Introduction
The general objective of this coursework is to demonstrate the importance of Strategic Management in the successful functioning of a business organization and illustrate the application of Business Strategy tools to implement strategic solutions at different levels of a business organization. In this case study, Aramex, which is a leading global provider of a wide ranges of logistics and transportation services, will be used for a SWOT analysis and demonstrate application of strategic management to grow a company.
The Company: Aramex
Mission: To be recognized as one of the top five global logistics and express transportation service providers.
Purpose: To enable and facilitate regional and global trade and commerce responsibly.
From a small express logistics company based in the Middle East, Aramex has grown to become a global player in a global integrated supply chain firm. In the recent past, Aramex has pursued an insistent expansion strategy globally to claim leadership position and establish itself as a formidable force among firms in the global logistics and supply chain management. Moreover, it has focused on leveraging the Global Distribution Alliance where it boasts of being among the largest constituent.
Aramex was established in 1982, and it has become a global brand known for its innovative and customised solutions. Consequently, in 1997, Aramex became the first Arab company to trade on NASDAQ.
Today, the company has grown across the globe with over 307 offices distributed in 195 countries. in addition, Aramex has more than 7,000 employees who meet diverse needs of more than 5,000 companies located in the Middle East, Africa, Asia, Europe, the US, and India. Aramex uses acquisition strategies to expand its business interests across the world (Shuaa Capital, 2008).
The company controls a significant market share in its main market in the Gulf region. In addition, Aramex continues to focus on other unexplored geographical regions for its expansion drive as a way of revamping its global distribution network. Nevertheless, the Middle East region will continue to be the most significant market for the company even in the future.
In light of this growth, it is anticipated that the company will continue to experience massive growth for several years. The growth will emanate from high and unrelenting regional economic activities, strategic outsourcing practices in supply chain management, declining trade barriers across geographical regions, escalating investment in the infrastructures and the company’s abilities to leverage on all these growth drivers.
Aramex has created different divisions for its operations, including international express, logistics, supply chain management, regional distribution and other strategic core operations. The international operations cover parcel distribution globally and in the regional destinations for both retail and corporate clients.
The distribution channels include air, land and sea. The company has warehouse, bulk services and clearance services. Within the domestic market, the company provides express delivery services for small packages and package pickup for shipment.
Aramex also has valued added services, including warehousing, supply chain management, and inventory tracking alongside other services.
A SWOT Analysis for the Company
Strengths
- Thorough knowledge of the Middle East market
- A record of excellent track record in the region
- A broad worldwide network
- A broad range of logistics and supply chain management services
- Strong customer service and recognised solutions
- An integrated strategic growth model
- Application of modern technologies in logistics and supply chain management
Weaknesses
- Limited presence in many emerging economies
- Heavy dependence on the Gulf region
- Slow penetration of the global leading economies
Opportunities
Introducing and integrating modern techniques in documentation
Focusing on higher margins from governments and other corporate clients
Increased growth opportunities in the Middle East
Dubai government making DP World a regional hub
Massive investments in the regional infrastructures
Strategic location of Dubai to support emerging economies in South America, Africa and Asian countries
Strategic partnership with regional logistics and supply chain management firms
Leveraging on emerging technologies to cut costs
Falling global oil prices
Threats
- Rising costs of operations, including repair and maintenance
- Increased competition from global brands and other small numerous domestic firms
- Volatile foreign exchange rates
- Unrest in some parts of the Middle East and North Africa
- Inability to manage surcharges
As Aramex expands its operations globally, it faces considerable risks.
In the recent past, Aramex has been able to capitalise on low global oil prices. However, stronger US dollar, fear of recession in Europe, and economic slowdown in China have potential impacts to influence the company’s global expansion and business activities. In addition, notable challenges in Russia and other BRIC countries have shown that regional economic growth will decline.
Competition at home has been intense for the company. Many global players have entered the Gulf region and now pose serious challenges for the company as they focus on its main market. In addition, these companies tend to collaborate with local players to expand rapidly and overcome obstacles. For instance, DHL has focused on ambitious investment plan in the Gulf region to strengthen its local presence.
