Corporate Social Responsibility Disclosure Practices

Question: Discuss about the Corporate Social Responsibility Disclosure Practices. Answer: Introduction Strategic analysis helps in the in-depth analysis of an organization for understanding its strategic position. It also helps in searching for the answers that arise in the internal environment of an organization like the inquiry about the present business environment, what are the available options and the process to develop the competencies for meeting the changes in the environment of the business. These questions help the organization to match its development and growth objectives with the existing reality of the environment of business (Rothaermel 2015). The decisions should be based on close analysis of the markets and products and not on blind optimism to match the reality with the objectives of the organization (Hill, Jones and Schilling 2014). This assignment will conduct the strategic case analysis of a large company based in UAE named Almarai for providing the company with the recommendations for improved long-term performance. Almarai is a public food industry that was established in 1977 in partnership with the Irish agri-foods. Almarai is regarded as the worlds largest vertically integrated dairy company with the products like dairy, juices, yogurt, infant formula, poultry and bakeries in UAE (Cummins 2016). The company underwent a drastic business change in 2005 as it transformed from a privately owned company to a company that is publicly listed with over 70,000 shareholders. A further investigation of the strategic analysis of the organization will be conducted in the commencing sections of the assignment (Sahoo 2016). Strategic analysis of the organization Political- Almarai is affected to a great extent by the import law and governments relations with foreign countries. Government regulations and policies regarding agricultural products have impacted the decisions of farmers to keep livestock sufficient to meet the needs of e company. The agreement on the Health Check has led to the obligation of abolishing UAE milk quotas in 2015. The agreement has also put forward measures for preparing the UAE dairy product industry for the situation. Any deal to be made must be unbiased and has to consider UAEs interest, especially in relation to agriculture (Nagy 2016). Economic- better standard of living, growing level of population and altering dietary prototype in UAE have lead to increase in food demand. However, prices are found to have fallen after a time frame of record commodity prices in early 2008 and early 2007. This fall in prices is crucial since the world economy is found to be facing a major downturn as a result of an amalgamation of adverse macroeconomic factors. Nevertheless, the medium-term projection for dairy products are good, and this is vital for the profitability of almarai (Sadi 2014). Social- the average size of dairy farms in UAE is 48.7 hectares. The age report of dairy producers indicates that it is the youngest of any farm in UAE. The majority population of the dairy farmers is of age less than 35 years. This implies that there is a scope of expectation for dairy food product companies, like almarai, as there are more chances of adopting new technologies in the farms, bringing benefits to the companies. Attitudes towards health complications, like obesity, can have a negative impact on the sales of dairy food products (Kumar and Prabhakar 2013). Technological- there is a need to bring developments in the product mix of almarai in order to combat the competitive pressure in relation to decrease in prices of food products and removal of price supports. Research and development would help the company in attaining a lesser level of dependency on low margin commodity products. It would also be a help to give emphasis on higher value added products (Aldosari and Atkins 2015). Environmental- almarai depends heavily on livestock and therefore the health and availability of livestock are a major concern for the company. Epidemics, plagues and other form of diseases affect livestock in UAE. Any such case of concern reduces the productivity of the company. Climatic conditions are a major influencing factor for the success of the product lines of food companies. As UAE is a warm country, the frozen products are successful (Pooch 2015). Legal- prices of food are found to be rising in the country in the recent past as a result of monopolistic activities by import facets. The liberalizing trade actions encompass 12 different sectors, including food product industry. Compliance of laws in relation to product labeling and advertising is crucial for Almarai as it produces dairy food products. It also needs to refrain from false claims regarding advertising. Food regulation bodies would have a role in the operations of the company. The products need to have nutritional information and specification of allergic products on them as a mandate of law (Tajkarimi, Ibrahim and Fraser 2013). Five-force analysis Bargaining power of suppliers- More diversification of the distribution channels implies that a single distributor will have less bargaining power. Almarai is considered as a difficult qualitative factor, and as a result, the competing institutions would be having a smooth time while overcoming it. Suppliers, when are dependent on high volumes, gives rise to less bargaining power since a producer can cut volumes and reduce the profit of the supplier. This process has the possibility to positively impact the organization. The