Lecico	
  Strategy	
  Analysis	
  
Strategic	
  Management	
  Course	
  
Presented	
  to:	
  Dr	
  Sherif	
  Delawar	
 ...
Table	
  of	
  Contents	
  
Background	
  ...................................................................................
Background	
  
Introduction	
  
History	
  
	
  
Lecico	
  has	
  come	
  a	
  long	
  way	
  since	
  its	
  modest	
  ea...
The	
  Lecico	
  Group	
  of	
  Companies	
  
Lecico	
  Egypt	
  S.A.E.	
  is	
  the	
  principal	
  operating	
  company	...
Lecico	
  Plus	
  For	
  Trading	
  S.A.E	
  
The	
  company	
  was	
  established	
  in	
  2007,	
  the	
  company’s	
  p...
Corporate	
  governance	
  	
  
	
  
	
  
Board	
  of	
  directors	
  
Name	
  
Mr.	
  Gilbert	
  Gargour	
  
Mr.	
  Taher...
Training	
  and	
  Development	
  
	
  
854	
  members	
  of	
  staff	
  from	
  all	
  areas	
  of	
  the	
  Group	
  hav...
 
Holidays	
  and	
  Pilgrimages	
  
	
  
Lecico	
  recognizes	
  the	
  importance	
  of	
  a	
  good	
  work/life	
  bal...
and	
  safety	
  management	
  systems.	
  It	
  was	
  developed	
  by	
  a	
  selection	
  of	
  trade	
  bodies,	
  
in...
Environmental	
  scanning	
  
	
  

External	
  environment	
  
Natural	
  Environment	
  	
  
	
  
Geography:	
  	
  
Egy...
divided into Upper Egypt and Lower Egypt, extending from Wadi Halfa
to the south of Cairo and from North Cairo to the Medi...
 
Mineral	
  &	
  Oil	
  Resources:	
  	
  
Egypt	
  is	
  endowed	
  with	
  a	
  fortune	
  of	
  important	
  metals	
 ...
Governance	
  Indicators.	
  
The	
  economic	
  landscape	
  section	
  outlines	
  the	
  evolution	
  of	
  Egypt's	
  ...
13	
  percent	
  at	
  end-­‐December	
  2012,	
  with	
  3.5	
  million	
  people	
  out	
  of	
  work.	
  Foreign	
  
ex...
motivated	
  by	
  the	
  perception	
  that	
  both	
  the	
  political	
  and	
  economic	
  systems	
  were	
  
rigged	...
Tax Rate
The	
  standard	
  rate	
  of	
  corporate	
  income	
  tax	
  is	
  40%.	
  The	
  rate	
  is	
  32%	
  on	
  pr...
Foreigners	
  that	
  have	
  been	
  working	
  in	
  the	
  country	
  for	
  more	
  than	
  183	
  days	
  
with	
  th...
•
•
•

Preparation of periodical reports and studies on the state of the
environment. Formulation of the national plan and...
face	
  competitors	
  that	
  will	
  try	
  to	
  expand	
  their	
  shares	
  in	
  the	
  Egyptian	
  market	
  as	
  ...
Bargaining	
  Power	
  of	
  Buyers	
  
There is heavy influx of cheaper tiles from China, India and Indonesia, which is
p...
Issue	
  priority	
  matrix	
  	
  
After	
  the	
  analysis	
  of	
  such	
  factors	
  we	
  will	
  distribute	
  them	...
 

Medium	
  

• High rate of
unemployment might
put stress of over
employment on industry
manufacturer (Threat)
• The inc...
• Political disturbance in
the whole region due to
the struggle between
Iran and Israel about
the nuclear arms race
issue....
Strategic	
  Types	
  	
  
	
  
Lecico	
  use	
  defender	
  strategy	
  because	
  it	
  focus	
  in	
  improving	
  effi...
Competitive	
  Analysis	
  
	
  

	
  
	
  
Al	
  Omaraa	
  co.	
  (	
  La	
  Beaut’e	
  )	
  
Production	
  capacity	
  1...
market	
  share	
  fast	
  
Distribution	
  channels	
  depend	
  mostly	
  
on	
  customers	
  in	
  upper	
  region	
  d...
 
	
  
Comments	
  on	
  Industry	
  Matrix	
  
	
  
Distribution	
  Channels:	
  Without	
  efficient	
  distribution	
  ...
EFAS	
  
	
  
Opportunities	
  	
  

Weight	
  

Raw	
  Material	
  (clay,ball	
  
clay,feldspar	
  )	
  local	
  availabi...
Internal	
  Environment	
  	
  
Organization	
  culture	
  	
  
	
  
Lecico	
  Egypt	
  culture	
  is	
  the	
  values	
  ...
Individualism	
  
Egypt,	
  with	
  a	
  score	
  of	
  25	
  is	
  considered	
  a	
  collectivistic	
  society.	
  This	...
Organization	
  structure	
  
	
  
Executive	
  Officers	
  
Name	
  
Mr.	
  Gilbert	
  Gargour	
  
Mr.	
  Taher	
  Gargou...
Primary Activities:
Raw Material:

The	
  consumption	
  of	
  the	
  natural	
  raw	
  materials	
  is	
  around	
  2,000...
After	
  glazing,	
  the	
  tile	
  must	
  be	
  heated	
  intensively	
  to	
  provide	
  it	
  with	
  the	
  required	...
the	
  local	
  output.	
  In	
  fact,	
  these	
  channels	
  are	
  aware	
  about	
  alternative	
  productions	
  
fro...
Lecicio Strategic Audit
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Lecicio Strategic Audit

