Instructions: Your introduction should explain a
- A brief historical background of the business, focusing on the major events as breakthroughs over the years in the life of the business,
- Positive points to build up an image of the business,
- Running references on a range of products and services,
- Ranking of the business in terms of its size and business activity
- Regions of operations
- Target customer
- Any available data on profit, sales or manpower, and
- Other related aspects that you think can be suitably the part of your introduction.
Almarai Company is an entity that operates in the food industry. Alongside its subsidiaries, Almarai focuses on the processing and distribution of beverages and foods across the Middle East region. The organization’s operations largely extend to Dairy and Juice, Poultry, Bakery, and Arable & Horticulture (Almarai, 2015). Almarai is in charge of the marketing of its products under the Almarai brand besides overseeing the processing activities in the United Arab Emirates (UAE) and Saudi Arabia. The company also trades products through Modern Food Industries Limited and Western Bakeries Company Limited under the brand names of 7 Days and L’usine respectively.
Reviewing the vision of the company provides information about the company’s strengths. Based on the entity’s self-assessment, it has an inspired vision that is traceable to its success story that began in 1977 (Almarai, 2015). The vision of Almarai is to transform the kingdom of Saudi Arabia’s dairy farming sector to a modern one that meets the objectives and expectations of the local market (Almarai, 2015). Given that the company has expanded to cater to up to 60% of the market, it is assumed that it has matched its aspirations.
From its inception, Almarai has embraced expansion. Among the main recent developments of Almarai are the events that took place in 2009 and 2010. In July 2009, Almarai acquired Hadco; later in the same month, it proposed opening new plants and, in December, the company took over Egyptian Dairy Juice Company (Almarai, 2015). In March 2010, Almarai explored the establishment of a Pediatric Nutrition center within the Gulf region and, in April, the company’s turnover grew by 17.6%. Thus, through such strategies, Almarai has taken an expansionary strategy.
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Summary: Briefly summarize the purpose and structure of your case study analysis.
The current paper analyzes the Strengths, Weakness, Opportunities, and Threats that Almarai Company faces. It does the analysis after reviewing the external environment based on the PESTEL analysis. The paper opens with an introduction, followed by a brief summary before capturing the external environmental and internal environments of the company. Thereafter, the analysis is presented before the recommendations and conclusions are made.
In this section, you will analyze the external factors that are affecting the business f your choice. Here are the important questions that you may find related to the business;
· What is the political situation of the country and how can it affect the industry?
· What are the prevalent economic factors?
· How much importance does culture have in the market and what are its determinants?
· What technological innovations are likely to pop up and affect the market structure?
· Are there any current legislations that regulate the industry or can there be any change in the legislations for the industry?
· What are the environmental concerns for the industry?
The company operates largely in the dairy industry. The sector is a subset of the agriculture industry that deals with the production, consumption, and distribution of products such as butter, milk, ice cream, and cheese. Many factors influence the operation in the company; thus, based on the PESTEL approach to environmental analysis, it is possible to understand the operational circumstances of the organization.
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Within the UAE and Saudi Arabia, the government’s regulations and policies on agriculture affect the farmers’ choices to rear livestock and extract milk for sale. Within the two countries, the governmental policies support dairy farming with the subsidies that are extended to the sector (Shadbolt, 2013). Similar to other businesses, Almarai is bound to operate based on governmental regulations and policies.
Economic factors usually influence the direction an industry takes. The purchasing power in an economy is a determining factor in the performance of a dairy business (Shadbolt, 2013). Because milk is viewed as an essential product, regardless of the financial state of people, they make efforts to buy this product. The implication is that milk sales are not affected significantly by the level of income. However, on the other hand, when incomes increase, people tend to buy more of the product. In the UAE, Saudi Arabia, and other parts of the GCC region, incomes have been shrinking owing to the declining oil prices. If the trend continues to such an extent that households’ purchasing power is eroded, there is a possibility that firms, such as Almarai, would be affected negatively as the consumption levels would fall. Consequently, reduced purchases would decrease the company’s revenues.
Reference to sociological factors is useful in highlighting the trends and lifestyles in society. In the event that a community shifts preference to vegan ways of life, the dairy market is likely to suffer negatively. A vegetarian-oriented lifestyle discourages individuals from consuming animal products such as meat, eggs, and milk (Five Factors Affecting Dairy Markets, 2015). At present, the number of health-conscious customers is on the rise. In other words, a big number of consumers are keen on what they eat due to their increased knowledge of healthy living. Such a trend is likely to lower the demand for products such as chocolate and ice cream. Hence, the players in the sector face a decline in sales if they do not adapt to the market by processing more nutritional products that appeal to societal needs.
