Sabic and Its Role in the Economy of Saudi Arabia: Analysis Research Paper

Introduction: Economy of Saudi Arabia in a Nutshell

When it comes to talking about business in Saudi Arabia, oil and oil tycoons are the first images that pop into one’s mind. However, oil industry feeds a number of other businesses, allowing them to grow from minor ones into business empires. Started as a company processing oil by-products, Sabic is a vivid example of such a phenomenon.

The History of Sabic: The Path of the Dragon

When talking about Sabic and the way in which it shaped the market of Saudi Arabia, as well as the specifics of business relationships within the specified market, it is crucial to offer a quick overview of the development of Sabic. Decyphered as Saudi Basic Industries Corporation, Sabic started out as a state enterprise that was going to offer the services of utilizing oil by-products.

As the company asserted, what used to be considered as waste would be transformed into useful chemicals, including such products as polymers and fertilizers. Needless to say, the given niche was relatively new and, therefore, no one had taken it by that point yet.

It is also essential that the company and its affiliates were originally located next to fishing villages. Having a tangible impact on the villages’ infrastructure, the Sabic affiliates finally contributed to the economical growth of the specified villages, turning them into industrialized cities. Creating a number of affiliates to coordinate the utilization, Sabic finally grew into a corporation that embraces eighteen affiliates and whose influence has been growing increasingly since 1976, when the company was founded.

In the course of its development, Sabic has gone through a number of changes, including organizational, industrial and economical ones. To see the peculiarities of the company development, one should consider the following stages of Sabic’s evolution:

Table 1. Sabic Statistics (GulfBase)

Sabic Real Statistics: from 1993 to 2013

Judging by the data offered above, Sabic has gone a long way from a small company to a major corporation that literally defines the further development of the Saudi Arabian business. According to the table above, the company’s development was boosted in 2011 – 2013, which can be explained by the fact that in 2011, Sabic started to expand under the influence of globalization tendencies. Thus, it can be considered that the chosen economical strategy, i.e., the expansion venture, has proven efficient.

However, it is clear that the company is not going to stop at this point of its development; on the contrary, Sabic is currently planning not only to win over the European Market, but also to meet the latest demands and come up with more items for its product portfolio, including such products as polyurethanes and metallocene linear low density polyethylene (MLLDPE) (Bloomberg).

Mission and Vision Statement: The Impossible Takes a Little While

Like any other company, Sabic has a distinctive vision and a clear mission statement. Even though in most cases, the company’s vision does not define the quality of the services that the given company provides, it still helps evaluate the scale and the scope of the company’s focus.

With that being said, it is important to stress that the company’s mission is, according to the way in which the company’s leader put it, “to responsibly provide quality products and services through innovation, learning and operational excellence while sustaining maximum value for our stakeholders” (Sabic).

Therefore, it is clear that providing technologically advanced services is only part of the company’s mission; the other part of the mission statement makes it clear that Sabic aims at satisfying the customers’ need for excellence. The latter proves that the company sells not only products, but also the legend behind these products, i.e., the image of a successful ad technologically advanced person.

As for the company’s vision, it seems to have been persistent since the day when the company was founded, too. In the company leader’s own words, Sabic’s vision is “to be the preferred world leader in chemicals” (Sabic). At this point, however, Sabic seems to abandon its tendency to stress the needs of the customers and focuses on its own achievements.

While the given feature of the vision statement is positive, Sabic could use a vision statement that will be more customer-focused. Thus, Sabic will be able to appeal to its potential customers in a much more efficient manner.

The Product: Selling Comfort and Peace of Mind

On the surface, every company sells a specific product to their customers, and the quality of this product, as well as its prevalence, defines the price that people are ready to pay for the product and, therefore, the company’s revenues. It would be wrong to say, however, that the produced goods or offered services are the only products that a company has to offer.

Adopting a more general view of the trading relationships, one has to admit that any company provides their customers primarily with comfort and certainty concerning a specific part of their lives; for instance, a pharmaceutical company sells medicine and an image of a healthy and, therefore, happy person; a toy company sells toys and the concept of development and entertainment for children and more free time for their parents; the list goes on. In that sense, the products that Sabic sells to its customers can be split into the following categories:

The actual products

When it comes to listing the products that the Sabic Corporation offers to its customers, one must stress that the company has made quite a few changes in the list of its products in the course of Sabic’s development. The given process can be considered natural, since with the progress of technology, the development of the customers’ demands and the recent discoveries regarding the 3-D polymers, it is necessary to shape the production process and reconsider production values. However, the basic range of products offered by the company remains unchanged since 1965; these are:

1. Chemicals;
2. Plastics;
3. Fertilizers;
4. Metals.

The legend behind the product

There is no use selling a product unless one has a strong and impressive legend behind it. Companies do not simply sell goods – they sell certainty and comfort, as well as the image of a happy owner of the specified product. Sabic is no exception to this rule; behind every product that it sells, there is a strong and well-polished legend. Among the most persistent ones that have stood the time test, the following should be named:

• Improving the customer’s market success;
• Providing comfort in the customer’s work and daily life;
• Guaranteeing safety in the customer’s working process by providing the goods and equipment of the finest quality;
• Offering the customer a concept of success and an image of a professional user of the provided equipment;
• Helping the customer feel that (s)he keeps in touch with the latest technological advances.

