Management-Revision

I need a revision for this paper.

SABIC

1. Executive Summary
SABIC is an international company that originated from Middle East where a significant part of its business is found. The firm is one of the largest petrochemical manufacturers in the world. In addition, it is the most profitable non-oil firm in the Middle East. The company is among the founder members of Gulf Petrochemicals and Chemicals Association (GPCA). SABIC headquarter is in Riyadh while and is headed by a chairman Saud bin Abdullah bin ThenayanAl-Saud (Kedourie & Kedourie, 2005).
SABIC has subsidiaries in Middle East, Africa, Europe, and America. The firm has six strategic business units based on product lines. These are chemicals, performance chemicals, polymers, fertilizers, metals, and innovative plastics. The Middle East is the main market for the products though most of the chemicals are sold in Africa. The company also has four corporate departments: Research and Technology, Corporate Control, Corporate Human Resources, and Corporate Finance. The corporate departments support the strategic 0business units and other parts of the business (Kedourie & Kedourie, 2005). (Summary need to summarize your paper …., it sounds more like introduction. Introduce the company, show what you discussed and the results of your analysis) ….
2. Introduction
SABIC manufactures distribute fertilizers, chemicals, and metal products in Saudi Arabia and globally. A third of their products are sold in the local market while the other two-thirds are exported worldwide, with Europe receiving the largest share. The company has merged with other companies such as Saudi Arabia Fertilizers Company, Saudi Kayan, and Yanbu National Petrochemical Company to assist in large scale production of goods. The company produces ammonia and urea with total net revenue of SAR 3,866 million and SAR 4,980 million respectively. Kayan produces propylene, polyethylene, ethylene, natural alcohol, and acetone which amounted to SAR 9,842 million. On the other hand, Yansab producing low density polyethylene, ethylene, high density polyethylene among other products realized revenue of SAR 9,299 (Alonso, 2012).
SABIC has remained a loyal supplier of high-quality chemicals and other industrial products used as raw materials by their customers. Currently, the company is using its advanced technology to produce high-quality goods that have enabled it to be among the leading firms in the world in the production of chemicals. The company is committed to environmental protection, human resource development and safety performance as a way of enhancing its social responsibilities. In this way, the firm has improved the environmental performance of their oil industry, conserved their natural resources, and created new economic and job opportunities for locals. As a result of the firm’s economic activities, the company has enabled Saudi Arabia attain self-sufficiency in food production. Their products enable millions of people to improve their quality of life. SABIC fertilizer has improved the quantity and quality of agricultural products in the Far East which in return has lessened the state of hunger in the region (Kedourie & Kedourie, 2005). Link to the mandate … until now I do not know what the paper is going to talk about. What is the questions this paper is trying to answer?
3. Mandates
Mission: SABIC mission is to be the world’s most innovative firm in the field. Innovation is the driving force in everything the company does. Innovation has enabled the firm to turn ideas into real world solutions. Innovation has also enabled SABIC to strengthen its technical know-how and, therefore, to gain a competitive edge over their rivals (Kedourie & Kedourie, 2005).
Core Values/Guiding principles: The Company is at the forefront in protecting the environment, creating job opportunities, and improving the lives of its customers. SABIC produces world class products which have played a major role in enhancing the lives of people who would have otherwise suffered (Kedourie & Kedourie, 2005).
Code of conduct: In all of its operations, SABIC tries to be a good corporate citizen with ethical business values, reliable and efficient operations, environmental protection, and highest standards of product quality (Kedourie & Kedourie, 2005). Repetitive and need to know why this paper is written … to discuss what?
Stakeholder Analysis
may be add a graph for this section Customers: SABIC’s goal and mandate have always based on a requirement to ensure the betterment of their customers and the communities they operate in. The firm is constantly working on new innovations to produce high-quality goods for the benefit of their customers and stakeholders (Alonso, 2012). Talk who are the customers: does the customers has the power or sabic …

