1. Hart 1
Cody Hart
PHAUS & Lebanon
MKT 365
T. Wilson
Political and Legal Analysis: Lebanon
Lebanon, a country in the Middle East, has had a contentious history when it comes
to political and legal systems structures. The Middle East has always had a heterogeneous,
divided populous. Being on the fringes of the Western World and Eastern culture, Lebanon
is at the forefront of such ideological divide: a perennial struggle or dichotomy. The issues
discussed center around the impact of the collapse of the Ottoman Empire, the Sunni-Shia
religious-factional divide, Israel and Syria.
Lebanon, from Roman times on, has swapped hands in terms of cultures and
influence. In Roman times, Lebanon was part of the Judea-Palestine province. Following the
collapse of the Roman Empire, Eastern influence descended onto the lands of the Levant, a
historical geographical region of present-day Jordan, Israel, Lebanon, and Syria. The
Ottoman Turks to the North, influenced the region for nearly half a millennium, from 1299-
1923. The events following the collapse of the Ottoman Empire in 1923, have a left heavy
impact on current Western-Middle East political relations. It must be understood by
western marketers involving political interests.
During WWI, the Arab Revolt, backed by Western powers, overthrew Ottoman
dominance in the Levant. Arab support by Western powers during WWI was largely fueled
by the German-Ottoman pact during WWI. Upon aiding the Arabs in overthrowing the
German aligned Ottomans, Western forces, namely the British, bargained an implied
political autonomy to the Arabs. However, following the end of the war, such a pleasant

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pact with the Arabs and Western powers turned sour. The promise for Arab political
autonomy in the Levant was ignored. It was the British and the French who occupied and
controlled the former Ottoman provinces of the region from WWI until the years following
WWII. This historical-political frame has engendered negative attitudes projected to the
West from Arabs within the region. For the marketer, it is worth noting policy which has
contributed to negative attitudes toward westerners and Western enterprise, especially if
the product in question is engineered and financed with American and European capital.
More presently, Lebanon has experienced the displeasure of turmoil and unrest
from its neighbors. In the 1980s, Israel invaded territory in southern Lebanon provoked by
the anti-Israeli, Palestinian aggression. This incursion sparked tensions within the factional
Lebanese political system, and thus an ugly civil war soon followed the invasion. Lebanese-
Maronite Christian factions joined the Israeli-backed coalition in the invasion, while
Muslim leftist factions, and Hezbollah, emboldened by the invasion, launched a counter-
offensive. Precipitating Israeli retreat, the divide sparked by the invasion burgeoned
hostility and ultimately a full-fledged civil war.
The civil war’s reflection on life in Lebanon is also key in understanding the political
and legal background of the Lebanese market. Lebanon, like a child in the middle seat,
stuck in between two siblings grappling for attention, becomes a victim if not influenced by
his siblings on either side. Lebanon, for the longest time, has had to wrestle if not jockey for
control of its own cultural and political sovereignty from two adjacent countries: Syria and
Israel. In the 1980s, it was Israel who jockeyed Lebanon for political sovereignty, now
today, its Syria who jockeys Lebanon’s political sovereignty.

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Diversity is indicative in Lebanese political structure and formation following
independence in 1943. Regionally, there is the presence of Christian, Jewish, and Muslim
populations. Upon gaining independence, political power was divided into a triad. The
office of president was assigned for a Maronite Christian, while the offices of the prime
minister and the parliamentary speaker were designated respectfully for a Sunni Muslim
and a Shiite Muslim (Library of Congress, 2015). Such structure has constitutional bias and
provides for equal representation politically for the interrelated religious-political factions.
The Republic of Lebanon is a parliamentary democracy, with 128 representatives.
Lebanon’s judiciary system is divided into four main courts: a judicial court, an
administrative court (Majlis al-Shura), a military court, and a religious court. The Majlis al-
Shura serves as the court responsible for matters regarding administrative decisions made
or issued by parliamentary agencies and institutions (Library of Congress, 2015).
Therefore, the Majlis al-Shura is the court of concern when dealing with such a passive
housing venture and has legal jurisdiction in allowing commerce.
Five parties have the largest shares of seats in the Lebanese parliament. There is the
Sunni-Muslim Future Movement, the Christian-backed Free Patriotic party, the Shia-
Muslim-backed Amal Movement, Shia-Muslim fundamentalist-backed Hezbollah, and the
Druze-backed Progressive Socialist Party (Samaha & Chugntai, 2015). The political parties
widely are influenced by religious preference and either extremists or moderates.
The instability in Syria has had a grip on Lebanese politics and alliances. Though no
party has a simple majority in the Lebanese Parliament, they do have opposition and
majority coalitions, predominantly based on attitudes toward Syria. Since 2005, given the
turmoil plaguing Syria, cross-party alliances have been forged with roots in foreign,

