Strategic Innovation Management

Individual Essay
With reference to the academic literature critically evaluate the role of Innovation
Strategy in generating Competitive Advantages. Use appropriate examples to
illustrate your argument

Heba Iskandarani
1723989
Introduction
Emaar, a real-estate development company, established in Dubai in 1997, Known across the
Arab-nation as the largest developer in the construction industry. It was listed in Dubai
Financial Market as the first developer in Dubai to offer freehold properties. Furthermore, the
constructors of Burj Khalifa are situated in a strategic location; Dubai is considered the heart
of innovation in the real-estate sector. Hence, driving the management division to offer the
ultimate product to their consumers. By following multiple diversified strategies to fight threats
and remain the first in the industry. Emaars strategy is similar to scholar Gerald Coles analogy
on Strategic management; Cole stated that strategic management is basically concerned with
setting the organization headlines aims, choosing the most suitable goals for such aims and
achieving both over time. (Cole,1997).

Strategist consider external and internal influences of a corporation to analyse impacts in

comparison with the weaknesses and strengths. it is the most critical stage in the development
of an organisation (Argenti,1900). This procedure enables the strategic decision. SWOT
analysis is a forecast that generates a tie between the capabilities of an organisation with
opportunities provided through the competitive environment. For example, Emaars strategists
are reliant on the SWOT analysis of the company to deliver a successful competitive
advantage. Divided into four categories, Emaar forecasted their future techniques through the
SWOT analysis. Organisations are fully dependant on the Swot analysis for its strong
correlation with the Pestle, 5 forces, marketing and operational management. Hence, it is the
key to evaluating the competitive advantage since all factors fall under this critical breakdown.

Strengths

Government Support
The UAE government has 32% shares in Emaar, hence, government backing
provides flexible regulations in development, and access to substantial land.
Furthermore, Bessamara, project developer, at Euromed capital stated that ...
the UAE Government has showed the willingness and ability to support
businesses in the face of economic crises, as is evident currently. Such help
lines can be tapped upon as and when Emaar is in need of backing. This will
help the company to stay adequately capitalized and finance operations and
expand markets. (Bessamra, 2009).

Diversified Portfolio
Emaars diversification strategy and concentration on expansion resulted in a
differentiated portfolio through innovation. By branching out into different
business developments including hospitality, malls, education, leisure and
healthcare (Emaar, 2012). The strategy implemented is in favour of Emaar due
to minimizing the threat of new entrants into the markets Emaar has invested
in. The segmentation of the company to various industries resulted in the
controlling of existing markets and exiling new participants. Not only does
Emaar have government support, but also product differentiation, profitability
and brand equity; this enhances customer loyalty. Hence, new entrants should
reach such standards before entering any market.
 Expansion to international Markets
Adapting to new technologies is not the only measure to expand into new
markets. However, by enhancing client leadership and produce organisational
resources; through imposing effective application procedures to perform
innovation (Blayse, 2004). Hence, Emaar focused on expansion, by entering
numerous joint-ventures, endorsed and enlarged their operation. Latham and
Egan reports urge the construction industry to perform better to meet the
challenges. Accordingly, many innovative changes to industry started taking
place including partnership, strategic alliances, supply chain management and
lean construction (Langford and Male, 2001). Emaar implemented the
strategy to focus on increasing domestic and international land-banking
through partnerships with NASA, Arabtec, Bawadi, Samsung, al Futtaim, etc...
therefore, owning a total of 22.26 million square-meters of land in Dubai and
500 million square-meters across the world such as Egypt, Canada, India,
Turkey, USA, etc (Emaar, 2012). Venturing with numerous suppliers
decreased the power of bargaining the suppliers have on Emaar via
alternatives. Forming strong relationships with various partners without the
dependence on a single supplier enhances dominance in the market. This
allowed Emaar to manage the suppliers according to changes in the
economical market.

Business Segmentation
Emaar categorize their source of income into divisions; based on stability.
Hence, their growth engine falls under property development in the domestic
and international markets. Establishing strong regional partnerships to
leverage local expertise, resulted in becoming market leaders in Dubai and
pursuing substantial growth in 10 countries. Partnerships created a cohesive
yet efficient method in enhancing customer services. Furthermore, Emaars
stable source of revenues is through business segmentation; by constructing
diverse developments such as malls, retail, hotels etc... Segmentation require
an accurate marketing strategy in order to promote the new innovation.

