STRATEGIC MANAGEMENT: EMIRATES ID
In the modern economy, most companies are the open systems; there is a continuous interaction between the organization and the environment, with which it interacts. With a view to an effective functioning of the company, it is required to assess its potential and prospects for the development, as well as determine the influence of the environment on its activities. The external environment of the company is fraught both with the threats faced by the company and the opportunities offered to it. At the same time, the analysis of the internal environment provides an insight into the strong and weak points of the company, as well as its potential and capabilities. It is the analysis of the environmental factors and forecasting that allow the company to adapt to the changes and make strategic decisions for the further development. The environmental analysis is especially important for the large companies working in the public sector, such as the Emirates Identity Authority (Emirates ID), a federal governmental organization of the UAE that has been mandated to enroll the country’s residents to a single population register, as well as provide them with the uniform ID cards (Emirates Identity Authority 2015). However, the achievement of this goal will require significant efforts due to the amount of the external challenges that the company will have to face, as well as its internal problems. Therefore, the following work studies both the internal and external environment of the Emirates ID by conducting PESTLE and SWOT analysis, as well as reviewing the role of the scenario planning method in the strategy development process.
PESTLE is a simple and convenient method of analyzing the external environment of an enterprise. Its techniques are often used in assessing the key market trends in the industry. Its results can be utilized in determining the list of threats and opportunities during the conduction of SWOT analysis of the company. PESTLE analysis is a tool of a long-term strategic planning, which is compiled for 3-5 years ahead, with the annual updates (The Stationery Office 2010). It aims to identify the impacts of the external environment on the company’s strategy. In the case of the
Emirates ID, it is possible to define the following factors that may affect its activities, as well as forecast their outcome:
1. Political factors
- – The initiation of the transition to e-services by the Government. The Emirates ID will have to resort to the new technologies in order to ensure the implementation of this social policy (Al-Khouri 2013);
- – The governmental policy of the business environment improvement. The registration and production capacity of the Emirates ID must be improved in order to attract the investments from abroad into the private sector (Almezaini 2012);
- – The federal initiative of the creation of a single ID card system will result in the establishment of the long-term cooperation with the local authorities (Al-Khouri 2013);
- – The low political stability in the adjacent countries. The organization will have to run through numerous check-ins of both the immigrants and visitors in order to ensure the safety of the UAE residents (Almezaini 2012).
2. Economical factors
- – The utilization of the zero-based budgeting. The duration of the planning process at the Emirates ID will increase, and the costs of using this method may exceed the benefits of its use, making the company an object of the strict governmental control, namely, by the Ministry of Finances (Emirates Identity Authority 2015);
- – Rather high fees for obtaining an ID card make it unaffordable for a particular segment of the country’s population. The company will have to review its pricing policy in order to ensure the maximum coverage of the UAE residents with its services (Emirates Identity Authority 2015);
- – The diversification of the UAE’s economy and the lowered share of the oil industry in the country’s GDP make it sensitive to any negative trends both at the local and global scale. In particular, the current global political and consequent economic crisis may result in the decrease of the foreign investments (Bazoobandi 2013). In turn, the financial well-being of the UAE residents will also go down while hindering the process of conversion to a single ID card system.
3. Social factors
- – A rather young age of the Emirates ID, being established in 2004, results in the absence of a comprehensive statistics on the UAE population (Emirates Identity Authority 2015). In turn, without this information, the company will encounter much more difficulties in the process of conversion to a single ID card system, namely when ensuring the maximum coverage of the UAE residents with its services;
- – The forecasted further diversification of the country’s population (namely, at the expense of the expatriates) may make the process of data gathering more complex and require the Emirates ID to update the population register constantly (Al-Khouri 2013);
- – Many UAE residents do not understand the purpose of the ID cards, at all. As a result, the added value of the Emirates ID’s products is rather low for them, which makes them view an ID card a liability rather than a valuable asset (Al-Khouri 2013). Being combined with rather high fees, this fact may hinder the process of conversion to a single ID card system since many people would consider it unreasonable.
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4. Technological factors
- – The introduction of a global-scale communication and data transfer provides many opportunities for the countries with the open economy, such as the UAE. In turn, this factor also affects its public sector companies, namely the Emirates ID, by providing the possibility of cooperation with the developers of specialized hardware and software, as well as the benchmarking of the world’s largest ID companies. At the same time, it also introduces the new risks in terms of the data security, requiring the Emirates ID to utilize the relevant methods of the data management (Al-Khouri 2013);
- – The growing global popularity of biometrics as a method of identification will require the Emirates ID to implements the similar features in its ID cards in order to simplify the process of the international relationship between the UAE and other countries (Bennett & Lyon 2008).
