1. Assignment 2
MBAS 881 – Global Strategy
Entry into Africa
Business School in Morocco
Karthik Arunagiri
Muneet Bhatia
Igor Buryak
Patrick Frank
David Peuto
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2. Contents
Executive Summary ................................................................................................................................ 3
I. Morocco Overview .......................................................................................................................... 4
Demographics...................................................................................................................................... 4
Economic and Business Overview ...................................................................................................... 6
II. Opportunity ................................................................................................................................... 11
III. Our Entry Strategy..................................................................................................................... 13
Mode of entry .................................................................................................................................... 13
Physical Assets .................................................................................................................................. 14
Reputation Assets .............................................................................................................................. 14
Intellectual and Human Assets .......................................................................................................... 14
Technological Asset .......................................................................................................................... 15
Service Excellence ............................................................................................................................ 15
IV. Risk............................................................................................................................................ 16
V. Mitigation ...................................................................................................................................... 17
VI. Marketing Plan .......................................................................................................................... 18
VII. Financials................................................................................................................................... 19
Key Assumptions .............................................................................................................................. 19
Projected Income Statement .............................................................................................................. 20
Sources of Funding............................................................................................................................ 25
Financial highlights ........................................................................................................................... 25
Sensitivity analysis ............................................................................................................................ 26
Scenario Analysis .............................................................................................................................. 28
Exhibits.................................................................................................................................................. 29
Exhibit 1 – Partner evaluation for Strategic Alliance ........................................................................ 29
Exhibit 2 – Morocco GDP by Sector................................................................................................. 30
Exhibit 3 – Trend on Services Contribution (% of GDP).................................................................. 31
Exhibit 4 – FDI flows for Morocco ................................................................................................... 31
Exhibit 5 – FDI flows into Morocco by Industry .............................................................................. 32
Exhibit 6 – FDI flows into Morocco by Geographical Origin .......................................................... 33
Bibliography .......................................................................................................................................... 34
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3. Executive Summary
Morocco is one of few African countries with stable economy and continuous growth over the
past half-a-century. As it still has great potential for business growth, which would require highly
educated business graduates, we will establish a business school in Morocco.
We are planning to enter into Moroccan business education industry through a joint venture
with Moroccan university - we will give first preference to Université Cadi Ayyad and second
preference to Al Akhawayn University. Our business school will offer both undergraduate and
graduate business programs. Course duration for undergraduate studies equals 3 years and for graduate
studies it equals 1 year. Tuition fee for undergraduate students will be $8,000 per year and for graduate
students it will be $18,000 per year – thus we will focus on the richest 20% of Moroccan households.
In our school we will have both local faculty members and professors from famous international
business schools. Administrative staff will also play an important role in our business school.
Among the risks, which are related to the business education in Morocco, it is necessary to
mention high illiteracy rate and unemployment rate. We will try to mitigate these risks using several
methods, which are described further.
In order to reach our target audience several communication activities will be used: above-the-
line activities (advertisements in newspapers, magazines, TV and Internet et cetera) and below-the-line
activities (bus-stand-hoardings, advertisements on trains et cetera).
Concerning financial aspects of our project, we will try to use three sources of finance:
government grants, bank loans and own funding. According to most likely scenario the net present
value of the project will be $3,555,510.73 (project duration equals 18 years), payback period equals 7
years – thus we can conclude that that project can be accepted.
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4. I. Morocco Overview
Demographics
Morocco is a country situated in North Africa sharing a common border with Algeria,
Mauritania and Spain. Its main cities are Casablanca (population 3.245 million), its capital city Rabat
(population 1.77 million), Fes (population 1.044 million), Marrakech (population 909,000) and
Tangier (population 768,000). Its overall population is about 32 million within a territory of 446 550
km2. That makes a human density of 70.92 people/km2. The age distribution of Morocco’s population
(by 2020) shows that there will be a considerable population between the age groups of 24 and 34
which is our target market.
Morocco Age Pyramid - 2020
100+
90-94 Male Population
80-84 Female Population
70-74
60-64
50-54
40-44
30-34
20-24
10-14
0-4
-2000000 -1500000 -1000000 -500000 0 500000 1000000 1500000 2000000
Source: http://www.census.gov
Morocco’s literacy rate has been steadily growing in the past few years. More and more
children have access to primary education, even though it is still an area of concern for the Moroccan
government. We can see from the chart below that the youth literacy rate is higher than the adult
literacy rate, depicting that this problem is being tackled by the government.
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5. 100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Primary Primary Primary Literacy rate Literacy rate Literacy rate Literacy rate Literacy rate Literacy rate
completion completion completion - adult - adult male - adult total - youth - youth male - youth total
rate - female rate - male rate - total female female
Source: http://www.tradingeconomics.com
Looking at the higher education level, Morocco has a very high international mobility rate of
15%. These are the students who leave country after high school in order to pursue higher education in
foreign destinations; this rate is less than 5% for other Maghreb countries such as Algeria and Tunisia.
The recent trend shows an increase in the number of students opting for management and business
studies
5% 3% Sciences
8% United States
Administration &
8% Management
37% Health Spain
9% Political Science
Germany
30% Human Science
France
Languages
Other
0 10000 20000 30000
Source: http://www.indexmundi.com
Moroccan student’s preferred destination to pursue their studies is France because they can
benefit from a better cultural and language fit as French is the primary medium of instruction from
primary school. More and more of them are getting into prestigious French business schools such as
HEC and ESSEC.
In order to assess the differences between Morocco and Western countries we used the CAGE
framework to give us an indication on the areas which will need adaptation from our perspective.
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6. Morocco is distant from Europe or North America from a cultural point of view. First of all on the
religion side, a large majority of Moroccans are Muslims (98.7%), creating a cultural barrier with the
western world which has a more Christian heritage. The official languages are Arabic and Tamazight
(since 2011). However, French is taught at school from the age of 8 years old.This cultural distance is
important for our opportunity as we are planning to use best western practices in our business sphere,
and these practices should be adapted to Moroccan circumstances. Cultural peculiarities of Morocco
will especially affect operational processes of our business – for instance, we will need to adjust our
timetable to Muslim prayer times, and moreover we will need to provide special places for this
tradition.
