Saudi Basic Industries Corporation (SABIC) is a firm that manufactures diverse products such as plastics, fertilizers, chemicals, and metals. It is ranked among the best 10 petrochemical companies worldwide (SABIC para. 6). SABIC is considered by the Fortune magazine as the fifth largest petrochemical company, while Simba Financial Group ranks it as the sixth largest petrochemical firm worldwide (CNN Money para. 3).
The company has succeeded in its mission because of its ability to prioritize its objectives. The firm‘s approach entails improving its productivity by ensuring that it sustains high technical and exceptional quality standards. In addition, the company is also devoted in improving its marketing efforts in order to make its products perform well in the competitive petrochemical market. SABIC has been able to position its products strategically in every region it operates.
For instance, SABIC has succeeded in establishing a very effective market for its methanol product in China. China is famous in the production of wines and spirits for both local consumption and the export market, mainly in the European nations and the United States of America (Gulbase para. 4). For example in 2008, China imported from SABIC methanol worth $ 2 billion. This was approximately 14% of the methanol that was manufactured by SABIC in that year.
Although the company is ranked among the 10 leading petrochemical companies globally and the leading petrochemical company in Asia, nonetheless, it requires positioning its products more appropriately in order to enhance the sales of its products within its established markets and in the new regions the company aspires to penetrate (Gulbase para. 4).
The company’s products are noted to face very stiff competitions from other rival petrochemical firms from Europe, U.S.A. as well as other Asian nations. For instance, the company faces very stiff competition in the European markets from the BASF a Germany petrochemical company that is considered as the worlds leading producer of chemicals. The company is estimated to possess more than 160 subsidiaries and joint ventures.
The company has succeeded in establishing the markets of its products in over 200 countries. The firm employs over 96,000 people (Gulbase para. 4). Most of its markets are concentrated with the European region. The company has been able to command a bigger market share particularly in the European region because it has been in existence for a longer period of time compared to SABIC.
Similarly, BASF has succeeded in its quest to establish a stronger brand than SABIC in the European markets. Another petrochemical company whose products compete stiffly with SABIC products is the Dow Chemical Company. This company is considered as the second largest petrochemical firm in the world. It is a US- based firm that has established its operations in more than 175 countries. Its workforce is estimated at more than 46,000 (A1 Saudi Arabia para. 2).
In addition, the company has been able to dominate the Unites States petrochemical market. Sumitomo Chemical which is regarded as the 8th petrochemical industry in the world with approximately 25,000 employees gives SABIC’s products a stiff competition within the Asian markets (Bloomberg Businessweek para. 5).
The recent global economic crises affected the market served by SABIC in a negative way. The effects were mainly felt in its Asian markets where the prices of key products such as high-density polythene as well as ethylene dropped by 60% and 80%, respectively. Similarly, the demand of SABIC products decreased considerably, and this resulted in SABIC recording a loss of SR 937 million in the first quarter of 2009.
The performance of SABIC has started to improve especially in the Asian markets (Bloomberg Businessweek para. 5). The opening up of more petrochemical industries in the Middle East that manufactures high density polythene has affected the sale of SABIC’s high density polythene negatively in the Europeans and the United States markets. These markets are still reluctant to buy more high density polythene as they speculate a drop in the price as a result of an increase in the supply.
China as well as the Far East regions are considered prime markets for SABIC products. SABIC should put a lot of effort in expanding its market to other potential regions such as Africa. Since the company is well positioned to get cheap raw materials from its petroleum, it should use this opportunity to build its markets in many other regions in order to strengthen its brand.
The company should offer its products at a lower price in order to help establish a competitive edge over its rival companies (MMC Learning. Distribution channels para. 4). This will enable the company to establish new other markets that will eventually become its prime markets. SABIC should stop overlying on the successful China market that it has established.
There, is a possibility that China’s petrochemical industries will eventually become SABIC number one rivals in the Asian markets (Bloomberg Businessweek para. 6). Although, SABIC has the advantage of receiving cheap raw materials for manufacturing chemicals, China on the other hand has an advantage in that it has highly skilled and cheap labor. Thus, China has the capacity to expand its petrochemicals industries in a position to become SABIC’s threats in Asian markets in future.
SABIC should launch appropriate awareness programs in the regions it operates in as well as in new markets that it intends to penetrate. The company should set aside considerable amount of money that it intends to use in marketing its brand. The ads should involve renowned celebs in order to help convince the consumers that SABIC products are of very high standards.
The use of celebs in the advertisement acts as a psychological persuasion that helps help consumers to perceive a company’s products with good quality (Kotler and Keller 88). In order for the company to be more effective in penetrating new markets by overcoming cultural barriers, the film should expand to new regions through acquisitions as well as through Direct Financial Investments.
Through these processes those people that live in the regions where the SABIC opens their businesses will tend to develop positive perceptions towards the companies products. Through this process the company will increase its performance as more people will tend to prefer its products over the available substitute products from competing firms.
