Executive summary

Strategic management entails the courses of actions that organizations take when making managerial decisions that determine their performance over the long term. It involves scanning the internal and external environment of the business, formulating strategies, implementing them, and taking corrective measures. Accordingly, strategic management is the evaluation and monitoring of external threats and opportunities in relation to the firm’s strengths and weaknesses. Strategic management accrues many benefits to the organization such as shaping its future, selecting the best strategies, enhancing productivity, and control among others. The analysis below evaluates strategic management in Emirates Global Aluminum (EGA), a premier aluminum mining and processing firm in the United Arab Emirates. The findings of the analysis are intended to help students address strategic questions about the management of the corporation. The compilation of this analysis is based on documented literature on the topic of investigation as well as necessary information relating to the subject.

PART I

Case Description

About the Company

Emirates Global Aluminum (“EGA”) is one of the leading companies in the United Arab Emirates. It was started in the 1970s, and the Investment Corporation of Dubai and the Mubadala Development Company jointly own it. At present, the company is the world’s leading producer of aluminum products. The firm is also the largest in the UAE besides companies that handle oil and gas production. It harbors a vision of providing the global economy with high-quality products in a sustainable manner and building a legacy of excellence both in the UAE and globally.  Notably, EGA’s primary operating assets include the Emirates Aluminum (EMAL) and Dubai Aluminum (DUBAL) which together have a combined production of over 2.4 million tones every year. The production capacity makes the firm among the top five aluminum producers in the world. The company has the world’s largest single-site aluminum smelting facility located in the United Arab Emirates. For instance, two of the firm’s facilities, DUBAL and EMAL, have facilities that consume over 5, 500 megawatts of electricity. Mainly, the operations of the company are based in centers located in Abu Dhabi, Dubai, other parts of the UAE, and Guinea (www.ega.ae). In 2017, the firm produced over 2.6 million tones of cast metal.

The Company’s Products

The firm’s products include Bauxite and Aluminum which it uses to make modern life possible. The company uses them as semi-conductors in phones, electronics, and other mobile appliances. Moreover, it uses some of its products in the manufacture of planes, automobiles, and metals used in the construction industry. The impact of the company in the United Arab Emirates is evident as is the world over. For over forty years, the company has been central to the industrialization of the UAE, sustaining the economy, and generating millions of jobs. For example, the firm’s products account for the largest ‘made in the  UAE’ exports to the global markets. The firm has also provided an economic alternative for diversification alongside petroleum and oil industries for which the UAE relied on for many decades.  The company’s high-quality aluminum is used to touch billions of lives every day globally. It is also known for its high volume of value-added products.

Ownership Structure

The Investment Corporation of Dubai and Mubadala Development Company co-own EGA Corporation. The joint ownership makes EGA one of the largest consortiums in the UAE. The company employs over 8,000 people and has a customer base from over sixty countries. Export to these countries brings to the UAE the needed billions of dollars used for economic diversification. The firm supports other industries that directly employ over 60,000 people and sustain millions of lives. It takes pride in its research and development activities and technological innovations which drive its growth. The technology used by the firm is environment-friendly and competitive, enhancing its position in the global markets. By 2016, the company had licensed and patented its industrial processes and technology in international markets (www.ega.ae).

Market Situation

The UAE economy has been experiencing exponential growth over the past five decades. As a result, many industries have sprung up and living standards improved. Initially, the UAE economy relied on the oil and gas industry which has significantly been diversified due to the introduction of other sectors such as EGA. The population of the UAE has also increased considerably with a sizeable number of international expatriates. The opening up of the global markets has also seen the demand for products from the UAE markets soar. In turn, it places EGA Corporation in a better position in the global markets. With the production of 2.6 million tons of aluminum, EGA accounts for at least five percent of the world’s aluminum and cast metal. EGA’s main competitors include Aluminum Bahrain, other smelters in the Gulf region, the Middle East, and the rest of the world. Industry trends indicate that the industry is on the growth stage of the product life development (PLD) because of the many modern technologies that use its products. The sector is anticipated to stagnate on the development stage of PLD for the foreseeable future (www.ega.ae).

