FROM THE EDITORIAL DESK
BE DISCIPLINED
CONCEPT Akshay Bhatnagar
As promised in the last issue of Ruwad, this time we are focusing on the Islamic Financing from the entrepreneur’s especially SMEs perspective. In the last two quarters, we have seen a number of events in the form of seminars, conferences and workshops taking place in Oman dedicated
CONTENT Khalfan Al Rahbi Turki Al Balushi Ghalib Abdullah Al Fori DESIGN
MARKETING Kush Gupta Chandni Maniar Jisha Velluvan CORPORATE Chief Executive Sandeep Sehgal Executive Vice President Alpana Roy
towards educating the public at large and relevant industry stakeholders
Art Directors Sandesh S. Rangnekar
about the distinction between traditional financing and Islamic financing.
Designers Khoula Rashid Al Wahaibi
Such forums have helped a lot in creating awareness about Islamic financing
Aliya Saif Al Wahaibi
and brought in some kind of clarity towards the guiding principles behind
Senior Photographer Rajesh Burman
Islamic Financing.
Photographers Motasim Abdulla Al Balushi
Business Support Executive Zuwaina Said Al-Rashdi
Production Manager Govindaraj Ramesh
Distribution United Media Services LLC
Those entrepreneurs who are expecting IF to be a generous medium of
Vice President Ravi Raman Senior Business Support Executive Radha Kumar
financing needs to understand that probably IF is going to be stricter compared to traditional financing institutions. And those entrepreneurs who are not so serious about the business’s success and looking for easy money, may not cut ice with IF at all. Does it mean IF is not going to create any positive impact on the SME sector? The answer is a firm no. To comply with the norms of the IF and meet its stringent conditions for business planning and management, the entrepreneurs are going to be more self-disciplined and required to incorporate the best principles of modern day business management. This will separate the serious players from the not so serious players in the market. This trend is going to lift the quality of entrepreneurs in the Sultanate and ultimately guide the SME sector towards a well-deserved
Published by United Press & Publishing LLC PO Box 3305, Ruwi, Postal Code - 112 Muscat, Sultanate of Oman Tel: (968) 24700896, Fax: (968) 24707939 Email: akshay@umsoman.com All rights reserved. No part of this publication may be reproduced without the written permission of the publisher. The publisher does not accept responsibility for any loss occasioned to any person or organisation acting or refraining as a result of material in this publication. Alam Aliktisaad Wala’mal accepts no responsibility for advertising content. Copyright © 2011 United Press & Publishing LLC Printed by Oman Printers Correspondence should be sent to: Ruwad, United Media Services PO Box 3305, Ruwi 112, Sultanate of Oman. Fax: (968)24707939
position in the economy. Enjoy reading the issue!
An Alam al-Iktisaad Wal A’mal Presentation
CONTENTS FINANCE. . . . . . . . . . . . . . . . . . . . . . . . 4 SME NEEDS AND ISLAMIC FINANCE – A NATURAL FIT
TOP SHOT . . . . . . . . . . . . . . . . . . . . . . 10 ALI MOHAMMED JUMA, VISION INVESTMENT SERVICES
COLUMNS BY ABDULLAH AL JUFAILI, SHARAKAH . . . . . . . . . . . . . . . . . . . . . 8 BY WILLIAM CREW, GROFIN . . . . 14
LABOUR LAW . . . . . . . . . . . . . . . . . . . 16 BY DAVID AUGUSTUS BALL, SASLO
WORKSHOP . . . . . . . . . . . . . . . . . . . . . 9 TO SUPPORT SMES IN SALALAH BY BANKMUSCAT
ASK THE EXPERT . . . . . . . . . . . . . . . . . 18 BUSINESS SOLUTIONS FROM ERNST & YOUNG EXPERTS
OCT-DEC 2011
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SUCCESSFUL ENTREPRENEUR HASSAN AL SOBHI, MATCH MEDIA
E-Services on MoCI website The Ministry of Commerce
& Industry’s website now provides useful consultancy services to the entrepreneurs. The Business Diagnostic Centre provides consultancy and conducts business studies for the ebenfit of the SMEs.
NEWS IN BRIEF
WIPO’S IP PROGRAMME FOR CRAFT INDUSTRIES Recently, World Intellectual
UPCOMING EVENTS Media & Advertising Exhibition 18-20 October, 2011, Muscat
Property Organization (WIPO) and Public Authority for
Traffic & Safety
Craft Industries organized a
18-20 October, 2011, Muscat
programme ‘Intellectual Property
Consumer Fair
(IP) and Protection of Craft
18-27 October, 2011, Sohar
Industries’ to support the small
Mediterranean Islamic Finance
enterprises and youth segment,
Conference 2011- New Openings
in Oman. Najma Rouhaimi, Director of Training Division of WIPO said that the international training programme was directed towards development of common work programmes to design training courses on protecting the IP of craft industries and small enterprises, and develop training and certifications in crafts. “This could be achieved by benefiting from the expertise and efficiencies in this field and adopting approved applications in the
27-28 October 2011, Malta Agriculture Expo 30 Oct – 1 Nov, 2011, Muscat GEW Oman Global Entrepreneurship Week Oman
field of protecting IP of small enterprises. We aim this through our partnership with
14-21 November 2011, Muscat
the Authority to promote the craftsmanship culture and increase the crafts’ revenue
Food & Hotel Oman 2011
by spreading awareness on the significance of establishing efficient and profitable
5-7 December, 2011, Muscat
small enterprises,” said Najima. During the final programme, several papers were
Home Décor Expo
presented related to the subject. Fawz al-Din Mohamed Abu-Jamous, Finance Expert
13-15 December, 2011, Muscat
at the Ministry of Commerce and Industry, talked about various aspects related to the SME financing and business planning. He said, “Earlier, The Ministry was providing the consultation services to the entrepreneurs at the Ministry offices. But now our consultation services are available to everyone across the country through the Ministry’s website with the introduction of online consultation features and Business
Consumer Exhibition 21-30 December, 2011, Muscat 3rd Muscat Youth Summit December, 2011, Muscat
Diagnostic Centre.” Commenting further, he stated in his paper that small enterprises need to be provided with consultancy on corporate finance. The paper further highlighted the importance of consultations to small enterprises. He referred to the role of the Business Diagnostic Centre which provides consultancy and conducts business studies. As for training, his paper reviewed the training techniques that vary in consistency with the trainees’ requirement, nature of work and qualifications. Training techniques include presentation, lecture, practical application, explanation, engagement and discussion. The paper stressed that comprehensive study of IP rights would eventually help in assessing an organization. Conducting this study requires specific period of time and assumptions. Meanwhile, brainstorming is the process by which each conscious trainee suggests solutions, based on co-operative efforts. Discussion techniques adopt the method of creative deliberation. In alignment with the Sultanate’s direction to support local and international IP protection, the training programme lasted for five days and discussed the applied frameworks of IP and its role in protecting crafts as a major expression of national identity.
