1. Arab Academy for Science and Technology and Maritime Transport -
Graduate School of Business - MBA -Alexandria
Comprehensive Exam
Professor: D. Sherif Delawar
Hossam El Din Hafez Mohamed Abd El Ghafar
+20 1003135591
Hossam-hafez1@hotmail.com
Group: (A)
Major: Supply Chain
No. of registration: 11135071

2. Introduction
The Middle East has become one of the most dynamic and lucrative confectionery
markets in the world nowadays because of many reasons:
- A huge consumption for sweets lead to an increase in confectionery sales in the region (15:
20 %annually).
- The Middle East accounts for nearly 9% of the world’s population and population growth is
expected to continue at a fast pace, by 2050, the population is forecast to increase by 60%
reaching 692 million.
- U.S. and European Union have reached a number of trade agreements and cooperation
with partners in the Middle East.
- The successful experiments for Cadbury, Nestlé and Mars and other multinational market
leader in the world encourage our company to penetrate the region.
Especially Egypt is a promising market to penetrate because of:
- Population about 85 million nowadays with a high growth rate increase.
- Huge government support for new FDI.
- Confectionery market is valued at 415 m $ in 2011, up 10.7% from 2007 with average
annual growth rate 2.5% which consider a high promising market.
So we will focus on Egypt as our new market expansion.
Egypt PESTEL Analysis
(Segment + or – from the perspective of the company)
Environmental:
- Emission intensity (kg CO2 per USD) 0.39 - CO2 emissions (metric tons CO2 per capita) 2.13
& Ranked as 76 as a member of the ‘Fossil-fueled’ country grouping, Has challenges include
an insufficient electricity capacity to meet the demand and no reserve capacities, low energy
efficiency especially in the industrial sector. (-)
- Egypt has a hot desert climate, generally dry. Temperatures are hot in summer & warm or mild
in winter, warm in summer nights and cool in winter nights, attracting tourists for all over the
world which an open market for our luxury products. (+)
Economic:
- Industrial sector (37.4% of GDP) due to care of industries and governmental incentives.
- Average borrowing rate 9.75 % according to the CBE for financing which consider high rate. (-)
- Inflation rate at November 2013 10.44% accelerated from 10.15 percent in October, mainly
due to higher food prices. (-)
- Unemployment rate Ranked as 56 all over the world with unemployment rate reach to 13.4 %
of total population offering big bowl of talents. (+)
- New renewable energy resources care as installed capacity: Hydropower 2.84 GW – Wind 365
MW – Solar 4.5 MW to solve the current problem of energy. (+)
- GDP-Per capita income (PPP) is $6,600 (2012) only relatively low according to region. (-)
Technological:
- New law for the protection of intellectual property rights, namely Law no. 82/2002 useful for our
new innovations for the country. (+)
- Internet penetration rate grew from 5% in 2004 to 24% in 2009. Ranking 110 globally will be
useful for marketing campaigns through social networks. (+)