As an old French colony, Morocco’s administrative distance is less pronounced. Though it is a
constitutional monarchy, its political system is quite stable.
As for the geographic distance, its location in Northwestern Africa makes it a privileged
business partner for European countries. Morocco is situated 15km from Spain and a project exists to
link both continents with a tunnel, which will give tremendous incentive for business in Morocco.
Economically, Morocco still suffers from a big disparity in income.
Economically, Morocco still suffers from a big disparity in income. According to the World
Factbook of the Central Intelligence Agency Morocco’s Gini index, which measures the degree of
inequality in the distribution of family income in a country, equals 40.9 [CIA, 2012]. This confirms
high disparity in income distribution in Morocco. For instance, Scandinavian countries in average
have index of 25 – income is quite equally distributed [CIA, 2012]. Moreover, according to the World
Bank income share held by poorest 20% equals 6.5% and income share held by richest 20% equals
47.9% [WDI, 2012].
Economic and Business Overview
Morocco is becoming an attractive country to locate a business. According to the World
Investment Directory report of 2008 (published by United Nations Conference on Trade and
Development), as many as 38 multinational companies such as Alcatel-Lucent, Bayer, Colgate-
Palmolive, IBM, Kraft Foods, Nestle, Renault, Societe Generale, and Unilever in the areas of
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7. Industrial, Tertiary (Trade related), Finance and Insurance have already set up offices/factories in
Morocco through Licensing, Joint Venture or FDI. These companies take advantage of Morocco’s
reformed investment laws, liberalized trade and prices, reduced red tape, updated financial system,
privatization of certain state firms and concession in telecommunications, power generation and water
management to establish their business in the country. Under the privatization and liberalization
program, the telecommunications sector has been opened to competition and is expanding rapidly with
new services and platforms. This opportunity has allowed the French telecom company Alcatel-Lucent
to bid and win the services proposal for a major opportunity with Morocco Telecom.Morocco is also
the first country in North Africa to install a 3G network.
Morocco has abundant natural resources. It’s abundance in phosphate based products has
prompted the Chemical/Pharmaceutical company like Bayer to setup a manufacturing plant in the
country to produce fertilizers for their crop protection venture. Morocco is integrated with the regional
and international economic systems through its membership schemes such as Arab Maghreb Union,
and Association Accord with European Union. Morocco is also a member of World Trade
Organization.
Morocco has a GDP of 139.5 Billion USD, giving them a GDP per capita of 4712.01 USD. In
comparison, it is close to Guatemala, Syria or Vanuatu and 8 times lesser than Canada. But, if we look
GDP - composition by sector Labor force - by occupation
Agriculture
17% Services Agricultur
35% e
Services
45%
51%
Industry
32% Industry
20%
at the latest
Source: http://www.indexmundi.com
projection, it is said that its GDP will grow around 4% in 2012. It is interesting to see they have
already switched to a more service oriented economy, which represents 51% of their total GDP.
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8. However, this sector employs only 35% of its workforce.The services sector in Morocco comprises
mainly of Tourism, Information Technology, Retail and Construction. Tourism has always been one of
the largest source of foreign currency for the country. It contributes close to 10% of the overall GDP.
Please see Exhibit 2 for detailed breakdown of Morocco’s GDP by sector.Exhibit 3 shows the trend
line on the contribution towards Morocco’s GDP for services sector. We can see that it is consitently
over the 50% mark for the past 10 years.
Unemployment Rate
Also they have an unemployment rate of 8.1% 30.00%
20.00%
(4th quarter 2011) which is quite comparable to
10.00%
the 7.4% of Canada. The trend shows a 0.00%
2010
1998
1999
2002
2003
2004
2005
2006
2007
2008
2009
2011
decrease in the unemployment rate over the past
ten years. Source : http://www.indexmundi.com
The World Bank’s “Doing Business in
Starting a
Business
Morocco” report also gives us an indication Getting 150 Dealing with
Electricity Construction…
100
(relative world ranking) on the barriers to setting up Resolving Registering
Insolvency
50 Property
a business in this country. In the chart below, we 0
Enforcing
Getting Credit
can see that they are quite efficient in trading across Contracts
Trading Across Protecting
borders, resolving insolvency and enforcing Borders Investors
Paying Taxes
contracts. However, they are lagging in areas like
registering property and getting electricity.This is particularly useful Source: World Bank
for gauging the mode of entry for a foreign enterprise into Morocco. For example, the relative ease of
getting credits, paying taxes, and enforcing contracts helped us with the decision of going for a joint
venture as opposed to a greenfield strategy.
One of Morocco’s biggest economic geographical and administrative neighborhood.
concerns is their negative trade balance. The To decrease this deficit, it is important for them
main reason for this is that it is the largest energy to enhance their productivity and trade with more
importer in North Africa. Its biggest export business partners.
partners are Spain and France due to their
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9. Source : http://www.indexmundi.com
45
39.16
40
34.19
35 30.55
30
25 21.22 20.6
18.15
20 15.63
13.92 14.49
12.4 12.75
15 10.4 9.75
11.72
8.2 8.47 9.47
10 7.5
5
0
2002 2003 2004 2005 2006 2007 2008 2009 2010
Exports (Billion $) Imports (Billion $)
In recent years, Morocco has established free trade agreements with many countries thereby
enhancing its business opportunities and exchanges. Some of the trade agreements they have taken
part in are Euro-Mediterranean free trade area Tourism
Real estate
agreement, Greater Arab Free Trade Area and US-
Telecommunications
Morocco Free Trade Agreement. Industry
Transports
The level of Foreign Direct Investment (FDI)
Energy and mining
hasrecently decreased in Morocco because of the Banking
negative effect of the Arab spring which might have brought fear in FDI distribution in Morocco (2007)
the mindsets of its majorinvestors. The main sectors which have benefitted from FDI were tourism,
real estate and telecommunications – these figures are taken from 2007 when Morocco attracted $2.57
billion.
