CHABROS INTERNATIONAL GROUP: A WORLD OF WOOD Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

CHABROS INTERNATIONAL GROUP: A WORLD OF WOOD Case Study Solution

Introduction

Chabros International Group was created in 1987, and deals in different kinds of wood surfaces. The company started its operations in Lebanon with selling only veneer type of wood surface. Later in 1991, due to unstable growth in Lebanon, the company expanded its operation in Dubai and started selling lumber along with veneer.

Due to successful expansion in Dubai, company started to make further expansions internationally. By the end of 2008, the expansion of the company’s subsidiary reached to eight different countries. The company also increased its product line by selling different quality of woods, which are categorized as A, AB and B.In 2009, company also got involved in production as well as trading of woods by acquiring its supplier company located in Europe.

The company was earning 100% profits and earning a higher revenue through its international subsidiaries. However, due to great economic depression in 2008, the company faced decline in Dubai sales in 2009.But the growth of other international subsidiaries remained sustainable. A decline of 30% in Dubai sales and 10% aggregate increase in overall company sales was experienced in 2009.

Dubai had been ranked as the leading subsidiary of Chabros International when categorizing according to sales. Moreover, the company’s core business was of veneer, but the company was experiencing lower sales and higher cost compared to lumber, which was earning higher sales and had lower cost.

The sales of the company were growing rapidly. But after deducting expenses, the company was left with only 6% or 6.8% of its net profits which were also not increasing.

To solve the issues faced by the company, few alternatives have been developed. An alternative that would be beneficial for the company’s long term and short term growth is necessary and urgent.

Problem Statement

Company has been suffering from growth problems due to 2008 economic crises. Moreover, cost of products are also increasing specifically the leading subsidiary of the company in Dubai is facing crises due to which, company as a whole is suffering from major problems.

Analysis

In order to solve the problems and issues faced by the company, it is necessary to analyze the company’s current status and resources by which company can take a feasible decision.

Porter’s five Forces

Bargaining power of Buyers:

Chabros sells higher quality wood compared to its local competitors. Moreover, the competitors are likely to sell local wood but Chabros is selling imported wood from different countries. Therefore, the buyer possesses low bargaining power as the company holds thecompetitive advantage and there is noother company standing at the status of Chabros.

Bargaining Power of Suppliers:

Chabros own sits supplying company in Europe with the name of -----. There would be less or no bargaining power of suppliers as the company has authority to increase the capacity of supply when there is higher demand of woods.

Threat of new entrants:

There are many local existing competitors but Chabros has the competitive advantage of imported wood which is highly preferred by the customers. Moreover, Chabros has expanded internationally and has the reputation of a brand. Therefore, the threat of new entrants would be lower.

Threat of substitutes:

The products sold by Chabros are of higher quality compared to other local competitors and due to the quality of its products, it has become customer’s preference. However, price conscious people may switch to other substitutes. Therefore, the company possesses moderate threat of substitutes.

Industry Rivalry:

Chabros has less or no industry rivals as there are no strong wood producing and trading competitors who can threaten the company and its customer base. There are some local wood suppliers in different countries, but there is no comparison between the quality of local and imported wood specially veneer wood therefore, industry rivalry of the company is very low.

SWOT analysis

SWOT refers to Strengths, Weaknesses, Opportunities and Threats possessed by the company. Following is the SWOT analysis of Chabros International Company:

Strengths:

The international expansion of the company is its main strength. As company has spread its existence in eight different countries, it may generate higher sales and revenues.
Variation and customizations in wood quality makes it easier for the customers to purchase wood according to their choice.
Expanding into producing as well as wholesaling woods has exploited many opportunities for the company.
Higher experience in selecting and evaluating wood, especially veneer wood would be very difficult for others to replicate.
Company is earning much benefits from economies of scales, which are related to serving wider and bigger markets.
Major employees of the company are Lebanesewho canemerge and adapt the culture of other countries.

Weakness:

Difference and fluctuations in currencies have higher cost to the company as wood production and its cost incurred is measured in Euros which is an appreciable currency.
Lesser advertising has been conducted by company due to which, company’s brand image and name has not been recognized.
High operating costs incurred by the company have lessen its net profit.....................

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