Have you ever known someone who seems to always be able to get what they want no matter what? If you do, you can bet that this person has a specific strategy which they have developed to help them achieve their goals.
‘Small is beautiful’
Operations: A B2B manufacturing company, which produces raw materials in the form of colorants and additives for the plastic industry. The UAE accounts for a small share of the operations. The company was established in 1999 and manufacture began in 2000.
TIS: How did you choose this area of operations? Would you call yourself a niche business?
AA: My father established this company along with my brothers and myself after his experience of working in the Middle East in the Oil sector in a Regional Head position of an American Oil Company back in the 1980’s. In the beginning, we contemplated on the kind of business to invest in and the plastic industry seemed very interesting. My father had the technical acumen from an earlier investment and establishment of a Unsaturated Polyester Resin company in JAFZ.
We started the company with the help of highly technical people with experience in the business and focused on establishing a high standard company to supply colorants and additives in the region, which back then was predominantly being imported from Europe. We found that this would be a niche that would give us an advantage, being a local manufacturer. We could support customers logistically, and Dubai was a great location to export from. So it wasn’t the UAE market alone that was the focus of our sales.
Also, it was important to identify a niche business that does not become too competitive me-too copy cat industries. Even today, we don’t have much competition in the UAE, there are others who make similar products, but they are not specialists in colour and additive, they are more into the commodity side of the business.
TIS: How was your company affected by the onset of the economic crisis?
AA: Before the recession we were focused so much on the growth of the company that we did not look inward to see where it is the real profitability, or where is the real value being generated. So towards the end of 2008, we were holding onto a very large high-priced inventory, and no longer was the market ready to absorb those prices and with the slow down they also didn’t want the products.
One of the advantages of being a SME is that we can sit at a table and make instantaneous decisions that can be implemented, especially during a crisis. We contacted our suppliers, most of them being large multinational companies, and told them that we had ordered this inventory with a projection of the last few years, we’ve been paying on time, and now we have this huge stock of material which cannot be converted into a finished product and sold, and would like to meet to work out a payment term.
We negotiated successfully with our suppliers who were pleased with our transparency and honesty and agreed to take back much of the over stocked and high priced raw materials allowing us to start fresh in 2009 and move forward in a new way during the crisis.
TIS: Did you make any other changes internally?
AA: Therefore we started 2009 with a clean slate and one of the things we did in that process was start looking more carefully internally. We reworked our business model based on our product mix, concentrating on more of a value-add approach rather than a volume-based one. We were quickly able to generate the highest profits in 2009 as compared to all the other years from 2000 to 2008. We actually benefited from the crisis because instead of trying to grow the volume of sales, firefight the growing volume requirements of the customers, we focused more on value addition and the core competency of our company. Our business is now strong and till now we have been seeing better profits, than what we made during the ‘booming construction’ years of Dubai.
TIS: Being a family owned business, how do you ensure targets are met?
AA: We are a SME and the benefits of a SME is that the Board can meet up and take decisions, in this case, my father, two brothers and an external director sat down and took the decisions. My father and our external director have the technical experience, my brother who is the CEO, Ahsin Aman has a great deal of financial expertise, while my second brother has experience in the procurement and production side. We wear two hats, one as a board member giving direction to the company and the other as an executive/employee making sure things run as efficiently as possible.
TIS: What challenges have you faced in the course of your business?
AA: There were a lot of customers who delayed payments due to a cash crunch in their companies. We hadn’t faced that before, and for at least six months in 2009, we faced a lot of delayed payments. Luckily, we had year on year growth and the banks supported us. A lot of our customers were in the construction business and manufacturing plastics for this sector. There were economic problems predominantly in East Europe, that were severely affected, and our customers in these areas stopped buying completely. Therefore, our market shrunk for about 6-8 months. In fact, in the GCC the effect was much less.
TIS: How did you overcome this situation?
