Analysis of Global Strategy and Competitiveness Al Khaleej Sugar Co - Case Study Example

Global Strategy and Competitiveness Customer Inserts His/Her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name 09, 09, 2010 Al Khaleej Sugar Co Company Profile Al Khaleej Sugar Company was established in 1995 as the forts sager refinery in the Gulf Region. Its production capacity then was about 2,400 tons of sugar, which has since risen to 4,800 tons. It is expected that by the end of the year 2010, the company will be able to produce 7000 metric tones of sugar, thanks to the new facility being completed. It is billed as the first standalone sugar refinery in the whole world. The company‘s core products include pure refined white sugar manufactured in its ultramodern facility at Jebel Ali in Dubai. It also produces sugar syrup as a by-product which it exports for use as cattle feed. Al Khaleej Sugar Company also re-exports its raw sugars to different end users across the world. The company has its headquarters in Jebeel Ali Port. The company produces sugar in three distinctive types. These include fine, extra pure and coarse. All these plus the syrup and raw sugar are exported to over 400 destinations across the world, as well as countries in and around the Gulf region. Al Khaleej Sugar Company makes a total contribution of around 2.4 percent of the total sugar produced and consumed in the world. The company’s emphasis on quality is reflected in the type of facilities and products under its name. Indeed, quality has become part of the culture of the organization. Among the quality systems it has implemented include ISO 9002, was then upgraded to ISO 9000:2000 around April, 2004. In 2000, it implemented the Dubai appreciation Program, the HCCP in 2004 and the OHSAS. Among the organizations in which the company is a member include the Refined Sugar Association of London, the Sugar Association of London and the Sugar Industry Technologists. Al Khaleej Sugar Company sponsors a number of research programs and contributes to papers in international sugar forums. It has also regularly played host to a number of sugar related conferences. Its orientation towards customer satisfaction, its focus on people and resources; innovativeness and processes backed up by strategies fronted by visionary leaders has made it possible to achieve all these. Al Khaleej Sugar Company is managed by a team headed by the chairman who is also the Chief Executive Officer. Below him are a number of directors of various areas such as investments and services, technical services, finance and commercial services; and human resources among others. There are also regional directors for regions which include Pacific/Asia/South Africa and the Caribbean; and the rest of Africa and Belize. Al Khaleej Sugar Company is a private limited company. Though the exact number of employees the company has cannot be accurately verified, they are known to run into hundreds of thousands, given the fact that the company has a presence in many parts of the world. It has very high net sales because of the variety of activities it deals in. Apart from doing business for profit making, the company is actively involved on social welfare activities such as provision of scholarships to students, construction and equipment of hospitals, humanitarian activities during disasters and so on. These activities have improved the organization’s image in all the countries and regions where it operates. This is thanks to its culture of corporate social responsibility. Importance of Appropriate strategies for a competitive Business World Like any other organisation that wishes to not only maintain its presence in the global market but also grow its profits, Al Khaleej Sugar Company ought to make use of appropriate strategies in its operations. Appropriate strategies would for example help the company to define its scope of operations, appropriately allocate its resources, and identify areas in which it can operate competitively as well as creating synergy (Feffer 2003). Since global business is increasingly becoming competitive, the company could use strategy to identify the countries and regions where it could compete effectively. Different countries and regions present different advantages and disadvantages. Because of the scarcity of resources, managers at Al Khaleej Sugar Company have had to identify markets which offer optimal opportunities for growth and profitability for the company. This has been possible with the company’s choice of appropriate global strategies. It would for example be imprudent to venture into a market that has stronger competitors, where the cost of business is high and which offers more risks than opportunities. Al Khaleej Sugar Company has also found it necessary to choose appropriate strategy for purposes of resource allocation. Resource allocation has been done in a manner that gives the company the ability to compete effectively in the global market. Resources have often been allocated to company departments, divisions, regions and functions that have the potential to improve its position in the market. Departments that are core to the goals and objectives of the company could for example be allocated more resources than the non-core ones. Regions that seem to have a lot of untapped market could be allocated more resources than those that seem to have reached saturation, and where more resource injection might not make any difference. Product lines whose products are on high demand are allocated more resources than those whose products perform dismally. This allocation is also seasonal. When pure white sugar is on high demand, most resources are allocated so that that department can cope with this demand. The company has found it necessary to use appropriate strategy that gives it a competitive advantage over competitors. As earlier established, there are a number of activities that the company participates in ranging from the production of commodities such as pure white sugar, syrup and raw sugar. Many times, the company has carried out its own assessment of the various production lines and product demand in various regions and chosen to concentrate more on what it does better than its competitors in each of the regions. It