Aramex has focused on acquisition as a strategic expansion strategy. However, creating a smooth and seamless integration process is a challenge and, therefore, this process hinders Aramex’s expansion model while other acquired businesses may lack synergy to create the needed synergy in respective markets.
Different regulations in various countries have potential difficulties for Aramex. The company must be a subject to different laws and regulations on operations and labour across the globe. In addition, many countries continuously review their laws and introduce new compliance requirements based on environmental laws, labour issues and customer service.
Technologies continue to change so rapidly that the company may not keep up with these changes. Moreover, new technologies tend to be expensive in terms of initial costs and training of end users.
The company has a revenue mix. Generally, the company generates much of its revenue from express deliveries and freight forwarding. However, these sources of revenues bear diverse gross margins with the largest contributions from express deliveries. This implies that any potential challenges in express deliveries would result in poor returns, gross and net margins.
Over the past years, the costs of operations have risen significantly. However, notably, the company’s gross profit margins have continued to increase. Thus, it can be concluded that the company has been passing surcharges to customers. This strategy may not be sustainable in the end because of steady increase in operation costs and, therefore, Aramex will notice decline in customer interests in it services.
Other external factors also pose formidable risks to Aramex. For instance, poor infrastructures, natural disasters, labour issues, obsolete technologies, poor protection of intellectual property rights, unpredictable partners and other geopolitical factors have hindered logistics activities of the company. Consequently, packages may delay. Thus, costs, availability and labour factors are major risks, which Aramex must evaluate.
Aramex’s Strategic Approaches
Aramex has taken unique strategic strategies to exploit the GCC market and other opportunities in emerging economies. As a result, the company has focused on sustained reinforcement of its position a leading logistics and transportation firm globally. Aramex continues to expand its global networks, revamp its technical solutions for customers’ unique needs and meeting needs of communities. These aspects of operations illustrate Aramex’s key strategic approaches for profitability, sustainable growth and value creation for all stakeholders in the long-term (Porter, 1998).
It is noteworthy that Aramex has developed from a local firm to a major global transportation and logistics solution company with many operations internationally. In the Arabian Gulf, Aramex has become the company of choice in the logistics and other related services. Aramex’s approach to internalisation involves geographical focus with certain products that enhance shareholders’ value based on the company’s growth strategy.
Strategic approach to growth
The company concentrates on a multifaceted strategy to promote growth. It believes that the approach would ensure that strategic goals and customer needs are met. These strategies for growth include the following.
A focus on strategic acquisition and joint ventures in emerging economies
Aramex has recognised that developing nations provide the best opportunities for the growth of its logistics and transportation network. Aramex believes that its business model allows it to create a stronger presence in these emerging economies. Consequently, the company has been able to strengthen its position as one of the leading logistics and transportation companies in the world. Aramex acquisition strategies involve a mid-term approach for small and medium-scale companies interested in joint ventures or total acquisition.
The company also concentrates only on politically stably countries with notable rapid rates of economic growth, specifically in Africa, Asian countries and other nations in the Commonwealth of Independent States.
Thus, geographical expansion based on acquisitions in emerging markets, such as Asian countries and sub-Saharan Africa has been identified as the main pillars in the global trade (Parasie, 2014). The geographical expansion strategy has ensured that Aramex gains significant presence in the US and China. The globalisation strategy has served the company well and therefore, Aramex considers it as a strategy for gaining significant market shares in emerging markets (Grant, 2005).
Aramex also concentrates on sustainability to promote domestic growth. The company believes that its services can spur economic development in emerging economies by supporting small businesses and facilitating trade. At the same time, Aramex has strategically focused on integrating many medium-sized firms within its network in major markets to ensure that it achieves increased efficiency in operations and provision of additional values to customers.
In the fiscal year 2011, the company successfully accomplished strategic acquisition in Kenya, South Africa and Ireland. At the same time, it also went into a joint venture with Sino Air of China, and later started Greenfield operations in Tanzania, Uganda and Kazakhstan. Further, Aramex has expanded to other countries in South and East of Africa countries.
