Analysis of Egypt as a potential market for foreign and home-grown industries in the next years. Entry modes for a foreign company to set itself into Egyptian market.
Egypt as a potential market for foreign and home-grown industries
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Module International Management
Lecturer Enda Murphy
Student Number 10375436
Assignment Requirement:
ABSTRACT
Analysis of Egypt as a
potential market for
foreign and home-grown
industries in the next
years. Entry modes for a
foreign company to set
itself into Egyptian
market.
Touseef Ahmed
International Management
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Table of Contents
Introduction: ...........................................................................................................................................................................2
Key Facts about Egypt:........................................................................................................................................................3
Major industries of Egypt are: ............................................................................................................................................3
Justification:........................................................................................................................................................................3
Analysis of Tourism industry of Egypt: ...................................................................................................................................4
Direct Contribution of Travel & Tourism (T&T) towards GDP: ...........................................................................................4
Indirect Contribution of T&T towards GDP:........................................................................................................................5
Induced Contribution of T&T towards GDP:.......................................................................................................................5
Total Contribution of T&T towards GDP:............................................................................................................................5
Government efforts to fasten growth of T&T industry: .....................................................................................................7
Analysis of Agriculture industry of Egypt: ..............................................................................................................................9
Facts about Egyptian Agriculture:.......................................................................................................................................9
Dependency on Import:......................................................................................................................................................9
Positive side of changing trend:........................................................................................................................................10
Egyptian Governments’ initiatives to boost agricultural: .................................................................................................12
Analysis of the Entry Modes of Foreign Multinational and their Performance to date:......................................................14
Indirect Exporting..............................................................................................................................................................14
Licensing............................................................................................................................................................................14
Direct Investment .............................................................................................................................................................14
Franchising ........................................................................................................................................................................14
Joint Venture.....................................................................................................................................................................15
Performance of foreign multi-national companies to date:.................................................................................................15
Examples of successful foreign business in Egypt:............................................................................................................15
1. Carrefour:..................................................................................................................................................................15
2. Vodafone Egypt:........................................................................................................................................................16
References ............................................................................................................................................................................16
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Introduction:
EGYPT is a cross-country nation spread in the upper east corner of Africa and southwest corner of Asia, by means of a land
connect shaped by the Sinai Peninsula. With over 98 million population currently, Egypt is the largest populated country
in Africa and the Middle-East and is also the 14th most populated countries across the world. About half of Egypt’s
residents live in urban areas, with most spread across densely populated centres of greater Cairo, Alexandria and other
major cities in the Nile Delta. Egypt is expected to reach 111.471 million in population by 2025. Egypt's current
unemployment rate is 11.3% of total labour force in the past year as compared to previous 11.9% which is a sign of growth.
[Worldometer Population, 2018] [Trading Economics, ’Egypt Unemployment’,2018]
GDP [PPP] (2017) USD
Purchasing Power Parity (PPP) 1197.967 Billion
Per Capita 12560.00
GDP (Nominal) (2017) USD
Total 408.045 Billion
Per capita 4503.00
[Trading Economics, ‘Egypt GDP’, 2018]
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Key Facts about Egypt:
Full Name Arab Republic of Egypt
Capital City Cairo
Population 98 Million
Area 1001 (in 2017) (‘000Km2
’)
President Abdel Fattah Saeed Hussein Khalil el-Sisi
Prime Minister Sherif Ismail Mohamed
Languages Arabic (official), English and French widely understood by educated classes
Religions Muslim 90%, Catholic 9% & other Christian 1%
Currency Egyptian Pound (EGP)
Main Exports Petroleum, petroleum products, cotton, Textile, Metal product and Chemicals.
Geographical Location Northern Africa, bordering the Mediterranean Sea, between Libya and the
Gaza Strip, and the Red Sea north of Sudan, and includes the Asian Sinai
Peninsula
Coming to the objective of this report, The main objective is to study the business markets of Egypt and identify two
industries that have the potential to grow strongly between now and 2025 using the analysis of management theories
and government policies in the international context. We will also analyse the entry modes and performance to-date of
existing foreign multinationals in Egypt. Our approach will be to extract our purpose by studying various journals,
articles and reports in our chosen industries of Egypt.
