SARCO's story reflects the history of Oman. Its CEO, Ajay Ganti, emphasizes transparency, communication and trust in its people as the key to the success achieved in recent years. Oman has experienced a similar projection and, according to Mr Ganti, it will play a more prominent role in the world in the next 10 years
Please tell us about your background and how you came to be the CEO of SARCO?
I did my initial education in the northern part of India and graduated in science. I started my career with a small firefighting equipments company while I figured out what to do. At that time, a friend of mine got into the distribution of consumer products, electronics and appliances business and insisted I join him. I worked with him for about three and a half years till 1996, after which I moved to one of the leading consumer electronics company in India Videocon where I worked for about one and a half year, that’s when I got the opportunity to join the leading MNC in consumer electronics Sony India and worked for them for six and a half years. It was a learning experience at Sony and in 2004 I became the area manager for a state. To gain international exposure I joined a company in Dubai who were looking for people to handle their international business and expand the distribution network in different countries. Normally, people do not leave Sony to work for a smaller company, but I realized I could learn more with them, so I moved to Dubai in 2004.
During the next two years I was exploring different markets it was a great learning experience as I had the experience of working with established systems and processes, but here I had an opportunity to learn about smaller or less organized units where you need to be hands-on with everything. In 2006, apart from other offers SARCO’s offer was the one that interested me the most as I always wanted to be somewhere where my presence would make a substantial difference, so I decided to join SARCO.
Tell us about the history of SARCO and the main activities of the company?
SARCO is a joint venture between the Juma Al Majid Group, one of the largest groups in Dubai, and Mr. Abdullah Moosa Group, a well-known business house in Oman. SARCO is into distribution, marketing and trading business for the past 25 years and has been distributing Samsung products.
I joined SARCO in September 2006. Before that, I was not familiar with SARCO, but I was attracted by the challenge that I was given the opportunity to run the business the way I wanted to and be an entrepreneur while being an employee. I decided to focus on the core competences of the company, which was first and foremost the Samsung business. We were primarily involved in trading and retail of consumer electronics, although we had other businesses as well, such as the distribution and retail of watches.
We spent most of 2007 consolidating our operations and working on the structure of the organization. The first task was to change the attitude of our people. When I joined, we had about 75 employees; today we have a workforce of about 306 people. 2007 was our first year of success as we registered almost 50% growth in terms of the top line.
In 2008, we decided to add the IT business line of Samsung. Up until then, it was done by another company in Oman and they were not doing so well. Samsung was not very well known for its IT vertical, they were more renowned for other products, but I believed it was an opportunity and we had to take advantage of it in order to be able to benefit in the future. I always believed in the brand Samsung. During the same time, we also started our commercial air-conditioning business and again, we started off with Samsung, even though their commercial air conditioning line was not doing so well back then, but we decided to bet on the horse that was not a winner but had the potential to excel.
Do you have the exclusivity with Samsung for Oman today?
We have the exclusivity for products groups – audio-visuals, home appliances and IT. We are not exclusive in the mobile phones, but we are at least three to four times larger than the other player. In my opinion, it is the conduct in business that creates exclusivity, not the label. One has to earn its position rather than demanding it.
At the end of 2009 we were keen expanding, and that is when we added the mobile phones to our portfolio, together with the digital cameras. Today, we are probably the only distributor in the entire GCC which carries the complete gamma of Samsung products.
Which business segment is the fastest growing?
The entire products range of Samsung is successful, with mobile phones growing at a faster pace, but on average, each one of them has grown about 35-40% per year. So the average growth of the company since 2006 has been about 50% every year.
In 2008 we also invested heavily in our service set up and today we have the largest service facilities in Muscat. We converted one of our warehouses into a service facility of 1,100 sqm area, and even that space is becoming small for us today.
In that process, we have expanded our retail operations. We currently have six large format stores (over 150 sqm area) out of which two are Samsung brand shops. The brand shops are important for building up the brand and product reach. Most of the distribution channels do not give you 100% representation, so we wanted to showcase our strengths in the Samsung brand portfolio. We are soon opening the 7 large format shops in Nizwa and it will be our third brand shop. In the meantime, we are looking at more locations to expand our operations.
We also have twelve small format mobile kiosks formats comprising 20 sqm, and we are opening up more of them in the coming months. My dream is take the number of small formats to about fifty in the next year and a half.
We are planning to have three concepts – the large format retail stores, the exclusive mobile kiosks and the small format mobility solutions, which will combine IT and digital imaging. It is a new concept in communication convergence, and we are going to experiment with it soon.
In your opinion, what are the main reasons behind such an impressive success?
In any distribution house, you have to be very careful to have the right product base, pricing, positioning, market penetration and promotion. We have been very active with promotions. Another thing that was critical was our ability to take decisions faster, especially when it comes to understanding the consumer needs and reacting to them immediately. We believe in proactive approach.
The way we have structured the organization has been very important. We do not have a traditional hierarchy, our management philosophy is different and we take our business more as a sport - we are a team, one person is the captain for a particular game, but when we decide on the teamstrategy, we sit down together and collectively come up with ideas. It is a more inclusive decision-making process where each one of us has to think like an entrepreneur about its own business. We ensure that decision-making is flexible at the lowest level possible. Transparency and communication have helped effective decision making. Most of the people delay the decisions in order to make sure they will be successful. We take faster decisions, we fail in some, but we learn from them, correct ourselves and grow stronger.