NEW APPLICATIONS TO SANAD The committee in charge of studying the grant of loans under the Sanad programme, recently held a meeting to review nine applications. Five applications were approved in the review. Two others are under examination and the remaining two applications were rejected for non-compliance with the required conditions. FOR THE NEXT GENERATION OF BUSINESS LEADERS
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Duqm Dry Dock & Port promises new business opportunities such
as fabrication workshop, reconditioning of ship equipment and parts, galvanising and treatment of pipes and outfitting services, laboratories equipped for the testing and calibration of tools, gauges and other measuring devices plus warehouses for material supplies, accommodation, catering and leisure facilities.
PLENTY OF NEW BUSINESS OPPORTUNITIES ON ENTREPRENEURS’ WAY Numbers of new large scale projects are going to result in a significant jump in the demand for services from entrepreneurs in various parts of the Sultanate. Oman Oil Company (OCO) is planning to award oil contracts worth $1.04 billion by the end of this year for its Al Ghubar South oil field. The company is also studying bids for a variety of contracts for exploration of oil and gas in different parts of the Sultanate. Among others, six of the
ship maintenance and repair operations. While ODC will focus
contracts will be awarded for exploration in Hasirah and Hoqah
on its core areas of expertise in the dry-docking, maintenance
gas fields, in addition to vapour injection in Al Ghubar oil field.
and repair of ships, it sees immense opportunities for a range of
In another major development, a Saudi based business house
technical support and other general services to be outsourced
has announced the plan to establish a Medical City in Salalah
to private contractors and service providers. Among the many
with an investment estimated at $1 billion. The project will be
areas listed by the company as attractive for private sector
integrated with a 530-bed multispecialty hospital and a state
investment around the Duqm yard are fabrication services.
of the art diagnostic centre, healthcare resort and healthcare
Given ODC’s ambitions to expand into the fabrication of steel
educational complex. In addition, the Medical City will also
structures for offshore and onshore projects, opportunities are
have a Healthcare and Education Complex, Healthcare Resort
aplenty for investment in a variety of fabrication workshop and
with Upscale Hotel, Wellness & CAM Center, and several other
support services. Equally prospective are facilities specialising
support services establishments.
in the fabrication and installation of package modules for plants. Other services that hold significant investment
Moving on, Oman Dry-Dock Company (ODC) sees significant
potential relate to in-situ machining and reconditioning of ship
opportunities for the development of private-driven business
equipment and parts, galvanising and treatment of pipes and
clusters to serve its newly launched ship repair facility at
outfitting services, and laboratories equipped for the testing
Duqm on the Wusta coast. According to Shaikh Khalil bin
and calibration of tools, gauges and other measuring devices,
Ahmed al Salmi, Deputy CEO of ODC, prospects abound for
he said. He envisioned opportunities for the establishment
investments in ancillary activities and services linked to ODC’s
of workshops specialising in the maintenance and repairs of marine equipment, warehouses for material supplies, storage areas for marine parts, and so on. Investments in accommodation, catering and leisure facilities for contractor staff are also potentially promising, he noted. Given the scale of the Duqm yard and its diverse portfolio of services, ODC also sees substantial potential for investments in transportation and logistics services, as well as the operation of small shiprepair facilities. Besides, there will be significant demand for vocational training services catering to Omanis looking to work at the yard. On the construction side, strategic road projects totalling more than 2,000 kms in length are currently under various stages of design and development across the Sultanate.
OCT-DEC 2011
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NO INTEREST
FINANCE
Equal Partners Unlike
traditional financing, entrepreneur is not required to pay interest to the Islamic Financing Institution.
SME NEEDS AND ISLAMIC FINANCE – A NATURAL FIT MANY OWNERS OF SMALL AND MEDIUM SIZED ENTERPRISES BELIEVE THAT ISLAMIC FINANCING WILL PROVIDE THEM WITH A PLETHORA OF EASY FINANCING OPPORTUNITIES! RUWAD SPOKE TO A CROSS-SECTION OF EXPERTS ON THE SUBJECT TO UNDERSTAND THE DIFFERENCE BETWEEN ISLAMIC FINANCING AND CONVENTIONAL FINANCING, AND HOW THE INTRODUCTION OF ISLAMIC FINANCING WILL OPEN A NEW AVENUE FOR PROJECT FUNDING FOR THE ENTREPRENEURS.
T
alking about the introduction of Islamic Financing in the Sultanate, HE Hamood bin Sangour al Zadjali , Executive President of the Central Bank of Oman (CBO), recently said the SME sector will be accorded great importance by the Islamic banking institutions as the SME sector plays a pivotal role in the economic development of any country. The Ministry of Awqaf and Religious Affairs will establish a Governmental Sharia panel to be in charge of the Islamic transactions. They will review the products before being released and ensure that they are Sharia compliant. Beside the Sharia specialists, this panel will include financial experts and other banking institutions. CBO is currently drafting the laws and regulations that will govern the Islamic banking sector. These legislations will be ready before the end of this year, HE informed. Dr. Omar Mustafa al Shareef, expert at the Islamic International Arab Bank, said that allowing Islamic banks in Oman is a qualitative leap for the banking sector in Oman as it will provide SME sector with scores of opportunities. He said that the
Islamic banking provides beneficiaries with fair options that ensure the interests of all stakeholders. The Islamic banks will provide the required finance to SMEs because Islamic Finance doesn’t approve of monopoly and profiteering. Islamic banking also plays an important social role because they focus not only on commercial aspects but also on the social benefits that will be reaped from its operations. Islamic banks’ focus is
not on expansion of clientele list but they are concerned about the needs of the customers. He added that the socioeconomic changes witnessed by the Sultanate in the last four decades make the Islamic banking a basic requirement and not a luxury in the country. The value of the Islamic banking has become very clear for everyone during the global financial crisis because the risk of Islamic banking transaction is very FOR THE NEXT GENERATION OF BUSINESS LEADERS
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New Window for Funding Entrepreneurs could seek funding from specialist Islamic Banks to be launched soon as well as traditional banks that are going to introduce exclusive windows for Islamic Financing.
