Monday, January 31, 2011

Blue Ocean Strategy for Alcohol Industry( Part 3 of the series)

                                    fig 1: Alcoholic drinks( source:                                                                    
This is the 3rd  blog of the series: Blue Ocean Strategy for Alcohlic Industry. The 1st two blogs talked about medicinal benefits of alcohol and Strategy Canvass of the alcohlic beverage industry respectively where as this one will talk about the types of non customers of the given industry and the  implementation strategy to target them.

Three types of non customers for the alcoholic beverage industry

Blue Ocean Strategy fundamentally talks about three kinds of non customers:-

a) Customers who are mentally your non customers but occasionally do use your product out of some compulsion.

b) Customers who have the needs for the kind of service your industry offers but who still prefers to choose an alternate industry to fulfill their needs.

c) Customers who are far away from your industry and they are not at all willing to use your product/service.

According to the above frame work the non customers of the alcoholic beverage industry can be categorized into following categories:-

a) People, who are not frequent drinkers, don’t enjoy drinking alcohol as such but sometimes can consume a little bit. This is the most potent target customer for the given BOS plan. It consists of people who do not have any strong opinion against alcohol and hence can be persuaded to consume it in moderation.

b) People, who don’t consume alcohol but don’t have any religious cum cultural bias, also have health based requirements where alcohol consumption can be helpful. Though these people prefer other alternates such as exercise and diet control. It is somehow tough to convince the following non customer section to consume alcohol but still if a proper strategy is put into place a small section can be captured. The given set of non customers might include some top ranking executives and other busy professionals who might not have time for other alternatives such as work out and exercise. Such people can be convinced for moderate consumption of alcohol.

c) People, who have strong opinion against alcohol (often due to religious cum cultural factors). These are the people who will even avoid consuming a low alcohol drink such as a breezier or a beer. Since such people have strong psychological bias against alcohol it will be very tough to convince them for alcohol consumption. Hence it is advisable to avoid the given section of non customers.

Utility, Pricing, Cost, Adoptability

Utility: - Based on the kind of research work conducted by various prestigious medical organizations it can be argued that moderate consumption of alcoholic beverage can be beneficial for one’s health. Moderate consumption of alcoholic beverage can result in prevention of cancer, heart and kidney based diseases etc. Since a large amount of the current population is suffering from such ailments (or is prone to them in the nearby future) moderate consumption of alcohol for prevention purpose might find very high degree of utility.

Pricing: - Since the product is of medical purpose and not an intoxicant hence can be priced at 10-20% lower than the existing alcoholic beverages. This will ensure

1> Higher penetration among various socio-economic spheres.

2> It will also help differentiating the new alcoholic beverage from the existing brands. The existing brands are used as intoxicants , hence having a slightly lower price will help in positioning the newer brand as an moderate non intoxicating drink that can be consumed for medicinal purpose. In other words a lesser price will help in positioning the new brand as a lesser alcohol and hence might find smooth adoptability among non consumers. (Another point to be taken care of is that while a 10-20% reduction will lead to perfect positioning, further reduction might be detrimental. It should be noted that it’s a medicinal product and a very low price might raise questions regarding quality and effectiveness of it.)

Target Costing:- Cost is not a major issue over here. In the given BOS cost is going down on account of fewer investments in packaging, promotional activities, celebrity endorsements, strength etc. On the other newer investments will be required for:-

1> Promoting the idea of safe drinking.

2> Strong promotional campaigns that might require the help of medical fraternity to convince general public towards safe drinking.

Hence there are parameters where cost can be cut down as well as there are newer parameters which will require  investments. Overall it might be concluded that the cost structure will remain unchanged.

Adoptability: - The adoptability will not be very easy initially due to the perception of the product as an intoxicant. But over the period of time with the help of an efficient promotional strategy a lot of non customers can be convinced for moderate consumption. Promotional campaign will be discussed in details in the coming section.

Marketing cum Promotional Strategy

• The given BOS plan requires a promotional plan that is :-

a) Of large scale

b) Clever

c) Genuine

d) Diversified

e) Socially Responsible

Large Scale: - There is a very strong bias against alcohol consumption due to cultural factors as well as side effects of over consumption. Hence in order to convince non customers towards moderate consumption it is essential that the manufacturers must implement a large scale promotional strategy.

Clever: - Along with large scale it needs to be well crafted and subtle in approach. Promotion of alcohol for moderate consumption will attract lot of opposition from various religious cum cultural organizations as well as some medical fraternities. Hence it is essential that the entire campaign must be well crafted in dealing with all this. It should not be very strong in its approach because a strong campaign will attract a strong opposition. It must try differentiating itself from the regular brands which are nothing but mere intoxicant and also emphasize strongly on moderate consumption.

Genuine: - Use of genuine evidences such as research works and testimonies by doctors can add strong strength to the campaign.

Diversified: - Since the given BOS talks about a very new idea it needs to be communicated through various different kinds of media channels. Along with the regular media channels such as print ads, commercials, hoardings etc there is a wide need for on the spot promotion, purchase point promotion etc. Web based platforms like social networking sites; regular web campaigns etc can also add strong value to the overall campaign.

Socially Responsible: - The campaign needs to be socially responsible, must promote only moderate drinking and communicate effectively the harmful effects of excessive consumption.

