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OMAR EFFENDI
By
Dina M. Rabie
Submitted to
Dr Ahmed Shalaby
Marketing Management Final Exam
February 7th, 2012
1
Omar Effendi (OE) was founded in 1856 by Orosdi Bek, and over the past century the iconic
department store has catered the needed low price quality goods. OE has been privatized in year
2007 where Anwal, a Saudi investor bought 90% of the shares. Later the IFC invested by lending
OE $ 40 million as a part of IFC initiative to encourage private sector and SME development.
OE after privatization was restructured to create a new image for the brand name. The
restructuring included changing the image, upgrading and renovating the stores infrastructure,
hiring highly qualified employees. Yet, the restructuring was not deep enough. In January 2011,
Egyptian businessman Aglan bought Anwal’s stake in OE.
Q1: Reasons behind OE’s failure:
1- After privatization, OE introduced higher-priced higher-quality products –most of them
with no known brand names- targeting upper class clientele. Yet, OE failed to attract the
targeted segment due to inadequate investment in brand knowledge for the new target
segment. At the same time, OE lost the loyalty/appeal of the mass market by charging
higher prices relative to competitors.
2- OE hasn’t met its brand promise of providing a quality shopping experience where the
latest in almost all products is available which resulted in doubtful positioning.
3- Inadequate marketing process resembled in poor marketing research, failure to
understand customer needs, and failure to create and communicate value to customers.
2
Internal
External
Strengths:
1- OE is an old established mega
department store with 82 outlets
and 68 warehouses across Egypt.
2- OE’s stores being located in
different Egyptian districts can
help serve a wide range of
consumer needs and segments.
Weaknesses:
1- OE has a reputation for selling poor
quality products targeting only the
mass market.
2- OE has poor infrastructure and
layout relative to today’s modern
market and untrained personnel.
3- Lack of marketing expertise and
poor supply chain.
Opportunities:
1-Shopping through the internet
provides a new market for OE.
2- Unsaturated retail market and
potential for growth.
(S2/O2) Quickly develop and
retain a competitive advantage to
attract potential market segments
and capitalize a good market share
in the unsaturated growing market
through extensive market research
& service development.
(W1/O1) Developing and improving
OE’s website and advertising it on
social websites as face-book to benefit
from E-commerce and communicate
an image of having high quality
products shown on the website.
Threats:
1- Well established competitors
providing new and innovative
goods and services.
2-Economic and political changes
and the subsequent impact on
buying behavior.
(S1/T1) Innovating services, cost-
effectiveness, and offering lower-
priced quality products compared
to competitors’.
Capitalizing on OE’s brand equity
and outreaching number of
branches in advertising.
(W3/T2) Employing marketing
expertise and extensive research to
predict and deal with any
environmental changes and
strengthening relations with suppliers.
(W2/T1) Improving infrastructure to
make it attractive to customers.
3
TOWSTOWS
Q2: SWOT/TOWS Analysis:
Q3: OE’s proposed marketing strategy:
STP:
<10 10 to 20
20 to 30
30 to 40
40 to 50
>500%
5%
10%
15%
20%
25%
% of Population
% of Population
Source: Calculated through CAPMAS.
- 62 % of population are less than 30 years, 98.5% of them have never married.
- Middle income class –earning between LE800 and LE5000- represents 50% of consumer
purchases in the retailing industry, while the low income class consumes at micro scattered
enterprises (Ministry of Trade and Investment).
-Although OE’s competitor in middle and low income region, El Tawheed Wel Noor, is well
established, it has only 48 branches compared to OE’s 82, While B-tech, OE’s competitor in
heavy households, electronics and appliances has 60 branches. Yet, the retail market in Egypt is
still unsaturated. i.e. organized retail sector represents only 1.5% of internal trade in Egypt
(GAFI).
- Therefore, OE can increase sales and profits through targeting low and middle class young
people aging less than 30. This requires that OE invests heavily in brand knowledge and image
for the younger generation.
4
<10 10 to 20
20 to 30
30 to 40
40 to 50
>5044%
45%
46%
47%
48%
49%
50%
51%
52%
53%
% Male% Female
- OE needs to enhance its supply chain and cost effectiveness to offer quality products that
appeal to the young generation at reasonable prices affordable by the target segment.
- OE can capitalize on “Buy Egyptian Products” campaigns and position itself as “The oldest
department store in Egypt is now Egyptian”.
Marketing Mix:
Product:
- OE offers broad range of products clothes, footwear, perfumes, cosmetics, electronics and
home appliances, furniture, linen and carpets.
- OE should supply products that are deemed convenient to the target segment of youth. Opinion
leaders could help OE identify the set of products required.
- OE should widen its products’ base, especially for household needs and furniture to attract
young people when preparing for marriage.
- Packaging should relate to the target market segment.
Price:
- Pricing is based on the cost of purchasing products from suppliers, and on the services
offered to customers.
- OE is targeting the low and middle classes whose price elasticity of demand is very high.
Thus, pricing strategy should be competitive and reflect good value for money for the target
segment, but at the same time profitable.
5
Place:
- OE has an advantage of having 82 department stores all over Egypt which makes it reachable
to the scattered low and middle class youth.
- OE should achieve effective supply chain management through building strong relationships
with cost-effective suppliers at different governorates.
Promotion:
- OE should communicate to the target segment in every possible way including flyers, news-
paper and TV advertising, and Online advertising on social networking websites.
- Public relations and sales promotions including discounts, coupons and buy-one-get-one-free
policy should help tie target customers to OE.
KPIs:
- New customers / average customers number %
- Current market share / pervious market share %
- Customers willing to repurchase from OE / average customers number %
- Customers willing to recommend OE / average customers number %
- Conversion rate = transaction number of a given period / customers’ numbers who entered the
store during the same period %
- Average age of contributing to sales customers.
6
Q4: Conditions leading to plan failure and contingency plan:
Conditions Contingencies
Price wars by competitors. Focus by OE on customer satisfaction through
selling and after sale services would increase
customers’ loyalty to OE and decrease OE’s
vulnerability to competition. OE should train
its personnel to provide unique services.
Frequent sales promotions and bundling, and
cost effectiveness would help OE preserve its
customers.
Increased purchasing power for target segment
and shifting to international brands.
Extensive & continuous marketing research;
opinion leaders, following social websites, and
conducting online and in store customer
satisfaction surveys would give OE an insight
of taste changes and hence OE can update its
products to keep up with its target customer.
OE can also encourage POS of desired brands.
Tax rate increases would hinder OE’s ability to
offer convenient prices.
Update and develop cost structure so as tax
increases can be contained with minimum
effect on profits and prices. Strategic alliances
may also help decrease cost through increased
economies of scales.
7
References:
Central Agency for Public Mass and Statistics (CAPMAS)
General Authority for Investment (GAFI)
Kotler, Philip and Kevin Keller (2006). Marketing Management. Vangonotes. 12th edition
Ministry of Trade and Investment
Websites including:
http://omareffendi.com.eg/myPage.aspx?id=9
http://english.ahram.org.eg/NewsContent/3/14/4760/Business/Markets--Companies/We-will-
avoid-the-previous-owners-mistakes,-says-a.aspx
http://www.marsdd.com/entrepreneurs-toolkit/articles/performance-measurement-kotler-on-
marketing
http://www.dmsretail.com/kpi%27s.htm
http://www.ifc.org/ifcext/spiwebsite1.nsf/0/D257B6C533749396852576BA000E29DF
http://www.bicusa.org/en/Article.12426.aspx
8