Table of Contents
Background of the company 3
Vision of the company: 4
Mission of the company: 5
Financial ratio Analysis for the past three years. 5
Financial ratio analysis table: 7
Firm’s organizational chart 8
Improvements in the chart 9
Map showing the firm’s operations and the light of strategies 10
Marketing strategy 11
IFE matrix 13
There has been a tremendous growth in the requirements of steel in the Arab countries owing to the high levels of development and infrastructural growth that is anticipated in these regions. Similarly, it has led to the increase in the market growth of the steel production companies in these regions. In Saudi Arabia, Saudi Steel Pipes tends to be a major player in the production of steel and supplying it for the development of the oil and gas industry, water supply and management and other industrial as well as commercial applications. Saudi Steel Pipe Company (SSP) was founded in 1980 and since then it has been making tremendous contribution in the construction, infrastructure and engineering industries in Saudi. It is one of the leading producer of welded steel pipes and has the recognition of being one of the first company to manufacture steel in the Arab world. There are many types of steel pipes manufactured in SSP which are developed by different processes. These different processes that are carried in SSP for manufacturing of pipes are high frequency induction welding, hot induction bending pipes and Electric Resistance Welded (ERW) pipes (SAUDI STEEL PIPES COMPANY, 2014).
Background of the company
SSP has been producing 240,000 metric tons of steel pipes annually. It has one of the largest plant that produces hot induction bending pipes, producing pipes from the diameters between 2 to 48 inches and having a thickness to the range of 50mm.It has been providing it’s extensive to several important sectors of development that are involved in developing the economy of the Arab world (NCB CAPITAL, 2010). These important sectors involve the oil and gas industry, water related projects and other types of construction carried in this region. It has been focusing in the state of the art technologies that are adapted in it to provide a highly efficient and sustainable technology that would help in providing high quality steel pipes.
As this steel pipes are used for critical applications like in the oil and gas industry and in the water supply industry, there would be serious consequences if the pipes fail or undergo any kind of distortion in its size. For managing this criteria, they have adopted an electric control and tracking for all the stages that are carried in the production process and this helps them to control the different variables that are involved in the development of the pipes through the entire production process. It has been accredited by the government for various projects that are to be carried in the oil and gas industry, water supply and processes, industrial processes and different phases of agriculture that are carried in these regions. This shows the level of trust and sense of responsibility, SSP has cultivated across the market in the Arab world. The customer list of the company involves the “Aramco Company in Saudi Arabia, ADNOC in UAE, Qatar Petroleum in Qatar, KOC in Kuwait and PDO in Oman” (SSPIPE.COM, 2016). It has an extended list of customers that are ranging from the North African region to the other contractors and developers in the manufacturing industry.
SSP has made an immense contribution in the sustainability of environment through reducing the waste generated in the form of the water used, consumption of electricity, usage of water and proper disposal of the wastages that are produced in the company. For this purpose, they have been credited with a certificate of industrial safety that is called as “OHSAH 18000” and it has also been accredited as per the ISO 14001 certification.
Vision of the company:
“We will be the leaders In Pipes manufacturing and support industries for energy sector across the Middle East, while maintaining continual growth”.
Mission of the company:
“We will meet our customers’ expectations and achieve high standards in production, safety, and quality, through investing in state of the art technology, the development of our human capital and our commitment to a positive working environment”.
Financial ratio Analysis for the past three years.
A Financial ratio analysis helps in obtaining an evaluation of the various elements that are responsible in the financial development of the company. There are various terms that are to be used in the financial ratio analysis and they have been mentioned as follows (SAUDI STEEL PIPES COMPANY, 2014):
Sales growth rate:
Sales growth rate = (Current year sales-Past year sales )/(Past yer sales ) X 100
= (1300-1100)/1000 (in SR million) X 100 = 20% for 2014
Operating income margin:
Operating Income margin = (Operating Income )/(Net Sales )
= 83.247703/839.336 (in SR million) = 9.8% for 2014
Net income margin:
Net Income margin = (Net Income)/(Net Sales)
= 79.448/839.336 (in SR million) = 9.4% for 2014
Administration and market expenses divided by total sales
It can also be called as expense to sales ratio.