The company also improved its presence in South East Asia by ensuring that an important link was created between core trade partners and other regional and global trading hubs. Consequently, Aramex has been able to strengthen its global operations. By creating a strong footprint in these emerging markets, the company focuses on enhancing and unlocking underutilised opportunities that can ensure further growth in the Asian and African regions, as wells as to ensure enhanced trade between these new markets and sustained growth strategies.
Brand Globalisation through Franchise Opportunities
Aramex has created a franchise strategy that offers sustained growth opportunities to local and global transportation firms interested in providing global logistics and transportation services. These firms can rely on its robust IT platforms, established regional and global networks and branding to achieve their goals.
These franchise opportunities act as sources of additional revenue stream for Aramex. Besides, the company can generate such revenues with minimal investments, management and costs. Aramex uses franchises to facilitate market entry, take advantage of local knowledge, increase the revenue base, develop the brand and enhance services provided globally.
The company also uses its franchise strategy to develop corporate values and ensure shared responsibility and sustainability through mutual corporation and best business practices (Banalieva & Dhanaraj, 2013).
Strategic Investment in Infrastructure and Technologies for Organic Growth
Aramex has identified several vital opportunities in its core markets to enhance its product and service provisions through its currently available infrastructures. It concentrates on massive investments in logistics at the current locations (KPMG LLP, 2011). Through this approach, the company believes that it will gain from expanding markets and demands in the Middle East and parts of Asian countries. These are mainly outsourcing services in supply chain and information management (Charnovich, 2009).
It keeps commitment on environmental sustainability. For instance, all logistics centres constructed after 2011 have LEED certification. The company intends to promote these cost-saving and environmental standards into the future for its projects in Africa while supporting and cementing its presence in South East Asia. This acts as the link between trading regions and further linking world trade regions, as well as showing the company’s global footprints.
Aramex has been able to leverage the local knowledge, grow its revenue, enhance brand awareness, and service provision. Aramex has been able to establish strong relationships, corporate values and sustainable business practices through franchises.
Aramex supports entrepreneurs and e-businesses to facilitate trade growths
The company has developed strong values, entrepreneurial culture and history. These aspects have given Aramex unique abilities to understand its strategic roles and work on promoting entrepreneurship, creating jobs and eventually establishing macroeconomic development.
Consequently, the company has focused on developing its strategic partnership with leading organisations to offer mentorship opportunities, support, and offer alternatives and solutions to budding entrepreneurs and engage start-ups and SMEs to facilitate and promote investments in small businesses.
Aramex continues to appreciate the role of online retailers and e-commerce in the Middle East. As a result, the company is working closely with many online firms to promote its online services. Aramex boasts of thorough knowledge, expertise and infrastructures, which can enhance financial transaction and delivery of services. The company hopes to improve further growth of small businesses and ensure market expansion through online platforms.
Strategic Investment in Human Resources
The company has realised that it can use human resources to create competitive advantage. Therefore, Aramex claims that investment in its people is a key priority and believes that it is vital for sustained growth. Further, the company invests in its workforce using different methods (Haid & Sims, 2009).
Employee training programs, for instance, have been established through the company’s corporate university. In addition, it works alongside major regional and global universities, promotes local management, focuses on better working conditions, and improves human resource management practices. Aramex therefore aims to establish a corporate culture that can attract and retain the best talents.
Value Creation for Customers
The company is customer-focused and, therefore, always strives to meet unique customers’ expectations. Aramex believes that its customers are long-term partners. As a result, the company has established a close relationship and responsiveness to needs of customers while continuously revamps its customer service and innovation for diverse customer demands (Hitt, Ireland, & Hoskisson, 2008).
Active Corporate Citizens
Many organisations have noted the need to conserve the environment in areas in which they operate (Aramex, 2011). Aramex, like these organisations, has also noted the strategic importance of environmental conservation and responsible business practices. Thus, it actively works with communities to achieve this goal. The company has therefore formulated a policy to control its corporate strategy for specific areas on environmental sustainability.
Conclusion
The current and endless changes that have affected the contemporary businesses have prompted many firms to reassess their strategic approaches to succeed in the highly dynamic environment and market growths. By taking into account the potential of technology-driven operations, organisations must adopt critical and comprehensive assessment of both macro-level and internal aspects of their organisations.