low compared to traditional banks. In many events, CBO has affirmed that the Omani Banking Law is strong and comprehensive therefore it allows for the introduction of Islamic banking transactions. Dr. Omar affirmed that work is underway by the CBO to prepare the legislative framework to provide a comprehensive legislation for the Islamic banking. This means that the current law may be amended to keep pace with modern developments in the market. To this end, a legal consultancy office has been appointed to prepare the necessary legal framework for Islamic banking. As for the allegations about being late in taking such a step, he pointed out that Oman is very keen to start where others have ended. Moreover, the Islamic banking’s share is not more 20 per cent of the banking transactions all over the world. This means that we have an opportunity to know more about the success of Islamic banks in different countries. Islamic banking transactions will be processed through the Islamic banks and the Islamic windows at the traditional banks. Moreover, Sharia panels have been developed in every bank with interest in Islamic banking. Each panel comprises atleast three members from the talented Sharia scholars. There will be a Sharia panel that comprises elite Sharia scholars to serve at the final reference points. Speaking to Ruwad, Sameerah Tajj Mohammed al Balushiyah, the analysis expert from The Islamic Bank of Asia said: “Islamic banks play an important role in meeting the needs of the corporates through services such as joint loans, business finance and project finance. The SME sector faces
HE Hamood bin Sangour al Zadjali, Executive President, Central Bank of Oman (CBO)
a number of tough challenges, the foremost of which is the lack of finance. The Islamic banks are mainly created to meet the needs of the market in a Sharia compliant way which in turn promotes the growth of our national economies. Islamic banks are very active in financing the small projects, family companies and other companies with high growth rates as well.” She pointed out that allowing Islamic banking transactions in Oman will open the door for the SMEs to meet their finance needs in a Sharia compliant way. “The new Islamic banking institutions in Oman will need to devise ways to attract SME customers and promote the sustainable business model that has a great potential for success.” She said that there is a great differentiation between Islamic banking and traditional banking especially in technical aspects. “The Islamic bank’s mode of business relies heavily on the
OCT-DEC 2011
5
Sharia principles which ban any form of interest, speculation and gambling. It also avoids the transactions that are prohibited in Islam namely the transactions that have fixed interest rates. The Islamic banking transactions also avoid uncertain or high risk transactions. The Islamic banking transactions avoid anything that may have deceit or uncertainty that may have a negative impact on any of the stakeholders.” She further said that high risk transactions including derivatives – which are a common place with traditional banks - are not allowed in the Islamic banking system. “Such transactions have been the main reason behind the global financial crisis. The balance sheets of the Islamic banks are different from the traditional banks in terms of assets as they use the resource on Murabha or Igara bases. The balance sheets of Islamic banks also include an item called the fairness of the investment account holders. Such item is separately
More Flexible Islamic Financing can provide flexible and creative solutions to the entrepreneurs but Islamic Banks will not partner with those who lack solid business planning and serious intent. This will make entrepreneurs do more hard work by identifying viable business opportunities backed by detailed planning.
FINANCE
proper planning and providing the right counseling,” Ahmed said.
Dr. Omar Mustafa al Shareef Islamic International Arab Bank
represented in the balance sheet. This is an extra advantage in the Islamic banks.” Ruwad spoke to Ahmed al Sabey , the owner of a small company, to gauge the views of the SMEs on Islamic financing. He said that intensifying the interest in promoting the SME sector will yield great benefits to our national economy especially this sector comprises a large share of the economy in terms of the number of projects. “The benefits of a vital sector like SMEs can be optimized when we develop a long term strategy for the development of sector. This involves providing the conducive laws and legislations that support the growth of this sector, encouraging fair competition not unfair monopoly, providing the required infrastructure that contributes to the growth of this sector and ensuring the collaboration of all efforts. There are a large number of SMEs in the country and their need for the finance is quite high also but if we look at the loans provided to them, it is quite low in comparison. While such gap is too wide and tough to plug in, we can reduce the gap through
Ahmed has a firm belief that providing the required finance for the SMEs will ensure their success. He said that though there are ample sources of funding for SMEs but these financial institutions are not flexible enough while lending to SMEs. “There are so many restrictions and` limitations for an SME in obtaining the finance. As a result, the SME sector has been left with very few viable funding options in the form of Government subsidies, limited number of private sector programmes and benevolent individual investors apart from some kinds of loans provided by the traditional banks and finance companies.” Ahmed expects that the Islamic banks will meet a resounding success in the finance of SMEs. “These banks should also be interested in developing the SME projects by providing creative solutions that ensure fair distribution of the wealth among individuals as per the Sharia principles. Great benefits may be reaped from the Sharia compliant contracts that keep pace with the modern developments in the market. The finance seeker should also need to plan his project in a proper way because
Islamic banks will not accept to partner with him without proper planning.” This is the most pertinent point to learn for SMEs. They need to have detailed business plan with strong reasoning to make a solid case before an Islamic bank. The traditional banks have also been stringent with SMEs in financing but Islamic banks are going to be stricter as unlike traditional banks they are going to take a much higher risk by partnering with the entrepreneur in his profits and losses. Mohammed bin Ali al Balushi, a chartered accountant professional who works with many SMEs, believes that Islamic banks can provide flexible and creative financing solutions to promote the growth of the SMEs. Overall, the introduction of Islamic financing is expected to make SME more responsible and professional in their approach towards the business and at the same time, it will provide them with a finance opportunity from a quarter that is not interested in just profiteering. This is going to improve the status of the SME sector and will lead to a higher percentage of healthy SMEs, diversification of the economy and generation of new job opportunities.
KEY DIFFERENCES BETWEEN ISLAMIC FINANCE AND TRADITIONAL BANKS ISLAMIC FINANCE Murabaha (sharing interests ) without having to pay interests The bank and the customer share risks Sharing in profit and loss Social responsibility
TRADITIONAL BANKS High interest rates
Based on values and ensuring the sources for generating the profit
The customer bears the full risk Loss born by the customer only Business finance without caring for the needs of the customer Based on uncertainty
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Don’t Ignore the Competition Strange enough many
entrepreneurs think that they are offering something so unique that there is no one else in the market offering something similar! The reality is, there is no business without a competitor.
COLUMN
Abdullah al Jufaili, General Manager, Fund for Development of Youth Projects (Sharakah)
I
know that you have so many creative business ideas in your mind, but if you want to transform those ideas into a profitable business, the first and hardest step that you will need to take is writing your business plan. I would not advise you to start a business without a written business plan. Let me try to simplify this by offering you 20 questions that have to be answered in any business plan regardless of type of activity or size of the business. 1 - Who are you? As obvious as it may sound, I have seen business plans where the entrepreneur have not mentioned any details about who they are and how they can be contacted. 2 - What are your skills, competencies and expertise? We want to understand a little bit more about your intellectual capital and how it adds value to the project. What is your educational background and what are your past experiences that are related to the project activity? 3 - Tell us about the project. In brief what is the idea and what services or products would you offer? Is that something unique in the market?
20 QUESTIONS YOU MUST ANSWER IN YOUR BUSINESS PLAN 4 - What are the products or services? Now tell us in more detail what are you offering to your potential clients? Describe the specifications of the product or the service. 5 - What is your target market? Your clients might be defined by a geographical area, age group or income level. It could also be a combination of all as well as other factors. It is important to clearly define who are you targeting to understand the size of the market and then determine how many products can you sell in a day, a week, a month or a year. 6 - Who are your competitors? Strange enough many entrepreneurs think that they are offering something so unique that there is no one else in the market offering something similar! The reality is, there is no business without a competitor. Get to know who they are specially those who have been in the market for a long time. Learn from their experience and the hurdles they face to maintain the business. 7 - What is so unique about your product or service? What is the added value that you offer to your clients? Could it be quality, speed of delivery or efficiency? What is it that will make your clients come back again and again?
