Gulf Upstream Manufacturing Company – 2009

Case Notes Prepared by: Dr. Victor Sohmen

Case Author: C.P. Rao

A. Case Abstract

Gulf Upstream Manufacturing Company (GUMC) was created in 2006 to take

advantage of the Kuwaiti government’s mandate to diversify the economy and steer
away from a narrow focus on petroleum. As soon as the company was established in
2006, CEO Mr. Abdullah felt that there may be a good opportunity to establish a
manufacturing plant to produce and market bitumen-based building construction
materials. The company enjoys a monopoly in the Kuwaiti market, but faces
competition from foreign suppliers of bitumen-based construction products, including
Saudi and Emirati contenders for the market. GUMC is considering a joint venture
with a European partner that is looking to establish and expand their bitumen-based
product manufacturing and marketing in the Middle-Eastern market.

B. Vision Statement (Actual)

“Our vision is to be the leader in the bitumen-based construction products industry in

Kuwait.”

C. Mission Statement (Actual)

“We excel in the manufacturing of the highest quality bitumen-based construction

products at reasonable prices.”

Mission Statement (Proposed)

Our mission at Gulf Upstream Manufacturing Company (GUMC) is to be a producer of

high quality bitumen-based construction products (2) for use by commercial and
domestic customers (1) in Kuwait (3, 5) who value quality (4, 7, 8) products and
services (2), at reasonable prices (8), as we make the most of our knowledge and
experience (4,9) to expand and transform the company into the preferred source for
bitumen-based construction products (6,7).

1. Customer
2. Products or services
3. Markets
4. Technology
5. Concern for survival, profitability, and growth
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employees

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D. External Audit

CPM – Competitive Profile Matrix

The Competitive Profile Matrix (CPM) identifies a firm’s major competitor(s) and its
particular strengths and weaknesses in relation to its strategic position. GUMC’s
relative strengths and weaknesses based on the case details are portrayed in the
weighted scores. As GUMC is a monopoly concern, there are no local competitors
identified by name in the case; however, the case mentions competition from Saudi
and Emirati companies. Therefore, a hypothetical foreign competitor is featured
herein as Company X, and will be considered as representative of the overall foreign
competition faced by GUMC. Their weighted scores are estimates based on their
strengths and weaknesses in terms of the critical success factors explicitly or
implicitly reflected in the case.

Even though no foreign competitor is identified specifically by name or details of

production and marketing parameters, there is sufficient data in the case through the
qualitative and quantitative survey to capture an actionable profile of the typical
foreign competitor to GUMC, operating in Kuwait.

It can be seen that there are four areas in which the foreign company has an edge
over the local monopoly player in Kuwait, GUMC. In terms of global expansion,
GUMC is confined to Kuwait only. As for customer loyalty, unfortunately, the average
Kuwaiti customer is price-conscious and would rather buy a lower quality product at
lower price – and this need is amply met by the Saudi and Emirati companies selling
in Kuwait. Finally, GUMC’s weakness in advertising has been repeatedly pointed out
in the case. This may have been the result of the company’s strong customer base
with the Kuwaiti government, with little need for advertising. Consequently, the
private sector has been neglected by GUMC, and this and related factors have
precipitated a lower Critical Success Factors score of 3.24 for GUMC than for
Company X with a score of 3.30.

Company X

GUMC Foreign Competitor

Rating

ScoreWeighted

Rating

ScoreWeighted
Weight

Critical Success Factors

Price Competition 0.12 3 0.36 4 0.48
Global Expansion 0.08 1 0.08 4 0.32
Management 0.07 4 0.28 3 0.21
Technology 0.08 4 0.32 3 0.24
Product Lines 0.10 4 0.40 3 0.30
Customer Loyalty 0.10 3 0.30 4 0.40

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Market Share 0.09 4 0.36 3 0.27
Advertising 0.07 1 0.07 3 0.21
Product Quality 0.10 4 0.40 3 0.30
Product Image 0.10 4 0.40 3 0.30
Financial Position 0.09 3 0.27 3 0.27
TOTAL 1.00 3.24 3.30

