Proceedings of 5th Annual American Business Research Conference
6 - 7 June, 2013, Sheraton LaGuardia East Hotel, NY, USA, ISBN: 978-1-922069-24-5
Strategic Planning for Entrepreneurs: A Teaching Case
from Saudi Arabia
Abdulrahman Alolayan* and Nathan Austin**
In less than two years, Jawlah DMC Inc. had become a
successful leisure tour company organizing trips for
foreigners vacationing in Saudi Arabia. However, the
Saudi Arabian government has introduced new
legislation banning the provision of non-religious tours for
foreigners. Saud Alharbi, chief executive officer of Jawlah
DMC Inc., has made some tough choices and decisions.
Was he able to respond to the challenges? Should he
have acted differently?
Introduction:
Jawlah DMC:
Jawlah DMC Inc. (JDMC) is a destination management company located in
Saudi Arabia. JDMC organizes itineraries, meetings, conferences, and events for
incoming groups to Saudi Arabia. Equipped with unique local knowledge, JDMC
caters to all tourism needs, from sourcing venues to transportation,
entertainment, and accommodation. Jawlah DMC offers first-rate destination
knowledge, industry expertise, creativity, and access to key areas in Saudi
Arabia. JDMC specializes in the development of creative itineraries, ensuring that
all customers „requirements, goals, and motivational objectives are met. JDMC‟s
services range from program design and event planning to transportation
logistics, recreational activities, cultural excursions, and a wide array of
entertainment and event production services.
Saud Alharbi:
Saud Alharbi was born and raised in Al-Suwaidrah a small village in Saudi
Arabia. He received his bachelor‟s degree from King Fahd University of
Petroleum and Minerals (KFUPM). On summer of 2006, Saud worked part-time
at the local Nike store while he attending KFUPM. The store‟s volume of daily
sales, ranging from $10,000-$15,000 per day, caught his attention and made him
wonder whether he could generate a similar income by starting his own business.
After brainstorming and discussing business concepts with his brother, he
decided to launch Jawlah DMC, a Saudi Arabian tourism company.
___________________
* Abdulrahman Alolayan is a PhD student at Morgan State University, and Lecturer at Taibah
University, Saudi Arabia abalo1@morgan.edu
**Nathan K. Austin is an Associate Professor in the Earl G. Graves School of Business and
Management, Morgan State University.
Proceedings of 5th Annual American Business Research Conference
6 - 7 June, 2013, Sheraton LaGuardia East Hotel, NY, USA, ISBN: 978-1-922069-24-5
Because of the need to work full time for JDMC, Saud took a leave of absence
from KFPM in 2007; then he returned to his school in 2009 to get his bachelor
degree from Business school of KFUPM. In 2010, he has been awarded Prince
Salman Award for young entrepreneur in the service sector for season of 2010.
In addition, his enterprise has been awarded for the best operator company in
Saudi Arabia for the season of 2011.
Overview:
Jawlah DMC is a tourism company that focuses on coordinating and organizing
visits to historical and spiritual sites in Saudi Arabia. Saud started the business
from the ground up with the goal of serving visitors to Medinah, a local city that
gets crowded three times a year by the Muslim pilgrims. JDMC barely survived
its first year in operation and Saud realized that to be successful he needed to
change his strategy. He shifted JDMC‟s primary focus to marketing V.I.P
packages. The V.I.P package is designed to provide the luxury tour for targeted
customers who are willing to pay a little more. This resulted in an increase in
business, but Saud though that he could further improve the JDMC bottom-line
by developing a package designed specifically for foreigners visiting Saudi
Arabia for non-religious purposes. The addition of this tour package dramatically
increased his sales. However, recently issued government regulations banned
bringing foreigners into the country for non-religious or business purposes. This
has forced Saud to consider some key questions that would influence the future
of his business. He realized that if he wanted his business to survive and grow,
he would need to develop a careful plan to move forward. Therefore, he did
develop a plan and acted toward achieving it.
Background:
Saud grew up in a small village near Medinah, where he attended high school.
He applied to King Fahd University of Petroleum and Minerals and was placed on
the wait list. However, he was admitted to a community college that was affiliated
KFUPM and would allow him to transfer to KFUPM if he maintained a high GPA
during the first two semesters. Luckily, after beginning his studies at the
community college, Saud was accepted to KFUPM. Saud moved to Dhahran to
attend school and was living in a big city for the first time. Although he received a
scholarship from KFPM, he needed to work a part-time job to cover his living
expenses in the city. In 2006, He applied and was hired for a part-time summer
job at Nike store. This opportunity served as a wake up call for Saud. He
discovered the realities of the business world and its lucrative potential. He
imagined himself as an entrepreneur running his own store or business.
