Project of Strategic

management

Salman Asfahani VB0093

Abdulellah Aburashed WB0066

Fall 2023
Contents
Introduction .................................................................................. 2
Current Vision and Mission ......................................................... 2
Current strategies ......................................................................... 4
External Environment Analysis ................................................... 4
Opportunities ............................................................................. 4
Threats ....................................................................................... 5
Internal Environment Analysis .................................................... 6
Strengths .................................................................................... 6
Weaknesses ............................................................................... 7
Porter Five Forces ........................................................................ 8
Threats of New Entrants ........................................................... 8
Bargaining Power of Suppliers ................................................. 9
Bargaining Power of Buyers ..................................................... 9
Threat of Substitute Products .................................................. 10
Competitive Rivalry ................................................................ 10
SWOT Matrix ............................................................................ 11
Matrix for Suggest Quantitative Strategy ............................... 11
Advantages and Disadvantages for the Alternative Strategy . 13
Recommendation of the Strategy .............................................. 14
Strategy Evaluation .................................................................... 14

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Introduction

A
lmarai Company Ltd. Is a national and one of the biggest
company inside Saudi Arabia, it founded, and based in Saudi
Arabia, exactly in 1977 and its head & centralized office located
in Riyadh within 150 kilometers. Then it separated in many branches all
over the Saudi Arabia, in addition to other branches in many countries.
The company shared and invested with a contributed capital by 750
million SAR in 1991. Company markets a range of food and beverage
products under the name of Almarai brand, and it aims around the main &
important aim, which is to make its products of high-quality to the
consumer, furthermore, it focused on the retail outlets, also it includes
fresh and long-life dairy products, as well as fruit juices, cheese, butter
and some nondairy products. Almarai supplies its chains from dairy farms
into the retail stores. Almarai Company was the first dairy farm in Saudi
Arabia to accredit with ISO 22000 & ISO 9001. Across all its operating
divisions, which are farming, procurement, processing, technical research
& development, distribution and supply chains.
In short, Almarai is a company that specializes in the production of milk
and its derivatives in an integrated manner. It has a wide range of
products, including dairy, liquids, juices, foods, and various forms of
yogurt, cheese, fresh chicken, bread, burger bread, Arabic bread, and
different types of croissants and wafers.

Current Vision and Mission

Historic frame

T
he company was established in 1977 by Prince Sultan bin
Mohammed bin Saud Al-Kabir as an owner and two foreign
brothers. The Prince currently serves as the board chair of the
company. The company recognized the importance of quality production
of milk, and proper logistics, in Saudi Arabia and the larger Middle East.
Thus, the initial business plan was the creation of a company that could
offer quality milk production and a large logistical capacity to transport
the milk to different parts of the Middle East. However, as Speculand
notes, the business model was significantly expensive because it also
employed a decentralized approach (38). This changed in the mid-1900s
when the company shut down several of the decentralized factories and
opened one large centralized plant.

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The company went public in 2006 when it listed in the Tadawul stock
exchange (Almarai Co). At this time, various competitors had entered the
market. To ensure that the company retained favor in the field, the
management began to diversify their products. They did this by also
including other dairy products in their portfolio. In addition, the
management bought up two major bakeries in an attempt to diversify 36,
furthermore, the company boosted the its position in the market 43, and it
became international and purchased businesses in Egypt and Jordan due
to their partnership with Pepsi. The company management has openly
stated that they will create 12,000 jobs in the countries they operate in, in
the next five years. They intend to expand their business and make new
acquisitions. It is crucial to note that the company has received a lot of
political goodwill. One of the main reasons for this is the fact that the
government has been trying to move investments from the oil industry. In
fact, government parastatals own approximately 16% through the
sovereign wealth fund. The company mainly deals with dairy products.
They have several plants based on a centralized approach in Saudi
Arabia. Apart from the different types of milk, the company’s operations
also touch on baking, poultry, and other agricultural products. As
mentioned previously, the company’s operations are not only in Saudi
Arabia. The company has also penetrated the Egyptian, Jordanian and
Argentinian markets.
Vision statement is "To grow our leading position as the trusted choice
for food and beverages in the region, delighting Consumers with quality
nutrition every day." A company’s vision statement outlines its future
aspirations and long-term goals. Almarai’s vision is to be the preferred
provider of nutritious and affordable food products across the Middle
East and beyond. The company aims to recognize as a global leader in the
dairy and food industry, setting the standard for quality and innovation.
On the other hand, mission statement is "To provide quality and
nutritious food and beverages that enrich Consumers’ lives every day."
The mission statement of a company outlines its purpose and reason for
existence. Almarai’s mission is to provide nutritious and high-quality
food products to its consumers, while maintaining a commitment to the
environment, community, and its stakeholders. The company aims to be a
trusted and responsible provider of essential food products, fostering a
healthier society.

