Business Enterprise Environment (Hotel Industry in UAE & China)
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Capitalism is the term given to the modern era of privatization. The history of Industrial Capitalism dates back to the eighteenth century. The pioneers in this system were Adam Smith, David Hume and many other eminent persons who gradually brought the Industrial Revolution. During this time, the traditional merchants were replaced by more influential industrialists. After the Liberalization, Privatization & Globalization (LPG) Era, the concept of Capitalism has gathered even strong impetus. Now, most of the countries all around the world are heavily dependent on the investments from the private sectors. The Government-owned organizations are not enough to improve the GDP of the countries. In order to gain competitive advantage and attain economic excellence, every country has to depend on private investments in different sectors like manufacturing, engineering, oil and gas, banking and financial services, insurance, automobiles, consumer durables, etc. They are the primary source of the Government’s revenues. This report seeks to reflect the Capitalistic scenario in UAE and China in the Hotel Industry (dfm, 2014).
Approaches to Capitalism by UAE & China:
In UAE, the concept of Capitalism in industry has been gaining popularity with each passing day. The UAE Government is coming up with major investments from the private sector in different areas like healthcare, automobiles, hotel and hospitality, aviation and other industries. However, the discussions in this report will revolve around the Hotel Industry in these two countries. The situation in UAE is not very ideal for the residents of the UAE. The population of the country is around 8 million. But, it is surprising to know that among them merely 20% people are given the status of citizenship and are entitled with full rights of being citizens. UAE has one of the highest Per Capita Income in the world which amounts to around $48,000. The local people enjoy free services like health services, water supply, electricity services and social security services. However, the immigrants are not provided the same social and economic status. There is marked difference in the rights of the locals and the immigrants. There is tremendous inequality and wealth disparity. The Hotel Industry is however, one of the major areas of revenue for the country (Atkearney , 2013).
In China, the end of 1976 can be counted as the era of reformation after the Mao era. The Capitalistic boom in China started from the end of the 90s. After that China was incorporated into the World Trade Organization in 2001. The Student Movement in China of 1989 can be termed as the catalyst towards the Capitalistic Revolution in China. After this period, China has really seen huge economic development and the Hotel Industry have also boomed to a new height. It was at its pick in 2010 however it fell a bit in 2014.
Comparison of UAE & Chinese Economies:
The Hotel Industry in UAE is in a boom phase. There are huge amount of investments which are coming up from the private sector which has led to the development of some of the best hotels in UAE like the Burj Khalifa, Burj Al Arab and others. The UAE makes a huge profit by exporting crude oil and other petroleum products to other countries of the world. It is an OPEC member. This has made the economy one of the best in the world. All the revenues which the country earns from the exports of oil products are invested in private sectors in the Hotel Industry.
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In comparison to UAE, China is largely dependent on FDIs from different countries. It has been observed that FDI in China amounts to almost 27% in the field of productions which add value to the country’s economy. Nearly 200 countries invest in China. So, this FDI is also done in the Hotel Industry. But, in the current scenario, it is being observed that the private players are gradually moving to some other sectors rather than in Hotel Industry. This is because the number of tourists visiting China has declined in 2012 and 2013.
Comparison of UAE & Chinese Social Environment:
The impact on Hotel Industry in UAE is also based on its Social conditions. There are two social categories for the Emiratis. These are the Nationals and the Immigrants or the Foreign People who are the Expatriates. The social classification can be categorized into the following:
- The Ruling Community- They is the Sheikh Rulers who enjoy the maximum wealth and social status in the country.
- The Merchants- They is the initial pearl traders, but now they are into selling consumer goods.
- The Middle Class- They are the professionals who have received education for free and are making their own living.
- The Low Income Group- They are the nomads or Bedouins who have recently found settlements in the country and also the pearl divers and the farmers who farm in the oasis of the country.
The majority of the revenue earned from the Hotel Industry is enjoyed by the wealthier class like the rulers and the Merchants. The immigrants are not dealt with equality.
The Chinese Society is led by the Han who are the superior class of the society and they constitute almost 92% of the ethnic groups. The rest are the minority communities. The country mainly observes Buddhism along with Islam, Taoism and others. This society is not well adept to the positive outcomes of the Hotel Industry as compared to UAE. The country is governed by the Chinese Communist Party. There is more of autonomous rule in the country (Arabianbusiness, 2014).