Major industries of Egypt are:
1. Agriculture
2. Tourism
3. Dairy and Meat
4. Information and Communications Technology (ICT)
5. Manufacturing and mining
In this report we are going to analyse the Tourism and Agriculture industries. The report describes various trends within
Tourism and Agriculture industry using various facts and figures.
Justification:
To justify that the Tourism and Agriculture industries are going to grow big in Egypt, The very first signs are that Egypt
has shown a healthy growth rate in the current decade. It is also few of the promising economies of African continent.
This recent increase in growth rate is mainly through high international tourist inflow and growth in trade and logistics
and ICT market. As per “Global Economic Prospects – A Fragile Recovery” of June 2017 - A World Bank Group Flagship
Report, Egypt has acquired a GDP of 4.6% as compared to previous 4.3% and is projected to grow to 5.3% till the year
2019.
[Global Economic Prospects – A Fragile Recovery]
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Analysis of Tourism industry of Egypt:
Tourism is one of the biggest revenue generating sector for Egypt. It possesses one third of the worlds known monuments.
Egypt’s tourism industry is the country’s biggest source of foreign currency. Egypt has ancient civilization landmarks, which
are an incarnation of the history of the people that constituted these civilizations since the dawn.
T&T is a major part of every political economy. Tourism industry contributes in greater amount now as compare to the
past due to the increase in transportation, hospitality and other economies being developed hand in hand. As per “World
Travel & Tourism Council” in “Travel and Tourism Economic Impact 2018 Egypt”, T&T industry across the globe contributed
directly to the GDP by 4.6% growth in 2017 and generated USD 7.6 trillion which is 10.4% of global GDP. T&T industry also
generated 292 million jobs in 2016. Which is like one in every 10 jobs in the global economy. The industry accounted for
6.6% of total global exports and almost 30% of total global service exports. Such was the growth of T&T industry in recent
years that in year 2016, this sector out-performed the other majorly contributing sectors such as Financial and business
services, Manufacturing, Public services, Retail and distribution and Transport sectors. Out of 185 countries studied for
such growth, 116 of them recorded the exact performance since 2016. Economies like India, Australia, China, Mexico,
South Africa and Canada were the big fishes for such performances.
[Travel and Tourism Economic Impact 2018 Egypt] [Travel and Tourism Economic Impact 2017 Egypt]
As the economies continue to grow, socio-cultural barriers will be broken. Curiosity will keep prevailing and curiosity gives
birth to exploration. It is in the genes of humans to be curious and try new ways. Therefore, people will keep exploring
the world which will again result in prospects of a new market for industries such as T&T.
In terms of Egypt, it is one of the countries standing alongside Tunisia and Turkey which were devastated by the wrath of
terrorism and has recovered strongly from the impacts.
Travel & Tourism is as important an industry for every developed and developing nations as is their other industrial sectors
such as Agriculture, Dairy, ICT, Logistics and transportation, Energy and many others. Since the T&T industry is rapidly
growing, it has significant Direct, Indirect and Induced impact on its economy. This impact is reflected in the GDP of the
nation.
Direct Contribution of Travel & Tourism (T&T) towards GDP:
➢ Commodities
• Accommodation
• Transportation
• Entertainment
• Attraction
➢ Industries
• Accommodation Services
• Food and Beverage services
• Retail trade
• Transportation services
• Cultural, Sports & recreational services
➢ Sources of spending
• Resident's domestic T&T spending
• Businesses' domestic travel spending
• Visitor exports
• Individual government T&T spending
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Indirect Contribution of T&T towards GDP:
➢ T&T investment spending
➢ Government collective T&T spending
➢ Impact of purchase from suppliers
Induced Contribution of T&T towards GDP:
➢ Food & beverages
➢ Recreation
➢ Clothing
➢ Housing
➢ Household goods
Total Contribution of T&T towards GDP:
➢ To GDP
➢ To employment
The Direct Contribution of T&T industry towards the GDP was USD 10.7 billion in 2017 which was 5.6% of the GDP and is
forecasted to rise by 3.2% to USD 11.35 billion in 2018 and at a rate of 4.0% pa it is estimated to rise to USD 16.3 billion
during 2018-2028. This shows the growth of subsidiary industries such as hotels, travel agencies, airlines and other public
transportation services. It also reflects the growth of restaurant and leisure industries being dependent on travellers and
tourists.
