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Global Leadership through Diversification

Global Leadership through Diversification. GIL Middle East 2009 October 7 th , 2009, Beach Rotana Hotel, Abu Dhabi, UAE. Why Diversification.

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Global Leadership through Diversification

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  1. Global Leadership through Diversification GIL Middle East 2009 October 7th, 2009, Beach Rotana Hotel, Abu Dhabi, UAE

  2. 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

  3. Diversification can manifest itself in multiple ways Company Product Diversification Portfolio Diversification Competence Diversification Geography Diversification Revenue Mix Diversification Non Hydrocarbon Hydrocarbon Organic In Organic Product Services

  4. Diversification and the impact on Corporate Profitability

  5. Real GDP Growth, Oil-Exporting Countries (Annual percent change) Non-oil vs. Oil GDP contribution (%) Oil Non- Oil Bahrain UAE Oman GCC Overall Saudi Arabia Iran Qatar Diversification from the Perspective of Middle East

  6. case studies exploring the journey from value creation to value capture

  7. 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

  8. 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

  9. 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 Extrusion (LME+700) Billet (LME+150) Pure Al (LME) Foil (LME+1150) Alumina (1400) Slab (LME+150) Re. Al (80%LME) Sheet Coil (LME+800) Ingot (LME+50) Rod (LME+225 Can (LME+1000) LME cost of Al/Tonne is considered as USD 1900 Conductor (LME+450) Selling Price is Indicated inside the shapes Cost of Production is indicated in black in USD/Tonne

  10. evaluation tools Mapping the opportunity to diversify

  11. Market Perspective: Identify the Parameters and relative importance Competition Growth Potential Project Feasibility • Domestic Supply Base • Global Supply Base • Domestic Consumers • Global Consumers • Supply / Demand • Threat of Backward Integration • Threat of Forward Integration • Competition from within GCC • 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 • 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

  12. Segment Attractiveness Vs Capability High 10 Aerospace & Defence Metals & Minerals 9 Petrochemicals 8 Renewable Energy Energy – Oil & Gas Industrial Products & Services 7 Tourism Transportation, Trade & Logistics Financial Services Capability 6 IT/Telecom services Education Food & Beverage 5 Media 4 KEY Pharma, Biotech & Life sciences Healthcare Equipment & Services 3 Long term Medium term Immediate potential Automotive 2 1 Low 0 1 2 3 4 5 6 7 8 9 10 Low High Segment Attractiveness

  13. Degree of Diversification: Adjacency & ROI Hi Degree of Adjacency Low Hi Cost of Capital Portfolio Returns Return on Investment

  14. Decision to Diversify will therefore be influenced by the choices a company pursues to fulfill its long term growth objectives. High Likely choices for long term growth Degree of Attractiveness* Medium Low Medium High Low 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

  15. 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

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