Comparison of UAE & Chinese Political Environment:
The political environment in UAE is governed by the President. There is also the Prime Minister. The Sheikhs are also the ruling community with huge collection of wealth. This political scenario has led to the environment which is helpful for the private investments in the hotel and other sectors. The President encourages private investments in the hotel sector, which is why UAE, currently houses few of the best hotels in the world. The UAE is very strict in its security systems. There are capital punishments meted out to those who have done grave crimes. This depends on the orders of the President. This is why UAE has so many less scenarios of crime and theft. The politicians are very influential in bringing in the investments in to the Hotel Industry.
The Chinese Political Environment is much more controlled by the Chinese Communist Party. The President and the Military hold the top position in the hierarchy. This scenario has led to certain restrictions in the sudden boom of the Hotel Industry. Although there are many countries who invest in China in different projects, but not so much in the Hotel Industry. That is why it might be said that UAE is a far better destination for the emergence of the Hotel Industry as compared to China. The Han, who is the leading community, has certain power over the other minorities. They are often given social and political favors as compared to others. But, there is not so much wealth disparity in China like in UAE (Fogel, 2014).
Scenario of Economic Growth & Personal Freedom in UAE & China:
The economic growth in UAE and China are both achieving a higher curve over the last few years. Both the countries have very high implementation of innovative and modern technology in every sector. While China has brought technological innovations earlier than UAE, yet the drawback in China is the presence of dual quality products, which could be harmful to the society due to the excess presence of lead and other harmful substances. This is the reason why the modern world has started to ignore few of the Chinese products like toys and other electronic goods. However, there is personal freedom of the residents to the extent as possible within the limits of law. The Han are the highest creed of the society. The people belonging to the minority community are allowed to express their freedom of speech and action.
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In UAE, however there is a different scenario. The ruling Sheikhs and the affluent Merchant classes enjoy the majority of the wealth that the country earns from exporting the oil and gas products to the different countries. There is great inequality of income distribution. The local people of the country are given the best of benefits. The immigrants are not given that kind of advantages. There is also a job preference given to the Emiratis in the different sectors. However, there is restriction on the activities that women can do, especially the Muslim Emirati women. They are not allowed to work in any sector as freely as some of the other countries. This is because the culture in UAE is very conservative. It is believed that the local Emirati women were only to manage their household duties. This is why there is less participation of the local women in the healthcare sector (Gulfnews, 2012).
In the end it might be said that, UAE and China are two contrasting countries with different social, economic, political and cultural factors. Hence the scenario of Hotel Industry in both the countries is different. UAE is more conducive to hotel industry as compared to China. This is because the UAE Government has significantly encouraged private investments in the Hotel Industry. However, in China the scenario is not conducive for investment in Hotel Industry, because it is a country which mainly encourages FDIs in other sectors like consumer goods, electronic goods and others. This report has discussed about the Capitalism scenario in both the countries and how both the countries have used it to their advantages. It might be said that both UAE and China are very good countries for foreign investment and growth of the private sector industries. The technological progress in both the countries has been truly commendable. This is why both of them are the leading economies in the world.
Arabianbusiness. (2014). Emaar Misr sets IPO price at 3.8 Egyptian pounds per share. Retrieved from arabianbusiness: http://www.arabianbusiness.com/markets/
Atkearney . (2013). China's Hotel industry. Retrieved from atkearney : http://www.atkearney.in/documents/10192/982632/Chinas_Hospitality_Industry.pdf/72ed00fb-1cad-4798-a1a1-1552604bc72e
dfm. (2014). NASDAQ Dubai securities are included in the table above in US Dollars. Retrieved from dfm: http://www.dfm.ae/Default.aspx
Fogel, G. K. (2014). BUSINESS ENVIRONMENT IN CHINA: . Retrieved from usi: http://www.usi.edu/media/3654697/Business-Environment-China.pdf
Gulfnews. (2012, September 10). Trade between the two countries grew to $15.6 billion in 2012. Retrieved from gulfnews: http://gulfnews.com/business/economy/uae-china-trade-grows-nearly-400-over-last-10-years-1.1072666