Dubai Multi Commodities Centre’s Strategy Essay (Article)

Introduction

The article explores strategic strategies used at the Dubai Multi Commodities Centre Authority. Dubai Multi Commodities Centre (DMCC) is the licensing authority for Jumeirah Lakes Towers (JLT) Free zone, a-2-million square meter mixed use development. The authority was established in the year 2002 by the government of Dubai as a strategic initiative that would offer the physical, market and financial infrastructure needed to set up and run a flourishing commodities marketplace (Dubai Multi Commodities Centre, 2014). Currently, the DMCC has been officially touted as the largest Free zone in the United Arab Emirates (UAE). It boasts of more than 10,000 registered firms.

Mission

“We are the Government of Dubai Authority dedicated to establishing Dubai as the global gateway for commodities trade and enable our members to succeed through continuous innovation delivery” (Dubai Multi Commodities Centre, 2014).

Vision

“We are the world’s leading commodities focused ecosystem and an indispensable partner for our member companies” (Dubai Multi Commodities Centre, 2014).

The Environmental Analysis

From the industry analysis, it is determined, based on the Porter’s five forces analysis, that the UAE’s Free Zones are moving from growth to maturity phase depicted by the following forces. There is a visible bandwagon effect from new entrants, increasing power of buyers, high power of suppliers, low threats from substitutes, and low focus on growth as depicted among rival firms.

Since its inception in the year 2002, DMCC has from zero customers to more than 10,000 customers in the year 2015. It has the mandate to register and license specific entities to conduct certain business activities within the Free Zone and outside the UAE, including overseas.

The Free Zone is competitive across the globe. It is estimated that there are nearly 600 economic free zones in the world, with nearly 36 of them operating in the United Arab Emirates. Although economic zones may focus on a wide range of opportunities, the specific economic zones mainly focus on industrial economic zones, port economic zones (sea & air), and commercial zones (often focused on a specific business sector).

Currently, there are 20 free zones in Dubai, which mainly concentrate on specific business areas, such as financial services (DIFC); maritime (Jebel Ali Free Zone); airport (Dubai Airport Free Zone); media (Dubai Media City); technology (Dubai Internet City); academia (Dubai Knowledge Village and Dubai Academic City); healthcare (Dubai Healthcare City); entertainment (Dubai Studio City); and commodities (Dubai Multi Commodities Centre).

In the year 2012, DMCC added 2,000 more new firms to its portfolio, reflecting an outstanding growth relative to any other global free zones. Therefore, it is one of the fastest growing free zones in the world. It has been ranked 11 among the most promising Free Zones of the future by the Fdi Intelligence. In addition, it is noted that DMCC enjoys favourable rating and support from customers and other stakeholders, including the government of Dubai (DMCC, 2014).

At the local level, DMCC faces competition from JAFZA, Media &Internet City, DAFZA, RAK FZ, DIFC and DSO while internationally, DMCC’s competition includes Singapore, Hong Kong, Iskandar (Malaysia, on Singapore’s border), Qianhai (Guangdong province, China on Hong Kong’s border) and Shanghai Waigaoqiao (China), Bahrain FZ’s and several free zones in Eastern Europe.

Despite intense competition from across the global, DMCC is well positioned in the market to become a leading Free Zone in the world.

The Analysis (Strategic Objective Implementation)

From the analysis, it is evident that DMCC is the fastest growing Free Zone in the world. This growth can be attributed to effective execution of growth strategies. DMCC can be said to have effectively executed its strategies despite changes in market conditions (Sterling, 2003). To avoid any failures, DMCC strategies have been consistently implemented before market conditions change and render them irrelevant. Thus, external obstacles can be mitigated effectively.

The DMCC leadership has ensured that strategic objectives and mission are achieved. Without effective leadership in an organisation, strategies often fail (Sterling, 2003). From the current rate of success, one can presume that the leadership has understood various scenarios used in supporting near-term decision processes applied in strategic planning (Fink, Siebe, & Kuhle, 2004). The current leadership has carefully evaluated the competitive landscape in the global Free Zone environments and developed appropriate models to attract more businesses to Dubai. Therefore, scenario planning has been effective in enhancing forecasting and strategies (Hirsch, Burggraf, & Daheim, 2013).

The macroeconomic review shows that DMCC can exploit favourable conditions to enhance growth. For instance, the UAE has enjoyed continued stability and a reputation as an inherently stable environment for foreign investment. Further, Dubai government focuses on encouraging foreign investment and promoting sustained relationships with the GCC and WTO. It also has favourable rankings. Economically, the UAE is ranked 30^th among economies in the world, identified as one of the fastest growing, and a progressively diversified economy with less reliance on oil. Further, social and demographic trends will promote growth. Specifically, a growing population, educated workforce and expanding entrepreneurial spirit will drive fast changes in the UAE. At the same time, technological factors noted in increasing automation of governmental processes and infrastructure improvements leading to better take-up of technology based solutions will facilitate growths.

Improving Competitive Strategies

Although competition has little impacts on strategic competitive, DMCC must always strive to improve its competitive advantages in the market. Specifically, it must concentrate on reaching the top rank by enhancing infrastructure (roads), process turnaround times, and value added services. Currently, the Authority enjoys right location and infra-structure, right processes, right products and services, right regulation and right customer service.

