Case Study

Samrira International: Dilemma of the Next Stage

Overview:
Your reputation is more important than your paycheck, and your integrity is worth more than
your career. Ryan Freitas, About.me co-founder.
Samrira International was is a Nigerian private engineering company owned by Venugopal
Jajoo (henceforth, Venugopal) and promoted by S. G. Galadima and his wife H. A. Galadima.
Venugopal was born in 1965 at Mahaboobnagar, a town in Andhra Pradesh State of India. He
was a Mechanical Engineer from the Kakatiya Institute of Technology and Science, Andhra
Pradesh State of India. He also holds a Diploma in Business Administration from the Institute
of Chartered Financial Analysts of India (ICFAI), India. He started his professional career in
1987 as an Engineer with Birla group of companies in Hyderabad, India before going overseas
for work with a medium size Auto Spare Parts manufacturing organization in Lagos, Nigeria in
1989 (perhaps, to ensure a higher savings and secure future through a fatter pay packet). With
his given knowledge, skill and experience, (and most importantly, material resources) on the
field, he decided to embark on an entrepreneurial plunge and started Samrira International
(henceforth, Samrira); an engineering firm catering for light engineering products. The quest to
increase the size of his business led him to diversify into hand-tools and later electrical parts.
As years flew, he became increasingly passionate about humanitarian works.; Tthis led him to
work with the Indian Cultural Association in, Lagos, Nigeria,; where he contributed to the
provision of portable water to public school pupils in Ilupeju. Seeing the good impact made in
the life of these pupils, he was propelled to do more, which was his the motivating factor that
led him to join the Rotary Club of Lagos, Palm Grove Estate, in 2008. Based on his active
participation and contribution to better the life of people, he was unanimously elected as the
president of the same for the period 2013-2014.
Samrira started business in 1991 as an exportation and importation company, sourcing its
products from India, China and Germany; then exporting to the U.S.A and West Africa. The
company deals with light engineering aspects of automobile such as; fog light, head light, side
lamps, work lamps, tail lamps and suspension parts. Seeing the demand for such products in
emerging economies such as Nigeria, the company steadily increased its importation in 1992
and left the U.S.A. markets for good. The devaluation of Nigerian currency in 1993 drastically
affected the company with a decline in annual turnover by 25-30%. In 1996, the company
regained its annual turnover and ventured into hand tools importation from Taparia Tools
Limited, India,; such as; pliers, spanners, socket tools, hammers, measuring tapes, screw

drivers, etc.. These products were branded with the company brand names; Super National (see
exhibit 5), and Best Choice (see exhibit 2). Aand were imported into the Nigerian market and
distributed to key West African markets which includes; Ghana, Ivory Coast, Benin and Togo.
By year 2000, Samriras other promoters sold off their stake, and Venugopal picked up their
equity stake as well. After which the company brands were established, and they had about 70
percent% of the light engineering automobile spare parts market in Nigeria, then they started
reinvesting for growth. Based on the market presence created, the company decided to flood
the electrical parts and hand machinery market with their brand products, namely; Super
National (see exhibit 3) and Eastman (see exhibit 1). These products were another mark of
quality which quality conscious electricians and artisans preferred to work with (instead of
others).

Market Entry:
To enter into the Nigerian automobile spare parts industry and be a known brand was a big
challenge for a liquidity constrained Samrira. The company was in the Nigerian automobile
market from 1991-95 and was not yet a known brand in the market and industry. By mid-1995,
Venugopal took time out of his busy schedule to retreat and re-strategize on the way forward
for the company. After a full study of the market,; he concluded that the best method was to
populate the market with his goods. By late 1995 he populated the Nigerian automobile spare
parts market with his products; the products being of good quality and fair price with easy
availability caused the companys turnover to boost. In 1996, the company introduced the hand
tools section; this section brought a lot of footfalls to the companys warehouses and as well,
took care of their advertisement need as well. By late 1997, Samrira was already occupying
about 40 % percent of the Nigerian automobile market. This they maintained till 1999 when the
company introduced the electrical parts section into the Nigerian market.
Quality and availability (being the companys watch word), coupled with the companys
market presence, made these new electrical products to be well accepted by the market. That,
in return, increased their market share to 70 percent%. During the period 1998 to 2003,
Samrira enjoyed striking growth rates in its turnover. It was able to maintain its product market
share until 2005 when serious competition entered the market from new Indians and Chinese
players, Samrira lost about 15 percent% of the market share. During 2006-08, the competition
increased further and Samrira had to forgo most of their key bulk-buyers. These customers
were now able to buy and import similar products on their own using web-based information.
This made Samrira lose another 15 percent% of the market share again, because they did not
take advantage of the access to information available online. In 2009, the worst case scenario
occurred and the company lost another 20 percent% of its market to socio-economic instability
in Nigeria, mainly in the North, and Kano market precisely, due to high insurgence activities.

