Jabwood Case Final

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Jabwood International

Didier Paquin

Internationalization of the Firm

6-012-08A.A2017.J01

Presented to

Professor Gwyneth Edwards

October 31st, 2017

Jabwood International

        Jabwood International, created in 1930’s in Beirut, Lebannon, enjoyed a great ride as a wood wholesaler in the industry for the last 70 years, operating exclusively in Lebanon and supplying mainly there as well. They had profited from a successful partnership with a Russian softwood supplier, TANITA, for the last 20 years, being their exclusive distributor in the Middle East. Unfortunately, it was a bad period for Lebanon and thus not an eventful time for Jabwood either. The political uprisings in the region (especially the neighbouring Syria) had brought upon Lebanon serious instability (ranking 39 out of 165 for political instability). Corruption, arbitrary legislation and political parties associating to a distinct religion or taking a stance in the Syrian conflict already plagued Lebanon. Taxes were high (30.2 %), inflation as well (5.2%), the already small population of 4.23 million was growing at a quiet rate of .45% combined  to a 12.1% migration rate of young Lebanese. The cherry on top occurs on July 16, 2012, when TANITA announces to Jabwood that they plan on ending their exclusivity as a distributor in the Middle East. Jabwood would not survive if they continued to operate solely from Lebanon without the exclusive rights to sell from TANITA. There was a sense of urgency within the management of Jabwood. Possible solutions were to expand to one (or two) of the biggest wood markets, being China and Saudi Arabia.

 China is one of the last remaining countries on earth with some form of communism still thriving. This creates considerable cultural distance with most countries worldwide, many which do not have any ties to communism. The communist government imposes stringent norms on the timber market; wood has to be of a specific size and of a certain quality. To improve the ease of doing business here and overcome the many cultural differences, several foreign companies have offices in less culturally distant Hong Kong. China was one of the only countries to survive the 2008 financial crisis, making it one of the more favourable selling partners for the many western timber companies. Its GDP growth is 9.1%, which is exceedingly good and they are projected to be the #1 timber importer by 2013 worldwide because of it’s expanding middle class (projected 500 million $ only for infrastructure wood). China is very far physically from Lebanon, it takes at least 24 days for a product to be imported in China from Lebanon. The climate is also different in China, for companies operating in the Middle East, new knowledge about what types of wood are the best for house building is required. (exhibit 1).