Six path frame work for the new alcoholic beverage

The concluding part will be looking the BOS with the help of a six path frame work

Look across alternative industry: - In order to realize the potential of the new beverage it is essential that the manufacturers should look across alternative industries. Rather than restricting the definition of alcoholic beverage as mere intoxicant they should also look at them as substance with medicinal values and hence consider other industries such as drug industry, health care industry, fitness industry etc into strategy formulation.

Look across strategic group within industries: - Like any other industry alcoholic beverage industry also has many strategic groups within. There are brands which are priced very high and are known for their exquisiteness , brands which are priced moderately and are targeted for working and middle income class , brands which are known for their strength and then there are low quality cheap brands popular in the third world countries. Manufacturers are supposed to look beyond these strategic groups if they have to offer a value innovative service to their non customers. By simply sticking to their respective strategic groups probably can never get the insight needed for looking beyond the obvious and taping the huge non customer segment.

Look across the chain of buyers: - manufacturers need to consider not only the direct user but also other influencers. For example in this case doctors can play a very important role in convincing the end users. So probably manufacturers can think of targeting doctors along with the end users.

Look across complimentary industry: - In the given context it hardly makes any sense.

Look across emotional and functional appeal:- The general trend have always been to promote alcoholic beverage as a high involvement products used as an intoxicant , companion of good times etc. But in order to capture the Blue Ocean market manufacturers need to look across it. They have to think beyond such stereotypical beliefs.

Look across time: - Though still there are inhibitions in people when it comes to stuffs like alcohol and cigarettes but with time slowly but steadily it’s changing. People these are becoming more open towards such stuffs. Even if they don’t consume such stuffs it can be observed that many of them don’t associate these things with any social stigma. Hence if a proper communication cum promotional strategy is put into place then chances of converting a good amount of non customers into moderate drinking might be high.

Blue ocean Strategy for Alcohol industry ( Part 2 of the series)

                                               fig 1: alcoholic beverage( source istockphoto) 

The previous blog dealt with the medicinal benefits of alcoholic beverages, now the 2nd one will be dealing with Strategy Canvass of the alcohlic beverage industry.

Alcohol industry is right now focussing on the following parameters:-

1>Huge expenditure are on promotional activities .This includes the following:-

• Promoting alcoholic beverages as a companion of good times.

• Promoting them as a great intoxicant. Something that can get you high

• Promoting social drinking in pubs and parties.

2> Alcoholic beverages are also promoted on account of their strength and alcohol contents.

3> Signing in of celebrities with strong presence in the media and strong fan following.

4> Huge investment as well as emphasis is  made on the distilleries used and the process of beverage making adopted by the manufacturer.

5> On  strong distribution network.

6> High taxes:- In most of the countries around the world generally the govt. charges huge taxes on such products.

7> Stylish packaging:- A very large amount of investment goes in providing exquisite and very stylish kind of packaging. There is always attempt by manufacturer to promote such beverage as an ego satisfying entity. Hence stylish and exquisite packaging becomes inevitable.

8> Miscellaneous factors such age of the drink, legends associated with the drink, drinking traditions etc also consume a good amount of investment.

9> The industry is not focussing very high on the medicinal properties of such beverage.

So the industry canvass can be drawn as follows:-

Table 1: -
Properties                                           Degree of investment/ Emphasis

Promotional Strategy                           High

Celebrity Endorsements                       High

strength                                               High

Distribution network                            High

Taxes                                                  High

Process of manufacturing                     High

Packaging                                           High

Miscellaneous                                     High

Medicinal properties                           Low

fig 2: Strategy Canvass of the existing Alcohol industry
Now According to the blue ocean strategy the proposed drink will target the non customers in the following way:-

1> Moderate expenditure on promotion:-

• The strategy should not be to promote alcoholic beverage as an intoxicant.

• Proper emphasis will be given on promoting it for social drinking and as a companion for good times.

2> Beverage will not be promoted on the basis of strength.

3> Celebrities can be signed in but not big celebrities with huge fan following but responsible ones with moderate fan following. Celebrities that are considered more popular among the intelligent circles should be signed.

4> There will be moderate focus on the process of manufacturing to specify the safety level associated with the consumption.

5> High investments in distribution network. This will not only include selecting a large no. of efficient channel partners but also proper sales force training. The sales force needs to play a very important role in convincing the non customers for safe drinking.

6> Taxes will be high initially but it had been assumed that the given strategy aims towards moderate and safe drinking; so some pressure can be built on the govt. machineries for tax reduction. Hence it might go moderate in the long run.

7> There has to be minimal expenditure in packaging since the purpose is not to promote alcoholic beverage as an ego satisfying drink but as a health drink.

8> Minimal expenditure will be incurred on factors such as age and taste of the drink.

9> High investments will be incurred in educating people regarding the medicinal properties of alcohol.

10> High investment will be incurred in promoting safe and moderate drinking.

