Doha-based Salam International is one of Qatar's great success stories. How this small family business made it to the big time
Most CEOs would think twice before shelling out $5 million for a consultant to help them reorganize their company. But Qatar's Issa Abdul Salam Abu Issa did not even blink before bringing in Bain Consulting to transform the Doha-based family business.
Issa runs Salam International, which has businesses in diverse areas ranging from retail and IT to oil and gas and construction. The group employs around 3,000 people and has a turnover of $250 million, with growth of nearly 20 percent a year. Salam as a company started in 1952 as a photography shop run by Issa's father, Abdus Salam. By 1982, when he passed away and Issa took over, the company had developed into a sizable retail business.
Two decades later, the group has grown into 22 separate companies, organized in three main groups. The principal one is the Salam Group, which has operations in Qatar, the UAE, Saudi Arabia, Jordan, Kuwait and Oman. The core business is the retailing and wholesaling of luxury goods. The second group is a public shareholding company, Salam International Investment Company, which was floated on the Doha Stock Exchange in 2000. This group manages about 15 companies that operate in diverse areas like oil and gas, telecommunications, building, construction and IT.
The third principal group of the family business is Omnix Group, which is basically a regional IT company. It is headquartered in Dubai and headed by Issa's brother Jamal. Omnix has close ties with Dubai Internet City. Omnix is currently undertaking a $1.3 billion project in Dubai Media City where it will construct a string of smart buildings, featuring the latest in technology. Salam was also involved in carrying out the systems integration at Al Jazeera. Since then, it has taken up similar projects with another 30 television stations.
It is this diversity of business and rapid growth in various sectors that led Issa to consider reforming company operations. "Two years ago, we embarked on a transformation of our group," he says. "The transformation consists of five elements. We used Bain as our strategy partner to create a corporate strategy, and that was done. We hired a German company to restructure our IT systems. We also used an IT consultant, Pricewaterhouse, who have developed our IT strategy. Now we have just signed with Oracle to use their software and we've signed a contract with an Egyptian company to do our implementation.
"I saw the transformation in the world economy, and I saw how small our markets are. If you take the whole GCC, including Saudi Arabia, it's still a drop in the bucket. So I saw the need for transformation. Traditionally, in luxury consumer goods, people opened stores for their own agencies. We have changed. We have started separating our agencies from our retail completely. Those are two separate structures and they both have to make a living. The retail business has to buy from the wholesale, and the wholesale has to fight its way onto shelves and into exposure within our structure. We are also rebranding our retail business to go into the bigger areas."
Two years later, Issa says that he is glad that he finally took the step. "It was crucial for us. We have reached a level where any growth, without restructuring, would have been dangerous for us. We have seen it happening within our group. You lose control when you grow. You can't afford to make mistakes. The opportunities are there but you have to be able to tap them, and for that we needed to restructure our entire operations."
The company was reorganized not only because of its internal requirements, but also because of the changes happening in the marketplace. "With big companies coming to our market, nobody suffers more than us," says Issa. "Over the last two years, Qatar has been over publicized as a destination. The competition in the UAE already exists. Qatar and the UAE are our strongest markets. The other economies in the region are basically dying and so everybody is attacking vibrant markets like Dubai and Qatar."
However, with a population of barely 850,000, Qatar is a small market. And when competition from overseas enters such a market, it hurts. Issa admits that the excessive competition has hit his companies as well. "Being a large company in such a small market, we have suffered for a few years, though I must add that now we are making a comeback. We were able to maintain, but not take advantage of the growth of the market because more companies keep coming and they want to get a foot in the door. They are buying their market share but, unfortunately, they have spoiled it for themselves and for us," says Issa, referring to the sharp drop in prices brought about by the new competition.
But Issa is optimistic about the future. He says that competition is becoming more sensible as firms realize the damage they caused to the market. He says that with the economy booming, the local market is also increasing in size, though not enough to accommodate all the competition. "The cake is getting bigger," he says, "probably three or four times bigger, but it is good enough only to feed the local players. With outsiders coming in, our cake is getting spoiled."
While fighting to protect his home turf against competition, Issa is also taking the battle to enemy territory. He has now launched an aggressive expansion program that will make his company's retail chain a truly regional player. "We have plans to franchise our department stores in many more countries and become a truly regional player," says Issa. "There is great opportunity for us to increase our presence regionally in the four sectors where we operate."
The strategy is timely since many countries in the region are joining the World Trade Organization, which is forcing them to adapt their business laws and open their markets to competition from overseas. Issa says that his company is well poised to enter into key markets as they open up. However, he complains, about the speed of reform. "They are taking about reform, talking about the need for reform. The reforms are social and economic, and political on top of that. We can see the awareness, and the awareness came from the needs. The whole world is changing, and we have to change. So it's imminent, whether it's in two years, three years, five years."
But one major issue over which neither Salam or any other business in the region has any control is the political climate, which has sharply deteriorated in the last few years. Issa admits that this is the biggest hurdle for him. "The only problem we are facing right now is the political ambiance," says Issa. "This is our biggest challenge. We don't have much to do as a business community. We are just hoping that we have wise politicians, politicians with vision."
Meanwhile, Issa is going ahead with his plans of making Salam a regional player that can not only take on the competition but also survive and thrive despite any political instability in the region. The company that he took over nearly three decades ago is looking stronger today than ever before. For Qatar and Salam International, the future has never been brighter.
© Arabies Trends 2004
