Strategy for Entering Qatar - Case Study Example

Contents Introduction 2 VRIO framework 5 Question of Value: 6 The Question of Rarity 8 The Question of Imitability 9 The Question of Organization: 9 Qatar 10 PEST Analysis 11 Political Factors: 11 Economic Factors 13 Social Factors 16 Technology Factors 17 Strategy for entering Qatar 18 The Marketing Mix 19 Product: 19 Price 20 Distribution 21 Promotion 21 Introduction The world is experiencing an economic crunch for the past several years and the energy crisis around the world is the primary reason behind this depression. The oil reserves of the Middle East are running out and as they are the paramount resources for around 70% of the world energy needs, countries all around the world are now in dire need of alternative energy resources to keep up the production and working of industries. The economists and experts are giving hints of a global economic collapse as most of the oil reserves of the Middle East including Saudi Arabia are estimated to be depleted around 2023. The European Union summit called an emergency analysis from the energy experts all around the world in order to look for the alternatives to keep the industries regulated. (Union of Concerned Scientists, 2013) Coal is emerging as a primary alternative for the global economic hub generally and for the Middle East specifically. Coal is the source item for natural gas which is being used all over the world for the production of electricity. According to a study, only in America, the efficient extraction of coal and its smart usage can sustain the energy requirements for all the 56 states whereas the present statistics show that more than half of the energy requirements of the country are being fulfilled by the coal. We plan to choose the energy sector for our business plan as it is a flourishing sector and has its demand increasing every day. Specifically, coal imports will be our target area. Coal is in high demand around the world because all the countries having economic hubs are feeling for the alternative resources. The middle east , being the sole supplier of the oil is also trying to increase the imports of the coal because they already know the fact that oil which was once known as “black gold” is no more a permanent resource whereas the coal reserves are huge around the world ranging from Australia, Germany, Russia, Indonesia and China. Coal is one of the most prominent sources of energy among the fossil fuels as it provides around 20% of the natural gas around the world. The natural gas can in turn be used to produce electricity and petrochemicals that is deployed for enhancing the efficiency of petroleum. Coal is now being used as a solid fuel around the world. According to a study, the usage of coal in the year 2010 was 7.25 billion tons whereas it is expected to go through a huge augmentation in the year 2030 by 48% with an exact figure of 9.05 billion tones. The importance of coal can be estimated from the fact that, China, an economic guru and rising super power of the contemporary world is using coal as its primary source of energy needs and according to an estimate around 68.7% of the total energy needs of China are sufficed by coal. Similarly, in Denmark, around 47% has been obtained at the coal-fired Nordjyllandsværket plant and there are multiple factions of the process that are involved in these phenomena from coal extraction to the refining. (Agprofessional, 2013). The coal imports are becoming a necessity for the countries all around the world and the world has experienced a dramatic increase in the imports and exports of the coal. Liquefaction technology is being widely used in the processing of coal and this is the key in making the coal as an alternative for the energy demands across the world. After 1970, the world has realized that the gasification of coal is the sole alternative for the increasing oil prices and depleting oil reserves in the Middle East and there is no other way to get the energy needs satisfied. Apart from coal gasification, the goal is also a great alternative to the wood and coal can be used very efficiently in the production of Liquid natural gas (LNG) across the world. The coal imports business seems to be very feasible for our business plan. (Worldcoal,2013) VRIO framework The VRIO framework is extensively used in order to foresee the advantages of any business plan and to evaluate the advantages and threats of the new initiative and business plans. It evaluates the strategic choices, external and internal affects that will decide the fate of the firm. It takes into account almost all of the strategic parameters and economic determinants to anticipate the future of the firm. It used four parameters on which the internal and external factors are checked in order to increase the certainty factor and sort out the ways in which the firm can achieve competitive advantage. It also analyses the geographical location of the firm where the business plan is going to flourish. The four parameters that are used to determine the competitive advantage of the company are the question of value, the question of rarity, the question of imitability and the