Lebanon

Rest & recreation – The beach life

by Executive Staff
written by Executive Staff

It’s an obvious business proposition: buy beach front property, wait for the sun to come out, and charge $20 a day for entry. And from mid-July through September, as long as there is heat to beat, Lebanon’s beach clubs are packed with tanned, oily bodies frying themselves to golden perfection.

As competition for customers intensifies, beach club owners are offering new, innovative incentives and programs to lure clients to their particular strip of sand. Furthermore, some are adding facilities to make their clubs year-round destinations, maximizing profit on some of Lebanon’s most expensive beach front property.

Club Senses in Kaslik sits near the coastal highway, 20 minutes from Beirut, drawing customers from the capital and nearby towns who want a quick escape from the urban heat. It’s a massive black building, with several floors of gym equipment, 40 exercise classes per week, an indoor pool with panoramic view and a large spa. While there is no beach access, it has two swimming pools, one of them for children. Last year, the pools were only for members of the gym, who pay a monthly ($165), quarterly ($462), half-yearly ($890) or yearly ($1,788) membership fee to use the equipment and take classes.

This year, the club’s management opened up the pool area for non-members. Although open for only a year, according to Shyrine Yaghi, Communication Manager at Club Senses, the laid-back, somewhat New Age feel proved extremely popular, especially with local Lebanese.

“Tourists are more likely to go to touristic cities,” she said. “But at Club Senses, it’s more like a resort. We’re not promoting it as the city of Kaslik. Last year we had a good experience with the beach club, so this year we’ve developed more space and a certain strategy to contain the 600 to 700 people who come on the weekends.”

In Byblos, Eddé Sands, one of Lebanon’s favorite beach resorts, is upping the ante, faced with increasing competition from places like Club Senses. In addition to their tropical outdoor spa, Eddé Sands opened an Ayurvedic spa this past year, the first of its kind in the country. Two Indian doctors trained in Ayurveda, an Indian science of healing, offer treatments, massages and consultations for specific ailments.

Eddé Sands is also looking to capitalize on the exclusivity angle, offering for the first time a silver “Presidential” tier membership, which for $1,430 comes with a host of benefits, such as free massages, free meals for two at all of the resort’s dining outlets, and a 15 percent discount at the spas. The regular purple ($411) and gold ($847) memberships are also now offered for families, rather than just individuals. And instead of one entrance for everyone, Eddé Sands also split the experience in two, with a VIP entrance that goes directly to the cabanas, bungalows and circular VIP pool, and a separate entrance for families and day-pass beach goers.

Like Club Senses, Eddé Sands is looking to make the resort a year-round destination. The memberships, which used to be valid until the end of September, are now valid through the end of the year. A massive new ballroom, over 700 square meters and seating up to 640 people, will host weddings and parties all year long. The resort’s traditional Lebanese restaurant, Layal al-Zaman, was the scene of New Year’s and Valentine’s Day parties last year, and can be kept open for winter dining.

Then there’s the beach club that’s opening this winter. Hotel Byblos-sur-Mer, owned by Alexy Karim, is set to re-open around Christmas this year, so he can catch some holiday tourists or Lebanese on a trip back home who are looking to spend a few days by the sea and explore Byblos’ old town. Located at the edge of the port and built in 1964, it ironically had its heyday during the civil war years, when many Beirut residents left for the relative peace of Byblos. But then the capital came back to life, with its new downtown and fancy hotels, and Byblos was, as Karim puts it, “forgotten.” He is looking to bring the hotel back to its former glory minus, of course, the circumstances that made it so popular.

Karim is also the owner of Dar l’Azrak, a seafood restaurant perched on a cliff in the town of Amchit, south of Batroun. With seven years in the seasonal food and beverage industry, he is keen to move onto a project with a slightly longer window of opportunity.

“We work all year just to make these three months,” he says, referring to the high summer season. Karim shudders to think of the summer of 2006, and calls 2008, when Lebanon’s government was pieced together just a month before the season began, “sort of a miracle.”

The four-story hotel will have 22 suites, eight rooms and a massive rooftop presidential suite with a 400 square meter terrace. Room rates will begin at around $200 for a 30 square meter deluxe room, and will climb into the thousands for the 160 square meter presidential suite. With high-speed Internet and two conference rooms, as well as a small spa on the third floor, Karim hopes to make it a corporate destination during the low season.

“There are two hard months, February and March. We have a low season like everyone else, when we will focus on corporate things, seminars,” he says. “But after February and March, you have Easter, and then springtime comes,” at which point he expects business to take off.

For summer 2010, he’s planning a beach club and pool just across the road from the hotel. Comprising 2,000 square meters, the U-shaped outdoor area sits just adjacent to the port. A finger of land that juts into the Mediterranean will house a seafood restaurant, also called Dar l’Azrak, and the rest of the little strip of coast will have a lounge pool, deck and snack bar.

“I’d rather give my guests nice clean water to swim in the sea than focus on a big pool,” says Karim, referring to a plan to pipe the hotel’s wastewater back into the municipal system for treatment, rather than letting it run into the sea. At the other side of the U is a raised wooden deck; this area will turn into a bar and lounge once the sun sets.

“It’s not wild like Eddé Sands, more of a chill out place, with jazz, blues, Cuban music. You can moor your boat and come spend the day, and then continue your evening after dinner at the lounge,” he explained. Guests will also be able to catch music from the Byblos Festival, whose stage is on the other side of the port.

“We’re targeting not teenagers but executives. Young executives,” said Karim, who is in his late 40s, “like me.”

The phased opening will help him iron out any kinks in what is his largest project to date, while not missing any of the seasons.

“I could have opened the beach this year,” he said, “but the hotel would not be done. I like to fix one thing at a time.”

“When you open it, that’s the hardest thing,” Karim continued. “It takes you two or three years to adapt, upgrading everything yourself. This way, we can fix any problems during the low season stages.”

0 comments
0 FacebookTwitterPinterestEmail
Lebanon

Telecom – Dialed with good intentions

by Executive Staff
written by Executive Staff

Lebanon’s telecommunications industry has seen some progress in the last year, mainly due to efforts aimed at reforming the sector. One of the most positive developments is that Law 431 has actually begun to be applied. The law, in theory, lays out a roadmap for how the telecommunications sector should be reformed by giving it a corporate style structure, the goal of which is to prepare the sector for possible privatization.

