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SHR019-6 Strategy Assignment - University of Bedfordshire, UK
Learning Outcomes -
1. Demonstrate in-depth knowledge of the tools and frameworks of strategy in order to select the appropriate ones with which to perform meaningful analysis to generate coherent strategic options and choice.
2. Select and apply a range of strategy tools, concepts and frameworks to analyse unstructured problems based on the issues presented by the external and internal business environment and use the analysis to evaluate and design appropriate strategies.
Task - Produce a management report providing strategic solutions for an issue or Strategic issue or issues that you have identified in your own organisation or Strategic Business Unit. The solution(s) should be based on thorough analysis and should involve critical evaluation of a range of potential solutions. The emphasis must be aiming to achieve competitive advantage. The choice of the final strategic decision should be justified. The solutions must not be descriptive of what the organisation is actually doing but analytical and proposing what it could and should do.
Answer - Business Strategic Management
This study has been documented targeting the immediate strategic decisions, strategic analysis of Arabian industries and its business expansion motives. The strategic plan has been developed with original documentation of company expectations, activities and current USA manufacturing and maintenance industry and market. The target market credibility and variables outlined above have established the following organizational expansion in the United States. Positioning strategies, consumer analysis and value proposition have been developed aligned corporate objectives, future scopes and market overview. Additionally, this strategic analysis study of Arabian industries LLC has outlined the business potentialities and draw suppositions and should be done activities based on the possibilities and future scopes.
From the situational analysis and company performance, it has been understood that Arabian industries, located at Rusayl, Sultanate of Oman, it is one of the renowned names for the manufacturing and maintenance operations in the Middle East and specifically based on Oman. Showcasing excellent expertise in local development, quality and technology, this company's existing Service portfolio consists of Professionalism and integrity concept around the stores offering comfortable, affordable shopping atmosphere (arabian-industries.net, 2019). Currently, these company managers have found out the fact that in the case of global competitive advantage, this organization needs to expand their market reach. They have initially decided to expand its market in the USA. This study will be involving marketing and strategic analysis tools to help Arabian industries achieve its business objective.
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The primary reason why this company wants to expand its business into the USA market is that it wants to have a better brand presence in the world, which it lacks compared to many of the prominent manufacturers like GE and IBM. It also wants to have made income in direct United States dollars. Since this company is based in the middle eastern part of the world, it is having trouble in dealing with only one currency.
Moreover, the United States does not impose any tariff in any of the middle eastern company. Having to access in the United States market will only result in better publicity. Unlike Europe, the United States promotes new business, and it is a capitalist market. The success of this company will largely depend on how well it manages to Seattle itself in the United States market. The home currency of this company is not stable either. Due to market fluctuations, this company is suffering from inconsistency in income and profit ratios.
Future scope of the business
Next range of this business regarding market expansion into the USA market are listed below;
- To develop its consumer base into an international base by expanding the market in developed countries
- To offer quality products in a cost-effective way
- To create global operative team and service experiences for consumers
- To sustain and increase a long-term relationship with the global suppliers
- Most importantly, to develop the sustainability of Arabian industries.
Understanding the Market of USA and its Possible Implications on the Company
In this part of the report, the macro-environmental factors will be analysed and by the help of this tool, the effects of the business factors of the USA, on the company Arabian industry LLC will be illustrated. This will help the company chalk out measures and get strategic solutions regarding acquiring competitive advantage in the USA Market. The pestle analysis has been given below:
USA has a strong political setup and the laws are majorly unbiased as it consists of election processes which are transparent and open to the right decision of the common people. It has been developing on national and global governmental policy making. This can be effect the Arabian industry LLC, as they have to transform the policies according to the USA industry. As the major industry of Arabian industry are based on industrial gas, petrochemicals it will have to increase its global influence and cater to the rules and policies of the USA (Baradatand Phillips, 2016). This can act as a challenging factor for the Arabian industry LLC, as USA also get criticised for its interventionist policies, that influences global relations among various industries, but also invites threats regarding terrorism. This can adversely affect the smooth operation of the organisation.
USA have GDP of $16.760 trillion, and therefore enacted as a country with the largest economy (Nolan and Thewissen, 2018). Nevertheless, expansion of the Arabian industry in the USA market will help in influencing their growth in economic factors. Among the various factors for expansion the global presence and recognition was the most important factors Arabian industry needed which will be boosted by the expansion in the European market.