AA: I believe small is beautiful, and we made more money in a shrunken, lower capacity sales than we did previously, so we realised that it wasn’t a number game, but rather the product mix and the value addition. We decided we would refocus our direction away from the commodity sector within our product range and focus more attention and resources to clients who were buying our specialty commodities. We expanded into territories that we hadn’t explored as much such as West Africa – Nigeria, Ghana and Ivory Coast – to compensate for the East Europe sales that had gone down. Then we became much more aggressive in East African countries such as Tanzania, Uganda and Kenya, as we did with Saudi Arabia and Iran.
Currently we have formal distribution arrangements with 32 different countries, but outside that we supply to 38 different countries across South Asia, Africa, Europe and Middle East Levant.
TIS: What marketing strategy have you employed to achieve phenomenal sales?
AA: Another thing we’ve learnt from the economic crisis is to spread our risk, by market segment and territory. We don’t want to focus in just one industry, say the construction industry within the plastic segment. We don’t want to rely on one country. This spreads our risk to different segments and widely as possible.
Moving forward our strategy is to get into niche, specialised products where there is less competition. So in 2010 we invented and patented our own oxo-biodegradable additive for the manufacture of plastic film, which would render the film biodegradable with a useful life of one year, after which it would begin to degrade and eventually bio-assimilate into the soil. We have already started supplying this internationally.
We are also working in partnership with another company to produce highly specialized additives which once the project is successful, we would see the doubling of our production capacity into a specialised business within the plastics sector. This is niche and not many people can get into this due to very many barriers.
TIS: What is your management philosophy?
AA: We’re a family run business, so all the life of my father who was the former CEO and is now the executive chairman of the company, he has been a top professional. One of the qualities he brought into the company is that even if it is a family owned business, it has to be professionally run. Limits of authority to the way everything is approached, quality control, production, sales and marketing, we have that ingrained in us, that although we’re a very small organisation, the leader has come from working with multibillion dollar oil companies and in a very senior position. He’s taken what he’s learnt in his lifetime of work and tried to bring that to an SME.
To give you an example, from day one when we started, we invested 40 per cent in quality control in our operations and 60 per cent in our production. This is rarely seen in other start up small businesses, because quality control doesn’t bring in profits, production capacity does (wrongly believed). But we did this because we were starting with a long term plan and we wanted to make sure we did everything right and not focus only on making lots of money is the shortest possible time. Our executive chairman believes that in order to be sustainable, we have to gear up to be an excellent company that competes with the multinational companies, and therefore concentrate on the factors like quality control, human resources, and so on.
We are a unique company in that the family members handle various departments in the organisation. Everybody has their own domain of work and independence. We work against a budget. The staff is also rewarded if they exceed expectations. We’re well structured, and it’s definitely not a one-man show. Everybody has a limit of authority.
TIS: What does the recognition from Dubai SME mean to your business?
AA: It’s great that whatever we have been doing has been recognised by an external party. It’s a great pat on our back. We are proud and confident that what we are doing is correct.
What is also means to us is that, being an export oriented company, our clients and their clients are confident in doing business with us. When we announced this to our distributors, they wanted more information from us in order to send this to their clients. The level of reliability and our standing as a company compared to the other competitors is increased, and they see value in our company. There is also immense internal satisfaction, that we have been recognised by an agency under the Dubai department of economic development. You can keep saying a lot of things about your company, but when a third party says it, the customer believes a lot more.
TIS: What advice would you like to give start-up entrepreneurs?
AA: Cashflow! When we started, we had no access to funding, and we had 100 per cent equity finance for machinery, and so on. But we constantly required an injection for working capital. Entrepreneurs need to think of the sustainability of their cash flow.
Today the world is more global, access to manufacturers is becoming easier, and so is the chance of meeting one’s competition. Therefore now, I would say, businesses need to try to get into niche products or services. Don’t go into a “me-too” business which is going to be harder to sustain, especially if you’re starting up, because there may be other businesses that may be doing the same more cost-effectively and efficiently, which means that you have lesser chance of survival. Be innovative, come up with an idea that hasn’t been done before, and focus not just on the UAE. Make your business model adaptable to more than just the country. It should be used for other markets as well.