question of organization (Arabianeurs, 2013). VRIO framework was presented by Barney and Hesterly (2006) and it has been used painstakingly. VRIO framework evaluation in our scenario is giving very optimal glimpse and there are positive signs that our business will flourish. Our plan is seeking to solve the biggest dilemma in the energy sector of the world and there are free market opportunities which we seek to avail in order to boost up out initiatives and profits. Comprehensive and detailed analyses of the business plan, with the perspective of the four parameters are as follows: Question of Value: There is an increasing demand of coal because of the global economic crunch around the world. The resources are huge and thus the coal imports business can deploy and exploit all the opportunities related with the local markets in a very optimal way. The oil reserves are depleting in the Middle East region and many entrepreneurs are seeking different ways to sort out the alternatives for the energy. The imports have started to flourish in the region after 2008; therefore the business can gain a huge competitive advantage. The threats which are of different types for example threat of new entrants, threat of the suppliers, threats of the rivals, threat of substitutes and threat of buyers are also analyzed and evaluated. As far as our business plan is concerned, there are much reduced threats in case of question of value. The threat of suppliers is almost absent in the case of coal imports because there are multiple countries which are supplying the coal all over the world. Around 49.5% of the coal around the world is produced by China. Similarly, Australia is emerging as a producer of top quality coal and the overall contribution of Australia to the exports of coal is estimated to be around 5.8 %. Similarly, there are many other resources of coal around the world for example Unites States, Russia, Indonesia, South Africa and Germany, The threats of new entrants is also not going to affect badly because the imports have just started to flourish and there are multiple outlets for the coal products ranging from petrochemical, energy sectors and liquid natural gas production. In the same way, the threat of buyers has diminished in the energy sector because of its vast scope and efficient risk management. The companies of energy sector and customers have no other choice but to switch to the alternative energy sources. The world is now relying excessively on coal and those countries which have no coal reserves are expanding the imports of coal from different economic hubs of energy sector. The petrochemical industry is also using coal as its primary component to produce different chemicals which are the stepping stone for detergents, soaps and shoe industry. The following figure shows the top consumers of coal around the world Nationmaster, 2013 The Question of Rarity The imports of coal in the Middle East have not been flourishing since long because the awareness about the depletion of the oil reserves started to surface lately. The imports of coal have been taking a boost after 2008 so there is no market saturation till now. The rarity principal is also favoring our business plan because even if there is market saturation, still there is a great chance of expansion of coal imports because with the hike of fuel prices in the global markets, the local fuel industries is switching massively to liquefied natural gas (LNG). Coal is the primary source of LNG and therefore there is a huge demand of good quality coal. Coal is also experiencing its high usage in the petrochemical industry, therefore there will be no risk involved as far as question of rarity is concerned. The supply of coal has rarity in the region we are targeting because there is an increasing demand of coal in that region in order to meet up the energy crisis. There has been a consumption of around 7,994,703.00 short tons of coal in the year 2010 and this rate is increasing day by day. The demand of the coal is ever increasing with respect to future because the world is going through a paradigm shift of alternative energy means. The Question of Imitability There is a very low Imitability factor in the business plan of coal imports because of the need of high investments and cooperate public relation experience. The plan of action is quite imitable in the theoretical perspective but on the practical grounds it is impossible for a new entrant to make a lead without any huge investments and on hands experience in this sector. Similarly the energy sector in the Middle East is so complex, heterogeneous and circuitous that it is practically impossible to imitate the idea of coal imports. There is a dire need of pre planned protocols and standard operating procedures with all the rates of the energy products fixed. The Question of Organization: The firm is totally ready and has done its homework before entering the market for initiating the business plan. The reporting protocols are designed in order to take the company to the official level which meets the international corporate standards. The compensation policies are also set. The primary source for the coal