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Almarai food company - Essay Example

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Name Instructor Course Date Dairy Industry in Saudi Arabia Saudi Arabia has spent many years without being industrialized. This is due to the adverse climatic conditions that make only the oil industry to flourish. Industries rose in 1970s when the Saudi government created the Saudi Industrial Development Fund (The Council of Saudi Chambers of Commerce 2)…
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Download file to see previous pages The entrepreneurs imported plants, cows and knowledge from other countries (The Council of Saudi Chambers of Commerce 3). The dairy industry has attracted a number of players but they are limited by widespread water shortage across the country. The major players in the industry include the Almarai Food Company which was established in 1976; Al safi Denone established in 1979; Nada dairy; Nadec and other smaller companies. The four organizations hold approximate market share of about 41.7%, 20.7%, 8% and 14% respectively (Pendleton 2). The companies started by producing plain lifelong milk but due to demand they have also included flavored lifelong milk. The government has over the years capped the growth of the dairy industry (Al-Otaibi and Robinson 2). This has made people to resort to the use of powdered milk made by Irish companies. There are very few players in the dairy industry in the Saudi Arabian market which makes structure of the industry to be oligopolistic (Al-Asfoor 1). This means that a slight change of the price by one player will have a big impact on competitors. Unlike it is elsewhere in the world where the outlets buy daily products from manufactures, outlet operators in Saudi Arabia do not buy but sell products for the manufacturers. The risk of excess stock is borne by the manufacturers. ...
The government helps the producers to reach an agreement on shelf space in the outlets and prices both at wholesale and retail levels whenever there is a problem. The competition among the players in the Saudi Arabia dairy industry is mainly price. This is because there is less differentiation of their products (Al-Asfoor 2). Whenever one of the companies lowers the price for its products, customers are likely to abandon other products in its favor. This makes others also to lower their so as to compete favorably. This has made economic advisors to advice the companies in this industry to differentiate their products as a way of avoiding cutthroat price competition. The Saudi Arabian dairy industry has grown to be very competitive in the gulf region (Pendleton 1). Almarai Food Copany, the biggest food manufacturing company in the industry entered into collaboration with Pepsi Company. This has enabled it to conquer markets in the Gulf region, Africa, and the Far East. This has been possible due to its high quality goods which compete effectively with those produced by international industries (Pendleton 1). Currently, the dairy industry of Saudi Arabia is the leading in the gulf region. It supplies its products to five countries including Oman, Qatar, Kuwait, Bahrain and the United Arab Emirates. Table 1 shows the market shares of different milk brands in Saudi Arabia between 2007 and 2011. Table 1: Historic Market Shares Government intervention in this industry has been minimal. The government came in when the prices wars threatened to lead the industry to a state of collapse. It helped the competitors in the industry reach agreements to stabilize prices (Uthman 7). In some cases the ...Download file to see next pagesRead More
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