Exhibit 4 shows the FDI inflows and outflows in Morocco between 2007 and 2009. Exhibit 5
and 6 show the FDI flow into Morocco by Industry and Geographical origin. From the industry
perspective, we can see that the secondary sector comprising of mining and fuel extraction contribute a
large amount to the FDI followed by transportation and storage services. For the geographical origin,
it is clear that the European Union especially France and Spain lead the world in the FDI investment in
Morocco.
These Foreign Direct Investments have helped develop the infrastructure in Morocco in the
last few years in many areas such as transport, water and energy. Here are a few examples which will
contribute to make Morocco more attractive to foreign investors as a country to do business in.
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10. • High speed train project, the first phase linking Casablanca to Tangier will end in 2013 for a
global cost of 1.8 billion euros.
• The automobile freeway network covers 1000km today and should reach 1420 km then 1800
km respectively in 2011 and 2015.
• Launch of a tramway in Rabat in 2011 and in Casablanca it will launch at the end of 2012.
• 200 million euros project for an extension of Tangier Med port, in order to increase its
capacity to 8 million, Twenty Foot Equivalent (as a comparison, it is twice the capacity of
Tokyo or Mumbai).
• The Access to drinking water has been increased as high as 90% (2009).
It is also interesting to see their development concerning their internet usage. As an example
of their online activity, we can look at the number of Facebook users in Morocco. Even though it does
not depict a demographic trend, it can give a good perception of how information can be shared. There
are 4,408,340 Facebook users in Morocco. This represents 13.94% of its total population; however it
is only 42.22% of Morocco’s online population. It is the 5th country in Africa in terms of internet
penetration and in comparison, the penetration of online population in Canada is 66%. The population
is sharing more and more information online and it is becoming an important means of
communication. In other Maghreb countries such as Tunisia or Egypt, this information sharing played
a significant role in the revolutions of the Arab spring.
Such advances in Internet propagation, telecommuncation (3G network) is a major advantage
for disseminating course materials over web, arranging web meetings/conferences with prominent
business leaders around the world. This would also help in expand our portfolio of offerings to web-
based MBA programs in future.
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11. II. Opportunity
The opportunity which we have identified is to setup a business school in Morocco through
joint venture with an existing university. We see Morocco and Africa in general has tremendous
potential for business growth which would require grooming of business graduates. The
professionals/students aspiring for business education but unable to pursue due to lack of quality
business schools right now would be eager to join our school. By breaking into this market which is
touted as the “last frontier” for business, we would be able to gain a strong foothold and though
strategic expansion be able to propagate our brand and be highly profitable.
In order to assess the profitability of the opportunity, we looked at the industry using Porter’s
five forces.The threat of new entrants in the higher level education in Morocco is low because of the
high barrier to entry in this business. A high level of capital is needed to create a university from
scratch; there are indeed many expenses such as the infrastructure cost, the marketing cost of building
awareness among potential students, the cost of securing high quality faculty from renowned partner
universities and partnering with corporates who will hire them upon graduation.
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12. If we look at the bargaining power of the buyers, we Rank University
22 Université Cadi Ayyad
can see that have the choice between several universities 25 Al Akhawayn University
51 Université Abdelmalek Essadi
when they enter tertiary level education. However, these 63 Université Hassan II – Aïn Chock
64 Université Hassan II – Mohammedia
universities are not well ranked in Africa; most of them are 65 Université Mohammed V – Souissi
68 Université Ibn Tofail
below 50th rank thought it is the 5th ranked economy in 77 Université Mohammed V – Agdal
81 Université Hassan Ier
Africa. Therefore we could say that the bargaining power of Université Sidi Mohamed Ben Abdellah
85 Fés
suppliers is low in Morocco. Source: www.webometrics.info
From the buyer’s point of view, that is to say the students and the high school pupils who are the
target, the bargaining power is also low. Given the few number of high level universities inMorocco, they
do not have the opportunity put them into balance.
However if we look at the threat of substitutes, it is an important threat to Moroccan universities.
Indeed as we have seen, close to 15% of the students go abroad to fulfill superior education because of the
lower quality of universities in Morocco. Therefore, it will be very important to hire high quality staff
members and estimate a convenient pricing strategy so that students are not tempted to go abroad.
Another available substitute is the online education which is able to play an important role on Morocco
given the level of online population (more than 13 million people in 2009 according to
http://www.indexmundi.com). However, online programs currently available from top north american
industries don’t pose a threat as a substitute as those programs are designed for working professionals
wanting to enhance their management knowledge. Moreover, those online courses don’t have a credibility
in the industry when compared to full time courses from well known universities.
This global context drives the rivalry between the different universities to be quite low. This is
not a mature business in Morocco. However, foreign universities and business schools have started
opening subsidiaries in Morocco, increasing the quality of higher education.
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13. Suppliers New entrants
- Few skilled staff - High capital needed
- Few universities - Infrastructure
Low Rivalry
Buyers Substitutes
- Increasing number of students - Studying abroad (15%)
- Low level universities - Online courses
Morocco’s situation as one of Africa’s most advanced countries, their growing economy and the
increasing level of their education system make them an attractive country for international businesses to
locate there; either to oversee their African operations from this location or to directly operate on the
Moroccan market. For this purpose, more and more skilled management workforce is required to fill the
different positions provided in these companies, where international trade plays a vital role. Therefore,
opening an international business school in Morocco is an opportunity to fill this education role in order
to meet the growing economy and business needs of this country. Moreover, developing managing skills
could drive them to become an important business hub for Africa given their geographical position as an
open door on this continent.
III. Our Entry Strategy
Mode of entry
We will enter in to the Moroccan business education industry through joint venture with a well-
positioned local university. Joint venture is a strategic alliance in which two or more firms create a legally
independent company to share some of their resources and capabilities to develop a competitive
advantage. We will evaluate the partners for this joint venture on the basis of criteria mentioned in Exhibit
1. We will give first preference to Université Cadi Ayyad and second preference to Al Akhawayn
University during our consideration for the local partnership.
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14. Physical Assets
We would have access to the physical infrastructure of the partner university and hence we would
need minimal capital investment in this area. We would however need to take care of the initial setup
(business registration) and operating costs. These costs would be discussed in detail in the financial
analysis section.