3. - A US$1.1bn, three-year plan to make the country a regional information technology (IT) hub
was announced in 2000 and Egypt became the 59th member of the WTO IT Agreement in
April 2003, fixed lines in operation run by Telecom Egypt increased from 510,000 lines to 9.2m
& three mobile companies’ networks which is sufficient telecommunication infrastructure. (+)
Political & Legal:
- Egypt continues a process of political transition. The country has undergone dramatic political
changes since the 2011 revolution, during those three years many governments take the lead
for a while, which show us the unstable governmental environment and long term programs
and decisions related to investments. (-)
- Egypt’s cabinet approved amending the anti-monopoly law to increase the fine for violations by
500 per cent, to at least LE300 million ($50.8 million) compared to LE50 million ($8.4 million)
previously to open the market for our expansion with no monopoly. (+)
- The new Income Tax Law No. 91 of 2005: income tax rate on the net yearly profits for juristic
persons from 40 per cent to 20 per cent which is high rates to affect our profits. (-)
- Investment incentives: Regulatory incentives: Guarantees against nationalization,
expropriation and price controls & Fiscal incentives: an Exemptions equal to paid-in capital
of publicly listed companies - Exemption for reinvestment of profits from sales of capital assets
- Reduced import duty on equipment needed to carry out the investment. (+)
- Egypt acceded to the GATT in 1970. Presented the Uruguay Round Agreements and became
a WTO Member with dealing with new low tariffs and low exemptions for our exports & imports.
(+)
Sociocultural:
- Many of Egyptians begin to adopt lifestyles similar to Americans and Europeans; they become
prime targets for foreign companies with products have new tastes with high expenditure on
foods & beverages, they can be loyal to our products quality. (+)
- There is a welcoming culture for any foreign product imported or carry the brand name of the
foreign company even its operations in Egypt (take the opportunity of new experiments). (+)
- New investments are important for work force expectations to improve their careers because of
the low investment traffic after the 25 Jan revolution and political instability. (+)
- Age structure: 0-14 years:32.5%-15-24 years:18.2%-25-54 years:38.1%-55-64 years:6.5%-
65 years and over: 4.7% which a perfect for our products targeting & Population growth rate:
1.922% & Population estimated by 80.72 M concentrated at 27cities only all over Egypt which
consist less than 5 % of Egypt (2012) this is a huge market to penetrate in a specific regions
and areas. (+)
- Life Expectations: Total population: 72.93 years - male: 70.33 years - female: 75.66 years
(2012) which guarantee long loyalty programs for our customers. (+)
- Living wage as the current new law of minimum salary level with 1,200 LE appropriate for our
marketing mix.
- Religions are Muslim (mostly Sunni) 90%, Coptic 9%, other Christian 1% with prohibition of
alcohols for both and pork for Muslims only to play on niche market.
- A culture rich with customs, religious celebrations, family gatherings and festivals. The two
main Islamic holidays are Eid Al-Fitr (Festival of the Breaking of the Fast) and Eid Al-Adha
(Festival of Sacrifice), Christmas and New Year’s celebrations for gifts purchasing habits. (+)
- The presence of large multinational retail chains such as Carrefour, which lead to
revolutionizing the retail industry in Egypt by introducing the hypermarket format. (+)
- Languages are Arabic (official for labeling), English and French widely understood by educated
classes.
- Literacy level: Total population: 72%-Male: 80.3%- Female: 63.5% (2010 est.) for marketing
campaigns and using image methods instead of words. (-)

4. INDUSTRY ANALYSIS
(5 Forces)
1) The Threat of New Entrants (Low)
 Presence of large capital requirements that is required in the chocolate and cocoa industry
because of high level of automation and diversification.
 The chocolate and cocoa industry does have a significant economy of scale entry barrier
because large companies exist in the industry that has high production output, which reduces
the cost to produce chocolate and cocoa.
• Switching the supplier of chocolate’s raw materials such as cocoa beans, sugar, and milk
create additional testing and research that must be completed by the company to ensure correct
quality, safety and taste.
• Distribution Access as hyper market and other main distribution channel depend on brand
identity which increases the barriers.
===============
2) Bargaining Power of Buyers (Medium)
 Buyer has the power to play competitors against each other and reduce the cost. But the
chocolate and cocoa industry has a differentiated product, which reduces the power of buyers.
The industry has several large players that have brand identification and customer loyalty, which
makes it hard for buyers not to use a particular supplier.
===============
3) Bargaining Power of Suppliers (Medium)
•The suppliers of the chocolate and cocoa industry have significant bargaining power over the
industry because of the limited number of these suppliers. Because the cacao tree is grown in
areas that have a tropical climate, many players in the industry are forced to import the product,
Tropical climates are often at risk for natural disasters, such as hurricanes, which can
dramatically reduce the number of suppliers.
• The dependency of the industry’s product on the suppliers’ product with no other substitutes.
The chocolate and cocoa industry relies on suppliers to deliver high quality products that meet
food regulations and consumer taste tests. If the suppliers’ product is not available or does not
meet the quality expected, the industry will suffer greatly
•The chocolate and cocoa industry is an extremely important customer of its supplier group
(important export). The bargaining power of the suppliers is reduced because of the importance of
the chocolate and cocoa industry as a customer.
===============
4) Threat of Substitute Products and Services (HIGH)
•The chocolate and cocoa industry must compete with numerous substitute products that can
threaten the industry’s profitability. Alternate cooking flavors are a substitute product to chocolate
and cocoa. As: vanilla, lemon, butter, or mint flavoring. Another category of substitutes is snacks.
Many non-chocolate snacks are available, such as peanut butter, fruits, potato chips, etc.
• Competition with other substitute products in the retail arena. Specialty chocolate and cocoa
products are used as gifts during numerous seasons, celebrations, holidays, anniversaries and
birthdays. Other types of gifts during these seasons are viewed as substitute products. These
products are flowers, fruit, jewelry and stuffed animals.
===============
5) Intensity of Rivalry among Competitors in an Industry (HIGH)