Given that the Middle East region is predominantly Islamic, the problem of halal is pressing. In practice, Muslims are advised to avoid foods that are considered not halal (Shadbolt, 2013). Although milk is seen as halal, associated products such as ice cream need halal-certification before they become accepted in the region.
Moreover, attitudes to such issues as obesity also influence the acceptability of a certain product by consumers. There exists a perception that dairy goods generally contribute to obesity (Five Factors Affecting Dairy Markets, 2015). Such a perspective is likely to discourage people from buying dairy products in favor of others considered healthier. In this case, low-fat or skimmed products prove attractive to consumers.
The role of technology in the production process is without a doubt critical. Due to technological advancement, it is possible to market an array of dairy products and their different variants at dissimilar costs. One of the major factors in the sector is the pace at which technology is being embedded into dairy farming practices.
The dairy farming business depends on the availability of healthy livestock. Epidemics, plagues, or adverse weather conditions are likely to have negative effects on the business. Such events contribute to lowering the quality and supply of milk (Five Factors Affecting Dairy Markets, 2015). Considering the weather conditions in the Middle East, the industry should adopt products’ preservation through refrigeration or freezing to extend their lives (Shadbolt, 2013). In addition, the consumption of products such as ice creams depends on weather conditions. Thus, in cold weather, the demand is affected negatively.
Another factor significant in the rearing of cows and production of milk is rainfall. Saudi Arabia has an average rainfall of 59mm annually (Shadbolt, 2013). Hence, it is not a good candidate for milk production. Given the adverse weather conditions, the growth of Almarai is, thus, surprising. The firms functioning in the industry employ the Californian model of production to overcome the rain challenge (Shadbolt, 2013). The model encourages sourcing for cow feeds from outside. According to Shadbolt (2013), using the method allows for rearing 1 000 cows in 40 acres of land.
Furthermore, high temperatures in the Middle East present another problem that must be adequately addressed. In practice, the level of milk production falls, with the chances of spoilage increasing. To overcome the heat problems, the Saudi company uses technology. The Holstein milking cows are maintained between 21 and 23 degrees under an automated process (Shadbolt, 2013). In addition, computers are used to monitor humidity and temperature. The cows are also put through immobile water jets to avoid the contamination of milk.
The first part of SWOT is about two internal aspects of a business, strengths, and weaknesses.
Strengths: in this section, the following points should be considered:
· Advantages of proposition? Is the main idea, vision, and mission of the business creative?
· Capabilities? What are the internal abilities which make this business different from others?
· Competitive advantages? What are the aspects which make a business more advantageous than its competitors in the same field?
· USP’s (unique selling points)? Locations where the business has its out-lets
· Resources, Assets, People? Does the company hires experts, does the company retain its man-force for a long time,
· Experience, knowledge, data? How long the company has been working in that field? How much technical and expert knowledge does it have?
· Financial reserves, likely returns? Does the company have enough financial resources, loaning abilities, and assets?
· Marketing – reach, distribution, awareness? What is the range and number of customers for the company? Are the products and services only serve a particular class? Or, more than one community?
· Innovative aspects?
· Location and geographical?
· Price, value, quality?
· Accreditations, qualifications, certifications?
· Processes, systems, IT, communications?
· Cultural, attitudinal, behavioral?
· Management cover, succession?
The company has a number of strengths. To begin with, Almarai is a market leader in the Gulf region (Almarai, 2015). Its dominant position has led to the assumption that the entity is the only reliable supplier of fresh dairy items in the Middle East. The second strength is that Almarai has a big market share. In 2010, for instance, the company’s market share in Saudi Arabia stood at 60% (Almarai, 2015). Having such a value of market reach translates to the characteristics of a monopoly. In other words, the company is in a position to influence the market of beverages and food through various strategies such as pricing. By adjusting the prices of products upwards, the company is able to increase its sales since it is a dominant player with the capacity to affect the market.
The third strength is operational efficiency. The percentage of wastage in an industry determines how profitable it is. Compared to other competitors, Almarai had a lower wastage margin of 3% (Almarai, 2015). The implication is that the company was operating more efficiently than other players in the industry were. The fourth strength displayed by Almarai is its effectiveness in quality control systems. The company’s framework is based on a supply chain that is well integrated (Almarai, 2015). Integrated supply chains have many advantages that enhance production and reduction in costs. The company’s sales and marketing expertise are also top-notch meaning that the enterprise is able to sell its products more easily when compared to its competitors. Besides, Almarai operates a chilled distribution network (Almarai, 2015), which enables supplying products to distributors and customers while they are still fresh. The provision of fresh products is ideal as it ensures a high demand due to meeting customers’ preferences and expectations. Another aspect related to the effectiveness of quality systems is the advanced technology that the company deploys in processing products. For instance, the use of q-pulse is an effective process-engineering process that simplifies the processing of the entity’s products.