  1. 1.   Lecico  Strategy  Analysis   Strategic  Management  Course   Presented  to:  Dr  Sherif  Delawar       Presented  by     1. Ahmed Ali Attia Ibrahim Taha 2. Mohamed Saad El Yamany 3. Mohamed Wasel   Students  of  Group  A  
  2. 2. Table  of  Contents   Background  .........................................................................................................................  3   Introduction  .................................................................................................................................  3   History  ..........................................................................................................................................................  3   Lecico  Egypt  ...............................................................................................................................................  3   Company  profile  .......................................................................................................................................  3   Corporate  governance  ..............................................................................................................  6   Social  responsibility  ..................................................................................................................  6   Employees  ..................................................................................................................................................  6   Training  and  Development  ..................................................................................................................  7   Employee  Communications  ................................................................................................................  7   Employment  Policy  .................................................................................................................................  7   Holidays  and  Pilgrimages   .....................................................................................................................  8   Community  .................................................................................................................................................  8   Environment  and  Health  &  Safety  ....................................................................................................  8   Environmental  Policy  ............................................................................................................................  9   Packaging  and  Waste  Reduction  Policy  .........................................................................................  9   Environmental  scanning  ..............................................................................................  10   External  environment   ............................................................................................................  10   Natural  Environment  ..........................................................................................................................  10   Society  Environment  ...........................................................................................................................  12   Task  (Industry)  Environment  .........................................................................................................  18   Internal  Environment  ............................................................................................................  29   Organization  culture  ...........................................................................................................................  29   Organization  structure  .......................................................................................................................  31   Organizations  resources  (Assets  /  human  skills)  ...................................................................  31   Strategy  formulation  .....................................................................................................  46   SFAS  ..............................................................................................................................................  46   TWOS  ...........................................................................................................................................  47   BCG  (Boston  Consulting  Group)  .........................................................................................  49   Space  Matrix  ..............................................................................................................................  50   Grand  strategy  matrix  ...........................................................................................................  52   Strategic  Alternatives  and  recommended  strategy  (QSPM)  .....................................  53   Recommended  Strategy  ........................................................................................................  55   Strategy  Implementation  .............................................................................................  56   Action  Plan   .................................................................................................................................  56   Evaluation  and  control  .................................................................................................  58   Lecico  balance  scorecard  ......................................................................................................  58   References  ........................................................................................................................  62        
  3. 3. Background   Introduction   History     Lecico  has  come  a  long  way  since  its  modest  early  beginning  of  manufacturing   1000  pieces  of  sanitary  ware  per  day.  The  company  was  the  pioneer  in  the   ceramics  business  in  the  Middle  East  and  its  origin  goes  back  to  1959  when  it   started  its  first  manufacturing  facility  in  Lebanon.     Lecico  Egypt     Lecico  Egypt  is  an  Egypt-­‐based  public  shareholding  company  engaged  in  the   manufacture  of  tiles  and  sanitary  ware  products.  The  Company  operates  three   factories  in  Egypt,  one  in  Lebanon  and  one  in  France,  which  produce  over  6   million  pieces  of  sanitary  ware  and  22  million  square  meters  of  tiles  annually.   Lecico  Founded  in  1975  in  Alexandria,  Egypt,  Lecico  Egypt  S.A.E.  Group  (Lecico   Group)  is  one  of  the  leading  sanitary  ware  and  ceramic  tiles  companies  in  Egypt.   In  1997,  the  Gargour  family  entered  into  a  50/50  joint  venture  with  Sanitec  Ltd   OY  (“Sanitec”),  a  prominent  manufacturer  of  sanitary  ware  in  Europe.   Subsequently,  in  November  2004,  Lecico  Group  executed  Egypt’s  first  dual  local   and  GDR  offering  and  is  now  traded  in  both  the  “London  Stock  Exchange”  and   “Cairo  &  Alexandria  Stock  Exchange”.  As  a  result,  the  shareholders  structure  of   the  group  is  now  as  follows:  Gargour  family  continues  to  retain  control  through  a   32%  stake,  while  Sanitec's  share  has  been  diluted  to  reach  15%,  down  from   39%;  in  addition  to  the  free  float  that  accounts  for  the  remaining  balance.     Company  profile              
  4. 4. The  Lecico  Group  of  Companies   Lecico  Egypt  S.A.E.  is  the  principal  operating  company  in  Egypt  and  acts  as  the   holding  company  for  the  Lecico  group  of  companies.  The  following  chart  sets  out   the  corporate  structure  of  Lecico  and  its  principal  subsidiaries     Lecico  for  Ceramic  Industries  S.A.E.   Lecico  for  Ceramic  Industries  S.A.E.  was  established  in  Egypt  in  1997  as  a  joint   stock  company.  Lecico  for  Ceramic  Industries  directly  owns  the  Company  exist   Borg  El-­‐Arab  sanitary  ware  plant  (the  new  Borg  El-­‐Arab  factory  currently  under   construction  is  owned  separately  by  European  Ceramics  S.A.E.,  as  to  which  see   below)  and  its  operations  focus  on  the  production  of  sanitary  ware  for  domestic   and  export  customers.     European  Ceramics  S.A.E.  (‘‘European  Ceramics’’)   European  Ceramics  was  established  in  Egypt  in  2004  as  a  joint  stock  company.   European  Ceramics  owns  the  new  factory  currently  under  construction  at  Borg   El-­‐  Arab  which  will  produce  additional  sanitary  ware.     International  Ceramics  S.A.E.   International  Ceramics  was  established  in  Egypt  in  2004  as  a  joint  stock   company.  Lecico  Egypt  currently  holds  99.9%  of  International  Ceramics  S.A.E.     Sarrdesign  S.A.E.   Sarrdesign  was  established  in  Egypt  in  2009  as  a  joint  stock  company.  Sarrdesign   is  a  brassware  manufacturing  joint  venture  between  Lecico  and  the  Shaarawi   family  with  a  design  capacity  of  300,000  units  per  year.     The  Lebanese  Ceramic  Industries  Co.  S.A.L.  (‘‘Lecico  Lebanon’’)   Lecico  Lebanon  was  established  in  Lebanon  in  1959  as  a  joint  stock  company   and  was  one  of  the  founders  of  Lecico.  Lecico  Lebanon  is  the  Lebanese  operating   company  which  produces  and  markets  sanitary  ware  and  tile  in  Lebanon  for   export  and  domestic  sales.   Web  site:  www.lecico.com.lb     Lecico  (UK)  Limited  (‘‘Lecico  (UK)’’)   Lecico  (UK)  was  established  in  1987  in  England  and  is  a  wholly-­‐owned   subsidiary  of  Lecico.  It  is  a  holding  company  for  the  European  subsidiaries  Lecico   plc  and  Lecico  France.   Web  site:  www.lecico.co.uk     Lecico  Algeria   The  Company  was  established  in  2006,  the  company’s  purpose  is  trading  and   manufacturing  of  ceramics  and  related  products,  Lecico  Lebanon  currently  hold   60%  of  its  share  capital.     Lecico  Saudi  Arabia   Lecico  Saudi  Arabia  began  operations  in  2006.  Lecico  Saudi  Arabia  is  focused  on   the  marketing  and  distribution  of  the  sanitary  ware  and  tile  products  of  the   Group  in  the  Kingdom  of  Saudi  Arabia.  