supply is decided to be Australia and the backup resource is decided to be China. There are multiple resources for the coal imports. There is no imitative strategy with regards to the resources and internal structure of the firm and all the focus is to gain the competitive advantage in the cooperate world. The imitative strategies are left off because of the principals in the cooperate world (Barney &Hesterly, 2011). The pay structure and incentives for the employees are also decided. The homework before initiating the business plan in any country is the key and the crafters of this business plan are very well aware of this universal fact. Qatar Qatar is chosen to be the target market area of our business plan; the reasons behind this choice are numerous. Qatar is situated in the Middle East region which is known for its peculiar importance in energy sector. Nearly 70% of the total production of oil is contributed by different countries of Middle East. There have been certain economic issues in past and present. The war between Iran and Iraq, the gulf war and its economic consequences were huge because the US put economic sanctions on IRAQ and there were around half million child deaths as a direct result of this. The main issue is that there is only one source of economy in Middle East and that is oil. Many studies show that there will be an end to the oil reserves in long term future. Agriculture is another mean of economic uplift but the lack of rain is also affecting this for example Egypt and Yemen. The local markets are flourishing in the energy sector so this is the best targeted area where a new investor should invest and put money. The government is trying to improve the efficiency of production of oil and as a result petrochemical industry is also taking new turns in order to promote petroleum and oil products for the efficient marketing of other products. (Mbt, 2013) PEST Analysis Political Factors: Political factors and environments in Qatar are perfectly matching the required criteria for the investments and new business initiatives. Qatar has been at a distance from all the political tussles and power games taking place in the region. As a result of economic sanctions on Syria, Libya and Yemen, the economy has suffered a lot in recent times. There were around 100,000 refugees from Syria alone. Similarly, around $2 million per day is lost from the tourism industry of Syria because of the present day crisis and internal conflicts. The birth rate in Middle East is growing day by day with fewer resources. Resources are also depleting because of interior unstable political bodies and global war scenarios. According to Middle East and North Africa (MENA), the increase in the population is 27 million in 1970 to 305 million in 2005. Since the oil shocks of the 1970s, the water and petroleum prices are increasing and causing unemployment. OPEC has always been used as a political puppet in the process of determining oil costs that affects the global politics. As Saudi Arabia is the supreme and importunate contributor of oil in the region, its biasness towards Iran and some other countries started hostilities and this was a trigger in tax policies and trade barriers. After the appointment of Mohammad Aliabadi as president of OPEC, things turned worse because Saudi Arabia said that it will not bow down and they do not consider the new president as legitimate. There is a need of neutral body in the region to normalize the issues. Nearly 70% of the total production of oil is contributed by different countries of Middle East. There have been certain economic issues in past and present. The war between Iran and Iraq, the gulf war and its economic consequences were huge because the US put economic sanctions on IRAQ and there were around 5 lac died children as a direct result of this. There is also an impact of these crises on other countries like turkey as the Turkish Finance Minister Mehmet Simsek said the central government has spent 400 million Turkish liras, or around $220 million, so far to help Syrian refugees. The economy in Qatar is taking a rise from the past ten years and the future economic and political analysis of Qatar also depicts the same. The current toppling of regimes as a result of Arab springs have also a zero effect on the political stage of Qatar as the country enjoys 4 highest income per capita in the world. The political instability occurs when there is nothing to eat for the people and there are hunger problems, unemployment issues and homeless masses. There is no such kind of economic void in Qatar that can create a paradigm shift in perspective of political instability. Qatar is also a very prestigious member of United Nations, World Trade organization and Gulf cooperation council. Economic Factors The indented area for this investment is proposed to be Qatar as it is more stable and diverse. Qatar enjoys the highest per capita of GDP at $101,000. (highest in world ranking). Oil production is at its peak with a rate of 500,000 barrels (80,000 m³) per day. Manufacturing sector contributes 7.5% of GDP (third important component of overall GDP).We intend to invest in Qatar because it