Law 431 also created an entity responsible for carrying out and overseeing the reforms, called the Telecom Regulatory Authority (TRA). Recently the TRA’s mandate has put it in conflict with the Ministry of Telecommunications, with both sides struggling to assert their authority over the regulation of the telecom industry. It doesn’t help that the ministry and the authority appear to be backed by parties from opposing sides of the country’s political divide.

The conflict came to a head earlier this year when the TRA made two decisions that the ministry perceived as overstepping its mandate.

Simply called “Decision Number 1,” the TRA ordered that all mobile numbers for MTC start with the prefix “71” and all numbers for Alfa would start with “72.” The point of the decision was to shed light on the actual cost of calls between networks, since it’s more expensive to call an Alfa number from an MTC Touch phone, or vice versa, than to call a number on the same network.

“Decision Number 1 gives transparency to the end-users and makes it easier to know whether they are calling a subscriber who is on the same network or on a different network, because there is a difference in terms of tariffs,” said Kamal Shehadi, chairman of the TRA.

Also included in “Decision Number 1” was a TRA order to issue one million mobile numbers to each of the two mobile network operators. The decision went directly against the ministry’s policy of approving and handing out numbers for MTC and Alfa in batches of 100,000, thus giving the ministry control over the amount of mobile numbers in the market and keeping the operators on a tight leash. The Ministry of Telecommunications contested both parts of “Decision Number 1” on grounds that the TRA was overstepping its authority, and Alfa went ahead and started issuing 71 numbers. The Ministry of Telecommunication and Alfa declined to comment for this article.

The dispute was brought before Lebanon’s highest court, the Shura council, and in mid-July the court issued a ruling backing the TRA decision. The court said that under Law 431 the TRA was within its legal mandate to issue “Decision Number 1.”

The allocation of the numbers is part of the implementation of a “National Numbering Plan (NNP).” The numbering plan would, in theory, allow for better management of the mobile networks, and is part of the planned reforms of the sector. But the numbering plan’s budget comes from government coffers, and is called the “numbering fee.”

The second decision made by the Shura council was to suspend the implementation of the numbering fee that would be paid to the TRA to implement the national numbering plan. In May, the current care-taker Telecommunications Minister Gebran Bassil issued a policy paper for the plan, where he envisioned the TRA to be “guided to work on an NNP,” thus outlining his support for the plan but not allocating the task to the TRA.

If Bassil’s policy paper is anything to go by it seems that these decisions won’t be the last points of contention between the minister  and the TRA. The section of the paper that deals with the TRA uses language that asserts the ministry’s authority over the TRA. The paper then states that the “TRA is bound to fulfill all its duties and responsibilities under the minister’s supervision, following all ‘general rules for the Regulation of Telecommunications Services in Lebanon’ set out by the minister.”

While all this may seem like the TRA and the ministry are in a state of perpetual tug-of-war, Shehadi insists that this is not the case.

“This is not a turf war,” he said. “The TRA’s position is based on its desire to have a full partnership between the TRA and the Ministry of Telecommunications… based on the law and the respect of the TRA’s independence.”

Liban Telecom
Liban Telecom is intended to be a government-owned body with a corporate framework that eventually replaces the telecommunications ministry. According to Bassil’s policy paper, when launched, 40 percent of Liban Telecom shares will be offered to the Lebanese public (33 percent minimum) through an initial public offering in the Beirut Stock Exchange.

“The delay in establishing Liban Telecom is creating a delay for the overall package of reforms that is called for in law 431,” Shehadi said.

For this to happen, however, a new cabinet will first have to ratify the decision — and this cabinet has yet to be formed.

0 comments
0 FacebookTwitterPinterestEmail
Companies & Strategies

Fujitsu – Stéphane Réjasse (Q&A)

by Executive Staff
written by Executive Staff

Stéphane Réjasse, managing director for Fujitsu Technology Solutions in the Middle East, has had a 22-year career in information technology that spans Europe, the Middle East and Africa. Previously based in Lebanon, where he worked at CIS Group, and before that as a marketing manager at Hewlett Packard in Switzerland, he has presided over impressive growth at Fujitsu since joining the company in 2005. Thanks to his long experience in the field, he has been able to successfully promote Fujitsu’s technology solutions to some of the region’s largest clients. A French national and graduate of MACI-Institut du Management des Affaires et du Commerce International in Bordeaux, he is currently based at Fujitsu’s regional headquarters in Dubai’s Silicon Oasis. He spoke with Executive about why Fujitsu Technology Solutions has been able to thrive in spite of the economic crisis, and how he plans to further its growth in the region.

E How long has Fujitsu been operating in the Middle East and how has its role changed and grown over the years?
Fujitsu opened its first office in Dubai about eight or nine years ago. Back then it only had three people; when I joined in 2005, we were 12. In the beginning, about 95 percent of our business in the region was what we call “volume” — laptops, desktops, things sold through retailers, and 5 percent was “value,” big computers, data centers, IT systems.

When I joined, I announced my intent to create and kick-start the value side, while continuing to grow the volume side. Now we’re about 70 percent volume, and 30 percent value, so we’ve made some really great inroads and advances. Value is a growing business, but it’s a matter of investment. Until recently, Fujitsu Solutions had not invested enough in this region.

E Can you explain Fujitsu’s relationship with Siemens and how that relationship has evolved? What does this mean for your customers?
The two companies have been tied since 1923, and for the last 10 years, Fujitsu and Siemens have been in a joint venture, 50-50. They signed that agreement in 1999, so now it is coming to an end. We realized that IT services are not core to Siemens, and Fujitsu is only about IT. So we took over Siemens’ share of the contract, which was expected, and now Siemens is our biggest client.

For our clients, it means that we are now able to service them globally, whereas before we were limited to Europe, the Middle East and North Africa. Fujitsu can really become a worldwide player.

E What needs and demands are you responding to in the Middle Eastern market? What products have proved most successful and why?
We’ve been very successful as far as retail and corporate customers go. You have two types of consumers here: one is very price-sensitive, and cost is the most important thing, although they also want very good technology. Our Esprimo laptops, which begin at about $500, have been very popular for individual users and small businesses.

