IBM 416 Lecture Notes - Lecture 8: Cubic Metre, Sawmill, Morocco
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Case Study - Chabros International Group: A World of Wood
· Where does Chabros originate from? (pg 1)Lebanon
· Why Chabros’ Italian partners sold their shares? (pg 2) Italian partners found it
difficult to adapt to the Saudi Arabian mentality and the Saudis’ way of doing business. The first
Italian partner sold his shares to Chabros one year after the establishment of the IJV and the
second Italian partner sold his shares to Chabros two years later.
· Why Chabros bought a production plant? (pg 2)demand for wood (lumber and veneer)
soared in the UAE, Saudi Arabia and Qatar, and Chabros experienced a great shortage in the
supply of European wood. The sales generated by Chabros far exceeded the production capacity
of Chabros’s European supplier. To reduce this supply shortage and secure the largest quantity
possible of European wood, in 2003 Chabros opened an office in Serbia, called Chabros Serbia,
and financed its Serbian supplier to increase its sawmill’s production capacity.
· Why did Chabros decide to enter Qatar? (pg 2) Qatar was attractive because it was a
small natural-gas-rich country that was following the path of its neighbor, Dubai, in fast
· How did opening the second subsidiaries in UAE and Saudi Arabia affect Chabros?
(pg 2)In 2006, it opened a second subsidiary in the UAE in Abu Dhabi. In 2007, it opened a
second subsidiary in Saudi Arabia in Jeddah. The last two subsidiaries were opened to increase
Chabros’s sales volume and take advantage of lower prices associated with purchasing larger
quantities. Later, Chabros benefited from production economies of scale after acquiring the
· How did entering Egypt benefit Chabros? (pg 2)later in that same year, it opened a
subsidiary in Cairo, Egypt, to access a newmarket where it could sell its supply of lower quality
lumber and veneer.
· How are the pricing of A, AB, and B quality veneer? (pg 2-3)when a trader bought only
“A”- and “AB”-quality veneers, the sawmill charged that trader prices as if he/she bought all the
different qualities of veneer and assigned the lower quality veneer that was left at the sawmill,
the “B”- quality veneer, a value of zero, assuming that it would not be sold. That was because it
was much more difficult for a sawmill to sell its lower quality veneers.
· What was the reason of the drop in sales in 2009? (pg 3) This was due entirely to the
drastic fall in Chabros Dubai’s sales. In 2009, while Chabros’s other subsidiaries experienced
either relatively stable or somewhat improved sales, Chabros Dubai suffered from a 30 per cent
decline in its sales.
· How did the demand for lumber change compared to veneer in 2009? (pg 4) In 2009,
Chabros International Group sold its veneer products at an average price of $3 per square metre
and its lumber products at an average price of $1,000 per cubic metre. This translated into sales
of 11,666,666 square metres of veneer and sales of 55,000 cubic metres of lumber.
· How is the potential for lumber compared to veneer? (pg 4) According to Chami,
although Chabros started as a veneer company, because Chabros was considered the market
leader in veneer in the MENA region, at that moment it had more potential and freedom to grow
· How did the distribution system of Chabros work? (pg 4) Chabros International
Group’s subsidiaries used their own trucks to distribute their products within the countries they
operated in. However, Chabros Serbia used its trucks to distribute its products all over Europe
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