UCSI UNIVERSITYFACULTY OF INDUSTRIAL BUSINESS

ASSIGNMENT ONE (1) REPORT

STRATEGIC FIT ANALYSIS FOR AL-DHABBY, INC.

Prepared By:

NAME : Mohammed S. Aldhabby

ID NO : 1401000040

PROGRAM : BBA (Oil & Gas Management)

ABSTRACT

he theme of this paper is analysis the strategic management about ‘strategic fit’ of

an organization’s relationship with its external environment and internal resources

and capabilities based on the case “Al-Dhabby, Inc.” company.

TThere 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

CHAPTE ONE INTRODUCTION........................................................................................................4

CHAPTE TWO COMPANY BACKGROUND.......................................................................................3

CHAPTE TREE COMPETITIVE AND SUPPLY CHAIN STRATEGIES.....................................................5

CHAPTE FOUR ACHIEVING STRATEGIC FIT.....................................................................................7

Step 1: Understanding the customer and supply chain uncertainty 8

Step 2: Understanding the supply chain 9

Step 3: Achieving strategic fit12

CHAPTE FIVE CONCLUSION......................................................................................................17

Bibliography.................................................................................................................................17

Table of Figures

Figure 1 The Value Chain in a company............................................................................6

Figure 2 Al-Dhabby, Inc. passion on the Implied Uncertainty Spectrum..........................9

Figure 3 Cost-responsiveness efficient frontier................................................................14

Figure 4 supply chain responsiveness spectrum...............................................................11

Figure 5 Zone of strategic fit............................................................................................13

Figure 6 Al-Dhabby, Inc. Distribution Network...............................................................17

Figure 7 the Allocation of Implied Uncertainty...............................................................18

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

side…Observing 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.

I

A firm’s 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 firm’s

ability to survive and prosper is the comparative strategy. But that’s 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 doesn’t 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.

A

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 it’s 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 servicesC1.1. 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, Al-Dhabby, 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

NewProduct

Development

MarketingandSales

Operations Distribution Service

Finance, Accounting, Information Technology, Human Resources

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.

S

A company may fail because of:

A. Lack of strategic fit

B. or A bad overall supply chain strategy that doesn’t 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 Understanding the supply chain

u 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 Customer Need implied demand uncertaintyRange of quantity increases Greater variance in demand from

summer to winterLead time increases Lead time between 3 to 7 daysVariety of products required increases Demand becomes more disaggregated

from just tomatoes and cucumber to other vegetables as well

Number of channels increases All supermarkets and grocery stores Rate of innovation decrease No changes in the productRequired service level increases 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

Salt at a supermarket

A new communication

device

Highly uncertain supply and demand

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

uncertain supply and demand

An existing automobile

model

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

AL-Dhabby, Inc.

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.

1.4. 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 it’s 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 it’s 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.

1.5. 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.

1.6. 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 Cost-responsiveness efficient frontier

AL-Dhabby, Inc.

Figure 3 supply chain responsiveness spectrum

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 customer’s 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.

1.7. 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 it’s 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

AL-Dhabby, Inc.

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

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

AL-Dhabby, Inc.

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.

1.8. Following below is the figure of our distribution network design. It’s retailer

storage with customer pick-up design.

1.9. 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.

Information flow

Product flow

Al-Dhabby, Inc. Retailer Customer

Figure 6 Al-Dhabby, Inc. Distribution Network

Central inventory

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

Al-Dhabby, Inc. Retailer

Extent of Implied Uncertainty for the Supply Chain

Al-Dhabby, Inc. absorbs most of the implied

uncertainty and must be very responsive

Retailer absorbs less implied uncertainty and

must be somewhat efficient

Figure 7 the Allocation of Implied Uncertainty

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