Gulf Upstream Manufacturing Company 2009 Case Notes Prepared by: Dr. Victor Sohmen Case Author: C.P.

. Rao

A.

Case Abstract

Gulf Upstream Manufacturing Company (GUMC) was created in 2006 to take advantage of the Kuwaiti governments mandate to diversify the economy and steer away from a narrow focus on petroleum. As soon as the company was established in 2006, CEO Mr. Abdullah felt that there may be a good opportunity to establish a manufacturing plant to produce and market bitumen-based building construction materials. The company enjoys a monopoly in the Kuwaiti market, but faces competition from foreign suppliers of bitumen-based construction products, including Saudi and Emirati contenders for the market. GUMC is considering a joint venture with a European partner that is looking to establish and expand their bitumen-based product manufacturing and marketing in the Middle-Eastern market.

B. Vision Statement (Actual)

Our vision is to be the leader in the bitumen-based construction products industry in Kuwait.

C.

Mission Statement (Actual)

We excel in the manufacturing of the highest quality bitumen-based construction products at reasonable prices.

Mission Statement (Proposed)

Our mission at Gulf Upstream Manufacturing Company (GUMC) is to be a producer of high quality bitumen-based construction products (2) for use by commercial and domestic customers (1) in Kuwait (3, 5) who value quality (4, 7, 8) products and services (2), at reasonable prices (8), as we make the most of our knowledge and experience (4,9) to expand and transform the company into the preferred source for bitumen-based construction products (6,7). 1. 2. 3. 4. 5. 6. 7. 8. 9. Customer Products or services Markets Technology Concern for survival, profitability, and growth Philosophy Self-concept Concern for public image Concern for employees

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D.

External Audit

CPM Competitive Profile Matrix The Competitive Profile Matrix (CPM) identifies a firms major competitor(s) and its particular strengths and weaknesses in relation to its strategic position. GUMCs relative strengths and weaknesses based on the case details are portrayed in the weighted scores. As GUMC is a monopoly concern, there are no local competitors identified by name in the case; however, the case mentions competition from Saudi and Emirati companies. Therefore, a hypothetical foreign competitor is featured herein as Company X, and will be considered as representative of the overall foreign competition faced by GUMC. Their weighted scores are estimates based on their strengths and weaknesses in terms of the critical success factors explicitly or implicitly reflected in the case. Even though no foreign competitor is identified specifically by name or details of production and marketing parameters, there is sufficient data in the case through the qualitative and quantitative survey to capture an actionable profile of the typical foreign competitor to GUMC, operating in Kuwait. It can be seen that there are four areas in which the foreign company has an edge over the local monopoly player in Kuwait, GUMC. In terms of global expansion, GUMC is confined to Kuwait only. As for customer loyalty, unfortunately, the average Kuwaiti customer is price-conscious and would rather buy a lower quality product at lower price and this need is amply met by the Saudi and Emirati companies selling in Kuwait. Finally, GUMCs weakness in advertising has been repeatedly pointed out in the case. This may have been the result of the companys strong customer base with the Kuwaiti government, with little need for advertising. Consequently, the private sector has been neglected by GUMC, and this and related factors have precipitated a lower Critical Success Factors score of 3.24 for GUMC than for Company X with a score of 3.30.

Company X GUMC Rating ScoreWeighted Foreign Competitor Rating ScoreWeighted 0.48 0.32 0.21 0.24 0.30 0.40 0.27

Critical Success Factors Price Competition Global Expansion Management Technology Product Lines Customer Loyalty Market Share

0.12 0.08 0.07 0.08 0.10 0.10 0.09

Weight

3 1 4 4 4 3 4

0.36 0.08 0.28 0.32 0.40 0.30 0.36

4 4 3 3 3 4 3

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Advertising Product Quality Product Image Financial Position TOTAL Opportunities

