SANITA STRATEGIC INDUSTRY ANALYSIS

Prepared for: Mr. wael Najdi Introduction to Business course American University of culture and Education

Prepared by: Tarek Al khayat Mahmoud Al-Hershy

May28,2009
1

CONTENTS
Page I. Introduction ..4 II. External Analysis.....6 a) Legal Environment. ..6 b) Natural Environment 7 c) Cultural Environment...8 III. Internal Analysis ........9 a) Mission and Vision b) Objectives.. IV. SWOT Analysis .... 10 a) Strengths...10 b) Weaknesses 10 c) External threats 11 d) External opportunities... 11 V. Sanita Current Strategy 12 VI. Conclusions & Recommendations 13 VI. Bibliography 14

EXECUTIVE SUMMARY

In this report, we discuss one of Indevco Groups companies, namely Sanita. We shed light on Sanitas role towards the individual, environment and society.Sanita's external as well as internal market analysis will provide a clear image of itsposition (where it stands) as one of the leading and organized industrial Lebanesecompanies. We also concentrate on studying its position in the market under strategy analysisby firstly referring to the forces of its suppliers, customers and competitors. Sanita'sreputation is simply Sanita's products; therefore, we will commit to examineSanita's major key success factors and other driving forces that brings the companyto having a competitive edge in the Lebanese market which is publicized throughthe ISO certificate and its Total Quality Management. Revealing Sanitas distinguished Business strategy comes through a tyoical SWOTanalysis. Sanitas strength and advanced quality come from its suppliers, and this whatmainly discusses Sanita's current strategy. Therefore, we decided to concentrate onone of its major suppliers namely Masterpak. This latter company provides Sanitawith proper flexible packaging and the latest polymer and printing technologies.

In all, this report tends to stimulate some kind of awareness to the importance ofSanita's business strategy as locall hygiene products manufacturing company thatbasically tends to improve the image of the Lebanese production

SANITA STRATEGIC INDUSRTY ANALYSIS

INTRODUCTION
Indevco Group, which is a privately-owned multinational company, has Sanita placed as one of its distinguished companies in Lebanon. Since Sanitas establishment in Lebanonin 1972, it has become a household name synonymous with quality consumer products,outstanding support of the community and commitment to the environment. As forSanitas confidante,namely,MasterPak, its mission is to remain the uncontested leader inflexible packaging in the Eastern Mediterranean. MasterPak is a supplier of quality products and services that use the latest polymer andprinting technologies and global industry expertise to satisfy the needs of existing andpotential customers in the region. Like other members of the multinational INDEVCO GROUP, Sanita actively createsjobs, stimulates industrial development and
4

strengthens the national economy. In linewith its mission to serve the Lebanese economy, Sanita became a regional player in 1987. Exports have expanded to the extent that Sanita is supplying markets in Europe, Africa,and the Mediterranean Basin. Sanitas aim is to gain the trust and satisfaction of its client, by standardized andconsistent quality. The Marketing Department forecasts and satisfies consumer needs,while seeking out emerging markets. The Research & Development Department isexposed to international trends and well-known references, so it works constantly todevelop innovative products of international standard. The Quality Control System gives an opportunity to regularly check the variousproperties of products and governs all manufacturing process. The highly visiblepresence of Sanita brand products - in homes, businesses, and public spaces acrossLebanon is an indication of their success.

Directors & Executives

Chairman: Chafic Frem President: Neemat Frem Vice President / General Manager: Elias Esta Export Manager: Bahjat Frem Sales Managers: Wissam Abou Diwan, Walid Said Marketing Managers: Hiba Darazi & Bassam Khoueiry Financial Manager: Antoun El Khoury

Factory Information:
Factory Size: Factory Location: Number of production Lines: Management Certification: 10,000-30,000 square meters Zouklebanon 6
HACCP ISO 9000/9001/9004/19011: 2000

A) Legal Environment
The Sanita brand name of the Indevco group operates out of Lebanon, and accordingly it must abide by the legal restrictions that apply within the Lebanese borders. As a result Sanita must continually seek to update its operations, production, and distribution of its products in order to abide by the legislation issued by the different relevant regulatory agencies. Sanita must pay special attention to the following government institutions mainly because failing to abide by the relevant laws could result in a shutdown of the operations:

1. The Lebanese Customs

Because Sanita is the business of producing and exporting many of its products, it must continually abide by the laws and regulations issued by the Customs agency. Additionally, Sanita imports a number of raw materials for its production operations and hence must abide by the relevant laws and regulations. In importing its materials, Sanita must pay special attention to the first chapter of the regulation booklet, which outlines the general import laws and regulations. Further in the booklet are more detailed regulations that must be adhered to. Sanita must also be aware of the major trade agreements that Lebanon is party to and export accordingly, this is essential because as a Lebanese company, Sanita carries the Lebanese flag and must behave in a manner that is in line with the official agreements signed by the Lebanese government. Also these agreements can be found with the Customs authority. A particularly useful document is the Customs guide published by the Customs authority, which outlines all the relevant laws that must be addressed by the trader and consumer within the Lebanese borders. Within this document is a discussion of the different import and re-import laws, as well as the export and re-export laws as well. Sanita must address this document in order to insure a successful operation that conforms to the prevalent customs laws in Lebanon.

2. The Central Bank

Although Sanita will not be directly regulated by the Central Bank since it is not a financial institution of any sort, it still must pay attention to the prevalent banking laws in order to effectively finance its expenditures and revenues. This is especially true because Sanita completes international transactions both on the import and export side as well, hence it must address question of payments and receivables into
7

the Lebanese borders. A full discussion of all the laws that must be adhered to would be needless however an example might help in clarifying some aspects. Since Sanita is involved in international trade, it probably at some point uses the LC and banker acceptance system in order to purchase or sell its products. Although Sanitas banking institution will advise on and complete the transaction, Sanita must also have an understanding of the domestic law and hence negotiate based on these terms. All this information must be addressed by working in accordance with the Central Banks policies and procedures. Finally, observing the Central Banks policies could prove beneficial because its an indicator of future monetary policy that could positively or adversely affect Sanita. If for example there is indication of a loose monetary policy, Sanita might adjust its objectives accordingly in order to maximize its profits from such simulative policy.

3. The Ministry of Finance

Because Sanita is a Lebanese registered company, the Ministry of Finances policies and procedures are very relevant and must be addressed in all decision made by the company. The MOFs regulation, due to their intrusive nature must be addressed is most aspects of the companys planning; marketing, financing, and distribution. This includes abiding by all Tax and VAT regulations, as well as employee compensation. The MOFs regulations have a strong effect on the bottom-line of Sanitas income statement, and hence a lot of the planning and volume estimates must take into account relevant taxation and expenditures made to the government. Another example is the incorporation of VAT into Sanitas pricing strategy since the costumer effectively pays this tax. Additionally the MOFs actions indicate the governments policies and procedures, making it a strong indicator of future economic performance. This sort of

information could prove very valuable to an organization that hopes to continue to make a positive profit even in deteriorating economic conditions.

4. The Ministry of Industry

Finally, Sanita must pay attention to the regulation imposed by the Ministry of Trade, and this is especially important is gaining the necessary licenses in order to operate. Getting these licenses entails abiding by the standards imposed by the Lebanese government and its agencies. Other relevant ministries whose legislation must be addressed include the Ministry of Economy and Trade, Ministry of Labor, and the Ministry of Environment.

B) Natural Environment
Having just recently emerged from a grueling 20-year war, Lebanon as a nation is focused on rebuilding and eradicating the destruction caused by the war. As such, it is not particularly strict in its environmental legislation. This doesnt however mean that there are not any efforts, on the contrary the Ministry of Environment is continue sly working to improve the natural environment and clean what has been damaged during the war. This is especially apparent is several large-scale projects underway in Lebanon, such as the clean up of beaches through the south and into the capital Beirut. Additionally an extensive waste management and eradication project is underway in the Solidere district of Beirut. This projects aim is to clear away many years worth of garbage that was disposed of in a makeshift location in the central district during the war. This clean up effort is taking place in conjunction with agreement and consultation with the Green Peace association. Sanitas main concern must be to adhere by the policies regarding land use and waste management. They must abide by regulation that limits the number of factories in certain residential areas and controls the management of waste produced
9

and how it must be properly disposed of. This is especially important in the postwar environment in which Lebanon is trying to correct all the environmental damages that have taken place, and properly implement laws and regulation that will seek to protect the environment in the years to come. Sanita must also pay special attention to a population of young baby boomers that have become increasingly global in their thinking and approach to issues such as the environment. As a result many citizens have become ethical buyers that focus on purchasing products that are produced without harming the environment.