Employees: The Company has approximately 40,000 employees serving their customers worldwide. SABIC has created a favorable working environment that has enabled its employees to optimize their potential and improve their productivity. The employees are also well paid which motivates them to serve the firm faithfully (Alonso, 2012). Is sabic attracting the top employees? Is Sabic see them as competitive advantage … ?
Suppliers: SABIC seeks out the best suppliers for additives, raw materials, and other building blocks. The suppliers provide it with fiberglass, dyes, carbon black, organics, iron oxides and other substances (Alonso, 2012). Again is Sabic limited with suppliers for raw materials? Is that a risk? Yes in Saudi, they depend on Aramco and their new projects are limited with Aramco Supply … etc
Government: SABIC was established in 1976 to further Saudi Arabia’s desires as a developing nation. The company is committed to developing the country’s natural resources and creating job opportunities for the locals. The job opportunities have enabled the locals to source for their livelihood (Alonso, 2012). Is SABIC satisfiying this stakeholder? Answer not fully, the gov started a new company sadara
Shareholders: the government owns 70% of SABIC shares while the remaining 30% shares are owned by private shareholders (Alonso, 2012).

4. External analysis add a graph: and may be rank each compenent as (high, medium, low) based on your analysis. For example entry barrier (high)
The entry of competitors: The high-profit margin realized in the petrochemical industry motivates investors to establish their petrochemical industries. In addition to this, the country represents a lucrative place that attracts foreign investors. 17 of the 25 petrochemical companies commissioned in the last five years are either situated in Saudi Arabia or near SABIC plants in Europe. In addition to this, the local population and those from India and China provide a ready market for the products (Leinwand & Mainardi, 2011).
However, there are some barriers that have prevented new entrants. One of the barriers is economy of scale. New entrants ought to come in on a large scale in order to compete with SABIC. This would require large capital, access to distribution channels, and strategic location. The barriers have prevented potential firms from competing with SABIC. Lastly, advanced technologies have also prevented new competitors from joining the market. The new competitors will have to develop new technology, employ qualified and skilled personnel before they can effectively compete against SABIC (Leinwand & Mainardi, 2011). Very good: Good analysis
The threat of substitutes: SABIC is fortunate to have a variety of products. Its strategic business units of basic chemical, polymers, intermediaries, metals, and fertilizers have made it a conglomerate company in the industry. Currently, there are no any economically feasible substitute products for goods from SABIC. Research has revealed that the world is becoming more and more dependent on petrochemical products from SABIC Company (Leinwand & Mainardi, 2011).
Goods from other rival companies are of poor quality making it hard for customers to switch from SABIC products. In addition to this, a substitute with higher performance than SABIC products may be too expensive hence discouraging customers from abandoning SABIC goods. Nonetheless, the existences of substitute products limit the ability of SABIC to increase prices or sales volume. This is because an increase in price will encourage customers to switch to the substitute products. However, SABIC has a brand name, produces high-quality goods, and is known for its corporate responsibilities. As a result, its customers have remained loyal while at the same time, expanding its market globally (Leinwand & Mainardi, 2011). Good, but threats are always looked as market point of view and not sabic. (make it sound that petrochemical products has weak substitutes)
The bargaining power of buyers: SABIC sells part of its products to consumers, companies, and local market while the majority of produced goods are exported abroad. Some of the firm’s products from one affiliate company can also be sold to another affiliate company to be used as raw materials. The local markets for SABIC goods consist of companies who use the products as raw materials for their manufacturing process and retailers who sell the goods to consumers for direct consumption (Alonso, 2012).
In the local market, SABIC is the largest producer of petrochemical and metal products. As a result, the firm does not experience the bargaining power of the buyers. Nevertheless, the situation is different on the global market. The firm has a tendency of exporting its goods in one region. This poses a risk for the firm because the customers in the region can become too powerful and control the company thus increasing their bargaining power (Alonso, 2012). good
The bargaining power of suppliers: SABIC has both local and international suppliers. Aramco is one of the local suppliers providing SABIC with vital feedstock required for its plants. Fortunately, Aramco is owned by the government just like SABIC. Other suppliers provide catalysts used to speed up chemical reactions when manufacturing various products. Fortunately, there are many suppliers who provide catalysts to SABIC. The firm managed to sign good deals with some of them hence it is not experiencing any threats in this sector of its operations (Alonso, 2012). Add about sadara and how the Aramco is changing its supply polices to sabic …
Other suppliers provide maintenance services to the company. They provide both routine maintenance, which requires only medium skill labor, and specialized maintenance, which requires high skill labor. The service providers are from medium companies and can be mobilized within a short time to provide service in case of an emergency. The companies are international and do not pose any threat to SABIC. The high competition among suppliers has lowered the level of their bargaining power (Alonso, 2012). good
The rivalry among the existing players: Until recently, SABIC enjoyed monopolistic advantages in Saudi Arabia. It was the only petrochemical company in the country. It enjoyed cheap feedstock from Aramco as well as free land from the government. The availability of raw materials, the presence of Aramco that provides required feedstock at affordable prices, the ease of export, and the relative proximity of SABIC to the market makes it hard for other companies to compete against it (Alonso, 2012).
Currently, there are various petrochemical projects that have been set up by private investors. They include Sipchem and Tasnee Petrochemicals that produce similar products to those manufactured by SABIC. Internationally, there are firms from Qatar and Iran that pose a threat to SABIC’s international competition rate. Similarly, international companies like Shell, ExxonMobil, Dow, and BASF have significant market coverage. Nonetheless, the petrochemical industry requires large capital and high technology to build, operate, and maintain. These features and requirements have created a high barrier to compete with established companies in the country (Alonso, 2012).
Add oppurtiniuties section here … what is the oppurtinity for the petrochemical industry?
5. Internal Analysis
5.1 Strengths
A). High Market share

