The Number 1 General Trading: Company Analysis Report

Introduction

‘The Number 1 General Trading’ is a multidimensional commercial house of Dubai, a limited liability company involved in sales, marketing, investment, business network development, technology transfer, and industrial supplies, along with a strategic partnership with global organizations. This company was foundered in 2000 and its headquarters in Dubai and started its operation as an SME with strong accord with its global partners and high-end consumer along with industrial and consumer products ensuring the best quality, reasonable price, durability, and trustworthiness. The company has already tagged with various foreign companies especially China, Europe, and the USA; in 2009, it merged with an US telecom company and introduced HD video streaming technology in the Middle East market that generated tremendous market respond for live channels broadcast its product and service to the prospective customers.

From the beginning, the company also emphasized strategic alliances and joint venture to provide service to the overseas companies to get entry in the UAE market in order to export locally produced products in the global market through collaboration with major fashion designers to explore ultramodern fashions in the GCC region. Meanwhile, the company also acts as an exclusive agent of various foreign companies for different product and services and due to its strong connection with the ruling Sheikh families; it has turned into a vital source for governmental purchase of the UAE. The product line of the company integrated with airlines in-flight materials including foods and beverages, hospitality equipment and products, kitchen appliances, merchandising equipment such as shelving system, trolley, and carts, office supplies, corporate uniform, fast moving consumer goods along with different services like marketing, distribution and market research.

Mission Statement, Vision, Goals, & Objectives

Vision

The company settled its vision to embark with incomparable excellence in every project that delivers highest customer’s satisfaction that brings ultimate accomplishment for the company.

Mission

To deliver superior quality of product and services with affordable price in order to meet the current needs of the society that would finally serve the prospects of the future generation to establish a competent nation.

Corporate Governance

Rashid (2012, p.5) defined corporate governance as a process that coordinates several relationships of company and guides how the company would go ahead to attain its ultimate objectives through clarifying the power of the board, role of management and their relationship with the shareholders along with other stakeholders. The core competence of corporate governance has based on the openness, reliability, accountability, and transparency those the board of directors and management would uphold to ensure all the shareholders interest by conducting the business in right track to maximize profitability for all stakeholders with stick maintenance of corporate social responsibility. A well-defined practice of corporate governance would always ensure its full compliance with legislative and regulatory directions that indicated in the relevant Company Act of the country where it conducts business operation and put special emphasis on the accounting system in order to generating a method of checks and balances.

Rashid (2012, p.5) mentioned that they have conducted a landmark research with the SME companies of the UAE where 75% SMEs like ‘Number 1 General Trading’ have demonstrated their eagerness to integrate corporate governance and they are able to realize the importance of CG¹. In the same study it has pointed out two major dilemmas to implementing CG in the UAE, first lack of knowledge of internal corporate governance between the SMEs and the others is scarcity of qualified specialists is this area to work externally as company’s needs. There are regulatory bindings in the UAE to maintain to compulsory corporate governance for the listed companies in the local stock exchanges while the non-listed companies have the opportunity for voluntary integration of CG.

The ‘Number 1 General Trading’ is a family business categorized as an SME with limited liability and not yet listed in any of the stock exchanges of the country, so there is no compulsory obligation to integrate corporate governance. ‘Number 1 General Trading’ is a company with family governance, Rashid (2012, p.28) added that it is very difficult to formulate any particular framework to govern due to the family relationship in the business and frequently more complex than the non-family business. Every family has its particular emotional engagement where such relationship break down the business administration and the management become bound to compromise with such engagement that could spoil the business growth to a certain objective. To overcome such dilemmas, ‘Number 1 General Trading’ needed to have a written governance plan that every family member would follow without any obligation; however, to introduce such provision, it may require to establish a ‘family council’ looks like a board of directors and all the members would cooperate to execute this procedure.

Environment Analysis

PESTEL Analysis

Political Factors

The Number 1 General Trading is an SME organization of the UAE and the political factors of the country are very influential agenda for the company to conduct its business smoothly in this territory. The undemocratic government of the UAE has prolonged with old-fashioned monarchy of seven individual emirates with a supreme council while the citizens of the country striving for democracy following the wave of Arab spring in the Middle East region in 2011. The government forces strongly condiment the anti-government movement and suppressed the organizers with serious violence and torture on the democratic forces. The human rights condition of the UAE is very worse; the law enforcement authorities cracked down on democratic movements and peaceful demonstration of the workers and provide imprisonment to the activists without any trail (IndexMundi, 2013, p.1)

There is no freedom of expression in the UAE, if anyone criticizes on any governmental activities, he must be harassed under the criminal justice system of the country and put for imprisonment. 88.5% of the working force of UAE is overseas workers; the country could not continue its economic activities without foreign workers, but suppression on them is very inhuman, poor wage rate, absence of collective bargain, and immigration law turned them into slavery.

