UCSI UNIVERSITY FACULTY OF INDUSTRIAL BUSINESS

ASSIGNMENT ONE (1) REPORT

STRATEGIC FIT ANALYSIS FOR AL-DHABBY, INC.

Prepared By: NAME ID NO : Mohammed S. Aldhabby : 1401000040

PROGRAM : BBA (Oil & Gas Management)

ABSTRACT

he theme of this paper is analysis the strategic management about strategic fit of an organizations relationship with its external environment and internal resources

and capabilities based on the case Al-Dhabby, Inc. company. There will be five main parts in the paper. An introduction will be present at the first. A small background about Al-Dhabby, Inc. and Al-Dhabby Inc.s business model will be presented in next part in the contacts of SWOT analysis. And then, the next part is to analysis Al-Dhabby Inc.s strategic fit by using relative theories. As the final part of this issue conclusion will be given with my own standpoint as the CEO of Al-Dhabby, Inc.

Table of Contents

Table of Contents.............................................................................................2 Table of Figures................................................................................................3 CHAPTE ONE INTRODUCTION................................................................................................3 CHAPTE TWO COMPANY BACKGROUND..................................................................................5 CHAPTE TREE COMPETITIVE AND SUPPLY CHAIN STRATEGIES................................................7 CHAPTE FOUR ACHIEVING STRATEGIC FIT.............................................................................10 CHAPTE FIVE CONCLUSION..................................................................................................20 Bibliography...................................................................................................21

Table of Figures
Figure 1 The Value Chain in Al-Dhabby, Inc. Company....................................9 Figure 2 Al-Dhabby, Inc. passion on the Implied Uncertainty Spectrum........12 Figure 3 supply chain responsiveness spectrum...........................................15 Figure 4 Zone of strategic fit.........................................................................16

CHAPTE ONE

INTRODUCTION

n the Art of War, the Chinese philosopher and insightful military strategist Sun Tzu wrote: The one who figures on victory at headquarters before even doing battle is the

one who has the most strategic factors on his side. The one who figures on inability to prevail at headquarters before doing battle is the one with the least strategic factors on his sideObserving the matter is this way, I can see who will win and who will lose. Hawkins & Rajagopal, 2005) As Sun Tzu notes, battles are often won in the mind long before enemy forces engage. In the modern business arena organizations are increasingly aware of the benefits of cooperation as well as competition. A firms ability to survive and prosper depends on choosing and implementing a good strategy, there is a sea of strategies for companies to choose from. There are strategies for marketing, production and financing. There are even deferent strategies for transporting products to customers. One of the most important strategies that can determine a firms ability to survive and prosper is the comparative strategy. But thats just having a good comparative strategy is just half the story. In order for our competitive strategy to work, we must have a good supply chain strategy. Not just that but it is also important to implement our supply chain strategy in way that doesnt result in a conflict between it and our competitive strategy or other functional strategy. This process is called achieving a strategic fit. We will in the following chapter discus, who choose a competitive strategy and supply chain strategy? What are the factors that we must conceder when implementing our strategies and finally who we can combine all of this to achieve our goal of realizing a strategic fit.

CHAPTE TWO

COMPANY BACKGROUND

l-Dhabby, Inc. is basically a agriculture company. It was funded in December last year by Mr. Saleh Aldhabby, a hydro geologist engineer. It funded by three

parties Mr. Saleh Aldhabby, Mr. Mohammed Aldhabby and one other party that will remain anonymous. Although it looks like a family business, it is actually funded on a corporation model.
Separating between ownership and management, have implemented a two-tier corporate hierarchy. On the first tier is the board of directors: these individuals are elected by the shareholders of the corporation. On the second tier is the upper management: these individuals are hired by the board of directors. So it benefits from the good organizing a corporation model brings at the same time steel hold the good communication family businesses usually have. Agriculture in Yemen is still under development. Farmers still use old methods in growing their crops. For years, they have been wasting too much water and abusing the use of fertilizers. Now with underground water levels falling down to unimaginable depth of

700m or so, farmers face the problem of finding water resources to

irrigate their crops.

