General Cable Company (GCC) SWOT Analysis

Overview
This section of the paper analyzed the strengths, weaknesses, opportunities, and threats faced by General Cable. The strengths, weaknesses, opportunities, and threats are identified and evaluated to determine the ways to capitalize, improve, or avoid these factors to strengthen General Cable as a company. Each of the categories is explained in details to see how it will impact the business or give it a competitive advantage. Below is the SWOT diagram.

Strengths

Geographically diversified (may also pose as a weakness)
Wide product breadth
Lean & efficient operation

Weaknesses
1. Geographically diversified

Political instability
Volatile foreign currency exchange

2. Excessive debt dependency
3. Over dependence on one key supplier

Opportunities

Expansion into emerging markets
Strong growth & Government support of alternative energy
Demand for greater communication bandwidth and global connectivity

Threats

Volatile commodity market
Stringent regulations
Litigations

Strengths
Geographically Diversified
GCC operates in three geographical segments namely North America, Europe and North Africa, and the Rest of World (ROW). The biggest markets and contributors of income are the United States and Spain markets. With the focus of long term growth however, it is predicted that there will be increasing population and wealth emerge from the developing countries so GCC has been focusing on diversifying geographically.1 The recession in the United States and slow market in Spain proved that diversifying geographically has been an excellent move.
Earlier this year, GCC acquired a major stake of Phoenix Power Cables, a cable manufacturer in Durban, South Africa as one of the moves to further diversify its market and increase its business and presence in Sub-Saharan Africa. 2 GCC is also increasing its presence in its Rest of World (ROW) market by strategic acquisition of local companies and/or building manufacturing plant. This wide international presence allows GCC to have several sources of revenue and globalize GCC as a brand in different parts of the world. It also allows GCC to not depend on a certain geographic markets and helps reduce business risks considerably by spreading its revenue sources.

