A Business Analysis Report on Egypt
A Critique and Analysis
Edwin M. Porter
Managing in the Global Environment-18SP-MG615-144
Throughout this business analysis report, it will explain several aspects of Egypt as a country. This business analysis report will be conducted to prepare for expansion into Egypt by King World Corporation. Throughout this analysis, we will come to understand the history, economy, climate, population, and culture. Moreover, it will demonstrate how the political structure is in Egypt and how understanding the political structure plays a significant role when an organization is expanding internationally. This analysis will give a sufficiently detailed report with valid sources, and data in which King World Corporation will have the information to decide on expanding in Egypt if this is the country in which they choose.
Table of Contents
Introduction4 History of Country4
Key Events of Egypt7
Egypt – Economic Indicators: Chart 1.110
FDI Inflows by Country and Industry: Chart 1.211
Significant Issues Faced by Egypt12
Characteristics between Egypt and The United States of America13
Hofstede model: Chart 1.314
Business Analysis Report on Egypt
This business analysis report on Egypt will analyze the history, climate, economy as well as business ventures in Egypt. This report will fully display how a company can benefit in the expansion to Egypt or decide it is not the best country to expand operations. We will see through this report how Egypt political system is structured and how that will affect conducting business in Egypt. Populations can change how organizations plan and carry out their plans to do business in another country, and how more abundant groups of people differ from smaller communities. Throughout this analysis it will also show how the culture and climate have a direct impact on conducting business and how Egypt is a vast land of opportunity, it is also known as a land of uniqueness, environment, and culture.
Historical Summary. As we look, at information from the “C.I. A World Factbook” will show us that Egypt formation occurred in 3200 B.C. which lead to the rule of a unified kingdom, along with a different series of dynasties over the next three millenniums (C.I.A, 2018). After this time in Egypt’s history, the dynasties that once ruled were then taken over by Greeks, Romans as well as the Byzantines. The changing of dynasties also influenced Egypt’s history when the Arabs finally took over the rule in Egypt; they introduced a new language to Egypt which consisted of Arabic. According to the C.I.A world factbook”. It states “Arabs who introduced Islam and the Arabic language in the 7th century and who ruled for the next six centuries” (C.I.A, 2018).
Additionally; per “C.I. A world factbook” Egypt has gone through several changes and challenges within its existence. The latest changes to the country came during the 2010 revolution. This revolution brought about different sects protesting the President at the time, which lead to the demise of the President. At which time the Egyptian military was the interim leadership in Egypt. Having an interim government is a difference than having a national government in place, which took form once again in 2012. In 2012 the Egyptian military once again took control of the government due to protest and took the newly formed president out of power (C.I.A, 2018). Egypt is known as a country that will protest the government if they feel as if they do not stand by the government. The actions taken by the people and opposing the government will cause the intervention of the Egyptian military. A concerning fact when conducted business in Egypt, this is something a business partner must know because things can be one way and then another within days, weeks, or months. Investors must pay attention to this aspect of political changes and challenges when looking at the history of Egypt, and as a place to invest.
Culture. When we look at culture, we must remember that every country culture is different. We must look at the uniqueness of the culture, to truly understand the culture. Egypt has a culture that most Arab countries display, a culture that some around the world cannot understand. According to the “C.I.A World Factbook” Egypt has a population of 97,041,072 this statistical count is as of July 2017. Egypt is predominantly made up of 99.6% Egyptians with a predominant language of Arabic, but also English and French (C.I.A, 2018). The versatility within this country makes it easier to conduct business as an outsider because there is no one language for the whole country. Arabic is the national language, but most people also speak the English language which is useful for organizations that want to expand.
Communication is the key to business ventures, and being able to communicate is something that organizations must take into accountability. The country religion makes up 90% of the population and according to the “C.I.A world Factbook” Christianity and other faiths contribute to 10% of the population (C.I.A, 2018). Data provided shows that Egypt is a dominant Muslim country, this is something that an investor should know when expanding and conducting business within a Muslim nation. Mulsim countries do business differently than other cultures, and the traditions are different from that of Western nations. Moreover; looking at the information provided in this business analysis report, we see that Egypt is a country that believes more in the Islamic religion more than any other religion, services in Egypt will be more of the Islamic background than any other religions.
