Dahab Plastics Co Case Analysis

December 26, 2011

Marketing and International Strategy – Findings and Recommendations

Dahab Plastics Co is still the largest manufacturer of tableware plastics with about 50% of the Jordanian domestic market. The company achieved and has been able to maintain its leading position for the last three decades. However the latest trends in the competitive environment brought about the decline in sales, loss of the market share (from 65% ten years ago to 50% now), and the overall outlook for the company’s future became very challenging.

The past performance and success of the company was due to the advantages of the first mover in the market, and also in big part was “the result of the regional disasters”. It was generally characterized by the reactive response to the market trends, rather than proactive market and industry analysis and strategy formulation.  This approach was apparently good enough in the past, but would no longer sustain the company in the increasingly complex world.

Jordan’s entering the WTO and consequent increase in competitive pressure from outside and within the country, introduction of new technologies, change in suppliers’ and distributors’ expectation – all these factors exacerbated by stagnant economy and flat demand for the company’s products within the country pose the need for significant, even radical, changes in every aspect of the company’s activities.

Since the very survival of the company is on the line, we are going to present the set of recommendations and implementation steps that may seem not palatable at the moment, but are critical for turning around the company and bringing it up to the success in the new world of unprecedented challenges.

One of the areas of the company’s development that warrants thorough evaluation and re-design is its marketing and international strategy. This strategy is focused on two major objectives:

  • Expanding the domestic market reach
  • Making in-roads to the international markets: Europe and North America

These objectives can be reached through the upgraded marketing mix of the company:

  • Product
  •  Price
  • Placement
  • Promotion

Product:  As was indicated in the findings of our team, while the domestic market for tableware plastics remained flat in the last ten years, the market share of Dahab Plastics Co decreased from 65% to just about 50%.  One of the reasons for this decline was the entry of new competitors who also introduced a less expensive and more efficient PET technology. Due to its characteristics the PET plastics have become quite popular among the consumers and will project a more contemporary image of the company.  It is also advisable to conduct internal marketing research to identify what kinds of plastic products are coming into the market from the outside competition in order to be able to adjust the product mix if necessary.

Price: The company has been shunning the transition to the PET technology for a long time. But now it is even more critical to upgrade the technology in order to keep the production costs under control. It is especially important in the light that Dahab’s prices are already higher than the competitors’.  Dahab Plastics has been able to fend off the price pressures from the competition by offering a product of higher perceived quality and through the benefit of on-time delivery to the long-term customers. Still, there is evidence that these higher prices are a significant contributing factor to the loss of the market share by the company.

Placement:  The company has maintained very good business relationships with majority of its long-term clients. However, the need to maintain these relationships through visiting customers, following up on the orders and taking new orders has been taking toll on the company’s ability to expand its customer base through new business development.  It is important now to expand the reach to potential new customers. We recommend hiring a new employee for the Assistant Marketing Manager position who would focus exclusively on finding new business. Dahab Plastics Co is relatively well-known to the many established restaurant businesses, but new businesses may be not aware of the company and its quality products.

Another alternative for the company to maintain its business is to expand internationally into Europe and Northern America. However the international customers have much higher quality requirements on their suppliers, one of which is for the company to obtain and maintain ISO certification. Given the current state of the company, its production processes and quality assurance controls, obtaining that certification would require significant capital investment in upgrading every aspect of the company, including the production machines and processes, computerization of the inventory and accounting systems, purchasing new equipment for quality controls, renovating and redesigning the factory and storage facilities, providing training to the employees and upgrading their skills.  While not completely impossible, these measures will require substantial investment from the company. The return on this investment is not guaranteed however, because the profit margins on the exported products are very narrow and could be easily undercut by the manufacturers from the South East Asia, such as China, Vietnam, Philippines, etc.

We recommend continuing investigation of the requirements for becoming ISO-compliant and conducting the cost-benefit analysis of obtaining the certification. However it is not clear at this moment if this could produce reasonably fast and lasting results.

Promotion: Given our recommendation to focus on new business development we believe that advertising in the national media could play critical role in increasing overall brand awareness of DPC and attracting new customers. We recommend launching a pilot advertising campaign in the local and national print publications. The duration of the recommended campaign should be no less than six months in order to create brand recognition and produce meaningful measurable results for gauging the effectiveness of the campaign. It would also allow DPC to save on the advertising costs by taking advantage of volume discounts available from the publishers. Advertising in the national print media would not only increase brand awareness and brand recognition, but also improve the overall reputation and quality image of the company among existent and potential customers. This would have positive effect on retaining existing clientele and attracting new business.

Alternative Recommendations:    The general manager of DPC Amer Dahab has been considering re-distribution of Israeli-manufactured plastic ware which is retailed at prices well below the cost of what DCP pays now for the raw materials. While we understand the potential serious implications on sales and business reputation of distributing Israeli products in the predominantly arab country such as Jordan, we believe that if done properly it could garner significant advantages for the company. One of the alternatives to direct distribution would be purchasing products from Israeli manufacturers and re-labeling and re-packaging them under the DPC brand. This arrangement would require a significant amount of preliminary work and negotiation with the Israeli counterparts, but the rewards of cutting the cost, increasing the profit margin or reducing the retail price to the customers in order to stay competitive potentially  outweigh the risks. In order to minimize the potential negative backlash from some of the customers there are three alternative ways to introduce these products:

  • A subsidiary of DPC could be formed to deal exclusively in these products. This way there would be clear distinction between the domestically manufactured and imported products for concerned customers.
  • The plastic products ordered from the Israeli manufacturers should not be identical to the present product line-up of DPC. They should be supplementary to the main line of the company’s products. This way the customers could choose if they want to purchase imported products in addition to their regular inventory.
  • The imported plastic products could be offered only to the new customers who are open-minded to the opportunity of buying Israeli-manufactured products. This arrangement would allow minimize the DPC exposure to losing business with its existing customers.

Any of these three alternatives could be used separately or in combination based on the gauging of the initial market reaction.