Saudi Basic Industries Corporation has a large market share. First, it is the market leader in the production of polypropylene and other advanced thermoplastics, glycols, methanol as well as fertilizers in the world. The position gives it an enormous opportunity of tapping into a vast customer base. In addition, its product differentiation model has enabled it to compete across different market categories. The fact that it is a market leader means that its brand is strong. Consequently, it can introduce new products into the market without investing a lot in brand creation.
SABIC has a comprehensive portfolio of chemical products that has enabled it to address the needs of a diverse customer base and global presence in 100 countries (Cordesman, 2003). The chemical products industry is a large market by itself. As a result, achieving a pole position in the lucrative industry ensures that it can generate a lot of revenues. Furthermore, the cost of chemical products is very high. Consequently, the organization can achieve high-profit margins on each chemical product.

SABIC has a strong domestic presence (Companies and Markets.Com, 2014). The oil supported Saudi Arabian economy is strong. In addition, there is a thriving construction and manufacturing sector. As a result, the demand for chemical products is high. Having a strong domestic operation is integral to the success of the organization because the cost of operations is significantly lower in domestic countries as compared to overseas operations (Shoult, 2006).
Having a large global presence protects the organization from downturns in economic markets (Companies and Markets.Com, 2014). For example, falling oil prices may affect the Saudi Arabian economy which will in turn affect the financial performance of SABIC in the country. Fortunately, a rise in demand in emerging economies or traditional economic powerhouses enables it to post a consistent high financial performance. Furthermore, its presence in 40 countries enables them to take advantage of global and regional trends. Good, but support with more numbers …
B). Cheap Raw Materials and Cost of Labor
SABIC has the unique advantage of accessing cheap labor and raw materials. The two factors of production have the most significant impact on the operations of SABIC. The prices of a product are influenced by a combination of the cost of the inputs used to produce it and the desired profit margins. As a result, having cheap costs of production enables it to have higher profit margins. Furthermore, it means that SABIC can pass the benefits to their customers by charging cheap prices. The move is a strategic coup because the more affordable a product is, the more consumers will be willing and able to buy it.

In a competitive global business environment, the organizations that succeed are those which can find ways of producing better products at a lower cost than their competitors. Cheap raw materials and a low cost of labor enable SABIC to have money that it can invest in global expansion or research and development. As a result, it is difficult for competitors to dislodge it from its top position in the market. Good, but support with more numbers
C) Strong distribution and sales network
SABIC has a strong distribution and sales network. The infrastructure has been built over the number of years that it has been working in the industry. Building a strong distribution and transport network takes a lot of time and requires a heavy financial investment. Consequently, it is a source of competitive advantage for the organization. In addition, it can use it to scale its existing operations in the basic chemicals market. In the same way, the organization can use it to drive its new advanced chemical products, if the management decides to pursue this strategic option. Good, more evidence
5.2 Weaknesses
A). Weak research and Development
SABIC has a weak research and development department. Although it has 17 dedicated Technology & Innovation facilities across the globe, it has failed to produce a lot of patents. A significant measure of the strength of an organization’s research capacity is the number of patents that it files. Patents are used to protect the intellectual property of an organization. In addition, they demonstrate the innovative capacity of the organization. Good but bring evidence to the argument. May be do a quick bench analysis graph (company in the x axis such as shell, exxon mobil, BASF, Linde Engineering etc., and SABIC. And in the Y-axis number of patents) this will show the reader how true is your argument)
The rise of 3D printing technology poses a significant threat for any manufacturing organization that does not invest in its research and development capacity. In addition, the lack of significant research breakthroughs leaves it vulnerable to disruption by other players in the industry. The numbers point at either a lack of sufficient investment in the department or the lack of a competent and skilled researchers who can come up with the technologies and products that will enable it to maintain its position at the top of the market.

