Professional Documents
Culture Documents
AASTU
Addis Ababa Science and Technology University
Value Chain Management of Ethiopian Garment
Companies:
The Case of Garment Companies in Addis Ababa
By Zerihun Abebe
August, 2016
Addis Ababa, Ethiopia
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Value chain Management of Ethiopian garment companies
By Zerihun Abebe
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Value chain Management of Ethiopian garment companies
Declaration
I hereby declare that the work which is being presented in this thesis entitled “Value Chain
Management of Ethiopian Garment Companies (The Case of Garment companies in Addis
Ababa)” is original work of my own, has not been presented for a degree of any other university
and all the resource of materials used for this thesis have been duly acknowledged.
This is to certify that the above declaration made by the candidate is correct to the best of my
knowledge.
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Value chain Management of Ethiopian garment companies
ACKNOWLEDGEMENTS
Throughout the course of research leading to the completion of this thesis, I have gratitude
to many people, who have provided me with tremendous help and support in one way or another,
which I think I cannot possibly acknowledge in full measures. First and foremost, I express my
deepest gratitude to my advisor, Dr. Belete Meberatu, for his time and valuable advice and
comment throughout the development of this thesis. His experience, insightful guidance, and
encouragement provide me necessary ways and confidence to carry out and complete this study.
I also wish to express my sincere thanks to garment companies, executives and garment
experts, for their generous and valuable support information to my research. Likewise, I would
like to send my heartfelt thanks to my colleagues in ministry of industry, who gave me not only
considerable assistance but also significant support to help me conduct the study.
Finally, I have indebted to my respected wife for her immeasurable love and cares during
my life. This research is dedicated to my wife, Meseret Shiferaw and my little daughter, Yohana
Zerihun, with love.
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Value chain Management of Ethiopian garment companies
ABSTRACT
The objectives of this study are twofold: (1) To explore the value chain management of
Ethiopian garment companies and (2) To recommend the policies in both firm and government
level to improve the value chain management of garment companies. The research model used for
this study is adapted from the Value Chain Model of Michel E. Porter (1985) and garment
concepts of Gini Stephens Frings (2002). The study shows the value chain of garment companies
through management of 9 activities: Inbound logistic, operations, outbound logistics, marketing
and sales, services, technology development, infrastructures, human resource management and
procurements. The research is analyzed based on qualified 49 questionnaires that are collected
from garment companies in Ethiopia by using SPSS: percentage, frequency, mean, standard
deviation, and t-test. Secondary data also is analyzed.
The main finding of this study, regarding to the value chain management of garment
companies, indicates that there are 8 activities that are managed moderately effective in garment
companies in Ethiopia. They are inbound logistics, outbound logistics, services, technology
development, human resource management, infrastructure and procurement. Marketing activity is
managed not too effectively. Only one activity is managed effectively is production. The
importance of activities in the value chain was analyzed to find the difference between the
perceptions of respondents from garment companies and experts. The finding of this study leads
to recommend Ethiopia government should establish concentrated trade centers in potential
market, organize and provide funding to regular trade fair abroad, and support in human
resource training and legal aid. The government also should help textile and garment related
services, such as industrial software, equipment and parts supply, technical services, trade
promotion, trade mark development, franchise, design, training, quality control, management etc.
Finally, the government and institutes should play as the facilitators for the development of the
industry though provision of information, development of physical infrastructure, and
institutional support. Garment companies in Ethiopia should consider operation, marketing and
sales, HRM and technology development as their key activities and need to improve these
activities to improve the value chain management.
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Value chain Management of Ethiopian garment companies
Contents
ACKNOWLEDGEMENTS .................................................................................................................................... i
ABSTRACT ....................................................................................................................................................... iii
Appendix ....................................................................................................................................................... vii
List of Figure ................................................................................................................................................. viii
List of Tables .................................................................................................................................................. ix
Abbreviations .................................................................................................................................................. x
CHAPTER ONE .................................................................................................................................................1
INTRODUCTION ...............................................................................................................................................1
1.1. Background and Statement of Problems ........................................................................................1
1.2. Objectives of the Study ...................................................................................................................2
1.3. Research Questions .........................................................................................................................2
1.4. The Scope of the Study ..................................................................................................................2
1.5. Operational Definitions ...................................................................................................................2
1.6. Expected Benefits of the Study ......................................................................................................4
1.7. The Conceptual Framework ............................................................................................................4
1.8. Organization of the Study ...............................................................................................................4
CHAPTER TWO ................................................................................................................................................6
LITERATURE REVIEW ...............................................................................................................................6
2.1. The Theoretical Framework ............................................................................................................6
2.1.1. The Value Chain Model ...........................................................................................................6
2.1.2. The Linkages between Activities ..........................................................................................16
2.2. Overview of Garment Industry .....................................................................................................16
2.2.1. Introduction ..........................................................................................................................16
2.2.2. APPAREL ................................................................................................................................17
2.3. Related Literatures Reviews .........................................................................................................20
2.3.1. Important Concepts and Theories Used In Garment Business..............................................20
CHAPTER 3 ....................................................................................................................................................25
RESEARCH METHODOLOGY ..........................................................................................................................25
3.1. Conceptual Framework .................................................................................................................25
3.2. Sources of Data .............................................................................................................................26
3.2.1. Secondary Data .....................................................................................................................26
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Value chain Management of Ethiopian garment companies
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Value chain Management of Ethiopian garment companies
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Value chain Management of Ethiopian garment companies
Appendix
Appendix 1: Letter for Interview’s Appointment……………………………………….….72
