The University of Manchester Manchester Business School: Real Estate Industry in Egypt

The University Of Manchester
Manchester Business School
Real Estate Industry in Egypt

SEGMENTATION, TARGETING, AND
POSITIONING APPROACH
HASSAN EMAM
7215565
(THIS PROJECT IS SUBMITTED IN PARTIAL FULFILMENT OF THE

REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS
ADMINISTRATION)
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Abstract
Due to the increasing importance of housing in general and the emerging markets in
particular and the changing political, economical and social situations in Egypt. This
report is investigating the relevance of marketing literature on the housing industry in
Egypt. The report will view the literature of the housing segmentation using the various
methods of segmentation and debates on this issue. Then will review other literature
related to targeting and positioning products in the market. The industry analysis tools
that will be used are then reviewed in brief. Then the report will investigate the overall
Egyptian market using PEST analysis. This overall analysis will then be narrowed to the
housing and construction industry in Egypt.
The report will then analyse the interviews responses and analyze them from each
segment separately with focus on highlighting the variables and reasons for responses.
Then conclusion and recommendations will be demonstrated using the information from
the data analysis along with the literature. The recommendations will be for each segment
separate and a final succinctly management recommendation is then summing up.
The principal findings that were found that the segments needs are varying considerably
from one segment to another. This supports the literature debates and assists the
organisation to focus on their target segment. The focus will help improving the
performance and reduce wastes which will subsequently increase the customer value for
money.
Acknowledgement
I would like to record my thanks and appreciation for the effort, support, direction and
assistance I received from many people throughout the MBA program whom enabled me
to reach this final stage.
 I would like to thank foremost Dr. Rudolf Sinkovics for his guidance and patience
in providing me with his knowledge and direction through the various stages of
the project
 Secondly I would like to thank all MBSW staff in the UAE and the support team
in the UK especially the project team for their continuous guidance and
responsiveness.
 My family (my mother, father, and my two sisters) for their support and for
inspiring and motivating me to finish the project that I started.
 Special thanks also go to friends who supported me with additional knowledge,

and guided me through the project.
TABLE OF CONTENTS
1 INTRODUCTION....................................................................................1
1.1 PROBLEM STATEMENT...........................................................................................................3
2 LITERATURE REVIEW........................................................................4
2.1 SEGMENTATION......................................................................................................................5
2.1.1 DEFINING SEGMENTS............................................................................................................5
2.1.2 SEGMENTS DESCRIPTION......................................................................................................6
2.1.3 EVALUATING SEGMENTS ATTRACTIVENESS..........................................................................7
2.1.4 SEGMENTS SELECTION STRATEGY........................................................................................9
2.2 TARGETING CUSTOMERS.....................................................................................................11
2.3 POSITIONING.........................................................................................................................12
3 INDUSTRY ANALYSIS TOOLS.........................................................17
3.1 PORTER GENERIC STRATEGIES...........................................................................................17

3.2 BCG ENVIRONMENTS MATRIX...........................................................................................18
3.3 SPACE ANALYSIS................................................................................................................19
3.4 PORTER’S FIVE FORCES SHAPING STRATEGY....................................................................20
3.5 COMBINING THE FRAMEWORKS..........................................................................................20
4 MARKET ANALYSIS...........................................................................21
4.1 METHODOLOGY....................................................................................................................21
4.1.1 PRIMARY RESEARCH...........................................................................................................21
4.1.2 SECONDARY RESEARCH:.....................................................................................................21
4.1.3 POPULATION........................................................................................................................22
4.1.4 SAMPLING...........................................................................................................................23
4.1.5 DATA COLLECTION STRATEGY...........................................................................................25
4.2 ECONOMICAL........................................................................................................................26
4.3 POLITICAL.............................................................................................................................29
4.4 SOCIAL ENVIRONMENT........................................................................................................31
4.5 TECHNOLOGICAL ENVIRONMENT.......................................................................................34
4.6 THE CONSTRUCTION INDUSTRY IN EGYPT AN OVERVIEW.................................................35
4.6.1 THE MICRO ECONOMICS.....................................................................................................35
4.6.2 DEMAND AND SUPPLY........................................................................................................36
4.6.3 THE MACRO ECONOMY......................................................................................................38
5 MARKET MECHANISMS (CURRENT PRACTICE)..................... 39
5.1 THE LOW INCOME SEGMENT...............................................................................................40

5.1.1 CUSTOMERS DESCRIPTION..................................................................................................40
5.1.2 DESCRIBING SEGMENT........................................................................................................41
5.1.3 INTERVIEW RESULTS ANALYSIS..........................................................................................41
5.2 MIDDLE INCOME SEGMENT.................................................................................................44
5.2.1 CUSTOMER DESCRIPTION....................................................................................................44
5.2.2 DESCRIBING THE SEGMENT.................................................................................................45
5.2.3 INTERVIEW RESULT ANALYSIS...........................................................................................45
5.3 UPPER-MIDDLE AND HIGH INCOME SEGMENT..................................................................47
5.3.1 CUSTOMER DESCRIPTION....................................................................................................47
5.3.2 DESCRIBING THE SEGMENT.................................................................................................47
5.3.3 INTERVIEW RESULT ANALYSIS...........................................................................................48
6 CONCLUSION & RECOMMENDATIONS...................................... 49
6.1 LOW-INCOME HOUSING SEGMENT.......................................................................................51

6.2 MIDDLE-INCOME HOUSING SEGMENT.................................................................................54
6.3 UPPER MIDDLE & HIGH INCOME HOUSING SEGMENT.......................................................56
6.4 MANAGEMENT RECOMMENDATION....................................................................................57
7 REFERENCES.......................................................................................58
Appendix A: Questionnaire..........................................................................I
1 - Introduction
1 Introduction
The housing industry is of considerable importance to people, which is derived from its
contribution to countries economy and social well-being. This contribution impacts the
four sources of capital defined by Pearce (2003) which are physical capital, human
capital, natural capital, and social capital. The economic contribution of construction
activities varies from one country to another for example; it was at 4% in the UK and
reaching to 7% in the United Arab Emirates in 2004. These figures for contribution are
based on a narrow definition of the construction activities as on-site activities.
The aforementioned importance of housing motivated scholars to study the industry and
analyze it. Scholars found that the housing market cannot be considered as a single
homogeneous demand. There are different needs and expectation from different
customers. They then developed different approaches to segment these demands to
different homogeneous groups that have the same expectations and demand. This
approach it helping organisations to identify the different needs for different segments.
The organisations can then assess the requirements of each segment then compare and
contrast with their technical abilities and resources and decide on their target customers.
The decision is then used for the organisation to develop their marketing mix for the
products they will offer. The whole process is called segmentation, targeting and
positioning (STP).
The Egyptian market is a large market with a population of more than 80 million of
population. The nature of this Egyptian market as an emerging one is adding
attractiveness to the investment in such a market especially in the housing industry. The
attractiveness in the housing industry is coming from the gap between the demand and
supply as a main point. The other important point is the low average age where the
percentage of young citizens is much higher than older ones. This will subsequently mean
increase in demand in the future. Moreover, the political situation in Egypt has recently
1
1 - Introduction
changed after a revolution took place in 25th January 2011, and there are great
expectations for the country economic and political future.
This report will commence by the literature review in chapter 2. The literature review
will begin by exploring the different literature and debates about the segmentation
importance and the market segmentation for housing industry, followed by covering the
literature for segment description and evaluating their attractiveness. The literature will
then review the different measures of targeting strategy and assess the recommended
cases for different strategies. The last portion of the literature review will be focusing on
the positioning strategy and how to create a position through different approaches from
the literature. The report will then proceed in chapter 3 identifying the analysis tools used
in the report. The tools discussed are Porter five forces, SPACE analysis, BCG
environmental matrix, and Porter genetic strategy.
The report will then move to country focus analysis. In chapter 4 it will introduce the
methodology used for data collection and analysis. Then a complete Political, Social,
Economical, and Technological analysis will be carried out for the Egyptian market. The
last part of the Chapter will focus on the construction industry in Egypt. This part will
overview the Macro and micro economy and the demand and supply. The report will then
move to chapter 5 which will analyse the different responses of each segment. The
analysis will be a descriptive analysis. The conclusion section will then use the
information provided in the previous chapter and uses the analysis tools to build the final
managerial recommendation.
2
1 - Introduction
1.1 Problem Statement
The perceived values are exploring the applicability of the modern management theories
to the construction industry in emerging markets like the Egyptian market. Developing
the existing theories to enhance the strategic positioning of existing construction firms or
new entrants will be explored. This will help with understanding the market mechanisms
and how that can be developed and/or penetrated. Moreover, the report will explore the
opportunities and threats for investment in this particular sector in such an emerging
market. The expected outcome will be a strategy for investment in different segments.
3
2 - Literature Review
2 Literature Review
The marketing strategies moved from sales approach to market approach. The sales
approach is that firms produce what they are good in producing and selling through
extensive sales campaigns this is called push approach. The market approach is a pull
rather than push approach. The pull approach, the firm produces the products and/or
services according to the customers need. The market approach is customer oriented; this
orientation increases the added value for the customer by eliminating wastes. Wastes are
the product or service features that are not needed by the customer, and if these features
are added to the product the customer pays even though they are not required. The
marketing strategy formulation in general consists of four processes these are:
 Understanding customer values

