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Based on the case study “strategic management in cartelized environment: case of Hisham Packaging, Dubai”, answer the following: Using the data from the case study, undertake a five force framework analysis to identify the factors influencing competitive pressure within the industry.

Based on the case study “strategic management in cartelized environment: case of Hisham Packaging, Dubai”, answer the following: Using the data from the case study, undertake a five force framework analysis to identify the factors influencing competitive pressure within the industry.

Management, Loose-Leaf Version
Management, Loose-Leaf Version
13th Edition
ISBN:9781305969308
Author:Richard L. Daft
Publisher:Richard L. Daft
Chapter11: Managing Change And Innovation
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Based on the case study “strategic management in cartelized environment: case of Hisham Packaging, Dubai”, answer the following: Using the data from the case study, undertake a five force framework analysis to identify the factors influencing competitive pressure within the industry.  

base consisting of more than 1,500 (mostly sharing common customers with all of their sister companies) across 15 countries. The company has strong technical backup from its in-house pre-press, printing plate production, engineering division along with good connections with the local authorities. Being one of the oldest companies in the country, it also has many loyal customers. Hisham Packaging also enjoys the benefits of cartel groups, as they cooperate and mutually support each other whenever they fall short of any raw material or machinery spare parts. It is estimated that, on average, the cartel provides 20-25 per cent price increase for the larger customers because the smaller corrugated box companies cannot meet their daily delivery demand and volumes. If there is no cartel, each converter can decrease their prices by 30 per cent in an effort to attract the bigger customer which then creates unhealthy competition. Some of the shortcomings of Hisham Packaging include that all of the employees of the company are expatriates from South Asian countries such as India, Pakistan, Nepal and Sri Lanka. Due to the improving economic conditions of these countries, Hisham Packaging currently faces around a 40 per cent manpower turnover every year. Because there is no paper mill in the UAE, it imports about 150 containers of paper every month and, although the company possesses about 1,000,000 square feet of space, it constantly faces storage and logistics problems. Because of the bulky nature of the product and transport costs, it cannot export the corrugated material very far from the UAE. Corrugated packaging Packaging material is classified as primary, secondary and tertiary packaging. Packaging material that comes in direct contact with the product is called primary packaging, which is the packaging that a consumer uses as a "portion pack"; for example, Coke or Pepsi cans, a sachet of tomato sauce or a strip of tablets. Secondary packaging is the material which contains several primary packages, for example, a set of 36 Coke cans packed in a corrugated box or tray or a set of tomato sauce sachets stored in a paper board box. Tertiary packaging is the material that packs several sets of primary and secondary packages on wooden pallets or in a larger outer carton, for example, 96 boxes of secondary packages packed and made ready for transportation on a pallet as a unit pack. A corrugated box consists of parts as shown in Figure 1, including a liner that is a supporting layer of sheet over the wavy fluted paper and a wavy paper sheet known as fluted material. The waves themselves are commonly referred as "flutes". The fluted material is laminated both sides by two liners, one on the top and one at the bottom. If the boxes required are heavy-duty, a second layer of fluted paper and top layer over that is laminated, making the sheet as a five-layer corrugated sheet. The fluted material gives strength to the laminate similar to how arches give strength to a bridge. The flutes also Figure 1 Single wall double-face corrugated sheet E 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 2 2016
Transcribed Image Text:base consisting of more than 1,500 (mostly sharing common customers with all of their sister companies) across 15 countries. The company has strong technical backup from its in-house pre-press, printing plate production, engineering division along with good connections with the local authorities. Being one of the oldest companies in the country, it also has many loyal customers. Hisham Packaging also enjoys the benefits of cartel groups, as they cooperate and mutually support each other whenever they fall short of any raw material or machinery spare parts. It is estimated that, on average, the cartel provides 20-25 per cent price increase for the larger customers because the smaller corrugated box companies cannot meet their daily delivery demand and volumes. If there is no cartel, each converter can decrease their prices by 30 per cent in an effort to attract the