The Total Contribution in 2017 towards GDP was USD 21.1 billion which was 11.0% of GDP in 2017 and is forecasted to
rise by 4.5% pa from 2018-2028 to USD 33.9 billion.
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Towards Employment contribution of T&T industry, in 2017 it supported the country by providing 8.5% of total
employment of 2,425,000 jobs and is expected to rise by 2.3% pa to 3,199,000 jobs (8.9% of total) until 2028.
When talking about T&T industry, Visitor Exports is also an important factor to consider the estimates. Visitor exports is
the spending that an international tourist spends for leisure and business travel within the visited country. Egypt generated
USD 8.0 billion of Visitor Exports in 2017 which was 31.6% of total exports in 2017 and is forecasted to grow by 3.8% pa
from 2018-2028 to USD 12.0 billion.
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Around USD 3.38 billion was invested in T&T industry in 2017 which was 11.4% of total investment and is expected to rise
to USD 6.4 billion at a rate of 5.9% pa over the next ten years.
[Travel and Travel Economic Impact 2018 Egypt]
Government efforts to fasten growth of T&T industry:
Egypt’s ever-growing tourism industry took a hit from the Russian passenger plane crash over Sinai region of Egypt in
October 2015 that killed all 224 passengers aboard. Several European countries had banned flights to the popular tourist
town of Sharm el-Sheikh near Red Sea. Egypt is desperately trying to recover since then.
Other redundant factors that are affecting the Tourism industry in a negative manner is that the Egyptian military is dealing
with possible Islamic insurgency in northern Sinai since 2013. Egyptian Christian community has been targeted by the
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infamous ISIS in multiple attacks reportedly. In November 2017 militants killed more than 305 in an attack on a mosque
in the northern Sinai. However, during the same period major European countries such as France, Germany and UK have
also suffered terror attacks and survived. Egypt was still considered safe seeing its history and development it did
(achieved) to come out as one the hotspots for travel destinations. In the year 2017, between January and September; 5.9
million tourists arrived in Egypt, up from the 3.8 million during the same time in 2016. The United Nations' World Tourism
Organization has ranked Egypt as the second-fastest growing tourist destination of 2017, and added that at this rate
Egypt should expect to welcome 8 million tourists by the year's end. However, Egypt has still to grow beyond what it has
already achieved in 2010 when it hosted 14.7 million tourists and had employed more than 10% of country’s workforce.
As per a report by Oxford Business Group on “Egypt's tourism sector showing strengths despite challenges” to overcome
challenges it has been facing, Egypt is focusing on strengthening the sector’s fundamentals. Also, in September 2015, “the
Ministry of Tourism signed a USD 68m contract with J Walter Thompson, an advertising firm involved in Egypt’s marketing
efforts prior to 2009. The plan is to run adverts in 27 markets around the world. The country wants not only to promote
what it has to offer in terms of sites, antiquities and other attractions, but also to counter the negative image of Egypt
being broadcast by the international press.”
The Ministry of Tourism is also working towards putting in capacity-building efforts to further diversify the sector. It
intends to form different products and activities that could attract more people and offers reasons to stay longer and
eventually spend more money. To support this idea the government is calling potential investors to partner with tourism
product developers. Continuous infrastructure development projects to increase number of three-star hotels and resorts
are going on targeting a larger reach of tourists.
Recent advertisement campaign slogans such as “Egypt is Close” and “We Miss You” is aimed at both regional,
neighbouring and worldly visitors to attract them towards this country. Egypt has also eased out its Visa policies to support
its tourism industry. Citizens from most Western countries are now again allowed to buy Visa on arrivals which was
stopped in 2015. Egypt is also going to install and apply e-Visa system aiming to increase tourist traffic by 20%.
[Oxford Business Group, No Date]
As per a report published on the official website of Egyptian tourism department; “Egypt tourism revenues picking up” In
2017 8.3 million tourist visited Egypt which is 54% more than the previous year. Egypt’s tourism revenue also jumped by
123.5% from previous year to USD 7.6 billion. [egypt.travel, 2018]
The Egyptian government is also doing its bit to support continuous growth rate of this industry. It is providing incentives
to tour operators (like Thomas Cook) and airlines. Famous celebrities like Will Smith and Lionel Messi were brought in for
photo-ops to publicize the country’s heritage. The weaker Egyptian Pound is also attracting tourists for a low-cost and
high-quality destination experience. While it would be too soon to expect a pre-2011 numbers, The road may be too long,
But Egypt is taking measured steps to turn the table in their favour and move ahead of the past and write up a new history.
