ETHIOPIA: AN EMERGING MARKET OPPORTUNITY

Contents
 Executive Summary
 Environments
 Conclusions
 Into the Business

This report has been prepared to highlight the key elements of the market conditions of
Ethiopia as an emerging market. Emerging markets are promising new destinations for
investors and entrepreneurs with high growth rate, urbanization and profit potential. However,
there are some challenges and struggles we require to mention as an outcome of our market
research.
Before entering to a new country, we highly suggest to analyze the demographic, economic,
socio-politic and infrastructural map of the country to minimize possible risks and to enhance
the likelihood of success. The outcome of the research will allow us to evaluate the accuracy of
the data and potential of the market. With the support of truthful outcome, we will be able to
define the important indicators which will affect the “financial results” before making the long-
term investment decisions.
As emphasized by Kotler and Keller, firms must monitor six major forces in a specific
“environment” as a target of business initiatives: demographic, economic, social-cultural,
natural, technological, and political-legal1.
The correlation among these major forces will guide to explore the opportunities and threats.
We will see how these each forces have a noteworthy and stand-alone value for doing business
in Ethiopia. However, because of the interaction with other dimensions, the overall
comprehension of these forces together gives us a different insight: “a remarkable population
growth not always means a growing market unless there is sufficient purchasing power”1.
The population of Ethiopia is growing rapidly and ranked as the 2nd within African region.
Growing population and the range of the middle-income level are highly important factors for
development of the emerging countries. These figures reflect the man power of the country
and attract the Foreign Direct Investment (FDI) to Ethiopia. In 2013/2014, FDI reached almost
to US$1bn. High FDI figures reflect the trust of the investors for long term. Current government
remarkably provides support to increase the range of middle-income level in the economy and
lead up to investors by establishing required regulations, providing the infrastructure and
investing on education2.
1
Marketing Management – Kotler Keller 15e (Identifying the major forces, page 95)
2
Ethiopia 2015 – African economic outlook 2015 – www.africaeconomicoutlook.org

Demographic
Environment
Economic
Environment
Political
Environment
Technological
Investment
Environment
Environments

 Demographic Environment
As first dimension, demographic environment will give an insight about the population, growth
rate of population, distribution of the age of population, labor power, urbanization and
poverty line.
The population of Ethiopia is increasing rapidly and it’s ranked as 14th in the world. Below given
Table-1 shows that, despite of high population and high growth rate of the population, the
urbanization ratio is low when compared with South Africa. Unfortunately, 39% of Ethiopians
live below the poverty line according to the reports of 20123.
See table 1 for a comparison with South Africa.
The comparison with South Africa gives us important insight of magnitude of the Ethiopia’s
positioning in Africa since South Africa is a reference country included in BRICS (association of
five major emerging national economies).
Figure - 14
3
Ethiopia South Africa
Population 99.465.819 53.675.563
Population growth rate 2,89% 1,33%
Urbanization 19,50% 64,80%
Countries

The information about the population alone doesn’t give complete picture of possible
segmentation. Adding the “age mix” can be useful to understand the composition of clients and
local labor force potentials. Ethiopia is clearly a young country compared to Italy which has one
of the world’s oldest age populations. For example, some products like milk, pre-natal medical
products, toys, school suppliers, will be more important products in Ethiopia rather than in
Italy4.
Ethiopia - Age Mix5
Italy - Age Mix5
Country has a young population which represents the 65% of the total population4. Young
generation will be an opportunity for investors especially within the agriculture and production
industries for long term FDI4.
4
The World Fact book (Africa – Ethiopia) – www.cia.gov
5

For a better understanding of the demographic dimension, the education factor is crucial to
consider. Education expenditure and literacy, in relation with economic dimensions like “GDP”
and “labor force by occupation”, can give us an insight on the quality of local workforce if a firm
decides to set up a subsidiary.
Included in the 2025 goals, government is targeting to increase the literacy rate and to invest
on education programs6. Ethiopia developed significant success and increased the rank of HDI
by 7%. However, this rank is still not sufficient. The literacy rate is a major indicator which
contributes to the efficiency and economic development6.
Nevertheless, again compared with South Africa, “education expenditures” takes only 4,7% of
GDP7 and literacy (age 15 and over can read and write) is 49% of the population compared with
94% of South Africa8. It goes without saying that Ethiopia education expenditure ranked at 85th
position whilst South Africa is positioned 42nd 8.
Government expenditure on education as % of GDP (%)9
6
7
World Bank - http://data.worldbank.org/
8
9

