SADAFCO

History of the Saudia Dairy & Foodstuff Company

In 1976 a joint venture among Saudi businessmen, Kuwaiti businessmen, and the Danish Turnkey Dairies gave rise to the establishment of the Saudia Dairy & Foodstuff Company. At the beginning, owing to financial constrains the company began its operations with the production of the UHT milk.

During this time the company’s factory was located in Jeddah. Ireland (112) points out that over time the company managed to make massive profits and as a result in 1987 Saudia Dairy & Foodstuff Company acquired the Saudi Danish Dairy Company as well as the Medina Danish Dairy Company.

It is as a result of this acquisition that the company merged the two and it started being referred to as Saudia Dairy & Foodstuff Company. According to her, the change to Saudia Dairy & Foodstuff Company did not take place immediately and therefore it had to wait until all the formalities are concluded.

The company changed its name to Saudia Dairy & Foodstuff Company (SADAFCO) in the year 1993. Beginning with UHT at the time of inception, the company had by early 1990s managed to introduce other products in the market most notably being the tomato paste, cheese- although this was a joint venture with a subsidiary of the New Zealand Dairy Board, hommos, bottled mineral water as well as snacks.

Global Investment House (p 3) says that Saudia Dairy & Foodstuff Company has undergone other important milestones that have placed it among the largest producers of dairy products in Saudi Arabia and in the Middle East as a whole. It notes that in 1989 Saudia Dairy & Foodstuff Company was the first company in the Middle East to begin commercial production of tomato paste in Tetra Pak packaging. In addition, it notes that this same company became the first to launch long life hommos in Tetra Pak packaging.

Furthermore, in the year 1998 the company commenced the production of bottled water as well as carbonated juice drinks and also established regional distribution centre in Jeddah so that their products could reach as many people as possible. Having done all this that company was well placed to compete with other multi nationals that were planning to initiate similar projects in the area.

Industry in which the Saudia Dairy & Foodstuff Company operates

Saudia Dairy & Foodstuff Company is a manufacturing industry. This means that it converts raw materials into finished goods. Some of the finished products produced include Tomato paste, UHT milk, and juice. Then the question is where do their raw materials come from?

According to Bricault (p 124) the key ingredients in the production of juice are fruits. He says that to produce an orange juice, the machine has to first of all crash orange fruits after which other preservative chemicals are added to it. In addition to that he notes that tomato paste production has to follow an almost similar way in its production.

This is also a similar case when it comes to the production of UHT milk. Therefore, according to him Saudia Dairy & Foodstuff Company changes the original state of a substance like orange, or tomato in order to make the end product stay for a long time without going bad. As a result he says that Saudia Dairy & Foodstuff Company is a manufacturing company.

Products or services offered by the Saudia Dairy & Foodstuff Company

UHT and fresh milk

As earlier stated when the company began its operations in 1976, UHT milk was the first product to be manufactured. This milk consisted of whole milk, skimmed milk, enriched milk as well as the flavored milk. All the UHT milk sold in Saudi Arabia or in the Middle East is marketed under the label of SAUDIA.

According to Ireland (p 121) the company has continued to realize increased sales of this product year in year out. She says that this as been made possible by the company’s decision to maintain quality of its UHT milk coupled with the innovative nature of the company employees. She says that in the meeting held in 2004, the company managing director estimated that by the year 2010, the market for its UHT milk would increase in the same rate as the population growth in the Middle East.

At the same time sales from their fresh milk has also increased more than the company estimated and as a result he says that the company management were forced to increase their production to cater for this demand. Furthermore he says that the company’s management team hoped that this increase in demand for fresh milk would not reduce the market demand of their UHT milk which for a long time has dominated the Middle East market.

Ice cream

Just like the fresh and the UHT milk this company usually sells its ice cream under the SAUDIA brand. Global Investment House (p 1) says that besides the SAUDIA brand other names used to market the Saudia Dairy & Foodstuff Company ice cream are the ‘Baboo’ and the ‘Movenpic’.

According to it, Movenpic products are manufactured and produced by this company under the license from the Kingdom of Saudi Arabia. The products are sold under this license in countries like, Bahrain, United Arab Emirate (UAE), Qatar, Kuwait, Oman, and Saudi Arabia herself.

