Uae ; Cultural Differences

Introduction

In the current business environment, in times of globalization, financial crisis and terror, there is a growing consciousness about difficulties that can occur when different cultures collide. These difficulties especially need to be regarded when wanting to expand a business internationally or wanting to enter a foreign market. In this paper the United Arab Emirates is analyzed with focus on critical information for operating a business there.

This paper will take into account the history, the cultural aspects as well as differences, the business development and opportunities based on an example of the German logistics company Kuhne & Nagel, which is doing business in the UAE since the '70s.

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History

The Palm islands, The World, the Burj al Arab and the Burj Dubai and other superlatives come to our mind when thinking about the United Arab Emirates, but they only represent the timeframe since the 1990’s. The UAE was founded in 1971.

To really understand the UAE and its culture it is important to take a look at the history and the developments before the foundation and the oil. About 1500 years ago the people in the Arabic region were living in tribes, their lives were dictated by the harsh natural conditions and pearl fishing was the prevalent dedication. The community was very important within the tribes and a deep social family structure was established. At that time the Islamic Belief was introduced to the gulf region and is therefore deeply rooted in the history and its culture. As trade and piracy rose in the 18th and 19th century the area became known as the Pirate Coast until the British navy launched several attacks on the pirate strongholds to secure the trade. This lead to the signing of 3 truce treaties in total, including the final treaty in 1892, which made them become the “Trucial States” and preventing them from entering into relationships with any other country but the United Kingdom (UK) as well as disposing territory to anyone besides the UK, in return for coastal protection and support in case attack of land[5].

The first discovery of oil in 1958[6] in Abu Dhabi, which led to many more, was very fortunate as the region, which relied heavily on pearl fishing, saw the pearl market collapse between the First and Second World War. The discovery of oil and the hence evolving wealth had a strong influence on the further development of the area. When the British first announced their intention of withdrawing from the Arabian Gulf by the end of 1971, Sheikh Zayed bin Sultan Al Nahyan of Abu Dhabi immediately wanted to establish closer relationships between the Arabic states. He and Sheikh Rashid of Dubai, became the initiators towards an union of Arabic Emirates, including the Trucial States, Bahrain and Qatar. Since no agreement could be reached between the nine and Qatar and Bahrain became independent, the rulers of Abu Dhabi and Dubai, Sheikh Zayed and Sheikh Rashid, decided to form a union between their emirates and later on present its constitution to the other 5 emirates with the offer to join. One day after the Britsh-Trucial Sheikdoms Treaty expired, the United Arab Emirates were founded on December 2nd, 1971.

Four emirates joined immediately and Ra’s al-Kaihmah followed on Febuary 10th, 1972. Since its foundation the UAE has experienced an incredible growth and has managed to go from one of the least developed countries, to achieving an income level comparable to that of the industrialized nations in less than 30 years. The oil revenues of course have contributed in a major way to the modern development and prosperity, but also political stability as well as the leadership by Sheikh Zayed were very influential. The sheikh, who was born around 1918 and raised under poor circumstances, wanted his people to benefit from the country’s resources, while making sure that the people are aware of their roots and that the country’s history and culture are kept. Through his efforts the Arabian culture has been preserved and passed on to the following generation.

He was very popular not only within the nation but also in Europe and the US due to his pro-western mentality. His open-mindness also had a big effect on the UAE and enabled it to become one of the most liberal and pluralistic countries in the Gulf region, with its now massively multicultural population. When he died in 2004 his oldest son HH Sheikh Khalifa bin Zayed al Nahyan became the ruler of Abu Dhabi and president of the UAE.

Economy

Since the oil was discovered the oil sector was the main contributor to the GDP of the UAE.  However the country has steadily tried to reduce its dependability of oil and to diversify its economy. The oil revenues were at first reinvested in to healthcare, education and the national infrastructure to raise the standard of living and pave the way for a sustainable economic development. In 1985 the first free zone of the UAE was opened. In the Jebel Ali Free Zone no taxes had to be paid and foreign companies could establish subsidiaries without a domestic partner. The concept of the free zone became very popular in the region and was the first step towards being an attractive location for subsidiaries of companies that want to open up the Middle Eastern market.

Today more than 850 companies have registered in the Jebel Ali Free Zone and almost 6,000 companies from over 110 countries conduct business there. All in all more than 10,000 companies are registered in one of the 15 free trade zones in the UAE. Due to the geographical location of the UAE in the Middle East and between the markets in the east, whose importance to the western companies has been steadily rising, and Western Europe the United Arab Emirates has become the hub for the complete Middle East, India, Africa and the Commonwealth of Independent States. This development is especially explicit in Dubai, which has evolved with over 140 scheduled fairs into one of the top locations for international trade shows and multilateral negotiations.

