The Options of Chabros International Group - Term Paper Example

Marketing and Supply Chain Management of Contents Contents 2 Introduction 3 Analysis 3 The case of Morocco 7 Conclusion 8 References 9 Introduction This paper explores the options of Chabros International Group that the company faces in the wake of the global financial crisis. The drastic drop in the sales of the company is making the top management explore the options that are available to the company. The company is exploring numerous options which ranges from product diversification to venturing new markets to raise the sales. This paper analyzes the marketing penetration and marketing development strategies that can be considered by the company. The paper also highlights the possible country in which the country should carry out its marketing penetration and the country it should consider for developing new markets. Analysis The main problem of Chabros international group began with the advent of the global financial crisis in 2008. The financial statement of the company began to show signs of jeopardy as the sales of its largest subsidiary in Dubai began to fall. The fall in the sales recorded in Dubai was however accompanied with the rise in the sales from other subsidiaries. The company had made a huge investment to buy Serbian sawmill to expand its capacity just two years back. This had aggravated the crisis of the company. The company was expecting a rise in the sales by utilizing the excess capacity and it is precisely at that moment when the subsidiaries reduced demanding the raw materials and only 50% of the production was bought by them. Two problems faced by the company are highlighted in this study. First the market penetration strategy and second the mode of entry. The management is dubious about market penetration and market development. The former relates to the increase of the market share in the existing countries in which it operates. By doing this the company wishes to achieve a higher market share and profitability. The latter option where the company wishes to develop new markets involves venturing new countries. This involves considerable risk as the type of market that is to be entered has to be reviewed properly and the mode of entry needs to be decided accordingly. The success or failure of a business in a new country depends on a great extent on the mode of entry that is chosen by the company. This is because an inappropriate mode of entry in the foreign market can severely block the opportunities and limit the ranger of strategic options that are available to the company. This indicates that the management will have to be cautious when it considers either of the options (Ivey, 2014). Initially the attempts of internationalization began when the company wanted to move out of the political and economic insecurity of Lebanon. The earliest attempt to business expansion can be traced when Mr. Chami had been intrigued by the rise of demand of the products of the company from Dubai. This resulted in the germination of the idea of the business expansion. Sales representative was sent by the company to Dubai to study the wood market in the country. As the company faced huge success in its initial effort it slowly expanded to various Chabros had used multinational strategy for expanding its business. Initially it had only exported its products to Dubai but later had opened subsidiary. Then it used joint venture for its expansion in Saudi Arabia. These show that the company had used a multinational strategy for expansion as it had investments in other countries and adapted its products to suit the needs of the local market. This was evident from the use of less superior quality wood in Egypt as the markets in Egypt were better suited for that type of a product (Ivey, 2014). Out of the several options that are available to Chabros International Group, using market differentiation and can be a suitable strategy. This is because new markets can bring new opportunities that can be exploited by the firms which are not present in the domestic markets. Entering the new markets can provide the following benefits for the company: Increased sales and opportunity from the new market. Lower acquisition and manufacturing costs. Foreclosure of markets to the competitors. Adds to the competitive advantage of the firm. The introduction of new products suitable to the needs of the specific country is also one of the good options that can be adopted by the company. This is because the needs of different country can vary according to the requirements of the country and following a customized approach can help the company achieve competitive advantage. Market Development Growth Strategy In order to have a successful market development strategy there are various aspects that needs to be considered by the company. The management has considered a list of sixteen countries where the business can possibly be taken to. This section discusses the comparative advantage Chabros International Group can have in each country. The following table shows the assessment the performance indicator of the chosen countries: Figure 1: Comparison between countries (Source: Ivey, 2014) The rationale for including these variables for the consideration of the markets is profound. The market size will provide an insight for Chabros for understanding which market has the highest potential for the business of the company. In this regard Algeria and Morocco are seen to have better results than the other countries. In terms of GNI per capita Bahrain ranks at the top. The figures indicated by double star are incomplete or refer to periods not compatible with the period under study. The GNI per capita is obtained by dividing the gross national income of the country by the population of the country. The wealth of the each country is measured by GNI per capita and this parameter reveals that Bahrain is the richest country as per the purchasing power of the consumer is concerned. In terms of estimated growth of the country in the next financial year Tunisia emerges as the winner. These parameters show that any single country does not emerge as a strong leader for Chabros to consider. This makes the choice difficult. The following table shows the political, legal, commercial and geographical distance of the countries (Source: Ivey, 2014). Figure 2: Comparison between countries (Source: Ivey, 2014) A stable political system is very important for providing a country with a stable business environment. The voice and accountability percentages show that Bahrain has the highest people participation in the government formation and highest freedom of expression (Source: Ivey, 2014). The legal system of a country becomes an important parameter for