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Ezdan Holding: Economic and Marketing Activities Report (Assessment)


Executive Summary

Ezdan Holding is a large investment and shareholding company based in Qatar. It invests in numerous activities, such as acquisition and sale of property and land, general contracting and construction services, property consulting services, and investments. The total market cap of the company is currently at 11.5 billion dollars.

The company PESTLE analysis describes Ezdan Holding as a strong political and economic entity that takes an active part in Qatar’s economic life, having received awards for providing housing and facilities for Asia Games of 2006 and Arab Games of 2011. The company has 3 main competitors, neither of which is capable of claiming its market share.

The internal analysis shows that while the company does not operate according to a strong and empowering Vision and message statements, it nevertheless fulfils its duties and experiences a modest rate of growth. Its total assets rates have been growing since 2012. Growing amounts of debt, however, reduces the company’s equity by a large margin. Ezdan Holding’s modest growth can be attributed to slow rates of industry growth in Qatar for the past 5 years.

Introduction

Ezdan Holding is a large investment and shareholding company based in Qatar that engages in numerous businesses, such as acquisition and sale of property and land, general contracting and construction services, property consulting services, and investments. The company’s numerous enterprises include real estate businesses, finance and insurance services, hospitality services (hotels and restaurants), retail services (malls), healthcare, industry, and media holdings (“Historical background,” 2017). The total market cap of the company, as of May 2014, is calculated at 11.5 billion USD (“Financial updates,” 2014).

Ezdan Holding was founded in 1960 by Thani Bin Abdullah and took a great deal of interest and participation in Qatar’s social and economic life over the past decades. The company itself came into the spotlight in 2006, when it gained notoriety for preparing Qatar for the Asian Games by constructing a series of residential facilities in preparation for the event (“Historical background,” 2017). In early 2007, the company acquired its current name and became a joint-stock company, and has been growing ever since. Ezdan Holding took a vital role in organizing and sponsoring the Arab Games of 2011 (“Historical background,” 2017). As it stands, the company holds a strong position in the market due to a strong financial base, notoriety, a profitable working relationship with the Qatari government, and rich experience in various vital areas of the private and public sector (“Historical background,” 2017).

The purpose of this paper is to review the economic and marketing activities of Ezdan Holding as well as to analyze its industry, external environment, internal affairs, and finances, in order to provide a set of conclusions about the company’s overall standing. The information used in this analysis is provided by Ezdan Holding itself, as well as other trustworthy economic sources.

External Environment Analysis

PESTLE Analysis

Political

Ezdan Holding has very good domestic and international political standings. The company acquired a good reputation in Qatar by assisting the governmental effort to prepare the country for two major events – the Asian Games of 2006 and the Arab Games of 2011 (“Historical background,” 2017). In addition, the company has received many awards for its excellent service and is perceived as one of the factors to reduce the inflation of the natural currency. Ezdan Holding, like any international enterprise, is sensitive towards the overall political situation in the region and the country. The last major challenges came in 2009 with the world economic crisis, followed by the oil crisis of 2012 (“Historical background,” 2017). These crises hurt the company indirectly, as they reduced the number of potential investors and companies willing to do business.

The company has strong views about social responsibilities, corporate governance, and the environment. All of these factors are included in the company’s vision and mission statements. Qatar is a country that appreciates and encourages free enterprise – a trait it shares with the rest of the GCC. However, with Qatar currently facing sanctions by the other members of the GCC, it may have a tremendous effect on Ezdan Holding’s assets in these countries. The tariffs, laws, and regulations in Qatar are beneficial to the company. However, Qatar is known for its restrictions towards the free press, meaning that one of the best ways to keep a good reputation and not face advertising restrictions involved keeping on the good side of the government. Ezdan Holding is greatly involved in the health, education, and infrastructure industries (“Qatar GDP,” 2017).

Economic

The economy of Qatar and the region surrounding it directly impacts Ezdan Holding’s performance. A drop in the economy decreases the number of potential customers and investors for Ezdan, as the majority of its income comes from construction, land purchases and sales, and retail. However, the crisis also presents an opportunity to acquire assets cheaply in order to sell them after the situation stabilizes. As it stands, Qatar’s economy is suffering greatly from sanctions imposed on it by the rest of the GCC (“Qatar GDP,” 2017). This lead to stilted growth potential and a marked drop in stock market trends for Qatar’s major businesses, including Ezdan Holding. Despite these factors, the economy of Qatar, overall, seems to be capable of enduring these limitations. It has a very low unemployment rate, low inflation rates, relatively low-interest rates for starting the business, and high levels of disposable income, although that factor is expected to decrease should sanctions persevere for an extended period of time.

