Sameh Abulyazid (Advisory , Tax and Assurance Services )

01/02/2026

Global wealth report 2025

30/10/2025

American investment private credit market and the Expansion of Lending with Dubious Collateral: Between Investment Ambition and a Financial Alarm Bell

By Sameh Abulyazid

In recent years, the private credit market in the United States has expanded dramatically, as major financial institutions such as BlackRock, Apollo, and KKR have increasingly offered direct loans to businesses outside the traditional banking system.
This trend has been driven by tighter regulations that constrained banks after past financial crises and by investors’ desire for higher returns in an environment of rising interest rates.
However, this rapid expansion is now exposing dangerous blind spots in risk assessment and collateral verification mechanisms.

The BlackRock Case: A “Breathtaking” Fraud

In October 2025, The Wall Street Journal revealed that BlackRock, the world’s largest asset manager, had fallen victim to what it called a “breathtaking fraud.”
The story began when BlackRock, through its private credit division, extended hundreds of millions of dollars in loans to companies in the telecommunications sector.
It later became clear that the collateral provided for those loans was falsified the invoices, accounts receivable, and even customer data had all been fabricated.

Suspicion arose when employees in BlackRock’s credit unit noticed that some emails from supposed clients did not match the official domains of those companies.
A quick internal investigation uncovered that some borrowers including Broadband Telecom and Bridgevoice had submitted misleading financial statements to obtain financing.
The case went to court, and the estimated size of the fraud exceeded $500 million.

A Wake-Up Call for Private Credit

This incident exposed how fragile the private credit system can be when operating without direct banking oversight.
In traditional banks, loans are subject to strict due diligence and continuous regulatory supervision.
In the private credit space, however, institutions rely heavily on internal verification and personal relationships with borrowers.
Amid fierce competition for investment opportunities, speed often takes precedence over scrutiny, creating an environment ripe for organized financial fraud.

Jamie Dimon and the “Cockroach” Analogy

These developments did not go unnoticed by financial leaders.
Jamie Dimon, CEO of JP Morgan, described such cases as “cockroaches.”
He argued that the current wave of credit problems is the natural consequence of a period of excessive lending that lacked sufficient due diligence.
As Dimon put it:

“Cockroaches rarely come alone, but unlike termites, they don’t eat away at the foundation.”

In his sharp metaphor, Dimon suggests that while these incidents are annoying and recurring, they will not destroy the U.S. financial system from within.
Rather, they serve as a warning bell of what could happen if lending continues to expand without proper oversight.

Broader Implications for Financial Stability

The BlackRock case is merely a symptom of a deeper imbalance in the U.S. financial system.
The expansion of private credit now a multi-trillion-dollar global market represents both a lucrative investment opportunity and a growing source of systemic risk.
Regulators such as the U.S. Securities and Exchange Commission (SEC) have begun reviewing disclosure and transparency rules for this sector in an effort to prevent similar incidents in the future.

Although the financial losses for BlackRock are limited relative to its massive assets under management, the psychological and reputational impact is significant.
It undermines confidence in a market that relies more on trust and relationships than on tangible, verifiable guarantees.

Ambition vs. Discipline

The aggressive expansion of American banks and investment firms into lending backed by questionable collateral reflects an unrestrained drive for profit, but it also exposes the fragility of governance when trust outweighs verification.
Quick profits may tempt many players, yet they can never replace smart oversight and thorough due diligence.

Between the “cockroaches” that occasionally appear and the “termites” that could silently weaken the foundation, the greatest challenge for the U.S. financial system lies in finding the right balance between boldness and caution between ambition and discipline.

24/10/2025

Linking the Three Financial Statements

- A Demonstrated Explanation

One of the most critical skills in finance is the ability to link the Income Statement, Balance Sheet, and Cash Flow Statement. These three reports form an integrated system that shows how a company’s operations translate into financial performance and position.

1. The Income Statement - Starting Point

The Income Statement captures a company’s revenues, expenses, and ultimately its Net Income for the period.
This Net Income is not just a standalone figure — it acts as a bridge to the other two financial statements.
• To the Cash Flow Statement: Net Income becomes the starting point for calculating operating cash flow.
• To the Balance Sheet: Net Income flows into Retained Earnings under shareholders’ equity.