It notes that the company’s management team hopes that the market for ice cream is going to replicate the success of the other products most notably being the milk. In order to achieve this, it argues that the company has a plan of building on the current sales by diversifying the products that they will avail in the markets. Some of the ice cream varieties that they have include vanilla, and chocolate.

It says that if the company continues in its quest to come up with new products, then sales from ice cream will definitely be on the rise as this is going to place them ahead of their competitors for instance the Almarai Company which had dominated this dairy products sector for a long time prior to the establishment of Saudia Dairy & Foodstuff Company.

Therefore, according to it all that the company needs is to inject a little more capital so that they can keep up the pace of those who started ice cream production ahead of them and possibly go ahead of them.

Juices

In juice production and marketing, the company uses the brand name SAUDIA to market them. According to Ireland (p 123) Saudia Dairy & Foodstuff Company has introduced other brands to the market namely the ‘Majestic’ and ‘Chiilz’. Besides juice production he contends that this company has also ventured in the production of bottled water which is also marketed under the brand name SAUDIA.

In order to cater for all segments in the society the company produces its water in different quantities. He says that this is meant to ensure availability of water to any one regardless of the place he or she is in. for instance at work, traveling, and even at home.

In the recent past Saudia Dairy & Foodstuff Company has introduced iced tea which comes under the brand name ‘Chiilz’ as well as the carbonated energy drink that comes under the brand name ‘GR8’. In addition to these products the company has gone ahead and launched the ‘Bonjus’ brand that caters for all the natural juices produced in the company.

She says that all this brands are intended to create uniqueness in the product and also to show how diverse the company is in terms of products production. However since the inception of juice production, she notes that, this product has not attracted much attention from the customers and therefore the company directors have been forced to go back to the drawing board and come up with new ways of making this product attractive and acceptable to the customers.

She argues that this is only possible if they carry out a market research to establish which juice flavors are being demanded for most of the times by the customers. If that happens she contends that they will be in a position to know what to produce and in what quantities.

Tomato paste

As indicated earlier this company became the first one to begin packing tomato paste in a Tetra Pak packaging. According to Bricault C. G. (p 178) Saudia Dairy & Foodstuff Company has managed to maintain the lead in terms of the market share. As a result of this advantage the company is willing to increase this market share by a way of introducing more products in order to create brand differentiation.

He says that in order to attract more customers the company is hoping for cuts in production costs thus price reduction in the shops, without compromising the quality of the product. If this is achieved he says that in the long run the company would for sure increase its market share in tomato paste and probably make other competitors think of how to counter Saudia Dairy & Foodstuff Company.

Snacks, Hommos, and Mutabal.

In 1995 Saudia Dairy & Foodstuff Company got hold of Sara Snack Food which resulted in the latter being considered as part and parcel of the company’s manufacturing division. Most of the products produced by this new acquisition were sold under the brand name of Crispy. According to SADAFCO (p 23) most of these products were supplied to institutions of learning.

It says that besides the snacks the company is solely responsible for the production of hommos and mutabal. It argues that in the recently held annual general meeting the company’s managing director revealed to the share holders of the company’s intention to venture into ‘ready to eat’ segment. Under this segment the company will be making food stuffs that the customers can eat immediately after purchasing.

Cheese

Together with another company SNZMPL, Saudia Dairy & Foodstuff Company markets cheese under the brand name SAUDIA. According to Bricault (p 126) in Saudi Arabia, Saudia Dairy & Foodstuff Company commands the lion share in the production of bulk feta cheese of about 5kg. He points out that despite the availability of cheap cheese from Europe, the Saudia Dairy & Foodstuff Company has continued in her dominance in cheese.

Environmental analysis of the industry

Although the company has continued to face stiff competition from other players in the field, it has continued to perform excellently because in spite of seeking to make an extra coin popularly referred to us profit, the company is environmental conscious. According to Arab News (p 2) most of their packaging are environment friendly.

It says that the company has continued to discourage its consumers from throwing away the packets in an open area through the writings in the packets. Furthermore the company has continued to embrace the modern technology in all its operation for instance it does not accept any job application done through papers. All this is meant to conserve and protect the environment.

