A class presentation of the Chabros case consisting of a VRIO Analysis, a swot analysis and other. The information is either gathered from the Harvard Case or the internet.

1. THE
WINNING
STRATEGY
Andreea Nan

2. Agenda
Introduction to Chabros International
VRIO Analysis – The Competitive Analysis of Chabros
Ansoff and The Different Choices Available to Chabros
The Solution

3. 1.
Introduction
A little
background info
on Chabros

4. MAPS
Headquarters
The Chabro’s Offices/Subsidiaries

5. Founded in 1960s in Lebanon.
Chabros is the leading wood company dealing with veneer and lumber.
The first international attempt was in Dubai, then later in 2001 Riyadh subsidy opened.
They extended their operations from wholesaling to include manufacturing.
Chabros Cairo opened to have a market for “B” quality veneers for cost cutting purposes.
Dubai brings in most of the revenue from sales even after the 2008 crisis.
A little introduction on Chabros

6. ONLY 50%of
sawmill capacity in 2009.
Problem
Since 2009, sales have been reducing.
Dubai’s sales – the subsidiary bringing most sales – dropped by
30%.
MENA SUBSIDIARIES BOUGHT

7. 2.
VRIO Analysis
A competitive
assesment of
Chabros

8. A basic model of
VRIO

9. Is Valuable? Is Rare? Is difficult to
imitate?
Is organization
organized
around?
Chami’s 25 years of
experience
YES YES YES YES
More variety and
more customized
wood products
than most
competitors
YES YES YES YES
Distinctive strategic
relationships with
its key suppliers
YES NO
Strategic Flexibility YES YES YES YES
Lower prices than
competitors
YES YES NO
Brand YES YES YES NO
Economies of scale YES NO
Adaptability of
employees
YES YES YES YES
Flexible Payment
Strategy
YES YES YES YES
VRIO Analysis of
Chabro

10. Chami’s 25 years of experience
LONG-TERM COMPETITIVE ADVANTAGE
The experience Chami has in picking and buying veneer is hard to gain or
replicate. Such experience is gained from years and years of work and learning
what people like or dislike. Not everyone has that.
It is important because people do not buy the veneer for its quality but rather for
the design and patterns.
It was a competitive advantaged in Dubai and continues to be.
Chami works to pass on his expertise to partners and top management.

11. More variety and more customized
wood products than most
competitors
Seeing that Chabros operate in the wood industry which has plenty of small-medium
competitors it is important to offer customers more variety.
It is rare because it is hard to adopt such broad operations especially if you are a small-
medium competitor of Chabro for instance. Thus this trait is fairly difficult and costly to
obtain.
Chabros takes advantage in its productive variety and customized works and the business
is built such that these can be offered to their customers.

12. Distinctive strategic relationships
with its key suppliers
COMPETITIVE PARITY
Seeing that Chabros operate in the wood industry which has plenty of small-
medium competitors it is important to offer customers more variety.
It is rare because it is hard to adopt such broad operations especially if you are a
small-medium competitor of Chabro for instance. Thus this trait is fairly difficult
and costly to obtain.
Chabros takes advantage in its productive variety and customized works and the
business is built such that these can be offered to their customers.

13. Strategic Flexibility
LONG-TERM COMPETITIVE ADVANTAGE
This is one of the most important competitive advantages that Chabros have. It ties in
with the fact that they are both a wholesaler and a manufacturer after acquiring the
Serbian sawmill.
It is hard to replicate because you need enough capital to acquire or build a factory. It
is incredibly rare for wholesalers to also be manufacturers and this provides Chabros
with strategic flexibility over its competitors.
The organization as a whole is organized after this dual ability.

14. Lower prices than competitors
TEMPORARY COMPETITIVE ADVANTAGE
This advantage comes from the previous Strategic Flexibility. The fact that they have a
sawmill in Serbia allows them to have higher margins yet sell at lower costs than
competitors.
It is valuable and to a certain extent rare, however this resource on itself, is not difficult
to imitate. There are high chances that other competitors can potentially lower their
prices, this is not something Chabros can consider as a competitive advantage for long.