This made the company to start re-strategizing on which method will boost their market share
and give them an edge over their competitors.
That was when Samriras CEO, Venugopal, started thinking of relocating the business to
another viable country, wherein the market entry challenge was, which country should he
invest in.? He decided to seek information from his towns man, who had lived and doneid
business in different continents,; on which location will revive his business empire to the
glorious days of early 2000s or even better. The discussions led to the analysis of these
continents and their growth rates: Americas average GDP growth rate is 3.2% 1, Europes is
meager 0.4%2, Asias is 6.9%3 and Sub-Sahara Africas average GDP growth rate is 4.1% 4.
After the discussion, the CEO was left to decide the best location suitable for his business.
America: The American automobile and hand tools market are saturated; even the light
automobile sector seems more saturated. If I decide to relocate to America, my
competitors will be the deep-pocketed Jews and it will be far more difficult to gain
market share there than here in Nigeria. But I will have access to the future
technology and produce automobile tools that will be in high demand in the future,
thereby breaking even; but how will I sustain myself, business, family, till I break
even in God knows when?
Europe:

If I decide to relocate to Europe, the markets there are also saturated, how will I
displace the entrained players and breakeven? Coupled with the high tax rate there,
it will be jumping from frying pan to fire, even though I will have access to good
health care and social amenities. I have to clearly define my priorities now.

Asia:

If the Asian market were to be so easy to enter and establish, I would not have been
in Africa in the first place (as I would have gone back to home). The future of
technology market is Africa; I think I have to remain in Africa.

Africa:

I know that Africans have deep affection for automobiles, my experience over the
years have taught me that but since the Nigerian market competition had greatly
increased, I dont even know what the market had in stock for me in the future, there
is a very high tendency that more and more entrants will emerge in the market. My

1 www.tradingeconomics.com/united-states/gdp-growth
2 www.qww.trading economics.com/euro-area/gdp-growth
3 http://timesofindia.indiatimes.com/business/india-business/IMF-pegs-FY14-GDPgrowth-at-4-25/articleshow/23769048.cms
4 http://www.tradingeconomics.com/sub-saharan-africa/gdp-growth-annualpercent-wb-data.html

greatest fear is the business community in Nigeria; their passion for business is
increasing by the day. They are going to be my greatest competitors,, should I
relocate to South Africa? After-all their economy is strong even though Nigerian
economy is stronger (see exhibit7). The fertility rate of womenan in Nigeria is one
of the highest in the world which is a positive indicator that the future will be
mostly young population which is a quality human and capital resource. 5 I think its
just right for me to remain here in Nigeria, since I understand the market here and
still have a good share of the market.

Nigerian Automobile Industry:

The Automobile Industry in Nigeria dates back to early 1960s when private companies such as
UAC, Leventis, SCOA, BEWAC and R.T. Briscoe pioneered the establishment of assembly
plants by importing completely knocked down (CKD) or semi-knocked down kits. Nigerian
federal government, however, became involved in the industry between 1970s-80s when it
concluded agreements with a number of European automobile firms to set up two car and four
truck/ light commercial vehicles assembly plants using CKD Parts. The two car plants are:
Peugeot Nigeria Ltd., Kaduna, and Volkswagen Nigeria Ltd., Lagos. The four truck plants are:
Anambra Motor Manufacturing Company, Enugu; Styer Nigeria Ltd., Bauchi; National Truck
Manufacturers, Kano; and Leyland Nigeria Ltd., Ibadan. These car and truck/light commercial
vehicle plants were all privatized by the end of 2007.
The Nigerian automobile Industry has installed capacity to produce 108,000 cars, 56,000
commercial vehicles, 10,000 tractors, 1,000,000 motor cycles and 1,000,000 bicycles annually.
Capacity utilization in vehicle manufacture is below 10 percent % in cars and about 40 percent
% in motorcycle, bicycle and components parts manufacturing. The current vehicle inflow into
the economy from America and Europe is about 50,000 new and 150,000 used ones per year.
This translates into about 200,000 units of new vehicles annually and was set to rise as the
economy improves. The Economic Community of West African States (ECOWAS) countries
are current and potential customers for Nigerian auto products. The ECOWAS contributes to 35
perecnt% of the annual turnover in Nigerian Automobile Industry.
Nigeria being import dependent onin automobiles over the last 5 decades is coming to the
limelight with a lot of companies showing interest in the countrysies automobile industry. The
foreign investors arewere convinced that the time iswas right for vehicle manufacturing plants
and other automobile ancillary industries to be set up in Nigeria, as the country is under the
spotlight of many foreign automobiles companies for having driven the African market share.
Besides, they considered that the growth of the nations economic indices and her high returns
on investment was are good factors to jumpstart the plan. In South Africa, after the (the)
5 http://www.tradingeconomics.com/nigeria/fertility-rate-total-births-per-womanwb-data.html

mining sector, which is the largest employer of labour, the auto manufacturing industry is the
next highest employer of labour. Thus, eEstablishing automobile plants in Nigeria will drive
job creation for the teeming youths.
Nigerias auto industry will see a considerable strengthening in vehicle production, vehicle
imports and car ownership over the next few years according to a market research published
recently by the Business Monitor International entitled: Nigeria Autos Report Q3 2013.
With growth potentially breaking at 7 per cent amid controlled inflation and a stable currency,
a number of carmakers which already had their eyes on the countrys auto market such as,
Japans second biggest car manufacturer, Nissan, which in July 2013, listed Nigeria as one of
the key markets it was targeting for the expansion of its small passenger vehicle product lines.
According to the report, in June 2013, Dana Motors Limited, the distributors of Kia Motors in
Nigeria, announced that it had entered into a partnership with retail bank Stanbic IBTC to
launch a financing scheme for customers. The deal, it pointed out, would include several Kia
models including the Picanto, Rio, Cerato, Optima, Cadenza, Sportage, Sorento, and Mohave
as well as the K2700 Light truck. The deal continues Kias expansion in the Nigerian market
with the company having launched the new Cerato models in April 2013. Meanwhile, Suzuki
had launched its Swift Dzire sedan model in early 2013, as it aims to acquire 20 per cent of the
market segment within its release year, using a model adapted from its hatchback unit.

The auto spare parts market worth over N13 billion had contributed to the Nigerian economy
over the years., this This market where Samrira was a major stake holder had over the years
been revolutionized. The challenges in this sector were similar to the automobile sector, and
the operations were similar as well, similar except for counterfeit products. These counterfeit
products started selling because of customers quest for cheaper spare parts. The counterfeit
products in the market most times confuse the customers, as customers who can afford the
original spare parts end up buying counterfeit products. This is because the counterfeit will be
packaged in the original product packaging just to confuse novice. Its durability of course was
limited to couple of weeks; this was to ensure that the dealers had regular customers as
customers must replace the bad parts. These challenges created a clear niche for the companies
who uphold quality against their counterparts.
These challenges in import, export and creating employment also made Innocent Chukwuma,
CEO of Innoson Vehicle Manufacturing Company Ltd., to venture into automobile production.
The plant located in Nnewi in Anambra State, Nigeria, which was established in 2007 and
commissioned by the President of the Federal Republic of Nigeria in 2011, had become a force
to reckon with in the automobile industry. Their product ranges from light trucks to Sports
Utility Vehicles, mini buses and luxurious buses. The company had witnessed many patronages
from different state governments, private and public sectors, federal parastatals among others.

Nigerian automobile is expected to be among the worlds renowned automobiles in the next 23 decades.