On the corporate side, there are people where price is not an issue. They are happy to splash out for design, status, and the latest technology. For this market our Lifebook, which costs around $3,000, has been extremely popular. It’s very heavy-duty, but stable, which they appreciate. It also has the feature of being able to plug in a SIM card and connect to the Internet anywhere  data service is available on the mobile network, like a 3G card. We’ve tested it out in the middle of the desert — you can answer emails, browse the Internet.

For the service side, our Primergy systems have been very successful, on account of their very, very advanced technology, particularly a feature called virtualization, whereby you can create a virtual machine for a system and then close it down when you are not using it. It allows you to launch new servers as your business grows. In this field, we are way above HP and IBM, so it turns out that our investment in this technology was a safe bet. Also, everything is made in Germany and Japan, which is something that our clients here really appreciate.

Fujitsu has posted some extraordinary growth numbers in certain markets; 241 percent year-on-year growth in 2008 in the United Arab Emirates despite a 10 percent contraction in that market, 484 percent in Saudi Arabia.

E How are you doing in the region overall and how have you been able to buck the downward trend in the way you have?
Because of our advanced technology, it’s actually been easier than before to sell these products. That’s one explanation for our success, that it’s really thanks to the technologies we’ve invested in. Maybe before the crisis hit, companies and governments were in the comfort zone. They thought, “Why change?” But once the crisis hit, they have been forced to consider different alternatives. Whereas before they were not willing to listen, now they see the technology and they want to buy it.

For example, we are working with many government clients. In Saudi Arabia, we are heavily involved, particularly in the education sector and with the new government agencies they are creating, like the Saudi Food and Drug Administration. They’re building a new office, and will be expanding extremely rapidly. That agency is wall-to-wall Fujitsu, specifically because of the virtualization, which will enable them to cope with their growth. In Saudi, we’ve reached 12 percent market share.

We also work with the King Abdul Aziz University in Jeddah, with Etisalat in the UAE, the Ministry of Communication and Information Technology in Egypt, and in Lebanon we work with Solidere. We’re also in Pakistan, Bahrain, and by the end of the year we’ll be in Kuwait and Qatar.

Retailers tell us that there is no problem, but when I walk around the malls I see they are empty. However, perhaps because Fujitsu is sold through places like Carrefour, as well as specialized retailers like Virgin, we are not feeling the effects as much. Carrefour is doing as much business as ever — people always have to eat and get their groceries, even in a recession, and maybe they see the products there.

E How does your performance in the region compare with Fujitsu’s experience of the crisis elsewhere?
Fujitsu is the number three worldwide IT provider, and in the Middle East it’s ranked number six. So our strategy here is to carry on investing in order to close that gap, and reach the same worldwide ranking here within the region. It’s really just a matter of investment. Fujitsu has been here quite some time, we just haven’t invested enough in the Middle East.

In terms of the economic crisis, in Europe, the IT sector as a whole has gone down 15 percent in the past year, while Fujitsu is down 8 percent. In the Middle East, however, the IT market is up 8 percent, and Fujitsu is up 40 percent.

E So there have been no negative effects of the economic crisis?
We’re feeling more the effects of the political situation in Iran at the moment. So much business in Dubai is linked to Iran and a lot of it has been brought to a standstill.

E What is your Lebanon market like and how does it relate to Fujitsu’s strategy for the region overall?
The Lebanese market is always resilient, out of experience, I would imagine. I have lived in Lebanon, in Beit Meri, and I was always surprised at peoples’ attitudes, no matter what was happening politically, even during all the bomb blasts and everything in 2005.

The real estate prices are going up by the day, and the market is very bullish. So even though right now it is only 3 to 4 percent of our business, it’s an interesting market. They are building very advanced projects, and the banking sector is very strong. Many of the banks — the Central Bank, the Lebanese-Canadian Bank, Société Générale — are using our services.

There are still a lot of opportunities. It’s not as depressed a market as Dubai, which is very quiet right now.

0 comments
0 FacebookTwitterPinterestEmail
Companies & Strategies

Ogilvy Group – Edmond Moutran (Q&A)

by Executive Staff
written by Executive Staff

Edmond (Eddie) Moutran  is the founder of the advertising firm Memac, and is now the chairman and CEO of its successor, Memac Ogilvy. As the first Lebanese advertising executive to open shop in the Gulf in 1973, he is a pioneer in the world of Lebanese marketing. He spoke to Executive last month.

E Will you tell me a bit about the early days of advertising in the region?
When I graduated from university in the States and came back here — this was 1972, there was a good industry, and I joined a small agency. In today’s terms they were very small, but at that time they were very big. It was an agency like any other agency, creating some ads for local clients, but mainly what you do is take pictures of the product, put them up, stick them on a piece of paper, write a couple words on it, and that was the ad. Sometimes they adapted international material for local consumption. That was the main function of local agencies.

I went to Bahrain in 1973, and I was the first Lebanese, believe it or not, to leave Lebanon and go to work in advertising in the Gulf.

E What was going on in Bahrain then?
In Bahrain at the time the agency had made an agreement with an agency in the UK to service Unilever products, and the head of Unilever at the time was living in Bahrain. Also what was then TEI, — Tobacco Exports International — they had an office in Bahrain. So I went and I started a one-man office there. I have had a home in Bahrain ever since.

Then, in 1975, when the Lebanese crisis started, the industry started evacuating and going to the Gulf.

E So, a lot has changed since then?
A lot has changed. The biggest thing that happened is this enormous speed with which the advertising industry caught up with the 20th century, and the enormous effort that is in place to stay with the rest of the world in the 21st century.

E Two years ago, you told a conference in Dubai that Memac Ogilvy was falling behind in the digital revolution…
We were. But that was two years ago. I think in the meantime we are leading the digital arena, without a doubt, because we’re not just supplying digital advertising on the web, we’re applying digital to every single discipline you can think of.

E So is it your view that the changing technologies are going to have a major impact on advertising?
Absolutely. Five years ago Internet penetration in the Arab world was 2.4 percent, today its 36 percent. Billions of people everywhere, not just in one country. Maybe the [United Arab Emirates], Lebanon, are ahead of the rest, but I don’t think the infrastructure is fast enough to keep up with the changes. I mean here, with one of our cellular providers you can’t use a BlackBerry because there’s no data service. Can you imagine? We are in 2009! Unheard of! So they’re not keeping up with the changes demanded by the consumer and demanded by the clients.