At the end of the summer, Saud returned to the KFUPM campus, but the
business world was still on his mind. He could not get the image of all of the
money that he collected daily from customers at Nike out of his head. One night,
Saud called his brother, who lives and works in Medinah, to tell him that he
Proceedings of 5th Annual American Business Research Conference
6 - 7 June, 2013, Sheraton LaGuardia East Hotel, NY, USA, ISBN: 978-1-922069-24-5
wanted to open his own business. His idea was to start a service that would
welcome visitors to Medianh, take them to the historic sites and explain the
history, and provide them with reliable transportation.
In the summer of 2007, Saud launched Jawlah DMC (JDMC) with a budget of
S.R. 60,000 ($16,000) that provided visitors to Medinah the guidance and
transportation needed to visit the local historic sites. The business‟ focus was on
customers who were already visiting Medinah, utilizing advertising brochures in
the hotels to reach potential customers. Since Saud was still a student at KFPM,
he hired someone local to run the business. The business struggled for the first
ninth months and the initial capital was gone by the end of first year. At this point,
Saud had two options—declare bankruptcy and close the business or reassess
the market and approach it with different business strategy.
Saud’s Realization:
Saud decided to postpone his studies for a year and focus on revitalizing JDMC.
In order to revive the company and avoid bankruptcy stage, he knew that he
needed to assess the company‟s situation including its strengths, weaknesses,
opportunities, and threats. He also determined that market research would
provide insight into JDMC‟s competitors and allows him to evaluate JDMC‟s
position within the market. Ultimately, he realized that the goal of making money
or opening a business alone was not sufficient for success; he needed to identify
his goals for the business and implement strategies that would help him reach
those goals.
Saud began by collecting information that from visitors, hotels, and business
owners that could help him create a plan to save his business. After extensive
information gathering, Saud made the following conclusions:
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JDMC had established a strong network with hotels managers and
influential locals.
JDMC maintained a working knowledge of historic places, transportation
options, and other logistics that visitors needed.
Travel agents who arranged visitors‟ flights to Medinah usually included
the expense of a one-day trip to historic sites in Medinah. Although
JDMC‟s services may be more comfortable for visitors, the majority of
customers preferred to go with the option offered by the travel agents
because it was already incorporated into the travel expenses and was
cheaper than JDMC.
The tourism market in Medinah is seasonal. Visitors come to Medinah
primarily during seven months out of the year, leaving five months out of
the year with little or not business.
Saud may need to hire additional help to run the business as his local
manager had been let go and Saud was running the business by himself.
There are additional historic sites outside of Medinah that customers
would like to visit, for example, Mada‟an Saleh and Bader.
Proceedings of 5th Annual American Business Research Conference
6 - 7 June, 2013, Sheraton LaGuardia East Hotel, NY, USA, ISBN: 978-1-922069-24-5
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Many famous individuals and their families regularly visited Medianh.
Some government incentives were available to help startup businesses in
the tourism industry.
The initial capital of the company was almost depleted and he would need
to arrange for a new loan to keep his business running.
The market is unorganized. A number of locals work independently and
unprofessionally to offer the same services for a cheaper price.
After assessing the company‟s situation and its position in the local tourism
market, Saud began to think of ways to gain a competitive advantage. He
decided to target certain customers that regularly visit Medinah and build
competitive advantages that would attract them.
The V.I.P. Service:
Saud‟s new strategy was to focus on attracting the business of celebrities and
businessmen who regularly visit Medinah. His efforts were concentrated primarily
on developing an attractive product for this demographic. His mother allowed him
to borrow her GMC SUV and display the company name on the vehicle. He also
prepared brochures to distribute in five star hotels. Fortunately, business was
picking up and he was able to meet the expectations of the V.I.P customers,
leading to referrals and more customers.
Although the income from this service was enough to keep the business up and
running, it was not overly profitable because of its limits to certain dates and
customers. However, Saud was able to expand his network and continue to gain
real world experience.
One of his clients was from South Africa. He called one day to ask Saud if he
could bring South African visitors to Saudi Arabia for cultural vacation. Saud was
open to the opportunity and began working on the itinerary. Saud was able to
secure permission for the non-pilgrim visitors through connections he formed
while developing the V.I.P. visitor program.