Financial Situation

The performance of most companies in the UAE has been good owing to the prudent management policies and regulatory framework. Over the years, the market for products of the company has been increasing, and currently, it has customers from over 60 countries globally. Since it is the largest producer of premium aluminum, the company reported a net income of $900 million or AED 3.3 billion in 2017, which was a 59 percent increase from the 2016 reports. Such an increase in business performance underscores the good operating environment and sustainable future of the firm’s performance. The company has also been recording significant improvements in its revenues. The adjusted EBITDA of the firm was also 32 percent in 2017 up from 30 percent in 2016. Other good news from the company includes its increase in production and sales in the global markets (www.ega.ae).

Corporate objectives

EGA’s organizational goals include being the leading player in its industry and areas of production. The company also has objectives of producing premium aluminum though value addition and commitment to build efficient systems. The goal is to enhance its value chain system to support its business position in the global markets.

Current Generic Strategies

Mainly, the successful performance of EGA Corporation attributed to its management strategies. Through these approaches, the firm has positioned itself in global markets to leverage its strengths and opportunities and effectively manage its weaknesses and threats. The company has also applied its strengths in broad and narrow scopes in all areas of management. Consequently, it has resulted in three generic strategies, including differentiation, cost leadership, and focus. Through the cost leadership strategy, the firm can produce high-quality products at a reasonably low cost. In turn, it has made it gain many customers in the global markets. Presently, the company has customers from over 60 countries which is a significant market share and earns profits higher than its peers. The differentiation strategy enables it to produce products with unique attributes “premium aluminum” which is well perceived by customers in the global markets.  Through the focus strategy, the firm concentrates in the production of value-added aluminum (Wheelen,  2018). Consequently, it makes the firm to differentiate itself in the market and draw customer loyalty.

Strengths and Weaknesses

The main advantages of EGA include its innovative technology that enables it to produce premium aluminum that customers widely sought after. The firm has also licensed and patented its manufacturing processes which give it cost advantages. Other strengths include strategic positioning in the global markets, cost advantages, supportive business environment and government as well as progressive management (Aaker and Moorman 2018). Conversely, some of the weaknesses include the use of generic strategies that may not effectively counter competitors.

PART II

Teaching notes

1. What strategies should EGA use to sustain its positive performance in the global markets?

The management can adopt many strategies which the firm can adapt to ensure that it sustains its currently good performance in the local and global markets. The various approaches are discussed as follows:

The Boston Consulting Group (BCG) matrix

The BCG matrix is one of the leading tools of strategic management that students may use to determine how EGA can sustain its excellent performance in the markets. Bruce Henderson, one of the leading consultants of the Boston Consulting Group, developed it in the 1970s. Through this tool, students can classify businesses as either high-performing or low performing depending on their growth as compared to the market share. To address the question better, one needs to differentiate between market growth and market share. Therefore, market share entails the percentage of the total market that the company services in terms of revenues or sales volume terms. When the market share is high, the business controls the markets. Conversely, market growth is used to measure the attractiveness of the company’s markets. Based on the analysis of the firm, its markets are growing because the available market share is expanding. Moreover, the company has plenty of opportunities to grow its markets. Owing to the growing markets, it should invest more in its production systems, facilities, and the entire value chain system (Barney & Hesterly 2019). The firm should also prioritize its generic strategies discussed above to sustain its performance in global markets.