 Creating the values
 Delivering the values
 Communicating values
Sales versus marketing perspective, Dikmen et al. (2005)
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2.1 Segmentation
2.1.1 Defining Segments
The adaptation of the marketing approach as debated by Dikmen et al. (2005) requires a
clear understanding of the market and the customers. Kotler et al. (1999) emphasised on
segmenting the market to homogenous groups that have the same needs. Housing market
segmentation is a debatable subject by scholars to date. The housing segments can be
defined using different methods as argued by scholars. Boursa et al. (2003) argued that
the selection of segmentation methodology depends on the use why it was carried out.
The main areas that segmentation can be used for predicting prices, setting marketing
strategy, and understanding market structure. O’Sullivan & Gibb (2003) identified three
main dimensions for housing which are immobility, durability, and heterogeneity. The
spatial immobility means that attributes that are related to the location is inherent to the
location where the house is located. These attributes can be socio-economics of
neighbourhoods, relatives, friends, and accessibility to various desired destinations
O’Sullivan (2003). The second characteristic is houses are durable; they are also a
considerable investment for buyers that can involve high mortgage borrowing or saving
spending. The heterogeneity is the variation in the characteristics of the houses as size,
exteriors, and interiors.
The approach for housing segmentation is debated by the scholars. There is no agreed or
best practice on the segmentation. There were arguments that houses in the same
topographic boundary possess the same characteristics (Goodman & Thibodeau, 1998;
Gallet, 2002). This classification considers houses that either having geographical
contiguous or not. Meanwhile, the prices of housing with similar attributes do not have
considerable difference within the same segment but will vary in price with others
(O’Sullivan, 2003).
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Others, emphasized the importance of the quality of the house will be the discrimination
bases for segments (O’Sullivan & Gibb, 2003). Furthermore, some groups of scholars
went to more complicated methods for segmentation where they used multiple tiers of
submarkets for segmenting the housing types. Due to the aforementioned debated and the
failure to have a consensus on the definition for the segmentation bases for housing
segments, the segments substantially varies (Islam, 2009).
Furthermore, there were debates on the housing customer segmentation variables.

Goodman and Thibodeau (1998) found correlation between income level and housing
ownership. He added also that the income level has a relationship with age, level of
education and job. Rosi and Shalay (1982) emphasized on the influence of demographic
characteristics of the customer on the selection of residence. The aforementioned
information demonstrates that housing can be segmented based on socio-economic,
demographics, and residential characteristics. The dependent variables used in this study
are low, middle, high income group. These variables were selected due to the findings of
Goodman & Thibodeau (1998) that argue that disposal income is significantly
influencing the demanded attributes.
2.1.2 Segments Description
After the market is segmented to homogenous segments, firms need to describe these
segments. There are two types of variable to describe a segment; these variables are
segmentation bases and segmentation descriptors.
Segmentation bases: are the variables describing the reason of different customers’
responses as their valuation, needs, or demands. Segmentation descriptors are the
variables identifying the segments to help marketers deliver the right offering to the right
customer. Descriptors varies they can be age, income, use of media, etc. depending on the
reason behind for conducting the segmentation.
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Soliman (1988) described the three market segments of the Egyptian market (Low
income, Middle income and high income housing). He classified the housing in Egypt to
formal housing and informal housing. The informal housing was then divided to semi-
informal and squatter housing. Soliman (1988) debated that squatter housing was
associated with the low income housing segment. Soliman (1988) defined the squatter
housing as the ones built on illegal land using informal construction methods.
Meanwhile, he defined the semi-informal as the houses built on legal land in informal
construction procedures. The semi-informal housing was argued to be for middle income
segment, while the formal housing was for the high income segment.
Housing system in Egypt, Soliman (1988)
2.1.3 Evaluating Segments attractiveness
After describing each of the segments, an evaluation has to be carried out in order to
investigate segments attractiveness. The evaluation starts with three main criterions.
Those are the size and growth, structural characteristics, and product-market fit.
7
Size and growth: this section will then be divided into two criterion, size and growth. The
aim of them is to identify the existing size of the segments and the potential growth of
each segment.
 Size: is identifying the current size of the market and the existing offering.
 Growth: forecasting the potential growth in segments by using forecasting tools
and historical data.
Structural Characteristics are the characteristics of the segments market. These
characteristics can be widely defined by competition, segments saturation, protectability,
environmental risk
 Competition: barriers to entry and exit, position of competitors, ability to retaliate
 Saturation: investigating the supply and demand relationship, if they are in
balance, demand exceeding supply, or supply exceeding demand and identifying
gaps in the segments that are not served or need more supply than existing
offerings.
 Protectability investigating the market protectability from different aspects such
as barriers to entry, patentability of products, government subsidization, and other
forms of protectability.
 Environment Risk: assessing the risks is crucial for investment. PEST analysis
can be carried out to assess the risks in the various segments.
Product-Market fit this criteria identify the degree of alignment of serving a particular
segments with the firm’s strategy and the ability of the firm to enter the segment.
 Fit with the strategy of the organisation

 Relationship with other segments synergy, cost interactions, image transfer,
cannibalization
 Profitability entry costs, margin levels, return on investment.
8
2.1.4 Segments Selection strategy
There are several targeting strategies that can be followed by firms. The following
targeting strategies describes the differences:
Single Segment targeting: also known as concentration strategy, this strategy is a focus
strategy on a single segment. It is usually implemented due to the resources constraints.
This strategy is for small firms with limited resources.
Selective specialization: also known as differentiation strategy, the strategy is based on

serving various segments with different marketing mixes.
Product specialization: the firm focus on a single product and tailor it to different market
segments
Market specialization: the strategy is to focus on serving a market segment and offering
different products to serve that segment.
Full market coverage: the firm covers the whole market. This strategy can be through
mass marketing of one product that fits with the whole market demand, or by
differentiating products that fits various segments.
If a firm wants to enter a market, the most attractive segment shall be targeted for market
penetration and market share growth then, other segments can be targeted. The targeting
process is a crucial part of the strategy formulation that is followed by positioning and
market mix formulation. It is crucial to target the best market segment(s) that fits the
organisation’s strategy to formulate the best possible strategy.
Freytag and Clarke (2001) proposed a framework for selection of segments to target. The
framework is based on investigating the potential of the segment in the future, the
forecast of the demand, the alignment with the organisation strategy, and the technical
9
ability to satisfy the demands. The following figure shows segments selection processes
as proposed by Freytag and Clarke (2001).
Segmentation Selection Process (Freytag and Clarke, 2001)
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2.2 Targeting Customers
The next step after segmenting and assessing different market segments is to select the
targeted segment(s). The organisation shall then decide the targeting strategy that will
highlight the approach of targeting customers. The customer targeting strategy is
influenced by the selection strategy. The targeting strategies can be concentrated
marketing, mass marketing, and multi-segment approach. Concentrated marketing is to
target a single market with a single product. The mass marketing is to ignore market
segments and target the overall market by offering a single product. While the multi-
segments approach is tailoring different products to fit different segments needs. The
housing segment cannot be dealt with by means of mass marketing. The products and
services marketing mix have to be customised to fit with the customer needs in the
targeted segment (Kotler et al, 1999). Customising the marketing mix to fit with the
customer needs and demand is the positioning. In order to position the product or service
to best fit the customer, the needs and demand for each segment have to be quantified.
The quantification of the needs and demands will occur through communication with the
segment customers (Dikmen et al., 2005).
It is crucial to reach targeted customers through various communication methods. Yavas

and colwell (1995) stated three approaches of housing marketing systems. The identified
systems were selling from the owner (FSBO- For Sale by Owner), selling through listing
with a multi listing service (MLS) broker, or listing with non-MLS broker. Tirtirogˆlu
(1996) concluded that the price of the brokerage can be passed to the buyer and he even
extended his debate that the price raise due to listing can even exceed the brokerage costs.
Zumpano et al. (2003) emphasized on the importance of the internet usage for housing
marketing. They also debated that the internet search reduces the transaction cost and
allows users to intensively search a wider variety. They also related the intense search
with the price range.
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2.3 Positioning
Kotler et al. define positioning as “A product's position is the way the product is defined
by consumers on important attributes“. The attributes that the consumers define the
products with can be quality, type of people using the product or service, strengths,
weaknesses, price, and any other characteristics valued by the consumers. Companies
have to manage and maintain positioning to successfully serve the targeted segment.
Ries and Trout (1981), suggested three different positioning alternatives, these
alternatives are:
1. Strengthening Brand Current position
2. Seeking new unoccupied position
3. Deposition or reposition the competition.
Strengthening Brand Current position

