Strategic Management Arkan Strategic Management Final.pptx

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1. The Strategy for ARKAN company as FDI in Egypt Strategic Management Presented to Mr. Omar Shawky Presented by Mr. Walid Sobhy Mr. Pascal Floride Mr. Thomas Abouleish

2. Company Background Company has its business plan aiming at searching for the best industrial opportunities in the Arab region, particularly in Gulf Cooperation Council countries, through studying the natural resources and markets in such countries. Arkan Holding Company’s Management has also supported the work team with the best efficient professionals in the field of industry and investment opportunities studying. ARKAN Kuwait

3. Arkan for manufacturing and mining is an Egyptian shareholding company and a subsidiary of Arkan holding company , established in 2004 to execute and operate the project of producing FRIT (which is the raw material used in ceramic tiles industry to form the glossy layer on the surface of tile). The factory has been built on an area of 20,000 m2 in 10th of Ramadan industrial city (near Cairo) and started the commercial production on 2007 using the latest European technology in this industry. The company can be considered as a leader in Egypt and Arab region in this kind of industry. And achieved a success in producing the same quality of the European frit for the first time in the region. Company Background ARKAN Egypt

4. Be one of the 10 biggest supplier of Glaze in the world at 2020

5. We will develop , manufacture , market and sell Glaze to national and international customers that are fit for their intended use. We will build strong business relationships with both our suppliers and customers that are based on mutual benefit and fairness . We will provide our customers with service in addition to product that will help them improve and grow their business. We will achieve the above through a team of qualified professionals - the company's only main asset - and, by creatively utilizing our assets, by being focused and process oriented, and by implementing the fundamentals of Total Quality. We reward contribution and achievement. We will always remain committed to our values which we coach and enforce.

6. Company Objectives •Be the local market leader by r eaching 60 % from local market share •Hunting fast growing markets in Middle East such as Syria, Saudi Arabia and Zambia • Take a kick start on European market •Hunting 3 main European markets, such as Spain, Italy and Turkey

7. P olitical legal forces Government stability: Instability Trade agreement: COMESA Agreement Egypt - EU Partnership Agreement Qualified Industrial Zone [QIZ] Free and Preferential Trade Agreements Between Egypt and the Arab Countries International Agreements AGADIR TIFA PAFTA Turkey Tax laws: Supporting new factory (investment law) Source :CIA website

8. E conomic GDP $500.9 billion (2010 est.) country comparison to the world:   27 $475.7 billion (2009 est.) $454.8 billion (2008 est.) note:   data are in 2010 US dollars Un-Employment level 9.7% (2010 est.) country comparison to the world:  106 Inflation Rate.. 12.8% (2010 est.) country comparison to the world: 209 Growth rate Industrial products growth rate.. 5.1% (2009) country comparison to the world: 23 Energy Availability 1 - Electricity production: 118.4 billion kWh (2007) country comparison to the world: 28 Electricity Consumption: 104.1 billion kWh (2007) 2 – Natural gas production: 62.7 billion cu m (2009) country comparison to the world: 14 Natural gas consumption: 42.5 billion cu m (2009) Source :CIA website ͏ Opportunity

9. Economic Freedom Score Source 2011 INDEX of Economic Freedom

10. LANGUAGES: Arabic (official), English and French widely understood by educated Classes. Population: Egypt is the second most populous country in Africa , at nearly 84 million people. First most populous country in Arab countries. Entrepreneurial spirit increased in the last 15 years due to the government interest in the private sector. S ocio-Cultural T echnological Telephones: 9.60 million (2009 est.) Cellular Telephones: 55.35 million (2010 est.) Internet Hosts: 187,197 (2010 est.) Internet Users: 11.41 million (2008 est.) Railways: 5,500 (2009 est.) Highways : 65,050 (2009 est.) Airports: 86 (2010 est.) Source :CIA website

11. Ranking of Egypt

12. Industry Analysis Porter’s 5 -Forces

13. 1- Barriers to entry Economics of scale Arkan started production with 5 furnaces, and now start to build 5 more. Arkan have a cost advantage that a business obtains due to expansion and the common sources of economies of scale are purchasing bulk material buying of materials through long-term contracts. As a Financial view Arkan obtained lower-interest charges when borrowing from BARAKA bank and having access to a greater range of financial instruments. Product differentiation Arkan start production only with Transparent , Matt , and Engoble . But still not produce a lot of types like: Opaque and colored glazes Reactive and effect glazes Glossy, satin-matt glazes Low-solubility lead-containing and unleaded glazes High-quality, high-performance frits for in-house glaze manufacture

