Mubadala Development Company

Mubadala Company Analysis

Mubadala Development Company (Mubadala) is a public multiparty (public) stock company whose headquarters are located in Abu Dhabi, United Arab Emirates. The company focuses on the development and management of extensive and diverse commercial initiatives. The code of business conduct has a set of standards and values, which have to be adhered to by all the employees of the Mubadala business group. The company’s values are driven by passion, collaboration, and responsibility, which can be included in the high standards of integrity witnessed in their day-to-day operations. Mubadala has different business units; aerospace industry, ICT and petroleum industry. Through this platform, Mubadala has established and invested in the aerospace, ICT and defense businesses. The sectors are listed by the republic of Abu Dhabi as critical for future opportunities in terms of building and sustaining competitive advantage of Emirates in the energy and other capital intensive areas. Mubadala plays a great role in facilitating the cutting edge ICT services and job opportunities to the UAE and even in other international countries. Currently, Mubadala offers ICT connectivity to customers across the three continents. The current paper gives a comprehensive overview of Mubadala, its business units as well as the PESTLE and SWOT analysis.

Company History & Background

Mubadala Development Company (Mubadala) is a governmental Joint Stock Company that has its head office in Abu Dhabi, United Arab Emirates. The company focuses on the development and management of extensive and diverse commercial initiatives. Mubadala is a company that was established in 2002 by the government of Abu Dhabi. Its strategic plan includes the creation of a long-term state of art partnership regarding the financial investment that brings good returns and improves the life of the community and the nation of Abu Dhabi. This company manages a multibillion-dollar assortment of the local and international investments, which have led to the globalization of its operations on a wider platform of industrial sectors. Some of the ventures include the aerospace, healthcare, communications, infrastructure, hospitality and service venture. Mubadala has around four international business platforms that are inclusive of the Mubadala 11 sectors located in more than 20 countries (Patton, 2012). The global business platforms assist the company in managing its portfolio in terms of growth and expansion while maintaining the international standards set up for control and management of risks.

Product-market Characteristics

a) Aerospace and Engineering Services

Through this platform, Mubadala has established and invested in the aerospace, ICT and defense businesses. The sectors are listed by the government of Abu Dhabi as critical to the future opportunities in building and sustaining Emirates’ competitive advantage in the energy and other capital intensive areas. The airline of the region is guiding the next generation of international aviation that focuses on the passenger-cargo traffic which is also expected to grow by a margin of 5 percent yearly. The new aircraft orders are also expected to grow to nearly 37000 units, all values being at 5.2 trillion US dollars (Khan, 2013). Therefore, Mubadala is strategically placed to specialize in the aerostructure manufacture as well as advanced maintenance which will significantly support the aerospace industry. The aerospace has positioned itself in the defense through the formation of a partnership with Tawazun and the Emirate Defense Industries Company. This company has an objective of unifying the defense assets of every organization that presents new opportunities. Defense spending in UAE is expected to increase by a margin of 4 percent from the on-going year till 2019 (Khan, 2013). Therefore, a range of Mubadala companies is working on innovative solutions to ensure that they have high technological aircraft to meet the growing demands in case there is such a need in the military operations sector.

b) Mubadala Petroleum Sector

The company draws its strength from the ability of the United Arab Emirates (UAE) to develop a world-class production business with its traditional commercial expertise and effective partnerships. Mubadala Petroleum was established in 2012 as a wholly-owned subsidiary, and building its success from the oil and gas business unit. This unit manages the operations and assets at all the stages of the value chain, with its primary focus on the discovery of emerging markets from the Eastern hemisphere. According to the data collected in 2014, Mubadala produces approximately 398,000 barrels of oil (Grassian, Scott, &Bahatem, 2015). The company also participates in other projects such as the multinational Dolphin Energy initiative which is critical for ensuring that energy demands across the UAE are met.

c) Information Communication Technology(ICT)

The presence of an advanced communication structure is vital for both economic and social development as the requirements of connectivity are growing. There is also an elaborate global demand for data connectivity, which has created a huge opportunity for the UAE as a home for the high-level ICT infrastructure and operations. Mubadala plays a great role in facilitating the cutting edge ICT services and job opportunities for the UAE and some other international countries. Currently, Mubadala offers ICT connectivity to customers across the three continents. At present, approximately 2.5 billion people have access to the internet, which is almost a third of the global population (Cavada, Hunt, & Rogers, 2014). This figure is expected to grow with a projection of 4 billion people by the year 2020. The UAE is the leading world fiber home penetration at a high percentage of 72. The launching of the Yahsats third satellite will expand the company’s band coverage in Africa which will add an additional 600 million users in both Africa and South America (Cavada et al., 2014).