15. Brand
UNUSED COMPETITIVE ADVANTAGE
Generally brand and reputation are not what is considered a competitive advantage
but in Chabros situation, the experience and the strategic flexibility the company has
gained, makes their brand into a rare, valuable and hard to imitate trait. however, in
this case there is no information on how Chabros are making this an advantage to
themselves.
It is clear that this is an unused competitive advantage. Their experience is the
differentiators, however not a lot hear about the company because they are not
utilizing this quite important advantage.

16. Economies of scale
COMPETITIVE PARITY
Economies of scale are valuable to Chabros in cutting costs and getting all the quality
types of veneer they need and to be able to offer different types of products and
customization.
It is important but it falls under competitive parity because it is common for businesses
that operate on the same scale as Chabros to have some sort of economies of scale.

17. Adaptability of employees
LONG-TERM COMPETITIVE ADVANTAGE
One of the biggest competitive advantages Chabros enjoys is that because of their
Lebanese background, employees are at least bilingual and very adaptable to different
environments. Their culture is a mix of European and Arab culture, putting them in a
good place where their operations are located. They adapt to the European culture
and speak the language spoken in the MENA region.
As long as those employees are within the firm or the firm employs Lebanese, this is
something that is rare, valuable, hard to replicate and the organization is highly
influenced by the nature of their employees.

18. Flexible Payment Strategy
LONG-TERM COMPETITIVE ADVANTAGE
One of the strategies implemented by Chabros to help raise sales was to make the
payment available to the customers more flexible. He did not ask for any letters or
credit and did not take any legal action if the customers was late to pay – even by few
months.
This was contrary to his MENA region competitors, however customers loved to work
with Chabros, gaining them loyalty and respect. This thus is a long-term competitive
advantage as it is rare, valuable, difficult to imitate accounting wise and the
organization is ran according to this mentality.

19. 3.
Ansoff
A look at the
different
strategies
available

20. Problem :
Profit dropped
significantly in 2009. 6
6.50
6.80 6.70
4.20
0%
1%
2%
3%
4%
5%
6%
7%
8%
2005 2006 2007 2008 2009
Chabros Intl. Group's Net Profits
from Sales (%)

21. ANSOFF Model
Important
strategies to
increase sales.

22. ANSOFF Model
Market Penetration
Benefits: using this method can use the lower prices Chabros offers to increase
market share. This is also an effective way at combating competitors, but Chabros
does not worry for those.
Disadvantage: With a low price you can potentially lower your brand image and
miss opportunities.
Product Development
Benefits: Broadens Chabros scope and could potentially get more customers and
hit new segments.
Disadvantages: 50-80% of new products fail and a lot of money is spent on
marketing and R&D.

23. ANSOFF Model
Market Development
Benefits: Chabros are very good with their products and they are known for it in the
places they operate. This strategy takes their products to new markets. As long as
there is a need, this is a less costly strategy that almost guarantees you increase
in sales.
Disadvantage: If marketing was biased or done wrong, and the new markets you
chose is not optimal, then you can lose a lot in form of costs and the subsidiary
would fail. Chabros have an a good history with new markets.
Diversification
Benefits: it stretches the capabilities of the company. It also spreads business risk
and is efficient when the other markets are declining.
Disadvantages: In this case, it can be too risky to undertake both new markets and
new products. It could also be costly and take too long and seeing that it is just
after recession, the best fit might not be found.

24. Different ALTERNATIVES TO
BOOST SALES
Closing Parts
of the
Serbian
Sawmill
Morocco
Change
product mix
Expand
within
existing
markets
Market Development
Market Penetration

25. Closing Parts of the Serbian
Sawmill
Benefits
Reduce employees by half.
Save $400,000 per year in
salaries.
Reduce excess capacity.
Focus resources where
needed more.
Buy the same lumber from the
lower priced supplier in Russia.
Disadvantages
The layoffs might demotivated other
employees in the business.
The 10 million investment put into it
would’ve been for nothing.
Firing so many employees, risks that
they won’t be prepared when demand
surges.
They lose competitive advantage
especially in non-MENA regions.
Lose potential subsidiary in Morocco.

