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SADAFCO

Updated on March 7, 2015

Introduction

Introduction

Sadafco was established in 1976 to cater for the increasing diary needs of Saudi Arabian. Since its inception, the organization has succeeded in capturing over half of the UHT (Long life) milk segment in the country. In addition, it has about a third of the lucrative milk market in the country. Besides its focus on milk, the organization has diversified into tomato paste, ice-cream, snacks and drinks. The commitment to excellence within the organization has enabled it to attain a strong market leadership status as the market leader in the tomato paste category. In the last two years, the organization has focused on expanding its product portfolio. The move has been informed by the need to pursuit its corporate mission. An evaluation of the fundamental elements of the organization demonstrates that it has a strong financial position. The organization is operating in an industry that has a lot of financial opportunities. The Saudi Arabian dairy market experienced total revenues of $4,859.6m in 2013 (Market Research. Com, 2014). The figures represent a compound annual growth rate (CAGR) of 6.8% between 2009 and 2013 (Market Research.com, 2014). In addition, the organization has a leadership structure that will enable it to achieve a lot of results.

Mission

The organization has a mission that implies that it is focused on developing, producing and marketing a wide range of nutritious food products for all age groups. In addition, it shows a commitment to increasing shareholder value through teamwork. An evaluation of the mission statement demonstrates that the organization understands its most important relationships. First, it has a responsibility to its customers. The mission statement reflects an understanding that it has to serve customers with different needs due to their ages. In addition, it highlights a commitment towards innovation. The production of new nutritious prepositions requires the development of an organizational culture that is focused on a relentless pursuit of excellence. Furthermore, it shows that the organization is willing to invest a lot of funds in the development of the dairy industry within the country. A lot of investment in research and development would be required for it to achieve its goal.

In addition, the mission statement demonstrates a lot of respect for its shareholders. The move can be attributed to the important role that they play in empowering the management to fulfill its mission. They risk their capital by investing in the organization. As a result, it is good for the organization to acknowledge its responsibility to increase shareholder value.

Vision

Sadafco has a simple vision. The organization wants to be the brand of choice. Although the statement is short and simple, it has a lot of bearing. First, it reflects an understanding that it is operating in a competitive business environment. The dairy industry in Saudi Arabia and all parts of the world is a lucrative one. The observation can be attributed to the fact that all individuals consume milk. Second, it acts as a guiding principle. For Sadafco to achieve its vision, it will have to focus on excellent customer service and a relentless pursuit of innovation. Furthermore, the organization has to invest in continuous improvement and growth for it to achieve its objectives.

Values

Sadafco has four values that guide its operations. First, it is committed towards upholding integrity. The value is important in an era where the business community is accused of violating business ethics as it pursues short term goals. In addition, it is important for an organization that produces consumer goods. Second, the organization is committed towards showing respect for all individuals. The value can be attributed to the influence of the Muslim teachings that urge all Muslims to respect everyone. Third, the organization values passion. The value is integral in ensuring that it realizes its objective of delivering quality products for its consumers. Fourth, Sadafco is focused on the creation of quality products. The value is influenced by its obligation to its consumers. All organizations have a responsibility to ensure that they produce high quality products that add value to the society.

Internal Assessment

Sadafco has an excellent website. First, its design is minimalist. As a result, it has focused on the most important things. In addition, it does not have a lot of colors. Consequently, visitors to its site do not get distracted. Second, the website has used the English language. The move ensures that it is accessible to a majority of the people in the world. English is the most widely spoken language in the world. Third, the homepage provides a real-time update of the products that it has sold since its establishment. The feature shows that it is a successful organization with a long history in the dairy industry. Consequently, it has a lot of expertise in the dairy industry. Fourth, the website is informative. Besides providing all the relevant information about the organization, it has a page that provides all the contacts of the organization.

Sadafco is committed towards achieving high quality standards. The organization is implementing the Food Safety Management Program. Furthermore, the implementation is being done according to the internationally accepted SO 22000:2005 Standard. The move ensures that it does not only cement its status as a leading regional food manufacturer, but shows that its products meet the highest quality standards in the world. In addition, it serves as a source of competitive advantage. Achieving the ISO standard means that the organization can expand into international markets.