has done this by use of its superior technology, implementation of sound organizational programmes and distribution systems and so on. Apart from identifying areas with a competitive potential, it also develops plans for maintaining operations in areas that it gas already secured competitiveness. Appropriate global strategies have been used to synergize its operations and functions. The most important aspect of this is to create a situation where its operations and functions have had to benefit from each other. Many times, it has had to use a product line such as production of sugar to spur the production and sale other products such as syrup and raw sugar. This way, each business segment has been able to benefit from the other. The benefit has been more when the demand of a particular product in one region has been used to encourage the production mans sale of other products on demand in another region. Al Khaleej Sugar Company Global Strategy: Multidimensional As earlier said, Al Khaleej Sugar Company has a presence in a number of countries and regions across the world. These countries and regions have different environments within which the company operates. Consequently, the company has adapted a global business strategy that takes these many differences into account – the multidomestic or multi-local strategy. Companies using a multidomestic strategy engage in competition in each national market in isolation of the rest of the national markets (Gupta and Gorindarajan 2005). The company tailors products for each individual market in each individual country. This is usually done after a lot of research and development activities have been carried out in that local market. Whereas a country New Zealand might be in need of syrup for their cattle, Kenya which does not need syrup for their cattle might demand more of pure white sugar for their tea. A global strategy could therefore fail because of lack of homogeneity in markets. The multidomestic strategy has enabled Al Khaleej Sugar Company to decentralize decision making from the head office to the various countries or regions where it has operations. Various markets present different challenges and situations where decision making is required. Managers in those countries and regions are better placed to make decisions in such situations. When there is a fall in prices because of unregulated sugar imports in a country for example, the manager in that country could decide how much price reduction to make so as to remain in business without consulting the headquarters. Al Khaleej Sugar Company has left the sourcing of personnel and materials used for its operations to the local managers and environments. This way, a lot of savings are made because the head office does not need to spend its resources in performing such activities. Local resources such as distribution trucks and personnel are cheaper than imported ones. Decentralization under the multidomestic strategy has made it possible for the company to quickly and effectively respond to the local market needs. The flipside of it is that a lot of resources are often used to tailor certain products and services to suit the local market, rather than offering uniform products and services to all the markets globally. On the whole, Al Khaleej Sugar Company has been able to use the multidomestic strategy because its markets lack homogeneity, lacks a uniform global distribution networks and the ability to transfer marketing because of the different environments. Departmental Strategy The department in which I work, the human resources department, has a departmental or functional strategy (D'Aveni 2006). These strategies involve developing and coordinating resources which make it possible to effectively and efficiently execute business unit level strategies. The strategies at this level complement the organizational business unit level strategies by providing them, together with the corporate level strategy, with input. It for example supplies the higher levels with input concerning human resources required for effective operations. From the input provided, the higher levels develop organization wide higher level strategic intents, which are then passed down to functional unit. The functional unit is charged with the responsibility of translating these strategic intents into discrete plans of action for the department. If the functional unit successfully implements these action plans, the overall corporate strategy will doubtlessly succeed. This is how my department at Al Khaleej Sugar Company has worked together with the rest of the departments within the organization. Strategy School Used at Al Khaleej Sugar Company Al Khaleej Sugar Company currently uses the transnational strategy school (Digman 2007). This in a way is a fusion of the global strategy and the multidomestic strategy. This school operates on a number of implementation tactics. The first one entails mass customization. There is a creation of synergy through globalized research and development. This way, a number of products are customized to suit the variety of markets the company is eying. The second pillar involves global sourcing and logistics. A number of resources are obtained not just locally, but globally. The third pillar of the school has to do with gathering intelligence and information from global resources. This is facilitated by the wide reach that the company enjoys. Customer service presents the company with another unique opportunity. Since the company operates in a number of countries and regions, there is the possibility of customers from each one of these countries and regions to demand for different services, which the organization has used to enrich its service provision to the customers. Lastly, the company has been able to build global alliances. The nature of business it transacts is such that it loops in with a number of players as customers, suppliers, governments, employees and so on. These business alliances have enabled the company to operate successfully and profitably. Many businesses world over have entered alliances of various types with Al Khaleej Sugar Company. A SWOT Analysis of the Multidimensional Strategy at Al Khaleej Sugar Company The strategy that Al Khaleej Sugar Company uses