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With a successful track record of overseas acquisition, combined with their technical know-how and expertise in the business, GCC is poised to leverage itself as a major global player amidst the ever changing business world. Even though geographic diversification is considered as a strength for GCC, this can also posed a weakness for the company. Detailed discussion of this is presented in the next section.
Wide Product Breadth
GCC has the broadest product offering in the industry. It offers wide variety of copper, aluminum and fiber optic wire and cable products which are sold to different markets and industries. These products are used not only in the cable industry but in other industries as well, such as, communication, construction, transportation, and oil and gas companies.
The wire and cable industry is highly competitive and by providing a wide variety of products is a competitive strength for GCC. This diversified product offering helps reducing the impact of market volatility in one particular product segment and provides economic stability.
Lean & Efficient Operation
GCC is a one of the leaders in the wire and cable industry and it strives very hard to be as lean and as productive as possible to give it a competitive edge. As an ongoing effort to reduce waste and costs, GCC spends considerable time and resources to educate its employees on how to reduce waste and cost and provide them with Lean Six Sigma manufacturing cost containment training. Talk about from the financial paper.
Operating income and gross profit were up in 2008 and GCC attributed some of these achievements to improved efficiency as a result of continued Lean manufacturing initiatives. With a leaner and more efficient operation than the industry, GCC possesses a competitive edge. It allows them to profit more from the operation with its lower cost structure or sell the products at a lower price than the competitors but still making the same amount of profit.
Weaknesses
Geographically Diversified
As mentioned earlier in the section, geographic diversification is a competitive strength for GCC. However, it is also a weakness for GCC. Geographically diversified means GCC operates in various parts of the world and exposed to different government rules and regulation, political instability in each country, as well as volatile foreign currency.
GCC has a significant investment in Thailand and is therefore subject to the political instability there. In late 2006, Thailand’s elected government was overthrown which created a lot of unrest and instability in the nation. This inevitably posed as a problem for GCC to smoothly operate in Thailand and may negatively impact the financial health of Thailand’s operation. Volatile foreign exchange rates can pose as an advantage or disadvantage. Favorable year-over-year foreign currency translation is a benefit while unfavorable translation means a loss that GCC has to bear and report in the financial statement. For example, Venezuelan government recently decided to devalue its currency for non-essential goods from 4.30 Bolivars to each US Dollar to 2.15 which means that $40-$45 million USD will need to be written off from the balance sheet.3
All of these factors may have negative impact on General Cable’s financial numbers as it influences sales, growth and net profit. Unfavorable foreign currency and political instability are some of the factors associated with having a global presence. GCC has to find ways to overcome these weaknesses by constantly monitoring current and prospective rules and regulations in each country and assess the likelihood and impact of them on GCC. Foreign exchange futures can also be used to lessen the impact of volatile foreign exchange rates.
Excessive Debt Dependency
As mentioned in the earlier portion of the paper, GCC is highly leveraged by debt and this may potentially have an adverse effect on GCC’s financial position. Talk about paper.
GCC competitive edge may be limited as it may be harder for GCC to obtain further financing due to the significant amount of debt it possesses. Net income may also be adversely affected when business is bad and cash flow is limited and there is a significant amount of debt repayments to be made.
Over Dependence On One Key Supplier
More than 90% of General Cable 2008 copper rod purchase was supplied by one key supplier. This posed as a high risk for General Cable if this key supplier fails or for any reason, fail to supply GCC with adequate material. GCC did not have any long term purchase agreements with this key supplier and it is extremely hard to find another key supplier that can supply raw materials in such a short notice.
Any unanticipated problems and interruptions with this supplier could have a material adverse effect on GCC. Be it natural catastrophes such as hurricanes and earthquakes or the supplier’s own financial and company problem, all of this will have a negative impact on GCC’s operation and financial performance.
To shield itself from this weakness, GCC has to identify new prospective supplier. GCC needs a supplier who is reliable, reputable, and has the ability to supply massive amount of raw material at the right time and price. However it seems that GCC is reluctant to do so, based on the statement in the 2008 annual report that identifying and accessing alternative suppliers may increase their costs. The likelihood that this key supplier will be problematic should be minimal considering that GCC has outweighed the benefits and cost of identifying new supplier.
Opportunities
Expansion Into The Emerging Markets
As there are massive growth and wealth coming from the emerging markets, GCC has been trying to expand further into these emerging markets and leverage their 150 years of technical expertise and One Company approach.
China and India are one the largest emerging markets right now and GCC has considerable investment and presence in both of these countries. Its expansion strategies include acquisition and building manufacturing facilities. GCC recently acquired a local specialty cable manufacturer as it plans to reach out to the Chinese automotive and industrial markets.4In 2007, GCC started its expansion in India by entering a joint venture with a local firm to leverage itself in the construction cables industry for the Indian market.5 GCC is vigorously expanding worldwide by leveraging opportunities in the emerging markets from building new world cup stadium in south Africa for the world cup to reaching into the local markets in China and India.
