Al-Marai Company Case Study Sample

Posted on: 23rd April 2020


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1.0 Al-Marai Company Background

Al-Marai is a multinational food and beverage company based in Riyadh, Saudi Arabia. It is a public enterprise that is traded in the stock exchange and generates significant revenues from its operations. The Company was founded in 1977 by Alister McGuckian and AIrish Agri Paddy. The firm began with 350 cows and mainly served the local dairy demands (Singh, Ajay, and Hagahmoodi 2). However, as its capital began to grow, the firm expanded its services to the entire Gulf region.  Currently, the company owns more than 200,000 dairy cows. Consequently, Al-Marai is one of the largest integrated dairy companies in the world.  In 2009, the company established a contract with Pepsi to bolster its market share and also appeal to the global market (Singh, Ajay, and Hagahmoodi 2).  The strategic partnership has not only increased the firm’s market share but also enhanced its operations through joint alliances. For instance, Al-Marai acquired strategic global suppliers and vendors who are capable of delivering the desired inventories within a short period.  Further, strategic partnership enhanced the organization’s brand loyalty which is responsible for its stable sales revenues. 

Al-Marai began its commercial enterprise in 1977 through a partnership between Sultan bin Mohammed and Alister McGuckian.  Prince Sultan is currently the organization’s executive chairman. During its initiation, the dairy industry was not developed due to a lack of infrastructure (Singh, Ajay, and Hagahmoodi 4). Moreover, technology limits hindered dairy businesses as the refrigeration facilities were quite expensive.  Logistics challenges prompted the organization to improve the local infrastructure to enhance the transportation of dairy products. Robust road networks were built to enhance the distribution of raw milk from the farmers to the processing plant as well as transport the finished products to the retailers. 

In the 1990s, the organization changed its manufacturing systems by centralizing its entire operations. The small processing units were merged to enhance mass production. For instance, the ten small processing firms across the nation were merged to form four large companies in Al Kharj (Singh, Ajay, and Hagahmoodi 5). Several factors prompted the organization to centralize its operations. First, centralization facilitated mass production and enabled the firm to take advantage of the economies of scale. The unit production cost for a centralized plant is significantly lower than the expenses in decentralized firms. Also, centralization enabled the organization to employ continuous flow manufacturing systems which solved the traditional problems that were inherent in the decentralized shops.  The decentralized plants used the functional layout in which the processing tools were arranged based on their functions. Thus, the work in process inventories would move from one processing shop to the other throughout the manufacturing system. The functional layouts in the decentralized systems were characterized by high work in processes inventories (Singh, Ajay, and Hagahmoodi 9). Moreover, production planning and scheduling were stressful due to the backtracking of stocks. Consequently, the throughput times and unit production costs were high. Furthermore, the decentralized systems employed general-purpose machines which were had high maintenance costs and also required skilled employees to operate them.  Material handling in the decentralized plants was difficult as it was not mechanized. 

As the organization employed a continuous flow manufacturing system in the centralized plants, it’s reduced the work in process inventories as well as the throughput times. Production planning and scheduling were also simplified as the backtracking of stocks were minimized. Moreover, special purpose processing machines were used in the centralized systems which reduced lead time (Singh, Ajay, and Hagahmoodi 12). Line balancing was used to enhance production efficiency, and relatively low skilled employees were capable of operating the machine and equipment. Thus, centralization reduced the firm’s labor expenses and maximized profitability. 

Al-Marai utilizes recent technologies to enhance production. For instance, the firm has automated most of its manufacturing processes to reduce lead time and improve product quality. Computer-Aided Manufacturing is also used to minimize the demand for the manual labor force. Most of the industrial operations are automated to enhance efficiency (Singh, Ajay, and Hagahmoodi 8). Programmable automation is used to manufacture products that meet the needs of several consumers. Programmable automation is employed to reduce the changeover time from one set of products to the other. 

Al-Marai engages in a wide variety of corporate social responsibilities to enhance its brand. Unlike other conventional organizations in Saudi Arabia, Al-Marai uses transformational and transactional leadership to meet its production objectives (Singh, Ajay, and Hagahmoodi 6). The employees are valued in the firm, and they participate in the decision-making process. The supervisors undergo transformational leadership training to enable them to manage the workers effectively. Similarly, the managers are supposed to use influence and persuasion to get work done. Rather than coercion, the employees are influenced to achieve a shared vision. Managers are responsible for setting the vision and then flows it down to the employees. The senior employees or transformational leaders coach junior staffs to improve their industrial productivity. 