bigger customer which then creates unhealthy competition. Some of the shortcomings of Hisham Packaging include that all of the employees of the company are expatriates from South Asian countries such as India, Pakistan, Nepal and Sri Lanka. Due to the improving economic conditions of these countries, Hisham Packaging currently faces around a 40 per cent manpower turnover every year. Because there is no paper mill in the UAE, it imports about 150 containers of paper every month and, although the company possesses about 1,000,000 square feet of space, it constantly faces storage and logistics problems. Because of the bulky nature of the product and transport costs, it cannot export the corrugated material very far from the UAE. Corrugated packaging Packaging material is classified as primary, secondary and tertiary packaging. Packaging material that comes in direct contact with the product is called primary packaging, which is the packaging that a consumer uses as a "portion pack"; for example, Coke or Pepsi cans, a sachet of tomato sauce or a strip of tablets. Secondary packaging is the material which contains several primary packages, for example, a set of 36 Coke cans packed in a corrugated box or tray or a set of tomato sauce sachets stored in a paper board box. Tertiary packaging is the material that packs several sets of primary and secondary packages on wooden pallets or in a larger outer carton, for example, 96 boxes of secondary packages packed and made ready for transportation on a pallet as a unit pack. A corrugated box consists of parts as shown in Figure 1, including a liner that is a supporting layer of sheet over the wavy fluted paper and a wavy paper sheet known as fluted material. The waves themselves are commonly referred as "flutes". The fluted material is laminated both sides by two liners, one on the top and one at the bottom. If the boxes required are heavy-duty, a second layer of fluted paper and top layer over that is laminated, making the sheet as a five-layer corrugated sheet. The fluted material gives strength to the laminate similar to how arches give strength to a bridge. The flutes also Figure 1 Single wall double-face corrugated sheet E 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 2 2016
Strategic management in cartelized environment: case of Hisham Packaging, Dubai Mohammed Laeequddin and K. Abdul Waheed On 1 January 2015, Hamza joined Hisham Packaging, in Dubai, United Arab Emirates (UAE), as the CEO. Hisham Packaging specializes in the production of corrugated boxes of various sizes, in both plain and printed forms. Most of Hamza's previous professional experience was in the automobile industry, where his focus had been on Lean operations rather than marketing. After joining Hisham Packaging, Hamza discovered that in a service industry, such as printing and packaging, the business focus is more customer-orientated than process-orientated. In the packaging industry, each customer has their own customized requirements that are unique to them and can vary vastly with regards to order volume. What was particularly shocking to him while investigating the business was the informal cartel arrangement among major corrugated box suppliers in the country and the fact that, without the consent of the cartel members, he was unable to make any major decisions, such as expanding the business or accepting or dropping a customer. Hamza discussed the scenario with his sales manager Ahmad to see what strategy to adopt for the growth of the company. He was trying to figure out what direction the company should head in next. Like any other new CEO, Hamza also had his own plans for increasing the market share and making the operations Leaner, but he quickly found that it would be difficult for him to have any major impact on the existing business due to the existing constraints, and he needed a different strategic move to grow the company. Mohammed Laeequddin is based at Nest Skills Profiling Pvt Ltd, Hyderabad, India. K. Abdul Waheed is based at the Department of Marketing, Institute of Management Technology, Dubai, United Arab Emirates. Hisham Packaging, Dubai Hisham Packaging was started in 1984 in Dubai and its main function included converting brown and white paper into corrugated boxes of various sizes both in plain and printed forms. These boxes are used for the secondary packaging of fast-moving consumer goods (FMCG), such as water bottles, beverage cans, snacks, cooking oils, soaps, fruits and vegetables, and consumer durables including refrigerators, microwaves, crockery, perfumes and clothes. Hisham Packaging converts about 250 metric tons (250,000 kg) of paper into corrugated boxes every day for various multinational companies (MNCS), including Unilever, Coke, Reckitt & Benckiser, Pepsi, Nokia and Black & Decker, and large local companies, such as Areej Cooking Oil and RAK Ceramics. About 70 per cent of its production capacity is utilized for local customers in the UAE and 30 per cent of the production capacity is utilized for neighbouring countries such as Sultanate of Oman, Saudi Arabia, Kuwait and Pakistan. Because of the bulky nature of the product, corrugated