Professional Documents
Culture Documents
Maghreb Oxygne
Acknowledgments
We express our sincere gratitude to all those people who have been associated with this
project and have helped us with it and made it a worthwhile experience.
All of us are deeply grateful for contributed to our learning process at Al Akhawayn
University, especially our Professors. In this respect, we thank Dr. Abderrahman Hassi for his
valuable advice, as well as Dr. Tariq Elouam and Pr. Imad Jebbouri for helping us to put the theories
we learnt into practice.
Last but not least, we are greatly thankful to Mr. Chafiq, Mr. Moustaid, Mrs. Touria, and Miss
Wissam who have shared their opinions and experiences through which we received the required
information crucial for our report.
Maghreb Oxygne
Executive Summary
Maghreb Oxygne
Table of Content
Company Introduction
History
Equity Distribution Overview
Current strategies and objectives
Mission and Vision statements of the company
Maghreb Oxygne product oerings
Organizational structure of Maghreb Oxygne
Input Stage
External Analysis
7
7
8
9
10
12
15
16
16
16
19
21
23
Opportunities:
reats
Competitive Profile Matrix Analysis
External Factor Evaluation Matrix
Internal Analysis
Strengths:
Weaknesses
Internal Factor Evaluation (IFE) Matrix
Financial analysis
Matching Stage:
SWOT Matrix:
e Boston Consulting Group (BCG) Matrix
e SPACE Matrix
e internal-External (IE) Matrix
Grand Strategy matrix
Decision Stage
Objective 1: To increase net income by 47%
Objective 2: to increase market share by 6% by 2015
Objective 3: to increase market share by 5% by 2015
Objective 4: To increase Total Revenues by 1.1%
Limitations:
References
Appendices:
23
25
28
31
33
44
45
47
49
60
60
63
64
64
65
66
69
74
78
82
85
86
87
5
Maghreb Oxygne
87
88
89
90
91
92
93
94
95
96
97
98
99
101
102
103
Maghreb Oxygne
Company Introduction
History
Maghreb Oxygne (MO) is a Moroccan company created in 1977 to fulfill the need of industrial gas
in the country with two industrial units in Berrchid, specialized in manufacturing gas from air and
acetylene.
e history of Maghreb Oxygen can be summarized through the following events:
1982: Maghreb Oxygne increased its production level by investing in two new production
units specialized in manufacturing nitrous oxide (medical gas) and carbon dioxide (food gas).
1992: Launch of two new activities in specialized services which are medical equipment and
welding equipment.
1994: Edification of a new production unit, in its new plant in Had Soualem, specialized in
producing Oxygen and Azote for an investment of 130 million MAD.
1998: Opening of a new production unit specialized in Hydrogen at the Plant of Had
Soualem, for an investment of 9million MAD.
1999: Introduction of Maghreb Oxygne to Casablanca Stock Market.
2002: MO reorganized its structure and its commercial approach.
2004/2005: Launch of a new production site in Jorf Lasfar for an investment of 70million
MAD.
2008: As part of a joint venture with AIR LIQUIDE, MAGHREB OXYGEN created the
company SODEGIM for building an on-site production unit of oxygen, nitrogen and argon.
2010: Pursuing the investment in SODEGIM whose actual start is scheduled for in 2011.
Maghreb Oxygne
Holding
61.54%
6.90%
5.30%
4.00%
4.00%
2.00%
1.89%
1.23%
13.13%
Holding
TAFRAOUTI
24%
51%
25%
28%
1%
2%
SODEGIM
PROACTIS
PHILCO
ENVIROTECH
PETROLOG
SETTAT
GOLF
MANAGEMENT
Maghreb Oxygne
Maghreb Oxygne
Vision statement:
Regarding the vision statement, the team was seeking to answer the question of what Maghreb
Oxygne wants to become in the future. erefore, the team suggested the vision of MO
becoming the leading industrial gases company in Morocco.
Maghreb Oxygnes vision is to be the leading industrial gases company in Morocco.
is vision is realistic and achievable by Maghreb Oxygne, and it provides a sense of direction
to the company and its departments and functions.
Mission statement:
During the brainstorming session, the team decided to use the following table with the nine
components of the company as a first step to forming a sound mission statement. e table
below gives an overview of each component of the mission statement related to Maghreb
Oxygne following their current mission statement.
Current mission statement:
Specialist in industrial gases, medical gases and related services, distribution of welding products,
broadcast equipment and medical consumables, Maghreb Oxygne is committed daily to providing
solutions, products and services to its customers, anywhere in Morocco.
Components
Information
Customers
Suggestion
Not included
Products and
services
No changes
Markets
Moroccan market
No changes
10
Maghreb Oxygne
Technology
Not included
Concern for
survival, growth or Not included
profit
Philosophy
Concern for
employees
Not included
Not included
Not included
Not included
Self-concept
11
Maghreb Oxygne
Origin
Oxygen
Nitrogen
Customer
Markets
Metal
industry,
waste water
purification
, aerospace,
oil industry,
medicine,
steel
industry,
Electronic,
Glass
Industry.
Food
industry,
medicine,
plastics
industry,
chemistry,
aerospace.
Use
- Welding, cutting, and flame
cutting of metals
- At the base of oxidation
reactions
- Viscosity of oil reduction
- Health Sector: intensive
care, diseases, respiratory
- Manufacturing of semiconductors
- Improved combustion in the
glass industry and steel
12
Maghreb Oxygne
Chemical
Industry,
pharmaceut
ical
industry,
aerospace
industry.
it intervenes in
- The manufacturing of
polymer, ammonia and
methanol
- Desulfurization of fuels
- The production of sorbitol,
and integrated in the
cosmetics including vitamins
- By oil companies to ease the
suffering of the oil it contains
Steel
industry,
Plastics
industry
and
manufacturi
ng of
batteries
Food
industry,
electronics
industry,
and
environmen
tal industry
and the
purification
of water
Carbon
Dioxide
13
Maghreb Oxygne
Nitrous
Oxide
Medicine,
and food
industry
- In anesthesia, it is used as a
common component of
general anesthesia combined
with injectable or inhaled
anesthetics.- In emergency
medicine , pediatrics or
delivery room.
- Used as a propellant,
particularly in the canisters of
whipped cream or dust
removal
14
Maghreb Oxygne
15
Maghreb Oxygne
Input Stage
External Analysis
Statistical facts on the industry
e figure below shows a clear evolution of the gas production in the Moroccan market. As one can
notice, the gas production has been evolving over the years to more than 434.2 million MAD in
2007 with a slight decrease from 2004 to 2005 by 15.5 million MAD of gas production.
16
Maghreb Oxygne
Figure4: Added value evolution (in Million MAD) and added value rate (%), Source: MICNT
eturnover ofindustrial and medical gases saleswas around630 millionMAD in2008 in
Morocco.is turnoveris experiencing an average annual growth rate (AAGR) of 8.4%over the
period 2004-2008, which provesthat the sectoris recording a strong growth.
e added valuereachedMAD308 millionin 2008meaningan added value rateof
49.2%andAAGR of7.3%between 2004and 2008.e averageadded value rate is 52% over the
period2004 -2008.
17
Maghreb Oxygne
18
Maghreb Oxygne
PEST Analysis
Political
Environment
country to operate in. In addition, Maghreb Oxygne has made sure to hold a reasonable position
with regards to political issues and is continuously prepared for any problems concerning the
political sector. Any political noise is irrelevant to the company. Unless the political environment
changes its rules that relate to their operations, Maghreb Oxygne prefers to stay away from such
subject. e political environment has allowed the liberation of the market. e laws of Morocco are
not a barrier to the growth of the company.
Two legal texts are closely related to this industry, which are the Royal Dahir of August 25th, 1914
on dangerous and inconvenient production facilities and the Royal Dahir of January 12th, 1955 on
regulating gas pressurized equipment. In addition, the ministry of industry and mines is responsible
for the control of all the pressure equipment (every 5 years), and the evaporators ( every 10 years).
e ministry of equipment and transportation is responsible for the control of the means of
transportation of the company as they deal with dangerous products if they spill out on the middle
of a road.
