Muntajat a New Company to Boost Petrochemicals - Case Study Example

Muntajat Situational Analysis Introduction In the past one year, the oil prices in the global market have declined tremendously. Many of the countries that produce oil have not diversified their economy. As a result, they have been hard hit by this decline. This has mainly resulted from oversupply of the commodity in the market. In order for the oil producing companies to remain competitive, they are changing their long-term strategies with the aim of reducing their costs of producing. In addition, they are merging with their subsidiaries and mechanizing their operations, an aspect that is mainly aiming at lowering the cost of operations in the firms. Muntajat Qatar Company, a subsidiary of Qatar Petrochemical Company has been experiencing relative stability over the years. However, the recent slump on the oil prices has had a major impact on the overall performance of the company in the market. Being a government owned firm, the government of Qatar is highly reliant on it to support the operations and projects that have been incepted by the administration. In order to understand the position of this firm, this research paper will conduct a situational analysis with a major focus being on environmental, industrial, and company analysis. Situational Analysis Environmental Analysis Economic Analysis Qatar government is highly reliant on oil business to support its operations. Over the years, the administration has started mega projects which are aimed at improving the economic status of the country on the global platform. This could not be achieved without the support by the oil firm. As a result, Muntajat Qatar Company has been gaining economic support from the government in order to maintain its operations during these tough times. For instance, the government has subsidized machinery and other equipments by the company which are outsourced from outside in order to enable the company to mechanize its operations (Kelly, 2014). Although oil prices have declined in the past one year, Qatar government has been able to control the level of inflation in order to protect the local people and investment from the consequences of these economic changes. For instance, the country recorded a 2.7% inflation rate in December 2014. The company has had an inflation rate of 3.73% from 2005-2014. Over the years, the country has been able to accumulate huge reserves in order to avoid the inflation. Therefore, during tough economic times and decline of oil prices in the global market, the country has used these reserves to cushion itself from the risks and uncertainties associated with inflation. Muntajat Qatar Company has used the stability to strategize on how to diversify its products and target other markets across the world (Netherlands Foreign Investment Policy, 2013). Qatar is the richest country in the world. The economic growth and interest rates have been constant. This has given a serene environment for Muntajat Qatar Company with a serene environment to operate. As a result, the top-level managers have been able to focus more on operations that would increase the competitive advantage of the company. In addition, being a government owned firm, the firm has been protected from external risks through regulations that create barriers of entry for other interested investors (Oxford Business Group, 2014). This has played a significant role in enabling the firms to penetrate and position itself strategically in the global market. Social-cultural Analysis Unlike other countries that are crumpling with the aging population, Qatar has a balanced population. In addition, the country has a stead population growth rate. Therefore, the company has a young workforce. These are subordinates that are able to forecast the future while still strategizing on how to tackle the current issues. This has been instrumental in enabling the company to be flexible and change with time in order to cope with the changes being experienced in the global market. Oil industry is one of the largest sectors in Qatar. As a result, the local population has positive career attitudes towards working in this sector. Therefore, the firm has been benefitting a lot from a motivated workforce which is ready to change their strategies in order to fit in the changing oil sector. This has been significant in enabling Muntajat Company to deal with varying issues that have been affecting the competitive position of the business in the market. The local population has put up major emphasis on their safety. However, over the years, the company has invested heavily in putting up mechanisms that are aimed at safeguarding the subordinates when working on the firm’s premises. This has improved the employees’ confidence and loyalty towards the company, an aspect that has played a critical role in assuring the company of internal stability. Technological Analysis Although the demand for oil has declined, the demand for oil products continues to increase tremendously. In order for the company to maximize on these returns, the firm has invested heavily on modernizing its operations through technology. This is through investing on machinery and information system. This aspect has improved the marketing ability of the company. This has