There is no doubt that the Middle East has been rapidly developing in social, economic technological and financial spheres for the last decades. It has managed to become a powerful economic, financial and manufacturing world centre. Consequently, many eastern companies are involved in the global business activities. They are managing to become the world leaders in different industries. One of such prosperous companies that are situated in the East is Sabic Company. The company engages in many spheres, although, the major of Sabic is the chemicals production. Thus, the research paper is aimed at the analysis of current strategic plan of Sabic organization depicting its strong and weak sides.
Organization Overview
Saudi Basic Industries Corporation is known all over the world as a SABIC Company, which is considered to be one of the largest non-oil companies in the Middle East (Gulf Base 2016). Sabic is a world known company that is engaged in selling, promotion and manufacturing the petrochemicals. According to Gulf Base (2016), Sabic is in top 10 world companies that are petrochemicals manufacturers. It was established in Riyadh, Saudi Arabia, 1976. In spite of the fact that Sabic is considered as a public company, about 70 percent of its shares belong to the government of Saudi Arabia (Sabic 2015). Nowadays the company is a rather prosperous one and is spread all over the world. There are representatives of the company in more than 50 countries around the world, namely such regions as America, Europe, Middle East and Asia Pacific (Sabic 2015).
Sabic is represented as a participant in several different fields, namely chemicals, plastics, agri-nutrients, metals and specialties. As a result of developing the business in these operational fields, Sabic is offering the following products to the market: polyester, melamine, and polypropylene, polyvinyl chloride, polystyrenes, polyethylene, polypropylene and their by-products. The Fertilizers unit produces ammonia and urea, phosphate and liquid fertilizers. The Metals unit is a supplier of flat steel, long steel and aluminum products. In addition, it is important to say that the company is rather innovative and fast developing. Much of finance is spent on research and development of the technology and innovation process.
One of the most important competitive advantages that the company is laying the stress on is the quality of its products. The Total Quality Management program has been launched by the company in order to control the goods delivered by Sabic. In addition, the whole manufacturing process is run according to the requirements of International Standard ISO 9001 certification (Sabic 2015). Thus, Sabic is a prosperous well-developing company of Saudi Arabia that is manufacturing chemicals of high quality for further distribution all over the world.
Financial State Analysis
It is beyond all doubt that in order to provide a company analysis, the financial situation plays a critical role in the evaluation, so another company criterion that needs to be described is the financial stability of the company. The important criterion of financial statement is company’s profitability. The gross profit of Sabic in 2015 was 43 million Saudi riyals. It is rather high profitability rate, although, it decreased by 8 million Saudi riyals comparing with the previous year (Sabic 2015). In addition, another important fact that should be taken into account, analysing the financial state, is the net income of the company, which shows that Sabic was profitable in the previous year. The net income in 2015 was 18 million Saudi riyals. It is rather considerable income level, although, it decreased comparing to the previous year. Other important criteria of the financial state are the analyses of shares, their volume and price. The total volume of Sabic shares is 975,838 (Sabic 2015). The average price for the share is about 92 Saudi riyals per share (Sabic 2015). The total share turnover is 89,439,128 Saudi riyals, which is a considerable amount and shows company’s good position on the financial market (Sabic 2015). Thus, Sabic Company is a financially stable and profitable public company with a big amount of shares. According to the financial criteria, the company’s development is rather rapid and high, although there is a slight decline during the last year.
Organization’s Strategic Plan and Its Analysis
The organization`s strategic plan is critically important for the further development. The first component of the organization’s strategic plan is the mission. The Sabic Company determines its mission as “responsibly provide quality products and services through innovation, learning and operational excellence while sustaining maximum value for the stakeholders” (Sabic 2015). In the company’s mission, the company plans to increase its production volumes and to grow further . In addition, Sabic is emphasizing the importance of its stakeholders to the company management.
The second part of the organization’s strategic plan is the company’s vision. Obviously, the Sabic Company is settling rather high vision of the future state of its business. The vision of the company is “to be the preferred world leader in chemicals” (Sabic 2015). Due to the fact that Sabic is setting such a challenging vision, organization strategic plan has to develop long-term and short-terms objectives that have to be fulfilled in order to acquire the world leading position in the chemical industry. Moreover, the core values of the company are important for the strategic plan. The value analysis is important in order to identify the instruments and principles according to which the company is running in order to complete the objectives and fulfill the vision of the company. Sabic has identified four values that are vital for the company. They are the following: inspiring, engaging, creating and delivering (Sabic 2015).