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 Current strategies
- First strategy is "the provision of exceptional transport and logistics".
This is one of the key business lines of the company. Not only does the
company transport its own products to different parts of the Middle East,
and the world, but it also helps local farmers transport their milk to other
processing plants. This means that even when the company is not directly
buying milk from the local farmers it is still making money off the
transportation of the farmers’ products. Logistics is an integral part of
milk processing. This is due to the fact about milk and other related
products are fast moving. They are using every day, thus, supply should
be constant. Moreover, milk and similar products have a short shelf life.
Therefore, they have to be delivered to the end-user quickly after
production.
- Second strategy is "powerful branding". This enhanced through the code
of conduct to which the company adheres at all times. Strong branding is
crucial in ensuring loyalty and attracting new consumers.
- Third strategy is "innovation". The company has known to be very
innovative both in packaging and in quality production. For example,
milk has a short shelf life. However, using innovative measures, the
company has been able to elongate the initial shelf life to make their
quality products last longer. This strategy ensures that the company saves
on wastage and allows the consumer enough time to use the products
without worrying that it has expired.
These strategies allowed the company to grow its portfolio so far.
Actually, it expected that the company would continue using the three
strategies
The strategies do not appear to have a transition plan into the next stage.
The transition plan is relevant as it measures all that has been achieved
through the current plan. It is this evaluation that will in turn help develop
a new plan. The management should be keen on doing the evaluation of
the implementation and the success of the current plan.

External Environment Analysis

Opportunities

M
any opportunities will leverage the complexity of the
company's SPA system. This complexity challenge creates an
opportunity for Almarai to offer capacity-building training to
other partners that are using the system. This opportunity will help the
company further diversify its business and portfolio. Besides, Almarai
can train a select few people in the system. These few employees will

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 tasked to teach other employees. Since they are in-house, the company
will only use resources to train the first specialized group.
In depth, the company can then consider having a capacity-building
department. There are two main reasons why a capacity-building
department would be a significant opportunity for the company. One of
the reasons is the fact that the manufacturing and production industry is
often changing. The changes mainly affect the production time, quality
standards, and even alternative raw materials. A capacity-building
department will ensure that all employees have the latest skills and
knowledge they need to enhance their performance levels. The
department should ideally work closely with the human resource
department to ensure that the needs of the employees considered when
choosing courses or training. This opportunity will help to motivate
personnel as they can certified for all the training they attend. Motivated
staff will not only work better but they will also believe in the mission
and the vision of the company. This will in turn translate to better
implementation of the strategic plan. The diverse nature of the system can
be identified as an opportunity for the business. As mentioned, the
company has been keen on diversifying its portfolio in the past. It started
as a dairy only company, now other agricultural products such as poultry,
has invested in bakeries, and makes juices via their partnership with
Pepsi. The system they have in place will further encourage such
diversity. The company will also be able to penetrate new markets due to
its strong brand. In fact, the government is buying more shares in the
company is critical in the growth and fulfillment of the company’s goals
and objectives. The company has to confirm political helpfulness at all
costs in order to remain productive. This is especially important now as
the government is implementing policies that affect its largest industry
(oil) and is trying to attract new investors.
In brief, the current strategy is flexible, and this ensures that the
management can incorporate other activities in their overall plan as long
as they adhere to the strategy.

