Exist for Wood and Veneer Manufacturer Chabros

¶ … exist for wood and veneer manufacturer Chabros International. The company is located in Lebanon which could cause problems due to the new political unrest which has plagued the country over the past four years. However, Chabros has positioned itself well by diversifying its business to other countries in the region. The business has grown in the past two decades, largely due to its emphasis on growth outside of Lebanon and its focus on the veneer industry. This report use Porter's five forces, a PEST analysis and a SWOT analysis to determine the advantages of moving to other areas of world. The issue at hand is that the companies sales have been greatly affected by the economic downturn which stopped many projects in its largest area of growth, Dubai. Because the economic situation has been tenuous for the past three years, Chabros has had to study its situation and try to determine what would be the best course of action to maintain its financial integrity until the global wood and veneer markets start to recover. Recommendations of different solutions to this problem are given at the end of the paper after the analysis has been completed.

Case Analysis: Chabros International Group

Introduction: Chabros International Group

Chabros International Group was originally just a small lumber and veneer supplier from Lebanon that operated in a country in which instability was common. The company was incorporated in the 1960's by father of the firm's current owner and the father's brothers. The name of the company comes from a combination of the words Chami and Brothers. The present owner took over the reins of the company in 1987 when his father died, and he had to deal with a country that was in the midst of a long civil war. After the war ended in 1991, the company still had to contend with unrest and the nation's financial difficulties.

However, a plan developed that positioned the company as an industry leader in its region. Chami learned, quite accidentally, that the local international market (within the circle of the Middle East) was ripe for a new entry. The company began by sending a representative to Dubai to conduct business, then they opened a warehouse in Dubai. After that success they began opening international offices in other Middle Eastern nations such as Saudi Arabia, Qatar, and Oman. Chami also opened a subsidiary in Egypt to sell his lower quality veneers which would normally have been discarded. As of 2009, the company was in many of the major countries in the Middle East, and seeking to expand their operations even further.

Chabros competes in the hardwood/softwood arena and with sales of veneers. The company has competitors in each of these products who are on the local, regional and international levels. Chabros is the largest of the regional companies, but since they are also now have operations in Europe, their competitors in that region are far larger and better established.

Chabros' environment needs to be analyzed to see where they can go from this point. The discussion is this paper regards the external market environment within which Chabros operates, their internal climate, the overall competitive market, and then the author gives recommendations for further growth. Analysis of all of these areas is crucial to the conclusion which the author reaches.

External Environment

The external environment in which any company operates is complicated by the forces that exist in that environment. For example, if the political situation in the base country is not stable, then the company may have difficulty with any plans it has for further growth. This analysis looks at the political, economic, social, and technological outlooks that concern the firm.

Political

Lebanon has long been a country that has had difficulties in the political arena. The reason for this is not the political parties that exist within the country as much as it is the fact that the country is divided religiously. Christians and Muslims are given equal representation in the parliament and the executive branches of government, and the 26 regions in the country have equal representation. The government itself is formed as a representative republic, but it has special laws governing it because of the split religious nature of the country.

The two religious factions fought a long civil war to determine who would control the country from the 1970's until 1991. The war was concluded by the sides reaching an accord in which equal representation was given to both religions. The problem is that since 2006 there have been constant skirmishes between the different political factions in the country. The primary opposition comes from the radical Islamist terrorist organization, the Hezbollah. They have been instigating conflict, and they have gained a majority control over the parliament which meant that they could name the prime minister. This political unrest does not bode well for businesses within the nation.

Economics

The economic structure of the country has been relatively strong despite having many periods in which the country has been at war, or had some level of internal conflict. The reason for this is that there is a lot of foreign direct investment, especially from Asia. Lebanon became the banking center, in the Middle East, for many Asian countries, and that has not changed despite the unrest in the country. However, this economic stability is greatly threatened by political turmoil.

If the government can gain control and stabilize the political situation, there is a lot of positive economic action taking place in and around the country. Although Lebanon is not one of the large oil producers in the region, they have the potential to be. Just off the coast, on the seabed that connects Egypt, Cyprus, Israel and Lebanon, a very large pocket of natural gas and crude oil has been discovered. Egypt and Cyprus are currently in negotiations with hopes of exploiting the field. Lebanon and Israel could enter the negotiations at any time to determine their part. Lebanon's economy could receive a large boost from this oil production, but it is already relatively strong because of its banking and tourism sectors. Many citizens also operate small, local companies and there is some small amount of agriculture that includes fishing, farming, and lumber.

Social

The country has a complicated social structure that plays into the political situation. Again, the population is divided between Christians and Muslims, and the government was structured so that each religious faction would have equal say in ruling the country. The social structure means that their always some tension in the country, especially now that the ruling Islamist faction is Hezbollah. The Muslim population has increased over the past twenty years until it holds a strong majority of the country's population. This is due to Christians leaving the country, and more Muslims immigrating to Lebanon.

Technology

Technology in the industry is always being upgraded, as new methods of both extracting wood and creating the products that Chabros sells are designed. The government in Lebanon is very aware of the part that they play in maintaining the technological base of the country, and the law supports growth in this area. Most of the population has access to advanced technology, and a majority also have access to the internet. The issues in this area also stem from the government which could impose regulations on the use of the existing technology.

