Emirates Islamic Bank unveils regional fund

http://archive.gulfnews.com/articles/06/04/12/10032347.html

Emirates Islamic Bank unveiled its Emirates Mena Opportunities Fund as part of a plan to create Sharia compliant financial solutions

Since its conversion in 2004 to Islamic Banking, Emirates Islamic Bank is working on introducing new Islamic Sharia compliant solutions such as credit cards, Ijarah, Sukuks and Islamic Funds.

Dubai Islamic Bank was the first Islamic bank in the world to practically implement Islamic banking concept and to actually generate revenue and profit. Since then, different banks entered the banking industry and adopted the same concept such as Sharjah Islamic Bank and Abu Dhabi Islamic Bank. Other banks are planning to convert to Islamic banking in 2006 such as Commercial Bank International and Dubai Bank.

Based on Hamel’s strategic framework of business concept innovation we can see that the Islamic banks differ from traditional banks when it comes to its core strategy and strategic resources. Despites its limited product and market scope, its mission and basis of differentiation have given the Islamic banking system and advantage of stimulating the interest of those Muslims who prefer investing their money in businesses that are being operated in accordance with Islamic law and regulations. Also, the strategic resources, particularly the core competences based on the experience and knowledge of Sharia scholars who are the prime members of Islamic banking business provide Islamic banks with special opportunities to offer a whole new business concept.

Dubai Islamic Bank was the first Islamic bank in the world to practically implement Islamic banking concept in 1975 and to actually generate revenue and profit. Since the Islamic banking is no more a new concept Islamic banks are facing high competition among them and with conventional banking. The opening of Dubai International Financial Center and the Emirates signing of the World trade agreement will open the doors to international banks to come and compete in this market.

In order to sustain its position in the market, Emirates Islamic Bank started introducing newly developed Sharia compliant products to increase its market share and maintain its success and competitiveness in the intense industry it operates in.

Under basis of differentiation EIB is concentrating on attracting high income customers by providing affluent services through its VIP Ethmar branches that meet high standards of customer services.

EIB’s core competencies includes the skills and unique capabilities of its human resources of highly educated and well trained former Emirates bank employees who’s been transferred to the new bank with their diversified and long experience in banking. The bank is supported by Emirates Bank Group from all aspects including financial, organizational, etc.
EIB strategic assets rely on its high paid up capital and its geographic coverage all around UAE and its expansion plans.

EITC will make a difference for customers (2)

http://www.ameinfo.com/78142.html

Again with the same article by applying Porter’s model of the five competitive forces we can notice the following:

Bargaining Power of Suppliers

The infrastructure and networking providers market is dominated by a small number players world wide. The telecom infrastructure is the highest cost for UAE telecom companies and a major element in its product. The switching cost from a brand to another is extremely high.

Sellers forward integration is also a possibility after opening the UAE market. Comparing it to global market, the UAE market is small and considered insignificant to sellers’ business.

Bargaining Power of Customers

Customers bargaining power may be considered weak, that applies to most consumer products, since they are fragmented and no buyers has any particular influence on product or price. In the other side since most customers are looking for reliable services with lower prices and are ready to shift to any new company that provide them with the same easily because of the low switching cost.

Threat of New Entrants

The threat of new entrants is increasing, after the entrant of EITC the door is left open for any telecom company that meets the required criteria set by government.

The barriers of entry to this market are still high, Economies of scale (minimum size requirements for profitable operations), High initial investments and fixed costs, Cost advantages of existing players due to experience curve effects of operation with fully depreciated assets. Even though the UAE telecom industry is still attractive for new entrants since ETISALAT is making increasingly high profits supported by the prosperous economy and high individuals’ income.

Government policy

Recently the UAE government started working on creating the needed open environment and introduced competition to the telecom sector aiming to become one of the best telecom sectors in the world.

The government in its effort to open the UAE telecom market changed its regulations and established the Supreme Committee for the supervision of the Telecommunications Sector.

