Entry and post-entry operations in the Saudi Arabian market: A qualitative study of German SMEs (Mittelstand) in the metal-forming machine tool sector

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.

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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.

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