CHABROS INTERNATIONAL GROUP: A WORLD OF WOOD Harvard Case Solution & Analysis

CHABROS INTERNATIONAL GROUP: A WORLD OF WOOD

1. INTRODUCTION

CHABROS INTERNATIONAL GROUP is a Lebanese Group with a business model whose core focus is on veneers as its best selling premium products, but with expanding opportunities in the lumber market, the company has also succeeded in establishing a firm footing in this market. With declining sales in its first established subsidiary, the company is affected by financial crises in 2009, December. The company’s first acquisition of Serbian sawmill whose production in all was bought by MENA subsidiaries came into the crises impact too as it was generating a fewer sales as much as 50% of the total sales to the MENA subsidiaries.
The problems and strategic issue faced by the organization is that its profits were dependant on external factors (currency pegging) due to its dual nature business model, which was veneer and lumber manufacturer along with veneer and lumber wholesaler. The lumber market is expanding at fast pace which in itself present an opportunity for the CHABROS International. Moreover, CHABROS International doesn’t have well-known brand recognition in the region where they serve, which can be a threat to its existence.
All of this needs to be dealt quickly given two major alternative suggestions that include: closing parts of the Serbian Saw mills or to re-boost CHABROS International ‘s sales by expanding in markets they already operate in, considering Morocco as a best fit to their expansion strategy. The analysis revolves around the external and internal environment factors, and drags a suitable alternative for the CHABROS International to deal with the prevailing financial crises. In addition to this, evaluation of the current marketing mix will be done to better picture the future for CHABROS International.

2. ANALYSIS

• What are the major issues and management problems challenging CHABROS International Group?

a. Lack in Ability to Intact Cultural Aspects in JV: Hofstede Cultural Dimensions
CHABROS International, a Lebanese Company planned expanding its operations into other countries as well because of their success in the Dubai Wood Market. Therefore, they entered into the Saudi Market where due to lack of financial resources they expanded by merging with two Italian partners in an IJV (International Joint Venture). This brought confrontation to variation in carrying business between the two parties (Smith, P., 2008). The Saudi Arabian way of doing business was way different from the way Italian people carry their business out, which ultimately resulted in selling-off the 50% shares from both the Italian Partners. CHABROS International lacked in its ability to incorporate the cultural dimensions from both the countries so as to make the venture successful. Moreover, reliance on a single supplier to cater all the MENA subsidiaries added to the fire, and the company suffered supply outages. Moreover, instead of coping up with the persistent supply shortage issue, the company invested 11 million more in Serbian Sawmill and raised unbearable expenses for itself, which further deteriorated the situation (Smith, P., 2008).

b. Short Sighted Marketing Strategy
The company lacked significant marketing expertise and fall short sighted to market its brand name. With operations carried out internationally, a major anticipated threat for the company was that it did not have an established presence in the markets they served. The 4PS in the marketing mix for CHABROS International reflected ups and downs. For example, the promotion was weak and the product distribution was also weak in its own (Kotler, P. 2006).

• What motivated CHAMI to expand CHABROS’ operations internationally? What strategy did he follow: International, multinational, global or transnational?
a. Analysis of the Business Type
CHAMI was motivated to carry its operations directly in the Dubai Market rather than carrying it through its clients, which suggests that the company followed an international strategy earlier. Later, the company followed a transitional strategy, which is evident by the fact that the company has invested in the foreign markets, with a central corporate facility, and has given autonomy to each market to conduct sales under the CHABROS International‘s brand name. The motivation for the company’s owner to establish its first subsidiary in Dubai market was the increasing demand for its product offering in the market. This led CHABROS International to have its first internalization. In essence, these were as following:

1. Chami’s Motivation: Plans to expand the business from production to trading due to rising demand for the product.

2. Earlier Strategy: CHABROS International is using Dubai Clientele as an intermediary to move goods in the Dubai Market

3. Later Strategy: Transnational, foreign investment in foreign markets with a single brand name and central corporate office.
• What strategies/options were available to CHABROS to overcome the financial; crisis? Which strategy/option would you recommend? Why?

a. Alternative Recommendations

The strategic option available for CHABROS International is to overcome the company’s financial crises and to revamp its position in the wood industry as per the case are:......................

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