Reputation Assets
We will have partnerships with various top notch universities around the world and we would
leverage their brand name in building our reputation in the region. We would hire adjunct faculty from
these universities and invite them to conduct courses on a 12 to 16 weeks period basis. These faculty
members will not only bring their international experiences and research expertise to the class rooms but
also will be able to build strong relationships with the local industries. We will leverage these brand
names to build our relationship with the local and international firms in the region and bring senior
executives of these firms as members of Advisory Board or Board of Directors. This would also establish
credibility in the local market, enhance industry acceptance to the high quality education and this will
drive high willingness to pay from the consumers’ point of view.
Intellectual and Human Assets
Professors from the partner universities would be contracted for the first five years. We will form
an engagement team between the partner university in Morocco and the foreign partner universities. This
team would select the Dean, Associate Dean and the Program Director for the programs. Efforts would be
made to search for faculty around the world who would have migrated to other parts of the world from
Morocco earlier and are now willing to come back to their home country. This will allow us to have a
good mix of local understanding and global perspective in the faculty members.
Since Africa in general has become a very attractive destination for the global businesses, faculty
from top global b-schools would like to join us as visitor faculty. This arrangement would provide them
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15. an excellent opportunity to the international faculty to learn about the region, business environment,
cultural implications on businesses and in general about the industry in Morocco and other African
countries. These faculty members would collaborate with the local industry leaders and faculty from other
local b-schools to launch research projects specific to the region.
Technological Asset
We would have access to some of the most advanced IT systems in the education industry which
would allow us to differentiate our services. This would include virtualization technologies which would
simulate a real time class room for the students present in different geographical locations. Our
partnership with Queen’s School of Business would provide us access to such innovative education
technologies and tools. Using these technological capabilities, we would design part –time and weekend
courses for the working professionals. Working professionals from other part of the country and other
African countries would be able to join us and take advantage of the high quality graduate business
education.
Service Excellence
We will provide excellent education experience to our students. This would include class lectures,
class discussions, case studies, access to industry experts from local as well as global enterprises, access
to world class faculty and research material etc. We would also provide access to the latest industry trends
through various international conferences and lecture series events. Our excellent relationship with the
global b-schools will differentiate us from the other local b-schools and also provide access to our
students more contemporary business knowledge and best practices. We will build close industry relations
with the support of our local partner. This would provide more visibility to the Partner University and
also direct access to industry for our students. We will also facilitate international faculty members to get
access to the local business markets through research and consulting projects. This would allow them to
broaden their research base and motivate them to visit Morocco on a required basis.
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16. IV. Risk
There are several risks related to the educational sector in Morocco. As the employment and
educational sectors are interconnected, so are the risks. Therefore, risks have to be seen combined.
First and foremost, the illiteracy rate of 50 percent among Moroccans is a serious problem
(“Bouoiyour n.d.”). As our project aims at higher education (University level), future students need to be
literate. As the problem of illiteracy is fundamental, it has to be tackled at a primary education level itself.
It cannot be accomplished by a university as its main existence aims at providing high education.
Therefore, illiteracy is a major impediment as a top academic career cannot be pursued without a basic
skill set.
Another problem is the high unemployment rate among the highly educated youth (Achy 2010).
This means that the job market cannot absorb highly skilled people. Especially people in the age from 15
to 34 years are unemployed. There could be several explanations for this phenomenon. On the one hand,
young people could be provided with the wrong education, i.e. wrong or inappropriate skills are taught or,
on the other hand, the job market is in bad condition. Both possibilities represent a risk as the market
could be temporarily saturated.
Per“Achy (2010)”, high unemployment is mainly rooted from educational reasons, economic
policies, and governance. Especially the two latter reasons represent a major risk. When economic
policies are underdeveloped and for instance the job market is not well aligned with graduates
(unemployment agency) then good education might be no goal of the youth in Morocco. They realize that
despite top education, the situation is tough and finding a job is extremely hard. Highly educated young
people often choose bad or indecent jobs in order to make a living. Going along with that, they lose their
acquired skills; this worsens the situation further. Attributable to the previous described circumstances,
young people are reluctant and listless to pursue an academic career; this is a major risk. Often, young
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17. people drop out of class as they do not see a future. But an academic institution depends on willing people
who want to study; they are the “lifeblood” of any academic institution.
The risk of governance refers to the lack of qualified people who could run an academic
institution. This includes professors and leaders. A good university depends on high qualified personnel.
Without appropriate personnel a solid and state-of-the-art education cannot be provided. It is therefore
vital to being able to draw on an excellent set of skills.
As Morocco is a constitutional monarchy, the King has the power over the parliament and the
ministries. He basically can make solely decisions in any matters. He therefore could make any kind of
change in the area of education. However, the reports and facts which depict increased government
spendings in Education sector, setting up of new schools and universities corroborate the fact that the
King is pro education. Also, the fact that we are planning on a joint venture with an already existing and
established university makes the risk quite low.
V. Mitigation
There are several possibilities to mitigate risk. First of all it is important to create awareness of
how important education is. A fruitful partnership with governmental institutes could be established to
initiate a countrywide campaign. Also, partnerships can be entered with other academic institutions. This
common approach can be beneficial to all academic institutions. It is important to show social
responsibility. The youth has to understand that good education only can be beneficial. Examples of
success-stories could be communicated in order to demonstrate that good education is vital.
Furthermore, it is important to communicate among the youth that the new institution’s expertise
can help improving their situation. It is important that the young people understand how the institution
differentiates itself and how its expertise can help them to be better prepared for the job market. The
message has to be clear and simple. In pursuing this approach, awareness can be raised dramatically.
It is also important for the new academic institution to stimulate the job market and to tightly
work together with major companies in Morocco. This can be achieved by actively initiating campus
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18. events (for instance case study challenges) and job fairs. It must be clear that an academic institution is a
vital intermediate between students and companies. Additionally, a business incubator could be
established to enable students and graduates to found their own company. This also stimulates the job
market and makes young academics confident. Overall, the above mentioned activities help to establish
trust and hope among the youth and to make them optimistic for the future.
