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Initially the Azza Fahmy strategy was to expand internationa

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Adriano Amaduzzi

on 25 February 2015

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Transcript of Initially the Azza Fahmy strategy was to expand internationa

1. Describe Fahmy's Strategic shifts over the last 10 years. What lessons can be learned?
Initially the Azza Fahmy strategy was to expand internationally, however the business itself was poorly organised. Due to this, Fahmy made her daughter Fatma the managing director. As managing director, Fatma organised the business into departments and reduced the number of managers reporting to Fahmy from 18 to 4 key managers. Fatma also hired high-caliber staff, and gave them incentives and benefits for hard work.

Fatma then monitored markets locally and internationally, and found that there was little competition locally, and internationally there were big rivals such as Bvlgari and Tiffany. The company also became more organised, with marketing, sales, design, planning and quality control departments.

As the strategy of Azza Fahmy was still to expand internationally, a business development division under the marketing and sales department was established to find possible areas for expansion. Potential franchisees and retailers approached management, who would then screen the locations for the most desirable locations such as Europe and the US. Promising locations were sent samples to sell, and AFJ would create strategic plans and train staff at successful locations.

Gahly’s plan was initially to saturate the local market, however Gahly found that to draw in more customers, the company would need to change consumers perception of the brand. She decided that the companies next move would be to open a store in Paris or London, so that the perceived value to customers in Egypt and other regions such as the Arabian Gulf improves to draw in more customers.

From this, it can be learned that it is important for businesses to be organised internally before expansion is possible. It can also be learned that by expanding carefully, such as through the use of sampling areas, there is more chance of finding potential markets. The perception of the brand in different markets is also shown to be an important factor in the success of Azza Fahmy, with Fatma wanting to open outlets in places such as London or Paris to improve the perception of the business to customers.

Initial Strategy
: International Expansion
Problems
: Business Poorly organised
Solution
: Restructure of company

2. Conduct a SWOT analysis to analyse the internal and external conditions Azza Fahmy must consider going forward.

Strengths: Highly skilled jewelery manufacturing. 9th largest consumption market. Low labour and energy costs. Experienced family members as staff.

Weaknesses: Poor initial organisation. Relatively new company.

Opportunities: Opportunities to expand into the Arabian gulf market as well as European markets (London, Paris, etc.) and the US market such as New York.

Threats: Local jewellery manufacturers - Damas and L’Azurde and international jewellery manufacturers - Tiffany and Bvlgari.



What Internal resources and assets does Azza Fahmy have that it may give competitive advantage?
4. Using Five Forces do an analysis of the jewelry Industry
5. "Structure follows strategy versus strategy follows structure" Discuss this statement based on Azza Fahmy's stratergies.

Structure follows strategy is when a business organises itself in a manner that it can carry out its strategic aims. In the case of Azza Fahmy, the company was initially poorly organised, with the main strategy of the business being to expand internationally. However at this early point, the business did not have the organisational structure required to expand into other markets.

When Fatma Gahly was appointed as managing director, she reorganised the departments of the company, as well as hiring more experienced staff and giving them incentives to perform well. This meant that the business now had the structure to follow the stratergy of international expansion.
Azza Fahmy Case Study
Introduction: A designer jewelry, focusing on product-oriented purchases
Internal resources:

Intangible assets:

Company Reputation
: Azza Fahmy is renowned in Egypt for its unique handmade designs which DIFFERENTIATES the products from other competitors.

Skilled labour trained by Fahmy to produce high-quality products.





7. Current Performance of Azza Fahmy

-In 2006, Fahmy collaborated for two years with British fashion designer Julien Macdonald.

-Initiated under a corporate social responsibility (CSR) umbrella in 2011, Fahmy co-founded project Nubre, meaning “Design” in Nubian, with the European Union (EU), to enhance the local culture of contemporary jewelry design through workshops.

-Fahmy collaborated with British designer Matthew Williamson, with a collection opening in September 2013 at London Fashion Week.

-Following the success of a series of workshops held in Aswan, Upper Egypt, in collaboration with the European Union, Fahmy established the Azza Fahmy Design Studio (AFDS) in 2013, a joint venture and partnership with Alchimia, Contemporary Design School based in Florence, Italy, teaching students jewelry-making skills and enabling them to establish their own independent brands.

-The pair launched Azza Fahmy and Matthew Williamson second jewellery collaboration in Dubai in 2014. Created to complement Williamson’s fall-winter 2014 collection, the Azza Fahmy x Matthew Williamson range is sold exclusively at Bloomingdale’s Dubai.
Risks to entry:
6. After the Company was restructured, Fahmy was considering her expansion options. In your opinion, which strategies should the company follow in order to become an international brand?

Currently, Azza Fahmy targets high-end customers and neglects lower-end customers. Azza Fahmy Jewellery could challenge high-quality products with their own unique designs and expensive handmade production techniques for high-end customers and also create ranges of jewelery from inexpensive materials for lower-end customers in Europe and the United States. Producing jewelery that is cheaper would allow Azza Fahmy to reach more customers, increasing brand awareness in the markets AFJ operates in. However, selling cheaper products can damage the company's image of high quality, luxury jewelery.


In Europe and the United States, women do not like the big jewelry that AFJ usually produce in the Middle East. Due to this, AFJ could adapt to the European and US markets by producing jewelery that would appeal to these consumers.

For Europe, AFJ should could take styling ideas from various civilizations in the Middle East and turn the products into modern jewelry that people will understand.
The company should put an effort and money not only into recruiting and training new designers, but also understating language, culture, customer buyer behavior and the location of target segments to produce new products that target people live Europe and United State.


To build her brand in international market, AFJ could diversify into Internet-based marketing to reach a wider consumer audience. AFJ could also advertise over the internet, to raise brand awareness further.
Barriers that keep potential competitors out of an industry
High
brand loyalty
towards well knows and already established brands like Tiffany. New market entrants face low brand perception, which regardless of the quality of jewels is hard to overcome for new jewel brands to become appealing
High costs in
maintenance and infrastructure
, especially in European markets (Azza Fahmy's expansion strategy in major capitals)
High Security costs
High leasing costs
High inventory costs

Threat of substitute products:
Due to the
increase in variety of luxury goods
in sectors like technology and other luxury goods, there is an increasing competition in consumer expenditure and what luxurious items are defined to be.

Example
:
Apple products:
Iphone, Macbooks,
Premium clothing brands


Bargaining Power of Buyers
In the event of economic downurn i.e financial crisis in 2008, there is a reduction in demand in luxury goods.
Psychological factors play an important role on how the brand is perceived
Egyptian Jewellery Industry:


1. Mainstream jewellery
most jewelry sold under this category
2. Designer Jewellery (Growing industry)
Azza Fahmy
Product-oriented purchase
Branded Jewelry segment
Damas
L'azurde
Relied on extensive promotional campaigns

Products branded in-store + advertised collection
International competitor brands:

3.Tiffany $3.9b retail sales value

Insurance
High skilled labour training required
Rivalry Among Firms:
In the mainstream jewellery--> semi-consolidated industry structure
Although there are inexistent switching costs for consumers, the general high customer perception of famous jewelry brands allows companies to charge premium prices, with little
Bargaining Power of Suppliers
Low bargaining power, as companies can
look and buy gold, diamonds or other materials from other suppliers if conditions are not favourable
The US industry is fragmented: the 50 largest companies generate about 40 percent of revenue.
Small firms can compete with larger chains as price is not the main competitive factor, but rather effective merchandising and good merchandising.

Or in Azza Fahmy's case: product differentiation
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