Arab Academy for Science, Technology and Maritime

Transport- MBA program

International Management Course
Final Take-Home Exam

Dr. Zakaria Nabil

29-Oct-22

Four Questions of equal weight, each has 4 parts, all must be answered

Question 1 (10 marks): Amazon in the Egyptian Market

In 2017 Amazon announced its acquisition of middle east online shopping business Souq after
competition over the deal with Emaar which was in the startup phase of similar business
noon.com, https://techcrunch.com/2017/07/03/amazon-souq-com-completed/
In 2022, Amazon announced a strategic investment of 4% ownership in Valu
(https://www.valu.com.eg/home ), Valu is one of the rising stars of BNPL (buy now pay later) in
Egypt, Valu already owned by EFG Hermes, one of the biggest regional investment bank in the
middle east, https://www.wamda.com/2022/05/amazon-acquires-4-cent-valu-10-million

1) Analyze the motivation for Amazon to acquire ownership of Souq.

2) Based on the introduction of the world leader in online retail, discuss the strategic options left
for the local and regional players like Jumia and Noon and what would be their strategic options
to compete against Amazon.
3) Discuss How Valu as a business can benefit from the current economic situation in Egypt and
how can the capitalize on this to gain market share in the new market of Buy now Pay Later
(BNPL)?
4) Discuss how the new business relationship between Valu and Amazon can benefit both business
in the Egyptian Market? What does this relationship could mean for Amazon competition like
Noon and Jumia and what does it mean for Valu’s competition like Souhoola
(https://souhoola.net/en/home ) and Forsa (https://www.forsaegypt.com/ ) and the likes?

Question 2 (10 marks): Zara’s Disruptive Vision: Data-Driven Fast

Fashion
The everyday ordinariness of clothing belies its significance in the global market. Apparel and
textile is one of the largest industries in the world. It employs countless millions and generates
more than $3 trillion in transactions.2 Its activities are vast in scale and scope: design, branding,
fiber production, fabric cutting, assembly, finishing work, logistics, merchandising, and

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marketing functions circle the world. Traditionally, big retailers drive the market, determining
what to make, where to make it, how to distribute it, and how to sell it. Operationally, global
apparel companies and national retailers outsource apparel production via global brokers, such as
3PL Center, GlobalTranz, or Li & Fung. The latter, for instance, supplies billions of pieces of
apparel to department stores, hypermarkets, specialty stores, and e-commerce sites worldwide. It
owns no fabric mills, no sewing machines, and no clothing factories. Rather, Li & Fung’s 22,000
employees in 250 offices in 40 nations manage the supply chains of many of the world’s biggest
retailers and brands.3

Historically, the typical garment maker is a small-scale, labor-intensive operation, usually

located in a low-wage country that employs a few to a few dozen workers. There, workers make
specific pieces of apparel, often in a narrow range of sizes and colors, which global brokers then
integrate with the output of hundreds of other such companies that span dozens of countries. As
more companies in more countries make more specialized products (i.e., one factory makes
zippers, one makes linings, one makes buttons, and so on), global brokers perform as cross-
border intermediaries and supervise the logistics and assembly of components into finished
goods. Ultimately, these goods are distributed to apparel retailers worldwide.

The dynamics of ever-changing fashion relentlessly pressure apparel retailers to have the right
style in the right sizes in the right quantities at the right time for the right price. In turn, they
press global brokers to improve coordination among the many players. By planning collections
closer to the selling season, testing the market, placing small initial orders, and reordering more
frequently, retailers can reduce forecasting errors and avoid the dreaded “death by inventory.”
Industry wisdom and historic practice spurred apparel firms, no matter how big or small, to
choose a “sliver” of an activity (i.e., make zippers, manage logistics, focus on retail) instead of
trying to create value across multiple slivers. Effectively, the global apparel industry pressed
firms to see strategy in terms of “do what you do best and outsource the rest.”