Of course, the Samsung brand per se has been growing over the past years which helped us greatly. Today, almost 80% of our business comes from Samsung.
Now let’s discuss the remaining 20% of your business. How is the watch distribution and retail business doing?
Traditionally the watch business is not a business with exponential growth. It contributes with about 5-7% to our overall revenue. When I took over the company, the channel business was dying down and the bigger players were moving out, while the smaller players required credit facilities. The brand was not getting its due respect. In 2007 we decided to look at things differently. We had retail stores in a couple of places, so we decided to revamp them and improve consumers’ perceptions. I decided to change the look and style, and move into the mid and high-mid sector and change the perception of the brand. Citizen and Casio are not low-end brands. We sell something really good in terms of technology and design, and it is very affordable, so it needs to be represented well in order to attract the right consumers. We gradually started getting into the concept of boutiques and exclusive shops.
With Casio we are looking at developing a new concept called the G Factory. They have an exclusive range of trendy high-end watches which are very famous in the West. They are quite expensive and they appeal mainly to the younger generations. You find these concepts in western countries mostly; they now even have it in Dubai.
Usually, in this part of the world, for a watch to be considered as a good one it has to be Swiss made. Casio and Citizen are Japanese brands and they have phenomenal watches so we need to change the brand perception in order to reach the right audience. We can only do that by increasing our own retail. Building a brand requires a lot of patience, but we are working on it. Our sales have been growing on an average of 10 to 12% per year. It is a different business, but a very interesting one. We are looking at making watches not just as timekeeping machines, but as jewelry, so we need to develop new concepts in order to achieve that.
How is the air-conditioning business growing considering the hot summer months in Oman? And what other products do you have in mind in order to expand your existing portfolio and maintain this pace of growth?
The commercial air-conditioning business is very strong and fast growing. Of course, we have Samsung products, but we have recently expanded by adding another American brand called the American Breeze, which is primarily for the chillers and package units. The air-conditioning portfolio is very large and Samsung caters only to certain things, but we are now focusing on developing that business, and in a few years it should contribute about 30-35% to our revenue.
We have also added two more brands to our portfolio. We have just entered into a distributorship agreement with Microsoft in Oman covering its Original Equipment Manufacturer (OEM) and commercial business. We are not exclusive however. They used to have regional distribution operating out of Dubai, but at some point, Microsoft thought about having a local distributor. We do not have any experience in software, but we must have qualified somehow with the credentials they were looking for. If Microsoft has a better penetration and distribution, we can eradicate a lot of software piracy. We have to educate people use original software and this line of business has no conflict of interest with our remaining portfolio.
Another area of growth is our exclusive partnership with Severin, a very small family-owned business from Germany for small domestic appliances. In terms of revenue, it is almost 400 million Euros. Germans are traditionally very good with technology, and we realized that this product line was missing in our portfolio.
Apart from that, there are many other non-conflicting projects in the pipeline, which complement our existing business. We are working on expanding and ensuring that our top line continues to grow. This year we have grown by 40% and we want to maintain that pace.
You have been working and living almost six years in Oman now. What is it like doing business in Oman?
It is the best country to do business in. Oman is the most wonderful country in terms of any entrepreneurial venture. It is not aggressive and people are very tolerant. One of the main challenges we are currently facing is Omanisation, but I actually see it as an opportunity. I am proud to say that in SARCO we now have more Omanis than expats. Our target is to reach 65% Omanization by the end of this year, and if we find the right skills set of people, we will achieve this goal.
In my opinion, the top line should be the prime objective of any organization, and the bottom line is management. You can manage your bottom line by improving efficiency, and it is a long-term process. It takes its toll on you as you are investing in your future, but what we are doing today will pay back in a few years.
If there is proper education, I believe that things can be transformed drastically. I have had a very positive experience over the past two years. At the moment, the focus is on developing the local workforce. They are soft, but firm at the same time when it comes to their beliefs, and I think this is very important. Over 50% of the population is under the age of 21, and almost 85% of the population is under 35 years of age. It is a very young country. You can imagine what the human resources will be like in ten to fifteen years from now.
Oman is also a very conservative country and the development has not geared purely by commercial profits, but it was meticulously planned well in advance. It is not easy to build a country and you do not find this level of development over 40 years in many countries in the world. Even if you look at the Arab Spring, it was handled in a very diplomatic manner here in Oman. His Majesty allowed people to voice their opinions, and I think very few statesmen can afford to do that. You need to be blessed to have that ability.
The direction of the country is very clear. My feeling is in the next ten years, Oman will play a more prominent role not only in economic terms, but also in the diplomatic arena. Oman will play a more significant role in the world. I see a lot of potential. Oman is going to boom and it will be great to grow with the nation. I think Oman can become a global manufacturing hub for a lot of industries. It is amongst the most strategically located countries in this part of the world and it could become a very strategic manufacturing launch pad for many products.
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