2. The Cash Flow Statement - Translating Profit into Cash

The Cash Flow Statement adjusts Net Income to reflect the company’s actual cash movements.
• Operating Activities: Start with Net Income, then adjust for:
• Non-cash expenses (e.g., depreciation, amortization)
• Changes in working capital (e.g., receivables, inventory, payables)
These adjustments show how profit differs from real cash generation.
• Investing Activities: Capture cash spent or received from long-term assets (e.g., purchasing or selling equipment, investments).
• Financing Activities: Reflect transactions with lenders and shareholders (e.g., borrowing, repayments, issuing shares, or paying dividends).

After combining all three sections, we get the ending cash balance — a figure that directly connects to the cash line on the Balance Sheet.

3. The Balance Sheet - The Financial Position

The Balance Sheet presents the company’s assets, liabilities, and equity at the end of the period.
Two important connections complete the linkage:
• Cash (from the Cash Flow Statement): The ending cash balance appears under current assets.
• Retained Earnings (from the Income Statement):
Retained Earnings increase by Net Income and decrease by any dividends paid.

Thus, the Balance Sheet always balances:

Assets = Liabilities + Equity

4. The Big Picture — The Flow of Financial Information
1. Profitability: Income Statement → Net Income
2. Cash Generation: Net Income → Adjusted on Cash Flow Statement → Ending Cash
3. Financial Position: Cash & Retained Earnings → Update the Balance Sheet

By tracing these flows, we can see how profitability (Income Statement) drives cash generation (Cash Flow Statement) and ultimately shapes the company’s financial health (Balance Sheet).

Mastering this linkage is essential for financial modeling, forecasting, and understanding how value is created within a business.

24/10/2025

Quick Note for Accountants

Revaluation of Assets — regarding the recognition of gain or loss upon revaluation through the Statement of Profit or Loss and the Statement of Other Comprehensive Income (OCI) according to International Accounting Standards:

First: Property, Plant, and Equipment (IAS 16)
1. Post-recognition measurement model can be one of two options:
• Cost Model: Assets are carried at cost less accumulated depreciation and any impairment losses.
• Revaluation Model: Assets can be revalued to fair value if that fair value can be measured reliably.
2. In case of an increase in value (Revaluation Increase):
• The increase is not recognized in profit or loss.
• It is recorded in Other Comprehensive Income (OCI) and added to the Revaluation Surplus under equity.
• However, if a previous revaluation decrease was recognized in profit or loss, a portion of the increase can be recognized in profit or loss up to the amount of that previous decrease.
3. In case of a decrease in value (Impairment / Revaluation Decrease):
• If the asset has never been revalued before, the decrease is recognized as a loss in profit or loss.
• If there was a previous revaluation surplus, the decrease is deducted first from that surplus (OCI), and any remaining amount is recognized in profit or loss.

Second: Investment Property (IAS 40)
1. After initial recognition, investment property can be measured using either:
• Fair Value Model, or
• Cost Model.
2. If the Fair Value Model is used:
• The revaluation differences (increase or decrease) are recognized directly in profit or loss,
• and not in Other Comprehensive Income (OCI).

Definition of Other Comprehensive Income (OCI):

Other Comprehensive Income (OCI) represents a group of items that are not recognized directly in profit or loss, but still affect shareholders’ equity, such as:

• Revaluation gains or losses on property, plant, and equipment (under IAS 16).
• Translation differences from foreign operations.
• Gains or losses on financial instruments measured at fair value through OCI (FVOCI).
• Gains or losses from remeasurement of employee benefit obligations or share-based payments (IAS 19).

22/10/2025

Accounting in the Light of the Holy Qur’an

By: Sameh Abulyazid

Accounting is not merely a financial system; it is an ethical and moral framework founded on justice, transparency, and trustworthiness—all core Qur’anic principles. When we reflect on the Holy Qur’an, we find that it establishes general foundations for accounting and financial management, which directly align with the theoretical framework of the International Financial Reporting Standards (IFRS).

Let us first review the Conceptual Framework of IFRS, and then connect it with the accounting concepts found in the Qur’an.