It is given by the equation = (Administration expenses + Market expenses)/(Total sales)
= ( 26.251 + 21.578 )/839.336 (in SR million) = 5.6 % for 2014
Current Ratio = (Current assets)/(Current liabilities)
= 518.662/138.797 (in SR million)
= 3. 75: 1 for 2014
Debt-to-Worth ratio = 131/(445 ) (in SR million) = 0.294 for 2014
Net worth = total assets – total debts
ROA (Return on Assets)
Return of Assets = (Net Income)/(Average Total Assets)
= 79.448/1343.946 (in SR million) = .058 for 2014
EPS (earnings per share)
EPS (earnings per share) = (Net Income – Dividends on Preferred Stock )/(Average outstanding shares)
= (79.448-9.42 )/45 = 1.56 with par value per share to be SR.100
(SAUDI STEEL PIPES COMPANY, 2014):
Financial ratio analysis table:
Variable 2012 2013 2014
Sales growth rate: 12 15 20
Operating income margin:
8.2 8.5 9.8
Net income margin: 8.6 8.8 9.4
Administration and market expenses divided by total sales
6.5 5.9 5.6
Current ratio 4.25: 1 4.10: 1 3. 75: 1
Debt-to-Worth ratio 0.30 0.35 0.294
ROA (Return on Assets)
0.062 0.045 .058
EPS (earnings per share)
1.25 1.43 1.56
Thus, the tremendous sales growth rate of about 20% from the last year tends to be a great achievement for the SSP Company and its sales in Saudi Arabia. There are many functions that are developed by the company on the grounds of quality and measurements that is to be implemented in it. There also has been a significant increase in the earnings per share as compared to the last two years for the Saudi Steel Pipes Company in the market.
Firm’s organizational chart
An organizational chart refers to the development of a diagram or flow chart that shows the flow of operations and authority within a company and the activities that are performed at every level in its structure. Organizational chart is very important to be developed as it helps in obtaining the flow of operations and the pattern that is to be followed in terms of hierarchy as well as power in the organization. It involves various other factors related to the development of the factors that immensely contribute to the development of operations and other management functions that are carried out in the organization.
The organizational chart that has been adopted in the SSP company throughout the production as well as the management process has been shown in the below figure:
There are few good and bad aspects of the organizational charts that has been adopted by Saudi Steel Pipe. It involves developing quality assurance and factory processes that the advantageous factor for SSP. It is their good aspect where they have been striving hard to provide and maintain high levels of excellence across its functioning. The only bad aspect or negative aspect that it has been witnessing is ensuring consistency in the administration and management process like the purchasing and inventory management. There are few issues that are to be handled from the management point of view and solving these issues would help in increasing the efficiency of the processes.
Improvements in the chart
There are few improvements that can be made in the chart. There has to be special care taken about the processes that are pertaining to the maintaining of quality and strength of the material in the global industry that is related to the development of steel in the market. On a similar, note, there are many upgradations and modifications to be made for ensuring that high levels of quality as well as strength and durability has been obtained products across the globe.
Map showing the firm’s operations and the light of strategies
There are many operations that are to be considered and executed in the manufacturing processes that are carried out in the SSP. It has to be ensured that these operations are carried out efficiently and there is optimum utilization of resources in it. The operational strategy that has been developed by the SSP is based on the operations that are performed in it. The below diagram shows the operations that are performed in the SSP.
It consists of the following processes:
In this process, there are many steps that are to be considered and they have been mentioned in the following section:
Setting up the requirement and demands of the product
Identifying the target customer and market
Developing an estimate of production
Evaluating the quality and quantity to be developed.
Starting the production
Maintaining various international standard benchmarks in the production process
Testing the product at high values
Certifying the quality and reliability of the product
Entering the market
Obtaining payment and feedback from the customers
Identifying the needs in the market.
In addition to this, the company keeps evolving its overall strategies and continuously explores the new methodologies and outlets to market the products through continuous communication with the existing potential clients and even follows the new opportunities of project and business sector in the region. In order to market the products, the company believes in diversification of the products. It has to be achieved as developing quality products tend to be the vision of the company. Therefore, the company keeps designing plans to modernize the existing plants, invests more in expansion and diversification of products and enhance the production capacity continuously (Babakri, 2010).
Developing a marketing strategy is very important for any company if it want to sustain itself in the industry. It is referred to as the sole concept behind the handling of the changes that occur in the market. At the same time, there are many other operations that are to be taken care of while establishing the marketing strategy for the manufacturing processes that are carried in an organization.
Marketing strategy in any company helps in streamlines the product development and helps in determining the optimal prices so that company can have best chances of making profit. Moreover, it is quite crucial in establishing effective distribution of the business and in establishing systematic marketing communications. To determine whether a particular radio station or magazine is fit for one’s selling plans, marketing strategies is the prime prerequisite. The marketing strategies implemented by Saudi Steel Pipe Company have created great organizational impact by implementation of their marketing strategies (SSPIPE.COM, 2016).
