Emaar Economic City Company

Emaar Economic City Company Introduction Emaar, The Economic City, often abbreviated as Emaar E. C. is considered to be among the world’s largest property developing companies. The company’s origins are in Saudi Arabia where its stocks are under Emaar Properties PJSC management. Currently, the company is undertaking a grand project where it is involved in the establishment of a 168 million square metres model city, King Abdullah Economic City, on the shores of the Red Sea in Saudi Arabia.

The project is mainly targeting the future wellbeing of the Saudi economy as it aims to open up new opportunities of employment to the largely youthful Saudi population. The project has been subdivided into different phases and is set to take more than a decade before final conclusion.

This paper intends to carry out an extensive analysis of the Emaar Economic City Company. In particular, the paper will analyze the company’s business model, explore on its marketing strategy, and finally analyze the different pricing strategies preferred by the company.

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Company Business Model Trading practices Emaar Properties PJSC deals in the real estate industry where its main aim and objective is to develop state of the art properties for sale, as well as on contract basis. The company has taken to fill the void that is created by the ever growing demand for real estate properties in Saudi Arabia, particularly given that the kingdom’s government has embarked on an aggressive program that is meant to uplift the living standards of the country’s population. Apart from building ultra modern homes in cities and other areas, the company also develops master-planned communities which specifically meet customer’s every demands and wishes. Emaar’s greatest strength has been its pioneer innovation that is particularly focused on introducing new and better living concepts in the developments being set up.

The company’s other business activities includes the management of real estate, most of which it was involved in their construction. Emaar, The Economic City literally manages general property and industrial parks as landlord. The company’s other business portfolio is in the services industry where it is involved in staffing of their human resources. These personnel are often outsourced. Finally, Emaar, E. C. also deals in the transportation industry where its main interests and investments are in water transportation. Despite its capital and labour-intensive business portfolio, however, Emaar, E. C. is more famous for the KEAC project where there are very high expectations from the public, investors, and the Saudi government. Although other similar projects have been lined up as a strategy of diversifying Saudi Arabia’s massive oil wealth, the KAEC project is unique and will determine Emaar’s future position as a major player in the real estate industry.

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Strategies of operation In ensuring that the company attains its goals and objectives, Emaar, The Economic City has signed numerous agreements and memoranda of union with several other service providers to enhance its services. In the King Abdullah Economic City construction project, Emaar E. C. has entered into joint operations with StrateSphere Enterprises together with PloymerOhio for purposes of developing the KAEC Plastic Valleys. The main objective of this project is to see to it that KAEC Plastic Valley becomes a global example in the plastics centre, a fete that could rival what is currently being done at Ohio, in the United States of America. This project will effectively position KAEC as regional and indeed global leader in the ever flourishing plastic and polymers industry. Potentially, KAEC Plastic Valley will attract investors in the industry owing to the modern facilities and equipments being installed.

Emaar, E. C. signed a working agreement with the Ritz-Carlton, which is a globally renowned luxury hotel and resort management company, to manage a resort facility at KAEC’s Resort Cove District. The memorandum of understanding between the two companies underscores Emaar, E. C.’s objective and resolution of integrating quality in the communities and real estate developments under its care and management. Ritz-Carlton is an international player in the industry with quite a remarkable reputation, having more than 71 hotels under its management in 23 countries. The partnership is meant to attract world class tourists into the city as they explore the mega rich investment of its own kind in Saudi Arabia.

In the manufacturing front, Emaar, E. C. has already set the ball rolling by entering into a pact with the globally recognised confectionary manufacturer Mars GCC FZE. This agreement is intended to enable the manufacturer evaluate on the potential of KAEC becoming a regional hub in as far as its activities are concerned. Although the GCC move is individual and meant to

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benefit it directly, an approval by the firm of KAEC’s viability is likely to open the flood gates as more manufacturers will follow suit and establish their operations in the model city as well.