B). Lack of operation efficiency
A significant weakness that should worry the management and other interested stakeholders is the lack of operational efficiency in the organization. Although it has the lion’s share of the global market and has the unique advantage of cheap costs of production, it has low-profit margins as well. The low-profit margins deny the shareholder’s an opportunity of maximizing their capital investment.
The lack of operational efficiency can be attributed to a number of factors. First, it has a weak supply chain that affects its schedules. A weak supply chain undermines SABIC’s ability to achieve production targets. Second, it has a turbulent relationship with its subsidiaries over sublicensing and overcharging issues. Subsidiaries form an important component of its operations. Consequently, the lack of an effective relationship undermines its ability to reach all its markets in a timely manner. In addition, it reduces the strength of their commitment to achieving shared objectives. Third, the organization pays its shareholders high dividends that deplete its cash reserves. Moreover, it has a complex group structure due to a complex minority shareholding arrangement (Companies and Markets.Com, 2014). Consequently, the structure undermines its decision-making process. Fourth, although it has a presence in 40 countries, the organization is over-reliant on the Saudi Arabian economy. The dependence on its domestic market exposes it to any factor that may undermine the country’s economy such as falling oil prices. In addition, it has failed to respond to the cyclical and volatile nature of profits in the sector. Again same argument, lack of evidence. Same thing as before do a quick bench analysis … Companies and profit margins %So the reader know what you are talking about … this should take you five minutes … look at top 100 chemical companies and see their proft margins %
C). Poor Environmental Record
SABIC has a poor environmental record. In a global business environment where there is a lot of focus on the environmental impact that organizations have, its environmental challenges threaten to undermine its image. In the same way, it will lose consumers if the organizations keep being at the receiving end of dumping and pollution claims. Furthermore, it may attract a heavy penalty from the government if the allegations turn out to be true. Moreover, the petroleum industry is accused of contributing towards global pollution. The failure to clean up their operations and cut their carbon footprint will result in the rise of cleaner and eco-friendly products that are sustainable to produce and use. This is a conflict with what you said in introduction … you were saying sabic is good at environmental …. I suggest you take the introduction points out and leave this
6. Strategic Options (Optional Analysis)
The organization has to take a number of measures to address its weaknesses. First, it should invest in research and development. SABIC has the infrastructure in place to support a robust research and development effort. The management should make the business function a priority. For example, it can hire new high-skilled researchers. In addition, it should form partnerships with universities and other organizations that are interested in research. The management should ensure that it is filing for more patents. However, the research efforts should be guided by its portfolio and needs in the market that it wishes to meet. The move will increase its competitive advantage by enabling it to produce new types of goods. In addition, it will enable them to produce better quality goods.
SABIC should also tap into the vast research talent in the region. The Middle East region has a lot of intelligent and educated scientists who can fill its research gap. Although the petroleum products industry has been characterized by little research activity, there is a lot of potential for the development of new technologies and products. The industry needs to create new ways that will enable it to reduce the cost of production by making the process more efficient and automated. In addition, it should produce more chemical products to meet the increasing manufacturing needs in the world. Label the table and link to it in the body of your text. More evidence and comparison to top companies …. Graph money spent on research vs profit margin (%) and show that the more money spent in R&D the hire proft margin (%).
INVEST IN RESEARCH AND DEVELOPMENT

ARENAS/MARKETS
Internal R& D department/ Strategic partnerships

DIFFERENTIATORS
Patent application, new production technologies, new chemical products

VEHICLES
Hire skilled researchers, invest more, tap into research organizations

STAGING
Advertise new openings in the Research and Development department

ECONOMIC MODEL
To produce new products and increase the efficiency with which the current ones are produced

PROS
The Middle East region has a lot of research skill pool, SABIC has a robust R& D infrastructure

CONS
The move will involve less dividends for shareholders due to increased operating costs.

