Executive Summary
The purpose of this report is to discuss of various business scenarios, strategic options, business strategy, aims and objectives, strengths, weaknesses, opportunities and threats of Majid Al Futtaim Properties LLC (MAFP Group). In addition, this report focuses more on market sizes, company sales and market shares of MAFP Group for a period of 3 years, customer preference analysis, core competencies, ethics and corporate social responsibility, future outlook to provide recommendation and implementation process of different strategies.
Introduction
Majid Al Futtaim Properties is one of the foremost fastest-growing real estate groups that started its journey in 1992 in the MENA region and came into operation through the City Centre mall in Dubai. Beside the real estate, hotels, malls, and property management, the company diversified its business in the entertainment, fashion, consumer financing, healthcare, food and beverage, energy management and even in the retail market with 33,000 workforces in fifteen (15) locations of Asia, Africa and MEENA. The Majid Al Futtaim Properties along with its subsidiaries are well known as MAFP Group that aimed to expand its business in the global market in the leading edges of the shopping malls, hospitality, asset management as well as project management with fee of cost advisory service for any upcoming venture.
National, Regional or Global Market Analysis
At present, this Group operates four business segments in 13 countries with three major operating subsidiaries; however, it owns nineteen shopping malls in the MENA region, operates twelve hotels adjacent to shopping malls in the UAE (ten) and Bahrain (two); furthermore, it controls Ski Dubai, an indoor ski resort with 22500 m2 of area. In addition, it has cinema business with more than 180 screens across the MENA region; it generates the highest profit from the operation of the national market; at the same time, Egypt, Bahrain, and Qatar are profitable market to this company; however, the following figure gives more details in this regard-
Industry Analysis
The real estate industry in the MENA region is saturated with a number of market players. As a result of the growing customer base, the industry in this region is becoming more and more competitive. However, in comparison with the global trend, the real estate industry in the MENA region lack considerable maturity and expansion, mainly because the relevant businesses are potentially vulnerable to unstable fiscal conditions and poor support from the governments. According to the reports of PwC (7), the overall size and growth rate of the real estate industry in the MENA region is higher than the relevant industry in Latin America and Sub Saharan Africa, but it still falls short in contrast with Developing Asia Pacific and Commonwealth of Independent States & Central and Eastern Europe. In contrast, the best possible industry situation is in North America, while the conditions in the Euro Area and Asia Pacific are also way better than that of the MENA region. The following figure illustrates this point elaborately:
Company Analysis
Majid Al Futtaim Properties LLC makes the highest 81% sales revenue from retail segment; however, the following figure gives more details in this regard-
According to the annual report 2015 of MAFP Group, profit before tax was AED 1,274.638 million against AED 1,233.552 million in 2015, total cash earned from operating activities was AED 1,765.186 million against AED 2,182.118 million in 2015; in addition, total sales revenue and management net income increased by 4% and 18% accordingly. Shopping malls business segment and Hotels business unit are most two profitable sectors of this company while it generates more than AED 4040 million from these two units; however, the following figure gives more information about company’s financial position-
Customer Analysis
Due to the rising purchasing power parity, per capita income, and gross domestic product in the economy, the customer base of the real estate industry is growing. People now have more capacity to buy properties, and this in turn promises a very prospective market for Majid Al Futtaim. It is important to state that Majid Al Futtaim already has a loyal customer base, which makes sure that the company keeps running smoothly even during recessionary periods. On the other hand, the company is aware of the fact that due to the presence of numerous competitors, the bargaining power of the customer are very high, which means that it must present better services and lucrative offers to retain them.
SWOT analysis of MAFP Group
Strengths
- Brand awareness: MAFP Group has established track record, reputation & brand awareness in the MENA region
- Diversified business strategy: According to the annual report, this company is leading diversified real estate and property services provider and it capable to develop and sustain as market leader in the sector of shopping malls operations and asset management, land, residential and commercial properties;
- Customers: 171 million customer visits last year;
- Strong operational performance: financial income is increasing from shopping malls ; however, the subsequent table shows key performance of this company –
Table 1: Financial performance. Source: Self generated from (“Majid Al Futtaim Group Overview” 5).