  5. 5. Lecico  Plus  For  Trading  S.A.E   The  company  was  established  in  2007,  the  company’s  purpose  is  trading  and   marketing  of  sanitary  ware,  ceramic  tiles,  and  trading  in  modern  building   material.     Lecico  for  Trading  and  Distribution  of  Ceramics  S.A.E.   The  company  was  established  in  2006  as  a  joint  stock  company  where  Lecico   Egypt  holds  70%  of  it’s  shares,  the  company’s  purpose  is  distribution  of   ceramics,  sanitary  ware,  tiles,  kitchen  and  bathroom  accessories.     Stile   Stile  was  incorporated  in  2009  in  Italy.  Stile  is  a  joint  venture  between  Lecico   and  the  SFA  Group.  The  JV  is  responsible  for  the  marketing  and  distribution  of   “Stile”  as  a  new  sanitary  brand  in  the  Italian  market  with  a  full,  exclusive  range  of   Italian-­‐  designed  products  manufactured  in  Lecico  Egypt.     Lecico  Poland   Lecico  Poland  was  incorporated  in  2009  in  Poland.  Lecico  Poland  is  focused  on   the  marketing  and  distribution  of  the  sanitary  ware  and  related  products  of  the   Group  in  Poland  and  the  markets  of  the  CEE.     Lecico  South  Africa   Lecico  South  Africa  began  operations  in  2009  when  Lecico  acquired  a  controlling   stake  in  its  South  African  distributor.  Lecico  South  Africa  is  focused  on  the   marketing  and  distribution  of  the  sanitary  ware  products  of  the  Group  in  South-­‐ Africa.     Lecico  France   Lecico  France  SARL  was  established  in  France  in  1994  and  is  a  wholly-­‐owned   subsidiary  of  Lecico  (UK).  The  operations  of  Lecico  France  focus  on  the   marketing  and  distribution  of  the  sanitary  ware  products  of  the  Group  in  France.     Lecico  plc   Lecico  plc  was  established  in  England  in  1987  and  is  a  wholly-­‐owned  subsidiary   of  Lecico  (UK).  The  operations  of  Lecico  plc  focus  on  the  marketing  and   distribution  of  the  sanitary  ware  products  of  the  Group  in  the  United  Kingdom   and  Northern  Ireland.      
  6. 6. Corporate  governance         Board  of  directors   Name   Mr.  Gilbert  Gargour   Mr.  Taher  Gargour   Mr.  Elie  Baroudi   Mr.  Alain  Gargour   Mr.  Toufick  Gargour   Mr.  Georges  Ghorayeb   Eng.  Aref  Hakki   Mr.  Pertti  Lehti   Dr.  Hani  Sarie-­‐Eldin   Dr.  Rainer  Simon   Mr.  Mohamed  Younes     Age   67   42   65   59   70   61   77   53   46   61   73   Position   Chairman  and  CEO   Managing  Director   Director   Director   Director   Director   Director   Director   Director   Director   Director       Year  Initially   Appointed  to   Board   1981   2008   2003   1997   1974   2003   1998   2002   2010   2011   2004   Social  responsibility       As  one  of  Egypt’s  leading  manufacturers,  Lecico  considers  Corporate  Social   Responsibility  (CSR)  to  be  an  integral  part  of  the  way  it  operates  and  an   important  contributor  to  its  reputation.     The  Board  takes  regular  account  of  the  significance  of  social,  environmental  and   ethical  matters  and  the  measures  covered  in  this  report  are  monitored  and   reviewed  with  the  aim  of  continually  improving  performance.     Employees     Lecico  recognizes  it  is  dependent  on  the  quality  and  effectiveness  of  its   employees.  The  Company  has  a  good  track  record  in  recruitment  and  retention.     In  a  labor  settlement  reached  following  the  worker’s  strike  in  February  2011,   Lecico  offered  a  number  of  additional  benefits  that  added  27%  to  the  company’s   wage  bill.  Aside  from  salary  increases,  the  benefits  introduced  included.     • 5% of any profit distributed as a dividend will be distributed to all workers • A meal allowance extended to all workers in the company’s Borg El Arab plants • 1.5 extra months of salary per annum bonus to workers in the company’s Khorshid plants  
  7. 7. Training  and  Development     854  members  of  staff  from  all  areas  of  the  Group  have  attended  internal   development  courses  in  2011  and  40  members  of  staff  have  received  external   training.  Language  training  remains  a  key  focus,  as  well  as  courses  in  IT,  Finance,   Marketing  and  Time  Management  and  safety  and  environmental  compliance  to   the  international  ISO  18001  and  ISO  14001  standards.     Employee  Communications     Lecico  recognizes  that  comprehensive,  two-­‐way  communications  are  essential  to   the  retention  of  skilled  employees.  A  number  of  communication  channels  are  in   place  including  briefing  meetings,  worker  boards  and  notice  boards.     To  further  improve  two-­‐way  communication,  the  Company  has  a  Worker's   Follow-­‐Up  Committee  representing  staff  from  all  departments  and  factories  that   meets  regularly  with  the  Executive  Board.  In  February  2011,  following  the  strike   in  our  factories,  workers  representatives  from  each  factory  were  added  to   ensure  it  was  more  representative  of  the  different  departments  and  employees   in  the  company.     The  key  initiatives  of  the  Worker's  Follow-­‐Up  Committee  included  improving  the   personal  support  for  any  employee  in  hospital;  ensuring  monthly  incentives   were  paid  to  service  departments;  increasing  the  Company's  contribution  to   employee's  Hajj  pilgrimages;  increasing  the  benefit  paid  for  marriages  or  deaths   in  the  families  of  its  employees;  increasing  disability  support  for  employees;  and   implementing  a  “Creative  Worker  of  the  Month”  program.     Employment  Policy     Lecico’s  policy  is  to  provide  equal  opportunities  to  all  existing  employees  and   anyone  seeking  to  join.  The  Company  is  committed  to  the  fair  and  equitable   treatment  of  all  its  employees  and  specifically  to  prohibit  discrimination  on  the   grounds  of  race,  religion,  sex,  nationality  or  ethnic  origin.     Employment  opportunities  are  available  to  disabled  persons  in  accordance  with   their  abilities  and  aptitudes  on  equal  terms  with  other  employees.  If  an  employee   becomes  disabled  during  employment  the  Company  makes  every  effort  to  enable   them  to  continue  employment,  with  re-­‐training  for  alternative  work  where   necessary.     The  Company  operates  a  number  of  employee  pension  schemes  across  its   business  including  a  retirement  fund  and  has  recently  offered  a  tailored  partial   contribution  private  health  insurance  plan  to  its  administrative  staff.  Lecico   contributed  over  LE  3.1  million  in  pension  contributions,  accident  and  medical   insurance  support  for  its  staff  in  2011.  The  Company  also  paid  out  LE  1.5  million   in  2011  to  400  laborers  who  had  left  the  company  between  2001  and  2006  to   offset  lower  retirement  packages  in  those  years.  
  8. 8.   Holidays  and  Pilgrimages     Lecico  recognizes  the  importance  of  a  good  work/life  balance  for  its  staff  and   offers  several  programs  to  help  staff  make  the  most  of  their  time  outside  of  work.   These  programs  include  organizing  and  subsidizing  day  trip  and  week-­‐long   holidays  for  its  staff  and  their  families  in  the  summer;  partially  funding  its  staff’s   Haj  and  Omra  pilgrimages  and  giving  salary  bonuses  to  the  staff  in  Ramadan  and   around  other  key  holidays.     In  2011,  these  programs  included  a  total  of  over  2,531  subsidized  holiday  days   enjoyed  by  staff  and  a  total  expense  in  holiday  and  pilgrimage  support  of  over  LE   150,000.     Community     Lecico  believes  it  has  a  responsibility  to  contribute  to  the  community  through   donations  of  goods,  funds  and  time  to  charitable  organizations  as  well  as   investing  in  the  neighborhoods  around  its  factories.     The  total  value  of  the  Company's  donations  during  2011  was  LE  420,903  with   the  majority  of  this  being  donations  of  goods.  It  is  the  Company’s  policy  not  to   make  political  donations  and  no  political  donations  were  made  in  the  year  2011.     Lecico  also  trained  circa  100  plumbers  in  a  new  internal  local  training  programs   designed  to  support  local  businesses  and  promote  water  saving  products.     The  Company  also  funded  local  sporting  facility  rental  and  equipment  for  its   workers  to  play  football  twice  a  week.     Environment  and  Health  &  Safety     Lecico  is  committed  to  developing  its  business  in  a  responsible  manner,   protecting  the  health  and  safety  of  its  employees  and  addressing  evolving   environmental  issues  and  ensuring  compliance  with  applicable  legal   requirements.     Lecico  has  well  developed  environmental,  packaging  and  waste  reduction   policies  that  are  communicated  to  all  employees  who  are  encouraged  to   participate  in  achieving  the  Company’s  goals.     All  Lecico’s  factories  in  Egypt  are  certified  for  ISO  9001  (quality  management   systems),  ISO  14001  (environmental)  and  ISO  18001  (Health  and  Safety).  ISO   14001  is  an  internationally  accepted  certification  for  effective  Environmental   Management  System  (EMS).  The  standard  is  designed  to  address  the  delicate   balance  between  maintaining  profitability  and  reducing  environmental  impact.   ISO  18001  is  the  internationally  recognized  certification  for  occupational  health  
  9. 9. and  safety  management  systems.  It  was  developed  by  a  selection  of  trade  bodies,   international  standards  and  certification  bodies  to  be  compatible  with  ISO  9001   and  ISO  14001,  and  help  any  company  meet  their  health  and  safety  obligations  in   an  efficient  manner.     In  2011  the  company  our  external  auditors  TUV  recorded  zero  audit  failures  or   breaches  of  compliance  against  the  IS0  9001,  14001  and  18001  standards  in   which  we  are  certified.     In  2011  Lecico’s  factories  received  new  certifications  from  AENOR  from  Spain,   WATERMARK  from  Australia  and  NORDTEST  from  Sweden.     Environmental  Policy     All  Lecico  companies  seek  to:     • Minimize the use of all materials, supplies and energy – and wherever possible use renewable or recyclable materials. • Minimize the quantity of waste produced in all aspects of our business. • Adopt an environmentally sound transport policy. • Communicate our environmental policy to all staff and encourage them to participate in the achievement of our goals. • Supply and promote, wherever possible, those products, which contribute to energy conservation and do not damage the environment. • Ensure that the Company continues to meet present and future environmental standards and legislation.   Packaging  and  Waste  Reduction  Policy     All  Lecico  companies  seek  to:     • Purchase recycled and recyclable packaging where practicable, including pallets and cartons. • Return reusable pallets to suppliers and similarly recovering used pallets from customers. • Reuse packaging opened at branch level for internal transfers and deliveries. • Actively take part in recycling and reclamation schemes. • Within its businesses embrace electronic communication aimed at significant reduction in internal paperwork throughout the Company. • Ensure that the Company continues to meet present and future environmental standards and legislation.      
