Brand Morocco Case Study - Marketing Plan for Textiles and Apparel Industry

Morocco: Access to the rest of the world

Textiles and Apparel

Oakland University

Professor Ravi Parameswaran

Group:

Courtnie Hallendy

Erin Handlon

Julie Marks

Table of Contents

Table of Contents. 2

Introduction.. 3

Morocco Overview.. 3

History. 3

US Relations. 3

Geography. 4

Culture. 4

Economy. 5

Competitive Overview.. 5

China. 5

Mexico. 6

Jordan. 7

European Union. 7

Competitive Advantages. 7

Target Market 9

Brand Image. 10

Accessible. 10

Partner 10

Efficient 11

Expertise. 11

Advertising Tactics. 11

Appendix A - Advertising Media Kits. 14
Introduction

I think we should put our "statement" into the introduction. We need to grab attention right off the bat. I also think that this should be more of an intro to our paper and our "plan" rather than the country that is why I moved part of this to "US Relations." If you don't agree, then we can move it back.

MATIC has identified thirteen business sectors where Morocco has a competitive advantage and of those, five have been identified which they feel have a high potential for success which are manufacturing, agriculture, information technology, design materials and textiles. We have chosen to concentrate our marketing plan on the textile industry. We plan to target fashion industry trade shows, fashion magazines,

Morocco Overview

History

Morocco gained independence from France in 1956 and the Sultan became Morocco's first king establishing a monarchial government. He was succeeded by his son in 1961 King Hassan II who led the country for thirty-eight years until his death in 1999. After King Hassan II death his eldest son Mohammed VI ascended to the thrown. He began implementing change and reform towards a more democratic society. He has taken significant steps to reform the current social structure and improve the quality of life for all citizens. He has faced strong opposition to his approach from Islamic fundamentalists. However, since his ascension to the thrown Morocco has become an Emerging-Market-Country through his pluralistic democratic views and Pro-US approach to economic growth.

US Relations

The Kingdom of Morocco has a long history of trade and economical security with Europe especially France and Spain. They hope to expand their global marketing opportunities with the signing of the Morocco-US Free Trade Agreement in 2006. King Mohammed VI has created significant goals for Morocco in light of this new agreement with the US., and hopes to position the country in the US marketplace as a global competitor.

King Mohammed VI has created the Moroccan American Trade and Investment Council MATIC, to help promote economic growth and stability in Morocco through the FTA. MATIC is a US non-profit organization designed specifically to target economic sectors where Morocco has a competitive advantage, and demonstrates to US commercial decision makers why it will benefit their business to use Morocco as an offshore location and economic business partner. The strategy for MATIC is to show Morocco as a brand to U.S businesses and what it's good and services, location, geography, climate and people have to offer to US companies (MATIC). Geography

The country of Morocco is 446,550 sq km approximately the size of California. It is located in the northwest corner of the African continent and bordered by both the Atlantic Ocean and the Mediterranean Sea. This unique location, which is just 8 miles across the Straits of Gibraltar to Spain, has helped Morocco establish its trading opportunities with Europe throughout history. The climate is Mediterranean with mountains along the northern coast and throughout the interior of the country. They are bordered by large plateaus and inter-mountain valleys.

Since 1912, the capital of Morocco is Rabat which has a population of 1.2 M. The largest city is Casablanca with a population of 3.4 M. The county has a population of 33.6 M people as of 2006. Both of these cities are located on the Atlantic coast Culture

Morocco has a unique culture which is a blend from its neighbors to the north Romans, Moors, Jews as well as people from the east such as Arab's and Berbers. The current majority of the population is from Arab-Berber descent. Predominate religion is Muslim at 99.9% with approximately 4,000 Jewish people and 1,000 Christian (Morocco Case). The official language of the country is Arabic while French is often the language used to conduct business and government.