EITC was favored by the UAE government and especially by Dubai Government at the expense of Etisalat in ways like exempting it from paying 50% of its net profit as a royalty to the federal government, which Etisalat is still paying. Another supporter of the EITC is the Emirate of Dubai who granted them the exclusivity to operate in the New Dubai.

Another major barrier of entry is the government ownership of any telecom company that wants to operate in UAE. For foreign firms this can be a competitive disadvantage.

Threat of Substitutes

A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. VoIP might one day replace the normal telephones especially with the new mobile phones with internet embedded in them. Etisalat used to generate up to 80% of its revenue from international calls, incase this service is approved by government all telecom companies will suffer since the income will drop heavily from international calls. The introduction of the new technology will turn the entire telecom industry picture on its head, and demonstrates that voice, presence, text messaging and other IP-based applications will be essential for the company of the future

In the case of EITC the switching costs will not be high because it just started its business and didn’t spend high capital costs. EITC in a better position and can upgrade its services to further differentiation.

Competitive Rivalry between Existing Players

It seems that a tough competition is going to start mostly by marketing campaigns and offering lower costs by both companies. This might lower the profits of both companies and might make it unattractive to others to enter this market.

There will be only two players in the market and the intensity of competition is not high. The market is small and the competition will result in pressure on prices, margins, and profitability.

The entrance of EITC to the market ended the monopoly of Emirates Telecommunications Corp (Etisalat). Etisalat has high penetration and an excellent level of coverage over UAE and considered one of the strongest financial operators in UAE.

EITC plans to have 30% share of the UAE telecom market within 3 years and will compete with Etisalat on all fields including pricing this means that Etisalat will start to play in a total different way.

EITC will make a difference for customers

http://www.ameinfo.com/78142.html

According to EITC Chairman Ahmad Bin Byat “EITC will make a difference for customers: the signing of the full services telecom license by the UAE Supreme Committee for the Supervision of the Telecommunications Sector (SCSTS) marked a new era in telecommunications in the UAE.”

By analyzing this article using Hamel’s framework of Business Concept Innovation we can see that EITC is planning to create a new business concept in the UAE telecommunication industry by introducing more varieties to the customers that is going to change the basis for competition within this industry.

Core Strategy: “is the essence of how the firm chooses to compete”

EITC is welling to compete with Etisalat on all aspects of the value chain including pricing.

a. The business mission: “the overall objective of the strategy – what the business model is designed to accomplish or deliver”

As per Du’s web site it’s business mission is “to exceed customers expectations, to be the best employer for the best talent, to generate value, deliver excellence & innovation, and is to contribute to the enrichment of society in the UAE, to celebrate our heritage and diversity”

This mission statement explains itself and doesn’t require explanation. EITC want to be different in all aspects including over-delivering its customers with advanced and new services and experiences.

b. product/market scope: “this captures the essence of where the firm competes – which customers, which geographies, and what product segments – and where, by implication, it doesn’t compete”

EITC will target individuals and business consumers in UAE by providing them with advanced and diverse services including mobile, fixed line services, internet and pay TV packages over a high speed broadband network. The company plans to have 30% share of the UAE telecom market within 3 years.

EITC geographic presence will not be limited to UAE but will reach several countries all around the world.

c. Basis of differentiation: “the essence of how the firm competes and, in particular, how it competes differently that its competitors”

The company will provide the consumers with the freedom of choice for the first time in UAE. EITC also aims to providing its customers with superior products and services that are simple to use, keep them better informed and entertained; and made them more productive. It also will try to differentiate itself from others by providing creative pricing structure and offering different packages

Core Competencies: “is what the firm knows. It encompasses skills and unique capabilities.”

EITC has the capability of achieving operational excellence that allows it to operate in an efficient and effective manner. EITC knows that consumers in UAE are looking for advanced, different, reliable and at lower cost services and EITC is welling to satisfy all these needs.