According to it some of their products are socially acceptable by people from all walks of life. It notes that their products are designed in a way that Christians, Muslims, and Hindus can consume without any religious restrictions. In addition to that it contends that the government action to lower the cost of excise duty has hurt the company in such a way that some of her products are considered expensive compared to the ones from other foreign countries. As a result her sales decreases significantly which translate to reduced profits.

SWOT analysis

SWOT analysis refers to the Strengths, Weaknesses, Opportunities and Threats a company normally faces in its day to day running. According to Arab news (p 12) the strengths of the Saudia Dairy and Foodstuff Company banked on its employees. He notes that the company employees are trustworthy and reliable. To him the Saudia Dairy and Foodstuff Company staff have been trained to work under no or minimum supervision.

In doing this the company ensures that when the employees are off to work time wastage is minimized as each employee knows what is expected of him or her. He points out that the company employees are dedicated to their work. In addition the company has created a good working condition for its employees which make these employees loyal to the company. In the long run the company realizes high productivity per employee.

In addition Bricault (128) says that the company has managed to open up other retail outlets so that it can facilitate the distribution of her products to the consumers with ease. He says that opening up these retail outlets in different parts of the country helps establishing the location that has high demands for certain products. Therefore in the long run the company will be able to know how much of her products should be allocated in certain location in order to avoid over stoking or under stocking.

The other strength about Saudia Dairy and Foodstuff Company is its ability to create the best packaging solution to its customers. Global Investment House (p 2) notes that Saudia Dairy and Foodstuff Company do carry out market research to identify the taste of the customers. Therefore, it is after doing this that they have managed to offer such a service to their customers better than their competitors. As a result consumers keep on streaming to the shops to get their products.

Besides this, the company has a strong believe in Allah. It says that there is a belief that Allah rewards those who are sincere and good to others and at the same time punishes those are not good to their fellow human beings. Driven by this believe the company management has tried as much as possible to be sincere to its customers in terms of quality with a hope that Allah will bless them. Because of this customers have continued to rely on Saudia Dairy and Foodstuff Company products for their use at homes.

According to Bricault (p 173) the reliance by the Saudia Dairy and Foodstuff Company on the economy of Saudi Arabia is one of its key weaknesses. He says that during the economic crisis of 2008-2009 the company was greatly affected because the economy of Saudi Arabia was also affected.

He says that if the company can man age to detach itself from relying on the country’s economy, then it is likely to move ahead regardless of the situation. Saudia Dairy and Foodstuff Company opportunities include a developed market that that has been brought about by increased players in the sector in addition there is also a good business environment. He says that the government has provided adequate security for investors thus propelling the economy of Saudi Arabia to greater heights.

Some of the threats faced by the Saudia Dairy and Foodstuff Company include the availability of cheap products from other countries in Europe and China. In addition there is increased investment from the multi national corporations in Saudi Arabia that are specializing in dairy products. He says that unless the company adopts a new and modern ways of operation then it might not keep up with the pace of the upcoming companies.

Planning and strategy of the company

According to Bricault (p 128) in 2004 Saudia Dairy and Foodstuff Company made plans to be listed in the stock market so that it could raise more capital. After fulfilling the Capital Market Authority requirements it was finally listed in 2005 having received a massive over subscription of up to 6.5 times.

He says that during its inception the managing director by then had envisaged opening branches in other countries of the world. He notes that because of the dedicated team that came after him the company is today listed in the stock exchange and also has other branches n the Middle East. Some of the countries where these branches have been opened include United Arab Emirates, Qatar, Oman, and Bahrain.

In the Saudia Dairy and Foodstuff Company the department responsible for planning is the finance department. SADAFCO (p 124) says that the finance manager has a choice available for him to select so that shareholders can get maximum returns on their investment. This department can determine which types of stock should be sold and of what quantities.

He says that based on his or her experience the finance manager is given a lee way to identify and take good securities that will be based on risk and return characteristics of such securities.

He points out that when Saudia Dairy and Foodstuff Company were established in 1976 things were different from what they have been in the last couple of years. As a result he notes that the company had to come up with measures to cope with the changing world. Some of the measures undertaken to protect the environment are; setting up of solar panels to capture light energy so that it can be used to run some of their machines. In addition paper work has been reduced by a way of adopting modern methods of sending mails.