can be subjected to a SWOT analysis (Porter 1985). Among its strengths is its ability to tailor products for different markets in order to avoid situations where products are taken to markets where they are not needed. This might be unprofitable to the company. The decentralization of decision making makes it easy for managers to take timely and relevant decisions in responding to market needs. Another strength is that the company is able to source for labor and materials locally hence saving on prohibitive import costs. The strategy used by the organization is also fraught with some weaknesses. Tailoring products and services to individual markets has proved to be costly. It is possible to compromise on product quality in the course of tailoring products to specific markets. The company also fails to benefit from the economies of scope. Al Khaleej Sugar Company has a number of opportunities open to it. This strategy could afford the company the opportunity to benefit from a wider reach of its products and services in ways that the consumers want. With the number of trading blocs quickly emerging, the company could seek to take advantage of the conducive business environment to reap maximumly from the markets being created. The business strategy adapted by Al Khaleej Sugar Company has a number of threats, especially from those competitors who are able to use the global strategy. Such competitors are able to spend less in production because of product homogeneity and standardization, transfer of marketing and the wider distribution networks they have. Such companies benefit from economies of scale in production, lowered transportation and product development costs and a wider scope of economies. All these threaten the position enjoyed by Al Khaleej Sugar Company in relation to the Multidomestic strategy of global business. The Effect of Changes in the Sugar Industry The kind of industry in which Al Khaleej Sugar Company is undergoing lots of changes. The first one is liberalization. Many countries are liberalizing the production and marketing of sugar, Al Khaleej Sugar Company’s core business. Whereas this will help it access international markets it was previously not able to access because of barriers, liberalization will make it possible to reach these markets. On the other hand, the company should be ready to face competition when markets that had been closed to other players, especially those in the Middle East, get opened up to them. The increasing global population has led to more demand for the company’s products and services, consequently increasing its profitability. As far as organizational management is concerned, many companies in the world are looking of individuals or corporations who can provide quality management and consultancy services in regions especially those in the Middle East. Al Khaleej Sugar Company has quality managers, and this opens up more avenues to export expertise. Al Khaleej Sugar Company has been aligning itself to these changes and this has helped it in the implementation of its strategies. Cultural Challenges Facing Al Khaleej Sugar Company in Global business Like any other company in international business, Al Khaleej Sugar Company has continued to face a number of challenges related to culture. Due lack of cultural homogeneity in the global market, it is obvious that the company has invested in some countries whose people’s way of life are a major challenge. Some of the destinations in which the company has invested do not for example allow women to work in offices. Consequently, the company has been denied the opportunity of making use of quality female managers who would have performed well in such countries. Another area is in advertising. There are some forms or symbols of advertisement which are not acceptable in some cultures. If the company uses such symbol, it is likely to alienate itself from the same customers it is trying to woo. This is a major challenge especially if managers are from outside the country. This is compounded that the company has its origins in the Middle East where the Islamic culture is supreme. The Future of Al Khaleej Sugar Company’s Cultures which are value driven have helped the company in decision-making because people are more interested in the quality of decisions made rather than who made the decision. Some countries have a very strong sense of loyalty to their values. Employees for the company in these countries tend to be very loyal. The company has found it easy to establish successful work teams in socialist rather capitalist countries. Whereas capitalists work on their own, socialists work in groups and value group rather than individual success. Generally speaking, whereas some cultures have accepted and indeed complemented Al Khaleej Sugar Company’s business operations and strategies, others have been rather hostile, forcing managers to adjust. The trend in Al Khaleej Sugar Company’s has shown a series of improvements form one year to the other. The world is continuously opening itself up to business and creating more business opportunities for inventors; opportunities that the company is likely to take advantage of. It is also investing a lot in human capital development for purposes of developing skilled manpower who can be relied upon to move the organizations vision forward and help in the implementation of its strategies. In spite of the competition that the company faces from its competitors, the superior products and services it offers gave it a competitive advantage over the rest. It is also aggressively entering joint ventureships with other companies globally as a way of reaching out to more markets. Generally, the future of Al Khaleej Sugar Company’s looks bright, all other factors remaining constant. References D'Aveni, Richard A 2006 "Corporate Spheres of Influence." MIT Sloan Management Review, vol 45, no 7, pp.38–46. Digman, L 1997, Strategic Management, Dame, Houston. Feffer, J 2003, Power Trip: U.S. Unilateralism and Global Strategy after September 1,. Seven Stories Press, New York. Gupta, AK, and Gorindarajan, V 2003, Global Strategy and the Organization. John Wiley & Sons Publishers, New York. Porter, M 1995, Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, New York. Read More