Industry Structure

The company seeks to maximize sustainable long-term business returns through strong business partnerships. Mubadala has a diversified portfolio with local companies in Abu Dhabi as well as foreign investment companies overseas. For example, Mubadala has invested in large scale industries located in the Persian region, Africa, the United States, and Europe. The company is a cautious investor, and more interested in energy, telecommunication, and aerospace industries to name a few. Some of these investments are Dolphin energy, which is the regional largest gas project. Besides large ventures, the company has also invested in minority stakes in such companies as Swiss Aviation Services, Leaseplan Corporation and other minor companies such as Carlyle Group in the United States. The company also participates in the social community programs that aim at improving the lives of the employees. For instance, the company participates in programs that improve infrastructure and education. Mubadala pursues a vision of becoming an international oil and gas company that would be recognized for the excellence of the employees’ work, external partnerships and linkages as well as the overall performance. Mubadala remains a world-class business company because of its strong partnerships and commitment to growth through the demonstration of capabilities. Mubadala has a mission of creating and maximizing long term returns as one of the high performing businesses and promising business ventures. Through the investments, Mubadala acts as the main driver of the economy in Abu Dhabi.

Competitive Environment

a) Abu Dhabi National Oil Company (ADNOC)

ADNOC has the experience of working with upstream oil projects with Abu Dhabi being the leader and most of the UAE locations being its major business regions. One of the strengths is that it is one of the major producers of domestic oil and gas, with huge access to exploration acreage. It has well-established relationships with the international oil-producing counties, hence acquiring a substantial share of the downstream oil segments. However, it also has weaknesses such as limited financial freedom to improve and implement its day to day business operations. This increases the cost efficiency disadvantages. ADNOC sees solid growth in future planning to cooperate with international oil-producing countries. The company pursues the aim of increasing its oil production by a third by the end of 2019.

b) Emirates General Petroleum Corporation (Emarat)

Emarat is the major fuel distributor with the ability to exploit the local oil demand as well as the international oil demands. It also has developed very good working relationships with international oil-producing countries. Emarat enjoys an excellent position within the gas distribution infrastructure, which makes it an ideal candidate for the long-term privatization. The major strength is its dominant share in the retail segment with a major role played by downstream oil supply. It also has infrastructures in place to ensure growth. Its weaknesses include the lack of refining or upstream projects which affect the company’s performance in the highly competitive markets.

CEO/ Managing Director

His Highness Sheikh Mohamed Zayed Al Nahyan is the Board of Directors Chairman. The Chairman His Highness Sheikh Mohamed holds a variety of policy and legislative, governance and economic responsibilities assigned to him by the Abu Dhabi government. He has been the crown prince of Abu Dhabi since 2004, and in the following year was appointed as the deputy commander of the UAE forces. Mohammed Ahmed Al Bowardi (vice-chairman) works with the Ministry of Defense as a vice to the Chairman of the Abu Dhabi technology development committee. The other members include Mahmood Ebraheem Al Mahmood, Hamad Al Hurr Al Suwaidi, Ibrahim Ajami, Grant Skinner and Musabbeh Al Kaam some of whom are members of the senior management committee.

Company’s Performance Review

According to the 2013 financial year results, Mubadala was able to deliver its key financial plans, making several milestones in its operations and socioeconomic agendas. The revenues increased to 31.1 billion Arab Emirates Dollars (AED), from approximately 30.8 billion AED in 2012 due to the increase in semiconductor and aerospace product sales (Mubadala Development Company PJSC, 2014). In addition, there was also an increase in renewable energy sales compared to the previous years. The gross profit recorded in 2013 was 5.8 billion AED, which was less compared to 2012. The investment policy of Mubadala is centered around the forging partnerships with a broad range of business initiatives and different areas of joint corporations. Some of the main partners include Total, The Carlyle Group, Imperial College London, GE, and Airbus. The collaboration with Total, a company that has been operating in UAE for over 75 years is a classic example of joint global ambitions and expertise which is achieved through diverse collaborations (Hamdan, 2012). The projects with Total include hydro-carbons as well as the sustainable space which has expanded Abu Dhabi’s economy through the expansion of its leadership. The joint venture between Total, Dolphin and Occidental petroleum produced approximately 2 billion cubic feet of gas in Qatar, which was then transported to be used in Oman and the UAE. In addition, the two companies are partners in the Indonesian project where gas is extracted by the Mubadala Petroleum and processed by the Total’s onshore terminal. They have also partnered in the renewable energy sector to deliver Shams which is regarded as one of the concentrated solar power plants. Through this collaboration, the solar plant provides clean energy to over 20,000 homes across the UAE.

