Analyzing Business Opportunities in Ethiopia: A Case Study Report

This case study examines business opportunities in Ethiopia, focusing on the country's economic growth and the government's role in fostering development. It analyzes the Ethiopian government's state-led development model, including investments in infrastructure and policies to attract private and foreign investment. The case study explores the market entry strategies of three fictional companies—CareCo, ShoeCo, and MedCo—evaluating their approaches to capitalizing on the growing consumer market and government initiatives. The analysis covers the pros and cons of doing business in Ethiopia, including challenges related to infrastructure, skilled labor, and competition. The study also forecasts the companies' potential for growth and payback periods, highlighting the importance of utilizing government policies and recognizing cross-cultural aspects for success. The case study concludes that all three companies have promising futures in the Ethiopian market if they effectively navigate the local business environment.

Running head: ETHEOPIA AND NEW OPPORTUNITIES
ETHEOPIA AND NEW OPPORTUNITIES
Name of the Student:
Name of the University:
Author Note:

2ETHEOPIA AND NEW OPPORTUNITIES
Question1.
After the GDP increased with population growth, Ethiopian government followed the
model of state led development. It invested in power, telecommunications and transportation that
instigated economic growth. It has taken initiatives to protect its local companies such as media
and retail sector and promote manufacturing of pharmaceuticals sector. The government has also
reserved financial sectors for domestic investment and state banks have hold most of the bank
assets. Ethiopian government has attempted to attract the local manufacturers and encourage
export system that substitute import. Tax and customs exemptions have permitted the investors
transmute their capital as well as profit into dollar.
Pros and cons: despite the fact that Ethiopian government has made policies to attract the
private companies and foreign investors, they are facing competitions in the fields of achieving
government tenders, custom clearing and navigating government bureaucracy. The problem in
transportation and telecommunications still continue. Frequent power cuts have infringed the
production (Quelch, & Sunru, 2015). In spite the country provides a high supply of workforce,
but skilled and trained labors are scarce as well as costly. Limited competition in market has
proved to be beneficial for the multinational companies but they do not have brand awareness
among the consumers. The government’s policy to restrict the imported goods to domestic
factories has prevented the way to invest in Ethiopia. Building trust with customers is difficult
and public sector corruption has been reported high which may affect investment.
Quetion2:
CareCo: The company has global recognition in manufacturing personal care products.
Initially the company had entered the Ethiopian market through local agent. This method served

3ETHEOPIA AND NEW OPPORTUNITIES
the company with low-risk and low-cost in production which previously helped the company to
increased its profitability. Now the company proposes for capturing the increasing purchase
power of Ethiopian consumers utilizing its popularity.
ShoeCo. The company used import-only strategies to increase its profitability through
local manufacturing as well as local importers. Now the company wants to build an economic
zone so that it can utilize the low cost local labor force to get exemption from taxes.
MedCo. As the Ethiopian government has taken drive to promote pharmaceutical
manufacturing, the company has proposed to establish independent pharmacies (Quelch, &
Sunru, 2015). Previously, MedCo had no propriety products and provided only the private
labeled goods with local packaging. Now with the economic growth, the expenditure on health
per capita will also rise, which has made the company to introduce wholly owned subsidiary.
Question3.
a. CareCo: The company has established its subsidiaries that have enabled it to build local
manufacturing facilities and invest its own people to grow the local business. This will help it to
reduce the retail prices compared to its local competitors, expand its reach to more people rather
than only urban customers. Local manufacturing will take time to start operating fully in the
country which may prove to be costly in competitive market.
ShoeCo: it had established long term contracts with individual distributors but now it
proposes for engaging 2000 local workers as employees. This will enable them to be exempted
from corporate taxes for five long years and the company will import all capital equipments duty
free. It wants to utilize the low cost labors available in Ethiopia but they will have to invest on
training them, properly.

4ETHEOPIA AND NEW OPPORTUNITIES
MedCo: the company visions to utilize the government’s policy of promoting healthcare
sector by assisting the pharmaceutical manufacturing. The3refore, the company tries to enter the
Ethiopian market by establishing fully owned subsidiary like CareCo. Despite the company’s
growth has slowed down due to international disturbances and business maturing process, it finds
Ethiopia as a promising market which will grow within a decade. The new policies for building
new healthcare system, clinics and pharmacies will help the company to introduce its products,
know the demands and build needed partnerships (Quelch, & Sunru, 2015). Like ShoeCo, this
company therefore will be able to import equipments duty free and will be tax free for five years.
The competitors of MedCo are china and India based manufacturers therefore, the company may
face a tough competition in Ethiopian market.
b. CareCo forecasts growth of 15% in the next year as the income of people are growing
and they are willing to spend on personal care products. Therefore, the company can pay back
within 5 years approximately.
ShoeCo’s low cost input method will enable it to payback approximately within in 4
years.
MedCo will definitely pay back within 10 years because their income is growing 15% to
20% per annum.
c. All the companies have promising future in Ethiopian market. The government’s market
enter policies must be well utilized and cross-cultural aspects must be recognized by the
companies.

5ETHEOPIA AND NEW OPPORTUNITIES
Reference:
Quelch, John A., & Sunru Yong. (2015). "Ethiopia: An Emerging Market Opportunity? (Brief
Case)." Harvard Business School Teaching Note 915-502.