The fifth strength refers to the company’s use of the acquisition strategy to improve its overall size and market reach.
Weaknesses: This section deals with the problems that exist in different levels of management, marketing, finances, hiring, and other departments of a business. Following points should be considered in this section:
· Disadvantages of proposition?
· Gaps in capabilities?
· Lack of competitive strength?
· Reputation, presence, and reach?
· Own known vulnerabilities?
· Timescales, deadlines, and pressures?
· Cash-flow, start-up cash-drain?
· Continuity, supply chain robustness?
· Effects on core activities, distraction?
· Reliability of data, plan predictability?
· Morale, commitment, leadership?
· Accreditations, etc.?
· Processes and systems, etc.?
· Management cover, succession?
In practice, weaknesses are part of a company’s operations. One of the main restrictions is the limited presence in the Gulf region. Given the size of the regional market, gaining a share in the area would be an improvement for the company. Although Almarai enjoys a big market share in Saudi and the UAE, expanding to other countries is an issue that the company should explore.
The second weakness is dependence on brand Almarai. Although the name has a high reputation, it lacks a fallback plan in case of unanticipated problems. Reliance on a single attribute also shows the lack of diversity in portfolio development.
Section 4: Threats and Opportunities: Discuss the following points:
· Market developments?
· Competitors’ vulnerabilities?
· Industry or lifestyle trends?
· Technology development and innovation?
· Global influences?
· New markets, vertical, horizontal?
· Niche target markets?
· Geographical, export, import?
· New USP’s?
· Tactics – surprise, major contracts, etc?
· Business and product development?
· Information and research?
· Partnerships, agencies, distribution?
· Volumes, production, economies?
· Seasonal, weather, fashion influences?
Under the opportunities category, it is noted that the possibility of a single currency in the GCC is likely to present attractive prospects for the company. A uniform currency is sure to eliminate problems associated with frustrations connected with the exchange rates, thereby allowing the entity to operate with some form of predictability (Shadbolt, 2013). In addition, it becomes possible to charge a uniform price across the region due to the prospect of using one denomination. Although the gains from using a single currency are not obvious, the company has an opportunity to alter its operations to benefit from the development.
Globalization raises the potential of the company greatly. For instance, the embracement of globalization is likely to play a role in the reduction of tariffs as well as import and export charges linked to products. The possibility of lowering such costs may allow the company to gain more profits, thus leading to higher revenues. Increased earnings are critical as they enable a company’s improving in a number of areas. One of the aspects that gains from increased revenue is research and development (R&D) (Shadbolt, 2013). Often, companies need to invest in R&D in order to improve the efficiency of their production processes. In addition, such investments are important in facilitating innovations. Another area that gains from increased revenue is human resource development. The company should invest in the training of workers with the objective of enhancing their productivity. Overall, due to the above changes, the company’s opportunities are immense and of significant importance for its further development.
Another tendency to consider is the increase of the population size. Similar to many other places of the world, the population in Saudi Arabia, the UAE, and other countries in the Gulf region is on the rise. Thus, there is a possibility that the target market of the company would increase. With an expanding market size, the company is likely to increase its sales and revenues. A high income would allow the business to improve its overall position. In addition, the company’s development of new products is sure to give Almarai the opportunity to increase its earnings.
In recent times, customers’ awareness of healthy living has expanded. Unlike in the past, now, consumers of food and beverages are more concerned about the nutritional value that they derive from consuming products (Shadbolt, 2013). The implication is that the company has a chance to increase its processing of healthy products to raise its preference among consumers.
Threats: Discuss the following points:
· Political effects?
· Legislative effects?
· Environmental effects?
· IT developments?
· Competitor intentions – various?
· Market demand?
· New technologies, services, ideas?
· Vital contracts and partners?
· Sustaining internal capabilities?
· Obstacles faced?
· Insurmountable weaknesses?
· Loss of key staff?
· Sustainable financial backing?
· Economy – home, abroad?
· Seasonality, weather effects?
Threats are also inherent in business. For instance, if the company benefited from subsidies in the oil business to some degree (Shadbolt, 2013), the moment the subsidies are removed, the company’s business is likely to face reduced earnings. As a result, the income would fall because oil is a major input in the production process. Secondly, to a certain extent, Almarai is dependent on governmental funding. Coupled with the prevailing unpredictability of the oil business, which is the largest source of the government’s income, there is a possibility that the company will face a threat of sponsorship cuts or freeze. Thirdly, given the expansionary nature that the entity is pursuing, it may be threatened by diseconomies of scale. Alternatively known as disadvantages of large-scale operations, diseconomies of scale are likely to undermine efficiency in activities and lead to a reduction in the company’s earnings.