And even so, buy the time the harvest and sell their crops, their return can barely cover their expenses on diesel and fertilizers.
AL-Dhabby, Inc. uses green houses to grow its crops. Greenhouses are relatively new technology in Yemen market. Few farmers use them to grow their crops and fewer know how to actually use them. In winter times its hard to grow some crops like tomatoes. But we bypassed this problem with the usage of greenhouses. So what we do (our business model) is to grow crops which are on high demand thus higher price during winter time, At the same time because greenhouses use a more modern irrigation systems, we manage to get a greater amount of harvest, yet use less water which means less diesel and less fertilizers.

Al-Dhabby, Inc. is still a small company and new to the market. Although it has very strong potential of growing, the political and security instability increases the threats and problems it might face.

CHAPTE TREE

COMPETITIVE AND SUPPLY CHAIN STRATEGIES

ompetitive strategy: defines the set of customer needs a firm seeks to satisfy through its products and services

1.1.Al-Dhabby, Inc.: My competitive strategy is based on quality products and availability. A. Quality products: most farmers use fertilizers extensively without knowing there proper use procedure and their long term health effects. We can find the usage of internationally forbidden fertilizers in many cases. Aldhabby, Inc. will be compete with other crops suppliers by producing crops based on: Less fertilizers use in growing the corps Better looking and healthier crops

B. Availability: most farmers struggle to produce crops (especially tomatoes and cucumber) during the winter time. There for, AlDhabby, Inc. will take advantage of the shortage in supplies and make sure that its customers will have a stable supply.

Supply chain strategy: strategy is simply the collection of the strategies for new product development, marketing, operations, distributions, and service. It tells us on what process we should focus on to achieve our competitive strategy and the way they should be done. The product strategy specifies the portfolio of products that will be offered for sale by the company and product development strategy specifies the portfolio of new products that the company will develop. A marketing and sales strategy specifies how the market will be segmented and the products of the company are positioned, priced and promoted. The supply chain strategy determines the procurement process of the raw materials, transportation of materials, manufacture of the product, distribution channels,

warehousing and transportation of the products, and the follow-up services. Consistency and support between supply chain strategy, competitive strategy, and other functional strategies is important.

Figure 1 The Value Chain in Al-Dhabby, Inc. Company

Finance, Accounting, Information Technology, Human Resources New Product Development Marketing and Operations Sales

Distribution

Service

Supply chain strategy

CHAPTE FOUR

ACHIEVING STRATEGIC FIT

trategy fit: means that both the competitive and supply chain strategies have the same goals (Sunil Chopra, 2010). Thus we have to have Consistency between customer priorities of

competitive strategy and supply chain capabilities specified by the supply chain strategy. We start by choosing our competitive strategy. Then we chose the supply chain strategy the most suit our company strategy. Last we consider our other functional strategies. A company may fail because of: A. Lack of strategic fit B. or A bad overall supply chain strategy that doesnt provide the capabilities to support the strategic fit. Example; Marketing is publicizing product variety and quick delivery while distribution is aiming for low cost means of transportation (slow modes of transportation, order consolidations).

How is Strategic Fit Achieved? u Understanding the customer and supply chain uncertainty

u u

Understanding the supply chain Achieving strategic fit

Step 1: Understanding the customer and supply chain uncertainty We now try Identify the needs of the customer segment being served. Is our customers, people value chip price our people value more quality? A customer who usually buys tomatoes from a convenience store values quality and availability more than the customer who goes to the market and buys them in larger quantities at cheaper price. In general customer demand differs according to this attributes: Quantity of product needed in each lot; Response time customers will tolerate; Variety of products needed; Service level required; Price of the product and lastly the desired rate of innovation in the product After understanding what our customers need we then try to identify the uncertainty in their demand. We do not look at the uncertainty of the whole demand but we focus on the uncertainty of demand of the segment of customers we are targeting. We call this the

implied demand uncertainty which is defined as the uncertainty in demand resulting from the portion of demand that the supply chain is targeting not the entire demand.
1.1. At Aldhabby, Inc. we can summarize the impact of customers needs on the

implied demand uncertainty in the following table

Attribute Range of quantity Lead time Variety of products Customer Need increases increases increases implied demand uncertainty Greater variance in demand from summer to winter Lead time between 3 to 7 days Demand becomes more

required Number of channels Rate of innovation Required service level increases decrease increases

disaggregated from just tomatoes and cucumber to other vegetables as well All supermarkets and grocery stores No changes in the product Have to handle surges in demand in winter