  10. 10. Environmental  scanning     External  environment   Natural  Environment       Geography:     Egypt  lies  in  the  northern  corner  of  Africa.  It  is  bounded  by  the  international   frontiers  of  the  Mediterranean  Sea  in  the  North,  the  Red  Sea  in  the  East,  Libya  in   the  west  and  Sudan  in  the  south.     Area: Total  area  of  Egypt  is  approximately  1  million  Km2     Capital: Cairo     Population:  Population:  83,688,164  (July  2012  est.)   Age  Structure:   32.5%  (male  13,917,469/female  13,298,009)     15-­‐24  years:  18.2%  (male  7,833,062/female  7,427,571)     25-­‐54  years:  38.1%  (male  16,166,968/female  15,723,340)     55-­‐64  years:  6.5%  (male  2,710,567/female  2,718,105)     65  years  and  over:  4.7%  (male  1,750,195/female  2,142,878)  (2012  est.)     Median  age   Male:  24.3  years     Female:  24.9  years  (2012  est.)     Population  growth  rate:  1.922%  (2012  est.)   Birth  rate:  24.22  births/1,000  population  (2012  est.)   Death  rate:  4.8  deaths/1,000  population  (July  2012  est.)   Net  migration  rate:  -­‐0.2  migrant(s)/1,000  population  (2012  est.)   Urbanization   Urban  population:  43.4%  of  total  population  (2010)     Rate  of  urbanization:  2.1%  annual  rate  of  change  (2010-­‐15  est.)     Major  cities  -­‐  population   CAIRO  (capital)  10.902  million;  Alexandria  4.387  million  (2009)     Ethnic  groups:  Egyptian  99.6%,  other  0.4%  (2006  census)     Religions:  Muslim  (mostly  Sunni)  90%,  Coptic  9%,  other  Christian  1%     Literacy:  Definition:  age  10  and  over  can  read  and  write   Total  population:  70.3%   Male:  77.6%   Female:  62.7%  (2006  EST.)     Topography:  Egypt  is  geographically  divided  into  four  main  divisions:   1- The Nile Valley and Delta (approx. 33,000 Km2) It extends from the North Valley to the Mediterranean Sea and is
  11. 11. divided into Upper Egypt and Lower Egypt, extending from Wadi Halfa to the south of Cairo and from North Cairo to the Mediterranean Sea. The River Nile in the north is divided into two branches, Damietta and Rachid embracing the highly fertile agricultural lands of the Delta. 2- The Western Desert (approx. 680,000 Km2) Extends from the Nile Valley in the East to the Libyan borders in the west, and from the Mediterranean in the north to the Egyptian southern boarders. It is divided into: - The Northern Section: it includes the coastal plain, the northern plateau and the Great Depression, the Natroun Valley and Baharia Oasis. - The Southern Section: it includes Farafra, Kharga, Dakhla, and ElOwainat in the far south. 3- The Eastern Desert (approx. 325,000 Km2) It extends from the Nile Valley in the West to the Red Sea, Suez gulf, and Suez Canal in the East, and from Lake Manzala on the Mediterranean in the North to Egypt's southern borders with Sudan in the south. The Eastern Desert is marked with the Eastern Mountains that range along the Red Sea with peaks that rise to about 3000 feet above the sea level. This desert is a store of Egyptian natural resources including various ores such as gold, coal, and oil. 4- Sinai Peninsula (approx. 61,000 Km2) Sinai has a triangular shape having its base at the Mediterranean in the North and its apex in the South at Ras Mohammed, the Gulf of Aqaba to the East and the Gulf of Suez and Suez Canal to the west. It is topographically divided into three main sections: - The southern section: it involves extremely tough terrain that is composed of high-rise granite mountains. Mount Catherine rises about 2640 meters above sea level, thus making it the highest mountaintop in Egypt. - The Central section: it comprises the area bounded by the Mediterranean to the North. - At-Teeh plateau to the south: it is a plain area having abundant water resources derived from rainwater flowing from southern heights to the central plateau.   Climate:     The  Egyptian  climate  is  influenced  by  the  factors  of  location,  topography,  and   general  system  for  pressure  and  water  surfaces.  These  aspects  affect  Egypt's   climate  dividing  it  into  several  regions.  Egypt  lies  in  the  dry  equatorial  region   except  its  northern  areas  located  within  the  moderate  warm  region  with  a   climate  similar  to  that  of  the  Mediterranean  region.  It  is  warm  and  dry  in  the   summer  and  moderate  with  limited  rainfall  increasing  at  the  coast  in  winter.  The   annual  average  day  and  nighttime  temperatures  in  Lower  and  Upper  Egypt  is  20   and  25,  and  7  and  17  respectively.       Water  Resources:     Egypt  depends  on  three  main  sources;  the  River  Nile  water,  rain  fall  and  floods  in   addition  to  ground  water.  
  12. 12.   Mineral  &  Oil  Resources:     Egypt  is  endowed  with  a  fortune  of  important  metals  such  as  phosphates,  raw   iron  and  oil.     Development  and  the  Environment:   Sustainable  development  entails  a  pattern  of  growth  in  which  economic,  social,   as  well  as  environmental  conditions  are  equally  considered  and  carefully   balanced,  leading  to  living  standards  for  future  generations  which  are  no  worse   off,  if  not  better,  than  present  ones.  In  this  respect,  environmental  protection  and   a  balanced  use  of  natural  resources  must  constitute  an  integral  part  of  the   development  process.  In  Egypt,  as  the  available  natural  resources  must  support  a   rapidly  increasing  population,  sound  management  of  such  resources,  together   with  a  continuous  improvement  of  the  protection  of  the  environment  are  an   evident  necessity.       The  Ministry  of  State  for  Environmental  Affairs  (MSEA)  with  its  executive   agency,  the  Egyptian  Environmental  Affairs  Agency  (EEAA),  meet  this  challenge   by  continuously  striving  for  the  integration  of  the  environmental  dimension  into   national  policies,  plans  and  lines  of  action.  This  is  carried  out  with  an  immediate   focus  on  the  reduction  of  pollution  and  the  conservation  of  Egypt's  natural   resources  through  effective  environmental  management.       Environmental  Authority:   In  June  1997,  the  responsibility  of  Egypt's  first  full  time  Minister  of  State  for   Environmental  Affairs  was  assigned  as  stated  in  the  Presidential  Decree   no.275/1997.  From  thereon,  the  new  Ministry  of  Sate  for  Environmental  Affairs   (MSEA)  has  focused,  in  close  collaboration  with  the  national  and  international   development  partners,  on  defining  environmental  policies,  setting  priorities  and   implementing  initiatives  within  a  context  of  sustainable  development.       According  to  the  Law  4/1994  for  the  Protection  of  the  Environment,  the   Egyptian  Environmental  Affairs  Agency  (EEAA)  was  restructured  with  the  new   mandate  to  substitute  the  institution  initially  established  by  Presidential  Decree   No.  631  of  the  year  1982.  EEAA  represents  the  executive  arm  of  the  Ministry.       MSEA  and  EEAA  are  the  highest  authority  in  Egypt  responsible  for  promoting   and  protecting  the  environment,  and  coordinating  adequate  responses  to  these   issues.     Society  Environment     The  PESTLE  analysis  of  Egypt  identifies  issues  that  affect  the  country's   performance  using  the  strengths,  weaknesses,  opportunities,  and  threats   (SWOT)  framework.   The  political  landscape  section  discusses  the  evolution  of  the  political  scenario  in   Egypt,  as  well  as  the  country's  economic,  social,  foreign,  and  defense  policies.  The   section  also  discusses  the  country's  performance  according  to  World  Bank  
  13. 13. Governance  Indicators.   The  economic  landscape  section  outlines  the  evolution  of  Egypt's  economy,  as   well  as  the  country's  performance  in  terms  of  GDP  growth,  composition  by  sector   (agriculture,  industry,  and  services),  fiscal  situation,  international  investment   position,  monetary  situation,  credit  disbursement,  banking  sector,  and   employment.         Political     Egypt  continues  a  process  of  political  transition.  The  country  has  undergone   dramatic  political  changes  since  the  2011  revolution  that  toppled  the  regime  of   former  President  Hosni  Mubarak.  In  June  2012,  elections  were  held  and   Mohamed  Morsi  won  51.7  percent  of  the  vote.  He  took  office  on  June  30,  2012,   and  a  new  constitution  was  passed  in  a  referendum  in  December  2012.  After   mass  demonstrations  and  the  removal  of  President  Morsi  on  July  2,  2013,  an   interim  president  was  sworn  in  on  July  4  and  a  Constitutional  Declaration  was   issued  on  July  9.  An  interim  government  was  formed  on  July  16,  2013.  A  body   appointed  by  Egypt's  interim  government  to  rewrite  the  country's  constitution   met  for  the  first  time  on  September  8,  2013.  After  a  referendum  on  a  new   constitution,  the  country  is  scheduled  to  head  to  presidential  and  parliamentary   elections  in  early  2014.   Economical     Egypt’s  economy  is  still  suffering  from  a  severe  downturn  and  the  government   faces  numerous  challenges  as  to  how  to  restore  growth,  market  and  investor   confidence.  Political  and  institutional  uncertainty,  a  perception  of  rising   insecurity  and  sporadic  unrest  continue  to  negatively  affect  economic  growth.   Real  GDP  growth  slowed  to  just  2.2  percent  year  on  year  in  October-­‐December   2012/13  and  investments  declined  to  13  percent  of  GDP  in  July-­‐December  2012.   The  economic  slowdown  contributed  to  a  rise  in  unemployment,  which  stood  at  
