Strategic Analysis of Oman Flour Mills: Industry and Company

This report provides a comprehensive strategic analysis of Oman Flour Mills, examining its external and internal environments. The analysis begins with an overview of the company and its mission and vision statements. The external environment is assessed using PESTEL and Porter's Five Forces an...Read More

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Strategic Analysis of Oman Flour Mills
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1STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
Table of Contents
1. Introduction..................................................................................................................................2
2. External Environment of Oman Flour Mills................................................................................3
2.1 Industry overview and analysis.............................................................................................3
2.2 PESTEL Analysis Model as per the company.......................................................................3
2.3 Porter’s Five Forces analysis.................................................................................................6
2.4 Ansoff Matrix........................................................................................................................8
3. Internal environment of Oman Flour Mills.................................................................................9
3.1 SWOT Analysis.....................................................................................................................9
3.2 VRIO Model........................................................................................................................12
3.2 Value Chain Analysis..........................................................................................................14
3.4 Company Key Strategies.....................................................................................................16
4. Recommendations......................................................................................................................17
Reference List................................................................................................................................19
Appendices....................................................................................................................................22

2STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
1. Introduction
Overview of Oman Flour Mills
Oman Flour Mills was established in 1977 and it was set up as Joint Stock Company.
This organisation has grown up in stature along with credibility features. Oman Flour Mills has
been followed hard work and determination in order to produce quality products. Therefore,
Oman Flour Mills has gained a large market share in Arabian Gulf countries and it has developed
exports in African countries and in Commonwealth of Independent States (Omanflourmills
2018). Oman Flour Mills has brands like Dahabi and Barakar Feeds. Dahabi is famous for top
quality products ranging from bread baking products, special products and health products.
Dahabi offers best for all delicious recipes to cook for the family. In addition, Barakat Products
has been segregated to Calf rarer, general ruminant. Sheep cubes, general camel feed, alpha
horse feeds, and pigeon feeds. Barakat Feeds mainly provides food for the pet animals and birds.
Mission statement of Oman Flour Mills is about providing a quality hygienic work
environment and it wants to be employer of choice. Oman Flour Mills wants to enhance
customer loyalty and it follows continuous community development (Omanflourmills.com
2018). Vision statement of Oman Flour Mills is to reach every household in the MEA region by
delivering healthy quality products through competent workforce and efficient processes. The
organisation wants to develop in contributing the local development both socially and
environmentally. Values of Oman Flour Mills are associated with integrity in business, focused
in diversification of the business, commitment to tasks and relationships and development of in-
house talent of the employees. Flour Mills Oman achieved a net profit after the tax of RO 12.74
million and it was better than RO 10.91 in previous year 2016 (Omanflourmills.com 2018).

3STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
2. External Environment of Oman Flour Mills
2.1 Industry overview and analysis
Food manufacturing industry in Oman has been growing at a Compounded Annual
Growth Rate (CAGR) of 4.6%. In the year 2016, the annual growth rate in food manufacturing
industry was 3.1 million tons and it would touch the figure of 3.9 million tons in 2021. The
consumption of the Oman population has been increasing with attribute to 3.1% and real gross
domestic product is increasing with 2.4% during the period in 2016-2017 (Rajsekar 2017). Oman
and the USA both have a bilateral trade agreement in order to export and import of the food
products. In bakery products and animal food products; Oman mainly sells the products to GCC
(Gulf Cooperation Council) that includes the countries like Kuwait, Saudi Arabia, the United
Arab Emirates, Bahrain and Qatar. Oman has currently population of 4.58 million and among
them, 2.1 million are expatriates (Gulfbase.com 2018). Oman Flour Mills increased the sales by
0.76% where Barakat Feed sales have been increased by 6%.
2.2 PESTEL Analysis Model as per the company
Political: Politics of Oman follows absolutely monarchy and Sultan of Oman is the head
of the government. Sultan serves supreme commander of the armed forces, minister of defence,
prime minister and foreign affairs as well as finance. Political condition is stable at present in
Oman and trends affect the situation of food industry. Food manufacturing companies are adding
healthier options to the product service. Current systems and policies push the people to be more
conscious when they purchase the products. Food safety rules are strict and Oman government
gives a grace period of six months prior to enforcement of new laws and regulations. Oman
promulgated new Food Safety Law aiming to safeguard the public health and strengthening the

4STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
consumer safety and public health. The government set the rules as part of the framework to
raise awareness in food safety towards international standards.
Economic: Oman is Middle East country and GDP per capita has expanded in past 50
years. Current GDP rank of Oman is 64th and in regard of PPP; it touches 74th. GDP growth of
Oman is 2.9% and the current inflation rate is 1% and agriculture sector provides 1.2% in the
Oman GDP (Gulfbase.com 2018). Oman currently has a labour force of 968,000. Main industries
in Oman are crude oil refining and production. The GDP growth of Oman is decreasing as it is
just 2.9% in 2017 and in 2015; it was almost 5.3%. Protracted low oil price is the reason behind
the lower GDP growth in Oman. Oman is famous for the local agricultural production as all
other foods are nearly all imported. Oman has raised food-sufficiency by 32% and Oman has
been modernising the agricultural food sector (Gulfbase.com 2018). The annual volume of
imports of major food-based grains exceeded 84 million tons and it has been estimated to be over
US$ 30 billion in value. FDI inflow into the country was negative in 2015 and it saw a bit
improvement in 2016 (USD 140 million).
Social: Oman is easy to place to do the business than other Middle East countries as
Oman was ranked 66th out of 190 countries by the World Bank's Ease of doing the business
ranking for 2017. In Oman, labour forces are primarily native people and there are many expats
who have been in Oman for a long time. The consumers of Oman change their taste frequently as
the country is eventually rich and they have a good amount of disposable income. Half of the
Omani population are from Ibadi sect of Islam and many of the population belong to Sunni
Islam. In Oman, there are many small communities and the population growth is estimated at 4%
per year. GDP per capita income of Oman is $43,800 (Oukil et al. 2016). The income
distribution is not same in Oman as demographic influences are higher. In case of food

5STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
preferences, Omani people like rice and in morning; it consists of bread. In Oman, dried or fresh
dates are important to diet and it is part of the ritual and hospitality. Omani people serve their
guest's various types of confectionary dishes like helwa. Many of the Omani people live in rural
areas and many of the countryside are self-sufficient with farmers and they have money in their
hands.
Technological: Oman based food manufacturing industry is looking forward to
improving the technology. Sultanate of Oman and Lithuania are both developing countries and
these countries make a tie to share the technology of food industry (Massoud et al. 2015). In food
manufacturing industry, Omani companies are using IT specialists for technological
improvement of database and communication. In technologies of food manufacturing machines,
the companies are following the recent trend of automation. The companies of Oman are trying
to spend more on automation as it can help to improve quality, productivity and reduce the cost
by automating the human tasks. Omani based companies in food manufacturing, the use of
technical operations and high-tech maintenance are in great demand. As stated by Khalfan and
Alshwaf (2014), automation in the food industry can enable the organisation to be more
proactive in information and monitoring.
Environmental: In Oman, food manufacturing or bakery industry emits the gases and it
takes serious note on improving the community sustainability and improvement. The weather in
Oman is hot and humid and sudden climate change can impact on the business venture. Extreme
weather condition and sudden natural disasters can provide toll on the business in the affected
area. In the supply chain, the vehicles can emit harmful gases. UN Environment Programme has
given Oman with credit for the environmental conservation, maintenance of ecological balance
and pollution control.

6STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
Legal: There is no sales tax and VAT in Oman. Companies have to pay taxes of 15% and
withholding taxes are a dividend of 10%, the interest of 10% and Royalties of 10%. Oman has a
bilateral agreement with Spain and Companies have to keep 10.5% social security contributions
paid by employers (Kazem 2014).
Oman US The Middle East and
North Africa
Number of payments
of taxes
15.0 10.6 17.8
The total share of
taxes
68.0 175.0 208
Time is taken for
administrative
formalities
23.9 44.0 32.0
Table 1: Country Comparison for Corporate Taxation
(Source: Gulfbase.com 2018)
2.3 Porter’s Five Forces analysis
Industry Rivalry:
Oman Flour Mills faces tough competition in their Dahabi products. They sell bread
baking products, health products, speciality products, premixes and grain. Industry rivalry is high
in Oman for the bakery products as there are many other companies who are associated with
bakery products. Oman Flour Mills has the advantage of having its market in the Middle East
and African countries. The competitors of Dahabi products are Modern Oman Bakery, Sohar

7STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
Beach bakery and Bread Winners. On the other side, Open Flour Mills sells animal feeds,
specialised feeds, poultry feeds in the name of Barakat. High numbers of firms are not there and
high aggressiveness of firms is not present in Oman (O’reilly 2018). In this sector, Oman Flour
Mills faces less competition as it is one of the largest organisations in animal feeds for B2C and
B2B companies. Therefore, this force is medium.
The threat of substitutes:
Substitutes in the market for Dahabi products are there in Oman. High substitute
availability is seen in Oman for Dahabi products as there are other organisations in the market
who sell the same kinds of products. Substitutes in the market are competitive in terms of
customer satisfaction and quality. Oman Flour Mills sells flour (Atta, Maida, Omani bread flour,
self-raising flour and Lebanese bread flour). The substitutes of the products are sold in the open
market without any brand names. The open market products without any brand name sell at
cheap prices. Therefore, the customers have low switching costs and high performance-to-cost
ratio. In case of Barakat products, Oman Flour Mills has been selling the products with fewer
numbers of competitors. This force is also medium.
The threat of new entrants:
New entrants in the market can influence on Oman Flour Mills' market share. In this
industry, the new venture will need the moderate capital cost to open a brand in the market
(Porter 1985). The customers have low switching cost. In addition, Oman Flour Mills has been in
the market for a long time; therefore, the organisation has a strong brand name in the market.
The new entrant organisation needs to manufacture good quality flour to enter the market. The

8STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
high cost of brand development is needed for the new organisation. It is always expensive for the
new organisation to develop brand development. Therefore, this force is low.
Bargaining power of customers:
Oman Flour Mills must address the significant power of customers as customers may
want to shift the taste of the food. The customers are loyal to Oman Flour Mills and it deals with
influence and demands of the customers. The customers in this food manufacturing industry have
low switching cost as they can choose other companies for Dahabi food products. The customers
can purchase the products from open market as well. The customers have high availability of the
substitutes in the industry from where they can purchase their products. The market for bakery
and food manufacturing is not saturated (Mintzberg et al. 2009). In case of Barakat products, the
customers don’t have many choices and they purchase from Oman Flour Mills. This force is
high in the industry.
Bargaining power of suppliers
The large numbers of suppliers are not present in case of Oman Flour Mills as the
organisation has its own set of suppliers that supply the flours, grains and other raw materials.
Oman Flour Mills makes mouth watering and moist cakes, soft dumpling and crispy and spongy
pancakes. In addition, the suppliers mainly sell grains and flours. Oman Flour Mills has its
community from where they purchase their products. The capacity of milling per day of Oman
Flour Mills is 300 MT (Omanflourmills.com 2018). It is agriculture based company and the
suppliers are mainly farmers and in case of the technological supply, it purchases from the US.
The suppliers do not have switching cost. This force is low.
(Refer to Appendix 1 for Five Forces Table)

9STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
2.4 Ansoff Matrix
Product development
Product development strategy is applicable to existing markets and new products. This
strategy is taken by Oman Flour Mills as they innovate new product concept in the brand name
of Dahabi. Introduction of new products like spongy pancakes, chocolate mix and other products
are done by Oman Flour Mills.
Market penetration
It has been done mainly in the existing market with existing products. In order to
penetrate the market, Oman Flour Mills makes two brands in the names of Dahabi and Barakat.
It has four subsidiaries companies.
Market development
Market development will be done in new markets along with existing products. New
markets will be far-East and South Asian countries.
3. The internal environment of Oman Flour Mills
3.1 SWOT Analysis
Strengths:
 The performance of Oman Flour Mills in the current years has been resulting in record
profit. The organisation has been gained due to the efficient and timely purchase of the
commodities at very good and competitive prices. Oman Flour Mills has its contracts
with suppliers which can provide the raw materials at very competitive prices and it helps

10STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
the organisation to remain volatile. In agriculture-based business, it is needed to purchase
the products at a correct time (Hakro and Omezzine 2014). Oman Flour Mills ensures the
product is getting maximised through regular maintenance of the mills and the equipment
are replaced at right time or refurbished.
 Oman Flour Mills has increased its sales by 6% and the organisation has been
experiencing the increasing demands of poultry feeds and cattle feeds as well. Therefore,
Oman Flour Mills enjoys a good market share in the industry.
 Oman Flour Mills has its subsidiaries in the industry and major subsidiaries are Modern
Poultry Farm (88% holding and Atyub Investments LLC (100%) (Omanflourmills.com
2018). Therefore, the parent company Oman Flour Mills enjoys the net profit of RO 12.7
million as it was compared to RO 10.91 million in the previous year.
 Oman Flour Mills is aware of the corporate social responsibility as shareholders in AGM
approved the business amount of RO 150,000 for the CSR activities. The organisation
started an initiative to open healthy school meal programme. Oman Flour Mills sent RO
75k for this programme. During the holy month of Ramadhan, the organisation
distributes the flour bags free of cost to the people (Omanflourmills.com 2018).
Weaknesses:
 Oman Flour Mills is well-known in Oman and Gulf Countries; however, it does not have
business in South Asian countries, the US and in Europe. Therefore, the limitation of the
business is in centre connectivity.
 Oman Flour Mills has its Internal Audit Committee as it supervises and reviews internal
audit regime to ensure the efficiency and adequacy. However, in the Middle East and in

11STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
the African region, the internal audit committee within an organisation is corrupted
(Cordesman 2018).
 Boards of Directors create the policies for the corporate governance of the organisation in
regard to the relevant laws. The corporate governance and rules are not strong of the
organisation as the company does not have manual and employee book. The major
philosophies of the organisation are performance, integrity, acting with prudence and
transparency with best practices of the stakeholders.
Opportunities:
 The strength of Oman Flour Mills lies to the future plans of the organisation as the
organisation is thinking to expand the business in poultry section. Therefore, it is thinking
to expand the business in eggs production. In addition, the new flour mill in Sohar is
expecting to start through its subsidiary. This new mill is expected to be ready by the end
of 2018 (Al-Lawati et al. 2008). Moreover, the business is trying to expand in the section
of soya crushing facility.
 The organisation can increase the exporting its high-quality flour to the international
market through enhancing the power of the mills
 Oman Flour Mills can increase its brand names in Barakat products as it is mainly
associated with the animal and birds feeds. It has opportunities in the market to introduce
the new brand name of the products.
Threats:
 The threat of Oman Flour Mills is the competition in the market as there are certain
competitors of the bakery products. The organisation has been facing the competition of

12STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
the loose; open market products. Open market products are cheap and the Dahabi brands
products face challenges from the competitors.
 People sometimes do not prefer readymade flour. Oman Flour Mills sell the readymade
atta, maida, multigrain atta to the customers. Competitors in the market have flour in the
market of Oman with the higher brand recall.
3.2 VRIO Model
Tangible resources
Financial Capacity to raise equity, cash, borrowing capacity
Parent organisation has earned the profit after tax of RO 12.74
million and the net profit of the group is RO 14.72 million
Physical Physical resources of Oman Flour Mills are a favourable
manufacturing company, modern facilities, equipment, building of
the organisation is located at Ruwi
Technological It has been using technological resources like equipment, software,
database management and the organisation uses social media to
advertise
Organisational The organisation’s hierarchical structure, controlling, coordinating
system and formal planning
Intangible resources
Human The employees of the organisation are the human resources along
with their trust, employee experience, knowledge, organisational
routines

13STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
The numbers of employees in Oman Flour Mills are 264.
Innovation and creativity Innovation comes in this organisation regarding the product
designing and the marketing plan. The ideas, innovation capacities
and specific skills are some of the resources of the organisation.
Reputation Oman Flour Mills has been in the industry since 1976; therefore,
the brand name, quality, supplier relations and quality and
reliability
Table 2: Resources and capabilities of Oman Flour Mills
(Source: Self-developed)
Valuable:
The resources of the organisation add value by enabling the form to exploit the
opportunities. The major resources of Oman Flour Mills are suppliers' values, financial condition
and subsidiaries. This organisation has been on the market for long. Resources are valuable to
increase the perceived values of the organisation.
Rare:
Resources those are acquired by Oman Flour Mills must be rare to grant temporary
competitive advantage. The rareness of the company lies in brand value, product mixing, product
lines and technological improvements (Ohmae 1982). Moreover, it has its customer base in the
Middle East and African region also. It produces animal and birds feeds, it gives them
uniqueness.
Costly to imitate:

14STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
Historical condition of the organisation cannot be imitated (Ginter 2018). In addition,
Barakat is another product line that cannot be imitated easily. The flours of the organisation give
nutritional values what make the products unique.
Organised to capture value:
The firm is organising the values and resources to enjoy the competitive advantage
(Rumelt 2011). The organisation values of the organisation are processes, systems,
organisational structure, policies and culture to realise the potential resources and capabilities.
(Refer to Appendix 2 for VRIO Framework table)
3.2 Value Chain Analysis
Primary activities
Inbound logistics Oman Flour Mills purchases raw materials and grains from its fixed and
pre-defined suppliers. Oman Flour Mills can increase labour and capital;
therefore, the production increases proportionally. Oman Flour Mills
follows the vertical integration to reduce the costs and to ensure the
products must be of top quality.
Operations The operation process of Oman Flour Mills is technology friendly and the
organisation has the capability of milling 350 tons a day. The milling station
does make the flour quickly and this organisation employs short-order
employees who are specialised in making the preparation that does not
require a lot of time. The mass production process needs each organisation
to have the distribution network to carry the product to the retail and nearby

15STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
stores.
Outbound
logistics
Oman Flour Mills is committed to giving highest quality food in a
welcoming and clean environment. Oman Flour Mills works for the
suppliers, subsidiaries and employees to serve the balanced array. Oman
Flour Mills produces high-quality food and it delivers the food with vehicles
through the network. Storage of food production is in the right place is also
needed.
Marketing and
sales
Oman Flour Mills sells its products in Oman, African countries and in
Middle East countries. It has been doing in its marketing through social
media networks as it has its official pages on Facebook, Instagram and
Twitter. It has its brand value in the market and it does television
advertising in Oman.
Service It mainly sells products in the name of Dahabi and Barakat. It has four
subsidiaries across Oman and Kuwait. It provides products on packaged
foods, meats, specialised finance, super centres and hypermarkets.
Secondary activities
Firm
infrastructure
Oman Flour Mills has infrastructure that is modern and sophisticated. The
organisation has been using advanced IT finance and they are maintaining
green activities. Oman Flour Mills strives to make an eco-friendly
workplace that reflects the sustainability aim.
Human
resources
Currently, Oman Flour Mills has 265 employees in Oman. The organisation
trains the employees so that they provide better work. The organisation has
done a modification to the hiring system so that they can increase the

16STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
production and supply.
Technology
development
Oman Flour Mills sets the strategic vision to increase the production
coverage regions and the organisation is starting the Sohar Flour Mills with
an investment of EO 15 million using state-of-art flour milling technology.
It has the capacity of 300 metric tons flour milling. Oman Flour Mills uses
Facebook, Twitter and YouTube so that it can connect with the customers.
Procurement Oman Flour Mills uses e-procurement system for its subsidiaries and it is
one of the main reasons for the success of the organisation. E-procurement
services enable the organisation to connect with the subsidiaries in the
Middle East, Oman and African regions.
Table 3: Value chain analysis of Oman Flour Mills
(Source: Self-developed)
3.4 Company Key Strategies
The key strategy of Oman Flour Mills is the product line as it has a group of related
products under the single brand. Oman Flour Mills expands the offerings by adding the products
in the product lines as customers are more likely to buy products from the brands with which
they are familiar. As stated by Magretta (2012), product line strategy is adding the different
product in the product category and it can be associated with the brand extension. Oman Flour
Mills has two set of brand one is Dahabi and another is Barakat. In addition, the organisation has
subsidiaries in Kuwait, Oman, African countries and in the Far East. Moreover, Oman Flour
Mills believes in product differentiation strategy as it has distinguished product offerings in the
market. It sells bakery products, animal and birds' food, flour, grain, specialised food, product
mixing, confectionary. Therefore, this product differentiation strategy helps the organisation to

17STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
create values as it makes perceived values in the mind of the customers (Johnson et al. 2012). It
provides a competitive advantage as it allows the business to compete in the areas other than
prices. Distinguished product line provides brand loyalty to the customers.
4. Recommendations
International expansion:
In the existing market, feed and flour sales have increased considerably; however, new
exports markets should be considered by the organisation as the traditional market is saturated.
In order to improve the margins; it is needed to improve the efficiency. The suggestion of feed
and flour are being implemented and this is confident efficiency those are needed to enhance.
Oman Flour Mills should expand the existing subsidiaries to the new market. They can make the
market in South Asian countries as the bakery and poultry based products have demanded in the
South Asian countries.
Open confectionary stores:
Oman Flour Mills can open confectionary stores across Oman and Middle East
Countries. Dahabi products are categorised as pre-mixes. In this category, Oman Flour Mills can
sell the pre-mixes products in the confectionary stores. They can sell the products like moist-
cakes, pa cakes, crispy and soft dumpling, chocolate cake mix and spongy cakes. The
organisation can start the journey from Oman and they can expand the confectionary stores to
other Middle East countries and in African region also.
Cost leadership strategy:

18STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
In order to gain a competitive advantage in the market, Oman Flour Mills should take the
cost leadership strategy as they already have taken the differentiation strategy. Cost leadership
strategy will increase the sales of the products in Oman and in other countries. Low-cost
operation will provide a higher profit margin. The organisation can increase the market share.
The budget-conscious buyers will be attracted through this cost leadership strategy. The benefit
of low-cost leadership is the availability of available capital resources to fund the growth.
Make customers’ loyal
Oman Flour Mills will make loyal customers through the letting the customers' know
what the products contain and the packaging will provide the nutritional values. This strategy
will provide a competitive advantage and Oman Flour Mills will provide long-time customer
personally. Oman Flour Mills has the mission to enhance the customer loyalty and improve
community development. The success of the organisation depends on meeting the strategic goals.

19STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
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22STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
Appendices
Appendix 1
Porter’s Five Forces
Elements Forces
Industry Rivalry Medium
Threat of substitutes Medium
The threat of new entrants Low
Bargaining power of customers High
Bargaining power of suppliers Low
Appendix 2
VRIO Framework
Resources Value Rarity Cost to
imitate
Organisation Competitive
advantage
Specialised
labour
Yes No Yes Yes Sustainable
competitive
advantage
High
quality
Yes Yes No Yes Competitive
advantage
Resources Yes No Yes Yes Temporary
competitive

23STRATEGIC ANALYSIS OF OMAN FLOUR MILLS
advantage
Brand
image
Yes Yes No Yes Sustainable
competitive
advantage
Suppliers’
relation
No Yes Yes Yes Competitive
advantage
Presence in
the market
Yes No Yes Yes Realised
competitive parity
Technology Yes No Yes Yes Realised
competitive parity
Internet
presence
Yes Yes Yes Yes Sustainable
competitive
advantage