Appendix 2: Topics for face to face interviews …………………………..............................73
Appendix 3: Letter for questionnaire survey………………………………………………...74
Appendix 4: Questionnaires …………………………………………………………………75
Appendix 5: List of garment companies in Ethiopia………………………………………....81
Appendix6: Ethiopia at a glance……………………………………………………………………….85
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Value chain Management of Ethiopian garment companies
List of Figure
Figure 2: 1 the value chain model ...................................................................................................................7
Figure 2: 2 inbound logistic model ..................................................................................................................8
Figure 2:3 operation managment model ........................................................................................................9
Figure 2:4 the supply chain in textile and clothing sector ............................................................................10
Figure 2:5 Marketing mix model ...................................................................................................................11
Figure 2:6 Decisions on price strategy ..........................................................................................................12
Figure 2:7 A fashion cycle ............................................................................................................................21
Figure 2:8 Apparel production process.........................................................................................................22
Figure 3:1 Value chain model of garment companies ..................................................................................25
Figure 4:1 Position of respondents ................................................................................................................31
Figure 4: 2 Firm’s experiences ......................................................................................................................32
Figure 4:3 Type of respondents’ company ....................................................................................................33
Figure 4:4 types of orders..............................................................................................................................33
Figure 4:5 Major markets of garment companies..........................................................................................34
Figure4:6 Inbound logistics management of garment companies .................................................................36
Figure 4:7 production management of garment companies ..........................................................................37
Figure 4:8 outbound logistics management of garment companies ..............................................................38
Figure 4:9 Marketing management of garment companies ...........................................................................39
Figure4:10 The sales management of garment companies ...........................................................................40
Figure 4:11 Services management of garment companies ............................................................................41
Figure4:12 Infrastructure management of garment companies in Ethiopia ..................................................42
Figure 4:13 Human resource management of garment companies ...............................................................43
Figure 4:14 Technology developments in garment companies .....................................................................44
Figure 4:15 Procurement of garment companies...........................................................................................45
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Value chain Management of Ethiopian garment companies
List of Tables
Table 2. 1 export trend .................................................................................................................................19
Table 3. 1 Likert's scale……………………………………………………………………………………………………………………………28
Table 4.1. 1 position of respondent…………………………………………………………………………………………………………31
Table 4.1. 3 Firms Experience in Garment industry ......................................................................................32
Table 4.1. 4 Type of respondents’ companies ...............................................................................................32
Table 4.1. 5 Type of order .............................................................................................................................33
Table 4.1. 6 the major market ......................................................................................................................34
Table 4.2. 1 width of class interval I………………………………………………………………………………………………………..35
Table 4.2. 2 inbound logistics management of garment companies ............................................................35
Table 4.2. 4 production management of garment companies .....................................................................36
Table 4.2. 5 outbound logistics management of garment companies .........................................................37
Table 4.2. 6 marketing management of garment companies.......................................................................38
Table 4.2. 7 the sales management of garment companies ...........................................................................39
Table 4.2. 8 Services management ...............................................................................................................40
Table 4.2. 9 infrastructure management of garment companies .................................................................41
Table 4.2. 10 human resource management in garment companies ...........................................................42
Table 4.2. 11 technology development in garment companies ...................................................................43
Table 4.2. 12 procurement of garment companies ......................................................................................44
Table 4.3. 1 width of class interval II…………………………………………………………………………………………….. 46
Table 4.3. 2 independent sample test of primary activities .........................................................................46
Table 4.3. 3 Group statistics of primary activities.........................................................................................46
Table 4.3. 4 inbound logistics........................................................................................................................47
Table 4.3. 5 Operations .................................................................................................................................47
Table 4.3. 6 outbound logistics .....................................................................................................................48
Table 4.3. 7 marketing and sales...................................................................................................................48
Table 4.3. 8 services ......................................................................................................................................49
Table 4.3. 9 independent sample test of support activities .........................................................................49
Table 4.3. 10 group statistics of support activities .......................................................................................50
Table 4.3. 11 infrastructure ..........................................................................................................................50
Table 4.3. 12 human resource management ................................................................................................50
Table 4.3. 13 technology development ........................................................................................................51
Table 4.3. 14 procurement ...........................................................................................................................51
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Value chain Management of Ethiopian garment companies
Abbreviations
CAD: Computer Aided Design
CAM: Computer Aided Manufacturing
CMT: Cutting, Making and Trimming
ETIDI: Ethiopia Textile Industry Development Institute
ETGMA: Ethiopian textile and garment manufacturer Association
EU: European Union
FDI: Foreign Direct Investment
FTA: Free Trade Agreement
HRM: Human Resource Management
MOI: Ministry of Industry
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Value chain Management of Ethiopian garment companies
CHAPTER ONE
INTRODUCTION
In business, companies are paid to take raw inputs, and to “add value” to them by turning
them into something of worth to other people. This is easy to see in manufacturing, where the
manufacturer “adds value” by taking a raw material of little use to the end-user and converting it into
something that people are prepared to pay money for (Abrue, M de Palva, 1995). In most cases, the
more value companies create, the more people will be prepared to pay a good price for the product or
service, and the more they will keep on buying (Michel E. Porter, 1986). And in today’s business
climate, every company needs to maximize the value of every process in their business. This is where
the “Value Chain Analysis” tool is useful. Value Chain Analysis helps companies identify the ways in
which the companies create value for their customers, and then helps the companies think through
how they can maximize this value (Michel E. Porter, 1986).