One of the most important components of the company’s strategic plan is the strategic objectives that the company is setting for the short-time or long-time achievement. The objectives are based on the company’s vision, according to which Sabic is targeting to become a world leader of the chemicals manufacturing. In order to reach such target goal, the following objectives have to be reached.
Increase the profitability rate by 5% in 2017. There is no doubt that each company is working for the maximum profitability increase, so Sabic is willing to develop financially as well. Thus, the short-term objective of the company is to increase its profitability level in the next year. Especially important this objective is due to the fact that in 2016 the reports showed a decrease of profitability comparing to the previous year.
Launch the company products distribution and promotion in 2 additional regions in 2017. According to the company’s vision, Sabic is planning to become a global company. That is why it needs to have the representatives or subsidiaries in each geographic region. Thus, the short-term objective for the next year is to fill two additional regions with the Sabic company products. It will increase the market share of the company and its geographic coverage.
Develop a new chemical product with the improved quality and technical norms in 2017-2018. In order to stay profitable and in great demand, the company needs to remain competitive on the market with the high industry rivalry. Due to the fact that the Sabic Company is positioning itself as a high-quality producer of chemicals, its competitive advantage needs to be sustained and developed constantly. In addition, in order to remain interesting to the loyal clients, the company constantly needs to develop the assortment and product range. Thus, the objective for 2017-2018 has to deal with the new products development.
Develop an ecological program of developing an eco-friendly production and manufacturing process during 2017-2020. There is no doubt that the issue of ecology is extremely urgent nowadays. More and more world organizations, governments and politicians are worried about global future environmental situation. That is why the popularity of ecological programs is rapidly rising. This fact is especially important taking into account the Sabic Company that deals with the chemicals that usually are harmful to the nature. Thus, it is critically important for the company to make the modifications into the production process and make it eco-friendly. This objective has to be implemented by 2020.
In order to ensure the objectives and vision are reached, the implementation process needs to be planned properly. Implementation is an important part of the organization’s strategic plan. One of the main stages of objectives implementation is the investments into the research and development process which would give an opportunity to develop a new product and improve the quality of the goods offered to the clients. In addition, the marketing department will have to research the existing and target markets in order to determine what countries are the best to target for the Sabic Company international expansion. Moreover, marketing department has to develop a product, distribution, price and promotion strategies for both the new market and the new product. What is more interesting, in order to ensure the ecological program development and ecological objective implementation, the Sabic Company has to create an ecological department as a body of the company, hire high-quality personnel and ensure the objectives` fulfillment.
The last but not the least stage of objectives implementation is thorough controll. It should take place in each stage of strategic objectives implementation. The quality and control department has to compare the actual results with the planned ones in the beginning. Control process is needed for the definite reach of all strategic goals and the company’s vision.
PESTLE Analysis
There is no doubt that Saudi Arabia is a well-developing and promising country, although companies need to know the existing conditions in the state. It is done with the PESTLE analysis (What is PESTLE Analysis? A Tool for Business Analysis). The first component is the political environment. It is rather stable in Saudi Arabia. The country is an Islamic kingdom that is run by the Royal Family (UHY Safdar & Sufari 2009). The rules are strict and stable for many years. Consequently, there are no strikes or political problems, which make the country attractive for business. However, the companies that are operating in Saudi Arabia need to take into account the threat of the conservative and closed policy to the international companies.
Another important criterion is economic environment. Nowadays Saudi Arabia is the largest market in the Middle East. Its gross domestic product is more than $300 billion ( UHY Safdar & Sufari 2009). Moreover, the country is rapidly developing, because its growth rate has become about 6% for the last 3 years (UHY Safdar & Sufari 2009). The country is presenting 10 biggest banks in the Middle East that makes the financial sphere stable and attractive for investors. However, in spite of the rapid economic development, the companies that are running on the Middle East market, need to take into account that, despite the favorable economic conditions, there is a threat posed by increasingly high competition on the market.
From the social point of view, Saudi Arabia is a country with more than 27 million people (UHY Safdar & Sufari 2009). The government pays special attention to investing in education of people and creating the high-skilled labor for the country. However, there is a considerable weakness of the market, because from the social point of view the Eastern Market is hard to have business on. It is caused by the fact that life and business is also regulated by religious factors. In addition, the society of Saudi Arabia has rather specific consumer needs and demands.