0.07 0.10 0.10 0.09 1.00

1 4 4 3

0.07 0.40 0.40 0.27 3.24

3 3 3 3

0.21 0.30 0.30 0.27 3.30

1. Quality, timely delivery, and meeting specific needs are crucial to obtain orders from users and distributors 2. Construction activity in Kuwait is booming 3. There is infusion of additional funds in the economy because of oil sales 4. The Public Authority for Housing in Kuwait has ambitious plans to create additional townships to alleviate the shortage of housing 5. With the budget surplus, the government plans to build schools, hospitals, and other public institutions 6. Demand for bitumen-based products for housing in Kuwait can be expected to increase 7. Older buildings are being replaced by multi-storied buildings with larger floor area Threats 1. Often local customers seek non-Kuwaiti sources 2. Unlike the cheaper Saudi bitumen which is subsidized by the Saudi government, Kuwaiti bitumen is not subsidized 3. The private sector prefers cheaper bitumen, rather than good quality bitumen 4. The competition to sell the bitumen-based products is very intense, and could erode the existing competitive advantage of GUMC 5. Increasing competition from local, regional, and international competitors can be expected. External Factor Evaluation (EFE) Matrix An External Factor Evaluation (EFE) Matrix allows strategists to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information. GUMC is in a comfortable position as the industry leader in Kuwait with a reputation for quality; and this provides the necessary capability to harness opportunities in the external environment because of a favorable climate for non-oil producing businesses that the Kuwaiti government encourages, in order to diversify the economy.

Key External Factors Opportunities 1. Quality, timely delivery, and meeting specific needs are crucial to obtain orders from users and distributors 2. Construction activity in Kuwait is booming

Weight

Rating

Weighted Score

0.08 0.12

3 4

0.24 0.48

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3. There is infusion of additional funds in the economy because of oil sales 4. The Public Authority for Housing in Kuwait has ambitious plans to create additional townships to alleviate the shortage of housing 5. With the budget surplus, the government plans to build schools, hospitals, and other public institutions 6. Demand for bitumen-based products for housing in Kuwait can be expected to increase 7. Older buildings are being replaced by multistoried buildings with larger floor area Threats 1. Often local customers seek non-Kuwaiti sources

0.06 0.08 0.10 0.10 0.06

2 3 4 3 2

0.12 0.24 0.40 0.30 0.12

0.07 2. Unlike the cheaper Saudi bitumen which is subsidized by the Saudi government, Kuwaiti bitumen is not subsidized 3. The private sector prefers cheaper bitumen, rather than good quality bitumen 4. The competition to sell bitumen-based products is very intense, and could erode the existing competitive advantage of GUMC 5. Increasing competition from local, regional, and international competitors can be expected Total 0.09 0.07 0.07 0.10 1.0

3 4 4 3 3

0.21 0.36 0.28 0.21 0.30 3.26

The average total weighted score is considered to be 2.5. A total weighted score of 4.0 indicates that an organization is responding in an outstanding way to existing opportunities and threats in its industry. In other words, the firms strategies effectively take advantage of existing opportunities and minimize the potential adverse effects of external threats. A total score of 1.0 indicates that the firms strategies are not capitalizing on opportunities or avoiding external threats. The total weighted score of 3.26 suggests that GUMC has recognized the opportunities and threats it faces, and needs to embark on a serious review of its potential for growth, its capabilities, and its limitations. Consolidation of existing capabilities and markets, as well as expansion into new markets through the proposed joint venture may sustain the vision of GUMC to be the market leader of choice in Kuwait. Product Positioning Matrix After markets have been segmented so that a firm can target particular customer groups, the next step is to find out what customers want and expect. Many firms have become successful by filling the gap between what producers see and customers perceive, as good service. Product positioning entails developing schematic representations that reflect how a firms products or services compare with their competitors regarding dimensions most important to success in the

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industry. Two such matrices are presented below for GUMC and the representative foreign Competitor X indicated above. Product Positioning Matrix for Price Competition and Customer Loyalty

Customer Loyalty (High)

GUMC Company X

Price Competition(low)

Price Competition (High)

Customer Loyalty (Low)

As depicted in the Product Positioning Matrix above for Price Competition vs. Customer Loyalty, GUMCs price is less competitive than that of Company X. As a result, customer loyalty is weaker for GUMC than for Company X, though there are some evidences of patriotic purchases from GUMC by the locals, and GUMC has a dedicated customer base hence loyalty with the Kuwaiti government.