In garment industry, value chain management becomes critical as the needs of customer
change very fast and production of customer value becomes more complex (Gini Stephens Frings,
2002). Buyer will expect from garment companies: A well maintained sample room and
fabric/accessory library, a constant supply of new fabrics and accessories, efficient communication,
fast and correct sampling, efficient order handling, competitive prices and good quality standard,
punctual and quick deliveries (45 to 60 days), a reliable, partnership-like business relationship (Till
Freyer, 2003).
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Value chain Management of Ethiopian garment companies
Garment manufacturers lack access to sufficient quality fabrics in Ethiopia. Because of the limited
number of local producers capable of supplying export-quality fabric most apparel manufacturers
order fabric from Asian suppliers, (ETIDI, 2013). This indicated to take up to 20 to 30 days (World
Bank Group, 2011). As a result, the garment manufacturers are characterized by long order-delivery
times.
Mean-while, the Ethiopian government has spearheaded the sector as one of the key priority
sectors for the generation of future employment and to realize its aim to enhance foreign currency
earnings. This is supported by the creation of various industry policies and incentives to attract foreign
direct investors. Ethiopian textile- and apparel products have duty free access to the European Union
and the US market through the African Growth and Opportunity act ( AGOA) and are part of the
General system of preferences GSP+ and Everything but Arms (EBA). The sector is part of the
governments Growth and Transformation Plan (GTP) which started in 2010/2011 to transform the
nation from an agricultural dominated economy into a manufacturing economy with aspirations to
become middle income nation in 2025. The value chain management so will be very important to the
success of garment companies in the new environment.
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Value chain Management of Ethiopian garment companies
Textile and garment Industry: Textile and garment industry is classified as the industry that
consisting of the companies which manufacture fiber, product of shuttle weaving, knitted weaving,
clothing product and accessories.
Garment companies: Companies that operate in the clothing sector are considered as
garment companies.
Export garment companies: Export garment companies are defined as garment companies
that appear on the list of Exporter,
Value: Value in organization is defined as any activity that increases the market form or
function of the product or service in garment companies.
The value chain: The value chain categorizes the generic value-adding activities of garment
companies. Activities compose of inbound logistics, operations, outbound logistics, marketing and
sales, services, firm infrastructure, human resource management, technology development and
procurement.
Value-chain management: The Value chain management is managing integrated information
about product flow from suppliers to end users to reduce defects and inventories, speed time to market
and improve customer satisfaction.
Inbound Logistics: Inbound logistics includes receiving, storing, inventory control,
transportation scheduling.
Operations: Operations includes machining, packaging, assembly, equipment maintenance,
testing and all other value creating activities that transform the inputs in to the final products.
Outbound Logistics: The activities required to get the finished products to customers:
warehousing, order fulfillment, transportation, distribution management.
Marketing and sales: The activities associated with getting the buyers to purchase product
including channel selection, advertising, promotion, selling, pricing, retail management, etc,.
Service: The activities that maintain and enhance product’s value including customer support,
repair service, installation, training, spare part management, upgrading, etc.
Procurement: Procurement of raw materials, servicing, spare parts, building, machine, etc.
Technology Development: Technology Development includes technology development to
support the value chain activities such as Research and Development, Process automation, design, and
redesign.
Human Resource Management (HRM): The activities associated with recruiting,
development (education), retention and compensation of employees and managers.
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Value chain Management of Ethiopian garment companies
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Value chain Management of Ethiopian garment companies
benefits and conceptual framework. Chapter 2 presents: the theoretical model, overview of garment
industry in Ethiopia, the related literature to understand the value chain of garment companies in
Ethiopia, Chapter 3 presents research methodology with conceptual frame work, sources of data,
sampling, design and measurement of question. Data analysis will be presented in Chapter 4 with
main parts are: response rate, and value chain management analysis, experts’ opinions summary and
secondary data analysis. Chapter 5 covers: conclusions, discussions and recommendations.
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Value chain Management of Ethiopian garment companies
CHAPTER TWO
LITERATURE REVIEW
The purpose of this chapter is to review theories and conditions of garment industry in Ethiopia.
Three following sections will be covered:
Section 1: The theoretical framework
Section 2: Overview of garment industry in Ethiopia
Section 3: Related researches
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Value chain Management of Ethiopian garment companies
The primary activities represent the sequence of bringing materials into the business (inbound
logistics), converting them into final products (operations), shipping out final products (outbound
logistics), marketing them (marketing and sales) and servicing them (service). The support activities:
procurement, technology development, human resource management and firm infrastructure are
handled in certain specialized department but not only there. The firm’s infrastructure covers the costs
of general management, planning, finance, accounting, legal and government affairs that are borne by
all the primary and support activities (E. Porter, 1985). To develop the value chain of garment
companies in Ethiopia, fashion and garment concepts of Gini Stephens Frings (2002) have been used.
