Essay: Strategic Analysis Of Arabtec Management." (52 Characters)

Discuss About The Strategic Analysis Of Arabtec Management?

In 1970 when the construction business was at its pinnacle, Arabtec was able to take hold of the opportunity and made itself as an important entity in construction business. Arabtec Construction LLC was found in the year 1976, and has become one of the most vital construction companies in United Arab Emirates. Since the formation of the organisation, it has witnessed fabulous growth and gained reputation while contributing immensely towards the development of country economy and tourism. (Arabtec Construction(LCC), 2016) In 1976, the organisation made its first venture of building high rise construction and named it 17- storey Pearl Building. After fourteen years the company again entered the market with another construction of Lagoon Tower in Sharjah. The 21st Century Tower is recognized as the tallest building in the world of housing construction. Arabtec is one of the most important construction companies in creating skyline buildings in Gulf Regions. The collaboration of Arabtec with Samsung and Six Construct has made the company recognised as the world’s most prominent builders and constructer’s. Presently the headquarters of the company lies in Abu Dhabi and has its business spread all over UAE, Asia, Europe, GCC, and MENA regions. (Experian a world of insight-International In-Depth Report ) The company has more than 52,000 satisfied workers who work for the various plans and projects worldwide. The mission of the company is to be one of the prime construction companies globally and provide quality construction along with efficient service to the customers by utilizing modern techniques and resources. By giving high-quality construction and service, the company was able to acquire many awards in sectors like hotels, hospitals colleges and villas. Some of the marvellous construction made by the company is Burj Khalifa, Dubai Sports City, and The Infinity Tower, the Fairmont Hotel. Major constructions made by the company are high rise buildings, luxury villas, schools, oil and gas plants and many more. With its dedication and loyalty towards work, Arabtec holds third position among top companies in Arabic Gulf and one of the top five in GCC. (Arabtec Construction, 2017)

Analysis which will assist in looking into different factors of the organisation externally is PEST analysis. It will also help in making macro environmental analysis of Arabtec.  The challenges and threats faced by the company due to globalisation had made the company formulate various strategies and policies with great consideration in order to evade it. The expansion of the company had been easier due to active constitution and steady government which is a politically essential part. By investing capital of more than $7.7 billion, the company is currently working on more than 44 projects spread in more than 11 countries. (Arabtec Holding PJSC A Regional Construction Giant in the Making, 2006) Since the company focuses more on mergers and acquisitions, the present strategy of the company lies on the development of organizational structure relating to the functional divisions which handles the target of expansion. The economic factors like increase in investors in real estate industry and rise in tourism have also helped the company to grow with ease. But at the same time the company is also depended on factors like increase in direct tax and GDP, and prominence of private sector investment and with any slowdown in economic growth or decline in liquidity levels can provide a negative impact on the ongoing construction activities. The Gulf Regions are extremely depended on oil market and UAE is one of the top countries who supplies oil worldwide (Arabtec Holding PJSC ARTC, 2017). Any sudden change in the economies of the countries it supplies oil in can affect the markets of UAE and as a result can indirectly affect the overall purchasing power of Arabtec. Thus it can be said that any drastic change in world economy can affect the company but the same can be overcome by the organisation if it spreads its network globally and increase its network. (Diaa, 2017)

Internal Analysis

UAE construction market is vastly fragmented which provides the company with opportunity to grow by acquisitions and mergers. The people are more fascinated to spend in real estate business for it ensures longer returns; social factors of the company are enhanced with large sale and profit returns.  Since UAE is surrounded by a network of seven industrial areas along with great access of internet, it utilizes the technology efficiently. Thus with the help of latest methods and technology, Arabtec has reached the top. (Aguinaldo, 2017)The company has also gained a reputation in acquisitions of subsidiary companies like Austrian-Arabian Ready Mix Concrete and Arabtec Precast LLC. These companies allow a great support in global market through partnership. Austrian Arabian supplies ready mix concrete to the company, while Precast LLC provides with pre-cast building materials. Although the company gives high support to its subsidiaries, it also brings threat to the company as it is highly depended on other subsidiaries and has to rely on raw materials supplied by them. This threat can be turned into opportunity if the company makes acquisition of company who supplies of raw materials and can produce them under the name of its own.