5. Legal factors
- – Currently, the concept of personal identity is not legally established in the UAE; this fact may affect the country residents’ attitude towards the ID cards, as they would not feel protected from the identity theft and similar crimes (Al-Khouri 2013);
- – The absence of the coherent laws on the data protection at the federal level may force the company to adjust its strategy separately for each of the emirates, which have own strict privacy policies in the public and private sectors (Bennett & Lyon 2008);
- – The introduction of biometrics changes the legal regulation of the data protection process, impacting almost every aspect of the work of the Emirates ID (Bennett & Lyon 2008).
6. Environmental factors
- – Currently, the environmental issues are taken into account in the policy-making process at all levels in the UAE (Bazoobandi 2013). Given the fact that the ID cards are made of plastic, the strategy of the Emirates ID must focus on the environmental protection, namely, recycling. In turn, this initiative will create an image of a socially responsible company for the Emirates ID and increase the loyalty of the UAE residents to it (Emirates Identity Authority 2015).
- Therefore, it can be seen that each of the presented factors affects the Emirates ID in a certain way. However, in order to develop a sustainable strategy, it is necessary to consider the cumulative effect of these factors. In particular, it should be noted that none of the mentioned factors can be considered a direct threat to the company’s well-being. At the same time, the impact of the external forces hinders the achievement of the company’s strategic goals while simultaneously presenting the opportunities of reducing its adverse effects. Therefore, the new strategy of the Emirates ID must consider all the above-mentioned factors, as well as their consequences for the company.
Scenario planning is one of the main ways of the long-term planning, which has been extensively used for the last three decades. The development of scenarios is used as an alternative to the linear planning, which often proves to be inefficient and inaccurate in the creation of strategic plans and forecasts, especially in the conditions of the economic instability. The primary tool of scenario planning is scenario analysis. This method is used for the strategic management processes with a high level of uncertainty that take place in a turbulent environment. Scenario analysis provides a set of detailed descriptions of the sequence of events that can lead to the desired result or cause possible outcomes, depending on the development options (Chermack 2011).
Most approaches to the scenario analysis consist of the following steps: the study of the external factors influencing the company, direct development and formulation of scenarios, and development of a strategy of the organization according to the created scenarios.
1. The analysis of the external factors impacting the company
This analysis, as well as the discernment of early signs of the future changes, serves as a basis for the development of scenarios. The analysis should be started with the definition of the business interests of the organization followed by the assessment of the parameters of the environment. Specific business interests of an organization, in fact, are the goals, which determine its desired state in the future. These objectives can be both short and long-term ones; they may be defined by the features of the country or world trends, such as the globalization. Therefore, the primary objective of the first phase of scenario analysis is identifying the most significant external factors or the so-called key variables, which will be the basis of the future scenarios (Chermack 2011). In particular, PESTLE analysis is among the most efficient methods of identifying the mentioned key variables. The purpose of this method is evaluating the influence of the most significant factors of the company’s environment and the possible changes in their influence over time. It should also consider the factors that are currently insignificant but can affect the activities of the firm in the considered time perspective. Therefore, the result of this stage is the list of factors that have the greatest impact on the organization’s activities in the certain period of time (Chermack 2011).
2. Scenario development
This stage is the longest and the most creative one; it consists of the following sub-stages (Chermack 2011):
- – The selection of the changeable variables. At this stage, it is recommended to study the results of the analysis of the external environment in order to identify the most important factors that will be the basis of the scenarios. It is also required to avoid any bias in reasoning and take into account the time period under consideration (Chermack 2011);
- – The design of the various outcomes of scenarios. This step involves a detailed analysis of the identified variables and defining several (at least two or three) possible outcomes (Chermack 2011);
- – The combination of the key variables and the development of scenarios. The purpose of this step is to establish the relationship between the outcomes of all the key variables for the further creation of scenarios. The result is the formation of 7-9 logically grouped outcomes of different variables. The next step is to combine the received mini-scenarios and obtain 2-3 main scenarios (Chermack 2011). Its implementation requires the application of the method of the scenario analysis in practice. At this stage, the most effective policy is to develop the most and least favorable outcomes or, in other words, optimistic and pessimistic scenarios. The last step is the description of the resulting scenarios to be presented to the company’s management. As a rule, it is made in writing as a number of alternative descriptions of the future; it may include the quantitative characteristics and diagrams (Chermack 2011).
3. The development of a strategy in accordance with the scenario
The contribution of the scenario planning into the further development of the strategy is that it allows developing a reasonable set of strategies that promote the best results for the organization. In particular, the scenario planning allows building a security against the major threats to the environment. The final step includes the development of a behavioral strategy of the organization, the implementation of which leads to the satisfaction of specific business interests of an organization or solving the identified problems. The best outcome of the scenario planning is finding and selecting a behavioral strategy, the impact of the implementation of which would be favorable for any scenario. Typically, each considered scenario corresponds to a single favorable strategy. In this case, it is required to select a strategy that would maximize the gain of the company at any conditions and would ensure the minimal level of risk. In the case the probability of realization of one of the scenarios is much higher than that of the others, it is possible to choose a strategy that is the most favorable for this scenario (Chermack 2011).