The basic model of Porters Value Chain is as follows:
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Value chain Management of Ethiopian garment companies
are needed on the production/assembly line. Goods are moved around the organization (E. Porter,
1985,Alan Rushton, 2000, Lisa Harrington, 1995). Inbound logistics are described as following figure:
Suppliers
Bulk delivery
Transfer
Production
Transfer
Transfer
Ware housing
Finished goods
Operations
Operation is the manufacturing or assembling of goods (Chase, 1998). Operation
management may be defined as the design, operation, and improvement of the production systems
that create the firm’s primary products or services. The head of operation management is the
management of production systems (Hiilier, F.S and Lieberman, 1990, Kogut, 1994). A
production system uses operations resources to transform inputs into some desired output
(Daniels, John D and L.H Radebangh, 1998). An input may be a raw material, a customer or a
finished product from another system. As indicated in the figure 2-3 operation resources consist
of what we term the five P’s of operation management: people, plants, parts, processes, and
planning and control systems (Richard B. Chase, 1998).
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Value chain Management of Ethiopian garment companies
Operations management
Operations management
people
People plant
Plant part
Part process
Process
input
Input output
Output
Planning and
Planning and control
controlsystem
system
Product system
In this study, operation is one of 5 primary activities and under E. Porter’s concepts it
include every value creating activities that transform the inputs in to the outputs. And to avoid
double analyzed, this activity later on will be analyzed as production of a garment.
Outbound Logistics
The goods are now finished, and they need to be sent along the supply chain to
wholesalers, retailers or the final consumer (Chandra, Sameer Kumar, 2000). Outbound logistic is
also considered as physical distribution. Physical distribution is defined as all activities concerned
with the management of the flow of finished goods to consumers (Chandra, 1997). Physical
distribution has been expanded into broader concept of Supply chain management (SCM). It
involves procuring the right inputs (Raw materials, components, and capital equipment),
converting them effectively into finished products and dispatching them to the final destinations
(Poirier, C.C, 1998).
Physical distribution starts at the factory. Managers choose a set of warehouses (stocking
points) and transportation carriers that will deliver the goods to final destinations in the desired
time or at the lowest total cost (Arthur St. Onge, 1997). Physical distribution also includes
transportation, but this time outbound from the plant or storage facility to customers (Alan
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Value chain Management of Ethiopian garment companies
Rushton, 2000). The management of the finished goods inventory is included here, along with the
protective packaging of goods to reduce damage in transit (marketing handles the type of
packaging designed to attract purchasers and sell products), and storage and materials handling
(Carl M. Guelzo, 1986).
In textile and garment sector, the supply chain starts at raw materials to textile plant,
apparel plant and then distributed through distribution centers, retail store to customer (Gini
Stephens Frings, Fashion from concepts to consumers, 2002). Chandra and Sameer Kumar (2000)
also wrote about the textile supply chain in their journal “An application of a system analysis
methodology to manage logistics in a textile supply chain”. Textile supply chain is described as
figure 2-6.
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Value chain Management of Ethiopian garment companies
Marketing mix
The marketing mix is probably the most famous phrase in marketing. The elements are
the marketing 'tactics'. Also known as the 'four Ps', the marketing mix elements are product,
price, place and promotion (Phillip Kotler, 2003).
Marketing – mix
Product
The product is the heart of the marketing mix. If the product fails to meet the end-user or
the consumer’s needs no additional efforts on any of the other ingredients of marketing mix will
improve the product performance in marketplace (Phillip Kotler, 2003). It is important that the
product is changed as necessary to bring it up to date and prevent it from being overtaken by
competitors (Cavusgil, S. Tamer, 1993). In garment industry, the style of product is very
important and it changes very fast. The product not only is required good quality but also
fashionable. “In garment industry one of the most important things is fashion” Designer Karl
Lagerfeld (1996) said “What I like about fashion is change. There’s nothing safe forever in
fashion. Fashion is a train that waits for nobody. Get on it or it’s gone”. And it is true that if
fashion never changes public would not buy garment so often. Here are some examples of product
decisions to be made: Brand name, functionality, styling, quality, packaging, repair and support,
warranty.
Price
Changing the product to reflect the product's life cycle is only part of the essence of a well
balanced marketing mix, and so price enters the second important consideration of the marketing
mix. It is very important that the correct price is charged for a product. If the price is too high
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Value chain Management of Ethiopian garment companies
consumers will avoid the product as they will believe it to be too expensive yet if the product is
priced too low they may believe that there is something wrong with the product for it to be so
cheap. Also if the company charges too low a price, it may not cover its costs (Phillip Kotler,
2003). There are many different pricing strategies that companies can use to decide on a price for
their product including market and psychological pricing methods (Cateora R. Philip, 2002).
MARKETING ANALYSIS
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Value chain Management of Ethiopian garment companies
to gain efficiency by replacing one promotional tool with others. The substitutability and
effectiveness of the promotional tools depends on consumer values and attitudes (Phillip Kotler,
2003, Cavusgil, 1993).
Advertising
Advertising can be used to build up a long term image for a product (Coca-cola ads) or
trigger quick sales. Certain forms of advertising (TV advertising) can require a large budget,
whereas other forms (Web advertising) may not. Just presence of advertising might have effects
on sales: consumers might believe that a heavily advertised brand must offer “good value”.
Sales promotion
Companies use sales-promotion tools to draw a stronger and quicker buyer response. Sales
promotion can be used for short run effects such as to dramatize product offers and boost sagging
sales.
