SANITA

STRATEGIC INDUSTRY ANALYSIS

Prepared for:

Mr. wael NajdiIntroduction to Business course

American University of culture and Education

Prepared by:

Tarek Al khayat

Mahmoud Al-Hershy

May28,2009

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CONTENTS

PageI. 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 ……….…………………….……………..…… 10a) Strengths…………………………………………………………...10b) Weaknesses……………………………………………………… 10c) External threats………………………………………………… 11d) External opportunities………...………………………………… 11

V. Sanita Current Strategy……………………………………………12

VI. Conclusions & Recommendations……………………………… 13

VI. Bibliography…………………………………………………… 14

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EXECUTIVE SUMMARY

In this report, we discuss one of Indevco Group’s companies, namely Sanita. We shed light on Sanita’s 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 Sanita’s distinguished Business strategy comes through a tyoical SWOTanalysis.

Sanita’s 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.

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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

SANITASTRATEGIC INDUSRTY ANALYSIS

INTRODUCTION

Indevco Group, which is a privately-owned multinational company, has Sanita placed as one of its distinguished companies in Lebanon. Since Sanita’s 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 forSanita’s 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

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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.

Sanita’s 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

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Factory Information:

Factory Size: 10,000-30,000 square meters

Factory Location: Zouklebanon

Number of production Lines: 6

Management Certification: HACCP   ISO 9000/9001/9004/19011: 2000  

A) Legal Environment

The Sanita brand name of the Indevco group operates out of Lebanon, andaccordingly it must abide by the legal restrictions that apply within the Lebaneseborders. As a result Sanita must continually seek to update its operations,production, and distribution of its products in order to abide by the legislationissued by the different relevant regulatory agencies. Sanita must pay specialattention to the following government institutions mainly because failing to abideby the relevant laws could result in a shutdown of the operations:

1. The Lebanese Customs

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Because Sanita is the business of producing and exporting many of its products, itmust continually abide by the laws and regulations issued by the Customs agency.Additionally, Sanita imports a number of raw materials for its production operationsand hence must abide by the relevant laws and regulations. In importing itsmaterials, Sanita must pay special attention to the first chapter of the regulationbooklet, which outlines the general import laws and regulations. Further in thebooklet are more detailed regulations that must be adhered to.Sanita must also be aware of the major trade agreements that Lebanon is party toand export accordingly, this is essential because as a Lebanese company, Sanitacarries the Lebanese flag and must behave in a manner that is in line with theofficial agreements signed by the Lebanese government. Also these agreements canbe found with the Customs authority.

A particularly useful document is the Customs guide published by the Customsauthority, which outlines all the relevant laws that must be addressed by the traderand consumer within the Lebanese borders. Within this document is a discussion ofthe different import and re-import laws, as well as the export and re-export laws aswell. Sanita must address this document in order to insure a successful operationthat 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 afinancial institution of any sort, it still must pay attention to the prevalent bankinglaws in order to effectively finance its expenditures and revenues. This is especiallytrue because Sanita completes international transactions both on the import andexport side as well, hence it must address question of payments and receivables into

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the Lebanese borders. A full discussion of all the laws that must be adhered towould be needless however an example might help in clarifying some aspects. SinceSanita is involved in international trade, it probably at some point uses the LC andbanker acceptance system in order to purchase or sell its products. AlthoughSanita’s banking institution will advise on and complete the transaction, Sanita mustalso have an understanding of the domestic law and hence negotiate based on theseterms. All this information must be addressed by working in accordance with theCentral Bank’s policies and procedures.

Finally, observing the Central Bank’s policies could prove beneficial because it’s anindicator 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 itsobjectives 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 Finance’spolicies and procedures are very relevant and must be addressed in all decisionmade by the company. The MOF’s regulation, due to their intrusive nature must beaddressed is most aspects of the company’s planning; marketing, financing, anddistribution. This includes abiding by all Tax and VAT regulations, as well asemployee compensation. The MOF’s regulations have a strong effect on thebottom-line of Sanita’s income statement, and hence a lot of the planning andvolume estimates must take into account relevant taxation and expenditures made tothe government. Another example is the incorporation of VAT into Sanita’s pricingstrategy since the costumer effectively pays this tax.Additionally the MOF’s actions indicate the government’s policies and procedures,making it a strong indicator of future economic performance. This sort of