E When you look at two seemingly opposing environments — Lebanon’s, which is stable, and Dubai’s which is plummeting — what do you see happening for advertising?
What’s happening in both places, actually, is a very, very serious development. But the development is stemming from the fact that clients are holding us more accountable, and clients are demanding a lot more justifications on their return on investments. There’s no easy money anymore in the world. So every penny they spend has to be justified.

E But of course the crisis has also been an impediment.
The crisis hit everybody. I would dare say it hit us harder than most industries because the first thing that’s cut in a crisis are [advertising and publicity] budgets, so we’ve been hard hit. Some agencies have suffered a lot more than others. It depends on the portfolio of clients you carry, the sophistication of the portfolio you carry, the number of offices you have, how many markets you’re in, etc.

E What do you see happening in the next five years?
In the next five years I hope to God the client will allow us to do our job. The client in Lebanon fancies himself as a trader, fancies himself as a solid businessman. He understands banking better than his banker, and he understands advertising better than his agency. I have one client who makes chocolates. I said to him, “As long as you make chocolates and I write the ads, we’re going to be ok. But if I make chocolates, and you write the ads, we’re going to [screw] it up.” Advertising is one of those subjects that everybody has an opinion, and rightly so. But the difference between an agency’s opinion and a client’s opinion is that the agency’s opinion is based on a lot of experience and is based on a lot of consumer insight.

E Are you optimistic that firms will be able to adapt to a changing advertising environment? Or do you see some major losers in the coming years? Television? Newspapers?
If you talk about possible losers in the media, there are to me possible losers. When television was invented, newspapers panicked, and radio panicked. What’s going to happen is people are always going to find time to watch television, but now it’s going to be the quality of the programs they create. There was a Turkish series called “Noor.” It had four million addicts that would not skip a second. It was a wonderful program, everybody was talking about it.

What newspapers have to do is evolve. They’ve just got to find out what the consumer wants. There’s still something to sitting, having a cup of coffee and reading the newspaper. But they’ve got to find out how you want to, where you want to, what time is good, and what do they need to do for you to continue to read it. Today, consumers have become much smarter than ever before. They rule the game. It’s no more a sellers market. So the more research you do to find out what the consumers want, the better off you will be armed to charge the future.

E Do you feel confident Lebanon will remain at the forefront of innovative advertising?
Lebanon has always been a very creative place. But if you look at Tunisia, Tunis is a very creative place. Dubai is highly creative, Bahrain [also].
We have fantastic creative directors in Lebanon, but it’s past their day. Once they get older, and they’re all getting old, is there going to be a replacement to keep Lebanon where it is? Or is another city going to have these young shining stars grow up there and take the center stage? I hope we continue to grow the talents in Lebanon, but these are things nobody can predict.

E Another thing you said back in Dubai two years ago is that you’ve turned over creative decisions inside Memac Ogilvy to a younger generation.
It’s gotten to the point that if I like the ad, I tell them, “Don’t run it.”

0 comments
0 FacebookTwitterPinterestEmail
Comment

Street smart in Gemmayze

by Paul Cochrane
written by Paul Cochrane

Lebanon’s tourism advertising campaign presents the country as a paradise of pristine mountain landscapes, beautiful shorelines and night time cavorting. What the ads don’t show are the effects of the apparent lack of interest by Lebanon’s public institutions to regulate waste management, protect the environment or deal with the perpetual gridlock on the country’s streets. Such images would not be good for Lebanon’s brand identity.

This is quite understandable; no country would highlight such downsides. But with tourism projected to contribute directly and indirectly an estimated $7 billion to the Lebanese economy this year — equivalent to 28 percent of gross domestic product — such images should be embarrassing to the sector. Resolving Lebanon’s environmental woes requires comprehensive efforts and capital to invest in infrastructure improvements. But there are also other initiatives that can be taken on a more local level.

Take Gemmayze street (the official name is “Rue Gouraud”). To drive the one kilometer long, one way street that runs from the edge of Martyrs’ Square to the Éléctricité du Liban building, it can take anywhere from 20 minutes to an hour as people search for parking or hand over keys to a valet. For an essentially straight and flat street, near areas with ample parking, like downtown and Charles Helou Station, such a log jam would seem a major urban planning oversight.

But in Gemmayze’s case, an area of ‘traditional character’ according to the signage, the street transformed into a nightlife hub haphazardly, bar by bar, restaurant by restaurant. The nightly traffic jam is also not solely due to a lack of planning. A big contributor to the jam is the Lebanese penchant for valet car parking, which combines a propensity for showing off with a reluctance to walk.

What if Rue Gouraud were to follow the example of cities as far apart as Shanghai, Cape Town, York, Copenhagen, Montreal and Curtiba, Brazil? What all these cities have done is “pedestrianize” streets or whole blocks, whether for retail, nightlife or areas of historic interest.

But Gemmayze would not need to look abroad to see how pedestrianization was implemented; half a kilometer away is pedestrian friendly downtown Beirut. With the upcoming opening of the Beirut Souks, the pedestrian area will be extended even further, and it could spread eastwards if Gemmayze followed suit.

The municipality could install rising bollards at either end of the long street, making Gemmayze pedestrian but also accessible at specific times for delivery trucks and residents with parking permits.

Parking space could be found in Martyrs’ Square, and if Charles Helou was given a lick of paint, fumigated, and linked via a bridge, several hundred more vehicles could be parked. For those unwilling to walk, a fleet of golf carts could be added to the current half dozen that ply downtown to transport people. Pedestrianized, bars and restaurants could spill onto Rue Gouraud, and there could be live music, dancers, street artists and performers. People would mix and mingle, no-one would be aggravated from a traffic jam or altercation with a valet, and air pollution would undoubtedly be reduced.

While this sounds desirable, there are always obstacles. In other cities, when streets have been pedestrianized, gentrification has also occurred, changing demographics. Lebanon’s ‘old rent’ laws, where rents were frozen at a particular monthly rate prior to the civil war, has prevented this from happening. It has also meant elderly residents need vehicle access. Noise pollution is another potential issue, although if the demographics changed, would be less of a problem, with those moving in aware of the neighborhood’s lively night time atmosphere. The valet car parking “mafia,” which attempts to control the parking spaces that line Gouraud street and surrounding roads, could also oppose such a move to pedestrianization.