- Others: Other success factors of this company include experience, adaptation of technology, stakeholders, alliances and partnerships with key retailers, corporate governance system, In-House expertise, customer relationship management, reduced labor costs, existing distribution and sales networks and business strategies.
Weaknesses
Future productivity and market size: This group has faced many other problems.
Opportunities
- Market expansion: This company constantly seeks new opportunities for expansion of its core businesses into countries across the MENA region and adjacent places (“Majid Al Futtaim Properties LLC Consolidated Financial Statements” 15);
- Market share: It has opportunity to increase market share with unique leisure offers
- Others: Prime locations secured for business, proper use of resources, growing demand, venture capital and so on;
Threats
- Competitors: Financial position of the relevant companies, such as, Al Futtaim Private Company LLC, Jumeirah, Emaar Properties PJSC, Nakheel PJSC, Mubadala Development Company, Al Baddad International and Meydan Group LLC and Nakheel PJSC are the main threat of this company; however, the subsequent table demonstrates direct competitor comparison-
Table 2: Direct Competitor Comparison. Source: Self generated.
- Visa Policy: At present, the government of this country introduces some hard visa rules, which makes it more difficult to attract expert workforce from the Asian market;
- Other: Majid Al Futtaim Properties needs to consider external financial risks such as global financial crisis, High operating cash flow, product liquidity management, financial capacity, government regulations and tax changes and so on.
Strategy Objectives and Goals
The company introduced its new skyscraping strategy bannered as “sustainability strategy” in 2013 with long research and study that driven the company to incorporate the stakeholders within the decision making process to ensure validity and reliability and to diminishing the most burning financial risk factors. Such strategy aimed to the sustainability has resulted remarkable outcomes with better performance both in business performance and risk minimization and lead the company to setup its goals those have been treated as part of core business and must attained by 2018 and the goals are pointed as –
- The first goal has developed to formulate cooperation and collaboration with the analogous projects and business entities through initiatives like community based interaction, negotiate with them to migrate workforces of construction sites in order to exchange views, option, and understanding at the ground level; (MAFP Group,20014, 2-6)
- The second goal was designed to introduce new labor policy with the cooperation and collaboration among the national, regional and global labor organizations, financial organizations, trade bodies, along with the other stake holders in order to standardize the new labor policies in this region;
- The third and foremost aim has been drawn to workout standard presentation and offerings to the valued customers and tenants with most flexible terms and conditions that ultimately generate long lasting business relationships with them without hampering financial gains.
- The fourth significant aim was designed to improve workforce skills and capabilities by introducing sustainability training in order to motivate them to attain the long-term goals of the company;
- The final goal of the sustainability strategy was introduced to explore the labor standard and to take quality assurance measures of the company for the contractors as well as workers (“Real Estate 2020 Building the future” 4);
Business Strategy
This report concentrates on sustainability strategy, pro-active funding strategy, business level and growth strategies of Majid Al Futtaim Properties.
Business level and growth strategy
From the competitive analysis, it founds that Majid Al Futtaim is the market leader of the real estate, retail, and leisure industry in the MENA region; however, it works to expand significantly its presence in Egypt and KSA; however, main policy of MAFP Group is to maintain its leading position by satisfying customers with unique offers and reasonable price structure. The management team of Majid Al Futtaim Properties LLC has long-term business plan to make better forecasts in the future even in the worst and unfavorable financial environment in the global market. Furthermore, this group tries to build foundation in the African nations, primarily with Carrefour; however, the following table gives more information about growth strategy of Majid Al Futtaim Properties LLC-
Table 3: Growth strategy of Majid Al Futtaim Properties LLC. Source: Self-generated.
