OMAR EFFENDI

By

Dina M. Rabie
Submitted to

Dr Ahmed Shalaby

Marketing Management Final Exam February 7th, 2012

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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 Anwals stake in OE. Q1: Reasons behind OEs 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 hasnt 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.

Q2: SWOT/TOWS Analysis: Strengths: Internal Weaknesses:

1- OE is an old established mega 1- OE has a reputation for selling poor department store with 82 outlets quality products targeting only the and 68 warehouses across Egypt. mass market.

SWOT

2- OEs stores being located in 2- OE has poor infrastructure and different Egyptian districts can layout relative to todays modern

External

help serve a wide range of market and untrained personnel. consumer needs and segments. 3- Lack of marketing expertise and poor supply chain.

Opportunities:

(S2/O2) Quickly develop and

(W1/O1) Developing and improving OEs 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.

1-Shopping through the internet retain a competitive advantage to provides a new market for OE. attract potential market segments

2- Unsaturated retail market and and capitalize a good market share potential for growth. in the unsaturated growing market through extensive market research & service development. Threats:

(S1/T1) Innovating services, cost- (W3/T2)

Employing

marketing

1- Well established competitors effectiveness, and offering lower- expertise and extensive research to providing new and innovative priced quality products compared predict to competitors. and deal with any and

goods and services. 2-Economic and political changes and the subsequent impact on buying behavior.

environmental

changes

Capitalizing on OEs brand equity strengthening relations with suppliers. and outreaching number of (W2/T1) Improving infrastructure to make it attractive to customers. TOWS
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branches in advertising.

Q3: OEs proposed marketing strategy: STP:

% of Population
25% 20% 15% 10% 5% 0% <10 % of Population

40 to 50

10 to 20

20 to 30

30 to 40

>50

53% 52% 51% 50% 49% 48% 47% 46% 45% 44% <10 10 to 20 to 30 to 40 to >50 20 30 40 50

% Male % Female

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 OEs competitor in middle and low income region, El Tawheed Wel Noor, is well established, it has only 48 branches compared to OEs 82, While B-tech, OEs 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.
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- 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.

 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, newspaper 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.

Q4: Conditions leading to plan failure and contingency plan: Conditions Price wars by competitors. Contingencies Focus by OE on customer satisfaction through selling and after sale services would increase customers loyalty to OE and decrease OEs 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 Extensive & continuous marketing research; and shifting to international brands. 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 OEs ability to Update and develop cost structure so as tax offer convenient prices. increases can be contained with minimum effect on profits and prices. Strategic alliances may also help decrease cost through increased economies of scales.

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-willavoid-the-previous-owners-mistakes,-says-a.aspx http://www.marsdd.com/entrepreneurs-toolkit/articles/performance-measurement-kotler-onmarketing http://www.dmsretail.com/kpi%27s.htm http://www.ifc.org/ifcext/spiwebsite1.nsf/0/D257B6C533749396852576BA000E29DF http://www.bicusa.org/en/Article.12426.aspx