chabros 160407210748

THE WINNING STRATEGY Andreea Nan Agenda Introduction to Chabros International VRIO Analysis – The Competitive Analysis of Chabros Ansoff and The Different Choices Available to Chabros The Solution Introduction A little background info on Chabros Headquarters MAPS The Chabro’s Offices/Subsidiaries A little introduction on Chabros Founded in 1960s in Lebanon Chabros is the leading wood company dealing with veneer and lumber The first international attempt was in Dubai, then later in 2001 Riyadh subsidy opened They extended their operations from wholesaling to include manufacturing Chabros Cairo opened to have a market for “B” quality veneers for cost cutting purposes Dubai brings in most of the revenue from sales even after the 2008 crisis Problem Since 2009, sales have been reducing Dubai’s sales – the subsidiary bringing most sales – dropped by 30% MENA SUBSIDIARIES BOUGHT ONLY 50% sawmill capacity in 2009 of VRIO Analysis A competitive assesment of Chabros A basic model of VRIO Is Valuable? Is Rare? Is difficult to imitate? Is organization organized around? Chami’s 25 years of experience YES YES YES YES More variety and more customized wood products than most competitors YES YES YES YES Distinctive strategic relationships with its key suppliers YES NO Strategic Flexibility YES YES YES YES Lower prices than competitors YES YES NO Brand YES YES YES NO Economies of scale YES NO Adaptability of employees YES YES YES YES Flexible Payment Strategy YES YES YES YES VRIO Analysis of Chabro Chami’s 25 years of experience LONG-TERM COMPETITIVE ADVANTAGE The experience Chami has in picking and buying veneer is hard to gain or replicate Such experience is gained from years and years of work and learning what people like or dislike Not everyone has that It is important because people not buy the veneer for its quality but rather for the design and patterns It was a competitive advantaged in Dubai and continues to be Chami works to pass on his expertise to partners and top management Chabros Intl Group's Net Profits from Sales (%) 8% Problem : Profit dropped significantly in 2009 7% 6% 5% 4% 3% 6.50 6.80 6.70 4.20 2% 1% 0% 2005 2006 2007 2008 2009 ANSOFF Model Important strategies to increase sales ANSOFF Model Market Penetration Benefits: using this method can use the lower prices Chabros offers to increase market share This is also an effective way at combating competitors, but Chabros does not worry for those Disadvantage: With a low price you can potentially lower your brand image and miss opportunities Product Development Benefits: Broadens Chabros scope and could potentially get more customers and hit new segments Disadvantages: 50-80% of new products fail and a lot of money is spent on marketing and R&D ANSOFF Model Market Development Benefits: Chabros are very good with their products and they are known for it in the places they operate This strategy takes their products to new markets As long as there is a need, this is a less costly strategy that almost guarantees you increase in sales Disadvantage: If marketing was biased or done wrong, and the new markets you chose is not optimal, then you can lose a lot in form of costs and the subsidiary would fail Chabros have an a good history with new markets Diversification Benefits: it stretches the capabilities of the company It also spreads business risk and is efficient when the other markets are declining Disadvantages: In this case, it can be too risky to undertake both new markets and new products It could also be costly and take too long and seeing that it is just after recession, the best fit might not be found Different ALTERNATIVES TO BOOST SALES Change product mix Morocco Closing Parts of the Serbian Sawmill Market Development Expand within existing markets Market Penetration Closing Parts of the Serbian Sawmill Benefits Reduce employees by half Save $400,000 per year in salaries Reduce excess capacity Focus resources where needed more Buy the same lumber from the lower priced supplier in Russia Disadvantages The layoffs might demotivated other employees in the business The 10 million investment put into it would’ve been for nothing Firing so many employees, risks that they won’t be prepared when demand surges They lose competitive advantage especially in non-MENA regions Lose potential subsidiary in Morocco Opportunities Strengths Known EU standards Moroccans have a positive view of work done in Dubai Specialized labor force No competent local rivals Big market High demand for Chabros Serbian lumber Very few sellers of veneers Morocco is not in recession SWOT Weaknesses Lacking relational networks Chabros isn’t known in Casablanca Chabros does not know which customers are worthy of trust for not using L/C’s Threats Possible entry of new foreign competitors Possible changes in taxes and tariffs Some local competition Supply contracts exclusively awarded to historically well-established suppliers Morocco’s SWOT Analysis Page 14 Analysis of Morocco EU has initiated a free trade agreement with Morocco to strenghten relationships with North African countries This benefits Chabros Serbian sawmill The market size is 31,606 in terms of population which is a good number for the lumber products It is a country with quite a high score at 128 of ease of doing business, which is good for opening a subsidiary there The GNI is lower than most of the other countries (@4,190), which means that lumber would be a preffered product or type B quality veeners There is a demand for such products, and thus Chabros could raise their sales by using the Market Development stage The currency is also tied in with the Euro so it is optimal for avoiding FX problems between Serbia and Morocco If transportation costs were about 10% of Total Cost between Serbia and the MENA regions, it will be approximately the same, thus something familiar to Chabros expenses Cultural Assesment - Hofstede As per the six dimensions, we see that Lebanon and Morocco have a lot in common and will be a potentially good fit Both countries score high on power distance so hierarchy is common and accepted in both cultures, meaning that work ethic is very similar They are both collectivist in nature and believe in team work This is encouraging to see since we already know that Chabros employees are good at adapting, now we know that it will be equally easy for Moroccan’s to get used to the way Chabros operate Expand within existing markets Existing markets: Dubai (2 subsidiaries), Saudi Arabia (2 subsidiaries), Qatar, Oman, Serbia(2 operations), Egypt, Lebanon Benefits Disadvantages In each market, Chabros already operates and thus knows the local regulations well The experience in the market is valuable to penetrate the market in ways that will work Operations already exist so costs won’t be that high Already built profiles of what products are needed where Already within each market and demand is decreasing No new knowledge is acquired Most of the existing markets purchase high quality veneers, whereas Chabros need someone to buy lumber made in Serbia Already established presence and positioning against customers, so it is hard to change that drastically to boost sales Change product mix Alternative 1: Focus on Lumber Benefits Disadvantages There are more European countries that they could sell lumber to It is cheaper to acquire It is easier to pick and doesn’t need much experience and talent It is a commodity The Serbian sawmill has the capability to supply the lumber It is not the core of the business Their brand comes from supplying veneer In the past Chabros bid against for huge projects in veneer, they would lose this edge Restructuring costs will further decrease profits Lose potentially important competitive advantages Change product mix Alternative 2: Focus on Veneer Benefits Disadvantages Their reputation comes from veneer They have extensive experience in the veneer market and Chami’s experience is one of their competitive advantage The MENA region prefers veneer and a lot of current operations are in the MENA region Dubai is still one of their biggest customers Miss the opportunity of moving focus to European countries or Morocco It requires more experience in the field of choosing It comes in different qualities at different costs It is not a commodity like lumber Solution Solution: MOROCCO The most prolific solution for Chabros is to open a subsidiary in Morocco They will enter a completely new market, with new opportunities and low competition Chabros can use the excess capacity of lumber from its sawmill to sell to the Moroccans since they have a demand for those products It is one of the least costly but highest potential for increasing sales in the long-run All the other strategies are short-term strategies, Morocco is a strategic choice for the long-run In the future, it could open up the market to neighboring countries – Tunisia, Algeria Culturally wise, Morocco is similar to Lebanon so the problems raised by culture could potentially be avoided completely This decision helps Chabros sell its extra lumber while maintaining their competitive advantages from selling veneer to MENA regions THE WINNING STRATEGY Andreea Nan