With the help of internal analysis of Arabtec it can be said that the company has an exclusive collection of innovative and massive constructions and the same is taken as strength for the company. The famous Burj Khalifa, Twin Tower in Doha and World Trade Centre are few examples of its masterwork. It carries out a high-quality status in Construction market area and also upholds well-built connection with property developers. With an exclusive collection of innovative construction buildings it can easily boost its portfolio for customer attraction. The entrance of the company in the regions of Qatar and Saudi Arabia has provided opportunity for the company’s growth in rising market. (United Arab Emirates Infrastructure Report). One of the strengths Arabtec enjoys is the interconnections it has made with the property developers in the region which helps it in maintaining a strong market clout. The synergies gained as a result of this collaboration reduces the overall price of the venture. The region of GCC and UAE is encompassing a booming stage for construction business which is a good opportunity for Arabtec to invest in. The economic strength of the company is people are more interested in investing real estate and with the development in construction sector more investors come in. There are chances of its drawbacks since any slowdown in country economy may affect the revenue returns for the project and sometimes proves to be worst when any project is under construction. Hence the overall project construction budget is hampered. Arabtec believes in investing for projects not only in UAE, but outer areas also and with its growing reputation is able to do so. This analysis shows that the company is more focused in geographical diversification and gains an opportunity with booming construction period. However threats related to the company are its increasing concentration in global diversification rather than investing in raw materials supplies. To overcome the threat, the company must make strong amendments in managing its expansion and keep acquiring the necessary supply companies on priority. Finally there are probable threats that if other market financial system slows downwards, the income returns for the project will also be affected. The changing or any reform taking place in UAE government and shifting in policies and norms will have an effect on the organisation. With proper strategy and management, Arabtec can build outstanding market existence and can build efficiency in its entire manoeuvre. The challenges regarding expansion strategy is the reason the company requires reform in the management of functional areas. (Weiner, 2017)

Porter's Five Force Analysis

The strategy which is considered as an important tool in recognising present business strategy of an organisation is Porter Five Force Analysis. In Arabtec, this structure has been used to analyse the competitiveness of the company and its capability to uphold the competition. (Martin, 2017)  Al Futtiam is another construction company which was established in 1930 and is a great competitor of Arabtec. It also holds a considerable trust among people and holds a superior brand image. With the entry of Al Futtiam, through strategic acquisitions beyond Greater Middle East and GCC, it had created a formidable match with Arabtec. Other companies who has more technical experts in the fields of IT and telecom, are more favoured by government and oil companies. Companies such as Arabian Construction Company, Al Naboodah Constructing, Saudi Bin Ladin Group are few of the competitors which gives challenges to the company for participating in difficult and exiting projects. Therefore, despite of being one of the most prominent construction companies, it faces constant comparison and competitions from its competitors. Expanding construction industry of Dubai has adequate suppliers of materials and Arabtec is at a lead here given that any key buyer can easily get lowest quotes from several suppliers. (M.R.Raghu, 2015)UAE’S network of companies dealing in Construction business makes it a centre of supplies in raw materials, which minimise menace of price blow or be short of supplies. Arabtec is convincingly well placed with consideration to suppliers since their bargaining power is weak. Since construction companies require large number of labour, it sometimes becomes difficult for the company to gather large number of labour for big projects due to which results in delay of project handling. For this reasons Arabtec have adopted new and advanced methods with the help of which it becomes technologically strong and up to date. (Construction in the UAE – Key Trends and Opportunities to 2017)