In yet another strategic move that is meant to see Emaar, E. C. provide quality service to its pioneer model city project, the company has signed a common agreement deal with Rezayat Aggreko that will see the latter provide temporary power to the KAEC project. Aggreko Plc is a global leader providing rental power generation systems and has enormous skill and reputation in the service industry. The SR 25 million worth deal is set to see Rezayat Aggreko provide power to the city using turn-key power packages. This deal, in essence, assures all investors wishing to dwell in the city that all their power needs have been taken good care of. Electricity remains one of the basic economic incentives whose capabilities will transform KAEC into a magnanimous venture.

Organizational structure Decision making at Emaar, The Economic City is done by the company’s top organ. At the helm of the company is the board of directors which also comprises of the entire senior management team. The board takes charge of all decision making processes, including signing agreements with trade partners, terminating contracts, as well as deliberating over crucial matters afflicting the company. The channel of command is as follows; the board of directors, company chairman, company vice chair, the chief executive officer. The board mainly takes care of the interests of the shareholders.

Marketing Strategy Emaar, E. C.’s main marketing strategy involves working closely with world renowned companies and service providers in all her projects. As value maximization remains the developer’s main objective, Emaar, E. C. continues to sign and enter into agreements with these

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companies boasting of international reputation, as a way of attracting customers who are after value for their money. In its strategy, Emaar, E. C. has agreed to working with PloymerOhio and StrateSphere Enterprises, two renowned companies with great expertise in the plastic industry, to help in the development of KAEC’s Plastic Valley. The aim of Emaar, E. C. entering into this agreement is to see it attract investors who would wish to set up industries in this sector within the model KAEC city. The value addition will see special infrastructure and equipment, unique in the Middle East region, installed and built to enable plastic manufacturers work with ease and total efficiency.

The company has also signed similar agreements with Ritz-Carlton, Rezayat Aggreko, Savola, Mars GCC, among many other companies, to enable it achieve quality in its performance and delivery of service. This strategic positioning is a marketing effort that targets at emphasizing two aspects about Emaar; firstly, the company values quality in its operations and works and, therefore, seeks to integrate the eminence by bringing on board proven service providers to accentuate on this promise. Quality often is an incentive that attracts investors as they are aware of the fact that it will enable them to achieve efficiency in their operations.

Secondly, Emaar prioritizes professionalism as the only avenue of achieving growth and development. With accurate professional practices, occupants of the units developed by Emaar are likely to get great satisfaction, a fact that will see the company’s workmanship score highly.

The developer gets involved in extensive research and innovation that seeks to explore on new ways of integrating modern technologies to the latest architectural designs for quality purposes. Virtually all units constructed by Emaar, E. C., including residential, office blocks, resorts and hotel, and malls been designed with utmost eminence as a way of marketing the company’s exquisite style. On completion, the King Abdullah Economic City is going to become

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a model city that will include 63.5 million square meters exclusively set as an industrial zone while 13.8 million square meters will cover the sea port. The central business district will cover 3.3 million square kilometres and which include state of the art hotels, apartments and villas enough to serve the 2 million population and other tourists visiting the area.

Emaar, E. C. uses its development projects as a way of enhancing its brand and advertising to the outside world. The company uses its own resources in developing a majority of the estates as a way of winning investor confidence that they are a big company with the capacity to sponsor large projects. Emaar, E. C. has been working hard in order to see to it that it acquires developments and other assets and further developing them to magnificent standards that can attract strong buyers. In this way, the company is optimistic that it will manage to imprint a mark into the market that is already proving to be competitive with major projects still in the pipeline and set to be rolled out in the near future. Other regional and international real estate developers are already eyeing the Saudi Arabian market, a fact that could jeopardise further chances of local companies, like Emaar, E. C. of sustaining the competition.