The Conceptual Framework for Financial Reporting (IFRS Conceptual Framework)

This framework is built on several key elements:

1. Qualitative Characteristics of Financial Information
• Relevance
• Faithful Representation
• Comparability
• Understandability
• Verifiability

2. Objectives of Financial Reporting
• To provide useful information for economic decision-making.
• To protect the rights of investors and stakeholders.

3. Fundamental Principles
• Going Concern
• Accrual Basis
• Full Disclosure

The Qur’anic Foundation of Accounting

Justice and Fair Measurement

“And establish weight in justice and do not make deficient the balance.”
(Surah Ar-Rahman, 55:9)

This verse emphasizes justice and fairness in all dealings, corresponding to the accounting principle of Fair Presentation.

Documentation and Transparency

“O you who have believed, when you contract a debt for a specified term, write it down…”
(Surah Al-Baqarah, 2:282)

This is the longest verse in the Qur’an, and it lays down explicit accounting principles: documentation, witnessing, and written control of financial transactions. This directly parallels the IFRS principle of Full Disclosure.

Trust and Responsibility

“Indeed, Allah commands you to render trusts to whom they are due.”
(Surah An-Nisa, 4:58)

The accountant is entrusted with managing others’ wealth. This sense of responsibility forms the essence of the accounting profession and aligns with international standards that demand integrity and objectivity.

The Ethical and Spiritual Dimension of Accounting

The Qur’an views accounting not merely as a technical or financial activity but as part of moral and divine accountability:

“So whoever does an atom’s weight of good will see it, and whoever does an atom’s weight of evil will see it.”
(Az-Zalzalah, 99:7–8)

This reflects the essence of Accountability, a cornerstone of accounting practice.

The conceptual framework of international accounting standards is not alien to Qur’anic values; rather, it can be seen as a modern institutional interpretation of divine principles justice, transparency, trust, and accountability.

Accounting in the light of the Qur’an, therefore, is not merely about compliance with laws and standards, but a commitment to divine ethics that safeguard rights and promote balance in society.

The Holy Qur’an is not just a book; it is a guiding light that directs humanity in every aspect of life from worship, transactions, and ethics to values and principles.

22/10/2025

Gold Between Record Highs and Rapid Declines.

When the Rules of the Game Change!

By: Sameh Abulyazid

In recent weeks, global markets have witnessed one of the most intriguing movements in gold and currency trading. Gold has soared to new record levels not because of traditional fears or risk aversion, but due to deeper and more complex factors. Then suddenly, the yellow metal began a sharp decline as the U.S. dollar regained some of its strength.

This dual movement gold and the dollar rising together, followed by gold falling as the dollar strengthened reveals that the rules of the market have changed. The forces driving prices today are fundamentally different from historical patterns.

1. Why Did Gold Rise So Strongly?

Traditionally, gold is seen as a safe haven during crises. However, the recent rally wasn’t just a response to geopolitical tensions; it stemmed from a set of structural factors in the global economy.

The first factor was the decline in real yields on U.S. Treasury bonds, which made holding gold more attractive compared to interest-bearing assets. When yields fall while inflation persists, the “opportunity cost” of owning gold diminishes.

In addition, concerns about inflation and waning confidence in fiat currencies have spurred demand for gold as a store of value. With mounting government debt worldwide, investors are increasingly seeking assets that are not tied to traditional monetary systems.

Central banks have also played a key role in this surge, increasing their gold purchases to reduce reliance on the U.S. dollar a sign of a broader global desire to diversify reserves. These purchases are not a short-term move but rather a long-term structural shift in international monetary policy.

Moreover, large institutional inflows into gold ETFs and physical reserves have pushed prices even higher. Smart money now views gold as a strategic long-term asset, not merely a temporary safe haven.

What’s more remarkable is that this surge occurred alongside a rise in U.S. equities, something rarely seen in past cycles. Instead of being an alternative to stocks during turmoil, gold is now climbing in tandem with them driven not by fear of markets but by structural concerns about currency stability and global liquidity.

2. Why Did Gold Fall Again?

After reaching record highs, gold began a steep correction as the U.S. dollar regained strength. This reversal is not entirely unexpected, but it differs from past patterns in its underlying causes.

