Abstract
It is clear from the case that Elsewedy Cables has been successful in the local and regional markets in the cable industry. The firm has emerged as one of the dominant players in this industry because of its effective market strategies. The main strength of this firm in the local and regional markets is its ability to understand the specific needs of its clients and provide products that meet these needs.
In the international market, especially in Europe, Elsewedy Cables will have to deal with stiff competition from competitors such as Prysmian Cables and NKT Cables, which are already operating in Europe. It will have to use its strengths to overcome market challenges.
Vision and Mission
Elsewedy Cables is one of the leading firms in the cable industry within the MENA (the Middle East and North Africa) region. From the case study, the mission and vision statements of this firm are not clearly stated. However, critical analysis of the strategies of the firm in the market can help in determining the vision and mission statements that the firm uses.
Vision
The vision of this firm can be deduced based on its market trends and the strategies it has been using over the recent past. The following statement must be the current vision of this firm.
To become the leading cable firm in the global market
This firm has come up with ambitious plans to expand its market share beyond the MENA region. It has already made a successful entry into the United Kingdom and France. It is now working on ways of entering the Spanish and Italian markets.
The case shows that this firm has become very keen on monitoring the global market competition, a sign that the firm aims to capture the global market. It is good to expand to the global market, but the firm must be ready to deal with massive market competition at this level.
Mission
The case study does not explicitly state the mission statement of Elsewedy Cables. However, its strategies in the market make it easy to predict the mission of the firm in the market. The firm’s mission statement must be close to the following.
To continue offering high-value products to our local and international clients
The firm has been keen to offer high-quality products to its local and international clients. This is a good strategy that will make it more competitive in the market. However, it is a costly one too.
Strategic Goals
Elsewedy Cables has specific strategic goals that it seeks to achieve in the market. The case study shows that the top management unit has developed these goals used in defining its activities in the market. The following are its strategic goals, as presented in the case study.
- To strengthen the firm’s position as a leading supplier of cables and other electrical and electronic products in the MENA region.
- To expand to the global market as a way of increasing the firm’s market share
- To diversify in its product delivery as a way of increasing its income within the current and future markets
Strategies
Elsewedy Cables has come up with a series of strategies that would help it achieve the above strategic aims. These strategies can be explained using Porter’s five forces model. The threat of new entrants is real in both the local and international markets.
As shown in the case, the firm is keen on protecting its local and international market share from the existing firms and the new entrants. To manage the threat of the new entrants, it has come up with strategies to retain its current clients through the delivery of high-quality products at competitive prices.
This way, it is assumed that the current clients cannot consider changing their loyalty to the new entrants. From the case study, it is clear that this strategy is working. The firm has been able to protect its market share despite the increasing number of new entrants. Its clients believe in the quality it offers them.
The threat of substitutes is another force that Elsewedy Cables must be ready to deal with in the market in order to achieve its strategic goals. The firm has developed a strategy of expanding its line of products to deal with the threat of substitutes.
Instead of ignoring the substitutes, the firm always develops products that directly compete with these substitutes in the market. That is why it expanded its product offering to the wireless market that had started eating into its cable market. This strategy was a success because the firm has become one of the leading providers of wireless electronic products within the MENA region.
According to Porter’s scheme, the bargaining power of the suppliers is another major threat that a firm has to deal with in order to remain competitive in the market (Ali & Aali, 2014).
The top managers of this firm have developed a unique strategy of accessing raw materials used in manufacturing products it delivers to the market. In fact, it has developed a close relationship with its suppliers, a move that has reduced the bargaining power of most of its suppliers.
This has worked for the firm in terms of getting the materials in time and eliminating cases where the prices of these materials are increased haphazardly.
The bargaining power of the buyers is another issue that Elsewedy Cables has to deal with in order to achieve its strategic goals. The organizational buyers, especially the government and large institutions that purchase products of this firm, have strong bargaining power.
Dealing with these organizations can be challenging if a firm lacks a clear strategy. It is clear from the case study that this firm has managed to deal with this threat successfully. The quality of its products, which exceeds the quality that is offered by most of its competitors in the current, forces these organizational buyers to continue using products of this firm.
The market rivalry among the existing competitors in the industry is another force that must be managed to help this firm achieve its strategic goals. In the local market in Egypt and in many other countries in the Middle East, this firm operates as a monopoly.
It means that it has been able to deal with the competition, and it is currently the market leader. As a market leader in a near oligopolistic market, this firm can easily manage any threat from the rivals in this industry.
External Environment Assessment
Elsewedy Cables currently operates in the International market. It expanded from the local market in Egypt to the regional market in MENA, and now it has expanded its operations to the global market following its successful entry into the European market.