The population in the USA have a liberal upbringing, but there have minimum racial tolerance which can be a factors for the employees of Arabian industry to get accustom to the USA weather (Parekhet al., 2016). Increase in illegal immigration is also a factors for which influences racial discrimination. Moreover, 11.7 million people are staying in US illegally which makes a vulnerable country for the expansion of the Arabian industry (El-Masriand Tarhini, 2017).
Technology long with innovative ideas are the key sources for the numerous industrial and manufacturing organisation to grow. The lack of technological implementations in their processes have made Arabian industry vulnerable and less demanding to the customers. Nevertheless, the company have to grow in their technological and innovation fields to gain competitive advantage and increase its value proposition.
In the recent years, Oman industries has excelled in the information technology department, therefore applying the expertise and development of their own can help in recognising the industry in the US market as well as increase its customer base.
There are various legal laws that are abided by the country people to cater to the safe operation of the organisation. The laws are regarding securities, contractual factors, employment, and consumer protection taxation policies. There are certain rules that are followed in industry and its specific to that certain industries. The Arabian industry LLC must gain knowledge regarding the manufacturing industries. The laws must be abided by so that they can develop in product development, increasing profit margins eventually boosting up the overall development of the organisation.
The environmental factors can be negatively affecting the operation of the Arabian industries, as they have been rising pollution by the increase in vehicles and industrial enterprises. The Arabian industry generally deal with oil and gas components, the operation can cause tremendous environmental concussion. The enterprise therefore must promote for sustainable development of the business by following CSR policies. Correct treatment of waste matters before dumping them can helps them create a good impression in the eye of the customers
Table 1: The Pestle analysis of USA and its effect on Arabian industry
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In further analysis, the Arabian industry must develop the factors that are most prevalent and prominent in the manufacturing industry of USA, which also deals with gas refineries, construction and manufacturing businesses. They must invest more in oil based industry so that they can improve their overall economy. The other measures that must be taken to grow the business are as follows:
- Involve CSR activities
- Indulging in participation of more foreign industries in the company, to understand their strategies and get competitive advantage (Geliland Lanza, 2017.).
- Grow their suppliers and increase their communication with the suppliers and the distributors.
- Hey must mot indulge in breaking rules and regulations of the particular country they are expanding so that they can be prevented from facing any legal issues.
Understanding the Potential of the Company
- It is recognised as a most strategic location as it governs the trade routes of marine in the regions of Arabian Gulf and Indian Ocean
- The sea coasts of Arabian industries that are situated in Oman covers around 1700 kilometres, the sultanate being the opening way for Arabian Gulf making it an ideal geographical location for business purposes (Oukil, and Al-Zaidi, 2016.
- Arabian market has a huge customer base with 28 million people, gradually increasing the purchasing power for the company Arabian Industry LLC.
- It also scatters its business regions in Iran and Yemen which consists of 82 million customers(Khadem, and Shamsuzzoha, 2018)
- The Arabian industries mainly situated in Oman is the member of WTO(World Trade organisation)
- The main weakness of the Oman industry is the economy, which is considerably weak.
- Oil reservoir are limited in those regions
- It has been estimated that the oil depletion will increase in the Oman regions by the year 2020.
- The Arabian industry is totally dependent on its oil reservoirs which are expected to deplete by the year 2020. This can act as a threat to the country as it will affect its economy of industries in Oman.
- Government is unable to provide support to the increasing industries which will serve as the downfall for many industries in the coming years (Umar, 2016).
- The inability to apply adequate strategies can hamper their process of getting adequate profit margins and competitors taking advantage.
- It has opportunities in the fields of converting industry as it is totally dependent on the licence of energy and the enough supply of raw materials and adequate availability of minerals.
- The oil industry covers the majority of Arabian economy, boosting its GDP by 50%. It can gain opportunity from the measure taken by the National Transformation Programme (NTP), which will help in achieving their objectives by the year 2030 (Vision2030.gov.sa. (2019).
- They can grab various opportunities by involving in projects that involve the partnership with other companies.
- The Arabian industry can expand its marketing opportunities in the manufacturing section as well as health sectors, as Government hospitals are unable to provide emergency facilities to the patients. Increase in the hospitality sector especially in cardiology and heart diseases can increase the standard of living and project as a good country for development of more business enterprises.