Emaar, E. C’s direct involvement in running and managing some of the basic properties in communities it builds, such as quality educational institutions and healthcare facilities also forms part of its strategic marketing plans. Dwellers and all the other residents of these communities appreciate the quality service that the company offers them through the direct involvement of running the basic infrastructure. The company also allows the general public and other established investors to form part of the company’s ownership through the sale of shares.

Emaar, E. C. also enters into numerous agreements with consultancy firms in a bid to allow communal participation in its undertakings while at the same time seeking to penetrate further into the markets using such established relationships.

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A different marketing strategy that Emaar, E. C. has continuously used to explore its operations and activities includes sponsoring projects directly in order to gain market hold. This strategy has been used more in Saudi Arabia where the company seeks to win over other government tenders as the Kingdom’s authority embark on aggressive upgrading of projects and initiation of new ones. The company undertakes its own sponsored research in determining areas that require modern developments which, in turn, will help in improving the quality of life for the residents that will be directly affected. In some instances, the Saudi Arabian government join efforts in ensuring that the projects get to conclusion through the forwarding of financial grants.

In this strategy, Emaar completes the projects it has earmarked then manages them or sells them off directly as a way of recouping the costs incurred (Emaar, 2007, para 4).

Pricing Strategy Emaar serves a wide market that is made up of different market characteristics. These markets include real estate development and management, staffing services, as well as running water transport. As such, Emaar employs different pricing strategies depending on the industry characteristics. However, the decision to choose on a particular pricing strategy also depends on the company’s analysis of the market trends, both in the present and in the future. The real estate industry in Saudi Arabia is currently booming as the country has earmarked numerous multi billion projects for development as it strategically positions itself for future growth and development. Generally, the main real estate client in Saudi Arabia remains to be the national government, a fact that dictates on the pricing strategy that company adopts (Shankar & Bolton, 2004, p. 28).

Premium pricing strategy

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Emaar, E. C. employs a premium pricing strategy on all projects that it undertakes, and whose client is the government. Often, the company settles for comparatively higher prices in such projects owing to the government’s financial ability to meet the costs incurred. Saudi Arabia is an oil rich country with the government raking in billions of Saudi Riyals every year.

Thus, the government’s financial position has always been stable to enable it raise the required funds. Emaar, E. C. has particularly been opting for high innovations and skills to ensure that the quality of their finished projects can compete effectively with those of rival companies in the real estate development industry. These innovations and skills are often costly and drive up prices for such projects.

The premium pricing decision has also been emphasized, in part, by the seesawing global economy which has been experiencing turbulent times since 2008. It is worth noting that at the time the global crisis was at its worst, Emaar, E. C. had just entered the most crucial phase in the ongoing KAEC project. In essence, this meant that the company’s overall operations costs had to shoot up owing to the rising cost of doing business. Emaar’s budgeted cost for the project developed serious shortfalls which also saw the company lag behind in its schedule. At one point, the Saudi Arabian government had to inject in some funds to see to it that the project moved swiftly as per the previous anticipations. Emaar, E. C. also borrowed funds from its business partners, particularly banks, to re-invigorate the project and ensure it moves on as per plans.

These unplanned economic stimulus programmes have effectively left Emaar, E. C. with no better options than adopting a premium pricing decision. The loans advanced to the developer during the economic hardship times have to be repaid within the agreed period of time in order to make it less expensive. Thus, the additional expenses and costs have been passed over to clients

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through the quotations being made. Although the economy is still reeling from the aftermath of the global economic crisis, improvements have been recorded in many sectors and buyers have already began buying units in the first phase of the finished KAEC project. Emaar, E. C. anticipates that with the top class quality engraved on already developed and finished units, many interested buyers will flock in and place their deals, thus enabling it to fully repay all the outstanding loans.

There is particularly less pressure from the marketing forces to compel Emaar, E. C. to lower its prices. Although the quotation for the already finished phases is comparatively high, the company is set to stick with the pricing model for the long term future. Other real estate developers in Saudi Arabia have equally experienced the poor economic run and are less likely to alter prices by lowering them down.