Changing Markets, Changing Opportunities

Steadily, globalization resets the global apparel industry. Fewer barriers, better logistics, and
improving technologies create paths to disrupt industry standards. That is, rather than accepting
the determinism of industry structure, some managers bet on revolutionary visions and radical
missions.4 A compelling example is the compression of cycle times in the apparel-buyer chain.
Traditionally, moving a garment from designer to factories to brokers to shippers to shops takes
approximately six months—three to design a new collection and another three to make, ship, and
stock it. Now, a few companies, notably H&M, Topshop, and Uniqlo, have cut the cycle to three
to five months.

One, Zara, has slashed the cycle to a phenomenal two weeks. Zara’s vision of data-driven fast
fashion, by outrightly rejecting sacred rules about strategy and success in the apparel industry,
has disrupted long-running principles and practices.5 For instance, unlike its rivals, Zara makes
most of what it sells, shuns advertising, avoids sales, and directs distribution. These choices,
once seen as heresies, have propelled Zara to the world’s leading apparel company and made its
founder, Amancio Ortega, one of the world’s wealthiest person with a fortune of more than $75
billion.6

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The Vision of Fast Fashion

In 1975, Señor Ortega opened a small clothing shop, Zara, in the small town of Arteixo, in a
remote corner of Spain, far, faraway from the fashion capitals of New York, London, Paris,
Milan, and Tokyo.7 From its humble beginnings, today there are more than 2,250 Zara
storefronts strategically located in premier spots in 96 countries.8 In the beginning, Señor Ortega
had a compelling vision: “Give customers what they want, and get it to them faster than anyone
else.”9 Over the years, Zara’s founding vision has held true, and today anchors its mission:
“satisfying the desires of our customers . . . we plan to continuously innovate our business to
improve your experience. We promise to provide new designs for quality materials that are
affordable.”10 Others offer clever spins, characterizing Zara’s vision as “Armani at moderate
prices,” or “Banana Republic priced like Old Navy.”11 No matter the nuance, Zara’s vision of
data-driven fast fashion anchors its strategy to integrate cutting-edge systems, state-of-the-art
technology, efficient production, smart logistics, and alluring distribution that designs, makes,
moves, and sells sophisticated, yet affordable, apparel.

Building a Strategy of Fast Fashion

Disrupting a global industry requires radically rethinking what customers want, how you make
and market it, and how you make money doing so. Zara, in starting and sustaining the data-
driven, fast fashion revolution, translates its vision into a practical strategy through a range of
ingenious choices in acquiring resources, developing capabilities, and creating competencies.
Separately and collectively, these sustain Zara’s competitiveness.

Resources and Manufacturing

Making and selling fast fashion calls for integrated manufacturing systems, logistic know-how,
and retail locations. Progressively, Zara has developed world-class resources in each.

Zara, as does virtually every other apparel firm, sources finished garments, like generic t-shirts,
slips, and the like, from suppliers in Europe, Africa, and Asia. Unlike its rivals, Zara also
employs thousands who staff its factories circling Arteixo to make more than half of its fashion
garments.12 Zara’s production prowess stems from Señor Ortega’s insight that exploiting short-
lived fashion trends requires speedy designs and quick distribution—which, operationally, means
making items close to home in order to get them quickly to customers around the world. Hence,
Zara makes millions of its most time- and fashion-sensitive products in its own state-of-the-art
factories on its own schedule.

Logistics and Retail Sites

Garments flow through Zara’s distribution center in Arteixo—more than the size of 90 football
fields—or smaller satellite centers in Brazil and Mexico. In Arteixo, garments travel along 24
miles (about 200 km) of underground monorails that link its 11 factories within a 10 mile (16
km) radius of its headquarters, known as “The Cube.” Along the way, they are swiftly sorted by
carousels in carousels capable of processing 45,000 folded garments per hour. Zara ships more
than million items per week to its stores in 96 countries. Custom orders reach its stores in

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Europe, the Middle East, and much of the United States in 24 hours, and 48 hours for Asia and
Latin America.13

