Mesaab Ismail
International Management 3680
9/22/14
Problem Statement
Jabwood International is contemplating international expansion into new markets specifically, Saudi Arabia and China to compensate for a decline in revenues.
Problem Causes
The Middle Eastern situation, specifically the uprising in Syria.
The borders between Lebanon and Syria being closed causing the company’s main wood supplier TANITA to expand to other timber companies.
Jabwood’s market share and sales volume had a drop of 20 %.
Jabwood does not have any business in Saudi Arabia which has the Biggest Market in the Middle East for wood products.
Jabwood does not have any business in China which the potential for wood products have increased every year due to the
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Capital can be 100% foreign.
Processed wood products are exempted from import taxes.
Government Stability is at 61 which means it is not likely for the country to go unstable.
Saudi- Arabia is in the Middle East and it also an Islamic country which Jabwood international is familiar with that market.
Cons
Tariffs on lumber are 12%.
28 million population does not compare to the 13 population in China and the citizens who need homes there.
0% forest areas
1 million CBM to import wood.
82 % of the country are urban areas meaning less places required for wood construction.
$686.00 to import per container.
Sawn timber is not needed.
China Expansion
China is a huge market for wood products, Demand for wood is through the roof. The Chinese wood industry has been Prospering since 2010. They have become the biggest producer and exporter of WBP and plywood in the world, they are the second biggest importer of wood products in the world.
Pros
A new regulation in Shanghai allows the replacement of sloppy rooftops to be replaced with sawn timber, this would be a huge market for Jabwood International.
Tariffs on lumber are low.
Only 150 million CBM is produced locally.
The 13 billion population alone makes the demand at an astounding number for wood.
Rural areas are at a higher percentage, meaning more room for building houses.
Cost of imports are at a less cost than in Saudi-Arabia.
Sawn timber is needed.
Cons
First years sales are at 2% of the target
This is high. The reason to this is because globalisation as given a movement to a world of free economic, financial, trade and communication integration where there is free transfer of goods, services, capital across national frontiers and as led to increase in rivalry in the market. This as made competitive rivalry rise in the industry and the Chinese furniture
✓ It could be strategic because, often governments will forbid foreign companies from selling products to its citizens, so as not to take away sales from local industry.
Today’s world is facing strong influence of globalization in each and every aspect of our lives. It is expressed through: free trade agreements, foreign direct investments, international trade, facilitated movement of labour, capital and resources, as well as a strong competition that eventually gives more power to customers. In addition, it resulted in the economic boom of the developing countries, with substantial dominance of China that mainly benefit from their massive labour force, its low cost and high comparative efficiency. This phenomenon has impacted all industries around the world. In particular, furniture production is going through a trend of moving to China that “in 2002
The company was too reliant on orders from the US Government. They need to expand its operations into other areas.
Third, the article says that pursuing certification is a value for American wood companies when they expose their products to abroad. The professor opposes this point by explaining that American
Traditionally, manufacturing in China (either direct or outsourced) has been seen as a way to cut costs and increase profits. Increasingly companies now see it as taking a strategic position that fits their global aspirations, including in China itself or further afield.
Just like other manufacturing, the company I worked had moved to China following the flow of manufacturing business. After researching the trend of future jobs in
has opened an Asian headquarters in Singapore. “Since it opened International sales, which accounted for 25% of the company's business four years ago, were 35% in 2010. The company has set a goal of at least 40% by 2014.” (JS ONLINE, Journal Sentinel)
Also most of the raw materials for making the RTD and beverage products for the company were exported from other countries which create significant overhead with higher operating costs(United States Department of State,2016). Consumer market for RTD and beverage products are less and business cannot grow after reach certain level of peak stage. So company was forced to think about new business opportunities and starting factories in Saudi Arabia or
the China market IKEA China has been allowed to exceed and expand its sourcing of
Another alternative should be to create a plant in Europe so now they don’t have top ay all the taxes they have to pay so they can export their products, in that way they will be able to give better prices to their clients, and they will supposed to have a better service and more quality because they where the pioneers in those products.
In the heart of the Middle East is a country known by many Westerners for its oil production and, often, extremist beliefs of groups within the country. The country is Saudi Arabia, and though it is thought of by many as a rather backward country, Saudi Arabia has a rich history and culture, and it is a country that revolves around Islam and the worship of Allah as the one true God.
They are facing difficulty in logistics and procurement restricted to imports from Taiwan. Sometimes, they are also have marketing budget of their products during their promotion.
The China’s forestry industrial structure improvement attributes to the advanced development and rationalization of the process (Yang and Nie 2011a). Chinese government has promoted the implementation of export oriented strategy since the reform and opening up in 1978 through encouraging foreign investment, by giving the chance to foreign investors set up factories locally and exchanging market for capital or technology.
Political instability in home country can make people lose confidence in their governments and future