Positioning using brand linkage can be achieved through three types of brand linkage,
these are:
Linkage to product category
Linkage to customer segments
Linkage to relevant purchase occasion
Seeking new unoccupied position
“Look for the hole” is the suggested strategy. This strategy emphasize analyzing the
market demand and supply and highlight unoccupied areas that has a demand, then target
this particular area Kim and Mauborgne (2005) proposed a new strategic framework they
call it “Blue Ocean Strategy” while they consider the competition on the existing market
demand as “Red Ocean Strategy”. The word blue refers to the colour of the clear ocean
while the red refer to the ocean full of blood from the competition. The proposed
12
framework is to create a strategy canvas for the market supply. As shown in the figure.
The strategy canvas plots a value for each of the main features of the offerings.
The strategy canvas created is used to understand the market supply of various products
and services. In order to find unoccupied area four actions framework that propose to
investigate the factors to reduce, eliminate, create, and rose on the strategy canvas to
distinguish the company’s offering than competitors creating a blue ocean.
13
The following figure shows the Strategy Canvas after applying the four actions
framework to the US wine industry.
Deposition or reposition the competition
14
This strategy depends on psychology of positioning of a certain brand in the customer’s

mind. Ries and Trout (1981) debated that the repositioning can call for changes in
product name, price, or any other relevant issues that secure the brand position success.
Housing Positioning
The aforementioned positioning methods are related to adjusting the marketing mix to
create a distinguished market position. The housing marketing mix has different elements
that need to be adjusted to fit the requirements of the targeted segment. The product
element has three main characteristics as debated by O’Sullivan & Gibb (2003) those are
immobility, durability, and heterogeneity. Consequently, the product has to fit customer
needs in terms of size, interior design, exterior design, and the type of the property
(house, villa, apartment, etc.).
The price is the second element of the marketing mix. The pricing of housing has to be
matching with the abilities of the segment customer to pay. Moreover, the pricing
strategy has to consider the price elasticity of different segment and the successful
organisation will maximise the value for money. The financial arrangement in different
segments should also be considered where, some segments does not have access to
finance while others have easy access to finance (Everhart et al., 2006).
The Place is one of the curial criteria for positioning housings (Meen et al., 2003).
Neighbourhood and the accessibility to the public and private transport vary from one
segment to another. Moreover, customers in different segments valuate the importance of
accessibility to different public services in different approaches. Meet et al. (2003) also
added the social level and exclusion were criteria that differ among different segments.
The promotion as the fourth marketing segment element is considerably important to

reach target customers and communicate the created values to them. The customer
segmentation will differentiate customers in different segments. The communication
methods can then be obtained by surveying the customers in the market and investigating
the methods they use to find their housing deals. It was mentioned earlier the different
15
approaches for finding the housing deals through a broker, directly from the owner, or
through internet. Meanwhile, advertising expands communicating information by radio,
television, newspapers, internet, etc.
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3 - Industry Analysis
3 Industry Analysis Tools
The construction industry is a highly competitive industry, for an organization to succeed

it needs to gain competitive advantage. This section will define the tools used for
analysing the industry.
3.1 Porter Generic Strategies
Porter (1985) in his generic strategies defines two shapes of competitive advantages that
are cost leadership and differentiation as shown in the figure.
Figure. Porter’s Generic Strategies.
Porter’s suggested strategies for outperforming competitors are lower costs and
differentiation. The cost leadership McNutt (2008) identified five processes to achieve
cost leadership. The five processes are:
1- Identifying the economies of scale and scope
2- Focusing on achieving maximum average productivity.
3- Offering bonus and incentives related to productivity increase
4- Control more of the production costs by hedging the costs of material, wages, etc.
17
5- Differentiate between excess capacity and reserve capacity. Then reduce the
excess capacity to the minimum.
Porter (1985) defined the differentiation strategy as firms focusing to achieve uniqueness
in their offering within the industry. The firms uniqueness has to be valued by the
customers. Moreover, differentiator has to sustain their differentiation by continuous
differentiation process.
The third generic strategy is the focus where firms selects one or more segments to serve
and tailor their strategy to the selected segments by positioning (Porter, 1985). The focus
strategy can be cost focus or differentiation focus.
3.2 BCG Environments Matrix
In order to identify the firms strategy, the industry needs to be analyzed in order to
identify the best generic strategy the firm can adopt. The BCG Environments Matrix
(1989) proposed a framework in order to identify industry generic typology. The
framework is based on two criteria that are the number of approaches to achieve
competitive advantage and the impact of the competitive advantage.
The framework suggests characteristics for each of the four segments which are
fragmentated, stalemate, specialization, and volume environments. The characteristics for
each significantly vary in the approach to manage each of them.
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3.3 SPACE Analysis
By identifying the generic industry strategic typology, the organization can identify their
strategic posture by implementing SPACE analysis. The SPACE analysis is Strategic
Position and Action Evaluation. The SPACE is a framework that is used to identify the
strategic posture of organizations. There are four criterions to carry out a SPACE
analysis. These are firm financial strength and competitive advantage as internal to firm
and two external related to the industry. The industry related criteria are industry
attractiveness and environmental stability. The figure shows the SPACE analysis
diagram.
SPACE analysis diagram.
By plotting the figure the strategic posture can be identified from that SPACE analysis. It
can be one of the four (Aggressive, Competitive, Defensive, Conservative) or can be with
no clear direction. The important note that the strategic posture is dynamic rather being
static. It can change by changing the criteria.
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3.4 Porter’s Five forces Shaping strategy
Porter (1979) argued that there are five forces that shape the strategy in industries. These
five forces are Threats of new entrants, threats of substitutes, bargaining power of
suppliers, bargaining power of buyers, and the rivalry among existing competitors.
Organisations willing to compete in an industry have to consider these five forces. The
real estate industry in Egypt can be analysed using the five forces model.
Porter Five Forces diagram
3.5 Combining the Frameworks
The BCG Environments matrix helps identifying the generic typology of the industry.
The typology is interrelated to the strategic posture to be adopted by the company. The
strategic posture can be concluded from the characteristics of each industry type by using
Porter’s five forces. The combination of the frameworks will be used to analyze each of
the identified segments.
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4 - Market analysis
4 Market analysis
In this section of the report, the methodology for the research will be highlighted then a
country PEST analysis will be carried out.
4.1 Methodology
4.1.1 Primary Research
Data applicable to the market nature will be gathered from industry professionals and
customers. This will be achieved by interviewing construction senior management and
professionals and through a questionnaire to the customers and potential buyers
4.1.2 Secondary Research:
Techniques, analysis methods and general data about the companies involved with this
study will be gathered from information available in the public domain. The used sources
of information will be books and publication, government reports, information from the
internet, newspapers, magazines and journals’ articles. A sample list of the sources of
information is listed in the schedule below.
21
4 - Market analysis
# Title Author Type of Document Date of