factor that high level of completion between the possible suppliers leads to a reduction of prices to producers is a positive aspect for the organization (Eden and Ackermann 2013). Bargaining power of customers- when buyers are not much sensitive to prices there is an increase in the prices. Inelastic demand has a positive impact on the organization as there would be a reduction in costs. Since the customers cherish the products of Almarai, they would end up paying more for the products that are valuable to them. Leverage of limited bargaining promotes the profits of the organization. Limited buyer choice has a positive impact on the organization as customers provided with limited choices end up paying more for those that are available. Intensity of existing rivalry-government policies and set of regulations have the capacity to dictate the competition level of the industry, including this particular organization. Limited competition is beneficial for Almarai and adds to the value of the organisation. Almarai has a large industry size, and this permits multiple producers and firms, paving the way for prosperity without any need for stealing market share from other companies. There are few competitors of the company who compete for the similar resources and customers. This is, therefore, a beneficial factor for the organization (Hitt, Ireland and Hoskisson 2012). The threat of substitutes- there are an inadequate number of substitutes for Almarai, implying that the customers do not have the opportunity to find other similar services and products fulfilling the needs they have in relation to the products they use. A limited number of substitutes is a high qualitative aspect that cannot be easily defended and competing companies would, therefore, have a tough time overcoming it. The threat of new competitors- weak distribution networks means that the expense to move around is more, and there is a chance that some goods may not get to the customers. Almarai has a strong distribution network that positively impacts the company. Customers are loyal to the branding Almarai has. The company has spent resources to build this strong brand, and this has resulted in fewer resources to compete for. The company has high capital requirements. This implies that the company needs to invest in huge amounts for competing in the present globalized market. The company has high sink costs that make it difficult for any competitor to enter the market in an effective manner. Almarai has a strong brand name that has been established over the years. Competitors of the company will therefore have to improve their branding if they want to have a strong competition with this company. Advanced technologies applied by the operations of the organization are a highly advantageous factor that the competitors need to build up (people.stern.nyu.edu 2016). SWOT analysis Strengths- Almarai has a multiple numbers of positive aspects that make the company an emergent leader in the industry it belongs to. The company has a robust and professional management team that can handle any critical challenge when it poses a threat to the profit of the company. The well recognized and strong branding is another point of strength for the company. The company has diversified products, like bakery and fruit juices, which make it appealing to the consumers. The company bears high average yield per resource used, bringing in benefit to the company. Committed investments in high-class dairy farming, integrated set-up, state-of-the-art processing units together with a strong network of distribution make up the most remarkable features of the operations of the company. The company focuses on innovation of new products and the packaging process, resulting in increased coverage. Extreme climatic conditions support the high consumption of liquids, thereby increasing the sa les of the liquid products. The huge population base translates into huge demand in the local area. The reduced labor costs, skilled workforce, experienced business setups, high rate of growth, higher operating margins are the other strengths of the company (Johnson et al. 2013). Weaknesses- one of the significant weaknesses of almarai is the high business operations concentration in the Riyadh region. The balance sheet of the company is moderately leveraged, implying an issue to be given immediate attention. Outside Saudi Arabia, there is no provision for production facilities set up by the company. This limits the chances of expansion outside Saudi Arabia. The turnover ratio of employees is unsystematic and high, reported at around 155. This has a negative impact on the company. The sector that the company operates in is highly reliant on emigrant labours. It also depends on to a large extent on the import of feed stocks and raw materials (Serkin 2015). Opportunities- increasing market share proves to be a good opportunity for the company to gain more profits in future. The company can consider venturing into product lines it has not got involved into yet. Geographic expansion of the companys operations to the Middle East and North African countries would be a positive step taken for bringing benefits to the company at large. The company must emphasize on the development of the fruit juice and dairy products as a drastic change in the consumer behavior is noticed in the recent past. Consumers are becoming highly health conscious, and this would likely increase the demand for health-conscious food products (Lasserre 2012). Threats- appreciation of major currencies, including