Chabros International Group Harvard Case Solution & Analysis

 

Strategy for international expansion:

The options available for Chabros were to follow international, multinational, global or transnational strategy however; the company followed transnational strategy. Transnational strategy can be defined as a structure where the company managed its local and global activities by locating their offices in different countries. In this strategy, the company’s global activities can be synchronized between the head office and other divisions of the company worldwide. As of Chabros, the company first followed international strategy, then continued the procession following by multinational strategy and transnational strategy in the end (Millington & Bayliss, 1999).

Initially, the company started its business by exporting its basic product to Dubai. After that, the company started exporting goods to other countries in order to address the demand and needs internationally. For the export in Dubai, the company only purchased high-quality goods however; for other countries like Egypt, the company purchased low-quality woods i.e. B quality woods.

Strategies to overcome the financial crisis:

Global Financial Crisis hit the economy badly and resulted in a drastic drop in the sales of veneer and lumber. After the crisis, the company had to reform some of its strategies to stay competitive in the industry. Three strategic options available for the company included maintaining the status quo that was waiting and watching the sensitivity of the situation. Second option could be closing some parts of Serbian Saw mill as the company estimated that this option would help the company to save around $400,000 annually in terms of salary. Next available option for Chabros would be following some growth strategy.

If the company decided to maintain the status quo and to do nothing; it would cost nothing for the company as the management of the company just had to sit and watch the trends in the economy. Further, as the economy after financial crisis was not stable and was vulnerable to many market conditions, it would be safe for the company to wait and see. Moreover, selling or downsizing the saw-mill immediately after the global financial crisis would be a premature decision.

However if the company adopted this strategy, then it would have to suffer losses on a daily basis until some decision was taken by the management team of the company. Further, it would decrease the motivation level of many employees as they felt themselves in depression and anxiety of losing their jobs.

Another option that could be used by the company was closing some parts of the Sawmill as this strategy would help the company to decrease its short-term costs through which short-term debts could be achieved. Moreover, with the help of this strategy the company would be able to maintain at least its current business situation and somehow help Chabros to maintain the minimum level of profitability.

However, this strategy would lead the company to shrink in terms of market share rather than to expand or to grow. This strategy might lose the company’s skilled labor and workers, which were the major assets of the company and it, would be difficult for the company to find such skilled labor again.

Another option for the company was to adopt some growth strategy which included penetration into the existing markets, exploring new countries for exporting of its products or company could also grow by doing Foreign Direct Investment in another country.

When the companies were more diversified in its business operation, it became much easier for them to hedge against the market and economic risks. However, it would be risky as well as the company was still fighting with the financial crisis of 2008 and at this stage, expanding its business in other countries would make the situation even more complex.

Further, if the company decided to grow in the already present market, it would be less risky as the company was familiar with the market and the ways through which business activities were conducted in that market.

Market Development Strategy:

If Chabros decided to follow the market development strategy then the company had to decide the country in which penetration would be best. For this, comparison of countries needed to be done on different criteria and ranking should be done for each criterion so that the best country for the penetration growth strategy can be identified.

For the purpose of identifying country for market development strategy, five factors have been taken from the case to evaluate the attractiveness of each country. These factors include market size (population), GNI per capita, wealth of consumers per capita, growth rate in future and geographical distance from Lebanon.............................

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