Company Alpha: The Family Firm Getting Noticed

Abstract

On January 12, 2015, Eng. Derik was looking out of his top floor office in the building where his factory was located. He had just finished a meeting with a managing director of a German company interested in acquiring all or part of the company, Alpha Adhesives Ltd.

Company performance had been very good since its inception, with a constant growth rate from year to year. However, in 2011 after the Egyptian revolution, the company’s sales growth had begun to slow due to many smaller competitors entering the market. Company products were also reaching the maturity stage of their life cycle, putting a strain on the family business.

In 2013, the company was approached by a German Company, Gamma, interested in having a hub in the Middle East. They had chosen Alpha as a potential strategic partner they could cooperate with. After a long meeting with Eng. Derik, they made an offer to acquire 60% of the company in an agreement to transfer technology, while keeping the same management team.

The choice was really hard for Eng. Derik and the rest of the family. From the family side, giving up part of the family business to an external investor would mean that the family culture and traditions might no longer survive. From the business side, this business had been struggling for the past few years and the sustainability of the current status appeared to be almost impossible.

Emotionally burdened, Eng. Derik felt very conflicted and called for a family meeting to discuss the options facing them. He was hoping to find a solution to this dilemma that would combine both the family and the business interest under one clear strategic plan that would embrace sustaining both the family characteristics and the business aspects.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

You are not authorized to view Teaching Notes. Please contact your librarian for instructor access or sign in to your existing instructor profile.

Resources

Exhibit 1. Alpha’s Adhesive Applications

The panel on the left depicts a cardboard manufacturing unit, the panel on the middle depicts an open cardboard box, and the panel on the right depicts corrugated cardboard sheets.

Figure 1. Corrugated Board Manufacturing

An illustration depicts various forms of cardboard production.

The panel on the left depicts a cardboard manufacturing unit, and the panel on the right depicts corrugated cardboard sheets underlying a machine.

Figure 2. Case Folding and Gluing

An illustration depicts two panels of a cardboard manufacturing unit.

The components depicted are the filter and the tobacco rod. The different parts labeled are as follows.

The filter comprises the filtration material, plug wrap paper, tipping paper, and filter adhesives.

The tobacco rod comprises brand logo ink, tobacco blend, cigarette paper, and side seam adhesive.

Figure 3. Cigarette Manufacturing

An illustration depicts components of a cigarette butt.

The panel on the left depicts one corner of a printer paper elevated from a cardboard sheet, the center panel depicts two printed bags of different sizes, and the panel on the right depicts a machine with cylindrical shafts and screws with a printed paper beneath.

Figure 4. Litho-lamination

An illustration depicts three panels of two paper prints and a machine.

The panel on the left depicts series of spiral interconnected wheels, the center panel depicts cylindrical cardboard tubes of various sizes, and the right panel depicts cylindrical cardboard tubes of various colors and patterns.

Figure 5. Spiral Tube Winding

An illustration depicts three panels with cardboard roll hacks.

The panel on the left depicts the top portion revealing the space between the spine and the book pages. The center panel depicts series of thread holder cylindrical cases. The right panel depicts a book placed in between two wooden planks.

Figure 6. Graphic Art and Bookbinding

An illustration depicts three panels related to book binding.

The first panel on the left depicts huge machinery unit with multiple slots with paper rolling out. The second panel depicts three paper bags in different colors. The third panel depicts a triangular dotted design along the left side of a paper and a label along the right side. The fourth panel depicts two papers slit diagonally along all the four corners. Two rectangular boxes are made on the top and bottom of the paper, respectively. The rectangular boxes on the top and bottom are enclosed within a hexagonal pattern with measurements marked as C1, C2, A, G, and L. The labels on the top read “inside valve” and “bag bottoms folded backwards.” The markings on the paper on the left are with dotted lines and on the paper to the right with solid lines.

Figure 7. Paper Bag Manufacturing

An illustration depicts four panels related to paper bags.

The panel on the left depicts a short tissue roll, the panel along the center depicts empty toilet tissue cardboard tubes, and the panel along the right depicts two long tissue rolls.

Figure 8. Tissue Paper Manufacturing

An illustration depicts three panels related to toilet tissue rolls.

Exhibit 2. Alpha’s Profits and Sales in the Past 10 Years

The graph is titled Alpha 10 year performance. The horizontal axis lists the years and ranges from 2005 to 2014. The y-axis lists the values and ranges from 0.0 to 25,000,000.0 with increments of 5,000,000.0. The approximate data from the graph are tabulated below.