If there is marketing at Zara, it’s done via high-profile real estate. “We invest in prime locations.
We place great care in the presentation of our storefronts. That is how we project our image,”
explained Director Luis Blanc. Zara’s stores command high-profile slots in premier shopping
venues such as the Champs-Elysées in Paris, Regent Street in London, Fifth Avenue in New
York, and Nanjing Road in Shanghai. The opening photo, for example, showcases Zara’s
flagship storefront in Beijing. Its location strategy creates interesting tensions. Noted a
consultant, “Prada wants to be next to Gucci, Gucci wants to be next to Prada. The retail strategy
for luxury brands is to try to keep as far away from the likes of Zara. Zara’s strategy is to get as
close to them as possible.”14

Capabilities and Design

Building factories and opening shops set the firm’s resources. Managers’ insight in how best to
bundle them to complete an activity in a way that is integrative, consistent, and productive
creates capabilities. Expectedly, Zara shines in translating ordinary resources, such as factories
and shops, into formidable capabilities.

Zara’s designers gather data from store managers, industry publications, TV, films, and Internet
sites and social medial streams. Its trend spotters focus on university campuses and nightclubs.
Its slaves-to-fashion staff snaps photos at couture shows and posts them to headquarters. There,
designers sift the data, quickly converting the latest looks into affordable fashion for the masses.
Zara often translates a fashion trend from a catwalk in Paris to a blouse or ensemble ready for
sale in Shanghai in as little as two weeks; its rivals, notably Gap and H&M, take months to do
the same. For example, when Madonna played a series of concerts in Spain, teenage girls arrived
at her final show sporting a Zara knockoff of the outfit that she had worn during her first show.
Zara’s real-time sense of what people want to wear lets it tap the convergence of fashion and
taste across national boundaries. It does not adapt products to a particular country’s preferences
but looks to standardize its designs for the global market. Executives reason that offering
affordable, quality garments with a hip vibe, by effectively offering customers a hard-to-resist
value proposition, globalizes fashion preferences.

Scarcity and Scenery

Attractive stores, both inside and out, are vital to Zara’s mystique. Explains Luis Blanc, “We
want our clients to enter a beautiful store where they are offered the latest fashions. We want our
customers to understand that if they like something, they must buy it now because it won’t be in
the shops the following week. It is all about creating a climate of scarcity and opportunity.”15
Fitting in with fancy neighbors, like Prada and Gucci, requires that Zara put its best face forward.
Its designers roam the globe, adjusting window displays, testing store ambience, and rethinking
arrangement schemes. Just as layouts are always changing, so too is the inventory mix. Zara
rejects the idea of conventional spring and fall clothing collections in favor of “live collections”
that are designed, manufactured, and sold almost as quickly as customers’ fleeting tastes—few
styles linger more than a few weeks.16

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Promotion and Competencies

Zara’s product policy emphasizes reasonable quality, affordability, and high fashion. It has little
use for advertising or promotion. Founder Amancio Ortega saw advertising as a “pointless
distraction”; he himself has never given an interview and rarely allows his photo taken.17 Zara
spends just less than half a percent of sales on advertising, compared with 3 to 4 percent for its
rivals. It avoids flashy campaigns, relying instead on word-of mouth among loyal shoppers. Like
Señor Ortega, it does not promote itself; it leaves that to thrilled customers.

Just as bright managers combine resources into capabilities, they then transform them into
competencies. Somewhat difficult to pinpoint, one can think of a competency as the special
knowledge, skill, or ability that a firm uses to connects its resources and capabilities. The
resulting synthesis sets and sustains its ability to create superior value for its customers.

Flexibility

Zara quickly turns around the latest, greatest fashion—many items you see in its stores didn’t
exist a few weeks earlier. Explains Director Marcos Lopez, “The key driver in our stores is the
right fashion. Price is important, but it comes second.”18 Zara aggressively prices its products,
and adjusts pricing for the international market, making customers in foreign markets bear the
costs of shipping products from Spain. Likewise, if the product line fails to excite customers,
Zara can “scrap an entire production line if it is not selling. We can dye collections in new
colors, and we can create a new fashion line in days.”19 Integrating new ideas and new designs
into reasonably priced, high-fashion garments that are available worldwide within weeks is an
awfully hard objective. Zara’s insight in blending its resources and capabilities successfully
develops a value-creating, hard-to-copy competency—perhaps best seen in its rivals’ struggles to
do to the same.