C) Cultural Environment
Sanita operates in a country with several different religious beliefs all fused into one united people, a very sensitive environment from a cultural point of view. Additionally, Lebanon continue sly copes with the different interpretations of its belonging either to Europe or the Arab world. Facing a cultural environment as such, Sanita must try to adapt its operations and production to accommodate this vast diversity that is Lebanon. This issue can be addressed accurately in terms of the advertising that Sanita will do. In the more conservative South of Lebanon for example, Sanita must advertise in a way so as not to offend the more religious people of this region. In contrast to that, Sanita can adopt a more open campaign in the more liberal North were people are more open to modern trends and customs of Europe. Sanita must also focus its production plans on trying to find products that are essential to the Lebanese costumer and their cultural norms. For example Sanita can focus on producing certain accessories used for the traditional smoking (hubbly bubbly), a product that would be especially suited to the local culture.
10

II. Internal Analysis

A) Mission and Vision 1. Supporting the National Economy
Availing employment vacancies to the largest number of Lebanese people Developing a local national industry and directing consumers towards Lebanese products

2. Addressing Social & Cultural Needs

Developing Sanita products to meet the existing and changing needs of consumers Launching and sponsoring environmental, social, and cultural activities which contribute to the welfare and health of Lebanese people

3. Fulfilling Employee Aspirations

Strengthening and enriching a family spirit of cooperation, unity, and sense of belonging Providing an acceptable level of security and a decent life standard Formulating clear career paths

4. Assisting in National Restoration & Rebuilding

Molding employees' spirits by reinforcing patriotism and national reconciliation Organizing and participating in activities related to the physical removal of war residues Serving as a corporate mentor of positive commercial-consumer relations

B) Objectives
Sanita's pledge to realizing quality objectives is attained through: Applying an effective local strategy that sieze incessant improvement in it is product line.

11

Evaluating and tracking a substantial number of production parameter(s) Investigating direct, as well as indirect, competitive stricture and range of effect on the quality of Sanita's products, services and organizational wellbeing. Committment to sustaining market position and effect among leading providers of consumable quality products Applying quality schemes at all levels as to position itself near to expected market changes and additional customers' demand. Striving to be not only a leader in the local market but to foster pride in Lebanese products at national and international levels.

IV. SWOT analysis:

A) Strengths:
Role in proper waste disposal Sanita provides wide-scale support for social welfare Developing Sanita products to meet the existing and changing needs of consumers Launching and sponsoring environmental, social, and cultural activities which contribute to the welfare and health of Lebanese people. TQM (Sanita = leading household in quality consumer products.) Availability of a quality control system which allows sanita to regularly check the various properties of the products and govern all manufacturing processes. Brand awareness , good reputation Services Strong customer support Sanita creates jobs, stimulates industrial developments, and strengthens the national economy. Sanita works to gain the trust and satisfaction of its clientele. Research and development department works constantly to develop innovative products of international standards. Sanita fulfils employee aspirations by streghtening and enriching a family spirit of cooperation, unity, and sense of belonging and by providing and acceptable level of security and a decent life standard and finally by formulating clear career paths.

12

B) Weaknesses:
Sanita is a big organization; it follows a certain bureaucracy in decisionmaking. Such a tedious and long process makes the achievement of Sanitas goals take a longer time and leads to delays in the production process. This weakness is justified to the size of the organization in accordance to the sizes of other small industries.

C) Threats:
Intense competition ( MIMOSA, FINE, KLEENEX, ) Lebanese economy is becoming worse and worse (more taxes imposed TVA) The Lebanese people with this bad economy will have less income, therefore people will try to buy cheaper product ( competitors product of less quality) Masterpack is sanitas only supplier , and Masterpack has no competition in Lebanon, therefore the bargaining power of the supplier is very high.( suppliers can set their own prices, usually high prices) Threat of new entrants( new companies that are willing to provide good quality products like Sanita does)

13

D) Opportunities:
Improved buyer supplier relationships ( Masterpack) Humanitarian Causes: Sanita provides wide-scale support for social welfare institutions by providing Sanita products free of charge. In addition, Sanita contributes gifts and assistance to local and international non-profit community-based organizations. Conferences & Exhibitions: Sanita sponsors regional United Nations conferences devoted to industrial topics, local exhibitions related to its core business activities, and exhibitions/events for children, scouts, and sports clubs. Referring to the previous points, Sanita has great opportunities to expand and go global.