 Economic Environment
Agriculture is the main industry in Ethiopia. On the other hand, government is willing to prepare
the country for foreign investment and aims to expand it into diversified industries such as
manufacturing, textiles and energy production.
While GDP growth remained high with high levels of saving & investment, Ethiopians has still
the lowest income level per capita in the world10 ($1.600) and shows a huge difference
compared with South Africa GPD – PPP ($13.100)10. These dimensions like poverty rate are
important to take into account: in country like Ethiopia, it is hard to find a market for luxury
products rather for primary needs products or strictly connected to the agriculture sector.
As given on the historical data below, GDP level has picked up after the crisis in 2008 and
aligned with the developed countries.11
GDP - GDP growth (annual %)11
GDP 201410 = $ 145 billion (ranked as 73rd in the world)
GDP per capita 201410 = $1,600 (ranked as 214th in the world)
10
11

Ethiopia has trade relationship with neighborhoods. According to figures in 2014, growth in
industrial sector is 21.2% from previous year12. The effect of the growth on GDP was quite high
with the percentage of 14.412.
Top 3 Trade Partners13: China, Saudi Arabia, and Kuwait
Top 3 Exported Goods13: Oil & Mineral Fuels, Coffee & Spices, and Vegetables
The figures below show that the majority of the GDP of Ethiopia comes from Agriculture and
Service industries14.
GDP by sector - Comparison of Ethiopia and South Africa14
12
13
United Nation Comtrade - http://comtrade.un.org
14

Labor force by occupation (45.5 million – 2013 country comparison to the world: 14th)
Inflation rate helps to measure the purchasing power of our potential consumers. The historical
data shows that the economy was quite slow after the crisis and picked up in 2011 with the
global effect. In 2014, the inflation rate has been kept as 7, 4%15.
Inflation, consumer prices (annual %)16
15
16

 Political Environment
On this dimension, we will review the recent history of the country and present the current
political status to give a clear picture for business.
Due to geopolitical location, country was a bridge between the Middle East & Africa with
Eritrea which is neighbor country. In Ethiopia, there are 9 major ethnic groups18
Until 1935, country was not involved with global politics however Ethiopia has been
participated to the World War. Country was the founder of the African Union with the support
of Former Emperor17.
After the global war, country has been faced with a border war with Eritrea which was
continued between 1990s to end of 2000. With the support of border commission, two
countries compromised to sign a peace agreement18.
Currently, Ethiopia is ruled by the federal government from 1994. Unfortunately, the first
smooth election was in 2015 after 20 years of democracy19. Due to instability, country is
ranked low at 173rd in the Political Stability Index19.
With the recent government, country has more stable picture. For economic perspective,
government is playing an extremely important role to attract foreign investors for long term to
help development of the country. Within the current economic environment, government
supports entrepreneurs via tax-exemptions and infrastructure investments for Ethiopia’s 2025
goals.
Government aims to develop agriculture and manufacturing industries as pioneer sectors for
GDP20.
17
Ethiopia 2015 - African economic outlook 2015 - www.africaeconomicoutlook.org
18
The World Factbook (Africa – Ethiopia) - www.cia.gov
19
20
Ethiopia: An Emerging Market Opportunity? Havard Business School, John Quelch, Sunru Young (June 16, 2015)

 Technological & Investment Environment
Lastly, we will review the telecommunication and transportation infrastructure. Under this
dimension, there 2 major indicator. First is investment to the “Transportation” and second is
investment to the “Telecommunication”
As a part of development plans, government focused on transportation infrastructure in the
country which will help investors to establish a strong supply chain to easy access to the
customers. This challenge has been overcome by the current government.
As a successful strategy in the emerging markets, public and private sector settled joint venture
projects for highways, rail line, electricity line etc. which require high technology and know-how
with the support of government21.
Ethiopia has lack of access to sea and this is an important challenge for the trade. The problems
with the neighborhood needs to be managed with high sensitivity.
Currently, the country’s infrastructure is still under expectation with 57 airports. And only 17 of
these airports have feasible access to the other transportation channels. The South Africa has
114 airports which are feasible22.
When it comes to the telecommunication sector, we can see the lack of privatization. Due to
the restrictions, private sector players don’t have access to the industry. Government is strict
about liberalization of telecom sector and the Ethio Telecom dominates the market as
monopoly. Monopoly and high bureaucracy effect the efficiency and price competitiveness in
the service sector23.
The figures below show that Ethiopia has poor infrastructure when we compare with the South
Africa which is with a pioneer country in the region24.
21
United Nation Comtrade - http://comtrade.un.org
22
The World Factbook (Africa – Ethiopia) – www.cia.gov
23
24