Additionally; In Muslim countries such as Egypt, one of the main differences in culture is how the treatment of woman in Muslim cultures from how the treatment of women is in western countries. Woman are not allowed to interact with men in Muslim countries, how they can interact with men in western cultures. Understanding the difference is something investors should know and understand, by understanding this aspect there will be no indirect disrespect of the culture and ways.
Next, as we look at the culture, we must look at how this plays a part in the human services of a company. Understanding the culture and being able to identify different elements of laws, demographics, cultural influences is vital to an organization. Being able to have a competent human resource department that can show empathy is essential to a business. Being able to identify with a culture, and understand it help a company to maintain cultural awareness and the do’s and don’ts in a different country. According to the textbook ” International Management: Managing Across Borders and Cultures Text and Cases” states “cultural empathy, is the awareness of and an honest caring about another individual’s culture CITATION Der17 l 1033 (Deresky, 2017). Understanding these different cultural aspects of a country will help in the process of training, education/cultural awareness, and staffing. Having a competent HR department is essential when it comes to cross-cultural training of employees. HR plays a vital role when conducting business in another country; this is why it is best to have a well-constructed plan and HR department to carry it out.
Climate. Climate is something that will dictate a lot of different aspects when conducting business. Climate is something that must be looked at in detail when thinking about expanding into another country or market. Understanding the climate in a place where an organization would like to conduct business is a valuable tool for an organization to utilize. Understanding the environment, of a country is essential, to the strategic planning of an organization. According to “An assessment of integrated climate change impacts on the agricultural economy of Egypt” we can see that there is a difference in climate from other parts of the world. We can also see that this country suffers from being a country that is very dry. This dryness that Egypt experiences are concerning for organizations, especially organizations that depends on agriculture. Factual statistics and data show that Egypt is a country that is very dependant on the natural climates (1998).
Additionally, the environment and climate changes play a significant part in agriculture, mainly when the Nile River is what the country depends on, having the Nile River as their source of water flow. This something that is very important to know for an organization. Having to rely on one source of water supply this is important to know as an investor. The climate of a country is a concerning attribute for investors because with climate changes can also bring changes in the business. When we look at the environment as well as the climate in Egypt, we must look at the different seasons, which is only three that includes a winter, summer and also a delayed summer season.
The Key Events of Egypt as a Country. Throughout time every country is known for specific events and individual elements that make a country unique. Egypt’s key events such as new laws allowing other candidates to run for president besides only one having the chance. Military take over of the government has been a significant part in the political area of Egypt. Having a nuclear weapons program is something Egypt has implemented. These are some of the critical events in Egypt’s history.
Additionally, as we can see from a “BBC News” report, Egypt has been allowed to produce nuclear energy. This is part of a program that six Arab countries participate in to provide a different kind of energy source. This major event in Egypt is backed by the International Atomic agency (2018). Egypt is known for strict governmental influence over the country. Political influence can be seen with the different military takeovers due to the protest of the government by the people. Egypt has been through several military shows of force to the government. Per a report by “BBC News” in 2011 two different Presidents were forced to step down because of protest, as well as one of their Presidents prosecuted for ordering the deaths of protestors(2018). Egypt has had this problem for decades; this is something that is serious in this country and must be looked at by investors.
Next, Egypt has brought about changes in the country in 2012 by implementing new laws that would not allow the government to challenge the Presidents decisions. Having full authority to make decisions and no oversight is something that is very concerning. According to the article, ” Egypt profile – Timeline”. It states “stripping the judiciary of the right to challenge his decisions but rescinds it in the face of popular protests” CITATION Ass18 l 1033 (Press, 2018). A major event that Egypt has gone on in Egypt according to an article from “BBC News” is the restriction of speech that Egypt experienced in 2012. New laws restricted the speech of the people and instituted the how Islam was viewed in the country by making Islam more powerful and boosting the role of Islam in the country CITATION Ass18 l 1033 (Press, 2018). With all of these events in the history of Egypt along with the influence of the government and how easy it is for the government to overthrow the President when the mast majority of people do not agree with them is a fact organization must look at when conducting business. This is concerning factor for Egypt as a country due to the weak currency because of these issues. In other aspects of a business, a country with a weak currency is because materials, labor, and other factors will be cheaper for an organization, thus inflating profit margins.