Transaction leadership is used to hold the employees accountable for their performance. In this leadership approach, the supervisors set the work objectives in close consultation with the junior staff. Each employee consents to the set targets. Punishments and rewards are then used to motivate hard work and commitment (Singh, Ajay, and Hagahmoodi 7). The employees who meet the set targets are motivated while those who fail to achieve the goals are reprimanded or penalized.  The use of transactional leadership and management by objective in the organization minimizes the need for direct supervision. However, the executive staff tracks the employees' progress by comparing their performance to the plan. They then give feedback to the employees regarding their progress. 

Customers are one of the most significant stakeholders in the organization. They are responsible for the organization’s sales revenues and growth.  Al-Marai desires to meet the needs of its diverse customers by manufacturing products that meet their needs. Consequently, the organization engages in a wide variety of market research to determine customer needs. Both market-based and product-based manufacturing strategies are employed in the organization to bridge the market gaps at an affordable cost. In the market-based production technique, the organization researches to determine the unmet consumer needs in the organization (Singh, Ajay, and Hagahmoodi 11). However, this production technique is quite expensive as it involves reprogramming the available equipment or purchasing other machines to meet consumer demands. Nevertheless, the accrued increase in sales revenues offset the expenditure. In product-based manufacturing, the organization develops new products using the available resources. Intensive marketing and promotion are then used to create demand for the product (Singh, Ajay, and Hagahmoodi 5). This technique is cost-effective as it does not require the organization to purchase new equipment and machines. Also, the available human resources are used to manufacture the new product. Consequently, the organization reduces its operational costs by engaging in product-based manufacturing.  

Al-Marai has a strong base of loyal customers who are attracted to the organization’s products and services. The loyal customer base is evident by its massive social media following. The company has effective customer service employees who promptly respond to the consumers’ needs. This research proposal illustrates the need for evaluating customer loyalty in the organization to develop a competitive edge in the industry. 

2. Research Design

2.1 Problem Statement

Although Al-Marai is one of the leading dairy companies in the world, it faces stiff competition from other organizations in the Gulf region.  Therefore, the organization should develop a competitive edge to remain relevant to the market. Moreover, the organization’s sales revenues indicate that it has reached the maturity stage. This phase has several challenges including reduced sales volume, increased competition, reduced consumer potential, and threats of new entrants. Consequently, there is a need to launch new products to meet consumer needs.  Evaluating the brand’s loyalty will enable the organization to identify its strengths, weaknesses, threats, and opportunities in the food and beverage industry. The analysis will also help the firm to determine the level of customer satisfaction. Thus, the firm will undertake remedial actions to improve its areas of weakness and optimize the strengths. 

Evaluation of the firm’s customer loyalty will also enable the organization to determine whether it should focus its resources on attracting new consumers are increasing the level of satisfaction for the existing buyers.  Researches show that the cost of drawing new consumer is seven times more than the expenses incurred in retaining the existing ones.  Nevertheless, organizations at the maturity stage must expand their market share to meet the needs of new demography. 

Brand loyalty is essential in the food and beverage industry as it influences the firm’s market share. Al-Marai has a conservable market across the globe. However, in the past decade, it has faced stiff competition from other food and beverage firms within the Gulf region. As many manufacturers saturate the food and beverage industry, the organization’s market share is reduced. Moreover, consumers have access to several substitutes which may also affect their purchase decisions.  The availability of alternatives increases the buyers bargaining power and increase industry competition.  

There are different types of consumers in any given industry. These include the affluent, middle-class, and economic. The wealthy class values the quality of the product and is not price-sensitive. These individuals have significant financial resources and do not mind spending their finances to acquire quality products.  They prefer high-cost and quality products over the cheap and substandard items. Moreover, the affluent class evaluates the quality of services which are offered by the organization. Consequently, they assess packaging as well as after-sales services. Although the wealthy classes are not price-sensitive, they constitute the least fraction of the consumers in any market. Most of them are capitalists, philanthropists, and reputable professionals such as chief executive officers, directors, and politicians. 