These projects, along with the recent acquisition and expansion in other emerging markets, further GCC’s strategy to expand globally into economies that are building their energy infrastructure. This creates an opportunity for the company to increase its sales and brand presence by providing energy and electrical infrastructure cables in these emerging markets. The opportunity in the emerging markets will also help strengthen GCC as a company as it presents more revenue sources and also helps reduce business risks considerably by spreading its revenue sources.
Strong Growth & Government Support In Alternative Energy
With the ever increasing desire for energy independence and environmental concern, alternative energy such as wind, solar and hydroelectric power is poised to grow rapidly. General Cable is one of the leading cable companies that support alternative energy by creating products that provide solutions in the alternative energy sectors. In 2008, more than $400 million of industrial and energy cable is sold to the terrestrial wind farm market globally and this number will continue to climb in the future.1 Alternative energy such as biofuels, biomass, geothermal, hydroelectric, solar, and wind provided 11.37% of domestic U.S. energy production in June 2009. This is a gain from the half of 2007 where alternative energy represents only 9.89% of the domestic energy production.6
The government support in the alternative energy movement is also an excellent opportunities for GCC. The economic stimulus package passed by congress supports renewable alternative energy and this will enhance investments and thus increase demands for GCC products. Both strong growth and government support for alternative energy allows GCC to capitalize on this opportunity to further enhance its market position and financial performance.
Demand For Greater Communication Bandwidth And Global Connectivity
As the demand for bandwidth increases to support the increasing need for global connectivity and communication, the demand for GCC products will inevitably surge. An article from ‘IT News Africa’ states that the demand for international connectivity has been much higher than anticipated, which proves there is a definite need for all the international cables global high-speed.7 Internet users will also increase as the emerging markets become more wealthy and require faster connection. This increase in demand is an opportunity that GCC has to capitalize on.
Successfully capitalizing on this opportunity will have a positive impact for GCC’s financial performance and reputation. GCC has taken considerable steps to take advantage of this increase in demand. It invested in multi-billion dollar of submarine optic communications markets, the medium for faster global connectivity. It is also in a stage to acquire a patent for a newly introduced product which will be used in networking cable technology spectrum.
Threats
Volatile Commodity Market
GCC transforms basic raw materials such as copper, aluminum, petrochemicals and steel into highly engineered wire and cable products. Raw materials account for approximately 75% of the conversion cost which means that fluctuation in raw materials prices may adversely affect GCC cost of sales and in turn, its competitive pricing. The price of copper and aluminum, in recent months, has been extremely volatile. Another issue with the commodity market is that big increase in the prices will substantially decrease demand for wire and cable products and ultimately, will have a negative impact on GCC financial performance.
GCC has been involved in numerous commodity hedging programs to shield itself from volatile copper and other raw material prices. However, due to the nature of the financial hedging, it is still no guarantee that they will always be able to protect themselves from the volatility.
Stringent Regulations
Operating in the wire and cable industry as well as having worldwide operation exposed GCC to numerous complex rules and regulations. The regulations range from import and export rules, individual government policies on the industry, environmental laws, to electronic or telecommunication rules. All of these factors are threats that may materially impact GCC’s growth strategy, performance, and reputation. It is noted, however, that GCC is doing its best to ensure that the employees, subsidiaries, contractors, and agents comply with the rules and regulations.
Litigations
By the end of 2008, GCC and its subsidiaries have been involved in 34,730 lawsuits, 1,275 out of the lawsuits are pending non-maritime asbestos cases.1 These litigation claims are worth millions of dollars combine. If GCC is found guilty in any of the lawsuits and subjected to hefty monetary fines and payments, it will materially impact GCC operation and financial performance.
However, GCC has been fighting these lawsuits for the past 20 years and therefore have the experience in defending itself against these lawsuits. In the past 20 years, GCC has had no cases proceed to verdict from those lawsuits and in many cases, was dismissed as a defendant. However, there is no guarantee in the foreseeable future that GCC will always have the upper hand in the lawsuits. Therefore the litigations faced by GCC is considered as a considerable threat.
Conclusion
GCC’s global presence and lean operation put it at a competitive advantage in the industry. It allows GCC to have a wide spread of income source and avoid that economy cyclicality when one country is in recession. As it was discussed in previous section, however, global presence is also a weakness for GCC. Exposure to political instability and fluctuations in the foreign exchange market may have adverse effect on GCC’s operation and financial performance. Wide product breadth is also another strength in that it helps reducing the impact of market volatility in one particular product segment and provides economic stability. In order to remain competitive in the industry, GCC has to not only maintain its strengths that give it a competitive advantage, but it also needs to capitalize on the opportunities available to the firm. The strong support and growth for alternative energy as well as increasing demand for greater bandwidth and connectivity are some of the opportunities that GCC has already capitalized on and will continue to do so. However, the rising raw material prices and volatility in the commodity market could pressurize the company’s profit margins, thus posing a threat to the firm. Litigations that GCC is involved in is also a threat to the firm’s operation and financial performance if and when it is found guilty.
It is crucial for GCC to continually analyze and assess its SWOT factors to see how it is going to impact the company. Doing so allows GCC to capitalize on its strengths and opportunities as well as take appropriate measure to decrease the likelihood of the threats and weakness from occurring.