Pro-Active Funding Strategy
The following figure gives detail information about this strategy-
Sustainability strategy
Ethics and Corporate Social Responsibility
Majid Al Futtaim maintains a strict ethical code in order to make sure that its employees and directors maintain a vigilant and sound approach towards the stakeholders, environment, business departments, and corporate governance policies. On the other hand, according to Sustainability Report (10), the company is very much conscious to make sure that it upholds strong corporate social responsibility towards the environment, by, for example, reduction of pollutant emission and use of recycled items. In addition, to provide a healthier internal atmosphere for the employees, the company has taken pioneering steps to attain safer working conditions; for instance, as the company has diminished heat reflection impact by using high quality organic substance on about seventy-five percent of the roof, and ensured better management of air quality within the workplace (Renewable energy white paper for Majid Al Futtaim 15). In addition, to significantly reduce the amount of waste released on the atmosphere, the company has undertaken a strategy to reroute fifty percent of waste from the landfills, and use at least ten percent of the recycled materials; conversely, the business has also included solar panels at its site that have helped to lessen at least twelve percent energy consumption per year (“Sustainability Report” 10).
Future Outlook and Recommendations
Recommendation-1: Joint Venture and Acquisition strategy
As this report suggests international expansion with new and existing product line, it should concentrate on the mergers and acquisition strategies; its interest in the fair value of the particular assets and liabilities; however, according to the annual report 2015, Payment of liability for acquisition of intangible asset was AED (28,564) million and share of post acquisition loss accounted AED (73,384) million.
Thus, Majid Al Futtaim Properties LLC should design its pathway to reach competitive advantages; however, Majid Al Futtaim Food & Beverages LLC, ENOVA by VEOLIA were two successful joint venture projects of this company; however, the following table provides judgment criterion for this strategic programs-
Table 4: Recommendation 1. Source: Self-generated.
Recommendation-2: Promotional plans & marketing strategies
The marketers of Majid Al Futtaim Properties LLC should acknowledge that customers could switch off the company if they get available stores and shopping mall in the nearest place; therefore, they should require addressing the inconveniences and should take immediate action to remove any kinds of dilemmas. Majid Al Futtaim Properties LLC should focus more on promotional campaigns as well as marketing strategies to gain a large customer base; however, the next table gives judgment criterion for this strategy-
Table 5: Recommendation 2. Source: Self-generated.
Implementation
Timetable
It should require more time to take decision regarding mergers and acquisition; however, it should provide at least 3 months to implement joint venture strategy and it should organize meeting, assess market demand before starting initial activities. On the other hand, the markets should continually design new promotional strategies; thus, it is continues process;
Budgets
The management should increase budget for promotional activities; however, this report suggests 10% increase of budget for implementation of marketing strategies by next year; in addition, it should provide more suitable offers like lucky coupons, get one buy one facilities, and so on;
Evaluation and Control
Majid Al Futtaim Properties LLC should focus on evaluation process to assess success of the plans;
Conclusion
From the above discussion, it can be said that Majid Al Futtaim Properties LLC has strong brand image and reputation in the MENA region, outstanding financial position and track record in the industry; in addition, it has eagerness to expand business in the national market and adjacent countries with four segments. In the era of globalization, this report recommends expansion plans to the management of MAFP Group to enter international market with huge success, and financial capability; however, it also suggests implementation of marketing strategies.
Works Cited
Al-Zu’bi, Ibrahim. Our sustainability strategy. 2015. Web.
“Majid Al Futtaim Group Overview.” Majid Al Futtaim Group, 2015. Web.
“Majid Al Futtaim Properties LLC Consolidated Financial Statements.” Majid Al Futtaim Properties LLC, 2015. Web.
“Real Estate 2020 Building the future.”PWC Real Estate, 2015. Web.
“Renewable energy white paper for Majid Al Futtaim”. Majid Al Futtaim Group, 2015. Web.
“Sustainability Report”. Majid Al Futtaim Group, 2015. Web.