The company’s core competencies rely mostly on its human resources lead by Ahmad Byat the Director of Dubai Internet City and have long experience in different fields of business such as technology and banking. The company’s CEO Osman Sultan, the former head of Egypt's first mobile operator MobiNil, and one of Egypt's largest companies. The company’s management has long and diversified experiences in top world telecom companies.

Strategic Assets: “what the firm owns. They are things, rather than know-how. It can include brands, patents, infrastructure, proprietary standards, customer data, and anything else that is both rare and valuable.”

The company’s paid up capital of AED 4 Billion plus the proceeds from the IPO’s over subscription of AED 600 Billions is considered high and allows the company to operate effectively within the market. The company’s cash position will allow it to invest in the most advance technologies easily not like Etisalat which got stuck with the high expenditures of old technologies that are not fully depreciated yet.

Customer interface: “is the front line where producer interacts with client”

EITC will work on making its brand name “du” become part of the language in UAE and be recognized as a confident, honest, and friendly company.

EITC aimed to provide customers with better experiences by providing them with superior products and services; offering products and services that were simple to use; kept them better informed and entertained; and made them more productive.

Customer expectations: According to Byat “A recent poll showed that more than 80% of people in the UAE believed a second telecommunications company would make a difference”

EITC intend to prove that expectation right. The company’s IPO oversubscription also proves how people are confident in this company and how high is their expectations to elevate the level of products and services provided to customers and the profit expectations to investors in this company.

Damas plans IPO in two months

This article is about DAMAS announcement for going public in the coming two months, the proceeds will be used to expand the company's retail presence in the key overseas markets, and to expand its diamond jewellery manufacturing facility in Dubai Metals and Commodities Centre.

By reading the article from the point of view of Barney’s Gaining and Sustaining Competitive Advantage and by applying VARIO framework on DAMAS we can notice the following:

The Question of Value: Do a firm’s resources and capabilities enable the firm to respond to environmental threats or opportunities?

This advantage can be attributed mainly to its resources and capabilities namely brand name that satisfy all tastes, experience, human resources, and geographical coverage.

DAMAS has a long experience in designing, manufacturing, and selling gold and jewelry all around UAE and the Middle East since 1907. This long experience allowed them to operate effectively and efficiently in the Jewelry industry, enabled them to understand the customer needs and to create a long term loyalty relationship with their customers.

DAMAS is serving its customers over a wide geographic area through 75 outlets in UAE only in addition to outlets in the GCC, U.S., Lebanon, Jordan, Maldives, and India operating under different brand names and price levels to satisfy all types of customers.

DAMAS has built its brand name though strong marketing and public relation that allowed it to become one of the most valuable brand names in UAE and GCC. In addition to being the brand that satisfies all tastes and budgets.

Their human capital is including the entrepreneurs Tawfique Abdullah, Tawhid Abdullah, and Tamjid Abdullah who learned the jewelry business since their early days from their father Mohd Taher Abdulla.

We can notice that DAMAS is not wasting time in exploiting the opportunities by the proposed IPO, that will increase its paid up capital to AED 2 Billions, to expand its presence over seas and by expanding its facilities in Dubai Metals and Commodities Centre to satisfy the increasing demand for DAMAS brand and to become a key regional player in the gold and jewellery industry.

The Question of Rareness: How many competing firms already possess particular valuable resources and capabilities?

DAMAS experience and resources allows them to lower their costs and provide the customers with differentiated products and styles by innovative methods in production and by relying on energetic and creative designers and craftsmen.

The Question of Imitability: Do firms without a resource or capability face a cost disadvantage in obtaining it compared to firms that already possess it?

Other firms without the resources and capabilities of DAMAS already face a cost disadvantage in obtaining them. Competitors will need to invest in research and development and to increase their capital in order to achieve the cost efficiency of DAMAS.