Table 3: The SWOT analysis of Arabian Industry
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The TWOS analysis would allow in the better understanding of the integrations that would wield positive results for the company. Realising their own potential is one of the greatest assets that a company can achieve for itself.
The company has a reputation making choices associated with proper geographic locations, making it evident that the company would be able to function better in the USA, given that there are less tariffs imposed over any middle eastern countries. The company also has enough resources and technological advancements and if combined with that of USA, then the company will be able to flourish more as
The weaknesses of Oman that has been witnessed by AI in their respective region can be eradicated if the company goes fully functional in USA. The market of USA has adequate amount of potential and possibilities to offer for the better operations of the company.
Just as the governments in Oman have not been enough supportive of the company I their own country, there is a possibility the USA government might be present ignorance similarly. The company is completely dependent on oil reservoirs and if the ones at middle east depletes then the company has to start looking for alternatives.
The economy of Oman is weak and thus, the company might face difficulty in maintaining their consistency of providing support to the local market. The depletion of oil reservoirs is also a challenge for the organisation given that they are completely dependent on oils.
Table 4: TWOS Analysis of Arabian Industries
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Product/Service Development and Investment in Business Units
The use of Ansoff Matrix can be considered as a strategic planning tool that would focus on the product/service development and the kind of investment that is required to be made in the business units of Arabian Industries (Gurcaylilar-Yenidogan & Aksoy, 2018).
The figure provided above depicts the components that could be found in Ansoff matrix. These elements are being mainly used when an organisation is inclined towards initiating their business in some other place that is not familiar to them and try to identify new means to create a loyal consumer base.
Market Penetration Strategy
The services that are being already offered by Arabian industries (AI) are difficult to be found in the USA market. It would be beneficial to see if the organisation would be able to keep up with the demands and high end requirements of the market to make their international expansion, a successful venture (Rapoport, 2015). A series of product refinements would be considered extremely beneficial for AI in USA. They have the potential to provide testing and maintenance of petrochemicals and power industries, the same services can be offered by them in the country.
Product Development Strategy
The idea of product development is not necessary for AI in USA as their existing products and services would be incremental in providing all of the necessary requirements for the businesses of refineries. Even though they are deeply engaged towards the development of their own nation, but their expansion strategy and myriad would provide them with more exposure and technological advancement to make far better improvements in their regular services.
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Market Development Strategy
As it has been mentioned earlier AI, was only inclined towards causing improvements and development in their own country. However, they have already reconsidered the idea and are willing to expand their market and services in USA. They will be initially starting all of their operations in Seattle and if every business operation goes according to their plan, then they might decide to expand their business operations onto other states as well. The organisation will be successful in creating relationship with various clients that would be mutually respectful and where they will be recognised as a leading EPC contracting, manufacturing and maintenance company (Arabian-Industries.net, 2019).
Since, the idea of diversification strategy requires the inclusion of both product and market development. It can be said that this strategy will not be entirely necessary unless there have been some serious issues going on with the operations of the company and their services. At the same time, it can be said that the company can opt for unrelated diversification.
Resource based view of Arabian Industries
The company is equipped with adequate amount of resources that is being considered as the reason behind their proliferated situation in their country and in their choice of expansion country as well. Even though they started their journey with the use of fabrication facility, it is due to their diversification strategy that they have been able to attain adequate amount of technological aspects required from manufacturing of process equipment. They have an incremental group of professionals who are inclined towards executing service contracts and EPC projects (Our Profile | Arabian Industries, 2019). The company also has adequate amount of infrastructure and technological advancements that they can continue to use perform more effectively in other countries. The company has already gained success in the UK and they continue to provide complete solutions in terms of upstream, downstream, midstream operations in their core markets of oil and gas.
Value Propositions for Stakeholders
As mentioned in Arabian-Industries.net (2019), the key value proposition that is being initiated by the company are as follows:
- Synergy of their business structure for value creation
- Focus upon automation and rigorous approach to continuous improvement
- Technical training for advanced learning of the employees
- Committed to provide high quality services to the clients
- Leadership and Commitment are the top quartile performers in HSE and Quality
From the value proposition and their differentiation in terms of corporate responsibility and other aspects, it can be said that the company is highly integrated towards providing adequate amount of services to both the customers and for their employees as well. They take into consideration the requirements of both the customers and their employees.