Decision Making Process

The decision making process is a process is one that includes all stake holders. The Board of directors, the Managing Director, the shareholders as well as employees have a role to play in the decision making process. The opinions of the employees are considered. They give feedback on the progress and the movement of products. Some are involved in doing research and the findings influence the decision to be made.

The feedback is adopted by the executive management inform of reports. According to SADAFCO, “the ‘Legal Counselor’, ‘Quality Assurance Manager’, ‘Group Business Development Director’’, ‘Senior Internal Auditor’, ‘Executive Manager Riyadh Corporate’ are key in the decision making process” (SADAFCO pg 18).

Sadafco is a company that has adopted corporate governance in its decision making process. The management and the board of directors together with the stakeholders are involved in the major decision making. The process is keen to observe transparency and accountability. The executive employees of the company are known for their integrity in their operation a virtue that has led to the success of the MNC (SADAFCO, pg 19).

Board of Directors makes decision pertaining to management from a large perspective. Major decisions are made by the Board where they engage in discussions and give honest opinions and make a consensus on the best opinion. They implement this by delegating the duty to the Managing Director.

It is within the mandate of the board of Directors to make long term decisions concerned with the company like engaging in the sale of IPO. The board of directors have the authority to decide whether to pay dividends as cash or otherwise.

The executive managers make decisions on every day basis concerning the management of the company. They guide the entire team of employees by giving directives on the business and ensuring that the company continues to engage in trade.

The process of making major decisions is not only the responsibility of the board of directors, the executive management and other stakeholders are involved. The board uses the reports, recommendations, suggestion and professional advice before concluding on a decision.

The managing director participates in both the Board of directors and the executive management committee. The participation in both committees act as a bridge so that there is uniformity in the decision making approach. The committees must participate in the major decisions that need large capital.

An example of a decision arrived at that received the consent of both committees is the purchase of the 13,000 refrigerators. They are also involved in the decision to adopt a new product in the market and give the required support both financially and technically.

The shareholders are included in the decision making process. Their input in terms of opinion is considered and given audience by the Board of directors and the executive managing directors. They are invited for an annual general meeting and are given financial statements (SADAFCO, pg 20).

Some major decisions are achieved through voting. In the annual general meeting, the shareholders are allowed to vote on the basis of their share holdings. For instance a share holder cannot be allowed to vote more than 20% of the entire shares.

The decision making process adopted a more decentralized approach after the challenge of boycott, high cost of production and increase in prizes led to the adoption of tetra pack. The company engaged in the Operation Cost Reduction (OCR) Program that incorporated the input of the employees. This approach became effective as the employees voices were being heard. The OCR program involved the training of employees which made them more conversant with the company’s operations and could make decisions concerning minor problems.

OCR program has made it possible for employees to make decisions. During the program employees receive training on the operation of the company. The training gives them gives them information on ways of solving problems and handling challenges they encounter in their course of duty.

The team work approach that the organization has adopted makes it possible for employees and their team leaders who are their supervisors to make decisions and handle problems without consulting the executive management.

This is because they are involved in the day to day activities and can detect challenges and can suggest solutions since they understand the problems. Team players with the support of their supervisors make minor decisions. Their opinions and suggestions can be considered in the major decisions that are related to their role.

The decision making process is decentralized. The decisions are made by consensus within the Board of directors. Furthermore, the stake holders in the annual general meeting vote on matters to make a decision. To vote for an opinion the majority votes or at least two thirds of voters must vote for a decision to be adopted. The employees in their daily routine can make decision in their teams by engaging in discussions or dealing with a challenge according to training given.

The Board of directors make use of the research done by its employees in the decision making process. These researchers provide current information on the real situations and the impacts of the conclusion they have made. They also provide recommendation and predict the outcome of certain actions.

Organizational structure of the company

The organization structure of SADAFCO is headed by the Board of Directors. The Board of Directors is a group that is composed of experienced individuals who are devoted in the management of the company. They are all involved in other successful organizations. The Board Committees have the mandate to carry on with auditing as well as accounting provisions.

