Date of Submission:
Identifying and discussing two major competitors:
Saudi Steel Pipes (SSP) Company serves to be a leading manufacturer of steel in the medium range enterprises. There are other medium range enterprises that consists of manufacturers of steel that tend to provide a considerable amount of competition to the Saudi Steel Pipes. Two of such competitors include Middle East Factory LLC and Emirates Steel. Both of these companies have been providing excellent services and products pertaining to their specialization and customization.
Emirates Steel tend to provide high quality of steel products with minimum effects on the environment. It has been established in 1998 and has been known for the different initiatives that it undertakes regarding the green measures for protecting the environment. It is one of the leading manufacturer in the world that has captured Carbon Dioxide at a commercial level. It specializes in producing bars, wire rods that is being utilized by different industries in the infrastructure as well as the commercial field across UAE (EMIRATES STEEL.COM, 2016).
Middle East Factory LLC is a company that has been developed in an Industrial zone of Al Quoz in Dubai. It has been mainly providing products that are required in the construction industry. The products that are developed by the Middle East factory LLC does not only contain steel, but it also contains brass, copper and aluminium production in large quantities. It also provides products for the companies that are involved in developing surface treatment plants in UAE (MIDDLE EAST FACTORY.COM, 2015).
These are the two main competitors that have a significant share in the market and have the potential to provide a tough competition to the Saudi Steel Pipes Company in the steel manufacturing industry of UAE.
Strategy Formulation framework
Strategy Formulation can be termed as a process in which all the decisions and the course of activities are developed by an organization for achieving its goals and predefined objectives. The framework of strategy formulation consists of three stages:
I. The Input Stage:
It consists of:
a) External factor Evaluation (EFE) Matrix
b) Competitive Profile Matrix
c) Internal factor Evaluation (IFE) Matrix
II. The Matching stage:
a) Internal – External (IE) Matrix
b) Strategic Position and Action Evaluation (SPACE) Matrix
c) Boston Consulting Group (BCG) matrix
d) Grand Strategy matrix
III. The decision stage
a) Quantitative Strategic planning Matrix (QSPM)
I. The INPUT STAGE
Competitive Profile Matrix (CPM)
A Competitive Profile Matrix helps in identifying the significant competitors that are existing in the market and helps in obtaining their strengths as well as weaknesses. It also helps in making a comparison between these companies and provides the strategic positions of these companies. In the table, the rating of 1 indicates that the specific factor related to it is a major weakness. Its magnitude increases gradually and a rating of 4 indicates that the factor related to it is a major strength of the company.
Critical success Factors Weight Saudi Steel Company
Score Middle East Factory Emirates steel
Critical success Factors Weight Rating Score Rating Score Rating Score
Product price competitiveness 0.10 4 0.55 3 0.35 2 0.24
Market share 0.15 3 0.40 2 0.28 4 0.59
Customer Loyalty 0.20 2 0.25 2 0.24 1 0.14
Product Quality 0.15 4 0.55 4 0.58 3 0.45
Management 0.15 3 0.40 1 0.12 3 0.39
Business development 0.15 2 0.26 3 0.35 2 0.21
Constant thrive for innovation 0.10 4 0.60 2 0.27 4 0.45
Total 1.00 2.96 2.19 2.47
It can be observed that the score is highest for the SSP which is 2.96 and it is very much similar to the Emirates Steel that stands at 2.47, whereas Middle East Factory LLC is also near at 2.19
Porter’s five forces model
The five forces that have been provided by Michael Porter helps in obtaining a strategy framework that has to be developed while ensuring sustainability and success of a product in the market. It consists of the following five forces:
Rivalry among the existing competitors
It refers to the rivalries in the form of competition that exists among the competitors that are competing in the market. There is a huge competition that is existing among the companies Middle East factory LLC, Emirates steel company and the SSP regarding the manufacturing of steel in the global market. The competition is regarding the market share that they aspire to create for themselves in the steel manufacturing industry. These three companies constitute a large portion of the overall development of steel by the middle range steel manufacturing industries (SAUDI STEEL PIPES COMPANY, 2014).
Bargaining power of suppliers
Bargaining powers of the suppliers refers to the power that the suppliers who provide the companies with the raw materials to develop the finished product have over the companies. Bargaining power of the suppliers is very limited as there are a large number of suppliers available to these companies and the resources that they require are developed by many suppliers across the globe. So, there is a constant competition among the suppliers too. It serves to decrease the power that each supplier has over the company in the market.
