Strategic Management practices at "Almarai Company Ltd."

TABLE OF CONTENTS

List of Abbreviations & Acronyms

Executive Summary

CHAPTR ONE INTRODUCTION
1.1 Almarai Company’s Overview
1.1.1 The Vision, Mission and Values of Almarai Company
1.1.2 Strategic Objectives of Almarai Company
1.2 Assessing Almarai’s Competitive Position
1.2.1 Almarai Company’s Competitors
1.2.2 Resource Based View (RBV) Theory of Almarai Company
1.2.3 Almarai's Strategic Management Evaluation
1.3 Current Business Scenario
1.3.1 The evaluation of Almarai Organizational Design
1.3.2 The Impact of Almarai Organizational Design on External Competitors
1.3.3 The Impact of Almarai Organizational Design on its Performance Effectiveness
1.3.4 The Evaluation of Almarai at the Current Stage of the Organizational Lifecycle
1.3.5 The Impacting of Almarai Organizational Lifecycle on External Competitors
1.3.6 The Impact of Almarai's Organizational Lifecycle on its Performance Effectiveness

CHAPTER TWO ENVIRONMENTAL ANALYSIS AND NEED FOR CHANGE
2.1 The Effect of THE External Environment on Almarai Company’s Operations
2.1.1 Political Factor
2.1.2 Economic Factor
2.1.3 Social Factors
2.1.4 Technological Factors
2.1.5 Legal Factors
2.1.6 Environmental Factors
3.1 Evaluation of the Impacts of Political, Economic and Environmental Factors on Almarai’s Business Profitability and the Company Response to Them.

CHAPTER THREE STRATEGY IDENTIFICATION AND IMPLEMENTATION
3.1 Strategy Formulation Tools to Design a Business Strategy
3.1.1 SWOT Analysis of Almarai Company
3.1.2 SWOT Analysis Application for Cost Reduction Strategy in Almarai Company
3.2 Implementation of Strategy
3.2.1 Cost Reduction Strategy Implementation Plan
3.2.2 The Critical Success Factors of Cost Reduction Strategy

CHAPTER FOUR: LEADERSHIP STYLES TO MANAGE STRATEGIC CHANGE
4.1 Leadership Styles and Organizational Performance
4.1.1 Democratic Leadership for Enhancing Almarai Company Performance
4.1.2 Transformational Leadership for Enhancing Almarai Company Performance
4.2 Leadership Styles and Values/CSR
4.2.1 Leaderships Styles Evaluation for Developing the Corporate Values
4.2.2 Why a Transformational Leadership Style Can Develop Almarai Corporate Values
4.2.3 How Transformational Leadership Would Further the Development of Almarai Corporate Values
4.2.4 The Impact of Transformational Leadership Style on CSR of Almarai Company
4.2.5 The Impact of Transformational Leadership Style on Managing Almarai Organizational Change

CHAPTER FIVE CONCLUSION AND RECOMMENDATIONS
5.1 Recommendations
5.1.1 Make Evaluation and Communication of the Strategic Plan
5.1.2 Developing the Implementation Structure
5.1.3 To Develop and Support the Policies and Programs of Implementation
5.1.4 To Equip the Executors with the Needed Tools and Capabilities
5.1.5 Evaluating all the Functions and Activities
5.2 Conclusion

References

List of Abbreviations & Acronyms

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Executive Summary

The strategic management adjustments and procedures used by Almarai Company have been studied and analyzed in this study. It has started with providing a clear picture of the company that involves its product portfolio, vision, mission, values, geographical operations, regions served, number of employees, and strategic objectives. Besides, it assessed Almarai’s competitive position compared to its competitors by using the resource-based view theory and evaluating its strategic drivers. Moreover, it evaluated the organizational design of the company and its current stage of the organizational lifecycle, in addition to discussing their impact on external competitors and the performance effectiveness of the company as well. Additionally, it analyzed the effects of external environmental factors by using PESTLE analysis factors. Then, it evaluated the impact of political and economic factors on Almarai’s business profitability and how the company responded to them.