The scenario approach plays a special role in the development of the company’s strategy. It allows taking a fresh look at what is happening around, notice the emerging issues and problems, and prepare the company for the future changes. Currently, an increasing number of managers are using the scenario planning in choosing a long-term business development strategy for their companies. As a result, the level of uncertainty is significantly reduced for them; they gain more confidence in the correctness of the chosen strategy, as well as understanding of how to act in the case the events unfold on a particular scenario. Therefore, the scenario planning allows lowering the risks of the large-scale investments and improves the overall quality of the strategic decisions (Chermack 2011).
SWOT analysis is one of the primary methods of strategic management that allows conducting the assessment of a set of the internal and external factors affecting the company’s development. In general, it is a process of creating the links between the primary features for the enterprise, such as its strengths and weaknesses, and its external environment, the results of which can serve as the basis for the formulation and selection of a strategy for the organization. It is conducted in order to research the company as an economic system in a particular market environment. It should be noted that SWOT analysis is only a tool; it does not contain definitive information for the decision-making, but allows organizing the process of analyzing all the available information by using the independent opinions and estimates. This fact makes it applicable to any company, regardless of its size or sphere of activity. SWOT analysis makes it possible to form a common set of strategies for the company based on its characteristics, such as the adaptation to the environment or ability to influence it. A wide application and development of SWOT analysis takes place because strategic management is associated with the large volumes of information to be collected, processed, analyzed, and used. Therefore, there is a need to find, develop, and apply rather simple, universal, and efficient methods of such work (The Stationery Office 2010).
By analyzing the internal environment of the Emirates ID, as well as taking into account the results of the previously conducted PESTLE analysis, it is possible to define the following features of the company:
- – The high recognition of the company across the UAE, which provides the high level of coverage of the population with its services (Emirates Identity Authority 2015);
- – The support from the UAE Federal Government that ensures the survivability of the company in the long-term perspective (Emirates Identity Authority 2015);
- – The cooperation with the federal and local authorities that simplifies the process of achieving the company’s goals (Emirates Identity Authority 2015);
- – The offering of the unique value-added services, which exclude the possibility of competition (Emirates Identity Authority 2015).
- – The imperfect pricing policy that makes most of the company’s services unaffordable to particular layers of the population (Emirates Identity Authority 2015);
- – The absence of a comprehensive statistics on the UAE population, which may result in the mistakes in the decision-making process (Emirates Identity Authority 2015);
- – The rather complicated processes of service delivery and customer-facing, which result in difficulties for both the clients and employees of the company (Emirates Identity Authority 2015);
- – The undeveloped communication with the population of the country, which is resulting in the low awareness and understanding of the company’s services (Emirates Identity Authority 2015).
- – The conversion to biometrics may simplify the process of international partnership (Bennett & Lyon 2008);
- – The increased hyper-connectivity allows using the positive experience of the world’s leading ID companies (Bennett & Lyon 2008);
- – Addressing the environmental issues may create the image of a socially responsible company for the Emirates ID;
- – The initiation of the transition to e-services by the Government may lead to the growing role of the Emirates ID in both public and private sectors of the UAE economy.
- – The lack of understanding of the purpose and value of the ID cards by the population (Emirates Identity Authority 2015);
- – The absence of the data protection laws may force people opt out of obtaining the ID cards (Al-Khouri 2013);
- – The rise in the number of cyber crimes, such as the data and identity theft (Bennett & Lyon 2008);
- – A high sensitivity of the country’s economy, which may have the negative consequences for the public companies (Bazoobandi 2013).
As a conclusion, it is possible to say that the analysis of both the internal and external environment of the Emirates ID has helped in obtaining the important results. In particular, due to the long-term perspective of the strategic planning (3-5 years), it has given an insight into the potential challenges that the company will have to face in the future. Moreover, it provided the time to develop an early warning system for addressing the possible external threats, as well as the strategies that can turn any previous threats into the profitable opportunities. In particular, in the long-term perspective, the company may request the support from the Federal Government and the local authorities in order to establish a robust communication with the residents of the country, as well as review its pricing policy. In addition, it may consider the possibility of establishing a partnership with the world’s largest ID companies with the aim of utilizing the tools and techniques used by them, as well as conducting a comparative analysis of their methods.
Therefore, the analysis of the environment of the company is an important component of the strategic management and decision-making. Such an analysis should be carried out regularly in order to neutralize the re-emerging threats, exploit the presented opportunities, and meet the current and forecasted needs of the environment.