Finally, because of some products of Maghreb Oxygne that are used in health care, the company is
subject to law number 17-04 regulating medicine production and pharmaceutical ministry of
Health, controls the medical gases (oxygen, nitrous oxide, carbon dioxide, air, nitrogen, nitric oxide
and liquid helium).
All in all, Maghreb Oxygne is respecting all the laws, norms and standards imposed by the
Moroccan government, and the political environment is fit enough, stable and attractive for the
company to operate and grow in.
Economic
Factors
19
Maghreb Oxygne
health, food and manufacturing industries which make the growth of the company correlated with
the general trends of the economy. is makes the company benefit from the governmental plans
that aim to promote investments in the manufacturing sector (Plan National pour lEmergence
Industrielle 2009-2015) since the majority of the manufacturing companies requires the products
oered by Maghreb Oxygne.
Several free trade agreements were signed with many foreign countries such as the US, European
Union and Jordan that Maghreb Oxygne was able to benefit from, such as the ability to import gas
from these countries at lower customs duties. Concerning the benefits Maghreb Oxygne is bringing
to the Moroccan economy, one can discuss the partnership between Maghreb Oxygne and
SONASID, Maghreb Oxygne installed a cryogenic unit for the production and supply of oxygen
and nitrogen at the Jorf Lasfar so that it can serve the National Society of Steel. One can also talk
about the Tangier-Med project which would not be possible without the partnership with the two
co-leader and suppliers Maghreb Oxygne and the Air liquide.
SocialCultural
Environment
males and females respectively. As for the government investment, the evolution of the operating
budget and investment in the period 1997-2010 increased sharply from 3.5 billion MAD to 11
billion MAD (SEIS, DPRF, 2010)
Technological
Forces
Oxygne makes sure they are updated with the current changes within the environment. However,
the production process used by Maghreb Oxygne is an internationally standardized one. ere is no
patent or license that protects it but costly machines are needed as well as energy.
20
Maghreb Oxygne
Rivalry
among
Competitors:
High
Threat of
New
Entrants:
Moderate
fierce competition make it dicult for prospective companies to enter the market. However, entering
the market does not require experts in the company, all they need is a abundant resources.
On the one hand, today the gases extracted from air are of use in many
Threat of
Substitutions
Low
industries: food (for food preservation, for example), the aerospace industry,
metallurgy, chemistry, industry pharmaceutical, diving; health and many
others. Moreover, with the environmental problematic, the hydrogen is a
21
Maghreb Oxygne
product that tends to prevail at the expense of others that are less environmental friendly. On the
other hand, due to technological changes, there are some substitutes for the manufactured gases. For
oxygen, instead of the use of gas bottles, there are some Oxygen generators. ese generators filter
the ambient air. e input to the generator is 21% Oxygne and 79% of nitrogen; the filter retains a
lot of nitrogen and a little bit of impurities. As for the output, it retains a maximum of 90% of
oxygen witha +-3% margin, the remaining are impurities and dioxide of Carbone, this leads us to
say that although it might seem to be a substitute which is less costly than filling bottles
continuously, it is still a risky process especially in the health industry due to the impurities left at the
output stage.
Another substitute for nitrogen is the Nitrogen generator. is one has also the same problem.
e nitrous oxide is the gas for anesthesia has as a substitute injections for the same purpose.
Bargaining
Power of
Suppliers:
Low
e industry includes two main suppliers; one of the energy carriers and the
other of the transporters. When selecting the suppliers, Maghreb Oxygen has
certain requirements of reliability, safety and service that relate to its own
customers. Suppliers must adapt to its organization.
Bargaining
Power of
Customers:
Moderate
business, the challenge is primarily to keep its portfolio of large customer (large Industries), which
22
Maghreb Oxygne
represent a high percentage ofthe companys total turnover and that has brought a certain prestige to
the company (Example: Renault, CNSS, CHU, Coca-Cola, Mac Donalds...).
Opportunities:
Maghreb Oxygne has several opportunities from which it can increase its sales, hedge
against unfair competition risk, and recover from the recent dramatic drop of net income. e
company recently launched a joint-venture with AirLiquide under the name SODEGIM (in which
Maghreb Oxygen owns 50%), which is considered an important opportunity for the sustainability of
Maghreb Oxygen. Since AirLiquide is the main competitor of Maghreb Oxygne, this joint venture
will strengthen long-term relationship of both companies, as well as facilitate collaboration on shortterm projects. Furthermore, it will allow Maghreb Oxygne to access new markets and distribution
networks, increase its production capacity, and share part of the risk with its partner. e
establishment of SODEGIM should also help Maghreb Oxygne improve its financial situation
starting 2012. Currently, SODEGIM has started gas production of argon (the first in Morocco to
produce this type of gas), with a production capacity covering the entire local market, and can be
even be extended to exports activities as well.
In addition, the healthcare and pharmaceutical sector in Morocco has known great
improvements, and the Moroccan government is paying special attention to this sector giving the
increased number of aging population in Morocco. e pharmaceutical and healthcare sectors grew
from MAD 8.64bn and MAD 39.76bn in 2010, to MAD 9.48bn and MAD 43.00bn in 2011,
respectively (Business Monitor International). With the current involvement of Maghreb Oxygne in
installing medical equipment in hospitals (including medical equipment: operating room,
resuscitation and first aid, hospitalization, sterilization and sanitation and fluids and medical
23
Maghreb Oxygne
laboratories), the expansion of the pharmaceutical and healthcare sector will provide another income
generating activity to Maghreb Oxygne.
Also, the Moroccan parliament is in process of releasing a new law (Law 1704) that codifies
the standard of producing medical gases. e application of the 1704 law (which will take action
starting 2013) will set serious standards to the production, the distribution, and the dispensing of all
sorts of medical drugs, including medical gases that were mentioned in the ocial bulletin, article 2
n16. Also, articles 45, 46, 47, require medical gas companies to have a health director (who has to
be an approved pharmacist) to monitor and supervise all activities related to producing medical
gases. Consequently, all companies that meet these regulatory requirements will be classified as
pharmaceutical institutions. According to one of the responsible in the company, Maghreb
Oxygne already have a health director, and with the current safety standards, the legal aspects of
penetrating the pharmaceutical industry has already been met by Maghreb Oxygne. is will
certainly eliminate most of the small competitors that are not able to meet those standards, and thus
creating another opportunity for Maghreb Oxygne to increase its market presence.
Also, during the past few years, demand on soft drinks has been increasing, with a potential
industry earnings of $868.15 million in 2009 (Parker, 2008). Maghreb Oxygne is a key supplier of
carbon dioxide to the soft drink industry in Morocco, which consists of big players such as Coca
Cola and Pepsi. Moroccos soft drink market has been witnessing significant growth, which would
create ample opportunities for the company to increase its sales. According to in-house research, the
total consumption of soft drinks in Morocco is projected to reach 2.4 billion liters by 2020. e total
value of the countrys soft drinks market is estimated to reach $1 billion. Both carbonates and stills
experienced similar levels of volume growth but carbonates drove the value growth. Within
carbonates the cola, fruit and glucose/stimulant sub-categories all enjoyed growth. e sports and
energy drinks also recorded a considerable growth. Such growing market creates tremendous
opportunity for the overall growth of the company. Finally, demand on emerging markets worldwide
(namely India, China, and South America, and few countries in Africa) is increasing. Additionally,
24
Maghreb Oxygne
the fact that the Moroccan government is becoming more involved in international trade makes huge
investment opportunities for Maghreb Oxygne to expand its scope beyond the Moroccan market.
reats
Maghreb Oxygne faces competitive pressure from several companies in the Moroccan
industrial gas market. Its key competitors include AIR LIQUIDE, which is a company operating
worldwide. Although Air Liquides annual revenue in Africa represents only 3%, the impact it has on
the Moroccan industry is tremendous. Among the major contracts signed during the past few years
in the industrial gas sector, Air Liquide seems to always grab an important percentage of them.
On the other hand, the company faces threat from other small companies selling industrial gases at
lower prices. During the last 5 years, the industrial gas sector has known new entrants that are
relatively small, and poorly regulated. ese companies are often involved in processing used oxygen
bottles, and reselling them for a lower price than the competition. ese bottles are either retrieved
from scrap heaps or imported from eastern European countries. Ultimately, for companies that
follow high safety and regulatory standards (like Maghreb Oxygne), it contributes negatively to
their level of sales, as well as their operating costs, and any failure to sustain a competitive advantage
by the company is likely to have adverse eect on its business, financial condition, and growth
prospects.