New industry canvass

Table 2

Properties                                                     Degree of investment

Promotional Strategy                                    Moderate

Celebrity Endorsements                               Moderate

strength                                                       Low

Distribution network                                    High

Taxes                                                          Moderate

Process of manufacturing                             Moderate

Packaging                                                   Low

Miscellaneous                                             Low

Medicinal properties                                   High

Safe & Drinking                                  High

fig 3: Strategy canvass of the new proposed market 

Now the next figure will be comparing both the red ocean as well as Blue ocean market

fig 3: Comparison of existing as well as proposed market 
Now in the concluding part of the blog the author attempts an ERRC framework which goes as follows


• Heavy drinking

• Intoxication due to heavy drinking

• Health and other risks associated with heavy drinking

• Stylish Packaging Reduce


• Celebrity promotion

• Promotional expenditure

• Taxes

• Emphasis on the process of manufacturing


• Awareness regarding medicinal properties of alcohol

• Other utilities (stress remover, Fighting cold etc) Create

• Awareness regarding safe drinking.

• Promotion of alcoholic beverage as a health enhancer.


• Awareness regarding safe drinking.

• Promotion of alcoholic beverage as a health enhancer.

Blue Ocean Strategy for alcohol industry( Part 1 of the series)

                                        fig 1: Portuguese wine( Source:

In chemistry, an alcohol is any organic compound in which a hydroxyl functional group (-OH) is bound to a carbon atom, usually connected to other carbon or hydrogen atoms.[1] Alcohol is used for various purposes ranging from drinking beverages to medical purposes.

From ancient time itself use of alcohol as beverage has attracted lot of critics as well as lauders alike, has always been described in almost every major religious books and the design of social of code of conduct. The consumption alcoholic drinks can cause intoxication which can further lead to hangovers; because of such effect Alcoholic beverages were always associated with negative connotation in the sphere of ethics and moral code of conduct leading to a big range of people avoiding consuming alcohol on moral and ethical grounds.

In the upcoming series of three blogs the author will attempt to target these non customers by promoting the positive sides of alcoholic beverages and not to just to promote it as an intoxication arousing drink. The 1st blog in the series will be dealing with Medicinal values of alcohol with the help of various research work conducted worldwide. The next two blogs will be dealing with strategy canvass and strategy implementation respectively.

In the beginning itself it has to be made clear that the paper does not attempt to nullify the side effects of alcohol nor does it attempt to encourage people towards its over consumption. The only point that the paper wants to make is that alcohol is not all that bad as it had been portrayed due to various religious and cultural factors. It had been medically proved that a little amount of alcohol consumption can actually be very helpful and beneficial for one’s health. Based on these grounds the paper will like to promote moderate consumption of such beverages to its non consumers who have so far avoided its consumption on some predetermined perception and wrong notions. #

Medical benefits of alcohol [2] :-

1> It gives longevity:-

• A Harvard study found the risk of death from all causes to be 21% to 28% lower among men who drank alcohol moderately, compared to abstainers. [3]

Harvard's Nurses' Health Study of over 85,000 women found reduced mortality among moderate drinkers.[4]

• A British analysis of 12,000 male physicians found that moderate drinkers had the lowest risk of death from all causes during the 13 year study. [5]

• Large-scale study in China found that middle-aged men who drank moderately had a nearly 20% lower overall mortality compared to abstainers. [6]

• A twelve year long prospective study of over 200,000 men found that subjects who had consumed alcohol in moderation were less likely to die than those who abstained from alcohol.[7]

2> It cures heart attacks and other cardio vascular disease.

• Harvard researchers have identified the moderate consumption of alcohol as a proven way to reduce coronary heart disease risk. [8]

• The Harvard Health Professionals Follow-Up Study of over 44,000 males found moderate alcohol consumption to be associated with a 37% reduction in coronary disease.[9]

• The Honolulu Heart Study found a 49% reduction in coronary heart disease among men who drink alcohol in moderation. [10]

• Harvard researchers concluded about coronary heart disease that "Consumption of one or two drinks of beer, wine, or liquor per day has corresponded to a reduction in risk of approximately 20-40%. [11]

• The American Heart Association, based on the research evidence, concludes that the “Consumption of one or two drinks per day is associated with a reduction in risk of (coronary heart disease) approximately 30% to 50%.” [12]

3> It is effective in curing hypertension and high blood pressure

• A Harvard University study found the lowest levels of hypertension among young adults who consumed one to three drinks per day. [13]

• A study of alcohol consumption and subsequent high blood pressure for eight years among over 7,000 women found that those who consumed an average of about half a drink a day had a 15% lower chance of developing high blood pressure than did women who abstained from alcohol. [14]

4> Alcohol consumption is effective in curing diabetes and related ailments

• The American Diabetes Association reports that "In people with diabetes, light-to-moderate amounts of alcohol are associated with a decreased risk of heart disease, probably because alcohol raises HDL cholesterol, the so-called 'good cholesterol.'" [15]

• A study of almost 21,000 physicians for over 12 years has found that men who are light to moderate drinkers have a decreased risk of Type 2 (non-insulin dependent) diabetes mellitus. [16]

• A study of 8,663 men over a period of as long as 25 years found that the incidence of type 2 diabetes was significantly lower among moderate drinkers than among either abstainers or heavy drinkers. These findings persisted after adjusting for age, smoking, blood pressure, HDL cholesterol, waist circumference, parental diabetes, fasting plasma glucose, body mass index (BMI), serum triglyceride concentration, and cardio respiratory fitness. [17]