In order to minimize risk further, the government can be supported to reduce bureaucracy and to
increase efficiency. This helps not only to create a more efficient job market (unemployment agency
optimization) but also to optimize especially the primary educational institutions to reduce the illiteracy
rate. Last but not least, a program in cooperation with the government could be developed in order to
increase the qualifications of teachers and professors and therefore to increase the quality of academic
institutions. The objective is long-term. In order to solve short-term issues, qualified personnel can be
hired form abroad in designing and implementing lucrative incentive programs.
VI. Marketing Plan
As a sophisticated marketing plan would go beyond the scope of this paper, the main focus lies on
how awareness among the target group in Morocco will be created.
The inception of the new institution is accompanied with a marketing strategy in order to create
awareness among the youth in Morocco. Both graduates from primary educational institutes and dropouts
are targeted. Furthermore, individuals who want to study further and who want to improve themselves are
a target.
In order to reach this target audience several communication channels will be used; i.e. the TTL
(trough-the-line) approach will be applied. To reach a maximum of individuals, ATL (above-the-line)
activities will be pursued. These include TV-ads on relevant TV-channels, advertisements in newspapers,
and further ads in relevant magazines. Furthermore, the Internet plays an important role. Especially
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19. Google AdWords will be used to place online-ads successfully. This helps to create awareness and traffic
can be created on the institute’s homepage. Also, SMO (search machine optimization) is important.
BLT (Below-the-line) activities include using bus-stand-hoardings and ads on trains. This reaches
people who might have no TV or do not use the internet. Public transport is frequently used and therefore
a good match to increase awareness. Pamphlets are a cheap way to reach a big amount of people. These
will be distributed in public in locations were the target group resides. This includes sport-clubs, kiosks,
cinemas, etc.
In order to create maximum awareness, individuals are not only targeted individually by the above
mentioned activities but also strategic co-operations will be entered. These include a partnership with the
unemployment office in order to make the staff aware of the new institution so that they can inform
jobless persons about new possibilities. This can be achieved with information events for instance.
Furthermore, co-operations with primary educational institutions will be entered in order to also create
awareness among teachers. Again, information events are most effective.
It is also important to work together with major employers and business clubs (e.g. Rotary
Morocco). A kick-off event will be organized where CEOs, leaders, and clubs’ presidents will be briefed
about the opportunities the institution can offer. It is vital that the industry supports the new university.
Last but not least an open house is initiated. Everybody who is interested and wants to see the new
facility will be welcomed to get a picture of the university. This creates publicity.
VII. Financials
Key Assumptions
The financial model is based on the following assumptions:
1. We are a top ranked MBA institute based out of Canada with branches in many countries.
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20. 2. The building facilities are leased/rented with a variable rent payment structure which changes
based on inflation rate.
3. We will recruit our own staff who are experienced and preferably local.
4. We will offer undergraduate and graduate business programs. Course duration for undergraduate
studies is 3 years and for graduate studies is 1 year.
5. Program is for locals (within Morocco) only.
6. Initial Intake capacity for undergraduate studies is 80 students and for graduate studies is 50
students.
7. Tuition fee for undergraduate students is $8,000 per year and for graduate students is $18,000 per
year.
8. Student housing and dining provided at the rate of $1,500 per year for undergraduate students and
$2,000 per year for graduate students.
9. Proposed number of administrative and teaching staff is 30 (1 Dean, 1 Associate Dean, 1 Program
Director, 1 Career Manager, 20 teaching staff (part-time and full-time) and 6 administrative staff).
10. Changes to student/staff intake considered every 5 years based on macro and micro economic
conditions.
11. Staff salary & tuition/other fees would be revised based on change in inflation and growth in
GDP.
12. Projected tax rate is 30%
13. Average Projected GDP growth rate is 4.5%
14. Average Projected Inflation rate is 1.75%
Projected Income Statement
We will utilize the first 2 years to perform
setup related activities by incurring initial
investment expenses of approximately $301,500.
20

21. For the first 2 years of operation, the university is projected to have negative net profits since we will not
be operating at full capacity. Once we start operating at full capacity (240 undergraduate + 50 graduate
students), from the 3rd year of operation, our profits will slowly start building momentum. The projected
net profit for the 3rd year is $389,061.80. The revenue generated for this year is $3,764,812.50 which is
mostly driven by the graduate and undergraduate tuition fees. For operating expenses, we have used the
split-up shown in the right.
We are planning to increase the tuition fees by 5% periodically considering the economic outlook
such as GDP, inflation rate etc. A small portion of the revenue is derived from the endowments received
by investing funds from alumni, corporate sponsors in various financial instruments.