8 - What are the raw materials that you need? This question is specific to manufacturers. You will need to clearly define the raw materials that you need, the quantity, where would you get it from and at what cost? Alternatively, for other businesses, you need to define the expertise that you need to offer the services. 9 - How many staff members do you have to hire and what is going to be their expertise? Depending on the type of business and volume of sales, you need to define the number of staff that you need to run the business. Are there specific skills that you are looking for? Can they be hired locally or would you need to find expatriates? How much will you pay them? 10 - What licenses do you need to have? All businesses have to be registered at the Ministry of Commerce & Industry as well as Chamber of Commerce & Industry. Some may also require Municipality license, environmental license or civil defense authorization for fire and safety purposes. Whatever the type of business, you are planning to establish, it is important to understand what licenses you need, where to obtain them and how long does it take to obtain. In the next issue, the author will provide the balance 10 questions. FOR THE NEXT GENERATION OF BUSINESS LEADERS
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Registration for the workshop is open
from 12 to 18 October. Those interested in registering, may contact 24768336 & 24767336.
WORKSHOP
BANKMUSCAT WORKSHOP TO SUPPORT SMES IN SALALAH
B
ankMuscat, the leading financial services provider in the Sultanate, is organising a workshop on entrepreneurship in Salalah on 20 October. Aimed at reaching 100 entrepreneurs in Dhofar region, the interactive workshop will be conducted by Amideast trainers focusing on strategies for securing business success through implementing operational and managerial best practices and overcoming challenges often encountered in managing business finance. The workshop will be delivered in Arabic by two Omani business consultants and entrepreneurs. Ilham Al Hamaid, Head - SME Credit and Marketing, BankMuscat, said: “The workshop theme ‘Financing SMEs: Challenges & Solutions’ fits the corporate ethos of BankMuscat, encouraging creativity and innovation among people, thereby contributing to national initiatives and economic development by facilitating an entrepreneurial environment in Oman. BankMuscat is a strong supporter of the government policy to encourage individual initiatives aimed at self-employment.” The workshop has been designed to focus on a variety of aspects relating to operational best practices in managing businesses, including the development of a business plan, managing business finances, and evaluating the potential for business growth. Sharifa Al Barami,
Entrepreneur Training Programs Manager, Business Consultant and Facilitator for Amideast/Oman’s Cisco Entrepreneur Institute, will make a presentation, drawing on her experiences as a business owner as well as her training expertise in conducting Cisco Entrepreneur Institute’s courses for a variety of prospective and seasoned entrepreneurs in Oman. Ahmed Kashob, CEO of Global Trust Investments Company, Capital Market Authority Board Member & Finance Management Consultant, will contribute his expertise in providing the tools needed to manage a result-oriented business rather than a goal oriented business. He will also summarise the most important aspects to understand in investments and financing. The workshop is designed to inspire and engage the participating entrepreneurs, providing them with relevant information that will address the challenges facing business owners today and that will identify the skills and capabilities necessary to overcome them. In addition
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to presentations, the workshop will feature open discussion and evaluation of a business case study. Establishing a business is the first stage of a long journey of continuous operational strategic planning. Research has shown that the majority of SMEs fail within the first three to five years of inception, and that these failures are almost always related to operational and/or managerial oversights. The workshop will shed light on the ingredients that are critical to SME success, and thereby empower the SME sector in the Sultanate. The workshop is the second such forum that BankMuscat and Amideast are conducting for SMEs in Oman. In April, workshop was conducted in Muscat entitled ‘Successful Entrepreneurship: A Global Perspective.’ Attended by approximately 50 entrepreneurs, the workshop generated lively discussion about strategies for SME growth in Oman, and was extremely well-received. “We are delighted to partner with BankMuscat in promoting entrepreneurship in the Sultanate,” said Sarah Jackson, Amideast /Oman Country Director. “With small businesses offering excellent opportunities for generating employment, encouraging innovation, and fueling economic growth, Amideast is very pleased to join BankMuscat in supporting SME development, and to offer entrepreneurship training opportunities through its partnership with Cisco Entrepreneur Institute.”
Expectations from the Youth It
is important that the youth should have interest in working and developing their skills based on organizational needs.
TOP SHOT
INVESTMENT EXPERT PAR EXCELLENCE ALI MOHAMMED JUMA, CO-FOUNDER AND CEO OF VISION INVESTMENT SERVICES CO. (SAOC), IS AN OMANI BUSINESSMAN WITH A VAST EXPERIENCE IN INVESTMENT MANAGEMENT. HE HAS BEEN A ROLE MODEL FOR THE YOUNG ENTREPRENEURS When we think of entrepreneurs who have made a name for themselves in a short span, Ali Mohammed Juma’s name come first. The successful businessman is the owner of a group of companies, specialized in financial services including asset management, stock trading, brokerage and insurance apart from forays into real estate services and facilities management in the GCC region as well as the international market. Ruwad’s Turki Al Balushi caught up Ali Mohammed Juma to track his success journey, understand his viewpoint on the business challenges and his advice to the young generation of entrepreneurs. “The majority of my time is spent at Vision Investment Services Co., one of the most active companies in local market, dealing in portfolio and investment funds management, and stocks. Furthermore, Vision Investment Services Co. owns strategic investments in several brokerage companies at Muscat Securities Market or other Gulf markets. In addition to that, we have other strategic investments in the Sultanate through Vision Insurance Co., specializing in insurance services, and in Kuwait with Kuwaiti Qatari Insurance Company as a partner”, said Ali. With financial markets world over in turmoil, his business is operating in
a challenging environment. “Global market and regional markets were affected by the financial crisis and its consequences. However, this is natural as all economic sectors irrespective of their location around the globe witness cycles of growth and depression. We are
optimistic and expect good prospects for the country given the ambitious state spending in growth oriented projects and programmes during the year. This would positively affect the market in general, the financial sectors and other sectors,” he stated. FOR THE NEXT GENERATION OF BUSINESS LEADERS
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Lack of Focussed Approach His Majesty has made great efforts over the last four decades to make Oman a modern nation. Today, the youth have to proceed patiently and objectively on the path of development, opened by His Majesty.