Furthermore, Mubadala has enjoyed a wonderful long-term partnership with Boeing Airbus, which kicked off in 2009. The two companies signed the strategic framework agreement that developed mutually beneficial initiatives in composites’ manufacturing. During the 2013 Dubai Airshow, the company announced that Mubadala will have a chance to supply composites worth over 2.5 billion United States dollars and metals to the Boeing flight commercial programs (Kar, Bonnefoy, & Hansman, 2010). This was done to provide support to the development of the aerostructures industry and create new expertise in the UAE. The two companies also agreed to work together on the development of the Pre-Preg carbon manufacture in Abu Dhabi. The new industry will provide access to the latest technology hence generating exports as well as supporting the local aerospace ecosystem. In addition, the two companies are also working on various projects aimed at enhancing the skills of their workers in the aerospace industry through education, training and research and development.

Organizational Structure of the Company

Mubadala was established in 2002 as a government joint-stock company through a verdict dispensed by Sheikh Mohamed Bin Zayed. The governor of Abu Dhabi exclusively owns the company, and as a public stock company, its functions include issuing of stock, being subject to similar legal rules that are present in other private entities. The corporation is governed by seven members of the board of directors, with the chairman being His Highness Sheikh Mohammed. The other members of the board include the chief executive officer and other conspicuous members of the Abu Dhabi business and commercial community. Furthermore, the company has approximately 500 employees who work in different departments and have specialized functions. Some of the employees have a responsibility to develop, screen and purse business investments. The other units are responsible for the management of the company’s investments while still, another fit into more specialized sections such as legal finance and human resources. The company has employees from different cultural backgrounds as well as international expatriates from Europe, Asia and other countries of the Middle East.

Current Problems and Difficulties

One of the on-going problems faced by the company is access to skilled labor. Most of the operations in Mubadala require technical expertise or skilled labor at least. There is poor motivation towards education and a high dropout amongst the boys. On the other hand, women still face challenges of equal contribution and participation in the prosperity of Emirates. In addition, a large amount of capital is invested in its petroleum company, so that the current climate change poses a threat to the business as most countries are shifting from the use of non-renewable energy, which emits more greenhouse gases, to renewable energy. This might force the company to change the shift in their long-term project. Being one of the biggest petroleum and gas companies, Mubadala faces challenges in terms of the impact of their product on climate change. The UAE has the highest environmental footprint when it comes to carbon dioxide emissions due to the high reliance on private transport and dependency on oil and other petroleum-based products as the main source of energy. It also has the highest level of domestic wastes with an average of 730kgs annually compared to other countries such as the United States that have an average of 710 kgs a year (Kar et al., 2010). The annual per capita water consumption is around 550 liters per day despite the arid climate of the region. This poses a high risk of depletion of the water reserve in the period of 50 years (Kar et al., 2010). With the issues of climate change, 85% of the total Abu Dhabi population and infrastructure are located at the shorelines. Therefore, changing climatic condition poses a threat to the Emirates due to the issues of flooding, which is as a result of the sea rising above the currently constructed infrastructures. Abu Dhabi has unique ecological biodiversity, which is also under the threat due to the environmental impacts resulting from the changes in consumption patterns and urbanization.

SWOT & PEST analysis

SWOT Analysis

Strengths. Mubadala petroleum company (Dolphin) occupies a unique position because of its regional gas provider linking two Gulf estates with its surplus fuel in Qatar. The company has the potential of becoming the leading supplier of fuel in the regional energy and power sectors in the future. By working with certain sections of the regional gas distribution grids, Dolphin has the ability to expand and handle large volumes of gas as the domestic economies grow to more power generation switches over the natural gas (Behrendt, 2009). It is also related to gas transportation systems with huge growth potential. Through diversification, Mubadala stands a chance to become the most powerful economy. It also has developed strong partnerships with private and public sectors. The investment policy of Mubadala is centered on forming partnerships with a broad range of business initiatives with different areas of joint corporations. Some of the main partners include Total, The Carlyle Group, Imperial College London, GE, and Airbus. The company also has a strong international presence. For example, Mubadala has around four international business platforms that are inclusive of the Mubadala 11 business sectors located over 20 countries. The global business platforms help the company manage its portfolio and maintain the international standards set up for the control and management of risks.