5> Other medical benefits of Alcohol

• Moderate drinkers have been found to be more resistant than abstainers to five strains of the common cold virus. Those who consumed 2 to 3 drinks daily had an 85% greater resistance. Those drinking 1 to 2 drinks daily had a 65% lower risk and those who drank less than daily had a 30% lower risk than abstainers.18

• Researchers at Boston Medical Centre analyzed data from 8,125 participants in the Third National Health and Nutrition Examination Study. They found that drinkers had a 43% lower chance of having Metabolic Syndrome than did abstainers or non-drinkers.19

• An analysis of data from 760,044 men and women who were tracked for seven to 20 years found that moderate drinkers are about 30% less likely to develop kidney cancer than abstainers. A large prospective study of 59,237 Swedish women age 40-76 found that those who consumed at least one drink per week had a 38% lower risk of kidney cancer than did abstainers or those who drank less. For women over 55, the risk dropped by two-thirds.20

Some of the important point that has to be noted over here is that:-

• The research works have been conducted over a large sample of people.

• They have been conducted over a very prolonged period of time.

• They have been conducted over various geographies such as USA, Italy, and China etc.

• They have been conducted by some of the very prominent organization in the area of medical science.

Thus it can be assumed that the degree of veracity in all these research works should be high.

Alcohlic beverages are good for health for the following factors:-

• Alcohol contains various types of anti oxidants that not only helps in curing diseases but also helps in providing better sexual health.

• Alcoholic beverages can be good for human heart because it increases the content of good HDL cholesterol.

• It also reduces the risk of blood clots in the coronary arteries. It can prevent platelets from clumping together to form clots, prevent sudden rise of fibrinogen (a protein) from liver that in many times is responsible for forming blood clots. [21]

• It is believed that Alcoholic beverages such as red wine contain a large amount of anti oxidant like flavonoids. It had been argued that such anti oxidants are good for human health and helps in prevention of thrombosis. [22]

• Apart from the medical properties one other aspect of alcohol is that it helps people in socializing. It had been seen that drinkers have better social circles than abstainer's .A better social life ensures prevention of loneliness thereby ensuring better health, lack of depression and longevity in living.

So the 1st blog fundamentally dealt with the medicinal benefits of Alcohol. The next two will be dealing with the Strategy canvass and Strategy implementation

# The paper talks only about moderate drinking. It strictly prohibits heavy drinking; heavy drinking has far more disadvantage than advantage. It can cause heart failures, kidney and liver damage, cause heavy intoxication that might lead to accidents, etc. Heavy drinking is something that must be avoided at any go. It is only moderate drinking that has so much of benefits associated with it. Though there is no hard and fast definition of moderate drinking but according to many of the doctors it could be 1-3 glass a day for a healthy man. Since women are generally smaller in size than men, the alcohol consumption should be about 25-30% lower


1 Wikipedia


3 Camargo, C. A., et al. Prospective study of moderate alcohol consumption and mortality in US male physicians. Archives of Internal Medicine, 1997, 157, 79-85.

4 Fuchs, C. S., et al. Alcohol consumption and mortality among women. The New England Journal of Medicine, 1995, 332(19), 1245-1250

5. Doll, R., and Peto, R. Mortality in relation to consumption of alcohol: 13 years' observations on male British doctors. British Medical Journal, 1994, 309, 911-918.

6 Yuan, J-M., et al. Follow up study of moderate alcohol intake and mortality among middle aged men in Shanghai, China. British Medical Journal, 1997, 314, 18-23

7 Boffetta, P., and Garefinkel, L. Alcohol drinking among men enrolled in an American Cancer Society prospective study. Epidemiology, 1990, 1(5), 42-48.

8 Manson, J. E., et al. The primary prevention of myocardial infarction. The New England Journal of Medicine, 1992, 326(21), 1406-1416.

9 Rimm, E., et al. Prospective study of alcohol consumption and risk of coronary disease in men. The Lancet. 1991, 338, 464-468.

10 Blackwelder, W. C., et al. Alcohol and mortality. The Honolulu Heart Study. American Journal of Medicine, 1980, 68(2), 164-169.

11 National Institutes on Alcohol Abuse and Alcoholism. Alcohol Alert, No. 45. October, 1999.

12 Pearson, Thomas A. (for the American Heart Association). Alcohol and heart disease. Circulation, 1996, 94, 3023-3025.

13 Gillman, W. M. et al. Relationship of alcohol intake with blood pressure. Hypertension, 1995, 25, 1106-1110. Also: Beilin, L., Puddey, I., and Burke, V. Alcohol and hypertension - kill or cure? Journal of Hypertension, 1996, 10, 1-5; Ramsey, L., et al. Alcohol and myocardial infarction in hypertensive men. American Heart Journal, 1979.

14 Thadhani, R., et al. Prospective study of moderate alcohol consumption and risk of hypertension in young women. Archives of Internal Medicine, 2002, 162, 569-574.

15 Wheeler, M., et al. Is there a place for alcohol in your diabetes meal plan? Diabetes Forecast, 2003 (August).

16 Umed, A., et al. Alcohol consumption and risk of type 2 diabetes mellitus among US male physicians. Archives of Internal Medicine, 2000, 160, 1025-1050.