Middle-class consumers refer to the market segment which can purchase the products but are unwilling to pay extra charges. They include middle-class individuals who have a moderate income. Most of them work in both large corporations and are reputable professionals in their fields. They may consist of accountants, engineers, doctors, lecturers, nurses, and other professionals who are employed. The middle-class desire quality and affordable products. Consequently, they strike tradeoffs between the product’s costs and quality before purchasing.  In developed economies, middle-class consumers are the majority. However, in low income and developing countries, economic consumers constitute the majority of the consumers. When the products or services have equal utility, the price is the primary determining factor among middle-class consumers. 

The economic consumers include low-income employees who earn minimum wages as well as the unemployed. This group of consumers is most-price sensitive as they do not have disposable income. They compare the market prices before purchasing a product. Although economic consumers consider the quality of the products, their choices are limited by their financial constraints. Although they may desire to buy quality products, they do not have sufficient resources. Thus, they often purchase low-cost products based on their income.  Economic consumers are the majority in most economies and significantly contribute to an organization’s sales revenues. Enterprises employ cost reduction technique to meet the needs of economic consumers tends to dominate the market’s share. However, these enterprises generate small profit margins as the unit costs for their products are low. However, they take advantage of the economies of scale that result from high sales revenues. 

Conducting customer loyalty enables the organization to determine the nature of its customers and develop products that meet their expectations. Al-Marai should evaluate its customers’ to determine whether they are affluent, economic, or middle-class. Gaining the information will enable the organization to launch products and services that meet or exceeds their expectations. If the organization’s loyal customers are affluent, then the firm should use flexible manufacturing systems to develop quality products in high volume. Although flexible automation results in high unit costs, it will enable the firm to meet the specific needs of the affluent consumers who are not price-sensitive. The organization can then offset its operational costs by charging high prices on the manufactured products. If the firm has more loyal economic consumers, then it should consider reducing its production costs using different strategies such as lean production, and just in time operations to develop a competitive edge. 

Customers’ loyalty towards the organization’s product will enable the firm to develop the strategy for retaining the buyers and also attracting others in the market. For instance, if the majority of the loyal customers are middle-class, the firm can develop programs to draw their peers, thus boosting its market share. Given that Al-Marai has attained the maturity stage, it is essential for the organization to revitalize its operation by focusing on a specific market in which it has a comparative advantage. 

2.2 Objectives

The general objective of the research proposal is to determine the level of customer satisfaction at Al-Marai by evaluating brand loyalty. The study will allow the firm to identify its strengths and weaknesses regarding satisfying the consumers’ needs.  Moreover evaluating the customers’ loyalty to the brand will enable the firm to quantify the threats and opportunities in the industry. Thus, the research proposal will illustrate the need for focusing on a specific market segment by providing goods and services that either meets or exceeds their expectations. Moreover, the firm will also be able to determine the efficiency of its operations in meeting the dynamic consumer needs. The following are the sub-objectives of the research proposal:

i.    To determine factors that influence brand loyalty in the organization

Any market is composed of diverse consumers who have different needs. These consumers have specific desires that must be met by the producers. The organization’s ability to meet consumer needs has a direct impact on its success. The research proposal will determine the different factors that influence customers’ purchase decisions in the industry. Different product features such a cost, quality, packaging, and delivery services will be evaluated in the analysis. 

ii.    To determine that influence the level of customer satisfaction in the organization

Social network marketing is one of the contemporary promotion strategies that enhance business growth in the contemporary industry. It works best when the customers are satisfied with the services which are offered in the organization. The level of customer satisfaction may be evaluated by their willingness to recommend the product or services to their peers.  Determining the level of customer satisfaction in the organization is essential as it enabled the firm to assess its achievements. In case the customers’ needs are adequately met, then the organization should consider expanding its operations to the external market. However, if the needs of the existing customers are not met, then the firm can consider initiating new programs to enhance their satisfaction. 