[Public Radio International, 2017] [The Telegraph, Gavin Haines, 2017]
Out of 185 countries that went for the survey in “World Travel & Tourism Council” in “Travel and Tourism Economic Impact
2018 Egypt”, Egypt came out at 45th position showing that it has the potential to grow financially and is one of the
contenders to be an Ideal Tourism industry examples.
[Travel and Travel Economic Impact 2018 Egypt]
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Analysis of Agriculture industry of Egypt:
Agriculture sector is again one of the building blocks of a country’s economy that decides how much a nation can feed to
its people and sell at the same time to generate revenue. Agricultural norms and patterns of a nation indicates how
independent and strong a nation is. The extent up to which a nation can harvest and then feed its population comfortably
and export a part of the harvest to generate profits and reservoirs is basically what an ideal agricultural industry is.
Facts about Egyptian Agriculture:
• Agricultural sector includes Agriculture, Forestry, Hunting and Fishing
• Agriculture sector contributes 11.26% of GDP of 2018
• 6,120,000 active population in agriculture
• 22,600,000 people depend on agriculture for their livelihood
• Arable land: 2,670,000 hectares (as per 2014) which accounts to 2.91% of total land area.
Total agricultural value of Egypt up to 2017
[AFDB Socio Economic Database, 1960-2019]
Even though Egypt has agricultural land area of only 2.91% of the total land area, it is highly productive and can be
harvested 2-3 times a year. As of 2015-2016, FAOSTAT, Food and Agriculture Organization of the United Nations, Egypt is
largest producer of Dates, Second largest producer of Figs, Fourth largest producer of Strawberries, Onions, Buffalo milk
and Eggplants. It is also the 5th largest producer of Tomatoes and Watermelons.
[FAOSTAT, Crops, 2018]
Dependency on Import:
Egypt has been dependent on imports to provide enough food for its increasing population for decades. Agriculture and
river Nile are always associated with ancient Egypt. The Egyptian Civilization was also based along the banks of river Nile
due to its ability to keep the land fertile in nature and to provide necessary water for agriculture. The Nile Valley and Delta
keep the soils fertile for favourable crops such as Rice, Wheat, Corn, Sugarcane, Onions and tobacco.
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However, considering the agricultural land area of Egypt, this sector was not capable to meet its domestic demands forcing
the government to import food supplies. The cost of agricultural imports of Egypt exceeded the agricultural exports in
1974 for the first time. Egypt’s scarcity of agricultural land and water resources are limiting domestic food production.
Weak institutions and lack of infrastructure are also the reasons for Egypt to have an unclear approach in achieving
sustainable agriculture and food security.
Positive side of changing trend:
Despite all these dis-advantages, Egypt has a positive side to look at to meet its food deficit. Egypt has a uniquely suitable
climate, ecology and location. There is so much potential to grow production and export index of certain high value
produce such as fresh fruit, vegetables (grapes, oranges, dates, cabbage, and green beans among others) and aromatic
plants. Growing these high value crops in large batches would mean using already scarce fresh water at a faster rate than
other traditional crops. But yielding these crops would generate larger cash and that too at a faster pace. “Harvesting
fresh fruit and vegetables would support sustainable use of natural resources due to their higher economic value and
lower water requirements. Improving infrastructure, market intelligence, introducing modern production techniques, as
well as taking advantage of current concessions in existing trade agreements and opportunities in negotiating new ones,
would benefit the country’s exports of such high value crops. Market diversification to new emerging markets in Asia, such
as China and Malaysia, as well as product diversification towards high quality varieties, would be beneficial steps towards
tapping the country’s potential.”
[Agricultural Policies, Trade and Sustainable Development in Egypt, 2017]
The nation's Sustainable Development Strategy Towards 2030 spots accentuation on expanding independence
concerning the farming items that contribute much to utilization, for example, wheat and maize, with the goal of taking
advantage of the water and land assets economically. Although, such a technique is inconsistent with the low financial
estimation of oats in connection to water utilized and Egypt's impediments in expanding creation of these harvests
because of serious shortage of land and water assets. The system determines two points of reference with target levels
of generation for these key items, one for 2017 and another for 2030. However, moderate progress towards production
targets so far proposes that the dependency on imports in basic food stuffs will continue. In the meantime, tapping the
potential exportable production in high value crops remains a test.