As investors ponder the decision of extending and doing business with Egypt, they must realize the influence the government has on what happens in Egypt. They must also take into account how the people protest against the government and the military overthrow the government. While conducting a SWOT analysis, they must take all of these things into account, because this will be a significant decision.
Political Structure. Egypt is known as a republic and for its central government, a government that has all the power and dictate to the lower government what it deems they would like the lower government to decide. Egypt also has a President, cabinet as well as a prime minister, thus making Egypt a semi-presidential country. The one critical aspect in Egypt’s government with all of the takeover by the military that has happened in this countries existence is the formation of a transitional government to aid in the transition of power.
Economy. Egypt is a country like several other countries overseas that is very dependant on a tourist visiting their country for economic purposes. Petroleum export is one of the main exports that push their economy; this is something that is very important to Egypt as a country. Petroleum export is vital to Egypt’s economy; it constitutes like 93% of Egypt’s economy as can be seen in chart The economy of Egypt is an economy that has an unemployment rate of 10.6%, a rate that has risen over the years. With weak currency playing a significant role, and the dependency on the Nile River plays a part in Egypt’s economy. This contributes to the agriculture field, where there are only three seasons in Egypt which Egypt is dependant. The inflation rate is at 14.4% which shows how the inflation in Egypt has been very crucial when the inflation rate was at 11.4% before 2018. The GDP has risen from 2017 to 2018 which stands at 101% today, which was at 92.3%. Egypt currently sits at 128 out of 190 countries in the rankings. Egypt’s main population center in Cairo; it is classified as their largest population. Also, a lot of Egyptians tend to live around the Nile River, this is because of the land in which could be used for agriculture due to the dryness of the country. Below is a chart showing the economic indicators for Egypt and how the economy factors look presently.
Egypt – Economic Indicators: Chart 1.1
Overview Last Reference Previous Range Frequency Unemployment Rate10.6 % Mar/18 11.3 8.1 : 13.4 Quarterly Inflation Rate14.4 % Jun/18 11.4 -4.2 : 35.1 Monthly Interest Rate16.75 % Jun/18 16.75 8.25 : 21.4 Daily Balance of Trade-3315 USD Million Apr/18 -3395 -5056 : 236 Monthly Government Debt to GDP101 % Dec/17 92.3 73.3: 102 Yearly Reference: Trading economics, CITATION Sta186 l 1033 (Staff, 2018) https://tradingeconomics.com/egypt/indicators
Foreign Investment. Foreign investors can view Egypt as a place to invest in today’s society with the turnaround of the government, which is now more stable. This expansion can also be looked at by how Egypt has expanded in recent years with more resources that are available. According to export.gov, we can see with Egypt restoring its financial status as one of the best in the world partnering with the IMF and restoring its currency. This gives an investor some security and a feeling that they can invest in Egypt without losing value (2017). We can see that the primary economic boost is oil, with the next being services at 10%. Advice that would be given to investors in regards to Egypt would be to think about every aspect of this report such as the political, economic, climate and culture. I would advise an organization to conduct business in Egypt due to the low cost of labor and the willingness of the country to work with foreign investors. There is also a 30% tariff relief on foreign investors who conduct business with Egypt. Looking at the tarrif relief is a fascinating statistic for investors, and I would suggest depending on the kind of business that an organization wants to conduct this would be a country that is an interesting option. Egypt economy is changing as well as GDP as we can see from the charts below.