iii.    To determine the suitable market segment for Al-Marai products

The research will determine whether the organization is affiliated with the affluent or economic consumers. If the organization has more economic loyal customers, then the firm should consider price reduction techniques. However, if the majority of the consumers are affluent, then the company should use the available resources to improve the products’ quality to meet their needs.  Evaluating the market segment will also influence the production techniques in the organization. Fixed-production systems are used to meet the needs of economic consumers who are price-sensitive.  In this production approach, the products are manufactured in high volumes and at a low unit cost. Special purpose machines are used to minimize the backtracking of inventories and also reduce labor costs. However, the needs of the affluent consumers can be met using the flexible manufacturing system. In this system, the production machines can be reprogrammed to meet the changing consumer needs. The changeover costs and time is minimized using flexible manufacturing systems. Emphases are put on the product features and utility rather than costs.  However, since the affluent consumers are limited, the sales volume tends to be low. Thus, the organization is likely to experience high costs of inventory control. For instance, the idle inventories may stay in the organization’s store for an extended period.  During this time the organization incurs the administrative overheads, rent, and capital depreciation costs. Moreover, flexible systems have high work in process inventories and tend to complicate production planning and scheduling.  However, the expenses are compensated by the high unit costs for the manufactured products. 

2.3 Research Questions

1.    What are the impacts of customer loyalty on the organization’s market share

2.    What are the factors that influence customers’ loyalty to the organization’s products

3.    What market segment does the organization are loyal to Al-Marai’s products

4.    What is the level of customer satisfaction in the organization

5.    What measures can be instituted to enhance brand loyalty and the level of customer satisfaction in the organization? 

2.4 Hypotheses

The research proposal is based on some assumptions or hypotheses which will either be confirmed or debunked after the final project.  The hypotheses are the tentative answers to the research questions and help in guiding the study.

1.    Customers’ loyalty has a direct impact on the organization’s sales revenues and market share. As the number of loyal customers increases, the organization expands its market share and also increases the profit margins. 

2.    The factor that influences customer’s loyalty includes the products’ costs, appearance, performance features, quality, as well as the organization’s engaged in philanthropic and corporate social responsibilities. Affordable products tend to attract more customers as the majority of the consumers are price-sensitive. Thus, firms that charge high prices have low customer loyalty compared to low-cost firms. Contemporary consumers are also attracted to the product’s physical appearance. The firms that develop aesthetic products are likely to have high customer loyalty. The attributes of the products are also essential in influencing consumers’ purchase decisions.  Healthcare researchers have raised concerns over the calorie levels of foods and beverages which are manufactured by different organizations. Consequently, consumers are more conscious about lifestyle ailments such as obesity, diabetes, and heart attack which are caused by hyper-palatable foodstuffs.  Thus, organizations that consider their customers’ health are likely to have high brand loyalty compared to those which are negatively publicized by the media for failing to comply with regulations. Further, companies that engage in corporate social responsibilities will have high brand loyalty. Consumers evaluate the social impact of the organization before becoming affiliated with them.  For instance, firms that support the youths and community initiatives have more loyal customers than those which do not engage in philanthropic activities. The research also assumes that when the price is kept constant, the quality of a product has a direct impact on consumers’ loyalty.  Therefore, the organization should struggle to produce quality products at low costs to meet the market needs. 

3.    Al-Marai appeals to the economic and middle-class consumers who are price-sensitive but can purchase the products.  Therefore, the best production strategy for the firm includes embracing cost reduction techniques to leverage the existing market. 

4.    The organization has a high level of customer satisfaction as evident from its sales revenues and repeat purchases. However, it needs to improve its service delivery to retain its competitive advantage as there are high threats of new entrants in the market. 

5.    Brand loyalty and customer satisfaction can be enhanced through consumer-based production processes. In this approach, the organization researches the market need before manufacturing the products. However, cost reduction techniques need to be employed to mitigate the expenses which are incurred through the research and execution processes. 

2.5 Execution Methods

Different techniques will be used in the research study to determine the level of customer loyalty in the organization’s products.  Both secondary and primary techniques of data collection will be used in the research. The primary methods of data collection that will be used include direct observation, questionnaire/survey, and interviews (Bryman 23). The use of direct observation of consumer behavior is one of the effective ways of recording data on customers’ loyalty as it is devoid of the respondent’s bias and prejudice. However, the method is quite expensive as it involves a lot of traveling. Therefore, the method will be complemented by other sustainable data collection strategies. In this research method, online questionnaires will be prepared and sent to the identified respondents. The method is cost-effective as it does not involve traveling (Bryman 23). Moreover, the use of questionnaires is less time-consuming as multiple responses can be obtained at the same time. However, the method may be unreliable as it is susceptible to the respondent’s bias and prejudice. The researcher may not know whether the respondent is candid or not. Consequently, implausible data may be collected using questionnaires.  Direct interviews with the respondents will also be used in the study. Both focused, formal, and informal interviews will be necessary to gain the consumers’ insights on their level of satisfaction (Bryman 23).  The use of direct interviews is effective as it enables the researcher to identify the respondents’ bias and prejudice.  Thus, it is easier to segregate factual from fictional responses through direct interviews. 