Then the party-goers themselves may very well resist such an idea, too accustomed to valet parking and reluctant to give up a perceived convenience — although it may take 40 minutes to get to the valet, as opposed to a 10 minute walk from parking lots on the eastern edge of downtown or, if it were renovated, Charles Helou.

But there are indications some nightlife patrons are willing to forgo their valet. A bar owner, not overly in favor of pedestrianization, admitted that out of the 150 cars usually valet parked every Friday, on one particular night there were only 15, as people shunned their cars to walk. While anecdotal, this does suggest that people are willing to forgo the valet to save time.

For access to Gouraud to improve — whether by improving parking or opting for pedestrianization — this would require a united front by residents and business owners to surmount the biggest obstacle, bureaucracy and vested political and economic interests.

PAUL COCHRANE is the Middle East correspondent for the International News Services

0 comments
0 FacebookTwitterPinterestEmail
Executive Insights

The efficiency of centralized network management

by Mahmoud El Ali
written by Mahmoud El Ali

Faced with pressure to increase network capacity and performance while saving money, information technology managers have often been quite content to simply add more hardware as required.

However, this results in a disparate network that is hard to manage, imposing an extra burden on IT staff and adversely impacting business efficiency. Ad hoc network expansion may have coped in the past, but the need for end-to-end network visibility to assure compliance with global security and privacy mandates and to streamline business processes means that this approach is no longer acceptable.

The past few years have also seen an increased need for speed in deploying new enterprise-wide applications — a capability that is severely impeded when systems are disconnected from each other. It’s clear that chief information officers and their IT teams need to grab hold of their networks and manage and secure them as a unified whole.

Bringing order to chaos
As a first step to solving this problem, chief information officers and their teams have consolidated infrastructure and staffing into datacenters that provide applications, storage and expertise to remote and branch sites from centralized resource pools. However, without centralized management to automate deployment, configuration and oversight of datacenter and remote operations, consolidation inevitably falls short of its promise. The answer is efficient network management.

Instead of trying to handle environments individually, centralized tools ease the network management burden. Deploying a centralized management tool automates not only performance monitoring, but also change, configuration, policy and patch management throughout the network.

Network management tools are critical to understanding how the network operates today and how new applications or procedures will impact it in the future. It’s a way of future-proofing your IT network.

Because these tools are integrated across a heterogeneous environment, IT teams can model how the network will react to a new application and determine whether they will need to make adjustments, such as provisioning more bandwidth, changing the priority of delay-sensitive traffic on the network, or adding more processing power.

Doing more with less
More efficient network management also helps address the biggest challenge network managers face at the moment: how to do more with less. There will always be more projects and users for IT to support, but staffing and budgets will not increase to accommodate these demands. Managing basic infrastructure and integration is hard enough; then you add in privacy and security requirements, and that increases the network management burden. Some have tried to accommodate ad hoc networks by buying an overarching management platform, but that makes it very difficult to apply critical policies consistently across the enterprise and to create compliance audit trail. They also struggle because they don’t have the in-depth, in-house knowledge to manage some of the more management-intensive technologies, such as voice over Internet protocol. Also, there are so many applications fighting for the network that, if handled incorrectly, things start to break down.

Bringing everything under one umbrella gives an amazing amount of control and helps deliver quality of service for all your local and remote voice, video and data applications. You can set business appropriate thresholds to alert you to network problems before users are impacted. And you can use comprehensive metrics to do forecasting, modeling and capacity planning. All these things help save time and money and make your enterprise far more efficient.

A comprehensive network management platform gives visibility to the status of your resources, services and users. The savings that can undoubtedly be made can either be returned to the business, or used to fund more strategic value-added services from IT.

Mahmoud El-Ali, 3Com general manager, Middle East

The authors of Executive Insights have been invited by this magazine to offer their professional opinions and analysis to you, the reader. Executive Magazine does not endorse the analysis of Insight authors, nor should the Insights be interpreted as reflecting the views or opinions of Executive or its editorial staff.

0 comments
0 FacebookTwitterPinterestEmail
Executive Insights

IPTV could be good enough to pay for

by Hadi Raad
written by Hadi Raad

Telecom and media companies used to operate in their own silos, with clear divisions between what each offered to consumers. Media players produced or managed content; telecom companies provided telephone and broadband services. With increasing competitive pressures, as well as technology-driven industry convergence, players on each side are moving into each other’s space. Media companies have moved into content and voice delivery; for example, Comcast, a cable TV media player in the US, currently offers Internet and phone services. Likewise, telecom operators have responded to declining fixed voice revenues and saturating broadband markets by stepping into multimedia services.

One promising such move by telecom operators is their venture into Internet protocol TV (IPTV) — a digital television service delivered over a broadband connection with a dedicated IP address. IPTV’s greatest value proposition to customers is its offering of premium content, in addition to greater control over that content. IPTV allows customers to personalize their TV experience with features such as time shifting, in which viewers can record programming to watch it later or pause, rewind, or fast-forward during a movie, and rich and user-friendly electronic program guides that allow them to navigate programming more easily. Operators also offer access to tens of thousands of video-on-demand titles that can be watched at any time. Aside from television services, IPTV applications include TV gaming, music, text, commerce and user-generated content. For example, viewers could have one-touch access through their remote control to real-time local weather, traffic updates, stock market fluctuations and horoscopes on their TV screens, without interrupting the program they are watching.

Verizon’s IPTV service offers a good example of IPTV’s features. It has a library of 14,000 video titles and its TV program guide provides viewers with integrated on-screen control of several applications. Customers can find and manage a vast array of digital content, including television programming, movies, Internet video, games, music and photos. This allows a customer, for example, to watch a movie about an action hero, play a video game about the same character, and buy retail items associated with the character, all on the same home system.

All of these features have contributed to IPTV’s popularity with subscribers, whose numbers are slated to reach approximately 40 million worldwide in 2012. This represents approximately 11 percent of broadband subscribers.