Aramex has shown that by conducting regular assessment of its operations and management, it can improve its competitiveness, as well as identify possible issues that could affect and deter future operations. As a result, assessment of business enhances comprehension of the organisational environment, including risks and opportunities. Aramex can then formulate suitable solutions to overcome challenges observed in areas where it operates amidst such challenging situations.
Just like in other progressive organisations, Aramex has applied strategic management strategies in its approaches to operations, which are responsible for its continued growth globally. As the company strives to establish itself among the global provider of logistics and transportation services, Aramex has concentrated on the global business while leveraging business opportunities from various stakeholders. Notwithstanding its current achievements, the company’s future, sustained profitability and global expansion will largely depend on finding the right balance and managing notable risks in order to remain competitive.
The analysis of SWOT shows that managers face both opportunities and challenges. The problems, however, could be ambiguous and may not conform to readily available simple solutions or models. In this regard, Aramex has applied principles of strategic management to assess and understand the practical implications behind critical organisational approaches and decisions.
Through strategic management approaches, Aramex has assessed and identified specific entry strategies in the global markets, specific services and products for those markets, the type of organisation to establish, as well as assessing and responding to competitors’ activities with the aim of creating competitive advantage.
The company understands the role of innovation, technologies, outsourcing and environmental conservation in the modern markets. Aramex believes in sustainability, leveraging local expertise and knowledge, leadership while promoting global networking to strengthen its positions among the leading global logistics and transportation companies.
The outcomes of strategic management at Aramex are noted in many spheres. First, Aramex has noted the importance of its customers. The company believes that customer’s centricity is the main force behind the growth of the company services. The company continuously develops products and services, which meet diverse needs of its customers. Second, service and product differentiation strategies at the company are part of strategic approaches. For instance, Aramex has a strategy of organic growth.
Through organic growth, the company relies on its superior and quality service for providing all logistics and transportation needs of its customers within its outlets. Third, the company continues to focus on innovation and entrepreneurship. Aramex has continued to focus on technology in services and products delivery. This is a way of enhancing its efficiency in operation, service qualities, fostering growth, and generation of revenues.
At the same time, the company also focuses on promoting entrepreneurship through empowering SMEs and encouraging applications of e-commerce in doing business. Fourth, strategic human resource management also defines aspects of operation at Aramex. Aramex believes that quality employees yield excellent results. Consequently, the company’s recruitment and selection processes focus on attracting and retaining best talents, nurturing, and providing them with chances to innovate and achieve the company’s aspirations.
Aramex principle promotes employer and employee partnership by providing job security, and investing in human resources. Finally, strategic management is also reflected in the company’s approaches to acquisition and expansion.
Aramex has been able to exploit free market economy in the global markets as a tool for venturing into new markets through acquisitions in strategic, and significant markets like the US and China. In emerging economies like Africa, Asia, and other Commonwealth nations, Aramex uses franchising strategy as a means of growing its brand globally.
References
Aramex. (2011). A n n u a l R e p o r t. GCC: Aramex.
Banalieva, E., & Dhanaraj, C. (2013). Home-region orientation in international expansion strategies. Journal of International Business Studies, 44, 89–116. doi:10.1057/jibs.2012.33.
Charnovich, J. (2009). How to Maximize Technology ROI and Create and Lead Superior IT Performance. TecExecs, 1-2.
Grant, R. M. (2005). Contemporary Strategy Analysis. Hoboken, New Jersey: Blackwell Pub.
Haid, M., & Sims, J. (2009). Employee Engagement: Maximizing Organizational Performance. Leaders Insight, 6100(5), 1-25.
Hitt, M., Ireland, D., & Hoskisson, R. (2008). Strategic Management: Competitiveness and Globalization: Concepts & Cases. New York: Cengage Learning.
KPMG LLP. (2011). Succeeding in a Changing World: International Strategy. Web.
Parasie, N. (2014). Dubai’s Aramex Earmarks Africa for Future Growth. Web.
Porter, M. E. (1998). Competitive Advantage: Creating and Sustaining Superior Performance: New Introduction. New York: Simon and Schuster.
Shuaa Capital. (2008). Aramex: A Regional Brand on a Global Mission. The United Arab Emirates: Shuaa Capital.