has the highest GDP in Middle East. Similarly, the political barriers are very less, the overall situation is great and there is no turmoil in the economic perceptive. Similarly, Qatar has such geographical location which distances it from the global war scenarios. Our investment will be safe there and cost of risk is also very low. Qatar is now being mentioned as one of the richest countries among the 57 states of the Muslim world. Qatar experienced 1,156% GDP growth and broke its own record of the financial rise in seventies. The increasing oil demand around the world and rise in the prices gave more expansion to the economy of Qatar and GDP per capita touched around 94% in the nineties. But rising global oil demand helped current GDP per capita to expand 94% in the Nineties. Qatar is striving hard to locate and nurture alternative energy resources as oil reserves are predicted to diminish by 2023. Energy sector, petrochemical industries and coal imports are highly vulnerable to profits and growth in the present times as well as in future. There is a great need of oil refinement and coal imports in Qatar. Qatar is seeking to expand the efficiency of oil in the near future because the oil reserves are depleting. The petrochemicals help to refine the oil and make it more efficient thus decreasing its usage. Petrochemical are derivates of oil which in turn are used in soaps, detergents and dyes. The oil imports will increase the production of natural gas and will locate numerous energy resources. Indexmundi,2013 Around 6.6 billion tonn of hard coal is used worldwide to produce brown coal. Coal is used for the production of electricity, there has been electricity crisis and the future is also anticipated to have such crisis. There has been a worst electricity crisis in Gaza and the supply from Qatar is going for the help. The future will need massive electricity generation to run heavy industries. Steel production industry is also flourished by the coal. Scope of investment is having low risk involved because the prices of coal are more stable and low as compared to oil.There are multiple markets of coal around the world. The biggest producers of coal in the world are Australia, America, Russia and Indonesia. The current scenario depicts that imports of coal from Australia and Indonesia are more feasible. Qatar is focusing on Liquid natural gas exports and has a new emerging industry in this sector. Coal is regarded as the ultimate source of LNG production so local partners will be seeking to use and buy it from us. In 2009, Qatar exported nearly 1,800 Bcf of LNG contributing around 33 percent to European markets. LNG is becoming a major need of the world. With the depleting resources of petroleum around the world, the world is relying upon LNG for making up its energy needs. The imports of coal will also give the benefit to us for having profit by supplying LNG to local gas stations. According to GCC (Gulf Cooperation Council), Qatar is already providing LNG to Kuwait and Dubai, and there is a lot more need to diversify the production of LNG and that is possible by imports of good quality coal. (Tititudorancea ,2013) Social Factors The social factors are a grave issue in this business plan because there are multi-ethnic groups and cultural standards that have different and volatile behaviors in the region the business initiatives must take account these cultural and social differences of middle east. The social and cultural standards of Qatar are same as that of Middle East. There is a huge difference between culture of the first world countries and the culture of Middle East. The multi-national companies have to stick to some rules and regulation while advertisements for example they cannot deploy women in the advertisements in a very open fashion as it is done by the companies all over the world. Similarly there are certain rules for the work places and a company cannot deploy more women, there are certain employments policies for the local women to whom they have to stick. Similarly, the ethical standards and protocols are different and religion plays a key role in this. There are some barriers for foreign investments due to religious and societal differences. Strong nationalism and tribalism issues are existing in most parts of Middle East. Advertisement and target market orientation will also face some issues. Technology Factors The automation of the existing system has revolutionized every industry around the world. Qatar is not an exception. Technology has been deployed in each and every sector of the economic hub of the world in order to cut short the labor of the human resource and increase the productivity of economic growth. Technology products, automation of industries, pre processed plants are being extensively deployed in the energy sectors and the results are amazing. Qatar is deploying both the computer technology as well as solar technology to expand the process of energy production and in order to locate the alternative means of energy production. (Qstec, 2013) The Middle East is taking a huge leap in the field of technology that is the reason why all the social media outlets from face