Strategic Management Research Paper
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Sample Research Paper on Strategic Management
The development of the real estate business in the United Arab Emirates as well in the Middle East region is nowadays very perspective, due to the high concentration of capitals and ample opportunities for the development of business in the region. One of the major reasons of the profound interest to the region from the part of investors is the progressing economy and the growing efforts of the local governments to develop the open market economy. At any rate, the development of the business in the region is nowadays substantially easier than it was a couple of decades ago, for instance. Speaking about the real estate industry, it should be pointed out that this industry is particularly interesting to investors because the UAE and the Middle East region is also the region that attracts a large number of tourists that makes the development of the local infrastructure and real estate industry quite profitable.
In such a situation, many company attempt to enter the local market of the real estate industry, but entering may be accompanied by serious difficulties because of the strong influence of the state. At the same time, companies supported or even owned by the state have very good perspectives and can expand their business successfully. In this respect, Sama Dubai may be viewed as one of such companies since it is a state owned company which operates not only in the UAE, but in recent years have started the implementation of the strategy of the international market expansion entering new markets and gaining a larger share in the markets of different countries, basically of the Arab world. In such a situation, it is very important to analyze the strategic development of the company and its management, assess its strength and possible weaknesses in the context of the current market situation as well as to evaluate its perspectives and possible threats in the future.
The background information on Sama Dubai
Speaking about the strategic development and management of Sama Dubai, it is primarily necessary to dwell upon the background of the company. First of all, it should be said that Sama Dubai is a member company and subsidiary of Dubai Holding, a holding company set up by the government of Dubai. At the same time, unlike other subsidiaries of the holding Sama Dubai focuses not only on the national projects, but, instead, is an international arm of Dubai Holding and it is mainly focused on international projects. The company targets at the operations worldwide. To put it more precisely, the company’s priority is the development of the international projects in which Dubai Holding is involved. At the same time, at the present moment the company is basically known in the Middle East and some countries of the third world where its performance was particularly successful and contributed to the formation of the positive image of the company in the world.
Among the most successful projects, in which the company was involved or is still working on, it is possible to name the building of the famous Dubai Towers. This was a serious of super-tall, mixed-use skyscrapers that are developed in three countries and they will contain residential, business, office and entertainment sections. The Dubai Towers are or will be build in Doha, Qatar, Istanbul, Turkey, and Dubai, the UAE. The latter project has been already accomplished and successfully functions in the UAE and it may be viewed as a proof of the reliability and successful work of the company.
Also the company has launched the construction of Salam Resort and Spas, a chain of resort and spa hospitality that is projected to be built in Oman and Bahrain. Among the other developments of Sama Dubai, it is possible to name the Lagoons, a luxurious real estate development in Dubai’s Dubai Creek district with retail, residential and business sections; Anway, another real estate development in Rabat Morocco; Century City and Mediterranean Gate, a luxury real estate development on the Lac du Sud of the Tunisian capital Tunis. The latter project is particularly impressing because it covers 830 hectares and will comprise the construction of the ultra-modern new city with many skyscrapers, hotels, cultural and leisure complexes, residential complexes, a marina and many shopping halls. The costs of the development of this project constitute about $14 billion. The construction has already been launched and the company plans to finish the construction within 15 years.
Obviously, such projects indicate to the fact that the company is really ambitious and have the strategic goal to become at least the regional leader in the construction of the luxury real estate. In this respect, it is necessary to underline that the company may be positioned as an international real estate company because it focuses on the international projects, though often it uses the developments in Dubai as pilot projects to demonstrate the significance and potential of these development to the world and, therefore, convince potential customers in the reliability of the company and its ability to develop and implement the most sophisticated projects. In this regard the recent achievements and the current projects, in which the company is involved, are very important for the international market promotion of the company and the recognition of the company in the foreign markets. Such a strategy is supposed to facilitate the entering of new markets and overcoming the existing entry barriers in foreign countries.
Furthermore, the company basically operates in the Middle East and North Africa that means that at the present moment the company may be characterized as regional because its successes in other parts of the world are insignificant, while the traditional markets remain one of the major priorities of Sama Dubai. Nevertheless, it is a solid basis for the further development of Sama Dubai as an international real estate company.
The current market situation
Naturally, the development of the company cannot be independent from the market situation. To put it more precisely, while developing a marketing strategy of the further development of Sama Dubai, the company should take into consideration the current situation in the market and the perspectives of its future development. It is obvious that without the analysis of the market situation the company is practically doomed to failure because it will be unable to forecast the future needs and demands of customers and it will unable to react adequately on the needs of the market if the company develops the strategy based on its own plans and perspective without any regard to the current market trends.
