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Introduction

Introduction.

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Introduction

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  1. Introduction Established in 1960, BSBC has carved itself a path to success built on good old fashioned hard work, great business sense and a tradition of excellence that is synonymous with the Sultan Family name. From our humble beginnings five decades ago(1960 – 2012), we have come a long way to being The leading company serving the medical needs of not just Kuwait but the whole of Middle East BSBC is owned by eight brothers of the Sultan family, who also collectively own a number of other privately held limited liability companies operating in the oil sector, real estate and investment fields. Each or more of the brothers also own separate entities outright such as Petroleum Services Co. that has a 40 year history of providing a full spectrum of comprehensive engineering and support services focused on the Oil & Gas, Refinery, Petrochemical, Power Generation, Water and Sewage Treatment sectors of Kuwait KEO International Consultants, whose owner and president is Dr. Abdul Aziz Sultan. Founded in 1964, KEO delivers world-class professional design and management services. KEO offers award winning architectural design, progressive infrastructure engineering and highly ranked project and construction management known for quality and professionalism. KEO is one of the largest AEP/PMCM firms and have consistently ranked in ENR in the top 200 International Design Firms as well as Top 20 International PM rankings 2004-2011. BD World recently ranked KEO #44 in the Top 100 Architects in the world. United Real Estate Co. which is a leading real estate development company in the MENA region, publicly traded since 1984 and delivers world class developments that contribute to the built environment through a culture which embraces a team-based approach, fosters communication and builds lasting stakeholder relationships.With a capital of 19 million dinars and assets of almost 20 million Union Real Estate Co., is among the most successful real estate developers in the region and are valued throughout for the beauty and creativity of their architecture and landscaping.

  2. The Sultan Center Food Products Co. (better known as The Sultan Center, or TSC) is a dynamic organization based in the Middle East that incorporates a diverse portfolio of successful companies, with retail as its primary focus, TSC is Kuwait’s largest independent retailer and a leading supplier of supermarket items, perishables, and general merchandise in the Middle East, with outlets in Amman, Oman and Beirut. Agility Logistics Co. brings efficiency to supply chains in some of the world's most challenging environments, offering unmatched personal service, a global footprint and customized capabilities in developed countries and emerging economies. Agility is one of the world’s leading providers of integrated logistics with more than 22,000 employees in over 500 offices and 100 countries. HOT Engineering & Construction Co., established in 1974 has over 3 decades of experience in the oil & gas / industrial sector and more than 10 years of experience in the Infrastructure and Building sectors. The company is classified with Central Tenders Committee as Grade-I in Construction & Infrastructure.

  3. BSBC Compliance System With more than 50 years of proven record of marketplace honesty and integrity. BSBC gives great importance to continue its legacy by transferring a clear message all over the company that only clean business matters to BSBC. Mr.Mohammad Hinawi- Quality Management Unit Head is BSBC compliance officer … Mr.Hinawi reports directly to Administration Manager. BSBC Anti Bribery and corruption Policy is being distributed and signed by every employee in BSBC. Compliance training is part of orientation and induction of every new employee after reading and signing a copy of BSBC Anti Bribery and Corruption Policy. RefreshCompliance training is done for all employees once a year. Note: Upon receiving Siemens note regarding BSBC offers covering letter statement “on behalf of Siemens”. Upon receiving the note, Our Quality Management Unit Head conducted full audit to all our official communications with MOH and Private customer to make sure its fully compliance with BSBC/Siemens Agency Agreement. In this Regards, we would like to confirm than BSBC had not used the same term in any of Its binding contracts with customers.

  4. Diagnostic Imagingand TherapyBusiness Model

  5. Market Status The Public Sector holds 80% of all healthcare and imaging business transactions in Kuwait. The two major suppliers in the Imaging Fields in Kuwait are GE through its representative Advanced Technology Company (ATC) and Siemens through Bader Sultan & Bros Co.(BSBC) Philips existence in Kuwait market is very weak due to internal reasons related to their Ex-distributor high prices and low quality after sales services. The displayed chart shows the total all installed base distribution in the public sector. Imaging & Radiation Therapy annual business in Public Sector is of the average of KD 10M. With our current aggressive sales strategy, our annual market share since 2013 changed from the average 30% to 45%.