made it possible for the business to reach the customers located in different geographical locations. Muntajat has invested heavily on modern technology that aims at improving its supply chain program. This has been significant in maximizing efficiency and assures faster and improved customer service before and after sales. In addition, this intervention has reduced lead and delivery times while at the same time decentralizing distribution to better serve the global customers. Political analysis Qatar has a serene political environment. The political class has avoided any political conflict that might affect oil businesses in the country. This is through ensuring that any major political issue is solved before it gets out of hand. In 2004, Qatar held a referendum and unanimously approved the Qatar Permanent Constitution. In addition, the country has maintained a healthy relationship with other GCC countries. This has provided Muntajat Company with a wider market (The Business Year, 2014). The labor laws are very friendly and have been able to take into consideration the interests of the employees and employers. In addition, the labor law of Qatar provides all companies with well outlined laws that are holistic and provides the employees with an opportunity to enjoy their workplaces. Muntajat Company has complied with these laws. This is providing its employees with various benefits. This has acted as a major motivation to the employees. In addition, it has played a significant role in reducing internal conflicts which could affect the company’s stability. Opportunities and Threats Muntajat Qatar Company has an opportunity to expand its market in emerging markets. For instance, the Asian and South American region is recording immense growth and development. The number of middle income people is increasing tremendously. In addition, the number of heavy industries that will highly rely on the company’s products has increased immensely (The Edge, 2015). This creates an opportunity for the firm to expand its market size, an aspect that will play a significant role in improving the level of performance in the global market. With the increasing population growth in the world, the demand for food will increase tremendously. The demand for fertilizer has increased over the years. This provides an opportunity for the company to increase the level of production in order to cater for the increasing demand. This will close the gap that is being left by the decline in oil prices. As a result, the new product line will enable the company to support its operation during these tough times. One of the major threats to the existence of the company is the increasing call for environmentally friendly machines and motor vehicles. With the increasing levels of global warming, international bodies have started intense campaigns to lobby people to start reducing the use of fuel and start exploring new energy sources that are environmentally friendly. This is likely to have a major impact on the company’s profits. In the meantime, major automobile companies such as Toyota and Tesla have already started producing electric cars. These firms are trying to reduce the costs of production in order to serve the global market. With the entry of these cars in the global market, the fuel consumption will decrease tremendously. This will affect the company’s returns. Industry Analysis Structure The industry is headed by a board of director which is headed by Engineer Hamad Rashid Al Mohannadi. This is the decision making body that is answerable to the government (Muntajat, 2015). The board makes critical decisions that are likely to affect the financial position of the industry. In addition, it approves major projects which are of great importance to the existence of the industry in the global market. Evolution Over the years, the industry has evolved to cater for the changing demands from the market. In addition, initially, the industry was mainly focused on oil production. However, with the increasing number of players in this sector, the oil prices can no longer sustain the operations of the industry (2bI, 2013). Therefore, it has diversified its operations and started new product lines in order to supplement the lost market share. This has played a significant role in enabling the industry to remain relevant despite the increased levels of competition in the market. Competition Many countries that have diversified their economies are exploring oil in order to reduce the costs of operations. In addition, major oil producers such as Russia and Iran are releasing oil in its reserve in order to cater for the gap that has been left after sanctions by the Western countries. This is having a major impact on the overall prices of oil in the global market. Multinational companies are eyeing the industry. These are firms that have experience in different markets across the world. Therefore, in case they are permitted to commence their operations in the country, they are likely to affect the market share of the current major players. Majority of these firms have specialized in other sectors such as manufacturing. As a result, they have enough funds to segment the markets and attract the loyalty of their customers towards their products. Competition analysis and positioning Although