Due to the booming construction industry and tourism after 20 years of budget deficit there has been a balance surplus since 2005. The GDP in 2007 grew by 7,5% to 192,6 billion US$. The United Arab Emirates now has one of the most diversified economies in the gulf region and managed to lower its dependence on the oil industry to a GDP-contribution below one third, as sectors like manufacturing, wholesale and retail trade, tourism, construction and real estate increased their share.

Important Values for a Successful Business in the Uae

To successfully operate a business in the UAE it is mandatory that certain basic values of the Arabian culture are known and respected. One has to aware of his own culture and depart from the wrong and right thinking of rong or right and better or worse when it comes to cultures, as cultures are just different without any judgement.

First of all one needs to be aware that time is seen in a totally different way in the Arab world and is not considered to be an issue. Business meetings and negotiations take longer, people are not as punctual and deadlines are often not met. Since personal relations are of highest importance for a successful business it is crucial, when first entering into business relations with people from the United Arab Emirates, to establish a trustworthy and respectful relation, much like a friendship. The first face-to-face meetings are commonly time absorbing and used to become acquainted with the prospective counterpart. Impatience or anger because of the often lengthy process should not be expressed as it would be conceived as rude and disrespectful possibly leading frustration of the business relations. Business meetings generally take longer in the Arab world as at the beginning time is usually spent on inquiries on the well-being of the family members. A strong effect on the business practices has the religious faith.

The working hours are for example interrupted for praying[36] and during the holy month of Ramadan overall business slows down in the Arabian area. In normal business practice the religion also comes into play, inasmuch as some decisions are left to “fate”. Therefore negotiations might end with the term “Insh'allah” – “if God wills”, which underlines the strong belief that the course of events cannot be controlled by the individual meaning that the decision will be made by god and not by them. One of the highest values in the Arabian culture is the belonging to groups, especially the family. 40] Family matters are of higher significance than business and interruptions of e. g. business meetings due to family and personal matters are no exception and should not be misinterpreted as rude.

 Since age also plays a significant role in the Arabian culture, greater respect must always be shown to the more elderly person, by e. g. greeting the most senior person in a meeting first. Often age and status has a greater influence on the career of an Arab than the actual personal achievements. The interaction with women is not always straightforward and therefore the behavior of the Arabs in the situation should be adopted in terms of how to greet a woman for example. When negotiating and also in normal interactions with Arabian counterparts the concept of saving face needs to always be kept in mind.

Criticism should not be expressed publicly and one should avoid to put anyone in a uncomfortable situation, since it could result in loosing face which seriously harms the person’s and his family’s reputation. Dignity and respect are key elements in Arabian culture and saving face, through the use of compromise, patience and self-control is a means by which these values are maintained. Since confrontation and conflicts are to be avoided in the Arabian culture business communication is done differently. Arabia has been identified by Edward T. Hall as a high context region where one has to read between the lines in contrast to Germany with a low context country where explicit words have specific meanings.

A yes for example may mean a perhaps as the Arabs often communicate indirectly through body language or other forms of non-verbal communication like eye-contact or facial cues rather than communicating directly through words. As, one should be aware of the so called “High Context Communication” and try to carefully observe his counterpart during a conversation and always pay attention to the way the complete message is conveyed. Management in the UAE is mostly done through centralized decision making and tall hierarchies.  Employees in the UAE expect to receive clear instructions and orders from their superiors, rather than having the freedom and the responsibility to manage their own work. Due authority being an element of the Arabian culture, the orders are normally obeyed and only rarely questioned.

Culture

Cultural differences at the national level The biggest difference between the German culture and the culture in the United Arab Emirates obviously is the religion. Religion in Germany exists and is practiced, but not in an extent comparable to the United Arab Emirates.

The culture in the UAE can be defined as the Arabian Culture as it is mostly the same in all Arab nations with some local differences and is mainly influenced by their history and even more their religion. Arabs living in the United Arab Emirates are almost all Muslims and believe that the Islam is not only a religion but a way of living. Their God Allah controls their entire life and even the law called Sharia is partly build on the Holy Koran. Praying five times a day as well as drinking no alcoholic drinks, eating no pork and fasting during the holy month of Ramadan is usual Islamic behavior.  Whereas in the UAE religion dictates to a large extent the life of the people, in Germany to the contrary, religion is practiced as well, but it’s done in a considerably more relaxed way. The most popular religion in Germany is Christianity, but Islam, Judaism and Buddhism are among other practiced as well. Even though a majority of the Germans consider themselves as Christian, it has only minor effects on their lives. The way people eat, dress or behave is rather set by themselves and their parental education than by their religion.