Also, crude oil prices worldwide almost doubled between 2007 and 2008, and will keep
increasing during the upcoming years (according to a forecast done by BMI). e company uses
fossil fuels in the production of carbon dioxide and several other materials that have been derived
from natural gases. e prices of these gases are eventually influenced by fluctuations in crude oil
prices. us, the volatility of fuel prices, which is commonly used in the production and
transportation of certain products, certainly poses another source of threat to the profitability of
Maghreb Oxygne.
25
Maghreb Oxygne
e increasing prices of raw materials could also aect the companys overall business. Raw
material prices constitute a significant part of the production cost of the company, specifically for
producing certain gas and welding products. In addition, the continuous supply of the raw materials
could be aected by weather conditions, national emergencies, strikes, governmental controls,
natural disasters, supply shortages or other events. us, price fluctuations and non-availability of
these raw materials may have a material eect on the product cost and the operation of the company.
e production of industrial gases requires significant amounts of electrical energy. e procurement
of electrical energy is important particularly in air separation and in the use of natural gas to operate
steam reformers. Increasing global demand and limited production capacity has pushed hydrocarbon
prices, which are primarily utilized in generation of electricity. As energy costs are a key component
in the manufacture of industrial gases, further rises in energy cost would push the group's production
costs thereby adversely aecting overall profitability.
Often delivering gas related products can be extremely dangerous since mishandling gas
bottles can lead to sudden explosions, and thus putting the life of worker and even customers in
danger. Maghreb Oxygne certainly takes this into consideration; however, it is still one of the
threats that is faced by the industrial gas in Morocco and worldwide.
Maghreb Oxygne is subject to a variety of environmental laws, regulations and policies
formed by the Moroccan state level authorities such as Department of the Environment and the
Moroccan association of Industrial and Medical Gases. ese laws and policies principally cover
issues such as air emissions, transportation measures, wastewater discharges, hazardous waste
handling and disposal, and the investigation and remediation of contamination. New government
regulations related to the companys products and services may result in significant additional
expenses, hampering its business growth. Any changes in existing regulations could aect the
companys financial and operating position. In addition, non-compliance with these laws and
regulations or failure to obtain any required permits and licenses may expose it to fines, penalties or
interruptions in operations.
26
Maghreb Oxygne
e fact that the industrial gas sector in Morocco has a lot of room for improvement places a
danger of increasing the number of potential foreign entrants. e Linde Group, a German
international industrial gas and engineering company currently operating in Algeria and Tunisia can
be considered as a perfect example of a potential entrant to Morocco. Headquartered in Munich, the
Linde Group employs over 48,400 people and currently operates in the engineering sector in
Morocco, which gives it more advantage to penetrate the industrial gas sector than other potential
entrants.
Lastly, their initial public oering (which started in 1999) as the only industrial gas company
publicly traded is aecting Maghreb Oxygne. ey are the only one in this sector that has financial
statements publicly disclosed, which makes it easy for the competition to access and evaluation
information about their financial standing.
27
Maghreb Oxygne
28
Maghreb Oxygne
OxyTech was founded in 2004 and is specialized in the production of industrial and
medical Gases, with a unit of production in Mohammedia.
Mroxyco is specialized in industrial and medical gases and related services. It was created in
2002 and operates in 15 cities with 80 distributors. In addition, Mroxyco has 2 units of
production: one in Berrechid and the other in Settat with an additional one expected to
open in Fes.
Using the Competitive Profile Matrix (CPM), twelve success factors were identified through
the literature review and analysis of the industry. ese success factors are important in the success of
the industrial gases industry. As for the weights given to every success factor, the team decided that
distribution network, product quality, cost management and price competition are the most
important factors to be successful in this industry and the weight attributed to them was of 0.1. e
distribution network in such an industry is very important as long as this is their only way to be close
to their customers and gain more market share. e product quality is essential in the production of
gases as the industry deals with hazardous material. Cost management is important for every
company as they need to be optimized as much as possible. Finally, price competition plays a major
role in this industry as a consumer might sometimes look for the best price. A value of 0.09 was
provided to the market share since this component is important to compare Maghreb Oxygne with
its competitors. Brand name and financial stability are the next success factors in the matrix with a
weight of 0.08 simply because they are not as important as the factors previously stated, but at the
same time, they can be of a high value to competitive assessment.
On the other hand, the lowest weights were assigned to the economies of scale, partnerships and
technology. ese three factors are obviously important for the success of industrial gases industry
but at the same time they are not as important as the one mentioned previously. As for the ratings
given to every factor, these were specific to every company. e assessment was based on the
respective presence of every company, their financial statements and other information provided by
the literature review. e weighted scores of the CPM show that AirLiquide is the most competitive
29
Maghreb Oxygne
company with a score of 3.55, followed by Maghreb Oxygne with a score of 3.06 and then by
Oxair, Flosit, Mroxyco and Oxytech with scores of 2.29, 1.99, 1.81, and 1.5 respectively. (See
Appendix 3)
30
Maghreb Oxygne
31
Maghreb Oxygne
moderately good standing. at said, there is still room for improvement, where the firm could take
advantage of the opportunities and find strategies to minimize the threats and turn them into
opportunities.
32
Maghreb Oxygne
Internal Analysis
Sales Policy
Maghreb Oxygne has decided to change its business strategy since 2003. It is defined based on its
customers rather than based on the activity. erefore, Maghreb Oxygne presents a global oering
(products and gases) according to the particularities of each customer. e organization of the
customer portfolio is defined as follows:
-
e activity called companies: that includes all customers with a global turnover that allows
deferred payments from the customer and requires further advice and technicalities from
Maghreb Oxygne.
e Health activity gathers all users of health products; gas, medical equipment, furniture,
medical consumables, installation of fluid flow, etc
Meanwhile, Maghreb Oxygne has made a split of the territory leading to the creation of seven
regional oces, which are equipped with four conditioning stations. (See map below)
Figure : Map illustrating the 7 regional oces of the company; Source: Maghreb Oxygne
33
Maghreb Oxygne
Distribution
e main objective of distribution is to cover the maximum of national territory while fulfilling
specific requirements related to the gas distribution (volume, temperature, loss, security, etc).
us, given the constraints related to gas transmission, the distribution network is based on a process
of three major steps:
-
Welding centers.
Oxygen storage is provided in liquid form in tanks either from on-site production (and Berrechid,
Had Soualem), or from infilling centers (Casablanca, Agadir, Oujda, Fes and Berrechid). As for other
gases, the filling plants are directly refueled by bottles from production sites. e regional centers
have a role of commercial leadership and logistics optimization as they provide the track sales and
shipments to the major customers and depositories, rom the filling centers or directly from the
production sites.
Moreover, with the introduction of the new sales organization in 2004, Maghreb Oxygne granted
more autonomy to its regional centers. ey have become real profit centers, oering all ranges of
medical products, welding, and related services (installation of pipes for fluids), where were
previously centralized in the companys headquarter at Casablanca.
Revenues by Geographic Areas
-
Central region: the axis of Knitra-El Jadida, including the cities of Casablanca and Rabat;
North Region: Mainly in the cities of Fez, Meknes, Oujda and Tangier.
Revenues in K MAD
Central region
2009
135 936
Variation 2008/2009
-3.6%
5.7%
34
Maghreb Oxygne
North Region
32 154
53.9%
4.2%
Customer proximity and diversification of the product oerings and prices for the SME/
individuals.
e Medias used vary between the taken actions and market segments. erefore, Maghreb Oxygne
favors press and exhibitions, conferences, forums as means of media for companies and health sector
activities, while it uses direct marketing mediums such as print, mailing, animation at points of sale
for SMEs and individuals.
e Pricing Policy
epricingvaries byproduct typeandcustomer.
e sale ofgas:
35
Maghreb Oxygne
Logistics
Distribution is organizedinto twodistinct phases:
First,the gas is transportedin liquid formin tankers from the production unitstothe filling
plantsordirectly to the customers who havethemselves fixedstorageunits.