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external politics. The March 14th alliance is the anti-Syrian faction in the Lebanese
Parliament, whereas the March 8th alliance is the Shiite-Syrian backed faction. The March
8th alliance is currently the majority coalition, whereas the March 14th alliance is the
opposition coalition (Samaha & Chugntai, 2015). The convoluted politics of Lebanon with
it’s various unconventional cross-party partnerships, is a facet the marketer must keep in
mind when operating in Lebanon.
Largely fueled by the Shia-Sunni divide in the Middle East, Lebanon still is a
microcosm. It is a hot spot of the perennial conflict between the Sunni and Shia populations
in the overall Middle East. This fact is evident in the present political structure and
coalitions in Lebanese government when dealing with the issue of Syria. Shiite aligned
Muslim parties tend to be more favorable to Syria, so too does Hezbollah, who sponsors
present incursions into Syrian territory to fight alongside fighters of Iranian backed
President Bashar al-Assad. Conversely, the majority of Muslim based parties in the March
14th alliance align with Sunni-Saudi backed ideologies.
When entering the market, it’s worth noting, Lebanon is less than ideal given its
political and infrastructural instability. The country is increasingly heterogeneous, divided,
and has occasional flare ups in its political sectarian structure. Michael J. Totten,
contributing editor at World Affairs & City Journal, states:
To say Lebanon is a nation of contradictions is a cliché, but it’s a cliché because it is
true. It is simultaneously Western and Eastern, Christian and Muslim, modern and
feudal, democratic and illiberal, secular and sectarian, cosmopolitan and parochial,
progressive and reactionary, tolerant and aggressively hateful. This is because there
is more than one Lebanon (Totten, 2013).

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Diversity is attractive, however, when coupled with instability and lack of order, Lebanon is
a precarious place for any investment to grow. Although polar opposite ideologues can
incite violence and destruction, it is important to cater to the moderates in each party to
engender peace and order. This practice will improve commerce, development, and
infrastructure in the country.
Lebanese citizens might question the acquisition of passive housing. Is it even a safe
investment, in a country so unstable? Is it worth the investment if, in the future, the value
of the house is decimated by prolonged and lasting sectarian violence? Going forward, the
historical political instability is a factor that must be addressed if the product is to be
secure. The wounds of the past are still open; they are pervasive in the sense of both
politics and infrastructure.
Lebanese infrastructure was torn apart in the civil war in the 1980s as noted
previously. Most building conditions are poor, if not dillapidated after hostilities. Poor
conditions have put a strain on infrastructure demand. Another strain attributed to
Lebanese politics, geography, and history is the presence of foreign refugee populations
from both Syria and Israel. For Israeli refugees, these are poor Palestinians escaping
destitute, cramped living-conditions. For Syrian refugees, these are citizens fleeing carnage
in the Syrian civil war; evading chemical weapon assaults and death. By early 2015, there
were over 1.2 million Syrian refugees in Lebanon officially registered with the UN High
Commissioner for Refugees, severely straining local resources and services. The influx of
refugees fleeing from Syria puts pressure on Lebanon’s political and infrastructure.