  14. 14. 13  percent  at  end-­‐December  2012,  with  3.5  million  people  out  of  work.  Foreign   exchange  reserves  have  continued  to  decline  and  are  now  less  than  3  months  of   imports.     The  government  also  needs  to  reconcile  the  need  for  more  public  spending  with   the  objective  of  reducing  the  deficit,  which  rose  to  11  percent  of  the  GDP  in   FY11/12.  A  major  challenge  the  government  faces  is  managing  the  state  budget,   which  includes  salaries  for  public  sector  and  subsidies,  items  that  account  for   more  than  half  of  all  public  expenditures.    Measures  to  further  reduce  fuel   subsidies  planned  for  April  2013  have  now  been  postponed  to  later  this  year.   Ongoing  political  tensions  have  prolonged  Egypt’s  bid  to  secure  a  $4.8  billion   loan  from  the  International  Monetary  Fund  (IMF).  The  IMF  has  been  discussing  a   program  of  support  with  the  government  and  calling  for  stronger  fiscal   adjustment,  full  disclosure  of  underlying  measures,  and  broader  political   support.   Economic  growth  remains  weak,  with  a  high  fiscal  deficit  and  gross  public  debt   (domestic  and  external)  rising  to  nearly  100  percent  of  GDP  at  end-­‐June  2013.   Low  growth  rates  pose  a  danger  to  mounting  social  frustrations,  as  they  will  not   suffice  to  deliver  the  needed  jobs  and  opportunities.  Unemployment  rate  reached   over  13  percent  in  June  2013.  Most  critically,  however,  more  than  three-­‐quarters   of  the  unemployed  are  between  15  and  29  years  of  age.   Socio-­‐cultural     Over  the  past  two  decades,  Egypt  showed  marked  improvements  in  a  number  of   social  indices:  infant  mortality  and  malnutrition  among  children  under  five  both   decreased  by  half  and  life  expectancy  rose  from  64  to  71  years.    The  economy   and  the  living  standards  for  the  vast  majority  of  the  population  improved   although  in  an  uneven  manner.    The  Household  Income,  Expenditure  and   Consumption  Survey  (HIECS)  for  2010/2011  showed  that  the  poverty  rate   increased  from  21.6  percent  in  2008/09  to  25.2  percent  in  2010/11.    Conversely,   the  extreme  poverty  rate  declined  from  6.1  percent  in  2008/09  to  4.8   percent.    Inequality  remained  constant  over  the  last  2  years,  according  to  the  Gini   coefficient  recorded  with  31  percent  in  both  2008/09  and  2010/11.  Although   only  a  little  over  half  of  the  population  lives  in  rural  areas,  more  than  78  percent   of  the  poor  and  80  percent  of  the  extreme  poor  live  there.    These  income   disparities  are  reinforced  by  the  gaps  in  social  indicators,  where  virtually  all   health  indicators  and  literacy  rates  are  worse  in  Upper  Egypt  than  in  Lower   Egypt  and  worse  in  rural  areas  than  in  urban  areas.    Illiteracy  rates  among  young   women  in  Upper  Egypt  are  24  percent,  twice  the  rates  of  their  male   counterparts.  The  new  government  also  faces  the  challenge  of  addressing  social   inequality.  This  will  involve  developing  an  education  system  that  equips  students   with  the  skills  to  compete  in  the  global  economy,  and  a  private  sector  governed   by  transparent  rules  that  allow  for  equal  access  to  both  entry  and   opportunities.    A  better-­‐targeted  system  of  social  benefits  would  ensure  that  the   needs  of  the  most  vulnerable  are  being  met  while  reducing  the  pressure  on  the   national  budget.  The  previous  government  had  made  efforts  to  modernize  the   economy  with  a  program  of  privatizations.  While  there  had  been  periods  of   sustained  growth,  averaging  seven  percent  before  the  economic  slowdown  in   2008,  the  opportunities  it  created  were  not  shared  equally.  The  uprising  was  
  15. 15. motivated  by  the  perception  that  both  the  political  and  economic  systems  were   rigged  in  favor  of  a  privileged  minority.  This  was  equally  true  of  the  expansion  of   the  private  sector,  which  was  seen  as  yet  another  way  of  benefitting  the  elite.   Investment  will  be  needed  to  stimulate  business  activity  as  the  only  source  for   the  scale  of  jobs  and  opportunities  needed.  The  education  system  will  need   reforms  that  gear  it  more  toward  a  market  economy,  as  enterprise  surveys  have   shown  that  workers’  skills  do  no  match  the  needs  of  private  businesses.   Technological     Governmental  spending  in  R&D,  Egypt  is  from  the  lowest  country  that  spend  on   R&  D  in  comparison  with  other  countries  which  adversely  affects  their   development  in  the  areas  of  agricultural,  industrial  and  other  industries   Internet  users  growth  rate  Due  to  the  successful  implementation  of  a  free   Internet  strategy  in  2002,  Egypt  now  has  the  largest  Internet  market  in  Africa   with  more  than  five  million  users  in  early  2006.  However,  Internet  penetration  is   still  relatively  low  and  the  vast  majority  of  users  are  located  in  urban  area   Legal     According  to  the  Law  4/1994  for  the  Protection  of  the  Environment,  the   Egyptian  Environmental  Affairs  Agency  (EEAA)  was  restructured  with  the  new   mandate  to  substitute  the  institution  initially  established  in  1982.  At  the  central   level,  EEAA  represents  the  executive  arm  of  the  Ministry.     The Principal Functions of the Agency Include: • Formulating environmental policies. • Preparing the necessary plans for Environmental protection and Environmental development projects, following up their implementation, and undertaking Pilot Projects. • The Agency is the National Authority in charge of promoting environmental relations between Egypt and other States, as well as Regional and International Organizations. Foreign trade   The  Egyptian  market  is  gradually  opening  up,  especially  after  signing  an   agreement  with  the  European  Free  Trade  Association  (EFTA)  in  2006,  and  a  free   trade  treaty  with  the  United  States.  Its  three  primary  export  partners  are  the   European  Union,  which  represents  more  than  a  third  of  the  trade,  United  States   and  Syria.  Its  three  primary  import  partners  are  the  European  Union,  the  United   States  and  China.  Egypt  mainly  exports  mineral  fuels  and  oil,  cotton,  iron  and   steel.  It  imports  mainly  consumer  electronic  goods  and  capital  goods,  nuclear   reactors  and  nuclear-­‐powered  boilers,  cereals,  food  products  and  chemical   products.  Import  volume  has  doubled  and  is  twice  the  export  volume,  a  fact  that   contributed  to  the  deterioration  of  the  country's  trade  balance.  
  16. 16. Tax Rate The  standard  rate  of  corporate  income  tax  is  40%.  The  rate  is  32%  on  profits   arising  from  export  operations  and  on  profits  of  an  industrial  company  as  long  as   they  arise  from  its  industrial  activities.   Withholding Tax Any  business  operating  in  Egypt  must  withhold  against  any  payments-­‐-­‐  made  to   any  contractor  or  supplier  of  goods  or  services-­‐-­‐  the  following  basic  percentages:   Contracting  and  supplying:  1%   Services:  3%   Commissions:  10%   Professional  fees  (under  LE  500):  10%   Professional  fees  (over  LE  500):  15%   Leasing  of  property  or  selling  of  goods  for  trading  or  manufacturing:  1%  -­‐  5%  (to   be  added  on  the  payee's  tax  liability  account.   Corporate Tax Exemptions and Deductions   • Almost all business expenses are deductible including depreciation, interest, royalties, rent, profit sharing payments to employees, legal expenses, pension and Egyptian state social insurance contributions. • Profits of companies located in the free zones. • Capital gains are applicable in some cases of asset replacement. • All tax holidays granted under Investment Law No.8/1997. • Joint stock companies employing more than 50 employees and maintaining proper books of accounts are granted a tax holiday for a five-year period. Also, hotels and tourist projects are granted a tax holiday for a five-year period which can be extended to ten years if the project is located in a remote area. • For joint stock companies listed in the stock market, a deductible allowance is made that is equal to interest income, which can be earned on a bank deposit (currently 10.5 percent). • Ninety percent of income generated by companies from their movable capitals which have been subject to the new tax imposed by Law 187 of 1993.   Personal Income Tax • • Taxable Income Tax Law No. 187 of 1993 distinguishes among the following categories of income of individuals (as well as partners in partnerships): • Salaries and wages. • Commercial and industrial profits • Income from immovable property • Income from movable capital • Noncommercial profits. Taxation of Foreigners
  17. 17. Foreigners  that  have  been  working  in  the  country  for  more  than  183  days   with  their  annual  salaries  varying  from  LE  1.00  to  LE  50,000  are  subject   to  paying  a  20  percent  income  tax.  However,  if  the  employee's  annual   income  exceeds  LE  50,000  then  they  will  be  liable  to  pay  32  percent   income  tax.   • Social Insurance Contribution Rates   On basic monthly salary up to L.E. 500 / month   On variable pay (such as production incentive bonuses)-up to L.E. 500/month Employer(%)   26   24   Employee(%)   14   11     Labor force and laws Labor force Government,  armed  forces  &  public  sector:  36% Agriculture:  34% Private  sector:  30% The  new  unified  Labor  Law  No.  12  for  2003  regulates  the  Egyptian  labor  market.   The  new  Law  comprises  257  articles  that  address  all  the  legal  aspects  regulating   the  Egyptian  labor  market.  The  new  law  aims  at  increasing  the  private  sector   involvement  and  at  the  same  time  achieving  a  balance  between  employees  and   employers'  rights.  Amongst  the  most  important  issues  that  the  new  law   addresses  is  the  right  of  an  employer  to  fire  an  employee  and  the  conditions   pertaining  to  this  as  well  as  granting  employees  the  right  to  carry  out  a  peaceful   strike  according  to  controls  and  procedures  prescribed  in  the  new  law.       Environmental  legislation       Law  4/1994:  has  a  greater  role  with  respect  to  all  governmental  sectors  as  a   whole.  The  law  has  been  designated  as  the  highest  coordinating  body  in  the  field   of  the  environment  that  will  formulate  the  general  policy  and  prepare  the   necessary  plans  for  the  protection  and  promotion  of  the  environment.   It  wills  also,  follow-­‐up  the  implementation  of  such  plans  with  competent   Administrative  authorities.  The  laws  and  regulations  covering  the   governmental22  sector  that  can  be  grouped  according  to  the  pollutant  emissions   from  various  activities:   The  Environmental  Protection  Law  has  defined  the  responsibilities  of  the  agency   in  terms  of  the  following   • Preparation of draft legislation and decrees pertinent to environmental management. • Collection of data both nationally and internationally on the state of the environment.