The Christian calendar defines the national holidays like Christmas and Easter and the day of rest being Sunday. The festivities of Christmas and Easter are celebrated in most of the Christian families, but on the normal every day life religion has almost no effect, compared to the United Arab Emirates. The calendar in the UAE is also influenced by the religion, as the Muslim New Year is around February and March and Ramadan in October. Even the weeks are separated differently, since Friday is the day of rest and either Thursday or Saturday is given off respectively to form the weekend.The Islam also has influence on the way Emiratis have to dress. Women have to wear the traditional abaya, which is a garment that covers their whole body with exception of the feet, hands and face. They might even have to cover up totally, depending on how strictly the husband practices his religion. Men are required to wear a white cotton thobe at with a guthra covering the head.

Leaving aside the religious influence on the people in the UAE, Arabs are very conservative as it is. Emotions and feelings towards each other are not openly expressed in public, as they generally try not to attract any attention. This behavior and urge for privacy can also be found in the way the houses are built, as a lot of space between buildings and thick walls are preferred and used to clearly keep the family inside and leave the rest out. The family in the interior is of highest importance to the Arabs and stands over everything. Family members are very loyal and close to each other, which has originated from the past. Traditionally the father is the head and leader who provides the family with what is needed for living. Although nowadays the situation s slowly changing and women gain e. g. opportunities in regards of education and are not as underprivileged anymore, the role of the woman still predominantly includes taking care of the children and the house as well as being the center for love and emotional support. Additionally women are still treated differently by the law.

German family members also live closely together and parents are very caring for their children, but at the same time statistically every third German marriage fails and commonly children have to grow up in different homes. Generally men and women are more equal in Germany in terms of the law as well as in terms of family. The man is not the predetermined head of the family, as the power is more or less equally divided between the father and the mother. The role of the father as the sole provider is slowly diminishing as more and more women work and have careers even though men yet have to get used to the concept of staying at home to take care and raise the children. Similarities in the development towards equality can be seen in both countries, although Germany seems to be a little bit further than the UAE.

Like the family, the community is also of high importance to the Arabs. Relatives, friends and neighbors always support each other in every life situation, while one cares for each other and the community. They are usually very patient and open to compromises, as conflicts or embarrassment are avoided. Criticism is not openly expresses because they do not want anyone to feel inconvenient or harm their dignity, because it could lead to someone loosing his face. To “keep face” is very important and if someone lost face there would be a strong impact on the family’s reputation. Guests are also always taken care of very generously, since the Arabs are known for their hospitality.

Such a strong community cannot be found in Germany, where the people are more independent and concerned of their own good. Germans behave very differently and are a lot more individualistic. People are primarily concerned about themselves and secondly about others. There is no concept of “keeping face” and therefore conflicts are common, issues are openly addressed and discussed. Germans can be emotional and loud publicly unlike the people living in the Arab world. Their openness for new things is also more distinct and attracting and standing in the middle of attention is not regarded as improper behavior in contrast to the conservative Arabs. Another big difference is the outwards appearance of the people in Germany to the people in the UAE since there is neither a predefined kind of clothing nor any limit to the individualism due to the constantly changing fashion trends and styles.

Cultural Differences at the Organizational Level

To show the differences between the two cultures of Germany and the UAE at the organizational level Hofstede’s analysis is a good instrument to apply.

The Dutch professor and influential author Gerard Hendrik Hofstede performed from 1968 to 1972 a survey among 116,000 IBM employees about their preferences in management style and working conditions.  Through his study he demonstrated that the behaviour of societies and organizations are affected by national and regional cultural groupings. Out of the results Hofstede identified the four dimensions called Power Distance, Uncertainty Avoidance, Individualism/Collectivism and Masculinity/Femininity among which the different groups can be differentiated. The first dimension Power Distance is defined as the extent to which less powerful members of institutions and organizations accept unequal distribution of power. In the Arab world, which includes the UAE, a high Power Distance Index of 80 points has been recorded, meaning that people tend to follow orders without hesitation and organizations have a rather steep hierarchy. It can also be said that there are a lot of laws, rules and regulations that have to be followed to reduce the amount of uncertainty.

The Power Distance Index in Germany is considerably lower than in Arabia with 35 points. Hence Germans have fewer superiors and their orders are more likely to be question than it would be the case in Arabia. Subsequently unequal distribution of power is not unconditionally accepted, the organizational structures are much flatter and decentralized decision making is common applied. The Uncertainty Avoidance Index describes the level of discomfort people feel in insecure situations and the beliefs and means like organizations and institutions that were developed to reduce the uncertainty. In this dimension the UAE and Germany are almost at the same level. [90] Both countries have adopted and implemented strict rules, laws, policies, and regulations to avoid those uncertain situations. A high need for security, structured activities and a strong belief in the knowledge of experts mutually applies as well. The way of conducting business though differs, since the Arabian way is affected by their religious belief. They believe their time is controlled by Allah and that they have no influence it.

