PEST Analysis

Royal Dairy

PEST Analysis (Egypt Market)External Audit• Threats• Opportunities

Amira Elsayed Bassem Safwat Boushra

Sara Mohamed

Agenda

IntroductionKey Facts about Egypt

• Full name: Arab Republic of Egypt• Capital: Cairo• Population: 82,079,636 million (July 2011 est.)• Age structure:

– 0:14 years: 32.7% (male 13,725,282/female 13,112,157)– 15:64 years: 62.8% (male 26,187,921/female 25,353,947)– 65 years and over: 4.5% (male 1,669,313/female 2,031,016) (2011 est.)

• Median age: – total: 24.3 years– male: 24 years– female: 24.6 years (2011 est.)

• Population growth rate: 1.96% (2011 est.)• Birth rate: 24.63 births/1,000 population (2011 est.)• Death rate: 4.82 deaths/1,000 population (July 2011 est.)• Area: 1 million sq km contains land: 995,450 sq km & water: 6,000 sq km• Major Language: Arabic• Major Religions: Muslim 90% , Coptic 9% & other Christian 1%• Currency: Egyptian Pound• Natural resources : petroleum, natural gas, iron ore, phosphates, manganese, limestone, gypsum, talc,

asbestos, lead, rare earth elements, zinc• Main exports: Petroleum, petroleum products, cotton, Textile, Metal product and Chemicals.• Geographical Location: Northern Africa, bordering the Mediterranean Sea, between Libya and the

Gaza Strip, and the Red Sea north of Sudan, and includes the Asian Sinai Peninsula

IntroductionPEST Analysis

Political EnvironmentPolitical structure

• President: Vacant Vice President: Vacant

Following the resignation of President Mohamed Hosni MUBARAK in February 2011, the Supreme Council of the Armed Forces, headed by Defense Minister Muhammad Hussein TANTAWI, assumed control of the government

• Head of Government: Kamal Elganzoury

• Legislative Branch: bicameral system consists of the Advisory Council or Majlis al-Shura (Shura Council) that traditionally functions mostly in a consultative role (264 seats; 176 members elected by popular vote, 88 appointed by the president; members serve six-year terms; mid-term elections for half of the elected members) and the People's Assembly or Majlis al-Shaab (518 seats; 508 members elected by popular vote, 64 seats reserved for women, 10 appointed by the president; members serve four-year terms)

• Judicial branch : Supreme Constitutional Court.

Political EnvironmentMain Political Parties

The multi-party system was restored in 1976 by president Mohamed Anwar ElSadate. However, in practice it is the ruling National Democratic Party (NDP)

which completely dominates the political arena. The Muslim brothers, a brotherhood created in 1928 by Hassan El Banna is the main opposition party of

the country. They were banned but in spite of it, they were able to win 88 seats in the People's Assembly in the 2005 elections. The other opposition parties like

Wafd, El-Ghad or the Nasserian Party are minority parties and were nearly wiped out in the 2005 elections.

Currently power has been dominated by Islamists in Egypt after the Freedom and Justice Party won the majority seats in parliament, followed by Elnour ElSalafi

Party.

Political Environment Environmental Laws and Foreign

The Principal Functions of the Environmental Agency Include:

• Formulating environmental policies.

• Preparing the necessary plans for Environmental protection and Environmental development projects, following up their implementation, and undertaking Pilot Projects.

• The Agency is the National Authority in charge of promoting environmental relations between Egypt and other States, as well as Regional and International Organizations.

• Existence of the free trade treaty with the United States in 2006

Political Environment Tax Rate

The corporate tax rate is 32% on profits arising from export operations and on profits of an industrial company as long as they arise from its industrial activities.

Social Insurance Contribution Rates

Employer(%) Employee(%)

On basic monthly salary up to L.E. 500 / month 26 14

On variable pay (such as production incentive bonuses)-up to L.E. 500/month

24 11

Political Environment Labor Forces

• 26.1 million (2010 est.)

• Labor force - by occupation: – Agriculture: 32%– Industry: 17%– Services: 51%

• Unemployment rate: – 11.6% (2011 est.)– 9.7% (2010 est.)– 9.4% (2009 est.)

• Population below poverty line: – 25% (2005 est.)

Economical Environment The budget deficit climbed to over 8% of GDP and Egypt's GDP growth slowed

to 4.6% In the past year, the economic team has simplified and reduced tariffs and

taxes, improved the transparency of the national budget, designed to foster private sector-driven economic growth and improve Egypt's competitiveness. Despite these achievements, the economy is still hampered by government intervention, substantial subsidies for food, housing, and energy, and bloated public sector payrolls.

STRENGTHS  Egypt boasts diversified sources of foreign exchange (the Suez Canal, tourism,

private transfers, and oil and gas exports). The country enjoys the political and financial support of Western countries. WEAKNESSES The interest on public debt and the cost of subsidies weighs on public finances

limiting the capacity for infrastructure development. The banking system is not yet capable of meeting the economy's needs. The tourism sector, whose revenues are of fundamental importance to the

current account balance and economic growth, remains vulnerable to the terrorist menace

Sociocultural Environment

Egypt’s total population stood at 82,079,636 million. Out of this approximately 90% are Muslims while the remaining are Christians. Most of the population inhabits the area near the Nile River and almost half of Egypt’s population is urban, living in the densely populated cities such as Cairo and Alexandria.

Unemployment rate is rapidly increasing

Literacy Rate (Males 68%, Females 47%)

The healthcare system in Egypt is underdeveloped

Technological Environment

Finance and telecoms sectors account for more than 25% of Egypt's total spending.

Communication• Telephones - main lines in use:10.313 million (2009)

• Telephones - mobile cellular:55.352 million (2009)

Opportunities & Threats

Opportunities ThreatsCheap labor (For Plants and dairy stores) Instability of Political Situation

Free trade treaty with the United States in 2006 U.S. District

Tax rate is 32% (Low in comparison with other countries) Vandalism and Theft

Tariffs are reduced by 2010 Population below poverty line almost 25%

The country enjoys the political and financial support of Western countries and USA

Unemployment rate is 11.6% in 2011

Weak position of the Egyptian Pound related to the US Dollars

The budget deficit climbed to over 8% of GDP and Egypt's GDP growth slowed to 4.6%

Well implementation of the telecommunication infrastructure

The interest on public debt increased

Population is high Literacy Rate is very low

Cows feed of corn and grain are cheapThe healthcare system in Egypt is underdeveloped

65% of poplulation is under 20 years Weak Stock Market

Dairy industry are growing over time Interest rate is high relative to other countries