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Product Positioning Matrix for Quality and Market Share

Quality (High)

GUMC Company X

Market Share (low)

Market Share (High)

Quality (Low)

It can be seen from the above Product Positioning Matrix for Market Share vs. Quality that GUMC is clearly ahead in a strong position on both dimensions, thanks to its high prioritization of unremitting quality in its products, and the patronage of the Kuwaiti government (resulting in 25 percent of the market share by GUMC for bitumen-based products). Company X on the other hand, depends heavily on the private sector in Kuwait for its market share, compensating for lower quality with lower price that is more attractive to the private sector customers.

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E.
Strengths

Internal Audit

1. The Kuwaiti government is restricting entry of new companies into the bitumen-products market 2. GUMC holds 25 percent share of the bitumen-based products market 3. Non-price aspects such as quality are very important for marketers and distributors of bitumen-based products 4. The company can produce approximately 4 million square meters of membrane products in a year 5. GUMC is likely to launch a joint venture with a foreign company to increase its market share Weaknesses 1. GUMC is tending to neglect the private sector as it is price-sensitive 2. Variety is lacking in bitumen products 3. There is strong competition from bitumen that used polystyrene in its components 4. The advertising and distribution of the Kuwaiti products are more sluggish than those of Saudi and Emirati products 5. The Kuwaiti product is concentrated on housing projects away from the market Internal Factor Evaluation (IFE) Matrix A summary step in conducting an internal strategic-management analysis is to construct an Internal Factor Evaluation (IFE) Matrix. This strategy-formulation tool summarizes and evaluates the major strengths and weaknesses in the functional areas of a business, and it also provides a basis for identifying and evaluating relationships among them. Itemized below are the strengths and weaknesses of GUMC from the information provided, there are equal numbers of strengths and weaknesses.

Key Internal Factors Strengths 1. The Kuwaiti government is restricting entry of new companies into the bitumenbased products market 2. GUMC holds 25 percent share of the bitumen-based products market 3. Non-price aspects such as quality are very important for marketers and distributors of bitumen-products 4. The company can produce approximately 4 million square meters of membrane products in a year

Weight

Rating

Weighted Score

0.12 0.12 0.10 0.08

3 4 2 3

0.36 0.48 0.20 0.24

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5. GUMC is likely to launch a joint venture with a foreign company to increase its market share Weaknesses 1. GUMC is tending to neglect the private sector as it is price-sensitive 2. Variety is lacking in bitumen products 3. There is strong competition from bitumen that used polystyrene in its components 4. The advertising and distribution of the Kuwaiti products are more sluggish than those of Saudi and Emirati products 5. The Kuwaiti product is concentrated on housing projects away from the market Total

0.10

0.30

0.12 0.08 0.08 0.12

4 2 2 4

0.48 0.16 0.16 0.48

0.08 1.00

0.16 3.02

Regardless of how many factors are included in an IFE Matrix, the total weighted score can range from a low of 1.0 to a high of 4.0, with the average score being 2.5. Total weighted scores well below 2.5 characterize organizations that are weak internally, whereas scores significantly above 2.5 indicate a strong internal position. In light of this, GUMCs position with a score of 3.02 reflects a somewhat strong internal position, though it needs to pursue the private sector more vigorously and endeavor to become a price leader consistent with maintaining high quality.

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F.