FDI Inflows by Country and Industry: Chart 1.2
Foreign Direct Investment 2014 2015 2016
FDI Inward Flow (million USD) 4,612 6,925 8,107
FDI Stock (million USD) 87,485 94,307 102,324
Number of Greenfield Investments*** 59 66 79
FDI Inwards (in % of GFCF****) 12.1 15.3 16.2
FDI Stock (in % of GDP) 28.6 28.4 30.8
Reference: EGYPT: FOREIGN INVESTMENT, https://en.portal.santandertrade.com/establish-overseas/egypt/foreign-investmentMain Investing Countries 2016-2017, in %
Saudi Arabia 2.6
Main Invested Sectors 2016-2017, in %
Oil sector 52.9
Reference: EGYPT: FOREIGN INVESTMENT, https://en.portal.santandertrade.com/establish-overseas/egypt/foreign-investment
Significant Issues Faced by Egypt. Some of the significant problems that Egypt face are obesity, as well as one that is very concerning to investors which are political corruption. Knowing this is an issue an investor must be prepared to deal with issues that may arise from political corruption in the country. Poverty is another concern in Egypt, where the rich is in a class by themselves while there is an underlying poverty problem. This is another concern for investors; if the poverty level is high, this means that people cannot spend as they would like to spend. They are fighting poverty and trying to support their families.
Additionally, if investors are looking at putting new business such as stores or markets, this is something that must be taken into consideration. If investors are looking for other ways of conducting business such as labor or supplies, this may be the best plan, because of the cheap pricing of labor and supplies. Moreover, Egypt also faces problems such as the issue with the dryness and the dependency on the Nile River, with more and more people moving along the river, this is causing a significant issue with the river starting to see a shortage. A problem with dryness in the country and the dependency on the river as a water supply is becoming more of an issue today.
The Characteristics of Egypt and The United States of America. If we look at the chart provided below according to the Hofstede model, we can see that Egypt has more of a power identity than in the United States of America. This comes from the Muslim culture where women are not as equal as men in the country. Whereas in the U.S women have more freedom and can have the independence to work, and be more of equals with their male counterparts. Individualism takes on a new meaning when it comes to Egypt than America as we can see from the chart below according to the Hofstede model. Where America think of the individual over the benefit of the group, we can see this with America ranking at 91%. Whereas, Egypt tends to come together and dictate things according to what is best for the group.
Furthermore, we can see that both countries are not too far off in masculinity in the country, but there are still differences in the way the two societies values things. In Egypt, they are more in the value of life such as quality and caring, whereas we will see that America is more driven by competition, success and achieving goals. Egypt does not like the uncertainty of the future or other things, thus leaving this society to be a strict society with strict rules and guidelines, as with America they do not put much stress into not knowing what the future may have in store.
Moreover, The U.S plans and prepares for the future as we can look at their score of 26 on the long-term orientation, which is still low on the scale, but it shows that America continues to strive for better education, preparedness, and change. Egypt is more traditional and does not focus mainly on change, but tradition and values while looking at new things with skepticism and searching for the truth.
Hofstede model: Chart 1.3
Color code:United States of AmericaEgypt
Reference: Country Comparison, https://www.hofstede-insights.com/country-comparison/egypt,the-usa/
As we look at the effects culture has on a country, we can see that a difference in culture can directly impact business relations, and this is why understanding another country culture is essential. Having a cultural awareness and being cultural intelligent in countries that organizations are planning on conducting business with is vital to the success of the mission. It is also essential to the human resource department in several aspects. We have seen that throughout this country analysis.
Furthermore, understanding the overall political structure is essential in understanding how the country conducts business and how the government plays a role in this process. We have seen how a corrupt government can affect the direct outcome of business ventures as well as how the government can drive foreign investors to invest by making things look more interesting to them. This analysis has shown how Egypt can be an interesting country to conduct business within today’s society, with the low cost of products, manufacturing, and labor, while the country benefits from the export of oil. As this country analysis shows that foreign organizations can benefit off of these aspects of Egypt, where profits will rise due to the low cost of manufacturing, and labor. It also shows how Egypt’s economy is struggling in other areas outside of oil export.
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Press, A. (2018). BBC NEWS. Retrieved from Egypt profile – Timeline: https://www.bbc.com/news/world-africa-13315719
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