On analyzing the current situation in the real estate markets in the region where Sama Dubai is currently operating, it is necessary to point out that the situation is quite positive for the development of projects created by the company. In fact, the real estate market is traditionally considered to be as one of the most reliable for investments worldwide, with the few exceptions concerning countries where the domestic situation is extremely unstable (Volti 2005). In such a situation, the investments into the development of the real estate business are quite reasonable because, even though it will not bring huge profits in the short run, but in a long term perspective, such investments may be very profitable and even more reliable than investments that could bring some short term benefits.
At the same time, it is necessary to point out that Sama Dubai basically focuses on the operations in the luxury segment of the real estate market. Traditionally, this market is considered to be a very difficult to enter because of several reasons. Firstly, as a rule, this segment of the market is already saturated because there are companies that have a huge experience and are well-recognized as leaders of the luxury real estate industry. Secondly, the investments in the development of luxury real estate are substantially higher than investments in the development of real estate of the medium level. Finally, the development and construction of the luxury real estate demands a considerable period of time and, therefore, the investments need a considerable period of time to get returned to the investor, while the profitability of this industry is not always certain, because the luxury real estate are destined to the representatives of the upper class. Naturally, in the situation, when there is a crisis in a country or a region, the risk that the profits from the luxury real estate can decrease is very high.
Nevertheless, in the current situation, it is hardly possible to distinguish any signs of the possible crisis that count outbreak in the nearest future, though the situation in some countries is very unstable. In this respect, it is primarily necessary to point out the situation in Iraq, where the situation may be characterized as very unstable, because the country is actually in the state of war. Taking into consideration the fact that Iraq is situated close to the major countries where Sama Dubai operates or plans to introduce its development, such as Qatar, Bahrain, the UAE, then it would be logical to presuppose that the instability in Iraq may be viewed as a potential threat to the development of Sama Dubai and its projects in the region.
In such a situation, it seems to be quite logical that the company attempts to enlarge its presence in foreign markets and enters the market of North African countries, such as Morocco and Tunis. The situation in these countries is more stable and, therefore, the company can develop its real estate business here without serious apprehensions concerning the future of the local market. However, even the situation in the market of the Gulf countries, such as Qatar or Bahrain, is not really dramatic because the probability of the downfall of the local real estate market, especially its luxury segment is very low. This is why it is possible to characterize that the general situation in the regional market is quite favorable for the development of real estate business by Sama Dubai.
In this respect, it is necessary to point out another very important fact. In recent years the Gulf countries, where Sama Dubai traditionally operates are rapidly progressing and national economies are flourishing, basically due to the constantly growing oil prices, since oil is the major product of import of these countries. The growth of the oil industry stimulates the development of local economies that naturally contributes to the enlargement of perspectives of the luxury real estate business in the region. The demand on such sort of real estate in the Gulf region as well as in other countries, where Sama Dubai operates, steadily grows. To put it more precisely, the development of business stimulates the growing demand on business facilities. Taking into consideration the enormous profits from oil industry and the high standards of life and work of the local elite, it is quite logical to presuppose that the demand on the services and real estate of the highest quality will also be very high. The demand will grow proportionally to the economic development of the Gulf countries. Briefly speaking, the more there are rich people, the higher is the demand on the luxury real estate and, therefore, on the services of Sama Dubai.
At the same time, the region is also very attracting for foreign investors who would readily cooperate with the local economic elite. It should be pointed out that both local business elite and foreign investors are interested in each other because the countries, where Sama Dubai is currently operating, are developing countries of the world. Consequently, they need the technological assistance to develop their major industries and just meet the high global standards of the quality of their services and products. This is why the local business elite need to develop the cooperation with foreigners that naturally stimulates the development of business facilities of the luxury segment of the market.
In addition, it is necessary to remember about the fact that the countries, where Sama Dubai develops its projects, are characterized by the rapid development of the tourist industry. In some countries of the Gulf region, the tourist industry became a complement source of income along with the oil industry. In fact, tourism is also very effective factor that contributes to the development of the local economies and leads to the growing need in the luxury real estate. In this respect, it is very important to underline that, unlike business elite, tourists basically need luxury real estate which could provide them the high level of comfort of the hospitality and restaurant industry, but the latter is impossible without the development of the luxury real estate. Naturally, tourists also need entertainment and recreational facilities that also constitute a part of the luxury real estate.