14. 1- Barriers to entry Switching costs Switching costs are the costs, which the customer faces, when changing the supplier. Arkan’s customers will have to face at least 6% to switch to another supplier. A vailability of product in anytime from Arkan - use just-in-time strategy. With Arkan the client got cost reduction, less delivery time and risk of payment. Capital requirement Not easy for investor outside industry, as you need to invest a lot in production facilities Access to distribution channels Not easy for foreign investor to enter new market Government Policy Government support new investor

15. 2- Rivalry among Competition Intense rivalry related to: Number of competitors (Monopoly, Monopolistic competition, Fragmented) Arkan have a lot of competitors from abroad, about 10 from Italy and Spain, the mother of Glaze and Frit industry. Rate of Industry growth Glaze industry growth decreases in Europe and move to other countries for many reasons: 1- European policy. 2- After financial crisis a lot of factories closed in Europe.

16. 2- Rivalry among Competition Product or service characteristics Glaze product need knowhow and must have experience with ceramic and glaze preparation. Amount of fixed costs At least $20.000.000 to start with 2 furnaces

17. 3- Threat of Substitute Switching costs T wo European companies came to Egypt and we expect more. So in future Arkan must try to enter European and US markets. Buyer inclination to substitute For this industry, it is not easy to change often as batches are big, even though a lot of clients like change colors and physical parameters. Price Performance trade-off of substitutes Price-performance have power to change supplier, but not for all Glaze Types

18. 4-Bargaining Power of Buyers Buyer buys large portion of seller’s product Maximum is the production of one day. Buyer can integrate backward Yes, we have two buyer make joint venture with our competitors. Availability of Sellers Arkan is the leader, but there are importing companies bringing in glace from abroad. Buyer orientation (Price oriented vs quality oriented) Depending on the brand, the clients focusing more on quality or price

19. 5- Bargaining Power of suppliers Strong position of supplier No, only for two types of material (out of 13). Potential suppliers exist or few potential suppliers Arkan have suppliers, but trying to find more to have competitive advantage and to reduce cost or increase quality Threat of forward intergration from suppliers Not easy, as it needs a lot of investment Amount purchased from supplier Large amounts relative to other industries

20. Value Chain Analysis

21. Strengths Economics of scale Switching costs Capital requirement Access to distribution channels Government Policy Product or service characteristics Amount of fixed costs Availability of Sellers Buyer orientation (Price oriented vs quality oriented) Weaknesses Product differentiation Number of competitors (Monopoly} Rate of Industry growth Switching costs Price Performance trade-off of substitutes Buyer buys large portion of seller’s product Buyer can integrate backward Strong position of supplier Threat of forward integration from suppliers Amount purchased from supplier Opportunities Trade agreement Tax laws Un-Employment level Growth rate Energy Availability LANGUAGES Population Technological Threats Government stability Inflation Rate S W O T

22. Hierarchy of Strategy How To Grow? H ow To compete? How To Implement?

23. ARKAN corporate Strategy 1- Backward Vertical Integration by To obtain a license to mine the severity of potassium feldspar high-quality and disposal of semi-monopoly, which represents the percentage of entering this materialin the final product of about 60%. 2- Backward Horizontal Integration Product differentiation to produce at least 3 type more per year like Opaque and colored glazes Reactive and effect glazes Glossy, satin-matt glazes 3- Forward Horizontal Integration by Building another factory in the area of ​​another gathering of ceramic companies in order to reduce transport costs, time, and more reassuring for the client to apply just-in-time  strategy which affects that our sales.

24. Outstanding Success Maintain Specialty Maintain Cost advantage Hope for Market growth Relative Cost Degree of Differentiation Low High Low High COMPETITIVE ADVANTAGE

25. Declining Maturity Growth Emerging Time Dollars Strategic Focus Sales Profits Product life Cycle

26. Questions ? Thank you ! Special Thanks to Mr. Omar Shawky