5. •An industry’s competitor rivalry is increased if there are numerous competitors or if the
competitors are equally balanced with slow industry growth (mature market) (Main globally players
are: mars – nestle – Cadbury & Hershey’s), this condition creates a strain on raw materials and
consumer groups, advertising competition and price wars.
SWOT Analysis
Strengths Weaknesses
 Diversified products lines for Many
Different collection of products to all
tastes.
 Technological improvements within
chocolate factories allow for optimum
production and efficiency within
distribution.
 Hershey marketing strategy
Characterized by strong brand
equities, product innovation, and
superior quality of the products,
manufacturing expertise, and mass
distribution capabilities abilities.
 Product packing is catch in mind of
customers according surveys.
 Hershey’s global market share in the
chocolate confectionary industry is
only 10 percent, lowest among its
competitors.
 Existing players in the market created
a customer loyalty base.
 Centralized structure with no
delegations responsibility
(Bureaucracy and slow decision
making).
 Brand awareness is low in Egypt.
 Low global expansion mind set.
 Inside company Culture obstacles
(Opponents for changing).
Opportunities Threats
 The ability to export to other Middle
East companies.
 Increased consumer demand for
healthy, organic and
premium/upscale chocolate.
 High unemployment rate & high
career Expectations for workforces.
 Moderate climate and high tourism
traffic.
 Internet available for works and
household sector for marketing
methods.
 Good Telecommunication
Infrastructure.
 Special incentives for new
companies (Regulatory & Physical).
 Good Attitude toward foreign
companies & welcoming culture.
 New lifestyle changes appeared.
 High growth rate of population – Age
distribution of population (high
middle & youth rate) – Regional
shifts in population (Cities) - High life
Expectations.
 Huge capital required to establish the
new plant.
 Difficulty to acquire a local firm at the
moment.
 Cadbury Schweppes is an Egyptian
market leader with a market share of
50%.
 The main competitors of Hershey
Foods are Mars and Nestle. Mars is
already a threat for Hershey, because
Mars has a stronger presence than
Hershey in Europe, Asia, Mexico, and
Africa Japan.
 High interest rates for financing by
loans.
 High inflation rate.
 High taxes rates.
 Instability of Government and political
conditions.
 High illiteracy level.
 Low energy efficiency at industrial
sector.
 Medium (Relatively high) bargaining
Power of Suppliers.

6.  Many multinational retailers (as:
Carrefour).
 Low threat of New Entrants.
 Medium Bargaining Power of Buyers
 High threat of Substitute Products
and Services.
 High intense rivalry among
Competitors in an Industry.
Corporate Overall Strategies
Business Level Strategy:
Adapting competitive strategy and especially differentiation strategy (Differentiation -
Broad Target)
Their strong brand equities, product innovation, superior quality of the products and manufacturing
expertise, create customer value under this strategy affirm deliver superior quality goods for a
broad market, profits comes from premium prices charged for truly differentiated products by using
innovation & marketing to appeal to changing consumer tastes. This strategy guarantees long
term growth.
Corporate Level Strategy:
The corporate should uses Directional strategy - Growth – Concentration – Horizontal
Integration – Market Development.
(By using a Green Field Development for building our own manufacturing plant with a future plan
for integrating vertically)
As the growth strategy enhances the co. leading position in confectionary industry & increases
profits and sales.co should well communicate its product to customers and that will be through
creative selling, marketing and merchandising techniques.
This growth strategy should be supported by a Global Strategy at a certain degree, where the
company should adapt a product that can be tailored according to Egyptian consumer preferences
& level of income (Hershey bar are stiff & it doesn’t melt like European chocolate) therefore
moving along the continuum from multi- domestic to globalization) as Nestle company did it
follows world consumption trends & develop product to meet consumer needs & Mars about the
same range of core products worldwide with certain adaptation to local needs.
(Reasons for applying a global strategy: All competitors are pursing such strategy to some extend
forcing the co. to match with them - Common customer needs allow product standardization &
ease to penetrate different markets with some adjustment according to Egyptian consumer need
and preferences - Distribution channel also expand the international scope of confectionary
manufactures such as Wal-Mart global branches – Economics of scale production through
minimum number of plants with high initial investments and marketing to many countries need
global strategy to manage as a result of globalization).