Egypt is geographically at a strategic location for trade, it has close proximity to large markets of European, Middle
Eastern and African countries.
Agriculture’s role in the Egyptian economy, 1995–2014
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Agricultural trade deficit increased from USD 2.3 billion in 1994 to USD 10.8 billion in 2014. Egypt’s agricultural trade
deficit value in 2014 was around 4 times the deficit in 1994. Additionally, the absolute increase in its agricultural trade
deficit since two decades, agricultural export revenues in respect to agricultural imports costs have also increased during
the 2000s as compared to the 1990s. This means Egypt’s agricultural exports grew relatively as compared to its
agricultural imports.
Evolution of trade in agricultural products in Egypt, 1994–2014
The share of total expenditure on agricultural imports in total revenue from merchandise and services exports in Egypt
was the 2nd highest among the countries of the Near East and North Africa (NENA) region in 2015. This was only 3%
lower than that of Yemen. As is evident, almost 40% of the earnings from Egypt’s exports were spent on agricultural
imports into the country.
Agricultural import expenditures as a share of total export revenues, Egypt vs selected NENA countries
[Agricultural Policies, Trade and Sustainable Development in Egypt, 2017]
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Egyptian Governments’ initiatives to boost agricultural:
Egyptian government is concerned in terms of food security as is reflected in both its 2017 and 2030 strategic development
plan. It marked importance to basic food commodities. In the first phase of the plan, the government focused on increasing
production of certain basic food commodities such as wheat and maize to reach up to a self-sufficiency level until 2017.
In the second phase of the plan, it has retained the status given to basic food commodities and set the level at a higher
rate for 2030. Results have already started to show in and is in near-terms of the projection level.
In addition to this, Egyptian government is planning to align its development projects with sustainability concerns.
According to Egypt’s Sustainable Agricultural Development Strategy Towards 2030, or SADS 2030, sustainable agriculture
implies that such increases in crop production are considered along with the efficient use of natural resources, now and
in the future. In Egypt, higher than average agricultural bound and applied import duties are on beverages, tobacco, and
cereals; oilseeds, fats, and oils are the least protected in terms of import duties applied. The Egyptian government
removed all customs service fees and charges on imports in 2004, and currently does not have any quotas or tariff quotas.
Though all other charges have been removed, a general sales tax of between 5 percent and 45 percent still exists and is
applied both to domestically produced and imported items, both at the wholesale and retail levels (WTO 2005; FAO 2010).
In an effort to increase customs revenues and protect markets for local production, by decreasing their relative prices in
comparison to imported produce, Egypt has recently introduced changes to its tariff schedules which involve increases in
tariffs on agricultural products imports. These changes have started to reflect the indirect positive impacts Egypt is going
through. Over the last decade, Exports of Egyptian market have started to rise gradually. In 2014 share of Egypt’s
agricultural exports were highest at 19% since 2005. Agricultural exports revenue in 2015 was 4 times the revenues
generated a decade earlier.
Agricultural export revenues in Egypt, 1994–2015
In 2015, Around half of Egypt’s agricultural export revenues were generated by fresh fruits and vegetables followed by
earnings from dairy products and preparations of fruit and vegetables. Egypt has a comparative advantage here as its
share is greater than the global share of exports. (FAO and EBRD 2015)
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Evolution of value of Egyptian exports of fresh fruit and fresh vegetables in USD, 2005–2014
[Agricultural Policies, Trade and Sustainable Development in Egypt, 2017]
Egypt’s agricultural export for the year 2017 was increased to 4.8 million tonnes as compare to the 4.3 million tonnes of
the past year. Apart from the dominating Orange, As per Daily News Egypt, the Ministry of Agriculture also gave figures
for other exported crops for 2017 such as Potatoes, Onions, Grapes, Pomegranates, Strawberries and Mangoes which
showed significant growth in the year. According to Minister of Agriculture and Land Reclamation Abdel Moneim El-Banna
as stated in an interview, “That increase is owed to the ministry’s recent efforts and the measures taken to ensure the
quality of Egyptian agricultural crops in order to increase their exports rate”. The minister added that Egypt has succeeded
in opening new markets for Egyptian agricultural crops abroad, such as in China, Canada, Taiwan, Kenya, Tanzania, South
Africa, and Mauritius.