An FMS refers to a network of interrelated elements that are integrated to ensure that food does not cause adverse human effects. The move is important in an era where some dairy organizations have been accused of failing to protect their consumers. The four key elements include; interactive communication, system management, good manufacturing practices and hazard analysis and critical control points.

Furthermore, as a publicly listed company, Sadafco has obligations to its consumers and stakeholders. First, it is required to release its financial performance to the public. An evaluation of this information shows that the organization is in a strong position financially. Second, its required to adhere to the highest quality standards. The focus on excellent customer experience and on creating a strong brand has ensured that the organization fulfills both obligations.

The organization has pursued a differentiated strategy that hs enabled it to cater to the unique needs of all its consumers. For example, it produces dairy products that are aimed at children alone. The move ensures that it caters for a category in the market that needs milk the most (Cooke & Nestle Nutrition Institute, 2007). Children are required to drink milk due to the important role that it plays in their lives. For example, they need calcium for bone development. In addition, protein, zinc, vitamin A, B2 and B12. Saudi Milk contains 27 vitamins that are essential for the growth of the baby. Parents are willing to spend a lot of money on ensuring that their children are prepared for a healthy life.

Also, Sadafco has produced different flavors. The move ensures that consumers with different needs have the opportunity of choosing which flavor they prefer. Similarly, Sadafco produces dairy products for the different age groups. As consumer awareness increases, the strategy will enable it to increase its market share as consumers seek products that are suited to the needs of their age. A differentiated strategy enables organizations to maximize their revenue (Hitt, Ireland & Hoskisson, 2007).

The strong performance of the dairy giant, has resulted in a strong stock price. According to its website, its stock price is at 123. The price shows that it is a good investment for stakeholders. However, as a publicly listed company it remains under intense pressure to ensure that it posts consistent financial improvement. The pressure may have an adverse effect on the organization in the long run. The observation can be attributed to the fact that it could be forced to focus on short term gains at the expense of investing in the infrastructure and research that would benefit it in the long run.

Sadafco has a strong leadership team. The Board of Directors is composed of individuals with a diverse expertise and experience. Consequently, the management receive advice from a team that has a holistic understanding of the dairy industry, the business environment in Saudi Arabia and the business industry in the world. In addition, it has assembled a diverse range of executives to form its management team. Instead of filling it with the native Saudi Arabians, its clear that it has a strong foreign presence. The foreigners enable the organization to benefit from their diverse viewpoints. In addition, it ensures that the organization benefits from best business practices borrowed from around the world. In addition, it serves as an example that the organization is committed towards rewarding talent and good performance. The move is integral in creating a positive organizational culture that rewards meritocracy.

Another aspect that the organization should be concerned about is the possibility that its focus on the regional market may be limiting its growth. The organization has the capacity to be a global dairy company. However, it has focused on the region. The move not only caps its revenue but also exposes it to significant losses in the event of a natural or man-made disaster that may disrupt the regional economy.

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External assessment

Sadafco faces a lot of competition from other dairy companies in the region. As a result, it is forced to spend a lot of money on marketing and customer acquisition (Euro Monitor International, 2014). The observation can be attributed to the lucrative nature of the milk industry in the region (Reuters, 2014). For example, it has to battle with Almarai, a dairy giant in the country (Shadbolt, 2013). Furthermore, a lot of families in the region have livestock (Saudi Embassy, 2014). As a result, they may not need to buy milk. Moreover, the country has seen an emergent trend where families with purchasing power are favoring imported products over the locally produced ones.

The Saudi Arabian economy is heavily reliant on oil (Li, 2012). Consequently, negative changes in the price of oil may affect the economy of the country (Woertz, 2014). For example, there may be a shortfall of foreign exchange services. Consequently, it would become more expensive for Sadafco to import machinery from abroad. In addition, it could affect the purchasing power of its target consumers.

The rise of the Saudi Arabian economy has led to an increase in living standards in the country. Although that means that more families can afford to buy Sadafco products, it has also been accompanied by an increase in wages (Kerr, 2014). Saudi Arabian workers command a high wage as compared to other countries in the region. Consequently, the organization has to spend more on operating costs.

