Country: Iran
Geographical Location and the Physical Environment
The Islamic Republic of Iran is situated in the Middle East. It covers 1, 48,195 km2. Iraq shares its border with Iran on a stretch of 1 458 Km. Iran shares its shortest border with Armenia. On the Armenian side, Iran shares a stretch of only 22 kilometers. The country is endowed with three water bodies, which it shares with other states too. These water bodies are the Caspian Sea, the Persian Gulf, and the Oman Gulf. The country is also endowed with many mountains and hills (Afary, 2021). The Zagros Mountains are the major mountain thread sprawling its western stretch. These mountains have peaks of up to 3000 meters above sea level. The highest peak is on Mt. Damavand. It is elevated at 18,403 feet above sea level. It is also known to be Asias highest volcanic mountain.
Iran hosts two huge salt deserts situated right at its central part. The salty desserts, the Dasht-e Lutandthe Dasht-e Kavir, are found in the Central Plateau towards the eastern part. There is an important wetland that hosts birds in winter, called the Ramsar Convention site. It is located between Rud-e-Gaz and Rud-e-Hara River deltas. The largest water body in Iran is called Lake Umia. It once covered a whopping 5 200 Km2 (Afary, 2021). The demand for water on the lake and the desert conditions have reduced the water by 80%. Recent rains in 2018 and 2019 have increased the lakes water level to significant levels at 3000 Km2.
Economic environment
The Iranian business model is different from the western model because Iranians prefer to trade with familiar people. Therefore, they make friends with such people before engaging in business with them. Thus, investors need to build strong relations with potential partners before pursuing business in Iran. You establish a relationship by inviting a friend or a partner in business to share a meal. This provides a chance for people to interact and get to know each other better. The other option is to become a member of a trading group.
The culture of business in Iran is that it is determined by senior management. Responsibility is rarely delegated to lower cadre workers. The senior management consults widely before reaching any decisions for the business to continue. The implications of such a bureaucratic red tape are rather obvious. The lines between business, personal, and community are rather vague (Coville, 2020). Family members are commonly invited to take part in the decision-making process in business. Iranians collectivist lifestyle is obvious in business, but one must acknowledge it as long as they operate within Iran. That part of business reality can be a real barrier to business pursuit if it is not carefully handled.
Local Currency/US Exchange Rate
Several foreign exchange regimes have controlled the country over time. The current arrangement is that the central banks official rate for importing goods is regarded as essential. These are mostly medicine and food. The open market rate is way higher than the central bank allotted rates. There is another rate: NIMA meant for the importation of non-essential commodities. There, exporters must redirect their export revenues into the Iranian economy to anchor the countrys currency needs, especially the needs of importers of non-essential commodities through the NIMA program. The supply and demand determine the NIMA rates. The prevailing forex exchange rates regime was established in 2018. The development was born of the devaluation of the Iranian rial. The regime remains in flux. Therefore, it will not be surprising if there is yet another transformation soon (Khatami, Salimi & Massihi, 2020). The need for businesses to follow...
…activity. Families own most businesses. Even
government officials operate within
friendship and family networks. Once a friend or relative has helped you out on government issues, you should also prepare to return the kindness someday. Establishing good relations with your Iranian counterpart is critical to not only your ventures but business-wise too (Neil,2016). It should also be noted that Iranian are astute as they come in business matters. They relish bargaining and haggling, so they get their way.
Making decisions in Iran is relatively slow. You are likely to meet fewer senior officials or senior family members at the onset. However, when they decide that you can be trusted, you will soon meet the senior lot.
Which US companies have invested in this country in recent years?
Following the renewal of strong us sanctions on Iran, on November 5, 2018, the US revoked foreign subsidiary authorizations that gave US companies leeway to deal with Iran in some business transactions (Iran watch, 2020). Therefore, currently, there are no American-owned businesses in Iran.
Entry Methods
There are several ways one can enter business in Iran, i.e., by buying a subsidiary or establishing one, opening a branch, starting and incorporating a business outfit with a local, or even signing a sale and distribution agreement with a local person or company. Although you can set up a direct investment, you are well-advised to use a local distributor at the onset. Remember, trust is everything. You need time and strategy to build it. Use person-to-person due diligence to find a good partner you can start with. Many companies use the so-called Dubai model to use local companies in the UAE to link with distribution companies and networks (Spivack, 2016). A lot of foreign companies have also used the technique using another model referred to as Turkish. It incorporates partners in…
