Almarai is a Saudi-based company that deals with food and beverages. Located in Riyadh, Saudi Arabia, the company is estimated to have a revenue of SR 10 billion. According to the company’s website, its mission is to provide quality and nutritious food & beverages that enrich consumers’ lives every day (Almarai, “Value Through Innovation” 1). On the same note, the company’s vision is to be the consumers’ preferred choice by leading in chosen markets with superior food & beverage products (Almarai, “Value Through Innovation” 1).
We will write a custom Term Paper on Almarai Co.’s Strategic Management specifically for you
301 certified writers online
History and Growth
The company was launched in 1977 (Speculand 6) by two foreign brothers. Like other foreign businesses, Almarai required a local investor for it to be profitable. The management added Prince Sultan bin Mohammed bin Saud Al-Kabir as an owner. 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.
Due to its success, and to achieve more, the company went public in 2006 when it was listed in the Tadawul stock exchange (Almarai Co). At this point in time, there were various competitors that had entered the market. To ensure that the company still retained favor in the field, the management began to diversify their products. They did this by also including other dairy products in their portfolio. Speculand explains that the management also bought up two major bakeries in an attempt to diversify (36). The acquisition of the two bakeries proved successful as it increased the company’s portfolio by SR 1 million. According to Speculand, further partnerships with Pepsi and other local companies also boosted the company’s position in the market (43). The company also 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.
As stated earlier, 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.
The company uses a top-down managerial style. The management is led by a chief executive officer. The senior management team also includes a chief information officer and several managers handling different departments. The managers are attached to the company business lines. For instance, the company has an information, security, and quality manager who ensures that all products are of standard quality. Additionally, the business has a manager in charge of milk production and another in-charge person of agricultural products and so forth. It is important to note that many of the employees in the company at the moment are attached to the milk production business line as it is the biggest.
Despite a large number of employees, all senior management team members supervise at most six members directly. The company’s span of control is relatively small to ensure effectiveness and a faster decision-making process. It is prudent to mention that whereas the division of labor at the managerial level is not highly specific, it is rather specialized amongst junior employees. An example can be given to explain further. The information, security, and quality manager have several duties under their docket. First, he/she is in charge of ensuring that all information and data is handled accordingly. Secondly, he/she is responsible for the security of the company while also dealing with quality concerns. The stated manager’s job is diverse and not specialized. However, the junior employees under him/her are divided according to their specialties. For example, those that deal with quality assurance will only be in that department and so forth. As mentioned, the company uses a top-down management approach. The CEO answers to the board. To ensure quality, the company has heavily invested in the right technologies. For instance, they use the QlikView, which is a modern data analytic business intelligence software (Speculand 19) to help make decisions. The management has employed various technologies in all their markets of interest.
Values and Ethical Code
Almarai has six core values (“Value Through Innovation” 1). The values are passionate, adaptable, respectable, innovative, sharing, and excellence (Almarai, “Value Through Innovation” 1). According to Anderson and Schiano, these values are relevant in contributing to the positive image the company has maintained so far (6). The management has been keen on ensuring that all employees understand each of these values and how they apply to their specific tasks. For example, the value of sharing is described as a way of collaborating and sharing work in order to benefit the individual employee, his or her team and department, the organization as a whole, and the community.
Almarai uses its code of conduct to guide its ethical obligations (“Value Through Innovation” 1). The company’s code of conduct applies to all its employees, regardless of their rank, and all partners that agree to do business with the corporation. It is this strict nature of the use of the code of conduct that has allowed the company to adopt and publish a positive image of its personnel. Anderson and Schiano argue that the behavior of the partners of a business is equally important in building the right image as is that of the employees (17). The issue of integrity is also stressed throughout the code of conduct. The company believes that each employee, including the senior management team, and all partners have to show integrity in personal behavior, human rights, and health and safety. The same document also highlights Almarai policies on the use of the company products, access to business and financial records, and other issues. One can argue that the code of conduct is very detailed to ensure that all employees know how to act.
According to the company’s website, Almarai is currently implementing the 2017 – 2021 strategic plan (Almarai Co). The strategic plan is based on three things, namely, regional economic development, Saudi Arabia Vision 2030, and global economic development. The regional economic development analyzes how business is growing in the Middle East. The company has put more specific policies on how to handle competition and attract new emerging markets within the region. The regional concern goes hand in hand with the Saudi Arabia vision 2030. One of the main challenges investors in Saudi Arabia are currently facing is the over-dependence on the oil industry. Anderson and Schiano explain that even business that is not directly linked to the oil industry is affected by the decline in levels in the oil reserves (16). Using the 2017 – 2021 strategic plan, the company has slowly started to move away from oil dependence. Machines and other items used in production that rely on oil have been or are in the process of being replaced. Saudi Arabia’s vision 2030 also pushes for businesses to stop being too dependent on the oil industry under the financial sector development program (Vision 2030).
