Case
Teaching Notes
Supplementary Resources
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
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
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
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
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
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
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
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
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
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
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
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
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
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
Exhibit 5. Customer’s Perspectives on Competitors
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