Additionally, adverse weather conditions also present a threat. Dairy business requires a good amount of rainfall; however, the region is a desert with some of its water aquifers depleted (Climatic and environmental factors affecting dairy productivity, 2015). Water problems are a threat to the business. As already mentioned, milk production depends on the amount of water that cows consume. Limited water reduces the level of milk produced. However, Shadbolt (2013) observes that through technology, the company manages to draw water from underground sources. However, the depletion of aquifers of the Saudi region poses a threat regarding the extent to which the drawing of underground water can be sustained. Furthermore, high temperatures also endanger the preservation of dairy products.
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Section: 4: Analysis
Analyze critically the facts and information that you have listed in sections 2 and 3. Discover the reasons and effects of the four factors of SWOT can have on the performance of the company. Your application of facts for the analysis should not repeat the facts from sections 2 and 3, rather you should deeply analyze, assess and evaluate all those facts and how they can be applied for future prediction about the business of that organization.
The Almarai Company is excelling despite the challenges that it encounters. As a market leader in the region, Almarai has the advantage of dictating the market since it has already set itself apart as the top player in the sector. Such an attribute is supported by a strong brand name not only in the country, but also across the region. In this regard, the company has a favorable opportunity to move forward while using its vantage point as leverage.
The company has also demonstrated technological competence since it relies on advanced mechanisms to process and preserve its products before they reach the market. Given the adverse weather conditions, it is difficult to conduct the dairy business. From the previous sections, it becomes clear that operating within a desert presents a host of challenges to the company. Thus, big investments in technology are propelling the company.
The weaknesses that the company faces are likely to undermine its performance. Despite its widespread presence in Saudi Arabia, there is a lack of similar achievement in the neighboring countries except for the UAE. The limitation in the regional market share dulls the prospects of the company because gaining a foothold in the global market requires dominance not only in local but also in regional markets. In addition, the dependence on a single brand is a weakness that impedes the stability of the business. In case of an emergency that may affect its performance negatively, the entity is likely to lose its clout.
The increase in the population size and changing preferences among consumers are opportunities that the business faces. The increasing population provides the entity with a bigger market to sell its products and get its labor. In addition, shifting consumer expectations based on nutritional and health awareness implies that customers are no longer willing to purchase unhealthy products. Thus, the company has opportunities to produce healthy products that meet consumers’ needs.
The threats that the entity faces are challenging. For instance, instability in oil prices poses a danger to the health of the business because the latter benefits from the revenues generated. When prices dip, incomes decline in Saudi, as does the purchasing power of consumers. In addition, the threat posed by adverse weather conditions such as depleted water sources is a great concern since rearing cows is dependent on water. Therefore, the implication is that the company explore measures to provide a basis for the sustainability of the business.
Section 5: Conclusion: Recommendations:
Explain your personal opinion about the business and suggest some remedies or action plans that can enhance the quality of their operations, skills, products, and finances. Your suggestions should be practical and related the real-world challenges.
In my assessment, the Almarai business is a high-performing company that has managed to excel amidst unfavorable conditions. Coming from a desert region, the company has surpassed expectations. As a leader in the dairy business, the entity has opportunities to use its current position to expand even further. However, for the enterprise to succeed, it has to demonstrate resilience similar to what it has shown in the past.
Hence, to advance further, the business is to understand its external and internal environment. The analysis done in the previous sections has revealed that Almarai operates in a relatively unstable environment. For instance, consumer preferences are changing, thus threatening the stability of the economy. In this regard, it is essential that the company explore alternatives for improving its business. With regard to the economic instability caused by volatility in the oil markets, the company should explore ways of increasing its production efficiency so that it can lower the prices of its products. Through such an approach, the sales of the entity’s items will not be considerably affected by declining incomes. Consequently, the Almarai Company would have to increase its investments in technology.
The company’s limited presence in the markets outside the Middle East should also be addressed. Based on the above weaknesses, the options to consider include carrying advertisements and expanding into neighboring countries. In a bid to increase Almarai’s presence in regional and international markets, it is necessary to develop a strategy of an acquisition. Furthermore, the company should employ brand diversification to provide cover for the existing one, in case of unanticipated problems. In addition, to make its dairy business sustainable, Almarai has to resolve the water problem. Given that some aquifers have been depleted, the company should partner with players with an interest in improving water availability. In this respect, addressing the water problem might require the relocation of Almarai’s plants to other countries or the importation of the substance.