The General Environment
The general market of this firm can be analyzed using Porter’s Five Forces Model. The economic environments in the global market vary in a number of ways. For instance, the global economic recession of 2008-2009 greatly affected markets in Europe and a few other countries in MENA. It was at this time that the firm had just entered the European market.
This economic downturn affected the firm’s operations in Europe. However, the effect was not felt in Egypt. The operations of this firm in the global market can be impacted by social and demographic forces. The firm should specifically be keen to monitor the emerging trends among the youths using their products. They always prefer trendy products which are fashionable.
According to Sekhar (2009), the political, legal, and regulatory forces in the global market may be a major challenge for a firm. For instance, the laws and regulations used in Egypt to govern businesses are very different from those used in the United Kingdom and France.
Elsewedy Cables will need to understand the legal, regulatory, and political structures of different countries where it operates. This will help it avoid legal battles, which may hurt its profitability. The issues about the environment cannot be ignored, given that it is now operating in Europe.
Most of the European countries have strict policies about the maximum allowable amount of greenhouse gases that a firm can emit within a given period. This firm will need to adhere to these environmental laws. It will also need to organize corporate social responsibilities designed to help protect the environment.
Finally, this firm will need to embrace emerging technologies in its production and marketing strategies. New trends in the production and marketing of products are emerging, and it will be necessary for the management to embrace them as a way of gaining a competitive edge.
The Specific Environment
Elsewedy Cables offers its products to a wide variety of customers in the market. They include governments, organizations, and individual customers. The demographics of its customers is very wide because its products meet the needs of almost every human being. The suppliers of the firm are mining companies that provide it with various minerals, which are used as raw materials.
Most of the current suppliers of the firm are Africa companies. These companies were chosen not only because they had the materials needed, but also because their products are priced in a friendly manner compared to the Chinese companies. It is clear from the case that the firm has access to professional expertise and labor it requires to achieve its objectives.
The firm has employed a team of experts in various departments to ensure that its operations run smoothly. It has a team of highly skilled engineers to work in its production plans. It also has skilled marketers who have enabled it to expand its operations to the United Kingdom and France. This team is currently working tirelessly to enable Elsewedy to gain access to the Spanish and Italian markets.
The competitive environment in the home country is relatively low, and Elsewedy has dominated the industry. However, this firm has to be ready to deal with stiff competition in the global market, especially from major global firms such as General Electric.
SWOT Analysis
The move by Elsewedy to expand its market operations to the global market means that it must have the internal capacity to deal with the challenges in the larger market and the ability to capture opportunities that will be presented to it. It will be necessary to conduct a SWOT analysis of this firm to determine its competitive ability to operate in the global market.
External Opportunities
- The local and international market offers Elsewedy Cables a huge market that this firm can tap into as it expands its operations beyond the MENA region.
- The decision to move to the global market means that the market size has increased. This offers it an opportunity to expand its market share. According to Freeman (2010), the purchasing power of the European market is one of the highest in the world.
- This firm’s product can be successful if they are designed to meet the needs of the customers in these new regions.
External Threats
The market has a number of threats that Elsewedy Cables must be ready to deal with in order to achieve success.
- The biggest threat that this firm faces in the market are stiff competition. Firms such as Prysmian Cables and NKT Cables have been operating in Europe for a very long time. They will be keen to react to the threat that Elsewedy poses to them as a new entrant. Given their competitive strength in this market, they can easily frustrate the operations of Elsewedy Cables, especially if they employ pricing as a strategy to protect their market.
- General Electric, another multinational cable company that has a very strong brand, may also pose a threat to operations of the firm. Issues such as insecurity and political interference may also pose a threat to this firm in the global market.
Internal Organizational Strengths
Elsewedy Cables has a culture of quality assurance at all levels of its operations.
- This culture has enabled it to produce some of the best and most preferred products in the market. It is this culture that has enabled it to gain popularity in the local and regional markets.
- The firm has a huge financial resource that has enabled it to higher highly qualified human resources and to maintain regular market research. This has enabled it to understand the changing trends in the market, enhancing its competitive edge.
- From the case study, the core competency of this firm is in the manufacture of cables and wireless products and also in marketing its products.
- The firm has a team of highly skilled workforce that enables it to achieve its objectives with ease.
Internal Organizational Weaknesses
The main weakness of this firm has been a culture that overemphasizes the need for quality at the expense of dynamism.
- The firm invests a lot to come up with the quality desired in the market that it finds it a little challenging to react to market dynamism in its product delivery. In the European market, the main weakness of this firm is a limited experience.
- Some of the main rivals that this firm will have to compete with have massive experience operating in the European market. They have a better knowledge of the specific needs of the customers in this region and the ways in which they can be met.
- Elsewedy will also need to develop distribution channels in these new markets. These issues may affect the firm’s ability to operate smoothly in the market.
