The Relationship between Dubai Aluminum E-commerce and International Trade - Essay Example

Dubai Aluminum (Dubal) Ecommerce and International Trade Name Institutional Affiliation Date Table of Contents Introduction 3 Company Origin and Business description 3 Company Origin 3 Business Description 5 Dubal`s Mission and Vision 5 Strategy Choices 6 Economic sustainability strategy 6 SWOT analysis of the Economic sustainability strategy 7 Strengths 7 Weakness 9 Opportunities 9 Threats 10 Strategy Implementation 11 Strategy evaluation and Recommendation 13 Strategy Evaluation 13 Recommendations 14 Conclusion 15 References 16 Introduction Dubal owns one the world`s largest aluminum smelting company (Jeffs, 2002). It is an Emirates Global Aluminum (EGA) entity owned, held and formed jointly between Mubadala Development Company based in Abu Dhabi and Dubai based Investment Corporation. The company lies on four hundred and eight hectare land in a place called Jebel Ali. Dubal has a capacity of smelting one million tons of aluminum per year (Jeffs, 2002). The complex has several other facilities within it, including a two thousand, three hundred and fifty megawatt power generating station, large scale carbon plant, casting facility with a capacity of approximately one and half million tons per year, a sea water desalting facility with a capacity of desalinating thirty million gallons of sea water per day as well as laboratories, storage rooms and ports. Dubal has a respected profile of producing high-quality aluminum products yearly that have been used for diverse operations (Dubal - world-class in aluminum smelting, 2011). Such products have proved their reliability and quality in uses such as automotive design, construction equipment, industrial applications as well as transportation. Company Origin and Business description Company Origin Dubal was established way back in the year 1979 (David, 2013). Its main agenda was to help diversify the economy of United Arab Emirates through value addition of the country`s mineral resources; majorly oil. The establishment of Dubal is associated with a decree signed by Dubai`s ruler; the late H. H. Sheikh bin Saeed Al Maktoum, in 5th may 1975. The decree established Dubal as a joint venture company. Dubal's foundation stone was laid five months later by H. H. Sheikh Rashid and its construction commenced in May 1976. Despite the harsh environmental condition of Jebel Ali, location of Dubal smelting company, it took only four years before completion of its construction. By then, it was the world’s biggest industrial development project. It was built simultaneously with other two projects. One of the two projects was the construction of the world`s largest man-made harbor in the world which currently offers dedicated port facilities to Dubal. The year 1979 marked the official birth to Dubal. This was due to a series of events that marked the beginning of its commercial production (David, 2013). On 26th February 1979, the official commissioning of Dubal desalination plant was done by Queen Elizabeth II. The first reduction cell named `Hazel` was powered up on 31st October 1979. The reduction cell No. 2 in line 1A was named so after the production manager Hazel Pinto.Tapping of the first metal was done on 12th November 1979 from `Hazel` and was mainly used in making of Souvenir Ingots. The green mill produced its first pre-baked anode on 31st December 1979. However, despite all these events, the first commercial production of aluminum by Dubal took place in January 1980 (Dubal's greener aluminum, 2010). However, a hundred and thirty five thousand tons of aluminum produced had been pre-sold to some companies in North America. Since then, a series of expansion projects on the Dubal Company has taken place raising the company to extreme status. It is currently the largest pre-baked anode technology based aluminum smelting company in the western World. The Jebel Ali smelter currently consists of one thousand, five hundred and seventy-three reduction cells in seven potholes (Dubal Aluminium, 2008). Exceptional purity of metals is produced from the different type of cells available. Standard purity cells deliver up to 99.89 percent purity in metals while the high purity cells have attained up to 99.98 percent purity levels. Business Description Dubal is described as a large scale non-oil contributor to Dubai`s economy. It majorly produces high-quality aluminum products used worldwide for various purposes (Emirates Aluminium Smelter, 2008). The products are used both locally although a larger portion of it is exported to other overseas countries like America. Dubal is well known for its high-quality aluminum production whose demand is forever high. It is a multi-million investment in the United Arab Emirates as well as other nations. Dubal`s Mission and Vision Dubal is aimed at providing an economy with sustainable material of the highest quality and building a legacy of excellence for the United Arab Emirates and the world. Its vision as formulated in the year 2005 is to become one of the world`s to five aluminum producers by 2015. Since Dubal has had a virtual certainty of achieving the vision formulated in 2005, they have considered revising their vision statement to go hand in hand with the current trends and customer demands. The new vision statement, therefore, is “To be the best aluminum company in production, markets, people and results by 2020”. This vision makes the company focus more on high-quality standards as a corporate company rather than chasing size. The mission and vision statements are achievable