Ali considers the current period of the market as a period of decline of trading and initial public offerings. “People are worried due to the significant imbalance of the market. It is a sensitive period. However, we are optimistic that irrespective of the time, economy is going to recover. Our optimistic vision is based on internal and external inputs and indications. Internally, major companies listed in Muscat Securities Market will have their share of the development projects underway and the other planned projects in the 8th FiveYear Plan. Externally, market improvement depends on addressing the negative implications of the debt crisis in Europe and America. This has affected the confidence of investors and their perception of general economic conditions. We live in the age of information and knowledge and we need some kind of positive information to encourage investors to access and invest in money markets and get rid of their instant fears,” he said. The real estate sector in Oman is undergoing a tough phase. The shrinkage of large developments has impacted the small-to-medium companies that survive on providing various kinds of products and services to the large developers. It is not easy time for them. What’s Ali’s take on the sector’s future? “While talking of the real estate, we need to differentiate between the speculation and real investment. The speculation takes place when there is a surplus in liquidity in the country. The speculative activity goes up in asset classes such
as real estate and stocks. Prices go high. It all results in economic bubbles over different time periods. Having said that, the real investments in the Sultanate is positively promising as a result of the growth of population, youths and the increase of foreign manpower. In addition to these, there is a noticeable increased demand for offices, housing and SMEs in the country. I think a balance of demand and supply is taking place in the real estate market. It is empowering the investor with confidence in the absence of any indications of degenerations or major shift in lease values, especially in highend residential areas. The real estate sector shall witness relative growth as there would not be any negative implications in this sector,” he said. Commenting on the recent amendments by the Government for the employment of Omani nationals in the private sector, he said: “The development of human resources and unemployment problems are common issues for many countries. Some countries have resolved these issues through promotion of business development in a socially responsible manner. They are doing it by helping their citizens in establishing their own projects to develop new income streams for themselves and other people as well. The governments can play a role by supporting such projects. We need to commit to this goal to achieve economic development, which would empower many of our youth to increase their individual income and
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BRIEF BIO Ali Mohammed Juma is a Mathematics and Computing graduate and has completed several advanced courses in management and finance from leading European & American Business Schools. He is the Chairman of MJS Group of Companies (group companies in Trading, Real Estate and Hospitality), Vision Insurance Company SAOC and Al Osool Real Estate Company (ERA Oman).
solve their issues optimally instead of committing only to Omanization.” Ali stressed on the importance of educating the youth, developing their skills and providing them the right opportunity. “It is important that the youth have interest in work and developing their skills based on organizational needs. I believe in having good relations with employees, provide positive environment for them where relationships are open, transparent and marked with objectivity. I’m committed to meaningful and constructive dialogue with all employees to come out with the right decisions. His Majesty has made great efforts over the last four decades to make Oman a modern nation by developing Omani human resources and encouraging development in various fields. Today, the youth has to proceed patiently and objectively on the path of development, opened by His Majesty,” Ali concluded.
Vision We strive to make our brand one of the most important brands in the Sultanate, promising high quality and unique services at affordable rates in event management, marketing and design services.
SUCCESSFUL ENTREPRENEUR
UNLOCKING THE POWER OF MEDIA HASSAN AL SOBHI, THE FOUNDER OF MATCH MEDIA, TALKS ABOUT WHAT SETS HIS COMPANY APART FROM OTHERS IN THE HIGHLY COMPETITIVE MEDIA SERVICES INDUSTRY, IN A TALK WITH TURKI AL BALUSHI service that not only meets the needs of our customers but rather goes beyond their expectations. We also seek to build good relations between the company and the local and foreign organizations by showing commitment to meet their needs. We also aim to provide a customer experience that is highly effective in terms of money and time spent. We want to build an Omani company with presence in the international market. We are also focusing on building customer loyalty apart from constantly expanding our customer base. We strive to make our brand one of the most important brands in the Sultanate, promising high quality and unique services at affordable rates in event management, marketing and design services.
What are the major activities of Match Media? We provide a number of media services to our customers such as event management, marketing, design and other support services. Recently, we organized a poetry festival, the first national poetry festival. We are also doing the marketing for Injazat Oman Exhibition to be held at Oman International Exhibition Center on the occasion of 41st National Day celebrations. We are also launching Muscat Tourist Guide in October this year. It is a comprehensive travel guide meant for the visitors to the city
What made you enter the highly crowded media services sector with so many SMEs jostling for a pie of the market?
and the residents also. It includes the tourist attractions and other support services in Muscat such as hotels, restaurants, hospitals, health centres, private universities and other relevant information about Muscat. Besides organizing events, Match Media also has plans to conduct marketing campaigns for a number of organizations.
What is the vision and mission of the company? We seek to provide our customers with high quality service by Omani staff. We rely on the creativity in our work and look forward to render unique and exclusive
No one can deny that the competition has become tougher and tougher especially in the last few years. A friend of mine jokingly told me that the number of media companies will soon surpass the number of supermarkets and foodstuff outlets in the country. I think the companies that have carefully studied business plans in place will survive the competition. I do hope that market players focus more on the quality of services rather than play the price card to beat competition.
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Strong Foundations We have managed to build strong relations with
our customers and as a result, our customer base is growing every day. The beginning may have been the toughest phase for us but now things have become a little bit easier.
Unfortunately, the presence of a large number of media companies has created unhealthy environment. As a company, we have our own values which we don’t sacrifice to get the business. We try to enhance our presence in the market by offering new and creative ideas and ensuring that the quality rendered to the customers is of high quality and cost effective at the same time.
How did you finance the company in the beginning? My partner Mohammed bin Sulaiman al Kindi and I relied on self-funding instead of taking the help of external sources for finance. Within a short span of time, we managed to achieve good revenues that helped us to expand our services and staff.
How do you see the future of the company in the next couple of years? Despite the tough competition and lack of finance resources, we have managed to build a good brand in the market thanks to the high quality services and aggressive marketing initiatives. We have also managed to build strong relations with our customers and as a result, our customer base is growing every day. The beginning may have been the toughest phase for us but now things have become a little bit easier especially after we have successfully managed to organize and market a number of events and exhibitions.
What are the challenges you are facing in the market? Do you anticipate the coming years to be more challenging? When we thought of establishing Match Media, we knew that our path to success
will not be adorned with flowers but rather with thorns. The challenge for us in the beginning was to find right kind of material for our work and employees with diversified expertise. We tried to convince our customers about our ideas which were unique and exclusive. These innovative concepts distinguished us from our competitors. We know that selling ideas is not an easy thing as fast foods or other commodities.
Did you face any administrative challenges before starting your media activities? We did not face such challenges but I hope that the business of media companies should be more organized.
Do you think that the local market can provide enough opportunities that could contribute to the growth of your organization? Many projects in the Sultanate are still in the pipeline. This will create a large number of business opportunities for media companies. Moreover, there is a change in the perception among the private companies about the event management and marketing. Some regional events are organized by individuals who lack the experience in this area. They should seek the help of the specialized companies because the damage as a result of the improper management may be beyond repair and leave a lasting negative impression about the industry and the country.