Market Challenges:
The escalation in the rate of competition among producers, importers and retailers in the
automobile spare parts market now, had never been noticed by Samrira in its over two decades
of operation. The angle that affected Samrira so much was that its key indigenous customers
are increasingly over the past five years becoming its main competitors. These former
customers understood the companys modus operandi; they now added their skills and
competencies in the companys weak areas and are now the major competitor to Samrira.
However, fellow Indians starqted coming into Nigeria and establishing the same business;
having the same source as Samrira was another big competitive challenge to the company.
Most of these investors were eager to gain the market share and sell their goods with little or
no margin just to create awareness. They also loaned out containers filled with automobile
lightening to notable customers including Samriras customers just to get the market share and
competitive advantage. Stocking the market with these goods makes Samriras customers
unable to buy from Samrira knowing that it will not give them such a bulk of goods on credit.
Some of these (past) loyal customers were purchasing a few products from Samrira just for
relationship sake. They would promise Samriras marketers, after they had cleared their
shelves, to buy their products. after they had cleared their shelves.
Samrira was still planning on which strategy to be used to stabilize their sales when the crises
in the North started. Kano state being another main business hub of the company after Lagos
state was besieged by a terrorist insurgency. Kano market used to be the gateway to the entire
northern zone of the country and also services neighboringneighbouring countries such as
Chad and Niger Republic. The increase in the insurgency activities kept neighbouring countries
customers away from Kano thereby paralyzing business in this part of Nigeria. This
catastrophe affected all suppliers to Kano market and Samrira was not left alone in the
incidence.
Another key challenge noted by Samrira during 2008-11 was instability in the economy. The
instability in exchange rate and high inflation rates was affecting investors profitability. The
high interest rates not only affected the customers but also affected the money lending
institutions, who were now struggling to remain in business. Government policies and power
sector challenges had affected business moguls over the years. In 2013, there were positive
measures implemented by the federal government to ensure stability in the countrys economy,
such as stability in exchange rate which is now sustainable, availability of low interest rate
loans from banks to small & medium enterprises, and the privatization of the power sector are
now encouraging investors into Nigeria.

The logistics and clearance delays at the ship ports which usually took over two months for
goods to be cleared were another challenge that used to affect the market share a company will
occupy. But the new government policy of less than 48 hours clearance on imported goods
from the ports had encouraged the investors, even though there were still some delays in
clearance at the ports but the situation was improved. Nigerias ban on the importation of
certain products (see exhibit 6) into the country was another thorn in the flesh of these
importers, although the ban was healthy for the Nigerian economy. For instance, the ban on
commercial motorcycles in various parts of the country drastically affected the importers of
these brands. Vespa was another brand of motorcycle which was not banned but it naturally
went out of fashion, and those importers with its spare parts in stock went broke.
The changing fashion in automobile brands was another challenge which the company had.
When an automobile company manufactures a certain brand of vehicle and it broke-even in the
market, automobile dealers and spare parts dealers tended to stock such products in large
quantity. Their view was that very soon, their competitors who stocked less will run out of
stock and those having large quantity stocks could then lay siege to the market, by increasing
the price of the commodity for that period and making much profit pending to when their
competitors containers will land. But the risk associated with this kind of stocking was that if
there are newer versions of another vehicle brand that supersede the brand they just stocked,
the dealer bears the risk of selling the goods at a giveaway price in order to meet up with the
market trend, or wait for a longer period for the goods to be marketed before repurchasing.
Those who took bank loans for business were mainly affected by this change in brand. For
instance, 911 Mercedes Benz truck was in high demand in the 1980s80s and 1990s90s but now
in 2013, Iveco and Darf were are now the market leaders. Also in the 1980s and 1990s,
Peugeots (504, 404) were the order of the day but now, Toyota (Camry), Honda (Accord) are
now the order of the day.

Between 1999 and 2003, Samrira used to import between 3-4 containers of light engineering
parts of automobiles, hand tools and electrical spare parts per month, but due to these market
challenges, the company, now in 2013, imports just about one container per month. Even with
these market challenges, Venugopal, being conservative, did not allow the company to give
goods on credit to customers as some of their competitors did; only a select list of customers
with good records received their goods on credit.

