CAGE Evaluation
This research assesses the level of economic success as well as possible success movements of a Dubai-based firm (DAMAC) that seeks to expand its services from the United Arab Emirates to Croatia utilizing the Cultural, Administrative, Geographic, and Economic (CAGE) factors.
Culture
Administrative
Geographical
Economic
Various Religions
Diverse ethnicities, different languages
Several races
Consultation with legislators
Collaboration with Regulatory Bodies
There are no political affiliations.
Access to transportation networks
Access to inland waterways and seaports
Target market accessibility
Subsidies for taxes
The expected rate of stock growth is 11%.
The annual dividend yield is 9.8 percent.
Cultural Distinction
Cultural distance depicts the difference in diversities, which exist between Croatia and the United Arabs Emirates (UAE). The cultural differences contrast according to language, religious affiliations, ethnic groups and cultural beliefs. Consequently, this gap results in social differences, especially in the working conditions. Moreover, the social environment is paramount when considering the strategic position of any organization. According to research, the native language in Croatia is Croatian but there are other ethnic languages such as Italian, Slovakian, Czech, Serbian, Ruthenian and Hungarian while in UAE is Arabic. This variance has some impacts on the success of any strategic plan.
Additionally, the working culture between the two countries is different. This means that homogenizing the working conditions may be difficult. As a result, the management of DAMAC Properties should ensure that a standard working culture is adapted to coordinate the activities of investments between the two countries smoothly. This will involve the hiring of people who can converse in both native languages and or English as well as observe the Croatian beliefs (Heritage.org, 2017). More so, employing the locals will be handy in ensuring that the target market has confidence in the nature and quality of services rendered by the company. This will make them believe that the services provided are as per the cultural expectations of the locals from both countries.
With regards to religion, the two nation also differ profoundly. Approximately 100 percent of the UAE population is Islamic thereby making it the official religion. Croatia has no official religion with the freedom of worship being a right defined in the constitution. As a result, the denominations in Croatia are equal in front of the law.
Administrative Distance
The administration layout of Croatia and United Arabs Emirates considerably differs. Croatia is a unitary state that uses a parliamentary system of governance. Its administrative units are lucrative at the county-city level. There are some municipalities, which represent the level of government administration. It also has a civil-law-legal framework with the law arising from the written statutes. The nation has a universal health system in which the population is covered by a basic health insurance plan.
The presence of monarchies defines UAE administration. The monarchies are hereditary and are overseen by a chosen council. Due to this, the legislation of DAMAC may be interfered by the difference in the administrative units. Basing on the fact that the economy of UAE is still developing, a tranquil environment for expansion exists and favors DAMAC investment activities. For instance, DAMAC has been able to partner with some regulatory bodies such as the Real Estate Regulatory Authority (RERA) and the Dubai Tourism and Commerce Marketing (DTCM) among others. Consequently, this relation helps in reducing the legal formalities, especially when setting up new ventures within UAE.
The differences between UAE and Croatian administrative units may pose a problem to the Company. With the two nations having different kinds of governance, DAMAC properties should seek partnership with Croatian regulatory bodies to adequately gain support while establishing other branches within the country (Cerna, 2017). Furthermore, the lack of political essence may also assist in ensuring that licensing of this company in both nations is not affiliated with political interests. However, the company has to acknowledge the legislation to avoid scenarios of conflicts of interest, especially on political grounds.
Geographical Distance
Despite the vast physical distance between Croatia and UAE, other geographic factors affect the success of DAMAC strategies. For instance, real estate investments require accessibility to good infrastructures. This includes water, electricity, communication and transport networks (Properties, 2017). However, analysts affirm that Croatia had finished more than 1,100 kilometers of it motorway by 2011 September. The safety and quality of this motorway network were assessed and certified by several EuroTest and EuroTap programs.
Both UAE and Croatia have access to seaports. Zadar and Split are the busiest passenger ports, and the Port of Rijeka is the most active cargo seaport in Croatia. Moreover, there are 610 kilometers of crude oil pipelines connecting the Port of Rijeka terminal with the refineries in Sisak and Rijeka. In Dubai, a 1,200 kilometers countrywide railway is under construction that links the major ports and cities (Damacproperties.com, 2017). This will help in reducing the shipping activities. The Dubai Metro is also the first urban train network in the Arabian Peninsula. In 2014, Dubai international airport was the busiest airline in the globe.
The excellent infrastructure network is paramount for both countries to ensure that the target market is appropriately reached. Reducing geographical remoteness is useful in guaranteeing that any organization has access to all market factors. DAMAC not only need access to the resource but also means of transporting them.
Economic Distance
The financial standpoint of a country defines its economic stability. The economy in Croatia is service based. This provides a perfect financial platform for real estate investments. The service sector amounts to over 65% of the total revenue. Similarly, the economy in UAE is service based. This explains why DAMAC properties record a dividend yield of approximately 9.8%. With both nations having a favorable environment for service based investments, it is forecasted that DAMAC properties will have an annual growth rate of 11%. Moreover, Croatia is categorized as a high-income economy by the UN and according to International Monetary Fund (IMF), its nominal GDP stands at 12,405 dollars per capita for the year 2017 (Focus Economics | Economic Forecasts from the World's Leading Economists, 2017). The purchasing power parity GDP was similarly rated to be at 23,171 per capita.