[Daily News Egypt, Nihal Samir, 2018]
Maximising exports of high value revenue generating agricultural crops has proved to be a fruitful policy for Egypt. These
types of crops, for which Egypt has a comparative advantage, could play a significant role in inclusive growth (creating job
opportunities and raising incomes for farmers and other actors in the value chain) and in food security by generating
foreign exchange needed for importing basic food stuffs. The Egyptian government is now working on prioritizing the
promotions of high value agricultural commodity trade and is increasing co-ordination among policies. Institutions and
the investment sectors are working on building a public-private linkage. Government is now working in terms with
research and development, training, infrastructure and logistics departments to enable a synchronised process in the
growth of economy. Egyptian government is also intensively working on improving the education and training programs
to enhance labour productivity and to set up a compliant common standard system. These all quality-conscious measures
would eventually allow Egypt to grow its market reach at a faster rate in near future.
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Analysis of the Entry Modes of Foreign Multinational and their
Performance to date:
Some of the multinational companies currently operating in Egypt are Carrefour, Spinneys, Makro in retain business and
Bavarian Auto Group – BMW, General Motors Egypt in Automotive business, Orange Egypt and Vodafone Egypt in
telecom sector and Microsoft Egypt in IT sector.
There are multiple entry modes for an organization to enter into a foreign multination such as Indirect Exporting, Direct
Exporting, Licensing, Joint Venture, Direct Investment and others. A brief description of these entry modes as mentioned
below:
Indirect Exporting
Indirect exporting means selling products to an intermediary, who in return sells your products either directly to
customers or to importing through wholesalers. The easiest method of indirect exporting is to sell to an intermediary in
your own country. When the companies try to enter in foreign market, they utilize a locally based specialist that work for
the business on the foreign soil at commission basis without taking any kind of credit for goods and business will sell the
product at international level. Small firms find it difficult to use this as it can sell the products via other organization which
export product on behalf of different small connectivity within firms (Carrefour, 2002). The biggest take-away of this entry
mode is that the expert company provides with knowledge and experience in handling the goods and service to be
exported.
Licensing
In Licensing system, A foreign multi-national will have to take license to operate in the intended market. The licensor will
then provide the local licensee system to access the patents, trademarks, brand and company, technologies and so on.
Licensing is also known as the exclusive right to market products and services provided by the organization for a limited
period in a specific region. Once entered in foreign market, the licensor in the home country will make the resources and
human rights available to the host market (Spinneys, 2006). Licensor fees is usually taken in the form of technical fees,
payment of royalty, one-time payment and other methods. The licensing system is thus helpful for an entity to enter in a
foreign market to increase its income by using effective service and technicality. Although, Licensing method is not that
effective in revenue generation as compared to other modes, yet it is a stable way to enter into a new market.
Direct Investment
This is also a very effective method to enter into a foreign market and invest their capital in the facilities based in foreign
manufacturing systems. The organization keeps committing maximum managerial efforts and capital for this entry mode.
With the help of this entry mode, the organization is able to control a considerate stake for its operations in host countries
(Carrefour, 2002). Besides this, Acquisition is also an effective system for the organizations to establish itself in the foreign
market. This entry mode enjoys a high level of control as compared to other modes.
Franchising
The franchising culture in in Egypt across all sectors started in the 1980’s with mostly fast food chains in the business. The
number has grown significantly to more than 300 franchises and 4,000 outlets, with a widening diversity. Direct franchise
sales in Egypt topped EGP 7 billion, while indirect sales reached as high as EGP 30 billion. The franchise boom has also a
positive impact on employment, creating more than 40,000 direct jobs and over 500,000 indirect positions for Egyptian
workers. While the number of franchises in Egypt’s metropolitan cities of Cairo and Alexandria is quickly increasing,
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upscale tourist hot spots are also an important target for investors. Some well-known chains such as Hard Rock Café are
choosing chic tourist hubs such as Sharm El-Sheikh before coming to Cairo.
