Six tips for success in a difficult market
Ionce read: “Every challenge contains within it the seeds of opportunity and growth.” Although there are challenges in the current manufacturing market due to the wider global slowdown, a number of opportunities exist that companies should consider in order to remain competitive.
Looking at what Senaat has done over the last two years, I believe there are six tips for manufacturing companies to succeed. Following these steps, our portfolio companies are working to ensure we continue to offer high-value products and services to retain our strong brand name in the market.
Bargaining power
Price pressure and reductions in projects have contributed to a slowdown in the manufacturing sector, along with an influx of cheap imports from foreign competitors. This creates opportunities for investment and procurement.
The current economic climate has created unprecedented negotiating power on the purchasing side, meaning there are unique opportunities for procurement. Rates of vendors are going down, creating a buyers’ market for companies that are selective.
For example, industrial machinery from foreign markets facing slowdown such as the European Union and China, as well as Germany and Italy, the hubs of European manufacturing, is available at lower rates when compared to previous years.
While these opportunities do not apply to all areas in the manufacturing industry, companies can consider these options if specific market opportunities benefit their procurement needs.
Explore markets beyond UAE
Currency fluctuations have created favourable opportunities for project financing — specifically in euros and yen — where the UAE dirham is pegged to the US dollar, which has performed strongly this year.
In addition to these beneficial exchange rates, foreign banks are eager to lend to UAE companies as they possess high growth potential in spite of the current slowdown.
Al Gharbia Pipe Company, a Dh1.1 billion joint venture between Senaat, JFE Steel Corp and MISC, two of Japan’s leading steel companies, successfully obtained financing in 2016 from an international consortium of mostly Japanese lenders providing $185 million for the project at a globally competitive rate.
Improve operations
Companies must combat price pressure and tighten margins by optimising their operations to ensure maximum efficiency.
Senaat’s portfolio company NPCC has done so in several ways, as it has mitigated the impact of a global slowdown in the oil and gas sector through enhancing its operational processes. It is executing a number of projects in the UAE and wider Asian region and has prudently managed costs throughout the supply chain in this industry down cycle.
Additionally, portfolio company Emirates Steel is pursuing operational excellence through applying to the Seka Diamond Award, which factors companies’ automated functions, including order placement, supply chain management, operations planning, quality control and assurance, inventory control, dispatch and customer service to financial operations.
Expand in new markets
Companies may consider venturing into new markets now to establish a presence in countries with future potential.
Our portfolio company Agthia — a leading food and beverage company — has done this through strategic acquisitions in Kuwait and Saudi Arabia, markets that offer great future potential. It recently acquired a Jeddah-based water bottling company and entered a joint venture with a Kuwaiti manufacturing company to set up a water bottling plant in Kuwait, which is a major step in its expansion strategy and growing its Al Ain Water brand regionally.
Invest for the long term
While the short-term outlook is that economic growth will continue to be slow, now is the time to invest in long-term domestic and regional opportunities. Companies should take advantage of pricing, financing and market conditions immediately to create future benefits. Because of this, although some future projects have been put on hold, many long-term projects in the UAE are progressing well.
Senaat is supporting the UAE’s economic vision through supporting three of these projects — the Al Gharbia Pipe Company, Ducab Aluminium Company (DAC) and Talex aluminium downstream projects.
Invest in domestic economy
The domestic market will recover from this current downturn sooner or later, and it is important that businesses invest now in local talent who will be the future drivers for our companies as well as our country.
Senaat has invested over Dh7.5 million in 2016 alone in training and development initiatives for our employees to provide them with technical and leadership skills for the future. The writer is chief executive at Senaat. Views expressed are his own and do not reflect the newspaper’s policy.
The current economic climate has created unprecedented negotiating power on the purchasing side