17 Wei, M. et al. Alcohol intake and incidence of type 2 diabetes in men. Diabetes Care, 2000, 23(1), 18-26.

18 Cohen, S., et al. Smoking, alcohol consumption and susceptibility to the common cold. American Journal of Public Health, 1993, 83(9), 1277-1283.

19. Freiberg, M, et al. Alcohol consumption and the prevalence of the Metabolic Syndrome in the US: A cross-sectional analysis of data from The National Health and Nutrition Examination Survey, Diabetes Care, 2004, 27(11), 2954-2959.

20 Rashidkhani, B., Åkesson, A., Lindblad, P, and Wolk, A. Alcohol consumption and risk of renal cell carcinoma: A prospective study of Swedish women International Journal of Cancer, 2005 (December 10), 117(5), 848–853.



Friday, January 21, 2011

Analysis of Middle Eastern and North African Economy ( in the last 2 years)

                             fig 1 Dubai written on wall( source:                                          

Middle Eastern and North African economy (MENA) has gone through a lots of ups and down in the past couple of years. In 2009 due to global economic downturn and dipping in the petroleum prices along with real estate bubble burst in Dubai hampered the MENA economy. The whole region whose GDP grew with the rate of 5.5% in 2008 witnessed a very slow growth rate of 2.9% in 2009. (, 2009)

In the given blog the author attempts to do a comprehensive analysis of the MENA Economy in the past couple of years in a very simple and layman’s language. The blog will be divided into three parts: -

The crisis in 2009 and its effects on the various individual economies.

The corrective period of 2009 where Economy signaled coming back to normal condition.

The future prospects of the region in 2011 and thereafter.

Before further analysis it is essential that few points should be cleared. Middle Eastern North African region or MENA includes Middle Eastern countries such as Iraq, Iran, Kuwait, UAE, Saudi Arabia, Bahrain, Oman, Qatar, Yemen, Lebanon, Jordan etc and North African countries such as Egypt, Morocco, Libya, Algeria and Tunisia. The Socio-Economic conditions are not homogeneous across the region. There are countries which are oil and gas exporters where as there are countries which are importer. The whole region can be primarily divided into four parts purely based upon Economic conditions. (, 2009)

Gulf Cooperation council (GCC): - These include oil exporters like Kuwait, UAE, Saudi Arabia, Oman, Qatar and Bahrain which have got a very small population.

Oil exporter like Iran, Iraq, Libya, Sudan and Algeria which have got large population for themselves.

Oil importers whose economy is closely linked with the GCC in the form of remittances, FDI, foreign aid and tourism. These include Jordan, Syria, and Lebanon etc.

Diversified countries like Morocco, Egypt, Tunisia whose Economy is linked with other countries in the region as well as with the Europe in the form of trade and tourism.

As mentioned earlier MENA has huge diversity in itself, it consists of some of the richest nations in the world as well as some of the most poor, some of the most politically and socially volatile nations as well as some of the most stable ones.

In 2009 there was the global economic downturn which did not have much impact on MENA directly since most of the financial institutions in this part of globe were not directly integrated with the global finance, but it had other indirect impacts in the form of (Middle East Economic survey, 2009) :-

• Due to drop in petroleum prices revenue of exporting nations got affected. In mid 2008 the petroleum price was at its record high of 150 US dollars a barrel where as in 2009 it went down to an average of 62 US Dollars a barrel. In order to deal with reducing price Oil exporting nations responded by reducing oil extraction to increase oil price, oil extraction got reduced by some 10% in 2009 in contrast to 2008, this further resulted in reduction of revenue.

• Drop in revenue affected their govt. expenditure, real estate investments, and other projects.

• Tightening of international credit resulted in lower investment and inflow of capital.

• The above factors affected the economy of non exporting nations whose economies were based on tourism and remittances. Nations like Egypt and Lebanon are primary source of labor for construction projects in the oil exporting nations. Investment crunch in such projects affected these non exporting countries indirectly as well.

Some of the other observations made during the period were:-

• Lower Oil prices have also helped oil importing countries in reducing their import cost.( International Monterey Fund, 2009)

• The average price per barrel went down to 62 US dollars per barrel. (, 2009)

GDP for the year 2009 were as follows (, 2009): -

Algeria                                             2.1

Bahrain                                            3.0

Egypt                                               4.7

Iran                                                  1.5

Iraq                                                  4.3

Jordan                                              3.0

Kuwait                                             1.6

Lebanon                                           7.0

Libya                                                1.8

Morocco                                          5.0

Oman                                               4.1

Qatar                                               11.8

Saudi Arabia -                                  0.9

Sudan                                               4.0

Syria                                                3.0

Tunisia                                             3.0

UAE -                                             0.2

Yemen                                             4.2

Few of the conclusions drawn could be: Qatar showed exceptional growth, non oil exporting countries like Morocco, Egypt, and Lebanon were less badly hit than the oil exporting countries.