Joint Venture
Many times, various multinational companies enter in a foreign market using the joint venture agreement with an existing
domestic company of the targeted market. Joint venture process goes through in two categories i.e. equity joint venture
and contractual joint venture. The process of Joint venture is necessary because of the various legal restrictions on the
foreign investment. The joint venture agreements reduces the level of investment as is required by a foreign firm to
establish on its own in a foreign country (Arla Foods and the Egypt-based dairy company Juhayna, 2015). In this, both the
partners bring their expertise area and enhance the success rate of the business. The joint venture aims to dominate the
local as well as international market. With respect to the economy, most of the joint venture is formed with the sole
purpose of entering in the market or the foreign investors of the business buys out the local partners.
[Press Release, New Joint Venture…Company, 2015] [export.gov. No Date] [Five Modes of Entry into Foreign Markets,
Michael Wolfe, 2017]
Performance of foreign multi-national companies to date:
There are various challenges that a company faces at the time of entering into a foreign market due to ever increasingly
tough competition. The International marketing environment is very dynamic. The challenges faced by the organization
can be categorized on the basis of various factors like socio- cultural, technological, legal, environmental, skills and style,
the structure of the business and others. There are some macroeconomic challenges also like high inflation rate, crashes
in currency, a budget deficit which impacts on the trust of investors.
To deal with these challenges, An organization makes policies and procedure to increase the investment level in the foreign
country. Also, using economic developmental marketing strategies, the organization is able to improve the performance
level of their business. Adjusting the currency policy, an organization is able to adopt to the economic development and
attract other foreign enterprise's investment.
Examples of successful foreign business in Egypt:
1. Carrefour:
Now operating 60 hypermarkets and 66 supermarkets) the French chain Carrefour has revolutionized the retail industry
in Egypt by introducing a new format for hypermarket shopping. The first Carrefour opened in December 2002, covering
28,000 sq. meters of retail space. Two of them opened in 2003, covering 32,000 sq. meters, and the last one was opened
in 2008. Carrefour is now reporting an average of 15,000 visitors per day on weekdays and 38,000 visitors on the
weekends; an average of 7,000 transactions a day during weekdays and 12,000 daily on weekends. While their focus is on
middle-income families, they rely primarily on local goods. Carrefour is targeting Egyptian middle-class families and is
relying on local goods primarily. The average daily sales of Carrefour are $300,000 (the highest is the El-Maadi outlet with
daily sales of $500,000). Carrefour currently stocks over 500 private label products and expected to increase this number
shortly.
[Company URL]
17. Page 16 of 17
2. Vodafone Egypt:
It is now one of the largest telecom company of Egypt. Vodafone launched itself in 1998 in Egypt. It entered the
Egyptian market by acquiring 30% share of MisrFone group. In 2011, Vodafone became the market leader in
terms of revenue generation and having the largest customer base. Egypt currently has a 15-year 3G license
from Egypt’s National Telecom Regulatory Agency (NTRA) signed in 2007. And in 2016, Egypt achieved the 4G
mobile services license from NTRA.
[Vodafone Egypt awarded 3G license, 2007]
References
1. Worldometer population, ‘Egypt population 1950 – 2018’. Available at: http://www.worldometers.info/world-
population/egypt-population/ (Accessed: 17 March 2018).
2. Trading Economics, ’Egypt Unemployment’. Available at: https://tradingeconomics.com/egypt/unemployment-rate
(Accessed: 17 March 2018).
3. Trading Economics, ‘Egypt GDP, 2018’. Available at: https://tradingeconomics.com/egypt/gdp (Accessed on 17th
March 2018).
4. Openknowledge.worldbank, ‘Global Economic Prospects – A Fragile Recovery’. Available at:
https://openknowledge.worldbank.org/bitstream/handle/10986/26800/9781464810244.pdf (Accessed on 16th March,
2018).
5. World travel and tourism council, ‘Travel and Tourism Economic Impact 2017 Egypt’. Available at:
https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2017/egypt2017.pdf (Accessed on
16th March, 2018).
6. World travel and tourism council, ‘Travel and Tourism Economic Impact 2018 Egypt’. Available at:
https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2018/egypt2018.pdf (Accessed on
16th March, 2018).
7. Oxford Business Group, ‘Egypt's tourism sector showing strengths despite challenges’. Available at:
https://oxfordbusinessgroup.com/overview/testing-times-while-current-challenges-are-myriad-sector-has-considerable-
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