Threats
- One of the main threats that the company might face is the environmental
regulations on the production of dairy products. Whereas Almarai does
not have ranches with cows and other animals, they support farmers who
breed these animals. Without cows, Almarai would run out of business

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 because their main business line uses cow products as its raw material.
Currently, companies that deal with dairy products are investing in
alternatives. The fact that the current strategy for Almarai has not
provided guidance on any alternatives furthers the threat. The non-
compliance to environmental concerns can negatively affect the positive
image that the company has developed over the years.
- Second threat is the storage of dairy products. Again, there have been
concerns over the use of chemicals to ensure that dairy products last
longer than their normal shelf life. Almarai uses several strategies to
ensure that their products’ shelf life is elongated. For example,
Pasteurization is a way of ensuring longer milk shelf life. Critics have
argued that these and other treatments also affect the health component of
the products. However, there are speculations of the relationship between
the two elements. This is a threat as it can affect the quality of products
produced in those countries. It is possible that a lower quality in a
different country will affect the brand presence in another country.

Internal Environment Analysis

Strengths
- The company is that they are currently the brand of choice for many
households in the Middle East. Almarai has been consistent about its
products over the years. Thus, the company has grown into a household
brand. This point can be argued about the company is a favorite since it is
one of the oldest milk-producing businesses in the region. In addition,
one can state that the high quality of products has attracted more clients
to the brand.
Several things make Almarai products high quality.
 First is the packaging of their different items. The company has
invested many resources to ensure that its products have attractive
and instantly recognizable packaging.
 Secondly, the quality of the product has been constant. The
company has also used many resources for market research to
make sure they cater to their clients’ needs.
- The strong distribution network that the company has developed over
decades and it can defined as a strength. Due to the extensive network,
Almarai can deliver its products to all its target audiences without extra
effort. Thus, the company has become very reliable despite the use of a

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 centralized approach. It is prudent to mention that this has also ensured
that the company has grown into a household across the Middle East
because their products can found even in remote areas.
- Heat is also important in milk production as it affects pasteurization.
Therefore, one can state that the environmental conditions of the Middle
East favor the company. In addition, the company has invested in
technology to help grow the business. For example, it uses the SAP
system, which streamlines some functions such as human resources,
production, and plant management. It is critical to mention that another
strength of the company is its convenient transaction policies.

Weaknesses
Whereas the company hires highly qualified personnel, it has done little
to ensure that its employees trained on the organizational culture and the
new technologies the company is using. This is a weakness can listed as:
- The employees are not able to use all the benefits that the technologies
can offer. It is arguable that if they trained on all aspects of these
technologies, they would have a better productivity rate. The second
reason why poor capacity building is a weakness is the fact that the
company does not maximize the return on investment for the innovations.
All the technologies that are using in the company bought. Therefore, not
maximizing their use can defined as resource wastage. There are several
reasons why the company has not invested in training its employees. The
most significant is the costly nature of the capacity-building exercises.
- The company uses the system for all production and plan management
functions. However, both junior and senior employees agree that the
system is not user-friendly. This is a weakness as any capacity-building
exercises that would ideally done would be expensive if not futile. It
would take the employees longer to understand how the system works
due to its complexities. Additional training might needed to ensure
compliance and effectiveness. Whereas there is little the company can do
to change user interactivity and experience with the software, they can
look for alternatives that are user friendly.
- The company has is delayed transactions. This tied to the SAP system
problem. As stated, the system controls everything. The company also
allows clients to use different currencies to pay for their products. The
system has, however, not been modified to allow various currencies.
Therefore, some of the purchases have to record manually. This is time-
consuming and devalues the software that the company uses. It is

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 important to point out that the company has installed the SAP software in
all its central plants, including those in Egypt, Jordan, and Argentina. All
these plants are, affected by the same weaknesses.
- The over-dependence on the oil industry. The company has proven that
the Middle East market can produce other items, not just oil-related
products. However, the company had to rely on the oil industry for some
of its raw products. It is arguable that in the Middle East, alternatives to
oil are expensive. This is because the alternatives are not readily
available. Thus, the company also has to monitor the costs of using
alternatives to oil in some of its production functions.