Inflation for the year 2009 is as follows(, 2009)

Algeria                                              4.6

Bahrain                                              3.0

Egypt                                                12.3

Iran                                                   12.0

Iraq                                                   6.9

Jordan                                               0.2

Kuwait                                              4.6

Lebanon                                            2.5

Libya                                                5.0

Morocco                                           2.8

Oman                                                3.3

Qatar                                                0.0

Saudi Arabia                                      4.5

Sudan                                               11.0

Syria                                                  7.5

Tunisia                                               3.5

UAE                                                  2.5

Yemen                                               8.4

It can be seen that inflation was comparatively moderate in oil exporting countries. In importing countries like Egypt inflation was high on account of high food inflation.( Later on though some incraese in inflation was observed in the oil exporting countries as well.)

• Though for GCC (Gulf Cooperation Council) other than Qatar the GDP growth have been abysmally low, they entered the crisis in a much stronger position and hence were able to provide cushion against it. (Auguste Kouame, 2009)

• For developing oil exporter countries ( Iran, Syria, Yemen, Algeria) GDP growth rate fell down from 2.9% in 2008 to 1.6% in 2009 and for non exporters it fall down from 6.6% in 2008 to 4.7% in 2009.(, 2010)

• The revenue for all the oil exporting countries which included both GCC as well as developing oil exporters went down from 755 billion US dollars in 2008 to 485 billion US dollars in 2009; the current account deficit got reduced from 25% of the GDP to 7.3% of the GDP. (, 2010)

• Diversified economies like Egypt and Morocco were hit not only due to being linked with the oil exporting economies but also due to alleviation in tourism and merchandise export activities to Europe. In Egypt the Merchandise export went from a 33% growth in 2008 to minus 15% in 2009, similar pattern was observed in Morocco and Tunisia. (, 2010)

• Most of the MENA nations tried to respond by increasing their expenditure which resulted in increase in fiscal deficit.

• One of the major events happening in this period was the real estate crisis in Dubai. Dubai underwent an unbridled growth in past six years and the dessert state was transformed into a lavish metropolis with state of the art buildings, malls, towers, and even man made islands. But it all got a sudden break in 2009; more than half of construction projects worth 582 Billion US dollars have been halted or cancelled. Though there was no exact figures but there was a joke that Emirate airways is not making loss due to unemployed workers going back. It is estimated that the Dubai’s economy contracted by 5% in 2009(Paul Lewis, 2009)

Economic Analysis of the MENA in 2010

After the Economic slump of 2009, the year 2010 came with some favorable sign. Though the growth was yet to touch the pre crisis levels but things were much better than the previous year.

Middle East and North Africa had been benefited primarily due to the increase in Oil prices. From 62 US Dollar a barrel, the price had increased to an average of 79 US Dollar a barrel as well as increase in oil production which had risen to 25 million barrels a day for the GCC alone(Bloomberg, 2010). Rising price had some effect on importing cost for nations like Morocco but it had been observed that over all there had been an increase in FDIs and investments. Jordan saw a 31% rise in soft loans and aids. (Thomas White, 2010)

The important observations made during 2010 are as follows: -

• GDP in these countries grew by 3.8% this year compared to 2.9% a year before. (Bloomberg, 2010)

• Due to slow credit growth stimulus spending was important as well as useful.

• There had not been much increase in the non oil export.

Dubai had shown recovery with many of the non oil trade and tourism coming back to the basics. Dubai is the trading hub of the Middle East and  in this sixth largest container terminal of the world trade comprises 40% of the GDP. Though the total GDP growth is still expected to be very low in 2010 and the fate of many of the real estate projects are yet to be decided, it is expected that things will get much better in 2011. According to standard charted Dubai will grow by 4% in 2011.

• Egypt had shown strong signs of resilience during 2010. The Economy was driven more by internal demand rather than depending on foreign trade. Compared to the 80s when the economy primarily depended on Suez Canal revenue and petroleum exports these days it exhibits a much more diversified portfolio with sectors like tourism and SME based export playing important role. The expected growth rate is 5.25% according to the government agencies and the govt. relied on expansionary measures. In spite of the high inflation, interest were not cut down by the national bank stating the reason that non food inflation is not high. One another upside of the economy was high foreign reserves (in mid 2010, it touched a record high of 35.5 Billion US Dollars). The downsides were/are high rate of unemployment, trade deficit , most of the growth coming through government investments alone and Egypt  still not insulated from the slowdown in Europe.(, 2010)

• A recently released report by Dubai chamber of commerce estimates the GDP of GCC will grow  by 4% in 2010, a net foreign asset of 110% of GDP and fiscal balances are expected to increase by 7% between 2009 and 2011 (, 2010)

Middle Eastern Economy: the way ahead


The year 2011 seems to bring better growth results for the MENA economy. IMF estimates that the region will grow with the rate of 5% where as World bank predicts 4.4% in 2011. These estimates were made on the assumption that oil price will be around 75 US Dollars a barrel but given the fact that Oil price is approaching 100 US Dollars a barrel, highest in the past two years, a higher growth can happen( though higher price will also result higher import cost for importing nations like Morocco). It will also result in, increase in foreign direct investments, remittances, aids, credit and higher employment.

