The Future of Dubai
September 27, 2010
To : All Shareholders
THE FUTURE FOR DUBAI
Dubai’s growth must come largely from generic sources, which in practical terms means trading activities.
Trading is the core business for Dubai, what Dubai has proven over time to be good at, and we must adapt to that model. There is still a market for construction-related services, mainly in the maintenance and preservation of what already exists, but new construction-related business should be approached with extreme caution and an adverse bias.
There is no doubt in my mind that Dubai will re-invent itself once again and I am equally sure that the past aims of creating a dream city will play no significant part in the future. We profited enormously from the ambitious development schemes of recent years but we must again plant our feet firmly on the ground and nurture our proven skills of innovation and sound business management.
Dubai at its best has always been a trading post – let the Government provide the infrastructure and the private sector will come up with the growth.
In retail, the busting of the boom has affected the supply chain all the way down to the flower-sellers and the whole sector, but especially the big-brand names in the giant malls, will soon have to recognize the contraction in business levels and the willingness to spend of those still able to do so. The retail sector is a big employer and a key player in the services chain so a domino effect will follow upon contraction affecting all other areas of the economy and not least the banks.
One encouraging sign I notice among my own business acquaintances is that the denial is slowly giving way to reality. For quite a long time there was a palpable reaction of complacency as people failed to face up to the magnitude of the crisis, and basically took no action (Don’ t just do something – sit there!)As expectations fall so too will disappointments and business activity will settle down to the new norms. We are ahead of this game by about two years – we bit the bullet and downsized materially in 2008 – and we have already scaled down and modified our activities, pruned our organization, so that we are ready for the climb back from a base which already sound to a restored level of high profitability as we seize new opportunities. Which brings me to......
Because of the collegiate way we manage our businesses we are quick on our feet and decisive when it comes to recognizing the need for change and implementing it. This will serve us well and put us a many steps ahead of our competition in the period ahead. Our principal strategic thrusts, already in place to some extent, must be emphasized:-
DIVERSITY - develop new markets
Introduce products and services to cater specifically for these markets
Geographical diversity is our best prospect for business expansion. To grow generically into new markets is a slow, costly and risky business so we should select our markets with great care and seek to create joint venture businesses with sound partners. We should be looking for JV partners who have well-established branded products or service skills, preferably with ready-made client bases and experienced managements. We don’t need their money and that should not be factor in our choice.
Concentrate on trade-related business here in the Northern Emirates
PRODUCTIVITY - press harder on the cost base to squeeze
out any remaining inefficiency or wasteful practices. Make sure every employee is revenue-justified and all tendencies to bureaucracy and cronyism are eliminated.
Incentivize employee performance by setting targets and rewarding performance which is above expectations and weeding out the non-performers.
Productivity improvements have already been heavily emphasized and have shown good results but there is always more that can be done. If revenue growth is hard to come by it stands to reason that we must strive to get more profit from what we have. Remember at all times that our key goals are to achieve optimum levels of margin and cash-flow, and if you allow these goals to guide you at all times you cannot go wrong in times like these.
I recently had the pleasure of talking to you and making my presentation on Dubai – Past, Present and Future, giving you in broad terms my personal views based upon my long experience in this market. But I promised you a letter expanding in more detail some of the broader captions in my presentation, so here it is put together in some haste while my comments are still fresh in your minds. Every time we meet I renew my confidence in the future of our own group when I see your enthusiasm and care for your businesses. I write to you about the future, not presuming to tell you things you don’t already know, but to crystallize our collective thinking, confident in the knowledge that you will at all times be doing your best and that in Dubai there is no better.