Marketing Strategy
Triggering the buyers emotions develops consumer equity to promote brand
name. Emaar shaped their brand through multiple media platforms to enhance
direct communication with investors. An innovative marketing strategy that was
implemented for the first time was partnering with Giorgio Armani in the
hospitality segment. Thus, it promoted Emaars luxury aspect in hotels as
stated Armani S.p.A the first ever partnership of the fashion legend with a
property developer. The first Armani Hotel is located in Burj Khalifa, the worlds
tallest building by Emaar Properties, while a second property, Armani Hotel
Milano, is located in Italy delivered by 2010Emaar will develop at least seven
luxury hotels and three resorts during the next 10 years under the agreement
with Armani. (Bhoyrul, 2010). Media is not the only platform Emaar uses to
promote their brand name, however, Emaars logo is placed on top of every
establishment the company has constructed as a strategy Direct
 Communication- in order to subconsciously trigger the publics emotions that
Emaar is the best developer in the market.

Weaknesses

Reliance on Domestic Market

Emaar still faces exposure to the Domestic market despite their vision of global
expansion to reduce risks. Hence, the dependence on UAEs market in terms
of sales affected the company during the financial crisis that collapsed the local
economy. It was stated that during the year 2008 sales have fallen down ,
domestic sales have reduced to AED 13,926,334,000 in 2008 from
14,278,224,000 in 2007. However, percentage of total profits have increased;
from 79.91 percent in 2007 to 86.96 percent in 2008 due to government
sponsorship (Emirates News Agency, 2008).

Funding Strategy
The operational flexibility could be affected due to future limits on loans. Since,
Emaar is dependent on the parent company in terms of funding land
acquisitions and infrastructure of construction; the parent company are
restricted on cost by 8%. By following the IPO strategy in funding, exposing
Emaar to difficulties in generating cash-flow, hence, the company is focused
on the completion of current projects and pausing future projects. The
recession the global economy has faced may decrease Emaars profit margin,
sales and return on equity, assets and capital (Smith, 2013). The operating
margin has declined from 30.42% in to 13.61% by 2008 with an annual growth
rate of -18.21%. The return on equity has declined from 20.99% to 8.48% in
2008 with an annual growth rate of -20.27% ... the operating costs have
increased from 69.57% in to 86.38% in 2008 (Bessamra, 2009). Therefore, it
resulted in the slow-down of Emaars construction sector and resorted to
management services through business segmentation as a main source of
revenues.

Economical Rescission
80% of the Dubais population is comprised of expats; the downturn of the
global economy will result in harming Emaars sales due to the pause reflected
on the credit markets after loss of jobs- hence, it will freeze the funding
invested on Emaars developments (Government, 2014).

Opportunities

Solid position in Domestic Market

A consolidated position in the domestic market is one of Emaars opportunities;
due to the substantial land owned by the corporation. Emaar has already
delivered the main asset in 2008 which is The Dubai Mall, Burj Khalifa,
Downtown- 20 billion Dollar Complex. The 3.9 million square feet master-plan
generated 54 million visitors, it was stated as being the most visited site on the
 planet during 2011. Furthermore, the opening of numerous hotels across Dubai
(Smith, 2013).

Diversification of Revenue
Expansion through diversified projects generating revenue from the global
industry. International segmentation of services aids the company in financial
profit growth; The diversification strategy Emaar has implemented received
immense success, hence, reducing the operating risks in case of downfall in
the construction sector. The investments in different sectors resulted in an
increase in acquisitions and functioning partnerships, enhance operations,
products and offered services. Emaar further diversified their management
services for example in the education division as stated Emaar began
operations of the Emaar Raffles International School in Singapore followed by
the Raffles International School in Dubai Umm Suqeim in September 2007. The
establishment of the University of the Arts is another strategic step taken by
Emaar as there is growing demand for local arts education of international
standards in the MENA region and Indian Subcontinent (Emaar, 2012).

Threats

Foreign Governmental Regulations

Emaar international developments may be subjected to delays due to
governmental regulations that foreign countries have on construction sectors.
Furthermore, restrictions may also deny the ability to increase the global market
growth of Emaar and loss of investments midway through development. An
infrastructure regulation Emaar faced was Dubai Ports World in the United
states it led to the stop of a production due national security concerns (Alfano,
2006).