The first group from South Africa visited Saudi Arabia in 2008, exploring different
cities and historical sites around the country. Saud arranged their itinerary,
lodging, and transportation. The income from this one program was more than
the income from a whole year of V.I.P bookings.
Saud‟s viewed this program as a new business concept—serving visitors that
were traveling to Saudi Arabia for cultural and family-oriented vacations. He
began to think about the ways he could benefit from this experience and use it as
a model to expand his company‟s offerings and operations.
Saud was prepared to bring new visitors seeking entertainment and family
vacations to Saudi Arabia. He depended on his relationship with the South
African customers and the good impression he made during their previous visit.
His South African partner assisted with a successful advertising campaign that
Proceedings of 5th Annual American Business Research Conference
6 - 7 June, 2013, Sheraton LaGuardia East Hotel, NY, USA, ISBN: 978-1-922069-24-5
resulted in more than 120 South African visitors signing up for tours during the
summer of 2009, providing JDMC with a substantial increase in income.
Saud also applied for angel funding from the government ($400,000). He planned
to use these additional funds to support business operations and advertise this
new tour package. After the demonstrated success of the South African visitors‟
trips to Saudi Arabia, he was able to convince the government to fund JDMC.
However, shortly thereafter, the government issued a new regulation that banned
bringing visitors into the country except for pilgrimage purposes. This was a big
disappointment for Saud as the changes to his business model focused on
visitors seeking a non-religious vacation, forcing him to reassess his situation
once again.
Reassessment of the Situation:
The new government regulation threatened JDMC‟s largest source of income
and Saud needed to act carefully. Saud struggled with conceptualizing how
JDMC could move forward. Although JDMC‟s original tour package for visiting
pilgrims who wished to visit historic sites still generated some income, those
tours alone would be insufficient to sustain business operations. If there was no
way to recuperate the income from the non-religious tour packages, JDMC may
once again face the possibility of having to declare bankruptcy. However, given
that the government banned foreign visitors, JDMC had limited options going
forward. At this point Saud JDMC could:
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Declare bankruptcy and suspend business operations.
Sell the business to another entity in the market.
Partner with other companies that would value JDMC‟s competitive
advantages and could provide access to new clients and streams of
business.
Saud considered the benefits and drawbacks of each option. Bankruptcy would
dissolve the company and remove it from the market, but it would save the
managers from the debt. Selling the company would transfer ownership to
another person or entity, but it would generate a considerable amount of money.
The partnership strategy would create shared ownership of JDMC with another
person or entity, but it would allow the company to continue operating under
Saud‟s management.
After extensive reflection and consultation with friends and family, Saud decided
to accept a partnership offer from the AlTayyar Group, the largest travel agency
in Saudi Arabia, for the following reasons:
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Partnering with the AlTayyar Group would allow him to continue operating
JDMC.
This partnership would give JDMC access to new customers.
Proceedings of 5th Annual American Business Research Conference
6 - 7 June, 2013, Sheraton LaGuardia East Hotel, NY, USA, ISBN: 978-1-922069-24-5
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The AlTayyar Group had an established relationship with the authorities
and local government, and had operated in Saudi Arabia since 1980.
Partnering with the AlTayyar Group would help Saud achieve his vision of
JDMC becoming the “first destination management company in Saudi
Arabia.”
The partnership would generate a reasonable amount of income for JDMC
and Saud.
Under the terms of the partnership offer, Saud would continue to serve as
chief executive of Jawlah DMC.
By the end of 2010, Jawlah DMC officially partnered with the AlTayyar Group
with Saud remaining the company‟s CEO. Saud continued to think about how he
could grow the business. He shared his thoughts in an interview, which is
reproduced below:
Interviewer: Why did you decide to start a business?”
Saud: … I used to live in a small village in a desert and I would go out after
school to look for treasure. I used to believe that I‟d find the treasure of Ali Baba
beneath the sand.
Interviewer: Interesting, so how would this help you reassess your current
situation?
Saud: When I grew up, I found that Ali Baba‟s treasure is in the business market
and that I needed to work hard to get a piece of it. Therefore, I was looking for an
opportunity to break into the market. I found that chance to get into the tourism
industry through Jawlah DMC.
Interviewer: So you realize that you went into the tourism industry to look for
treasure?
Saud: That‟s true, but eventually I realized that I‟m in love with introducing the
Saudi culture to others, which inspired me to determine that Jawlah DMC. should
be one of the top tourism companies in Saudi Arabia.