Even the employers kill their employees and propagate it as suicide, in the government statistics, the rate of commencing suicide has increased seriously among the foreign workers (HRW, 2013, para.1). Women of UAE are seriously discriminated, men are allowed to keep four wives at a time, but women are not polygamous marriages, men are allowed to keep foreign spouses, but women would lose their citizenship if they marriage any foreigners. The most uncivilized penal code of the country allowed men to physically abuse and torture the women children and there is no scope for women to sue against domestic violence.

Economic Factors

The UAE is one of the richest countries in the world; in addition, based on the oil economy, the country has overcome from the major shock of global financial crisis without any momentous harm to the local economy (BTI, 2012, para.1). However, Lloyd’s (2013, p.1) reported that the GDP of the UAE on purchasing power parity in 2012 was US$ 271.2 billion, according to the official exchange rate GDP was US$ $361.9 billion, and GDP real growth rate was 4% with a per capita income of $49,000 in the same year.

To reduce dependency on the oil sector the government has been emphasizing to explore its non-oil sectors, with huge budget surpluses it has engaged to carry out broader economic development scheme with special attention to the infrastructural development, health care as well as education sector development. The demography of the country consists with 85% foreigners and 15% local people, the expatriates are the major contributor of the economy, and the education rate is increasing gradually in the primary and secondary level.

Social Factors

The development of civil society is very backward, lack of sufficient strength it could not influence the social progress and could not dare to protest against the undemocratic role of the government. There are few initiatives from the government to raise a puppet civil society to serve the monarchy rather than addressing the needs and demands of the society, due to lack of democratic institutions, few professional associations along with a little number of NGOs and voluntary organizations are trying to explore broader citizen participation.

The people’s participation in the social events is very low due to the governmental suppression, the progress and protection of social trust has explored through personal contacts rather than institutional engagement. Although the governmental initiatives urged to develop societal groups, women empowerment and people’s engagement, but people think that there are only propaganda to misguide the development partners with the aim to long lasting the monarchy.

Technological Factors

The UAE has placed at the top position among the Middle East countries for ICT progress and reached at 29^th position in the global ICT ranking index depending on its infrastructural development, number of connectivity, bandwidth, and time of uses (ITU, 2012, para.2). At present, there are only 30.8% of the connectivity has integrated with fiber optic network and the government has planned to improve the nationwide of fiber optic connectivity with a further investment of US$ 1.36 billion that would provide broad brand connectivity at home, educational institutions, and both public and private sector.

The researcher added that government is also much aware to provide ICT security and it has already amended the relevant legislation and keeping its continuous effort for scientific and technological innovation to contribute the national development (TRA, 2012, p.6). The online presence of the UAE companies through eCommerce and website integration, governmental initiatives to integrate e-governance would be helpful for business operation in this region.

Environmental Factors

Library of Congress (2007, p.7) added that the cultural factors and ethical issues of the UAE develop with a Muslim majority state with 85% Sunni ethic group are privileged by the state; in addition, the 15% Shia and others are minorities with comparatively deprived class. With a rolling desert, the county has 1,318 km of coastline from the Persian to Oman Gulf with a special economic zone up to 200 nautical miles (Library of Congress, 2007); however, there is no river in the country, but it has two Oases that provide natural water resources of the country for cultivation. The climate is hot and dry and the most hazardous fact is that there are regularly sand and dust storms that harshly reduce visibility and very risky to travel out of the shelter. In the coastal areas of the country, there are huge coral reefs, uneven sandbars are available and carry the threats to destroy by the presence of travelers, the tidal storm, and irregular windstorms make it difficult navigate near the shore for fishing.

Legal Factors

All commercial concerns in the UAE have to organize under the ‘Commercial Companies Law’ -1984 that make it compulsory to have the local nationality while the legal system of the country allowed foreign companies as a heavenly place to start a new business (Tarbuck & Lester, 2009, p.5). The legal framework has designed in a manner that significantly encourages the local and foreign companies to do business in this jurisdiction smoothly that provide appropriate treatment civil law principles of Islamic Sharia. Easy licensing scope, free trade zones, and duty free entry are the major attraction for overseas companies to start business in the UAE.