As one can see, with this extensive list of concepts that lie beyond the goods produced by Sabic, the ideas of safety, comfort and innovations can be traced. Therefore, it can be assumed that the above-mentioned concepts should also be included in the list of Sabic’s services.

Company’s Financial Heath: A Published Account

Sabic has definitely made an impressive progress over the past few years; a mere look at the financial report that the company has to offer shows that the company is relatively financially healthy. However, some symptoms can be viewed as rather menacing; by analyzing them, one can possibly determine the existing threats and detect the issues that might evolve into serious concerns in the nearest future.

The 2013 Sabic report consists of five parts, each representing a corresponding element of the company’s financial strategy. The Independent Auditors’ Limited Review Report has shown that the company is in perfect conformity with the existing standards and that there is no need to change the current financial strategy of the company whatsoever. According to the Inteim Consolidated Balance Sheet, Sabic’s assets are almost $4,000,000 lower than the 2012 estimated amount (141,375,305 and 145,368,067 correspondingly) (Saudi Basic Industries Corporation (Sabic) and Its Subsidiaries).

As the aforementioned financial report shows, Sabic’s weakest financial aspect is its inability to provide an accurate estimation of its future financial assets. The given drawback poses a considerable challenge to the company’s further development, since it poses a tangible threat to the efficiency of the avenues chosen by Sabic for the company’s financial growth. Moreover, the inability to anticipate the possible losses might result in the inability to handle a crisis that may struck the company in the future.

At the same time, it is necessary to specify that the company’s cash equivalents at the end of the period are much higher in 2013 than they were in 2012. Therefore, it can be assumed that at present, it will be best for Sabic not to make risky financial stakes and rely on the traditional financial strategy. The given strategy can be very challenging, since Sabic is going to operate in a completely new environment. However, with a well through-out plan, the company will be able to achieve success in the new market.

Aiming Higher: Forward Markets and Expansion Plans

As it has been mentioned above, Sabic is not going to stop at what it has already achieved and is working on its further strategy. Despite the fact that the company could use more popularity in Saudi Arabia, the company director has clearly decided to expand into the Asia and European markets.

The given choice seems rather risky, seeing how the company has not captured the Saudi Arabian market completely yet. However, as the interview with Al Madi shows, the given step is the only way to meet the company’s standards, which presuppose “doubling of sales to $60 billion/year by 2020” (Alperowicz 25).

When speaking of the forward markets that the company will most likely explore in the nearest future, one must stress the fact that Sabic is going to introduce new products to its customers. As a result, the company has included more states into its expansion plans. It is remarkable that Sabic is going to introduce its goods to the Asian population as well as the European and American one, therefore, having to face even tougher competition with the local companies.

The results have been rather satisfactory by far; according to the latest accounts of the company’s progress, Sabic has started capturing the Asian market; in 2013, the number of polymer feedstocks provided by Sabic has risen to 1300 (stable) (Polymerscan, 2013). Therefore, it is clear that the Sabic Company is going to pursue its expansion idea.

The given strategy has its strengths and weaknesses. On the one hand, it is clear that in the light of the current concern for cleaner and safer environment, the idea of recycling oil by-products sounds more than attractive to most of the public that the company’s promotion campaign is targeted at.

Therefore, Sabic is clearly on the right track; offering the goods that will help keep the environment cleaner and at the same time providing a relatively flexible pricing policy. It is also important that the company is keeping the track of the latest technological developments in the given sphere, trying to keep in pace with the standards that the recent technological advances set. Compared to the products that the company offered in the distant 1990s, the production of polypropylene goods is a major improvement.

On the other hand, the risks of producing completely new services in an entirely new environment are obvious; the slightest slip is fraught with great consequences, which the head of the company is clearly aware of: “We are trying to strike a balance between C2 and C3. We are concerned about polypropylene.

There is no structural alteration in PP demand, so any sharp [movement] could possibly choke off the [improvement] we are seeing” (Polymerscan, 2013). Therefore, it is crucial that the company should take account of every single factor, either an inside or outside one, when planning its further steps.

Conclusion: The Existing Avenues of Further Development

The conducted case study shows that Sabic definitely has the potential to enter the world market and compete with the world-renowned companies efficiently. It is clear that the company has its faults, among which the company’s cyclicality, limited geographic diversity and high dividends should be named. Since the aforementioned issues can be considered the company’s features and, therefore, are an inseparable part of Sabic, there is no need to get rid of them; moreover, the elimination of these features can lead to the loss of the company’s uniqueness. Thus, Sabic should find the way to operate successfully in the new environment without these disadvantages in the way, which will require improvement of the other aspects of Sabic’s operation. In addition as a contrast to the specified flaws, Sabic has a distinct leadership style and strategy that will help it stay afloat in the new environment and, by learning more about the latter, become highly valued in the new market. With that said, it can be concluded that Sabic will survive the changes associated with expansion and prove prone to the possible crises.

Works Cited

Alperowicz, Natasha. “Sabic Grows and Diversifies.” Chemical Week 172.29 (2010): 25, 27–28. Web. ProQuest. 2013.

Bloomberg. Saudi Basic Industries Corp. Web.

GulfBase. Saudi Basic Industries Corp. Web.

Polymerscan, 2013. Web.

Sabic. Ambition and Commitment. Web.

Saudi Basic Industries Corporation (Sabic) and Its Subsidiaries. Web.