Executive Summary
Chabros International Group is a wood company headquartered in Lebanon that has reported a drastic drop in its lumber and veneer sales in its largest market, Dubai. The company had invested in a Serbian sawmill two years ago to meet the increasing sales volume at the time; however, now the company is facing a decrease in revenues due to the global economic crisis. Chabros International Group has several strategic alternatives, such as closing parts of the Serbian sawmill, increasing sales within existing countries, or expanding into a new country. The recommended course of action is expanding into a new country like Morocco. This would allow Chabros International Group to reach a new customer base and provide additional revenue. The implementation plan for expanding into a new country should include research on the market and potential customers, marketing and promotional plans development, and an analysis of the costs and benefits associated with the expansion. The company should also consider partnerships with local companies to gain access to the new market. A timeline should be established to implement the expansion plan and resources should be allocated accordingly. Finally, there should be a plan to evaluate the success of the expansion and make necessary adjustments. Overall, the recommended course of action is a viable solution for Chabros International Group in overcoming its current financial crisis. With the right strategy and resources, the company can successfully increase its market share and re-boost sales to its former levels.
Key Problem/ Situation/ Opportunity
Chabros International Group is a leading wood and veneer trading company in the Middle East and North Africa (MENA). In the past two years, Chabros has invested over $11 million in a Serbian sawmill to expand its production capacity and increase its presence in the MENA market. However, the global economic crisis has caused the company to face a drastic decline in sales, leading to a decrease in revenues. The current situation has caused Chabros to consider closing parts of its Serbian sawmill. The company is now actively looking for solutions to control the damage and save their investment. In the short term, the objective is to identify a solution to prevent further losses. In the long term, the company aims to increase sales and re-establish itself as the leading trader of veneer in the MENA region. The symptoms of the current situation are evident in the company’s sales figures, which show a 12.5% drop in veneer sales and an 8.3% drop in lumber sales. This indicates a significant decline in the demand for their products. The company must now decide whether to increase sales within the countries they already operate in, or to expand into a new country.
Chabros is now faced with the challenge of finding a solution to the current problem to prevent further losses and increase their revenues. The company must also decide whether to stay in the same countries and increase sales, or explore new markets to gain a competitive edge. In order to address the current situation, Chabros must consider a variety of solutions. This includes cost-cutting measures such as reducing waste, streamlining operations, exploring new markets, and expanding their product range. The company must also look at ways to increase customer loyalty and build brand recognition in order to remain competitive in the market. Chabros is now faced with the difficult task of finding a solution to the current situation in order to protect their investment and increase their sales. The company must consider a variety of solutions to remain competitive in the market and re-establish themselves as the leading trader of veneer in the MENA region.
Symptoms
Decreased Revenues Due to The Global Economic Crisis.
The decreased revenues due to the global economic crisis has resulted in a significant drop in Chabros’ sales. In the MENA region specifically, veneer sales have declined by 12.5%, and lumber sales have decreased by 8.3%. This has directly impacted the company’s bottom line, resulting in the need to consider closing parts of its Serbian sawmill, which had cost them more than $11 million to acquire and expand two years ago. Furthermore, the company has seen a decrease in its overall profitability, with profits dropping year-on-year for the past two years. This has been due to a combination of factors, including reduced demand for their products, increased competition in the market, and a sustained increase in the cost of raw materials.
The effect of this has been a decrease in the company’s liquidity, with cash reserves falling to just $2.5 million. This has further compounded the situation, as Chabros has been unable to invest in new equipment, technology, or even marketing activities, all of which are essential for the company’s future growth. In addition, the company has seen a decrease in the number of orders received and the average size of orders (Wallas et al., 2021). This has been attributed to the fact that customers are now more cost conscious and are looking for cheaper options elsewhere. The current situation has forced Chabros to make some hard decisions, such as whether to increase its sales within the countries it already operates in or to expand into a new country. Ultimately, the company must find a way to remain competitive in the market, while at the same time maintaining its profitability.
Drastic Drop in Lumber and Veneer Sales in Its Largest Market, Dubai.
Chabros International, a leading retailer of veneer and lumber in the MENA region, has experienced a significant drop in sales due to the global economic crisis. This has greatly impacted the company’s largest market, Dubai, where veneer and lumber sales have fallen by 12.5% and 8.3% respectively. This decrease has been further compounded by the company’s costly acquisition and expansion of its Serbian sawmill two years ago, which has cost them more than $11 million. The crisis has also caused the company to consider closing parts of the Serbian sawmill, as the costs of running it have become too much for the company to bear, especially in the face of decreased sales. Furthermore, the company must decide whether to increase sales in the countries it already operates in or to expand into new countries and risk further losses. Both options have their associated risks and may not be the best solution for the company. The decrease in sales has ripple effect on the entire company, from the sawmill workers in Serbia, to the head office in Dubai. The situation is dire and requires urgent attention, as the company is in danger of losing its status as the leading trader of veneer in the MENA region.
Need To Adjust Business Operations to The New Economic Environment.
