Chabros International's Expansion to North Africa Chabros Essay
- Length: 10 pages
- Sources: 15
- Subject: Business
- Type: Essay
- Paper: #55087022
Excerpt from Essay :
Chabros International's Expansion To North Africa
Chabros International is a company based in Lebanon that sells wood products and veneer that began its operations in the 1960's. The company was started by the current owners father and father's brothers. The company was envisioned, at the beginning, as a small local company that would deal in local wood products and veneer. During the ensuing years the company had very little growth, but it produced a living for the family, and, when his father died in 1987, Chami took over the company (Chabros, 2012).
Chami was more ambitious than his father had been and he wanted to take the company further that his father had ever thought possible. The first issue he faced is that Lebanon was still in the midst of a civil war that had plagued the country since the mid-1970's. It was difficult to find reliable suppliers, and it was hard to find workers who would stay with the business for very long (Chabros, 2012). This uncertainty ended in 1991 when the Christian and Muslim factions in the country agreed to an agreement that ended the fighting (if only temporarily) (Global Security, 2012). When the war ended Chami saw an opportunity to begin to build the way he thought he could. His company had started to import some supplies to Dubai, and they sent a representative there on a permanent basis to ensure the company's operations. They soon opened their first international office in Dubai, and the company has taken off from that point (Chabros, 2012).
Chabros International now has offices in eight different countries in the Middle East, and a lumber mill in Serbia besides their headquarters in Lebanon (Chabros, 2012). Because of the success of these operations, they are now able to think of even greater expansion into other regions. Chabros is far from saturated in the countries in which it operates, but the company does have more than 50% of the veneer business in some of the countries in which it operates (Chabros, 2012). But hardwood and softwood products remain the biggest sellers. The company has also become a brand name that is sold in Europe, Africa, and Asia although the company does not have offices outside of those previously mentioned. The company has become a known supplier in much of the world, and the quality of its products is without dispute.
The issue that Chabros has to contend with is that they have not ventured out of their comfort zone before. All of the operations that they have begun in the past have been contained in the friendly (to them) confines of the Middle East. The desire of the company's managers is to expand into markets that have very little representation, especially in the veneer market, so that Chabros can gain market share quickly and establish a base from which to operate.
Chabros wishes to expand into North Africa, and they will first target the markets in Morocco. The problem is that they do not know the market, they have not previously worked with the government of the nation, the customers will not recognize the brand, and there is some amount of political unrest in the country. The company has done some exploratory studies into the market and the difficulties they may have in establishing a base there, but they are not yet confident in their ability to enter the market in Casablanca. Thus, the company wants to do some more exploratory work that may be able to give them a greater amount of confidence in the venture.
There are many different methods that can be used to find solutions to the issue of moving to Morocco and the inherent dangers of entering a new market (EIU, 2012). The company needs to know as much about the area it is entering as possible. It is possible to get this information second hand, but it is better if the solutions are examined by someone who is trusted by the company. It is possible to use ad hoc methods because such a situation has been worked through in the past. When Chabros entered the Egyptian market, they were just as unfamiliar with the market and the people as they are in this instance. The company has made many moves within the confines of the Middle East, but each time they had to conduct PESTLE (Marketing Minefield, 2012) assessments on the nature of the external obstacles and SWOT studies for the market, product and Chabros itself. This could provide solutions that would spare the company the expense of sending an advance buyer to the region (as it had done in Dubai (Chabros, 2012)) to work with the people in the area and establish how the company was going to operate. Another possible solution is just to enter the market with all possible resources that Chabros can provide behind the startup (Lisle, 2010). Of course, there are benefits and dangers to all four potential solutions.
The problem is complex because there are many avenues that failure can take in the proposed expansion. The expansion is dynamic and complex because there are many things that must be accomplished in order to accomplish the move, and dynamic because the situation does not remain solid in either the area to which the company is moving or in Lebanon itself (EIU, 2012). The dynamic problems, such as recurrent unrest, needs to have a solution that will be in place to deal with it as it happens. In some ways, this is also an issue that will remain somewhat ill-structured because the problem itself dictates that there will be some amount of chaos. One issue here is that the market is growing faster than the suppliers can deal with (Moroccan-Market, 2012). Although, Chabros has taken care of that problem to some extent by purchasing a mill in Serbia, they are still not able to provide enough product by themselves, and the forests that the company controls do not have all of the woods that they will be needing, especially in a new market (Chabros, 2012). Thus, the solution will have to be one that is able to encompass all of the issues that can happen, that is, be as structured as possible, but have some means of dynamism because of the nature of the issues.
Thus, there are four possible solutions to the issue that has presented itself to the Chabros board. They can do nothing and grow market share in the areas where they are already established; they can do market studies to see if this is a good move and then move cautiously; the company can send an advance buyer to the area, which they have done before successfully in other markets, to establish their brand name and gauge the climate of the region; or, they can enter the market in full force with all of the resources behind them that they have at their disposal. All four are viable solutions to the problem, but only one seems to give the company all of the advantages of making immediate sales without the dangers of entering the market in an all-out fashion (Lisle, 2010). The company has decided to send a broker into the country who can arrange sales of product with local buyers and who can conduct an analysis of the situation first-hand. All of the solutions will be discussed in detail below.
Three of the solutions were rejected because they contained problems that could not be overlooked and were difficult to overcome. The first was to continue in the markets where Chabros has some amount of comfort, and not enter this new market at this time. It is possible that Chabros can grow market share in the areas it already occupies, but the competition has become more intense. The company looked at the competitive components in Porter's five forces model (threats from new competition, the bargaining power of competitors, and the intensity of the competition) and decided that this would not be a viable option. The reason was when they looked at the data from the study on the intensity of the competition (Economist, 2012). The Middle East, and especially Dubai, is becoming one of the wealthiest and fastest growing areas on the planet. This means that there are a lot of suppliers of the same products that Chabros sells who are vying for contracts. Because of the money involved, the competition is fierce for every job. It is difficult to maintain market share, let alone grow it, when the market is so intense. Other areas of the region are starting to recover from the events of "Arab Spring," and the competition there is increasing also (Bilan, 2012). Chabros is not afraid of competition, but the owners realize that it will be difficult to gain market share going forward. It may cost as much to do this as the company gains from the exercise.
The company could also evaluate the situation without doing anything right…