Finally, it is necessary to remember about the local customers. Due to the growth of the local economy and increasing standards and level of life, the demand of the local customers on the luxury real estate also increases. In this respect, it should be pointed out that the development of economy, tourism, and growing wealth of the local population stimulates the development of trade and facilities which could be included in the luxury real estate are very helpful in this regard to satisfy the needs of the local as well as foreign customers.
Thus, it is obvious that the general market situation is quite positive for the development of Sama Dubai since the segment of the luxury real estate market is steadily progressing and the demand on the projects and development of the company remains stable and relatively high. It is also important to underline the focus of the company on the construction of the mixed-up and complex projects which combine business and hospitality facilities as well as trade centers that increases the number of potential customers and, therefore, increases the profitability of the luxury real estate developed by Sama Dubai.
The analysis of the company’s position in the market and its basic strategies
Sama Dubai is one of the regional leaders at the moment in its segment of the market. The headquarter of the company is situated in Dubai but it has a complicated structure with its affiliate units situated in different countries of the world where Sama Dubai operates, including neighboring countries of the Gulf region and North Africa. Nevertheless, all the affiliates of the company are strictly subordinated to its headquarter in Dubai. In fact, it is possible to speak about the mechanistic bureaucracy that dominates in the organizational structure of Sama Dubai. In actuality this means that the company tends to develop a strict control over all production processes from the development of projects to its practical realization. This is why the role of control officers in the company is very significant because they control the quality of services and products of the company and the quality is one of the cornerstone concepts of the functioning of Sama Dubai.
The current market trends are apparently very important but, in order to better understand perspectives of Sama Dubai and assess the effectiveness of its strategies, it is necessary to analyze the company’s position and its development as well as it is important to discuss the strategies selected by the company as its major priority. Speaking about the position of the company in the market, it is necessary to apply SWOT analysis (Table 1) that will help clearly define major strengths and weaknesses of the company and its opportunities as well as threats.
In fact, nowadays, Sama Dubai has a number of strengths which put the company into advantageous position compared to its major competitors. First of all, it should be said that the company constitutes a part of the Dubai Holding that means that the company is supported by the large holding that naturally provides the company with larger opportunities for the development because it can rely not only on its own sources but it can also count for the support of other members of the holding. Furthermore, it is necessary to point out that the company as a part of the Dubai Holding is set up by the government. This fact is extremely important to the company which operates in the Gulf region, as well as North Africa, because the role of the government in this region is very significant. To put it more precisely, the government can influence the economic development of the entire country and particular industries. In such a situation, the governmental support can provide the company with a strategic advantage not only on the national but also international markets because the government can also contribute to the promotion of the company abroad. Also, it should be said that Sama Dubai has a well-developed structure and successful experience of work in the international markets. It should be pointed out that the company was created on the basis of Dubai International Properties. This means that the company had actually certain experience, a developed structure, i.e. certain basis for the further development and, what was more important, Sama Dubai had got wider responsibility and mandate than its predecessor. Consequently, the company became more independent and, therefore, flexible that is very important in the contemporary market situation when the market conditions may change very fast and it is necessary to be able to implement new strategies or change the existing ones without wasting long time (Gitlow 1997).
On the other hand, the company still has certain weaknesses. In this respect, it should be said that even though the company defined its major strategy as the international market expansion, Sama Dubai still cannot overcome the frontiers of the Arab world. To put it more precisely, the company develops its most successful and serious projects only within the Gulf region and some North African countries. Naturally, such a focus on the specific region does not really meet the strategic goal of the company and indicates to its inability or, probably, the company is still not really ready start the intensive international market expansion. However, it should be said that the current projects the company is developing are really very serious and it is possible to presuppose that the company simply cannot develop several projects similar to that of Century City and Mediterranean Gate. In this respect, it should be said that the company simply lacks the human resources for the development of several projects of such scale, though it can hardly be viewed as a weakness because projects are really unique and even the largest luxury real estate companies can hardly afford several projects similar to Century City and Mediterranean Gate.
In spite of certain weaknesses, the company still has good opportunities to continue their development and further market expansion. At the present moment, the company operates in different countries of the world and the situation in the international market is favorable for the further progress of the company, especially in the traditional region, where the company operates, i.e. the Gulf region and North Africa. Furthermore, the state support guarantees the company the privileged position in the national market as well as the support of the state in the process of entry of foreign markets.
