Strategic Management for Al Nahdi Company

1 Strategic Management for Al Nahdi Company Harvard University 2 Strategic Management for Al Nahdi Company Introduction History Al Nahdi Company was founded in 1986 when Sheikh Abdullah Amer Al Nahdi purchased two pharmacies in Jeddah. Currently, the company has over 1151 Pharmacies around the Kingdom of Saudi Arabia (KSA). A key milestone in the company’s structure occurred in 2003 when it partnered with SEDCO Holding, with the latter acquiring a 50% stake in the company (Al Nahdi, 2024a). Six years later, Al Nahdi significantly invested in IT infrastructure to enhance its distribution and supply chain capabilities. The company also adopted a strategy to coordinate offers within its pharmacies. Owing to a need for training and capacity development of its workforce, the company set up the Nahdi Academy. Mission and Goal The company's mission is “to exceed all guests’ expectations by providing superior personalized life care experiences every day everywhere.” The mission statement supports the vision of being the most loved and trusted health and wellbeing partner for all of Al Nahdi's guests (Al Nahdi, 2024b). The company appears on course to attaining the aspiration as currently, it commands almost a third (31%) of the pharmaceutical market share in Saudi Arabia. Scope of Business/Products Al Nahdi operates as a retail pharmacy and healthcare company. It focuses on wholesale and retail customers of pharmaceutical products, cosmetics, medical equipment, and special and healthy foods (Reuters, 2024). Its two segments are Pharma and Front Shop. The range of its offerings includes medicine, wellness, beauty, FMCF, and mom & baby products. The wide range of offerings has increased brand awareness throughout Saudi Arabia. 3 Major Markets The Kingdom of Saudi Arabia is the primary market for Al Nahdi. Recently, the company has expanded into the United Arab Emirates (UAE) and intends to upscale its market reach through Nahdi Global Services (Argaam Investment, 2023a). Such a global reach would help diversify its market geographically, escaping from the shrinking market as competition increases. Overall Performance The company's stock is currently trading at SAR 146.00. In 2022, Al Nahdi recorded sales worth 8.6 billion SAR (Market Watch, 2024). The first half of 2023 recorded sales of SAR 4.3 billion and a net income of SAR 509 million, representing 0.4% and 0.6% increases from the previous period, respectively (Argaam Investment, 2023b). Earnings per share (EPS) for the first six months of 2023 was SAR 3.92, representing a 0.6% rise from the previous period. Industry Analysis Underlying Forces in the Industry Ease of Entry The Pharma and Front shop segments have relatively low barriers to entry. In 2014, the total expenditure of the pharmaceutical industry was $5 billion (Alhassan, 2016). This significant amount incentivizes firms to enter the market and reap part of this expenditure. Such developments reduce the market share among existing companies. Power of Suppliers Suppliers’ power within the industry is low. There are fewer incentives for suppliers to sell to consumers directly because this would incur significant costs (Alhassan, 2016). Besides, 4 there are regulations governing the conduct of business and contracts between suppliers and distributors/wholesalers, and breaching them would adversely impact suppliers. Power of Buyers Buyers have significant power, particularly in the Pharma segment. Saudis are the largest consumers of pharmaceuticals in the Gulf region, with an estimated medicine consumption of $52 per capita (Alhassan, 2016). With increasing health consciousness among consumers, they are bound to spend on brands that meet their expectations. The availability of information allows consumers to compare alternative products before purchases. Besides, online product reviews imply that customer experiences get amplified by influencing the purchase decisions of potential buyers. Availability of Substitutes Al Nahdi’s products have a significant number of substitutes. Because it is a wholesaler and retailer rather than a producer, its products lack differentiation. Consumers may, therefore, see alternatives offered by other companies as close substitutes, leading them to use alternative criteria, including pricing and quality, to choose among them. These latter characteristics can confer differentiating attributes against close substitutes. Competitors Currently, Al Nahdi's is the dominant player in its industry. The company accounts for 31% of the market share in Saudi Arabia (Argaam Investment, 2023a). The main competitors include Al Dawaa with a 20% market share, United Pharmaceuticals