Furthermore, SWOT analysis was used to measure the situation of the company, help design a strategy for the company, and enhance its competitiveness. According to the results, the study suggested and designed a cost reduction strategy by using the SWOT analysis as well. Thus, it provided a purposeful cost reduction strategy plan with a discussion of its critical factors of success, including how to manage stakeholder engagement in the implementation plan process and how to address the expected organizational change issues and challenges successfully. The paper has evaluated the most appropriate leadership styles for enhancing the performance of the company and creating continuous improvement. These leadership styles include democratic leadership and transformational leadership, with evidence of how they can enhance the performance of the company. The paper has also analyzed the transformational leadership style for further development of the corporate values of the company. This style has been measured for its influence on managing the corporate social responsibilities of the company and managing organizational change as well. The report has concluded by providing essential recommendations to ensure the successful and effective implementation of a cost reduction strategy for the company that includes five steps.

CHAPTR ONE INTRODUCTION

1.1 Almarai Company’s Overview

Almarai Company Ltd. is a multinational company founded in 1977 in Riyadh, the capital of the Kingdom of Saudi Arabia (KSA), by Prince Sultan bin Mohammed bin Saud Al Kabeer (Almarai, 2021). It has a product portfolio that includes five segments, which are dairy, juices, bakery, poultry, and infant nutrition products, as detailed in Figure 1. It manufactures dairy and juices under the brands Almarai, Teeba, and Beyti, while the bakery segment is manufactured under the L'usine and 7 Days brands. In addition, the poultry segment works under the Alyoum and Albashayer brands for horticultural and agricultural products. Also, the infant nutrition segment is manufactured under the names Nuralac and Evolac (WSJ, 2021).

This image was removed by the editorial team due to copyright reasons.

Figure 1: Almarai's Product Portfolio with Different Brands in Each Business Segment, Source: (J.P.Moragn, 2019)

Moreover, Almarai is the world’s biggest dairy company and the largest food and beverage manufacturing and distribution company in the Middle East, with revenues of about SAR 15.4 billion (USD 4.10 billion) in the year 2020, as shown in Figure 2, which is based on its sales by product and geography. At the end of 2020, the gross profit grew by 3.1% compared to the previous year to reach SAR 5,536 million. The company also paid-up share capital to SAR 10 billion for the year, as each issued share was SAR 10.00, which means there were one billion shares fully paid (Almarai, 2021).

Furthermore, Almarai Group is classified as the first of the fast-moving consumer goods (FMCG) companies in the Middle East and North Africa (MENA) region and the market leader group across the Gulf Cooperation Council (GCC). It has 170,000 cows that feed them from its farmlands in Argentina, Romania, and the United States of America. It has more than 41,000 employees worldwide, with more than 27,000 residing in its accommodations (Almarai, 2021).(Almarai, 2021).

This image was removed by the editorial team due to copyright reasons.

Figure 2:Almatais Revenue Segmentation 2020

Source : (Almarai, 2021).

Additionally, the group extended its operations in Saudi Arabia, the United Arab Emirates, Jordan, and Egypt. It also operates successful joint ventures with Chipita and PepsiCo in Egypt and Jordan. Besides, the company owns and operates arable farms in Argentina, Romania, and the United States of America (USA). As the company cares to provide the highest quality feed for its animals, it depends 100% on its imported yearly green fodder requirements from these farms. ("USA"), as demonstrated in Figure 3 (Almarai, 2021).

This image was removed by the editorial team due to copyright reasons.

Figure3: Almarai’s Subsidiaries and Farms.

Source: (Almarai, 2021)

1.1.1 The Vision, Mission and Values of Almarai Company

Based on the 2020 annual report of Almarai, the mission statement shows that the company focuses on its production to produce the best quality and most healthful food and drinks that enrich the everyday lives of its customers. Almarai's vision statement also shows that Almarai wants to be the best choice for the customer not only in the Middle East but also in the world and the market leader of food and beverages with high-quality nutrition for the consumer's daily life.