 LABOR FORCE
The figures show that Ethiopia has high population which is ranked 14th in the world with
a 2.89% growth rate ranked 10th in 201525. Around 40% of the population is between 15-54
ages which have high potential of young manpower with a literacy level of 49.1%30. The quality
of the manpower is not qualified to enter any non-agricultural work environment.
Nevertheless, according to the massive investment and developments in manufacturing sector
and the growing rate of enrollment to school (increased to 85.7% in 2012/2013026, we can
assume this fact gives investors high-potential to enhance the success in a long term
perspective.
 EASE OF DOING BUSINESS
In terms of economic developments, Ethiopia has ranked the 3rd highest country with the GDP
growth; However, PPP is still ranked as 214th30. Agriculture is the dominating sector with 43%
ratio of the total GDP and average income is $550 for per Ethiopian30.
Ethiopia is a member of COMESA (Common Market for Eastern and South Africa) however they
are not part of WTO (World Trade Organization)27. In terms of Ease of Doing Business, Ethiopia
ranked as 146th out of 189 in the world (scored 31/100)28. Government states to reach the
level of middle-income economy by 2025 with public & private investments by supporting these
investments with income-tax exemptions29. These improvements have motivated foreign
companies to enter the market. Even with a transportation infrastructure under GCI index
(Global Competitiveness Index), Ethiopia ranked better than Ukraine30, in medium short term.
Nevertheless, the first mover of specific sector, with medium level of technology involved,
would struggle considering the low level of basic infrastructure (still under developing phase)
like communication and electricity, and would face problems in logistics.
25
The World Factbook (Africa - Ethiopia) - www.cia.gov
26
National Human Development Report 2014 (Ethiopia) - www.et.undp.org
27
Office of the United States Trade Representative - https://ustr.gov/countries-regions/africa/regional-economic-
communities-rec/common-market-eastern-and-southern-africa-comesa
28
World Bank Group - www.doingbusiness.org
29
30
World Economic Forum - www.reports.weforum.org

 IMPACT OF TRADE AGREEMENTS
Ethiopia has ranked as 126th with $3.721 billion (2014 est.) export volume30. Major products are
coffee, khat, gold, leather products, live animals, oilseeds30. China, Germany, US, Belgium,
Saudi Arabia are the main export partners30.
On the other hand, Ethiopia has ranked as 96th with $11.57 billion (2014 est.) import volume31.
Food and live animals, petroleum and petroleum products, chemicals, machinery, motor
vehicles, cereals and textiles are the major products which they import from China, US, Saudi
Arabia and India36.
Figures show that Ethiopia has a potential of increasing trade between partnered countries. In
2003, Ethiopia began the process of joining to WTO32. Nevertheless, implementation progress is
not yet fully integrated to trading system and policies. Local policy makers have still power on
tariffs and trade measures.
According to the Growth and Transformation Plan (2011-2015) and targets by 2025,
government is willing to attract investors for an open economy. UNDP supports Ethiopia by
partnering with the Ministry of Trade and the European Union to create a stable trade platform
between Ethiopia and global economy with WTO regulations and trade agreements33.
In addition to trade agreements, WTO agreement will impact the education and health sectors
in Ethiopia. This will open the market for service industry38.
 SUPPLY CHAIN AND DISTRIBUTION CHANNEL
In 2015, Ethiopia is ranked 109th out of 140 countries in the world for Global Competiveness
Index34. GCI of Ethiopia is higher than Bosnia & Herzegovina, Egypt, Paraguay, Pakistan etc39. As
sub-indicator, Transport Infrastructure is ranked 90th which is higher than Ukraine,
Montenegro, Peru, Romania, Costa Rica, Serbia39. In addition, Electricity and Telephone
Infrastructure is ranked as 128th which is higher than Nepal, Pakistan, Nigeria39.
The level of infrastructure is highly important for the investors to move their goods. On the
other hand, the cost and consistency of electricity is highly important for manufacturing
industries.
Investors are required to establish strong relationships between stakeholders by initiating “win-
win” projects for a sustainable supply chain to keep their positioning in Ethiopia.
31
The World Factbook (Africa - Ethiopia) - www.cia.gov
32
World Trade Organization – www.wto.org
33
34
World Economic Forum - www.reports.weforum.org