  18. 18. • • • Preparation of periodical reports and studies on the state of the environment. Formulation of the national plan and its projects. Preparation of environmental profiles for new and urban areas, and setting of standards to be used in planning for their development. Preparation of an annual report on the state of the environment to be prepared to the President.   Global  Warming  Legislation   Over  a  decade  ago,  most  countries  joined  an  international  treaty  -­‐-­‐  the  United   Nations  Framework  Convention  on  Climate  Change  (UNFCCC)  -­‐-­‐  to  begin  to   consider  what  can  be  done  to  reduce  global  warming  and  to  cope  with  whatever   temperature  increases  are  inevitable.  More  recently,  a  number  of  nations   approved  an  addition  to  the  treaty:  the  Kyoto  Protocol,  which  has  more  powerful   (and  legally  binding)  measures.  The  UNFCCC  secretariat  supports  all  institutions   involved  in  the  climate  change  process,  particularly  the  COP,  the  subsidiary   bodies  and  their  Bureau.     Task  (Industry)  Environment     Fives  Forces  of  porter         In  a  competitive  framework  characterized  by  declining  barriers  to  entry,  the   distinction  between  foreign  competitors  on  the  Egyptian  market  and  foreign   competitors  on  the  other  markets  (that  are  the  market  where  Egypt  could   export)  is  losing  importance.  In  other  words,  Egyptian  manufacturers  have  to    
  19. 19. face  competitors  that  will  try  to  expand  their  shares  in  the  Egyptian  market  as   well  as  in  the  European,  Mediterranean  and   African  areas.  We  should  rather  differentiate  between  “present”  and  “future”   competitors,  taking  into  account  that  other  countries  in  the  region  are  building   a  strong  productive  capacity  and  that  the  export  might  become  their  first  way  of   sectorial  development.   Therefore,  among  the  main  present  competitors  for  the  local  industry  we  can   consider  Turkey,  China  and  UAE:  they  can  export  in  the  Mediterranean  area   (included  Egypt)  via  shipping.  In  fact,  imports  from  the  Mediterranean  and   Middle  East  area  are  still  limited,  with  the  growing  presence  of  China.  On  the   other  hand,  Egyptian  exports  are  mainly  directed  to  UAE.   In  the  near  future  (from  two  to  five  years)  Iran,  Morocco  and  Saudi  Arabia  can   become  important  regional  players,  because  they  are  building  huge  production   capacities  and  the  export  will  be  the  obvious  channel  to  allocate  their  production   surplus.  Their  productions  could  reach  part  of  the  region  by  truck.   Threats  of  New  Entrants   The tile and sanitary industry in Egypt is on a growth stage, which makes it an attractive investment. The demand for tiles and sanitary is persistently increasing due to the booming construction sector. However the initial startup cost for a manufacturing plant is massive especially on plant and machinery and distribution channels (732,162,639 L.E). The typical payback period of setting up a plant is about 4 to 5 years also the industry requires economies of scale to produce a product with a significant cost advantage; hence this makes a barrier for potential players to enter the industry. The consolidated balance sheet for the year ended 31/12/2012 gave a total assets figure of 2,030,485,287 L.E (Opportunities). Total investment in the sector stood at EGP5bn. The country has about 25 tiles plants with a total annual capacity of 225mn sqm p.a, while consumption is around only 140-160mn sqm p.a, leaving Egypt with room for an enormous export capacity. In FY08/09, Egypt’s Ceramics industry was ranked 8th in the world in terms of total production output. Rivalry  among  Existing  Firms   Since the industry has a significant growth rate in Egypt and globally as well, so the rivals will not do much impact on the industry since the demand is growing and the market is not saturated. Since the product is highly differentiated in colors, dimensions and design, this leads to products differentiation in the industry and hence it decreases the force of rivals (Opportunities). Threats  of  Substitute  product   The closest substitutes for tiles are marbles, wooden (parquet) flooring and grout & mortar however for the sanitary ware the ceramic is the dominant choice up to now due to the ease cleaning and temperature resistance. Even the price of ceramic tiles may elevate due to heavy production cost (increasing energy and raw material prices), still its price remains competitive to the substitutes. On the other hand there is no current alternative for the sanitary ware. On the whole, households prefer to use ceramic tiles to get their desired fit and finish and also many of wooden parquet installed on the ceramic tiles to improve the flatness of the floor (Opportunities).
  20. 20. Bargaining  Power  of  Buyers   There is heavy influx of cheaper tiles from China, India and Indonesia, which is preferred by income elastic customers. Nevertheless despite of premium prices possessed by locally manufactured tiles, due to high quality and durability, the local demand still exists and also the domestic buyers are not limited in numbers. Overall customers possess a moderate bargaining power due to the availability of cheap imports (Threat). Bargaining  Power  of  Suppliers   Tile and sanitary industry consumes large quantities of clay and consumes a lot of energy as well. Around 31% of the production costs accounts for the raw material and 16% of the cost accounts for energy. Since the government subsidiary was removed from the energy supplied to the industry plus the gas production shortfall, which might affect negatively on the industry, the suppliers’ posses a higher bargaining power (Threat).      
  21. 21. Issue  priority  matrix     After  the  analysis  of  such  factors  we  will  distribute  them  according  to  issues   priority  matrix.  The  items,  which  have  been  categorized,  as  high-­‐high,  medium-­‐   high  or  high  medium  will  be  our  focus  in  selecting  the  opportunities  or  threats,   which  can  be,  categorized  as  strategic  factors.     Issue  Priority   Matrix   Probability  of  occurrence   High   High   Probable  Impact  on  Organization   Medium   Low   • Raw Material (clay,ball clay,feldspar )are available locally from Aswan and Sukhna (Opportunity) • Low foreign reserve might negatively affect the business activities (Threat) • Shortfall in gas supply and delay in gas wells development along Egypt and consequently lead to a higher energy price. (Threat) • High inflation rate will impact the product price and lose low price competitiveness (Threat) • Higher exchange rate will impacted negatively on the industry since the raw material for the glaze is not available on local market (Threat) • Downturn in European markets may negatively affect export sales (Threat) • Deployment of advanced technology in the firing equipment leads to energy conservation (Threat) • Frequent strikes might affect the company supply chain (Threat) • Labour union becomes more robust and the labour asking for their rights (Threat) • The country will go for more construction projects especially for the youth housing which will give a significant growth to the industry (Opportunity) • Egypt current instable political situation (Threat) • World directions toward the ecodesign products (Threat) • World direction towards new application in the ceramics products like in the medical and electrical industry (Opportunity) • Open new market in Libya especially in after their revolution and more development projects will be in place (Opportunity) • Moderate ambient temperature and region out of earthquakes zones (Opportunity)
  22. 22.   Medium   • High rate of unemployment might put stress of over employment on industry manufacturer (Threat) • The increased awareness with hazards caused by such ceramic factories for its neighborhoods may cause serious problem in the near future especially after this socio-cultural changes occurred after revolution (Threat) • Lake of trained or skilled workers and managers (Threat) • No support from universities and other research institutes in the field of R&D (Threat) • Nanotechnology science will contribute in the change of the industry know how (Threat) • Low Fresh water supply along Egypt might be arises due to the building of new dams on the Nile Basin countries (Threat) • New strict environmental regulations might be arise which impact significantly on the industry capital cost (Threat) • Rivalry among Existing Firms (Thread) • Evolving of new economic countries might negatively affect the global market share (Threat) • More restricted environmental regulations after the revolution (Threat) • The perspective of new political system to taxation laws; import/export regulations and the extent of government bureaucracy in business regulation (Threat) • Bargaining power of buyer (Threat) • Threats of New Entrants (Threat) • Ending the monopoly politics which was undertaken by the previous authorized party by assigning the major country projects to a specific manufacture (Opportunity) • Newly joint trade with China will adversely affect the industry (Threat) • Threat of substitute product
  23. 23. • Political disturbance in the whole region due to the struggle between Iran and Israel about the nuclear arms race issue. (Threat) • Imported tiles and sanitary could be significantly decreased due to stringent protectionist policies could enacted by the government in the future (Opportunity) • Disturbance in relations between Israel and Egypt about Sinai security issue; modification of peace agreement and Palestine issue. (Threat) • Bargaining power of suppliers (Threat) • Revolution of the pigments industry (Threat)     Low     Strategic  Groups          
  24. 24. Strategic  Types       Lecico  use  defender  strategy  because  it  focus  in  improving  efficiency  to  make   expansion  growth     Lecico’s  strategy  is  to  leverage  its  large  production  base  in  Egypt  to  build  a   significant  presence  across  the  Middle  East  and  Europe  by  providing  innovative,   modern  design  and  world-­‐class  quality  ware  at  competitive  prices.   Expand  regional  and  International  Exports.    Lecico’s  strategy  is  to  continue   developing  its  presence  and  footprint  in  regional  and  European  export  markets   under  its  own  brands  and  as  an  OEM  producer  for  leading  global  manufacturers.   In  2008,  we  are  seeing  a  strong  increase  in  enquiries  from  existing  and  new   customers  across  all  categories.   Lecico’s  exports  to  Europe  account  for  over  80%  of  exports  and  over  35%  of  the   company’s  sales.  The  Lecico  brand  has  a  10%  market  share  in  the  UK,  France  and   Ireland  combined.  Lecico  plans  to  increase  it’s  market  share  in  Europe  by   targeting  new  markets  and  OEM  customers  while  also  widening  its  offering  in   existing  markets.  Lecico  will  also  continue  to  selectively  explore  any   opportunities  to  make  value-­‐enhancing  acquisitions.     As  a  result  of  Lecico’s  focus  on  growing  its  presence  in  regional  markets,  the   company’s  sanitary  ware  and  tile  exports  to  the  Middle  East  have  grown  50%   annually  over  the  last  five  years.  Lecico  sees  strong  opportunities  for  continued   growth  in  regional  markets,  particularly  in  those  countries  with  large   populations  and  underdeveloped  or  rapidly  growing  economies.  Lecico  has   established  small  trading  subsidiaries  in  Saudi  Arabia  and  Algeria  to  better   access  these  markets.     Lower  production  costs.  Lecico’s  production  base  in  Egypt  provides  it  with   relative  cost  savings  in  energy  and  labor  that  allow  it  to  be  a  competitive   producer  of  world-­‐class  quality  products  for  European  and  regional  markets.   The  company  is  dedicated  to  constantly  improving  efficiency,  cost  control  and   vertical  integration  in  an  effort  to  remain  competitive.        
