Othman Tazi is head of product and business development at Richbond, a leading home products manufacturer in Morocco.
Knowledge@Wharton: Richbond is a third generation, family-owned company. For those who are not familiar with Richbond, can you tell us a little about the company and its operations?
Othman Tazi: Richbond was founded 50 years ago by my grandfather, in the wake of the independence of Morocco. It was originally a chemicals and plastics company and it specialized in home products. After that, he founded a company that also worked in home products, but more with foam and mattresses. Since then, we’ve branched out into a number of activities. Today, we are primarily a home products manufacturer and we have a foothold in the agro industry.
Knowledge@Wharton: How much of your business is in Morocco and how much is outside?
Tazi: Today, everything is in Morocco. We have 2,500 employees. We made a brief foray into Europe, opening a network of our own stores, selling Moroccan furniture and especially Moroccan decorative products in France, Belgium, Spain and the Netherlands. But it wasn’t very successful because of the economic crisis that has hit Europe for the past maybe 15 years, on and off. So we slowly franchised most of our activities there, decided to refocus on our core Moroccan activities. And now, we’re exploring — well, we’re more than exploring, we’re preparing to enter Côte d’Ivoire and probably Kenya.
Knowledge@Wharton: Can you tell me the thought process that you went through in deciding how to go about expanding into other parts of Africa?
Tazi: We and the rest of the Moroccan economy are generally pointed at Europe because it’s such a large economic unit. But the past few years haven’t been very kind to Europe. So we had to look for growth elsewhere. Africa has been offering very attractive rates of return to any number of industries.
Knowledge@Wharton: What kind of returns?
Tazi: When we met the investment authority in Cote d’Ivoire, I was pleasantly surprised to hear them almost apologizing for only having achieved 8% growth in 2013 – which, coming from a country that’s almost in a recession, I found amusing. Granted, the base isn’t the same, but any activity that can offer 8% growth is worth putting a few seeds into and hoping that they yield something more impressive later on. Likewise, East Africa has a number of attractive characteristics. I am thinking of the general rule of law, an investor-friendly state and business climate, large markets in terms of population and a growing, burgeoning middle class. So people who work with the middle class and need a certain amount of protection for their long-term investment would be more than welcome in East Africa. That’s the feeling and the welcome that we have had.
Knowledge@Wharton: Are there any other markets that you are exploring in Africa as a way to grow throughout the continent?
Tazi: Our conglomerate has a distinct business unit for this that I don’t really work with. But sometimes, our interests collide, in hotel furnishing [for example]. In Morocco, we are the partner of choice for a leading hotel group to entirely furnish their hotels, from the bedrooms to the restaurants to the kitchens. We spun that activity into a distinct business unit, and we’re looking to use our expertise to enter other regions in the Middle East and North Africa. I am thinking of Algeria, Tunisia and Libya. We’re also relatively close by boat to Senegal and Mauritania, and we’d like to try to work there. Otherwise, no, most of our African focus is for the foam/mattress activity and that’s in Western and Eastern Africa.
“The past few years haven’t been very kind to Europe. So we had to look for growth elsewhere.”
Knowledge@Wharton: When you look at entering some of these markets, what sort of risks do you think that you would face? And how do you plan to hedge those risks?
Tazi: Well, the first risk we face is that our technical know-how might not be adapted to the local environment. There’s always that transition period. You take your assumptions that you’re used to in your home market and you verify: Do they apply in the new target market? Most of the assumptions, or a number of the assumptions, will be incorrect and need tweaking. It’s important to make sure that the initial wager isn’t so big that the entire adventure is risky. There’s obviously country risk in some places in West Africa, specifically where any government transition is marked by a certain amount of uncertainty. We need to plan for that — although, to be fair, for the past couple of years, it hasn’t really been a problem in Cote d’Ivoire. We’ve met a number of very large, multinational companies who had no hesitation in undertaking large investments, multiple-billion dollars in energy or whatnot. There is always the risk that — I’m thinking of corporate governance — if we are based in Casablanca, Morocco, are we going to be able to manage the activities in another country from a distance? Are we going to be able to find the right people to manage it? If not, how are we going to manage both the existing and the future activities?
Knowledge@Wharton: Have you thought about how you will deal with those questions?
Tazi: A number of our colleagues are going to move to Abidjan for at least two years. I, myself, am looking forward to spending a few years in our various African activities. We have always invested in IT because we believe that it gives us a competitive advantage over competitors in Morocco. I am confident that IT will allow us to manage a certain number of critical aspects of our business, even from Casablanca. That said, we’re still a family company…. So there’s a big transformative effort that we’re currently undergoing. We’re undergoing it with external institutional investors and external consultants. The family — every generation, every member — has to question themselves: Are we doing something that is sustainable, that can be scaled and exported?
“I am confident that IT will allow us to manage a certain number of critical aspects of our business [in other markets], even from Casablanca.”
Knowledge@Wharton: One of the big challenges in family businesses is succession. How is your family dealing with this?
Tazi: We are lucky in that we realized this very early on — between the first and the second generation. When my grandfather and his two sons started working together, there was no assumption that his sons would have all the key posts; quite the contrary. They had to confront high-quality, external competition for key decision-making posts. Nonetheless, it was easier back then when the total workforce was just a few hundred people. Today, it is impossible for just the family to run the company effectively. And we’ve already started: Most of our corporate suite is external, professionally qualified managers. Those who remain from the family are generally either not in key positions or they are working their way to a key position, but in transparent competition. And the recruitment process is both internal and external.
Knowledge@Wharton: If you were to project forward over the next five to 10 years, where do you expect your expansion plans for Africa and the business overall will be?
Tazi: Geographically, they will be much more Africa-centered. We will probably start to steer a bit away from hard, heavy industry. As I said, we’re entering the agro industry. We’re investing very heavily in our distribution in Morocco. We’re looking for opportunities in other sectors; I’m particularly thinking of real estate. So we will probably be both sectorally and geographically distinct from what we are today. And I’m hoping that Africa will represent a significant part of our work.