Public relations and publicity
The appeal of public relations and publicity is based on three distinctive qualities: High
credibility (News stories and features are more authentic and credible to readers than ads), ability
to catch buyers off guard (public relations can reach prospects that prefer to avoid salespeople and
advertisements), dramatization (public relations have the potential for dramatizing a company and
a product).
Personal selling
Personal selling is the most effective tool at later stages of buying process, particularly in
building up buyer preference, conviction, and action. Personal selling has three distinctive
qualities: personal confrontation (personal selling involves an immediate and interactive
relationship between two or more persons), cultivation (personal selling permits all kinds of
relationships to spring up ranging from a matter of fast selling relationship to a deep personal
friendship), response: personal selling makes the buyer feel under some obligation for having
listened to the sales talk.
Direct marketing
The many forms of direct marketing: direct mail, telemarketing, internet marketing-share
four distinctive characteristics. Direct marketing is: Nonpublic (the message is normally
addressed to a specific person), customized (the message can be prepared to appeal to the
addressed individual), up-to-date (a message can be prepared very quickly), interactive (the
message can be changed depending on the person’s response) (Phillip Kotler, 2003)
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Value chain Management of Ethiopian garment companies
Service
This includes all areas of service such as installation, after-sales service, complaints handling,
training and so on (E. Porter, 1985, Phillip Kotler, 2002). Each of the categories may be vital to
competitive advantage depending on the industry. In any firm, however, all the categories of
primary activities will be present to some degree and play some role in competitive advantage (E.
Porter, 1985).
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Value chain Management of Ethiopian garment companies
management costs, such as salary compared to the cost of recruiting and training due to turnover.
Human resource management affects competitive advantage in any firm, through its role in
determining the skills and motivation of employees and the cost of hiring and training. In some
industry it holds the key to competitive advantage (E. Porter, 1985).
Technology Development
Technology is an important source of competitive advantage. Companies need to innovate
to reduce costs and to protect and sustain competitive advantage (E. Porter, 1985). Technology
development consists of a range of activities that can be broadly grouped into efforts to improve
the product and the process (Daniels, 1985). Technology development tends to be associated with
the engineering department or the development group (Niebel, B.W, 1993). However, it occurs in
many parts of a firm, although this is not explicitly recognized. Technology development may
support any of the numerous technologies embodied in value activities. This could include
production technology, Internet marketing activities, lean manufacturing, Customer Relationship
Management (CRM), and many other technological developments (E. Porter, 1985; Sayer, A.
1986).
Procurement
Procurement refers to the function of purchasing inputs used in the firm’s value chain.
Purchased inputs include raw materials, supplies, and other consumable items as well as assets
such as machinery, laboratory equipment, office equipment, and buildings (E. Porter, 1985).
Though purchased inputs are commonly associated with primary activities, purchased inputs are
present in every value activities including support activities. Procurement tends to be spread
throughout a firm. Some items such as raw materials are purchased by the traditional purchasing
department; while other items are purchased by plant managers (e.g., machines), office manager
or salespersons. E. Porter, 1985). The cost of procurement activities themselves usually represents
a small if not insignificant portion of total costs, but often has large impact on the firm’s overall
cost and differentiation (Levy, 1993). Improved purchasing practices can strongly affect the cost
and quality of purchased inputs, as well as of other activities associated with receiving and using
the inputs and interacting with suppliers. The aim of procurement is to secure the lowest possible
price for purchases of the highest possible quality. They will be responsible for outsourcing
(components or operations that would normally be done in-house are done by other
organizations), and e-Purchasing (using IT and web-based technologies to achieve procurement
aims).
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Value chain Management of Ethiopian garment companies
2.1.1.3. Margin
The term “Margin” implies that organizations realize a profit margin that depends on their
ability to manage the linkages between all activities in the value chain. In other words, the
organization is able to deliver a product / service for which the customer is willing to pay more
than the sum of the costs of all activities in the value chain.
to link into the cotton value chain which utilize a very small (1-8% depending on source) of
current land available for its production. Most new investors in the market are viewing entry also
as a long term enterprise which means there are longer term benefits foreseeable and in addition
although an accounted for but valuable factors such as the stable politics, cost of living, quality of
life all bring together conditions conducive to investment. However as it will be discussed later
there are many structural and technical issues which are negatively affecting the industry at all
level from the seed quality to the labor skills to the customs and transport procedures.
The apparel value chain if considered from fiber to garment is long and consists of different
stages many of which are interlinked but may also be stand alone independent value chains. The
most important characteristics per stage of the value chains of the garment industries are
discussed.
2.2.2. APPAREL
In Ethiopia, there are currently 48 standalone garment manufacturers. According to ETIDI
(2014), this amount is expected to increase to 81 garment manufacturers in the coming years.
Standalone garment manufacturers are mainly involved in cut make trim (CMT) activities
(ETIDI, 2013). The annual production capacity is found to be 22 million pieces of woven garment
and 57 million pieces manufacturers and their production capacity as indicated by ETIDI (2013).