publishing
1 Real Estate Overview Prime Research Report 2010
2 Housing Mechanisms Ahmed Soliman Paper 1988
in Egypt
3 Doing Business in World Bank Report 2010
the Arab World
4 Egypt’s Economy Ministry of Finance Internet Accessed 13
(Egypt) (http://www.mof.gov.eg) Nov 2010
5 Egyptian Population State Information Publication 2010
Service
www.sis.gov.eg
6 Egypt Vital Statistics Ministry of Trading Publication 2009
& Key indicators
7 Real Estate Reality Al Ahram Weekly Newspaper 30 Dec 2009
4.1.3 Population
The selected population for the study was focused on Egyptian citizens. The population
excluded the citizens living in rural areas. The exclusion was for the reason that in rural
areas the citizens build there own houses from preliminary building materials. There was
another exclusion based on age. The people under age of 18 and above 70 were excluded
from the survey because; they were not expected to purchase houses. The population
included Egyptians expatriates, they are estimated to be around seven millions and their
contribution through remittances to the Egyptian economy is considered to be the third
largest in the country revenues (www.almasryalyoum.com, accessed 12 March 2011).
22
4 - Market analysis
4.1.4 Sampling
The sampling method used for selecting the sample for interview was the simple random
sampling method (SRS). The sample is unbiased and did not exclude any of the potential
respondents. The number of responses was thirty out of more than sixty requests sent. To
ensure having an unbiased sample the sample included females as well as males, different
ages (within the specified range), different ranges of income (low, middle, and high
income), different employment status (self employed and employed) expatriates and local
residents. Therefore, the sample avoided being biased by these two measures
(randomness and including various criteria). The sample as compared to the population is
not a representative sample and more research efforts shall be considered to collect a
higher number of responses. Representation of the sample is illustrated in the following
graphs.
Age of Correspondents
17%
20%
63%
Less Than 30 30-45 46 65
Sample discrimination by age
23
4 - Market analysis
Gender
47%
53%
Male Female
Percentage of Males and Females of participants
Level of Income
23%
30%
47%
Low Income Middle Income High income
The Percentage of participants based on their level of income
24
4 - Market analysis
Working Status
10%
30%
60%
Working Abroad Working in Egypt Doesn't w ork
Sample distribution based on the work status
4.1.5 Data Collection Strategy
The data collection was carried out by two methods. The first was through personal
interviews where the interviewee was contacted by telephone or face to face interview.
The second method was through emails, in that method the interview questionnaire was
sent to the interviewee and responds were collected by email and through internet. The
challenges faced during the data collection processes especially in the second method (by
email) were language difficulties because, the interview questions were developed in
English and the country language is Arabic. The questions were translated in Arabic in
order to overcome these difficulties.
25
4 - Market analysis
4.2 Economical
The Egyptian government announced in the presidential election in 2005 an economical

and political reforming. The government proposed a strategic plan for the economical
reforming in the country. The plan is based on urging the private investment locally as
well as foreign investment to boost the economy. This will help reducing the
unemployment in the country that exceeded 10% of the working population.
The economical reforming efforts of the government started showing good indicators. In
2006 the GDP increase to 6.6% from 4.5% in 2005. The GDP kept increasing in 2007
and 2008 to reach 7.1% and 7.2%. The year 2008 the global credit crunch hit the world
that consequently affected the overall economic growth of the globe. Meanwhile, the
Egyptian growth continued unexpectedly at lower level then the previous years in 2009
reaching 4.7% (El-Shennawy et al., 2009).
Egyptian GDP
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
2004 2005 2006 2007 2008 2009
Series2 4.10% 4.50% 6.60% 7.10% 7.20% 4.70%
Egyptian GDP from Ministry of Planning (www.mop.gov.eg)
26
4 - Market analysis
The unemployment has changed with the GDP where the level of unemployment in 2004
was 10.32% it increased in 2005 to 11.24 then started reducing in the successive years to
reach 8.95% minimum in 2007. In 2008 the world’s credit crunch resulted in job cuts to
try sustaining businesses in the private sector. This leads to increasing the unemployment
to 10.6% in 2009.
Unemployment
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2004 2005 2006 2007 2008 2009
Unemployment 10.32% 11.24% 10.64% 8.95% 9.10% 10.60%
Rate of unemployment from State Information Service (www.sis.gov.eg)
The overall strategy as announced by the government is encouraging the private

investment and reducing the public ownership by means of privatization and encouraging
private investment. The economical figures of growth show good reforming efforts but
the inflation rates were extremely high. The available information for inflation was for
three years 2007, 2008, and 2009 where the inflation was 7.2%, 10.4%, and 19.1%
successively. This tremendous inflation that reached up to 19.1% is subsequently
affecting the cost of products and services. Moreover, it creates instability in the labour
market through continuous protests for increase in salaries.
The international financial corporation stated “Egypt was among the world’s 10 most
active reformers for the fourth time in 2008/09. It moved up in the global rankings on the
ease of doing business from 116 to 106 among 183 economies. Egypt made business
27
4 - Market analysis
start-up less costly and accelerated the construction permitting process by eliminating
most pre-approvals. It expanded the range of information available from the private credit
bureau. And it created commercial courts to speed up the resolution of contract disputes.”
(World Bank, 2010)
The mortgage finance was first introduced in Egypt in 2002. The law stated a maximum
finance of three times the annual income for the applicant. The mortgage finance industry
still needs to develop further to look more attractive to customers or potential borrower.
There is no evidence of Egyptians preferring to takeout mortgages as their financing
instrument to finance their housing purchase. This is due to three main reasons; the first is
the high interest rate that is varying from 13 to 14 percent. The second reason is the
amount of loan being capped by three times the annual income and thus excluding the
low income customers from finding apartments with that amount. The third reason is a
social reason that is due to the religious nature of the people. This religious nature
restricted the usage of loans and paying interest due to the religion leaders declaring it a
taboo. These are consequences for the lack of competition in this industry. The financial
institutes that provide the service are limited to thirteen lenders only. The Egyptian
markets that contain 74 millions of population need more lenders to generate competition
and refine the offering to march with the customers’ needs and conditions. (Ministry of
finance, www.mof.gov.eg [accessed 12, October 2010])
28
4 - Market analysis
4.3 Political
The political system in Egypt is a republic system. The president is elected then he
nominates the prime minister who nominates various ministers that has to be accepted by
the parliament. The parliament is called the people’s assembly consists of 444 elected
members and 10 members as nominated by the president. The last president is Hosni
Mubarak, who ruled the country since 1981 after the assassination of the ex-president
Anwar Alsadat. The former ruling party is the National Democratic Party (NDP) that has
been the ruling party since 1981. The majority of the parliament members were from the
ruling party. The ruling party has enforced an emergency law for the last 30 years.
Due to international pressure in the last decade, the Egyptian government has started
reforming the political system. The presidential election was first introduced in 2005.
Prior to 2005 there was a referendum. The advancement of technology has affected the
political system as well, through the media and internet. The government has no control
over the overseas media since the installation of satellites and the internet. Consequently
the government and the political system gave substantial freedom to the media.
Recently, prior to the presidential election, Egyptians protesting trend is increasing daily.
There are different goals for protesters varying from political to social and financial
requests. The political protesters have identified their request for some changes required
to reforming the current political system in Egypt. Most of the opposition politicians are
having the same list of required changes. Some of these requirements are:
 To stop using the emergency law.
 The full supervision and power by judges for running the elections
 Supervising the elections by the social and international communities.
 Allow for equal opportunities in all elections in general and the presidential
elections in particular.
 Allowing Egyptians abroad to participate in the elections.
In order to satisfy these requirements, three articles of the constitution need to be
changed. The three articles are number 76, 77, and 88. The overall political situation in
29
4 - Market analysis
Egypt is instable and especially after ex-director general of IAEA declared that he would
run in the presidential elections. The governing party declared that the current
constitution will not allow Mr. Al Baradie to run the presidential elections as an
independent without satisfying some conditions “which are not possible to satisfy” stated
Dr. Al Baradie.
The political movement increased recently and wide protests commenced by 25th January
2011. These protests lead to the aforesaid changes to take place. The peaceful protests in
Egypt resulted in President Hosni Mubarak to step-down and assign the high council of
Egyptian armed forces (Military) to manage the country. The armed forces declared their
intention to protect the revolution and implement all the requirements. The January 2011
revolution requirements were; Hosni Mubarak to step-down, eliminating the corruption in
the country, empowering the law, and transition to democracy. The high council of armed
forces translated their declaration by implementing changes to the constitution, and
allowing filing court cases against the corrupted ex-government related figures such as
ministers and other public figures in the ruling party.
On the foreign politics, Egypt strategic location plays an important role in its foreign
policies. The Middle-East is having a lot of political problems such as Israel-Arab dispute
where most of the Arab countries have disputes with Israel. Egypt is the only Arab
country that signed a peace agreement with Israel in Camp David since 1978. These
conditions put Egypt in a position to facilitate negotiations. This make a well established
foreign policy, but Egypt has disputes with some countries like Iran and recently the river
Nile countries. The countries of the river Nile want to change the agreement of sharing
the water resources of the Nile. Egypt stated that this is a vital strategic issue and any
changes to the agreement have to be signed by all concerned countries. The dispute is
increasing and some countries as Ethiopia stated they will sign the agreement without
Egyptian and Sudanese signatures. If this happens, it will affect the water resources in
Egypt tremendously. The anticipated reduction will be 55.5 billion cubic meter per
annum.
30
4 - Market analysis
4.4 Social Environment
The Egyptian social system consists of three main segments. Those segments are the
lower, middle and high class. During the economical growth in Egypt, the gap between
the classes started increasing. The lowest (poorest class in the country) are even
struggling to survive. Meanwhile, the medium class of employees with high education is
suffering unemployment and low income employment. That added more pressure on the
medium class moving it to diminish from the Egyptian social life. The higher class
exploited the economical growth to increase their wealth with no regulations for
corporate social responsibility. Marotta et al. (2011) debated that 55 percent of the
Egyptians are living near poverty.
The consequences of the aforementioned social environment lead to migration of the well
educated and qualified mid-class professionals to work abroad, providing their families
the financial support (Amin, 2000). Moreover, the lower and mid-class are criticizing the
business men and the government regularly for suspecting corruption and conflict of
interest. During the last years it is quite clear the Egyptian lower and mid-class are facing
considerable amount of difficulties that they showed by frequent demonstrations. The
social life in Egypt is highly religious. The citizens appreciate and respect the religion in
most of their daily transactions.
The Egyptian society is consisting of two religious groups those are Muslims and
Christians. The Muslims are the majority with around 90 percent of the population. The
majority of the populations live near the banks of the Nile River consuming an area that
is almost 4% of the total area of the country. Half of the population lives in urban areas.
The population distribution to ages is shown in the figure. The figures show 21% of the
population between 5 and 15; these are going to the workforce in the next two decades.
The average age of marriage according to survey by CAPMAS is around 25.7 years.
31
4 - Market analysis
Population Distribution by Age
60.00%
49.76%
50.00%
40.00%
30.00%
21.07%
20.00%
12.34%
9.72%
10.00% 6.24%
0.86%
0.00%
1< 1-5 5-15 15-45 45-60 >60
Distribution of Population by Age.
The wages in the Egyptian market are considerably low compared to other countries the
figure demonstrate the minimum wage comparison between number of countries (ILO,
2008). This figures show an Egyptian minimum wage equivalent to 12 percent of the
minimum wage in the UK. The government thinks about it as a competitive advantage
but they were proved wrong. Due to the continuous dissatisfied feeling of workers of
their struggle to survive with the minimum humankind needs as food, shelter, and cloth,
worker went to protest in an increasing trend demanding to raise the minimum wage in
the country to an acceptable level. One of the main demands of the recent revolution
happened in Egypt was the social justice and restructuring the distribution of income.
32
4 - Market analysis
Comparison of level of income in different countries (ILO, 2008).
33
4 - Market analysis
4.5 Technological Environment
The technological awareness and application in the country as an overall is increasing.