expansion because the context of contract enforcement and property rights are important for the security of the business. In this context Qatar ranks at the top. In terms of ease of doing business too Bahrain stands out to be a country in which setting up of the business is relatively easier. The distance parameter has been incorporated as well and Iraq is lowest to Lebanon in terms of distance. After an analysis of the conditions in the country Bahrain emerges as a favourable country for doing business. The political structure of the economy is quite stable and the ease of doing business is favourable as well. From the previous table it can be seen that Bahrain is the richest country in terms of wealth of the consumers. This can make Bahrain as the next business destination for Chabros International Group. Market Penetration strategy If the company chooses a market penetration strategy then the management will have both the knowledge about the products and the knowledge about the existing markets (Daniels, Radebaugh & Sullivan, 2007). This strategy involves the increasing of sales of the existing products in the existing markets. The expansion of sales can from the following methods: Firstly, to change the buying pattern of the existing buyers by making them to buy more products or make them purchase more frequently. Secondly, searching the existing markets to search for newer consumers who are non-users and converting them into potential customers by extensive advertising and promoting techniques. Thirdly, to directly target the customers of the competitors by offering them the products of the company which would directly result in the increase of the market share. All of these actions lead to an increase in the market share of the company among the existing customers. Market penetration has been considered as one of the options by the company to expand its business. As the company operates in a number of countries, so the primary question for the company is to choose the exact country where it should consider market penetration. This research points out Abu Dhabi as the country where Chabros International Group should conduct its market penetration strategies. This is because there are a host of factors that points out to the accelerating economic performance of Abu Dhabi. The per capita income of the country is rising and people are having higher living standards than before. The overall economic growth of the country is very high and the current government policies are geared in the direction of creating a strong economy for attracting foreign business. The primary reason that has been attributed for this is the growth of the chief export of the crude oil from Abu Dhabi which has consistently raised the income of the country. Therefore, the long-term growth prospects of the country are high which will provide Chabros a great opportunity to have a greater market penetration. The rising level of income of the citizens provides a great opportunity for introducing new products and raises the potential of rise of revenue. The case of Morocco The management of the company has conducted a SWOT analysis of Morocco to understand about the persisting conditions in the country. The SWOT analysis allows a very simple way to understand about the internal conditions and market audit. Analysts carry it out in a manner which hugely reduces the cost of strategic planning of an organization. The system improves the overall quality of the strategic planning through integration and synthesis of diverse information of both qualitative and quantitative nature. In short, it is a beneficial tool for decision-making and helps in the understanding of dependencies between a company and its environment. It promotes proactive thinking rather than depending on subjective opinion. The SWOT analysis of Morocco has revealed the conditions in the country that can prove both favourable and unfavourable for the business. The strengths and opportunities in the country make it plausible for the Chabros International Group. However, both threats and weaknesses in the country are profound. The most serious being, the company is not well known in the country and the tax structure of the country may change in the future, which can prove to be harmful for the business This makes Morocco a less attractive destination (Ivey, 2014). Conclusion Making effective business decision in the cross-cultural perspective requires a greater investigation of the options and risks associated with the business. There are a number of factors that affect the business decisions in a different cultural setting, namely, social stratification system, risk taking behaviour (that varies across nationality), perceptions about the information system and motivation of the employees. The successful financial survival of business is based on deeply held cultural attitudes toward work, power, trust, wealth and communication (Daniels, Radebaugh & Sullivan, 2007). This Ivey, 2014 has revealed that the Lebanese based firm had to consider the cultural differences when it had to extend its business activity. The expansion in Cairo had taught the business about the difference in the pattern of markets and it had quickly adapted its strategy to reap the benefits. Again in countries like Saudi Arabia and UAE the cultural difference made the company provide superior quality goods to meet the customer expectations. In this way it had adopted cultural factors in managing business decisions to raise the profitability of the organization. HSBC is a multinational bank that operates in various continents and actively engages in the cross-cultural transactions. This makes it essential for the organization to be flexible enough to adapt to the cross-cultural differences. HSBC can learn quite a few lessons from Chabros International group which had incorporated cross-cultural differences in its management. The two ways in which the organization can improve its performance is by promoting top business management practices and sustainable management practices. As the organization houses a large number of employees working from various cultural backgrounds and therefore sustainable development can be promoted only by the effective consideration of cross-cultural differences. A group-wide strategy that aims to improve diversity can improve the performance. The diversity based on age, gender and ethnicity can accommodate the cultural difference and lead to robust performance. References Daniels, J., Radebaugh, L. & Sullivan, D. (2007). International Buisness. New Delhi: Pearson Education India. Ivey. (2014). Chabros International Group: A World of Woods. Richard Ivey School of Business. Retrieved from file:///C:/Users/user/Downloads/26E03100_chabros.pdf Read More