through the core values encapsulated in three words; protect, provide and perform. Strategy Choices Economic sustainability strategy There are many factors for the success of Dubal Company, many of which are strategies laid by the management for sustainability. However, of all the strategies laid down by Dubal, the most important of all is the company`s strategy towards economic sustainability (Lumley, 2011). Dubal has considered several strategies towards economic sustainability. These include investments in employees, future investments, creation of employment opportunities, supply chain support, investments in community training through education programs and general support of national economic development. Future-focused investments are one major economic strategy laid by Dubal. Several joint protocols have been signed between Dubal and the respective nations. Such joint ventures ensure a wider network of production for the company and could help cushion it from any economic crisis that may arise. In Brazil, dubal has a joint venture agreement with a company named Companhia de Alumina do Para that ensures an extra source of raw materials for its company. Guinea also has an agreement with Dubai Alumina that makes Dubal a major shareholder with BHP Billiton (Lumley, 2011).. Dubal is also said to have a joint venture agreement with Cameroon. Dubal with other two countries signed an agreement enabling the company to source extra Alumina from the jointly formed Cameroon Aluminium Limited. Raykal projected is another project formed through a joint venture agreement between Indian based Larson and Turbo companies. Despite the various community development activities, the various countries that have entered into a joint convention with Dubal have managed to successfully mine and process the mineral ores. Dubal, on the other hand, have ensured security of its mineral sources through such future based investments thus ensuring its economic sustainability (Lumley, 2011). SWOT analysis of the Economic sustainability strategy Strengths In 2009, when most primary aluminum producing companies experienced a lot of losses and were forced to significantly reduce or stop their production activities, Dubal continued with its operation at its normal capacity for the entire period of crisis (Scott, 2010). During that particular year, production of cast aluminum products reached a record increase of over one million metric tons. This record was realized by implementation of the company`s economic strategy in 2009. It was done through a change of production mix to suit market demands; decreasing value added products in preference to standard purity aluminum. Dubal`s main strategy is to sell a larger portion of their products to end user customers. However, due to the market crisis in 2009, the company managed to sell an approximate of fourteen percent of their annual production to LME warehouses. The abundant existence of mineral ores in Dubai gives Dubal an ability to sufficiently compete in the market even during the tough economic recessions (Lumley, 2011). It is one major strength that enabled Dubal to make bigger profits when the rest of its competitors were recording huge losses during the economic crisis recorded in 2009. Through the signing of joint ventures with other countries, Dubal have been able to leverage expertise and technology of production from countries with such personnel. Moreover, such companies that have entered into joint ventures with Dubal like Brazilian Based Companhia de Alumina do Para, Guinea Alumina Corporation; an aluminium smelting company based in Republic of Guinea, Cameroon Alumina limited that is based in Cameroon as well as Rykal Project; an Indian based company, are all creating an extra source of Alumina to Dubal (Lumley, 2011).. This is one strategic Plan that gives Dubal more advantage over the others. This will help improve the production abilities of the company and consequently higher quality products with higher productivity. Further, Asia remains one of the biggest market for the Dubal`s products over the years 2008 and 2009. It is approximated that forty-two percent of total tonnages produced by the company are sold to Asia as shown in the chart below. Fig 1:Comparative sales per region, 2008 & 2009 Weakness However, Asian countries, just like the Middle East countries are susceptible to civil and political wars (Lumley, 2011). Such wars hinder the economy in terms of productivity and flow of products. The bigger success of Dubal, therefore, depends on the stability of Asia; the main consumer of its products. Mineral resources like alumina are non-renewable source and would definitely be exhausted with its continuous extraction. Despite the efforts made by Dubal to expand its mineral sources through future investments in other countries, it is still inevitable to accept the fact that, such sources would still be exhausted in the future. Opportunities Several other nations worldwide have the existence of such mineral ores as aluminum, but most of them do not have the financial capabilities to extract such metal for commercial production. Dubal, through its future-focused investments in such countries, is an economic strategy that could enable them to acquire more raw materials for their production.Several countries have already signed joint ventures and agreements with Dubal ensuring an extra source of Alumina to the company. Such countries include Cameroon, Brazil, Republic of Guinea as well as India. All these Investments will ensure that Dubal has a long term source of Alumina for its production