Socio-cultural

Qatar is an interesting country from a socio-cultural perspective. 88% of its citizens are foreign workers from India, Bangladesh, Sri-Lanka, Egypt, and other countries. Native Qatari makes up only 12% of the population (Makaaron & Montouche, 2016). This leads to an amalgamation of various cultures. The dominant religion in the country is Islam. Education is compulsory and free for all citizens aged between 6 and 16, and the quality of education is high.

Levels of social mobility, however, are relatively low for foreign workers, with the locals holding the majority of important positions and posts in the government and company structure. This may pose several problems to Ezdan holding, as they are limited in the hiring pool by the social and cultural restrictions of the Qatari people. This tendency may change with the increase of globalization and generational shifts, as the younger generation is more exposed to more cosmopolitan values as opposed to traditional Qatari ways.

Technology

Qatar does its best to implement cutting-edge practices when it comes to technology. It surveys managerial practices in other countries, TQM and servant leadership are being implemented in the majority of the large companies. Advanced technologies are being imported from abroad. Ezdan Holding is following this trend as well and implements the latest and most efficient practices in its business and construction. Qatar has a high percentage of internet penetration, but the quality and prices of internet services are largely determined by one company – Qatar Telecom. This affects the overall quality of the internet in a negative way. In addition, internet filtering restricts the amount of information that a user has access to. Still, due to the highly-developed information infrastructure, Ezdan Holding has no trouble communicating and searching for information. Due to the nature of the investor industry, R&D is not as important to the company as it is to the production industry (“Historical background,” 2017).

Legal

While Qatar practices relatively benign legal and economic policies in its home region for domestically-established companies, it has a notable set of restrictions for foreign investment, particularly in the banking sector. However, since 2005 Qatar has been working on establishing free economic zones in order to encourage foreign investment into the country. These zones feature the potential for 100% foreign ownership, tax exemptions, and free repatriation of profit (Makaaron & Montouche, 2016).

Ezdan holding has the potential of using these zones in order to work with foreign investors without facing many legislative restrictions. Qatar has been criticized for infractions against foreign workers and unfair employment. While Ezdan Holding states to not engage in such practices, its reputation may suffer regardless. Due to a highly volatile political situation, it is impossible to say what legislative changes would affect the industry the most and when they are to be expected.

Environment

Ezdan Holding views the environment as one of the areas of its corporate social responsibility. As such, it often donates to various events and research programs aimed at environmental preservation, such as the 22 Million Trees Initiative, hosting Islamic environmental scholars and advocates, supporting Youth Forums, etc. Since the company’s business is not directly related to the environment, as they operate with investments and construction rather than agriculture and resource extraction, it does not heavily rely on the environmental factor. The only enterprise that is part of Ezdan Holding’s portfolio that could be affected by consumer perspectives towards nature is the retail industry, which is why the company strives to maintain a good image and endorses the use of green products (Makaaron & Montouche, 2016).

Industry Environment

Industry Growth Rates

Industry growth rates in Qatar have fallen from 7% in 2009 to roughly 2.5-3% in the next years (“Qatar GDP,” 2017). Stilted levels of growth are also explained by the ongoing sanction campaign from other members of the GCC. Naturally, this situation affects Ezdan Holding’s positions as well.

Informational Complexity

High. The investment industry requires analyzing a multitude of political and economic factors that determine the value of joint stocks and plausibility of successful investment. Ezdan Holding involves numerous financial analysts and complex data gathering tools in order to make accurate predictions and offer investment consulting (“Vision and message,” 2017).

Product Differences

The company has several competitors who offer similar services and products in the area of real estate service. However, their portfolio is more focused on its initial industry and is less expansive compared to Ezdan.

Brand Identity

Ezdan is a well-recognized brand in Qatar and other countries of the GCC. It existed for over 50 years and is associated with low prices, quality investments, and a diverse portfolio of services (“Vision and message,” 2017).

The diversity of Competitors

There are only three major competitors, which are Mazaya Qatar Real Estate Company, Qatar Real Estate Investment company, and Barwa Real Estate Company (“Financial updates,” 2014).

Corporate Stakes

Low. As it stands, the company is not in a position to of losing domestic market or acquiring new gains, as both it and its competitors are suffering from sanctions and stilted levels of economic growth.

Exit Barriers

Since Ezdan Holding deals in stock and has a varied portfolio of assets, exit barriers are relatively low, as the company can offer its assets to its competitors, in order to return a profit and leave the market.

Switching Costs

Ezdan Holding is very competitive about cost-efficiency, as low-cost services are one of their primary selling points for real estate construction industry. By making its prices lower, the company forces its competitors to reduce theirs as well.

Bargaining Power of Customers

Differentiation of Outputs

Ezdan Holding offers many services in different sectors of industry in order to not rely too heavily on one particular branching enterprise. This reduces bargaining power as it separates the customers.