The investments in the technology sector are increasing in value and importance and
specially after assigning the minister of communications and technology as the Egyptian
prime minister.
The increase in the technology market influenced in some instants the construction
industry. Major project and contractors use up to date technology to facilitate the
construction processes. Meanwhile, due to the cheap wages of labours, some works are
more economical to be executed manually causing organizations not to acquire these
technologies, deeming them unnecessary.
The technological environment in Egypt affected the political and economical

environments by different means. It was claimed that the Egyptian revolution which took
place on 25th January 2011, was the first electronic revolution. The protest started and
was organised on Facebook and then implemented in the streets.
34
4 - Market analysis
4.6 The construction industry in Egypt an overview
4.6.1 The Micro Economics
The Ministry of Economical development in Egypt showed the contribution of each

sector to the GDP. The pie chart shows the construction contributed by 4% and the Real-
estate by 3%, combined together 7% to the GDP of the country that is considered to be a
considerably high amount.
The contribution in GDP by different sectors (Elshennawy, 2009)
The construction industry has been reforming in the last few years, and the contribution
of the private sector to the growth was urged by the government. The figure below shows
the reduction of the public sector contribution to the construction industry from 40% to
around 25%. Meanwhile the private sector contribution increased from 60% to 75% to
the whole construction industry. That was a result of the government privatization
programme as mentioned earlier in this report.
35
4 - Market analysis
Private Vs. Public Sector contribution to Construction Activities
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Public % 40.29% 28.09% 19.62% 25.54% 26.55% 29.79% 10.16% 19.27% 19.90% 24.49%
Private % 59.71% 71.91% 80.38% 74.46% 73.45% 70.21% 89.84% 80.73% 80.10% 75.51%
Shares of private and public sector in construction activities (Ministry of Planning)
Due to the continuous increase in the construction activities, the materials prices were
subsequently increased due to the high demand prior to the credit crunch. After the credit
crunch the world demand has reduced which facilitated the reduction of the prices of
construction material.
4.6.2 Demand and Supply
Further to the demographic analysis of the population mentioned earlier in this report, the
demand increase is predicted quite easily due to the high percentage of young and middle
age population that are around 53% of the total population are in the age range between 5
and 25 years old (Ministry of Investment, 2009). According to the USAID prime
estimate, the demand will increase by around 37% by the year 2014. The demand
increase estimate is shown in the figure.
36
4 - Market analysis
The housing demand per segments (Prime Research, 2010)
Due to the increase in demand, the prices increase. That price increase urges new entrants
to enter the competition for exploiting the prices increase to achieve high profits. Lately,
the focus in the construction of the high and upper-middle income housing segment was
increased. The supply in this segment tremendously increased and expected to exceed the
demand by 2014 as forecasted by USAID prime estimates. Meanwhile, other segments
will still show a gap between the supply and demand.
The demand and supply gap per segment (Prime Research, 2010)
37
4 - Market analysis
4.6.3 The Macro Economy
According to prime research report and the interviews conducted with construction
professionals the market has reformed over the past few years producing three main
segments in the housing sector. These segments are the low, mid, and ‘upper-middle and
higher’ income segments. The three segments has different structures (Prime Research,
2010) the low-income segments competition is classified as perfect competition due to
the high number of suppliers, the middle income is classified as monopolistic competition
were there are few suppliers but they do not have the control over the prices. The report
also considered the upper-middle and high income as an oligopoly competition.
38
5 – Market Mechanisms
5 Market Mechanisms (Current Practice)
This section will reflect the current practice in the Egyptian real-estate and construction
sectors in Egypt. The reflection is based on interviewing customers from different
segments and developers. The interview questions for customers were investigating
different variables where it starts with trying to identify different segments in the market
and the criteria used to discriminate the segments. The interview question then explore
varies demands for the different segments including the buying behaviour and
experience. The last section is about the research methods for making the buy decision.
Segments
The results of the interviews show that customers can be segmented to three main
segments. These segments are low income, middle class, and upper middle and high
class. These segments were referred to earlier in the segmenting the market section. The
interview shows results matching the cited references for market segmentation.
Meanwhile, some notes need to be consider further. The upper middle and high income
segment can be further broken down to individual segments. In this report it was decided
to combine both in the view that the requirements and characteristic are to considerable
extent matching.
39
5.1 The low income segment
5.1.1 Customers Description
The customers in this segment are from the less educated customers. These customers are
described by having lower education than a university degree. Meanwhile, in the
interview conducted, it was noticed that some of the highly educated are considered as
low income. Their level of earning is considerably low compared to their qualifications.
The deeper analysis of the responses demonstrated that these highly educated low income
earners are from females. This explains the social injustice and clear discrimination in job
positions based on gender. The responses from them was varying from the other segment
customers and tending to be more towards the middle income segment rather than the low
income. The explanation of such results is that in the Egyptian culture and tradition the
males are responsible for all types of expenditure and the women depend on them for the
arrangements of the housing. Despite the fact of the low income, they insist in
maintaining the social level. It was also clearly noticed that all the low income segment
customers are working in Egypt and it was not recorded of any expatriates with low
income. Therefore the customers of these segments can be described as customers having
low income and low level of education.
Low Income Segment Sample Education
13%
37%
25%
25%
illetrate Diploma University Grad Postgrad
40
5.1.2 Describing segment
The low income housing segment is a segment having a high potential due to the fact it
has the highest demand in the market that is estimated by 256,212 units in 2010 (Prime
research, 2010). The demand in the segment is also expected to increase reaching
287,390 units by 2014 (Prime Research, 2010). The Prime research (2010) report
forecasted an increase in the demand and supply gap from 183,043 units in 2010 to
202,121 units by 2014.
The competition nature of the segment is considered as perfect competition. There are no
barriers to entry or barriers to exit. The competition is between many small firms that are
producing almost homogenous product. The competitors have no influence on the prices
and the profit margins are lower than other segments. Moreover, the government
subsidies the low income housing but the subsidisation is granted to the customers. The
legal form of the low income housing is considered to be informal (squatter housing) as
debated by Soliman (1989). The informal housing is built on illegal occupation of
publicly owned land. This housing type is usually built by self-help techniques or without
any standards. The reason behind that is the limited financial resource of the customers of
the segment.
5.1.3 Interview Results analysis
The customers from this segment were interviewed and their responses to the questions
will be analysed in this section. Total numbers of customers interviewed with low income
were 8. The percentage of postgraduates from the overall was 37.5 %. The 37.5 percent
are divided to 25 percent females and 12.5 percent males. The interviewed customer had
63.5 percent married and 37.5 percent single. Moreover, all the low income interviewed
customers were working in Egypt and none was reported as expatriates. This is believed
to be as a result of the lack of justice for the income distribution as a result of corruption
as debated by Tanzi (2006). The requirements for the low income segment varied on
other criteria as stated earlier based on their social level and level of education. The
females earning low income with a high post-graduate degree are tending to be more
41
towards the middle-income segment. The following section will analyse the interview
outcomes.
The low income interviewed customers demonstrated that the majority did not purchase a
property before the response showed 62.5 percent never purchased property and 37.5
percent had previous purchases. The interviewees showed consensus of purchasing a
property in the future, and the reason behind that was mainly for securing the future.
Only 37.5 percent of the low income interviewees demonstrated their interest for
purchasing more than one property in the future while, 63.5 percent declared that they
have no intention to purchase more than one property. This result is due to the scarcity of
financial resources for the customers of this segment. Meanwhile, the 37.5 percent
showed their interest in purchasing more than one apartment were all the highly educated
females. The preferences of the low income housing came in the order of security, price,
and size of the property, transport accessibility, and finishes quality. The results were in
contrary to the expectation where, it was expected that the first priority will be for the
price. Further investigation efforts were spent to explore the reasons behind this result.
The finding from these investigations is that, most of the low income housings in Egypt
are informal housing. Soliman (1989) stated that the low income housing is also squatter
and does not comply with the urban planning and legislation of the country. Moreover,
this segment housing is usually built on a land owned by the state without approval. All
these factors create insecurity for the resident of these housings. The willingness to pay
of the low income housing showed 62.5 percent willing to pay less than 100,000 EGP
while 37.5 willing to pay more.
The Interviewee Response to historical purchases
38%
62%
Purchased a property Never Purchased
42
The preferred financial arrangements were 75 percent of the respondents want to pay
down payment and then pay instalments during the construction on short-term with no
interest. The other 25 percent preferred to pay the full amount in cash. The mortgage
finance was not an option for any of the respondents. This was analysed as a result of two
main issues. The first issue is the low income of the segments customers that will not
grant them access to finance. The second is due to religious their religious beliefs, where
some people believe that mortgage and bank loans are taboos and against their religious
view. The responses to the preferred size resulted in 25 percent prefer two bedrooms
apartments while 62.5 percent preferred 3 bedrooms and 12.5 percent prefer 4 bedrooms
apartment. The respondents had consensus on their preferred housing type where all
selected an apartment type. Meanwhile, the majority of 87.5 percent preferred to
purchase their property in the town an 12.5 percent considered purchasing their apartment
in new urban community. The last section which is related to the ways of searching for
the property, the responses showed the first preferences is through friends and relatives
followed by through newspaper than the last preference was for real estate brokers.
43
5.2 Middle Income segment
5.2.1 Customer Description
The customers in this segment are the highly educated professionals. These customers are
described by having high level of education as university degree or higher. The
respondents of the interview supported the aforementioned argument. The results
reflected that 92 percent of the middle-income interviewed finished a university degree or
higher post-graduate education. The interviewees were differentiated by their work status
and the results showed 50 percent were working expatriates, 42 percent working in
Egypt, and 8 percent studying. Regarding discrimination by age, 42 percent of the middle
income respondents were above 30 years and 58 percent were below 30 years. The
gender basis showed 53 percent males and 47 percent females.
Education for Middle Income Segment
7%
29%
64%
illetrate University Degree Post Grad
44
5.2.2 Describing the Segment
The middle income housing segment is growing and it more preferable than the low
income for its higher margins. The segment potentials for growth are high as illustrated
by the Prime Research (2010) report. The report forecast an increase in the gap between
demand and supply. The forecast for the gap in 2010 is 73,567 units while in 2014 it is
forecasted to reach up to 79,679. These figures support the arguments of the high
potential for this segment where the market can still accept new entrants and additional
supply. Moreover, by increasing the demand-supply gap the profit margin will
subsequently increase.
The competition among existing suppliers is considered as monopolistic competition as