IPTV’s Prospects in MENA
In the Middle East and North Africa, the existing television landscape presents both a challenge and an opportunity. It is dominated by free-to-air (FTA) satellite service and illegal distribution. On one hand, these free options could make it difficult to convince consumers to pay for TV; on the other hand, these services offer consumers no real interactivity. Video on demand and pay-per-view, especially, could be popular in the region and convince consumers that IPTV is worth the money.

Cable TV, which offers many of the same services as IPTV, has limited network reach in the region with penetration of only around 5 percent. By contrast, the number of broadband connections is expected to multiply, with household penetration forecasted to increase from 9.4 percent in 2008 to around 30 percent in 2012, driven by telecom incumbents’ asymmetric digital subscriber lines (ADSL) and fiber optic networks. A large broadband subscriber base will position the MENA region to leverage the advantages IPTV offers. A few telecom operators have recently launched basic IPTV ventures, and more are in the pipeline. Yet IPTV household penetration at the beginning of 2008 was still low in the region — just 0.2 percent, representing approximately only 2 percent of broadband connections.

However, IPTV may not be the right choice for all operators. Ventures are expensive and complex and, as noted, IPTV requires consumers to pay higher monthly bills than they are used to. Most homes receive television services from FTA satellites or through illegal distribution; these represent as much as 90 percent of TV subscribers in some MENA countries. Moreover, many FTA channels are able to transcend national boundaries, since MENA countries share a common language and culture; as such, there has been huge growth in their number, which reached around 500 channels in 2008. According to a recent survey, a majority of viewers are satisfied with FTA offerings.

Operators that decide to launch or expand IPTV ventures will face several additional challenges. First, although broadband penetration in the region is slated for growth, it is still low, except in Bahrain and the United Arab Emirates. Speeds are also slow, with insufficient bandwidth to support streaming television service.

Second, IPTV providers will need to offer premium content to attract subscribers. There’s little regional premium content production in MENA, so shows must be produced elsewhere — a considerable investment.

Another consideration is competition. Television over the Internet can offer non-linear services similar to IPTV’s, such as time shifting and video on demand. These competitors not only steal market share from IPTV operators, they do it using the operators’ own resources. By transmitting content using the operators’ broadband data connections, they are taking operators’ bandwidth while generating revenues for themselves.

Getting IPTV right in the MENA region
Telecom operators that decide IPTV is right for them must consider the following factors critical to successful rollout. For those that don’t have the ability to meet these criteria, IPTV is probably not a viable option.

  • Hybrid solution: Operators should position IPTV as a complement to the FTA offering rather than a substitute. A hybrid IPTV-satellite set-top box could provide the dual benefits of IPTV services with FTA programming.
  • Features: Innovative interactive services will have significant appeal and should be a key part of any IPTV offering. Digital video recorders, time shifting, video-on-demand and pay-per-view could be popular. Operators should constantly define, prioritize and introduce innovative interactivity features.
  • Content: Successful IPTV entry requires operators to secure exclusive or premium content that can differentiate them from their competition. Premium content acquisition is expensive, but the investment is justified, so long as content is carefully chosen with the audience’s needs in mind so that they will be willing to pay for it, and if the operator has sufficient scale and a large enough customer base to secure a viable return. Operators need to carefully define their role along the content delivery value chain and establish the right partnerships accordingly.
  • Operational and infrastructure readiness: IPTV imposes new requirements in customer care and field and video operations, which must be appropriately handled via in-sourcing, outsourcing, or “managed services” models. It is paramount that operators ensure they have the necessary access and core network resources in place for a high-quality customer experience.

Conclusion
IPTV presents a unique opportunity for MENA telecom operators. With little competition from cable on the supply side, careful positioning will boost IPTV significantly. On the demand side, consumers are likely to be receptive to IPTV and its benefits. To be successful, operators need to provide consumers with attractive content and significant control over it. They must make sufficient investments in premium content and infrastructure, and ensure they deliver a consistently high quality service. In a region where viewers are used to hundreds of free channels, only a compelling package will persuade consumers to start paying for IPTV.

Hadi Raad is a senior associate and Mahmoud Makki is an associate at Booz & Company

The authors of Executive Insights have been invited by this magazine to offer their professional opinions and analysis to you, the reader. Executive Magazine does not endorse the analysis of Insight authors, nor should the Insights be interpreted as reflecting the views or opinions of Executive or its editorial staff.

0 comments
0 FacebookTwitterPinterestEmail
Executive Insights

Beyond cost reduction

by Rami Nazer
written by Rami Nazer

An economic crisis is too good an opportunity to waste. It is an ideal time to step off the treadmill and ponder improving your business, your core offering and your cost structure. This year could very well be the year when financially sound and forward-looking organizations actually make their fortunes.

Over the past 12 months, market conditions have been eventful for some and extremely difficult for many. Firms have been taking steps — preventive and remedial — to cope with the recession and emerge stronger. Their responses have been varied, as there is no universal or one-size-fits-all solution. Nonetheless, businesses must ensure that steps taken are both appropriate for their business models and sustainable in the long run.

Most sectors of the economy are vulnerable to the effects of the downturn, but our global research indicates that risks are even greater for sectors like banking and capital markets, real estate, biotechnology, asset management, telecoms, utilities, manufacturing, consumer products, automotive and media and entertainment.

To effectively address the economic downturn, enterprises must also remain adequately responsive to the expected upturn in growth and demand after the recession ends. They need to clearly understand the macroeconomic causes and the microeconomic means to manage profitability during these times while also planning to profit during the revival.

Opportunities in adversity
Ernst & Young’s recent report on corporate priorities titled ‘Opportunities in Adversity’ revealed that insightful enterprises focus on how to effectively reduce costs by acting on decisions that must be sustainable in the long term. This means reducing costs without compromising revenue streams, and reducing operational costs without burdening the business with heavy implementation costs. However, the central message of the study is that cost reduction has become essential, with more than 85 percent of over 300 top level executives polled citing it as a key issue for their business. Overwhelmingly, they have focused on four major areas: number of employees, information technology, employee benefits and real estate.

But is cost reduction the only initiative that corporations need to undertake? Is employee reduction the most effective in reducing costs? A pool of institutional knowledge is beginning to indicate the fallibility of most cost-reduction initiatives: that these are not sustainable in the long term.