They ensure that the three auditors who report directly the Board of directors correspond to the standards and policies. Moreover, the board monitors the progress of the company in general and executes the policies, while considering current practice and new practices that suit the market.

The executive management of Sadafco constitutes a committee that is answerable to the Board of Directors. The committee comprise of highly qualified, experienced and competent employees who have a wide understanding of the dairy industry and other areas.

According to Sadafco (pg 1) there are three major divisions in the organization structure namely: the sales and marketing, the manufacturing and then finance and administration. They perform different roles as assigned by the managing director.

The sales and Marketing Division

The Sales and Marketing Division is headed by the general manager who is supported by the marketing manager, the ice cream sales managers, export sales manager, regional sales manager offshore and the regional sales managers. There is a long list of employees involved in the marketing of Sadafco products. The division has availed vehicles that enable the marketers to transport the products from the warehouse to the market.

The manufacturing division

The manufacturing division is headed by the general manager of the department with the support of managers in charge of Dammam and Jeddah factory, the logistical manager and the accountant in charge of the division. The other employees in the division are involved in the manufacturing, supply and support in the two manufacturing locations.

Corporate division

Finance and administration department includes the managers responsible for Information technology, public relations, human resource, group accounting, treasury, civil engineer and overseas and domestic purchasing. This division has a smaller number of employees than other divisions but not with the least. It provides administrative assistance to the entire company.

The head office

The head office is a division that has the least number of employees and its employees is answerable to the managing director. The division takes care of developments in business, legal matters, quality assurance in addition to auditing within the company.

Organization according to function

The organization structure is prearranged depending on the functions they perform. The three major divisions are separated by the function they perform. The marketing division consists of departments that perform the marketing roles in different locations. The employees market the products of Sadafco are given guidance by the general manager through the various heads of the departments.

Organization according to geography

The departments under the marketing division are divided under locations. The sales manager is allocated duties either in the central, east west, north or south location. The allocation of duties within the same locality allows the managers to keep track of new developments and to be able to deal with problems in the locality efficiently and effectively.

Organization according to product

The marketing group and the sales team are classified according to the line of products. The Juices form one group; ice creams form another group and milk products from the other group. When advertising the products they use these classes to target buyers by giving the desired products. The advertising agency also pays attention to these categories. It ensures that it covers the wide rage of Products offered by Sadafco by paying attention to the three classifications.

Human Resource Management practices.

Saudisation

Sadafco has in its recruitment encouraged saudisation as SADAFCO (pg 19) points out. It has encouraged the local citizens to get vacancies in the company. It has increased the number of Saudi nationals employed using the training programs. The training programs are offered to students during summer.

Another program is that of employees within the company to motivate them. The company has engaged into partnership with other national companies to offer training and possibly employment to the Saudi citizens. This program has led to the relevant training of employees in specific areas. The company has used this opportunity to employ trained employee. The company has therefore employed a Saudi national at all the levels of the organization.

Recruitment, Selection and Training

Sadafco uses the employees as one of the key strategies of the company. The company in its process of recruitment, selections and training ensures that they get the most compete employees. The recruitment process is transparent and is conducted by the human resource management team. They recruit candidates from different background both within and beyond the borders.

Employees are selected on the basis of merit. The best qualified and those who have successfully undergone training are selected to join the workforce. The selected have specialization in a specific field. Experience is also given priority as those who have experience are given priority. The company usually has programs during summer and offers training for students.

The employees are adequately compensated. The executive management ensures that the employees are rewarded for their efforts adequately and in time. Human resource division develops programs that are designed to increase their competence. Whenever, their contract are not renewed or when the leave for other employment opportunities, they are knowledgeable due to the training program they were engaged in the company.

Training has been given importance by Sadafco. They ensure that employees receive the relevant training for the actual roles that they perform. The company has succsful adopted the Operation Cost Reduction (OCR) program which was has led to increase in the revenue of the company. This program aim was to reduce the cost involved in the production and also to make the product affordable to the customers despite the increase in prices of commodities. This program admitted the employees of the company to motivate them to work.

OCR is program that is a developed program that sets the standards of operations for the employees. Since the employees are trained on the correct procedures they work willingly to deliver on time quality products. They perform their duties more confidently while delivering on time. The coordination effective and efficient making the organization to run smoothly and maximize on their profit.