The products manufactured by Saudi Steel Pipe Company are not only sold locally but are exported to more than 20 countries of Africa and Middle East. Due to the business marketing strategy the company has acquired a leading place in the manufacturing sector of flexor pipes, and steel pipes. The company keeps itself continuously engaged in a broad range of steel pipes. These pipes are of various sizes and are designed to meet the requirement of various markets. In order to let the products market itself, the company indulges itself into production of steel pipes that are of highest quality standards used widely in American Petroleum Institute (API). The company is designated with two certificates API for the production of pipe for the transportation of gas and oil. To market the products of the company on international platform and on broader aspect, the company deals with the agents and distributors that are approved outside and within KSA by the mode of direct communication and commitment to access all clients and sectors (Babakri, 2010).
Well, the company considers getting adapted with the market as one of the important marketing strategy. By getting accustomed with the new market trends, the company keeps introducing new marketing strategies accordingly. It has developed a very high level of flexibility, in order to get adapted with the developments and amendments of the market. Whether it is flexibility in terms of changing the prices of the raw materials it uses or the way it responds to the demands of the products, it has acquired all.
An IFE matrix refers to the internal factors analysis that is carried out in an industry to obtain high levels of efficiency and optimization of resources across the industry. It can be termed as the analysis that helps in identifying the factors that are useful for developing extensive progress and growth in the company. It is the main element that provides extensive research among the operations that are to be performed in the industry. It involves development of various elements that are important in the development of operations and executing the strategies that are developed for achieving effectiveness within the organization. It also includes the number of steps that are taken by the management to identify the factors that are existing in the industry and are related to the development of the industry in the global market.
The value of the various internal elements that have been evaluated in the SSP has been obtained and it has been derived from the operational excellence that is observed in the company through its internal operations. The analysis of internal operations is very important as it helps in obtaining a complete scenario regarding the operations that are to be reconsidered and redeveloped for ensuring high efficiency in their functioning.
The below table shows the internal factors analysis 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 report. The weighted score of above 0.60 indicates that the Saudi Steel Pipes (SSP) has achieved considerable growth in that specific dimension or parameter.
Internal Factors Analysis Summary
Internal Factors Weight Rating Weighted Score Comments
Standards of safety .5 4 .70 High level of satisfaction
Market share .4 3 .60 Good engagement
Employee motivation .5 2 .65 Highly motivated employees
Quality .6 4 .75 High attainment of quality
Durability .7 3 .80 High durability in its products
Reliability .75 2 .70 High reliability in its product
Consistency .7 4 .60 Highly consistent performance
Strength of the material .5 4 .65 High tensile and other strengths.
Business development .4 3 .75 Effective business model development
Employee satisfaction .3 4 .65 High values of employee satisfaction
Employee engagement .7 5 .80 High values of employee engagement
Employee turnovers .5 2 .65 Highly sensitive
Improper strategic development .5 2 .80 Improper balancing of customers
Negative performance among the employees .6 4 .75 Threat of negative culture developing in the organization
Constant thrive for innovation .7 3 .80 Lack of innovation
Cost effective services .75 2 .70 Making the processes and services cost effective
Handling the risk assessment .7 4 .60
Fatigue factors .5 4 .65
Extending the limits .4 3 .75
Managing operations effectively .5 4 .65
Environment considerations .4 3 .75
Thus, SSP has developed various operational and product excellence in its functioning and there are few factors that are related to the scope of improvement that SSP can induce in its operations. It should be ensured that higher the value of the customer needs, higher the quality of product has to be developed in order to sustain themselves in the cut-throat competition that consists of large number of competitors. Along with it, environment and the effects that the processes have on the environment has also to be considered for the SSP.
Babakri, K. A. (2010). Improvements in flattening test performance in high frequency induction welded steel pipe mill. Journal of Materials Processing Technology , 2171-2177.
NCB CAPITAL. (2010). Saudi Steel Pipes Co: Unrecognized Growth Story. Saudi: NCB Capital.
SAUDI STEEL PIPES COMPANY. (2014, January 5). CONSOLIDATED FINANCIAL STATEMENTS. Saudi: Saudi Steel Pipes Company.
SSPIPE.COM. (2016, March 16). AGENTS & DISTRIBUTORS. Retrieved April 16, 2016, from www.sspipe.com: http://www.sspipe.com/en/Pages.aspx?PageID=206
SSPIPE.COM. (2016). ORGANIZATION CHART. Retrieved from http://www.sspipe.com: http://www.sspipe.com/en/pages.aspx?pageid=200
SSPIPE.COM. (2016). Saudi Steel Pipe Company. Retrieved from http://www.sspipe.com: http://www.sspipe.com/en/pages.aspx?pageid=195