Second,from thefilling plants, the gas is transported as bottlesto retailers,who themselvesmay be
supplyingtheir customerswith their own transport.
To minimizetransportation costs,and ensurean optimized distribution ofstocks,
the organizationof the distribution isensured by TIMLOG, a subsidiary of AKWAGroup that
isspecialized in transportation.It invoicesits servicesaccording to the volume transported.
Information, Accounting and Financial Management Systems
Originally, the information systems of Maghreb Oxygne were centrally managed by the
AKWA Group IT department.e lack of integration and scalability of this system led to its change
in 1996 and its replacement with an integrated software package. Since January 1999, the modules
for tracking sales and purchasing are integrated into this system. e software used is an American
product, JD Edwards, installed initially on an IBM AS400 and currently on a Windows platform.
In addition to the installation of this integrated software package, the management
information systems of AKWA GROUP has developed and made available to MAGHREB Oxygne,
and other subsidiaries, a tool for decision support that allowsaccess to accounting, financial and
36
Maghreb Oxygne
commercial through Intranet.is tool, called is called "Afriware" which can substantially improve
the quality of reporting, and provides better access to information needed at each level.
In order to ensure business continuity, system Backup data is set up for performing a daily
backup and test restoring data from a weekly basis. e accounting and financial organization of
MO is part of the Group's policy and relies on supporting functions by PROACTIS.e latter is a
subsidiary of AKWA Group and is responsible for the management of accounting, insurance,
heritage, tax optimization and information technology on behalf of the Group and its subsidiaries.
Human Resources
e average numberof MAGHREBOxygne employees amountedin 2009 to162 people
with anaverage annual reductionof 4.1% over the period2007 to 2009.
edeclining enrollmentin 2007-2009is explained by theretirements, the
redeploymentofsome profilesto better suited positionsin othersubsidiaries within the Group and
finally due to the voluntarydepartures.
37
Maghreb Oxygne
Investment policy
e alpha investments made by Maghreb Oxygne were stable between 2007 and 2008, then
witnessed an strong rise in 2009 of 83.1% related to technical installations, machinery, equipment
and other tangible assets. In addition, the total annual recurring investment is about 15 to 16 million
MAD. is includes mainly the purchase of spare parts, cryogenic tanks, bottles, faucets, and
hardware. With regards to investments in transportation equipment, it is related to equipment for
logistics within the society (primarily forklifts).
Operations analysis
38
Maghreb Oxygne
e Pareto's Principle or Pareto's Law as it is sometimes called, can be a very eective tool to help
you manage eectively. is means that the 80/20 Rule means that in anything a few (20 percent)
are vital and many (80 percent) are trivial.
In the case of Maghreb Oxygne, an internal analysis has been conducted and demonstrated that 20
percent of the stops impact 80 percent of the productivity. e value of the Pareto Principle for a
manager is that it reminds you to focus on the 20 percent that matters. Of the things you do during
your day, only 20 percent really matter. ose 20 percent produce 80 percent of your results. e
Pareto's Principle would thus serve as a daily reminder to focus on 80 percent of your time and
energy on the 20 percent of you work that is really important. Don't just "work smart", work smart
on the right things. For this reason, we will be focusing on idle times that occur the most, do for
them the fishbone diagram and find the adequate solution.
Percentage of occurrence
32%
22%
17%
13%
9%
7%
Cumulative Percentage
32%
54%
71%
84%
93%
100%
39
Maghreb Oxygne
e problems encountered during the supply chain process of manufacturing industrial gases
are mainly due to iddle time during settings, logistics, adjustment, development and product. ese
types of iddle time cited below all impact productivity negatively. When we talk about settings, this
means the time to change from a reference (article) to another. In other words, it concerns the
machine programming before the production of a product X. For instance, to extract oxygen from a
machine X we need dierent settings than when we extract nitrogen.
As for the internal logistics, it concerns the power positions in commodities and products. It also
concerns the handling and planning of the dierent stages of this process. When it comes to talk
about adjustment, we mean by that the machines operators interventions that aims to correct a
derivative or to repair a minor failure in the production. is intervention is supported by the
production team. Concerning the maintenance stops, these are the fault repairs made by the
maintenance team (technicians).Regarding the development part, this is the time operated by the
development service to achieve a new product using the machine in question. Finally, we have the
idle time that is linked to the quality of the product once entering a job. For example, if at the input
stage the air is very impure this may aect the quality of the oxygen or nitrogen at the output level.
us, the job cannot be processed and this will consequently impact productivity.
All the idle times that we have reported above are problems that are detected and recorded in the
production book over a period of 3 months. In this production book, there is the objective of each
job during the process and what has been met. If the objective production is higher than the actual
one, then this must be justified by one of the problems listed above. After that, the worksheets were
these problems have been reported are collected and then a data capture is performed to have their
respective percentages.
40
Maghreb Oxygne
Fishbone Diagram:
e fishbone Ichikawa diagram is a tool used for team brainstorming. It also helps categorize
potential sources of defects or root causes and possible failure modes. In our case, we will be
concentrating on the settings problem, find its main probable causes and then find a possible
solution that might reduce it. e bones coming from the main spine of the Ishikawa Diagram are
usual named according to the 4Ms, 5Ms, or 6 Ms, depending on the complexity of the problem or
the process that we are looking to improve. In our fishbone diagram, we decided to look at the 6 Ms
which are the following:
Man/People: these are the causes that can be attributed to the people working on the
process. In the settings idle time, machine operators may need more training and experience
acquisition.
Methods: Which are about how we conduct the operation that can cause the eect that we
are trying to solve. In our case, product complexity is one of the causes once we see from the
methods and procedures side. Also, the production of the former product can lead to a long
time of space emptying and thus an idle time related to methods and procedures (an already
used bottle once it needs to be filled for the second time or more, it needs to follow a specific
process and be sterilized).
Machines: ese are the causes due to the machines or the equipment in the process. e
machines need a lot of time to start and be settled. Moreover, the condition of both the
machines and equipment also impact the settings idle times (if there is corrosion).
Materials: ese are potential causes due to the materials used. For example, the quality of
the raw materials may aect the idle times linked to setting. For example, if the air at the
input stage is very impure, this may delay the process. Also, if in a given stage the needed raw
material is not available; the idle time increases at this stage. Another case is the unavailability
of the raw material at the first stage which will make the machine idle until it arrives.
41
Maghreb Oxygne
Management: Are the causes linked to the strategy of the company. ese are in our case the
diversity of the gases manufactured within the company, as they need each time to change
their respective settings and also the fact that their customers ask for Just in Time deliveries
making higher weekly orders and thus more settings update.
e solution for this type of idle time is the Single-Minute Exchange of Die (SMED) method.
is technique is one of the manylean productionmethods for reducing waste in a manufacturing
process. It provides a rapid and ecient way of converting a manufacturing process from running
the current product to running the next product. is rapid changeover is key to reducing
production lot sizes and thereby improving flow .
e phrase "single minute" does not mean that all changeovers and startups should take
onlyoneminute, but that they should take less than 10 minutes (in other words, "single-digit
minute"). is method has been using by many companies. e need for SMED and quick
changeover programs is more popular now than ever due to increased demand for product variability,
reduced product life cycles and the need to significantly reduce inventories.
42
Maghreb Oxygne
To implement it, several basic stepsare needed. First of all, the current methodology must be
observed (using a camera for example). After that the setting mode must be identified and described.
en the INTERNAL and EXTERNAL activities must be separated. Internal activities are those
that can only be performed when the process is stopped, while External activities can be done while
the last batch is being produced, or once the next batch has started. For example, go and get the
required tools for the job BEFORE the machine stops. Afterward try to convert (where possible)
Internal activities into External ones (pre-heating of tools is a good example of this). Finally, the
decrease of the internal activities is the last step in terms of time and number. is procedure will
normally save up to 45% in set-up times, so it may take several iterations to cross the ten minutes
line.