V. Sanita Current Strategy

Sanitas current strategy is differentiation. In fact, Sanita is always trying to improve its products and transform them into a superior product relatively to its the competing products that exist in the market. The company believes the most important factor in the success of a product and of a brand is customer loyalty; and the best way to get customer loyalty is to offer them top quality products that they value and benefit from. We can see from this that the strategy of differentiation is supported by a customer oriented attitude from the part of the company. In fact, when it communicates with its customers, it talks to them by putting emphasis on

14

what those customers want and on their own personal needs. That usually give customers a sense of satisfaction and of importance and that will make them more loyal to the company and its products. The following passage that can be found on Sanitas website, illustrates this attitude: At Sanita, we believe in helping consumers achieve proper hygiene and confidence in their bodies. We even believe that people should indulge themselves. It's nice to know that soft, durable and reliable Sanita products contribute to good health and feeling fresh on a daily basis. Our customers find that as comforting as we do. With this in mind and under the competent supervision of our Research & Development Department, we manufacture our personal care products with prime quality materials using the latest technologies. Our goal is to meet all consumer needs, down to the most discerning. (www.sanitalb.com) In addition to its differentiation strategy, Sanita also adopts a diversification strategy. In fact, it produces a variety of product for various segments of the market by meeting a wide scope of needs; its products include: Personal care products, home care products, medical products and institutional products. The differentiation strategy is mainly supported by the quality policy of Sanita:

Quality Policy
Sanita manufactures and markets a wide range of quality hygienic tissue, disposable and plastic products. Committed to maintaining their market position among leading providers of consumable quality products through their quality schemes at all levels. Sanitas plans, activities, efforts and culture are geared toward anticipating, meeting and satisfying consumers' needs and stockholders' expectations. The commitment to meet goals and quality objectives is achieved through a strategy of continuous improvement. The continuing success in making Sanita's Quality System an essential part of day-to-day activities depends on safeguarding performance standards via:
15

 Coordination & cooperation among all departments Acquisition of appropriate technologies & materials Continuous evaluation of risks & opportunities in light of market research Wide sales coverage & effective sales support Effective & efficient use of resources Commitment of skilled, trained & motivated employees

VI. Conclusions & Recommendations

We think that Sanitas differentiation strategy is very convenient for the nature of the product it sells (tissue) because all kinds of tissues, are usually viewed by consumers as the same. That means that the bargaining power of the buyer because strong and the bargaining power of the supplier becomes weak. The result of this will be that if a consumer buys a Sanita product, any decrease however small it may be will make that consumer shift to another brand. In order to fight this weakness that the nature of the product imposes, Sanita is trying to differentiate its product so the consumer would have a preference for Sanita and thus will be more loyal to the brand because they find something in it that they dont find in other brands. This loyalty will prevent customers from shifting whenever there is a price decrease in other products. This is very important, because price wars are very destructive, especially when the companies are equal in size, like Sanita, Fine and Ninex; having this loyalty advantage over its competitors, Sanita wouldnt have to enter in a price war and start loosing money for nothing. We also believe that the customer oriented attitude of the whole company is an important key success factor that we can find in all most all of the industries; because in the process of buying a product, the customer first asks himself: whats in it for me? If the company is customer oriented it will give him a direct answer to this question which will probably satisfy the customer and make him buy the

16

product. On the other hand, we believe that Sanita should give more importance to its marketing department. Marketing is very important because it reminds the customers about the product. If you dont remind the customers about a product, they tend to forget it and to switch to a brand that is being advertised. Of course brand loyalty will compensate a bit but it is not enough. We suggest that Sanita sets a meeting with professional advertisement agencies and build a complete advertisement campaign including television radio and bill board. In order to afford this, Sanita should keep a certain budget for the marketing and to cut expenses on other less important issues.

BIBLIOGRAPHY
Krietner, R. ( 2001). Management, 8th Edition. Houghton Mifflin Company. Kotler & Armstrong ( 1999). Principles of Marketing. Prentice Hall Inc. John A. Pearce II & Richard B. robinson, Jr. Strategic Management, 9th Edition. McGRAW-Hill Habry,Bassem 2002 Consumption of tissue in the Middle East .Conference (June)

17

www.sanitalb.com www.iso.org www.qualitybiz.com www.indevcogroup.com www.masterpaklb.com www.bdl.gov.lb www.customs.gov.lb www.economy.gov.lb www.industry.gov.lb www.idal.gov.lb www.finance.gov.lb www.cas.gov.lb

18