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Jabwood International

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Winkie Su

on 13 September 2013

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Transcript of Jabwood International

Jabwood International
Outline
JABWOOD INTERNATIONAL
TIMELINE OF JABWOOD INTERNATIONAL
TIMBER INDUSTRY
WHAT WENT WRONG?
Founded in 1930s by Mahmoud Jabado.
Headquarters in Tripoli, Lebanon.
Small Family business became multi-division company supplying the Middle East.
One of the biggest companies in Lebanon and the Middle East.
Successful because of knowing the market thoroughly, committed with visionary discipline and hard work.
Competes in two industries, Timber (softwood and hardwood) and WBP industry.

Divided into two segments:
Supply side of the market
Manufacturers and developers -> Jabwood specializes in this segment.
One of the oldest industries in Lebanon, contributing to the economy.
The sector failed in 2007 with the financial crisis.

Political uprising in Syria, borders from Syria to Lebanon were closed.
Jabwoods’ sales had fallen below the expected volume.
This gave way for the brand TANITA wanted to pull out of the company due to recent lack of sales and fall in market share.
Consulting family members, the decision at hand was to penetrate to either the Middle East or China or both simultaneously.

OUR RECOMMENDATION
PORTER'S 5 FORCES MODEL - CHINA
Bargaining Power of Buyers
Threat of Substitutes
Intensity of Rivalry
High:
Prospering industry
Many interested countries
World's biggest construction market
Second largest importer of wood in the world
Low:
when wood products meet all requirements it is hard to find substitute products of wood
suppliers are able to charge high prices
High:
Chinese prefer other materials such as steel and concrete
Hesitant to use wood for infrastructure
Lack of skills with wood work
PORTER'S 5 FORCES MODEL - SAUDI ARABIA
Threat of New Entrants
Bargaining Power of Suppliers
Bargaining Power of Buyers
Threat of Substitutes
Intensity of Rivalry
Low:
Top companies are owned by wealthy SA families
High:
exempt import duties
rising demand
SA had no wood supply
Time to start a business is low (5days)
time to import (17)
High:
Prospering industry
high demand market
recent regulations mean lower costs for wholesalers (exempt wood products from import duties)
Competitive market
intense price competition = high rivalry
High:
intense price competition
well-stocked timber yards increased price pressures
Low:
wood is a primary material for furniture making and construction
locals lack experience in working with steel and concrete
Bargaining Power of Suppliers
High:
Many new countries stepping in to meet demand for wood products
Cheap products from Canada
Threat of New Entrants
High:
Biggest construction market in the world
Increasing demand for wood
However:
Time to start a business (38 days)
Time to import (24)
Strict admin procedures
SWOT for Jabwood in China & Saudi Arabia
Strengths
Weakness
Opportunities
Threats
early entry
R&D
intermediary between Western suppliers and Middle Eastern customers
close customer relationships, unique ability to ship global orders immediately from an inventory measures in thousands of CBM
high energy costs, high costs of living, expensive workforce
lack of government support
depended heavily on one major supplier
business structure
not well-known by end users
does not have exclusivity to sell TANITA products in China
expansion
quality as a source of competitive advantage and differentiation
global trend like environmental issues
growing economies and social suitabilities
local and regional competition
Cheap imported products from China and Indonesia
Cultural differences
Result: Unfavourable
Result: Favourable
Result: Favourable
Result: Unfavourable
Result: Unfavourable
Result: Unfavourable
Result: Favourable
Result: Unfavourable
Result: Unfavourable
Result: Unfavourable
Forecast sales in the next 3 years
Ownership
Brand name
Technologies
Know-how
Localization
TANITA removing a crucial supply network
Internalisation
Employs only family members in managerial positions
Only two generations members have available expertise and knowledge to take over new position
Jabwood's Competitive Advantage - OLI Model
Legal and Fiscal Characteristics
Entry Modes: How to Enter?
1990-2004
2007
2009
2009-Now
The Company experienced rapid growth and established distribution channels in Syria, Jordan, Iraq and the Kingdom of Saudi Arabia.
Saudi Arabia generated US$50 million in sales and contributed half of Jabwood Internationals’ sales.

Closing down the Saudi subsidiary due to personal circumstances unrelated to the business.
Supplied most of the Middle East with timber.
Sales growth dropped.
In addition, fierce competition in the Lebanese market.
Previously having a successful relationship with Saudi Arabia, the company should resume exporting ties once again

Consider restructuring the management board
Ownership + Internalisation = ?
Saudi Arabia ?
China ?
China : New market
Exchange rate US$1= 6.37 Yuan

Year 1 Max: 100 thousand CBM x 2% = 2 thousand CBM x US$300=
$600,000
Local currency= 3,822,000 Yuan

Year 2 sales growth 0% therefore $600,000
Local currency= 3,822,000 Yuan

Year 3 sales growth 100% therefore 4 thousand CBM x $300=
$1,200,000
Local currency= 7,644,000 Yuan
Saudi Arabia : Familiar Market
Exchange rate US$1= 3.75 Riyals

Year 1 Max: 100 thousand CBM x 10%= 10 thousand CBM x $300 =
$3,000,000
Local currency= 11,250,000 Riyals

Year 2 sales growth 100% therefore 20 thousand CBM x $300= $6,000,000
Local currency= 22,500,000 Riyals

Year 3 sales growth 50% therefore 30 thousand CBM x $300 =
$9,000,000
Local currency= 33,750,000 Riyals
Which country should we choose?
If so, what entry mode should we choose?
Risk
Market and
Competitive
opportunities
high
high
low
low
Country's Attractiveness
high
high
low
low
Entry Mode Analysis
Intensity of investment
Control
Expanding to China
Short-run
Long-run
References
Case Study: "Jabwood International: The Risky Business of Expanding East"

Jabwood official site <http://jabwood.com>

Lecture notes - week 6

The World Bank 2013, Economy rankings, accessed 9 September 2013, <http://www.doingbusiness.org/rankings >

Introduction: facts about Jabwood, Timber industry, Current situation

Analysis of the current situation using relevant theories

Recommendations
Thank You
Leah Rhaya Page
Marijana Bilic
Winkie Su
General Investment Framework
Full transcript