Introduction
FBT Avocats was founded in 1993 based in Switzerland, Geneva. It is one of the largest law firms in Switzerland which comprises of lawyers and tax advisers. They are specialised in 5 teams: Banking and Finance, Tax, Corporate and commercial, litigation & arbitration and lastly, private clients.
FBT Avocats is currently operating in Paris and Geneva. Their revenue has always been stable and successful. In fact, their balance sheet and cashflow are constantly growing. Such meaning that their financial position is advantageous for the firm. However, FBT only operate in Europe, therefore if they operated in a new country or new continent, their profitability would increase at a higher rate. Therefore, considering to operate somewhere else could be beneficial for the law firm.
Consequently, FBT may stay at the position they are at, without struggling financially, or they may expand and see whether their chance of a significant profit increase happens. Surely, expanding may have many downsides to it such as failure of success or loss of clients, but in another way, it may increase.
Thus, this report will focus upon whether FBT avocats should expand in Dubai for an increase of profit due to new market representation or no.
Procedure/method
Primary research was done by interviewing Mr Tsimaratos and Mr X, to whom I have asked detailed question with regards to their current financial position, whether they were looking at expanding in another country and what would be their strategy if they would. In addition, some financial information were given, however limited due to being a firm which shares few financial data. With such, I will be able to calculate profitability and liquidity ratios such as the gross profit margin and the net profit margin as I they will share their profit and loss account.
Secondary research was made by FBT’s website which allowed me to identify some information from their websites and others in regards to the numerous law firms and competition that could perhaps occur if they are operating broader. Lastly, the use of statistics data and content from the finance and accounts unit allowed me to get financial information
Main Results and findings
Figure 1
Ansoff Matrix
Existing Products New Products
Existing Market Market Penetration Product Development
New Market Market Development Diversification
Ansoff Matrix is one the most important tool needed for this investigation. If FBT expand their business in Dubai, they would be categorised as Market development as they will introduce their business to new clients.
Developing an existing firm in a new country for new clients will allow the business to gain more profit as they will operate in various countries and have new clients. Additionally, the business’s name will be more recognisable.
However, there are many risk to take in consideration such as competitors. Dubai, being a city well known for establishing businesses without any tax fees, organizations are challenged to compete with other firms. Competition between firms may exist although many clients would rely upon FBT, as there is a significant percentage of French and Swiss community currently living in Dubai.
Figure 2
STEEPLE:
Social Must speak Arabic
Dubai courts conduct in Arabic
Economical Tax free business environment
Requires to have local shareholders owning 51% of the shares
Environmental Infrastructure to be using renewable energy: Hire a cleaner company for their CSR (Corporate Social Responsibility) which will reinforce their brand image
Legal
Lawyer must be court licenced
Install their company in one of the free zone which means 100% foreign ownership
No activities in Dubai main land will be allowed if FBT is in a free zone
Legal services to small or medium sized entities in the field of CTF and private banking
Must be based on common law and not civil law like in Europe
Sharia law has to be taken in consideration
Figure 3:
Force Field Analysis
Figure 4
Profit and Loss Account
All data in euros
2015 2016 2017
Sale Revenue 10,000,000 12,000,000 14,000,000
Gross Profit 6,000,000 7,000,000 7,000,000
Expenses 4,000,000 5,000,000 3,000,000
Net Profit 2,000,000 2,000,000 4,000,000
Net Profit: Gross Profit -expenses= Net Profit
2015: 6,000,000-4,000,000= 2,000,000
2016: 7,000,000-5,000,000= 2,000,000
2017: 7,000,000-3,000,000= 4,000,000
Figure 5
Ratio Calculations
Gross Profit Margin: (Gross profit)/(Sale Revenue)x 100
6,000,000÷10,000,000= 0.6×100
2015= 60%
7,000,000÷12,000,000= 0.583×100
2016= 58.3%
7,000,000÷14,000,000= 0.5×100
2017= 50%
Net Profit Margin: (Net profit)/(Sale Revenue )x 100
2,000,000÷10,000,000= 0.2×100 =20%
2015= 20%
2,000,000÷12,000,000= 0.167×100 =16.7%
2016= 16.7%
4,000,000÷14,000,000= 0.286×100 =28.6%
2017= 28.6%
Analysis and Discussion
Regarding the Ansoff Matrix tool, it is clear that there are numerous advantages to broaden the firm. For instance, FBT’s service may be unavailable in Dubai as it is rare for firms to work in various fields like theirs, therefore it would attract a new market. Altogether, this supports the question as to how they should operate in Dubai as there are many positive outcomes which could occur if the change happens.