Bargaining power of buyers
Bargaining power of buyers refers to the development of power among the customers in terms of controlling the sales of the product in the market. It has to be considered while developing strategies that re related to the management of the resources in the organization. The bargaining power of buyers is extremely high. It is due to the increasing demands of the customers and a tremendous boost in the availability of quality steel products at feasible prices. Buyers have to be constantly upgraded with the new innovations and designs that are developed in the steel industry by these companies. Buyers, in the form of customers, are very crucial in determining the success of any business through several platforms and it has to be accomplished by the companies to develop a niche for themselves in the market. SSP has to adapt suitable innovative strategies for the same.
Threat of new entrants
There is a constant threat of new entrants that have the potential and capabilities to occupy a large share in the market through providing interesting offers to the customers at very effective costs. However, the threat of new entrants is harmful on long term basis as it would take time for the new entrants to develop a market share that would be comparable with the existing leaders in the middle range manufacturers that consist of SSP, Emirates steel and Middle East factory LLC (SAUDI STEEL PIPES COMPANY, 2014).
Threat of substitutes
There is a constant threat of substituting the current designs and features offered by the leading Steel manufacturing companies by a more effective and feasible product that has the same strength but is available at low cost. It has to be kept under constant check so as to ensure that the companies are staying upgraded with the new innovations made in the industry.
External factor Evaluation (EFE) Matrix:
The below table shows the External Factors Evaluation though a EFE Matrix and can also be termed as the IFE matrix that has been established from the Annual report of the Saudi Steel Pipes. In the table, the weight column shows the importance of the parameter out of 1. The ratings has been provided by the customers out of 5 and the weighted score is obtained from the annual report. In the table, the rating of 1 indicates that the specific factor related to it is a major weakness. Its magnitude increases gradually and a rating of 4 indicates that the factor related to it is a major strength of the company.
EFE Matrix for Saudi Steel Pipes Company
Key External Factors Weight Rating Weighted Score
1. SSP has been producing 240,000 metric tons of steel pipes annually 0.05 4 .35
2. Possesses one of the largest plant that produces hot induction bending pipes 0.05 2 .12
3. Employee motivation 0.03 2 .18
4. It produces pipes of the diameters ranging from 2 to 48 inches 0.02 4 .31
5. Providing service to important sectors that involve the oil and gas industry, water related projects and other types of construction carried in this region. 0.05 3 .25
6. Focusing on developing state of the art technologies that are adapted in it to provide a highly efficient 0.05 2 .14
7. Develops sustainable technology that would help in providing high quality steel pipes.
0.04 4 .34
8. Adopting an electric control and tracking for all the stages that are carried in the production process 0.05 4 .35
9. Accredited by the government for various projects that are to be carried in the above mentioned fields 0.05 3 .28
10. Reducing the waste generated in the form of the water used, consumption of electricity, usage of water and proper disposal of the wastages 0.05 1 .08
11. Awarded with a certificate of industrial safety that is called as “OHSAH 18000” 0.07 2 .14
1. There would be serious consequences if the pipes fail 0.05 2 .16
2. High impactful accidents can be caused if the pipes undergo any kind of distortion in its size 0.04 2 .18
3. Negative performance among the employees 0.03 4 .35
4. Constant thrive for innovation and getting accustomed with the new market trends 0.02 3 .22
5. Cost effective services 0.05 1 .06
6. Handling the risk assessment 0.08 4 .32
7. Fatigue factors 0.06 4 .38
8. Extending the limits 0.05 3 .24
9. Managing operations effectively 0.03 1 .06
10. Environment considerations 0.05 3 .27
Total 1 4.78
Internal factor Evaluation (IFE) Matrix
Internal Factors Analysis Summary
Internal Factors Weight Rating Weighted Score Comments
1. Standards of safety .05 4 .70 High level of satisfaction
2. Market share .10 3 .60 Good engagement
3. Employee motivation .05 2 .25 Highly motivated employees
4. Quality .10 4 .75 High attainment of quality
5. Business development .05 3 .45 Effective business model development
6. Employee satisfaction .10 4 .65 High values of employee satisfaction
7. Employee engagement .10 4 .60 High values of employee engagement
1. Employee turnovers .05 2 .25 Highly sensitive
2. Improper strategic development .15 2 .20 Improper balancing of customers
3. Negative performance among the employees .15 4 .65 Threat of negative culture developing in the organization
4. Constant thrive for innovation .10 3 .50 Lack of innovation
II. THE MATCHING STAGE
It refers to the strengths, weaknesses, opportunities and threats that the Saudi Steel Pipes Company poses in the market. The strengths and weaknesses has been shown in the internal factor evaluation matrix whereas the opportunities and threats has been shown in the External Factor evaluation matrix.