Euro, can lead to the increase of feed stock cost, thereby translating into lower margins. The reason for this is that Saudi Riyal is pegged to the dollar. Government restrictions, when imposed on the price of retail foods, become a threat to the profitability of the company. The company suffers low margins on sales with hypermarkets and supermarkets contributing around 20% of the revenues. Possible loss of investment as a result of a failure of Zain KSA operations adds to the threats the company has. Rising costs of raw materials, growing competition and changes in price are the other threats the company suffers (Mahajan 2012). Stakeholder analysis Almarai is one of the largest food and beverage manufacturer and distributor in Middle East. Individuals, groups or organizations are affected by what an organization does. The effect may be on that particular organization as well. In this manner they are said to have an interest or stake in the decisions of the organization. Stakeholders are both internal and external who together help in having a smooth functioning of the operations of the organizations. The internal stakeholders of Almarai include the employees of the organization at all levels and managers and supervisors. The external stakeholders include the standard agencies, the government, the customers, and the local community in which the organization operates. One of the most important internal stakeholder groups for Almarai is the employees. The food industry depends on expertise people able to manufacture food products that are hygienic and good quality. Keeping in mind the importance of the employees the company promot es better job security, training program and other beneficial initiatives. Stakeholder engagement is enhanced by strategic consultancy, design initiatives and content development. Ethical values cover all stakeholders; those are the shareholders, consumers and employers. Values are based on transparency, fairness, respect, integrity and trust (Grain 2012). Addressing competitive advantages: innovation, quality, efficiency and customer responsiveness The four main building blocks of competitive advantage are innovation, quality, efficiency and customer responsiveness. These four factors when considered together with each other creates value and generates high profitability for the organization (Hatch and Howland 2015). Almarai needs to give emphasis on all the four factors as an amalgamation for getting the best benefits and having a sustained competitive advantage. The efficiency of Almarai can be increased by having a standardized process, thereby boosting the productivity of the employee. The economics of the scale in purchasing would also be boosted by a standardized process. Both of these would be an advantage to the company by lowering the costs. Standardized processes also would help in ensuring reliable quality. The quality of food sold by almarai is reliably dependable. It needs to bring improvement in the quality of food in order to maintain the value for customers. The company needs to take steps for raising the percei ved quality of the food by using milk that is reliable in its quality. Customer responsiveness can be demonstrated by the shift towards healthier meals. A decision to offer drinks of more high quality would also draw attention of the customers. Innovation in the food products can be brought through a strong research and development process. The company needs to build up a more efficient research and development team for gathering valuable research data from food industry across the world and incorporating them in its own production process (Katsioloudes and Abouhanian 2016). Strategic alliances beneficial of the organization Almarai must continue to see out relationships with other agencies and partners that can be a source of enhancement and growth for the organization. The company must seek eligible partners who are aligned with the mission and vision of Almarai and are committed to the enrichment of the consumers served by almarai. It is desirable that the company works closely with the farmers, livestock producers, suppliers at a regional collaborative platform. Positive change can be driven by working closely with the strategic partners (Khan et al. 2013). Fuller et al. (2016) outline the means by which strategic alliances can be made strong. First, early meaningful accomplishments are crucial for cross-partner team unity and morale. Second, it is significant to develop objectives that are out of the box. Thirdly, agencies need to have cost expectations that are realistic. Lastly, it is necessary to undertake only the critical few alliances for driving success. By these methods, the organization can continue to remain the efficient and lean organization it is that is effective in minimizing the duplication with regional bodies. Globalization as applied to the organization The world has witnessed significant changes since the beginning of the 21st century and last decade has seen the rapid transformation in technology, money, ideas and tastes of consumers due to globalization. Globalization is making an impact on all industries as it brings along opportunities, challenges and competition. To overcome the coming challenges and embrace the opportunities, industries must respond swiftly to the changes. For Almarai, globalization implies how effectively it embraces new things and responds to possible approaches and solutions to challenges for remaining competitive. In order to be on the safer side, the company needs to adjust the ways thing