Case Study Questions
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Case Study Questions
Question 1
Almajid Limited is a large family business based in Saudi Arabia. Following its tremendous growth, the company as developed several competences that position it advantageously in the highly-competitive and unpredictable business environment in the country. Firstly, the company has built a formidable reputation in the country, owing to the high-regard with which the Almajid family is held. This promotes the firm survivability and sustainability because it endears customer loyalty and generates a sustainable social license to operate (Gao, et al., 2017). It also helps the company attract and retain high talent, who contribute directly to the firm’s performance assuring it of continuous revenues. Similarly, a good reputation enables the firm to charge premium prices for perceived high quality of products and services, assuring the firm of continuous and sustained revenue flows.
Secondly, the company has exceptionally skilled leadership, which has shepherded it to prosperity across two generations. The chairperson and chief executive officers of the company, starting with the patriarch, Zaid Almajid, and thereafter his son, Abdullah Almajid have performed very well to steer the company to become a large conglomerate. These two individuals has undivided passion and exceptional entrepreneurism that have enabled to company to take up any viable business opportunities that has emerged in Saudi Arabia. The current leadership of Abdullah is exceptional because it has managed to steer the company into new lucrative horizons as the business environment is Saudi Arabia evolved while keeping the family together, fitting well with its founder’s wishes though business model innovation (Bleeker, 2020). However, this is not sustainable because the firm’s performance may suffer upon Abdullah’s exit and the absence of a suitable successor. The lack of an elaborate succession planning program at Almajid Limited denies the company the opportunity to mentor and coach a possible leader to take over from the current chairperson and chief executive officer.
Thirdly, Almajid Limited has digitized its operations and established a digital services division, improving efficiency and decision-making. Digitization helps organize a firm’s processes, particularly in one that is highly-diversified and fast-expanding, such as Almajid Limited. It makes processes easier, facilitates communication between dispersed individuals, and maintains records and data that can be used to make informed business decisions. Besides, digitization promoted business professionalization of family firms thus contributing to long-term survivability and sustainability (Bat et al., ). This is because digital technologies help to plug the gaps of professional skill and expertise deficiencies common in family firms.
Question 2
Almajid Limited has undergone significant transformation since its founding in 1950. Its growth is characterized by specific phases long its evolution trajectory. The company started as a small exclusive distributor and seller of automotive paints for an American company, PPG Paints. It transited from this humble beginning to become a paint manufacturer, and chemical manufacturing firm, and currently, a multidivisional diversified family business. This evolution has occurred in different societal and contextual environments. As an exclusive automotive paint distributor and seller, Almajid Limited operated is a simplified societal environment that comprised the patriarch, his two wives and their sons. Therefore, the then top executive of the company was Zaid Almajid, the sole proprietor. The company operated in a new business segment, enjoying a first-mover advantage because it was the only company selling high-quality automotive paint in a market that had very few cars but looked promising in the long-term. At this stage, the business environment was conducive for fast growth. The market consolidation stage, when Almajid Limited signed exclusive contracts with foreign paint manufacturers
The external environment surrounding Almajid Limited is characterized by the evolution of business environment is Saudi Arabia, which has significantly influenced the operations and strategic direction of the company. For instance, the lack of a strong regulatory regime in the country has enabled unscrupulous business practices, like corruption, to thrive. This affected the firm mostly at its nascent stages when it was dealing exclusively with imported branded paints and had to struggle for market share with the suppliers of low quality products, which were sold at much cheaper price. Collusion between suppliers and contractors, who are the consumers of bulk paint quantities muddied Almajid Limited’s business environment and performance.
From a contextual perspective, the Islamic and Arabic culture has remained unchanged throughout the life of the company and has influenced significantly the management structure and business decisions made by Almajid Limited. Males play a significant role in business leadership while women are relegated, despite having excellent management and leadership skills. This condition has pervaded the firm throughout its entire lifespan, even when global practices are more accepting of women in management and leadership.