Competitive Rivalry
In relation to the five forces strategy, Emaar faces a competitive rivalry in the
construction industry under the innovation sector. Nakheel a privately owned
developer, based in Dubai since 1990, generated revenues worth $30 Billion
during the year 2006, similarly to Emaars profit margins. Nakheel focuses on
a single profit-generated innovation; constructing on Dubais coastline through
man-made islands- known as Palm Jumeirah. Hence, being the first in the
global industry. As stated Nakheel generated $70.1 billion in revenues in 2006.
Upon completion, its various waterfront projects will have added more than
1,000km of shoreline to Dubais coastline. However, Emaars IPO strategy in
funding projects keeps it in the lead with 59,0000 shareholders. Nakheel is
aiming to copy Emaars financing strategy as stated competitor Nakheel is also
thinking about an IPO in the third quarter of 2009. Finally, Nakheel has plans
in penetrating the global market through joint-ventures. If applied Emaar will
face a decrease in its competitive advantage due to the new innovation
Nakheel will provide to the international market (Kippreport, 2015).
 Threat of Substitution
Another threat that could affect Emaar is enforcement of sustainable
construction. According to the 5 forces by porter, a threat of substitution may
cause a decline in the corporations power. Hence, Dubais main source of
income is through real-estate, however, environmental factors have been
exposed due to construction methods applied during production. UAE
government is aiming to turn fully sustainable by year 2020; through enforcing
regulations on the public and the construction industry. Saeed Al Abbar, chair
of the Emirates Green Building Council stated "awareness of sustainability
issues has increased significantly over the past few years... Over 800 buildings
have complied with the regulations so far at the design stageThe real
challenge is in ensuring that the code requirements are fully incorporated in the
completed constructions through rigorous control measures." (Lobel, 2015).
These imposed regulations on developers in the UAE may cause Emaar to face
a drawback in future productivity if sustainable strategies are not applied in their
construction methods.

Emaars Mission Statement and Vision

A company sets a mission statement in order to publically highlight the vision through their
achieved strategies. The success is emphasized in order to satisfy the costumers needs
through the condition of the market. Furthermore, it drives the employees to accomplish their
ultimate performance.In the construction field the leader is a critical asset in the production of
a project. Peter Kay stated that a driven leader is a necessity particularly during the early
stages of the firms launch and during the growth change. vision and mission are indicative
of a wish-driven strategy which fails to recognise the limits to what might be possible given
finite organisational resources (Boddy, 1998). Emaars mission, sets a good example for
Peters argument Our mission is to transform Emaar into a one-stop, global solution provider
for lifestyle, including homes, work, play, leisure, retail, health, education, finance, industry
and more. (Emaar, 2012). Hence, Emaars is setting world-records due to the implementation
of their business model; Mohamed Alabbar, Chairman of Emaar Properties stated, That the
vision portrayed the success of Emaar through the positive growth due to dynamism in project
management. We are committed to creating long-term value for our stakeholders through
strategic business expansion in Dubai and other key international markets, where we are
expanding our hospitality and malls operations. In Dubai, in addition to committed delivery
schedule, we are launching new real estate assets that meet demand from buy-to-live
customers. (John, 2015).

Emaars Business Strategy

Porter believed that the success of an organization falls under two categories by being
differentiated in the market or cost advantage. The two strengths generate three basic
strategies; focus, differentiation and cost leadership (Porter, 1980). Emaar exceled in
implementing the strengths. Initially, by having a strong business model in which the
developments aim was to offer a lifestyle-living; not only providing a simple property. This
strategic approach was the success of their business model; by being experts in constructing
communities in both the domestic and international markets. Such strategy led to an innovative
operations management. Hence, the company delivered independent and self-sufficient
communities to the clients. Thus, these large gated societies not only included parks, schools,
leisure facilities, retail, hospitals etc. but provided a mix of apartments, villas and condos.
Emaar also offered empty plots within the community as an option for investors. This blend
was a winning tactic by applying differentiated attributes to many master-planned projects to
gain client-satisfaction. Not only did it provide an innovative concept, but also high quality
properties were delivered on time. By 2008 Emaar delivered in the UAE approximately 22,000
properties (Emaar, 2012).

During 2010 Emaar aimed to duplicate their success out of the domestic market market
penetration- to achieve market growth, in the construction field, and generate revenues from
international alternative industries. This foreign expansion was a tactic taken to reduce the
risk on the dependence on a single market however, diversifying their market for future
success. The diversification strategy allowed Emaar to gain performance competencies and
capabilities in design, sales and distribution through collaborations with international
managements. For Example, Emaar created the Emaar Design Centre, based in Newport
Beach, California to aid the companys core skills in conceptualization, master-planning,
development, landscaping and interior design. (Bessamra, 2009). Emaar restructured their
organisation and recruited their management from an international pool of expertise to
influence and penetrate the global market, by following two new strategies; in relation to the
ansoff matrix known as market development. Furthermore, introduced an innovative risk
management sector and KPI systems allowed Emaar to develop the product given to both the
domestic and global market.