 Into the Business - General Framework
 MedCo
MedCo is a UAE based company that manufactures and sells generic pharmaceuticals. MedCo’s
strategic plan is to enter the Ethiopia market with a wholly owned subsidiary. MedCo aims to
get benefit from government support for the tax exemption.
 Pharmaceutical industry in Ethiopia
In 1976 the Government established the Ethiopian Pharmaceutical and Medical Supplies
Corporation (EPHARMECOR) with the ultimate objective that it would take over the import,
manufacture and distribution of all drugs for both the public and private sectors35.
When it comes to local competition, Addis Pharmaceutical Factory (APF) PLC, PharmaCure PLC
are the main manufacturer in the country36. In addition to these 2 major companies, Hikma
Pharmaceuticals PLC37 has entered to the market in 2013 and UAE based Pharmaceutical
Company; Julphar38 is announced to enter African market by establishing joint venture with
Ethiopian partner.
35
World Bank. Report No. 5299-Ia Sector Review Ethiopia Population, Health and Nutrition
36
UN. Local Production of Pharmaceuticals and Related Technology Transfer in Developing Countries. A series of
case studies by the UNCTAD Secretariat
37
Hikma Quality - http://www.hikma.com/en/media-center/news-and-press-releases/all-news/2013.aspx
38
Julphar - http://jusline.ae/Julphar%20Ethiopia/Event1.htm
MedCo ShoeCo CareCo
Yousef Al-Abbar Beatrice Chen Axel Kazuo
Abu-Dhabi, UAE Beijing, China London, UK
Pharmaceuticals, Generic Medicines Shoes Skin Care products
Business Goal
Risk of Channel
Very efficient in manufacturing small
batches that allows it to gain cost and
speed advantage
Efficient manufacturer, low cost of
employee salaries
($50 for 2000 employees)
Low cost production through local
subsidiaries
wholly owned subsidiary Local subsidiary or JV
Establishing local subsidiary,
as it gives 70% margin
Very high, $85 million investment High, $35 million investment High, $55 million investment required
Capitalize on the growing Ethiopian
market, since government prioritized
the healthcare sector
Manufacture locally and sell in Ethiopia
and export to neighboring countries
Expand into the rest of the Ethiopian
market and increase the profit. Desire
to defeat the competitor who already
started producing locally in Ethiopia
Key Players
Where
What
Source of Competitive
Advantage
Preffered Channel

 Current Industry’s Trends
As part of the country’s objective of becoming a regional manufacturing hub, the Ethiopian
government recently launched a business plan for pharma industry which is aligned with their
2025 goals. Government aims to guide the development of the country’s pharmaceutical-
manufacturing sector39.
In accordance with the development plan, government targets to increasing the capacity of
local production by aligning with international regulations in pharma industry which is an
important indicator for health care. In addition, an increase on manufacturing will help to
create long-term investments and growth in GDP40.
 Industry’s Policies
As an effort to encourage the foreign investment in the country, the Ethiopian government has
issued several regulations and proclaims. As per Regulation No. 312/2014, a manufacturing
industry or agriculture who invests at least 200K US$ and creates permanent employment
opportunity for at least 50 Ethiopian nationals shall be entitled to import, at any time, duty-free
capital goods necessary for his enterprise for up to 5 years. In addition, the regulation exempts
private industrial development zone investors from income tax for 10 years41.
This should allow foreign investors to consider Ethiopia as a great market for various industries
including Pharmaceutical
39
2015 KPMG Africa Limited, Economic Snapshot, Quarter 2, 2015
40
2015 KPMG Africa Limited, Economic Snapshot, Quarter 2, 2015
41
Regulation No. 312/2014. Federal Negarit Gazette of the federal democratic republic of Ethiopia