Year

Sales

Gross Profit

Net Profit

2005

10,875,954.4

3,792,953.7

1,850,454.2

2006

13,641,638.2

4,072,380.3

1,740,587.6

2007

15,143,892.0

4,122,172.3

1,476,284.6

2008

17,438,223.3

4,589,265.9

1,887,418.4

2009

17,437,628.6

5,010,377.9

1,943,196.4

2010

18,595,127.5

5,682,868.8

2,281,190.8

2011

17,879,279.3

4,996,730.6

1,507,845.6

2012

20,851,601.9

5,952,761.1

1,925,706.0

2013

21,900.510.0

6,216,191.2

2,034,448.2

2014

23,353,877.3

7,279,688.2

2,274,168.5

Figure 9. Egyptian Adhesive Market Size

A bar chart shows a comparison of market trends of Alpha from 2005 to 2014.

Exhibit 3. Egyptian Adhesives Market

The chart is titled Egyptian Adhesives Market Distribution.

The details from the chart are tabulated below.

Rigid Packaging

Flexible Packaging

Tapes and Labels

Wood Working

Transportation

72,122,000

53,750,000

11,550,000

751,280

15,000,000

Figure 10. Dextrin Based Adhesives Supply Chains

An exploded pie chart depicts the key trends in the market distribution of emulsion polymers.

The series of consecutive stages are tabulated below, connected to each other with a right arrowhead.

Plants (Corn, Potatoes, Tapioca, etc)

Starch

Dextrin Powder

Dextrin Adhesives

Figure 11. Emulsion Polymers Adhesives Supply Chain

An illustration depicts the formulation of dextrin adhesives.

The series of consecutive stages are tabulated below, connected to each other with right arrowhead.

Petroleum Derivatives

Monomers

Polymers

Emulsion Polymers Adhesives

Figure 12. Competitor’s/Applications

An illustration depicts the formulation of dextrin adhesives of polymer adhesives.

Exhibit 4. Adhesives Companies by Technology

The details are tabulated below.

Application Name

Menatec

Delta

Henkel

ACCA

HB Fuller

Wafa Chemical

Importation

Paper Lamination

square, circle

square, circle

circle

square, circle

 

circle

 

Litho Lamination

square, circle

square, circle

circle

 

 

 

 

Film Lamination

circle

circle

circle

circle

 

circle

circle

Case and Boxes Closing

circle

circle

triangle, circle

circle

triangle

circle

triangle

Tray Erection

 

 

triangle

 

triangle

 

triangle

Bookbinding

square, circle

square, circle

triangle, circle

 

triangle

circle

circle

On Line Labelling Paper plus Glass/PE, PP Metal)

square

square, circle

circle

 

 

 

circle

On Line Labelling Bopp on PVC

 

 

triangle

 

triangle

 

 

Bags and Sacks

circle

 

triangle, circle

 

triangle

 

triangle

Tissue Applications

square, circle

circle

triangle, circle

 

triangle

 

triangle

Square indicates Dextrin, Circle indicates WB, Triangle indicates HM

Figure 13. Competitor’s Perceptual Map

An illustration depicts a consolidated table highlighting the various application used companies.

Exhibit 5. Customer’s Perspectives on Competitors

A chart depicts a perceptual map highlighting the price rating and quality ratings of different companies.

Appendices

Appendix 1. Adhesive Market Size

Technology Name

Market Volume (Tons)

Typical Market Value EGP

Dextrin

4,332

16,245,000

Water–Based

2,778

62,505,000

Hot Melt

2,220

49,950,000

Polyurethane

2,150

77,400,000

Solvent Based

160

2,160,000

Structural Adhesives-Bus Building

22,500,000

Total Volume

11,640

230,760,000

Appendix 2. Past Performance (3 Years)

Past Performance

2012

2013

2014

Sales

EGP20,851,602

EGP21,900,510

EGP23,353,877

Gross Margin

EGP5,952,761

EGP6,216,191

EGP7,279,688

Gross Margin %

28.55%

28.38%

31.17%

Operating Expenses

EGP3,674,945

EGP3,809,726

EGP4,684,798

Collection Period (days)

80

76

72

Inventory Turnover

4.66

4.54

4.85

BALANCE SHEET

2012

2013

2014

Current Assets

 

Cash

EGP2,726,579

EGP3,427,742

EGP3,535,408

Accounts Receivable

EGP4,355,383

EGP4,284,808

EGP4,419,363

Inventory

EGP3,198,324

EGP3,708,872

EGP2,913,785

Other Current Assets

EGP282,012

EGP178,836

EGP307,141

Total Current Assets

EGP10,562,298

EGP11,600,258

EGP11,175,698

Long-term Assets

 