43
Maghreb Oxygne
Strengths:
Maghreb Oxygne oers a broad range of products and services tailored to dierent customer
needs in fluids among several sectors, mainly industry, food and health. It produces packages and
sells industrial, medical, food and special gases. is diversification in their portfolio helps them to
cater to a larger group of customers, with varied preferences and purchasing choices. It also trades in
welding products and equipments, medical equipment, industrial fluid dispensing, and medical
laboratories. e companys products are used in diverse applications such as beverage, agribusiness,
rubber and plastics, chemistry, environment, heat treatment and metallurgy, petrochemical, welding
cutting and others. is involvement in various sectors gives the company a potential strength to
making profit, and thus increasing its financial standing.
Maghreb Oxygne ensures quick delivery of its products to customers through its
sophisticated network of production, distribution and sales units. e distribution network consists
of 100 outlets of both resellers and dealers, which gives it the capability to distribute the products on
a national level. e company operates a network of production units including the plants of Had
Soualem and Berrechid. It has an 18 million meter cube production capacity of oxygen and nitrogen.
Furthermore, Maghreb Oxygne has key place in all formats of delivery, including gas cylinders and
cryogenic tanks. It is also involved in design engineering and storage installation for industrial gases
in both liquid and gas forms.
Maghreb Oxygne is the second subsidiary of Akwa Group. Also, being an aliate of such a
leading holding allows it to have several advantages such as liquidity, financial stability and brand
name.
Maghreb Oxygne is one of the leading gas producers and distributors in the country. It has a
dominant market presence in industrial gas sector that was built thanks to the many years of
experience in the gas market. e overall market share of 36% (compared with 50% of Air Liquide,
7% for Oxaire, and 2% for Flosit) gives a competitive edge to the company over its peers.
44
Maghreb Oxygne
For the fiscal year ended December 2010, the company reported current assets of MAD
171.54m, compared to current liabilities of MAD 78.37m. e current ratio of 2.17 in 2010 shows
a good standing for the companys amount current assets compared with current liabilities. It also
recorded a cash position of MAD7.90m and an account receivable of MAD 122.67m, which puts
the company in a strong financial position. e performance of the company largely depends upon
the cash position and its ability to generate cash from operations. Sucient cash or cash equivalents
would contribute to the ongoing operations of the company.
Maghreb Oxygne was able to grab major contracts in various industries in Morocco. Coca Cola and
Pepsi are one of the two major clients of the company, with a 5-year renewable contract of supplying
carbon dioxide. CNSS and CHU are another two major clients of Maghreb Oxygne with a 3-year
renewable contract. Recently, the company was able to sign a contract (whose conditions and time
length were not disclosed for confidentiality purposes) with Renault.
Weaknesses
Maghreb Oxygne published a profit warning in the first half of 2011 saying that their net
income is expected to drop by 49% compared with 2010. e industrial and medical gas industry
has known a severe disruptions in terms of the worldwide performance, however, the main causes
behind the drastic drop of Maghreb Oxygne (according to sources from the company) are the
following: the unfair competition from poorly structured competitors, fraudulent activities of some
of the new entrants, dramatic decrease in prices of medical gases specifically. Maghreb Oxygne is
currently trying to mitigate this great loss by cutting some of its operating costs, however, this
sudden drop of net income weakens the financial situation of the company.
e turnover and dividends also decreased between 2010 and 2011 by 6.5% and 6.11%,
respectively. However, surprisingly, the magnitude of the net income drop wasnt way more than the
percentage drop of turnover, which put the financial statements into questions as to what exactly
caused the sudden decrease in net income.
45
Maghreb Oxygne
46
Maghreb Oxygne
47
Maghreb Oxygne
With regards to the weaknesses, the factor with the highest rate of 0.08 is the fact that the companys
net income has dropped by 49%. Also, the company is witnessing a decrease in the turnover of
6.5% and it has debts to total assets of 86% in 2011, these two factors have a rate of 0.7 while a 0.6
rate has been assigned to a weak MIS that the company has. In fact, the company does not have an
IT department, which can be very critical for a company with that caliber in the market. e factor
with the lowest rate (0.03) assigned is the weak organizational structure, because the company
follows a matrix structure and it creates a confusion for the employees as to whom they should report
to; and also there is the issue of a redundancy of some tasks, as the company would have to hire
twice as much managers as for a line management.
After assigning a weight to each of the factors mentioned in the matrix, a rate has been
conveyed based on how well the company was reacting to each one of the strengths and weaknesses.
Taking the example of the long-term agreements, the rate that was assigned to it was 4 because the
company is taking advantage of this strength and it is seeking an increase in the number of
agreements with other possible clients.
48
Maghreb Oxygne
Financial analysis
Income Statement:
Growth Ratios:
e growth ratios allow the analysis of the evolution of the sales of the company and its net income.
Sales:
Maghreb Oxygne experienced a net increase between 2007 and 2010 and this is mainly thanks to
its development of products for large accounts and its sub-welding activity and also by the retention
and adoption of the best prices to the most major markets. However, Maghreb Oxygne Net Sales
decreased in 2011. e decrease was of -6.5% compared to 2010 sales. is decrease can be
explained by the fierce competition and also the black market. In other words, the small new
entrants decreased the prices drastically as they diverted the used bottles of Maghreb Oxygne and
Air Liquide or imported them from eastern countries to sell them at much lower prices.
Net income:
Concerning the Net income of Maghreb Oxygne, this latter decreased from 18,044,000 MAD to
9,118,000 MAD meaning a colossal decrease of 49%. In addition to the reasons stated above, this
decrease was also due to the increase in the operating costs
49
Maghreb Oxygne
50
Maghreb Oxygne
51
Maghreb Oxygne
For Maghreb Oxygne, the current and acid-test ratios were used to measure its liquidity. e reason
behind the use of this last ratio instead of the cash ratio is the fact that Maghreb Oxygnes account
receivables are very high due to the fact that the government pays them. e acid-test ratio includes
in it cash, accounts receivable, and short-term investment. is ratio is far more strenuous than the
working capital ratio, because the working capital ratio allows for the inclusion of inventory assets.
Both ratios allow inferring that the company is able to repay its short-term obligations.
Leverage ratios:
ese ratios are used to calculate thefinancial leverage of a company to get an idea of the company's
methods of financingor to measure its ability to meet financial obligations. ere are several
dierent ratios, but the main factors looked at for the company include debt and equity.
52
Maghreb Oxygne
53
Maghreb Oxygne
e Debt-to-equity ratio is used to measure MOs financial leverage and it indicates the proportion
of equity and debt the company is using to finance its assets.
From the graph, one can see that MO was aggressive in financing its growth with debt in 2007 since
it attained the highest percentage of 108.23%. However, the company reduced this aggressive
financing until 2009 where it readopted the high debt financing in 2010 and 2011.
54
Maghreb Oxygne
55
Maghreb Oxygne
e cash balance ratio was used to measure the number of days MO can pay its debts, as they
become due, out of current cash. e graph indicates that this number of days decreased drastically
from 2009 to 2011 as it decreased from 19 days to 1 day respectively.
56
Maghreb Oxygne
In 2011, the companys operating margin and net margin suered from the decrease in sales. e
operating costs remained the same even though there was an increase in salaries. Operating margin
dropped to 9% and net margin dropped to 4.7%.
Return on assets and return on equity show an alarming decrease in profitability. Indeed, Return on
Assets is of 2.3%, which is far below the industry average of 5%. Return on Equity is in bad
position, with a 5.2% it is below the 12% industry average.
ese returns show that the company does not take full advantage of its assets and equity.
57
Maghreb Oxygne
Balance Sheet:
Maghreb oxygen financial structure is well balanced. Indeed, they keep a 45% debt across the years.
In 2011, the company issued corporate bonds with a 5 year maturity in order to renew its borrowing
through debt.
58
Maghreb Oxygne
Maghreb oxygens working capital shows a strong financial situation which means that the company
can easily pay o their short term liabilities.
Forecasted elements:
Year
Net Sales
EBIT
Net Profit
2012F
197372,7049
23123
12192
2013F
204131,3414
23914
12609
2014F
211121,4139
24733
13041
Due to the lack of information for several elements in both the income statement and the
balance sheet, the team managed to forecast only the net sales, EBIT and Net profit. As can be
noticed from the table above, the forecasted results predict an increase in the net income resulting
from the net sales of the company, which are expected to rise due to both the industry growth and
the implementation of the new strategies.