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This refugee factor adds to the strain on infrastructure in Lebanon and must be
addressed by central planners in the future. Will Lebanon continue to be a place of
dilapidated, poor infrastructure with remnants of the civil war 35 years prior? Or will the
Lebanese improve public infrastructure and housing? This is of value to the marketer
because passive housing policies can be advanced if the latter is piqued.
Recently it was announced in 2014, the government of Lebanon was ending its rent
control policy. The move comes as more and more foreign developers have transformed
city infrastructure. The move was aimed at increasing ownership by boosting the economy,
yet also give way to the private sector as well as improve the infrastructure (Lebanese
American University, 2014). The dilapidated state of Lebanese infrastructure, coupled with
the government rent control reductions adds value to the passive housing concept. The
reduction will force the consumer market toward ownership. For a passive housing
marketer, this is important. The Lebanese will see the price of rent rise as conditions fall
and they may be exposed to the idea of passive housing ownership. The value in the passive
housing is its cost advantage attributes, engineering, savings, and ecological conservation.
In all, Lebanon is largely a diverse, convoluted country with a history of bloody
turmoil. The legal system, in theory, is viable enough to encourage and support the
prospects of passive housing ventures in Lebanon. However, given the political instability,
the influx of refugees from Syria, and the Shia-Shiite political divide in the country;
Lebanon’s fragile state raises questions about the procurement and acquisition of passive
housing.

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Product in the Lebanese Market
The product of passive housing (PH) in Lebanon has serious potential benefits:
diminished energy expenses, engendering the value of conservation, and developing new
green techniques to combat climate change. The PH method in general “consumes 80
percent less energy than a standard house” (Solovitch, 2015). However, given the relative
economies of adoption in the United States and Northern Europe, the capital intensive
product may suffer hiccups in Lebanon given its incongruence to such economies. Capital is
the main concern to the consumer and the supplier. On average, the PH method in terms of
construction is 10-15 percent costlier to the consumer, limiting demand and thus affecting
supply. In capitally endowed countries like the US, it is worth noting PH’s market demand
growth since its beginning has been steadily slow (Solovitch, 2015).
The Passive House Alliance-United States (PHAUS) is a membership organization
that consumers, suppliers, developers, and consultants all enamored by PH ascribe to.
Various metrics and standards are benchmarked by PHAUS. PHAUS also serves to connect
industry enthusiasts to a global network. Greater contingency and flexibility must be
considered when it comes to organizational structure in Lebanon, because of PH’s verdure
to the region. The primary focus of PHAUS and other international governing associations
is to enter the market and provide the greatest flexibility for the market to bud and then
flourish. To achieve this flexibility, attention should be focused more on local brand
development than by marketing adherence to stringent codes and association by-laws.
When considering market entry, with regards to Lebanon, it is in the interests of PH
firms to segment the population and profile the target consumer. PH is not limited to
domestic construction efforts, such as single–housing constructs, but also can be either an

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option of retrofitting present or future public buildings. Nearly 25,000 buildings in Europe
have been certified under PH membership and guidelines. Some of these buildings include
supermarkets, schools, churches, factories, and hospitals (Solovitch, 2015). In other
markets, public buildings and housing have been retrofitted to meet PH codes and cut
down on energy consumption and cost. This model can be adopted by Lebanese PH
developers and builders.
In terms of organization, the PH industry is a foreign and international concept first
developed in Germany. Much of its international organization can be streamlined into the
Lebanese market, with a Lebanese flare. Working alongside as sister ventures of the PH
industry are the Certified Passive Housing Consultants (CPHC) and certified PH builders. If
this model can be emulated in the Lebanese market, the industry is set for success. The
main concern for the marketer is the lack of capital in the economy of Lebanon, as well as
Lebanon’s lack of supply chains needed for PH’s successful adoption.
PHAUS must market with foreign capital and developers in pitching and testing
these new architectural standards in Lebanon. There is not a massive local effort already in
existence. However, as foreign commerce and developers enter into the cities, they bring
with them various options for bettered infrastructure. For the PH firm, there should be
industry-wide liaisons working with the public and private sectors. These liaisons work
locally in conjunction with the public and private sectors to promote the idea to the
developing market. The public liaison would lobby with various developers to win bids for
public constructs of prime societal endowments: government agencies, hospitals, and
universities. The private liaison would work directly with developers, promoting the idea
of PH and its benefits to the target market. PH’s benefits include dramatically reduced