  6. Market Status Private Sector holds 20% of Health care and Imaging business transactions in Kuwait. The Major Hospitals in Private Sector are: • Dar Al-Shifa Hospital • Al-Mowasat Hospital • Al-Salam Hospital • Hadi Clinic • Royal Hayat Hospital • Al-Seef Hospital • Al-Urf Hospital Market installed based chart looks different in the private sector where BSBC is the dominant player here. BSBC/Siemens supplied all the major imaging modalities in 5 of the above mentioned 7 hospitals in the past three years.

  7. Public Sector Sales Strategy • Equipment procurement in public sector is based on governmental tender where 80-90% of award decision is based on the initial submitted prices. Lowest bidder usually wins the tender. • Siemens Equipment costs are -in average- 30% higher than our major competitors’offered prices. A large difference which technical superiority can not overcome. • In order for BSBC to reserve Siemens installed base and increase gradually its market share. BSBC had to strategically lower its end user prices below Siemens Cost to reach the same level of ATC/GE prices. • The initial investment will be recovered on the long run through potential upgrades and Maintenance. • This model is similar to the business model in Siemens Diagnostics and lab equipment in General where machines are given on zero margin or on FOC bases against potential reagent order income.

  8. Public Sector Sales StrategySample of BSBC 5 years plan calculations

  9. Public Sector Sales Strategy Notes Regarding BSBC projects Calculations: • Calculations are done on 5-6 years bases. • Public sector is being treated as one account. • Projects in public sectors are being grouped in packages. i e, profits in one project will compensate losses in another.

  10. Public Sector Sales Strategy Options & Upgrades Sales: Systems’ options and upgrades are being sold with relatively high margins. (30% to 100%) Special Components Sales: Two considerations has to be taken into account in special components sales: - Special components are not included in MOH maintenance contracts. -Issuance of MOH order for any special component takes approximately 8-18 months. Invoices processing and payment terms adds at least another 6 months in its best cases. -In order to Guarantee the continuation of the services in MOH hospital, It was mutually agreed that X-ray Vendor will not wait to receive MOH order and will replace any defective special components immediately upon receiving MOH repair request. As the above setup puts X-ray vendors under the pressure of negative cash flow. It was also mutually agreed that higher profit margins will be applied in all Special components sales. Note: Despite the high profit margins in Special components sales, BSBC – as an added value to its offerings- had offered many of the DR and Mobile X-ray systems with 5 years warranty on X-ray tubes (Tenders 534, 535, 536, 530 & 540 are examples). Even though standard warranty term specifies 2 years warranty only.

  11. Finally: Future Sales Strategy Our aggressive sales strategy is successfully paying of in terms of market share and expansion the market. As per our forecasted business of 2014 & 2015, BSBC annual market share will increase from the traditional 30% to 45 %. However, BSBC current sales strategy and its heavy long term investments are affecting its financial status and negatively affecting its cash flow. BSBC alone can not continue in the same direction. It was requested in many occasions that we need to set new BSBC/Siemens shared sales strategy in Kuwait. In this regard, I refer to our last communications with Mr.Fabre back in April 8th, 2013 and hope to continue where we have stopped: “Dear Maurice, Dear Dragan,  I would like first to thank you for your efforts to secure the maximum possible discounts for Q2 orders.  It is not hidden that BSBC had taken a high risk investment represented in buying every single project in the order list. An investment which aimed to strengthen our BSBC/Siemens market position  in Kuwait.  Keeping our long term investment and commitment in mind, we have again to raise the red flag and discuss our future strategy in Kuwait market.  I have attached a list of the last 6 months MOH tenders (excluding US), This sample shows ATC/GE pricing trend that started two years ago in killing the prices in order to eliminate any possible competition. The list shows as well our best efforts to secure a position in the market. It’s very sad to tell that we are losing most of the MI tenders against GE because of the price. Based on the above and the fact that our existing installed base is aging, We see no other option but to strategically reduce our selling prices to the same level of ATC or lower and then recover with Maintenance income and potential upgrades over the life time of the machine.

  12. In order to conduct such strategy,  we would request Siemens Support to either: 1.       Reduce the after sales extended maintenance and application support prices to the level of Max 4% of the Siemens sales value. or, 2.       Reconsider Siemens maintenance setup in Kuwait where Bader Sultan & Bros Co. takes over the full responsibilities of after sales Technical Support activities in Kuwait. Our focus is on the market and our aim is to secure a continuous income to finance our long term investment plan. We had dominated the Private market when the chances were equal. But under the current aggressive price war in MOH we have no other option but to go for aggressive solutions. Awaiting your prompt response”

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