Opportunities

1. Quality, timely delivery, and meeting specific needs are crucial to obtain
orders from users and distributors
2. Construction activity in Kuwait is booming
3. There is infusion of additional funds in the economy because of oil sales
4. The Public Authority for Housing in Kuwait has ambitious plans to create
additional townships to alleviate the shortage of housing
5. With the budget surplus, the government plans to build schools, hospitals,
and other public institutions
6. Demand for bitumen-based products for housing in Kuwait can be expected to
increase
7. Older buildings are being replaced by multi-storied buildings with larger floor
area

Threats

1. Often local customers seek non-Kuwaiti sources

2. Unlike the cheaper Saudi bitumen which is subsidized by the Saudi
government, Kuwaiti bitumen is not subsidized
3. The private sector prefers cheaper bitumen, rather than good quality bitumen
4. The competition to sell the bitumen-based products is very intense, and could
erode the existing competitive advantage of GUMC
5. Increasing competition from local, regional, and international competitors can
be expected.

External Factor Evaluation (EFE) Matrix

An External Factor Evaluation (EFE) Matrix allows strategists to summarize and

evaluate economic, social, cultural, demographic, environmental, political,
governmental, legal, technological, and competitive information. GUMC is in a
comfortable position as the industry leader in Kuwait with a reputation for quality;
and this provides the necessary capability to harness opportunities in the external
environment because of a favorable climate for non-oil producing businesses that the
Kuwaiti government encourages, in order to diversify the economy.

Key External Factors Weight Rating Weighted

Score

Opportunities
1. Quality, timely delivery, and meeting specific
needs are crucial to obtain orders from users 0.08 3 0.24
and distributors

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2. Construction activity in Kuwait is booming 0.12 4 0.48

3. There is infusion of additional funds in the

economy because of oil sales 0.06 2 0.12

4. The Public Authority for Housing in Kuwait has

ambitious plans to create additional townships 0.08 3 0.24
to alleviate the shortage of housing
5. With the budget surplus, the government plans
to build schools, hospitals, and other public 0.10 4 0.40
institutions
6. Demand for bitumen-based products for
housing in Kuwait can be expected to increase 0.10 3 0.30

7. Older buildings are being replaced by multi-

storied buildings with larger floor area 0.06 2 0.12

Threats
1. Often local customers seek non-Kuwaiti sources
0.07 3 0.21
2. Unlike the cheaper Saudi bitumen which is
subsidized by the Saudi government, Kuwaiti 0.09 4 0.36
bitumen is not subsidized
3. The private sector prefers cheaper bitumen,
rather than good quality bitumen 0.07 4 0.28

4. The competition to sell bitumen-based products

is very intense, and could erode the existing 0.07 3 0.21
competitive advantage of GUMC
5. Increasing competition from local, regional, and
international competitors can be expected 0.10 3 0.30

Total 1.0 3.26

The average total weighted score is considered to be 2.5. A total weighted score of
4.0 indicates that an organization is responding in an outstanding way to existing
opportunities and threats in its industry. In other words, the firm’s strategies
effectively take advantage of existing opportunities and minimize the potential
adverse effects of external threats. A total score of 1.0 indicates that the firm’s
strategies are not capitalizing on opportunities or avoiding external threats. The total
weighted score of 3.26 suggests that GUMC has recognized the opportunities and
threats it faces, and needs to embark on a serious review of its potential for growth,
its capabilities, and its limitations. Consolidation of existing capabilities and markets,
as well as expansion into new markets through the proposed joint venture may
sustain the vision of GUMC to be the market leader of choice in Kuwait.

Product Positioning Matrix

After markets have been segmented so that a firm can target particular customer
groups, the next step is to find out what customers want and expect. Many firms
have become successful by filling the gap between what producers see and
customers perceive, as good service. Product positioning entails developing
schematic representations that reflect how a firm’s products or services compare

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with their competitors’ regarding dimensions most important to success in the
industry. Two such matrices are presented below for GUMC and the representative
foreign Competitor X indicated above.

Product Positioning Matrix for Price Competition and Customer Loyalty

Customer Loyalty
(High)

GUMC

Company
X

Price Price Competition

Competition(low) (High)

Customer Loyalty
(Low)

As depicted in the Product Positioning Matrix above for Price Competition vs.
Customer Loyalty, GUMC’s price is less competitive than that of Company X. As a
result, customer loyalty is weaker for GUMC than for Company X, though there are
some evidences of “patriotic” purchases from GUMC by the locals, and GUMC has a
dedicated customer base – hence loyalty – with the Kuwaiti government.