Est (7%), Planet Pharmacies (3%), and others accounting for 38% (Statista, 2024). The market is competitive, demanding that Al Nahdi actively engage in strategies to maintain a competitive edge over 5 rivals. Strategic acquisitions can help the company reduce the competition posed by small firms that collectively command the largest share (38%). Industry Attractiveness The industry remains attractive for existing and new entrants. In 2020, the health and beauty retail industry in Saudi Arabia was valued at SAR 44.7 billion and is projected to reach SAR 56.9 billion in 2025 (Global Data, 2021). The drug stores, and health and beauty stores, in which Al Nahdi has significant interests, account for 63.8% of this market in 2020. These prospects affirm the sustainability of the company’s market niche. However, the lucrative nature of the industry also implies that the company has to proactively engage in measures that will enhance its competitiveness in light of the threat of new entrants who aim to scoop some of the market share. One way of staying ahead is by ensuring that products are dynamic to meet changing preferences of consumers, thus motivating them to stick with the brand even as alternatives increase. Critical Factors that Determine a Company's Success within the Industry Brand loyalty is a significant success factor in this industry because it increases the likelihood of repeat purchases. The components of brand loyalty include the brand name, product quality, price, promotion, service quality, and store environment (Alhedhaif et al., 2016). Al Nadhi is conscious of the importance of brand loyalty and has invested in enhancing it. For instance, it has acquired a fresh identity and strategy to keep the brand relevant and aspirational among millennials (Al Nahdi, 2024a). The company launched the 'Nuhdeek' Loyalty Program as a promotion that allows guests to earn points and redeem them. It has also launched an Omnichannel platform, the " Nahdi " app, which coincided with its 1,000th pharmacy (Al Nahdi, 6 2024a). The app offers an alternative and convenient way for guests to review the products and place orders. Health consciousness has emerged as a crucial concern among consumers. Shoppers have developed a preference for natural, plant-based, and toxin-free ingredients in health and beauty products (Global Data, 2023). As a result, manufacturers who use natural-based and safe ingredients outperform those using potentially harmful ones. Companies should, therefore, focus beyond quality to the potential long-term impacts of products on the customers' health to win them over. Consumers may also consider factors such as the environmental impact of the products or the manufacturer's production methods. Environmentally-conscious companies could win customer's loyalty over those whose activities are seen as negatively impacting sustainability. 7 8 9 International-level strategies Entry strategies Nahdi does its best to keep expanding its operations within the United Arabs Emirates and worldwide (UAE) through direct investments (Tessema, 2021). It also extended its footprint when it invested in and opened a healthcare centre in Dubai. It also penetrates external markets by investing in and incorporating e-commercial platforms to promote its aims of offering omnichannel healthcare to global clients. Cooperative strategies Nahdi regularly engages in strategic partnerships with suitable and high-performing global companies for purposes like boosting services, enhancing a culture of advancement and allinclusion and supporting societal initiatives in the health industry. It partnered with SSI SCHAEFER, a world-class firm from Germany offering intralogistics services in 2022 ("Middle East’s first automated pharmaceutical distribution center in Saudi Arabia," n.d.). It did that to develop the pioneering automatic pharmaceutical supply firm for the Middle East. It also partnered with Repustate, a global firm offering services in granular message analytics in 2020. That was meant to enable Nahdi to use the firm’s technological expertise to promote its customer and employee experience ("Arabic sentiment analysis partnership in healthcare," 2020). Global integration Nahdi incorporates standardization whereby it offers its Guests worldwide flawless and integrated healthcare provisions using its polyclinics, virtual centers and express clinics ("Nahdi pharmacy," n.d.). It is able to efficiently access universal clients and deliver its great products and services to them through its e-pharmacists and e-commercial platforms. Nahdi introduced and 10 implemented Nahdi Global to raise the e-commercial provisions to its global clients. Clients are able to access and