Penetration pricing strategy Emaar, E. C. also adopts a penetration pricing strategy particularly in instances where it seeks to gain penetration and acceptance. With Saudi Arabia embarking on its vigorous development strategy that is aimed at positioning the country among the top ten most sort investment destinations in the world, there is likely to be a scramble among real estate industry players. More cities and other developments, including sale of land and property, are set to be developed during this period. Thus, real estate developers are using all methods and artillery, including price, to win government tenders for the numerous projects on offer. The penetration pricing model in this effect is very appealing as it is meant to outwit the competitors and win most of the tenders.

Although the aftershocks of the global economic crisis that has been here for the last four years are still being felt even to as far as Saudi Arabia, Emaar, E. C. can still afford to use the

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penetration pricing strategy. The reasoning behind this plan is that more projects with lesser profit margin will be better than targeting higher profits and eventually ending up with only one or two projects. It is also aimed at winning the government’s confidence that indeed Emaar, E. C. is a reliable developer who can produce quality projects with limited financial resources. Emaar, E. C.’s strong financial background ensures the company can comfortably sustain such a pricing model, a competitive advantage that effectively locks out other players with lesser financial power.

Psychological pricing strategy Emaar, E. C. employs the psychological pricing strategy especially as a way of warding off mounting competition from different real estate developers. The company combines its fully innovative and quality workmanship with its strategy of partnering with world class service providers to effectively explore on the benefits of psychological pricing. This combination works in tandem in order to lock out competitors while at the same time wooing clients. In this regard, Emaar, E. C. sets its asking price for the finished units slightly lower than what the average market price is ranging at. The company then embarks on creating market awareness about its quality and the world class service that is integrated therein.

Interested buyers then make their own analysis and eventually settle for Emaar, E. C. instead of the other real estate developers. This strategy, however, is mostly favoured for the high end hotels and resorts that it Emaar, E. C constructs. Psychologically, many individual buyers will match the amount of money they are paying for a product or service with the value they derive from it. Thus, it is easy to convince buyers by giving them maximum quality on the one hand, while at the same time charging less expensive. However, the psychological pricing project is a bit risky and Emaar, E. C. does not use it more often than would be necessary. For

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instance, where the market range has been set such that the profit margin is small, the company cannot afford to go lower than it. That would men selling at a loss, which in any case is not any business’ plan.

Conclusion Emaar, E. C. is an established construction company whose main objective is to undertake construction projects of high value in Saudi Arabia. The company operates in the real estate sector where it develops communities, acquires and sells assets, and also manages them.

Currently, Emaar, E. C. is undertaking a grand project that will see Saudi Arabia develop a model city which is meant to cost about SR207 billion. This city will officially be known as the King Abdullah Economic City, abbreviated as KEAC. In sustaining its marketability, Emaar, E. C. effectively enters into agreement with other companies with international reputation in a bid to enhance quality addition. In its mega KAEC project, Emaar, E. C. has signed numerous memoranda of agreement with several companies, including StrateSphere Enterprises together with PolymerOhio in order to develop KAEC Plastics Valley, a grand project that will attract investors in the plastic industry. The company has also worked closely with other service providers, including Ritz-Carlton, Rezayat Aggreko, Savola, and Mars GCC, all of which are international companies with good market reputation. Emaar, E. C. uses a combination of pricing strategies in order to position itself strategically in the market. The premium pricing strategy is being used mainly as the company seek to recover from poor economic times that have been worsened by the four-year long global economic crisis that began in 1998. The penetration pricing strategy seeks to enhance the chances of Emaar, E. C. winning more projects ahead of its competitors. Finally, the psychological pricing model also seeks to outwit Emaar, E. C.’s other

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main challengers in the real estate industry. It targets to use quality and marginally low asking prices to woe property buyers their way.

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