7. Marketing Plan
MarketingObjectives:
It will be divided into 2 terms, short term and long term.
A. Short Term marketing objectives (1 Year time)
 Product will be available in at least 10 local convenience stores and large grocery chain in
each potential city.
 Increase introduction promotion in the local area through social media and local news
media.
 Set a market share by 15%.
 Required profit margin by 13%.
 Maintain the good relationship with the retailers.
B. Long Term (5 Years time)
 Increase numbers of shops by 25%
 Increase our market share to reach a 20%
 Develop our strategy so it contains a vertical Growth by acquiring a key supplier in the
market and owning our own disruption channels and wholesalers.
 Improve supply chain and productivity.
 Provide the market with new products, size and flavors.
 Exporting our product to other countries in the Middle East especially to Saudi Arabia &
UAE due to the great growth potential for these countries.
MarketSegmentation & Targeting:
 As we penetrating a new region we need to focus on following segments:
Age from 5 to 60
Specific Middle & Upper class consumers, Children,
Teenager, Women, Athletes.
Income Above 1200 LE Per month
Location All Cities
 Targeted expected bases are approximately: up to 10 million child and teenagers - 12
million women - 1.5 million athletes.
 We can Reassures from our positioning on our customer’s perception through continuous
surveys and questionnaires to improve our position if needed.
Marketing Mix (4 P’s)
1- Product:
As mentioned earlier our strategy should be product differentiation, products to be produced:

8. Product type Exacted Quantity to be sold Batching time in months
Dark & White chocolate pars 30 Million U 2 Months
Digit Chocolate 7 Million U 1 Month
Baking Chocolate 5 Million U 15 days
Ice creams toppings 7 Million U 1 Month
Lollipops 3 Million U 1 Month
cookies Sank Nuts 6 Million U 2 Months
Hard candies 17 Million U 3 Months
Chewing Gum 5 Million U 2 Months
 All previous products would be produced with Different size and Flavors.
 Batching time depends on how the consumer appreciates our products & the collection
period from our customers & the duration of acquiring raw materials.
 The row materials will be used from the local market in order to reduce the import expense,
our products is going to be distributed to the final consumer through cafes, malls,
supermarkets, we want to reach every place in Egypt.
 In rural areas most confectionary retailers in these markets aren’t equipped with
refrigerators which cause serious problems for the storage of confectionary especially
chocolate products so it could be distributed as gifts with usage contracts.
2- Price:
The following is a list of the expected cost we are going to afford in the first year of our
expansion in Egypt:
Item
Total cost per
Million
COGS %
Average price for Raw material 94 LE 34% of GOGS
Average price for Production Cost 102 LE 36% of COGS
Average packing costs 28 LE 10% of COGS
wages and salaries expenses (Direct labor)
800 worker for 8 Production lines
with minimum salary of 1500 LE
14LE 5% of COGS
Distribution expenses 42 LE 15% of COGS
Total GOGS 281 Million EGP 67% of T. COST
SG&A (including wages and salaries of Indirect
labor , BOD and advertising expense )
94 EGP 22% of total
expenses
Depreciation Expense& Impairment exp
30LE 2% of Total
expenses
Interest Expenses (10% annual interest rate) 20LE 5%of Total

9. expenses
Tax Expenses
13 3%of Total
Expense
Total expenses 418 Million LE 100%
In order to achieve our marketing objectives, then Expected sales to achieve a 15% of the
confectionary market in Egypt would be 469 million EGP, to be achieved as follow:
The following are price about our products expected sales or the following year:
Product Name
average price per
unit
Quantity sold per year
( # per million )
sales figure
(# per million )
Dark & White chocolate pars 8 LE 23 u 184 LE
Digit Chocolate 10LE 5 U 50 LE
Baking Chocolate 9 LE 4 U 36 LE
Ice creams toppings 5 LE 6 u 30 LE
Lollipops 3 LE 2 u 6 LE
cookies Sank Nuts 8 LE 5 u 40 LE
Hard candies 8LE 15 U 120 LE
Chewing GUM 0.25 LE 3 u 3 LE
Total Sales for the first year 469 million EGP
Prices set to cover the Initial investment cost putting into consideration the average prices in
the local market set by our main competitors, rising prices for Raw materials and other
expenses however we could control the price of the row materials thought such as coca and
milk, by futures vertical integration.
3- Place:
The location that was chosen to build our factory will be at 6 of October the industrial zone are
in Cairo, due to the following reasons: Far from a population area & crowded areas – center
for distribution purpose - One of the largest industrial territories in the region - No electricity,
water and logistics problem for the huge governmental care.
Initial investment cost for the plant would be as following:
Banks long term loan With 100 Million EGP + Self financing with 150 Million EGP =
Total investment costs with 250 million
4- Promotion:
Promotion objectives: Create a brand loyalty & Encourage repeat and multiple purchases.
A- Social Media Marketing:
Our Firm will have its own web store which is connected to some popular social networking on
the internet such as YouTube, Face book, twitter, tumbler, instagram, and Google+.
B- Advertisement Marketing
Make a contract with a media and promotion company to show our products through TV
advertising, magazines, For TV Advertising.
C- Special offers & Discounts:

10. In case of cash sales or large quantities purchased a 20% discount should be to the clients - A
special offer for our products should be made weakly on malls foe examples wining trips, extra
gifts).
Corporate Structure
The firm will have a Divisional Structure that can be a mix between Geographic Area
Structure & Product Group Structure (Matrix Structure).
It can be divided according to products division basis as: chocolate product division, sugar based
product division, gum division, each division can be divided into served region.
Activities can be coordinated across co’s functions & division to foster resource sharing and to
use the power of global brands.
As another global brand of the same co., global synergies can be achieved through sharing of
local resources.
This structure allows:
1- Decentralizing significant power & authority to local subsidiary managers (Plant managers)
in each geographic area so each plant can uses the resources of the country or region they
are in.
2- Allows the company to tailor product to regional differences & customer preferences
(According to my adapted global strategy).
This recommended horizontal structure will be characterized with a wide span of control, fewer
level of management (chain of command) this means that each manager will have more
employees to communicate with but each employee has been trained to set a standard which
allow manager to trust them to get the job with little guidance from him or her allowing workers to
be more empowerment & independence, innovative & can make quick decisions.
Top executives need to communicate clearly to their employee or management teams globally
oriented should be assembled to form the needed global mindset employee training of both
international market knowledge & language should be provided & information system should be
build up to facilitate information flow & further integration of domestic division & international
divisions are necessary to form the appropriate organization structure for the implantation of a
global strategy.

11. Human Resources Plan
Our strengths is the quality of our people, they are the most important element in our
corporation, An organization’s human resource can be a key competitive advantage as
technology can be copied by competitors around the world while people however are not willing
to move to other companies in other countries So in order to achieve a global HR strategy we
need the following:
First: Board OF Directorsand Top managers Broughtfrom Head Office in USA
(Building a globalmind set):
- Assembling a capable management team to fill our international positions from outside,
because the corporation does not have insiders with requisite experience and management
knows about ambitious global expansion.
- BOD, Top management should spent large time in Egypt understand the local consumers
needs and local market trends, customs and habits of the society.
- Language obstacle should be overcome by taking language course so they can
communicate with local customer and employees.
Second: Executives and Manpower:
 In order to reduce our cost we may depend on outsourcing regarding the direct labor force,
while other indirect labors like (Marketing, legal, Financial, Purchases) Departments will be
hired directly from our company without using a recruiting agency.
 Using a Fair and an effective way of recruiting and selection of corporate staff
First: we need to make a poll of candidates through posting an advertisement “internal and
external” and make a shortlist of qualified candidates.
Second: Select Candidates who succeeded in the interviews and a series of exams like
(Cognitive test, Personality test, and Psychometric test) to fill the vacant positions
Third: An orientation day should be set in order to inform new employees with their duties
and rights and with history of the organization and BOD.
 Set a Training need assessment (TNA) in order to identify the training program required for
each job in which will enable us to train and continuously develop new and current
employees, Leaning the corporate values, culture, ethics , Loyalty and targeted goals .
 Instead of Focusing on how to adopt domestic consumer needs, Hershey needs to train its
employees to understand the needs of the world market and focus on the commonalities of
these markets.
 Set compensation and motivational plans for employees such as: staff loans, medical
insurance, annual salary increase based on the performance appraisal made.
 Use an effective way for performance appraisal like using ( 360 degree appraisal method)
as it use input from subordinates and peers , this method is considered the best way for a
company which uses a competitive strategy as differentiation.
 Prepare our HR Department as a Business partner: These include talent development in
HR, creating corporate centers of excellence, developing the right metrics and analytics,