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The business development process in a high need to modification because the demand in the current segment is different. The most of the cases it is seen that the Arabian Industries have made a huge modification in the business development process. Being an EPC organisation the services of the organisation is vast as described in the previous section of the report. The market for the organisation is in a different state and it is seen that the business development process and approach is totally different from the other companies in the USA (Alden & Nariswari, 2017).
The best option to go for is high price and high quality segment. It is looking for a better understanding of the market in order to have a better kind of position in the market. The most of the cases it is seen that ht eservice providers have to think of the issues like cultural differences and the modification related maintenance. The positioning of the company should be in a state where the company can make sure that it is making a significant impact on the cost management and business development segment. The manufacturing department needs to make sure that the services are cost effective and proper in accordance with the demand of the customers (Tyagi and Raju, 2018). It is obvious that the USA does not have a high amount of oil refinery companies but in case of other services the company Arabian Industries need to take a good look at. The service should be affordable and compliable for the business modification. The management needs to be cost effective sop that the company falls in a category of most effective but quality service providing line up. The management has to think of a proper kind of support system and for this purpose they need to study the market properly.
Arabian industries LLC is a manufacturing and maintenance brand in Dubai and Oman, which is originated in 1991. Here, the Arabian industries LLC is going to expand its market to the U.S. for more global recognition and a better profit graph as well as brand expansion apart from the middle east. So, to ensure the market research, it is mandatory to know and have a point to point analysis of the competitive market that the U.S. offers in front of the brand (Monzón, Ortega, Martínez & Ortega, 2015). Many manufacturing and maintenance brands originate from the U.S. and are highly in demand in the global world of Oil and construction management. Some of the competitors' Arabian industries LLC needs to face while heading towards success in the U.S. market are as follows:
- General Electric
- Intel Corporation
- Emerson Electric Co.
- Rockwell Automation Inc.
- SAS Institute
This was a brief list of the competitive market that Arabian industries LLC will get hold of as it emerges in the marketplace of the U.S.
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Using Porter's Five Forces to Determine Competition
Porter's five forces give a clear idea about the way Arabian Industries can become a sustainable competitor in the market place. The services, product and the technologies provided by AI make them a strong competitor in the market. This model will be very much beneficial to understand a strong competitive advantage in the market but also will help in spreading their business in another marketplace as well. (Fitzpatrick, Nguyen and Cayan, 2015)
Threats of New Entrants: New entrants in the Contracting, Manufacturing and Maintenance industry need to come up with innovative ways and technologies in completing a project. The company has to provide the services in economical rate, new strategy, cost reduction and providing best services to the customers. Arabian Industry has to keep all these challenges in mind and must make an effective solution which will give great mileage to the company (Fern Fort University, 2019). Arabian Industries must expand its market in the USA through a new product launch as it will attract new consumers toward the company.
Bargaining Power of Suppliers: It is common for every manufacturing and construction companies that they buy their raw materials from different suppliers. Suppliers in these industries play a powerful role. Arabian Industries can change the suppliers depending on consumer's requirement over quality. It has a huge impact on the manufacturing company as lower the profit margin of Arabian Industries. Arabian Industries must identify and create a supply chain in the USA to get the best quality product within an economical rate.
Bargaining Power of Buyers: In the present time the whole market is driven and controlled by the buyers. The common trait of buyers is that they want to get the maximum services or product by paying the minimum cost as possible. This will be a challenge to Arabian Industries to keep a great profit margin. The more powerful consumers there for Arabian Industries higher is the chance to get a huge discount and offers by the buyers. Arabian Industries must target to create a large consumer base so that discount and bargaining power of the buyers can be limited.
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Threats of Substitute Products or Services: When any new product or services accepted by similar consumers but in different ways, the profitability of Arabian Industries will suffer. There are other companies who provide the same services as this company. Arabian Industries must keep a close eye on the need of the consumers rather than focusing on what the consumer is buying. Arabian Industries must offer a value proposition which is unique and different from the present offers in the industry. Arabian Industries must focus on their service that they are going to provide to the fresh clients in the USA as buyers must be satisfied with the service.