debated by Prime Research (2010). The report detailed the competition nature by large
number of suppliers, weak control over the prices, and weak brand loyalty. The suppliers
can reduce prices in order to attract new customer. This price reduction might
subsequently reduce the potential profit margins. The middle income housing is
considered as semi-informal housing as debated by Soliman (1989). The semi-informal as
defined by Soliman (1989) is illegal housing built on legally owned land. The informality
in such case is a result of ignorance of the procedures and standards. Meanwhile, the
semi-informal housing usually has an occupation permit.
5.2.3 Interview Result Analysis
The interview results response showed common characteristics of the middle income
segment customers. The majority (92 percent) of the customers has a university degree or
higher. The married customers of the segment that owned their own property was 67
percent while 33 percent live with their family. The single middle income customers are
different where 87.5 percent live with family and 12.5 percent rent a property. The
response for the question whether the interviewee had purchased an apartment or not
resulted in, 87.5 percent never purchased a property while 12.5 purchased their own
property before. There was consensus for the preference of owning the property rather
45
than renting or leasing. The distinguishing question from the low income was the
planning to purchase more than one property. The response to this question resulted in 85
percent of the middle income customers planning to purchase more than one property
while 15 percent will not purchase more than one. The reasons behind planning several
purchases came in the following order “for investment”, “for children security”, “for
different uses as summer residence”, and for renting and getting a monthly income. These
results reflect the reality where the return of rent is not proportional with the amount of
investment used for the purchase. Meanwhile, property appreciation is considerably high
compared to any other investment. That explains the reasons behind focusing on the
investment side especially that there is no capital gain tax in Egypt. The main criteria that
the middle income customers are looking for are location, value for money, social level
of the neighbourhood, spatial configuration of the property, and size of the apartment. It
was clear that customer approach is towards value for money rather than price. They
accept to pay a premium to get more value. The customers of the segment again showed
consensus that the developer brand name does not matter. The average willingness to pay
for a property was between 400,000 to 600,000 EGP. The financing methods had a
variation between customer opinions where 57 percent wanted to pay a down payment
and continue the balance in instalments directly with no bank mortgage or loans, while
28.5 percent preferred to pay the full amount in cash and 14.5 percent preferred to pay
through mortgage finance. The location selected for living was 65 percent for living in
the town while 35 percent preferred to live in the new urban communities. The majority
who selected living in the new urban communities selected living in a villa or a house.
Unlike those selected living in the town their preference was living in an apartment. The
methods that customers uses to search for a property came in the following order, family
and friends, newspaper, internet, and finally real estate brokers.
46
5.3 Upper-Middle and High Income Segment
5.3.1 Customer Description
The customers in this segment are the highly educated professionals. These customers are
described by having high level of education as university degree or higher and they are
most likely in senior management level. The results reflected that 100 percent of the
high-income interviewed finished a university degree or higher post-graduate education.
The respondents were differentiated based on their age where, 62.5 percent were above
45 years and the 37.5 percent less than 30 years old. It was also noted that 75 percent of
the high income category were males while 25 percent only were females.
Education Level for Upper Middle and High Income
25%
75%
University Degree Postgrad
5.3.2 Describing the Segment
Unlike the low and middle income segments, the upper middle and high income segment
is forecasted to shrink. It is expected that the demand-supply gap will shrink from 811
units in 2010 to reach -155 units by 2014 (Prime Research, 2010). Meanwhile, the
47
competition in the segment is considered as oligopoly competition. The classification of