Furthermore, the region experiences a lot of political instability. Although its core market has managed to remain stable, the instability in the Middle East has undermined its ability to expand to the rest of the region. Saudi Arabia is one of the easiest places to start and operate a business in the region (Saudi Arabian General Investment Authority, 2014). In addition, the strained relationship between Saudi Arabia and some countries in the region have undermined business between their companies. As a result, the operations of the organization are affected by factors that are beyond its control

Strategy Formulation

Sadafco should invest in the development of technology that will increase the efficiency of its operations. The move will enable the organization to reduce the cost of operations while increasing its revenue. The additional funds would enable it to expand to other markets in the world. As a result, it will achieve its objective of maximizing shareholder value.

The organization should ensure that its supply chain is lean and efficient. The supply chain is one of the most important elements of the business. However, it represents one of the most difficult challenges that organizations face (Zsidin & Ritchie, 2008). Creating a seamless supply chain could enable it to expand into other markets in the region.

In addition, Sadafco needs to introduce more products to the market. The organization has demonstrated the ability to create new product lines that add value to their customers. As a result, it should leverage the strength of its brand to introduce more consumer products into the market.

Furthermore, Sadafco should leverage its Muslim heritage to appeal to Muslim consumers in other parts of the world. If it employs a good marketing strategy then it will be able to attract a lot of Muslim consumers. The move will enable it to achieve growth as an organization.

Conclusion

In conclusion, it is evident that Sadafco has a strong position. The organization has a mission, vision and values that show that it is focused on operating as an ethical business that not only enhances its shareholder value but also produces products that benefit its consumers. In addition, an internal assessment shows that it has a strong leadership structure. Furthermore, the organization has managed to create an organizational culture that is centered on positive values. An external assessment shows that the organization faces a lot of challenges. However, it has demonstrated the ability to overcome any challenges that it may face. The implementation of the proposed strategy will enable it to overcome the challenges in its external environment.

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References

Cooke, R. J., & Nestlé Nutrition Institute. (2007). Nutrition support for infants and children at risk. Basel: Karger.

Euromonitor International. (2014). Dairy in Saudi Arabia. Retrieved from http://www.euromonitor.com/dairy-in-saudi-arabia/report

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2007). Strategic management: Competitiveness and globalization; [concepts and classes]. Mason, Ohio [u.a.: Thomson South-Western.

Kerr, S. (2014). Saudi Arabia’s rulers face dilemma on economic reforms

Retrieved from http://www.ft.com/cms/s/0/29a6f058-8a68-11e3-9c29-00144feab7de.html#axzz3LklhfF2W

Li, H. (2012). Business in Saudi Arabia: Culture Differences to Watch for. Retrieved from http://www.ibtimes.com/business-saudi-arabia-culture-differences-watch-406450 Reuters. (2014). Research and Markets: GCC Dairy Market 2013 Report - Saudi Arabia is the biggest dairy consumer. Retrieved from http://www.reuters.com/article/2014/02/26/research-and-markets-idUSnBw265664a+100+BSW20140226

Market Research. Com. (2014). Dairy in Saudi Arabia. Retrieved from http://www.marketresearch.com/MarketLine-v3883/Dairy-Saudi-Arabia-8558921/

Sadafco. (2014). Home. Retrieved from http://sadafco.com/

Saudi Embassy. (2014). Dairy industry works towards self-sufficiency. Retrieved from http://www.saudiembassy.net/files/PDF/Publications/Magazine/1997-Spring/dairy.htm

Saudi Arabian General Investment Authority. (2014). Easy Place to Do Business. Retrieved from https://www.sagia.gov.sa/en/Why-Saudi-Arabia/Key-Benefits--/Easy-Place-To-Do-Business/

Shadbolt, P. (2013). Milking the desert: How mega-dairies thrive in Saudi sands. Retrieved from

http://edition.cnn.com/2013/12/18/world/meast/milking-the-desert-saudi-dairy-farms/

Woertz, E. (2014). Trouble in oil paradise: domestic challenges in Saudi Arabia and their global implications. Retrieved from http://www.energypost.eu/trouble-oil-paradise-domestic-challenges-saudi-energy-market-global-implications/

Zsidisin, G. A., & Ritchie, B. (2008). Supply chain risk: A handbook of assessment, management, and performance. New York: Springer.

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