1.2. The uncertainty in the supplier capability is less.

1.3. Now we come to the end of the first step which is mapping the customer demand

on the implied uncertainty spectrum. Implied uncertainty spectrum is a combination between customer demand uncertainty and supply capability uncertainty.

Figure 2 Al-Dhabby, Inc. passion on the Implied Uncertainty Spectrum

Predictable supply and demand Predictable supply and uncertain demand or uncertain supply and predictable demand or somewhat uncertain supply and demand Highly uncertain supply and demand

Salt at a supermarket

An existing automobile AL-Dhabby, model Inc.

A new communication device

Figure 2.2: The Implied Uncertainty (Demand and Supply) Spectrum

Step 2:Understanding the supply chain

After understanding the uncertainties Al-Dhabby, Inc. faces. The next question is how can the company best meet demand? The answer is by creating a supply chain strategy that best meets the demand the company has targeted and the uncertainty resulting. Choosing the right supply chain responsiveness is trade-off process between responsiveness and efficiency. Supply chain responsiveness is the ability to: respond to wide ranges of quantities demanded; meet short lead times; handle a large variety of products; build highly innovative products and meet a very high service level. Example: in 7 Eleven stores they needs short lead time and better product availability. For that they need a responsive supply chain to support their needs. On the other hand, we have Supply chain efficiency which means cost of making and delivering the product to the customer. Increasing responsiveness results in higher costs that lower efficiency. Thus, 7-Eleven will have to lower it supply chain efficiency.

2.1. Aldhabby, Inc. customers value quality, availability and service. If we choose an

efficient supply chain then we have slower transportation method and can distribute to a small number of retailers. This is clearly does not suit the company competitive strategy and the needs of the customers its targeting. A responsive supply chain is better suited for Al-Dhabby, Inc. commutative strategy and the uncertainty it faces as a result from the customer segment its targeting. It will meet the short lead time and wide range of quantities demanded by scheduling delivers to be every three days, two times a week. This will insure that we satisfy any uncertainty demand surges and make sure that our customers get quality

produces that are fresh and healthy which also serves our high service level requirement.

2.2. Cost-responsiveness efficient frontier (figure 3) is used to show the lowest

possible cost for a given level of responsiveness.

Plotting Al-Dhabby, Inc.

supply chain shows that we have a mid-high responsiveness, medium cost passion. And it also shows us that there is still some room for improvement until we position the company on the frontier curve itself. This could be done in the future by either increasing the level of responsiveness or efficiency. Figure 3 Cost-responsiveness efficient frontier

AL-Dhabby, Inc.

2.3. Then we end our work in step two by mapping Al-Dhabby, Inc. on the supply

chain responsiveness spectrum (Figure 4). It shows the different levels of supply chain responsiveness starting from high efficient supply chain to high responsiveness supply chain.

Figure 3 supply chain responsiveness spectrum AL-Dhabby,

Inc.

Step 3:Achieving strategic fit The last and most important step is to ensure that what the supply chain does well is (supply chain strategy) consistent with target customers needs (competitive strategy). This is ensuring that the degree of supply chain responsiveness in consistent with the implied uncertainty. So for a low implied uncertainty we choose an efficient supply chain strategy. And for a high implied uncertainty we choose a more responsive supply chain strategy.
3.1. As we can see in figure 5, we mapped Al-Dhabby, Inc. on the Zone of strategic

fit according to the decisions we mad in the previous steps. We will have mid to mid-high uncertainty demand level and a highly responsive supply chain. It is

clear that Al-Dhabby, Inc. has a higher responsive supply chain then the determined implied uncertainty needed. This has been done on purpose because firs its a new business form and for that there is a high chance of overlooking a uncertainty element. The second reason is that we are in early stage in the business and we must encourage retailers to start dealing with us and gain their loyalty by making things easier for them by increasing our supply chain responsiveness.

