Drone technology is one of the most emerging technologies across the globe. Drone is influenced with aircraft and they are formally known as unmanned aerial vehicles (UAVs) or unmanned aircraft systems (UASes). Apart from this, drone is also considered as a flying robot as these could be controlled through a software-controlled plans which is fitted in their embedded systems and these are operated in conjunction with sensors and GPS. Drones are considered as the disruptive innovation and it is one of the biggest achievements of technology.
Drone technology could be used in various sectors through which positive outcomes could be originated. In this report, drone technology will be launched in Saudi Arabia by Aeryon Labs with the objective of business expansion. Aeryon Labs have chosen Saudi Arabia for introduction of drone technology due to high scope of technology as well as due to favourable and stable political conditions (The Economist Intelligence Unit Limited, 2018).
This report will aim over determining the scope of drones in Saudi Arabia with the help of certain factors of PESTEL analysis. PESTEL analysis is a crucial framework for evaluating external environmental conditions of a particular place. It consists of political, economic, social, technological, environmental and legal factors. Science, technology and innovation are primary pillars of Saudi Arabia’s growth and development (International Trade Administration, 2018). Across the globe, intellectual property is being considered as stimulus for innovation and creativity.
These factors encourage fair competition as it positively influences global economy and it also helps in developing new and innovative products and methods. Saudi Arabian government always promotes and encourages technology with the objective of originating opportunities in terms of moving towards advancement and it also help the organization to enhance its performance (Alsodais, 2013).
Although, modern technologies have pros as well as cons and to avoid misuse of modern technology, government of Saudi Arabia have implemented certain rules and regulations. Misuse of modern technology could create negative impact over Saudi culture, thus, PESTEL analysis will be executed for the motive of evaluating the impact of all factors which could affect business of Aeryon Labs in order to take appropriate market entry and other relevant strategies for the successful establishing business in the Saudi Arabian market.
What is Pestel ?
It is framework mainly used for evaluating impact of macro environmental factors. Primarily used by business organizations for analysing the conditions of target market so that appropriate strategies could be adopted for the attainment of desired goals and objectives (Rastogi & Trivedi, 2016).
Political
Political environment is being scanned to analyse policies, regulations and laws imposed by the political parties which could affect business’ growth directly or indirectly.
Economic
This is the most crucial factor as it attracts FDIs, multinational corporations to invest or set up their business respectively. Economic factors include interest rate, exchange rate, GDP, etc. attributes (Gheibi, et. al., 2018).
Social
Social factors include consumer’s behaviour, their purchasing pattern, demand and preferences of consumers, etc. These factors are changing rapidly, thus, it is required for the organization to pace up their functionalities in order to match up with the dynamic social environment conditions.
Technological
Due to revolutionary change introduced by internet in almost every sector, technological sector is one of those revolutionary changes which have both positive as well as negative impact over the organizational performance (Fozer, et. al., 2017).
Environmental
This is one of the trending issue and challenge for every sector, industry as well as for business enterprises, thus, in order to attain desired goals and objectives, appropriate green strategies needs to be adopted (Aithal, 2016).
Legal
This factor describes rules, regulations and restrictions for the particular market and the impact of legal factor is much high in comparison to other factors over organization (Gray, et. al., 2016).
Strengths and Weaknesses of PESTEL
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Strengths |
Weaknesses |
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· User friendly and this model are easy to understand. · It helps in evaluation of macro environmental factors which could affect organizational performance. · With the help of outcomes originated from PESTEL analysis, companies could adopt relevant strategies in order to sustain in the business environment for longer period of time. |
· External environmental scanning is a bit lengthy and costly process. · Needs to be carried on a regular basis through which policies of the organization could be implemented for the objective of attaining positive outcomes on regular basis (Gasiorowski, 2016). |
PESTEL analysis of Saudi Arabia
With regards to the market conditions of Saudi Arabian market, this analysis will majorly focus over political, technological and environmental factors as Aeryon Labs is planning to introduce drones in Saudi Arabian market. Company’s business will mainly be influenced by these three factors as per the basis of their nature of work; thus, following are the details of these factors which would replicate the conditions of the target market so that desired goals and objectives could be attained:
Political
Saudi Arabia is a politically stable country which follows monarchy. Saudi Arabia is majorly known for largest oil reserves and across the globe; it stands on the second position. Apart from this, Saudi Arabia is the sixth largest natural gas reserves in the world. Saudi Arabia has positive business environment along with excellent infrastructure which attracts multinational companies to invest as well as to set up their businesses in the Saudi Arabian countries. Initially, Saudi Arabian market was known for its oil related activities but later on, they have diversified their economy towards non-oil sector which has generated opportunities for other sectors as well. Amongst them, one of the sectors encouraged and promoted by the government of Saudi Arabia is technology (Time Inc, 2018).
Saudi Arabia is one of the giant players in the technological sector across the globe through which innovations related to technology are much appreciated and adopted by the government of Saudi Arabia.