12. and perhaps most important, understanding how human capital management impacts
business results.
Financial Analysis
A) Financialstatement Analysis
We may start our analysis by implementing DuPont formula on the historical financial statements
data in order to determine what is driving a company's ROE to increase in 2004 ;return on
sales which shows the operating efficiency, asset turnover that shows the asset was used in the
same efficient way of 2003, the leverage factor that shows how much leverage is being used.
DuPont formula31/12/200431/12/2003
ROE53.7%35.7%
(ROS)13.3%11 %
Asset turn over (ATO)1.161.16
( ALEV)348.6%279.9%
First: Income statement Analysis:
1- Net Income Items : 2004 2003
Sales growth 6.2% -
COGS growth 5.3% -
Net Income Growth rate 29.1% -
COGS/sales 60.5% 61%
Gross profit margins 39.5% 39%
SG&A / sales 19.1% 19.6%
EBIT/Sales 20.4% 19%
Sales: Net sales increased with 256697 $ thousand, or 6.2%, from 2003 to 2004, resulting
primarily from the selling price increase, volume growth in sales of key confectionery brands
reflecting the introduction of new products and population growth which indicates the
successful marketing strategy implemented from the firm.
COGS: Cost of sales increased by 134805 $ thousand or 5.3%, from 2003 to 2004. The cost
increasing is an appropriate percentage because of the divestitures and rationalization of
certain products and lower supply chain costs, principally associated with reduced costs for raw
materials, packaging, shipping and distribution which indicate the firm’s efficiency in controlling
its production cost and its bragging power over their suppliers.
Gross Margin: increased in 2004 with .5% this reflected the impact of the Sale Growth and
improved sales mix and, with low percent due to the increase in the Cost of sales (relatively
high (5.3 %) in comparing with sales growth (6.2 %)).
Financial charges: Interest expense increased in 2004 by 4.7% than 2003, primarily as a
result of an increase in outstanding debts as (short term debt) increased in 2004 by 331245 $
thousand.

13. Net Income: The company achieved a positive net income over the years of comparison with
a growth rate in 2004 by 29.1 % supported by net sales Growth and appropriate increase in the
Firms costs.
Second: Balance sheetAnalysis:
2- Liquidity Ratios 2004 2003
Current ratio(CA/CL) .92 1.9
Quick ratio(CA-Inventory/CL) .49 0.9
Net working capital (102941) 545759
Current Ratio: The ratio of current assets to current liabilities decreased of December 31, 2004,
primarily reflecting a decrease in cash and cash equivalents, and an increase in accrued liabilities
as a result of increased promotional allowances, the firm will face a problem in covering it's urgent
liability easily.
Net
working capital: The Firm achieved a (-) Working capital in years of comparison which reflect a
problem in the firm's capital structure (Short term source finance a short term use), which provides
a problem for protection for current creditors.
3- Asset efficiency (Activity Ratios) 2004 2003
Working Investment 660153 640331
WI/Sales 14.9 % 15.3 %
AR turnover 10.8 Times 10 times
A/R DOH 33 days 34days
Inventory Turnover 7.94 times 5.16 times
INV DOH 45.34 days 71days
AP Turnover 18.02 times 19.25 times
A/P DOH 20 days 18days
Accrued Expenses DOH 63 days 55 Days
Asset turn over 1.16 times 1.16 times
Fixed assets Turnover 2.6 times 1.7 times