Fashion-Tech

Zara’s stores, besides presenting its face to the world, function as grassroots marketing agents.
Networked stores feed sales data and customer requests (the latter helping to localize otherwise
globally standardized products) to headquarters in Arteixo. At the center of the Zara-web,
physically and symbolically, is “The Cube,” the gleaming central command of the company.
Here, designers, analysts, and planners bundle and blend resources and capabilities,
experimenting with ways to leverage real-time data into real-time fashions. Designers, for
instance, simulate product presentation and positioning (even testing the acoustics of the in-store
soundtrack) on its “Fashion Street,” a Potemkinesque strip of mock storefronts that mimic the
layout of its strategically significant storefronts around the world. Constant and continual
refinement of resources and capabilities fortifies Zara’s competencies.

Clothes Shopping as an Exciting Adventure

The timeliness of its offerings, aura of exclusiveness, captivating in-store ambience, and positive
word of mouth, fed by rapid product turnover, leverages Zara’s resources and capabilities. Loyal
shoppers learn which days of the week the latest, greatest fashions are delivered—so-called “Z-

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days”—and shop accordingly. Zara fuels the frenzy with small shipments—say, three or four
dresses in a particular style—to a store. Small shipments make for sparsely stocked shelves.
Moreover, products have a display limit of one month. Rapid turnover does the rest: even though
consumers visit Zara frequently, when they return, things look different. The CEO of the
National Retail Federation, reflecting on Z-days, rapid turnover, and sparse inventory, marveled,
“It’s like you walk into a new store every two weeks.”20

Moving Onward

The first Zara shop opened its doors in 1975 in Arteixo. Today, there are more than 2,200 outlets
and, on average, a new one opens every few days. The elegant clarity of Zara’s vision, mission,
and strategy, translated into a compelling mix of resources, capabilities, and competencies,
drives its stunning success. Significantly, Zara’s choice to be great rejected the long-established
strategic standards of the global apparel industry. Currently, no other apparel company comes
close to designing, making, moving, and selling fashion as speedily as Zara. Its success leaves
rivals with less time to figure out how to better configure and coordinate their operations. Some
stay in the game, such as H&M, while others fall further behind, notably Gap. Ultimately,
struggling rivals must follow Zara’s strategic lead—if they don’t, warns analysts, they won’t stay
in business.

1) Evaluate how Zara translates its “Give customers what they want, get it to them faster
than anyone else” into its day-to-day operations?
2) Assess the difficulty a competitor, such as Gap, faces re-creating the resources,
capabilities, and competencies that define Zara?
3) What are the reasons that led Zara to historically expand internationally and given the
current worldwide economic situation of rising inflation and economic stagnation what
could Zara do to weather this situation?
4) Given Porter’s Diamon Model, analyze Zara’s International expansion and what are the
reasons that led Zara to keep around 50% of its manufacturing in Spain while they could
have used other low cos labor countries like Bangladesh.

Question 3 (10 marks): Fawry the pride of the Egyptian e-payment

Market
Fawry is a pioneering Electronic Payment Network, offering financial services to consumers and
businesses through more than 141 thousand locations and a variety of channels. Fawry offers a
convenient and reliable way to pay bills and other services in multiple channels (online, using
ATMs , mobile wallets and retail points) Fawry’s network of retailers includes small groceries,
pharmacies and stationaries, and post-offices, all equipped with point-of-sale machines – the
same ones used for credit card payments.

Based on its own-patented technology, that is fully compliant with international security
standards of the ISA 27001 and PA DSS certifications, Fawry performs more than a million and
a half financial operations daily. Fawry services for businesses include collection services,
customer acquisition, electronic cash, payment facilitation, and business-to-business collection
centers. Fawry was incorporated in 2008 with an authorized capital of EGP 350,000,000. The
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purpose of Fawry is establishing the operating systems of banking services through internet and
mobile phones, and provision of e-payment services. Fawry focuses on e-payment services from
individuals to companies and governmental authorities. These services are provided through
mobile wallets and e-payment. Further, Fawry provides microfinance services and insurance
brokerage. Fawry is a listed company as of July 2019. The main shareholder of the company is
Payment Solution International Netherlands Holding BV (“PSI”). For the purpose of
implementing some of its business goals, Fawry provides its services in collaboration with some
banks, which may require having a prior approval from the CBE as outlined above.