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energy consumption and sustainable architecture. Foreign developers with a local footing
in Lebanon’s public and private sectors would provide essential avenues for PH adoption.
The idea of local centricity in Lebanon for PH firms, if they choose to enter the
market is key. Lebanon is in the Middle East where being foreign is a negative facet to
business. Being local, honest, and loyal to the consumers of this region is imperative for the
firm. Connecting face-to-face with the consumer will add to the value proposition of PH to
the Lebanese consumers. “Business in the Middle East is personal, and it is largely based on
good manners, so building strong personal relationships and trust with your
counterparts… is really important” (Vollmer, 2015). It is important to have an emphasis on
local interaction as opposed to an emphasis of viral interaction via the internet. For the
consumer, local interaction reduces consumer dissonance and supports the product,
especially because PH is a new product and concept to Lebanon. Local interaction is
analogous to the Middle East’s cultural norms; a local footing can bolster PH’s brand
perception in the region and can contribute to higher levels of product acceptance.
PH acts as luxury product, even to most advanced developed nations’ consumers. PH
is defined as a luxury good; PH is not essential and typically consumed by consumers with
high incomes. “Luxury goods are products that are not essential but are highly desired and
associated with wealthy or affluent people. They are bought for several reasons: to support
self-worth and status, or for the product's quality and craftsmanship” (YourDictionary,
2016). PH as a luxury good can be purchased for its cost and conservatory measures, as
well as its affective inducing greenness.
In recalling the Income Elasticity of Luxury Goods model of economics, as income
levels increase, a greater level of consumption is devoted to luxury goods (EconPort, 2006).

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As a luxury good, PH’s demand curve is relatively inelastic. A decrease in price, seldom
reaps large quantities sold in most markets. In Lebanon, the short run economic
profitability of the product for the seller, PH, may be slim to marginal. The Lebanese elite
class, because of its higher income, is more likely to purchase this luxury good, one that is
10-15 percent costlier than traditional construction methods. Given the luxury status of the
product, the marketer must price such a product in accordance with higher-income
earners.
When marketing the product to more aspirational consumers, it is important to
address the green techniques of the building standards and their effects on energy
consumption. When developing the perception of the product, for the marketer, it is
important to not singularly address the functional value of the product, but also the
hedonic value. The marketing of PH’s value is scored by its attributes: energy savings or
functional value, and combating climate change or hedonic value. After all, the premise of a
luxury good is “…. [to tell] stories. Story telling might be the best way to popularize a niche
brand. The end consumer picks up a few points and of course has something to talk about
to his friends” (Som, 2013). Marketing to higher income earners the value proposition of
PH is key in developing brand perception and knowledge.
Given the initial cost increase of 10-15 percent on construction compared to the
alternative, the long-run benefit quickly diminishes the intensity of the short-term cost.
Typically, 75 percent of a home’s total energy consumption is attributed to the cost of
space-heating. However, once the building is PH-code compliant, the heating-percentage of
a home’s total energy consumption is dramatically reduced to 10 percent. In relative terms,
“… comparing a 1,500 square-foot standard-built home with [PH codes and methods], the

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savings for space heating is estimated to be $1,400 per year” (GO LOGIC, 2016). The short-
term cost to the consumer may seem daunting. However, when put into perspective, the
long-term benefits outweigh the cost. PH must take this into consideration when marketing
to consumers in Lebanon. The increased cost in the short term, in general, will require
more capital to finance, which is not not readily apparent to the Lebanese consumer.
When segmenting the market, further market research must be performed to find
what general demand conditions exist for such a product. Receding back to the notion of
the product as a luxury good, the marketer should market the product to the socially elite:
the banking, ruling, and commercial classes inside Lebanese society. By marketing to such a
segment, the process of product diffusion is essential to public sector growth within the
industry. Most individuals in this segment have the capital needed to finance and support
such construction efforts, such individuals have regulatory, public, and market influence as
well. If an elite man in the finance sector in Lebanon is aware of the long-term and hedonic
value of the PH model, he is most likely to diffuse the product to others in his echelon of
wealth.
This form of target marketing can have a precipitous impact in garnering bids for
public works, for instance, universities and government agencies. In most developing
countries like Lebanon, if the product is diffused to the elite the product will then diffuse
down the income earning slope. This form of target marketing and market entry strategy
can impact successful implementation. This means targeting to the high-income earners
who have the capital and influence necessary to expand the product’s market.
A question that must be asked of the PH industry, if it chooses to enter Lebanon is
who will finance the construction of such architecture? Will it be an individual within the