59
Maghreb Oxygne
Matching Stage:
SWOT Matrix:
After a thorough description and assessment of the internal and external environment of the
company, it is time to go to the matching stage of the study. e first matrix conducted at this phase
is the SWOT matrix. Basically, the team took the internal and external factors that were evaluated in
previous sections, and used to produce the matrix in the table above.
e table shows a list of possible strategies that Maghreb Oxygen could adopt in the future, which
can be summarized through the following points:
SO strategies (Strategies to make use of opportunities through Maghreb Oxygens
strengths):
Taking into consideration the strengths of the firm in terms of its liquidity, which
means that they are in a strong financial position to pay any obligations or debts, as
well as the fact that they have a fast and ecient network distribution, and matching
it with the opportunities that can illustrated in the aging population and the
increasing demand within the healthcare and the pharmaceutical sectors, as well as
the application of the new 1704 law that would make the company a pharmaceutical
institution, the team suggested that a related diversification might be a feasible
strategy in this case. is related diversification would consist in the company
entering the pharmaceutical industry and manufacturing of medicines (medical
drugs).
60
Maghreb Oxygne
the field, a strong reputation gained through the fact that Maghreb Oxygen is an old
company that has already established its reputation in the market.
Market penetration through opening more retail stores in the market could be
another possible strategy that Maghreb Oxygen could adopt in order to match the
strength of having a strong liquidity with the opportunity of having an aging
population and an increasing demand in both the healthcare and pharmaceutical
sectors.
With the well-established and reputation of the company, and strong financial
position of Maghreb Oxygen matched with an increasing demand in the soft drink
market, a possible strategy for that would be to build a new manufacturing plant in
order to cover the increasing demand during the summer time with regards to carbon
dioxide.
61
Maghreb Oxygne
Taking the strengths of the firm in terms of an ecient distribution network and
matching with the threats of the rivals and the fierce competition, and the fact that
the company is listed on the stock exchange market, which means that their
information and financials are available to the competitors, the possible strategy that
Maghreb Oxygen could adopt is do a market penetration through extensive
promotional eorts in order to increase their market share.
Acquisition of smaller competitors could be a possible strategy that would solve the
matching between the strengths of being an already established firm, a highly liquid
one, and the threat of the rivals.
With an established presence of the firm and a highly liquid position of Maghreb
Oxygen, mixed with the threat of the industrial gas leaders targeting emerging
markets such as Morocco, the company could do a joint venture with AirLiquide to
export oxygen.
62
Maghreb Oxygne
by putting certain projects on hold in order to cut their costs. According to the
financial analysis, the company has a return on assets of 2.3% that is less than 5%
which means that the investors will not be attracted enough to invest in the firm.
Basically, this means that the company is not taking full advantage of its assets and
they are not managing their cots eciently.
Due to the fact that the company has a weak MIS, and did not acquire an inventory
management system and the fact that there is an increasing pressure in the
competition, Maghreb Oxygen could adopt the forward integration strategy and take
the control over their distributors.
63
Maghreb Oxygne
Because all divisions belong to Quadrant II (stars), they represent the organizations best long-run
opportunities for growth and profitability. In return, they should receive substantial investment to
maintain their dominant position. Accordingly, strategies like forward, backward, and horizontal
integration; market penetration; and product development seemed possible and appropriate in this
case.
e SPACE Matrix
e Strategic Position and Action Evaluation matrix is another technique that helps
generating possible strategies that the company could adopt. Based on the financial strength,
competitive advantage, environmental stability and industry strength analysis shown in the table
above, the quadrant in which the company falls under is the aggressive one, that generates the
following possible strategies: backward, forward, horizontal integration, market penetration, market
development, product development, and diversification (related or unrelated).
64
Maghreb Oxygne
less than 1% of profit out of this operation, which means that they do not operate fully in this sector.
is would explain the retrenchment and divestiture strategies suggested by the model.
65
Maghreb Oxygne
Decision Stage
After the strategy formulation stage, the team conducted the Quantitative Strategic Planning
Matrix (QSPM), which showed that the strategy that got the highest weighted score is related
diversification with a value of 4.86, followed by product development with weighted score of 4.47,
then market development with a value of 3.64. Market penetration and retrenchment strategies were
the ones with the lowest weighted score of 3.52 and 2.43 respectively.
at said, it is important to note that the QSPM remains a tool that helps visualizing the
important external and internal factors that are related to the company, and definitely helps the team
make an informed decision.
After a thorough analysis and discussion, the team decided to disregard the related diversification
strategy even though it is the strategy that got the highest score. e problem with this strategy is its
implementation as it turned out to be infeasible for the time being. In fact, the production of generic
drugs cannot be done for a starting company within the pharmaceutical industry, because it requires
heavy capital, a high level of expertise in the field, and most importantly, importing these products
do not require any special license, hence, it can be done by any other competitor that wish to enter
the same business. Also, this strategy would imply an investment in a land for a manufacturing plant;
however, the financial status of Maghreb Oxygne does not allow it to start with such a heavy
investment.
Although the market development strategy is attractive for the company, it turned out that it
is not feasible upon the discovery of an insight about the company, which is that it had already
thought of adopting the market development strategy by expanding to the international market,
specifically to two African countries, which are Senegal and Ivory Coast. However, this strategy was
not able to be fully implemented because of the political instability of the countries, as well as the
huge delays in payment, which made it dicult for the company to successfully operate and generate
maximum profit.
66
Maghreb Oxygne
As for the retrenchment strategy, other than the fact that this strategy had the lowest
weighted score, the team conducted a research about the company, and discovered that the firm does
not have any departments that are particularly unprofitable, or any specific products or services that
they could dispose of or abandon.
However, for reasons that will be further explained in this section, the team decided to go for
another direction. In fact, the recommended action plan can be summarized through the following
points:
Objective 1: To increase net income by 47%
is objective can be achieved within one year through an extensive cutting of costs by:
Investing in fleet management
Investing in inventory cost management
Decreasing the yearly employee bonuses
Decreasing the marketing budget
Objective 2: To increase market share by 5%
is objective can be reached by year 2015 through the adoption of product development strategy.
is strategy consists of improving an existing service that Maghreb Oxygne oers. is product is a
package that the company could provide to its customers and it consists of the following:
e installation of piping and medical equipment to a hospital
Supply of oxygen
Maintenance service
Objective 3: to increase sales by 5% by 2015
67
Maghreb Oxygne
is objective can achieved within a timeframe of 3 years through the adoption of the market
penetration strategy. e company will be expected to invest in geo-marketing in order to evaluate
the environments conditions, customers, the locations of the dierent distributors and networks,
which will automatically help the company plan and maximize sales within the most profitable stores
as well as enhance customer service.
Objective 4: to increase total revenue by 1.1%
is objective can be achieved started year 2014, and it consists of manufacturing new products that
Maghreb Oxygne does not but its competitor does. is strategy is also a product development
because MO will manufacture laboratory gases.
e next section is dedicated to explain each strategy and objective, with a thorough analysis of its
costs.
68
Maghreb Oxygne
Daily
# Trucks
40
Fuel Consumption
200
Transportation Cost
8,000
Monthly
Annually
x 28
x 336
224,000
2,688,000
e solution suggested by the team would be for the company to invest in fleet management
system. For a company that relies heavily on transportation, fleet management would allow the
increase of productivity and eciency, because it would help manage the speed, the transportation
costs, the tracking of the vehicles and the shortest routes location, among other functions that can be
oered through this system. Specifically, Maghreb Oxygen will be able to decrease its fuel
consumption by 20%, which means that within one year, the firm will be able to decrease its fuel
consumption costs by -537,600 MAD per year.
e second problem that the company faces is the loss of 10% of their customers due to bad
inventory management. Basically, customers had to deal with a shortage of Maghreb Oxygne
products, which pushed them to switch to other competitors. is problem is essential to solve
because the costs of this loss accounts for a decrease of 53,280 MAD per week, which is equivalent
to 2,557,440 MAD per year.
69
Maghreb Oxygne
In order to solve this issue, the team suggests that the company invests in an inventory
management system, which would be used in order to control the sales and the demand of each
client of the company. is inventory control system will be included as an application in the
Geographic Information System. By following this strategy, the company will be able to recover and
regain the 10% lost customers.