On the same note, the global economic development rate is a key element of the Almarai strategic plan. This is due to the fact that the company has invested in other countries as well. The global platform affects the products manufactured, the quality of the mentioned products, and even the countries that the business will penetrate in the near future. It is important to state that the strategy also focuses on lowering operating costs, maximizing the use of available resources, and investing in SR 14.5 billion to increase the company’s portfolio.
The strategic plan is meant to help achieve the strategic objectives as approved by the board. According to Almarai’s report, the company currently has six strategic objectives (“Resilience Through Quality” 19). These are to ensure leading market share (value), grow faster than the market, record significant growth from new businesses, maintain strong return on assets, contribute to top-quartile employee satisfaction, and develop a preferred consumer brand (Almarai, “Resilience Through Quality” 19). The report indicates that the company has made significant strides in each of the stated objectives.
It is important to note that these objectives are loosely tied to the strategic plan. This is due to the fact that the management has up to 2025 to achieve these objectives. Since the current strategic plan ends in 2021, the management will have to develop a new strategy to help the business achieve the stated objectives. Anderson and Schiano explain that strategic objectives should rarely be implemented using one strategy (21). The main reason for this is the fact that companies and managements need time to test their plans and see if they are suitable for the objectives. The scholars go further to explain that even though companies are guided by large strategic plans, they have more specific actions that will achieve the objectives. These measures are often carried forward from one strategic plan to another.
Current Strategies to Achieve Objectives
There are three specific strategies that the company has been using to achieve the six objectives mentioned in the previous section (Almarai, “Resilience Through Quality” 21). The 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 that milk and other related products are fast-moving. They are used 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.
The second specific strategy is powerful branding. This has been 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. The third strategy is innovation. The company is known to be very innovative both in packaging and in quality production. For instance, as stated earlier, 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. One can argue that the three strategies mentioned have allowed the company to grow its portfolio so far. Indeed, it is expected that the company will continue using the three strategies
Get your first paper with 15% OFF
A SWOT analysis is needed to highlight the effectiveness of the current strategy on the set company objectives. This section of the paper will discuss the strengths, weaknesses, opportunities, and threats of the Almarai company.
One of the strengths of the company is that they are currently the brand of choice for many households in the Middle East. Anderson and Schiano argue that many households prefer proven brands over new ones (13). Almarai has been consistent in regard to its products over the years. Thus, the company has grown into a household brand. It can be argued that the company is a favorite since it is one of the oldest milk-producing businesses in the region. Also, one can state that the high quality of products has attracted more clients to the brand. Indeed, quality products can be listed under the strengths of the company. There are several things that make Almarai products high quality. The first is the packaging of their different items. The company has invested a lot of 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 a lot of resources for market research to make sure they cater to their clients’ needs.
The strong distribution network that the company has developed over the decades can also be defined as a strength. Logistics is one of the most profitable businesses in the world today (Anderson and Schiano 25). 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 centralized approach where production is done from a few central points. 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 be found even in remote areas.
As mentioned previously, Almarai has diversified its portfolio to include other beverages. Anderson and Schiano explain that the hot climatic environment of the Middle East makes it easier to manufacture these beverages (19). Heat is also important in milk production as it affects pasteurization (Anderson and Schiano 19). Therefore, one can state that the environmental conditions of the Middle East favor the company. On the same note, 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. Clients are able to use various currencies to purchase the company’s products.
The strengths mentioned have been enhanced by the corporate strategy the company uses. Each of these advantages can be linked to one of the key objectives and the specific and targeted strategies utilized by the company. For example, the use of technology is both in regard to the innovation strategy and the business growth objective. The extensive distribution network goes hand-in-hand with ensuring a large market share. Indeed, Almarai has one of the largest distribution networks in the region and this, as explained previously, has also helped the company deliver its products to different and vast parts of the Middle East.
According to Anderson and Schiano, Almarai has suffered some shortcomings due to poor capacity building of staff (11). Whereas the company hires highly qualified personnel, it has done little to ensure that its employees are also trained on the organizational culture and the new technologies the company is using. This is a weakness in two ways. The first is that the employees are not able to use all the benefits that the technologies can offer. It is arguable that if they are to be 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 used in the company are bought. Therefore, not maximizing their use can be 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.
Another weakness is in the main software itself, the SAP system. 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 be 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 also be 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.
A second weakness the company has is delayed transactions. This is also 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 be recorded manually. This is time-consuming and also devalues the software that the company uses. It is 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, therefore, affected by the same weaknesses.