In present market the clients with the help of enhanced digital marketing knowledge makes their decision for choosing their construction company. Along with it customers demand for additional options like differencing their project from any other in the recent past, or on their targeted location while deciding a construction company. If the demands are met and all the parameters are fulfilled, not so much scope of price negotiation is left for the customer to select the construction company. (Pacheco, 2017)This is also because every construction project of the company carries its own quality, which makes it exclusive from different aspects. Thus negotiation done by customer does not have any accurate suggestion or comparison from other projects and what he is buying. It makes bargaining power of the customer weak and is reasonably fair for the organisation. There are few risks also as the clients are more attracted to new entrant, it sometimes makes them postpone the running projects. In acquiring big projects, bidding takes place among top contractors and due to high competition the low bidder wins which shows disloyalty among customers. The risks related with construction segments are increasing considerably for any new competitor as they can visage short of project. Superior companies are able to lessen their overall costs since they can easily reorganize their employee placement system to other projects which enables to increase their effectiveness. Problems relating lack of knowledge, indecisive projects and short of confidence among consumers makes it hard for Arabtec Construction to be successful. Any short term seismic change in construction sector is a doubtful matter as new innovations and advanced technology enables cost effective and innovative construction, therefore the inferior companies which do not implement latest business style and way have to face concentration risks. (Rinaldi, 2015)

With the analysis made and research done on Arabtec’s strategy both internally and externally, more planning and development is required by the company to continue in upcoming property extension along with affirmative excellence.From the above analysis it can be said that Arabtec is a project based company. To provide further assistance to the organisation, there are few issues which require to be looked at and changes for improvement need to be made. An evaluation made after completion of each project  can further provide assistance to the firm as it can enable the company to evaluate and see if further diversification to another market area is possible or not. In the company strategy coordination of subsidiaries and major units is very necessary as if they are well aligned it may stop unnecessary stoppage of projects. If any subsidiary like suppliers or designing team faces problem, which is possible in big projects, the strategic formulation in coordination section may prove beneficial regarding flow of project (Halligan, 2016). Arabtec is a company who constantly pursues mergers and acquisitions which call for a strategy of elasticity in its operation. This is another important change required in the company for taking more thoughtful decision while making expansions. With appropriate diversification and mergers, it can help company reach its goal of reducing the risks related to expansions and result in becoming a global market player. In any organisation cash generation and profits are the main targets after providing quality product to the consumers. In Arabtec, since the company purchases ready mix concrete and steel from other companies, it distributes its large profit shares to them. Hence the company should focus more on acquiring such companies who supplies raw materials to it. If the execution of strategic management in construction part is made precisely by observing the product, design and actual construction place then the companies dealing in raw material supplies will be able to supply the required materials on time. (Mubasher KSA-News Analysis, 2017)

The organisation is huge and has its wings spread all over the globe which makes very difficult for it to utilize all its available resources efficiently. Thus by focussing on the part of available resources, the company can reduce its production cost by utilizing them properly. With the help of analysis prepared and discussions made, the position of the company demands utilizing the assets correctly along with supple and well coordinated company policy which will eventually result in augmenting profit and improved structure and expansion in operations. (Arabtec Holding)

Conclusion

After making a brief analysis of Arabtec it can be rightfully said that the company holds a strong position in construction market worldwide. With efficient service and quality construction it has been able to sustain and gain loyalty among customers. Though there are few drawbacks relating to expansion management, still the company have been trying to work on it with improving its management sector and make way to survive in the present market tactfully. Government support and stable economy have always supported the company and people are enjoying benefits from its monumental constructions by promoting rise in tourisms and investments. (ME Construction News, 2017) It can also be said that with strategic management control and immense diversification, company has been able to reach to its ultimate goal of expansion along with reputation. There had been many ups and downs in the company relating to the environment and country economy in its long run but the company have surpassed all of them by making appropriate assessment and by adopting latest technology and modern techniques.

References:

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Pacheco, F. (2017). Arabtec Rights-Issue Investors Left With 33% Loss in One Week. Retrieved from https://www.bloomberg.com/news/articles/2017-05-22/arabtec-rights-issue-investors-left-with-33-loss-in-one-week

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