For instance, the company may participate in international agreements between the national government and foreign governments. Consequently, it can gain foreign state contracts due to the support of the national government. Also it should be said that the development of the tourist industry in the Gulf region as well as the development of tourism in global terms provide Sama Dubai with ample opportunities to increase its presence in the international markets. To put it more precisely, after the realization of its successful projects the company may be involved in the development of similar projects in other parts of the world where the tourist industry is booming, for instance, South-East Asia, including such countries as Malaysia, for instance, or African continent.
As for the potential threats the company can face in the international market, it should be said that one of the major threat is the lack of the international recognition of the company by developed countries. In fact, the company is poorly represented in developed countries. Moreover, such perspective countries as China, for instance, prefer to deal with companies from developed countries such as the EU or the US, which are more popular and well-known in the world.
This is why the competition from their part may be a serious challenge to Sama Dubai and significant obstacle in the realization of its strategy of the international market expansion. Also, it is necessary to remember about the risk of a possible economic crisis which can undermine the position of the company in its traditional markets, while the lack of penetration in new markets will expose the company to a serious threat of the profound financial crisis. The latter is quite probable taking into consideration the huge funds that are needed for the accomplishment and realization of the projects developed by Sama Dubai. In fact, the possibility of the deterioration of the economic situation should not be rejected because the Gulf region is still unstable, while the growing terrorist threat may decrease the attractiveness of the region to foreign tourists as well as investors. Moreover, it is quite difficult to forecast the rapid decrease of oil prices, for instance, which are vitally important for the region. In the case of crisis, companies operating in the luxury segments of any market will be the most affected because they basically count for a very narrow range of customers, representing the upper classes of society, which are apparently not numerous.
In such a situation, the strategy of the company to focus on the luxury segment of the market is apparently quite risky because it makes the company dependent on the situation in the international market leaves little room for maneuvers in case of the deterioration of the situation in specific markets. For instance, if the company was focused on the larger medium segment of the market, it could develop its business worldwide in a larger number of countries. The projects would be less expansive and they would take less time for the realization. Consequently, the company would not need a long-term stability as it needs now because the realization of some of its current progress is supposed to take about 15 years, for instance. This means that if the situation in the country changes within this period of time the company may fail to accomplish this project and, thus, the financial losses of the company will be enormous, while participating in less expansive projects the company could develop real estate for a few years or even months and the long term stability would be unnecessary.
Nevertheless, the strategy targeting the international market expansion is correct in the contemporary economic situation because in the modern globalized economy this is the main strategy that could make the company more competitive and gain the strategic advantages compared to companies operating on the national markets.
Basically, the strategy of the company on the functional level implies the development of new projects and Sama Dubai lays emphasis on the development of innovative solutions for the development of new projects. Each new project of the company is unique and original that makes customers interested in Sama Dubai’s services. The company tends to flexibility, though its flexibility is limited by its dependence on long-term projects.
On the business level, Sama Dubai attempts to develop its cooperation within the Dubai Holding and spreads its operations in the Gulf region and North Africa. The major business goal of the company is the high quality of its products and services that leads to the growing customers’ satisfaction. The latter creates a positive image of the brand of Sama Dubai and, therefore, makes the company recognizable and opens larger opportunities for entering new markets.
In fact, the international market expansion is one of the major strategic goals of the company. Sama Dubai attempts to become one of the prominent and leading companies operating worldwide focusing on the luxury segment of the world market. It should be said that the focus on the global market can secure the company from possible instability in the traditional markets where Sama Dubai is presented, such as the Gulf region.
Thus, taking into account all above mentioned, it is possible to conclude that Sama Dubai is a very perspective company operating in the luxury real estate segment of the market that targets at the international market expansion. The company has already achieved significant successes being involved in a number of large projects in the Gulf region and North Africa. The company has a potential to continue the further market expansion, regardless existing problems and challenges, which could be overcome due to the proper strategic management.
In fact, in the current market situation, it is possible to recommend continue the strategy of the international market expansion because it can improve the position of the company in the global market and facilitates entering markets of developing countries, which are very perspective. At the same time, the further expansion will apparently need certain changes in the organizational structure of the company. To put it more precisely, the company should function more effectively through the use of more flexible organizational structure, where creative members of the personnel will be more independent and have larger opportunities to implement their innovative ideas while the role of control officers will need to decrease in order to minimize interference and bureaucratization of the production and creative processes within the company. Such a change will make the company not only more flexible but also more competitive in the international market.
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