• Many parts of the region are going to invest heavily on infrastructure. Qatar which is hosting 2022 football world cup is going to invest 250 Billion US dollars in infrastructure, housing, roads, stadiums etc. Oman is going to invest 80 Billion in the next five years where as Kuwait 104 Billion us dollars in the next four years. Abu Dhabi will be investing 27 Billion US dollars in establishing world class museums and attraction centers. Saudi Arabia will be building 5 new cities in the dessert for business purpose. (, 2011)

• Morocco had strong ambitions in the tourism sector. It aspires to be among the 20 most visited destinations in the world and wants to double its tourism revenue to 20 Billion dollars in next 10 years. It had planned to invest 20 Billion US Dollars in developing various facilities, hotels and infrastructure. (Thomas White, 2010)

• Economy in Egypt seems to be comparatively stable, though inflations and unemployment rate are still high. The govt. has strong plans to boost export, and aspires to reach a figure of 34 Billion US Dollars by 2013. (Thomas White, 2010)

• In the GCC crude oil extraction is expected to increase from 25 Million barrels a day in 2010 to 26 Million barrels a day in 2011.

• Dubai seems to come out of its short term challenges related to the real estate bubble burst. 2010 was the year of constant and moderate growth and 2011 seems to be better. Business men in UAE seem to be unanimously optimistic of doing good business in 2011. (, 2011)

Recommendations: -

In the end author will like to give some recommendations based on his readings and understandings of research papers and articles related to the MENA economy. These are as follows: -

• Egypt should try to diversify its export business to newer markets like Latin America, South East Asia etc. So far the growth is driven by govt. investment which is keeping the fiscal deficit high and not allowing the inflation to come down. In order to achieve a growth rate of 8.5% by 2015 govt. needs to build an economic structure which is less dependent on govt. spending.

• Unemployment is another major concern for the Egyptian Economy. In order to curb the current rate of unemployment it at least needs 850,000 to 870,000 new jobs a year. The only factor that can bring such a higher employment is a growth rate of at least 6-6.5% or above.

• In the Middle East region there had been hardly any considerable increase in the non oil revenue. It is high time that the various individual economies  diversify into various newer avenues other than  oil. The government needs to prudently invest into a diversified portfolio. Efforts must be made to reduce the dependence on non oil revenue.

• The MENA oil importers need to work on their competitiveness. This region is characterized by dominating public sector, inefficient and weak institutions and burdensome regulatory frameworks. The region needs to work on improving business climate along with implementing fiscal consolidations and sound Macroeconomic policies. (Middle East economic survey, 2010)

• As discussed earlier in Egypt’s case most of the MENA's oil importing nations are restricted to Europe for trading purpose. There had hardly been much growth in Europe in the recent time whereas most of the growth has come from emerging economies of Asia and Latin America. Today BRIC (Brazil, China, Russia and India) constitute 50% of the global GDP but only 9% of the total exports of the Oil importers of the MENA region. Hence it is imperative that it needs to diversify its trade to such new engines of global growth. (Middle East economic survey, 2010)

• For Oil exporters in the region fiscal stand should be expansionary as long as there is no sign of overheating in the Economy. (Middle East economic survey, 2010)

• For Oil exporters, development of financial market is another area where there is ample scope of development, non GCC oil exporters need to develop their financial market by working on free entry and exit barriers. GCC members though have sound fiscal policies which helped them cushion against the global meltdown but still there are ample scope of development. For both GCC and non GCC oil exporters development of bond market can be another strong alternative. (Middle East economic survey, 2010)

Referencing: -

1>, 2009, Q & A on economic crisis and MENA, available at <,,contentMDK:22153569~pagePK:146736~piPK:146830~theSitePK:256299,00.html  >

2>, 2009, Q & A  on economic crisis and MENA, available at <,,contentMDK:22153569~pagePK:146736~piPK:146830~theSitePK:256299,00.html   >

3> International Monetary fund, 2009, Middle East economic analysis, p-10

4>, 2009, Economy 2010: Middle East returns to growth, available at <  >

5>, 2009, Economy 2010: Middle East returns to growth, available at < >

6> Auguste Kouame: (chief economist world bank, Middle East region), 2009, Interview on: QA on global economic crisis and MENA …..On April 23, 2009

7>, 2010, Regional economic prospects, p-140

8>, 2010, Regional economic prospects, p-142

9>, 2010, Regional economic prospects, p-142

10> Paul L, 2009, Dubai's six-year building boom grinds to halt as financial crisis takes hold,, available at <     &gt ;, Accessed on January 2011

11 Bloomberg, 2010, Middle East, North Africa Economies Will Accelerate Next Year, IMF Says, available at < html >

12>Thomas White, 2010, Middle East/Africa: Economic review, available at < aspx >

13 > Bloomberg, 2010, Middle East, North Africa Economies Will Accelerate Next Year, IMF Says, available at < html  >

14 >, 2010, Egypt’s economy shows resilience during financial crisis, available at < article  >

15 >, 2010, GCC economic outlook indicates robust growth – DCCI, available at < html >

16 > , 2011, Faster growth in Middle East economies expected in 2011, available at < print  gt;

17 >
Thomas White, 2010, Middle East/Africa: Economic review, available at < http://www.thomaswhite

18 > Thomas White, 2010, Middle East/Africa: Economic review, available at < aspx >

19 >, 2011, UAE businessmen bullish on economic growth in 2011, available at < StoryId=1093386251>