Weaknesses. Substantial short-term expenditure required as well as the struggles for more supply contracts are some of the company’s weaknesses. The tax structures of different countries might not be favorable for the advancement of the company’s vision. Since Mubadala has investments across different countries, territorial tax differences can really bring about tax burden for the business. The difference in statutory tax has the potential of increasing the tax base for the foreign investors, which could end up increasing liabilities, hence reducing profit margin. The company also faces competition from other similar companies. Therefore, the success stems from true partnerships that are based on mutual trust. The company has set up an advertising campaign that is focused on customer and technological excellence which leads to a truly winning situation. Besides generating returns, Mubadala has supported the development projects of the country through the creation of employment and deployment of qualified UAE citizens to the private and public national sectors to improve the quality of living.

Opportunities. The scope of other nations in terms of the joint partnership projects creates more room for expansion. Mubadala has a joint partnership with several international companies, which has increased its opportunity for investments. Abu Dhabi has built an acquaintance based economy as part of its long-term efforts to diversify oil and gas capitals. Under the vision 2030, Abu Dhabi has diversified a number of non-hydrocarbon sectors which include aerospace and hi-tech manufacturing. Through Mubadala, aerospace has established the Abu Dhabi Aircraft technologies which provide services to more than 70 commercial aircraft worldwide (Behrendt, 2009). Recently, Mubadala merged its aerospace communications technology with defense units in an effort to use their shared benefits from the partnership effectively. The combined business employs over 10,000 staff globally.

Threats. The need for ongoing high-level investments and the changes in the Qatar energy policy pose a serious threat. Due to climate change, there is increasing mobilization of the community to embrace the use of renewable energy over non-renewable energy. This is associated with a threat of affecting the demand and supply of petroleum products. Mubadala has set up a 3.5 billion dollar long term project to develop gas fields in both Qatar and Oman to supply the customers in the UAE (Abdelal, 2009). The Qatar energy policy changes can negatively affect this long-term project, hence posing a risk to their long-term revenue generation. The company also faces a threat of the rising costs of employment. Due to inflation, the cost of employment has gone up so that more human capital is needed. Furthermore, the company’s objective is focused on the production of high tech products which also require high maintenance costs as a well-skilled labor force. Due to the fact that a large amount of capital is invested in the petroleum company, the current climate change poses a threat to the business as most countries are shifting from the use of non-renewable energy that emits more greenhouse gases to renewable energy. This might force the company to change a shift in its long-term project.

PEST Analysis

To achieve the strategic goals, it is important to understand the business environment that favors Mubadala business operations:

Political. Abu Dhabi government looks forward to achieving excellence, and it is one of the best governments. It has the objective of ensuring sustainability in achieving the government’s excellence. The Abu Dhabi policy agenda 2030 defines the vision of the Emirates to achieve the development of the nation through the construction of a cohesive and open economy that would fit into the global competitive market. There is also an increasing demand for coordination of sustainable efforts through the setup of sustainability initiatives in Abu Dhabi.

Economic. In January 2009, Abu Dhabi announced the economic vision strategy that had the aim of safeguarding the Emirates future through diversification of the economic base to lessen the dependency on oil. Mubadala has benefitted from this agenda through its diversified business strategy that focuses not only on the petroleum industry but on other such industries as ICT and aerospace business. The diversification of the economy requires channeling of the resources to the development of other economic sectors. The government requires approximately 167.5 billion dollars to help these non-oil economic sectors (Cavada et al., 2014). In addition, Abu Dhabi is a fast-growing economy, which creates room for employment hence strengthening intercultural dialogue and social and economic balance.

Social. The population in Abu Dhabi and Emirates inclusive of the western region and Al Ain is approximately 2,463, 465 billion (Grassian et al., 2015). The population is expected to grow at an average of 4.5% annually. The urban residences occupy the largest population fraction with approximately 45% of the population being under the age of 15 years. There are more men than women due to the high numbers of male migrant workers. The literacy level is nearly 90 percent of the males with 96 percent of females (Hamdan, 2012). This is related to the national development agenda that has put initiatives to improve the level of education across the country. There are other new educational initiatives launched in key areas and focused on the transformation of the educational sectors to increase the number of students attending the universities.