book to twitter have produced the Arabic versions and persuasive design in order to change the conventional process. Qatar solar is regarded as the land mark in the history of Middle East. Qatar solar is an initiative by the royal people in order to amplify and embellish the use of solar technology first in Qatar and then throughout the Middle East. The following figure shows the usage of social media and number of tweets from the Arab region. This shows the immense interest, people from Qatar and Middle East are taking in the technological emergence of the world. DigitalQatar,2013 Strategy for entering Qatar Approach will be joint venture where we will pay the local partners for advertisements and quotations. Initially some samples will be shown to the industry partners. The target market will be set initially in order to focus the effort. After the initial costing issues are solved, the imports will be done officially. There will be cut from the overall profit because we will pay the price of all the efforts of the local partners in advertisement cost and supply chains. Coal imports will give alterative resources for energy industry for production of petrochemical because oil reserves are depleting quickly. There was an import of around 2 thousand short tons of coal in 2010 but the need to carry out energy shortages is more. Intended Approach is a joint venture, where the local partners will be located who will buy material from us. The Marketing Mix Product: The coal that will be imported is state of the art and of good quality. The main regions from where we will import the coal will be from Australia and china. Our main product is bitumen which is relatively softer than the other kind of coal which is known as lignite. The soft nature of the coal will decrease the processing cost of coal which is necessary in the production on liquefied natural gas production. Price The most latest prices of coal in the international markets are measured to be around  59.53 USD/st. Keeping in view the investment of 100$ M, large quantities of coal can be imported and supplied to the local energy partners. In case of any crash of local markets, there are multiple markets to switch. The figure shows the latest prices of coal in the international markets. The penetrating strategy will be used in the markets of Qatar. The initial prices will be set low in order to locate the local partners so that our firm can get an initial boost and public relations competitive advantage in Qatar. Infomine,2013 Distribution Strong distribution plan is established which includes massive marketing and opinion making in the economic corridors of Qatar. The local business partners and suppliers will be handled and made contact with in order to start the business. The coal will be imported via sea routes. The coal will be taken down from the sea routes and then transported the local processing plants on special large containers and it will me made sure that the quality of the raw black coal is not damages while the transportation phase. Promotion The strongest emphasis will be given on the promotion phase because marketing and advertisements is the key. If our firm manages to get into the markets of Qatar in the perspective of people’s mindset then the rest of the job will be an easy one. Marketing and promotion techniques will be used including TV ads, magazines awareness, promotion through brochures, public quotation, tender notices for the suppliers and public meetings with the share holders. References Agprofessional.com. "World coal and natural gas consumption and production."N.p., 1854. Web. 12 Jan 2013. [http://www.agprofessional.com/news/World-coal-and-natural-gas-consumption-and-production-185406662.html]. Mbt.gov.qa. "Development of Qatars Economy." N.p., n.d..Web. 12 Jan 2013. [http://www.mbt.gov.qa/English/ForeignInvestor/Pages/QatarEconomy.aspx]. Union of Concerned Scientists."Clean Energy | UCSUSA."N.p., n.d..Web. 12 Jan 2013. [http://www.ucsusa.org/clean_energy/]. Worldcoal.org. "Uses of Coal - World Coal Association." N.p., 2000. Web. 12 Jan 2013. [http://www.worldcoal.org/coal/uses-of-coal/]. Indexmundi.com. "Qatar - GDP - real growth rate - Historical Data Graphs per Year."N.p., 2011. Web. 12 Jan 2013. [http://www.indexmundi.com/g/g.aspx?c=qa&v=66]. Infomine.com. "Coal Prices and Coal Price Charts - InvestmentMine."N.p., n.d..Web. 12 Jan 2013. [http://www.infomine.com/investment/metal-prices/coal/]. Qstec.com. "Qatar Solar | QSTec - Qatar Solar Technologies."N.p., 2011. Web. 12 Jan 2013. [http://www.qstec.com/about/joint-ventures/qatar-solar]. Tititudorancea.com. "Qatar Coal, Net Exports/Imports (-): historical data with chart." N.p., 2010. Web. 12 Jan 2013. [http://www.tititudorancea.com/z/ies_qatar_coal_net_exports_imports.htm]. Nationmaster.com. "Coal consumption statistics - countries compared worldwide - NationMaster."N.p., n.d..Web. 12 Jan 2013. [http://www.nationmaster.com/graph/ene_coa_con-energy-coal-consumption]. Arabianeurs."VRIO Framework."N.p., 2011. Web. 12 Jan 2013. [http://arabianeurs.wordpress.com/2011/09/15/vrio-framework/]. DigitalQatar.N.p., 2013. Web. 12 Jan 2013. [http://www.digitalqatar.net/]. Read More