Leadership:
Some of Samriras staff interviewed on the leadership quality of Venugopal and their
companys performance had this to say:
Mrs. Okere Edith: Samrira is an interesting place to work and my boss Engr. Venugopal Jajoo
is a seasoned manager and administrator, and I had worked with him

for over 15 years. I started as the companys secretary but now am

the companys administrator and I also used to market when the need
arose. The leadership qualities of Engr. Venugopal amaze me; how
he treats issues, gives listening ears and assists his staff in their areas
of difficulty is so encouraging. Engr. Venugopal is a goal getter, he
knows how to set the pace and how best to get his plans
accomplished with little or no expenses at all. Another great quality
is his motivational ability, my boss knows how to motivate his staff,
to get them to achieve the companys target and exceed it. Engr.
Venugopal also likes setting the standard and sticking to the
standard. He deals with quality products, and even when his price is
costlier than his competitors price, he still does not compromise
quality. In this market, turnover is very important, this makes some
of his competitors to smuggle in substandard goods and sell them at
a very cheap price, although most of them were apprehended by
security agencies and they lost alleverything.

Engr. Mustapha Abayemi: I joined Samrira in 2005 as a store keeper. It has been great
working with the company, the knowledge, exposure, and challenges
were have been quite interesting. We normally import our products
in 40ft containers (containing automobile lightening) and 20ft
containers (containing hand tools). Due to the quality of our
products, we usually had sales faster than that of our competitors.
This popularity in the market had made our import rate and market
share grew grow to about 70 percent% during the period 1999-2003.
Competition in the market started increasing and we started losing
our market shares gradually until 2013 when our market share has
collapsed to about 25 percent%. When our market was booming, our
customers used to come by referral but now, we have to seek them
out, showing how competitive the market hasd beenbecome. Despite
the whole challenges, Engr. Venugopal was still calm in conducting
the affairs of the company; he still motivates us to work.
Nevertheless, he is still strategizing on the way forward, which is a
very great good quality of a good leader. Engr. Venugopal took me as
his son; our relationship is more of father and son than boss and
staff. He paid my school fees and lends me money when am in need.
In 2010 we had a very big challenge, most of our goods kept
shorting in the store, and because I am the store/ keeper manager, he
accused me of stealing. I tried my best to prove my innocence but to
no avail. The theft continued for over six months in the two

warehouses located about 10 miles apart and all the staff denied
being involved. I then decided to fish out the thief. At night with a
trap, I was able to discover that the security man of the company had
been the brain behind that loot the company had been experiencing.
This discovery renewed the relationship between me and my boss
and since then, such incidence had has not occurred again.

Mrs. Akinbode O.M:

I started working with Samrira since 1992 as an accountant. The

company had has been an interesting place to work in, although the
staff strength was about 8, we understood ourselves and cooperated
well. I personally emulate the leadership quality of my boss Engr.
Venugopal even though most of my opinions were rejected; he had a
great subtle way of handling issues which arose in the company. The
major challenge with him is that he does not consider gender when
delegating tedious task and there are no allowances for extra job
done. Nevertheless, he grants staff loans without interest rate.
Generally, he is a calculated person and also charitable., Hhis
charitable personality was what made Rotary Club of Lagos, Palm
Groove Estate, to crown him the president and he made remarkable
achievements in his tenor.

The above views reflect the staffs opinion on Venugopals leadership and personality style.
His conceptual skill and understanding of his staff ideology was highly needed for company
growth. While, his friends pointed his family background of being part of traditional business
community as their reason for his entrepreneurial endeavors, observers from the management
field felt that Venugopals motivators in life had changed over time and could be easily
explained by Maslows hierarchy of needs. It iswas an established fact that well-known
companies with reputable top managers use the motivation system, which is, fellowship with
staff and taking of responsibility to grow the company, . Tthis was the part towed by the CEO
of Samrira.
Venugopals son who is an MBA student in one of the worlds premier business school was
worried why that his father was not putting in much effort and strategy to grow the business
back to the good old days or even better. He called his father to enquire from him why the
business was losing market share and why he was shifting attention to philanthropy and social
issues rather than focusing on his business prospects. The cold answer from the father got the
young man thinking.; Aafter much thought, he concluded that his father is now having
different drivers in life, and is now in his esteem needs according to the hierarchy of needs.