The STEEPLE analysis helped the report with the specific end goal to research the external factors which could affect the business if they operate in Dubai. Installing renewable energy would imply that they would need to hire a clean company for their CSR. Such would eventually cost money, but would reinforce their image as it would show their involvement regarding environmental and social impacts and thus will influence new clients. Furthermore, being based in Geneva, (which is viewed as the primary place for the financing of commodities like Mr. Tsimaratos said), clients from Europe may allude such business which would boost their image. Furthermore, Dubai has a high Swiss/French citizens which would be an advantage for FBT as loyal clients may refer this company as the most successful. Thus, would influence new Swiss/French clients. However, introducing an office in Dubai would require FBT to have investors owning 51% of the shares which would have a negative effect to other investors as they could just acquire 49%. Additionally, as courts in Dubai are conversant in Arabic, this would then require have translators in court or to have lawyers fluent in Arabic.
One of the main advantage for FBT to set up an office in Dubai is the fact that it is a tax free zone for businesses. Hence, this would allow FBT to diminish their cost which would then imply that the objective increasing profit will consequently be succeeding.
Regarding the profit and loss account, FBT financial position has expanded throughout the previous 3 years. Although 2015 and 2016 were the approximate same net profit. Unfortunately, 2016’s expenses has increased and therefore resulted into the same net profit as 2015’s. However, 2017’s net profit increased by $2,000,000. This then shows that they limited their expenses and consequently have maintained a stable position regarding finance. On the other hand, the profit margin has decreased over the past 3 years, starting with 60% to 58.6% and now 50%. Eventually the percentage decrease is vast and must be taken in consideration however, if FBT operates in Dubai, being a tax free zone, it would perhaps increase over the years to come as expenses will reduce at a much higher rate. In 2015, the net profit margin increased drastically by 20% but then in 2016, it declined to 16.7%. Despite of the decline, it increased up to 28.6% a year later. Being the reason why establishing an office in Dubai would allow FBT to increase their net profit margin as expenses will be reduced.
On the other hand, there are negative impacts which must be taken in consideration. For example, the expense to buy another office alongside finding new employees. Eventually, establishing an office in Dubai would require an investment alongside new employees which would mean that they will have to take in considerations of their salaries. Thus, their income will take longer to increase. Additionally, policies and laws are more strict in Dubai which may affect FBT Avocats as their skills may not be allowed or would be forced to follow laws which FBT is not used to follow. For instance, they must practice common law instead of civil law which would require FBT to work upon their court methods. Also, the Sharia law must be kept in mind as it is a religious law, part of the islamic tradition and therefore FBT’s way of conducting cases may be different. FBT is as well, required to have licences and authorisations. In addition, looking at the Force Field analysis, one factor which is against change is the loss of control as it will be a major issue. Establishing a new office not only requires time, money and new staff but as well as restricted control. In the light of the fact that controlling three big firms is challenging without mentioning the fact that it is overseas which requires even more effort and attention to the business. Yet, the hardest challenge is the opposition with different firms. There is an excessive amount of firms in Dubai which could prompt a solid rivalry, hence, less customers would be intrigued and low income will be gathered.
Conclusion and Recommendation
Conclusion:
In conclusion, the various financial data and organizational tools has helped in the process of deciding whether FBT Avocats should operate in Dubai. Although both opinions whether they should or no are appropriate, it is recommended to try to operate. This is firstly because it is a free zone which gives various opportunities for FBT to increase their profit. Also, it will allow them to have more international or Swiss-French clients, which would conclude to a higher income.
Limitations of Research:
The first limitation was the fact that FBT is located in Europe, which is challenging to get information as interviews and questionnaires were conducted through emails or calls. Additionally, the interview questions were often modified or not answered as specific as expected. Thus, it affected the analysis as it was not in depth and therefore required investigation upon the answers that FBT responded to. Because of this issue, more interviews and questions were conducted and therefore the answers to the questions were in much more depth which led to a better analysis of the data collected.
Recommendation:
It is recommended for FBT Avocats to operate in Dubai for a significant increase of profit and a larger market representation.
Employ lawyers who are conversant in Arabic and who practice common law: Not necessitate extra work regarding courts in Dubai
Influence Swiss/French expats to work with FBT as the skills will be similar: Firms that operate internationally will persuade native customers to work with them which would lead to a higher percentage of loyal clients.
Investigate upon other firms in Dubai which could potentially be a disadvantage. FBT may then employ strategies to differentiate themselves.