Do you think event management business promises a good return on the investment for the entrepreneurs? What has been your experience on this front? We have made good returns on our
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investments and most of the profit has been ploughed back in the business to expand the scope of our work and increase the team strength. As for operational expenses, I believe that if you want to render high quality services, you have to spend more than others because you will need highly qualified and skilled staff to do the job in a way that goes beyond your customers’ expectations. If you want to have such skilled staff in your organization, you have to provide a good remuneration to them.
How many employees are working in your company? Do you also rely on temporary staff? Besides the partners, we have eight permanent employees. All of them are Omanis. We have partners who provide us with assistance when the need arises. We have partnerships with a number of companies in different fields. We believe that Omanis have good skills that are required in our line of business. We have managed to achieve our goals and move ahead on the growth path due to their dedication and hard work.
What are the major projects that you plan to do in the future? We always have some activity or the other to work on. We have some event management and marketing projects for a number of private and public organizations. We are organizing the Media and Advertisements Conference which will be held during 18-20 October this year, in collaboration with Al Nimr International. This conference will be held on the sidelines of the 3rd Media and Advertisement Exhibition. We are also planning for a number of events for next year.
COLUMN
TRACKING THE BUSINESS HEALTH BREAKEVEN ANALYSIS IS A POWERFUL TOOL WHICH ALLOWS THE ENTREPRENEUR TO DETERMINE THE HEALTH OF THE BUSINESS AND ITS COST STRUCTURE AND ALSO THE REASONABLENESS OF ANY PROJECTIONS
William R. Crew, General Manager, GroFin
O
Table 2: Profit & Loss
ne of the best financial analysis tools for SME owners and entrepreneurs is breakeven analysis. Not only is the breakeven sales level looked at by lenders in Oman and around the world, but the frequent use of this tool is a characteristic of many successful entrepreneurs. Breakeven analysis means that we identify the level of sales necessary to pay all of our fixed and variable costs, and have a net profit = zero. That is, at what level of sales is there neither a profit nor a loss? When completing the breakeven analysis for our SME, our first step is to identify the fixed versus variable costs.
Six Months to 30 June 2011
Six Months
Sales
65,000.000
Total Cost of Goods Sold Gross Profit
38,000.000
Office Supplies
500.000
Accounting
300.000
Bank Charges Miscellaneous Expenses
54.000 1,000.000
Office Expenses
300.000
Office Maintenance
550.000
Marketing Expenses
5,106.000
Rent
9,000.000
Salaries Insurance
It’s important to keep in mind that Fixed Costs + Variable Costs = Total Costs. As such, all costs must be accounted for. Let’s look at a basic example and first determine what are the fixed and variable costs from this six month income statement:
27,000.00
Delivery Expenses Interest Expenses Total Expenses Net Profit
10,000.000 190.000 1,000.000 6,000.000 34,000.000 4,000.000
Table 1: Fixed v. Variable Costs Definition
Fixed Costs
Variable Costs
Costs which remain constant
Costs which change directly with sales.
regardless of the sales level. Example
Rent. Interest. Salaries. Accounting
Cost of goods sold. Production labour.
fees. Most marketing costs.
Delivery costs. Sales commissions.
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Table 3: Fixed v. Variable Costs Fixed Costs
Variable Costs
Salaries
10000
Cost of Goods Sold
27000
Rent
9000
Misc. Expense
1000
Interest
6000
Delivery Expense
1000
Office Supplies
500
Accounting
300
Bank Charges
54
Office Expense
300
Marketing
5106
Repair
550
Insurance
190
Total
32000
29000
Total Costs = 61,000 Our goal is to determine how much is available to pay the fixed costs after we pay the variable costs. We can look at historical or projected figures. Looking at the historical six month figures above, we know that: 30 June
% of Sales
Sales
65000
100.00%
Variable Costs
29000
44.6%
Fixed Costs
32000
55.4%
We can now determine how much in sales we need to pay fixed costs like rent and salaries. Just to pay the rent, we will require (9,000/.554) 16,245 in sales over this six month period, or 2,707/month. To pay rent and salaries will require (9,000 + 10,000)/.554 = 34,296, or 5,716/ month just to pay rent and salaries. Again we can check the math: Breakeven Sales
34,296
Variable Costs (44.6%) Available to Pay Fixed Costs
That is, for every Rial in sales, 44.6% goes to pay variable costs and 55.4% is available to pay fixed costs. With fixed costs of 32,000, then we need 32,0000/.554 = 57,761 to breakeven. The following is a check of the math: Breakeven Sales Variable Costs (44.6%) Available to Pay Fixed Costs Fixed Costs Total Loss/Profit
57,761 (25,761) 32,000 (32,000) -0-
Rent + Salaries
(15,296) 19,000 (19,000)
Total Loss/Profit
-0-
Breakeven analysis is a powerful tool which allows the entrepreneur to determine the health of the business and its cost structure and also the reasonableness of any projections. It allows him/her to analyze the impact of prices upon profitability. For instance in the above example if prices fall due to competition, but costs remain the same, then the breakeven will rise a great deal. Hence, this tool allows the SME to determine how price competitive the business is or can be.
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Termination If an employee is under an initial fixed-term contract, his employment can be terminated by the employer giving him notice that his contract will not be renewed and that he must leave on or before the final date of the term.
LABOUR LAW
FIVE MOST COMMON PITFALLS EMPLOYERS NEED TO UNDERSTAND THE OMANI LABOUR LAW TO SAFEGUARD THEIR INTERESTS WHILE DEALING WITH EMPLOYEES.
David Augustus Ball, Head of Litigation and Arbitration, SASLO Said Al Shahry & Partners and Lecturer at SLTC (SASLO Legal Training Center)
A
s a legal consultant and lecturer, I often hear from employers that the Omani Labor Law (RD 35/2003 as amended) is totally slanted in favor of the worker. In my experience, though, employers overlook certain basic concepts in the Labor Law. The five most common pitfalls in the Labor Law from the employer’s standpoint are the following:
The Probationary Period Article 24 allows an employer to subject his worker to a probationary period of up to three months. During this time, the employee or the employer have the opportunity to assess one another and, if things do not fit well, to part ways by one party giving the other seven days’ notice. However, it is essential for employers to remember that the probationary period must be specifically mentioned in the contract. If the contract is silent on a probationary period, the employee is deemed a permanent worker from the first day of his employment. Furthermore, though the law clearly states that an employer does not need to show any reason to terminate an employee during the probationary period, the courts are fairly uniform in requiring a showing of legal cause for termination.
Documenting Poor Performance or Misconduct Many employers operate under the misapprehension that if an employee receives a poor performance rating, or breaches some internal disciplinary rule (e.g., by arriving late, committing insubordination, misusing company property), the employer may simply proceed to issue a notice of termination. This is not correct. First, any criticism of the employee’s performance or breach of a rule must give rise to an impartial investigation. The employee must be presented with the criticism or accusation and must be given a chance to explain or justify his actions. Second, the employee must be given one or two chances to remedy his poor performance or breach of regulations. If the employer fails to observe any of these steps – which, by the way, are nowhere found in the Labor Law – any attempt to terminate the employee on the basis of such poor performance or breach will be deemed unfair dismissal.