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 Product Positioning Matrix for Quality and Market Share

Quality (High)

GUMC

Company
X

Market Share Market Share (High)

(low)

Quality (Low)

It can be seen from the above Product Positioning Matrix for Market Share vs.
Quality that GUMC is clearly ahead in a strong position on both dimensions, thanks
to its high prioritization of unremitting quality in its products, and the patronage of
the Kuwaiti government (resulting in 25 percent of the market share by GUMC for
bitumen-based products). Company X on the other hand, depends heavily on the
private sector in Kuwait for its market share, compensating for lower quality with
lower price that is more attractive to the private sector customers.

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E. Internal Audit

Strengths

1. The Kuwaiti government is restricting entry of new companies into the

bitumen-products market
2. GUMC holds 25 percent share of the bitumen-based products market
3. Non-price aspects such as quality are very important for marketers and
distributors of bitumen-based products
4. The company can produce approximately 4 million square meters of
membrane products in a year
5. GUMC is likely to launch a joint venture with a foreign company to increase
its market share

Weaknesses

1. GUMC is tending to neglect the private sector as it is price-sensitive

2. Variety is lacking in bitumen products
3. There is strong competition from bitumen that used polystyrene in its
components
4. The advertising and distribution of the Kuwaiti products are more sluggish
than those of Saudi and Emirati products
5. The Kuwaiti product is concentrated on housing projects away from the
market

Internal Factor Evaluation (IFE) Matrix

A summary step in conducting an internal strategic-management analysis is to

construct an Internal Factor Evaluation (IFE) Matrix. This strategy-formulation tool
summarizes and evaluates the major strengths and weaknesses in the functional
areas of a business, and it also provides a basis for identifying and evaluating
relationships among them. Itemized below are the strengths and weaknesses of
GUMC – from the information provided, there are equal numbers of strengths and
weaknesses.

Key Internal Factors Weight Rating Weighted

Score

Strengths
1. The Kuwaiti government is restricting
entry of new companies into the bitumen- 0.12 3 0.36
based products market
2. GUMC holds 25 percent share of the
bitumen-based products market 0.12 4 0.48

3. Non-price aspects such as quality are very

important for marketers and distributors of 0.10 2 0.20
bitumen-products
4. The company can produce approximately 4
million square meters of membrane products 0.08 3 0.24
in a year

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 5. GUMC is likely to launch a joint venture
with a foreign company to increase its market 0.10 3 0.30
share
Weaknesses
1. GUMC is tending to neglect the private
sector as it is price-sensitive 0.12 4 0.48

2. Variety is lacking in bitumen products 0.08 2 0.16

3. There is strong competition from bitumen
that used polystyrene in its components 0.08 2 0.16

4. The advertising and distribution of the

Kuwaiti products are more sluggish than 0.12 4 0.48
those of Saudi and Emirati products

5. The Kuwaiti product is concentrated on

housing projects away from the market 0.08 2 0.16

Total 1.00 3.02

Regardless of how many factors are included in an IFE Matrix, the total weighted
score can range from a low of 1.0 to a high of 4.0, with the average score being 2.5.
Total weighted scores well below 2.5 characterize organizations that are weak
internally, whereas scores significantly above 2.5 indicate a strong internal position.
In light of this, GUMC’s position with a score of 3.02 reflects a somewhat strong
internal position, though it needs to pursue the private sector more vigorously and
endeavor to become a price leader consistent with maintaining high quality.

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F. SWOT Strategies

Any organization, whether military, product-oriented, service-oriented,

governmental, or even athletic, must develop and execute good strategies to win. A
good offense without a good defense, or vice versa, usually leads to defeat.
Developing strategies that use strengths to capitalize on opportunities could be
considered an offense, whereas strategies designed to improve upon weaknesses
while avoiding threats could be termed defensive. Taking into consideration the
above identified External Audit of the Opportunities and Threats (OT) and the
Internal Audit of Strengths and Weaknesses (SW), a SWOT Matrix can be compiled
and is presented below as: SO (strengths-opportunities) Strategies; WO
(weaknesses-opportunities) Strategies; ST (strengths-threats) Strategies; and, WT
(weaknesses-threats) Strategies. Matching key external and internal factors is the
most difficult part of developing a SWOT Matrix, requiring good judgment – and
there is no one best set of matches.

