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Zamil Industrial Investment is a well known construction company that was founded in Saudi Arabia in 1998. Zamil has been manufacturing products, engineering systems and a number of different services for the construction industry. As it will be analyzed further we know that over 30% of the revenue generated by Zamil occurs from investments in other countries where there is a high demand for construction. This can be seen from the fact that Zamil operates in over 90 countries and has manufacturing facilities in UAE, Egypt, Austria, India, Vietnam and Italy.
The prime reason behind the success of any business including Zamil Industrial is the vision which is:
`A Winning Industrial Leader Creating Superior Values for Business and Community `
When Zamil Industrial was founded in 1998, it was initially classified as a Closed Joint Stock Company but went public in 2002 when it was listed on the Saudi Stock Market. Over the years Zamil Industrial has acquired a number of companies around the world that have helped them in reaching the position they are in now. Some of the major acquisitions include:
1999: Clima Tech - Austria: Largest producer of technology based air handling systems in Europe.
2000: Geoclima Srl - Italian manufacturer of Chillers
2006: Zamil Industrial acquired a 51% controlling stake in Arabian Fiberglass Insulation Company from the Saudi Amiantit Group
These acquisitions and the fact that Zamil Industrial has increased its capital from SAR 350 million in 2004 to SAR 450 million in 2006 to over SAR 600 million in 2010 shows that Zamil Industrial is going in the right direction and based on our financial analysis we will see that they have a profitability also
Zamil Industrial is the umbrella of five sectors, Steel, HVAC, Glass, Insulation, and Concrete. The company exports its product to more than 90 countries worldwide. There are various companies under each sector which are either solely owned by Zamil Industrial, or are joint ventures with various international companies from USA and Canada. For instance, Zamil Steel Industries and Zamil Air Conditioners are soley owned under Zamil. While Zamil is in joint venture with Canam Asia Ltd. (CAL) from Canada and Petro-Chem from USA.
It is very important to have a set of core values for any organization as these values are the core of the firm and lay a foundation based on which the work needs to be performed. Zamil Industrial Investment also has a set of core values that need to be followed by every employee and due to the strong emphasis put on these values; Zamil has been successful over the years.
Honesty and Integrity: Zamil Industrial has put a strong emphasis on being honest and the importance of following a certain level of business ethics when conducting business. Zamil tends to follow a level of professionalism and integrity when it comes to dealing with clients.
Customer and Excellence: Zamil tends to cater to the needs of their customers in any way possible and in regard to this are willing to work as hard as possible in order to provide their customers with products that signify high quality and excellence.
Innovation and Change: Innovation is very important in any organization. Zamil Industrial focuses on innovation and changes by continuously learning from experiences and based on this trying to create products through innovation that will bring about great success to the business.
Leadership and Prudence: In order to fulfill the needs of customers, Zamil creates solutions that are based on talent and leadership. In order to enter more markets and increase the value to shareholder`s, Zamil adopts a cost effectiveness and leadership culture by focusing on the customers and providing them with the required benefits.
Community and Prosperity:A lot of emphasis is put on not creating a high value for the people that Zamil works with but also with the environment in which the business is operating. Zamil tends to bring prosperity to everyone as their main focus on mutual prosperity referring to everyone being involved tastes some form of success.
In order to taste success, it is imperative that you have a successful workforce that will lead you towards the goal that you have set. It also depends on the framework of the organization that is followed by the company. Zamil has an organization structure where the Chairman has authority over every sector, however as we see in the organizational structure that each of the 5 sectors have either a GM or a President, we see that there is decentralization meaning that despite the orders coming from the Chairman, the line managers for each sector have the authority to influence the employees in the work that needs to be done and how.
Looking at the economy of Saudi Arabia, we see that majority of the revenue that is generated is from oil. Oil is the prime commodity in Saudi Arabia and has led to economic development over the years. Due to Saudi Arabia possessing over 20% of the world`s oil, the petroleum and construction industries have been greatly affected by this amazing statistic. There has been a huge increase in the construction projects being awarded to many different construction companies such as Zamil Industrial Investment and Saudi Industrial Development Co. In 2011, the Saudi Arabian economy is expected to increase by 4.5%, this with the increasing oil prices and an increase in demand is showing signs that the future for the Saudi Business community as well as the construction industry looks optimistic.
There has been a sharp decrease in the inflation rate in Saudi Arabia from 9.9% in 2009 to 5.7% in 2011. This has helped Saudi Arabia deal with the global crisis that resulted in slower growth and a decrease in the number of construction projects being offered to companies.
Looking at the unemployment rate in Saudi Arabia, it has gone down to 10.8% in 2011 compared with 13% in 2008. This shows that there has been an increase in the level of employment which related to a growing economy.
Analyzing the risk level in Saudi Arabia, we see that there is a low economy risk due to an increase in the oil prices and the high level of government spending has helped the economy of Saudi Arabia to recover over the past 2 years.
The political structure of Saudi Arabia is similar to that of other countries in the Middle East where the constitutional monarchy is followed. King Fahd is the ruler of Saudi Arabia, however after he suffered a stroke in 1995, the Crown Prince Abdulla is the de facto ruler. The constitution of Saudi Arabia follows the Koran and the traditions of the Prophet Muhammad and based on these practices and teaching the Basic Law was set out stating the rights of governments, citizens and the various powers held by the state.
Saudi Arabia is one of those countries that is part of the Gulf Cooperation Council (GCC). The prime reason behind forming this council was to strengthen ties and relationships between the people, to devise similar regulations in different fields such as finance, economy and trade and also to establish a common currency in the near future.
Analyzing the political risk diagram, Saudi Arabia is doing an amazing job in the legal system, international transactions policy, monetary policy, business environment, labor flexibility, government stability, and social stability. However the concern rises as Saudi Arabia is not being able to maintain regional stability
Competitiveness of the market depends on ease of new companies entering the industry or whether the entry barrier is very high due to intensive competition. Competition is limited as the construction projects are allotted based on the discretion of the Saudi government. As of now there are a few companies that have a stronghold on the Saudi Arabia construction market such as Zamil Industrial Investment and Bin Laden construction. However, new companies do have the opportunity to enter the Saudi construction industry as there is a huge gap in the market. The level of product innovation is very low and customers are willing to accept a low level of service which shows that companies can enter the industry. Companies such as Sika feel that if they offer a high range of innovative products and full technical support they can get a high market share thus increasing competition in the Saudi Arabia construction industry.
In the Middle East, there is a high market share in Saudi Arabia and UAE for the construction industry. Over the past 10 years, we see that UAE has dominated the construction industry with a high market share. Saudi Arabia currently has a market share of 38% in the region with construction projects worth $624 billion either planned or underway. Saudi Arabia in 2011 plans to award construction projects worth $86 billion which shows that the construction industry is moving in a positive direction meaning that demand for construction companies is on the rise.
According to a report published in 2010 by the Arabian business, it states that the Saudi Arabia construction industry is going to take over from the UAE as the largest construction and infrastructure market in the Middle East with planned projects worth $322.9billion compared to $252 billion in the UAE.
This shows that construction market is moving in an upward direction and demand for construction companies due to the high level of construction projects is rising. Construction companies can take advantage of this by entering the industry as soon as possible. The construction sector has great potential to expand especially the building of houses as the population of Saudi Arabia is increasing at an average rate of 2.5% per year. Apart from that in order for Saudi Arabia to be part of the National Industrial Cluster Development, the construction industry will be an integral part in doing so. Zamil Industrial Investment can take advantage of their presence in the market by acquiring as many projects in order to attain a higher market share.