Choosing The Right Strategy in SA

THE SAUDI
STRATEGY
SANDBOX
SERIES
THE SAUDI
STRATEGY
SANDBOX
Saudi Arabia’s economic landscape is undergoing

a significant transformation, driven by Vision
2030 and a rapidly diversifying economy. As
traditional sectors like oil and gas make way for
new industries, Saudi companies are re-evaluating
their growth strategies. In this evolving
environment, businesses must decide between
two primary expansion strategies: horizontal and
vertical growth. Each has its own advantages,
challenges, and strategic considerations.
Horizontal and vertical expansions are both

powerful strategies, but they serve different
purposes and come with unique sets of
challenges.
THE SAUDI
STRATEGY
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In the Saudi market, where industries are rapidly

evolving and new opportunities are emerging every
day, choosing the right expansion strategy is like
picking the right camel for a long journey across the
desert: it requires knowledge, foresight, and a strong
sense of direction.
Whether expanding horizontally into new product

lines or vertically integrating along the supply chain,
Saudi companies have an unprecedented chance to
reinvent themselves and lead the way in a diversified
economy. The road ahead is challenging but full of
potential for those ready to seize it.
THE SAUDI
STRATEGY
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In this article, we’ll explore how Saudi

companies are leveraging both horizontal
and vertical expansion strategies, and
provide insights on how to choose the
right approach in the context of the Saudi
market.
THE SAUDI
STRATEGY
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Understanding Horizontal and Vertical

Expansion
Horizontal Expansion: This involves growing a

business by entering new markets or offering new
products/services that are closely related to the
current offerings. The goal is to increase market share,
diversify the product portfolio, or reach a broader
customer base.
Vertical Expansion: This strategy involves expanding

along the supply chain, either by acquiring suppliers
(backward integration) or distributors/retailers
(forward integration). The aim is to control more
stages of the production process, reduce costs, and
improve operational efficiency.
THE SAUDI
STRATEGY
SANDBOX
Understanding Horizontal and Vertical Expansion

THE SAUDI
STRATEGY
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THE SAUDI
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Horizontal Expansion: Examples and

Benefits
In Saudi Arabia, horizontal expansion is

popular among companies looking to
diversify their revenue streams and mitigate
risks associated with reliance on a single
industry.
Here’s how it’s being implemented...

THE SAUDI
STRATEGY
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Example #1
Almarai’s Diversification
Beyond Dairy
Almarai, the largest dairy company in the

Middle East, is a prime example of horizontal
expansion. While initially focused on dairy
products, Almarai has diversified into juice,
bakery products, and poultry.
This horizontal expansion has allowed the

company to tap into new markets, cater to
changing consumer preferences, and spread its
risk across multiple product lines.
THE SAUDI
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Key Takeaways:
Market Research:
Almarai’s expansion was driven by
comprehensive market research identifying
gaps in the Saudi food and beverage sector.
Brand Strength:
Leveraging its strong brand recognition,
Almarai successfully introduced new products
that resonated with its existing customer base.
THE SAUDI
STRATEGY
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Example #2
STC’s Entry into Fintech with STC

Pay
Saudi Telecom Company (STC), traditionally

a telecom provider, expanded horizontally by
launching STC Pay, a digital wallet service.
This move allowed STC to enter the

booming fintech market, providing a new
revenue stream and tapping into the growing
demand for digital financial services.
THE SAUDI
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Key Takeaways:
Leveraging Existing Infrastructure:

STC used its existing telecom infrastructure
and customer base to gain a foothold in the
fintech market quickly.
Capitalizing on Trends:
The rise of digital payments in Saudi Arabia,
accelerated by increasing smartphone
penetration and e-commerce growth, made
fintech a logical expansion choice.
THE SAUDI
STRATEGY
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Vertical Expansion: Examples and

Benefits
Vertical expansion is often chosen by

companies seeking to control their supply
chain, reduce costs, and gain more control
over production and distribution
processes.
THE SAUDI
STRATEGY
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Example # 1
Saudi Aramco’s Backward