21

22. Table 1 – Projected Income statement for 2012 to 2017
YEAR 2012 2013 2014 2015 2016 2017
INITIAL INVESTMENT
Business Registration $ 1,500.00
Equipment, Marketing and Furniture $ 300,000.00 $0
EXPENSE 1.64% 1.60% 1.56% 1.52%
Rent payments $ 210,000.00 $ 213,444.00 $ 216,858.52 $ 220,245.78 $ 223,602.80
Salary and Benefits $ 1,440,000.00 $ 1,440,000.00 $ 1,512,000.00 $ 1,587,600.00 $ 1,666,980.00
Supplies $ 180,000.00 $ 182,952.00 $ 185,878.73 $ 188,782.10 $ 191,659.54
Interest expense $ 240,000.00 $ 243,936.00 $ 247,838.31 $ 251,709.46 $ 255,546.05
Scholarship $ 90,000.00 $ 90,000.00 $ 90,000.00 $ 90,000.00
Other expenses $ 630,000.00 $ 640,332.00 $ 650,575.55 $ 660,737.34 $ 670,808.39
TOTAL EXPENSE $ 1,500.00 $ 300,000.00 $ 2,810,664.02 $ 2,903,151.17 $ 2,999,074.70 $ 3,098,596.79
REVENUE 4.43% 4.40% 4.37% 4.34%
Tuition fee
Graduate 50 18000 $ 900,000.00 $ 945,000.00 $ 992,250.00 $ 1,041,862.50
Undergraduate 80 8000 $ 640,000.00 $ 1,280,000.00 $ 1,920,000.00 $ 2,016,000.00
Student Housing and Dining $ 0.05
Graduate 50 1500 $ 75,000.00 $ 150,000.00 $ 225,000.00 $ 228,257.92
Undergraduate 100 2000 $ 200,000.00 $ 400,000.00 $ 600,000.00 $ 608,687.78
Interest from Endowments $ 25,000.00 $ 26,250.00 $ 27,562.50 $ 28,940.63
TOTAL REVENUE $ - $ - $ 1,840,000.00 $ 2,801,250.00 $ 3,764,812.50 $ 3,923,748.87
EBITDA $ (1,500.00) $ (300,000.00) $ (970,664.02) $ (101,901.17) $ 765,737.80 $ 825,152.08
Depreciation expense $ - $ - $ 196,746.48 $ 203,220.58 $ 209,935.23 $ 216,901.78
EBIT $ (1,500.00) $ (300,000.00) $ (1,167,410.50) $ (305,121.76) $ 555,802.57 $ 608,250.31
Tax $ - $ - $ - $ (91,536.53) $ 166,740.77 $ 182,475.09
PROFIT
NET PROFIT $ (1,500.00) $ (300,000.00) $ (1,167,410.50) $ (213,585.23) $ 389,061.80 $ 425,775.21
FREE CASH FLOWS $ (1,500.00) $ (300,000.00) $ (970,664.02) $ (10,364.65) $ 598,997.03 $ 642,676.99
22

23. Table 2 – Projected Income statement for 2018 to 2023
YEAR 2018 2019 2020 2021 2022 2023
INITIAL INVESTMENT
Business Registration
Equipment, Marketing and Furniture
EXPENSE 1.49% 1.45% 1.41% 1.37% 1.34% 1.30%
Rent payments $ 226,926.55 $ 230,214.04 $ 233,462.23 $ 236,668.11 $ 239,828.65 $ 242,940.85
Salary and Benefits $ 1,750,329.00 $ 1,837,845.45 $ 1,929,737.72 $ 2,026,224.61 $ 2,127,535.84 $ 2,233,912.63
Supplies $ 194,508.48 $ 197,326.32 $ 200,110.48 $ 202,858.38 $ 205,567.41 $ 208,235.01
Interest expense $ 259,344.63 $ 263,101.76 $ 266,813.98 $ 270,477.84 $ 274,089.88 $ 277,646.68
Scholarship $ 90,000.00 $ 90,000.00 $ 110,000.00 $ 110,000.00 $ 110,000.00 $ 110,000.00
Other expenses $ 680,779.66 $ 690,642.12 $ 700,386.70 $ 710,004.32 $ 719,485.94 $ 728,822.54
TOTAL EXPENSE $ 3,201,888.34 $ 3,309,129.71 $ 3,440,511.13 $ 3,556,233.26 $ 3,676,507.74 $ 3,801,557.72
REVENUE 4.32% 4.29% 4.26% 4.23% 4.20% 4.17%
Tuition fee
Graduate $ 1,093,955.63 $ 1,148,653.41 $ 1,206,086.08 $ 1,266,390.38 $ 1,329,709.90 $ 1,396,195.39
Undergraduate $ 2,116,800.00 $ 2,222,640.00 $ 2,333,772.00 $ 2,450,460.60 $ 2,572,983.63 $ 2,701,632.81
Student Housing and Dining
Graduate $ 228,257.92 $ 228,257.92 $ 237,979.17 $ 237,979.17 $ 237,979.17 $ 247,912.15
Undergraduate $ 608,687.78 $ 608,687.78 $ 634,611.11 $ 634,611.11 $ 634,611.11 $ 661,099.08
Interest from Endowments $ 30,387.66 $ 31,907.04 $ 33,502.39 $ 35,177.51 $ 36,936.39 $ 38,783.21
TOTAL REVENUE $ 4,078,088.98 $ 4,240,146.14 $ 4,445,950.75 $ 4,624,618.77 $ 4,812,220.20 $ 5,045,622.64
EBITDA $ 876,200.64 $ 931,016.43 $ 1,005,439.62 $ 1,068,385.51 $ 1,135,712.46 $ 1,244,064.93
Depreciation expense $ 224,132.18 $ 231,639.08 $ 240,835.78 $ 248,936.33 $ 257,355.54 $ 266,109.04
EBIT $ 652,068.45 $ 699,377.35 $ 764,603.84 $ 819,449.18 $ 878,356.92 $ 977,955.89
Tax $ 195,620.54 $ 209,813.21 $ 229,381.15 $ 245,834.75 $ 263,507.07 $ 293,386.77
PROFIT
NET PROFIT $ 456,447.92 $ 489,564.15 $ 535,222.69 $ 573,614.43 $ 614,849.84 $ 684,569.12
FREE CASH FLOWS $ 680,580.10 $ 721,203.23 $ 776,058.47 $ 822,550.75 $ 872,205.38 $ 950,678.16
23

24. Table 3 – Projected Income statement for 2024 to 2029
YEAR 2024 2025 2026 2027 2028 2029
INITIAL INVESTMENT
Business Registration
Equipment, Marketing and Furniture
EXPENSE 1.26% 1.22% 1.18% 1.15% 1.11% 1.07%
Rent payments $ 246,001.70 $ 249,008.25 $ 251,957.52 $ 254,846.59 $ 257,672.57 $ 260,432.60
Salary and Benefits $ 2,345,608.26 $ 2,462,888.68 $ 2,586,033.11 $ 2,715,334.76 $ 2,851,101.50 $ 2,993,656.58
Supplies $ 210,858.60 $ 213,435.64 $ 215,963.58 $ 218,439.93 $ 220,862.20 $ 223,227.94
Interest expense $ 281,144.80 $ 284,580.85 $ 287,951.45 $ 291,253.24 $ 294,482.93 $ 297,637.25
Scholarship $ 110,000.00 $ 110,000.00 $ 125,000.00 $ 125,000.00 $ 125,000.00 $ 125,000.00
Other expenses $ 738,005.11 $ 747,024.74 $ 755,872.55 $ 764,539.76 $ 773,017.70 $ 781,297.79
TOTAL EXPENSE $ 3,931,618.50 $ 4,066,938.16 $ 4,222,778.22 $ 4,369,414.30 $ 4,522,136.92 $ 4,681,252.16
REVENUE 4.15% 4.12% 4.09% 4.06% 4.03% 4.00%
Tuition fee
Graduate $ 1,466,005.16 $ 1,539,305.42 $ 1,616,270.69 $ 1,697,084.23 $ 1,781,938.44 $ 1,871,035.36