oil industry is regulated by the Qatari government, the increasing levels of globalization which is mainly resulting from liberalization of markets, efficient flow of information, and integration of economies across the world is threatening this protection. Many of the economies that initially protected some of the local businesses have been forced to remove all tariffs. This is likely to happen to Qatar as pressure is mounting. This is likely to expose the oil industry to global risks; an aspect that may make it very hard to forecast and plan on how to improve the sector in the future. Qatari oil industry is positioned strategically in the global market. However, with the liberalization of markets, this position is likely to be lost. This will have a major impact on its position as other global companies that have experienced in different markets across the world are likely to dig in this position. Company analysis Structure Muntajat is headed by Yousef Jeham Al-Kuwari who is the chairman of board of directors. Yousef is answerable to Qatar Petroleum. He heads the rest of directors who forms an import decision making organ. The internal operations of the firm are headed by Mr. Abdulrahman Ali Al-Abdulla who is the chief executive officer. The company has 36 subsidiaries across the world. These are mandated with overseeing the logistic issues are dealt with effectively in order to improve the customer relationship management. This has enabled the firm to supply the products to 120 countries across the world. Resources Muntajat get its resources from sales. Over the past two years, the company has recorded increased sales especially from polymers, chemicals, and fertilizers. This has been significant in ensuring that the sales are not being affected immensely by the decline in the global oil prices. Processes The major processes have been the distribution of fertilizers, polymers, and chemicals across the world. This is through developing effective supply chain which makes it easy for the firm to reach various customers who are located in different parts of the world. In addition, the company has been involved in intensive marketing of its products. This aims at attracting new customers towards its products. Staffing Staffing is a role left entirely to the human resource department. This is a department that hires new subordinates depending with their areas of specialization. In addition, this body is mandated with promotion and demotion in the organization. This ensures that there are clear cut roles of each employee in the organization. However, top positions are filled by the board of directors. These are the personnel who have a role of deciding the best suited employees to fill these positions which are very demanding. Culture Muntajat has a customer oriented culture. This is a culture that ensures that all employees are focused towards the satisfaction of the target market. This has played a significant role in improving the competitive advantage of the company in the market. Strengths and Weaknesses Strengths The company has an experienced workforce. This has enabled the firm to penentrate global market. Muntajat has a strong financial base especially due to support offered by the Qatari government The firm has a strong brand name. This enables the firm to segment the market The company has a financial base. Due to its diversification strategy, the organization has been able to accumulate immense funds that could be used as a barrier of entry for interested investors. Weaknesses The company has been experiencing high rates of turnover as employees feel that they are not well remunerated. Hiring of new employees has slowed the growth of the company. The company is yet to maximize on the use of emerging advertising platforms such as social media and internet market. References 2bI. (2013). Qatar creates - Muntajat - a new company to boost Petrochemicals. Retrieved from http://www.2b1stconsulting.com/qatar-creates-muntajat-a-new-company-to-boost-petrochemicals/ Kelly, C. (2014). Qatar's $25bn decade of petrochemicals | ArabianOilandGas.com. Retrieved from http://www.arabianoilandgas.com/article-13213-qatars-25bn-decade-of-petrochemicals/ Muntajat. (2015). Muntajat - COMPANY PROFILE. Retrieved from http://www.muntajat.qa/index.php?page=company-profile Netherlands Foreign Investment Policy. (2013). Muntajat to open international marketing office in The Hague - Netherlands Foreign Investment Agency. Retrieved from http://www.nfia.nl/news/892/Muntajat-to-open-international-marketing-office-in-The-Hague.html Oxford Business Group. (2014). OBG talks to Abdulrahman Ali Al Abdulla, CEO, Muntajat (Qatar Chemical & Petrochemical Marketing & Distribution Company) - Interview | Qatar 2014 | Oxford Business Group. Retrieved from http://www.oxfordbusinessgroup.com/interview/sailing-downstream-obg-talks-abdulrahman-ali-al-abdulla-ceo-muntajat-qatar-chemical-petrochemical The Business Year. (2014). The Business Year - Smooth Transitions. Retrieved from http://www.thebusinessyear.com/publication/article/31/3366/qatar_2014/smooth-transitions The Edge. (2015). Bringing Qatar’s petrochemical sector under a single organisation - The Edge. Retrieved from http://www.theedge.me/bringing-qatars-petrochemical-sector-under-a-single-organisation/ Read More