Even with the advances made since King Mohammed VI's ascension to the thrown there is still a very prevalent social gap in Morocco. Education is free from primary school until college; however there is still an average illiteracy rate of 61%. This is even more staggering in the rural areas of the country where only 25% of women are literate. This increases in the urban areas where the literacy rate is 77% among women (Morocco Case). Due to the inconsistency among income, education and health care among the classes there is a need for an educated labor force and middle class to further develop the economy.

King Mohammad has created many education initiatives to help establish Morocco as an educated knowledgeable workforce and feels it is an important aspect of Brand Morocco. It will be the driving factor in bringing US companies Morocco as investors and business owners. Currently, Moroccan's have free access to education from grades K-12 and it is an issue of awareness on how important education is and helping them realize that with the proper training they have tremendous employment opportunities available to them. Economy

Morocco has one of the most advanced economies of all the African nations; however as with any developing country they have problems with unemployment and poverty. The government has taken many steps in the past five years to improve the economy and the free trade agreement with the U.S is just the beginning. They have also made improvements to the financial and investment sector, political reforms, and set up programs to build a competitive economy through training and education of its workforce. Improvements in the financial sector have been made through foreign direct investment from private investors and the rich oil states of the Middle East in return they have been able to reduce their external debt by 50% in seven years down to $15.6B (Morocco Case).

The government has created initiatives to entice foreign companies to build and bring business to morocco in return strengthening their economy. Some of the changes and incentives include: lightened restrictions on customs, redefined tariffs and establishing a free trade zone in Tangier. They have also created a program for start-up companies which would allow a new organization to be shielded from the value added tax for the first five years of business and also exempt them from start up licenses fees, corporate taxes and general income taxes for the first five years as well. Even after the first five years these taxes are steeply reduced.

Competitive Overview

When considering Morocco's competition for sourcing of textiles from the US, there are two major players to take into account: China and Mexico. These two countries pose a competitive obstacle for differing reasons.

China

China is known for low labor rates in all industries, textiles included. In fact, the labor rates in China are approximately half of the rates for comparable work in Morocco. Additionally, China is known for its expertise in the textile industry. It offers low tax rates to foreign investors at 13%, and claims a 90% literacy rate; all which are considered key criteria for a decision maker when evaluating possible locations for outsourcing (Morocco Case). From 2000 to 2005, China increased its share of US apparel imports by 8.6%. This can be attributed to two factors. First, China entered the World Trade Organization in 2001, and when coupled with the elimination of worldwide apparel quotas on January 1, 2005, China accelerated, maybe at the detriment of other countries such as Mexico, another major competitor for Morocco (Economic).

China, however, has its disadvantages too. While there exists a large number of US businesses that source from China, their investment zones, which offer incentives to businesses, are overcrowded, leading to an increase in the cost of land and utilities as well as a decrease in the approval of future projects. When tied with the projection that the labor force will decline by 11 million people between 2005 and 2015, due to China's one child policy and an increase of education causing people to look for higher demanding jobs, China may lose its competitive edge. Also important to consider is the high government regulation. Long, complex and unclear policies inhibit the time required to establish a business, and also the flow of products and services between the US and China. Although the government invests heavily in the infrastructure there are energy problems, with blackouts occurring frequently and major water shortages (Morocco Case).

Mexico

Mexico has a unique relationship with the US due to its close geographical proximity. The two countries rely on each other to achieve the necessary level of product mix. The US accounts for over half of the FDI in Mexico. 88% of Mexico's exports are sent to the US which is almost a quarter of the country's GDP. Since the two countries economies are so closely tied together, it is in the best interests of the US to ensure that Mexico enjoys economic success and stability (Morocco Case). While Mexico has experienced a loss of US apparel imports to China since 2005, (-4.9%), it may reap the benefit of its niche relationship with the US when China experiences a downturn, as forecasted for the years 2005-2015 (Economic). Aside from its relationship with the US, Mexico enjoys many competitive advantages in the textile industry. For one, Mexico has the most open trade policy in the world and enjoys the benefit of the North American Free Trade Agreement when dealing with the US and other member countries. NAFTA eliminates most taxes and customs fees into, and out of Mexico. Mexico is also a good source for inexpensive labor, especially in the textile industry, which is one of its areas of expertise. Mexico has relatively low corporate income tax rates, at 30%. English proficiency is poor in the country but given its unique relationship with the US, English is often the language of business (Morocco Case).