Annual report. http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzMxNTkwfENoaWxkSUQ9MzEzNzYyfFR5cGU9MQ==&t=1
http://cincinnati.bizjournals.com/cincinnati/stories/2010/01/18/daily10.html?ana=yfcpc
http://investor.generalcable.com/phoenix.zhtml?c=81254&p=irol-newsArticle&ID=1374797&highlight=
http://www.generalcable.com.cn/
http://www.nema.org/media/ind/20070419b.cfm
http://www.southernstudies.org/2009/09/power-politics-growth-in-renewable-energy-outpaces-nuclear-fossil-fuels.html
http://www.itnewsafrica.com/?p=3921

 

Gcc economies

Introduction
Challenges and Opportunities in GCC Economies. General Attitude towards Foreign Investors
Trade integration and Economic Philosophy in GCC economies. Economic Status of GCC economies. Economic Stability. GCC’s Political Stability . FDI in the GCC countries
The size of the Market . Physical Infrastructure . Resource Endowment and Industrialization . Labor Force . GCC – India business relationship . Challenges. Trade Protection and Competitiveness. Lack of diversification
The Changing Economic Context of Gulf Politics. Recommendations and conclusions
Reference
Executive Summary
The Gulf Cooperation Council (GCC) is an attractive location for investment and a salient consumer market for imported goods and services, and information technology to one of the youngest population that is considered to have highest powers of spending in the world.
The common market of the six GCC economies are open to foreign capital investment and are continually working to grant national treatment to all foreign investment firms and cross country investment and services trade. By 2010, GCCs inter-state trade is expected to enhance by 25 percent, and international trade in this states is anticipated to grow by multiples. Given its trade history and strategic location, the six GCC economies has had long trade and diplomatic relationships with Asia, Europe, and African states, suggesting that it stands to benefit in the long-term from the anticipated growth of these countries.
The GCC economies have upheld an open system of trading, free capital movement, convertibility of currency with fixed nominal rates, and large labor inflows- both skilled and unskilled. Additionally, the GCC’s advanced financial systems have been an essential channel for advancing their trade integration into the global community.
Despite current global economic crises, the GCC has remained a very liquid expanse. The economic growth in several key sectors is forecasted to be moving forwards across the region. Any investor considering venturing in the GCC should be centrally positioned to take advantage of one of the world’s fastest-growing markets.
Given the GCCs’ comparative advantage in oil, gas, petrochemical products, and private capital, and given the India’s technology, know- how, marketing skills and that can be marketed in a very sizeable market indeed. When countries or trading partners specialize on the basis of their comparative advantages, returns are maximized. Therefore Indian firms invested heavily according to the strategy emphasizing their comparative advantages in oil and gas service sector, which presents a great scope for Indian enterprises to undertake joint investments in these fields.
Introduction
The Gulf Cooperation Council (GCC) consisting of states six Arab states (Saudi Arabia, Bahrain, Qatar, Oman United Arab Emirates, and the Kuwait) located in Arabian Gulf. The GCC economies are one of the fastest-growing international markets and have become increasingly important to the economy of the whole world.
GCC attracts an ever-increasing number of foreign investments and across wide-ranging sectors. Its rapid development and expansion has made it an active seeker for modern technological capacities, infrastructure development, and business services. Development and improvements have been made to build up a private sector that is fewer dependants on government or natural resources, thus making the area an attractive destination for investment and competitive market for expatriate workers and overseas expansions (Al Bawaba, 2007).