It is also necessary to look at how the company is positioned to deal with the external environment in the industry. This type of analysis is best done with Porter's Five Forces Model. This model looks at threats of new competition, threats from new products and services, the bargaining power of consumers, the bargaining power of competitors, and the intensity of the competition.

Threat from New Competition

There is always a possibility that new competition will arise, especially as the company explores expansion into new areas. In Europe and the Americas, there would be a great threat of competition, but the company is planning to stay a little closer to home and expand to Morocco. Local competition is not a large concern, but Chabros does only control five percent of the market in Lebanon.

Threats from Duplicate Products

Many companies around the world sell basically the same products that Chabros does. But, because of the nature of the industry, the products that Chabros sells are easily duplicated. It is difficult, in the lumber industry, to devise new products to sell. Unless a niche market is found such as the B. level veneer sold to Egypt.

Consumer Bargaining Power

Consumers in the industry in which Chabros operates are manufacturers of finished products. Because there is a great deal of competition, the consumers have a great deal of power to influence the business of the company. Since sellers of lumber and veneer are plentiful, this could be a major source of frustration for Chabros.

Supplier Bargaining Power

A large portion of the product that Chabros deals with is supplied by their own mills. They recently bought a mill in Serbia to make sure that they had the production needed for the customers that they already have. This makes it easier for them to deal with other suppliers, and gives Chabros more bargaining power. Also, because Chabros acts as a middle man between its suppliers and the ultimate customer, they have more power than the original supplier.

Competitive Intensity

Since the economic downturn there is actually a greater amount of this than there was previously because of the lack of jobs globally. This means that the customer has the power to make the different suppliers compete for the jobs that are available. Rivalries are not a large part of the problem, but there is a lot of competition worldwide.

Internal Environment

A company's internal environment is more than just its financial statement. The company relies on a vision and values to energize its people, and they have strategies for growth that are specific for the company. This section talks about how the company operates internally.

Mission, Values, Vision

The main vision of the company is growth in the markets it is a part of. The company believes that because they have superior products to its competitors in the region, they can compete with any on an equal basis. Also, the company's mission is to introduce quality veneers as an alternative to the solid wood products that others are selling. Although only about one-third of its sales are in veneers, the company hopes to grow this section of the product line even greater. One of the reasons for this is that the company believes that it is more environmentally responsible for them to take this path.

Resources and Capabilities

The resources that the firm has developed over the last fifteen years have given it the ability to get past some of the political upheaval in its home country. Because the company has had the foresight to move into different countries in the region, and because they bought their own large mill in Serbia, Chabros is positioned for continued growth. The firm has also shown the ability to grow also by its use of products that others considered waste.

Key Strategies

The primary goal of the company is growth in the region, and then to expand beyond their region. The way that they have made this happen in the past is to open a simple warehouse in a densely populated area of the country and then continue this by working into other areas of that country, or expanding to close neighbors. This growth strategy has worked so far, and the only way that they can improve on it is by further saturating areas in some of the markets that they already occupy.

Overall Competitive Environment for Chabros International

This section of the paper will discuss how Chabros is positioned to compete in the wood and veneers markets. A SWOT analysis of the firm will be the primary means of completing this analysis.

Strengths

The main strength of the company is in its that it has known quality standards because it products have been certified by the European Union. Because if this relationship and the fact that Chabros already has a large mill in Serbia, means that the products Chabros makes are highly valued by its customers. Chabros has a high quality rating and continues to build on this because of the company's desire to achieve status in the WTO.

Weaknesses

The company has not yet dealt with many other consumers outside of its immediate region. Although, Chabros would like to see if it can market its products to Morocco, there is a danger that they will fail in that market because the company is not known the way it is in the Middle East. Another issue that Chabros faces is its general unfamiliarity with other markets.

Opportunities

The primary opportunity that Chabros is looking at is the possibility of moving into new markets, specifically Morocco. The company has built a great reputation for itself, but needs to expand in order to continue its revenue. The opportunity is there because there are very few local competitors in the region, and customers are begging a company like Chabros to come in. The people of Morocco apparently want the veneers from the tree species Chabros is able to obtain from it Serbian supply, and there is a large market for other products as well.

Threats

Chabros is spread out enough that political unrest in the home country means less than it once did, but that could still spell problems for commerce in general. The advent of the "Arab Spring" last year meant that the entire region was in turmoil. This does not bode well for a company like Chabros whose main business is currently centered on the region.

Recommendations

The first recommendation that has to be made is that the company needs to pursue its expansion into Morocco. The reason for this is that the market is wide open because there are very few local competitors, and there are very few competitors from Muslim states. This means that Chabros should be able to use the advantage they have in the placement of their company in relation to Morocco, as well as fuel the desire that seems to exist for its Serbian products. The company will have to examine how its customers would conduct business (as that could be much different from how Chabros normally conducts business and financial matters) before they dive into the country. A SWOT analysis has already been conducted, and the results seem promising.