Jordan

Within Morocco's geographical region, there exists one key competitor: Jordan. Jordan is a major player in the textile arena, as this is the major contributor to its economic growth. It has a Free Trade Agreement with the US that eliminates nearly all tariff and non-tariff barriers to bilateral trade. Furthermore, Jordan has Qualifying Industrial Zones where textiles are manufactured that allow the items to enter the US tariff and quota free. Jordan is a well educated country with a high literacy rate, 91.3% and excellent English proficiency that is used widely in business. It however, has relatively few resources, including water, and maintains a high corporate income tax rate of 35%. While the country has its advantages, it is also vulnerable to political unrest in the region due to its location amidst the countries in the Middle East (Morocco Case).

European Union

Eastern Europe also poses a threat to Morocco in terms of its competitive advantages. It boasts high productivity at low wage rates with a large multi-lingual workforce with good English proficiency. Average corporate tax rates are lower than any previously discussed competitor countries. The EU also offers tax exemptions, depending on the country in question, and offers government grants for training, construction and real estate purchases. They maintain special economic zones with rent-free technology and industrial parks with reduced tariffs and tax exemptions. Specific countries that pose a threat to Morocco are Estonia, Poland, Hungary, Romania, Croatia, Slovenia and Turkey, as they are all involved in the textile industry. The major issue to overcome when sourcing to the EU is that there are variations from country to country in terms of stability, government regulations, infrastructure and tax rates to name a few. These variations can be detrimental to a business looking to establish a working relationship with the region so careful consideration is required (Morocco Case).

Competitive Advantages

Morocco, although not widely known, has many competitive advantages that could be beneficial to any country that chooses to invest its operations there. For one, Morocco is geographically situated so that is serves as a link between Africa and Europe. It is only a few miles from Spain and 6 days via cargo ship to the US. The capital city of Rabat, located on the Atlantic coast, is the center for the textile industry. A port expansion is planned in 2007 for the port of Tangier to lessen transport costs. Furthermore, Morocco encourages investment by offering a free trade zone in Tangier that is open to both Moroccan and foreign companies, allowing firms located within the zone to import goods duty free and also makes all other taxes exempt (Morocco Case).

To further stimulate foreign interest, Morocco has established 16 Regional Investment Centers that allow businesses to register their business in only 2 days time. Foreign businesses have access to local credit on market terms if they so choose. There are many programs beneficial to foreign companies, especially in the textile industry. USAID, for example, has programs focused on improving capacity to increase textile exports from Morocco and is also involved in improving education and training in the industry. The Hassan II Fund offers grants for ready-to-wear clothing. Other incentives include a cut in social security contributions and electricity costs to spur business (Morocco Case).

Morocco is shifting toward upgraded technology in order to compete in the high fashion, high quality arena of textiles. In fact, many facilities can process and complete orders in a matter of days. Textiles are a growing industry for Morocco due to its competitive labor costs, creative designs and free access to the European Union (Morocco Case).

One major factor that Morocco can leverage when trying to develop new opportunities; especially with the US, is its perceived quality in the textile industry. US survey respondents tend to rate Morocco as having a slightly positive country image, and are receptive to new business opportunities there. When polled, 70% of current investors in Morocco said they would expand their investment, while 77% would recommend investment to others. Furthermore, 85% of investors stated that their investment was a good one (Morocco Case).