As for Almarai’s values statement, it provides good concepts that drive and direct the decision-making in the company and its philosophy and moral code. Almarai adopted the ASPIRE values as they are directly connected to the world-class quality management system (Almarai, 2021). To see Almarai’s vision, mission, and values, see Figure 4 below:

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Figure 4: Almarai Company’s Vision, Mission and Values

Source: (Almarai, 2021)

1.1.2 Strategic Objectives of Almarai Company

According to the 2020 annual report of Almarai Company (Almarai, 2021), the strategic objectives of the company come under the main objective of the company statement, which is to deliver on their promise of‘Quality you can trust." Their commitment to the people and consumers of the Middle East is unwavering. These strategic objectives can be divided into the following six goals:

- Enhancing its leading market share in the region.
- Developing a preferred consumer brand
- Achieving significant growth from new businesses.
- Developing high-potential new categories
- Enhancing organizational health and employee satisfaction
- Focusing on delivering nutritious and high-quality food and beverages across the markets.

As a result of the impact of the COVID-19 global pandemic in 2020, Almarai faced market-moving challenges like other big companies in the world. In response to that, Almarai focused on one strategy: delivery. However, in 2020, the company called this year an evolutionary year for Almarai, as the company had become a big leader after 40 years of historical investments and achievements paying off for the company, shareholders, and consumers. Consequently, Almarai decided to adapt for future growth both financially and non-financially under the delivery strategy, which consists of four objectives as follows (Almarai, 2021):

-There were zero product shortagesin all the challenging conditions, such as the COVID-19 pandemic in 2020, so the company worked to cover all its production demands.
- Keepcommitmentto qualityin Almarai’s DNA concepts.
- Maintainresiliencevalues as a test for the company to pass.
-Enhancing the responsibility concept to keep market leadership across important food and beverage categories.

However, the most important thing is that all these objectives are related to the 2025 strategy, and the company's management remains committed to achieving these objectives up to 2025 as a long-term objective, while the current strategic plan ended in 2021 as a short-term objective (Almarai, 2021)

1.2 Assessing Almarai’s Competitive Position

To assess Almarai’s competitive position, it should be used a suitable strategic management theory to measure how resources can drive competitive advantage along with the strategic management that the company uses to achieve its objectives and make it more effective and efficient compared to its major competitors. Thus, it would be discussed in this section about the major competitors and Almarai’s competitive position by using the resource-based view theory, which is used to examine how resources can drive the competitive advantage of Almarai and measure its current driving strategies as well.

1.2.1 Almarai Company’s Competitors

To analyze the competitors of Almarai Company and its rank among them, we need to analyze customer satisfaction and choice against its competitors in the region and its market share as well. Therefore, it will analyze them critically according to different literature studies, reports, and my view as a researcher. The main competitors of Almarai are Nadec, Alsafi, SADAFCO, and Nestle.

1.2.1.1. Customer Satisfaction

As most customers look for the best quality in the market, the quality of the product evaluation would be used to measure customer satisfaction. Based on the study by Singh & O. (2017) about performance measurement of Almarai products and customer satisfaction against its competitors' products in KSA, it was found that the major competitors of Almarai are Nadec, Alsafi, SADAFCO, Nada, and other companies such as Nestle.

The result of this study shows that Almarai has been getting the rank 1 by its customers and the general population as the customer choice in the market due to the quality of the product and its taste, whereas the indicators in the availability of the product, value what customers get, and overall demand of the products have been getting the rank 2 by the respondents (Singh & O., 2017), as illustrated in Figure 5.

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Figure 5: Customer Satisfaction Ranking of Al Marai's Products Against the Competitive Companies Products

Source:(Singh & O., 2017)

1.2.1.2 Market Share Position

According to the study about the competitive position of dairy companies in KSA by (Al-Nsour, 2017), it found that Almarai company is the most successful company as it has a high growth rate and high market shares compared to its competitors inside or outside KSA as it uses the strategy of application of marketing control elements. Specifically, Almarai company has taken the position of a market leader with a market share of 79% against its competitors (Al-Nsour, 2017), as demonstrated in (Figure 6).