oligopoly was concluded because of, the few number of suppliers in this segment and
their high control over prices. The high control over prices will consequently allow for
maintaining high profit margins. The customers of the segment have low price elasticity.
However, beyond a certain level of price the customer can be lost. Moreover, customers
of this segment have high brand loyalty. The housing in this segment is mostly formal
housing (Soliman, 1989). The formal housing is developed by private organisation in the
form of individual or mass production and complies with all regulations, building codes
and procedures. The construction method can be conventional or prefabrication.
5.3.3 Interview Result Analysis
The customers of this segment have responded with 75 percent own their own house and
25 percent living with family. It was noted that the 25 percent living with family are all
single. The same percentages apply for the previous house purchases. Regarding the
preference to purchase or rent, the customers responses were 87.5 percent prefer
purchasing their property while 12.5 percent for renting. There was consensus on
purchasing more than a property by all customers of this segment. The reasons for
purchasing more than one property were for investment, followed by renting to get a
monthly income, then followed by purchasing for children, the last was use for different
purpose as a summer house. The criteria for selection were various but the top five
criteria selected by customers were in order location, value for money, neighbourhood,
availability of security, and the size of the property. The average willingness to pay for
the customers was between 400,000 and 600,000 EGP. The financing options were 25
percent for mortgage finance, 62.5 percent for financing through down payment and
instalments to the developer, and 12.5 percent for paying cash. The location of living was
75 percent for living in new urban communities while 25 percent living in town. The
customers selected to purchase a villa were 50 percent while purchasing a house and
apartments were equally 25 percent.
48
6 - Conclusion
6 Conclusion & Recommendations
The analysis of the Egyptian market in general resulted in favourable economical and
technological positions. The growth in GDP is an indicator to the continuous
improvement of the economy. Moreover, the percentage of employment in private sector
versus public sector is increasing in the favour of the private sector which demonstrates
the government efforts towards privatization. The technological analysis of the country
shows that good improvements and efforts are spent in this sector. Meanwhile, the social
and political positions are not in a good position.
The political disputes are rising clearly and opposition is against the government
decisions. The recent change in the political environment resulted in classifying the
country as unstable. Meanwhile, it is believed that the instability is occurring only in the
transitional period and not expected to continue.
The country’s social position is influencing the politicians by means of new laws, which
are against the privatisation strategy adopted by the Egyptian government. The changes
of laws continuously form an unfavourable business conditions and considerable level of
risks are added. The political changes that resulted from the protests and 25 th of January
revolution as called in Egypt calls for eliminating the corruption and empowering law.
The social conditions also influenced the political conditions and stability by means of
the unemployment, from the country analysis it is clearly demonstrating a high
percentage of unemployment. It is debated by the previous Egyptian government that the
only means to overcome the unemployment is growth. Moreover, they claim that the
reduction in unemployment will be significant if the growth rate reaches or exceeds the
7% per annum. The opposition debated the relation of the growth and unemployment;
they based their debates that government are attracting low employment demanding
investment. The low employment investments do not reduce the unemployment levels.
These sort of investments support the increase of wealth of wealthy and increase poverty
for poor as debated by Amin (2011).
49
6 - Conclusion
The unfavourable political and social positions lead to the protests against the ruling
regime. The protests resulted in Hosni Mubarak to step down and the army to take power
in order to make the necessary changes to the constitution in order to satisfy the
protesters requirements. The three main requirements of the revolution are change,
freedom, and social justice. The expected future is expected to change the demographic
distribution of the Egyptians. It is forecasted in the next years to improve the income and
social level of the low-income and the middle-income populations (Havrylyshyn, 2007).
Moreover, the expansion to the western deserts of Egypt to create new communities is
expected to be the upcoming focus of the government. On the economical side, it is
forecasted that the inflation will be high in the first few years after the revolution and the
value for the currency will decrease consequently, due to the high level of inflation and
the wages restructuring.
This section will conclude the findings for each of the segments described earlier in this
report. The summary will structure will be applying the SPACE, Five Forces, and BCG
environmental matrix frameworks individually. The frameworks analysis will then be
combined and recommendation will be developed.
50
6 - Conclusion
6.1 Low-income housing segment
The aforementioned information demonstrated that the low-income housing segment has
low number of differentiation methods that create low competitive advantage for the
customer. This description results that the segment is classified as stalemate segment
based on the BCG environments matrix discussed earlier. The main disadvantage is the
difficulties for customers of this sector to finance. The revolutionary changed recently
occurred in Egypt shows high potential to change the wages structure by reducing
corruption (Tanzi, 2006). Subsequently, that may result in enhancing the segment
attractiveness. The environmental stability is expected to increase due to the revolution
took place and succeeded to change the existing regime. Consequently, that is expected to
create more stability in the country.
The small scale of competitors and the high competition will urge the competitors to
match their rivals. The competitors matching will not allow for any sustainable
competitive advantage. It is concluded that the fragmented industry combining the
frameworks of five forces and SPACE will result in unclear strategic posture. Meanwhile,
in this particular case, it is recommended to adopt an aggressive strategic posture. The
reason behind the recommendation that the industry attractiveness is expected to increase
and the environmental stability as discussed earlier. Moreover, organisations adopting the
aggressive posture will invest more that will result in increasing the financial stability,
which will enforce the aggressive posture. There are other opportunities for the segment
51
6 - Conclusion
to create new offering such as new cities in the western desert. The western desert is
having high potential for growth by having considerable amount of underground water
and the land can be farmed easily. This means new community and expansion in the
country in addition to low price of land and housing. The low price of housing can be
achieved by means of using substitutes to the current construction methods as earthship
as discussed earlier and the work opportunities will be available to provide services to all
community. This can be promoted by making formal housing instead of the informal
existing arrangements which will add safety and security to the customers.
SPACE analysis for Low-income segment
The following figure is the recommended strategy canvas for the sector. This was
concluded from the results of the interviews with the customers of this segment.
52
Social Level
Spatial
configuration
Full time
Securit
Quite
Elevators
After Sale
Service
Green Areas
External
Appearance
53
Location
Finishes
Quality
Tranport
Low Income Strategy Canvas
access
Additional
Services
Luxury
Suggested Strategy Canvas for the Low Income segment
Price
Area
Security
6 - Conclusion
6 - Conclusion
6.2 Middle-income housing segment
The Middle-income segment consists of the middle class highly educated professionals.
There are various methods of differentiation with limited size of competitive advantage in
this segment. This will result in the classification of the segment as ‘fragmented’ segment
as BCG Environments matrix. The main focus in this sector as debated earlier is the value
for money. In order to achieve success in this segment, the organisations are
recommended to consider the waste reduction, quality management, focus on geographic
area, maintain good customer relationship, and high tactical abilities.
The demand and supply gap forecast is demonstrating increase in the gap. This shows the
segment attractiveness. The organisations competing in the segment are relatively small
and have no control over prices and their financial abilities are limited. The overall
economical conditions are favourable in the market as highlighted earlier. The
environmental stability is currently low due to the political situation in the country. It is
forecasted that the environmental position to improve shortly.
The suggested strategy to maintain in this segment is variable. It is suggested that during
the environmental instability the organisation to adopt defensive strategy. The strategy
shall be changed to aggressive when, the environmental stability changes to a better
position. In order to achieve the change, it is recommended that the organisation increase
its financial strength by additional investment.
54
6 - Conclusion
SPACE Analysis for Middle Income Segment
Middle Income Strategy Canvas

Luxury
configuration
Full time
Social Level
Value For
Tranport
Finishes
Elevators
Security
Additional
Green Areas
After Sale
Quite
Location
Appearance
Area
Securit
Services
Quality
access
Service
Money
External
Spatial
Suggested Strategy Canvas for the Middle Income segment
55
6 - Conclusion
6.3 Upper Middle & High income housing segment
The aforementioned information regarding the demand supply gap demonstrates that the
segment attractiveness for the upper middle and high income housing sector is
considerably low. In addition, there are barriers to entry and exit and the competition is
protected. Moreover, the recent revolution in Egypt asking for social justice and
restructuring income will reduce the demand on this specific segment. Therefore, it is not
recommended to invest in this segment. Meanwhile, the segment has to be monitored for
any changes during the continuous dynamic movement and changes in the Egyptian
social, political, and economical conditions
High Income Strategy Canvas