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The GCC countries investment climate is conducive to foreign investment. GCC countries are continuously adopting policies and taking measures to improve this climate and taking into consideration changes in the international economic parameters and factors. GCC economies recognize the value of attracting and maintaining foreign investment and have resulted to adopting measures aimed at attracting and encouraging foreign investment.
GCCs openness to foreign investment and capital has been motivated by an expectation that foreign capital and investment will attract financial resources- visible and invisible, as well as bringing in modern technology (Al-Shamali & Denton, 2000). In addition, it may also raise marketing potentials of the local firms by providing access to export markets. Foreign capital and investment can also advance skills and techniques of management and set up state-of-the art facilities of training.
The initiative for encouraging invest mostly focuses on the institutional structure and on creating legal and administrative conditions appropriate for carrying out investment activities.
Despite current global economic crises, the GCC has remained a very liquid expanse. The economic growth in several key sectors is forecasted to be moving forwards across the region. Any investor considering venturing in the GCC should be centrally positioned to take advantage of one of the world’s fastest-growing markets.
However, investments and trade links among the Arab countries leave much to be desired. Capital-rich countries do not feel safe investing in people-endowed or resource-rich countries. However this latter group of Arab countriescan insure food safety, enlarged markets for industrializing GCC countries and investment opportunities (Al Bawaba, 2007). Political risk is often cited as a deterrent, along with bureaucracy. Most often governments are blamed for failure to devise a system that motivates the public as well as the private sector to joint efforts.
This paper identifies investment prospect and provide advice on the challenges and opportunities for an Indian enterprise intending to embark on an investment in oil and gas service sector in the GCC region.
Challenges and Opportunities In GCC Economies
General Attitude towards Foreign Investors
Generally speaking, GCC Countries’ religion, social fabric and norms, and their economic and political cultures do not have in any way prejudices against foreign investors (Al Bawaba, 2007 b). The fact is that there is a history of fruitful co-operation and strong tradition of hospitality. The number of foreign firms and expatriate workers in the region clearly manifest this attitude. Hostilities in whatsoever manner of at any level of contact are absent.
Trade integration and Economic Philosophy in GCC economies
The GCC economies has had an apparent degree of success in terms of trade integration, capital mobility, labor creation, and in setting regular standards in diverse regulation areas. Some of the GCC members have extended cordial privileges to foreign capitals and investment in areas such as share-market, investment, and government procurement.
The longstanding economic philosophy of the region is obviously an open free market and outward – oriented (Al Bawaba, 2007). Private property rights are well established and honored. GCC countries, unlike many developing countries, have never experienced what could be called socialist inclinations. Capital and goods are allowed to freely enter and leave GCC countries. Foreign exchange control measures are non- existent and as thus expatriation of profits, remittances and dividends face no restrictions.
GCC countries openness is also manifested in their high foreign trade openness ratio which reached more than 70%. For comparison reasons, the same ratio amounted to 16% in U.S.A. and 18% in Japan. This manifests the dependence and incorporation of GCC economies in the international market (Al-Shamali & Denton, 2000).
Economic Status of GCC economies
The combined Gross Domestic Product (GDP) of the GCC economies is estimated to reach 1.15trillion dollars according to the Gulf Finance House (GFH) projections. The projection by the Saudi American Bank (Samba) and Al Ahli Bank estimates that by 2018, total investment in the GCC economies could reach up to 670 million dollars.
The GCC’s world economy share is estimated to enlarge slightly higher than the annual average global growth with an aggregate of 4.5 percent, compared to globally annual average of 3.3 percent (Emerging Markets Monitor, 2008). Within 10 years, the GCC countries are expected to be supplying nearly one-quarter of the world with oil as well as increased quantities of petrochemicals, plastics and metals.
Economic Stability
The six countries of the GCC possess many common and rather special characteristics. They all depend on oil and gas for government revenues and foreign exchange earnings. These governments’ revenues and expenditures move the engine of the economy. The non-oil sector, while growing constantly, remains relatively dependent.
Oil will remain the major source of energy and the main vehicle to development for years to come (Al-Shamali & Denton, 2000). Its role in the international economy as an important strategic commodity needs no elaboration here. Thus, GCC countries status as major producers and exporters will continue to enhance their economic power. GCC production of this strategic commodity accounts for more than 20% of world production. Of the world’s proven oil and natural gas reserves, GCC states hold 45% and 15% respectively, according to conservative estimates (Emerging Markets Monitor, 2008).
GCC states have been recording positive GDP growth rates even at times of international recession. Their Consolidated GDP has surpassed the landmark of $ 550 Billion according to World Bank. Expenditure on capital formation (investment) totals more than 25% of GDP.
Another indicator of stability, inflation, has remained one digit, and below 5% in most recent years in all GCC countries. Not only that, but inflation was recorded with a negative sign in some years.
GCC states have maintained their realistic path of rationalizing expenditure and conservatively estimating revenues. This year’s budgets which have been based on expected oil prices of $ 40 per barrel, at a time when market indicators and oil experts’ expectations foresee a price close to $ 60 per barrel. In fact, this behavior has helped GCC countries to record large surpluses in their actual oil revenues during the last few years, and thus assisted them in settling internal debt arrears, and replenishing their foreign exchange reserves.
It is evident that GCC countries have started to reap the fruits of the daring measures – adopted for the last few years – of rationalizing expenditure and embracing the concept of efficiency in the management of both the private and the public sectors. More importantly, they have succeeded in reducing people’s expectations regarding the role of t he government in providing subsidies, employment opportunities…etc.
GCC countries have enjoyed surpluses during the last decade, sometimes substantial, in the current balance of payments (Al Bawaba, 2007). High rates of savings, however, have been unmatched by corresponding internal investments, the potential growth vehicles for these economies. The exhaustibility of their resources implies the urgent need for long-term economic and financial planning in these countries before nonreversible trends take root