The recent dollar rally has been fueled by several key factors.
First, the U.S. economy has outperformed other major economies, leading markets to view the dollar as a temporary safe haven. Strong data on growth and employment have reinforced confidence that the U.S. remains more resilient than Europe or Asia.

Second, U.S. bond yields have started rising again as markets dial back expectations for rapid interest rate cuts by the Federal Reserve. The longer the Fed delays monetary easing, the more attractive dollar-denominated assets become exerting downward pressure on gold.

Third, the dollar remains the world’s ultimate liquidity refuge, even without a major crisis. Any turbulence in emerging markets or bond markets often drives investors back to the greenback.

Finally, divergences in global monetary policy have also played a decisive role. While some central banks in Europe and Asia lean toward easing (lower rates), the Fed remains cautious, widening the interest rate gap and bolstering the dollar.

3. Is the Dollar’s Strength Sustainable or Temporary?

Despite these justifications, the dollar’s strength is far from guaranteed. Many analysts believe its current momentum may be temporary, as maintaining such strength requires sustained economic growth and persistently high yields both of which are uncertain.

A strong dollar also carries negative side effects for the U.S. economy: it raises export costs, reduces competitiveness for American firms, and increases debt burdens in emerging markets that borrow in dollars.

Thus, some observers see this rally as a short-term correction rather than a long-term trend. If global inflation eases or expectations for rate cuts return, the dollar could lose momentum allowing gold to rebound once more.

4. A New Relationship Between Gold and the Dollar

Historically, the relationship between gold and the dollar has been strictly inverse: when one rises, the other usually falls. But that dynamic is now more complex.

Recent trends show that gold can rise even amid a strong dollar, as long as the drivers are structural such as rising global debt, central bank diversification, and declining confidence in traditional monetary policy.

Conversely, short-term movements in the dollar (driven by economic data or Fed statements) can cause temporary volatility in gold prices, but they do not alter gold’s long-term strategic trajectory.

In today’s foggy economic landscape, gold is no longer just a “safe haven” it has become a mirror reflecting global financial power shifts.

The dollar, despite its recent rebound, remains in a delicate position balancing between its historical dominance and the challenges of an evolving monetary system.

In other words: gold rises because the world is changing, and the dollar rises because the world still depends on it.

But ultimately, neither can maintain supremacy forever because markets, like history, never move in a straight line.

19/10/2025

02/10/2025

"There are many causes that I am prepared to die for but no causes that I am prepared to kill for."

Today is the International Day of Non-Violence, as well as the anniversary of Mahatma Gandhi's 156th birthday.

Gandhi was nominated for the a few days before he was murdered on 30 January 1948. Gandhi was nominated on 12 occasions for the Nobel Peace Prize.

Read more about him: https://bit.ly/2LpNiZh

02/10/2025

The Principle of Substance Over Form in Preparing IFRS Financial Statements

By: Sameh Abulyazid

Peace, mercy, and blessings of Allah be upon you,

“The best among you are those who learn knowledge and teach it.”

To my friends and followers: auditors, certified accountants, accountants, business students, business owners, and professionals from both accounting and non-accounting backgrounds , welcome to this specialized article in which we will discuss one of the most pivotal accounting principles, a cornerstone of the International Financial Reporting Standards (IFRS):

The principle of “Substance Over Form.”

Perhaps you have come across this term before, during your studies or professional practice. Today, we will dive deeper into its true essence, practical applications, and the risks of ignoring it. By the way, this principle is not limited to accounting alone “substance over form” is a value we should apply in every aspect of life.

What is meant by the principle of “Substance Over Form”?

In accounting under IFRS, it is not enough to consider only the legal form of a transactionthat is, what is written in the contract or what is formally agreed upon.

Instead, we must dig deeper to understand the economic reality or true essence of the transaction.
• A contract may appear to be a “sale,” but in reality, it is simply a financing arrangement.
• Another contract may appear as a “service,” but in substance, it is an “asset lease.”

Thus, the key question is: How does the transaction truly impact resources, obligations, profits, and losses—not just what the contract says?

Why is this principle so important?

Historically, ignoring this principle has led to major financial scandals that shook investor confidence and global capital markets. For example:
• Enron, which used off-balance-sheet entities to hide its losses.
• WorldCom, which reclassified expenses as investments, distorting the economic reality of its transactions.