  25. 25. Competitive  Analysis         Al  Omaraa  co.  (  La  Beaut’e  )   Production  capacity  11  production   lines  produce  80,000  square  meter   daily  means  26,900,000  annually   Aim  to  Obtain  Maximum  Level  of   quality  for  the  final  product  That  is   begin  from  Raw  material  necessary  to   be  from  pure  &  highest  level  of   Material   Omeraa  use  a  logo  well  known  to   Christian  religion  to  accomplish     Lecico  Group   Production  Capacity  in  Egypt  14   production  lines  produce  88,000   square  meter  daily  means  29,500,000   Plus  8,000,000  for  Lecico  Lebanon   Aim  to  satisfy  its  customer  satisfaction   through  producing  larger  number  of   product  ranges   Lecico  is  a  well  known  brand  since  50   years  
  26. 26. market  share  fast   Distribution  channels  depend  mostly   on  customers  in  upper  region  due  to   lack  of  Cleopatra  market  share   Distribution  channels  are  bounded   well  by  sharing  the  company  in   empowering  distributer’s  assets  like   purchasing  warehouses  for  each  region   Same  percentage  yearly  for  work  lab  to   Lecico  invest  on  complementary  items   research,  development  &  training   used  in  the  industry:   factor  whether  it  is  for   • Purchasing  moulds  for  its   industrialization  and  quality  technical   sanitary  seat  cover  used  by  the   or  for  humanity  trouble  with  different   supplier  Rubex   company  departments   • Improve  the  idea  of  flushing   system  by  importing  most   efficient  samples  for  Local   suppliers Average  Market  selling  Price  per  meter   Average  Market  selling  Price  per  meter   square  25  L.E   24  L.E   They  begin  to  produce  this  year  with  2   Lecico  use  98%  of  its  needs  of  frites   kins  of  frites  to  use  in  their  production   locally  from  its  internal  factory  of  8   beside  importing  other  70%  of  their   kins  beside  exporting  exceeded   needs  from  Spain   production  for  Lecico  Lebanon  factory   needs   By  using  a  team  of  professional   Lecico  import  designs  from  China  due   designers,  the  product  is  highly   to  high  machinery  used  in  graphic   developed  beyond  local  customer   designs  available  in  Chinese  ceramic   expectation   industry     Industry  Matrix     Key Success Factors Relative Weight Lecico Rating Lecico Weighted Score Distribution Channels Product varieties Economy of scale Technology Managing volatility Summation 0.3 4 1.2 0.25 0.2 3 4 0.75 0.80 2.5 3.5 0.625 0.7 0.15 0.1 2 1.5 0.3 0.15 3.5 2.5 0.525 0.25         1 3.2 Al Al Omaraa Omaraa Rating Weighted Score 3 0.9 3
  27. 27.     Comments  on  Industry  Matrix     Distribution  Channels:  Without  efficient  distribution  channels  manufacturing   companies  cannot  distribute  nor  sell  their  products,  Lecico  dominates  local  and   foreign  distribution  networks  by  offering  them  attractive  sales  incentives  and   discounts.     Product  varieties:  Product  varieties  range  from  different  designs  of  the  same   product  to  a  whole  package  of  the  sanitary  products  (sanitary  ware,  tiles  &   brass).  Lecico  produces  all  three  product  ranges,  although  Lecico  has  little   product  designs  compared  to  the  competitors  but  the  acquisition  with   Sarreguemines  plant  in  France  will  provide  Lecico  with  the  updated  product   design  and  TQM  system  in  the  sanitary  ware  product.   Economy  of  scale:  The  economy  of  scale  is  very  important,  in  addition  to  its   entry  barrier  effect  for  the  industry,  it  is  essential  for  providing  low  cost  with   high  quality  products.   Technology:  Technology:  Old  operated  design  kilns  in  Lecico  are  heavily   consumers  of  energy  (only  4  kilns  out  of  17  had  been  replaced  by  newly  fuel  gas   saving  technique). Managing  volatility:  Managing  volatility  is  important  due  to  extreme  changes  in   energy  prices  with  unstable  supplies.  Also  frequent  strikes  affect  the  company’s   supply  chain.      
  28. 28. EFAS     Opportunities     Weight   Raw  Material  (clay,ball   clay,feldspar  )  local  availability   from  Aswan  and  Sukhna     Open  new  market  in  Libya   especially  in  after  their   revolution  and  more   development  projects  will  be  in   place   Closeness  to  European  markets,   Demographic  location  when   compared  to  Chinese  and  Indian   competitors  in  the  European   market.   Opening  Retailer  in  more   European  countries  (European   Unions)   The  country  will  go  for  more   construction  projects  especially   for  the  youth  housing  which  will   give  a  significant  growth  to  the   industry   Summation   Threads   Rating   Weighted   Comments   score   0.2   5   1   0.10   3   0.3   0.10   4   0.4   Advantage  when   compared  to  Chinese   and  Indian  competitors   0.05   2   0.1   Takes  time  to  establish  a   good  position  in  market   0.05   1   0.05   Political  disturbance  in   country   0.5   Weight   Rating 1.85     Weighted   Comments score Shortfall  in  gas  supply  and  delay   in  gas  wells  development  along   Egypt  and  consequently  lead  to  a   higher  energy  price   Frequent  strikes  might  affect  the   company  supply  chain   Lake  of  trained  or  skilled   workers  and  managers   0.15   1   0.15   0.1   4   0.4   0.1   3   0.3   World  directions  toward  the  eco-­‐ design  products   0.1   2   0.2   Low  Fresh  water  supply  along   Egypt  might  be  arises  due  to  the   building  of  new  dams  on  the  Nile   Basin  countries     Summation   0.05 2 0.1           0.5 Availability  of  Raw   material  with  cheap   prices   Might  face  new   competitors  from   Chinese  manufacturers     1.15 Industry  highly  depends   on  energy  supply  prices   and  can’t  oppose   government  rules.     Political  disturbance  in   country   Low  quality  and   quantity  training  for   workers  in  Egypt     Direction  of   Environmental   satiability     Water  supply  dilemma  
  29. 29. Internal  Environment     Organization  culture       Lecico  Egypt  culture  is  the  values  and  behaviors  that  contribute  to  the  unique   social  and  psychological  environment  of  an  organization.     Organizational  culture  includes  an  organization's  expectations,  experiences,   philosophy,  and  values  that  hold  it  together,  and  is  expressed  in  its  self-­‐image,  inner   workings,  interactions  with  the  outside  world,  and  future  expectations.  It  is  based   on  shared  attitudes,  beliefs,  customs,  and  written  and  unwritten  rules  that  have   been  developed  over  time  and  are  considered  valid.  Also  called  corporate  culture     Lecico  Egypt  Conducts  its  business  with  relative  cost  savings  in  energy  and  labor   that  allow  it  to  be  a  competitive  producer  of  world-­‐class  quality  products  for   European  and  regional  markets.  The  company  is  dedicated  to  constantly   improving  efficiency,  cost  control  and  vertical  integration  in  an  effort  to  remain   competitive.  It  also  maintains  world-­‐class  quality,  service,  manufacturing  and   design.     Lecico  Egypt  recognizes  it  is  dependent  on  the  quality  and  effectiveness  of  its   employees.  The  Company  has  a  good  track  record  in  recruitment  and  retention   and  has  increased  its  investment  in  training,  development  and  employee   communications.     Lecico  Egypt  believes  it  has  a  responsibility  to  contribute  to  the  community   through  donations  of  goods,  funds  and  time  to  charitable  organizations  as  well  as   investing  in  the  neighborhoods  around  its  factories.     As  mentioned  before,  lecico  Egypt’s  main  marketing  strategy  is  cost  leadership   so  it  counts  mainly  in  the  reduction  of  production  costs  while  maintaining  high   quality  levels  and  so  decision  making  is  typically  centralized,  developing  of  new   ideas  is  a  must  but  still  innovation  is  not  the  main  force  driving  the  company.     Geert  Hofstede  dimensions     Located  in  Egypt,  Lecico  Egypt  Staff  follow  the  same  society  behavior  in  terms  of   Geert  Hofstede  dimensions.     Power  distance   Egypt  scores  high  on  this  dimension  (score  of  70)  which  means  that  people   accept  a  hierarchical  order  in  which  everybody  has  a  place  and  which  needs  no   further  justification.  Hierarchy  in  an  organization  is  seen  as  reflecting  inherent   inequalities,  centralization  is  popular,  subordinates  expect  to  be  told  what  to  do   and  the  ideal  boss  is  a  benevolent  autocrat.    
  30. 30. Individualism   Egypt,  with  a  score  of  25  is  considered  a  collectivistic  society.  This  is  manifest  in   a  close  long-­‐term  commitment  to  the  member  'group',  be  that  a  family,  extended   family,  or  extended  relationships.  Loyalty  in  a  collectivist  culture  is  paramount,   and  over-­‐rides  most  other  societal  rules  and  regulations.  The  society  fosters   strong  relationships  where  everyone  takes  responsibility  for  fellow  members  of   their  group.  In  collectivist  societies  offence  leads  to  shame  and  loss  of  face,   employer/employee  relationships  are  perceived  in  moral  terms  (like  a  family   link),  hiring  and  promotion  decisions  take  account  of  the  employee’s  in-­‐group,   management  is  the  management  of  groups.       Masculinity  /  Femininity   Egypt  scores  45  on  this  dimension  and  is  thus  considered  a  relatively  feminine   society.  In  feminine  countries  the  focus  is  on  “working  in  order  to  live”,  managers   strive  for  consensus,  people  value  equality,  solidarity  and  quality  in  their   working  lives.  Conflicts  are  resolved  by  compromise  and  negotiation.  Incentives   such  as  free  time  and  flexibility  are  favored.  Focus  is  on  well-­‐being.  An  effective   manager  is  a  supportive  one,  and  decision-­‐making  is  achieved  through   involvement.     Uncertainty  avoidance           Egypt  scores  80  on  this  dimension  and  thus  has  a  high  preference  for  avoiding   uncertainty.  Countries  exhibiting  high  uncertainty  avoidance  maintain  rigid   codes  of  belief  and  behavior  and  are  intolerant  of  unorthodox  behavior  and   ideas.  In  these  cultures  there  is  an  emotional  need  for  rules  (even  if  the  rules   never  seem  to  work)  time  is  money,  people  have  an  inner  urge  to  be  busy  and   work  hard,  precision  and  punctuality  are  the  norm,  innovation  may  be  resisted,   security  is  an  important  element  in  individual  motivation.    