Second, it should move from the production of basic chemicals to the production of advanced chemicals. The move will enable SABIC to increase its profit margins since the latter category is more profitable. Fortunately, it can shift its focus. The generation of more profits will enable it to invest more in research and development. Good but show some examples that ethylene is a basic chemical and profit margin is xx% and carbon fibre for example has this much profit margin %. All this will make your paper much stronger
Moving to the production of advanced chemicals will enable it to enter to a new market category. In addition, it will reduce its dependence on the Saudi Arabian market because there is demand for the chemical goods in other parts of the world. Furthermore, it will enable it to retain its position at the top of the market. Although entering a new market category involves a lot of marketing costs, the organization can utilize its existing distribution channels and client base to launch the new products.
The advanced chemicals market category is served by a few industry players due to the high cost involved. In addition, a lot of organizations in the petroleum industry do not have the requisite expertise that would enable them to produce advanced chemicals. As a result, the market category offers an opportunity to tap into a market where the current supply does not match demand for the products. In addition, the situation will enable SABIC to charge premium prices that will increase its revenue through higher profit margins. Good table but label it and refere to it in the text body (Table 2)
MOVE FROM THE PRODUCTION OF BASIC CHEMICALS TO ADVANCED CHEMICALS

ARENAS/MARKETS
The Middle East, Europe and Asia

DIFFERENTIATORS
Brand name, customer recognition, loyalty, industry
experience, leading market share, consistent and broad range
of merchandise

VEHICLES
Lease facilities, internal capabilities, capital, established
distribution channels, warehouse, suppliers

STAGING
Advertise new product offerings in newspapers, radio and in
community flyers

ECONOMIC MODEL
To increase sales, revenues, profits and build the brand name as well as
market share

CONS
Increase capital and advertising costs, threat of cannibalism
As it abandons its basic chemicals model, may fail to get government approval for a higher allocation.
Third, SABIC can increase the production of basic chemicals. The move will enable SABIC to retain its large client base. In addition, it already has expertise in this market category (Mababaya, 2003). Moreover, there is a clear opportunity for growth. Presently, the organization receives a limited amount of gas from the Saudi Arabian government. The organization can request the government to increase its allocation of gas. However, in order for this to be effective it will have to demonstrate how the government will benefit from the new arrangement. The management will have to convince the Saudi Arabian authorities that an increase in its production activities will translate to increased revenue for the government and the creation of more jobs for the Saudi Arabian people. Very good
Although the basic chemicals category has low-profit margins, there are many factors that make doubling down its focus on it an effective strategy. First, SABIC already has an established infrastructure for basic chemicals production. Second, it already has an established supply chain and market base. As a result, abandoning this market category would involve walking away from ready revenue even if it is replaced with a more profitable market. The best thing for SABIC is to increase its basic chemicals production, while at the same time venturing into the production of advanced chemicals. The fact that it has a diverse product portfolio means that it can handle multiple products (Leinwand & Mainardi, 2011). The combination of basic and chemicals will give it an opportunity to keep its existing market share as it seeks to also growing it by venturing into new markets. Furthermore, it would demonstrate innovative and proactive approach that has been lacking in the organization. Link the table and label it
INCREASE THE PRODUCTION OF BASIC CHEMICALS

ARENAS/MARKETS
The Middle East, Europe and Asia

DIFFERENTIATORS
Brand name, customer recognition, loyalty, industry
experience, leading market share, large portfolio
VEHICLES
internal capabilities, capital, established
distribution and sales channels, warehouse, suppliers

STAGING
Advertise its new strategic direction in newspapers, radio and in
newsletters

ECONOMIC MODEL
To increase sales, revenues, profits and
Market share. In addition, it should build the brand.

