Pricing in the industry
The industrial manufacturing sector in Qatar is not a free market. The industry is critical to the economy of Qatar hence the government id directly involved in the market. The government plays a dominant role in the industry hence prices are not solely determined by the market forces of demand and supply. The government controls the pricing of products in the sector since it holds a significant stake in large companies in the industry. The government is a major shareholder in firms such as Qatar Steel Company, Qatar National Cement Company, and Qatar Fertilizer Company, among other companies. In recent years, the dominance of the government has been reduced through privatization of some state-owned companies as well as joint ventures with foreign corporations. The government of Qatar uses several controls to achieve its desired economic goals. State-controlled companies are offered import duty exemptions, tax holidays, among other incentives. The economy of Qatar is oil-driven hence the prices of almost all products in all sectors depend on the price of oil. The price of oil plays a crucial role in determining the pricing of products in Qatar’s industrial manufacturing market.
Most of the companies supplying raw materials to firms in the industrial manufacturing sector are located near their primary markets. The raw materials/supplies involved in this case are bulky thus they reduce the cost of transport by situating close to the manufacturing companies. Besides, it also helps in creating synergies as well as external economies of scale. For instance, oil and chemical companies are located in areas near the mines to maximize returns on their investment by reducing transport costs. Qatar Petrochemical Company Limited and other chemical companies set up plants in areas with sufficient chemicals such as ethane. An example is the Al-Karaana Petrochemical Project (Oilandgastechnology.net, 2016).
SWOT analysis
Strengths
The sector has a strong backing by the government since it holds a majority stake in the key companies in the industry. The government protects these industries by providing incentives such as exemptions from import duties, among other incentives. The government has a strong interest in the industry.
An abundant supply of oil and other minerals in the country supports the industrial manufacturing sector. The industry is largely based on oil, natural gas and other minerals for raw materials as well as energy. The abundant supply reduces the prices of these items in the country. This implies that the cost of production in the industry is lower than in other countries where there is a limited supply of oil and other minerals. The large oil sector also provides a market for products of companies in the industrial manufacturing industry. Qatar also ranks highly among countries in the ability to develop competitive industries (staff, 2014).
Weaknesses
The economy of Qatar is over-reliant on the oil sector. A deterioration in the oil sector will have a substantial adverse impact on the industrial manufacturing sector. When oil prices fall, it directly affects the industry due to a reduction in demand for industrial products.
Excess government protection of the industry may prevent it from realizing its full potential. Government restriction prevents small and medium enterprises in the industry from thriving. Besides, limiting the access of the sector to foreign companies leads to inefficiencies. If the industry were liberalized or free, competition would enhance its efficiency thus improving productivity.
Opportunities
The upcoming FIFA World Cup in 2022 will boost the entire economy of Qatar including the industrial manufacturing sector (Gulf-Times, 2014). The demand for materials required to build stadiums will promote the manufacturing industry.
The industry also has opportunities for increased financing as a result of the growth and improvement of Islamic Banking in the country. Qatar’s economy and financial sector is stable and growing hence manufacturing companies benefit from increased access to financing (Rabobank, 2014). The Qatar Islamic Bank helps companies in financing and other financial strategies such mergers and acquisitions, stock issues, among other restructuring options (Arabian Business, 2016).
Threats
The instability in the oil sector may hurt the industry. In late 2015, the global oil prices fell rapidly (Gulf-Times, 2015). The failure of the OPEC to cap oil supply may hurt the oil sector thus adversely affecting the industrial manufacturing sector. Besides, the removal of economic sanctions against Iran will increase total supply thus lowering prices (Let's Talk Development, 2015). Most countries have started shifting their economies from being oil-reliant.
The industry and the entire economy is affected by the threats brought about by ISIS and other violent extremist groups (Doha News, 2015). Terrorist attacks affect foreign investment and the confidence of investors. ISIS has been a thorn in the flesh countries worldwide.
Porters Five Forces
Threat of new entrants: Companies in the industry face a low threat of new entrants since most companies are state-controlled and protected from competition especially by foreign firms.
Bargaining power of suppliers: Most suppliers of the industry are mining companies. Due to the government control of the oil and mining sector, suppliers in the industrial manufacturing market have a low bargaining power.
Competitive rivalry: There are fewer competitors in the market hence competitive rivalry is less.
Threat of substitution: it is very difficult to find new products that can substitute industrial manufacturing products. Therefore, the threat of substitution is very low.
Power of buyers: There are limited options for consumers hence consumers do not have a great power to determine prices.
References
Country Report Qatar. (2014). Rabobank. Retrieved 20 May 2016, from
https://economics.rabobank.com/publications/2014/november/country-report-qatar/
Falling oil prices and its implications on Qatar’s economy. (2015). Gulf-Times. Retrieved 20
May 2016, from http://www.gulf-times.com/story/428406/Falling-oil-prices-and-its-implications-on-Qatar-s
How safe is Qatar from an ISIS attack? Experts weigh in - Doha News. (2015). Doha News.
Retrieved 20 May 2016, from http://dohanews.co/how-safe-is-qatar-from-an-isis-attack-experts-weigh-in/
Industries Qatar searches for alternative petrochemical projects in Qatar | Oil and Gas
Technology. (2016). Oilandgastechnology.net. Retrieved 20 May 2016, from http://www.oilandgastechnology.net/downstream-news/industries-qatar-searches-alternative-petrochemical-projects-qatar
Lifting of Iran sanctions could have major impact on energy markets. (2015). Let's Talk
Development. Retrieved 20 May 2016, from http://blogs.worldbank.org/developmenttalk/lifting-iran-sanctions-could-have-major-impact-energy-markets
Qatar Islamic Bank. (2016). Arabian Business. Retrieved 20 May 2016, from
http://www.arabianbusiness.com/companies/qatar-islamic-bank-66880.html
Staff, b. (2014). Need for Qatar to develop its manufacturing sector. bq Magazine. Retrieved
20 May 2016, from http://www.bq-magazine.com/economy/2014/05/need-for-qatar-to-develop-countrys-manufacturing-sector
World Cup to benefit Qatar economy in long term: QNB. (2014). Gulf-Times. Retrieved 20
May 2016, from http://www.gulf-times.com/story/404499/World-Cup-to-benefit-Qatar-economy-in-long-term-QN