26. Morocco’s SWOT
Analysis
Page 14
Strengths
Known EU standards
Moroccans have a positive view of
work done in Dubai
Specialized labor force
Opportunities
No competent local rivals
Big market
High demand for Chabros Serbian
lumber
Very few sellers of veneers
Morocco is not in recession
Weaknesses
Lacking relational networks.
Chabros isn’t known in Casablanca
Chabros does not know which
customers are worthy of trust for not
using L/C’s
Threats
Possible entry of new foreign
competitors
Possible changes in taxes and tariffs
Some local competition
Supply contracts exclusively awarded
to historically well-established
suppliers
SWOT

27. Analysis of Morocco
EU has initiated a free trade agreement with Morocco to strenghten relationships
with North African countries. This benefits Chabros Serbian sawmill.
The market size is 31,606 in terms of population which is a good number for the
lumber products. It is a country with quite a high score at 128 of ease of doing
business, which is good for opening a subsidiary there.
The GNI is lower than most of the other countries (@4,190), which means that
lumber would be a preffered product or type B quality veeners.
There is a demand for such products, and thus Chabros could raise their sales by
using the Market Development stage.
The currency is also tied in with the Euro so it is optimal for avoiding FX problems
between Serbia and Morocco.
If transportation costs were about 10% of Total Cost between Serbia and the MENA
regions, it will be approximately the same, thus something familiar to Chabros
expenses.

28. Cultural Assesment - Hofstede
As per the six dimensions, we see that Lebanon and Morocco have a lot in common and will be a
potentially good fit. Both countries score high on power distance so hierarchy is common and
accepted in both cultures, meaning that work ethic is very similar. They are both collectivist in
nature and believe in team work. This is encouraging to see since we already know that Chabros
employees are good at adapting, now we know that it will be equally easy for Moroccan’s to get
used to the way Chabros operate.

29. Expand within existing markets
Existing markets: Dubai (2 subsidiaries), Saudi Arabia (2 subsidiaries), Qatar, Oman,
Serbia(2 operations), Egypt, Lebanon.
Benefits
In each market, Chabros already
operates and thus knows the local
regulations well.
The experience in the market is
valuable to penetrate the market in
ways that will work.
Operations already exist so costs won’t
be that high.
Already built profiles of what products
are needed where
Disadvantages
Already within each market and demand is
decreasing.
No new knowledge is acquired.
Most of the existing markets purchase high
quality veneers, whereas Chabros need
someone to buy lumber made in Serbia.
Already established presence and positioning
against customers, so it is hard to change that
drastically to boost sales.

30. Change product mix
Alternative 1: Focus on Lumber.
Benefits
There are more European countries that
they could sell lumber to.
It is cheaper to acquire.
It is easier to pick and doesn’t need
much experience and talent.
It is a commodity.
The Serbian sawmill has the capability
to supply the lumber.
Disadvantages
It is not the core of the business.
Their brand comes from supplying veneer.
In the past Chabros bid against for huge
projects in veneer, they would lose this edge.
Restructuring costs will further decrease
profits.
Lose potentially important competitive
advantages.

31. Change product mix
Alternative 2: Focus on Veneer.
Benefits
Their reputation comes from veneer.
They have extensive experience in the
veneer market and Chami’s experience
is one of their competitive advantage.
The MENA region prefers veneer and a
lot of current operations are in the
MENA region.
Dubai is still one of their biggest
customers.
Disadvantages
Miss the opportunity of moving focus to
European countries or Morocco.
It requires more experience in the field of
choosing.
It comes in different qualities at different
costs.
It is not a commodity like lumber.

32. 4.
Solution

33. MOROCCOSolution:
The most prolific solution for Chabros is to open a subsidiary in Morocco.
They will enter a completely new market, with new opportunities and low competition.
Chabros can use the excess capacity of lumber from its sawmill to sell to the Moroccans
since they have a demand for those products.
It is one of the least costly but highest potential for increasing sales in the long-run.
All the other strategies are short-term strategies, Morocco is a strategic choice for the
long-run.
In the future, it could open up the market to neighboring countries – Tunisia, Algeria.
Culturally wise, Morocco is similar to Lebanon so the problems raised by culture could
potentially be avoided completely.
This decision helps Chabros sell its extra lumber while maintaining their competitive
advantages from selling veneer to MENA regions.

34. THE
WINNING
STRATEGY
Andreea Nan