Fawry owns the following companies:

• Fawry for Microfinance;

• Fawry for Insurance Brokerage, S.A.E.;

• Fawry for Integrated Systems, S.A.E; and

• Fawry Dahab for Electronic Services, S.A.E..

Along from these companies, Fawry invested in other companies:

• Fawry Plus for Banking Services,

• Ticketing Information Technology and Electronic Reservation

• Waffarha.com and Bosta Inc. Delaware

Fawry Plus for Banking Services S.A.E. (“Fawry Plus”) was incorporated in 2017 with an issued
capital EGP 60,000,000 fully paid. Fawry owns about 38% of the shares of Fawry Plus. The
main shareholders are: the CIB, Bank Misr and ACIS.

Fawry Plus is the first banking agent in Egypt authorized by the CBE. It was circulated in the
news. Fawry Plus has around 66 stores in Egypt, with a plan to reach 300 stores. Fawry Plus is
agent for 7 banks. Fawry Plus provides the following services:

• mobile wallets (e-payments, transfers and withdrawals) in cooperation with 33 banks;

• banking services (KYC, e-wallet services, issuing debit and credit cards, loans and opening

of bank accounts within Fawry Plus stores); and

• all Fawry services (payment of some governmental authorities’ fees, payment of mobile
services fees, booking and payment of tickets and international shipping services).

Fawry is currently competing with Bee, Masary, Aman and couple of the other small players in
the e-payment market, with the telecom payment generating more than 50% of this e-payment

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market coming from 3 players mainly Vodafone, Etisalat and Orange, the rest of the e-payment
sources is scattered around electricity, water, and other payments that are predominantly
government payment.

https://fawry.com/history/ https://fawry.com/financials-and-earning-releases/

1) Analyze Fawry’s strategy using the tools you have learned so far with specific focus on
the competitive market landscape and the competition with other payment providers (do
your own research on the other payment providers).
2) In 2021 Fawry announced an investment in the Sudanese Sudanese Classifieds and
Marketplace Platform “alsoug” https://fawry.com/wp-content/uploads/2022/08/Fawry-
PR-Alsoug-E.pdf analyze why Fawry would internationalize its business, why
specifically in Sudan?
3) Given Fawry’s move to the Sudanese market what could be the cultural, Political, Legal
& Economical challenges Fawry would have in Sudan?
4) If you are the CEO of Fawry, what other countries in the region or worldwide you would
think of taking your business too and why?

Question 4 (10 marks): Eva Pharma& the African opportunity

With roots dating back to early 20th century, Eva Pharma pivoted from Egypt in 1997 with the
1st manufacturing facility in Egypt and went on to have good presence in Middle east, Africa
and even Europe (https://www.evapharma.com/ourcompany#overview)

When Covid-19 pandemic impacted the whole world and Egypt was no exception, Eva Pharma
was in a very good position to seize this as a business opportunity and use it as a vehicle for
growth.

https://www.evapharma.com/covid/developing-vaccine

EVA Pharma to manufacture COVID-19 treatment Molnupiravir®, January 26, 2022

EVA Pharma signs agreement with Egyptian ministries of Scientific Research and Agriculture to
produce local COVID-19 vaccine “Egyvax”, March 01, 2022

1) Discuss How Eva Pharma Managed to benefit from an international crisis like Covid-19 and how
did they manage to turn it into a business opportunity
2) From a general business perspective what could be the lesson learned from the Covid-19
pandemic as a crisis, in your own business what did you lean that can be used to minimize the
impact of a crisis like this on your business?
3) Like many other Egyptian pharmaceuticals, Eva Pharma has been very active pursuing the
business opportunities in Africa, discuss what are the options for establishing Egyptian business
in Africa and what are the Pros and Cons of Each option? How could Eva Pharma employ its
effort in the Covid-19 vaccine manufacturing in this?
4) For an Egyptian pharmaceutical expanding in Africa, How the porter’s diamond model looks like
having Egypt as the home market? Discuss what are the benefits and Risk?