Focus strategy

Focus strategy is one of Michael Porter’s strategies used for strategic management. Through this approach, businesses are urged to concentrate on narrow segments of their performance and work on them to ensure that they obtain differentiation or cost advantages. The premise of this strategy is that firms can achieve their objectives by focusing on their core activities. By doing this, companies enjoy high degrees of customer loyalty, as they focus on what they do. In turn, they produce high quality, value-added and premium products just as EGA. When firms entrench customer loyalty, it makes it difficult for others to compete directly. Such companies also obtain less bargaining powers with suppliers gives them competitive advantages. When they succeed in using focus strategy, it enhances the strengths of the firm through broad product development (De Kluyver 2015). In effect, it sustains the competitive position of the firm in global markets.

Bowman’s Strategy

EGA management may employ Bowman’s strategy clock to evaluate the performance of the Corporation and address the question above. Such a strategy is similar to Porter’s generic model only that it uses price variable as opposed to the cost variable when making comparisons on the perceived value of the company’s products. The model analyzes and evaluates the competitive position of the business in relation to its competitors. While using this model, students may categorize EGA Corporation using its differentiation strategy which is among its generic approaches. Students suggest that the differentiation strategy demands that the firm develops products and services that have unique attributes such as high quality, reasonably priced, and easily available. Customers value such features highly, and they form the basis on how they perceive the company’s products and their attractiveness to them as compared to those of rivals. Through the value addition of EGA’s products, the firm may charge a premium price for them. In turn, it will enhance the company’s profits and help it to cover its costs well, hence, become more sustainable in the markets. Students also propose that the firm engages in a hybrid strategy that is double-edged, which will see it pursue both differentiation and price strategies. To demonstrate this, the student may argue that EGA should ensure its products are of premium quality and prices of its products are affordable through research and development. The firm should also use innovative technology to sustain the excellent quality of its products and affordable pricing. While using this approach, students hold that EGA’s use of the hybrid and differentiation strategy will determine its EGA’s competitive advantages (Pearce & Robinson 2014). These approaches will help the firm manage the effects of the dynamic nature of the global markets, hence, sustain its competitive advantages and good performance.

2. How do the suggested strategies enhance the performance of the business and its management going into the future?

Dunnings OLI model

Other students may propose that EGA uses the Dunnings OLI model or the eclectic paradigm. Through this framework, the net market advantages that companies enjoy from one nationality over those from international markets should be considered. Many factors give companies advantages such as privileged ownership or a conducive business environment  (Pearce & Robinson 2013). For example, EGA’s joint owners are honored to be major stakeholders in the United Arab Emirates. The UAE government has also given the firm a good environment to operate in. The firm’s management has also been coordinating the company’s operations in the global markets fairly well compared to competitors and potential market rivals.

Secondly, students argue that the abilities of firms to internalize their markets to generate assets helps them to add value. Thirdly, companies should choose the extent to which they can add value, increasing the facilities within their national boundaries. For example, EGA has production facilities within the Emirates which enjoy political, legal, and even market environment benefits. All these factors generate for the company many benefits that include owner-specific advantages, location-specific benefits, and internalization advantages which comprise the OLI-model (Saloner, 2018). By utilizing the model, EGA can create local and international market imperfections to its advantage.

Blue Ocean Strategy

Students argue that the blue ocean strategy is a value innovation approach that enables firms to evaluate their business environment and make strategic decisions to improve performance. Through this strategy, companies explore new markets, expand into international markets, perceive the competition, and identify important opportunities for growth. The core concept of using this approach is to help the firm to drive its costs down while giving the buyer value. When the firm achieves high buyer value, the sales volumes will create economies of scale for it and form the basis of cost reduction. The essence of this strategy is to enable the corporation to look beyond its current markets. In doing so, the firm will capture markets that its competitors control currently. The approach will also help it to stop concentrating on a contracting market share. Instead, it will stimulate the demand economy and leverage its competitive advantages.

The blue ocean economy is good to use when the leadership of the firm is committed to research and development. Such approaches are critical for the company to invest in innovative technology that will allow it to reduce its costs significantly and increase its profitability. The company should also use the strategy now that its core business is operating well. It can also employ the approach because it focuses on future opportunities than short-term priorities (McGee et al. 2006). Finally, the students argue that the strategy is effective for balanced portfolio management. Overall, EGA can use the blue ocean strategy to awaken visually, explore, communicate, and strategize fairly.