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Figure 6: The Market Share of Dairy Companies in the KSA

Source: Author

1.2.2 Resource Based View (RBV) Theory of Almarai Company

Many literature studies consider the competitive advantage at the heart of the strategic management field of organizations. So, the resource-based theory shows that the main reasons for the sources and the competitive advantage driver of the company, along with its major performance, are its costly resources and capabilities that make it stronger than its competitors (Omalaja & Eruola, 2011). According to Barney's view in 1991, the resources of an organization must have four attributes to sustain a sustained competitive advantage that include value, rareness, imitability, and non-substitutability (VRIN) among its competitors (Barney, 1991).

While the company's resources consist of assets, organizational processes, capabilities, company attributes, information, and knowledge, the company must have possession of assets or positions, access to distribution and supply, proficiency of competence, knowledge, and capability resources in business operational activities efficiently and effectively compared to competitors (Omalaja & Eruola, 2011). Bareny also argued that the two relevance assumptions of RBV theory are that resources must be heterogeneous (diversity of resources across companies) and immobile (the competing firms cannot get resources from other companies). On the other hand, the supporters of this theory focused on internal resources instead of the external environment to gain a competitive advantage. It can be understood easily through the detailed explanation (Figure 7) below.

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Figure 7: Resource-based View Theory, Source, (Jurevicius, 2020)

In addition, the VRIN framework developed to VRIO framework to answer the question: is the resources valuable? rare? costly to imitate? And is a firm organized to capture the value of the resources? If the resources or capabilities meet the four requirements to achieve competitive advantage as illustrated in (Figure 8).

Accordingly, it needs to identify Almarai’s resources and strategic capabilities with its two assumptions of heterogeneity and immobility before applying VRIO analysis to determine the resultant competitive advantage of Almarai.

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Figure 8: VRIO Framework by Rothaermel in 2013

Source: (Jurevicius, 2020)

1.2.2.1 Almarai Company’s Resources and Strategic Capabilities

Almarai has adopted a current business model that includes six strategies to achieve its promise of "Quality you can trust," which contains six objectives as discussed above. Therefore, the company depends on its tangible and intangible resources as it possesses most of the supply chain lines, from feed production and importing to manufacturing, packaging, and distribution, to ensure food safety and quality in all stages of product development and delivery through six strategies (Almarai, 2021).

Crop Cultivation and Selection Strategy

Almarai provides its animals with the highest quality feed that it imports 100% from its own arable farms in Argentina, about 32’000 acres of land, Romania, and the United States of America (USA), about 15’000 acres. It depends 100% on its yearly green fodder requirements from these farms.

Extraordinary Care for Farm Animals Strategy

For high-quality end products, Almarai takes care of the dairy herd and poultry flock with 24-hour veterinary care, temperature-controlled housing, and highly nutritious feed. Almarai is the largest dairy company by milk volume globally, as it produces 1.47 million metric tons per year and has more than 105,000 dairy cows, making it the second-largest dairy cow company by number. Also, the company is considered the third-largest Saudi chicken meat producer (IFCN, 2020).

Best-in-Class Manufacturing and Processing Strategy

Almarai always uses cutting-edge technology to produce a huge quantity of nutritious products while reducing costs and using 4.0 quality. It also works to expand and renovate its facilities. The company focuses on meeting all the growing demands. The company also depends on experts and specialists from different nationalities to achieve that. Moreover, Almarai is the first dairy company in MENA committed to operating with the following industry benchmarks and standards as follows:

- (ISO3 9001:2015) - Quality, Regulatory, Health, Safety, Security & Sustainability (QRHSS&S)
- (14001:2015) - Sales Distribution & Logistics
- (ISO 22000:2005) - Farming
- (27001:2013) - Manufacturing
- (FSSC 22000, 45001:2018) - Information Security

Exceptional Transport and Logistics Capabilities Strategy

Almarai has the largest transport and logistics division in the Middle East, which contains 8,441 vehicles that deliver 2 billion kg of product on time and in perfect condition as these products have a short shelf life.