Morocco can also leverage its long-standing relationship with the US. It was the first country to recognize the US as an independent nation and the two nations hold the longest unbroken peace treaty, the Spartel-Lighthouse Treaty, since 1865. The US and Morocco are working together to spur their economies. Some incentives being offered to do this include guaranteed transparency and efficient customs administration to facilitate rapid clearance as well as duty free textile and apparel trade between the two countries. Additionally, the Moroccan government will enforce International Labor Organization standards and uphold a nondiscriminatory legal system available to foreigners. As can be seen, the textile industry is of major importance to Morocco as it generates 33% of all Moroccan exports and employs 37% of the workforce. Morocco can use the combination of these incentives along with its long-standing relationship with the United States to overcome some of its competitors' strengths and gain worldwide market share in the textile export industry. Given Mexico's already declining market share and China's declining workforce over the next 10 years, Morocco is entering the market at an opportune time (Morocco Case).

Target Market

The target market for the textile sector in Morocco is rather large. There are not limitations to the corporations in the US that they can market to. The most obvious are the US clothing manufacturers.

Currently, there are at least 50 fashion designers in the US (Wikipedia). Most of these companies outsource the manufacturing of their clothes to other countries. With the data telling us that 76% of clothing is made in China and 5% in the EU, it is safe to assume that the US companies follow similar market patterns (IESC). This provides an opportunity for Morocco to capitalize on their US relations and convert companies to producing in Morocco.

The optimal target is a company that is committed to excellence. Morocco is dedicated to producing a quality product through the use of their resources - people, policies, etc. A company that is a good fit is one that has corporate goals of delivering excellence to their customers.

Our target is a company that currently outsource to China, Brazil, and/or the EU. The primary reason for targeting these customers is because there are benefits that Morocco has over these countries. With a company that is comfortable in outsourcing, there is already one hurdle overcome and the focus of Morocco can be on educating the country as to why Morocco is better than who they are currently using for the manufacturing of their goods. This is explained in more detail below in the "Brand Image" section.

The current image of Morocco is not necessarily outdated, but rather it is uninformed. Our target market is not very familiar with us, but they do have a positive impression. Some view Morocco as lagging in the education, infrastructure, and technology to handle their business. As current investors have reported, this is not true. Though it is accurate that the average literacy rate is 61% with discrepancies between rural and urban people), the Moroccan government has new education initiatives - some specifically for the textile industry (Morocco Case).

In addition to education initiatives, capital investment on textile industrial equipment increased in 2004 (by 10%). Moroccan manufacturers decided to improve and update their capabilities by reinvesting their profits (Morocco Case). Currently, many facilities are able to process orders quickly and fly the finished clothing to buyers in a matter of days (Morocco Case).

Presently, 70% of current investors are willing to expand their investment and 77% are willing to recommend investment to other CEO's. These loyal customers, who are willing to recommend, mention customs requirements, infrastructure (ports and airports) as good facilitators of making Morocco a global brand. Any marketer will tell you that a recommendation from a current customer is the best advertising that any business can have. Additionally, a loyal customer tends to spend more money and be a good investment.

The final consumer of apparel is currently not as conscious of the made in label as they are with the name on the label. However, that doesn't mean that creating relations with the end user is not important. In addition to the B-to-B marketing that is planned, there should be some B-to-C. This could be assisting the travel bureau with their travel communications. By assisting in consumer desire to travel to Morocco, they are secondarily encouraging the consumer to be receptive and positive towards goods manufactured in Morocco.Brand Image

"Because we are accessible, you are too"

The brand image that we have designed for Morocco is all about accessibility. By leveraging the many ways that Morocco is accessible to the textile industry, we will create a new, functional image in our target market's mind and increase textile manufacturing in Morocco. There are four words that are the brand image of Morocco: Accessible, Partner, Efficient, and Expertise. Knowing our customers like we do, we can take their needs in a manufacturing center and place them under the heading of one of our brand equity traits. From that, four areas emerge as necessary to convey to our customers so that they can have faith in what we are offering. Those four areas are: people, geography, relationships, and infrastructure.