processes (Lumley, 2011). The expertise and new technologies leveraged through signing of joint ventures between Dubal and other countries may result in more inventions (Scott, 2010). Such inventions could result in new technologies that might revolutionize the production of aluminum and its products. Most developing countries in the world need aluminum for industrial and commercial development purposes. Dubal is, therefore, guaranteed of long term market from such countries. Developed countries, on the other hand, still provide a market for such products for purposes of expansion of their commercial and industrial infrastructure. Most of the countries that have abundant existence of alumina mineral ores face an acute shortage of expertise and technology in metal extraction. This is an opportunity that Dubal has taken through signing of agreements and joint ventures with such nations. It, therefore, gives them an opportunity to increase their aluminum supply. Dubal have expanded their financial capabilities over time as well as inventing more advanced technologies of mineral extraction. Therefore, with such abilities, they can carry out mineral extraction without obstruction from such stated challenges (Zarouni, et. al., 2013). Threats Mineral resources like alumina are non-renewable source and would definitely be exhausted with its continuous extraction. Despite the efforts made by Dubal to expand its mineral sources through future investments in other countries, it is still inevitable to accept the fact that, such sources could still be exhausted in the future. Such countries that have already entered into joint venture agreement with Dubal such as Cameroon, Brazil, Republic of Guinea, as well as India, will soon have their sources of Alumina depleted and render the company economically unsustainable again. This fact is considered natural and inevitable course. Strategy Implementation The economic sustainability strategies put in place by Dubal are diverse although all of them have a common goal. Several future focused investment strategies are among the economic sustainability strategies established by the company. In February 2006, Dubal signed a joint venture with Mubadala Development Company based in Abu Dhabi (Jeffs, 2002). The venture was intentioned at leveraging synergy of Dubal`s efficient production technology and expertise and Mubadala`s energy and commercial as well as industrial development plans. The two companies designed 50:50 joint venture in February 2007 creating Emirates Aluminum (EMAL) mandated to develop a new Aluminum smelting company at Taweelah in Abu Dhabi. EMAL projected is aimed at becoming the world`s largest aluminum smelter and its construction will take place in two phases. The first phase named EMAL phase 1 will have the capacity of producing up to seven hundred and forty thousand metric tons of aluminum yearly. However, at the end of phase 2, it is projected to have a capacity of up to fourteen million tons of aluminum per year. Construction of EMAL phase 1 will consist of 756-cell smelter as well as a dedicated power generation plant and metal casting facility. The site work for the project commenced in January 2008, and the commercial production begun in December, 2009. The initial production of the company was marked by production of both cast and molten metal. The continuous expansion of EMAL remains a strategic priority for expansion of overall production capacity. The future of Dubal`s economic sustainability will be based on its continued income generating operations as well as supplements from long-term financial support to other projects. Strategic plans to secure Dubal`s alumina requirements are in place. Currently, Dubal has an active engagement with four strategic alumina projects each of which are in various stages of development. Dubal signed an agreement with Brazilian-based Companhia Vale Do Rio Doce (Vale) in 2009. The agreement resulted in the formation of Companhia de Alumina Do Para (CAP) mandated to development of green-field bauxite and an alumina refinery in Brazil. The Green-field bauxite and alumina refinery is projected to have a production of up to two million tons of alumina in a year at its initial stages, and a yearly production of up to 7.4 million tons, on its completion. Each shareholder will be mandated a right of purchase of alumina from CAP at their respective equity participation ratio. The project feasibility was completed and currently, site work is ongoing. In 2007, Dubal signed another agreement with BHP Billiton, as well as with the original promoter; Global Alumina International, with a common goal of developing and operating an alumina refinery with a capacity of producing 3.3 million metric tons of alumina yearly as well as a bauxite mine in the republic of Guinea. The agreement let to the formation of Guinea Alumina Corporation (GAC).Currently, Dubal owns a twenty-five percent equity interest in the project whereas Guinea Alumina Corporation (GAC) and BHP Billiton each has 33 percent equity interest. Dubal signed another long-term deal with Guinea for supply and purchase of up to fifteen percent of total aluminum produced by GAC BVI during the term covered by the agreement. Community development programs have been successfully established in the country in return. In the year 2008, Dubal signed another joint venture agreement together with Hindalco Industries; an Indian based company and Hydro-mine Inc. based in United States of America (Jeffs, 2002). The agreement was to execute development and operation of a bauxite and alumina refinery in the northern part