These manipulations relied on showing transactions in misleading legal forms that contradicted their true substance.

Therefore, IFRS emphasizes:

“Financial statements must faithfully represent the company’s reality, not conceal it.”

Practical Examples

1. Lease-like Service Contracts (Hidden Leases)

Sometimes companies enter into “service contracts” that, in substance, give them the right to use an asset for an extended periodessentially a lease.

Example:
A company signs a printing services contract, but in reality, a single printer is dedicated for its use on-site for five years.

Question: Service or lease?
Answer: It is a lease under IFRS 16, since the company controls the right to use the asset.

2. Special Purpose Entities (SPEs)

Companies may set up legally independent entities for projects or financing, but the parent company retains actual control.

Example:
A parent company establishes a subsidiary to finance equipment purchases while keeping full control.

Treatment: Under IFRS 10 and IFRS 12, the subsidiary must be consolidated, regardless of its separate legal existence.

3. Sale and Repurchase Agreements

A company may “sell” assets to a financier but agree to repurchase them later. Formally it looks like a sale, but in substance it is a secured loan.

Example:
Selling machinery to a bank with a contractual obligation to repurchase it after 12 months.

Form: Sale
Substance: Loan secured by the asset

4. Sale and Leaseback Transactions

A company sells an asset and then leases it back. This can make it appear as if the company has generated liquidity, but in reality, it’s financing with an ongoing lease obligation.

Example:
Selling a building and leasing it back for 10 years.

Treatment: Under IFRS 16, recognize the right-of-use asset and lease liability if the company retains control and benefits.

5. Factoring

When a company sells receivables to a third party but retains credit risk, the transaction cannot be treated as a true sale.

Example:
Discounting invoices with a bank but guaranteeing repayment if customers default.

Form: Sale
Substance: Financing

Treatment: Receivables should not be derecognized if risks and rewards remain, per IFRS 9.

6. Embedded Derivatives

Some contracts contain terms linked to market variables, such as interest or exchange rates, which qualify as embedded derivatives.

Example:
A loan with an interest rate tied to USD exchange rates.

Treatment: The derivative must be separated and measured independently.

What happens if we ignore these differences?
• Companies may appear less indebted than they actually are.
• Financial statements could mislead investors and financiers, leading to poor decisions.
• Companies risk credibility loss and strict regulatory penalties.

How to Apply “Substance Over Form” in Practice?
1. Analyze each contract critically.
2. Always ask: Who truly bears the risks and rewards?
3. Refer carefully to relevant IFRS guidance.
4. Seek advice from colleagues and external auditors when in doubt.

Conclusion
• The principle of “substance over form” is not just theoretical—it is the foundation for preparing financial statements that reflect economic reality.
• As a professional accountant, adhering to it demonstrates integrity and transparency.
• Financial statements are not just numbers; they are a mirror of reality—either reflecting it faithfully or distorting it.

Relevant IFRS Standards for Further Reading
• IFRS 9: Financial Instruments
• IFRS 10: Consolidated Financial Statements
• IFRS 12: Disclosure of Interests in Other Entities
• IFRS 15: Revenue from Contracts with Customers
• IFRS 16: Leases

15/08/2025

From the Ranks to the Leadership Seat!

“Not long ago, I was sitting alongside my colleagues, sharing the same ambitions and facing the same challenges and today, as one of the group’s executive managers, I have never forgotten that I am still one of them.”

When I assumed the role of Executive Manager at the Salhia Real Estate Group, I knew I had two choices: to manage in the traditional way from behind a closed office door, or to stay close to the people who are the heart of the company. I chose the latter.

I believe leadership is not about issuing orders or following schedules, but about building bridges between the leader and the team. That’s why I decided to keep my door literally and figuratively open to every employee. I began joining their daily discussions, sitting with them at their desks, and engaging in the small details of work that many in senior positions might overlook.

This closeness was not just a courtesy it was a strategic decision. When employees feel their leader listens to them and trusts them, enthusiasm turns into productivity, and individual effort transforms into collective achievement. I saw firsthand how motivation levels rose, and how small initiatives grew into major projects simply because someone supported them and cleared the way.