Presence of Substitutes

Substitutes are present in the form of three competing companies. However, while all three are aiming to reduce prices in order to stay in the competition, the reductions are limited by the laws of the market as well as value-creation costs, which prevents the customers from forcing the prices too low.

Buyer Information

While there are policies in place for market transparency and there is plenty of information in regards to Ezdan Holding and other enterprises, the information is difficult to assess without professional knowledge, meaning that major customers are required to rely on the company’s consulting services in order to make the best buy. This lowers the customer’s bargaining power.

Buyer Profitability

Ezdan Holding deals with stocks and investments, with a promise that buyers would receive profit in return for their money. This gives buyers a degree of control, as the relationship between them and the company is not immediately terminated upon purchasing the product (“Vision and message,” 2017).

Importance of Volume

While Ezdan Holding offers small-time investment services, the majority of its investors hold large portfolios of assets, with expectations of high returns. This gives the buyers more power, as the hold substantial stocks within the company.

Decision-Making Incentives

The company controls some of the decision-making initiatives by providing investment consulting services, thus encouraging the customers to make decisions aligned with the interests of the company. However, buyers have the capabilities of seeking independent services from competitive companies, limiting the possibilities of control (“Vision and message,” 2017).

The threat of Backward Integration

The Qatari government is one of the company’s major shareholders, which has the possibility of affecting the decisions made by the company. There are other shareholders and important customers as well, which poses a threat of backward integration, should the company lose their favor and they choose to endorse one of Ezdan Holding’s major competitors (Makaaron & Montouche, 2016).

Bargaining Power of Suppliers

The bargaining power of suppliers for Ezdan Holding varies from one enterprise to another. For the retail industry, the company is reliant on a multitude of suppliers to deliver various products to stock up their inventories. However, since there are so many of them and there is the opportunity for diversification, not a single one of them holds enough bargaining power in order to influence the company. In the medical segment, however, the situation is different. While there are plenty of drugs to choose from, medical equipment is largely provided by three companies that have offices in Doha.

Since Ezdan Holding is reliant on these companies to maintain their equipment, it gives these suppliers a great amount of bargaining power. However, since medical and retail industries are supplemental to Ezdan Holding, any bargaining with secondary suppliers would not drastically alter the position of the company. At the same time, small suppliers profit greatly from working with Ezdan Holding and its retail system, as they are given the opportunity to sell most of their stock to one buyer. That diminishes their bargaining power, however (Makaaron & Montouche, 2016).

Threats of New Entrance

The threats of the new entrance are largely mitigated by how conservative the GCC market is. Almost every country has policies to protect the local businesses. While the construction of free trade zones will allow access to foreign capital in Qatar, it will not be enough to force large and competitive entities such as Ezdan Holding out of the market. A similar situation could be said about the banking industry – over 80% of all banks in Qatar belong to the countries of GCC.

New entrants to the market would have to challenge the already present businesses by switching costs and reducing prices, meaning that they would need to sell their services and merchandise, with marginal profit for a long time, which would not help them penetrate the market without suffering significant losses. Without an established brand identity, an entrant to the market would have no cost advantage and clear superiority over the existing companies, while capital requirements for starting a business large enough to threaten Ezdan Holding would be high (Makaaron & Montouche, 2016).

Threats of Substitute Products

Due to the existence of 2 large companies that provide similar services, it could be suggested that the possibility of customers finding similar services are high. However, the companies have competed with one another for the market share for a long time, and a semblance of balance has been established. Customers tend to favor one over the other based on familiarity, as the quality of products and services are relatively equal. In order for customers to decide to switch their allegiance to Ezdan Holding would require the introduction of a product or service that is either significantly superior to anything the competitors have to offer, or significantly cheaper (Makaaron & Montouche, 2016).

Internal Analysis

Company’s Vision, Mission, Goals, and Objectives

The vision and mission statements of the company are relatively basic and vague, they do not impose any great overarching objectives for the company, and simply state that the purpose of Ezdan Holding is to protect the investments and achieve maximum profits for its shareholders. The statements are as followed:

Vision statement: To achieve leadership in investment, through professionalism in the business industry and assets development (“Vision and message,” 2017, para. 1).

Mission statement: To seize investment opportunities to achieve significant returns to shareholders at the lowest possible risks, providing a motivational working environment for employees, following development plans guidelines of the State of Qatar and adhering to social responsibility and regulation (“Vision and message,” 2017, para. 2).

These statements do not mention the company’s strategic markets, but they do mention the priorities of the company’s existence, those being shareholders, stakeholders, and the communities. Ambitions and values, while present, do not go beyond becoming the leader in the industry without explaining the means of achieving that.