Long-term Assets

EGP6,324,479

EGP6,508,117

EGP6,605,060

Accumulated Depreciation

EGP2,915,412

EGP3,275,412

EGP3,635,412

Total Long-term Assets

EGP3,409,067

EGP3,232,706

EGP2,969,648

Total Assets

EGP13,971,365

EGP14,832,964

EGP14,145,346

 

 

 

 

Current Liabilities

 

 

 

Accounts Payable

EGP2,187,389

EGP2,498,889

EGP2,495,894

Current Borrowing

EGP0

EGP0

EGP0

Other Current Liabilities (interest free)

EGP10,427

EGP3,586

EGP1,714

Total Current Liabilities

EGP2,197,816

EGP2,502,475

EGP2,497,608

Long-term Liabilities

EGP0

EGP0

EGP0

Total Liabilities

EGP2,197,816

EGP2,502,475

EGP2,497,608

 

 

Paid-in Capital

6,050,000.0

6,050,000.0

6,050,000.0

Retained Earnings

EGP5,723,548

EGP6,280,488

EGP5,597,738

Earnings

EGP0

EGP0

EGP0

Total Capital

EGP11,773,548

EGP12,330,488

EGP11,647,738

Total Capital and Liabilities

EGP13,971,365

EGP14,832,964

EGP14,145,346

Appendix 3. Scenario One: Gamma Acquiring 60% of Alpha Indicators

Expected Quantities to be Sold (In Kg)

Product Category

2016

2017

2018

Dextrin-A

1,309,215

1,335,400

1,362,108

Dextrin-B

744,763

759,658

774,851

Dextrin-C

1,394,704

1,422,598

1,451,050

Dextrin-D

444,103

452,985

462,045

PVAS-A

354,963

354,963

354,963

PVAS-B

97,246

99,191

101,175

PVAS-C

250,781

263,320

276,486

Hot Melts-Bookbinding Local

57,000

83,500

91,850

Hot Melts-Packaging Local

45,000

140,000

154,000

Hot Melts-Bookbinding Export

30,000

150,000

165,000

Hot Melts-Packaging Export

10,000

110,000

121,000

Selling Prices (EGP/KG)

Product Category

2016

2017

2018

COGS %

Dextrin-A

2.67

2.94

3.23

57.00%

Dextrin-B

3.47

3.82

4.20

71.00%

Dextrin-C

2.81

3.09

3.40

55.00%

Dextrin-D

3.62

3.98

4.38

60.00%

PVAS-A

16.44

17.59

18.83

80.00%

PVAS-B

12.15

12.76

13.40

70.00%

PVAS-C

16.31

17.45

18.67

65.42%

Hot Melts-Bookbinding Local

26.25

27.56

28.94

80.00%

Hot Melts-Packaging Local

28.35

29.77

31.26

80.00%

Hot Melts-Bookbinding Export

26.25

27.56

28.94

85.00%

Hot Melts-Packaging Export

28.35

29.77

31.26

85.00%

Appendix 4. Scenario Two: Alpha a Distributor of Gamma

Expected Quantities to be sold (In Kg)

Product Category

2016

2017

2018

Dextrin-A

1,309,215

1,335,400

1,362,108

Dextrin-B

744,763

759,658

774,851

Dextrin-C

1,394,704

1,422,598

1,451,050

Dextrin-D

444,103

452,985

462,045

PVAS-A

354,963

354,963

354,963

PVAS-B

97,246

99,191

101,175

PVAS-C

250,781

263,320

276,486

Hot Melts-Bookbinding Local

57,000

83,500

91,850

Hot Melts-Packaging Local

45,000

140,000

154,000

Hot Melts-Bookbinding Export

30,000

35,000

40,000

Hot Melts-Packaging Export

10,000

12,000

20,000

Selling Prices (EGP/KG)

Product Category

2016

2017

2018

COGS %

Dextrin-A

2.67

2.94

3.23

57.00%

Dextrin-B

3.47

3.82

4.20

71.00%

Dextrin-C

2.81

3.09

3.40

55.00%

Dextrin-D

3.62

3.98

4.38

60.00%

PVAS-A

16.44

17.59

18.83

80.00%

PVAS-B

12.15

12.76

13.40

70.00%

PVAS-C

16.31

17.45

18.67

65.42%

Hot Melts-Bookbinding Local

26.25

27.56

28.94

93.00%

Hot Melts-Packaging Local

28.35

29.77

31.26

93.00%

Hot Melts-Bookbinding Export

26.25

27.56

28.94

95.00%

Hot Melts-Packaging Export

28.35

29.77

31.26

95.00%

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

locked icon

Sign in to access this content

Get a 30 day FREE TRIAL

  • Watch videos from a variety of sources bringing classroom topics to life
  • Read modern, diverse business cases
  • Explore hundreds of books and reference titles