Porter’s 5+1 forces model

Table 1: Porter’s 5+1 forces model. Source: Self generated from Number 1 General Trading LLC (2013)

CP Matrix

Table 2: Competitive Profile Matrix (CPM). Source: Self generated

The above CP matrix table demonstrates that Kahraman Dubai General Trading Co is the powerful competitor of Number 1 General Trading because the total scores of Kahraman are 2.86 while Salah General Trading Company gains only 2.52; however, the total weighted scores of Number 1 are 3.09.

SWOT Analysis

Opportunities

This company has already opened a new branch in China and five branches in the UAE market; however, it has opportunity to gain competitive advantage from international market particularly GCC market using existing business resources and capabilities. At the same time, the owner of the Number 1 General Trading has ability and capacity to acquire other business entities to expand business or open new outlets in the national and international markets to achieve the short-term mission and long-term vision of the company. Moreover, it has scope to take the advantages of globalization, and free trade concepts (reduce trade barriers and minimize costs in some extent) to exploit the emerging markets across the globe to increase sales revenue and profit margin. On the other hand, this organization has several opportunities to boost profit margin, as this company has to pay no tax according to the regulation of this country for family business; in addition, it takes competitive advantages as a private owned multi-disciplinary company.

Threats

The competition in the local market has increased significantly because of the adverse impact of globalization; in addition, the number of small family business increased rapidly in this country due to lack of liability imposed by the government. At the same time, it has only one outlet in the foreign market and has limited manpower in order to compete with the competitors of GCC market; in addition, it has not enough resources to focus on technological changes and adoption of new technologies. This company has to face severe challenges despite the existence of these opportunities, such as, rapid growth of substitute products and services by the emerging companies, rules and regulations to expand business in the local and foreign market, adverse economic condition influenced buyers, insufficient labor force, and resources for expansion, threats from new entrants (small private organization) and so on.

External factors analysis summary (EFAS):

Table 3: EFAS. Source: Self generated

Jovanovic & Davidovic (2012, p.2) stated that EFAS identified the most significant categories of chances and external threats to demonstrate the extent to which the company able to face such external factors by taking into consideration their importance. The above table pointed out key opportunities and threats those derived from the SWOT analysis of the Number 1 General Trading; however, it included weight along with rating for each opportunity and threat (greater the weight indicates bigger the influence) to assess the strategic position of the business in the market. At the same time, the result of the rating (multiplying each factor’s weight by its rating) shows how well this private organization responds to each opportunity and threat; however, total weighted score of the company “Number 1 General Trading” equals to 3.20, which indicates it has to concentrate more on the external factors to develop the position in the market.

Strengths

The Number 1 General Trading is one of the top 100 SME’s of Dubai, which is the strongest point for the future development of the business; in addition, brand awareness is the key asset of this company. According to the report of the company website, many renowned companies in the UAE and GCC countries have purchased products and services from this company, such as, Emirates, Milk & Honey, Etihad Airways, IMAR Spa, Jumerah Group and so on. However, other renowned clients are Dubai World Trade Center, Dubai Silicon Oasis Authority, kempinski Hotels, & Resorts, Rotana, etc. Moreover, the CEO of this business has three years experience to operate business in the UAE with honesty, integrity, and professionalism.

At the same time, this family business has no leadership crisis because the CEO “Jasem Al Shehhi” has exclusive control over the employees of the Number 1 General Trading and there is no board of directors. However, this company has three subsidiaries and distributors to enhance business operation in the UAE market, such as, Archetypal, UAE based company “First Choice Tents”, and RAK Petroleum (under process to collaborate with International Oil & Gas companies). Other success factors are economies of scale to increase the volume of production and distribution centers, introduction of new outlets to maximize the market penetration and target customers, consider effective strategic management (diversification of the products and services), and adoption along with implementation of technology, skill development programs, and Differentiation of the products from the market.

Weaknesses

This company has many internal problems, such as, inadequate customer service to build loyal customer base, motivation of the employees, lack of transparency as it has no board of directors and effective corporate governance system, execution of strategic plan for lack of human resource, less attention in the core business, unpredictable audience in the post recessionary period and so on.

Internal factors analysis summary (IFAS):

Table 4: IFAS. Source: Self generated

According to the report of Jovanovic & Davidovic (2012, p.2), IFAS recognized the most significant categories of internal strengths and weaknesses to demonstrate the extent to which the firm able to envisage such internal aspects by taking into consideration their significance. However, the above table categorized main strengths and weaknesses those based on the SWOT analysis of this company; nevertheless, it provided weight as well as rating for each strength and weakness (larger the weight indicates larger the influence) to assess the tactical position of the firm in the UAE private business sector.

