Business View Caribbean interviews Omar Gafoor, Managing Director of Barbados Steel Works Ltd., as part of our focus on Barbadian best businesses practices.
Barbados Steel Works Limited – From manufacturing to trading
Barbados Steel Works Limited (BSWL) was originally established as a manufacturing company of a wide range of construction products, especially coated steel corrugated roofing sheets, for Barbados and the wider Caribbean markets. Today, the company also supplies lumber, electrical, plumbing, and general building materials, in addition to its roofing products.
“The very first company was set up by my grandfather in the mid 1950s in Guyana,” says Omar Gafoor, BSWL’s Managing Director. “Barbados Steel Works came about through an expansion in the Caribbean that took place in the late ‘70s, when my dad decided to branch out into Barbados, because, at that time, the economic environment in Guyana was very challenging. Barbados was the first step; it was the most stable and the most promising landing point that would serve as a launching point for the rest of the Caribbean. From there, we went into Grenada, Dominica, St. Lucia, and then, later on, we ended up in Jamaica, as well. So that is how we started.”
“The operations that we set up in the Caribbean, especially in Barbados, were primarily manufacturing operations of construction materials that were destined for export,” Gafoor continues. “The main focus was on the manufacturing of, primarily, steel-based construction materials with the Guyana operations also manufacturing aluminum and plastics products. The goal was to service the young and maturing economics of the southern Caribbean states, where major investments were taking place in housing, education, and infrastructure.”
Gafoor reports that the company’s business model began to change in the 1980s and ‘90s, as its traditional Caribbean markets started to develop their own manufacturing bases, and evolving trade agreements in the CARICOM region began to stimulate the growth of a more globalized form of commerce, coupled with the removal of localized, preferential trade accords. Those dynamics made it increasingly apparent that Barbados Steel Works was going to have to scale back its export manufacturing activities as it became more difficult to compete with local manufacturers in its target markets, as well as having to compete against larger and more sophisticated manufacturers operating out of Europe and the Far East that benefitted from economies of scale.
So, Barbados Steel Works shifted its focus. “We moved away from primarily manufacturing and distributing products directly to large scale distributors and more into trading activities,” Gafoor explains. “We tried to stay with our core of manufacturing, but realistically, the commitment to address our customers’ varied needs meant that we have had to embrace the trading end of our market. So, the end customer became more of our day-to-day user as opposed to a middle man.” However, that shift in the company’s business model, while it did relieve it from having to compete with lower-priced manufacturers, did not prevent it from having to compete with others in the trading sector.
“In the local market, the number of persons who are in the business of importing and selling construction materials is significant,” Gafoor opines. “It’s like that in all the markets in which we operate. It’s very easy to get into and acquire materials which you can sell, even for a marginal profit. In addition, what we have found is that the market in which we operate has matured – it’s very much become like the North American market, where people are accustomed to having a source of supply for their demands and requirements close to hand. So, maybe four or five years ago, when the number of players in the market was smaller, people would frequently travel to find us and to shop with us. That’s not happening anymore. We’ve got competitors across the landscape and customers can find what they need closer to home.
“So, what we’ve decided to do is expand on our operations so that we, ourselves, can be present in various strategic places within the market, more or less geographically, so that customers are able to come to us and we can present ourself directly to our end user – typically, contractors who do construction work for smaller homes, or medium-sized projects like townhouses and maybe condos – rather than trying to sell a product through an intermediary, like a distributor or a hardware store.
“So, our key here is going to be physical infrastructure – going out and looking for land and/or buildings that we can convert into outlets. We’ll find properties that are derelict or in poor condition, that we can buy, lease, or rent, or we’ll find land and develop from scratch. You’ve got to have a physical presence, so customers can find you easier. There’s no sense in marketing and advertising and then, when they find that you’re out of their way and they don’t plan to come in your direction, then you’re still going to lose out to your competitors. Physical structure is definitely key, now. That’s what’s on the front burner. We’ve undertaken that in our St. Lucia target market and it’s turned out to be quite successful.
“Now, we need to move forward in the Barbados market – to be able to branch out our retail operations to get directly to our end user. For Barbados, the end game in terms of outlets – I don’t think we’re going to need to go beyond maybe three or four. I don’t think the market is big enough beyond that, as yet. There are certainly two key areas that we already identified that we’re going to move into, and then maybe one that is further out, which will catch a certain element of traffic on the northern end of the island. We have already set up two outlets under a subsidiary, La Belle Vie, to cater to a specialised area of the home improvement and finishes market.”
Gafoor adds that since everything that the company can’t manufacture, or that can’t be sourced locally, has to be imported, maintaining good relationships with its suppliers is essential. “The manufacturing base in Barbados, even though it is sophisticated to a certain extent, the range of products that are manufactured and actually consumed in Barbados as a percentage of the overall needs of the island, is small. To that extent, now, our best relationships are with our overseas suppliers, because those guys are our lifeline; they’re the ones that we rely on to be able to source product of acceptable quality and acceptable pricing points that we can get it into the Barbados market.”
Equally crucial, according to Gafoor, is maintaining a high level of customer service. “It’s key to the whole process,” he states. “In the markets that we’re in, we’re very much like a Home Depot or a Lowes in North America. It comes down to what it is you offer, what your pricing point is, and how convenient you are for your clients to find you and interface with your staff. The most important thing is that, whatever their requirements, we are capable of meeting them and satisfying our customers’ needs.”
AT A GLANCE
WHO: Barbados Steel Works Limited
WHAT: A manufacturing and trading company
WHERE: Oistins, Barbados