From the competency gap analysis, the Free zone leadership team must prioritise improvement in customer focus, transparency, project management, and process and systems management.

The resource audit has determined that DMCC has adequate resources to implement its strategic objectives. The best use of resources can ensure more productive uses, but this can only be attained through effective execution by skilled managers (Calandro, 2014). While resources are available for the organisation, it requires an integrated approach using best in class applications to achieve the greatest value. Thus, in operations, DMCC requires sufficient office infrastructure with flexibility to reconfigure to business needs and a strong brand, as well as eliminating some structural disconnects with leasing management being handled by FZ and Property department. The human resources should be motivated, employees should possess diverse range of skills while training should be introduced in specific areas for capability improvement. DMCC also requires flexible and supportive Human Resources department that enables the business to run smoothly.

The current organisational resources can be deployed to achieve competitive advantage. The free zone department requires refocusing based on ‘To Be’ processes in order to better deliver value, excellent management control system in place and support by marketing, IT and Property departments.

Financial resources are also available for DMCC to implement its investment plans, but a strong support from the finance team is required.

The SWOT analysis conducted revealed specific issues for the organisation to tackle. For instance, the mixed use of development is a key advantage for investors. This makes the free zone extremely attractive for many investors. As previously mentioned, the available resources give the organisation opportunities for sustained growth as it aims to create a good reputation and brand.

DMCC can leverage favourable economic and political situations in the UAE for growth. In addition, it can diversify to other areas, including offshore company, family trust type company, and full one stop shop. These growth strategies should be supported with robust IT systems and online presence, as well as consultants to provide advice when necessary.

DMCC must however address certain critical weaknesses that may hinder growth, specifically weaknesses in processes and system management, inefficient turnaround and review marketing spend to focus on the most beneficial channels such as MICE, web, and referral. In addition, the organisation must also review stalled projects, invest in parking and roads and enhanced customer service to reduce negative experiences and feedback.

By creating competitive advantage, the company can effectively mitigate threats from Abu Dhabi investments in large FZ infrastructure, price pressure from ‘no frills’ FZ’s like RAK, virtual office capability of other FZ’s, reduce migration of agents to other FZ and overcome challenges from Hong Kong and Singapore, which are seen as the key trade hubs.

It has also been determined that DMCC Free Zone sustained competitive advantage will be achieved through a cost leadership strategy and enhanced licensing to a wide variety of clients to set up with JLT.

Marketing positioning and approaches should also be considered to match specific targets (Slater & Olson, 2001). DMCC can only achieve growth through market development by bringing more new businesses into DMCC free zone from across the world. It must also expand products, create new ones and eliminate obsolete services. DMCC must also review its brand strategy, consolidate it and carry out a brand re-launch. This may include new Web site, members’ portal and enhanced customer experience. The promotion must also target the appropriate stakeholders for growth.

Conclusion

Strategic approaches to DMCC management have ensured that the organisation is now providing a leading Free Zone in the UAE, and is well placed to challenge other global free zones.

DMCC must improve on areas of weaknesses and focus on mitigating threats. For instance, analysis of all stakeholders is vital for its competitive advantage. It was established that all existing members and potential members have been treated equally with only one standard level of service available. On this note, the organization can offer different levels of service to extract extra value from certain select members. At the same time, this will raise the satisfaction level of these members. Thus, high-level of customer service is an effective strategy increase satisfaction among agents (Wouters, 2004), who are most likely to refer potential customers.

Any strategic approach, for instance, a focus on enhancing customer experience should be practical, actionable, and measurable activities rather than abstract concepts (Allio, 2005). They must provide future strategic direction for DMCC and executives must be willing to provide clear answers for critical issues, including present competitive advantages (Longman & Mullins, 2004).

Reference List

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Calandro, J J 2014, ‘New insights for corporate strategists from a renowned value investor’, Strategy & Leadership, vol. 42, no. 6 , pp. 29 – 36. Web.

DMCC 2014, DMCC Free Zone: Strategy Update 2015. DMCCA, Dubai.

Dubai Multi Commodities Centre 2014, About DMCC. Web.

Fink, A, Siebe, A & Kuhle, J-P 2004, ‘How scenarios support strategic early warning processes’, Foresight, vol. 6, no. 3, pp. 173 – 185. Web.

Hirsch, S, Burggraf, P & Daheim, C 2013, ‘Scenario planning with integrated quantification – managing uncertainty in corporate strategy building’, Foresight, vol. 15, no. 5, pp. 363 – 374. Web.

Longman, A & Mullins, J 2004, ‘Project management: key tool for implementing strategy’, Journal of Business Strategy, vol. 25, no. 5, pp. 54-60. Web.

Slater, S & Olson, E 2001, ‘Marketing’s Contribution to the Implementation of Business Strategy: An Empirical Analysis Stanley’, Strategic Management Journal, vol. 22, pp. 1055 – 1067. Web.

Sterling, J 2003, ‘Translating strategy into effective implementation: dispelling the myths and highlighting what works’, Strategy & Leadership, vol. 31, no. 3, pp. 27 – 34. Web.

Wouters, JP 2004, ‘Customer service strategy options: A multiple case study in a B2B setting’, Industrial Marketing Management, vol. 33, pp. 583–592. Web.