Strengths
1. The Kuwaiti government 1.
is restricting entry of
new companies into the
bitumen-based products’
market 2.
2. GUMC holds 25 pecent
share of the bitumen- 3.
based products’ market
3. Non-price aspects such
as quality are very
important for marketers
and distributors of 4.
bitumen-based products
4. The company can
produce approximately 4
million square meters of
membrane products in a
year 5.
5. GUMC is likely to launch
a joint venture with a
foreign company to
increase its market
share
Opportunities S-O Strategies
1. Quality, timely 1. As GUMC holds 25 1. As the company is
delivery, and percent share of the
meeting specific bitumen-products
needs are crucial to market, it should ride on
obtain orders from the tide of the
users and construction boom in
distributors Kuwait, targeting the
2. Construction activity government as well as
in Kuwait is booming the private sector
3. There is infusion of 2. GUMC should launch the 2. GUMC should
additional funds in proposed joint venture
Weaknesses
GUMC is tending to
neglect the private
sector as it is price-
sensitive
Variety is lacking in
bitumen products
There is strong
competition from
bitumen that used
polystyrene in its
components
The advertising and
distribution of the
Kuwaiti products are
more sluggish than
Saudi and Emirati
products
The Kuwaiti product is
concentrated on
housing projects away
from the market
W-O Strategies
already reputed for
quality, it must find
ways to reduce prices
through cost-cutting
measures and target
the neglected and
price-sensitive private
sector
advertise more

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 the economy with a foreign company aggressively to
because of oil sales to offset the advantages capture both
4. The Public Authority of countries importing government and
for Housing in Kuwait bitumen-based products private sector markets
has ambitious plans into Kuwait with the expansion of
to create additional private and public
townships to construction activities
alleviate the
shortage of housing
5. With the budget
surplus, the
government plans to
build schools,
hospitals, and other
public institutions
6. Demand for
bitumen-based
products for housing
in Kuwait can be
expected to increase
7. Older buildings are
being replaced by
multi-storied
buildings with larger
floor area
Threats S-T Strategies W-T Strategies
1. Often local 1. Availing of government 1. GUMC could diversify
customers seek non- patronage, GUMC should its bitumen-based
Kuwaiti sources lobby with the product line according
2. Unlike the cheaper government for subsidy to the products that are
Saudi bitumen which of its bitumen-based most in demand
is subsidized by the products to counter
Saudi government, subsidized foreign
Kuwaiti bitumen is imports
not subsidized 2. The government and
3. The private sector GUMC should promote
prefers cheaper the advantages of
bitumen, rather than Kuwaiti bitumen-based
good-quality bitumen products to sensitize the
4. The competition to public across all market
sell the bitumen- sectors
based products is
very intense, and
could erode the
existing competitive
advantage
5. Increasing
competition from
local, regional, and
international
competitors can be
expected

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SO Strategies use a firm’s internal strengths to take advantage of external
opportunities. GUMC can capitalize on its high reputation and monopoly in Kuwait as
the market leader with quality bitumen-based products, and make concerted efforts
to expand into the private sector to avail of the construction boom. The company
could also launch a joint venture with a strong foreign partner to offset the
advantages of importing companies.

WO Strategies aim at improving internal weaknesses by taking advantage of

external opportunities. Consistent with expansion capabilities, GUMC could launch an
aggressive advertising campaign, especially to target the private sector with cost-
cutting measures translating into lower product pricing.

ST Strategies use a firm’s strengths to avoid or reduce the impact of external

threats. GUMC needs to lobby the government for subsidies to take on the subsidized
foreign imports, together with concerted promotion across all market sectors.

WT Strategies are defensive tactics directed at reducing internal weaknesses and

avoiding external threats. GUMC could diversify its bitumen-based product line
according to the products that are most in demand.

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G. SPACE Matrix

The Strategic Position and Action Evaluation (SPACE) Matrix below indicates whether
aggressive, conservative, defensive, or competitive strategies are most appropriate
for a given organization. The axes of the SPACE Matrix represent two internal
dimensions: (Financial Strength [FS] and Competitive Advantage [CA]) and two
external dimensions: (Environmental Stability [ES] and Industry Strength [IS]).
These four factors are perhaps the most important determinants of an organization’s
overall strategic position.