of Cameroon. From the agreement, Hindalco and Dubal holds an equal forty-five percent equity interest each, while USA based Hydro-mine holds ten percent equity interest. Each participant is also mandated to purchase of aluminum relative to their ratio of percentage equity interest. An application for a mining license is currently under processing and is expected to be granted soon. The community has had great benefits from the plant though it is still in its early stages. Fourteen water wells have been drilled; courtesy of the joint venture project, and are currently providing drinking water to about 20,000 residents. Indian based Larson and Tubro have entered into a joint venture with Dubal signing an agreement to jointly develop bauxite mine and alumina refinery in Orissa n India (Jeffs, 2002). Application for a mining license was done, and is currently under processing. However, benefits to the community through community development projects have already commenced. Construction of medical facilities, as well as funding of local schools as a way of boosting education has already been done. Strategy evaluation and Recommendation Strategy Evaluation Dubal`s economic strategies are all aimed at achieving its strategic goals namely; • Expansion of smelting activities both organically and through green field technology by means of joint ventures with other excellence-based companies. • Pursuing future based upstream investments in other nations to secure the supply of alumina for their main aluminum smelting company; Dubal. The company`s strategic visions have already been met, though partly. Through the successful signing of joint ventures with other companies in countries like Brazil, guinea, Cameroon and India, the company has the capacity of sustaining its production activities. Continuous production process is possible through the continued supply of alumina raw materials for its aluminum smelting plant. In the 2008 & 2009 global economic downturn, there was a sharp reduction in aluminum prices globally. Despite all the other aluminum smelting companies recording massive losses, Dubal managed to sustain itself economically during the period and further managed to record profits and positive cash flow (Bordiga, 2009). Its operating activities recorded only a slight decrease of about five percent from the previous years. Various future investments projects made by Dubal have proved to be successful. All the investments in the various countries in conjunction with other companies have a long-term contribution to the economic sustainability of Dubai Aluminum (Dubal) Company. Recommendations Dubal should consider finding other diverse market options rather than selling approximately half of its production to Asia alone. The company should research on further methods of expanding and opening up their markets through further marketing strategies. Such strategies will ensure a sustainable and healthier economic growth (Bordiga, 2009). In order to ensure it economic sustainability, Dubal should further explore future investments options in other mineral rich countries. Further agreements with other companies and nations will ensure a secure supply of the raw materials to Dubal Company and stabilize its economic sustainability. More research in mineral rich countries with the willingness to establish an excellence-based, as well as economic sustainability investments should be carried out ((Bordiga, 2009). This will enable the company to be able to sign more joint ventures and agreements that will further move its economic sustainability to higher standards. Conclusion The strategies towards economic sustainability laid down by Dubal are so far proving successful. In the recent past, the company has been able to cushion itself from economic lapses leading to extreme decrease in aluminum prices. It is, therefore, appropriate to allude that the strategies implemented by the company are viable and will help ensure its economic sustainability. The progressive expansion of Dubal has placed the company into a high standard company with ability and capacity to produce very high quality products that have since its production, have one the customers` trust in the company. References Bordiga, R. (January 01, 2009). DUBAL breaks production records. Aluminium and Its Alloys, 21, 5, 41. David, B. (January 01, 2013). Tracking the trends in manufacturing technology management. Journal of Manufacturing Technology Management, 24, 1, 5-8. Dubal - world-class in aluminium smelting. (January 01, 2011). International Aluminium Journal, 87, 24-25. Dubal's greener aluminium. (January 01, 2010). Aluminium International Today, 22, 5, 50-52. Top of Form Top of Form Top of Form Top of Form Dubal Aluminium: expansions and technological advances. (January 01, 2008). Aluminium International Today, 20, 1, 22-23. Emirates Aluminium Smelter: UAE. (March 01, 2008). Project Finance, 96. Jeffs, E. (January 01, 2002). Dubai Aluminum: an Independent Generator Backing up Public Supply. Turbomachinery International, 43, 18-21. Top of Form Top of Form Top of Form Lumley, R. N. (2011). Fundamentals of aluminium metallurgy: Production, processing and applications. Oxford: Woodhead Pub. Top of Form Top of Form Top of Form Scott, L. (January 01, 2010). DUBAL DX Technology performing strongly. Aluminium and Its Alloys, 22, 4, 84-85. Zarouni, A., Mishra, L.,Potocnik, V. Bastaki, M., Jasmi, A. A., & Arkhipov, A. (January 01, 2013). Mathematical Model Validation of Aluminium Electrolysis Cells at DUBAL. Light Metals, 597-602. Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Read More