From the technological point of view, Saudi Arabia is a country of high-technologies. Due to the fact that Saudi Arabia is a prosperous country, much money is spent on the acquiring the global technologies and implementing them on the domestic market. Thus, the inside-country technological development is a weakness.
The next part of PESTLE analysis is legal situation within the country. Saudi Arabia is regulated by two main governmental documents, namely Quran and Sunnah (UHY Safdar & Sufari 2009). The county’s regime is a monarchy system. The legislative part is presented by the King and the Council of Ministers. Thus, it might be confusing and complicated for the global companies to run the business in monarchy system country, which is a considerable country weakness. As for the environmental point of view, it is important to say that Saudi Arabia is the country with rich natural resources and hot continental weather (UHY Safdar & Sufari 2009). Thus, Saudi Arabia is a prosperous country, although the main threats and weaknesses for the business deal with the considerable dependence on the religious factors and conservative policy.
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Porters 5 Forces Model
In order to develop an industry internal analysis, the Porters 5 Forces model is applied (Mind Tools). The industry rivalry is rather high. Many companies on the market are offering fertilizes and chemical products. However, it is important to say that the Sabic Company is one of the largest companies that are running in the industry, so it is easier to compete with the rivals. Due to the fact that there are many companies and products presented on the market the bargaining power of buyers is very high.
The manufacturing process of chemicals is very complicated. Ensuring the high level of quality of the products offered to the customers, the company needs to use only good raw materials. Thus, the bargaining power of suppliers is rather high. As for the threat of substitutes, it is also rather high. It is caused by the fact that more and more chemical means and products are developed every day.
However, due to the need of expensive research and development process, qualitative personal and patents, the industry is not very appealing for investors. Thus, the threat of new entrants is rather low. Taking all Porters 5 forces model elements into account, the conclusion can be done that the chemical industry is rather hard to develop business in, because the number of competitors, enter barriers, bargaining power of substitutes and buyers are very high.
Generic Strategy
Each company has a choice of competitive advantage to offer for the clients and customers. There is an option of the generic strategy; companies can compete with the cost leadership or product range differentiation (Quick MBA). The Sabic Company has decided to follow the strategy of differentiation. The company is presenting a varied range of products. There are several product groups, which include the different product lines and modifications. Thus, the Sabic Company is offering a varied product range at average prices. In such a way, the company’s generic strategy is differentiation.
Critical Success Factors
There is no doubt that the main critical success factor of the Sabic Company is the high quality of products delivered to the final customer. The company is building the marketing strategy with the competitive advantage emphasis on high quality of raw materials, excellent final products and effective pre and aftersales service. Another critical success factor of the company is to spread on the global market. Due to the fact that the company is presented in more than 50 countries, its products are spread all over the world and the company has become well-known. People from the globe are aware of Sabic products and are buying them. The last but not the least critical success factor is the goodwill. The Saudi Basic Industries Corporation has been on the market since 1976. It has become well-known and reliable brand of chemical products all over the world.
Strategic Priorities
Despite the fact that the company is rather successful on chemicals market, the company still needs to work on its promotion and expansion. Due to the fact that the European market and Eastern marker are very different, Saudi Basic Industries Corporation has to focus on company promotion in Europe. In addition, with the raising popularity of taking care of ecology, the Sabic Company has to focus on its field development. The third priority for the company should become the development of strong corporate culture within the company, because it affects company’s success considerably.
Conclusion
Thus, taking everything into account, we may conclude that Saudi Basic Industries Corporation is a well-developing company that is taking a leading position on the global market of chemicals. Its current strategic plan is rather efficient, it deals with the development and improvement of the existing competitive advantages and acquiring new strengths. The company’s PESTLE analysis shows that the Sabic company is operating in prosperous and rich country, although, there are considerable obstacles for business that are explained by the cultural differences. According to Porter 5 forces model, the chemical industry is rather hard to develop a business in because a number of competitors, enter barriers, bargaining power of substitutes and buyers are very high. Analyzing the generic strategy, we may conclude that the Sabic Company is using the differentiation strategy. The main critical success factors are the high level of goodwill, promotion and high quality of products.