FS
Conservative Aggressive GUMC
+7

+6

+5

+4

+3

+2

+1

CA IS
-7 -6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6 +7

-1

-2

-3

-4

-5

-6

Defensive -7 Competitive

ES

Financial Strength (FS)* Environmental Stability (ES)

Return on Investment 4 Risk involved in business -2
Leverage 4 Technological Changes -3
Liquidity 5 Price Range of Competing Products -5
Working Capital 5 Competitive Pressure -4
Cash Flow 5 Barriers to Entry -1
(*These figures are best estimates
based on performance and market
realities, as the case does not provide
financial information)
Financial Strength (FS) Average 4.6 Environmental Stability (ES) Average -3.0

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Competitive Advantage (CA) Industry Strength (IS)
Market Share -2 Growth Potential 6
Product Quality -1 Financial Stability 4
Customer Loyalty -3 Ease of Market Entry 3
Product Life Cycle -3 Resource Utilization 4
Technological Know-how -2 Profit Potential 5
Control over Suppliers & Distributors -3 Technological Know-how 4
Productivity, Capacity Utilization 4

Competitive Advantage (CA) -2.3 Industry Strength (IS) Average 4.3

Average

Y-axis: FS + ES = 4.6 + (-3.0) = +1.6

X-axis: CA + IS = (-2.3) + (4.3) = +2.0

The directional vector of the SPACE Matrix above indicates that GUMC is in Quadrant
I of the SPACE Matrix. Therefore, according to the results of the SPACE Matrix, it is
recommended that GUMC embark on an Aggressive Strategy on a growth
trajectory in the promising bitumen-based construction industry, availing of the
Kuwaiti government’s patronage. The company should thus balance all extant
external and internal realities impinging on it. According to the SWOT
recommendation, the company could avail of horizontal integration (acquiring similar
firms towards oligopoly or monopoly) through joint venture partnership with a strong
foreign firm. It may not be timely for the company to be forward integrated (taking
ownership of distribution channels and nodes such as warehouses and retail store
chains), or for backward integration (acquiring firms providing raw bitumen). It
appears from the overall strategic thrust of the various analyses including the CPM,
EFE, IFE, SWOT, and Product Positioning Matrix, that GUMC is likely to adopt a
related diversification strategy as the company’s mainstay is the production of high-
quality bitumen-based construction products. It can therefore acquire a firm(s) that
could help in innovating and cost-cutting to establish GUMC’s presence in the private
sector with lower pricing. GUMC will thus need to embark on a market penetration
and market development strategy, together with product development to meet
quality, price, and demand for various market segments in the promising Kuwaiti
market for bitumen-based construction products.

H. Grand Strategy Matrix

All organizations can be positioned in one of the Grand Strategy Matrix’s four
strategy quadrants. The Grand Strategy Matrix is based on two evaluative
dimensions: competitive position and market (industry) growth. Any industry whose
annual growth in sales exceeds 5 percent could be considered to have rapid growth.
GUMC’s sales growth is unknown based on information provided in the case, but its
market leadership, monopoly, government patronage, and 25 percent market share
puts the company in a healthy annual growth trajectory. Appropriate strategies for
an organization to consider are listed in sequential order of attractiveness in each
quadrant of the matrix. Firms located in Quadrant I of the Grand Strategy Matrix are

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in a strong strategic position with rapid market growth. For these firms,
continued concentration on current markets (market penetration and market
development) and products (product development) is an appropriate strategy (see
also the SPACE Matrix above). As it would be unwise for a Quadrant I firm to shift
notably from its established competitive advantage(s), GUMC should consolidate and
expand its market. When a Quadrant I organization has excessive resources, then
backward, forward, or horizontal integration may be effective strategies – in the case
of GUMC, horizontal integration has been recommended in the SPACE Matrix
analysis. When a Quadrant I firm is too heavily committed to a single product, then
related diversification may reduce the risks associated with a narrow product line.
GUMC has a successful product line, which could be further extended through related
diversification. Quadrant I firms can afford to take advantage of external
opportunities in several areas. They can take risks aggressively when necessary –
and this is recommended for GUMC (see also the SPACE Matrix above).