SWOT Strategies

Any organization, whether military, product-oriented, service-oriented, governmental, or even athletic, must develop and execute good strategies to win. A good offense without a good defense, or vice versa, usually leads to defeat. Developing strategies that use strengths to capitalize on opportunities could be considered an offense, whereas strategies designed to improve upon weaknesses while avoiding threats could be termed defensive. Taking into consideration the above identified External Audit of the Opportunities and Threats (OT) and the Internal Audit of Strengths and Weaknesses (SW), a SWOT Matrix can be compiled and is presented below as: SO (strengths-opportunities) Strategies; WO (weaknesses-opportunities) Strategies; ST (strengths-threats) Strategies; and, WT (weaknesses-threats) Strategies. Matching key external and internal factors is the most difficult part of developing a SWOT Matrix, requiring good judgment and there is no one best set of matches. Strengths 1. The Kuwaiti government is restricting entry of new companies into the bitumen-based products market 2. GUMC holds 25 pecent share of the bitumenbased products market 3. Non-price aspects such as quality are very important for marketers and distributors of bitumen-based products 4. The company can produce approximately 4 million square meters of membrane products in a year 5. GUMC is likely to launch a joint venture with a foreign company to increase its market share S-O Strategies 1. As GUMC holds 25 percent share of the bitumen-products market, it should ride on the tide of the construction boom in Kuwait, targeting the government as well as the private sector 2. GUMC should launch the proposed joint venture Weaknesses 1. GUMC is tending to neglect the private sector as it is pricesensitive 2. Variety is lacking in bitumen products 3. There is strong competition from bitumen that used polystyrene in its components 4. The advertising and distribution of the Kuwaiti products are more sluggish than Saudi and Emirati products 5. The Kuwaiti product is concentrated on housing projects away from the market

Opportunities 1. Quality, timely delivery, and meeting specific needs are crucial to obtain orders from users and distributors 2. Construction activity in Kuwait is booming 3. There is infusion of additional funds in

W-O Strategies 1. As the company is already reputed for quality, it must find ways to reduce prices through cost-cutting measures and target the neglected and price-sensitive private sector 2. GUMC should advertise more

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the economy because of oil sales 4. The Public Authority for Housing in Kuwait has ambitious plans to create additional townships to alleviate the shortage of housing 5. With the budget surplus, the government plans to build schools, hospitals, and other public institutions 6. Demand for bitumen-based products for housing in Kuwait can be expected to increase 7. Older buildings are being replaced by multi-storied buildings with larger floor area Threats 1. Often local customers seek nonKuwaiti sources 2. Unlike the cheaper Saudi bitumen which is subsidized by the Saudi government, Kuwaiti bitumen is not subsidized 3. The private sector prefers cheaper bitumen, rather than good-quality bitumen 4. The competition to sell the bitumenbased products is very intense, and could erode the existing competitive advantage 5. Increasing competition from local, regional, and international competitors can be expected

with a foreign company to offset the advantages of countries importing bitumen-based products into Kuwait

aggressively to capture both government and private sector markets with the expansion of private and public construction activities

S-T Strategies 1. Availing of government patronage, GUMC should lobby with the government for subsidy of its bitumen-based products to counter subsidized foreign imports 2. The government and GUMC should promote the advantages of Kuwaiti bitumen-based products to sensitize the public across all market sectors

W-T Strategies 1. GUMC could diversify its bitumen-based product line according to the products that are most in demand

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SO Strategies use a firms internal strengths to take advantage of external opportunities. GUMC can capitalize on its high reputation and monopoly in Kuwait as the market leader with quality bitumen-based products, and make concerted efforts to expand into the private sector to avail of the construction boom. The company could also launch a joint venture with a strong foreign partner to offset the advantages of importing companies. WO Strategies aim at improving internal weaknesses by taking advantage of external opportunities. Consistent with expansion capabilities, GUMC could launch an aggressive advertising campaign, especially to target the private sector with costcutting measures translating into lower product pricing. ST Strategies use a firms strengths to avoid or reduce the impact of external threats. GUMC needs to lobby the government for subsidies to take on the subsidized foreign imports, together with concerted promotion across all market sectors. WT Strategies are defensive tactics directed at reducing internal weaknesses and avoiding external threats. GUMC could diversify its bitumen-based product line according to the products that are most in demand.

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G.

SPACE Matrix

The Strategic Position and Action Evaluation (SPACE) Matrix below indicates whether aggressive, conservative, defensive, or competitive strategies are most appropriate for a given organization. The axes of the SPACE Matrix represent two internal dimensions: (Financial Strength [FS] and Competitive Advantage [CA]) and two external dimensions: (Environmental Stability [ES] and Industry Strength [IS]). These four factors are perhaps the most important determinants of an organizations overall strategic position.