A Fixed-Term Contract is Not Always Fixed If an employee is under an initial fixedterm contract, his employment can be terminated by the employer giving him notice that his contract will not be renewed and that he must leave on or FOR THE NEXT GENERATION OF BUSINESS LEADERS
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Follow the Procedure Employers sometimes overreact when employees commit offenses on the workplace and terminate them on the spot. This is understandable, but it carries with it the risk that the employer will be sued for unfair dismissal.
before the final date of the term. However, if the employee remains in the company’s employment for even one day beyond the expiration of the initial term, Article 36 makes clear that the worker is deemed to be employed on an unlimited contract. Moreover, if an employee completes his first fixed-term contract and signs a second fixed-term contract, ministerial practice and the courts are unanimous in the view that the relationship has been converted from fixed-term to unlimited. In the latter case, the only way for an employer to ensure that the employee retains a fixed-term contract is to change both his position and scope of responsibilities and his salary in the new contract. However, the employer must ensure that both changes are substantial rather than cosmetic.
Crimes or Offenses on the Workplace Employers sometimes overreact when employees commit offenses on the workplace and terminate them on the spot. This is understandable, but it carries with it the risk that the employer will be sued for unfair dismissal. Employers can avoid this risk because the Labor Law sets out a clear path for an employer to respond to such a problem. If an employee commits some misdeed that amounts to a criminal offense under the Omani Penal Law (RD 7/74 as amended) or another statute, Article 32 of the Labor Law allows the employer to suspend the employee for up to three months to allow the Public Prosecutor to investigate the charges. During this period, the employee’s entire gross salary can be withheld for the first month, but half of his gross salary must be paid to him during the second and third months. Note, however, that if the
Moreover, if an employee completes his first fixedterm contract and signs a second fixed-term contract, ministerial practice and the courts are unanimous in the view that the relationship has been converted from fixedterm to unlimited. In the latter case, the only way for an employer to ensure that the employee retains a fixedterm contract is to change both his position and scope of responsibilities and his salary in the new contract employee is not prosecuted at the end of three months, the employer must take the employee back and restore to him the salaries that were withheld.
Always give a cause for termination Contrary to what one might conclude from the wording of Article 37, when an employer terminates a worker, he must state a cause justifying the termination. Moreover, this cause must be legally sufficient. Some causes – such as redundancy or restructuring – are not considered legal, although a detailed study of the individual facts of each case must be made. If the cause is poor job performance, the courts seem to look for some evidence of a substantial financial loss caused by the person’s deficient work. If legal cause is absent or insufficient, the termination will be deemed unfair, and the employee will be eligible, under Article 106, to claim compensation ranging from three to twelve months’ gross salary. Whilst it is true that the goal of the statute was to guarantee workers in the Sultanate certain rights and to protect them against exploitation, employers can, with careful planning, take steps to safeguard their own interests as well.
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Contact us Please email your queries on entrepreneurship to akshay@umsoman.com and they will be answered by FATHI AL BALUSHI and KUMAIL SAID of Ernst & Young
ASK THE EXPERT
NEW BUSINESS IDEAS – POINTS TO REMEMBER QUESTION: As an entrepreneur who is drafting his business plan and cash flow projections, are there any tools freely available to help me calculate loan installments? ANSWER BY FATHI AL BALUSHI: The capital required to start any project will be part of a business plan preparation and cash flow projections. Based on cash flow projections, cash flow profile and target capital structure, loan amount will be determined. To calculate the loan installments, a set of assumptions regarding interest rate, loan maturity and payment profile needs to be assumed. The easiest and freely available tool is PMT function within an excel sheet. Example 1: Calculating loan installments using PMT function within an excel sheet: Excel function = PMT (rate, nper, pv, fv). rate: is the interest rate for the loan. nper: is the total number of payments for the loan.
11 2 2 3 3 4 4
pv: is the present value, or the total amount that a series of future payments is worth now; also known as the principal. fv: is the future value, or a cash balance you want to attain after the last payment is made. QUESTION: Likewise, what is the best way to create realistic projections? It may be easy for a product based business but in the service industry how can we create the projections? ANSWER BY FATHI AL BALUSHI: In order to create realistic projection, a detailed market research should be carried out by the entrepreneur. The purpose of the market research will be to test the feasibility of his business idea and undertake a market assessment of the proposed business model. One of key results of the market research will be the key revenue and cost drivers, and supply & demand analysis for the proposed business idea. Based on the market study, a reasonable financial projection can be created.
A
B
Data
Description
8%
Annual Interest Rate
10
No. of Months of payments
10,000
Amount of loan
Formula
Description (Result)
=PMT(A2/12, A3, A4)
Monthly payment for a loan with the above terms (-1,037,03)
=PMT(A2/12, A3, A4, 0, 1)
Monthly payment for a loan with the above terms, except payments are due at the beginning of the period (-1,030,16)
To prepare the financial projection, a set of assumptions need to be assumed for revenue, cost, capital expenditure and capital structure. Those assumptions will not be different for a service industry. However, in product bases business, the structure of the business will be more mature and preparing a financial projection could be more realistic compared to service based industry where individual behaviors can drive the business direction. Example 2: Financial projection for a food distribution company. Business Model/idea: An entrepreneur is planning to setup a food distribution company. The primary business of the proposed company is to deliver meal to the work force in Oman during the lunch break. For simplicity, the entrepreneur is assumed to focus on Muscat Governorate to start with. And within Muscat Governorate, the focus is only on expatriate workforce working in Ruwi and Muttrah area. Market study: Analysis of the size of workforce taking lunch break in Oman within Ruwi and Muttrah area in term of following:•
Total number of workforce (this will determine the market size)
•
How many of them have lunch break, where do they live, how they have it, etc. (primary market study needs to
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Inability to Raise Adequate FundsThis might be a very common
challenge facing many entrepreneurs in Oman. One way to address this issue is to develop your project in phases so that your funds are sufficient.
ANSWER BY FATHI AL BALUSHI: The entrepreneur should evaluate the reasons for banks refusing to lend due to the credibility issue. The reasons could be: •
Lack of genuine business plan
•
Is this due to unrealistic financial projections where some loan terms cannot be met
•
Past history of financial default
•
Or project sponsor reaching maximum credit limit capacity
The entrepreneur should evaluate each reason and try to overcome them either by revising financial projections, realistic business plan or new equity injection. QUESTION: If the entrepreneur cannot provide the minimum financial contribution asked by financial institutions, what else can they do? be done where you can circulate a questionnaire to a random sample of the expatriate workforce) After the market study, the entrepreneur should be ready to answer the following questions: Revenue drivers:
you will require to arrive at the total fuel cost) •
Administrative expense
Capital expenditure: •
Number of vans for delivery (you may assume that for 100 deliveries you may need one van)
•
Telecommunication system Others
•
Size of market (number of workers who may need this service)
•
•
Delivery charge per meal
•
Number of deliveries per day
With above assumptions, a detailed financial model can be built where the entrepreneur can test his business idea based on different scenarios and sensitivity along with business assumptions.