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information could prove very valuable to an organization that hopes to continue tomake 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 ofTrade, and this is especially important is gaining the necessary licenses in order tooperate. Getting these licenses entails abiding by the standards imposed by theLebanese 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 isfocused on rebuilding and eradicating the destruction caused by the war. As such, itis not particularly strict in its environmental legislation. This doesn’t however meanthat there are not any efforts, on the contrary the Ministry of Environment iscontinue sly working to improve the natural environment and clean what has beendamaged during the war. This is especially apparent is several large-scale projectsunderway in Lebanon, such as the clean up of beaches through the south and intothe capital Beirut. Additionally an extensive waste management and eradicationproject is underway in the Solidere district of Beirut. This project’s aim is to clearaway many years’ worth of garbage that was disposed of in a makeshift location inthe central district during the war. This clean up effort is taking place in conjunctionwith agreement and consultation with the Green Peace association.Sanita’s main concern must be to adhere by the policies regarding land use andwaste management. They must abide by regulation that limits the number offactories in certain residential areas and controls the management of waste produced

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

C) Cultural Environment

Sanita operates in a country with several different religious beliefs all fused into oneunited people, a very sensitive environment from a cultural point of view.Additionally, Lebanon continue sly copes with the different interpretations of itsbelonging either to Europe or the Arab world. Facing a cultural environment assuch, Sanita must try to adapt its operations and production to accommodate thisvast diversity that is Lebanon.

This issue can be addressed accurately in terms of the advertising that Sanita willdo. In the more conservative South of Lebanon for example, Sanita must advertisein a way so as not to offend the more religious people of this region. In contrast tothat, Sanita can adopt a more open campaign in the more liberal North were peopleare more open to modern trends and customs of Europe.Sanita must also focus its production plans on trying to find products that are essential tothe Lebanese costumer and their cultural norms. For example Sanita can focus onproducing certain accessories used for the traditional smoking (hubbly bubbly), a productthat would be especially suited to the local culture.

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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 Lebaneseproducts2. Addressing Social & Cultural Needs• Developing Sanita products to meet the existing and changing needs of consumers• Launching and sponsoring environmental, social, and cultural activities whichcontribute to the welfare and health of Lebanese people3. Fulfilling Employee Aspirations• Strengthening and enriching a family spirit of cooperation, unity, and sense ofbelonging• Providing an acceptable level of security and a decent life standard• Formulating clear career paths4. 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 warresidues• 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 isproduct line.Evaluating and tracking a substantial number of production parameter(s)

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Investigating direct, as well as indirect, competitive stricture and range ofeffect on the quality of Sanita's products, services and organizational wellbeing.Committment to sustaining market position and effect among leadingproviders of consumable quality productsApplying quality schemes at all levels as to position itself near to expectedmarket changes and additional customers' demand.Striving to be not only a leader in the local market but to foster pride inLebanese products at national and international levels.

IV. SWOT analysis:

A) Strengths:

Role in proper waste disposalSanita provides wide-scale support for social welfareDeveloping Sanita products to meet the existing and changingneeds of consumersLaunching and sponsoring environmental, social, and culturalactivities which contribute to the welfare and health of Lebanesepeople.TQM (Sanita = leading household in quality consumer products.)Availability of a quality control system which allows sanita toregularly check the various properties of the products and governall manufacturing processes.Brand awareness , good reputationServicesStrong customer supportSanita creates jobs, stimulates industrial developments, andstrengthens the national economy.Sanita works to gain the trust and satisfaction of its clientele.Research and development department works constantly todevelop innovative products of international standards.Sanita fulfils employee aspirations by streghtening and enriching afamily spirit of cooperation, unity, and sense of belonging and byproviding and acceptable level of security and a decent lifestandard and finally by formulating clear career paths.