Porter Five Forces

Threats of New Entrants

P
orters Five Forces of Almarai Company Milk and
Modernization in the Kingdom of Saudi Arabia, the barrier to
market entry appears to be high, which indicates that it is not
easy for new players to enter the market, hence leading to lower
competition. This show the industry is attractive and seems to be in
good shape.

For Almarai Company it exists in the market along with the huge cost
advantages, it becomes difficult for new players to bear the
competition and maintain the sustainability. So, any new players, most
of the time, have scarce resources of efficiencies to compete on prices,
hence, displaying a huge barrier for new entrants

Brand image is also another greater hindrance for newcomers.

Almarai Company have a strong brand image, therefore, it takes ample
of effort to take business away from these trusted brands.

Although technology and expertise in a specific industry could go in

favor of new players, however, it might also create a huge barrier for
them. The reason is that it demands an ample amount of knowledge
and advancement to create a new business. Policies of Government
have the potential to restrict the competition in industry through new
legislations, tariffs and quotas. Hence, it goes in favor of Porters Five
Forces of Almarai Company Milk and Modernization in the Kingdom
of Saudi Arabia as by restricting competition; it becomes expensive
for newcomers to enter the market.

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Bargaining Power of Suppliers

S
uppliers' bargaining power referred to the market inputs. As the
suppliers provide the raw material to the firms, so that firms
may further carry their businesses. Thereby, it is crucial to
know how much power suppliers have in the industry. The reason is
that it may create a detrimental effect on revenue. As suppliers could
generate threat to firms by increasing their product/service prices
which ultimately firms would not be able to recover. Hence, they only
have the option to increase their costs price. There exist several
reasons that could treated as an indicator of high supplier bargaining
power. For suppose, when suppliers dominate the industry due to
fewer in quantity. Thereby, becomes more concentrated in contrast
with industry, or the industry is not much crucial customer for them.
However, the bargaining power could manipulated through a number
of suppliers, low product differentiation and the presence of product
substitutes.

Specifically talking about the situation for Porters Five Forces of

Almarai Company, supplier power is medium. Hence the company
somewhat faces low pressure in terms of margins from suppliers.
Following are the factors, which are crucial to know in order to be
aware of supplier power.

The supplier industry is not concentrated; Almarai have numerous

options on the table to have their raw material at a reasonable cost.

Multiple suppliers who have able to produce the same product, but
they will not. The presence of a significant number of suppliers makes
the switching cost low for the company.

Bargaining Power of Buyers

B argaining power of suppliers known to be a vertical force in

the porter framework. We can say that this force happens to
have occurred in various stages of the supply chain.

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Bargaining power of buyers considered to high when plenty of
sellers exist and buyers have limited quantity.

Almarai knows how many sellers exist in markets and how many
options they have in terms of buyers. The reason is buyers have the
option to refuse to purchase the product. The volume of buyers is high
Almarai so it is giving them power to regulate suppliers as per their
demands, and it could gain the power to retain its customers. In
addition, the buyers are price sensitive, and the company takes care of
their pricing strategy if they really want to retain their customers and
attract new customers.

Threat of Substitute Products

A
lmarai Company substitutes are one of the important
problems due to the strong position in the market.

The presence of substitutes in the market raises the threat;

thereby, Almarai makes sure to monitor it regularly. Another factor it
increases the threat is lower as compared to the original product.
Switching cost is lower as buyers can easily switch whenever they
want, hence making the situation critical.

Competitive Rivalry

W
hen competitors are very sincere in their businesses and
sustain their competitive edge via good leadership skills,
this makes their position stronger in the industry

Almarai needs to be aware of all its competitors because not being

familiar with them may increase the competition intensity. In Porters
Five Forces of Almarai case, competition is high. However, Porters
Five Forces of Almarai is aware that they should not just compete in
terms of price; thereby, they also analyze other factors as well in order
to increase returns and retain consumers.