Another weakness is the over-dependence on the oil industry. It is true that Almarai is one of the few companies that have been praised for moving away from the oil business. 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 due to the fact that 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. With this in mind, it is important to appreciate that the company has taken strides to acquire alternatives despite their higher costs. It is expected that the whole region will shift focus from the oil industry in the near future and this will, in turn, lower the prices of alternative sources of fuel.
The weaknesses discussed and the strategic plan all create several opportunities for the company. The first opportunity will leverage the complexity of the SPA system. Anderson and Schiano confirm that many companies that are using the system have complained that it is too complex (21). The 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 it’s business and portfolio. Moreover, Almarai can train a select few people in the system. These few employees will then be tasked to teach other employees. Since they are in-house, the company will only use resources to train the first specialized group.
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 also ensure that the needs of the employees are considered when choosing courses or training. This opportunity will help to motivate personnel as they can get 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. What started as a dairy-only company now does 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 easily penetrate new markets due to its strong brand.
One can argue that the new strategy also offers an opportunity for the company to grow. It does this by tying the company objectives to that of the Saudi government through its vision 2030. One reason why this is critical is the fact that businesses in the Middle East are often highly affected by political and religious concerns. The fact that 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 ensure political goodwill 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 also trying to attract new investors. 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.
One of the major threats that the company might face is the environmental regulations on the production of dairy products. Anderson and Schiano state that environmentalists have explained that the rearing of many cattle at a time and in one specific location can lead to the damage of the ozone layer (27). This is mainly due to the consumption rate of the cows. Whereas Almarai does not have ranches with cows and other animals, they support farmers who breed these animals. One can argue that without the cows Almarai would run out of business because their main business line uses cow products as its raw material. With a call to stop rearing such big numbers of cattle, the company might find itself short of its main raw material. Currently, companies that deal with dairy products are investing in alternatives. The fact that the current strategy 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.
A 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, the ultrahigh temperature (UHT) treatment which heats the milk kills bacteria that would normally shorten the product’s shelf life. Pasteurization is another way of ensuring longer milk shelf life. Critics have argued that these and other treatments also affect the health component of the products. Indeed, there are currently no studies that show any linkages between dairy products with higher than normal shelf life and illnesses. However, there are speculations of the relationship between the two elements.
It is also important to note that there is a less advanced technology in other countries that the company has invested. One can state that Almarai has heavily invested in technology and innovations in the Middle East, particularly Saudi Arabia. However, since the company penetrated the Egyptian, Jordanian and Argentinian markets, it has not had the same enthusiasm in regards to technology and innovation for those new markets. 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 impact the brand presence in another country. This is especially enhanced by the use of the internet where clients can leave reviews and complaints that can be viewed worldwide.
The complexity of the SAP system can be cited as a threat if not properly handled. One of the main concerns from the SAP system is the motivation of new employees. Speculate confirms that employees can be highly demotivated if they cannot do their job well (14). To ensure that the system used does not become a liability, the company will have to invest in thorough capacity building. All new employees should have training on both the organizational culture and the system to avoid burnouts. Due to the costly nature of the trainings, the company has to weigh its options and come up with a way of capacity building without using much resource. The next section of the paper offers suggestions on some of the things the company can consider as allowed by the approved strategic plan they are currently implementing.
Analysis of Strategic Management
The strategic management of the company in question is viable. Using the current strategic plan as a point of reference, one can argue that the company takes into consideration almost all aspects when coming up with its objectives. One of the successful things the company has done in regard to strategic management is the provision of allowance of different business lines to also have their own mini-strategies that feed into the main strategic plan. There are several things that one has to consider when doing an analysis of the strategic management of Almarai. Three of the main considerations are environmental, goals and objectives and alternatives.
The environment in which the company currently works is very conducive. As mentioned previously, the company has good political goodwill. The additional fact that it has a Prince as its board chair gives it an advantage over other competitors. Apart from the external environment, the internal one is critical in analyzing the strategic management of the company. Internally, the company treats its employees very well. The employees enjoy various benefits and this has, to some extent, created a viable working environment. However, the complexity of the company’s SAP system has negated any positive outcomes within the working environment. Towards this end, the company needs to obtain better strategic management of the technologies and innovations.
Goals and Objectives
The company’s goals and objectives are clearly stipulated in their strategic plan. It is important to state that the strategy is sufficient and aligns the company’s goals and objectives with those of Saudi Arabia Vision 2030. This further solidifies the relevant relationship the company has with the Saudi government. It is also prudent to mention that the company has specific goals that are achievable. The management allows specific business lines to create their own goals as well. This is beneficial as it ensures all employees know what they want to achieve with their work. One can only stress the importance of the management also making sure that individual employees have their own individual goals to further become an accountable and productive staff. In regard to goals and objectives, therefore, one can state that the company has strong strategic management techniques.