Interviewer: Is it Jawlah DMC.‟s vision to be the first destination management
company in Saudi Arabia?
Saud: Yes, and from here I began to reassess Jawlah DMC.‟s situation.
As Saud reassessed the situation, he thought of what distinguished Jawlah DMC.
from others tourism companies:
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Development of personal relationship with customers, locals, and
partners.
First-hand experience and knowledge of the evolving tourism market in
Saudi Arabia, as he was one of the first tourism entrepreneurs who
brought non-religious visitors to Saudi Arabia.
After establishing the vision of Jawlah DMC and choosing to partner with the
AlTayyar Group, Saud began to analyze Jawlah DMC‟s operations and the
business environment to update his prevous market research. Most of the
Proceedings of 5th Annual American Business Research Conference
6 - 7 June, 2013, Sheraton LaGuardia East Hotel, NY, USA, ISBN: 978-1-922069-24-5
changes he observed stemmed from the new law banning non-religious or
business visitors. Additionally, Saud developed goals in light of Jawlah DMC‟s
partnership with the AlTayyar Group. The first goal was to reach out to local
citizens and corporations with products and packages that fit their needs. The
second was to surpass its sales from 2010 when JDMC was an independent
company.
JMDC after Partnership with Altayyar Group:
Saud decided to pursue the first goal by building unique packages for local
Saudis to visit different parts of Saudi Arabia. With the help of the
AlTayyarGroup‟s staff, Saud was able to develop new tour packages like the
Desert Adventure, Discover Hael, Deep in Najdi Culture, and Yanbu Diving
programs. These packages could be arranged for both corporate outings and
private bookings. Jawlah DMC‟s packages are unique because they draw on
local knowledge, provide access to different places in Saudi, and are reasonably
priced.
2011 was a successful and yet challenging year for JDMC as it was the first year
of the partnership and JDMC needed to prove that it could continue to operate
and be competitive in the tourism industry in Saudi Arabia. It was also a
successful year for the business. As a result of tremendous work and effort, sales
in 2011 surpassed those of 2010 by more than 600%, meeting Saud‟s second
goal. Saud and his team celebrated these accomplishments and are prepared to
keep up the good work and continue to expand the business.
References:
Hill, C.W.L., & Jones, G.R. (2008). Strategic Management An Integrated
Approach. Boston, MS: Houghton Mifflin Company.
Oswald, S.L., Mossholder, K.W. & Harris, S.G. (1997). Relations between
strategic involvement and managers‟ perceptions of environment and
competitive strengths: The effect of vision salience, Group & Organization
Management, 22(3): 343-365.
Rinke, W.J. (1989). Empowering your team members, Supervisory Management,
34(4): 21-25.
Scarborough, N. M. (2001). Effective Small Business. Reading, 28.
Thompson Jr., A.A., & Strickland III, A.J. (1990). Strategic Management
Concepts and Cases. Boston, MS: McGraw-Hill Companies.
Proceedings of 5th Annual American Business Research Conference
6 - 7 June, 2013, Sheraton LaGuardia East Hotel, NY, USA, ISBN: 978-1-922069-24-5
Teaching notes:
Saud Alharbi is a young entrepreneur in Saudi Arabia. He launched his company
Jawlah DMC to help visitors of Medinah to visit historical places. Eventually,
Saud expanded his business to bring visitors to Saudi Arabia. However, due to
the recent government ban of non-religion or business visit to Saudi Arabia, Saud
faced tough choices to make. Although Saud described himself as unorganized
person, his thinking and logic follow by large the entrepreneur strategic planning
process. This section explains the main teaching point in the case.
1) To which level of importance, Saud needed to develop a strategic
management for entrepreneurs?
Developing strategy is one of the areas that usually overlook by
entrepreneurs. Entrepreneurs, driven by enthusiasm and optimism, want
to jump to the actions part in order to make their dreams true. However,
strategic management is very important when it comes to the direction,
competitive advantage, and strategy to the success.
In today‟s global market, the forces that may threaten the entrepreneur are
wide. The competition is not only limited to the local store, but it also
coming from everywhere in the globe with the help of the Internet. This
competitive environment raises the rate of uncertainty and change.
Although this environment creates a lot of challenges, it also brings
opportunities that entrepreneurs could utilize if they have the right
strategy.
As you may notice on the case, strategic planning process was important
to Saud. Although he did not follow all planning steps, he was able to
examine some key steps in strategic planning process such as swat
analysis, choosing a strategy, developing goals.