The training educates the employees on the organizational goals. For this reason the different divisions work together to achieve the company’s goals through team work. The team work that is emphasized by the training has led to reduction of time compared to the time used before the training.

The human resource department has adopted the OCR continuous improvement program. This program is meant to encourage more participation in training for both the existing and the new employees. Training is well known to keep the employees motivate.

Besides training the company offers a good working environment. The company ensures that the employees working environment is safe and give all the necessary requirements to be able to work. For instance the company has a large number of vehicles that are used by the marketing employees to market and sale the wide range products. The vehicles enable them to reach the small retailers in different locations. As a result, they facilitate the customers who do not have access to supermarket to buy the products.

Major problems faced by company

In accordance with Arab News (pg 1), Sadafco entered in to huge losses after the boycott of products originating from Danish in 2006. This affected the annual sales and had an implication on the revenue. The company as a result had to relieve employees off their duty and failed to renew contracts as a result. The decision caused the company to lose competent and devoted employees.

Another challenge Sadafco experienced is the rise of prices and the increased cost of purchasing the raw materials. Consequently the cost of production has increased making the company to increases the price of purchasing the items. With the boycott in mind the company has resulted into cutting down on the cost to be able to recover. This challenge to a major restructuring which has seen the company survives in the competitive market.

Another solution of the MNC that was welcomed by the customers was the Tetra Pak Operation Cost Reduction Program. This program became a success in mi4enimizing the operation cost and improved the productivity.

Sadafco (pg 20) has observed the Kingdom of Saudia and across borders has trusted the Sadafco products over a long period of time. They have a challenge to maintain their competitiveness in the market and to continue offering a variety competent products according to demand. They have to keep delivering the best product with competitive prices and retain the customers. Moreover the prices of agricultural products keep increasing. The company has to develop a strategy to be able to deliver the products at competitive prices.

The company experience challenges in the human resources. They lacked training and were generally not motivated. The problem was experienced following the merging of two companies which made operations to be slow. The demand for product was below the expectation a problem which was largely the failure in the staff.

The employee’s performance was poor characterized by lack of coordination between the technicians and operators. The roles of the employees were not clearly outlined and in most cases there lacked understanding of the duties. The responsibilities were not clear and thus the company wasted a lot of revenue in the production cost due to wastage of resources (Arab News, pg 1).

This problem was best addressed by the introduction of Operation Cost Reduction program. This program entailed training that the employees were given. The employees were trained on new ways of manufacturing that incorporated team work in their duties. The roles were clearly outlined and coordination between activities was improved. The end result was increased sales. This is because the Tetra Pak was pocket friendly to the customers. The program helped reduce the wastage of resources that was experienced for lack of coordination.

The results of the training were pleasing because the trained employees had learned techniques of solving problems, decision making techniques, evaluating measuring achievements. The problems that resulted from delayed decision making from the supervisors became eliminated as they became more aware of the standards and procedures in the company.

Solution

The adoption of the OCR continuous improvement program is effective. This program ensures that both the joining and the existing employees are trained. Consequently, the employees gain confident and the ability to make accurate decisions. The supervisors become team leaders and work hand in hand with the employees to attain the best results while saving on cost and time.

Developing a team work spirit is the most effective strategy to deal with challenges. This is because the employees with training are capable of cooperating. In a team employees can give contributions which may be helpful in handling challenges. The employees remain motivated due to the training.

Works Cited

Arab News. Boycott-Hit Sadafco Undergoes Restructuring, 2006. Web. 12 May, 2011

http://www.gulfbase.com/site/interface/NewsArchiveDetails.aspx?n=28674Sadafco

Bricault, Chester. Major companies of the Arab World. Harrogate: Whiteside & Graham, 1995.

Global Investment House. Saudia Dairy and Foodstuff Company (SADAFCO), 2010. Web. 12 May, 2011

Ireland, Helen. Tetra Pak operational Cost Reduction Programme helps dairy leaders SADAFCO improve productivity and cut operating costs, 2010. Web. 12 May, 2011

Saudi Dairy & Foodstuff Company (SADAFCO). Prospectus, 2005 . Web. 19 May, 2011