Summary of SWOT Analysis
McKinsey 7S Framework
McKinsey’s 7S framework shown below can also enhance the analysis of this firm.
Elements such as the marketing strategy, structure of the organization, and systems are hard elements that can easily be defined and managed without difficulties.
However, soft elements, such as shared values, staff, skills, and style, are soft values that cannot be managed easily. Elsewedy can use its hard elements to influence the Soft elements to be in line with the expectations.
Financial Analysis
According to Davido (2010), it may be necessary to conduct a financial analysis of a firm to determine its ability to achieve its objectives in the market. In this section, the researcher will use the information provided in the case study to conduct a comprehensive analysis of Elsewedy Cables’ financial position.
Current ratio for 2008 and 2009
Current ratio= current assets/current liabilities
2008:
= 7,191,554,354/5,305,096,011
= 1.36
2009:
= 6,736,996,042/5,533,967,265
= 1.22
This value of the current ratio means that Elsewedy Cables’ financial health is good. It can meet its short term objectives. However, performance in 2008 was better than 2009.
Quick ratio for 2008 and 2009
Quick ratio= (current assets- inventory)/current liabilities
2008:
= (7,191,554,354-3,170,071,301)/5,305,096,011
= 0.76
2009:
= (6,736,996,042-2,779,135,384)/5,533,967,265
= 0.72
This ratio helps in determining the liquidity of the firm without considering the inventories. The firm’s performance in 2008 was better than what was registered in 2009.
Debt ratio for 2008 and 2009
Debt ratio= total debt/total assets
2008:
= 10432963222/10,432,963,222
= 1.0
2009:
= 11362612214/11,362,612,214
= 1.0
The debt ratio shows that Elsewedy total debt can be fully settled by the firm’s assets without the need to get external help. This ratio did not change within the two years.
The information provided in the firm’s balance sheet shows that its current financial performance is good. This firm can support its expenses in the new market in Europe. Its debits, both short term and long term, can also be paid without struggle.
The only issue that is emerging from this financial analysis is the amount of stock that this firm holds before it can be released to the market. This is an indication that the marketing team should make major adjustments to ensure that the rate of stock turnover is higher than what it is currently.
Data Analysis
Elsewedy’s Competitive Position
The information provided in the case helps in understanding the competitiveness of Elsewedy Cables in the local, regional, and international markets. When conducting an analysis of the competitiveness of the firm, it may be necessary to look at it from the three different perspectives.
The local market
According to the information in the case study, Elsewedy Cables dominates the local Egyptian market in the cable industry. There are a few small firms that operate in the same industry, but they do not pose any serious threat to this firm.
As a monopoly, this firm enjoys a wide market share that promotes its profitability. As an industry leader, it can dictate the trends in the market. El Giza Cables enjoys a 21% market share in the Egyptian market. However, its poor operational strategies have made it easy for Elsewedy Cables to attract most of its previous clients. Electro Cables and Energia are the other competitors in this market.
These two competitors are struggling to survive, a fact that reduces their capacity to compete favorably in the market. They have made it easy for Elsewedy Cables to control the local market. However, Freeman (2010) warns that operating as a monopoly has its challenges that a firm should take care of to ensure that it remains profitable.
As a monopoly, a firm may fail to understand the needs of its customers in the market. This is so because customers are always forced to accept what is presented to them due to a lack of variety. Being insensitive to market needs can be very dangerous.
In case another firm comes into the market that understands the needs of the customers, then it can easily attract the larger market share. Currently, it may be safe to say that this firm has a commanding lead in the local Egyptian market.
The regional market (MENA)
According to the information provided in the case study, Elsewedy Cables has made a successful entry into the regional market in the Middle East and North African markets. General Electric has been operating in various countries in the Middle East, including Nigeria, where this firm is currently operating.
There are also numerous other firms in this region which offer similar products in the market. One of the main forces that may affect the competitiveness of this firm in the market is the legal environment in the countries outside Egypt.
According to Thompson and Martin (2005), Nigeria is one of the most corrupt countries in the world. This has affected most of the foreign firms operating in this market because they are forced to pay bribes quite often to a number of government officials in order to remain operational.
A report by Rothaermel (2013) showed that many firms were forced to quit the Nigerian market in 2008 due to increased levels of corruption. This firm will have to find a way of dealing with such problems. In the Middle East, this firm has experienced relative success.
It has not faced serious competition from the local players. Its operation in Riyadh, Saudi Arabia, has particularly been successful because of the political stability in the country. The firm has also managed to understand consumer behavior in the entire market.
According to Ali and Aali (2014), consumer behavior is largely influenced by cultural practices and beliefs of the people. Many firms from the West have failed to achieve success in the MENA region due to a failure to understand the local culture.