Undergraduate $ 2,836,714.45 $ 2,978,550.17 $ 3,127,477.68 $ 3,283,851.57 $ 3,448,044.15 $ 3,620,446.35
Student Housing and Dining
Graduate $ 247,912.15 $ 247,912.15 $ 258,049.01 $ 258,049.01 $ 258,049.01 $ 268,381.00
Undergraduate $ 661,099.08 $ 661,099.08 $ 688,130.68 $ 688,130.68 $ 688,130.68 $ 715,682.67
Interest from Endowments $ 40,722.37 $ 42,758.48 $ 44,896.41 $ 47,141.23 $ 49,498.29 $ 51,973.20
TOTAL REVENUE $ 5,252,453.21 $ 5,469,625.31 $ 5,734,824.47 $ 5,974,256.71 $ 6,225,660.57 $ 6,527,518.59
EBITDA $ 1,320,834.72 $ 1,402,687.15 $ 1,512,046.26 $ 1,604,842.41 $ 1,703,523.65 $ 1,846,266.43
Depreciation expense $ 275,213.29 $ 284,685.67 $ 295,594.48 $ 305,859.00 $ 316,549.58 $ 327,687.65
EBIT $ 1,045,621.42 $ 1,118,001.48 $ 1,216,451.78 $ 1,298,983.41 $ 1,386,974.07 $ 1,518,578.78
Tax $ 313,686.43 $ 335,400.44 $ 364,935.54 $ 389,695.02 $ 416,092.22 $ 455,573.63
PROFIT
NET PROFIT $ 731,934.99 $ 782,601.04 $ 851,516.25 $ 909,288.39 $ 970,881.85 $ 1,063,005.14
FREE CASH FLOWS $ 1,007,148.29 $ 1,067,286.71 $ 1,147,110.72 $ 1,215,147.39 $ 1,287,431.43 $ 1,390,692.80
24

25. Sources of Funding
The following sources of funding are available for this project:
1. Government Grants – We can seek government grants by submitting a written proposal as a
means of funding. The government usually provides this as a means to stimulate growth in
particular sectors. Since education sector is poised for growth in Morocco, we could consider this
option. However, the approval of grants is not 100% guaranteed.
2. Bank Loans – We could get loans from major banks in Morocco such as Attijariwafa Bank,
Banque Populaire du Maroc, BMCE Bank etc. Bank Al-Maghrib, which is the central bank of
Morocco, regulates the lending rate which is typically around 6.25%. We could avail loans from
Canadian banks as well.
3. Own Funding – We could use our own cash assets (from other branches) as a source of initial
funding.
Financial highlights
Table 4shows the financial highlights which can be used to make a decision about acceptance or
rejection of the project. All calculations were made in Microsoft Excel using built-in functions. Discount
rate was taken as WACC of the project: 0.6*11%+0.4*9%=10.2%, where 0.6 – share of equity in the
capital, 0.4 – share of debt in the capital of school, 11% and 9% are cost of equity and debt respectively.
Cost of debt was taken as the real interest rate, offered by the biggest Moroccan bank - Attijariwafa Bank
(Attijariwafa Bank, 2012).
Table 4 - Financial highlights
Financial coefficients Value
Payback period 7 years
Net present value (NPV) $3,555,510.73
Internal rate of return (IRR) 37%
Profitability index (PI) 14
25

26. As the NPV of the project is more than 0, then we can conclude that that project can be accepted.
Other financial coefficients also confirm this outcome.
Sensitivity analysis
To investigate the influence of various factors on the financial results of the project and its
feasibility, we selected the following parameters: salary and benefits of employees, tuition fee for
graduates, tuition fee for undergraduates, and total number of students. The range of change from their
initial levels is from -20% to 20% in increments of 4%. As an indicator of the financial results of the
project, we chose the net present value.
Analysis of the results of sensitivity analysis presented in table 5 below shows that the outcome of
the project is strongly influenced by the total number of students, tuition fee for undergraduates, salary
and benefits and tuition fee for graduates. We should these results take into consideration in the actual
project implementation.
26

27. Table 5 - Change of the NPV of the project, depending on variation of selected parameters
Selected parameters -20% -16% -12% -8% -4% 0% 4% 8% 12% 16% 20%
Salary and Benefits $5,469,463.56 $5,086,673.00 $4,703,882.43 $4,321,091.86 $3,938,301.29 $3,555,510.73 $3,172,720.16 $2,789,929.59 $2,407,139.02 $2,024,348.46 $1,641,557.89
Tuition fee for $2,326,877.84 $2,572,604.42 $2,818,331.00 $3,064,057.57 $3,309,784.15 $3,555,510.73 $3,801,237.30 $4,046,963.88 $4,292,690.46 $4,538,417.03 $4,784,143.61
graduates
Tuition fee for $1,416,903.42 $1,844,624.88 $2,272,346.34 $2,700,067.81 $3,127,789.27 $3,555,510.73 $3,983,232.19 $4,410,953.65 $4,838,675.11 $5,266,396.57 $5,694,118.03
undergraduates
Total number of $188,270.54 $861,718.58 $1,535,166.61 $2,208,614.65 $2,882,062.69 $3,555,510.73 $4,228,958.76 $4,902,406.80 $5,575,854.84 $6,278,798.70 $6,922,750.91
students
27

28. Scenario Analysis
According to the results of the sensitivity analysis of the project, the factor “Total number of
students” had the greatest effect on the financial results of the project. We considered three scenarios:
optimistic, pessimistic and most likely. In each of the scenarios we changed the value of the selected
factor and then calculated key financial highlights of the project: NPV, IRR, payback period.