Beyond moral support, I made it a point to share my own experience and the knowledge I had gained over the years. Every situation I had faced and every mistake I had learned from became a tool to help my colleagues save time and avoid obstacles.

Today, I can say with full confidence that the success we have achieved is not my personal success it is the result of a dedicated, unified team. At the Financial Group, we have learned that real success does not come from a single individual, no matter how skilled, but from a team that believes in one vision and works with one spirit.

“I have never been a leader who distances himself from the ranks. I was, and still am, a colleague yesterday, a leader today, and a partner for the future.”

Sameh Abulyazid

15/07/2025

The Forecasting Matrix: A Strategic Toolkit for Financial Decision-Makers

In the ever-evolving landscape of financial management, the Forecasting Matrix has emerged as an indispensable tool for professionals such as FP&A teams, CFOs, and controllers. This framework goes beyond simple budgeting or trend analysis, it integrates both quantitative and qualitative dimensions, enabling leaders to forecast with accuracy, agility, and strategic foresight.

🔍 What Is the Forecasting Matrix?

The Forecasting Matrix is a structured framework that breaks down a company’s financial model into key operational areas, mapping forecasting drivers against a set of practical checklists. Each matrix row typically represents a financial category like sales, expenses, or capital expenditures while columns define the internal and external variables that influence outcomes, as well as best practices for analyzing and projecting them.

This format empowers decision-makers to visualize the cause effect relationships in business dynamics, thus making it easier to simulate various scenarios, anticipate risks, and align financial goals with operational strategy.

Core Components of the Forecasting Matrix

The matrix typically includes the following major components:

1. Sales
• Drivers: Market growth, seasonality, historical demand, economic conditions.
• Checklist: Historical analysis, customer churn evaluation, industry trends, and pricing reviews.

2. COGS & Gross Profit
• Drivers: Input costs, supplier terms, economies of scale.
• Checklist: Procurement trends, contract analysis, gross margin modeling.

3. Headcount & Salaries
• Drivers: Organizational structure, talent strategy, wage inflation.
• Checklist: HR collaboration, industry salary benchmarks, turnover risk analysis.

4. Variable & Fixed Expenses
• Drivers: Output levels, efficiency improvements, technology adoption, service contracts.
• Checklist: Vendor agreement reviews, process optimization, cost categorization.

5. CapEx
• Drivers: Asset replacement, growth initiatives, depreciation trends.
• Checklist: Asset lifecycle evaluation, investment approvals, cash flow impact assessment.

6. Net Working Capital
• Drivers: AR/AP cycles, inventory turnover, credit terms.
• Checklist: DSO/DPO tracking, liquidity planning, working capital ratio analysis.

7. Debt & Interest
• Drivers: Loan structure, interest rate trends, refinancing opportunities.
• Checklist: Loan schedules, covenant compliance, financial leverage evaluation.

Why the Forecasting Matrix Matters

The matrix format enhances forecasting by introducing a disciplined, repeatable approach. Here’s how:

1. Holistic View Across Departments

Each line item in the matrix forces finance teams to engage with operational units Sales, HR, Procurement, Production ensuring that forecasts reflect real-world business conditions.

2. Scenario Planning & Risk Mitigation

By breaking drivers into granular factors, finance leaders can test what-if scenarios and build contingency plans for various operational shocks (e.g., supply chain disruptions, inflation spikes, or headcount fluctuations).

3. Improved Communication

The matrix translates complex financial forecasts into a simple, visual language that is easier to present to stakeholdersboards, investors, or cross-functional leadership.

4. Supports Strategic Alignment

It links operational activities to financial outcomes, helping leadership ensure that budget planning, strategic initiatives, and performance targets are fully integrated.

The Forecasting Matrix is more than a financial planning tool, it’s a thinking framework. By codifying the key variables behind financial performance and aligning them with operational reality, it empowers organizations to forecast smarter, act faster, and plan more confidently.

In an age of uncertainty, agility, and data-driven decisions, this matrix is not just helpful, it’s essential.

28/06/2025

The Relationship Between Marketing and Manufacturing: An Analytical Study Based on Global Market Models

Abstract

This paper explores the intricate relationship between marketing and manufacturing, arguing that the success of any industrial project is not guaranteed by product quality alone, but by prior understanding of the market. Drawing inspiration from the principle of renowned Egyptian industrialist Mahmoud El-Araby—“Before starting a manufacturing project, first trade the product”—the paper examines this approach through theoretical marketing frameworks and real-world global case studies of both successful and failed projects, supported by validated marketing research.