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industry, who has ties to the target market in a safe and secured location, possibly in the
financial district of Beirut? Or a foreign developer who wants to build a swanky
condominium complex along the coast for the rich to play or get away for the weekend? Or
maybe it could be for a government agency seeking the product’s long-term investment
benefits showcasing Lebanon’s progressive, economic, and climatic motives in its public
infrastructure? All options for PH represent possible buyers and financing agents of the
product in the present Lebanese market.
Costs to PH more than likely will be high due to the lack of proper supply channels
and capital needed for minimal return on investment. The overall economy in Lebanon,
when compared to developed countries where the product sells well, is less than ideal.
High-income earners are proportionally more evident in Northern European and North
American economies to support the industry-wide PH market. In these markets it is worth
noting the main finance agents of such product tend to be affluent, single-families. For
attracting and catapulting the industry within Lebanon, PH marketers must augment their
accustomed Northern European and North American strategy where capital is more
abundant. To diminish Lebanon’s weaknesses in sufficient supply channels and capital, the
PH marketer must rely on foreign capital, local Lebanese finance-giants, and government
expenditures.
The marketer should be unsettled by the political fragility of the region and country
as well. What is to happen if political dissidence once again descends onto the country from
either the North or South? A loss of capital needed to sustain and grow such industry would
be catastrophic. It would be better to market such a product to a safer, more secure nation,

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one who’s economy is more bountiful and more align with the North American and
Northern European dominance.
In all, PH must augment its North American and Northern European strategy if it
hopes for a successful Lebanese market strategy. Two main concerns PH must keep in mind
is the unrest of the region and lack of capital in the Lebanese economy needed to sustain
the industry. Product issues must be resolved when considering the Lebanese market.
Greater contingency must be integral for PHAUS and other PH international associations
when attracting membership. Industry wide liaisons must be employed to work locally
alongside the private and public sectors of Lebanon. A local interaction will be key to
successful implementation given the cultural norms of the Middle East. Lastly, because the
product acts as an economic luxury good, the marketer must segment the population to
find the target market of choice based on high income earners and the product’s short-term
costs.
However, product issues alone, regional issues trump and hamper the conditions
necessary for successful product implementation. The lack of capital and amount of unrest
in the region spells doom for PH. If the consumer cannot be certain about the political and
regional future of the product’s location, why bother with the investment if the product’s
long-term benefit, likewise, is uncertain? Regional issues tied indirectly to product issues
preclude market entry and expansion of PH in Lebanon.

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Works Cited
Econ Port. (2006). Income Elasticity. Experimental Economics Center. Retrieved from:
http://www.econport.org/content/handbook/Elasticity/Income-Elasticity.html
GO LOGIC. (2016). The Financial Benefits of Investing in a Passive House. Retrieved from:
http://www.gologic.us/passivhaus/cost-benefit-of-a-passive-house/
Library of Congress (2015). Legal Research Guide: Lebanon. Retrieved from:
https://www.loc.gov/law/help/legal-research-guide/lebanon.php
Lebanese American University (2014). We need an overhaul of Lebanon’s housing
market! Retrieved from:
http://www.lau.edu.lb/newsevents/news/archive/we_need_an_overhaul_of_lebano
n/
Som, A. (2013). The Logic of Luxury Goods in Emerging Markets. ESSEC Business School.
Retrieved from: http://knowledge.essec.edu/en/strategy/the-logic-of-luxury-in
emerging-markets.html
Solovitch, S. (2015). The House that Could Save the World. Politico Magazine. Retrieved
from: http://www.politico.com/magazine/story/2015/09/the-house-that-could
save-the-world-213159
Samaha, N & Chugntai, A . (2015). Al Jazeera. Lebanon: At the crossroads. Retrieved
from:
http://interactive.aljazeera.com/aje/2015/lebanoncrossroads/
Totten, M. J. (2013, July). Dreaming of a Lebanon at Peace with Its Neighbors. The Tower.
Retrieved from: http://www.thetower.org/article/dreaming-of-a-lebanon
completely-at-peace/
Vollmer, S. (2015). How to mind your manner in the Middle East. Journal of Accountancy.
Retrieved from: http://www.journalofaccountancy.com/issues/2015/jan/middle
east-business-culture.html
Your Dictionary. (2016). Examples of Luxury Goods. Retrieved from:
http://examples.yourdictionary.com/examples-of-luxury-goods.html