Figure 4 Zone of strategic fit AL-Dhabby,

Inc.

We have to understand that increasing the responsiveness of supply chain strategy could be done by increasing the level of responsiveness at the different stages of the supply chain. This is done by assigning rules at any certain stage of the supply chain that matches the needed increase in responsiveness (efficiency) level, thus resulting to an overall increase in the chain responsiveness (efficiency) but most be consistent with the implied uncertainty in demand.

To move to the strategic fit zone and achieve the desired responsiveness level, we start adjusting the rules of each stage of the supply chain. Making one stage more responsive allows us to make to make other stages more efficient. These changes in rules can be in the product design strategy, pricing strategy or manufacturing strategy. It also can be in the inventory strategy, lead time strategy, supplier selection strategy or the transportation strategy.

3.2. Following below is the figure of our distribution network design. Its retailer

storage with customer pick-up design. Figure 6 Al-Dhabby, Inc. Distribution Network
Information flow

Al-Dhabby, Inc.

Retailer

Custome r

Central inventory

Product flow

3.3. We decided to a have a responsive supply chain. We also said we want to make

things easier on retailers. This means we well make demand uncertainty less on the retailers side of the supply chain and will try to absorb most of the

uncertainty through the company operations. Figure 7 shows the allocation of implied uncertainty within in the supply chain.

Figure 7 the Allocation of Implied Uncertainty

Al-Dhabby, Inc. absorbs most of the implied uncertainty and must be very responsive Al-Dhabby, Inc.

Retailer absorbs less implied uncertainty and must be somewhat efficient Retaile r

Extent of Implied Uncertainty for the Supply Chain

We will achieve this by making the retailers hold small inventory sufficient for 5 days with lead time of 3 times for product request. We will also have scheduled delivery every 5 days. Because controlling the production of the cucumber and tomato trees is hard. We will solve this by first having a flexible Irrigation and fertilizing schedules. Second by renting space in one of the city central refrigerated inventory. We will have a higher price for our product then the rest of the market, but will not exceed the 30% point. We can achieve this through our competitive advantage of having lower cost higher rate production. Our supply of fertilizers, seeds and other equipment will be made available two months in advance. We will also have a small green house that will used for R&D. we will use it as sight to experiment with new types of tomato seeds, new fertilizers and try lasts methods of growing them. We also will use it to experiment with new crops

starting with strawberry six months later. For our other functional strategies will be adjusted to supper the competitive strategy to achieve strategic fit as follow. First our marketing strategy must be aggressive. We will target all supermarkets and stabilized outlets in the capital only. For our human resource strategy, we will hire an agronomist consultant from time to time to train our farmers and crow and to make sure that agricultural procedures are followed. Last our finance strategy will include having some spear cash to face in uncertainties. This will be achieved by holding 10% of net profit each year and use some of it for R&D.

CHAPTE FIVE

CONCLUSION

It should be recognized that any strategy or management style is appropriate only in a particular set of circumstances. Strategic fit enables an organization to operate in its particular competitive situation at peak effectiveness. This strategy will make Al-Dhabby, Inc. match its resources and capabilities with the opportunities in the market. The

matching takes place through strategy and it is therefore vital that the company have the actual resources and capabilities to execute and support the strategy. All the changes on our deferent stages of the supply chain will prove to support our competitive strategy and thus satisfying our customers. This fit strategy will be used for the next two years.

Bibliography
Sunil Chopra, P. M. (2010). Supply Chain Management. London: Prentice Hall. Wang S. (2010, 10). Strategic Fit. StudyMode.com. Retrieved 10, 2010, from http://www.studymode.com/essays/Strategic-Fit-451668.html