The study respondents will be required to sign consent forms before taking part in the survey. The consent form will ensure that the respondents understand the study’s objectives and are not coerced to participate. The collected data will then be analyzed using different techniques such as Net Promoter Score and Repeat Purchase Rate (RPR).  The results will be presented in tables and graphs for easier analysis. 

Other than the primary methods of data collection, the research will also utilize reputable peer-reviewed secondary sources in the analysis. Thus, journals, magazines, conference proceedings, and newspaper articles will be reviewed to determine the level of customer loyalty.  The secondary literature will enable the reach to focus on the gaps and develop data that is useful in the organization. It will also eliminate study replication and help to develop a focused research question. 

2.6 Sampling Methods

Stratified sampling will be used in the research to identify the respondents. In this approach, the entire population of the organization’s market will be divided into ten equal classes. Each class will have an equal number of participants. Six respondents will then be randomly selected from each category to form a sample size of sixty respondents.  Stratified sampling enhances the fair selection of the participants, thus eliminating the researchers’ bias. Although several respondents should be sampled in the study, the research will be constrained by cost and time. Thus, sixty respondents will be sufficient to determine whether customers’ loyalty to the organization’s products.

2.7 Measurement Methods

  Interval scales will be used to analyze the collected feedback from respondents.  Thus, the Likert scale will be used to record qualitative data from the respondents. General questions such as the respondent’s demographic information will be included in the questionnaires. The demographic data will be used to stratify the participants based on their purchasing potential. Coding questions will be used to enable the application of the SPSS program in the analysis. Open-minded questions will also be included to allow the respondents to input data based on their discretion. 

3.0 Literature Review

Identifying customer loyalty is one of the most effective ways of determining their level of satisfaction as well as an organization’s strengths and weaknesses. Typical techniques for determining customer loyalty include the Net Promoter Score (NPS), Repeat Purchase Rate, and Customer Lifetime Value (Gornostaeva and Sorokina, 31). The NPS is a tool that determines the willingness of the customer to recommend a brand or an organization’s product to other consumers based on their experience. It contains an index that ranges from -100 to 100 which shows the degree of customer satisfaction (Gornostaeva and Sorokina, 31).  Those consumers who are willing to recommend the product are referred to us the promoters while those who may discourage prospects against purchasing the item are referred to us the detractors.  NPS is computed by subtracting the percentage of detractors from the promoters. 

Repeat Purchase Rate (RPR) measures customers’ loyalty by evaluating their shopping frequency.  It directly relates to the retention rate and is calculated by dividing the number of repeat consumers with total buyers (Gornostaeva and Sorokina, 31).  The Customer Lifetime Value (CLV) determines the benefits of engaging the buyers in the organization’s corporate social responsibility (Gornostaeva and Sorokina, 31). It may indicate whether the firm's efforts to retain the existing customers are profitable. 

4.0 Data Presentation

After conducting the research studies, the inferences will be published to delineate the findings as well as avail the raw data which were obtained from the analysis. The research deliverables will include formal presentations including graphs, tables, and charts, research reports, inferences, participants, survey responses, observable notes, and interview recordings. 

5.0 Timeframe

The entire research study will take four months. The following is the planned schedule

Al-Marai Company Case Study  Sample


Works Cited

Bryman, Alan. Social research methods. Oxford university press, 2016. 

Gornostaeva, Z. V., and Y. V. Sorokina. "Increase of customer-oriented approach by means of evaluating the loyalty of services’ consumers." Overcoming Uncertainty of Institutional Environment as a Tool of Global Crisis Management. Springer, Cham, 2017. 31-37.

Singh, Ajay, and S. O. Hagahmoodi. "Performance Measurement of Almarai Products and Customer Satisfaction." International Journal of Management Science4.1 (2017): 1-12.

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