Political conditions and regulations for local as well as for international business entities are friendly in Saudi Arabian market which attracts multinational corporations to expand their business. The government of the nation has a consistent and long commitment to liberal economic and pro-business policies which also includes the protection of intellectual property rights. Primary concern in Saudi Arabia for Aeryon Labs is obtaining license for introducing drones in the target market.
Setting up business in the selected marketplace is a big opportunity for Aeryon Labs as recently an incident has taken place with an unmanned aerial vehicle which was flying near to King Salman’s royal palace has left lawmakers to put the new legislation. Now interior ministry has introduced certain regulations to warn drone enthusiasts for getting permission before executing any activity through drone (Franke, et. al., 2015).
One of the problems facing this service is the company’s permits and security approvals. It is known that the Middle East is one of the most volatile places for the political situation, a region that has been burning for many years. Saudi Arabia is one of the countries targeted for terrorist operations. Saudi Arabia has faced these attacks with all its might and has managed in years to eradicate this phenomenon, which lasted for several years. Saudi Arabia has been facing a war in Yemen for three years and Riyadh has been targeted several times by rocket attacks from Yemen.
Which means that the Kingdom will think well before granting these approvals and permits, and there will be strict regulations to ensure the safety of the Kingdom and society.
Saudi Arabia has a good economy, the problem lies in the fact that the main source of income and GDP is oil, which makes the kingdom quickly affected in the event of a drop in oil prices globally. As a result of the decline in oil prices since 2014,The Kingdom faces major economic challenges and budget deficits. In recent years, Saudi Arabia has embarked on a new vision called 2030 with a number of economic measures aimed at bridging the budget deficit and reaching an economic level not dependent solely on oil. While the reforms were selective taxation, the Red Sea project, and added tax as it sought to raise non-oil revenues and cut spending to fund its $ 72 billion plan to diversify the economy. Simon Kiir in Dubai June 8, 2016
But diversity has begun in an easy way by imposing progressive taxes on foreigners working in Saudi Arabia and their families. Saudi Arabia began to impose a monthly tax on families of foreign nationals working in the private sector and its employees, valued at about $ 26.6 per month for each family member. The tax increases annually to $ 106.6 per person in 2020,
New tax imposed on many consumer products. As of January 2018, companies in Saudi Arabia will have to pay VAT on their sales by 5%. Increase prices on electricity and gasoline to double the value and price of these products As 100%.
Which has recently led to a situation of reverse migration of many residents in Saudi Arabia,, Al-Mursad newspaper – A bank report estimated the number of foreign workers leaving Saudi Arabia about 670 thousand people until 2020. According to a report by Saudi France Bank, the rate of leaving foreign workers will be about 165,000 workers per year, the Saudi newspaper Makkah reported.The fee for the companions will save about 20 billion riyals over the next three years, the report said.The number of foreigners in the Kingdom is about 11.7 million, of which 7.4 million are workers, while 4.3 million are 1.1 million families.
Technological
International business corporations have shown their interest in terms of investing in Saudi Arabian market due to emergence of key opportunities for partnership in numerous sectors including healthcare, technology and manufacturing. Thus, Aeryon Labs which is one of the giant players of manufacturers of Drone across the globe has decided to invest in Saudi Arabian market as well as for establishing their business over there. Drone is useful in almost industries including healthcare, manufacturing, e-commerce industry and it is also useful for government (Mabon, 2015). There are various scenarios related to natural calamity or during any illegal activity, government needs to hire aircrafts in order to distribute relief amongst the target audience.
The major challenge in these scenario faced by government is that they are only able to serve in one particular area but if drones will be used in place of aircrafts, it will be bit easy as well as cheap platform to provide relief packages such as food to the sufferers. Saudi Arabia represents the largest IT market across the region with strong growth in enterprise and consumer end markets. Huge public investments in health, infrastructure, and education has paved the way for advanced technology and security systems in the country along with the government planning to boost up the contribution to the GDP from the industry by 20% by 2020.
IT market in the country was valued at $3.6 billion in 2011 which crossed the set mark of $4.9 billion after 2014. This mark will be increased in the future as expected and on the basis of growth rate in the IT market. Thus, Aeryon Labs will easily be able to transact in Saudi Arabian market in order to set up its business along with fulfilling their primary objective of introducing drones in the target market (Nizami, et. al., 2015).
The Kingdom of Saudi Arabia is moving towards electronic governance and has come a long way in this area. Today, Saudi citizens or even residents in Saudi Arabia are following all their documents through the Internet. Electronic governance has provided a great deal of effort and time.
This shows that the society and government are keeping pace with the rapid development at the technological level.With vision 2030, the Kingdom embarks on a technology-driven economic transformation.
