Chabros International Group: World of Wood Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

A. Close parts of his sawmill

This strategy basically relates to downsizing. By following this strategy Chami can reduce costs and thus reducing his losses. The shutting down of his sawmill will be advantageous as he can save $40000 relating to salaries expense per annum. Along with the short term costs; the long term costs will also be reduced. The lower levels of short term costs and long term costs will assist in coping up with the economies all over the world.

The lower levels of short term costs and long term costs will also assist in maintaining the offering prices at the present level. As a result, they can retain their current customers and even increase the customer base with lowered prices. The level of annual revenues will also increase. The increased availability of cash will result in attainment of operating efficiencies in rest of the Serbian sawmill facilities.

All the above advantages will help in attaining the lost profitability.

But, as a result of undertaking this alternative Chabros will lose skilled employees that are the part of the closing parts. The retention of workers in the remaining parts will also become difficult and insecurity will prevail among remaining workers. If in the near future, sales return to higher level then Chabros will not be able to meet the demand. This is the strategy that will not be supported by most of the management team as it will result in reduction of the company’s size and operations.

B. Try to increase sales to use the unutilized capacity

This alternative relates to instilling growth in the company. The alternative can undertake the following two options;

Increasing sales and marketing efforts in the existing locations
Expanding into new countries

If Chabros expands in new countries, it will have geographical diversification which will help in reducing the country risk. The second advantage will be that the company will develop an efficient global scanning and learning capability. Sales and revenues will increase. As Chabros is following a multinational strategy; hence adopting this option will be in alignment with the existing strategy.

Chabros can easily expand in new countries as it has complete knowledge regarding the nature of these markets. The penetration in the existing market will not require the company to invest large fixed costs; thus it is a less expensive alternative. The company will not shrink but will expand and can be made profitable by making the operations efficient in future. There will be no threat of not being able to meet the demand, which may arise if alternative one is followed.

But a growth strategy can be riskier too. As Chabros is facing reduced demand, this may continue for years to come and thus for all these years Chabros will have very low ROI and a very extensive payback period for these projects. The growth strategy will also require huge amount of resources including financial as well as human resources. Efforts of penetration in current markets may fail because the current market may be at its maturity level now. Most of the current markets of Chabros are small and not profitable at present. While expansion in the foreign destination require huge fixed costs and the process will be intricate too. The risk of uncertain government regulations will also increase for many locations. The expansion in foreign markets may be profitable in the long run but the strategy will not result in profits in the short run.

4. If you decide to follow a market development growth strategy, into which new country would you expand? Rank the candidate countries. Explain how you derived your ranking.

To follow a market development growth strategy, six new countries have been considered in the analysis, they are;

Morocco
Bahrain
Syria
Iran
Kuwait and
Jordan

The factors that are used for analysis include; market size, wealth, future growth rate, political factors, geographical factors, commercial factors and legal factors. The Table # 1 contains the real values for each country taken from exhibit 14 and 15 of the case study. The Table # 2 contains the value assigned in order to rank the countries in terms of feasibility for expansion. The country having highest value in any factor gets ten marks and the lowest value of any factor is given one mark. Then the total of all these value make a standardized total that can be compared for different countries. According to this analysis Iran and Kuwait are favorable countries for expansion..........................................

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