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Al Othaim Supermarkets
Transcript of Al Othaim Supermarkets
2. External Environment
Wednesday, May 07, 2014
6. Main Source of Problems
Al Othaim Supermarkets
5. Corporate Level Strategy
Sales & Profits
Establishment of the first grocery shop in Riyadh
Implementation of consumer products wholesale
Al Othaim Real Estate Investment Company Establishment
Full Joint Stock Company
108 store across the Kingdom
Launch Al Othaim e-commerce Website
Expansion in other markets
Increasing disposal Income
Young population -> western products, shopping is considered as entertainment
Expat population is growing
The life style is changing, more working more hours and more women in workforce -> one-stop shop and more ready-to-eat food
No regulation concerning environment but AL Othaim is doing it as part of CSR (Cooperate Social Responsibility)
Internet penetration is high -> website
Business intelligence reporting systems BI, Dashboard and data warehouse
Certain products not to be sold
Certain countries not to import from
Certain hours for trucks to deliver shipments
Saudization and "Equal Employment Opportunity"
Threat of New Entrants (LOW)
Saudi grocery market is dominated by few competitors
It transformed into the supermarket or hypermarket dominated business
This powerful force had a great impact on the small traditional shops
it possesses a strong barrier for new companies who desire to enter the grocery market.
sufficient capital because of large fixed costs and highly developed supply chains, distribution channels in strategic locations.
Bargaining Power of Suppliers (Moderate)
Suppliers of major grocery chains fear losing their business to the large supermarkets.
Al Othaim has the advantage of being the 3rd largest market share in Saudi therefore
It can get better promotional prices from suppliers
Bargaining Power of Customers (Moderate to High)
The switching cost is low
Sloution -> IKTESAB loyalty card
Yet, Al Othaim should constantly work to meet customer needs
Although Al Othaim has adopted vertical integration by producing exclusive products but they are undifferentiated and standard
Threat of Substitutes (Low)
Small chains of convenience (Baqalah) which already exists yet it doesn't offer the same range of products and services as a supermarket.
Online grocery store. However, there is no threat of this kind so far in Saudi Arabia due to the consumer behavior and cost of logistics.
The Intensity of Competition (High)
Market is dominated by larger players.
Every player tries to outperform the others.
Al Othaim is trying to offer innovative services such the development of an e-commerce website in response to changes in consumer behavior and to add a competitive advantage.
5 Forces Model
3. Internal Environment
Control operating costs
COSTLY TO IMITATE
Capabilities, Core Competencies and Competitive Advantage
Value-Chain Model Analysis
It includes the logistical tasks, which includes the receipt of goods from suppliers, storage of goods, handling & transportation of products.
Delivering the product to the customer.
Al Othaim tried to add value by offering home delivery service through the e-commerce website but wasn't successful.
Marketing and Sales
CSR activities, which serve as a good marketing tool for the company.
Digital marketing campaigns such as e-mail ads, twitter account and newsletters
68% of the focus group participants mentioned that these activities are not interactive or creative enough to attract them.
In the focus groups, Al Othaim was rated fair to low in terms of products variety.
The reduction in choice is damaging to the welfare of the company since consumers have less choice and are unable to purchase goods they desire.
Consumers chose Al Othaim Markets for grocery shopping based on their lower prices and nothing else.
Human Resource Management
High retention percentage by providing good package for employees
A commitment towards their employees to provide a good work environment.
However, the Ministry of Labor pressure to hire more Saudis could effect the quality of service in the short term but will pay off at the end.
E-commerce website. However, the logistics but then turned it to just a static website that shows offers and products availability in store.
Al Othaim has replaced over 400 points of sale
Implemented a Dynamics systems to cover the needs of the back office.
Listed in TASI since 2007.
Al Othaim can raise fund by issuing stocks.
We aspire to sustain Al Othaim markets business in the retail industry in Saudi Arabia and have a remarkable position in the Saudi national economy map as a whole, and to help the company create more growth and prosperity by extending its business to regional level to access more consumers in the neighboring countries and to further the success story that has been launched decades ago during which genuine concepts has been established and sustained in serving local community and meeting consumer's needs.
All Al Othaim cadres are functioning to reach objectives of the company, whether strategic or operational by setting up mechanisms that ensure a better balance between the company's internal objectives and those pertaining to our external consumers. The following are some of these mechanisms:
• Tackle clients and their needs as a top priority
• Comply with local traditions prevailing in KSA
• Contribute to the improvement of local manpower
• Build professional teams with broader and future vision
• Sustain ties with partners in success such as vendors and suppliers
• Focus on quality and high profile professional criteria
• Quick response to the market changes
• 7 hypermarkets
• 68 supermarkets
• 11 wholesale outlets
Their main activity:
Importing, producing, exporting and selling grocery products to consumers.
Saudi Arabia’s retail sector is
the largest in GCC representing 42%
Food is the third most imported
commodity by value
Major part of the Saudi retail
sales will be driven by sale of food
Retail sales is estimated to increase from US$83.3bn
in 2011 to US$131.2bn by 2016, of which food sales’ contribution is expected to increase from 50% to 53%.
High demand for high-value foods
Food is the third largest imported commodity
Increase of Disposal Income
Opening every day, operating hours, maintaining the shelves, and the stock.
82% of the focus group participants mentioned that they don’t like the interior design, look and lightning
Al Othaim needs to reconsider the interior design
Has the ability to control their operating costs so well that they are able to price their products competitively and able to generate high profit margins, thus having a significant competitive advantage.
Al Othaim focuses on the creation of internal efficiencies that will help them withstand external pressures
Al Othaim doesn't focus on a niche market but rather at the broad market
Mr. Abdullah Al Othaim once said in a documentary in YouTube “By selling a lot at a lower price you will achieve a lot of profit”.
Al Othaim has the advantage of having a Real-Estate sister Company
Al Othaim handles the logistics within the Kingdom
Cost leadership strategy
Related linked diversification strategy
Entering real estate market in 2005
Due to excess of cash and management skills.
Retail sector is the fastest growing sector in Saudi Arabia. However, Al Othaim net profit dropped since the beginning of 2013. Although it started to recover in 2Q2013 but in Q3-2013 financial results remained lower than estimations.
Low variety of grocery products
The interior design of Al Othaim supermarket specially that grocery shopping is considered entertainment
Not strategic locations
Doesn't accommodate the new Life style
one stop shop
Private label products
The tangibles that have to be improved are those of store layout, parking facilities, trolleys
Layout of supermarkets should complement the one-stop-shop
The interior design should be enhanced
Make alliances with coffee shops
Find strategic locations.
Interactive and creative
International products and Healthy Living Product Line should be offered
Self check out in stores
RFID for inventory management
Smart phone applications