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Family Businesses & The Evolving KSA Market


Family businesses have long been the backbone of the Saudi Arabian economy, accounting for an estimated 63% of all businesses in the Kingdom. However, with the Kingdom's economy undergoing a major transformation in recent years — driven by Vision 2030 and Saudi Arabia's National Transformation Program — the dynamics of the family business model are changing.

As the Saudi market evolves, family businesses need to adapt their strategies to continue to flourish and thrive. This means understanding the new opportunities and challenges that exist and leveraging them to their advantage. There may be some bumps along the way, but with the right approach family businesses will be well-positioned to capitalise on the Kingdom's evolving landscape.


The Saudi Market is Entering a New Phase

The Saudi economy is currently in a period of transition as the government implements its ambitious reform agenda under Vision 2030. The goal of this vision is to reduce Saudi Arabia's dependence on oil and transform the Kingdom into a leading global investment destination. In order to achieve this, significant changes are taking place in various sectors of the economy, extending from energy and tourism to education and healthcare.

These reforms are opening up new opportunities for businesses of all sizes, including family businesses. However, they are also creating new challenges that need to be addressed. For example, the privatisation of state-owned companies and an increase in foreign investment are likely to lead to more competition in the marketplace. This year alone, the nation has recorded a 9.9% year-on-year increase in foreign direct investment (FDI).


The Saudi commercial environment is also becoming more regulated, bringing it in line with international standards. Just this June, the Saudi Cabinet approved a new Companies Law, which aims to regulate all provisions related to commercial enterprises of all kinds. To address local employment figures, the government has also taken steps to encourage the private sector to employ more Saudi nationals, reducing the nation's reliance on foreign labour.

Apart from an economic transformation, Saudi is also undergoing a digital transformation. This is being driven by the Saudi government's commitment to becoming a leading digital economy and hub of technical innovation by 2030. As part of this, the government has invested over $6.4 billion in new technologies and future tech such as 5G, cloud computing, artificial intelligence, and the Internet of Things (IoT).

To survive and prosper in this new era, family businesses need to be adaptable and agile, with a clear understanding of the changes taking place in the Saudi market. They must also have a vision for how they can best take advantage of these changes to grow and succeed.

What Does This Mean for Family Businesses?

The changes taking place in Saudi Arabia present both opportunities and challenges for family businesses. On the one hand, the privatisation of state-owned companies and the increase in foreign investment present a more level playing field for private businesses. This is especially true for smaller family businesses that may have found it difficult to compete with larger, better-resourced companies in the past.


The reforms are also creating new prospects in sectors such as healthcare, education, and tourism. The government's focus on developing a strong digital economy is also likely to create new business opportunities in the technology sector. To leverage these openings, family businesses may need to rethink their routine practices and re-evaluate their structure, strategy, and internal processes. This may require a particular focus on their governance and succession planning to ensure that they are equipped to deal with the trials of a more complex and competitive business environment.

Family businesses may need to consider adopting a more formal structure, with clear roles and responsibilities for family members. This will help their leaders to make quick and effective decisions in a rapidly changing ecosystem. A formal structure will also make it easier to attract and retain the best talent, both within and outside the family.


Family businesses need to have a clear understanding of the new regulations that are being introduced and ensure that they are compliant. They should also consider investing in new technologies to stay ahead of the competition and create more efficient, effective operations. This might include investing in cloud-based systems, digital marketing, and data analytics.


Family businesses will always form a central pillar of the Saudi economy. However, they need to be prepared to adapt to a new operating environment in the years ahead. Those that are able to embrace change and seize the new opportunities that are emerging are likely to be the most successful.

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