While the first response to a more difficult market is to seek to improve efficiency by reducing costs, slowing recruitment and reducing inventory, the risk of reduced effectiveness is real. Cost cutting is frequently a short term solution.  The challenge is to ensure that the organization is robust enough to face new market conditions without weakening its business mission and to take advantage of opportunities that will undoubtedly emerge later.

Amongst cost reduction initiatives, two measures stand out from all others: business process improvement was cited by 77 percent of those surveyed, and supplier cost reduction was cited by 60 percent of respondents. At 47 percent, employee reduction came in after info-tech optimization (49 percent).

Managers need to understand the psychology of cost and treat sustainability as the key focus at the very outset, ingraining cost optimization behaviors in the organization while attempting to ‘take the pain of change’ out of the process.

While businesses evolve mechanisms to withstand an economic downturn, educative examples of what is really happening in businesses are already available, for example a global investment bank reengineered its product control and identified savings initiatives of $8 million, compared to an earlier target estimate of $5 million. A pharmaceutical manufacturing company strengthened an existing cost reduction program, conducted a ‘health-check’ and identified cost savings of between $45 million to $73 million per year from a total cost basis of $410 million. A global telephone company also implemented a new global purchasing organization to reduce annual costs by 22 percent on average.

Based on research and interviews with our clients, we have developed the ‘stress pendulum’ which focuses specifically on the issue of cash. The primary driver of management action is the amount of cash that the company has and is generating. If you are burning cash during a credit crisis, your priorities are clear. If you are generating cash through operations, the opportunities are many. In any case, the need for management action is paramount.

Rami Nazer, Partner, Ernst & Young Middle East

The authors of Executive Insights have been invited by this magazine to offer their professional opinions and analysis to you, the reader. Executive Magazine does not endorse the analysis of Insight authors, nor should the Insights be interpreted as reflecting the views or opinions of Executive or its editorial staff.

0 comments
0 FacebookTwitterPinterestEmail
Executive Insights

The Lebanese banks‘ 2008 report card

by Marwan Salem
written by Marwan Salem

In July, I authored a report for FFA Private Bank titled “The Lebanese banking sector 2008,” which examined the Lebanese banks’ fundamentals, performance, financial strength and the challenges the sector faces going forward.

The report pinpoints that the Lebanese banking sector has steadily grown over the years relative to the size of the domestic economy, having amassed assets in excess of 327 percent of Lebanon’s gross domestic product amidst ongoing deposit inflows. The increase was driven by several comparative advantages, including a banking secrecy law, a skilled workforce, a relatively stable currency and high yields on local and foreign currency compared to peer countries. The strict regulatory framework and conservative policies set by the central bank that shielded Lebanese banks from exposure to toxic assets and structured products also helped considerably.

Over the past decade, the Lebanese banking landscape has changed significantly, moving from a highly competitive and fragmented environment to an asset consolidation environment. The period also witnessed the expansion of Lebanese banks on the regional scene.

Banks’ balance sheets suggest that Lebanese banks are “deposit-rich banks,” as they are funded mainly through customer deposits, which accounted for about 83 percent of total liabilities and shareholders’ equity during 2008. But the asset allocation also reflects the large exposure to sovereign debt, with more than 50 percent of the assets made up of government and central bank paper, mirroring the fact that the Lebanese banking sector is acting as the backbone of the economy, providing funding for its sovereign debt by accumulating customer deposits.

The report noted that the Lebanese banking sector has demonstrated remarkable growth over the years despite the persistent political instability and the global financial crisis that surged in 2008, proving its resilience to external turmoil. Initially, customer deposits were bolstered by the inflow of wealth following the civil war and by the ample petrodollar liquidity in the region that flowed into the sector in the aftermath of the September 11, 2001 events in the United States.

More recently, deposit growth was triggered by the Lebanese banking sector emerging as a safe haven for depositors in light of the prudent policies set by the central bank and the attractive interest rates on deposits compared to regional peers. In 2008, the sector added $10.5 billion in deposits, implying a 15.6 percent year-on-year growth rate. The dollarization rate dropped from 77.3 percent in December 2007 to 69.6 percent in December 2008, highlighting the renewed confidence in the Lebanese currency and the economy as a whole. Supported by solid economic activity and steadied by a stable political situation, loans growth recovered in the last two years and lending grew at a compound annual growth rate of 17.3 percent between fiscal year 2007 and fiscal year 2008, compared to a rate of 0.63 percent between 2000 and 2006.

The Lebanese banking sector has reported regular growth in profits across a seven-year track. In recent years, profitability was favored by an increasing contribution of regional entities to the sector’s income, a recovery in lending activity and improving cost-to-income ratio. As a result of a further diversification of the Lebanese banks’ business lines, non-interest income has witnessed significant growth in the past few years, but remains underdeveloped relative to the net interest income, which accounts for 69 percent of the sector’s total income.

Thus, the performance of Lebanese banks is closely linked to the interest spread between the cost of funding and yields on uses of funds. Prospects for sustained profitability will depend on the maintenance of growth in earnings within the context of international interest rate contraction. The banking sector will also need to attract additional deposits from operations abroad as regional economies slow.

But the FFA report also states that the Lebanese banking sector is growing without any detriment to its financial position and asset quality. Banks’ asset quality improved during the political and security difficulties of the last few years; loan portfolios also showed strong growth. The Lebanese banks also enjoy very high liquidity levels, while banks around the globe suffered from the severe liquidity crisis. But most importantly, Lebanese commercial banks are solidly capitalized, as witnessed by their capital adequacy ratio standing at 11.23 percent, significantly above the 8 percent required by the Basel II committee.

The immediate risks facing the Lebanese banking sector remain limited given its ability to counterbalance the adverse effect of the global financial crisis. The positive factors include ongoing deposit inflows, increasing oil prices and the political and security improvements following the parliamentary elections in June.

But the FFA report notes that Lebanese banks are faced with two key risks. First, their high exposure to the sovereign debt in light of the fragile political environment. The second risk is the highly uncertain political and security environment in which they operate. According to the report, the immunity of the Lebanese banking sector is correlated to the consolidation of the recent domestic achievements; they include the economic growth recovery and the decline in government debt ratios.

Marwan Salem is head of research & advisory at FFA Private Bank

The authors of Executive Insights have been invited by this magazine to offer their professional opinions and analysis to you, the reader. Executive Magazine does not endorse the analysis of Insight authors, nor should the Insights be interpreted as reflecting the views or opinions of Executive or its editorial staff.