1. Introduction

Entering the manufacturing sector is a high-risk strategic decision. While product quality is vital, it does not ensure success unless it is driven by market demand. Manufacturing should be a response to a real need—not just an investment aspiration.

Research Question:

Does ignoring marketing and market research before manufacturing lead to project failure? What global models support the strategy of entering trade before manufacturing?

2. Theoretical Framework: Marketing Before Manufacturing

According to Philip Kotler, a leading figure in modern marketing, the process begins with identifying customer needs—not production. He famously stated:

“Marketing is not the art of finding clever ways to dispose of what you make. It is the art of creating genuine customer value.”

This reflects the principle that manufacturing must be driven by demand, not production capacity.

Demand-Driven Market Theory

Contemporary business models in leading companies follow this framework:
• Identifying unmet needs.
• Designing products based on consumer insights.
• Linking manufacturing to clear distribution and marketing strategies.
• Launching with a Minimum Viable Product (MVP) before scaling up.

3. Global Case Studies

3.1. Success Case: ZARA
• Industry: Fashion
• Strategy: Started as a small retail business focusing on tracking customer behavior.
• Transition: After thoroughly understanding consumer preferences, ZARA developed a flexible manufacturing system (Fast Fashion) that directly responds to actual demand.
• Result: ZARA takes less than 3 weeks to design and produce a new item, giving it a massive competitive edge.

A study published in Harvard Business Review (2010) confirms:
“ZARA’s success lies in its feedback loop between customers and production.”

3.2. Failure Case: Segway
• Industry: Personal transportation
• Strategy: Launched directly into manufacturing without proper market validation.
• Outcome: Despite being a high-quality and innovative product, Segway failed commercially due to:
• Unclear target audience.
• Lack of a coherent distribution strategy.
• Misjudgment of actual market need.

From MIT Sloan Management Review (2003):
“Segway failed not due to poor engineering, but because it was a solution looking for a problem.”

4. The Role of Market Research in Manufacturing Decisions

A 2022 study by McKinsey & Company concluded:

“80% of new product failures within the first year result from insufficient market research.”

The study recommends:
• Testing MVPs (Minimum Viable Products) before scaling.
• Analyzing primary and secondary market data.
• Evaluating price sensitivity and demand elasticity.
• Mapping distribution channels prior to manufacturing.

5. From Trade to Manufacturing: A Practical Model

Suggested Steps:
1. Start with trading or reselling the intended product, without manufacturing.
2. Collect data on demand, pricing tolerance, sales volume, and customer behavior.
3. Analyze strengths and weaknesses in the current product offering.
4. Develop a manufacturing plan based on a clearly defined competitive edge.
5. Align manufacturing operations with a robust marketing and distribution strategy.

6. Emerging Markets Focus: The Middle East Case

Reports by PwC and Ernst & Young show that emerging markets often suffer from unstructured manufacturing due to a lack of market data and reliance on passion-driven decisions or public trends.

EY MENA Report (2021):
“Many SME manufacturers in MENA fail due to a lack of understanding of customer needs and go-to-market strategies.”

7. Conclusion and Recommendations

Conclusions:
• Manufacturing should never begin without validated market demand.
• Trading offers a safer path to test a business model and reduce risk.
• Market research is not a luxury—it is a strategic necessity.

Recommendations:
• Incorporate market research as a prerequisite in feasibility studies for industrial ventures.
• Support entrepreneurs with pre-manufacturing market testing programs.
• Encourage business schools to integrate real-world market modeling in entrepreneurship curricula.

References:
1. Kotler, P. & Keller, K. (2016). Marketing Management. Pearson.
2. Harvard Business Review (2010). The Secret to Zara’s Success.
3. MIT Sloan Management Review (2003). Why Segway Failed.
4. McKinsey & Company (2022). Why Most New Products Fail.
5. EY MENA Report (2021). Challenges Facing SMEs in Manufacturing.
6. PwC (2020). Emerging Markets Industrial Outlook.