Resources

  • Financial Resources – the company possesses over 7.6 billion dollars in financial resources, which it uses to invest in large-scale projects initiated by the Qatari government, as well as to support the already existing enterprises (“Financial updates,” 2014).
  • Human Resources – the company implements TQM and servant leadership in order to help their employees grow as professionals and as people. Corporate loyalty and long-term engagements are encouraged as well (“Financial updates,” 2014).
  • Physical Resources – the company owns a number of real estates and land which it uses to fund construction of cheap living localities. In addition, the company invests in retail, medicine, and logistics and possesses physical resources that maintain the enterprise (“Financial updates,” 2014).
  • Organizational Resources – the company uses highly skilled managers in order to meet the organization’s goals and schedules, keep employees on track and make them grow. The company implements various styles of management in order to achieve maximum results (“Financial updates,” 2014).
  • Technological Resources – the company implements statistical and information software in order to make accurate prognoses in regards to investments and ensure profit for the shareholders (“Financial updates,” 2014).
  • Innovation Resources – innovation does not seem a prime prerogative for the company, as it does not deal in production and industry. Investments, on the other hand, do not require innovations and advanced technological acumen (“Financial updates,” 2014).
  • Reputation – the company uses its reputation of one of the oldest in the market and its chain of connections in the Qatari government to gain an advantage over its competitors (“Financial updates,” 2014).

Capabilities

  • Corporate – as an investment corporation, Ezdan Holding has the capabilities to analyze the investment market in order to forecast the most efficient and long-term possibilities for supporting various enterprises (“Financial updates,” 2014).
  • Research and Development – the company does not have a dedicated R&D division.
  • Marketing – the company has a marketing division that promotes Ezdan Holding within the domestic market and in the countries abroad. Since the company invests in Mass Media, it can also use its assets in the industry to expand (“Financial updates,” 2014).
  • Information Management – the company possesses the capabilities to gather, assess, and project potential profit of numerous enterprises, as well as take into account various political and geopolitical outcomes. It uses an array of information-gathering and analysis software to do so.
  • Product Design – the company does not have any products of their own to speak of. The company provides investment services.
  • Sales and Fulfilment – the company sells land and low-cost living locations, satisfying the customer’s need for places to live in or starting a productive enterprise.

Financial Analysis

Ratio 2012 2013 2014 2015 2016
Total Assets 38,890,232 41,202,913 43,390,384 46,938,692 49,828,792
Total Liabilities 11,143,470 12,558,642 12,809,634 16,556,533 19,255,100
Total Equity 27,746,853 28,264,771 30,077,181 30,381,231 30,573,692
Net Cash from financing activities 4,549,764 960,356 691,140 495,859 638,815
Net Profit 408,747 1,071,256 1,360,365 2,064,799 1,804,944

Total assets is the sum of everything that a company owns. In the last 5 years, total assets of Ezdan Holding were growing steadily. Total liabilities includes debts owed by a business to various organizations. Ezdan Holding’s debts have almost doubled between 2012 and 2016 (“Financial updates,” 2014). Total equity is calculated by deducting total liabilities from total assets. As such, this parameter has seen modest growth. Net cash from financing activities has dropped considerably from 2012, meaning that Ezdan Holding earns profit from activities other than financing. Net profit is the measure of profitability of a company (“Financial updates,” 2014). Ezdan Holding was very profitable in the last two years, with net profits almost doubling. Overall, the company is slowly growing, and its growing debt is associated with expanding its assets.

Conclusion

Ezdan Holding is a large investment company with a good name to itself and a successful business history in Qatar and other GCC countries. Its main areas of investments are real estate, construction, medicine, retail, and logistics. The company has a solid footing and only three major competitors. While it has a good working ethic and promotes the interests of stakeholders and shareholders alike, it does not have a strong vision and mission statement to guide it and no overarching goal. The company has strong ties to the government and focuses on investing in large construction projects. For the past 5 years, the company’s assets have been growing steadily, meaning that Ezdan Holding is a stable business that is not planning to exit the market in the nearest foreseeable future.

Appendix A

Financial Analysis

Ratio 2012 2013 2014 2015 2016
Total Assets 38,890,232 41,202,913 43,390,384 46,938,692 49,828,792
Total Liabilities 11,143,470 12,558,642 12,809,634 16,556,533 19,255,100
Total Equity 27,746,853 28,264,771 30,077,181 30,381,231 30,573,692
Net Cash from financing activities 4,549,764 960,356 691,140 495,859 638,815
Net Profit 408,747 1,071,256 1,360,365 2,064,799 1,804,944

References

Financial updates. (2014). Web.

Historical background. (2017). Web.

Makaaron, C., & Montouche, A. (2016). Web.

(2017). Web.

Vision and message. (2017). Web.

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