box-making requires a lot of space for raw material storage, work in progress, finished goods and vendor inventories. The Hisham Packaging Plant is established across an area of 10,00,000 square feet with more than 400 employees and has state-of-the-art corrugator and printing and converting machines imported from Japan and European countries. As a unit, it is of one of the largest business groups in the UAE and has strong financial backing from its corporate head office. In 2014, the group turnover was US$500m, with a customer Disclaimer: This case has been developed solely as the basis for class discussion and for education purposes only. The primary data have sourced from the packaging companies to illustrate the real-life situation but the names are fictitious. It is not intended to ill ustrate either effective or ineffective handling of an administrative situation or decision-making or represent the views of management about the topic of the case. DOI 10.1108/EEMCS-05-2015-0076 VOL. 6 NO. 2 2016, pp. 1-16, © Emerald Graup Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1
Transcribed Image Text:Strategic management in cartelized environment: case of Hisham Packaging, Dubai Mohammed Laeequddin and K. Abdul Waheed On 1 January 2015, Hamza joined Hisham Packaging, in Dubai, United Arab Emirates (UAE), as the CEO. Hisham Packaging specializes in the production of corrugated boxes of various sizes, in both plain and printed forms. Most of Hamza's previous professional experience was in the automobile industry, where his focus had been on Lean operations rather than marketing. After joining Hisham Packaging, Hamza discovered that in a service industry, such as printing and packaging, the business focus is more customer-orientated than process-orientated. In the packaging industry, each customer has their own customized requirements that are unique to them and can vary vastly with regards to order volume. What was particularly shocking to him while investigating the business was the informal cartel arrangement among major corrugated box suppliers in the country and the fact that, without the consent of the cartel members, he was unable to make any major decisions, such as expanding the business or accepting or dropping a customer. Hamza discussed the scenario with his sales manager Ahmad to see what strategy to adopt for the growth of the company. He was trying to figure out what direction the company should head in next. Like any other new CEO, Hamza also had his own plans for increasing the market share and making the operations Leaner, but he quickly found that it would be difficult for him to have any major impact on the existing business due to the existing constraints, and he needed a different strategic move to grow the company. Mohammed Laeequddin is based at Nest Skills Profiling Pvt Ltd, Hyderabad, India. K. Abdul Waheed is based at the Department of Marketing, Institute of Management Technology, Dubai, United Arab Emirates. Hisham Packaging, Dubai Hisham Packaging was started in 1984 in Dubai and its main function included converting brown and white paper into corrugated boxes of various sizes both in plain and printed forms. These boxes are used for the secondary packaging of fast-moving consumer goods (FMCG), such as water bottles, beverage cans, snacks, cooking oils, soaps, fruits and vegetables, and consumer durables including refrigerators, microwaves, crockery, perfumes and clothes. Hisham Packaging converts about 250 metric tons (250,000 kg) of paper into corrugated boxes every day for various multinational companies (MNCS), including Unilever, Coke, Reckitt & Benckiser, Pepsi, Nokia and Black & Decker, and large local companies, such as Areej Cooking Oil and RAK Ceramics. About 70 per cent of its production capacity is utilized for local customers in the UAE and 30 per cent of the production capacity is utilized for neighbouring countries such as Sultanate of Oman, Saudi Arabia, Kuwait and Pakistan. Because of the bulky nature of the product, corrugated box-making requires a lot of space for raw material storage, work in progress, finished goods and vendor inventories. The Hisham Packaging Plant is established across an area of 10,00,000 square feet with more than 400 employees and has state-of-the-art corrugator and printing and converting machines imported from Japan and European countries. As a unit, it is of one of the largest business groups in the UAE and has strong financial backing from its corporate head office. In 2014, the group turnover was US$500m, with a customer Disclaimer: This case has been developed solely as the basis for class discussion and for education purposes only. The primary data have sourced from the packaging companies to illustrate the real-life situation but the names are fictitious. It is not intended to ill ustrate either effective or ineffective handling of an administrative situation or decision-making or represent the views of management about the topic of the case. DOI 10.1108/EEMCS-05-2015-0076 VOL. 6 NO. 2 2016, pp. 1-16, © Emerald Graup Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1
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