 Financial Projections
Total EBIT = $ 95.33 Million
Return on Investment in 7 year forecasted = 12%
 MedCo Opportunities and Challenges
Opportunities
The industrial sector growth is 21.2%. This potential high growth will have a domino effect on
GDP and create job opportunities in the country42.
According to the projection provided by the company, the market is expected to grow by 15%
to 20% annually until 2025. This is Projection is also feasible as the government’s aspiration to
reach the middle income status in 2025.
The recent established JVs in Pharmaceutical sector are a competitive threats for MedCO,
however, MedCO’s efficient operation and low cost manufacturing creates an advantage and a
great opportunity to compete and meet the projected market share.
42
United Nation Comtrade - http://comtrade.un.org/
Addressable market $200M 1 2 3 4 5 6 7
Market growth 0,15 - 15 15 15 15 15 15
Forecasted market share Year 1: 5%, year 7: 25% 5 8,33 11,7 15 18,3 21,7 25
Forecasted gross margins year 1: 70%, year 7: 75% 70 70,8 71,7 72,5 73,3 74,2 75
Forecasted fixed costs year 1: $10M, year7: $13M 10 10,5 11 11,5 12 12,5 13
Capital Expenditure $85M
MedCo Year
Year 1 2 3 4 5 6 7
Sales 10 19,17 26,83 34,5 42,17 49,83 57,5
Cost of Seals 3 5,59 7,6 9,49 11,24 12,87 14,38
Gross profit 7 13,58 19,23 25,01 30,92 36,96 43,13
Fixed costs 10 10,5 11 11,5 12 12,5 13
EBIT -3 3,08 8,23 13,51 18,92 24,46 30,13
P&L Statement (in $ millions)

Challenges
MedCo lacks experience in Ethiopia’s local market regulations. Thus it needs support from a
local partner who understands local regulations, licensing requirement and local manpower
staffing.
With the increasing Pharmaceutical firms entering the market, MedCO should think about the
current rivals’ products by entering into the market with a diversified portfolio to differentiate
the company’s products from the competitors.
In addition, the Company should take into account other challenges such as delays in
production for a lack of sustainable infrastructures and according to the high competition
without a patent regulation in place, the possibility to lose the know-how.
 Final Recommendation
MedCo has a great potential to enter Ethiopia pharmaceutical market. The company has to
proceed with its stated plans and financial projections. However, we strongly recommend
MedCo to seek for a partnership (establishing JV) in order to overcome the challenging local
market experience and to speed up the desired growth projected
 CareCo
CareCo, a London based company with its new director of strategy, Alex Kauzuo, the Ethiopian
market is a must to enter decisively since the purchasing power of Ethiopians will only grow and
more delay in entering the market would have negative consequences since competitors will
dominate the market, build strong brand and have power in the distribution channels. At the
moment the company is using local distributor which gives gross margin of 35% to 45% but
makes it subject to 30% or more customs duties, and this makes its products more expensive
than the local offerings43
Reference to our study to the Ethiopian market and recommendation for investment, we
strongly believe that the general investment climate is very positive. However, for the personal
care industry in general and a British company investing in Ethiopia in particular, there are
additional few factors need to be taken into consideration:
43

The economic boom in the African continent made the major players in the beauty and
personal care industry keen to enter this market. P&G, Uniliver and L’Oreal are all looking at
this continent as a growing market with high potential and they have already set their plan to
maximize their market share44.
According to the specific consumer needs, preferences and value proposition, CareCo has to
come up with products that satisfy those. There is a high awareness of CareCo’s brands among
Ethiopian consumers9. “Mercato” is the largest market in Addis Ababa for the wholesale from
which all the rural areas are depend on.
The pre-capita income in Ethiopia is among the lowest in the world45. Therefore, CareCo needs
to produce affordable products in order to target the mass, increase the revenue and dominate
the market with high market share.
Total EBIT = $ 6,57 Million
Return on Investment in 7 year forecasted = -88%
44
ROLAND BERGER STRATEGY CONSULTANTSP4
45
Market growth 15-20% over 10 years (0.5%year) - 15 15,5 16 16,5 17 17,5
Forecasted market share year 1: 5% year 7: 25% 5 8,33 11,7 15 18,3 21,7 25
Forecasted gross margins year 1: 60% year 7: 70% 60 61,7 63,3 65 66,7 68,3 70
Forecasted fixed costs Year 1: $12 year 7: $15 12 12,5 13 13,5 14 14,5 15
Capital Expenditure $55M
CareCo Year
Year 1 2 3 4 5 6 7
Sales 6,25 11,93 16,84 21,75 26,7 31,69 36,72
Cost of Seals 2,5 4,57 6,18 7,61 8,9 10,03 11,02
Gross profit 3,75 7,36 10,67 14,14 17,8 21,65 25,7
Fixed costs 12 12,5 13 13,5 14 14,5 15
EBIT -8,25 -5,14 -2,33 0,64 3,8 7,15 10,7

