Rational thinking

After carrying out a series of restructuring measures in recent months, IT products distributor Almasa is looking to put the tough times behind it and get back on the attack again. In an exclusive interview with Channel Middle East, CEO Mehdi Amjad outlined how the company is gearing up for a new chapter in its existence.

Tags: Almasa IT DistributionRetailUnited Arab Emirates
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Rational thinking (ITP Images)
By  Andrew Seymour Published  October 9, 2009 Channel Middle East Logo

The distribution business can be a volatile one at the best of times, let alone in the midst of a worldwide recession. Distributors are inevitably forced to scrutinise costs even more closely than usual and make uncompromising decisions about the direction of their operations. Almasa, a stalwart of the Middle East channel, is no exception.

In fact, the Dubai-based outfit has just emerged from what CEO and founder Mehdi Amjad describes as a “rationalisation” phase. It has been an exercise in forward business planning that has led to Amjad carrying out a complete review of the distributor’s strategy in a bid to prepare it for future growth.

“The key question for us was about the rationalisation of our resource utilisation and how we as Almasa use our resources in this current market environment to maximise the risk-adjusted returns that we are looking for,” explained Amjad. “And in line with that was the rationalisation of direction — where is distribution going and how are we going to position ourselves for the future?”

Staff reductions and the integration of warehouses (a necessity partly driven by the acquisition of Delta Business Products earlier this year) appear to be among the more conspicuous steps that Almasa has taken. Amjad doesn’t say how many employees were let go in total, but it is clear that no part of the organisation has been spared scrutiny. Various senior roles that were once separate have now been consolidated following a “cross-utilisation and cross-integration” of resources, paving the way for a structure that looks poised to place considerable responsibility into the hands of the VP for finance and operations and the VP for sales and marketing.

Sajid Sarwar has already been lured across from Aptec to fill the finance and operations role, while a search is presently underway for a sales and marketing executive.

Amjad claims Almasa’s restructuring has already culminated in “some very good results” and put it firmly back on the front foot. He says the company, which made sales in excess of US$400m last year, has halved its costs over the past quarter, while driving gross profit up by 40% as a result of measures that have also included a thorough analysis of its vendor portfolio.

Indeed, cost rationalisation represents just a small part of a much wider strategic plan that Almasa is currently implementing. Although it has exited agreements with vendors such as Juniper and ViewSonic during the past year — and doubts have been cast over its alliance with HP — the distributor expects to unveil some significant partnerships this month.

“Vendor portfolio rationalisation has been a major part of what we have done,” reflected Amjad. “We will soon be announcing some major vendor tie-ups that will complement our offering for the different sectors that we are focusing on right now. Some good names will be added to the portfolio and they will tie into networking and retail, as well as the channel sector of the market.” Although Almasa has no plans to step away from the components business for which it is best known, the appeal of the finished goods market has prompted it to begin putting a more pronounced focus on the retail and networking channels.

“We are going to launch a separate brand identity for our networking and retail departments to really show the market that we are specialists,” revealed Amjad. “Almasa has been very strong in components and channel development, which we will continue, but retail and networking are two different conduits to the market that require a specialist approach and this will be part of our positioning to the market. Both departments will have their own logo and look and feel. This again amplifies the holistic and specialist approach we take by sector rather than trying to purely generalise the applied distribution phenomenon across the board.”

The acquisition of Delta, in particular, has augmented Almasa’s existing retail coverage by giving it access to additional power retailers throughout the Gulf. With the business remaining under the leadership of Delta chief Govinda Siddartha — now a shareholder in Almasa — Amjad is confident that retail sales should account for at least 35% of its turnover come next year.

“Delta has been a major step for Almasa and it will contribute heavily to our future strategy,” he commented. “It has already been paying off very nicely by positioning us with all the major retailers across the GCC. Our product is listed in more than 160 stores across the region and we have over 30 people on the sales and marketing side dedicated to the retail market,” he said.

Amjad also has his eye on taking Almasa into new geographic markets, notably Africa where he cites a strong opportunity for components sales. “We are looking at developing North Africa first and then going down to Central Africa,” he explained, adding that Almasa has already assigned two Dubai-based sales heads to tackle the region and is presently looking to supplement those with product management resources.

Whatever happens though, Almasa’s philosophy will not be to chase sales at all costs. Its rationalisation programme has taught the company that running the business on sound financial principles needs to be its main priority as it moves forward.

“This year will be very much focused on the bottom line rather than revenue and that will give other distributors some room to overtake us [in terms of sales],” admitted Amjad. “But the message is strong and clear: we will be heavily pursuing growth around our areas of focus and I think that the rationalisation and the capacity now open for Almasa is a key sign to all the vendors that we are looking at some major tie-ups to deploy our free capacity.”

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