PROS
Growth potential, low risk and low capital investment, strong
financial position, increase market share, maintain competitive
advantage, economies of scale, established distribution and sales channels, suppliers and warehouse facilities
CONS
Increase capital and advertising costs, low profit margins,
,the distribution and sales market may be overstretched, slow growth in weak economy
Implementation and recommendations:
Risk
(20%) Cost
(10%) Capabilities
(10%) Time
(10%) Potential Change / impact
(50%)
Strategic option1 High high Low long High
Strategic option2 Medium High Medium Short High
Strategic option3 Low Medium High Short Low

This table shows the evaluation critiera of the optional analysis. Since SABIC is looking for a change in its position among competitors to fulfill it is 2025 vision, then the most weight was assigned to the “potential change” criteria. Other important factors were also considered in the evaluation such as Risk, Cost, and Time that will determine the success or failure of that potential change.
Option # 1
Risk is high as the nature of R&D projects (refrence or bring an example of success rate of R&D projects). Cost is high (samething example). Capabilities (low) reference. Time is long as research required long time to develop. Potential of change is high and refer to the graph I told you in the previous section (profit margin % vs money spent in R&D). This option is the best option for long term strategy.
Option # 2
Risk is Medium because SABIC already have few projects in that area but not at the top technical level for that. Cost is high because new plants need to be made … and bring example of a cost of a new chemical plant. Capabilites Meduim because sabic … samething as risk … Time to build a plant is around 4 years from signing the contract which is short for the chemical industry … potential is high because high profit margins … THIS IS THE BEST STRATEGY FOR SHORT AND MEDUIUM TERM

Option # 3
Same concepts … potential is low because of lower proft margins and will not fulfill sabic goals and visions of 2025

Reccomendation:
Short/ Meduium term
Option # 2
Long Term:
Option # 3

Implementation
Option # 2
For short/ Medium term: (SABIC has two options)
1) JV
JV is the best option since sabic has medium capabilities in this region and this option will reduce the risk of success and bring the know how from others … best option for short term
2) In house
Best option for medium and long term as sabic knolowdge and capabilities would be increasing after JV

Option # 1
Short Term:
To strength short term R&D power and capabilities, SABIC should invest in third parties such as Universities and R&D companies to gain short term solutions for intlectual properties.
Long term:
Invest on exisiting scientests and hire new capabilities to make IP in house, spend more money in house.

Conclusion
In conclusion, it is evident that SABIC has a strong market position that it can utilize to ensure it retains its position and reaches greater heights. In addition, the organization has a diverse portfolio and skilled labor force that will enable it to hold its position. However, the changing global landscape requires it to address its weaknesses so that it can be prepared to face the emerging threats facing it and the entire industry. As a result, the management should evaluate its strategic options. Implementing them will enable the organization to become stronger by increasing its market share and adopting to meet the needs of a changing market.

To address its weakness SABIC should focus on portfolio change as a short and medium plan towards specialized chemicals. And in R&D as long term strategy. These stratigies if implemented well (through JV and partnering with universities), then SABIC should add more to its competitive advantage (cheap raw material and labor costs) and improve its efficiency.

References
Alonso, F. J. (2012). Stakeholder value network analysis for the energy system of Saudi Arabia (Doctoral dissertation, Massachusetts Institute of Technology).
Saudi Basic Industries Corporation (SABIC) – SWOT Analysis. (2011). Companies and Markets. Retrieved from http://www.companiesandmarkets.com/Market/Energy-and-Utilities/Company-Profile/Saudi-Basic-Industries-Corporation-SABIC-SWOT-Analysis/RPT853634.
Saudi Basic Industries Corporation (SABIC) – SWOT. (2014). Companies and Markets.Com.
Cordesman, A. H. (2003). Saudi Arabia enters the twenty-first century: The political, foreign policy, economic, and energy dimensions. Westport, Conn: Praeger.
Kedourie, E., & Kedourie, S. (2005). Essays on the economic history of the Middle East. London: F. Cass.
Leinwand, P., & Mainardi, C. (2011). The essential advantage: How to win with a capabilities-driven strategy.
Mababaya, M. P. (2003). International business success in a strange cultural environment. USA: Universal Publishers.
Shoult, A. (2006). Doing business with Saudi Arabia. London: Global Market Briefings.

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Management-Revision

Management-Revision

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