Question 3
During its development and existence, Almajid Limited has transformed from a sole proprietorship, through a manufacturing enterprise to a diversified conglomerate with several divisions in various business sectors, including manufacturing, training and professional development, real estate, and information technology. Consequently, Almajid Limited adopted different strategies in its lifespan since inception in 1950. During its inaugural era as a sole distributer and seller of branded automotive paints, the company the market entry and penetration strategy, considering that the branded automotive paints were unknown in Saudi Arabia. The company’s focus was to generate sufficient revenues to support the patriarch’s family, and all employees were drawn from within the Almajid family. Later, the company used the market consolidation strategy by controlling and dominating the premium paints market. It partnered with foreign investors to establish a paint manufacturing facility, which ended up with the company creating its own paint brand. However this strategy failed when unscrupulous business practices pervaded the paint market. Consequently, Almajid Limited employed the product and market diversification when it opened branches across the country, diversified its manufacturing portfolio and ventured unrelated business segments like real estate, information technology, insurance, and training and professional development. This strategy was largely successful because it assured the firm of a regular and sustained revenue inflow from diverse sources. It also caused the firm to expand rapidly and involve more family members, as wished by its founder.
Question 4
Almajid Limited experiences significant governance and leadership succession dilemmas which threaten its sustainability as a highly-diversified company. The corporate governance dilemma emerges from the corporate, leadership, and management structures of the company. The overarching question is whether Abdullah Almajid should keep all his family members informed about the company despite the different levels of involvement, roles played, and positions held. The current strategy is to inform only the family members that are directly involved in the direct running of the company regardless of being shareholders or the amount of shareholding. However, this has generated animosity from the male family members outside the company’s operations, particularly Badr and Mohsen, considering that one of them, Walid, is a direct competitor. A recommended resolution to this dilemma is to inform all family members with shareholding in the company. All shareholders have a stake in Almajid Limited because they are concerned about its performance and the value of their stakes. All of these are the males in the family and their sons that have been allocated shares by their fathers.
Similarly, the leadership succession dilemma emanates from the difficulty in selecting between Ahmad and Faisal based on their different skills, entrepreneurial, and enthusiasm levels alongside the constraints presented by the deeply-embedded Arabic and Islamic traditions of the Almajid family. On one hand, although Ahmad is a highly-qualified engineer, he lacks the skill multiplicity needed to lead a large diversified firm. On the other hand, while Faisal is visionary and very entrepreneurial, he lacks the professional qualifications to lead a highly-professional management team. A recommended resolution to this dilemma is to consider meritocracy and being visionary to help the company navigate the future business environment, which is increasingly crowded, competitive, fast-changing, and unpredictable. In this regard, Faisal fits be leadership position better than Ahmad. However he needs to be groomed and mentored by Abdullah alongside undertaking professional development to upgrade his management skills level. In turn, Faisal should also hold a senior executive position, like the executive vice president to deputize Ahmad. This way the two can collaborate, complement, and support each other for the organization’s and family’s benefit.
References
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Bates, M. O., & Buckles, T. A. (2017). An examination of market entry perspectives in emerging markets. International Journal of Business and Economic Development (IJBED), 5(3), 19-29.
Batt, C. E., Cleary, P., Hiebl, M. R., Quinn, M., & Rikhardsson, P. M. (2020). The digitalization of family firms: A research agenda. In A research agenda for family business (pp. 247-260). Edward Elgar Publishing. https://doi.org/10.4337/9781788974073.00021
Bleeker, W. (2020). Overcoming the barriers to business model revision in family firms to increase firm survivability. Doctoral dissertation, University of Groningen.
Gao, C., Zuzul, T., Jones, G., & Khanna, T. (2017). Overcoming institutional voids: A reputation‐based view of long‐run survival. Strategic Management Journal, 38(11), 2147-2167. https://doi.org/10.1002/smj.2649
Le, H. (2019). Literature review on diversification strategy, enterprise core competence and enterprise performance. American Journal of Industrial and Business Management, 9(1), 91-108. https://doi.org/10.4236/ajibm.2019.91008