Bilton and Cumming’s Six Degree of Strategy and Innovation

Other students suggest that EGA Corporation may derive competitive advantages from innovative strategies that its management may use while managing it. To evaluate the effect of innovative approaches, one should determine how these strategies sustain and leverage the company’s competitive advantages. Consequently, students suggest Bilton and Cumming’s six degrees of strategic innovation. The company uses many relevant innovative strategies to assess how strategic change contributes to the competitive advantages that the firm enjoys at present. Accordingly, the six degrees of strategic innovation include strategic thinking, brainstorming, serious play, strategic planning, scenario planning, and management simulation. The convergence of these approaches through benchmarking with peers keep firms focused on generic strategies and strategic plans to ensure that they remain sustainable to the future. Through strategic thinking, the company’s management can come up with progressive solutions to every challenge that it may face. Brainstorming helps the company to share its organizational issues and come up with talented approaches to address them. Strategic planning entails planning for the future while scenario planning focuses on various company situations. Furthermore, management simulation involves looking at different management situations and proposing the best strategies for managing them (Rothärmel, F. T. 2019).

Mckinsey’s 7s Model

Students also argue that organizations can use Mckinsey’s 7s model to enhance their performance in global markets. In the 1980s, Robert Waterman and Tom Peters developed this structure. The premise of the model is that for firms to succeed, they should address seven aspects of their internal organizational environment. Companies can apply the model to improve their performance, examine the likely changes in the future, align processes and departments, and determine the best ways to implement the proposed business strategies. The model’s elements are further divided into hard and soft parts. The hard elements are those which the management of the firm can quickly identify, define, and influence. Accordingly, these elements include organizational charts, policy statements, IT systems, and other formal processes. On the contrary, the soft factors are difficult to describe and less tangible aspects of the organization and things its culture influence (Hitt, 2017). The bottom line of this model is to underscore the fact that all these areas are interconnected in the organization and should be addressed as a whole. According to Mckinsey’s 7s Model, the seven parts that require a shared vision in an organization’s management include structure, systems, strategy, style, staff, and skills.

Conclusion

EGA is one of the largest industries in the United Arab Emirates besides firms operating in the oil and gas industry. For the past five decades, it has been in operation. Over the years, the company’s performance has been excellent. The firm has also been recording good profits every year and significant growth in its market share. Accordingly, this analysis evaluates the performance of the company by critiquing its strategic management aspect. By addressing this analysis, it offers students notes on various strategic management tools that the management can utilize for effective and sustainable management of the firm going into the future.

References

AAKER, D. A., & MOORMAN, C. (2018). Strategic market management.

BARNEY, J. B., & HESTERLY, W. S. (2019). Strategic management and competitive advantage: concepts and cases. New York, Pearson.

DE KLUYVER, C. A. (2015). Strategic Management. Business Expert Press. http://www.myilibrary.com?id=716218.

HITT, M. A. (2017). Strategic management: Competitiveness & globalization: concepts and cases. New York, Cengage Learning.

MCGEE, J., THOMAS, H., & WILSON, D. (2006). Strategic management. [Limerick], McGraw-Hill.

PEARCE, J. A., & Robinson, R. B. (2013). Strategic management: formulation, implementation, and control. New York, McGraw-Hill Higher Education.

PEARCE, J. A., & ROBINSON, R. B. (2014). Strategic management.

ROTHÄRMEL, F. T. (2019). Strategic management.

SALONER, G. (2018). STRATEGIC MANAGEMENT. [Place of publication not identified], JOHN WILEY.

WHEELEN, T. L. (2018). Strategic management and business policy: globalization, innovation, and sustainability.

https://www.ega.ae/en/sustainability/ Retrieved on March 12, 2019