The fundamentals of doing business successfully in Kuwait – offering a good product or service – are no different than anywhere else. However there is a much greater emphasis on price and Kuwaitis are extremely hard bargainers.
When the Bedouin ancestors of the modern Kuwaitis settled in the area in the early 18th century they adapted their nomadic way of life to include sea-faring, fishing and pearling.
At that time one of the main international trading links between India and Europe was the sea-route through the Arabian Gulf which joined the overland caravan routes to the Eastern Mediterranean.
The new settlement became increasingly active in this trade and eventually the ruling elite in Kuwait consisted of highly mobile merchants who controlled camel trains and fleets of ships.
Following the Bedouin tradition, the first Al-Sabah amirs (leaders) were elected by the merchants to administer and defend the town. Later, once the Sabah family had entrenched itself politically, it chose one of its own members as the Amir provided he could obtain a pledge of allegiance from the other merchant families.
According to the Kuwaiti historian Al-Rushaid, real authority rested with the merchants and the primary duty of the Amir was to protect ‘the rights of the merchants against the greed of foreigners’.
The Amirs were certainly successful in doing so. Due to its stable administration and geographical position, early Kuwait was able to develop industries based on trading, transport by land and sea, shipbuilding, and related activities.
The country became a centre for caravans crossing from south-eastern Arabia to the Mediterranean. Kuwaiti merchants also handled most of the sea-trade that passed through Kuwait, as well as much of the trade that went through other Gulf ports. Kuwait merchant ships also sailed the Indian Ocean between East Africa and the Indian subcontinent.
Eventually these families became trading dynasties with networks that spanned the Indian Ocean and the Middle East. However they remained centred on Kuwait where they relied on the Amir to provide favourable conditions for their commercial activities.
The dominance of the merchant class only began to weaken in the 1950s when the oil wealth, which was controlled by the Amir, started to flow.
However the trading ethos remains deeply embedded in the Kuwait character, and today’s Kuwaiti business men and women have well-earned reputations for mercantile astuteness and hard bargaining, which the foreign entrepreneur ignores at his peril.
This narrow trading mentality means that one of the first questions you will be asked when you are making a pitch in Kuwait will be about prices. Indeed you may be asked about pricing at the start of discussions, even before you have explained your product or service fully.
This early emphasis on pricing is a tactic designed to pare prices down long before the final bargaining begins.
Of course, you have to state your prices when asked. If you don’t, discussions will probably end there and then. The problem is, once you have announced your price, you will be asked about discounts at every stage of the game thereafter.
To start giving discounts early could be fatal to getting a reasonable return on your efforts, because if you agree discounts before the final decision stage is reached, each new price will become the starting point for a further round of price negotiations.
So how do you deal with repeated requests for discounts?
The trick is to indicate early on that a discount will be available but refuse to quantify it until it becomes absolutely necessary … until you feel that the final decision-maker is comfortable with all the other aspects of your deal.
Another thing, you must decide early on the price you wish to achieve for your product or service. You then pitch your ‘first’ price between 30 and 50 percent higher than that price in order to leave plenty of room for substantial discounts.
Even though Kuwaiti businessmen and women understand that the lowest price does not always represent the best value for money, they do insist on substantial discounts.
This is because ‘getting the best price’ is not just about saving money … it’s about status in the local business community; hence the determination to reduce prices as far as possible.
Negotiating a contract with seasoned Kuwaiti entrepreneurs is not for the faint-hearted.