“Thank you... visit again!” a shop owner told me on my way out the door. For him, it is proven concept that repeat customers mean a thriving business. Commonly, when a friend or family member opens a shop, we will be their first potential customers and we will make an effort to help them be successful by buying from them and referring people to their shop.
These patterns of purchasing are critical for businesses so that they can predict and drive demand. It is equally important for consumers or corporate buyers to be aware of what influences their decision to source from a place or a company.
Responsible purchase is a great portal to social responsibility. The buying decision can be strategic that can extend the perceived benefits beyond the direct need for consumption. From supporting the local supply chain to increasing employment, sourcing plays a pivotal role in the prosperity of the market. Thus, local content is now encouraged, and incentives are in place to enable local suppliers. The preference for local content will attract local and international investors to allocate more capital and resources.
Government procurement has a major influence on the market. Hence, the Saudi government has approved a new law and related executive regulations for tenders and procurement, effective as of Dec. 1, 2019. In addition to boosting public spending efficiency, the new law supports the local content of small and medium enterprises (SMEs). The regulations which are applied on all government entities and affiliated companies will give priority to local content and will grant SMEs a 10 percent price preference in sourcing and services contracts.
In line with the objectives of Saudi Vision 2030 to diversify and strengthen the national economy, the Saudi Local Content and Government Procurement Authority (LCGPA) was established to set policies and targets to measure the contribution of local content. In October 2019, LCGPA launched the Local Content Partnerships initiative wherein government entities and major national companies announced their commitment toward developing local content throughout various sectors in Saudi Arabia. Among these entities were Saudi Aramco, SABIC, Saudi Arabian Mining Company (Ma’aden), Saudi Telecom (STC), Saudia Airlines, Saudi Electricity (SEC), Saudi Chambers and the General Authority for Military Industries (GAMI).
These national entities have put forth many notable initiatives to support local suppliers, for example, the “Nusaned” initiative by SABIC which facilitates investment opportunities for SMEs in the local industrial base and aims to improve the efficiency of Saudi factories. Saudi Telecom Company (STC) has also announced its support for local SMEs via direct and indirect procurements valued at four billion riyals. The same intent was demonstrated by the Saudi Electricity Company by giving a competitive advantage of 10 percent to the prices of local factories to stimulate them and increase their market share in the field of electrical industries.
Furthermore, many international companies operating in Saudi Arabia decided to increase the local content in their supply chain. A recent example was the KFC restaurant chain’s announcement of its partnership with Almarai’s poultry brand, Alyoum, as well as from Al-Watania Poultry, and Tanmiah Food Group to supply chicken from local farms to over 200 KFC restaurants in KSA. Many more large companies in various sectors operating in the Kingdom are convinced of the strategic advantages of tapping local content which will positively impact their competitiveness in Saudi Arabia and across the world.
On the other hand, local SMEs businesses should capitalize on these positive trends of supporting local content. Business owners and SMEs management can stay current with relevant procurement policies and tender announcements pertaining to their sector. This will help them update their business strategy and the possible introduction of new products and services in line with the local content policies and requirements announced by major buyers in Saudi Arabia.
Practical steps can be taken to promote your business, such as registering with the relevant government and business entities to become an approved supplier. Many buyers look for potential suppliers online; therefore, have an up-to-date website that clearly identifies who you are, what is it that you offer and how you can be reached. Moreover, attend business events that are regularly organized by local chambers of commerce and other business support organizations. You can stay current with their social media channels, registering on mailing lists and reading press releases and corporate news in the business sections of local media outlets.
The author can be reached via email: otaias0y@gmail.com and Twitter account @otaibi3w