Saudi Arabia has embarked on a major investment push into technology,In the Saudi’s Vision 2030, the aim of the government is to create a suitable environment for the growth of small and medium enterprises. The hope is to use this as an avenue for increased job creation amongst the country’s citizens. In this regard, IT is expected to play a critical role in ensuring that the government’s objectives are achieved without a hitch.Technology will be a key enabler and driver of the numerous changes envisaged by Vision 2030, with the goal of developing the nation’s digital infrastructure and stimulating the related economic sectors, industries, and private sector entities.
Environmental
Saudi Arabia is the largest country in the Middle East. Country has always lacked with appropriate environmental policies and as the country is mainly known for large oil reserves and due to intense usage of fossil fuels, country has generated numerous environmental issues. These issues have ultimately led the citizens of country towards hazardous diseases including asthma, cancer, etc. With regards to this, government has taken some actions like construction of renewable energy and new policy development to ensure environment suitability (Khan, et. al., 2017).
Thus, government thinks twice before approving new project in the country but as drone technology does not lead to any type of pollution or emission of disastrous gases, etc. Infect this technology will help the government to reduce the pollution through which environment sustainability will be promoted. Drones could be used in healthcare industry in providing emergency services, by construction industry for transporting adequate material from one place to another, in manufacturing firm for keeping the products in the warehouse as well as for loading and unloading the trucks for distributing the products from one place to another. Further, drones could be used in almost every sector and in the future, drones flying in the air will look as normal as trucks and other vehicles look alike on roads (Alkhater, Wills & Walters, 2014).
Saudi Arabia is famous by hot temperature, sand storms, and harsh weather and this must be taken into consideration for the company, by offering a product that is compatible with this harsh and extreme environment at times.
We known that Saudi Arabia is characterized by vast areas, located in one of the largest deserts in the world, which means that Drone technology is an important opportunity to solve this problem, and benefit from the low cost of the value of shipping goods and save time and money.
Recommendations
It has been summarized that organization is planning to introduce drones in the Saudi Arabia with the objective of expansion of their business but due to strict rules and regulations, organization would require implementing certain changes in its policies, rules and regulations so that desired goals and objectives could be attained. In order to sustain for longer period of time in the target market, following recommendations needs to be consider by organization:
References
Aithal, P.S., 2016. Study on ABCD analysis technique for business models, business strategies, operating concepts & business systems.
Alkhater, N., Wills, G. and Walters, R., 2014. Factors influencing an organisation’s intention to adopt cloud computing in Saudi Arabia. In Cloud Computing Technology and Science (CloudCom), 2014 IEEE 6th International Conference on (pp. 1040-1044). IEEE.
Alkhathlan, K. and Javid, M., 2015. Carbon emissions and oil consumption in Saudi Arabia. Renewable and Sustainable Energy Reviews, 48, pp.105-111.
Alrashed, F. and Asif, M., 2015. Analysis of critical climate related factors for the application of zero-energy homes in Saudi Arabia. Renewable and sustainable energy reviews, 41, pp.1395-1403.
Alsodais, S. 2013. Science, Technology & Innovation in Saudi Arabia
Alwagait, E., Shahzad, B. and Alim, S., 2015. Impact of social media usage on students academic performance in Saudi Arabia. Computers in Human Behavior, 51, pp.1092-1097.
Fozer, D., Sziraky, F.Z., Racz, L., Nagy, T., Tarjani, A.J., Toth, A.J., Haaz, E., Benko, T. and Mizsey, P., 2017. Life cycle, PESTLE and multi-criteria decision analysis of CCS process alternatives. Journal of Cleaner Production, 147, pp.75-85.
Franke, R., Kroenung, J., Born, F. and Eckhardt, A., 2015. Influential factors for e-government success in the Middle East: Case study evidence from Saudi Arabia. International Journal of Electronic Government Research (IJEGR), 11(1), pp.39-62.
Gasiorowski, M., 2016. The government and politics of the Middle East and North Africa. Hachette UK.
Gheibi, M., Karrabi, M., Mohammadi, A. and Dadvar, A., 2018. Controlling air pollution in a city: A perspective from SOAR?PESTLE analysis. Integrated environmental assessment and management.
Gray, S., O’Mahony, C., Hills, J., O’Dwyer, B., Devoy, R. and Gault, J., 2016. Strengthening coastal adaptation planning through scenario analysis: a beneficial but incomplete solution. Marine Policy.
International Trade Administration. 2018. Saudi Arabia – Information and Communication Technology
Khan, M.Z., Nizami, A.S., Rehan, M., Ouda, O.K.M., Sultana, S., Ismail, I.M. and Shahzad, K., 2017. Microbial electrolysis cells for hydrogen production and urban wastewater treatment: A case study of Saudi Arabia. Applied energy, 185, pp.410-420.
Mabon, S., 2015. Saudi Arabia and Iran: power and rivalry in the Middle East (Vol. 132). IB Tauris.
Nizami, A.S., Rehan, M., Ouda, O.K., Shahzad, K., Sadef, Y., Iqbal, T. and Ismail, I.M., 2015. An argument for developing waste-to-energy technologies in Saudi Arabia. Chem. Eng. Trans, 45.
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