Its operations went global, existed strongly across 36 countries. It was stated in Emaars 2011
annual report that Emaar has achieved an overall sales level of 82% in its key International
markets that includes Egypt, KSA, Lebanon, Turkey, etc with a grand total of 20,920 units
released and 17,133 units were sold (Emaar, 2012). Moreover, it recently introduced a new
innovation into the transportation industry The spirit of innovation pervades at Emaar
constructing the worlds first launch of a hydrogen-powered, zero-emission street tram. Dubai
Tram is the regions first-of-its-kind transit system that will offer easy and free access for
visitors and residents to several attractions in Downtown Dubai. (Industry-me, 2012). This
final diversification strategy not only enhanced pioneering transportation however, was
implemented for touristic purposes for a state-of-the-art experience around the tallest tower in
the World Burj Khalifa also by Emaar- which led to the improvement of Dubais tourism.

Emaars Operations Strategy

Innovation in the construction industry require a specified unique treatment in comparison to
other industries. Since construction is not a fast growing industry in terms of technology; the
industry follows the variability of sub-sectors scheme for example the production activities are
mostly conducted on site and the learning curve is compromised due to the uniqueness of
projects. Accordingly, strategic approaches and thoughts should be flexible enough to have
variations to suit this industry Thus the innovation implements practical interactions that are
feasible in the project delivery sector and costumer contact. (Cheah and Chew,2005).
Therefore, Emaars substantial success was due to a key operations model that was
implemented in all their current and future construction developments. By merging both the
IPO strategy- initial public offering- with project- based financing; the Conservative
construction Methodology was developed in which pre-sales developments are utilised to the
investor to generate cash-flow instalments. Hence, funding the ample cost of the construction.
If the financing from pre-sale investments were not achieved the ventures are rescheduled.
Thus, it provides flexibility, from the contracts that are signed with the contractors, in project
rescheduling, exempting material costs during the phases of development and finally,
contractors charges on work that has not been done. (Emaar, 2012).

Thus, this strategic administration enhanced efficiency by maximizing profit of Emaars

organization. Therefore, controlling of finances of all developments and the trust of investors
in pre-sales are due to the established reputation that surpasses the company; by providing
diverse and high-quality innovative real-estate projects during a short period of time allowed
the dependence of investors on Emaar. Approximately 70% of units in projects under
construction as at end of December 2011 pre-sold All Emaar developments under
construction will complete within the next 2 years developments are situated in prime
locations which will be the focus of any sales activity over the forecast periodMore than 2
million sqft of commercial space delivered up to end of 2011 (Emaar, 2012). Furthermore,
the strategy resulted in the decrease of the bargaining power of the buyer on Emaar due to
the high-quality of services and costs that the corporation provides to the costumer in
comparison to other developer companies in the market.

Conclusion

In conclusion, the returns of assets are driven by Emaars business activity. Thus, the
companys efficient operation strategy endorsed profitability and the capacity to classify
targets for investments. Hence, enhances access to capital. Furthermore, through Emaars
acquisitions the corporation has grown significantly in the domestic and international market.
Thus, the diversification strategy that was applied allowed a number of strengths. That
includes, capabilities, technologies, and expansion of the industry. By the usage of its
successful funding strategy it built a solid R&D management to enhance variations in the
market; through business segmentation. Emaar provided a diversified quality in its
management structure that enriched the brand name through performance in production,
innovation in technologies and financial procedures. The integration of innovative construction
along with real-estate investments provided customer satisfaction in terms of services. Thus,
generated competencies which gave Emaar a competitive advantage in the development
industry. Through governmental support and international partnerships, Emaar was able to
penetrate the global construction market. Finally, the business subdivisions of Emaar
reinforced and supported the profit margin during predicaments, thus, attaining a competitive
advantage.

Competitive advantage is the most important force which shapes the market environment. It
is a combination of factors that makes an organization more successful than others. The
sources of competitive advantage include: organization resources and capabilities, excellence
in strategy implementation, quality, time, innovation and creativity (Feurer and Chaharbaghi,
1997).
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