Rapid Market
Growth
Quadrant II Quadrant I
GUMC

Weak Strong
Competitive
Competitive
Position Position

Quadrant III Quadrant IV

Slow Market Growth

1. Market development
2. Market penetration
3. Product development
4. Backward integration
5. Forward integration
6. Horizontal integration
7. Related diversification

According to its Quadrant I location in the Grand Matrix, GUMC is in a strong

competitive position, and underscores the competitive stance reflected in the SPACE
Matrix – with the possible addition of Related Diversification by joint venturing with a
strategic foreign partner to cut costs, and to optimize production, market expansion,
product diversification, and overall profits. When a Quadrant I firm is too heavily

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committed to a single product, then related diversification may reduce the risks
associated with a narrow product line. It is therefore recommended also that GUMC
diversify its product line to include the most profitable bitumen-based construction
products. As a Quadrant I firm, GUMC can afford to take advantage of external
opportunities in several areas; it can take risks aggressively to make inroads into the
booming private sector.

I. The Quantitative Strategic Planning Matrix (QSPM)

The only analytical technique in the literature designed to determine the relative
attractiveness of feasible alternative actions is the Quantitative Strategic Planning
Matrix (QSPM), which comprises Stage 3 of the strategy-formulation analytical
framework. This technique objectively indicates which alternative strategies are best.
The QSPM uses input from Stage 1 analyses and matching results from Stage 2
analyses to decide objectively among alternative strategies. That is, the EFE Matrix,
IFE Matrix, and Competitive Profile Matrix that make up Stage 1, coupled with the
SWOT Matrix, SPACE Matrix, and Grand Strategy Matrix that make up Stage 2,
provide the needed information for setting up the QSPM (Stage 3). The QSPM is a
strategic decision-making tool that allows strategists to evaluate alternative
strategies objectively, based on previously identified external and internal Critical
Success Factors. Like other strategy-formulation analytical tools, the QSPM requires
good intuitive judgment.

The left column of a QSPM consists of key external and internal factors (from Stage
1), and the top row consists of feasible alternative strategies (from Stage 2).
Specifically, the left column of a QSPM consists of information obtained directly from
the EFE Matrix and IFE Matrix. In a column adjacent to the Critical Success Factors,
the respective weights received by each factor in the EFE Matrix and the IFE Matrix
are recorded. The top row of a QSPM consists of alternative strategies derived from
the SWOT Matrix, SPACE Matrix, and Grand Strategy Matrix. These matching tools
usually generate similar feasible alternatives. However, not every strategy suggested
by the matching techniques has to be evaluated in a QSPM. Strategists should use
good intuitive judgment in selecting strategies to include in a QSPM.

Strategy 1 Strategy 2 Strategy 3

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 With 25 GUMC GUMC
percent could should
share of the diversify launch the
bitumen- its proposed
products bitumen- joint
market, based venture
GUMC product with a
should line foreign
target the according company to
government to the offset the
as well as products advantages
the private that are of
sector most in importing
demand countries

Key Factors Weight AS TAS AS TAS AS TAS

Opportunities
1. Quality, timely delivery, and
meeting specific needs are 0.08 4 0.32 3 0.24 3 0.24
crucial to obtain orders from
users and distributors
2. Construction activity in 0.12 4 0.48 4 0.48 3 0.36
Kuwait is booming
3. There is infusion of additional
funds in the economy 0.06 2 0.12 3 0.18 2 0.12
because of oil sales
4. The Public Authority for
Housing in Kuwait has 0.08 4 0.32 4 0.32 3 0.24
ambitious plans to create
additional townships to
alleviate the shortage of
housing
5. With the budget surplus, the
government plans to build 0.10 4 0.40 3 0.30 2 0.20
schools, hospitals, and other
public institutions
6. Demand for bitumen-based
products for housing in 0.10 4 0.40 4 0.40 4 0.40
Kuwait can be expected to
increase
7. Older buildings are being
replaced by multi-storied 0.06 3 0.18 4 0.24 1 0.06
buildings with larger floor
area
Threats

1. Often local customers seek 0.07 1 0.07 3 0.21 3 0.21

non-Kuwaiti sources
2. Unlike the cheaper Saudi
bitumen which is subsidized 0.09 1 0.09 2 0.18 3 0.27
by the Saudi government,