Rivalry among the Existing Competitors: It is the last stage of five force competitive study which Arabian Industries must be aware of. Arabian Industries must approach differently which is different from the other rival companies. They must provide the best services at very economical rate keeping a fair profit which will help in company's long term establishment in the market. Arabian Industries must identify the current traits in the companies in the USA and must create a different approach so that it can make the company stand out within the USA.
From the five forces analysis, it is quite clear that to stay firm and strong in the market the company has to break through the barriers of the entrance along with new services to hold a position in the market. Arabian Industries must plan every project economically so that they can keep a fair percentage profit which will help to generate revenue as well as to spread throughout the market. Arabian Industries must keep an active look into the market and spending money in market research to check all the loopholes in the company and maintaining the standards of the company regularly. Arabian Industries must try producing different products by using different raw materials of different price ranges which will help the company to keep a backup option in raw materials in case of price hike or unavailability of the raw material faced by the company. The company must come up with new products as buyers bargain on an established product but the power of bargain will not be as strong on the new product by Arabian Industries.
There are many ways through which a new company has to keep in mind while competing with an established company in the market. Arabian nights should build up a supply chain with multiple suppliers who will provide the best product in economical rates so that the company provides the product at the best economical price. Arabian Industries must also bring new products and services that will help them to keep a strong consumer base as well as it will attract new consumers as well. Arabian Industries can collab with its rivalry company to increase the market size rather than competing in a small market. (Arabian-industries.net, 2019)
Finding New Source of Differentiation by Using Porter's Generic Strategies
The use of Porter's Generic strategies ensure that an organisation is able to understand the proper implications of using certain strategies that allows them to determine their competitive position in the market. All the credentials need to be used from the organisation in a manner that it can be used as a part of their competitive advantage.
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Cost Leadership Strategy
The company has managed to achieve the idea of cost leadership strategy with the help of their high asset utilization and with the help of their complete control over the value chain. They take care of all of the inventory, supply/procurement and other essential aspects to ensure that the organisation can gain a competitive advantage in the USA market. The company has always been known for their attention towards their clients and key employees and it would eventually allow them to achieve the desired remark for the betterment of their business operations. Since, the company has maximum market share and has greater hand in manufacturing and production.
The company has also been able to gain success because of their differentiation strategies because they have the potential to understand the cases that might be able to generate them positive outcome and to ensure that they can easily take over their competitors. The exclusive nature of the services of the company determines its potential and worth in all of the cases. The differentiation strategy of AI drives their profitability and given that they have always been considered as the best in terms of quality and service, their premium pricing strategy would never bother the clients.
Justification of strategic decision
The United States industrial maintenance and manufacturing sector continued as a strong performing body this year, following the similarly effective 2017. Heading in the concluding year of the decade as well as the 10th straight year of financial development in the United States economy, this sector finds itself in an innovative position (deloitte.com, 2019). On the other side, the strategic decision taken by Arabian industries LLC is expanding the business into the United Nations. Many points could justify this vital decision. Densely populated states in the USA are considered as high retail spenders. On the other hand, overall, metropolitan zones develop faster than the suburban areas, putting concentration on customers with low access to vehicles.
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The manufacturing could be counted as the firing on all cylinders; market output is droning, capability utilization is up and various manufactures, even the foreign ones are delivering effective performance outcomes and shareholder returns. Additionally, trading tensions waiting in the back and supply chains are draining to cope up with the demands, while capable talents are in short supply along with threatening to derail the recent sector momentum. In the midst of these headwinds is a fundamental move to the digital and developed technologies, which are altering not only business functions but also partner ecosystems along with business models (deloitte.com, 2019). The digital holds marvellous potential and is likely to be pivotal in underlining the fate of industrial maintenance and manufacturing organizations in the months and years to come. From the above analysis, it has been understood that except the little declining situations in this industry, for Arabian industries LLC strategic decisions to expand market in United States carry many potentials.
From the above discussion on the strategic decision-making process of Arabian industries LLC regarding their business expansion into the USA, it has been understood that Arabian industries LLC should focus on the current market trend and development in the new market and what are the manufacturing operations that could impact on the business profitability in the short and long run. The supply chain activities and strategies are also a vast area for the company to be invested. The report also focused on the external and internal environment of the company while operating in USA and pay attention towards their understanding of their stakeholders. The company must update its collaboration policy with the other competitor companies so that it can increase the size of the market. They must always bring a lucrative product to hold a strong customer base.
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