FS
Conservative
+7 +6 +5 +4 +3 +2 +1

Aggressive

GUMC

CA

IS
-7 -6 -5 -4 -3 -2 -1 -1 -2 -3 -4 -5 -6 +1 +2 +3 +4 +5 +6 +7

Defensive

-7

Competitive

ES
Financial Strength (FS)* Return on Investment Leverage Liquidity Working Capital Cash Flow (*These figures are best estimates based on performance and market realities, as the case does not provide financial information) Financial Strength (FS) Average Environmental Stability (ES) Risk involved in business Technological Changes Price Range of Competing Products Competitive Pressure Barriers to Entry

4 4 5 5 5

-2 -3 -5 -4 -1

4.6

Environmental Stability (ES) Average

-3.0

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Competitive Advantage (CA) Market Share Product Quality Customer Loyalty Product Life Cycle Technological Know-how Control over Suppliers & Distributors Competitive Advantage (CA) Average Y-axis: FS + ES = 4.6 + (-3.0) X-axis: CA + IS = (-2.3) + (4.3)

-2 -1 -3 -3 -2 -3 -2.3

Industry Strength (IS) Growth Potential Financial Stability Ease of Market Entry Resource Utilization Profit Potential Technological Know-how Productivity, Capacity Utilization Industry Strength (IS) Average

6 4 3 4 5 4 4 4.3

= +1.6 = +2.0

The directional vector of the SPACE Matrix above indicates that GUMC is in Quadrant I of the SPACE Matrix. Therefore, according to the results of the SPACE Matrix, it is recommended that GUMC embark on an Aggressive Strategy on a growth trajectory in the promising bitumen-based construction industry, availing of the Kuwaiti governments patronage. The company should thus balance all extant external and internal realities impinging on it. According to the SWOT recommendation, the company could avail of horizontal integration (acquiring similar firms towards oligopoly or monopoly) through joint venture partnership with a strong foreign firm. It may not be timely for the company to be forward integrated (taking ownership of distribution channels and nodes such as warehouses and retail store chains), or for backward integration (acquiring firms providing raw bitumen). It appears from the overall strategic thrust of the various analyses including the CPM, EFE, IFE, SWOT, and Product Positioning Matrix, that GUMC is likely to adopt a related diversification strategy as the companys mainstay is the production of highquality bitumen-based construction products. It can therefore acquire a firm(s) that could help in innovating and cost-cutting to establish GUMCs presence in the private sector with lower pricing. GUMC will thus need to embark on a market penetration and market development strategy, together with product development to meet quality, price, and demand for various market segments in the promising Kuwaiti market for bitumen-based construction products.

H.

Grand Strategy Matrix

All organizations can be positioned in one of the Grand Strategy Matrixs four strategy quadrants. The Grand Strategy Matrix is based on two evaluative dimensions: competitive position and market (industry) growth. Any industry whose annual growth in sales exceeds 5 percent could be considered to have rapid growth. GUMCs sales growth is unknown based on information provided in the case, but its market leadership, monopoly, government patronage, and 25 percent market share puts the company in a healthy annual growth trajectory. Appropriate strategies for an organization to consider are listed in sequential order of attractiveness in each quadrant of the matrix. Firms located in Quadrant I of the Grand Strategy Matrix are in a strong strategic position with rapid market growth. For these firms, Copyright 2011 Pearson Education Limited

continued concentration on current markets (market penetration and market development) and products (product development) is an appropriate strategy (see also the SPACE Matrix above). As it would be unwise for a Quadrant I firm to shift notably from its established competitive advantage(s), GUMC should consolidate and expand its market. When a Quadrant I organization has excessive resources, then backward, forward, or horizontal integration may be effective strategies in the case of GUMC, horizontal integration has been recommended in the SPACE Matrix analysis. When a Quadrant I firm is too heavily committed to a single product, then related diversification may reduce the risks associated with a narrow product line. GUMC has a successful product line, which could be further extended through related diversification. Quadrant I firms can afford to take advantage of external opportunities in several areas. They can take risks aggressively when necessary and this is recommended for GUMC (see also the SPACE Matrix above).
Rapid Market Growth

Quadrant II

Quadrant I

GUMC

Weak Competitive Position

Strong Competitive Position

Quadrant III

Slow Market Growth

Quadrant IV

1. 2. 3. 4. 5. 6. 7.