  31. 31. Organization  structure     Executive  Officers   Name   Mr.  Gilbert  Gargour   Mr.  Taher  Gargour   Mr.  Georges  Ghorayeb   Mr.  Mats  Bergdahl   Mr.  Mohamed  Hassan   Mr.  David  Gater   Eng.  Elie  Youssef   Mr.  Alessandro   Raimondi   Mr.  Pertti  Lehti     Position   Chairman  and  CEO   Managing  Director   Group  Technical  Director  and   Managing  Director  Lebanon   Executive  Director  –  Export   Financial  Manager   Total  Quality  and  New  Product   Development  Director   Production  Director,  Sanitary   Ware   Khorshid  Plant  Manager,  Tiles   Supply  Chain  Director       Year  Initially   Appointed  to   Board   1981   2008   2003   1997   1974   2003   1998   2002   2010   Organizations  resources  (Assets  /  human  skills)     Lecico  distribution  channels  are  very  robust  locally  and  globally  since  it  has   distribution  channels  in  18  countries  and  25  channels  locally.   Lecico  Distribution  channels  are  bounded  well  by  sharing  the  company  in   empowering  distributer’s  assets  like  purchasing  warehouses  for  each  region.   Lecico  recognizes  that  comprehensive,  two-­‐way  communications  are  essential  to   the  retention  of  skilled  employees.  A  number  of  communication  channels  are  in   place  including  briefing  meetings,  worker  boards  and  notice  boards.  To  further   improve  two-­‐way  communication,  the  Company  has  a  Worker’s  Follow-­‐Up   Committee  representing  staff  from  all  departments  and  factories  that  meets   regularly  with  the  Executive  Board.   Value  chain  analysis     The  value  chain  analysis  initiative  calls  for  energy  cost  management,  planning  for   joint  purchasing  and  management  of  the  internal  supply  chain,  and  process   control  and  productivity  improvement.  
  32. 32. Primary Activities: Raw Material: The  consumption  of  the  natural  raw  materials  is  around  2,000,000  tons.  This   quantity  will  be  increased  proportionally  with  the  expansion  of  the  sector   production  capacity  the  industrial  cost  of  ceramic  tiles  is  divided  into  60%  raw   materials,  15%  Labor  cost,  15%  fixed  asset  depreciation,  3%  energy  and  the  rest   is  miscellaneous.  For  sanitary  wares  the  industrial  cost  is  divided  into  30%  raw   materials,  50%  labor  cost,  5%  energy,  5%  fixed  asset  depreciation  and  the  rest  is   miscellaneous.  The  imported  raw  materials  cost  presents  74%  of  total  raw   materials  cost  for  ceramic  tiles  and  82%  for  sanitary  wares.     Operation: Ceramic  tiles  production  starts  by  blending  the  dust  constituents  to  obtain  a   certain  mixture.   Then,  the  mixture  is  placed  in  the  Mix-­‐Muller  to  adhere  the  particles  of  the  dust   in  a  solid  state.  Next,  the  dust  is  transported  to  a  pul  verizer,  which  breaks  down   the  dust  globules  created  by  the  muller  into  a  fine,  dusty  form.  This  dusty  form  is   transformed  in  the  pressroom  into  a  solid  body  of  specific  size,  shape  and  tensile   strength.   Next,  the  body  is  stacked  on  metal  racks  and  entered  the  drying  rooms  to  void  off   the  moisture  from  the  body  and  to  attain  the  required  tensile  strength.  The  body   is  then  placed  on  a  moving  spray  booth  chain,  where  the  ceramic  tile  glaze  is   applied  to  the  face  of  the  tile.  The  glazing  process  enables  the  best  possible   results  in  color,  weight  and  density  of  the  ceramic  tile.   There  are  many  other  methods  of  applying  glazes  to  the  ceramic  tile,  including   silkscreen  patterns,  waterfall  glazes,  brushes,  and  roto  screens,  and  others.   Tiles  can  be  produced  as  glazed  and  unglazed  tiles.  Glazed  tiles  may  be  plain  or   decorated  and  generally  used  as  both  wall  and  floor  tiles.  Meanwhile,  unglazed   tiles  are  more  suited  to  commercial  and  industrial  settings  and  commonly  used   for  areas  of  heavy  foot  traffic.  
  33. 33. After  glazing,  the  tile  must  be  heated  intensively  to  provide  it  with  the  required   strength  and  the  desired  features.  The  glazed  tiles  are  put  through  the  firing  zone   of  the  kiln  (furnace),  at  high  pressure  and  temperature  (around  2100  degree   Fahrenheit  for  45-­‐minutes),  where  the  glaze  becomes  fluid  and  attacks  the  body   of  the  tile,  absorbing  some  of  the  chemical  properties  of  the  body  and  creating  a   bond  between  the  glaze  and  the  body.     Dust   Blender   Mix-­‐Muller   Drying   Rooms   Press  Room   pluverizer   Glazing   Firing   Sorting  and   Packaging   Packaging: Packaging  seems  to  be  an  important  issue.  The  modern  pallet  packaging  system   is  not  used  for  the  local  sales,  while  it  is  used  for  the  exports  but  with  a  low  level   of  automation.  The  packaging  does  not  fit  the  international  standards  (the   cardboard  is  poor  and  the  boxes  are  manually  prepared).  During  the  company   survey,  a  trader  highlighted  that  the  sub-­‐standard  in  packaging  affects  the   overall  Egyptian  industry  (special  pieces  breakage  can  reach  5%).  All  these   elements  influence  the  export  capability,  because  the  developed  markets  are   particularly  sensitive  to  the  effectiveness  in  deliveries,  breakages,  homogeneity   inside  boxes,  etc.  For  example,  considering  that  the  general  market  trend  shows   to  appreciate  special  pieces  and  associated  décor  pieces,  high  percentages  of   breakage  for  this  product  types  can  destroy  an  opportunity  for  the  Egyptian   industry  and  compromise  the  image  of  the  local  manufacturers  as  producers  able   to  control  the  entire  value  chain  in  the  richest  segments.   On  the  other  hand,  the  problem  is  common  to  many  developing  industries   because  an  automated  packaging  system  generally  requires  investments  in   training,  more  skilled  people,  continuous  technical  assistance  for  software  and   hardware,  so  that  the  packaging  phase  can  easily  become  a  bottleneck  within  the   entire  cycle.     Customer Satisfaction: Interviews  with  professional  operators,  such  as  dealers  and  contractors,   provided  the  most  detailed  information  about  the  level  of  satisfaction  offered  by  
  34. 34. the  local  output.  In  fact,  these  channels  are  aware  about  alternative  productions   from  a  number  of  countries  and  manufacturers  and  are  in  strong  competition  to   reach  the  best  procurement  conditions.  More  than  final  consumers,  dealers  and   contractors  are  particularly  interested  in  the  overall  quality  of  the  service   provided  by  the  companies  and  constantly  include  them  in  a  sort  of  global   comparison.  Concerning  the  tiles  market,  the  main  issues  highlighted  during  the   company  survey  can  be  summarized  as  follows:     1- No regular stock for some product typologies; 2- An excessive interval time between the order and the delivery; 3- Production problems cause sometimes delays in the delivery schedule; 4- Lack of conformity for the same product type (inconstancy of the final product, mainly concerning colors); this problem is particularly frequent in case of tiles supplied in different deliveries, i.e. at end of a project; 5- Gap between designs of imported and Egyptian tiles; 6- Differences between the producer catalogue and the actual range and also between approved samples and delivered tiles. Supporting Activities: Firm Infrastructure: A  sound  management  team  with  extensive  experience  in  the  global  ceramics  and   sanitary  ware  industries  is  one  of  Lecico  Egypt’s  primary  assets.  This  affords  it   strong  credentials  and  a  well-­‐established  business  network.   The  Gargour  family  currently  retains  control  of  Lecico  through  a  39%  stake  by   Intage  Holdings  and  Lecico  board  members.  This  consists  of  the  13%  stake  of   local  shares,  in  addition  to  a  26%  stake  held  in  GDRs.  Corporations  and   institutions  hold  a  further  18%  stake,  with  GDR  free  float  and  local  free  float   currently  standing  at  12%  and  30%,  respectively.  Lecico's  corporate   management  strategy  recently  garnered  international  attention  within  the  global   financial  arena.  In  FY10  it  was  listed  as  one  of  the  top  ten  constituents  of   Standard  &  Poor’s  newly  launched  S&P/EGX  ESG  Index,  the  first  index  designed   to  track  the  performance  of  companies  listed  on  the  Egyptian  Exchange  (EGX)   that  have  demonstrated  strong  leadership  on  environmental,  social  and   corporate  governance  (ESG)  issues.     Human Resources: Due  to  its  strong  development,  Egyptian  industry  seems  to  face  a  certain   pressure  on  some  specific  categories  of  labor  force.   Technicians  with  3  to  5  years  of  experience  are  very  required  and  the   competition  to  hire  them  is  increasing  among  the  companies,  especially  in   industrial  sites  with  high  level  of  concentration  (for  example,  10th  of  Ramadan).   Losing  such  a  kind  of  workers,  for  the  company  which  sustained  the  costs  of   training  them,  means  to  loose  important  investments  in  human  resources  and  a   delay  in  building  an  important  layer  of  middle  level  technicians.  The  scarcity   seems  to  concern  the  young  workers  that  come  from  the  secondary  school  (a   specialized  secondary  school  in  ceramics  does  not  exists  in  Egypt)  rather  than   engineers  with  a  long  university  curriculum.    

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