Accessible

We have a unique position as being accessible in all four key areas that our customers are concerned with. The availability of skilled labor is abundant within our boarders. Our geographic location, the link between Africa and Europe, makes us an easily accessible manufacturing center.

Our relationships, in the form of free trade agreements with the US (and soon with the EU) position us extremely well to provide accessibility to our manufacturing partners. Our US customers can benefit from our other trade agreements by lessening the financial impact that shipping and transporting their finished goods will have on them.

Partner

Our people are multi-cultural by nature. The history of Morocco has lead to many cultures co-existing and we plan on leveraging this to include acceptance and immersion in US culture as well. The multi-cultural influence that is already evident in the Moroccans (multiple languages and religions) makes it easier to expose them to additional cultures and lessens the push back that could occur and makes establishing partnerships with Moroccans a fairly painless task.

Similarly, our people are educated and eager to learn. This makes the training necessary to manufacture textiles easier to accomplish. As noted before, there are extensive education efforts taking place in Morocco. These education initiatives are aimed at increasing not just the overall level of education that Moroccans have but also their adaptability to new opportunities that Morocco being a global brand will bring to them. Again, our relationships with other countries make us an ally to our manufacturing partners.

Efficient

Our current labor force is heavily employed in the textile industry, 37% currently employed in textiles (Morocco Case). Despite our current literacy rates, the ability of our labor force to learn and adapt makes us accessible to and able to meet the needs of our customer.

The geography of Morocco is nothing but accessible. Our close proximity to Spain and our location on both the Atlantic Ocean and the Mediterranean Sea make transporting to and from easy. We are the link between Africa and Europe. Our location makes us efficient in cutting down the time to market of our partners' goods. We are in a position to ship to Spain in less than a day, to mainland Europe in one to two days, and to the US in six days by cargo ship (Morocco Case).

Expertise

As mentioned, nearly half of our current work force is employed in the textile industry. This is just one part that makes our work force experts in textiles. Our work force is committed to quality and excellence in the goods that they produce and take pride in the knowledge of manufacturing textiles that they have.

Advertising Tactics

Given the nature of the industry, traditional marketing techniques will be of little benefit to Morocco. Instead, they should focus on more personal communications such as PR and tradeshows. This does not mean that our plan abandons all traditional media - but the focus will be print rather than broadcast.

Sponsorship will be focused on the B-to-C arena. Morocco textiles will partner with the travel bureau to create spots that are aimed at tourism. TV spots will be created jointly with the sole purpose of increasing interest in Morocco as a culture. Once that happens, then acceptance of Moroccan goods will increase and the target market is more receptive to producing their goods in Morocco.

There currently is a plan in place called The Morocco 2010 Plan. This plan is heavily funded and is intended to promote the development of six cities along the coast lines as tourist destinations. The crux of this plan is to build 150 new hotels in addition to increasing the number of golf courses. Brand Morocco should partner with and ally themselves with those who are heading this project. The exposure will be great and the sense of good will and country pride will be invaluable.

References

"Brand Morocco: Driving the US. Investment in Morocco". Case Study EdVenture Partners. Fall 2006 Semester. http://intranet.edventurepartners.com/casestudies/morocco/login/default.asp

Economic Policy Institute, http://www.epi.org/content.cfm/webfeatures_snapshots_20050810. 10 Aug 2005.

IESC. "Report on the Textile and Apparel Importers Trade and Transportation Conference." November 15, 2005.

MATIC. Moroccan American Trade and Investment Council. http://www.moroccanamericantrade.com/aboutmatic.cfm. Oct 2 2006.

Wikipedia. http://en.wikipedia.org/wiki/Main_Page. Search US. Fashion Designers. 27 Oct 2006.

Appendix A - Advertising Media Kits