In the Croatia service sector, tourism dominates and accounts for approximately 20 percent of the nation’s GDP. As a result, tourism positive impacts are felt throughout the economy in regards to increased business volume, summer seasonal employment, and the industrial processing order.
UAE has the most differentiated economy in the Gulf Cooperation Council (GCC). Furthermore, its economy is highly dependent on oil except for Dubai (World Bank, 2017). AE laws do not permit trade unions, and therefore, the rights to strike or collective bargain are not recognized. The labor ministry has the authority to force works to go back to work.
Porter Diamond Analysis
Factor endowment
It includes all input resources present to ensure there is an entrepreneurial success in Croatia, which is the host country. There is a vast pool of skilled laborers basing on the fact that economy in Croatia is mainly service-oriented (Damacproperties.com 2017). Presence of professionalism is a critical input factor. Factor endowment will enable DAMAC Properties to have an easy time in labor acquisition. There will be no need to import employees from UAE or other neighboring countries. Furthermore, Croatia has a well-developed infrastructure, which provides easy access to other input factors and the target markets. As a result, Real Estate investments in Croatia is worthwhile.
Demand Conditions
There is a massive demand for housing and property ownership in Croatia, which is underpinned by the excellent economic state. This high demand increases the market share size served by DAMAC Properties (Properties, 2017). Also, it provides a reason behind the forecasted 11 percent revenue growth rate of the company once the Croatian market has been reached. Furthermore, the demographic state of Croatia shows an evenly distributed population primarily due to an increased urbanization rate (Living, and Emirates, 2017). This suggests that there is an even distribution of the target market.
Related and Supporting Industries
Real Estate investments require the presence of specific supporting industries. For instance, financial companies should be present and can provide loans to potential clients as well as to the company in cases of monetary downfall. In Croatia, there are several fiscal bodies such as banks and help groups that can provide credits services to both clients and the company during property purchase (Focus Economics | Economic Forecasts from the World's Leading Economists, 2017). Additionally, there are insurance companies, which offer property and financial covers to the concerned parties. This guarantees security for all the involved parties.
Firm strategy, structure and Rivalry
DAMAC properties have expanded its operation both local and overseas. This has however been faced by some competitive forces mainly from other well-developed nations such as the United States and China. Their use of state-of-the-art machinery and numerous financial units have posed shattering rivalry to DAMAC Properties.
Government
The government controls all business operations. It imposes policies, which are aimed at protecting the interests of the citizens from the exploitations by investors (Hziegler.com, 2017). UAE and Croatia governments have put in place the legislation, which protects the citizens from excess charges on housing investments. For instance, the Croatian government has laid down specific anti-trust regulations which are mainly aimed at discouraging unhealthy competition in real estate ventures.
Recommendations
The management should ensure that there is sufficient research on the international markets to identify opportunities.
DAMAC properties should identify nations with legal morass and devise measures, which can help in eschewing the impact of these unfavorable regulations such as partnering with regulatory bodies of the countries in question.
The company should practice professional importation, especially from the targeted global markets to have a glimpse of the expected cultural environment.
The company should join several global marketing organizations to form a conducive ground for international investments adequately.
The company should partner with international distributors.
DAMAC Properties should research tax codes and other financial compliance requirements.
DAMAC Properties should partner with other local Real Estate Companies with the aim of promoting their international entry points.
Lastly, DAMAC Properties should diversify and improve the quality of its products to a level that is internationally marketable.
References
Cerna, F. (2017). Dubai’s Damac looks to Croatia for investment opportunities | ConstructionWeekOnline.com. [Online] Constructionweekonline.com. Available at: http://www.constructionweekonline.com/article-47442-dubais-damac-looks-to-croatia-for-investment-opportunities/ [Accessed 16 Dec. 2017].
Damacproperties.com. (2017). DAMAC International Close to Identifying Real Estate Investment Opportunities in Croatia | DAMAC Properties. [Online] Available at: https://www.damacproperties.com/en/media-centre/press-releases/damac-international-close-to-identifying-real-estate-investment-opportunities-in-croatia [Accessed 16 Dec. 2017].
FocusEconomics | Economic Forecasts from the World's Leading Economists. (2017). Croatia Economy - GDP, Inflation, CPI and Interest Rate. [Online] Available at: https://www.focus-economics.com/countries/croatia [Accessed 16 Dec. 2017].
Heritage.org. (2017). United Arab Emirates Economy: Population, GDP, Inflation, Business, Trade, FDI, Corruption. [Online] Available at: http://www.heritage.org/index/country/unitedarabemirates [Accessed 16 Dec. 2017].
Hziegler.com. (2017). The Political System of the UAE. [Online] Available at: https://www.hziegler.com/articles/political-system-of-the-uae.html [Accessed 16 Dec. 2017].
Living, C. and Emirates, C. (2017). Cost Of Living Comparison between Croatia and United Arab Emirates. [Online] Numbeo.com. Available at: https://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=Croatia&country2=United+Arab+Emirates [Accessed 16 Dec. 2017].
Properties, D. (2017). DAMAC Chairman Praises Croatia's Growing Tourism Sector during Meeting with President. [Online] Prnewswire.com. Available at: https://www.prnewswire.com/news-releases/damac-chairman-praises-croatias-growing-tourism-sector-during-meeting-with-president-633772273.html [Accessed 16 Dec. 2017].
World Bank. (2017). Overview. [Online] Available at: http://www.worldbank.org/en/country/croatia/overview [Accessed 16 Dec. 2017].