SABIC should embrace appropriate distribution channels in order to increase its performance locally as well as in the other regions it has ventured into (Miles 94). Distribution channels are the means that firms use to sell their products. SABIC should intensify its B2C as well as B2B strategies. The company should employ multiple teams that specialize in selling different company’s products or customer segments.
For example, SABIC marketing team should establish diverse sales teams that will be assigned the tasks of selling the company’s diverse products in all the areas it operates as well as the new regions it aspires to expand to (PRLOG para. 6). The teams should be well informed about the products they will be assigned to market in order to be in a better position to respond to any query from the consumers (Aaker 106).
Because SABIC manufactures several products, it will be very challenging for the sales people to have all the details about the products SABIC manufactures. That is why the company’s marketing department should consider grouping its sales people into different groups and assigning every group a product to market.
In addition, the marketing department should make sure that it assigns different sales people to market same products in different regions. This will help the sales people to study its market niche appropriately in order to enhance their effectiveness. When preparing the teams as well as when deploying the sales people, the marketing department should make sure that the teams are strategically formed in order to make sure that they are well represented to overcome cross-cultural barriers.
SABIC should increase the sale of its products through e-commerce. The company should use the internet infrastructure to intensify the awareness of its products considerably (Kotler and Keller 89).The internet will help the firm to create awareness of its products in the regions where it has not succeeded to expand to.
Similarly, the internet will also help the company to sell its products to foreign consumers that are not in close proximity to the company’s products. The company’s IT department should make sure that the company’s website is secured appropriately in order to prevent exposing the customers’ credit cards to hackers who can make unwarranted purchase. Through this process the company can offer a lot of negative publicity that will adversely affect the sale of its products.
Another strategy that SABIC can adopt is to expand the market of its products in Europe and the United States by acquiring other petrol chemical industries that operates there. SABIC is well known for using the acquisition strategy as its expansion approach. Therefore, the company should use the same strategy to augment its operations in Europeans and the American region.
By buying other petrochemical companies that operates in U.S. and Europe, SABIC will be in a position to extend its market in these regions. Consecutively, the company is in a better position to expand its operation and become the leading petrochemical company in the world ahead of BASF.
SABIC should also try to extend and develop its other line operation in order to avoid it relying mostly with the production of High-density-Polythene as well as ethylene. It’s over relying on these products that have very high demand in China are the one that contributed greatly to the company experiencing considerable losses during the previous economic recession.
The economical downtown of 2008/2009 forced many companies that depend on petrochemical products in China and Far East to cut down their operations considerably and others closing their operations completely in order to avoid experiencing huge losses.
Subsequently, the performance of SABIC was greatly compromised that resulted to the company witnessing substantial losses. Thus, the company should invest most of its resources to develop its other line of production such as the production of fertilizers. The company should make sure that they carry out thorough researches in order to manufacture better quality fertilizers that possess very minimal side effects.
Moreover, the firm should equally invest a lot of their resources to market their fertilizers to consumers Africa as well as farmers in America. The development of the company’s other lines of production will help to assists the company from not over- relying on the sale some of its products, but to distribute its revenues appropriately such that the failure of some products will not affect the performance of the firm significantly especially during recessions.
SABIC has a very bright future in the petrochemical industry, the company is should consider positioning its products more efficiently by improving its promotional strategies as well as the distribution channels adapted. SABIC should use appropriate ads to promote its products.
The use of celebs is its ads is a good approach it can opt. equally, the firm should capitalize on the presence of e-commerce to increase the awareness as well as the sale of its products within as well as outside Asia. Similarly, the company should consider venturing into new markets such as in Africa, the United States and Europe, to avoid limiting most of its market in Asia and particularly, China which may end up becoming SABIC’s greatest rival in the near future.
The company can adopt Direct Financial Investment as well acquisitions as its expansion strategies. Moreover, SABIC should extend its operation in order to avoid over-relying on the sale of high quality polythene as well as ethylene. This way, the company shall have diversified its operations and by extension, increased its income revenue. This is because in case the market that it has been over reliant on fails, SABIC can focus on the other markets that it has identified and concentrate its marketing efforts in it so as to realize its goal.
Works Cited
A1 Saudi Arabia. Kingdom leads the way in petrochemical exports. N. d. Web.
Aaker, David. Strategic Market Management. London: Sage, 2008. Print.
Bloomberg Businessweek. SAUDI BASIC INDUSTRIES CORP (SABIC: Saudi Arabia). 2011. Web.
CNN Money. Global 500. 2011. Web.
Gulbase. Saudi Basic Industries Corp. (Sabic). 2011. Web.
Kotler, Phillip, and Keller, Kevin. A Framework for Marketing Management (4th ed.). New York: Pearson Prentice Hall, 2009. Print.
Miles, Raymond. Organizational Strategy, Structure, and Process. Stanford: Stanford University Press, 2003. Print.
MMC Learning. Distribution channels. 2009. Web.
PRLOG. Global Petrochemical Giant SABIC Sponsors London Sukuk Summit 2008. Web.
SABIC. SABIC is a leading global petrochemical company and ranks among the world’s market leaders. 2011. Web.