One of the most valuable resources in the world is pure drinking water. Its value differs by region, depending on the location and economic conditions of the country. Having performed much research, the Wilson Corporation has decided to make a direct investment in Saudi Arabia. The company is going to build a desalination plant in the sea port of Jubail in the East of Saudi Arabia, by the Red Sea. The corporation is going to name the plant “Myraj desalination plant” and intends for it to provide high quality bottled drinking water. The plant is going to supply the Eastern and Central Provinces of Saudi Arabia with bottled water.
To make entering the Saudi Arabian market easier, the Wilson Corporation will have a joint venture with Aramex Distributing Company. Upon entering the joint venture, the Wilson Corporation will give up 25% share in the plant building project.
The corporation would like to make a direct foreign investment because it wants to have controlling interest share in the venture, to save on transportation expenses and to avoid trade limitations. This venture permits to make a long-term investment in which the corporation will receive such property as land, buildings and equipment. The investment is also very profitable in terms of saving on labor costs which are much lower in Saudi Arabia than in the United States. This goal can be easily reached because the company has to meet the requirement of Saudi law. According to this law, 75% of employees of a foreign company should be the citizens of Saudi Arabia.
Another reason why this venture is expected to be profitable is the insufficient volume of water supplied to the consumers at the moment. It is a good chance for the Wilson Corporation to become successful, because Saudi Arabian consumers are highly capable of paying for bottled water. Besides, the infrastructure in Saudi Arabia is modern and the stability of this country’s market has not changed for 15 years.
To receive the support of Saudi Arabian government, it will be wise to have a joint venture with the company Aramex. The government welcomes joint ventures with their national companies since they create working places and attract foreign investment. Foreign companies entering the market receive multiple benefits. For instance, they do not have to pay custom tax, they acquire electricity and natural resources at a low price and are granted easy access to business information and statistical data necessary for the project.
One of the most valuable resources in the world is pure drinking water. Its value differs by region, depending on the location and economic conditions of the country. Having performed much research, the Wilson Corporation has decided to make a direct investment in Saudi Arabia.