector. Doctoral thesis, Northumbria University. This version was downloaded from Northumbria Research Link: http://nrl.northumbria.ac.uk/36163/ Northumbria University has developed Northumbria Research Link (NRL) to enable users to access the University’s research output. Copyright © and moral rights for items on NRL are retained by the individual author(s) and/or other copyright owners. Single copies of full items can be reproduced, displayed or performed, and given to third parties in any format or medium for personal research or study, educational, or not-for-profit purposes without prior permission or charge, provided the authors, title and full bibliographic details are given, as well as a hyperlink and/or URL to the original metadata page. The content must not be changed in any way. Full items must not be sold commercially in any format or medium without formal permission of the copyright holder. The full policy is available online: http://nrl.northumbria.ac.uk/policies.html Entry and Post-Entry Operations in the Saudi Arabian Market: A Qualitative Study of German SMEs (Mittelstand) in the Metal-Forming Machine Tool Sector H P Kleber DBA 2016 Entry and Post-Entry Operations in the Saudi Arabian Market: A Qualitative Study of German SMEs (Mittelstand) in the Metal-Forming Machine Tool Sector Hans Philipp Kleber A thesis submitted in partial fulfilment of the requirements of the University of Northumbria at Newcastle for the degree of Doctor of Business Administration Research undertaken in Newcastle Business School October 2016 Abstract I Abstract The Kingdom of Saudi Arabia (KSA) is one of the most important trade partners in the Middle East for the German machinery industry, which mainly comprises small and medium enterprises (SMEs). In Germany, these firms are named Mittelstand firms due to their distinctive characteristics. This study investigates the question, ‘How do German Mittelstand firms in the metal- forming machine tool sector (MFMTS) successfully enter the Saudi Arabian market?’ It further explores the challenges that occur during the entry and post-entry operations, and how they are overcome. Furthermore, the study investigates the success factors of these firms entering the Saudi Arabian market. The study follows an inductive research approach and uses the philosophical assumptions of social constructionism and interpretivism. Qualitative, primary data were collected through semi-structured interviews with relevant first-line practitioners from Mittelstand firms and support agencies. The results indicate that the clear link between ownership and management, flexibility to customer requests and product adaptation, and a still strong ‘Made in Germany’ claim are some of the most important success factors when entering the Saudi Arabian market. Major challenges are identified along the political and legal environments, including the labour nationalisation system and local partner enforcement. Additional obstacles are identified within the cultural and religious belief system and the special roles of women, families, relationships, and hierarchies. This study highlights that, in their initial steps to KSA, most Mittelstand firms act randomly and without structure, contrary to most of the theories and concepts. While there is evidence in the literature for the need of German Mittelstand firms to expand abroad, the theory-building approach to and knowledge about entry and post-entry operations in the Saudi Arabian market will close an existing gap in this literature by providing empirical insights. The study further reveals the partial relevance of the Resource-Based Theory and the network view for the Mittelstand firms’ expansion into the Saudi Arabian market. Acknowledgments II Acknowledgments This thesis would not exist without the help of many people who supported me throughout my doctoral studies on a personal and academic level. My first and sincere thanks are dedicated to my supervision team, Doctor Paul Copley and Doctor David Bennett. Your on-going advice, constructive, critical comments, and motivation guided and encouraged me to go through this journey. I would additionally like to extend my sincere thanks to my panel members, Professor Helen Woodruffe-Burton, Professor Fraser McLeay, and Doctor Zhibin Lin, for your helpful support and comments. This thesis would not exist without the support of the Mittelstand and support-type organisation interview partners. Thank you for your kind cooperation, for answering my questions, and for participating in interesting discussions that inevitably strengthened this project. Particularly during challenging times, my dear friends and doctoral colleagues Tena Patten, Helen Shield, Patrick Glackin, and Oran Doherty offered invaluable moral help, advice, and support. Finally, I would like to sincerely thank my family for their love, support, and encouragement throughout this journey. List of Tables III List of Tables Table 1: Research question and link to thesis chapters .................................................... 5 Table 2: Overview and classification of theoretical concepts ........................................ 66 Table 3: Overview of interview guide sections .............................................................. 99 Table 4: Ethical principles ............................................................................................ 113 List of Figures IV List of Figures Figure 1: Thesis structure ................................................................................................. 8 Figure 2: German machine export by region. ................................................................. 10 Figure 3: German direct investment in foreign mechanical engineering. ....................... 11 Figure 4: Employees and turnover (2015) in the German mechanical engineering industry................................................................................................................ 12 Figure 5: NACE classification of the MFMTS ............................................................... 14 Figure 6: German machine production by sector. ........................................................... 15 Figure 7: German metal forming machine tool sector by company size (%-shares) ...... 16 Figure 8: Machine tool sector – export ranking .............................................................. 17 Figure 9: Machine tool sector – key data. ....................................................................... 18 Figure 10: Size class structure in the German mechanical engineering industry. .......... 22 Figure 11: KSA machinery import development between 2012 and 2015..................... 25 Figure 12: Annual GDP growth and oil price development in KSA. ............................. 26 Figure 13: Structure of the literature review chapter ...................................................... 40 Figure 14: Structure of the market entry drivers, motives, and influencing factors section ................................................................................................................. 45 Figure 15: Structure of the market entry barrier section ................................................. 56 Figure 16: Root’s decision-making process model ......................................................... 63 Figure 17: Choice of market entry mode by Pan and Tse .............................................. 64 Figure 18: Theoretical approaches to the selection of the market entry strategy ........... 67 Figure 19: The resource-based theory ............................................................................ 68 Figure 20: The network view .......................................................................................... 72 Figure 21: A proposed holistic theoretical approach to the selection of the market entry strategy ....................................................................................................... 77 Figure 22: Structure of the research methodology and design chapter ........................... 80 Figure 23: Access to primary data .................................................................................. 89 Figure 24: Qualitative data analysis flowchart ............................................................. 105 Figure 25: Cross-language approach ............................................................................ 111 Figure 26: Findings and analysis chapter structure ...................................................... 116 Figure 27: Visualisation of findings within the research question context ................... 119 Figure 28: Conclusions and recommendations chapter overview ................................ 179 Figure 29: Proposed process conceptualisation of an MFMTS Mittelstand market entry into the KSA ............................................................................................ 199 List of Symbols and Abbreviations V List of Symbols and Abbreviations ASEAN Association of Southeast Asian Nations BDI Bundesverband der Deutschen Industrie (Federation of German Industries) BRICS Brazil, Russia, India, China and South Africa CAQDAS Computer Assisted Qualitative Data Analysis Software CIA Central Intelligence Agency CNC Computer Numeric Control, Computer Numeric Control EM Emerging Market et al. et alii (and others) EU European Union EUR Euro FDI Foreign Direct Investment