Transcript Likely choices for long term growth

Global Leadership through Diversification
GIL Middle East 2009
October 7th, 2009, Beach Rotana Hotel, Abu Dhabi, UAE
Why Diversification
 Diversification involves the creation of a portfolio of businesses that derive
themselves from a core, minimize cyclic risks and maximize returns to stakeholders
 Business Diversification can be driven by multiple needs, the most common being to
hedge the inherent risks that stem from single product companies.
 It primarily derives from setting the long term growth context and designing an
organization structure that will deliver the growth.
Setting the Diversification Context
Preparing the Organization
Diversification can manifest itself in multiple ways
Product
Diversification
Company
Portfolio Diversification
Competence Diversification
Geography
Diversification
Organic
Non
Hydrocarbon
In Organic
Hydrocarbon
Revenue Mix Diversification
Product
Services
Diversification and the impact on Corporate Profitability
Diversification from the Perspective of Middle East
Real GDP Growth, Oil-Exporting Countries
Non-oil vs. Oil GDP contribution (%)
(Annual percent change)
Oil
Non- Oil
89
Bahrain
UAE
11
74
26
73
Oman
27
68
GCC Overall
12
12
10
10
8
8
6
6
4
4
2
2
32
0
Saudi Arabia
61
39
-2
Qatar
58
40
42
60
-6
2000
-2
Total GDP
Non-oil GDP
Oil GDP
-4
Iran
0
MENA Oil Exporters
2002
2004
2006
-4
2008
-6
2010
Projections as
of Jan. 2009
case studies
EXPLORING THE JOURNEY FROM VALUE CREATION
TO VALUE CAPTURE
Aerospace: Significant Opportunities Across the Value Chain
Design &
Engineering
Services
Design, Modeling, Simulation, Crash Analysis, Validation & Testing of
Various Aircraft Systems
Components
Mfg & Machining of Components, Sourcing & Distribution of Components,
Repair of Systems & Components
Assembly
Assembly of Small Aircrafts, Helicopters; Components/ Systems / Avionics
Assembly
Leasing &
Operations
Aircraft Leasing, Air Cargo Operations, Ground Handling Operations,
Airlines Operations, Fractional Ownership
Infrastructure
Development of Green & Brown Field Airports, Pilot Training Academies,
Technician & MRO Engineers Training Facilities
MRO /FBO
Airframe & Engine MRO, CRO, Aircraft Conversion &Repainting Facilities,
Facilities Based Operator for Business Jets
Chlorine Tree: Opportunities in Chlorine Derivatives
The figure below describes a range of value added products that belong to the “Chlorine Tree”.
About 1/3rd of finished products are chlorine-free, although made with the help of chlorine
Legend
End use
Intermediates
No Chlorine in
product
Mapping the Value Chain for Down Stream Aluminium
Middle East is not converting its value creation from global scale in smelter capacity into value capture
into the producer of value added down stream products
Billet
(LME+150)
Extrusion
(LME+700)
Foil
(LME+1150)
Pure Al
(LME)
Slab
(LME+150)
Alumina
(1400)
Sheet Coil
(LME+800)
Re. Al
(80%LME)
LME cost of
Al/Tonne is
considered as
USD 1900
Ingot
(LME+50)
Rod
(LME+225
Can
(LME+1000)
Conductor
(LME+450)
Selling Price is Indicated inside the shapes
Cost of Production is indicated in black in USD/Tonne
evaluation tools
MAPPING THE OPPORTUNITY TO DIVERSIFY
Market Perspective: Identify the Parameters and relative importance
Competition
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Domestic Supply Base
Global Supply Base
Domestic Consumers
Global Consumers
Supply / Demand
Threat of Backward
Integration
• Threat of Forward
Integration
• Competition from
within GCC
Growth Potential
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Market Size
Market Growth Rate
Market Status
Market Structure
Degree of fragmentation
Down Stream Potential
Export Potential
Threat of Replacement
Likely returns
Adjacency Potential
Value Capture
Project Feasibility
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Access to Raw Material
Access to Technology
Access to Manpower
Environmental Risks
Non Market Risks
Investment Levels
Investment Horizon
Cost of Capital
Returns per $ Invested
Downstream
Investments
Segment Attractiveness Vs Capability
High
10
Aerospace & Defence
Metals & Minerals
9
Petrochemicals
8
Renewable Energy
Capability
Energy – Oil & Gas
7
Industrial Products & Services
Tourism
Transportation, Trade & Logistics
Financial Services
6
IT/Telecom services
Education
5
Food & Beverage
Media
4
Pharma, Biotech & Life sciences
KEY
Healthcare Equipment & Services
3
Long term
Automotive
2
Medium term
1
Immediate
potential
Low
0
1
Low
2
3
4
5
6
Segment Attractiveness
7
8
9
10
High
Degree of Diversification: Adjacency & ROI
Degree of Adjacency
Hi
Low
Cost of Capital
Portfolio Returns
Return on Investment
Hi
Decision to Diversify will therefore be influenced by the choices a
company pursues to fulfill its long term growth objectives.
Degree of Attractiveness*
High
Likely choices for long
term growth
Medium
Low
Low
Medium
High
Alignment with Companies Long Term Objectives
Degree of Attractiveness is a function of multiple variables such as the size of market opportunity,
Potential CAGR, Competitive levels, Investment Levels and likely ROI
Closing Remarks
“Leadership is the art of
accomplishing more than the science
of management says is possible.”
General Colin Powell
ex Secretary of State, United States of America