Consumer Insights and Powerful Branding Strategy

To gain and enhance the trust and loyalty of the consumer, Almarai is keen to provide the best quality to be the strongest and most competitive brand in the Middle East through the ongoing feedback process.

Innovation is in our DNA Strategy

Almarai is adopting innovation in all its activities as a core value and a quality culture. The company uses it for digitalization of production, packaging, quality, and automation of business processes. The company adopted the SAP system as a global technology company to improve operations and support food self-sufficiency. For innovative people, the company provides a world-class training and development program.

1.2.2.2 Almarai’s Heterogeneity and Immobile Features of Resources

According to our discussion above, it shows that the resources of Almarai are heterogeneous and immobile especially the intangible resource while the tangible resources are heterogeneous and immobile, but they can be homogeneous to the competitors as well and this is based on their advancement, and strategic developments.

1.2.2.3 VRIO analysis of Almarai Company

Through what has been discussed above, it needs to identify if the resources of Almarai Company can build a competitive advantage for the long term by using the VRIO framework, which contains four assessment tools: valuable, rare, inimitable, and organization. The result can be classified into four methods: 1) competitive advantage (++++), 2) temporary competitive advantage (+++), 3) competitive parity (++), and competitive disadvantage (+). Almarai’s VRIO analysis is detailed in Table 1 below.

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Table 1: VRIO Analysis of Almarai Company

Source: Author

1.2.3 Almarai's Strategic Management Evaluation

The business model of Almarai Company and its marketing strategies created leading competitive advantages for the company nationally and internationally. The business model provides four major competitive advantages: innovation, technology-based production, effective supply chain and distribution management, strong promotion campaigns, and effective consumer communication (Ivypanda, 2021). Through strategic management, Almarai has achieved the following sources of competitive advantage:

Frequently asked questions

What is the Almarai Company Overview?

Almarai Company Ltd. is a multinational company founded in 1977 in Riyadh, Saudi Arabia. It has a product portfolio that includes dairy, juices, bakery, poultry, and infant nutrition products. It is the world’s biggest dairy company and the largest food and beverage manufacturing and distribution company in the Middle East.

What are Almarai's vision, mission, and values?

Almarai's mission focuses on producing the best quality and most healthful food and drinks. Their vision is to be the best choice for customers in the Middle East and worldwide, and a market leader of food and beverages. Almarai adopted the ASPIRE values.

What are Almarai's strategic objectives?

Almarai's strategic objectives include: enhancing its leading market share in the region; developing a preferred consumer brand; achieving significant growth from new businesses; developing high-potential new categories; enhancing organizational health and employee satisfaction; and focusing on delivering nutritious and high-quality food and beverages across the markets.

Who are Almarai’s main competitors?

The main competitors of Almarai are Nadec, Alsafi, SADAFCO, and Nestle.

How is Almarai's customer satisfaction ranked against its competitors?

According to a study, Almarai has been ranked 1 by customers for product quality and taste. However, it gets ranked 2 for product availability, customer value, and overall product demand.

What is Almarai's market share position?

Almarai holds a market leader position with a market share of 79% against its competitors in the KSA.

What is the Resource Based View (RBV) Theory of Almarai Company?

Resource Based View is a strategic management approach that examines how a company's resources and capabilities can lead to a competitive advantage. It emphasizes internal resources over the external environment.

What are Almarai's resources and strategic capabilities?

Almarai relies on tangible and intangible resources. This includes the Crop Cultivation and Selection Strategy, Care for Farm Animals Strategy, Best-in-Class Manufacturing and Processing Strategy, Exceptional Transport and Logistics Capabilities Strategy, Consumer Insights and Powerful Branding Strategy, and Innovation is in our DNA Strategy

What is the VRIO analysis of Almarai Company?

VRIO analysis helps assess if a company's resources can build a competitive advantage for the long term using value, rareness, imitability, and organization. A summary is provided in the document.

What are Almarai's Strategic Management Evaluations?

Almarai Company’s business model and its marketing strategies created leading competitive advantages for the company nationally and internationally.