Integration into Chemical
Manufacturing
Saudi Aramco, the world’s largest oil
company, has been investing heavily in
backward integration by expanding into
chemical manufacturing. Through its
acquisition of SABIC (Saudi Basic Industries
Corporation), Aramco has extended its reach
into petrochemicals, allowing it to control
more of the value chain from crude oil
extraction to high-value chemical products.
THE SAUDI
STRATEGY
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Key Takeaways:
Cost Efficiency:
By integrating upstream and downstream
operations, Aramco reduces raw material
costs and improves profitability.
Value Addition:
This move allows Aramco to produce
higher-margin products, reducing its
dependence on crude oil revenue.
THE SAUDI
STRATEGY
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Example #2
Al Othaim’s Forward
Integration in Retail
Al Othaim Group, a major player in the Saudi

retail sector, has successfully implemented
forward integration by expanding into retail
operations. Originally a wholesaler, Al Othaim
entered the retail space with a chain of
supermarkets and hypermarkets across the
Kingdom.
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Key Takeaways:
Direct Access to Consumers: Forward

integration allowed Al Othaim to gain
direct access to end consumers, improving
margins and customer insights.
Brand Building: Controlling the retail

experience helped strengthen the Al
Othaim brand, fostering customer loyalty.
THE SAUDI
STRATEGY
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Deciding Between Horizontal and

Vertical Expansion in the Saudi
Market
When determining which expansion strategy

to pursue, Saudi companies must consider
several factors...
THE SAUDI
STRATEGY
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1. Market Opportunities and Demand

The first step is understanding market demand.
Horizontal expansion is ideal when there’s a clear
demand for related products or services. For
instance, Saudi Arabia’s growing young
population and increased digital adoption have
created fertile ground for tech and fintech
services, making horizontal expansion into these
sectors highly attractive.
Questions to Ask:
Are there gaps in the market that our

existing brand can fill with new
products or services?
Is there rising demand for
complementary offerings that we can
leverage?
THE SAUDI
STRATEGY
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2. Control Over the Supply Chain
If a company faces challenges related to supply

chain disruptions, high production costs, or
reliance on third-party suppliers, vertical
expansion may be the better choice. By
integrating backward or forward, businesses can
reduce dependency, control quality, and capture
more value.
Questions to Ask:
Are we heavily dependent on external
suppliers for key components or raw
materials?
Would controlling more of the
production process result in significant
cost savings or quality improvements?
THE SAUDI
STRATEGY
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3. Capital and Resources Available
Vertical expansion often requires significant

capital investment, as it involves acquiring
suppliers or distributors. On the other hand,
horizontal expansion might be less capital-
intensive, especially if it involves leveraging
existing capabilities to enter a new market
segment.
Questions to Ask:
Do we have the financial resources and
capabilities to support the expansion
strategy we’re considering?
Which option offers the highest
potential return on investment given
our current financial position?
THE SAUDI
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4. Strategic Fit with Long-Term Vision
Lastly, any expansion should align with the

company’s long-term strategy and the broader
goals of Vision 2030. Companies need to
evaluate whether the chosen path supports their
overall mission and positions them well for future
growth.
Questions to Ask:
Does the expansion strategy align with our long-term
vision and goals?
How does this decision fit into the broader context of
Saudi Arabia’s economic transformation?
THE SAUDI
STRATEGY
SANDBOX
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THE SAUDI

Saudi Arabia’s economic landscape is undergoing

Horizontal and vertical expansions are both

In the Saudi market, where industries are rapidly

Whether expanding horizontally into new product

In this article, we’ll explore how Saudi

Understanding Horizontal and Vertical

Horizontal Expansion: This involves growing a

Vertical Expansion: This strategy involves expanding

Understanding Horizontal and Vertical Expansion

Horizontal Expansion: Examples and

In Saudi Arabia, horizontal expansion is

Here’s how it’s being implemented...

Almarai, the largest dairy company in the

This horizontal expansion has allowed the

STC’s Entry into Fintech with STC

Saudi Telecom Company (STC), traditionally

This move allowed STC to enter the

Leveraging Existing Infrastructure:

Vertical Expansion: Examples and

Vertical expansion is often chosen by

Saudi Aramco’s Backward

Al Othaim Group, a major player in the Saudi

Direct Access to Consumers: Forward

Brand Building: Controlling the retail

Deciding Between Horizontal and

When determining which expansion strategy

1. Market Opportunities and Demand

Are there gaps in the market that our

2. Control Over the Supply Chain

If a company faces challenges related to supply

3. Capital and Resources Available

Vertical expansion often requires significant

4. Strategic Fit with Long-Term Vision

Lastly, any expansion should align with the

THANK YOU FOR

Dont forget to like, share, and comment

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