DAMAS poses a competitive advantage in this field in terms of experience and scale making it difficult for competitors to keep up with DAMAS

The Question of Organization: Is a firm organized to exploit the full competitive potential of its resources and capabilities?

It seems that DAMAS is one of the organizations that mostly encourage innovation and its focus on the educational and training aspects of its employees.

The company was successful in implementing MBS Navision system that put all their 100 stores online.

From all of the above I’m confident that DAMAS enjoys a sustained competitive advantage.

P&O Share Hldrs Vote for DP World Bid

http://au.biz.yahoo.com/060214/18/jdqa.html

Finally “DP World” won the battle for acquiring P&O against PSA the Singapore based port group. 99.5% of P&O's stock holders voted in favor of DP World at 520 pence per share with total value of GBP 3.9 billion (USD 6.8 billion). DP World/ P&O will become the world's second largest operator behind Hutchison Whampoa Ltd. of Hong Kong. DP World/ P&O will manage 51 terminals in 30 countries around the world, including 6 ports in the United States.

Was it a right decision for DP World to buy P&O? Nobody know the right answer yet, but lets look at it from David Porter’s 5 forces framework – barriers to entry which might give us some insight in what could be the right answer:

Economies of scale: DP World/ P&O can benefit from the economies of scale since it will have a wide network around the world, which will give them the ability to reduce their prices and making high profits at the same time. This will allow the major ports operators such as DP World to increases the barriers to entry at selective ports that has potentials in the future by reducing their prices.

Product differentiation: DP World established its name and reputation around the world by operating in several ports around the world successfully and currently by buying P&O DP World will by the second largest operator in the world.

Capital Requirements: DP World is government owned by a wealthy Emirate, DP World was successful in offering the world’s largest Sukuk issue to provide USD 6.8 billion to purchase P&O. the new acquisition will increase DP assets and its capacity.

Government policy: DP World and P&O are operating in foreign countries and dealing with foreign governments. All international ports operators are facing the risk of changing government policies against the foreign interests. But governments noticed the benefits of relying on large port operators in terms of efficiency and reliability. DP World received the approval from the US government to buy P&O which operates 6 ports in USA, national security and interest can work against the international operators at any point in time.

Intensity of Rivalry among Existing Competitors: Four companies are managing one third of the world ports. The acquisition will increase the big companies’ power and share against the locally managed ports. Big companies with wide networks are in a better position against regional competitive pressures.

Other frameworks such as Barny’s “Gaining and sustaining competitive advantage” can be discussed in relation to this topic.

Effect of Danish Boycott Patchy

This article describes the reaction of the Saudi supermarkets to the Danish controversial cartoons, looking at it from the business strategy angle I don’t think it will have a strong effect on Denmark economy; the largest exporters of dairy products in Europe and whos economy rely heavily on dairy products exports. Based on Porter’s “Bargaining Power of Buyers” the Arab or Muslim can be considered a strong buying power, even though most of the countries are poor or developing countries, but with a population of more than one billion, I think they can have an effect, but small, timely and not forever.

No action was taken by most Arab governments to support the boycott since such thing can have negative impact on their relations with the European Union and the World Trade Organization. The boycott cannot be considered organized, its only lead by the media not by organizations established for this purpose. These factors can lessen the impact of the boycott especially that some supermarkets are still fully stocked with many Danish products and it’s a personal choice for the customer to buy or not.

In the other hand most of the Danish products sold in Arab states can be considered undifferentiated and the buyers can always find an alternative with zero switching costs, especially the dairy product.

Removing the Danish products from the shelves in some supermarkets can fall under “Relationship Dynamics” in Hamel framework. Where the supermarkets are concerned of what happened and want the people to notice that they are also angry of the cartoons, in order to sustain its Muslim customers loyalty.

It is doubtful that the Danish product can recover 100% of its position in the Middle East, and this will allow the current suppliers to increase their sales or open the doors to new supplies to take shares in the Arab markets.

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