In this case, the result of the rating (adding the result of multiplying) demonstrates how well this family business responds to each opportunity and threat; however, total weighted score of the company “Number 1 General Trading” equals to 3.30, which illustrates it needs to focus more on the internal aspects to change the position of this firm in the market.

Generate strategic factors analysis summary (SFAS)

Table 5: SFAS. Source: Self generated

According to the above total scores are 2.85 (near to average); therefore, Number 1 General Trading responses to the external and internal environment with average concentration and it should give more effort on these factors.

Level of Strategies

Functional level strategies

Gutterman (2007, p.1) stated that the main features of this strategy are the capability of the firm to carry out specific functional activities more proficiently with intent to offer low price and differentiates the products and services to design future plan and increase the profit margin.

Financial

Mr. Jassim Al Shehhi is the chief executive officer and chairman of this family business who strictly control all employees; however, there is no board of directors and external CFO because the leader of this company has ability to mange the function of financial department of this small company

Marketing

The marketing policy of this company is not too effective to increase sales revenue of the fast moving consumer goods, office supply & equipment, corporate gift items and hospitality supply & equipment (hotel supplies, shelving system, mattresses and appliances); however, it uses social media like twitter, linkedin, Facebook and many other sites in order to develop business. Emirates Airlines and Etihad Airways are two major clients of the airline supply segment for which it is possible to expand this segment with limited marketing campaign; on the other hand, other segments of this company had not experienced such huge success from advertising in social media. Therefore, this report suggests the Number 1 General Trading to introduce effective marketing campaign particularly for hospitality supply, FMCG and office supply.

HR strategies

According to the survey report, the Number 1 General Trading has 12 employees at present (other secondary sources show 25 employees) and two of them are -family members hold the top management position. In addition, the top management introduced special procedure for all segments of the business to coordinate the task of the human resources; however, all employees are responsible to appreciate client’s needs, comply with the rules and regulations, offer quality service, and work with integrity and honesty.

Sales

This company has five outlets in the local market and one branch in China (survey report); however, it has already entered European and the US markets using different strategies to increase sales of the products. Furthermore, the supply chain management of the core segment is very strong for which it became possible for this company to hold 29^th position among the 72000 small and medium size companies in UAE; however, it has three subsidiaries and distributors.

Business Level Strategy

Table 6:- Competitive Business Level Strategy for Number 1 General Trading. Source: Self generated

Corporate Level Strategy

Keller (2009) argued that this strategy needs to consider when a firm deals with several projects or units or business divisions; in addition, it plays vital role to control different units by addressing key factors, such as, identify prospective markets, direct the top management, estimate invest in each business, and centralize at the corporate level. At the same time, Keller (2009) further addressed that levels and types of diversification are the main indicator to assess the position of the company; however, less than 70% of the total earning generated from Airline supply, which indicates it is following moderate level diversification strategy.

BCG Matrix

Table 7:- BCG Matrix table for Number 1 General Trading. Source: Self generated

Stages of corporate Development

Churchill & Lewis (1983, p.2) stated that the owners and managers of the small organizations need to upgrade the operating system in order to maintain growth by solving common problems; however, the researchers suggest five phases for the

Table 8:- Stages of corporate Development. Source: Self generated

Strategic alternatives

Strategic alternatives using the TOWS Matrix

The following table demonstrates TOWS Matrix for Number 1 General Trading and alternative strategic plans to develop market position within next three years –

Table 9: TOWS Matrix for the Number 1 General Trading. Source: Self-generated from Panagiotou & Wijnen (2005)

Implementation Plan

Programs

Possible Alternatives Strategy and Selection of Right Strategy

In order to identifying the right strategy for Number 1 General Trading L.L.C, this part of the study would use 1 to 5–scale assessment where 1 indicates most unfavorable condition, 5 would indicate the most favorable alignment of the strategy.

Program 1: Develop new product line

In the website of the “Number 1 General Trading L.L.C”, the company mentioned that it has engaged in airline, hospitality, supermarket, and office supplies, including merchandising corporate gift items and FMCG brands where the airlines supplies are doing well. The company has already developed its own brand for FMCG products, as a highly diversified company it is necessary to develop own brand for airline supplies and explore those product line in the hospitality industry including supermarkets and own retail outlets. As the company has strong network in the GCC counties, it could easily penetrate the newly developed products in the neighboring countries without any additional efforts. Meanwhile, in 2012 Mr. Jasem Al Shehh the chairperson of the company received the top 29^th SMEs award out of 70,000 SME companies in the UAE, which is a reorganization of its dynamic performance and tremendous financial growth in the recent years.