Due to the slower growth of the industry, more effort into competing
for what already exists. As the industry barrier to exist is higher, hence
firms have low options to leave and to maintain sustainability, they
forced to compete even earning less. Hence, this establishes additional
pressure to compete well.

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SWOT Matrix
Table 1 SWOT Matrix

Strength
Weakness
 Brand Power.
 Sustainability. Low market shares in the Gulf
 High Market Share in region.
KSA.  No Other partner Business to
 The top fresh dairy support during Crisis Situation.
product manufacturer.
 Lowest wastage rate of the
raw material.
 Effective quality system.
 Advancement of
technology.

Opportunities Threats

 Change in Currency value.  Competitor’s market shares in

 The decrease in Import the Gulf region.
and Export Duties.  Fluctuation in Petroleum Prices.
 Bigger Focus on Gulf
Region.
 Increased Health
Awareness.

Matrix for Suggest Quantitative Strategy

The quantitative strategy matrix used for the evaluation of possible
growth strategies. This matrix actually involves the evaluation of all
feasible analytical alternatives for growth and development for the
Almarai Company.

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Table 2 Suggest Quantitative Strategy
Alternative Strategy
Key Factors (Focus on Gulf region using the
power of Milk product SBU)
Strengths Weight Rate Score
Brand Power 0.1 2 0.2
Sustainability 0.1 1 0.1
Top fresh dairy manufacturer 0.2 2 0.4
Low wastage of raw material 0.05 1 0.05
Effective Quality System 0.2 1 0.2
Weaknesses Weight Rate Score
Intense Competition 0.2 2 0.4
No other subsidiary 0.15 1 0.15
SUM TOTAL 1 1.5
Opportunities Weight Rate Score
Decrease in Import/export duties 0.2 2 0.4
Focus on the Gulf Region 0.3 2 0.6
Increased health awareness 0.1 1 0.1
Threats Weight Rate Score
Higher market share of a competitor firm in the
0.2 2 0.4
Gulf Region
Fluctuation in petroleum prices 0.2 2 0.4
SUM TOTAL 1 1.9

The result of the alternative strategy's growth is highly attractive, because

of the internal and external evaluation of the environment. the
management of Almarai Company must go with the more focused
approach on the Gulf region to buy sing the particular brand power of its

12
fresh milk products, which are the stars of the BCG matrix in the KSA
market.

Advantages and Disadvantages for the Alternative Strategy

The first alternative growth strategy is to move out of the box and gain
maximum market share in the Gulf region. The reason behind this
alternative growth strategy is the attractiveness of the target market. The
main advantage of this growth strategy is that the company of Almarai is
already serving in the Gulf region but with a low extent of business
operations.

The disadvantage of this growth strategy is that the competitive power is

higher in the Gulf region and, the management has to plan for market
penetration by offering a high-quality product to lead the competition in
the Gulf region.

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Recommendation of the Strategy

A
ccording to the internal and external environmental factors, the
competitor matrix and all other significant results of the key
success factors suggest that the growth opportunity to cover the
Gulf region by using the strong of fresh dairy products is the most
attractive and potential decision. The management at Almarai is famous
for its market penetration using aggressive growth strategies. Likewise, in
Gulf region market penetration is the best and suitable growth strategy to
grab the increased market.

The capital structure should be more equity-focused and less debt-based.

These are the high points of the figures of Almarai Company, which
depicts the proposed capital investment structure of the company’s new
investment decision. The EBIT shows that the earning of the company
before taking out the value of interest and taxes is attractive enough to
carry with the equity financing. On the other side, if the company goes
with debt financing then the rates of interest will ultimately minimize the
net earnings.

Strategy Evaluation

T he most important part of making growth and development

decisions is to evaluate the effects of any strategy implementation.
Strategy making or implementation is not the only success factor
for determining the success or failure of any growth or development plan.
There are many other factors including managerial leadership, luck,
supportive organizational culture, and a valid strategy, which can
collectively lead the business towards success. In the same way, in the
case of Almarai, the growth strategy formulation is significant; however,
it is not an exclusive key success factor. There are different procedures to
check the success or failure of valid strategy implementation.

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