receive Nahdi’s products and services using the platform efficiently. Corporate governance Top management teams Nahdi’s top management team encompasses its C-level leaders and Board of Directors (Cuypers et al., 2022). The Chief Executive Officer (CEO), the Chief Network Development Officer, the Chief Commercial Officer, the Chief Financial Officer and the Chief Supply Chain and Business Support Officer are Yasser Joharji, Zuhair Aytah, Karim Dimitri Mohammed AlKhubani and Raed Monagel, respectively. Additionally, the Chief Operating Officer, the Chief Marketing and Strategy Officer, the Chief Human Resource Officer and the Chief Information Technology Officer are Dr. Hossam Khattab, Hani Ismail, Samer Bokharee and Dr. Khalid Tadlaoui respectively. Saleh Salem Mahfouz and Abdullah Amer Abdullah are the Chairman and Vice Chairman of the Board of Directors, respectively. The heads of the different committees Nahdi has also comprise of the top management team. The chairman of the Audit Committee; Remuneration and Nomination Committee; and the Digital Transformation and Cyber Security Committee are Abdulatif Ali Al-Seif, Junaid Ezmat Bajwa and Romain Voog, respectively. Governance mechanisms Nahdi’s Board of Directors is responsible for creating, running and directing the firm’s Corporate Governance Manual. It does that to make sure the firm fully complies with suitable rules to promote firm sustainability and development. The Board created three committees to effectively boost its roles, called the Digital Transformation and Cyber Security Committee; the Audit Committee and the Remuneration and Nomination Committee. The committees’ performances are periodically reviewed by the Board per the statutory requirements. The Board constantly meets 11 with shareholders to hear their views and guidance regarding Nahdi and its performance. Nahdi also possesses a unique department for investor connections that ensures enhanced communication and relationships with firm shareholders. 12 13 14 15 16 17 18 References Alhassan, A. (2016). The competitiveness of Saudi pharmaceutical industry using Porter 5 Forces analysis. European Journal of Business and Management, 8, 23, 58-66. Alhedhaif, S., et al. (2016). Brand loyalty and factors affecting cosmetics buying behavior of Saudi female consumers. Journal of Business Studies Quarterly, 7, 3, 24-38. Al Nahdi. (2024a). Our history. Retrieved from Al Nahdi. (2024b). About Nahdi: overview- mission vision values. Retrieved from https://www.nahdi.sa/about-nahdi/our-mission-our-vision/ Arabic sentiment analysis partnership in healthcare. (2020, October 28). Repustate: Sentiment analysis and Social listening for CX & EX. https://www.repustate.com/news/arabicsentiment-analysis-partnership-between-nahdi-medical-company-and-repustate/ Argaam Investment. (2023a). Nahdi market share in Saudi Arabia reaches 31%: CEO. Retrieved from Argaam Investment. (2023b). Nahdi H1 profit up marginally to SAR 509.3 mln; Q2 at SAR 265 mln. Retrieved from < https://www.argaam.com/en/financial-reports/companyreport/12760/2023/71> Cuypers, I. R., Patel, C., Ertug, G., Li, J., & Cuypers, Y. (2022). Top management teams in international business research: A review and suggestions for future research. Journal of International Business Studies, 53(3), 481-515. Global Data. (2020). Health and beauty retailing in Saudi Arabia- sector overview, market size and forecast to 2025. Retrieved from < https://www.globaldata.com/store/report/saudiarabia-health-and-beauty-retail-market-analysis/?utm_source=Company>. 19 Global Data. (2023). Middle East and Africa (MEA) health and beauty market opportunities, trends, growth analysis, and forecast to 2027. Retrieved from < https://www.globaldata.com/store/report/mea-health-and-beauty-market-growthanalysis/> Market Watch. (2024). Nahdi Medical Co. Retrieved from < https://www.marketwatch.com/investing/stock/4164?countrycode=sa> Middle East’s first automated pharmaceutical distribution center in Saudi Arabia. (n.d.). SSI SCHAEFER USA - A Global Leader in Intralogistics - Cutting-Edge Technologies Around the Globe! | SSI SCHAEFER. https://www.ssi-schaefer.com/ende/newsroom/news/nahdi-medical-company-1011294 Nahdi pharmacy. (n.d.). Welcome to Global Village Dubai. https://www.globalvillage.ae/en/nahdi-pharmacy Reuters. (2024). Al Nahdi Medical Company SJSC 4164.SE. Retrieved from https://www.reuters.com/markets/companies/4164.SE Statista. (2024). Market share of leading pharmacy retailers in Saudi Arabia in 2020. Retrieved from https://www.statista.com/statistics/1381745/saudi-arabia-market-share-of-leadingpharmacy-retailers/ Tessema, B. M. (2021). Foreign Direct Investment and the Roles of Multinational Entreprise.