20> International Monetary fund, 2010, Middle East economic analysis, p-33

21> International Monetary fund, 2010, Middle East economic analysis, p-36

22> International Monetary fund, 2010, Middle East economic analysis, p-16

23> International Monetary fund, 2010, Middle East economic analysis, p-22 to 24

Wednesday, January 19, 2011

PEST Analysis of MICE industry in Middle East

                                fig: Abu Dhabi Ferrari theme park( source:                                                                  
In the past two decades one of the regions in the world that had witnessed phenomenal growth is Middle East. It had shown excellent growth not only in the traditional oil and gas sector in which it has abundant resources but also in other sectors like services, retail, tourism and hospitality. Having some of the fastest growing cities with state of the art infrastructure carved in the midst of the dessert Middle East attracts a large chunk of tourist from all around the globe. Along with the leisure tourism the segment which is growing by leaps and bound is the “Business tourism” or the MICE segment. In the following blog the author will attempt to do a comprehensive PEST analysis of the MICE industry in Middle East. ( #)

PEST Analysis: -

Political factors: -

• The political factors in Middle East have both pros as well as cons.

• It has real sincere govt. machineries which want to put the region on the forefront of the tourism as well as business tourism market.

• Strong initiatives are taken, delegates are sent to different parts of the world, programs and promotional campaigns are conducted and meetings and conferences are high on the government agendas.

• The region has huge geo- political significance which attracts the attention of policy makers, corporate, officials, diplomats etc towards it.

• The down side is that many parts of the Middle East are politically volatile and disturbed which can create apprehensions about it.

Economic factor: -

• Middle East had been among the fastest growing regions in the world.

• In the past two decades the region had witnessed phenomenal growth.

• After the dip in the oil prices its growth rate went down and it witnessed a modest growth rate of 2.9% in 2009. ( Business intelligence middle, 2010)

• Though yet to catch with the other developed markets the economy is poised for a strong growth in 2011. Govt. expenditure and rising oil price will facilitate stronger GDP growth in the region. (, 2011)

• Middle East has cities like Dubai, Abu Dhabi, Kuwait, with state of the art infrastructure. There are also cities like Doha, Muscat etc which are growing very fast and investing hugely on infrastructure.

• The region can boast of some exquisite hotels, resorts, spas, leisure park and super market stores such as Burj al Arab, Emirates palace, Marina Mall tower, Abu Dhabi ice rink, Abu dhabi Ferrari theme park, Palm islands, etc.

• States run efficient and effective airlines such as Emirate airways, Etihad airways, Qatar airways etc that connects the region smoothly and frequently with the rest of whole world.

• Many parts of the region are going to invest heavily on infrastructure. Qatar which is hosting 2022 football world cup is going to invest 250 Billion US dollars in infrastructure, housing, roads, stadiums etc. Oman is going to invest 80 Billion in the next five years where as Kuwait 104 Billion us dollars in the next four years. Abu Dhabi will be investing 27 Billion US dollars in establishing world class museums and attraction centers. (, 2011)

• It can be assumed that since Middle East is an emerging market it puts the meetings and conferences high on the govt. agendas compare to other matured markets. The basic region is that not only MICE is a growing and lucrative industry in itself but it also helps in driving investment and overall branding of the place .

• Middle East is comparatively economical and cost efficient in providing various goods and services in comparison to its more developed Western counter parts. But over the period of time it had been seen that cities like Dubai has become very expensive.

• A matter of concern could be the current Economic condition of Dubai, the city state considered as the epicenter of business and tourism activities in the Middle Eastern region has a debt of around 110 Billion US dollars and in 2010 it recorded a sub standard GDP growth of 3.2%. (, 2011)

Social factors: -

• Islam plays a very important role in Middle Eastern culture.

• The primary inhabitants of Middle East are Arabs which are known for their warmth and hospitality.

• Many of the leading cities in the region such as Dubai, Muscat, Abu Dhabi and Kuwait etc are very cosmopolitan in nature with more than 50% of population comprising of expat population.

• The downside can again be the political turmoil and fundamental forces existing in the society.

Technological: -

• Middle East has some state of the art convention centers like the ADNEC (Abu Dhabi national exhibition center), DWTC (Dubai world trade center), QNCC (Qatar national convention center), Bahrain international convention center etc with excellent technical facilities to conduct meetings and conferences of international standard.

• Telecommunication facility varies in the Middle East from being very advanced to very rudimentary. Most of the nations have their own national operator though of late many of them are introducing foreign players as well. (, 2008)

Note: -

# (A point to be noted over here is that Middle East has a wide range of diversity within itself, there are places, which are growing very fast where as those just trying to catch up, which have huge oil and gas deposits as well those with almost no oil, which are very cosmopolitan and open in nature where as those which are comparatively less open. Hence the given analysis is just a generalized analysis and tries to look at Middle East as a single entity. Individual analysis of individual places and states will follow in subsequent blogs. )

Reference: -

1> Business intelligence middle, 2010, Middle East economic growth to rebound to 3.7% in 2010, says World Bank, available at <  >

2> , 2011, Faster growth in Middle East economies expected in 2011, available at <  >

3> , 2011, Faster growth in Middle East economies expected in 2011, available at <  >

4> , 2011, Faster growth in Middle East economies expected in 2011, available at <  >

5>, 2008, Executive summary: Middle Eastern Fixed Voice and Telecommunications Infrastructure Market, available at <  >