EMBA 809-50 Summer 2019: Ethiopia Market Entry Opportunity Analysis

This case study analyzes the market entry opportunities and challenges for three companies – CareCo, ShoeCo, and MedCo – in Ethiopia. The analysis considers the attractiveness of the Ethiopian market, including its growing market size, stable government, and availability of cheap labor. The assignment explores the challenges each company faces, such as cultural assimilation, legal and regulatory barriers, and weak distribution networks. It recommends specific modes of entry for each company: CareCo should form a joint venture, ShoeCo should enter with a local importer, and MedCo should establish a full subsidiary. The analysis highlights factors affecting the success of market entry, including cheap input costs, first-mover advantage, tax exemptions, and government spending on infrastructure. The document provides a comprehensive overview of the Ethiopian market and offers strategic insights for international business expansion.

Investing in Ethiopia

Is market entry attractive?
For all the three companies,
CareCo, ShoeCo and MedCo,
business opportunity does exist
in Ethiopia, because of the
following reasons:
Continue...

Is market entry attractive?
Growing market with very few
players
Stable government
Promoting FDI in Ethiopia
Availability of cheap labour
Improving Infrastructure sectorContinue...

Challenges for all companies:
Assimilation with local
culture/community
Legal and regulatory barriers as
protection
Local Government’s support
Challenges in reaching remote part
of country where local distribution
network is very weak Continue...

Challenges for all companies:
Study of local market in terms of
market trend, financial feasibility,
Protection of intellectual property
rights, brand Image

Mode of entry- CareCO
For CareCo, it would better for this
company to ally with local partner and
form joint venture with majority equity
owner, this way company can quickly
assimilate with local people through local
partner and can expand their business in
remote areas. This will not be possible
going solo, later on, it can buy majority
state in company after expanding its
business and network and understanding
local people’s demand as per their culture
and tradition.

Mode of entry- ShoeCO
ShoeCo, it has huge potential in a country,
which is poor and growing market and has
huge labour cost advantage. I would
suggest ShoeCo to enter there with local
importer and once it gain foothold, it can
established its own subsidiary company
after few year of business. In terms of
capital investment it required less capital
than others two businesses. It is more like
labour intensive sector and labour are
easily available there.

Mode of entry- MedCO
As far as for MedCo, it is one of the
essential items related to health care
and China and India are the main
foreign players already operating in
Ethiopia with majority market share,
but since MedCo has full knowledge
of this and has capability to compete
in Ethiopia with other two major
players. Continue...

Mode of entry- MedCO
Their strategy of entering market as full
subsidiary company is right decision; it
can take advantage of tax holiday that is
provided in economic zone. Health care
sector has huge potential to grow with
maximum gross margin. It would not be
good idea for capital intensive sector
company to enter this market through
local partner or as through local importer.
It is also one of the export oriented sector
where they can take advantage of low
input cost. Custom exemption on capital

Factors affecting success of the firm’s
Market entry
Cheap input cost
First mover advantage
Growing demand
Tax exemption- custom, income tax,
tax holiday in economic zone
Government spending on improving
overall infrastructure
Continue...

Factors affecting the success of the firm’s
Market entry
Particular thrust on pharmaceutical
industry
Special incentive for manufacturing and
export oriented company
Special Economic zone with tax incentive
In top 30 countries in ease of doing
business in African continent as per world
(http://www.ethiopia.doingbusinessguide.co.uk/the-guide/how-to-do-business-in-
ethiopia/)

References:
 Abner, Brian, (2015, Feb. 12). 4 considerations before taking your
business international. Retrieved June, 14, 2019., From
https://www.bizjournals.com/bizjournals/how-to/growth-
strategies/2015/02/considerations-for-taking-your-business-
global.html
 Trading Economic, Ease of Doing Business in Ethiopia, Retrieved
June, 14, 2019, From https://tradingeconomics.com/ethiopia/ease-
of-doing-business
 Central Intelligence Agency, (2019, June 06), The World Factbook,
Retrieved June, 14, 2019., From
https://www.cia.gov/library/publications/the-world-factbook/geos/e
t.html
 Doing Business in Ethiopia, How to do business in Ethiopia,
Retrieved June, 14, 2019, From
http://www.ethiopia.doingbusinessguide.co.uk/the-guide/how-to-
do-business-in-ethiopia/