Most of the apparel manufacturers make use of imported fabrics and produce both knitted and
woven apparel. The standalone garment manufacturers lack access to sufficient fabrics produced
at the local industry. This is due to lack of large standalone quality fabric producers in Ethiopia
(ETIDI, 2013). The majority of the fabrics are produced in the integrated textile firms. These
fabrics are not sold at the local market as the integrated textile firms have the facilities to produce
value added products such as apparel products (ETIDI, 2013). In some cases international buyers
supply the standalone manufacturers with the needed quality fabrics, and accessories such as
trims and buttons (ETIDI, 2013).
The textile industry is not yet producing at the high fashion level according to ETIDI
(2013). The garment manufacturers rather produce basic products such as shirts, sport wears and
uniforms. Even H&M is currently demanding more basic products such as t-shirts (ETIDI, 2013).
Main products produced include t-shirts, polo shirts, lady tops, work wears, uniforms, overalls,
kids wear, under wear, sportswear, bed sheets, bed covers, pillows cases, table dresses, jackets,
skirts, and bags (ETIDI, 2013).
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Value chain Management of Ethiopian garment companies
Main Challenges
Standalone garment manufacturers lack access to sufficient quality fabrics in Ethiopia.
Most of the textile firms are integrated and consume their fabrics to produce finished products
(i.e. bed sheets and covers). In addition, integrated textile firms often directly export their fabric
to international markets rather than supplying local garment manufacturers. The local fabric
production industry lacks the capacity to produce the right variety, quality and quantity of fabrics
to supply standalone garment manufacturers. Because of the limited number of local producers
capable of supplying export-quality fabric most apparel manufacturers order fabric from Asian
suppliers, (ETIDI, 2013). This indicated to take up to 20 to 30 days (World Bank Group, 2011).
As a result, the garment manufacturers are characterized by long order-delivery times.
Other problems indicated include the inability to produce at full capacity due to the lack of
sufficient input materials such as fabric and accessories. There is not a sufficient local production
of accessories in Ethiopia and apparel firms are forced to import them (ETIDI, 2013). In addition,
the garment manufacturers face a lack of credit, low profit margins due their focus on CMT, high
overhead costs and high inland transportation costs (ETIDI, 2013; World Bank Group, 2011).
ETIDI plans to support garment manufacturers to become clustered so that they can share their
resources (ETIDI, 2013). Lastly, there is a lack of spare parts for the machinery used in the
factories. As the result the factories have to wait for spare parts imported from china and Indian,
which can take several weeks. The costs of apparel manufacturing are dominated by the cost of
fabric, which is 71.9 percent of the cost. No information is available on other major costs in
apparel manufacturing (World Bank 2006).
Ethiopia is a net importer in the textile and apparel sector. With net imports valuing 350
USD Million. In 2012 textile and apparel exports valued 70 Million USD Million, whereas textile
and apparel imports value 420 USD Million (Trade map, 2013). The share of textile and apparel
exports in the country’s total exports are 2 percent, while as share of textile and apparel imports
are higher at 3 percent (Trade map, 2013).
Due to a lack of local availability of quality fabrics, standalone garment manufacturers are
forced to import fabric from abroad (ETIDI, 2013). Major suppliers of textile and apparel
products are (1) China (2) India, (3) Ethiopia and (4) Thailand (Trade map, 2013).
Based on information from then ETIDI (2013) Ethiopia mainly exports yarn (21,536 USD
thousands) and garment products (61.485 USD thousands). As can be drawn from table 2.2-1 the
export of finished garments has increased in recent years. A shift has taken place in recent years
18
Value chain Management of Ethiopian garment companies
from mainly exporting yarn to the exporting finished garment pieces. The main markets for
Ethiopia textile and apparel products are (1) Germany, (2) Turkey, (3) China, and (4) Italy
(ETIDI, 2013).
Table 2. 1 export trend
Regional market
The EAC and COMESA countries are minor export markets. Although the values are low,
the products that are exported to the EAC countries include woven apparel, cotton and second
hand clothing. Ethiopia exports mainly knitted apparel to the COMESA countries.
The EAC and COMESA countries are minor suppliers of textile and apparel products.
Ethiopia mainly imports cotton from EAC countries. Considering the COMESA countries
Ethiopia mainly imports woven apparel, knitted apparel and other textile and apparel products
such as tents and camping good sacks and bags for the packing of goods.
International market
The EU is largest market for Ethiopian textiles and apparel. The products exported to the
EU include knitted and woven apparel. A limited amount of knitted and woven apparel is
exported to the US as well. Ethiopia exports a limited amount of cotton and fibers to Asia.
Asia is by far the largest supplier of textile and apparel products. A diverse range of
products is sourced from Asia with the highest values for filaments and knitted and woven
apparel. In addition, the country sources cotton and other textile and apparel products such as
furnishing articles and bed, table and kitchen linens.
19
Value chain Management of Ethiopian garment companies
20
Value chain Management of Ethiopian garment companies
the general public. They use less expensive fabric and may modify the design to sell the style at
lower price.
Peak of popularity
When a fashion is at the height of popularity it may be in such demand that more
manufacturers copy it or produce adaptations of it at many price levels. Volume production
requires mass acceptance.
Decline in popularity
Eventually, so many copies are mass produced that fashion conscious people tire of the
style and begin to look for something new. Consumers still wear garments in the style but they are
no longer willing to buy them at regular prices.
Rejection of a style
In the last phase of the fashion cycle, some consumers have already turned to new looks, thus
beginning a new cycle. The rejection or discarding of a style just because it is out of fashion is
called consumer obsolescence.