Market development Market penetration Product development Backward integration Forward integration Horizontal integration Related diversification

According to its Quadrant I location in the Grand Matrix, GUMC is in a strong competitive position, and underscores the competitive stance reflected in the SPACE Matrix with the possible addition of Related Diversification by joint venturing with a strategic foreign partner to cut costs, and to optimize production, market expansion, product diversification, and overall profits. When a Quadrant I firm is too heavily committed to a single product, then related diversification may reduce the risks Copyright 2011 Pearson Education Limited

associated with a narrow product line. It is therefore recommended also that GUMC diversify its product line to include the most profitable bitumen-based construction products. As a Quadrant I firm, GUMC can afford to take advantage of external opportunities in several areas; it can take risks aggressively to make inroads into the booming private sector.

I.

The Quantitative Strategic Planning Matrix (QSPM)

The only analytical technique in the literature designed to determine the relative attractiveness of feasible alternative actions is the Quantitative Strategic Planning Matrix (QSPM), which comprises Stage 3 of the strategy-formulation analytical framework. This technique objectively indicates which alternative strategies are best. The QSPM uses input from Stage 1 analyses and matching results from Stage 2 analyses to decide objectively among alternative strategies. That is, the EFE Matrix, IFE Matrix, and Competitive Profile Matrix that make up Stage 1, coupled with the SWOT Matrix, SPACE Matrix, and Grand Strategy Matrix that make up Stage 2, provide the needed information for setting up the QSPM (Stage 3). The QSPM is a strategic decision-making tool that allows strategists to evaluate alternative strategies objectively, based on previously identified external and internal Critical Success Factors. Like other strategy-formulation analytical tools, the QSPM requires good intuitive judgment. The left column of a QSPM consists of key external and internal factors (from Stage 1), and the top row consists of feasible alternative strategies (from Stage 2). Specifically, the left column of a QSPM consists of information obtained directly from the EFE Matrix and IFE Matrix. In a column adjacent to the Critical Success Factors, the respective weights received by each factor in the EFE Matrix and the IFE Matrix are recorded. The top row of a QSPM consists of alternative strategies derived from the SWOT Matrix, SPACE Matrix, and Grand Strategy Matrix. These matching tools usually generate similar feasible alternatives. However, not every strategy suggested by the matching techniques has to be evaluated in a QSPM. Strategists should use good intuitive judgment in selecting strategies to include in a QSPM.

Strategy 1

Strategy 2

Strategy 3

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With 25 percent share of the bitumenproducts market, GUMC should target the government as well as the private sector

GUMC could diversify its bitumenbased product line according to the products that are most in demand AS TAS

GUMC should launch the proposed joint venture with a foreign company to offset the advantages of importing countries AS TAS

Key Factors Opportunities 1. Quality, timely delivery, and meeting specific needs are crucial to obtain orders from users and distributors 2. Construction activity in Kuwait is booming 3. There is infusion of additional funds in the economy because of oil sales 4. The Public Authority for Housing in Kuwait has ambitious plans to create additional townships to alleviate the shortage of housing 5. With the budget surplus, the government plans to build schools, hospitals, and other public institutions 6. Demand for bitumen-based products for housing in Kuwait can be expected to increase 7. Older buildings are being replaced by multi-storied buildings with larger floor area Threats 1. Often local customers seek non-Kuwaiti sources 2. Unlike the cheaper Saudi bitumen which is subsidized by the Saudi government,