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B) Weaknesses:

Sanita is a big organization; it follows a certain bureaucracy in decision-making.Such a tedious and long process makes the achievement of Sanita’s goals take alonger time and leads to delays in the production process. This weakness is justifiedto 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, thereforepeople will try to buy cheaper product ( competitors product of less quality)Masterpack is sanita’s only supplier , and Masterpack has no competition inLebanon, 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 goodquality products like Sanita does)

D) Opportunities:

Improved buyer – supplier relationships ( Masterpack)Humanitarian Causes: Sanita provides wide-scale support for social welfareinstitutions by providing Sanita products free of charge. In addition, Sanitacontributes gifts and assistance to local and international non-profit

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community-based organizations.Conferences & Exhibitions: Sanita sponsors regional United Nationsconferences devoted to industrial topics, local exhibitions related to its corebusiness activities, and exhibitions/events for children, scouts, and sportsclubs.Referring to the previous points, Sanita has great opportunities to expand andgo global.

V. Sanita Current Strategy

Sanita’s current strategy is differentiation. In fact, Sanita is always trying toimprove its products and transform them into a superior product relatively to it’s thecompeting products that exist in the market. The company believes the mostimportant factor in the success of a product and of a brand is customer loyalty; andthe best way to get customer loyalty is to offer them top quality products that theyvalue and benefit from. We can see from this that the strategy of differentiation issupported 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 onwhat those customers want and on their own personal needs. That usually givecustomers a sense of satisfaction and of importance and that will make them moreloyal to the company and its products. The following passage that can be found onSanita’s website, illustrates this attitude: “At Sanita, we believe in helpingconsumers achieve proper hygiene and confidence in their bodies. We even believe

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that people should indulge themselves. It's nice to know that soft, durable andreliable 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 primequality materials using the latest technologies. Our goal is to meet all consumerneeds, down to the most discerning.” (www.sanitalb.com)In addition to its differentiation strategy, Sanita also adopts a diversificationstrategy. In fact, it produces a variety of product for various segments of the marketby 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, disposableand plastic products. Committed to maintaining their market position among leadingproviders of consumable quality products through their quality schemes at all levels.Sanita’s plans, activities, efforts and culture are geared toward anticipating, meetingand satisfying consumers' needs and stockholders' expectations. The commitment tomeet goals and quality objectives is achieved through a strategy of continuousimprovement. The continuing success in making Sanita's Quality System anessential part of day-to-day activities depends on safeguarding performancestandards via:• Coordination & cooperation among all departments• Acquisition of appropriate technologies & materials Continuous evaluation ofrisks & opportunities in light of market research• Wide sales coverage & effective sales support• Effective & efficient use of resources• Commitment of skilled, trained & motivated employees

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VI. Conclusions & Recommendations

We think that Sanita’s differentiation strategy is very convenient for the nature ofthe product it sells (tissue) because all kinds of tissues, are usually viewed byconsumers as the same. That means that the bargaining power of the buyer becausestrong and the bargaining power of the supplier becomes weak. The result of thiswill be that if a consumer buys a Sanita product, any decrease however small it maybe will make that consumer shift to another brand. In order to fight this weaknessthat the nature of the product imposes, Sanita is trying to differentiate its product sothe consumer would have a preference for Sanita and thus will be more loyal to thebrand because they find something in it that they don’t find in other brands. Thisloyalty will prevent customers from shifting whenever there is a price decrease inother products. This is very important, because price wars are very destructive,especially when the companies are equal in size, like Sanita, Fine and Ninex; havingthis loyalty advantage over its competitors, Sanita wouldn’t have to enter in a pricewar and start loosing money for nothing.We also believe that the customer oriented attitude of the whole company is animportant 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: “what’sin it for me?” If the company is customer oriented it will give him a direct answer tothis question which will probably satisfy the customer and make him buy theproduct.

On the other hand, we believe that Sanita should give more importance to itsmarketing department. Marketing is very important because it reminds thecustomers about the product. If you don’t remind the customers about a product,they tend to forget it and to switch to a brand that is being advertised. Of course

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brand loyalty will compensate a bit but it is not enough. We suggest that Sanita setsa meeting with professional advertisement agencies and build a completeadvertisement campaign including television radio and bill board. In order to affordthis, Sanita should keep a certain budget for the marketing and to cut expenses onother 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)

www.sanitalb.comwww.iso.orgwww.qualitybiz.comwww.indevcogroup.comwww.masterpaklb.comwww.bdl.gov.lbwww.customs.gov.lbwww.economy.gov.lbwww.industry.gov.lb

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www.idal.gov.lbwww.finance.gov.lbwww.cas.gov.lb

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