Sales
Peak
Rise Decline
21
Value chain Management of Ethiopian garment companies
Costing
Scheduling
Production pattern
Grading
Maker
Cutting
Assembly
Shipping
Figure 2:0:8 Apparel production process
22
Value chain Management of Ethiopian garment companies
measurements for each size. When using fabrics that shrink such as cotton, patterns have to allow
for that shrinkage. At most large manufactures, patterns are made on computer. With computer
aided design (CAD) systems, the pattern maker manipulates small graphic patterns on the
computer screen with a handheld control device.
Spreading and cutting procedures
Using the markers made from graded patterns, fabrics are cut to prepare for garment
assembly. Conventionally, a spreader machine is guided along a table, laying fabric on the cutting
table, the length determined by the marker. The fabric is cut at the, the machine returns to the
other end, and the next layer is laid face up on top of the first, in the same direction. Fabric is
spread on the cutting table with one ply on top of another so that many layers can be cut at the
same time. Then the marker is put on top of the layers of the fabric. A cutter follows the pattern
outlined on the marker, using a straight knife machine with a long and thin blade that vibrates
vertically as it is pushed through many layers of fabric (Gini Stephens Frings, 2002).
Garment assembly
The next step in production is the actual assembly or sewing of quantities of garments. No
two garment companies use all the same methods, but all follow the same basic order. A
supervisor analyses a garment’s construction to determine the best and fastest way to sew the
garment. An operation sheet is drawn up, listing all necessary operations in sequence. Nowadays,
most garment company uses Individual Incentive Systems (piecework) to improve productivity.
Sewing machine operators, finishers and pressers are paid on a piecework rate. That is they are
paid a set amount for each operation that they complete, rather than by the hour. Rates vary with
the difficulty of the operation. Actually, most companies pay a guaranteed wage (minimum
wage), with piecework acting as incentive for operators to work fasters and therefore earn more.
In USA and EU, most factories have installed automated systems for movement of goods and
sewing to speed up production and cut lead time. They also use computer technology in garment
assembly with Computer–aided manufacturing (CAM): applications include computerized cutting
and programmable sewing machine (Gini Stephen Frings, 2002).
Finishing
To ensure a perfect color match between garments to be worn together, manufactures can
dye the finished garments, which are in case made with greige (gray) fabrics. Washing sometime
required by customers.
23
Value chain Management of Ethiopian garment companies
Pressing
Pressing vastly improves the look of a garment. It can hind a multitude of imperfections
such as puckered seams and collars that do not lie flat. Garments are pressed during the course of
construction as well as at completion. Steam irons are used for areas not easily accessible.
Automated pressing is done by computer-controlled pressing equipment (Gini Stephen Frings,
2002).
Quality control
Quality control is the standardization of production sing specifications as guides. The last
garment sewn should be the same as the first garment. To ensure that production has been done
correctly and to prevent returns, both work in progress and finished garments are inspected
totally. Quality controllers not only check for poor sewing, but also spot check measurements
against original specifications. “Nothing to have beautifully designed garment if it is not produced
well” Karl Lagerfeld, 1990s international trendsetting designer, said. Besides construction
mistakes, reasons for return include poor fabric, fabric shading and broken needle still remain in
the garment.
24
Value chain Management of Ethiopian garment companies
CHAPTER 3
RESEARCH METHODOLOGY
The purpose of this chapter is to present the methodology of collecting and interpreting data. This
chapter is divided into 2 sections:
Section 1: Conceptual framework
Section 2: Methodology
3.1. Conceptual Framework
Based on the value chain model of Micheal E. Porter and garment concepts of Gini
Stephens Frings, the researcher have developed a conceptual model for garment companies in
Ethiopia as seen in Figure 3.1.
Source: Adopted from the value chain model of E. Porter (1985) and garment concepts of Gini
Stephens (2002) by researcher
25
Value chain Management of Ethiopian garment companies
26
Value chain Management of Ethiopian garment companies
With N = 42, e = 5% (95 percent confidence). Hence the sample size for conducting questionnaire
should be 38 companies.
Questionnaire design
Questionnaire was designed to match with the objectives of the study and conceptual
framework. A short questionnaire with conceptually clear and concise statements is judged to be
desirable for both the respondents and the researcher. The questionnaire consists of a series of
questions that shown in Appendix 4. To ensure the accuracy, the questionnaire was developing
through the process as following.
1. Specify information will be sought base on the objectives of the study, the value chain model
mentioned in chapter 2.
2. Determine type of questionnaire
3. Determine content of individual questions
4. Determine wording of each question
5. Determine sequence of questionnaire
6. Draft questionnaires based above factors
7. Submit the draft questionnaires to the advisor
8. Advisor check, correct and approves the questionnaires
Measurement of conducting questionnaire
The main type of questionnaire is questionnaire with 5 point rating scale. The
questionnaires with 5 point rating scale were used to measure respondents’ evaluation by asking
them the degree of performance with statements in the questionnaire that ranked from (1) not
effective at all (or not important at all) to (5) very effective (or very important). Each question
consisted of many activities that mentioned above based on literature review, especially the value
chain model to capture the construct of interest. The higher the score the better the activities are
done. 5 point scales will be used to measure activities in a way such that mean scores could be
calculated to show how the garment companies in Ethiopia manage activities in their value chain.