Taxes being reduced in Dubai, FBT can as well reduce their expenses such as utility expense or depreciation will result to higher income.
Works Cited
FBT Avocats SA. “FBT Attorney at Law, Business Law Firm Geneva and Paris.” FBT Avocats, FBT Avocats SA, www.fbt-avocats.ch/en/.editmore horizontal
Appendices
Appendix A:
Interviewing Partners of FBT Avocats
Translated from French
Interview with Mr. Gaëtan
Can you tell me more about your firm?
Founded in 1993, FBT is a business law firm with offices in Geneva and Paris. We are specialised in 5 complementary legal teams such as Banking and Finance, Tax, Corporate & Commercial, Litigation & Arbitration and Private Clients.
What is your current financial position?
Since 1993, we have each year positive and growing cash flow; growing profits; We also have a strong balance sheet.
Can you share your profit and loss statement?
We don’t disclose our Profit and Loss statements, however we may give you estimates of what our sale revenue, gross profit and expenses are.
How many employees do you have in the office?
80 employees in total (Paris and Geneva)
Have you ever thought about operating abroad?
We have, although due to our financial position and loyal clients, we do not want to go too much abroad as it would require more employees and we would have too much clients to work with. This firm is really about focusing on clients and helping them to the maximum. It is important for us to stay close to our loyal clients and to put our full attention and work with them.
What about in Dubai?
Dubai would indeed be a potential idea. There are many reasons as to why but the main one would be that because Dubai is a tax free business zone, our revenue would increase. Yet, there are many challenges to take in consideration such as legal factors and competitors.
Would you believe that extending your firm out of Europe would be a good idea?
It definitely would. I trust that if many businesses like ours had the possibilty to operate outside of Europe, they would. In regards to FBT, it would be beneficial as we would definitely increase our sale revenue and our brand image would be greater. However, like said earlier, many challenges, competition and loss of control may occur.
Questionnaire
Response from Mr. Tsimaratos
What would be your strategy to expand FBT in Dubai?
“Dubai enjoys the position of a significant player in international trading and transport logistics. It has the advantage of its inherent strategic location on the globe. Dubai is in the middle of far east and Europe and situated at the crossroad of international trade between east and west. Due to its geographical location, Dubai is considered to be the gateway to the world’s most progressive markets, including Africa, India and china. Dubai and UAE as a whole is a tax-free business environment whether it is free zone or mainland Dubai has zero corporate and income tax on businesses. Moreover, Dubai has zero income and wealth tax on individuals.
It is widely agreed that Geneva is the main centre for the financing of commodities and that major commercial and investment banks (CIB) have maintained and even decided to increase their Commodities Trade Finance (CTF) involvement, in particular, through self-liquidating trade transactions, uncommitted credit lines, that constitute very flexible instruments with small capital allocation, as opposed to long term financings used in project and structured finance.
It is also widely agreed that Geneva is one of the main centre of the world regarding asset management and private banking activities.
FBT has a broad knowledge in CTF, private banking laws and regulations and tax laws.
Considering the above, the strategy to expand in Dubai would be to provide cross border legal services to small and medium sized entities active in the fields of CTF and in private banking. Such services would include propose administrative and tax support to clients willing to implement an perform their activities in Switzerland or in Dubai, including, in respect of the various required licences and authorisations, coordination, liaising and representing clients with Swiss or Dubai relevant authorities.
Such services would have to be cost and quality efficient and appear competitive, as compared with the UK and US law firms established in Dubai.”
What are the legal factors to consider operating in Dubai
“Limited Liability Companies (LLC) setting up in main land are required to have a local shareholder who holds at least 51% of the shares and therefore, the maximum shareholding a foreign business can hold in an LLC is 49%. This remains a key concern for foreign investors despite practices being developed to mitigate the potential risk associated with this requirement.
As an alternative to setting up in mainland, it is also possible to establish an LLC or branch in one of the many free zones across Dubai and the UAE. Free zones are specific areas within the UAE and were introduced to attract foreign investment. Free zones allow 100% foreign ownership. However, businesses established in a free zone are not permitted to carry out activities in mainland UAE.”
What challenges may FBT Avocats face if they operate in Dubai?
“Dubai courts conduct themselves in the Arabic language and so legal representation not only requires legal advocates who are properly licensed to appear before the courts, but also requires that they are conversant in Arabic.
Free zones in Dubai which have, to varying degrees, different laws and regulations to non-free zone areas. However, in the main free zones, laws and regulations are inspired by common law (Law applicable for example in the UK and USA). While, FBT is in a country based on civil law.”