Maghreb Oxygen sells an average of 2000 bottles per week within 48 depositories in Morocco.
e process works as follows; Maghreb Oxygen provides the products to the depositories. ese
depositories sell the products for an average of 300MAD per bottle, and they keep 20% of the price
for them, leaving the remaining 80% to Maghreb Oxygne, which is equivalent to 240MAD per
bottle. is last amount will then be used to pay for the dierent costs related to the manufacturing
of the products, transportation costs, and any other related costs.
When calculating the revenues of the firm regarding this operation:
Revenues= 2000 * 240 = 480,000 MAD per week.
Taking into account the loss of 10% customers:
X ! 100%
2000 ! 90%
X= 2222 total bottles to be sold
Following these calculations, Maghreb Oxygne incurs a loss of 222 bottles per week. erefore, the
company incurs a loss of 53,280 MAD per week justified through the following calculations: 222 *
240 MAD = 53,280 MAD per week, which is equivalent to 2,557,440 MAD of losses per year.
Moreover, the company has been oering employees yearly bonuses regardless of the 49% drop
in the net income. erefore, Maghreb Oxygen should definitely consider cutting costs of these
bonuses. e estimated amount that the company should consider decreasing from the employee
bonuses accounts for 3,450,000 MAD, which represents 11.5% of the total salaries payable.
70
Maghreb Oxygne
Following this cutting cost strategy, the total costs that will be decreased accounts for an
amount of 8,311,440 MAD
Amount
Explanation
6,545,040
(537,600 + 2,557,440 +
3,450,000)
2,225,314
(6,545,040 * 0.34)
After Tax
4,319,726
(6,545,040 - 2,225,314)
13,437,319
(9,117,593 + 4,319,726)
47%
(13,319,726/9,117,593)-1
e results show that if Maghreb Oxygne were to purchase the software solution of both
inventory management and fleet management systems, they will be able to increase their net income
by 60%.
After extensive research, the team found a a geographic information system including three
applications, which are fleet management system, inventory management system and geo-marketing
system, with a cost of 1,027,212.00 MAD. Please note that the geo-marketing system will be further
discussed within the market penetration strategy implementation.
71
Maghreb Oxygne
Designation
Qty
Price per
unit
Total Price
MAD
300,000.00
300,000.00
200,000.00
200,000.00
200,000.00
200,000.00
GPS Trimble
50
5
6
HP DL380-G7 E5620
UPC Reader
1
50
110,000.00
2,200.00
27,260.00
376
27,260.00
18,800.00
TOTAL HTVA
856,060.00
TVA 20%
171,212.00
TOTAL TTC
1,027,212.00
72
Maghreb Oxygne
track the vehicles and make informed decisions that would increase eciency during
transportation of products. e software used in this system is called ArGIS, and it is
basically a tool based on geographic knowledge. Maghreb Oxygne will be able to localize its
vehicles through a map, where they can get all sorts of information in real time such as the
exact address, the number of products there are in each vehicle, the number of products left
in the inventory, etc (See Appendix)
Inventory management system: is system will solve the issue of the 10% loss of
customers due to shortage of supply. is system deals with the flow of products that go in
and out of the depositories of Maghreb Oxygne. e idea is for managers to be able to keep
track of the number of products in inventory and to be notified when a particular depository
is about to run out of a given product. Inventory management system enables a better
organization of the items in the dierent depositories of Maghreb Oxygne, it helps keep
track of inventory and minimize the safety stock, and it also provides assistance in
anticipating deliveries in the depositories of the company. If the company were to invest in
this system, they will definitely be able to increase customer satisfaction, hence, a higher
customer loyalty. (See Appendix)
73
Maghreb Oxygne
74
Maghreb Oxygne
and quality requirements, and it has the ISO9002 quality standards, which can also be used as a
competitive advantage by Maghreb Oxygne.
e actual prices that Maghreb Oxygne oers:
-
Public Hospitals
200 to 300 MAD per bottle
Average of 6 bottles per week (1 bottle = 10 m3)
Tank of 3000 liters (equivalent to 252 bottles (3000*0.843)/10)
Tank of 6000 liters (equivalent to 504 bottles (6000*0.843)/10)
The price of 3000 liters tank is 30240 MAD
The price of 6000 liters tank is 60480 MAD
Private Hospitals
200 to 450 MAD per bottle
Average of 10 bottles per week
75
Maghreb Oxygne
e team suggests two dierent packages for the public and private hospitals:
Package for public hospitals:
Regional hospitals and health centers
Installation of piping (500m), pumps, ramps and power plants at 1 Million MAD
Free Maintenance
Specialized Hospitals and small hospitals with a capacity less than 200 be
Installation of piping (2 km), pumps, ramps and power plants at 4 Million MAD
Free Maintenance
University Hospitals:
Installation of piping (4 kms), pumps, ramps and power plants at 8 Million MAD
A tank of 3000L+ a tank of 6000L + 6 bottles a week at 90720 MAD to be paid monthly
Free maintenance
Installation of piping (1km), pumps, ramps and power plants at 600,000 Dhs
Free Maintenance
76
Maghreb Oxygne
Installation of piping (500m), pumps, ramps and power plants at 4 Million MAD
Free Maintenance
77
Maghreb Oxygne
78
Maghreb Oxygne
following calculations:
The cost to be invested in each region is
12,500 MAD (10,000 + 15,000)/2
The number of cities to be opened is
6
The total cost related to opening new cities 72,000 MAD (12,500 * 6)
79
Maghreb Oxygne
matter of fact, the team spotted an event with a high importance within the industry. is event is
POLLUTEC MAROC 2012, which is basically an international exhibition of Environmental
Equipment, Technology and Services for Industry and Local Authorities. is event will take place in
Casablanca on October of this year. rough sponsoring this event, Maghreb Oxygen will succeed in
projecting a positive brand image, which will eventually positively aect the future purchase
intention of both existing and potential customers. e purpose of this action will also to show that
Maghreb Oxygne is positively involved in the community, and is customer oriented and most
importantly, eco-friendly. is advertisement might represent a competitive advantage over the
competitors and possibly, it will have a positive impact on the market share of this latter.
e second action that Maghreb Oxygne could take is to start participating in exhibitions
related to its industry in order to increase its brand awareness. Knowing that the company has a wide
range of customers going from food to health industries, then, the importance of being actively
participating in exhibitions and other business gatherings becomes essential.
Luckily, there is a series of events taking place this year, in which Maghreb Oxygne could be
involved:
Side Morocco 2012: is is an international Energy Exhibition and Conference on oil, gas,
mining, and renewable energies. is would be a good opportunity for Maghreb Oxygne to
expose their products and increase their brand awareness. e event will take place in
Marrakech on October 2nd of this year.
Medical Expo 2013: this is an international exhibition of Health care, where Maghreb
Oxygne could expose their medical equipment and gases. e company could take
advantage of this event and use it as an opportunity to expose and advertise for the new
special package, consisting of installation of piping and equipment, supply of medical gases
and maintenance. is package will be further discussed in the next strategy. is event will
take place in Casablanca on January of year 2013.
80
Maghreb Oxygne
Aero-expo Marrakech 2012: is is the international aerospace exhibition which will take
place in Marrakech on April of this year. is exhibition will include over 250 companies,
and it has large audience coverage since more than 42,000 people visit the site. In addition,
about 350 media representatives will be present for the event, which is why Maghreb
Oxygne could take advantage of this event in order to expose and advertise for three main
products that are hydrogen, azote and nitrogen.
e costs related to the market penetration strategy can be summarized in the following table:
Events
Costs
SIDE MOROCCO 2012: International
(3,500 MAD * 15 m2)= 52,500 MAD
Energy Exhibition & Conference. Oil, gas,
(2,000 unit * 15 MAD)= 30,000 MAD
Mining, Renewable Energies
Sponsoring POLLUTEC MAROC 2012
MEDICAL EXPO 2013 : International
Exhibition of Health Care: Casablanca:
January 2013
AEROEXPO MARRAKECH 2013
81
Maghreb Oxygne
18,200MAD (7*650*4)
Revenues
**Expected revenues from the strategy
2,880,000MAD (900*800*4)
To assess whether this strategy should be adopted or not we calculated its Net Present Value.