0 comments
0 FacebookTwitterPinterestEmail
Executive Insights

Market matrimony

by Dima Itani & Ramsay G. Najjar
written by Dima Itani & Ramsay G. Najjar

The wedding season has arrived this summer, which means not only fireworks, flowers, beautiful designer gowns, tuxedos and people spending half their salaries on wedding lists, but also pairs of souls bound for life, for better or for worse, for richer or for poorer, in sickness and in health.

For better or for worse is not always easy. Marriages that last a lifetime need an extra dose of planning, a sprinkle of good faith and a pinch of foresight. Just like human beings, corporate organizations make vows to their stakeholders and decide to engage in a long term union, expecting the beautiful and glowing life “à deux,” only to realize it takes more than love to make a marriage successful.

When people are engaged they are eager to show their finest and most admirable qualities and behavior. They are enthusiastic to confirm to their soul mate that they have all the outstanding qualities and the most favorable persona. They are both excited to discover their shared values and beliefs. In fact, they are building their image as the best future husband and wife. They are striving to capture the other person’s heart in a way that ensures they could never think of marrying someone else.

This period of courtship is similar to when a company first enters into a new venture, whether establishing itself on the market or launching new products and services. During this crucial period, the company’s main objective is to build a particular brand image that would ultimately attract its targeted stakeholders. These can include employees, customers, suppliers, investors and the general public. Employees, for example, will only join a company if they can identify themselves with its image. This brand image is the most important asset for the company as it establishes its personality and differentiates it from the competition. A meticulous branding strategy driven by the company’s aspired image should therefore be developed at the first stage of a new venture, serving as the basis of future relationships with different stakeholders.

‘Getting to know each other’ soon leads to popping the question and a marriage proposal to the woman, or more commonly today, the man of one’s dreams. Similarly, a company backed with a meticulous brand image “proposes” to its stakeholders by asking them to invest, be employed, become clients or join the company. For this “engagement” to take place, the man and woman, or in another case, the company and its stakeholders, should share the same values. This is absolutely crucial before plunging into marriage or partnership. Values are what make up the core of a person or an organization. These are the beliefs, principles and standards which they abide by in each and every aspect of life or business.

Having established a set of values and gotten engaged, it is now time to talk about marriage. A couple should at this stage discuss and plan their future together. Two independent human beings are about to take a step forward and make vows to be together for the rest of their lives. These two people in love should now project a vision of their life together. Just like that, a company plans a union with its stakeholders. At this stage, a couple should discuss the potential of raising a family together. Similarly, a company should project how it will stand in the next five years or so, clearly defining its vision and objectives, and then communicating these to its stakeholders. All actions and initiatives that follow should be aligned in order to ensure that the mission is being applied and the vision reached.

When the big day comes, two people become bound for life. After the rosy pre-wedding period and the beautiful reception, real life, with all its ups and downs, begins. No matter how strong love is, a marriage cannot survive or succeed without transparency, a vertebra in the backbone of marriage which keeps a couple together. It is essential to remain transparent about all emotional issues, financial matters and future plans, whether communicating with one’s partner or stakeholders. A company, like a husband or wife, must provide timely and accurate information to its stakeholders and communicate as frequently as possible through two-way communication mechanisms. Open communication is the key to avoiding potential negative attacks and ascertains the company’s credibility.

Another vertebra is consistency in image and substance. One day of “I Love You’s” followed by another day of the cold shoulder makes a marriage rocky. A couple should maintain a level of consistency in the way they deal with and react to each other. Following the same logic, a company committed to its stakeholders should abide by a high level of consistency and avoid any kind of schizophrenia in its image and business conduct. As such, the company should adopt a clear communication strategy which ensures alignment and consistency across all messages.

However, consistency does not necessarily suggest routine and predictable behavior. Communication between a husband and his wife can be translated into various gestures of appreciation. Some of these gestures can cost a foot, arm and a leg while others can be extremely easy on the pocket. One husband can express his love to his wife by buying expensive jewelry; another can opt for the low-cost option and leave small post-its all over the house or write cute notes on the bathroom mirror.

There are innumerable channels that can convey a person’s or a company’s message to a specific audience. These channels can range in price, but the key is to achieve cost efficiency by using the best channel for the particular message. For example, instead of launching an expensive advertising campaign, a company might only need targeted ongoing initiatives like viral videos, round-table meetings, editorials and articles. Diversification in communication helps avoid routine and preserves the impact of a communication message.

On the other hand, no matter how diversified the communication between a couple, all marriages are exposed to crises. These crises can emerge when many small issues remain unresolved and the smallest argument, regardless of its importance, becomes the straw that breaks a camel’s back. A person can avoid these crises by solving all issues before they accumulate and by knowing what irritates their spouse.

Crises in the corporate world can emerge in the same way as in marriage, and can also be avoided by the same crisis management logic. Just like in marriages, crises that are not resolved in the corporate world can lead to a “divorce” and can have damaging repercussions on the company’s image, reputation and financial equity. Establishing an effective crisis management mechanism, just like going through marriage guidance counseling, can address and mitigate crises through effective communication messages and initiatives. Moreover, these crises can be avoided altogether through preemptive measures that primordially consist of a solid communication strategy that can provide a company’s image with a shield of immunity against any potential negativity. Additionally, in the unforeseen and much unwanted event of a “divorce,” a good communication strategy would spare the two parties deep or irrevocable injury, whereby they decide to separate but still remain on good terms.

As psychologist Michael Cavanagh once said, communication in a love relationship is like an intravenous feeding tube that is attached to each partner. The relationship flourishes when nutrients flow through the tube; it turns toxic when poison is fed through it, and becomes anemic when little or nothing flows through it. Similarly, the amorous relationship between a corporate organization and its stakeholders requires just the right amount of “nutritious” communication in order for it to thrive happily ever after.

Dima Itani & Ramsay G. Najjar
S2C

The authors of Executive Insights have been invited by this magazine to offer their professional opinions and analysis to you, the reader. Executive Magazine does not endorse the analysis of Insight authors, nor should the Insights be interpreted as reflecting the views or opinions of Executive or its editorial staff.

0 comments
0 FacebookTwitterPinterestEmail