The main symptom of this problem is the need to adjust business operations to the new economic environment. This will involve the restructuring of operations to reduce costs, whilst still enabling the company to increase its sales. This will involve the rationalization of operations and the allocation of resources to those areas that can generate the most increased sales. The company will also need to consider the possibility of increasing its sales through the use of digital marketing and e-commerce solutions, as well as the use of more traditional methods of sales such as trade shows and exhibitions (Noyelle, 2019). The need to adjust business operations to the new economic environment is the key symptom of the problem that Chabros is facing. The company must look to address this symptom in order to remain competitive and increase its sales in the current economic climate. This will involve the rationalization of operations, the development of relationships with existing and new customers, the diversification of its product offering, and the introduction of new and innovative products.
Major Facts of the Case
Chabros International Group is a wood company headquartered in Lebanon that has reported a drastic drop in its lumber and veneer sales in its largest market, Dubai. The company had invested in a Serbian sawmill two years ago in order to meet the increasing sales volume at the time. However, now the company is facing a decrease in revenues due to the global economic crisis. The average price for its veneer products is $3 per square metre and the average price for its lumber products is $1,000 per cubic metre, resulting in sales of 11,666,666 square metres of veneer and sales of 55,000 cubic metres of lumber. Chabros is considered the largest trader of veneer in the MENA region and has a lumber market share of around 20 per cent in both the UAE and Qatar, and around one per cent in both Saudi Arabia and Egypt. In order to adjust to the new economic environment, the company must consider various strategic alternatives in order to increase sales and revenue.
Strategic Alternatives
Close Parts of The Serbian Sawmill
Closing parts of the Serbian sawmill would result in cost-cutting measures and a reduction in workforce, which could result in savings for the company. However, this could also lead to a decrease in production capacity, which could negatively affect the company’s ability to meet customer demands This could lead to a decrease in customer satisfaction and a decrease in sales, which could further result in a decrease in profits (Kroll and Horvat, 2017). The potential downsides of reducing production capacity and workforce must be weighed against the potential savings that could be achieved by this cost-saving measure. If the company decides to move forward with this option, they must be sure to take into account the potential impact on their customer base and their ability to meet customer demands. Additionally, they must consider the potential impact on morale and productivity among the workforce and ensure that any layoffs are handled in an ethical manner.
The company must also consider the implications of any potential restructuring on the local economy. The sawmill is a large employer in the area, and reducing production capacity could lead to a decrease in economic activity in the region. This could further result in a decrease in tax revenue for the local government and a decrease in economic opportunities for the local population. Ultimately, the company must carefully weigh the potential pros and cons of any cost-saving measures before making any decisions (Jamali et al., 2017, 10). It is important to take into account the potential impact on the local economy, the potential impact on customer satisfaction and sales, and the potential impact on morale and productivity among the workforce. If the company decides to move forward, they must ensure that any layoffs are handled in an ethical manner, and that any potential restructuring is done in a way that minimizes the impact on the local economy.
Try To Increase Sales Within Existing Countries
Chabros International Group could focus on increasing sales in its existing markets, such as Dubai, by implementing more aggressive marketing and promotional campaigns. This could result in increased sales and revenue, but more is needed to offset the decrease in sales due to the global economic crisis. By implementing more aggressive marketing and promotional campaigns, Chabros International Group could increase sales in existing markets such as Dubai (Haneef, 2017, 20). This could include strategies such as targeted advertising, targeted email campaigns and promotions, and targeted promotions on social media. Additionally, Chabros International Group could offer discounts and promotions to customers in existing markets to increase sales.
In addition to marketing and promotional strategies, Chabros International Group could focus on building relationships with customers in existing markets. This could include hosting events, providing incentives, and offering personalized services. Additionally, the company could look into expanding its product line in order to increase sales and meet customer needs. Furthermore, Chabros International Group could look into expanding its presence in existing markets by opening more stores or launching online stores (Haneef, 2017, 28). This would increase the company’s visibility and reach more potential customers. Additionally, the company could focus on providing a superior customer service experience by improving the customer service process and training its staff to better handle customer inquiries.
Expand Into a New Country Such as Morocco
Expanding into a new country such as Morocco would allow the company to reach a new customer base and provide them with additional revenue. This could be a viable option if the company is able to identify a suitable new market. This would require a significant investment in research and development, as well as marketing and promotional efforts. The company would then need to create a comprehensive marketing and promotional plan tailored to the Moroccan market, including strategies to reach potential customers effectively. Additionally, the company should look into potential partnerships and collaborations within the Moroccan market to further strengthen their presence and maximize their potential for success.
The company should also consider investing in local talent and expertise. Hiring local employees who are knowledgeable about the culture, market, and language of the country can be invaluable in helping the company achieve their goals. Additionally, training staff in the company’s products and services can help ensure a smooth transition into the new market (Bajjou and Chafi, 2018). The company should be prepared to face potential obstacles such as logistical or financial issues, or even resistance from the local population. It is important for the company to remain flexible and open to changing their strategies and plans as needed, in order to ensure the success of the venture. Overall, expanding into a new country such as Morocco could be a lucrative move for the company. It would require an extensive amount of research, planning, and investment, but could open up a large new customer base and provide the company with a significant amount of additional revenue.