Indeed, the Almarai strategic plan 2017-2021 is very flexible. Despite this, the strategy has no provisions for alternatives. This is a main concern due to the environment the company in which the company operates, and the major business line it produces. The economy of Saudi Arabia is changing due to the reduction of oil in the natural reserves. Whereas this does not directly affect Almarai, it affects the economy in general. Secondly, the company’s business line also requires alternatives in form of their raw materials. As mentioned, the company will have problems with environmental enthusiasts due to the link between cow rearing and environmental degradation. On the same note, many people are taking up drinking alternatives to dairy for health reasons. For instance, soy milk has gained popularity over the last decade due to its health benefits as compared to those of cow milk (Anderson and Schiano 27). The lack of alternatives makes the strategic management of the company appear poor and disorganized. However, the flexibility of the strategy allows the company and management to incorporate these alternatives.
Opinion About Current Strategic Plan
After analyzing the current strategic plan and the strategic management of the company, one can argue that whereas the company has a good strategic plan in regard to its set goals and objectives, the plan is limited in several ways. First, the strategic plan does 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 before 2021 when it ends. Additionally, the evaluation should be communicated well to the employees so that they can give the right input to inform the new strategy.
On the same note, the plan does not indicate any employee involvement. Speculand explains that the best strategies are often owned by the employees (44). In order for the personnel to develop these strategies, the workers have to be involved in the strategic management process from the initial stages. Management can take opinions and suggestions from all staff at the start of the planning and implementation process to ensure that they own it. Additionally, staff should be informed of the intentions behind the development of a new strategy and how it will relate to their particular jobs. This will ensure that they know what is expected of them before the implementation begins. Employees should also be involved at the evaluation stage of the strategy. This is because they will offer valuable information on the implementation process and how to better the system, in case they have noticed any false functions.
Suggestions on Improvements
Several things can be suggested on how to improve both the strategic management process and the strategic plan. First, it is crucial for the company to invest in capacity building. As mentioned previously, a capacity building department will help the company in various ways. For example, it will ensure that the company minimizes the amount of money it would have otherwise used to train its employees on a regular basis. As stated earlier, the management can invest some resources in the training of a few employees who then act as full-time facilitators. This would mean that these trainers are also frequently capacity built on related platforms. To ensure that the resources used are limited, the company can train at most two people in every business line who can then be part of the capacity building department.
Secondly, it is suggested that the next strategic plan be more comprehensive. There are several things that are missing from the current strategy. The first is the issue of alternatives. Alternatives will touch on the raw materials, the business lines and also resources. These three things can be affected by external pressures and the strategy should allow for change as needed. It is crucial that the company does not give specifics but rather offer guidance on what should be done in case any of the three stated elements is affected. Similarly, the new strategy should also include a comprehensive evaluation plan. This will ensure that the company can analyze how their implementation plan affected their productivity and how they can improve other manufacturing functions. This will, in turn, increase productivity and profitability levels.
The choice of technology can also be improved. One can argue that the company uses the SAP system due to the fact that many other international companies also manage systems with it. However, as research proves, many businesses that have utilized the platform have complained of its complex nature. The fact that the system is not user friendly, even among people who have been trained on how to operate it, makes it a liability. Since the company started using the system, it has relied on support from the developers of the SAP system. However, this type of assistance is not sustainable.
The company should consider other alternatives for two reasons. The first is the fact that other alternatives will be cheaper than the current system. As long as they are not as complex as the SAP system, employees will not need much training in order to understand how the alternative system works. Secondly, the company will get its return on investment. Almarai is currently not maximizing the use of the SAP software, therefore, the company is not getting its ROI. However, it will be able to maximize the potential of alternative software as it is assumed that the new software will be easy to operate. If the company prefers the same software, it will have to set aside some resources for proper training in order to maximize their productivity levels. Indeed, the SAP system albeit complex is very effective in regard to plant management and production functions. The company will have to weigh its options and decide whether they will invest in capacity building or they will change their system.
Almarai. Resilience Through Quality. Annual Report, 2018.
Almarai. Value Through Innovation. Annual Report, 2017.
Almarai Co. Tawadul, n.d. Web.
Anderson, Espen, and Bill Schiano. Teaching with Cases: A Practical Guide. Harvard Business School, 2014.
Speculand, Roland. Excellence in Execution: How to Implement Your Strategy. Morgan James Publishing, 2017.
Vision 2030. Kingdom of Saudi Arabia, n.d. Web.