The first step in the calculation of the NPV is finding the weighted average cost of capital.
The WACC is actually the minimum return that a company must earn on an existing asset base to
satisfy its creditors, owners, and other providers of capital, or they will invest elsewhere. As for
its computation it is as follow:
WACC = (Weight of Equity * Cost of Equity) + (Weight of Debt * Cost of Debt) * (1 Tax
Rate)
82
Maghreb Oxygne
4.0%
0.92
11.00%
2%
8%
14.1%
10.2%
The next step is calculating the discounted expected cash flows of our investment for the next
coming years. The discounting factor is the WACC.
Year
Expected
cash
ows
(discounted)
2014
2371534
2015
2152027
2016
1952838
The last step is the calculation of the NPV which is the sum of the expected cash flows
discounted to the present minus the initial investment (the machine and bottles acquirement) :
NPV=(2371534 + 2152027 + 1952838) - 5740000= 736398MAD
As the NPV is positive, then the project should be accepted and adopted by the company.
As for the financing of this strategy we did the EPS/EBIT analysis to see by which mean should
the company be financed: issuing either by debt, common stock or a combination of the two. The
results of the analysis are assessed through the highest earnings per share.
CS Financing
Debt Financing
Combination Financing
Recession Normal Boom Recession Normal Boom RecessionNormal Boom
EBIT
9,5
19
28,5
9,5
19
28,5
9,5
19
28,5
Interest
0
0
0
0,553
0,553 0,553 0,2765 0,2765 0,2765
EBT
9,5
19
28,5
8,947 18,447 27,947 9,2235 18,7235 28,2235
Taxes
3,325 6,65 9,975
3,325
6,65 9,975
3,325
6,65
9,975
EAT
6,175 12,35 18,525
6,175
12,35 18,525
6,175 12,35 18,525
number of
0,8423
shares
0,84234
40,84234 0,8125 0,8125 0,8125 0,8274 0,8274 0,8274
EPS
7,33 14,66 21,99
7,60
15,20 22,80
7,46 14,93
22,39
Table: EPS/EBIT Analysis for Product Development Strategy
83
Maghreb Oxygne
84
Maghreb Oxygne
Limitations:
Although the experience of Maghreb Oxygne was an interesting and appealing one, the
team still had to face some obstacles that made it difficult to reach the intended objective,
which is to conduct a deep and a thorough analysis of the company. These limitations can
be summarized through the following points:
Getting access to the University's facilities was not easy for the team to work
together, especially when all the laboratories on campus were full with other
capstone teams and students working for their final projects.
The industry in which Maghreb Oxygne operates was not an easy one to analyze,
and understanding the product offerings and all the operations the company was
involved in made it hard for the team to analyze.
Getting information from the company is also among the limitations of the
experience, as well as the obligation of keeping some information provided by the
firm as confidential, made it hard for the team to provide a better assessment.
Dealing with team members having different personalities and coming from
different backgrounds was also a tough situation that the team had to overcome
throughout this experience.
85
Maghreb Oxygne
References
86
Maghreb Oxygne
Appendices:
Appendix 1: IFE Matrix
#
1
2
3
4
5
6
7
1
2
3
4
5
6
7
87
Maghreb Oxygne
6
1
2
3
4
5
6
7
8
88
Maghreb Oxygne
Total
Maghreb
Oxygne
Air
Liquide
Ra5ng Score
Ra5ng Score
4
0.28
4
0.28
4
0.32
4
0.32
4
0.36
4
0.36
2
0.14
4
0.28
3
0.21
3
0.21
4
0.28
4
0.28
3
0.3
3
0.3
3
0.21
4
0.28
4
0.4
4
0.4
2
0.2
3
0.3
2
0.2
3
0.3
2
0.16
3
0.24
3.06
3.55
Oxair
Flosit
Oxytec
Mroxyco
Ra5ng Score Ra5ng Score Ra5ng Score Ra5ng Score
3
0.21
2
0.14
2
0.14
3
0.21
3
0.24
2
0.16
1
0.08
1
0.08
2
0.18
1
0.09
1
0.09
1
0.09
3
0.21
2
0.14
1
0.07
2
0.14
2
0.14
2
0.14
2
0.14
2
0.14
3
0.21
3
0.21
1
0.07
1
0.07
2
0.2
2
0.2
1
0.1
2
0.2
2
0.14
1
0.07
1
0.07
2
0.14
3
0.3
2
0.2
1
0.1
1
0.1
1
0.1
1
0.1
1
0.1
1
0.1
2
0.2
3
0.3
3
0.3
3
0.3
2
0.16
3
0.24
3
0.24
3
0.24
2.29
1.99
1.5
1.81
89
Maghreb Oxygne
90
Maghreb Oxygne
Appendix 5: IE Matrix
Segment
Gas
Welding
Health
%Prot
Total
EFE
87
12
1
IFE
3.57
2.89
1.7
2.72
3.65
3.03
2.46
3.05
91
Maghreb Oxygne
Market
share
Product
Quality
Customer
loyalty
Axis
X CompeXXons
capacity
uXlizaXon
(delivery)
Control
over
distributors
Average
-2 Growth
potenXal
-1 Prot
PotenXal
-2 Financial
stability
-4 Resource
uXlizaXon
-3 Ease
of
entry
into
market
ProducXvity,
capacity
uXlizaXon
-2.4
Net
income
Net
sales
Working
capital
Current
raXo
OperaXng
Margin
Axis
Y ROE
ROA
Financial
structure
Cash
raXo
Average
5
4
4
Technological
changes
Rate
of
inaXon
Demand
variability
Price
range
of
compeXng
products
Barriers
to
entry
into
market
CompeXXve
pressure
Ease
of
exit
from
market
Price
elasXcity
of
demand
Risk
involved
in
business
3.22
3.83
1.43
3
3
4
4
5
2
2
3
3
4
1
5
-2
-3
-2
-2
-2
-1
-4
-4
-2
-2.44
0.78
92
Maghreb Oxygne
93
Maghreb Oxygne
%Prot
Gas
Welding
Health
Total
RMSP
87
12
1
100
IG Rate %
0.72
0.72
1
3.15
1.53
1.32
6
94
Maghreb Oxygne
Appendix 9: QSPM
1
Market
Related
Product
penetra5on
diversica5on development
Market
development
Retrenchment
Key Factors
Weight
As
Tas
As
Tas
As
Tas
As
Tas
As
Tas
Opportuni5es
0.095
0.38
0.285
0.19
0.475
0.095
0.1
0.3
0.4
0.5
0.2
0.1
0.1
0.3
0.5
0.4
0.2
0.1
0.09
0.1
0.2
0.4
0.3
0.5
0.1
0.065
0.195
0.325
0.26
0.13
0.065
CompeXXve
Pressure
Sharp
uctuaXon
of
oil
prices
and
economic
downturn
0.09
0.36
0.27
0.45
0.18
0.09
0.05
0.04
0.07
0.08
0.08
0.16
0.32
0.24
0.4
Stringent
regulaXons
Industrial
gases
leaders
targeXng
emerging
markets
0.04
0.08
0.2
0.12
0.16
0.04
0.05
IPO
0.03
0.09
0.18
0.45
0.36
0.27
0.09
0.09
0.07
0.21
0.35
0.14
0.28
0.07
0.11
0.22
0.55
0.44
0.33
0.11
0.1
0.3
0.5
0.2
0.4
0.1
0.09
0.05
0.08
0.24
0.16
0.32
0.08
0.4
0.07
0.21
0.14
0.28
0.07
0.35
0.05
Debt obligaXons
0.04
0.12
0.08
0.16
0.04
0.2
0.07
0.06
Weak MIS
0.03
0.15
0.09
0.03
0.09
0.12
3.525
4.86
4.47
3.645
2.43
Threats
Strengths
Weaknesses
Total
95
Maghreb Oxygne
96
Maghreb Oxygne
97
Maghreb Oxygne
98
Maghreb Oxygne
99
Maghreb Oxygne
100
Maghreb Oxygne
101
Maghreb Oxygne
102
Maghreb Oxygne
103