Cost drivers: •
Number of drivers required
•
Fuel cost (you can assume that a van can cover around 200km per day and then multiply the figure to understand how many litres of fuel
QUESTION: If financial institutions/ banks refuse to lend due to ‘credibility’, who or what else can be done to avoid business closure?
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ANSWER BY FATHI AL BALUSHI: As a general practice, the minimum financial contribution by the entrepreneur is determined by the target capital structure of the project. The target capital structure will be determined by benchmark analysis of the industry. The minimum financial contribution indicates the entrepreneur’s commitment to the project and amount of the risk shared by the entrepreneur. In case the entrepreneur is not able to meet the minimum equity contribution by himself, raising equity from other stakeholder/ entrepreneur is one of the main options available to the entrepreneur. ANSWER BY KUMAIL SAID: This might be a very common challenge facing
Big Idea? For your business idea to succeed, it doesn’t have to be new. What you should keep in mind is - What do you have that will make you succeed (competitive advantage)?
ASK THE EXPERT
many entrepreneurs in Oman. One way to address this issue is to develop your project in phases so that your funds are sufficient. Another way is raising equity/capital for which there are a growing number of sources such as private equity, business development houses and start-up funding entities(eg: Grofin-Intilaaqah and The Fund for Development of Youth Projects). QUESTION: What to keep in mind when thinking of a new business idea? ANSWER BY FATHI AL BALUSHI: Consider the following: •
Innovation of the idea. Is this concept available in the market?
•
Barriers of entry
•
Laws and regulation
•
Competition
•
Human resources
•
Target customers
•
Market positioning
•
Funding requirements
•
Feasibility of the idea (the idea is great but it is not feasible!)
ANSWER BY KUMAIL SAID: For your business idea to succeed, it doesn’t have to be new. What you should keep in mind is - What do you have that will make you succeed (competitive advantage)? How long can you maintain your competitiveness (sustainability of your competitiveness)? QUESTION: How to get proper marketing data for the purpose of developing a marketing strategy?
ANSWER BY FATHI AL BALUSHI: They are many sources of data which can used to prepare the marketing strategy. However, the data required to prepare the marketing strategy will be based on the industry. Below are some sources of data: •
Industry reports published by the industry experts and research agencies
•
Professional firms with access to decision makers
•
Statistics published by respective governments
•
Word Bank publications
•
International Monetary Fund publications
•
Primary market survey conducted by the entrepreneur for purpose of marketing strategy
•
Demand and supply projection about industry, published by industry analysts
the business, a business location can be selected. ANSWER BY KUMAIL SAID: The importance of your business location can be attributed to one or more of the following factors•
Proximity to customers: Service based businesses are very particular about their location in order to be close to their customers. Convenient stores and fuel pumps are a good fit for this category.
•
Branding: Your location can also determine how you want to be seen. If you are a premium service/ product vendor, then selecting “posh” areas maybe your best option. High end restaurants and private bankers are good examples.
•
Proximity to talent: If you are an IT company and assume that you can be located anywhere then think again. Nearly all of the largest technology companies have their headquarters or offices near the prominent universities. For instance, RIM is located next to the University of Waterloo where the founders of the company went for their studies and the university continues to provide the company with its brightest talent.
•
Proximity to suppliers: This one is mainly applicable to capital intensive industries. If you are considering setting up an aluminium excursion mill then it would be wise to be located adjacent to a smelter.
QUESTION: What is the basis of selecting a suitable business location? ANSWER BY FATHI AL BALUSHI: To determine a suitable business location, the entrepreneur is required to consider several factors such as: •
Surrounding land uses
•
Access
•
Topography
•
Visibility and proximity to demand generators
•
Transportation
•
Infrastructure
Along these lines, you might also want to consider accessibility and visibility.
Based on the above factors and nature of FOR THE NEXT GENERATION OF BUSINESS LEADERS
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Barack Obama to a group of entrepreneurs: “The big companies generally get most of the attention in our economy… but it is small businesses like yours that help drive America’s economic growth.”
VIEWPOINT
ARE ENTREPRENEURS “BORN” ENTREPRENEURS?
Kakul Agha, Assistant Head of Department, Department of Postgraduate Studies and Research, Middle East College of Information Technology (MECIT)
One might describe an entrepreneur as an independent thinker, an innovator, or perhaps a risk taker. The entrepreneurial employees are passionate enough to work out of their garages if that’s what it takes to get the company up and running. Consider Bill Gates, who was so enthusiastic about computers that he dropped out of Harvard University to pursue his vision. It is rarely mentioned that most entrepreneurs are an exception rather than a norm and that their success is a result of carefully executing an appropriate plan to commercialize what inherently is a solid business idea. Some myths still surround our understanding of entrepreneurs. Entrepreneurs are born, not made! This myth is based on the mistaken belief that some people are genetically predisposed to be entrepreneurs. The consensus of many hundreds of studies on the psychological and sociological makeup of entrepreneurs is that the latter are not genetically different from other people. This evidence can be interpreted as meaning no one is “born” to be an entrepreneur and that everyone has the potential to become one. In his autobiography, the Irish entrepreneur Billy Cullen (2003) narrated the story how as an 8-year old boy he demonstrated sharp entrepreneurial skills. In a poverty stricken area of Dublin, young Billy would buy wooden crates of apples for a shilling and then sell the apples on a
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Saturday afternoon to local people who would come to watch their people play football. This provided Billy a healthy profit, if he could sell all the apples. But his entrepreneurial skills didn’t stop here. He would then take the wooden apple boxes to the football ground and sell them to people at the back of the crowds so that they can stand on the box for a better view, and finally he would collect the boxes at the end of the match and sell them in bundles for firewood. Kanaksi Gokaldas Khimji who is one of the oldest and well established entrepreneurs of the Sultanate, remembers his olden days when he joined his father’s business as a hardworking employee, and he was placed to discharge duties in the warehouse. He mentions that he learnt the tricks of the trade from his father, who has been his university. He stresses that in his family after completion of the basic education, the children of his home are first assigned with the business tasks that gradually inculcates in them the commercial acumen as well as hands on experience. Hence, a good blend of practice and understanding of ‘what and how to do’ enables a commoner too, to develop into an entrepreneur and grow into a flourishing business. Last but not the least, it is important to mention that Omani entrepreneurs substantially contribute to the Sultanate’s economy.