SABIC Company Audits - Essay Example

CASE AUDIT: SABIC Introduction Company audits are very important in that they determine the current position of a given company internally and externally (Doole & Lowe, 2008). Some companies enjoy their success based on the historical culture that they built up which determines that they have a given clique of customers. This audit report seeks to establish an understanding of a case based on SABIC Company. In this regard, it will audit the key insights of the company implementation strategy with a specified focus on the historical approach, the success rate and the barriers that the company faces in the implementation of the change process. Historical Approach Many businesses have succeeded based on their historical perspective. From the case, it is determined that the business has been in operation for the past 39 years (SABIC, 2014). This is life stable enough to determine that it has a status in the economy of Saudi Arabia. Apart from time, the company has historically been supported under focus of the king of the country. According to Doole & Lowe (2008), history has a strong bearing on the success of a company in the market. This is especially prevalent in societies that are relatively conservative. The Saudi Arabian society is incredibly much of a conservative society and there are norms that determine the consumption patterns in the country. Being largely Muslim, most of the laws and legislations on trade are bound to be based on sharia laws. History of existence in market serves a lot of functions to a company (Peng, 2013). First, the company develops experience of the market and makes it possible to understanding changing trends from time to time. SABIC Company deals in a collection of products; chemicals, fertilizers, plastics and metals. It is size that determines the market success factors because there is a focus on expansion programmes. The company is owned by the government (70%) and the private individuals (30%). History has therefore helped it to know and understand its customers, the market, the need for expansion and the challenges that it is likely to face when in any other country apart from Saudi Arabia. Historical context has enabled the company to understand its customers, the purchase context, the feelings in the market and strategies that help develop a business from one level to another. Success Rate The insights to the success of SABIC are based on the achievements from the time it was formed to date. Over time, the company has grown and it is now the largest companies in the specified areas of operation. How is this success? According to Peng (2013), when a company is large enough, it is bound to benefit externally from the market economies of scale. Economies of scale determine that the company is able to use its large resource base to reduce its costs of operation while maximizing its profits. A reference back to the past statistics of the company indicates a growing trend in the success sector. This is to indicate that the success rate of the company is higher after every accounting period and keeps expanding. The company has 22 subsidiaries, very many specific product lines and in other success parameters. For example, in 1985, the overall production was 6.3 million metric tons. By the year 2008, the production had reached 56 million tons. It is projected that by the year 2020, it will be able to produce 135 million metric tons. The company has been able to expand to other continents such as Europe and America. The importance of expanding to the internal; scene for the company is very important. It is able to tap virgin markets for exploitation. Market expansion is therefore a progressive strategy for every business in any industry. It shows that it has a high success rate in the current market and would still be comfortable operating in another market. The success rate can therefore be considered to be higher than others. Another reason for the high rates of success is the government sponsorship. In this case, it is important to note that when a government support a company, it is easier to determine the success levels of such companies. Moreover, the company is said to own 30% of the public. This means that the company is able to approach the present shareholders for financial assistance as well as the internal shareholders. The company also empowers its employees (McSweeney, 2002). It makes make sure that ethical boundaries are well kept as well as the employing their time at the company as opposed to other companies. The company working environment is also a complete family where families stay. Therefore, the success rate is ever increasing and can be used to rank companies from time to time. These may lead to increases in earnings, the growth of the earnings, the quality of the earnings and the actual return on equity. Therefore, the company has SABIC got an assured success rate in all the industries it is working in (SABIC, 2014). All the rates keep increasing meaning that there is a continuous success rate in the company as compared to others. Barriers Faced in the Change Process The change process is quite tricky in many companies. The international companies have an added barrier to a change process that may serve a special purpose of not acquiring knowledge for international expansion. With reference to SABIC, there is a collection of challenges that have been identified from the case. These are cultural, gaps in communication and business associates that are untrustworthy. Cultural scientists and management professionals have determined that the way the customers understand the seller is influenced by the cultural perspective. The company is stated to lean its success to understanding the culture of the people of Saudi Arabia (Hofstede, 1996). When the same company moves to the western countries, it is important noting that the culture strongly changes and there are people that do not accept is culture. Therefore, an acclimatisation program will be carried out in the new markets to determine the customer requirements (Peng, 2013). The second barrier is the communication gaps between the local business professionals at the company and those from abroad (Doole & Lowe, 2008). Being a multinational company, it has a collection of employees with different education backgrounds and there is needed a cultural unification programme in communication that will later balance the perspectives at the company. Hofstede (1996) and McSweeney (2002) determined that people from different cultural backgrounds have different understandings of communication. Therefore, the aspect of unifying the communication concepts at the company develops on the basis of improving the overall performance of the company. Untrustworthy business associates are also a barrier to effective implementation of the company strategies. According to Doole & Lowe (2008), when there are some forms of mistrust among business associates is cancerous. It can lead to total business failure. SABIC is a company that has become successful due to harmonization of the international business methods and this has led to it improving where many failed. Conclusion The key insights in the case given are discussed based on their impacts and possible effects on SABIC Company. It has been determined that the company has a historical backing of its success. This has largely contributed to the continuous development its success rate both locally and internationally. In the strategic bid to become better, the company encountered challenges such as cultural differences, the gaps in communication as well as business associates that are not trustworthy. These findings are based on an analytical reference to the professional settings of management scholars and practice managers. References Doole, I., & Lowe, R. (2008). International Marketing Strategy: Analysis, Development and Implementation. Melbourne: Cengage Learning EMEA. Hofstede, G. (1996). Riding the waves of commerce: A test of trompenaars' “model”. International Journal of Intercultural Relations, 20(2), 121. McSweeney, B. (2002). Hofstede's Model of National Cultural Differences and their Consequences. Human Relations, 55(1), 211. Peng, M. (2013). Global Strategy. New York: Cengage Learning. SABIC. (2014, 10 23). Sustainability. Retrieved 3 15, 2015, from SABIC: http://www.sabic.com/corporate/en/sustainability/sustainability_report Read More