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 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.

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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.

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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.

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<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.

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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.

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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.

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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

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