Economic stability and growth are also combined with general trends which – among other results – strengthen and enhance foreign investments. GCC governments are pursing policies towards more economic liberalization, privatization and giving a greater role to the private sector. Moreover, export – 0riented policies are dominating and manifested in the creation of export financing institutions and establishing specialized exporting units in ministries and chambers of commerce and industry.
GCCs Political Stability
GCC countries are renowned for their stable political and administrative governance. Power is smoothly handed and regime change is less frequent as compared to most of the developed and developing countries. The stability of the regimes in GCC countries is totally correlated with the stability of general strategies and policies (Al-Shamali & Denton, 2000). The strong legitimacy and popular support enjoyed by GCC regimes is rather rare in other developing countries and even in some developed ones.
However, on the political and administrative level, there are several fundamental problems that have remained unsolved. Some customs union are yet to be fully implemented, while unstable bilateral agreements between individual GCC states and other trade partners undermine the consistency of the external tariff regime. The monetary union of some GCC economies has been called into question and especially by latest announcement by Oman to opt out and by the reluctance of the governments to agree on representative criteria of convergence. Political tensions have been created between some neighboring GCC States, particularly between Saudi Arabia and Qatar, which could make the political stability level of the GCC economies to wobble.
FDI in the GCC countries
Having recognized the importance of attracting FDI, GCC economies have adopted new measures aimed at attracting foreign capital and investment. These new measures and development priorities include realizing sustained economic growth by raising investment rates of private sector; enhancing technological skills and local capacities; improving the exports into the world markets, creating more competitive employment opportunities. Openness to foreign capital and investment has been stimulated by an expectation that this openness will bring in financial resources, while attracting modern technology. In addition, foreign capital and investment provides raises marketing capabilities of local firms and access to export markets. It also facilitates upgrading of the management techniques and skills.
In the GCC economies, the FDI flow accounts for more than the world’s average in two of the GCC states (Bahrain and Qatar). Conversely, except for the UAE, FDI stock has accounted for a key share weighed against to the value of Gross Domestic Product in these GCC economies, as was evidenced in the case of Bahrain, in which the stock reached more than 74 percent and 70 percent of the level of GDP in 2000 and 2004 respectively.
The GCC Service sector Market
The size of the market is considered one of the main factors in determining inflows of foreign investments. The larger the size of the market and the greater its growth rates, the larger are volumes of foreign investments. Unfortunately, a popular perception, based on the population estimates only, sees GCC states’ markets as small. This perception fails to appreciate a number of facts:
First, GCC states constitute an economically united bloc which entails – among other things – a market size of a population approaching 38.7 million inhabitants. Second, the per capita income for GCC states is more that $ 14,317. In other words the populations of the GCC countries enjoy high levels of income, even by advanced industrialize countries standards. Third, the high incomes enjoyed by GCC countries are reflected in high purchasing power and effective demand.
GCC states are also strategically situated, by neighboring the African and European continents and being the entrance gate to Asia. It should be mentioned that GCC imports from the rest of the world totaled about $ 119,524.35 million in 2004.
Physical Infrastructure
Whenever foreign investment in developing countries is discussed, inadequate physical infrastructure is cited as a major discouraging factor. On the contrary, GCC states have succeeded in utilizing their abundant resources in creating a very well developed – by any standards – physical infrastructure. Major industrial and population centers are connected to each other and to the ports with international – standard road network. Recently installed telecommunication systems are in some ways even better than some industrialized countries. New power and water capacity is being installed, and the consumption is being rationalized through meaningful tariffs (Diekmeyer, 2009).
Most large urban centers in the region have been provided with industrial parks, complete with necessary utilities and other amenities needed by manufacturing operations (Diekmeyer, 2009).
Resource Endowment and Industrialization
As petroleum and natural gas form the greatest volume of GCC resources, their industrial development has been directed mainly towards oil and gas based industries such as petroleum refining, chemical fertilizers and petrochemical industries and/or to energy intensive industries such as aluminum and steel (Al-Shamali & Denton, 2000). This goes in line with the concept of comp of comparative advantage i.e. if countries specialize in producing commodities on the basis of their comparative advantage, returns from production and trade will be maximized.
The availability of cheap energy resources is a blessing for GCC industrialization. For example, the gas used as a feed stock to the petrochemical industry is associated gas and most of it is a by-product of crude oil production. The cost of producing this gas is very low and if it is not used it would have to be flared (Al-Shamali & Denton, 2000).
Developments in the level and efficiency of the industrial capabilities of the GCC region enhanced the availability of a number of foreign investment attracting factors such as the skills available to prospective investors, efficiency of local suppliers and service firms, and a net-work of supporting institutions, both private and public.
Labor Force
The substantial developments which took place in all economic sectors have affected GCC labor force in two major ways. First, it required and induced large influxes of foreign professional, skilled and unskilled labor. On the positive side, this has helped in bridging the shortage in local labor, expediting the development process, and exposed the local labor force to a variety of rich experiences and high levels of theoretical and practical training in all fields and aspects of life. That is definitely a plus and an encouraging factor for any future investments, both local and foreign. Second, the tradition and experience in bringing and dealing with well-trained foreign labor reduces the possibility of manpower bottlenecks. That is to say labor as a factor of production is no problem for whoever is interested in establishing production or services units.
Expatriate labors as well as nationals do not pay income taxes. Another important factor – for foreign and local investors – is that in the GCC region there is no record of business disruption because of labor disputes.
Gcc – India Business Relationship:

GCC countries and India have strong trade relations. In 2005, the volume of trade between the two parties was nearly $20 billion GCC countries supply India with a large portion of its oil imports, near $6 billion (Alam, 2008).
For GCC countries, their comparative advantages lie in the manufacture of hydrocarbons and the development of energy intensive metal and mineral based products. In addition to this there is a great scope for investment in small and medium size ventures.
Furthermore, forecasts show that petrochemical industries – for example – can branch out into two categories during the next few years (Ramazani & Kechichian, 1998). Industries in the GCC countries can specialize in basic petrochemical and energy – intensive metals while Indian companies can benefit from such products by using them in manufacturing highly specialized and specialized and sophisticated products with higher value added (Alam, 2008). As a result, this step will certainly enhance the ability of GCC countries not only to import more specialized Indian products, but also will help them in diversifying their industrial base.
The attractive investment climate and the geographical market proximity of GCC countries make them suitable candidates for export platform of Indian investments and joint ventures. This scenario is strengthened by the availability of more than 6000 GCC small and medium sized enterprises, covering a wide variety of manufacturing activities (Ramazani & Kechichian, 1998). These include food, textiles, wood, paper, chemicals, metallic, non- metallic, engineering and other fields of activities (Alam, 2008). Studies reveal that about 90% of these SME’S have plans for expanding their activities.
This fact offers the Indian business community wide opportunities via joint ventures, turnkey operations, production sharing, licensing, and other forms of non- equity involvement.
The GCC – Indian economic relationship would be enhanced by:

Arranging visits for Indian businessmen to GCC countries so that they learn more about the region’s investment and business opportunities. FGCCC can co-ordinate such visits.
Organizing joint exhibitions both in the region and in India.
Organizing events to enlighten GCC businessmen with the available Indian co-operation instrument and institutions in fields of trade and investment.
We notice a dearth of information on trade, markets and investment opportunities. There is a need for India – GCC body to collect and disseminate such information.

Challenges
Trade Protection and Competitiveness
Although many GCC countries boost of open trade policies, they extensively use production subsidies protect a large inefficient, domestic non-oil sectors, often public owned.
Price related factors ones are usually among the most imperative factors that affect trade outcomes (Al Bawaba, 2007). The prices of goods and services being traded are considerably influenced by tariffs level and non tariff barriers as well as by real effective rates of exchange, which are themselves influenced by macroeconomic conditions and policies. There is a compelling evidence that trade protection is high for some GCC countries relative to their income levels.
Lack of diversification
The GCC countries lack diversification in the sustainable economic base and need to devise a system which encourages private investment in industry, agriculture, exports and re-exports, i.e., production and movement of goods. The virtual absence of continuous local water resources and reliance on desalinated water, which is both expensive and insecure, is a constant challenge. Local food and agricultural production falls far short of providing self-reliance and security in light of a burgeoning population and evolving patterns of consumption. Population increase and a dramatic upsurge in education require finding appropriate employment for those with improved skills, as the present rate of growth in the non-oil sector leaves a widening gap between manpower supply and demand.
The Changing Economic Context of Gulf Politics
The Islamist sectors in the states making up the GCC have grown more politically active since the time that the welfare states were established in the 1970s. The population in these regions has also increased while the price of oil, the main source of revenue, remained fixed. The educated young generation is actively seeking participation in administrative and political levels of governance, while the middle demands work with good wages (Ramazani & Kechichian, 1998).
On the political and administrative level, there are several fundamental problems that have remained unsolved. Some customs union are yet to be fully implemented, while unstable bilateral agreements between individual GCC states and other trade partners undermine the consistency of the external tariff regime. The monetary union of some GCC economies has been called into question and especially by latest announcement by Oman to opt out and by the reluctance of the governments to agree on representative criteria of convergence. Political tensions have been created between some neighboring GCC States, particularly between Saudi Arabia and Qatar, which could make the political stability level of the GCC economies to wobble.
Recommendations and conclusions
The GCC countries investment climate is conducive to foreign investment. GCC countries are continuously adopting policies and taking measures to improve this climate and taking into consideration changes in the international economic parameters and factors. GCC economies recognize the value of attracting and maintaining foreign investment and have resulted to adopting measures aimed at attracting and encouraging foreign investment.
For Indian enterprises trading in the oil and petroleum service sector, their comparative advantage lies in their specialization in production technology
The Gulf Cooperation Council (GCC) is therefore an attractive destination for an entrepreneur wishing to invest in oil and petroleum service sector and the opportunities in this sector far outweighs the challenges.
References
Alam A., (2008) India and West Asia in the Era of Globalisation, Michigan: New Century Publications,
Al-Shamali A., & Denton J., (2000) Arab business: the globalization imperative, India: Kogan Page Publishers,
Al Bawaba, (2007 a), The Future of the Gulf: The World Economic Forum Launches Scenarios on the Gulf Cooperation Council Countries, p1
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