Analyses of Jabwood International

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On supply side, competitive foreign companies entered the huge Chinese market, thus increasing the entry barriers. China had a large consumption of 250 million CBM of timber, of which 150 million CBM was domestically produced. This gap for import served as a great chance for companies like Jabwood to compete for. Competitors with exclusive rights from around the world entered Chinese market to sell major brands, thus increasing the entry barriers.

On demand side, Chinese timber buyers had high requirements for timber size and quality and had relatively low bargaining power in trades with high quality timber companies. This was because the cost of searching alternatives was high and once Chinese buyer found the perfect option for timber, they generally kept on the cooperation.

On regulatory side, the Chinese economy system had many special characteristics due to the communist party system and was drastically different from the Middle Eastern world. Timber companies had to take time to understand Chinese law and administrative procedures, since these may be barriers for successful market entry.

2.2 Analysis-Internal

Strength of Jabwood

Jabwood is one of the leading timber wholesaler and retailer in the region. Its big competency was good relationship with supplier and customers. Its strong relationship with main Russian supplier guaranteed the exclusive right to sell TANITA brand of softwood in the Middle East for over 20 years. The close relationship with customers helped secure more contracts within the region.

The second strength of Jabwood was the satisfactory price, responsive delivery and great quality of timber. Since the company secured many contracts, it could buy and store large quantities and different grades of timber with economies of scale, allowing the company to have cost advantage. The storage of timber and the trucks the company owned allowed the company to be responsive to contracts and delivered timber in the shortest possible time within the region. Besides, the owner Fayez and his family had great expertise in choosing timber products and could satisfy the various needs of the customers.

The third ability was that Jabwood had the ability to be great intermediary between suppliers and regional buyers. Many of the family members used to live abroad and were trilingual. The smooth communication paved the way for final contracts.

On the contrary, Jabwood’s main weakness was overdependence on the main supplier and the supplier bargaining power was too large. The revenue from the exclusive sales of TANITA product was about 60% to 70% of Jabwood’s total revenue. But this exclusivity couldn’t be guaranteed any more since Jabwood failed to meet the required sales level in the contract. The main supplier decided to add one company as distributor for the brand in the Middle East, which led to more intensive competition.

Besides, since Jabwood was family owned business, the succession could be problematic because of interest disputes. Besides, limited competent family members set constraints to human resources of management teams. But for now, the company will stay family-owned.

Conclusion

Overall, political instability and economic downturn implied that domestic market was not promising and Jabwood should enter new market to increase sales volume. Thus Jabwood should build up cooperation with more suppliers to raise the bargain power in the first hand. Besides, the company should choose the new market that can promise revenue growth and can be penetrated without too much difficulty.

3 Options

Expand? Yes

Which country?

Saudi Arabia first, know-how, experience, near and easy control, build office, familiar market 100% sales growth in the first year, promise fast growth, only sawn timber ( huge demand)

Chinese market first, no exclusivity, far away, new markets 0% in first year, ignorance of the language and market, lack of talents, opprtunity in Shanghai rooftop changes for sawn timber, lower tariff

Resource allocation: only 2 family members can take up the responsibility

Short-term, enter Saudi, high profit growth, 2 members to operate

Later, with stronger power, consider enter China, 1 member, start from exporting to test the market, later consider build office

4 Recommendation & Implementation

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