are done, the production and resources used. Reorganization of the operations would be a good move to remain in pace with globalization. Food products are to be manufactured that meet the value chain demands, the shift of consumer choices and preferences and enhanced consumer consciousness. Centralized, efficient and mo dernized dairy farming would drive the efficiency of the company. The environment footprint of farms is to be reduced. Using advanced technology for packaging and processing would drive down costs but maintain good food safety levels. The needs of the consumers are to be understood, and food products are to be made for meeting their needs (Grunert and Traill 2012). Major problems faced by the company and possible challenges in future According to Kapferer (2012), the food manufacturing industry is the largest industry in the world at present. The food industry is facing many challenges at the present time, the main issues being powerful retailers, fickle consumers, stringent food safety regulations and more. The biggest challenge that the company faces is from the consumers side. Consumers are avoiding the centre of store products at large in the recent times. This becomes an issue for traditional packaged food companies like Almarai. Consumers are wanting what they feel are healthier products (de Boer and Schsler 2016). Food companies like almarai have been suffering a dip in sales as consumers find it beneficial to buy less from the center store shelves. Consumers feel that fresh products are to be consumed more and therefore they thrive to buy food products after judging some parameters. Consumers are not focused on purchasing food products that are fit for their diet as before. The present scenario reflects t hat consumers are conscious of taking food products that enable them to cut down their calories and fat. They are now motivated to buy those products that are aligned with the well-being and health. This includes avoiding products with artificial ingredients. Almarai has the challenge of adapting to this trend and withstands the pressure of bringing changes in the types of products it manufactures. Major organizations across the world, like WHO and FDA, are moving out against the high sugar intake by the general population. They are recommending less calorie intake for health benefits and avoiding the chances of major health complications. The consumers are therefore avoiding foods that are high in sugar (Saguy 2016). The issue faced by the company is that many food products of Almarai have high sugar content. The challenge for the company is to continue producing sweet products that are not high on sugar content. Almarai is facing a challenge in bringing new products to the market that align with the emerging trends of the consumers within a specific time frame. There is a need to create new and relevant products and move them through research and development, testing process and marketing for retailing them on an effective basis. The main concern is that by the time some of the products are out in the market, the trends may be found to be changing. In addition, companies need to think about the designing and packaging of the products as for making them more appropriate and convenient for consumption. Consumer is moving away from the traditional way of having meals, and Almarai may have a major challenge in adopting to similar innovations in the near future. Almarai can be facing competition from more supple companies, making it difficult to stand out in the market. Conclusion The global demand for food products, especially dairy products is increasing, and the industry is expected to grow in the coming years. In order to maintain its supremacy in this industry, Almarai must take up certain measures that would help it maintain its position in the market. Almarai must boost its sales and focus on increasing its customer loyalty. The supply chain must improve its effectiveness and efficiency. Global competitiveness can be built by making the supply chain work together for adding values to the products. Together retailers, processers, and farmers must build strong relationships that are based on evenhanded value creation. The performances of the concerned departments are to be measured in terms of environmental sustainability. Technical efficiency improvement can be beneficial for the production of almarai. The company needs to be more responsive to the ever-changing needs of the consumers. More collaboration with the concerned stakeholders would also be a be neficial step for the organization. Almarai is always known to be leading the way for production innovation as it has emerged as a leader who can control the large market share in the area of operations. The belief of business analysts is that the company is commended to apply three branched strategies as reflected through the growth initiatives. Expanding business outside Saudi Arabia can have a possibility of challenges to operate successfully in those markets. Nevertheless, since the company has a strong brand value and ability to remain a market leader, the company can be surely said to be well positioned and ready for taking up challenges and emerging as a leader. The company has adopted several profit maximizing and growth-oriented initiatives in the past, compelling analysts to have a positive overview of the company. References Aldosari, A. and Atkins, J., 2015. A study of corporate social responsibility disclosure practices in Saudi Arabia. Cummins, S. 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