Long talks with lots of coffee and tea are very common in a business meeting and should not be refused, whereas Germans certainly belief that they control their time themselves and are usually on tight schedules and have fixed dates which they administrate. Germans are even famous for creating appointment schedules and seemingly never missing them too. The third dimension is the Collectivism and Individualism (IDV) respectively. This dimension displays whether people rather take care of themselves or other people around. [93] The Arabs have a very low IDV score of 38 points compared to the world average of 64 points.

This makes the UAE a collectivistic country, where a strong relationship to the member group is very important. That is e. g. the family offering life-long protection and loyalty, which is prior to all other rules. This translated into business as most jobs and promotions are obtained due to age and family status. In Germany to the contrary the IDV score of 67 is relatively high and above the world average, meaning that it is an individualistic country. People rather take care of themselves in stead of others and e. g. job promotions are based on one’s own efforts and market value rather than the family background. In the last dimension the Masculinity Index (MAS) shows the people’s preference for “masculine” values like competitiveness, authority and materialism.

The MAS of 53 in the Arab World is slightly above the average of 50,2, but still 13 points lower than in Germany, which means that Arabians prefer both “masculine” and “feminine” values. They like authority and materialism, while valuing quality of life and relationships at the same time. Germans are mostly “masculine” in this respect and value especially competition, power and high salaries. Considering the results of Hofstede’s analysis it can be said that religion and tradition have a great influence on the way business is done in the UAE and that there is a fast differences to the Germany, which can not be neglected when doing business.

Kuhne + Nagel

Kuhne + Nagel is a German logistics company, which was founded in 1890 in Bremen by August Kuehne and Friedrich Nagel.

Since then it has evolved from a traditional international freight forwarder to a globally leading transportation and logistics provider offering integrated supply chain solutions. The company today has 850 offices in over 100 countries with more than 54,000 employees. Their concept of helping to turn the customer’s logistic challenges into a competitive advantage through superior service and integrated end-to-end supply chain management solutions has been successful and still is. Kuhne + Nagel has entered the market of the United Arab Emirates in 1977, when an office was established in Dubai. For internationally operating logistic companies a global network of representations is very important in order to guarantee a smooth transit of goods.

That way in case of any problems the local office can cope with it and is familiar with standards and processes at that location. Like in most Arab countries, a subsidiary can only be established with a domestic sponsor or partner. Therefore the office in Dubai was not owned by majority by Kuhne + Nagel and there was not a lot of business actually taking place in the UAE, but an increasing number of goods passed through, thus the office was at first mainly used for project support. Kuhne + Nagel also moved their office to the Jebel Ali Free Zone and could thus conduct their business independently.

With the increasing business activities in the UAE, the branch office in Dubai gained in importance as well. In 2008 there were 120 employees in three Dubai offices, which makes Kuhne + Nagel the 7th biggest German employer in Dubai. Since the company had already established many offices in other countries they are experienced in dealing with different cultures and mentalities. They have always been aware of the cultural differences between e. g. Germany and the United Arab Emirates and paid attention and adjusted to them.

As Germans though they enjoyed good reputation and made only positive experiences in making business with the Arabian people as long as they were treated respectfully. With the hotel industry booming, Kuhne + Nagel introduced in 2001 an innovative product containing a tailor-made logistics solutions associated with the construction and furnishing of hotel and tourist facilities. Apart from warehousing, the service portfolio further includes the entire management of suppliers and transport. [109] In 2005 this service was even deepened as firstly introduced to the hotels in the UAE by Kuhne + Nagel, which includes supplying amenities to hotels on a regular basis.

Kuehne + Nagel is responsible for the entire supply chain, including order management and procurement. Due to its great acceptance the global availability of this service followed in 2006. The general trend towards becoming the “hub” of the Middle East, makes the location Dubai logistically even more important. The success of Kuhne + Nagel in the UAE is also displayed through the plans of the company to expand its logistic infrastructure as part of the Dubai Logistics City adding about 52,000 m2 to its existing facilities in the Jebel Ali Free Zone.

This new logistic centre will allow the company to optimally provide all the markets in the Middle East and meet the increasing storage requirements of many companies due to the relocating of their stock to the Middle East rather than supplying the area from Europe or Asia in order to reduce their costs and delivery time.

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