Table 10: Program 1. Source: Self-generated

Program 2: Joint Venture and Acquisition strategy

In 2010, the chairperson of the company has taken part ‘Global-2010’ summit in Vancouver, Canada and signed memorandum of understanding with seven overseas representatives from Brazil, Canada, and France green technology in the field of natural energy recycling, building materials, and ICT. Among the overseas contacts, Mr. Janahi expressed his highest support strengthen the cooperation with the S.S. Lootah Group to generate a precious podium in the UAE that would explore further business opportunities through joint venture with different foreign companies as a source of competitive strength in the local market. Thus, the ‘Number 1 General Trading’ has designed its pathway to gain achieved competitive advantages from joint venture projects with globally renowned companies in order to share its resource and capabilities to increase its business in the UAE market (Number 1 General Trading LLC, 2013, p.1)

Table 11: Program 2. Source: Self-generated

Program 3: Combination of Alternative Strategy 1 and Strategy 2

Mr. Jasem Chairman of the company attended several trade fares in Hong Kong, Canton, and Uzbekistan with the aim to explore market for its own branded product line in the foreign market and at the same time, he was eager to find out innovative manufacturing process that would fit for the UAE market. In the HKTDC² Mr. Jasem emphasized to establish trustworthy relationship with the overseas counterpart to generate long-term cooperation for the UAE products, while in the Canton fair he welcomed Chinese companies to establish their technological hub in the UAE. The Uzbekistan mission of the chairperson explored new opportunity for the products of Number 1 General Trading in the global market in terms of both side beneficial events to promote the incomparable history of foreign collaboration. The strategic alignment of the company illustrates that Number-1 is putting similar emphasis to develop new product locally and to explore joint venture and acquisition for further expansion.

Program 4: Social Media strategy and IMC Campaign

Table 12: Program 4. Source: Self-generated

Timetable

Table 13: Schedule to implement the projects. Source: Self generated

Budgets

It helps the company to assess the feasibility of the programs and recommendations in order to develop and reach the objectives of the company. Here, it is important to mention that it is not possible to prepare budget for the first two programs because the management needs to take decision regarding implementation of the projects, product selection and so on; however, the following table prepares a budget for the last program–

Table 14: – Cost of IMC Campaign for Number 1 General Trading. Source: – Self generated

Evaluation and Control

David (2008) stated that the main advantages of the process include provide direction and guidance to the management, and inspire to perform confidently to keep up track record; however, the following figure illustrate the process of evaluation and control-

Controls

Table 15: – Controls. Source: – Self generated

Financial measures

As the company has no CFO, the CEO will calculate return on investment to take financial measure (ROI), earning per share (EPS), and other profitability ratios in order to measure the extent to which the strategic alternatives are feasible for the company.

Stakeholders’ measure

Reference List

BTI: United Arab Emirates Country Report. (2012). Web.

Churchill, N.C., & Lewis, V. (1983). The Five Stages of Small Business Growth. Web.

David, F. (2008). Strategic Management: Concepts and Cases. London, UK: Prentice Hall.

Gutterman, A. S. (2007). Functional-Level Strategy. Web.

HRW: United Arab Emirates: End Arrests; Free Political Activists. (2013). Web.

IndexMundi. (2013). United Arab Emirates Economy Profile 2013. Web.

ITU: ICT in the United Arab Emirates: Delivering on WSIS goals. (2012). Web.

Jovanovic, T., & Davidovic, N. (2012). Strategic Factor Analysis Summary – Applicability in the Case of City Tourism in Novi Sad (Serbia). Web.

Keller, K. (2009). Strategic Brand Management- Building, Measuring and Managing Brand Equity. New Delhi, India: Prentice Hall.

Library of Congress. (2007). Country Profile: United Arab Emirates (UAE). Web.

Lloyd’s (2013). Country Profile: United Arab Emirates. Web.

Number 1 General Trading LLC (2013). Home, About No.1, Products, Services, Subsidiaries, and News. Web.

Panagiotou, G. & Wijnen, V. R. (2005). The telescopic observations framework: an attainable strategic tool. Web.

Rashid, M. B. (2012). The Corporate Governance Code For Small and Medium Enterprises Building the foundations for growth and sustainability. Web.

Tarbuck, A. & Lester, C. (2009). Dubai’s Legal System. Web.

TRA: A View into the UAE’s Future ICT Scene. (2012). Web.

Footnotes

1. Corporate Governance
2. Hong Kong Trade Development Council