14. Working Investment / Sales: Hershey's WI/sales has increased in 2004 by 3% as a result of
increase in Accrued expense and account payable items which indicates that the firm has received
a better terms with its suppliers.
A/R DOH, AP DOH: was stable during years of comparison which indicate that the firm
maintained its Selling, purchasing and storage policy.
INVENTORY DOH was improved by decreasing the number of days which reflect a policy of better
inventory cycle.
T. Assets turnover was stable during years of comparison which indicate that the firm maintained
its assets using policy and with no great expansions and acquiring.
4-Profitability Ratios : 2004 2003
ROS ( Net Profit margin) 13.3% 11%
ROE 53.7 % 35.7%
ROA(Return on Investment ) 15.6 % 12.8%
Net Profit Margin: As previously discussed at the Income statement analysis the overall
profitability has enhanced due to sales and Net Income Growth in 2004.
ROE: increased in 2004 as a result on increase in NI while Equity has reduced.
ROA: increased in 2004 that indicate that the firm was more efficient in using its assets to
generate higher sales and higher NI.
ROE is higher than ROA which indicates that the firm is employing financial leverage effectively.
5-Debt Ratios 2004 2003
Financial leverage (Total Debts / Equity) 248.6% 179.9%
Gearing(Total bank debts/total equity ) 95% 77%
ALEV (Assets/Equity) 348.6% 279.9%
Interest Coverage Ratio (EBIT/Interest expense) 13.55 12.5
Interest Coverage Ratio: despite the increase in firm’s short debts in 2004 the firm was able to
cover its financial charges of its outstanding debts from its operating income more than in 2003.
Financial Leverage: Hershey depends on External sources of finance, as (long term debts)
decreased by 277897 $ thousand , Short term debts increased by 331245 $ thousand in 2004
which reflected on the Gearing ratio and the overall financial leverage , as the firm used the
increase in short debts to finance its short & long term assets and the increase in the
permanent level of working investment , financial structure is not adequate as (Short Term
source finances a short term use).
B) Assumptionsfor projected Financials2014:
First: Income statementassumptions:
1. Sales: previously determined at the Marketing Strategy.
2. COGS: previously determined at the Marketing strategy (represents about 60% of sales).
3. Depreciation Expense: assuming a s straight line method of depreciating PP&E
(Purchased Price =200 million EGP) with zero salvage value on 20 years useful life
According to the Egyptian accounting standard 5% of Plant and machinery costs (200
million /20 Years) = 10 million .

15. 4. SG&A: Represents advertising and administrative expenses and salaries of BOD and
marketing and accounting and legal team and other indirect labor force about 20% of sales.
5. Financial Expenses: Assumed that Hershey will be Granted a Long term loan of 100
Million with an annual fixed interest rate of 10% (10%*100 Million = 10 million).
6. Taxes: According Tax Law No. 91 of 2005 corporate subject will be 20% of the net income
after interest.
Second: Balance sheetassumptions:
Owner's Equity:
1. Legal Reserves account: According to the Egyptian accounting standards it's a 5% of
the Paid up capital.
2. Retained earnings: Assuming that the firm will retain 85% of the Current year Net
income.
3. Paid Up Capital: According to Industry average assumed to be 200 million.
Assets:
1. Cash: Assumed to be 2% of sales according to Industry average in Egypt.
2. Accounts Receivables: Assumed that the firm will be able to collect its dues from it's in
3 months, so AR Figure = (Projected sales *90/360) = 117 million which represents 25%
of sales figure.
3. Inventory: Assumed that the Firm Inventory DOH will be 70 days so the Inventory figure
will be (projected COGS*70/360) = 55 million Represents about 19.6% of the Firms
COGS Raw material represents 30% of the Inventory , WIP represents 50%, Finished
Goods Represents 20% of firms Inventory.
4. Land & Property plant and Equipment: Assumed that the Initial Investment requires
250 billion (Land =50 million, PP&E =200 billion).
Liabilities:
1. Bank Loan : Assume Hershey will be Granted a medium term loan from local banks
to finance the purchases of its investment in Egypt by the amount of 100 million EGP
with an interest rate of 10% to be repaid in 5 years to posted in the firms B/S as
following :
- Current portion to be due within 1 year = 100/5=20 Million EGP.
- Long term will be due in the following 4 years = 80 Million EGP.
2. Accounts Payable: Assumed that suppliers will grant Hershey 2 months to pay them,
so AP Figure = (Projected COGS *60/360) = 47 million which represents which
represents 16.7% of Cogs.
3. Over draft account: the New money need for Hershey to finance its Working capital
will be (Projected Assets – Known liability +OE) = 5 Million.
Recommendations and Conclusion
- Hershey’s new global expansion thinking is the new trend, towards growing their business
and extending their reach as far as possible.
- Egypt is a promising market to enter with high potentials and some threats.
- Additionally venturing into smaller niche market businesses will allow Hershey’s to reach
consumers of all areas, tastes, and backgrounds.
- Hershey’s can take the confectionary market by storm and take an even bigger chunk of the
market share.

16. - In the next years, Hershey’s will remain a prominent industry within the US, and potentially
grow into a global status. Unless the world progressively becomes allergic to chocolate or
candy, the future only holds positivity and growth for this confectionary leader.
- Hershey can take an active interest in the communities of their workers and vendors.
- Global strategy adapted is the new trend today for customizing for Egypt consumer
preferences & level of income and exporting to Middle East.
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