In this region, Islamic culture closely defines consumer behavior. For instance, it is important to understand that although electronic products are used by all family members, the buying decision is always made by the male members of the family.
They also control family wealth. It means that when developing a television commercial, a firm should make an effort to attract the men as much as possible, even if the product is used by both men and women.
International market
In the regional market, there are completely new forces that this firm must understand in order to be successful. It will need to understand that consumer behavior among the British and French is very different from that in the MENA region.
In the West, Sadler and Craig (2003) say that women are liberated irrespective of their religious practices. They have the freedom to make their own buying decisions without being coerced by anyone. This must be put into consideration in order to protect the competitiveness of this firm in the international market.
Prysmian Cables and NKT Cables are currently the dominant market players in Europe. They have been operating in this market for several years, and therefore, have a better understanding of it than Elsewedy Cables.
They are expected to offer serious competition in the market to this firm as they try to protect their market share. The socio-cultural difference between Europe and the MENA region would mean that this firm will have to conduct massive research in order to understand dynamics in the foreign markets.
How Elsewedy Can Use Opportunities and Strength to Overcome Threats and Weaknesses
It will be very important for Elsewedy Cables to find ways of overcoming market threats and internal weaknesses using its strengths in order to maximize on the opportunities that the market has to offer. The main weakness that this firm faces in the international market is a limited experience.
It can use its financial strength to overcome this challenge by conducting extensive and intensive research in the new markets to understand the dynamics. This will enable it to take advantage of the opportunity it has to grow its market share.
In the international market, the main threat comes from the stiff competition that is posed by the market leaders. These rivals have been operating in Europe and have a close relationship with their clients. They know what the clients need and the best way that they can design their products to meet these needs.
They also have stronger financial strength than Elsewedy Cables, which means that they can use a variety of strategies to fight the threat posed by new entrants. The only option for Elsewedy Cables would be to rely on the superiority of its products, especially in terms of quality, to manage the threat of stiff market competition.
Recommendations
Recommended long-term objectives for the company
The case study provided clearly demonstrated that Elsewedy Cables is making positive progress in the market. It has achieved massive success in the local Egyptian market and regional MENA markets. It has now decided to go to the international market.
It will be necessary for this firm to evaluate its long-term objectives in the market, given that it has decided to operate in the international market. The objectives must reflect its current position. The following are the recommended objectives that the firm can use to define its operations in the global market.
- To become a leading manufacturer and supplier of cables and related products in the global market
- To continue offering quality products that uniquely meets the needs of clients in different markets
- To understand international market dynamism and emerging trends, and respond to them as appropriately as possible
Recommended competitive strategies
In order to reach the above objectives, the management of Elsewedy Cables will need to come up with effective competitive strategies. Using Porter’s scheme, this firm will first develop mechanism of dealing with the threat of rivalry among the players in the industry.
This can be done by developing products of unique quality that will enable its products to occupy a unique niche in the market. This will take this firm above the market competition by setting its products apart from other products offered in the market.
Regular research is another strategy that this firm will need to employ in order to understand market dynamism and emerging trends and to be able to respond to them appropriately. This firm has little knowledge of the European market.
The estimated cost of the strategies
The proposed strategies may have varying costs that this firm will have to meet. First, it will have to start by conducting market research. It is important to note that as a new firm in Europe, Elsewedy Cables will need to hire a local European marketing consultant to undertake the marketing research. The cost of the market research may vary based on the marketing consultant hired to do the job.
The estimated cost may range from € 78,000- € 250,000, depending on the size of the market covered. The firm will also have to incur the cost of creating additional quality for its products. This may be estimated to be 2-7 percent additional cost per unit of its products in the market.
Comparing the recommendations with what the company is doing
The current strategies used by this firm and the recommendations offered in this paper compare closely. The firm emphasizes the need for quality. In the recommendations, it has been suggested that the quality should be improved even further given that the European market is highly competitive.
The firm is not currently focused on market research, as recommended in this paper. Embracing market research will enable it to understand the global forces that affect the market. The research will also enable it to come up with new products that uniquely meet market needs locally and internationally. This way, it will gain a competitive edge over its market rivals.
References
Ali, A. & Aali, A. (2014). Strategic Management: Concepts and Cases, 1st Arab World Edition. London: McMillan.
Davido, F. R. (2010). Strategic management. Harlow: Pearson Education.
Freeman, R. E. (2010). Strategic management: A stakeholder approach. Cambridge: Cambridge University Press.
Rothaermel, F. T. (2013). Strategic management: Concepts. New York: McGraw-Hill Irwin.
Sadler, P. & Craig, J. C. (2003). Strategic management. London: Kogan Page.
Sekhar, G. (2009). Business policy and strategic management. New York: I K International Publishers.
Thompson, J. & Martin, F. (2005). Strategic management: Awareness and change. London: Thomson Learning.