2) Why Saud needed a competitive advantage?
The main goal of strategic plan is to build and sustain a competitive
advantage. The competitive advantage is the value that entrepreneur offer
to the customers. The customers must recognize the unique about the
entrepreneur business and work; in order to attract more and sustain
customers.
Saud competitive advantage was local knowledge, access to areas and
personal in Saudi Arabia.
3) How did Saud create competitive advantage?
First entrepreneur must identify what matter most to the target customer.
Do they concern about healthy product, fast delivery, superior quality,
good customer care service, or something else. Then entrepreneurs need
to develop a set of core competencies that enable them to serve the need
of the customers and operate more efficiently. Core competencies are
unique set of skills, knowledge, or abilities that a company develops in a
key area such as superior quality, speed, responsiveness, team building,
or flexibility. Typically, a company develops core competencies in no
Proceedings of 5th Annual American Business Research Conference
6 - 7 June, 2013, Sheraton LaGuardia East Hotel, NY, USA, ISBN: 978-1-922069-24-5
more than four to five areas. Those core competencies become the
nucleus of the competitive advantage and quite enduring over time.
Market, customers, and competitors may change, but the core
competencies are more durable, forming the building blocks for everything
the company does. They should be difficult for competitors to duplicate.
Developing core competencies do not require spending a lot of money.
However, it does require that entrepreneurs have a great deal of
imagination, creativity, and vision to build the core competencies.
4) Can you tell the steps that Saud follow to develop a strategic plan?
Developing a strategic plan for entrepreneurs is important to peer into the
future and take advantage of the strength and develop the weakness in
order to overcome the challenges and seize the opportunities. There are
nine steps to develop the strategic plan as the following:
1- Develop a clear vision and translate it into meaningful mission
statement.
Vision question address “what do we stand for?”. It‟s the sense that
tells you why you exit; and what different you bring into the world. A
vision is a result of entrepreneur dream of something that does not
exit; and the compelling ability to paint a picture of it to everyone to
see. A vision usually is based on entrepreneur values.
Mission statement addresses the question of what business am I? The
purpose of establishing the business gives a clear sense of direction to
the company. It makes clear of why we are here; and where are we
going.
Although Saud has not developed a clear mission for Jawlah DMC, he
developed a clear vision. The vision of Jawlah DMC is to be the first
destination management company in Saudi Arabia.
2- Assess the situation strength and weaknesses.
Having defined the vision and mission, entrepreneurs can turn their
attention to the assessing company strength and weaknesses.
Strengths are positive internal factors that contribute to the
accomplishment of the company‟s mission and goals. Weaknesses are
negative internal factors that inhabit the accomplishment of the
company‟s mission and goals.
Saud assessed the strength and weakness of Jawlah DMC many
times throughout the case. The first time was when he assessed the
situation before he created the V.I.P services, then he assessed before
he gone with the partnership option.
3- Scan the environment for significant opportunities and threats facing
the business
Opportunities are positive external options that a company can exploit
to accomplish its objectives. The number of potential opportunities is
Proceedings of 5th Annual American Business Research Conference
6 - 7 June, 2013, Sheraton LaGuardia East Hotel, NY, USA, ISBN: 978-1-922069-24-5
limitless; so the entrepreneur needs to find the most promising
opportunities to the business.
Threats are negative external forces that may hamper the company
ability to achieve it objectives. Threats can take variety of forms such
as competitors entering to the market, government mandate regulation,
and other things that may influence the business.
Saud scans the environment looking for opportunities and threatens.
The first time was when he assessed the situation before he created
the V.I.P services, then he assessed before he gone with the
partnership option.
4- Analyze the competition
Saud was able to manage to b partner with one of the most dominant
company in Saudi Arabia AlTayyar Group. This move protects him
from the competition with other small travel and tourism agent.
5- Create company goals and objectives
Saud developed two goals after partner with AlTayyar group.The first
goal is to reach out to local citizens and corporations with products and
packages that fit them. Second is to top the sales of 2010 when Jawlah
was independent company. Although these goals are not detailed
enough and may not touch all the aspect of Jawlah DMC, Saud
developed two main goals that his company should pursue.
6- Formulate strategic options and select the appropriate strategies
The strategy that Saud chooses to go with is differentiation strategy.
JDMC‟s packages were reasonably priced, diversified, and targeted to
locals, visitors, and corporations.
Although Saud miss some strategic planning elements such as
translating strategic plan into action plan, and establish accurate
control, he developed key components of the strategic plan.