It refers to the strategic position and action evaluation matrix. For the SSP, it has been developed as follows:
BCG matrix and Grand strategy matrix:
It is referred to as the Boston Consulting Group Matrix. It shows the two dimensions of market growth and market share as shown in the below figure:
It is the evaluation of the IFE and EFE matrix that has been developed in the above section.
Most important factors and discussion of the scores:
The quantity of steel produced by SSP is a major characteristic of the Company in the middle range manufacturers. It provided different range of diameters across its manufacturing system. It tends to be the major advantage of SSP. Owing to the high standards of industrial safety established in it, SSP was awarded with a certificate of industrial safety that is called as “OHSAH 18000” (SSPIPE.COM, 2016). These are the important factors that develop opportunities for the company in the international market. On the other hand, there are few factors that develop threats and they are the high intensity of danger that is involved in the operations that are performed in the plant. The strength of the material is also a major threat as the products manufactured in the SSP are used in different critical applications that involves operating at high temperatures, pressures and other such conditions that has high values.
III. THE DECISION STAGE
Quantitative strategic planning matrix (QSPM):
Key Factors Weight Increasing the production (Strategy 1) Decreasing the wastes (Strategy 2)
Key External factors
Political .20 Political factors have to be considered Support of the political factors would be obtained
Economic .25 Economic costs to be considered Cost of wastes has to be considered
Social .20 Increasing number of opportunities in the society Beneficial to the society
Technological .35 Development of technology Sustainable use of technology
Key Internal factors
Management Optimum utilization of the available sources Obtaining effective utilization of resources
Production Increasing tremendously Increases as the waste reduces
Processes Number of processes increase Waste generated during each process reduces
R & D High investment, but provides immediate results High investment and shows steady results.
The PEST Analysis is an evaluation model or tool that helps in identifying and evaluating the political, Economic, Social and Technological factors that are existing in an organization in a specific market. The following factors are involved in developing an evaluation of the external environment that is pertaining to the Saudi Steel Pipes Company (SAUDI STEEL PIPES COMPANY, 2014).
Saudi Steel Pipes Company is affected by the unstable political conditions in the Middle-East countries of Iran, Syria and Iraq. It has been affected by the political conditions prevailing across the world such as wars, terrorist attacks and natural disasters. Due to this, there has been a considerable hindrance in the development of infrastructure and expanding the construction across the UAE.
It is one of the most significant factor in the contribution of SSP success in the global steel manufacturing industry. There is a tremendous amount of investment made by the UAE government to improve its infrastructure and boost the economy of the country. This has resulted in a large number of projects to be developed related to the infrastructure, energy development and water management. As a result, there is an increase in the demand of the products that are developed by the SSP. Some economic factors that affect firm strategy:
• Growth rate
• Interest rate
• Steel rate
• Price stability (inflation and deflation)
• Currency exchange rate
Social factors refers to the changing dimensions in the society like the population, percentage of educated class, increase in standard of living of the people, increasing demands of the people to get good quality of service. These factors have contributed to the increase in the development of the products that are developed by SSP. They have been pioneering in contributing to the social factors by carrying various tasks and activities for the development of the society.
The advancements in technology has boosted the steel manufacturing industry as the ease of producing high quality of steel and that too in large quantities has increased the pressure on the companies that are producing it. Also, there is a boost in the requirements of the different industries and quality demands of the industries that require the use of steel pipes in it (Elbanna, 2010).
Elbanna, S. (2010). Strategic planning in the United Arab Emirates. . International Journal of Commerce and Management, 20(1), , 26-40.
EMIRATES STEEL.COM. (2016). About the Company. Retrieved from http://www.emiratessteel.com: http://www.emiratessteel.com/index.php/en/
MIDDLE EAST FACTORY.COM. (2015). Welcome to Middle East Factory LLC. Retrieved from http://middleeastfactory.com: http://middleeastfactory.com/welcome-to-middle-east-factory-llc
SAUDI STEEL PIPES COMPANY. (2014). SAUDI STEEL PIPES COMPANY. Saudi Arabia: Saudi Steel Pipes Company.
SSPIPE.COM. (2016). Saudi Steel Pipe Company. Retrieved from http://www.sspipe.com: http://www.sspipe.com/en/pages.aspx?pageid=195