Final Solution
Expanding into a new country is a big decision for any company, and Chabros International Group is no exception. Before making such a move, the company must thoroughly research the potential new market. This includes researching the economic and political climate, assessing the current competition in the marketplace, and carrying out a detailed analysis of the potential customer base. Once the research is completed, Chabros International Group should develop a marketing and promotional strategy to ensure its products and services are attractive to the target market. This strategy should include an analysis of the pricing structure and any promotional activities the company might undertake. Additionally, the company should consider the most effective channels of distribution for its products and services.
In order to gain access to the new market, Chabros International Group should consider entering into partnerships with local companies. This would allow the company to tap into existing customer bases and gain valuable market intelligence. Additionally, these partnerships would provide the company with valuable resources such as distribution networks and local knowledge. Finally, when expanding into a new country, it is important to analyze the costs and benefits associated with the move (Mardatillah et al., 2020, p. 1869). This includes assessing the cost of setting up operations in the new country, hiring and training staff, and launching a marketing campaign. Additionally, the company should consider the potential returns it could expect from the move and weigh these against the costs. Expanding into a new country is a major undertaking, but with the proper research and planning, Chabros International Group could reap the rewards of its efforts. With an understanding of the new market, a well-thought-out marketing strategy, and a network of local partners, the company could gain access to a new customer base and increase its revenues.
Implementation (Recommended Course of Action)
Expanding into a new country can be a complex process and requires careful consideration of numerous factors. Research should be conducted to gain a thorough understanding of the target market, including the potential customer base, their needs and preferences, and any cultural or regulatory considerations that may affect the company’s operations in the new country. Additionally, a detailed marketing and promotional plan should be developed to ensure the company’s products and services are presented in a way that resonates with the target audience and drives sales.
An analysis of the costs and benefits associated with the expansion should also be conducted, taking into account the resources required, the expected return on investment, and the risks involved. The company should consider entering into partnerships with local companies in order to gain access to the new market, as well as to benefit from their knowledge and expertise. A timeline should be established for the implementation of the expansion plan and resources should be allocated accordingly. The company should also plan for contingencies in case of unexpected delays or changes in the market. Finally, a plan should be put in place to evaluate the success of the expansion and make necessary adjustment (Xing et al., 2018, p. 670). This plan should include measurable metrics to track the performance of the expansion and identify areas for improvement. Regular meetings should be held to review progress and ensure the objectives of the expansion are being met. By following the steps outlined above, the company can ensure that its expansion into a new country is successful and profitable.
Conclusion
Chabros International Group is facing a decrease in revenues due to the global economic crisis. The company had invested in a Serbian sawmill two years ago in order to meet the increasing sales volume at the time, however, now the company is reporting a drastic drop in its lumber and veneer sales in its largest market, Dubai. In order to adjust to the new economic environment, the company must consider various strategic alternatives in order to increase sales and revenue. The recommended course of action is to expand into a new country, such as Morocco. This would allow Chabros International Group to reach a new customer base and provide them with additional revenue. The implementation plan for expanding into a new country should include research on the market and the potential customers, development of marketing and promotional plans, and an analysis of the costs and benefits associated with the expansion. The company should also consider entering into partnerships with local companies in order to gain access to the new market. A timeline should be established for the implementation of the expansion plan and resources should be allocated accordingly. Finally, there should be a plan to evaluate the success of the expansion and make necessary adjustments.
References
Bajjou, M.S. and Chafi, A., 2018. Lean construction implementation in the Moroccan construction industry: Awareness, benefits and barriers. Journal of Engineering, Design and Technology.
Haneef, S.K., 2017. An exploratory study of the Digital Marketing trends in Dubai tourism industry. Journal of Tourism Challenges and Trends, 10, pp.25-43.
Jamali, D., Karam, C. and Blowfield, M., 2017. Introduction: Corporate social responsibility in developing countries: a development-oriented approach. In Development-oriented corporate social responsibility (pp. 1-12). Routledge.
Kroll, H., Schnabl, E. and Horvat, D., 2017. Mapping of economic, innovative and scientific potential in Serbia. Karlsruhe: Fraunhofer ISI.
Mardatillah, A., Raharja, S.J., Hermanto, B. and Herawaty, T., 2020. Characteristic partnership and local wisdom in achieving sustainable competitive advantage for micro and small business. Journal of Talent Development and Excellence, 12(1), pp.1869-1883.
Noyelle, T.J., 2019. Beyond industrial dualism: Market and job segmentation in the new economy. Routledge.
Wallas, T., Park, S.C., Fiedler, R. and Osiewicz, P. eds., 2021. Beyond Europe: Central Asia, the Middle East and Global Economy. Logos Verlag Berlin GmbH.
Xing, Y., Liu, Y. and Cooper, S.C.L., 2018. Local government as institutional entrepreneur: Public-private collaborative partnerships in fostering regional entrepreneurship. British Journal of Management, 29(4), pp.670-690.
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