 CareCo Opportunities and Challenges
Opportunities
Several brands of CareCo are enjoying a global recognition and high awareness among
Ethiopian consumers. The purchasing power of Ethiopian consumer will only grow since
incomes are rising and discretionary spending is growing. As per the current distribution
channel, CareCo is making low margin and facing high custom duties.
Challenges
Although the labor cost is low, the quality of the workforce is also low, as majority is in the
agriculture sector. This leads to high cost of on-site, on-the-job trainings of the personnel if its
own subsidiary is preferred as a business channel. It would also require the CareCo to establish
internal quality management. Moreover, after establishing a subsidiary, CareCo would have to
deal with the poor and fragmented infrastructure without the experience of local player that
should facilitate the logistics.
CareCo should find a partner with excellent access to the market and distribution channels. This
would reduce the share of the projected margin as they have to split the profit with the
partner. However, the risk in play would be split considering a negative ROI forecasted for the
first 7 years, and the CareCo would not be subject to 30% or more customs duties.

 ShoeCo
A Beijing based shoe manufacturing company is deciding whether to open a wholly owned
subsidiary or a joint-venture in Ethiopia based on the following facts: The labor costs in Ethiopia
are very low46; The facility would be built in a special economic zone outside Addis-Ababa, with
five years of exemption from corporate taxes12 and all capital equipment imported duty-free12.
According to the Import/ Exports transaction volumes with China, Ethiopia is an emerging
market where Chinese companies are already operating and present.
Total EBIT = $ -48.93 Million
Return on Investment in 7 year forecasted = -240%
46
Market growth 8-12% over 10 years (0.4% year) - 8 8,4 8,8 9,2 9,6 10
Forecasted market share year1: 3% year7:10% 3 4,17 5,33 6,5 7,67 8,83 10
Forecasted gross margins year 1: 60% year 7: 65% 60 60,8 61,7 62,5 63,3 64,2 65
Forecasted fixed costs year 1: $10 year7: $12 10 10,3 10,7 11 11,3 11,7 12
Capital Expenditure $35M -
ShoeCo Year
Year 1 2 3 4 5 6 7
Sales 2,7 4,05 5,2 6,36 7,53 8,71 9,9
Cost of Seals 1,08 1,59 1,99 2,39 2,76 3,12 3,47
Gross profit 1,62 2,46 3,21 3,98 4,77 5,59 6,44
Fixed costs 10 10,33 10,67 11 11,33 11,67 12
EBIT -8,38 -7,87 -7,46 -7,02 -6,56 -6,08 -5,57

 ShoeCo Opportunities and Challenges
Opportunities
Regional markets are growing at nearly 10%12, and economics of production from the factory
would allow ShoeCo to serve them more profitably. Monthly wage of $50 that ShoeCo intends
to pay is above the local Ethiopian industry average12, and below than its other factories12.
Challenges
Ethiopia has very poor transport infrastructure. Even though low-cost of inputs for production
in Ethiopia gives regional advantage, it would be costly to transport goods for the purpose of
exporting to neighboring countries. As 85% of the labor force is employed in agriculture47,
ShoeCo will be required to spend significant amount of money in training its employees before
having them start working. Otherwise, the production would be inefficient, subsequently
leading to lost working hours and revenues. For Chinese companies projecting to establish a
local Subsidiary would face language barriers. In fact, the official language of Ethiopia is
Amharic (27% of population belongs to Amhara ethnic group)53, however there are slightly
more ethnic people that speak Oromo language (34.4%)53. With literacy rate of 49%53, we can
expect some group of staff being unable to speak Amharic, not to mention English. Chinese
management would need to find reliable employees who can speak Mandarin, Amharic and
Oromo or English, Amharic and Oromo to be able to deliver their message clearly.
According to the Financial projection ShoeCo will have steady negative result in terms of EBIT
and deep negative return on Investment index, giving the capital investment in case of local
Subsidiary. In this specific case we highly suggest to continue with the current strategy using a
local distributor. This approach doesn’t require any new resources and decreases the risk
exposure.
47

Abdulrahman Daqqa
Bisher Yousfi
Ilhom Rasulov
Gennaro Moraca
Ozlem Kocak
Team 10

ETHIOPIA: AN EMERGING MARKET OPPORTUNITY

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