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 Kuwaiti bitumen is not
subsidized
3. The private sector prefers
cheaper bitumen, rather 0.07 2 0.14 2 0.14 3 0.21
than good-quality bitumen
4. The competition to sell
bitumen-based products is 0.07 2 0.14 3 0.21 3 0.21
very intense, and could
erode the existing
competitive advantage of
GUMC
5. Increasing competition from
local, regional, and 0.10 2 0.20 2 0.20 4 0.40
international competitors can
be expected
TOTAL 1.0 2.86 3.1 2.92
Strengths
1. The Kuwaiti government is
restricting entry of new 0.12 3 0.36 3 0.36 2 0.24
companies into the bitumen-
based products’ market
2. GUMC holds 25 percent
share of the bitumen-based 0.12 4 0.48 4 0.48 3 0.36
products market
3. Non-price aspects such as
quality are very important 0.10 4 0.40 3 0.30 3 0.30
for marketers and
distributors of bitumen-
based products
4. The company can produce
approximately 4 million 0.08 4 0.32 3 0.24 4 0.32
square meters of membrane
products in a year
5. GUMC is likely to launch a
joint venture with a foreign 0.10 4 0.40 3 0.30 4 0.40
company to increase its
market share
Weaknesses
1. GUMC is tending to neglect
the private sector as it is 0.12 1 0.12 2 0.24 4 0.48
price-sensitive
2. Variety is lacking in bitumen 0.08 2 0.16 4 0.32 3 0.24
products
3. There is strong competition
from bitumen that used 0.08 -- -- -- -- -- --
polystyrene in its
components
4. The advertising and
distribution of the Kuwaiti 0.12 2 0.24 2 0.24 3 0.36
products are more sluggish
than those of Saudi and
Emirati products

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5. The Kuwaiti product is
concentrated on housing 0.08 2 0.16 2 0.16 3 0.24
projects away from the
market
SUBTOTAL 1.00 2.64 2.64 2.94
SUM TOTAL ATTRACTIVENESS SCORE 5.50 5.74 5.86

J. Recommendations

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Strategy #3: It is recommended that GUMC launch the proposed joint venture with
a foreign company to offset the advantages of foreign countries importing bitumen-
based products into Kuwait.

Strategy #2 could be incorporated into Strategy #1 after the joint venture is

launched, to avail of foreign technology and other competencies; and Strategy #3
could follow to expand the market in order to include the booming private sector with
efficient foreign partnership.

K. Epilogue

Gulf Upstream Manufacturing Company (GUMC), the market leader and monopoly
player in Kuwait, is well established and highly regarded as the leading manufacturer
of bitumen-based construction products such as bitumen-based paints, membranes,
and coatings. The company has taken advantage of the Kuwaiti government’s
strategy to diversify its hitherto largely oil-based economy. GUMC’s product quality is
high, and it has captured the lucrative government market with adequate patronage
to garner 25 percent of the market share. Though GUMC needs to lobby the
government for subsidies to counter the cheaper Saudi and Emirati foreign imports,
it has nonetheless neglected the private sector. This imbalance in the face of an
impending construction boom needs to be redressed in order to maintain market
leadership, and to increase market share.

Following a multi-pronged analysis using judgment and reasoning coupled with

numerical and graphical outputs, three strategic choices were presented for GUMC:

(1) As GUMC holds 25 percent share of the bitumen-products market, it should ride
on the tide of the construction boom in Kuwait, targeting the government as well as
the private sector.

(2) GUMC could diversify its bitumen-based product line according to the products
that are most in demand.

(3) GUMC should launch the proposed joint venture with a foreign company to offset
the advantages of countries importing bitumen-based products into Kuwait.

According to the comprehensive and decisive Quantitative Strategic Planning Matrix

(QSPM), Strategy #3, with the highest Sum Total Attractiveness Score (STAS)
[5.86], has emerged as the best option among the three promising alternatives. This
involves related diversification by joint venturing with a strategic foreign partner to
cut costs, and to optimize production, market expansion, product diversification, and
overall profits. This means that foreign collaboration needs to be embarked upon
immediately. As the STAS for the three possible and related strategies are only
marginally different from the above score of 5.86, GUMC should diversify its product
line according to the most profitable bitumen-based construction products – thus,
Strategy #2 (STAS: 5.74) could be incorporated into Strategy #3. Further, the
proposed joint venture should target both public and private sectors equitably
[Strategy #1 (STAS: 5.50)] – in order to maintain market leadership, to seize the
imminent construction boom, and to neutralize foreign competition in Kuwait.

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