Weight

AS

TAS

0.08 0.12 0.06 0.08

4 4 2 4

0.32 0.48 0.12 0.32

3 4 3 4

0.24 0.48 0.18 0.32

3 3 2 3

0.24 0.36 0.12 0.24

0.10

0.40

0.30

0.20

0.10

0.40

0.40

0.40

0.06

0.18

0.24

0.06

0.07 0.09

1 1

0.07 0.09

3 2

0.21 0.18

3 3

0.21 0.27

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Kuwaiti bitumen is not subsidized 3. The private sector prefers cheaper bitumen, rather than good-quality bitumen 4. The competition to sell bitumen-based products is very intense, and could erode the existing competitive advantage of GUMC 5. Increasing competition from local, regional, and international competitors can be expected TOTAL Strengths 1. The Kuwaiti government is restricting entry of new companies into the bitumenbased products market 2. GUMC holds 25 percent share of the bitumen-based products market 3. Non-price aspects such as quality are very important for marketers and distributors of bitumenbased products 4. The company can produce approximately 4 million square meters of membrane products in a year 5. GUMC is likely to launch a joint venture with a foreign company to increase its market share Weaknesses 1. GUMC is tending to neglect the private sector as it is price-sensitive 2. Variety is lacking in bitumen products 3. There is strong competition from bitumen that used polystyrene in its components 4. The advertising and distribution of the Kuwaiti products are more sluggish than those of Saudi and Emirati products

0.07 0.07

2 2

0.14 0.14

2 3

0.14 0.21

3 3

0.21 0.21

0.10 1.0

0.20 2.86

0.20 3.1

0.40 2.92

0.12

0.36

0.36

0.24

0.12 0.10

4 4

0.48 0.40

4 3

0.48 0.30

3 3

0.36 0.30

0.08

0.32

0.24

0.32

0.10

0.40

0.30

0.40

0.12 0.08 0.08

1 2 --

0.12 0.16 --

2 4 --

0.24 0.32 --

4 3 --

0.48 0.24 --

0.12

0.24

0.24

0.36

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5. The Kuwaiti product is concentrated on housing 0.08 projects away from the market SUBTOTAL 1.00 SUM TOTAL ATTRACTIVENESS SCORE

0.16 2.64 5.50

0.16 2.64 5.74

0.24 2.94 5.86

J.

Recommendations
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Strategy #3: It is recommended that GUMC launch the proposed joint venture with a foreign company to offset the advantages of foreign countries importing bitumenbased products into Kuwait. Strategy #2 could be incorporated into Strategy #1 after the joint venture is launched, to avail of foreign technology and other competencies; and Strategy #3 could follow to expand the market in order to include the booming private sector with efficient foreign partnership.

K.

Epilogue

Gulf Upstream Manufacturing Company (GUMC), the market leader and monopoly player in Kuwait, is well established and highly regarded as the leading manufacturer of bitumen-based construction products such as bitumen-based paints, membranes, and coatings. The company has taken advantage of the Kuwaiti governments strategy to diversify its hitherto largely oil-based economy. GUMCs product quality is high, and it has captured the lucrative government market with adequate patronage to garner 25 percent of the market share. Though GUMC needs to lobby the government for subsidies to counter the cheaper Saudi and Emirati foreign imports, it has nonetheless neglected the private sector. This imbalance in the face of an impending construction boom needs to be redressed in order to maintain market leadership, and to increase market share. Following a multi-pronged analysis using judgment and reasoning coupled with numerical and graphical outputs, three strategic choices were presented for GUMC: (1) As GUMC holds 25 percent share of the bitumen-products market, it should ride on the tide of the construction boom in Kuwait, targeting the government as well as the private sector. (2) GUMC could diversify its bitumen-based product line according to the products that are most in demand. (3) GUMC should launch the proposed joint venture with a foreign company to offset the advantages of countries importing bitumen-based products into Kuwait. According to the comprehensive and decisive Quantitative Strategic Planning Matrix (QSPM), Strategy #3, with the highest Sum Total Attractiveness Score (STAS) [5.86], has emerged as the best option among the three promising alternatives. This involves related diversification by joint venturing with a strategic foreign partner to cut costs, and to optimize production, market expansion, product diversification, and overall profits. This means that foreign collaboration needs to be embarked upon immediately. As the STAS for the three possible and related strategies are only marginally different from the above score of 5.86, GUMC should diversify its product line according to the most profitable bitumen-based construction products thus, Strategy #2 (STAS: 5.74) could be incorporated into Strategy #3. Further, the proposed joint venture should target both public and private sectors equitably [Strategy #1 (STAS: 5.50)] in order to maintain market leadership, to seize the imminent construction boom, and to neutralize foreign competition in Kuwait.

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