SABIC as Public Company - Essay Example

Speech-SABIC a) Company Scan. Founded in 1976 by royal decree, SABIC has steadily grown from its headquarters in Riyadh Saudi Arabia to over 40 countries worldwide with a workforce of 40,000 extremely capable individuals (sabic.com).This public company is presently one of the world’s largest petrochemical manufacturers in the global marketplace with 70% of its shares in the hands of the government of Saudi Arabia while the remaining 30% is in the hands of private investors, mostly from the Gulf Region (Mababaya, 2002). With net profits of $6.7 billion and an asset portfolio of $90.4 billion according to the 2013 financial reports, SABIC is without doubt a global leader in the petrochemical industry. Production has steadily grown from a modest 35metric tones in 2001 to 68.5 million metric tons in 2013, painting the picture of a company on the path to global dominance. With a vision to be the most respected market leader in chemicals and a mission to responsibly offer quality products with the help of innovation and seamless operational procedures, SABIC is without doubt, headed to the apex in the global petrochemical industry. Presently, the company has a lean product line of; ethylene glycol, methanol, polythene and engineering plastics (sabic.com). With such a product line, the following four key factors have immense influence on the company’s overall well-being and these are; environmental, economic, technological and innovation issues. b) Products The largest strategic business unit at this company is chemicals, which accounts for 60% of the company’s total production and revenue. For this reason, it will by my area of focus. To continue this steady growth path, there must be sustained innovation to optimize operational processes and reduce the impact of the company’s operations to the environment. Presently, SABIC has technology and innovation centers in half a dozen countries from its homeland in Saudi Arabia, to Europe, China and India, just to mention a few. The huge investment in state of the art technology has enabled the company to develop more than 150 products annually, the main reason behind SABIC’s 8000 global patents. It is important to report that the journey towards sustainable operations in the chemicals division has been dotted with important milestones and in 2008, the Safety, Health and Environmental Performance Index (SHEPI) of the company and its affiliates was 0.74, a figure below the ceiling for that year (sabic.com). The company in its massive operations recorded a marginal two injuries, showing massive improvement in its commitment to employee safety To remain a leader in the chemicals industry, SABIC must stay ahead of its main competitors; Reliance Industries Limited, Mitsubishi Chemical, Lyondell Basell Industries AF S.C.A., Formosa Petrochemical Corporation and Braskem SA. It can achieve that by using its existing strengths and grabbing the available opportunities as it keeps the threats at bay while working on the weaknesses. A quick SWOT analysis will help you understand the company’s currently standing in the market place. So let me begin with the Strengths: The company is the world’s market leader in polyethylene, polypropylene, glycols, methanol and fertilizers together with other advanced thermoplastics. It is, therefore, possible to use this position and innovate around these products to totally separate SABIC from its competitors. A huge portfolio of chemical products spanning 40 countries where the company has market presence is another area of strength. The company has extra strength in technology with its 17 technology and innovation centers around the world. Given the company has a solid workforce of 40,000 employees and the backing of the government of Saudi Arabia, SADIC has enough areas of strength to match any competitor. There are, however, some areas of weakness like; dumping allegations in Turkey and India that pose a threat to the company’s brand image, unstable relationship with the company’s subsidiaries regarding issues of sublicensing overcharge and a weak supply chain that could adversely affect the company’s overall network efficiency (sabic.com). It has massive opportunities however, in joint ventures that can be useful in meeting capacity demands and reducing any production shortfalls as well as leverage on strong innovation that enables it to improve its product portfolio. Demand for sustainable innovation in the manufacture of fertilizer is also another notable opportunity for SABC (sabic.com). The company is not short of threats and some of these emanate from environmental liabilities that have the possibility of increasing its costs substantially, political situation in the Middle East with wars in most countries surrounding Saudi Arabia (Cordesman, 2002). Intense completion from other players is also a major threat to SABIC’s profitability. c) Target Market As a leader in the global chemical industry, SABIC will continue to expand its product to industrial chemical consumers beyond its traditional markets of the Middle East and Europe, to Asia and Sub-Saharan Africa. Recent statistics reveal that Africa, is steadily growing to be a leading consumer of polymer related products and with such growth comes a huge opportunity to take lead in the continent with the amazing products at SABIC. d) Distribution The company has been distributing directly in its major markets especially in North and Central America. This is however set to change with a deal to work with Ashland Distribution, an independent distribution company in America, to deliver SABIC’s products to end users. This strategy had been piloted in other markets outside America and was found to be both economical and efficient. Moving forward, SABIC will adopt the new model as part of the company’s go-to market strategy in the continents of Europe, Asia and South America. With Ashland taking over North America, SABIC will totally eliminate direct distribution from its operational policies because this was the last market where products were delivered directly. e) Pricing Strategy As with the company’s practice, Market-oriented pricing will continue to be the strategy as it expands into new territories. This strategy requires that sufficient research is undertaken from the target market and prices set on the basis of these research findings (Cordesman, 2002). Other strategies like target pricing can be adopted if the market dynamics call for such. Presently, the chemical industry uses market oriented pricing as its universal strategy and a change in this norm can only be influenced by a major market shake up. f) Promotion SABIC has been successful at using industry targeted marketing to send its brand message across. From chemical industry stakeholder conventions to online advertising targeting similar players, SABIC has been very innovative in this regard. The company equally has an aggressive sales force that makes personal visits to industrial customers to sell to them directly, something that has yielded notable results. Company and Product Overview Since its founding in Riyadh, SABIC has taken competition to the doorsteps of other chemical industry players through innovation and efficient management systems. The present industry leadership enjoyed in its chemical division is a visible outcome of the company’s well though strategies that meet and exceed the industry benchmarks. From the analysis of its strengths, weaknesses, opportunities and threats, it is clear that the resilience of this company exhibited through a turbulent four decades cannot be stopped by recent events around the world, especially with conflict in the Middle East. This analysis has looked at the company’s strategies on distribution, pricing, promotion and target market and from the findings, SABIC stands at a position of leadership given its recent move to have a homogenous distribution strategy around the world. This is particularly important because the pilot projects in this area were found to bear much fruit in regions outside North America. It is my recommendation that as the company works on expanding its market presence to more countries around the world; it should deal with the dumping allegations in India and Turkey. By so doing, SABIC will present to new markets, a brand that has a lean record in the area of environmental degradation that is presently a major concern by stakeholders, especially against chemical companies Thank you! References Cordesman, A. H., & Center for strategic and international studies (Washington, D.C.). (2003). Saudi Arabia enters the twenty-first century. Westport (Conn.: Praeger. Mababaya, M. (2002). The role of multinational companies in the Middle East: The case of Saudia Arabia. www.sabic.com Read More