Luxury
Full time
configuration
Tranport
Social Level
Value for
Security
Finishes
Elevators
Additional
Appearance
Green Areas
Quite
Location
After Sale
Area
Securit
Services
Quality
access
Money
Service
External
Spatial
Suggested Strategy Canvas for the High Income segment
56
6 - Conclusion
6.4 Management Recommendation
The management of organisation seeking success shall monitor and analyse the overall
political, economical, social, and technological condition in the country. The
management shall also conduct an industry analysis using the strategic analysis tools as
the SPACE, five forces, and BCG environments matrix. These have to consider the
current situation and forecast scenarios for future by using what-if analyses techniques.
Then response for different scenarios is defined.
Moreover, the managements shall be market oriented rather than production oriented, in
order to satisfy the customers and maintain current customers. The market orientation
requires extensive marketing research and continuous communication from the customers
to get feedback and tailor the products to best fit the customer needs and demands. It is
clear from the study that customers have different needs and demands, this will
emphasize on the segmentation importance. So, the management shall segment the
market and select the target segment(s) based on segments attractiveness analysis. The
demands from each of the targeted segment are then plotted on strategy canvas diagram
and the marketing mix is tailored to best fir the segment’s customer needs. The
communication methods with the customers are concluded from the marketing research
of each segment by customer preferences for investigation.
57
References
7 References
Amin G., (2001), “Whatever Happened to the Egyptians? Changes in Egyptian Society
from 1950 to the Present”, American University Press, Cairo, Egypt (2001).
Aming G., (2011), “The Egyptian Revolution and the unemployments”, Al-Shorouk
newspaper, 25 February 2011. [Arabic]
Bourassa, S.C., Hamelink, F., Hoesli, M. and MacGregor, B.D. 1999. Defining Housing
Submarkets. Journal of Housing Economics 8(2), 160–83.
Bourassa, S.C., Hoesli, M. and Peng, V.S. 2003. Do Housing Submarkets Really Matter?
Journal of Housing Economics 12(1), 12–28.
Dikmen, I.; Birgonul, M. T.; Ozcenk, I. 2005. Marketing orientation in construction

firms: evidence from Turkish contractors, Building and Environment 40(2): 257−265.
El-Shennawy, A.; Elela, A.A.; El-Shal, A.; (2009), “Egypt Vital Statistics and Key
Indicators for Investment”, Ministry of Investment, Arab Republic of Egypt.
Freytag, P V., and Clarke, A. H. (2001), ‘Business to business segmentation’, Industrial

Marketing Management, 30, 6 (August), 473–86.
Havrylyshyn, O., (2007), “Fifteen Years of Transformation in the Post-Communist World

Rapid Reformers Outperformed Gradualists”, Center for Global Libertify & Prosperity,
Washington D.C.
ILO (2008), “Golbal Wage Report 2008”, International Labour Organization (2008).
Islam, Kazi Saiful and Asami, Yasushi. (2009) Housing Market Segmentation: A
Review. Review of Urban and Regional Development Studies. Vol. 21, No. 2/3.
58
References
Kim, W. C., and Mauborgne, R. A. (2005). “Blue ocean strategy: How to create
Uncontested Market Space and Make the Competition Irrelevant”. Harvard Business
Review Press, Boston, Massachusetts.
Kotler, P., Armstrong, G., Saunders J., Wong, V., (1999), “Principles of Marketing:
Second European Edition”, Prentice Hall
Linda Tay, (2002) "Internet Marketing in Real Estate", Journal of Property Investment &
Finance, Vol. 20 Iss: 6, pp.527 - 528
Marotta, D., Yemtsov, R., El-Laithy, H., Abou-Ali, H., Al-Shawarby S., (2011), “Was
Growth in Egypt Between 2005 and 2008 Pro-Poor”, Policy Research Working Paper
5589, The World Bank, March (2011).
O’Sullivan, T. and Gibb, K., (eds.) 2003. “Housing Economics and Public Policy”.
Edited by Stephen Brown, John Henneberry and James Shilling, Real Estate Issues.
Oxford, UK: Blackwell Science Ltd.
Porter, M. E., (1979), “How competitive forces shape strategy”, Harvard Business
Review, March-April, pages 137-145.
Porter, M. E., (1985), “Competitive Advantage: Creating and Sustaining Superior

Performance”, Free Press, 1985.
Prime Research, (2010), “Egypt Real Estate Sector Overview”, Prime Research.
Ries, A. and Trout,J. (1981), “Positioning, The battle for your mind”, Warner Books
McGraw-Hill Inc., New York, 1981,
Soliman, A. (1989), “Housing mechanisms in Egypt: a critique” in Netherlands Journal

of Housing and Environmental Research Vol.4, No.1, pages 31-50.
59
References
State Information System (SIS) [online], www.sis.gov.eg, [accessed, 20th November

2010]
Tanzi,V. (2006), “CORRUPTION AND ECONOMIC ACTIVITY”, THE EGYPTIAN

CENTER FOR ECONOMIC STUDIES, Cairo, Egypt, 2006
World Bank, (2010), “Doing Business in the Arab World”, World Bank, Washington.
Yavas, A and Colwell, P.F, (1995), “A Comparison of Real Estate Marketing Systems:
Theory and Evidence”, Journal of Real Estate Research, Vol. 10, No. 5, 1995, pages 583-
599.
Zumpano L.V., Johnson K. H,. Anderson, R. I., (2003), “Internet use and real estate
brokerage market intermediation”, Journal of Housing Economics 12 (2003) 134–150
60
Appendix I: Questionnaire
Appendix I: Questionnaire
Demographic Descriptors:
Age:
Sex:
Monthly Income: Less than 5000, 5000- 15000, more than 15,000
Marital status: Single – Married – Married with kids – Widowed - Divorced
Education: illiterate – Primary Education- High School – Higher Institute – University
Degree – Postgraduate degree.
Psychological descriptors:
What are your preferred activities?
What is your current job junction?
What are your interests?
What are your interests?
What is your Religious view?
Demand including historical purchase

1. What is your current living arrangement? (eg. Living with family)
2. Have you purchased any properties before?
3. Will you consider purchasing a property? Or you prefer renting? Or other
arrangement?
4. Why you would think of purchasing a property?
5. Will you consider purchasing more than one property? And why?
6. What are the criteria you consider while purchasing a property?(State all relevant)
7. What are the factors influencing the buy decision? (State all relevant)
8. Does the name of the developer make a difference? (Brand name)
9. What is your price cap for purchasing a property? (limit for your purchase)
10. How do you prefer to finance your property purchase? (financing options)
11. What is your size preference? (1, 2 , 3 , 4, etc Bed rooms)
12. What is the preferred neighborhood? (Urban, Suburbs, town) and why?
13. What type of properties you plan to purchase? (Apartment, House, Villa, etc.)
14. What are the additional services and/ or features you would like the developers to
add that don’t currently exist in the real estate market?
15. What are the features that you believe can be eliminated from the current market
offering without affecting your anticipated value?
16. What are the features currently offered you believe can be reduced without
affecting your anticipated value?
17. What features need to be increased to add value?
Media
18. What kinds of support are using to search for a property: friends, real estate
agents, internet, newspapers, TV, radio...Will you consider using internet
searching for your property?
19. Which newspapers you prefer to read?
I1

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The University Of Manchester

Manchester Business School

Real Estate Industry in Egypt

(THIS PROJECT IS SUBMITTED IN PARTIAL FULFILMENT OF THE

 Special thanks also go to friends who supported me with additional knowledge,

1.1 PROBLEM STATEMENT...........................................................................................................3

3 INDUSTRY ANALYSIS TOOLS.........................................................17

3.1 PORTER GENERIC STRATEGIES...........................................................................................17

5.1 THE LOW INCOME SEGMENT...............................................................................................40

6 CONCLUSION & RECOMMENDATIONS...................................... 49

6.1 LOW-INCOME HOUSING SEGMENT.......................................................................................51

1.1 Problem Statement

 Understanding customer values

Sales versus marketing perspective, Dikmen et al. (2005)

2.1.1 Defining Segments

Furthermore, there were debates on the housing customer segmentation variables.

2.1.2 Segments Description

Housing system in Egypt, Soliman (1988)

2.1.3 Evaluating Segments attractiveness

 Fit with the strategy of the organisation

2.1.4 Segments Selection strategy

Selective specialization: also known as differentiation strategy, the strategy is based on

Segmentation Selection Process (Freytag and Clarke, 2001)

2.2 Targeting Customers

It is crucial to reach targeted customers through various communication methods. Yavas

Strengthening Brand Current position

Seeking new unoccupied position

Deposition or reposition the competition

This strategy depends on psychology of positioning of a certain brand in the customer’s

The promotion as the fourth marketing segment element is considerably important to

3 Industry Analysis Tools

The construction industry is a highly competitive industry, for an organization to succeed

3.1 Porter Generic Strategies

Figure. Porter’s Generic Strategies.

3.2 BCG Environments Matrix

3.3 SPACE Analysis

SPACE analysis diagram.

3.4 Porter’s Five forces Shaping strategy

Porter Five Forces diagram

3.5 Combining the Frameworks

4.1.1 Primary Research

4.1.2 Secondary Research:

# Title Author Type of Document Date of

Less Than 30 30-45 46 65

Sample discrimination by age

Percentage of Males and Females of participants

Low Income Middle Income High income

The Percentage of participants based on their level of income

Working Abroad Working in Egypt Doesn't w ork

Sample distribution based on the work status

4.1.5 Data Collection Strategy

The Egyptian government announced in the presidential election in 2005 an economical

Egyptian GDP from Ministry of Planning (www.mop.gov.eg)

Rate of unemployment from State Information Service (www.sis.gov.eg)

The overall strategy as announced by the government is encouraging the private

4.4 Social Environment

Population Distribution by Age