Some of the best universities are also creating programs that would attract talented students to Arab countries. Despite these efforts, the government still faces challenges in raising the educational standards through student motivation and encouragement of women to pursue their education to the highest levels. Furthermore, the UAE is the most culturally diverse nation where modernity and traditions coexist in a peaceful manner despite multiple socio-economic challenges. Mubadala has set up collaborative projects with other stakeholders in an effort of conserving the natural heritage. Other challenges include difficulties in accessing healthcare services, decent housing and education.

d) Technological, Legal and Environment also play a key role in business. A knowledge-based economy plays a key role in ensuring economic sustainability. It requires strong investment in human capital and development, expansion of the private sector, the establishment of research centers and general improvement of ICT literacy. The corporate governance law for the entire public listed company that came into force in 2010 has helped restore trust and improve the code of conduct in the company.

Porter’s 5 Forces

There are five forces that elucidate the competitiveness of a business which are the supplier power, the buyer power, competitive rivalry, threat of substitution and the threats from the emerging new entrants to the market. Mubadala has strategically established its business where the supplies of the materials are high. For example, the petroleum sector is located in the countries where they can easily access the raw materials for their production. They also have enjoyed the market of their products and services. For example, petroleum and gas products are used in automotive within the UAE and even across the globe. In addition, they also enjoy the need for an aerospace business with the growing markets. In addition, being the biggest supplier and source of its products in Abu Dhabi, Mubadala has surpassed most of its competitors. The company also has forged partnerships, which reduce the power of its competitors. Because of their unique services, Mubadala has ended up developing sustainable business strategies that have enabled them to remain competitive in the changing business markets. Mubadala faces little threats from the new entrants to the market. This is because the kind of products that they deal with requires huge capital to start off. Furthermore, they have also established companies in different countries that make the delivery of their products easier. Furthermore, through forged partnerships, they are able to cushion themselves against the threats of new entrants to the market.

Vertical Integration and Outsourcing

Due to the high numbers of unskilled labor, a huge percentage of the workers are international migrants. The rates of unemployment in Abu Dhabi are approximately 14 %, with a large proportion of the unemployed being males having a low educational level (Cavada et al., 2014). The growing complaints of labor violations for the late payment to unskilled migrant workers have been on the rise. As a response to these complaints, the government has established an electronic wage protection system distributing it to all the employees. Other measures are also needed to address other economic challenges that arise from the availability of immigrant workers. The operations in other countries have also warranted the need to use labor from these countries include the enhanced oil recovery projects located in Bahrain and Oman, with their production based in Thailand and Indonesia. The company has formed lasting partnerships with the host countries and other international gas companies, which are central to Mubadala’s success. The company continues to expand its operational and technical expertise to advance its objectives together with the partners.

Ethics and Leadership

As Mubadala grows and expands to new emerging markets, it must focus on delivering its business agenda without compromising the ethical values of its country of operation. The code of business conduct has a set of standards and values which have to be adhered to by all the employees within Mubadala business group. The company’s values are driven by passion, collaboration and responsibility, which make up the high standards of integrity witnessed in their day-to-day operations. By living according to the code, each of the employees protects and enhances their reputation and capability to meet their mandate whilst upholding a commitment to transparency and corporate governance. The performance of the company is directly linked to its ability to conduct business successfully while maintaining the stakeholders’ trust through conducting business in an ethical and compliant manner. The code applies to every individual who is somehow related to Mubadala; which includes employees and other subsidiaries. These subsidiaries are entities controlled by Mubadala and they ensure that they also comply with the highest level of ethical standards.

Recommendations and Expected Future Trends

For further growth, the company needs to assess the labor costs and possibilities of acquiring cheaper skilled labor. This is because currently, the company faces challenges of accessing cheaper labor because of the technicalities associated with the nature of its business. The company needs to simplify its business and financial structure to become a simpler industrial business. In an effort to shift to the emerging markets, the company needs to do a thorough market analysis. The company also has more possibilities for future collaboration because of its high standards of ethics in conducting businesses. The company is also analyzing the future expansion of its business through the improvement and facilitation of cutting edge ICT services and job opportunities in the UAE and other international countries. Currently, Mubadala offers ICT connectivity to customers across the three continents. The company also needs to extend its partnership in the future to maximize the benefits.

Conclusion

Mubadala contributes significantly to the diversification and 2030 UAE development agenda, which stems from the vision of the company that is based on the importance of a sustainable economic future. Mubadala Development Company has remained forefront in developing the globally integrated industries and state of art social infrastructure which acts as a foundation for future prosperity of the Emirates. Mubadala remains the world-class business company because of its strong partnerships and commitment to growth by means of demonstrating its capabilities. The global business platforms help the company manage its portfolio while maintaining the international standards set up for the control and management of risks. Mubadala’s general performance is good so far as the company continues to explore new emerging markets.