Table 6 - Effectiveness of the project depending on the scenario
Probability of Value, % from IRR, Payback
Scenario Factor NPV
scenario, % baseline % period, years
Total number of
Pessimistic 25% 80% $188,270.54 12% 8
students
Total number of
Most likely 50% 100% $3,555,510.73 37% 7
students
Total number of
Optimistic 25% 120% $6,922,750.91 67% 6
students
Results of the scenario analysis are presented in Table 6. As we can see, our project remains
acceptable even in the case of the pessimistic scenario. The break-even point of the project (as
percentage decrease of total number of students) equals 21.12%.
28

29. Exhibits
Exhibit 1 – Partner evaluation for Strategic Alliance
We considered the top 3 universities in the country for our purpose and evaluated those on the
following criterion:
Complementary Cooperative Compatible Commensurate
University Overall
skills offered culture goals risk sharing
Université Cadi Ayyad Y Y Y Y Y
Al Akhawayn
Y May be Y May be May be
University
Université Abdelmalek
Y May be May be May be May be
Essadi
Note: We don’t have sufficient information at this point in time but we are making some assumptions
to take a decision.
29

30. Exhibit 2 – Morocco GDP by Sector
30

31. Exhibit 3 – Trend on Services Contribution (% of GDP)
Exhibit 4 – FDI flows for Morocco
31

32. Exhibit 5 – FDI flows into Morocco by Industry
32

33. Exhibit 6 – FDI flows into Morocco by Geographical Origin
FDIflowsinthehosteconomy,bygeographicalorigin,1996-2006
(Millionsofdirhams)
Region/economy 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Totalworld 2 850 11499 4418 16069 4 998 32486 5 876 23257 9 485 26708 26070
Developedcountries 2 336 10470 3486 15560 4 655 32044 4 943 22586 8 198 24740 23149
Europe 2 249 6726 3179 14550 4 335 31326 4 545 22109 7 734 24502 22228
EuropeanUnion 2 214 6650 3006 14295 4 205 31017 4 300 21808 7 051 23743 21303
Austria - - - - - - - - 1 0 3
Belgium/ Luxembourg 70 29 134 98 172 103 261 190 346 426 2 605
Cyprus - - - - - - - 12 16 31 8
Denmark - - - - 4 1 3 0 2 1 3
France 915 1448 1614 3 657 1 624 27650 2 252 2 889 4 745 19843 8 646
Germany 70 600 48 69 193 257 493 145 475 856 940
Hungary - - - - - - - - 0 1 279
Ireland - - - - - - - - 10 7 40
Italy 44 29 58 118 202 109 69 107 266 210 335
Netherlands 218 257 288 3 157 76 199 239 74 125 260 227
Portugal 645 10 134 4 961 857 1422 237 35 21 60 50
Spain 148 476 490 2 030 564 939 390 18095 477 1442 7 191
Sweden - 3601 - 20 24 52 1 16 113 155 46
UnitedKingdom 105 200 240 186 490 287 356 244 455 452 931
OtherdevelopedEurope 35 76 173 255 130 309 245 302 683 759 925
Iceland - - - - 0 0 0 26 3 - -
Norway - - 48 - 11 - 5 15 3 1 19
Switzerland 35 76 125 255 119 309 240 260 676 758 906
NorthAmerica 87 2982 307 1 010 308 710 390 477 461 235 896
Canada - 10 58 - 11 10 10 5 13 8 33
UnitedStates 87 2972 250 1 010 297 699 380 471 448 226 864
Otherdevelopedcountries - 762 - - 11 9 9 0 4 4 25
Japan - 762 - - 11 9 9 0 4 4 25
Developingeconomies 375 876 749 412 304 437 904 623 1 197 1932 2847
Africa 139 248 182 69 27 162 76 190 67 45 150
NorthAfrica 139 248 182 20 27 162 76 179 66 43 134
Algeria - - - - 20 75 23 1 25 1 1
Egypt - - - - 1 11 1 0 13 10 85
LibyanArabJamahiriya 139 248 182 - 3 6 - 26 24 4 8
Tunisia - - - 20 3 70 52 152 5 28 40
OtherAfrica - - - 49 - - - 10 0 2 16
Gabon - - - - - - - 10 - 2 -
Mali - - - - - - - - - - 16
Mauritania - - - - - - - - 0 0 1
SouthAfrica - - - 49 - - - - - - -
LatinAmericaandtheCaribbean - - - - 1 - 71 - 3 32 -
Chile - - - - - - 2 - 3 27 -
Panama - - - - 1 - 69 - - 5 -
Asia 235 629 567 343 276 275 757 433 1 127 1856 2 697
WestAsia 235 267 192 196 248 275 750 432 1 012 1542 2 418
Bahrain 17 - - - 0 13 - - 83 0 35
Iraq - - 19 - 6 22 7 7 210 137 71
Jordan 9 76 - - - - 1 1 - 5 55
Kuwait 9 10 19 78 33 131 431 17 18 223 1 012
Lebanon - - - - 0 11 11 9 13 17 66
Qatar - - - - - 1 6 0 - 26 50
SaudiArabia 183 76 86 108 145 87 172 163 354 362 330
SyrianArabRepublic - - - 10 - 0 1 - 1 25 14
Turkey - - - - - 0 3 11 3 20 12
UnitedArabEmirates 17 105 67 - 64 9 118 222 331 728 774
South,EastandSouth-EastAsia - 362 375 147 27 1 6 2 116 314 279
China - - - - - - - 0 15 1 -
HongKong,China - - - - - - - - - - 13
India - 76 48 147 - 1 6 - 1 184 20
Indonesia - - - - - - - - - - 20
Korea,Republicof - 286 327 - 27 0 0 2 0 - -
Pakistan - - - - - - - - 100 129 226
Unspecified 139 152 182 98 39 5 29 48 90 35 74
Source:UNCTAD,FDI/TNCdatabasebasedontheOfficedesChanges,unpublished.
Note:Datarefertogrossinvestments andmaynotbecomparable tothosepresentedintable3.
33

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2012, <http://carnegieendowment.org/files/Lahcen_Achy%20%5BCompatibility%20Mode%5D.pdf>
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34