The researcher defines the criteria to measure level of variable according to the separate of five
levels following.
27
Value chain Management of Ethiopian garment companies
28
Value chain Management of Ethiopian garment companies
Science and Technology University (AASTU). The time for conducting questionnaires was from
20th may, 2005 to 25th June, 2016.
The secondary sources of data that the researcher used are different relevant books,
Journals, Articles, senior thesis work, manuals, available documents, Ethiopian textile Industry
Development Institute, Ethiopian Textile and Garment Association and electronic retrievals.
3.5. Research Analysis, Statistics and Interpretation of Questionnaire
With 5 point scales, the interval for breaking the range in measuring each variable is calculated
by: 5–1
------------- = 0.8
5
It means items with scores fall between the ranges of:
1.00 – 1.80: Not at all effective (or not at all important) level
1.81 – 2.60: Slightly ineffective (or slightly unimportant) level
2.61 – 3.40: Moderately effective (or moderately important) level
3.41 – 4.20: Effective (or important) level
4.21 – 5.00: Very effective (or very important) level.
Data from questionnaires were processed by SPSS program, Excel work Sheet in term of
frequency, mean, standard deviation (descriptive statistic) and t-test. The presentation of result
and data analysis is fully discussed in next chapter.
29
Value chain Management of Ethiopian garment companies
Chapter 4
RESULTS OF ANALYSIS
In this chapter, results of the data analyses are presented in 4 sections:
Section 1: Summarize the response rate and describe the demographic data of garment companies
in Ethiopia by using descriptive statistic (frequency, percentage, mean).
Section 2: Analyze the value chain management of garment companies in Ethiopia by using
descriptive statistic (mean, Standard Deviation).
Section 3: Compare means between data variables at significant level 0.05 by using t-test and
weighted average of two groups: respondents and experts.
Section 4: Summarizes the opinions of senior experts
Section 5: Analyze the secondary data.
30
Value chain Management of Ethiopian garment companies
Frequency Percent
Director 11 23
Vice Director 6 12
Import-Export Manager 9 18
Marketing Manager 7 14
Production Manager 16 33
Total 49 100
postion of respondents
productio
n mgr
33%
director
23%
vice
director
12%
marketing import
mgr export
14% mgr
18%
Table 4.1.1 shows the position of the respondents. Of the 49 qualified responses, the
majority of the respondent is the top management positions: production managers cover 33
percent with 16respondents and follow by director 23 percent and import export managers 18
percent respectively. Marketing managers occupy 16%, and vice director occupy only 12%.
Marketing manager and Vice director occupy the smallest percent of total respondents because
there are not many companies that have marketing Departments in their organizational chart.
31
Value chain Management of Ethiopian garment companies
5-10 years 8 33
total 24 100
No of operating years
< 5 years 5-10 years >10 years
25%
42%
33%
Table 4.1.2 shows numbers of years that the companies operate in garment trade field.
Most of respondents have experience more than 5years (42 percent) follow by 5-10 years
experience (33 percent) and less than 10 years (25 percent). This indicates that the country is the
late comers for the garment industry.
Table 4.1. 3 Type of respondents’ companies
State owned 0 0
Private limited 18 75
FDI 6 25
total 49 100
32
Value chain Management of Ethiopian garment companies
Type of respondent
companies
FDI
25%
private
limitted
company
75%
Table 4.1.3 shows type of 24 respondents’ garment companies. There are 18 respondents
from private limited companies (occupy 75%), and 6 respondents from FDI garment companies
with percent = 25%.
Table 4.1. 4 Type of order
FOB: 0-25% 10 42
FOB: 25-50% 8 33
FOB: 50-75% 4 17
FOB: 75-100% 2 8
FOB:75-
100%(CMT types of orders
:0-25%)
8%
FOB:50-
75%(CMT:
25-50%) FOB:0-
17% 25%(CMT:
75-100)
42%
FOB:25-
50%(CMT:
50-75%)
33%
33
Value chain Management of Ethiopian garment companies
Table 4.1.4 shows the types of orders. Of 24 qualify response, 10 companies has 0-25% of
their order is FOB (42%), mean that in those companies CMT order is 75- 100%. Follow by that
is the percent of FOB from 25 to 50 percent with 8 responses (17%), 4 response have FOB 50-
75% (17%), 2 responses have FOB 75-100% (8%).
Table 4.1. 5 the major market
Oversea
market
79%
Table 4.1.5 shows the major market of respondents’ companies. There are 19 companies
have the major markets are oversea markets (79%), while only 5 companies concentrate on the
local market with 21% of 24 qualify respondents.
4.2. Analysis of Value Chain Management of Garment Companies in
Ethiopia
The perceived effectiveness of activities on the value chain management are measured on a five-
point Likert type scale (1 = Not effective at all; 5 = Very effective).
Very effective = (5)
Effective = (4)
Moderately effective = (3)
Slightly ineffective = (2)
Not effective at all = (1)
34
Value chain Management of Ethiopian garment companies
Moderately
Not effective at all Slightly ineffective Effective Very effective
effective
Moderately
Receiving fabric 9 20 20 3.22449 0.743452
effective
Moderately
Handling system 3 28 18 3.306122 0.584668
effective
Moderately
Inventory control 12 28 9 2.938776 0.658539
effective
Transportation Moderately
10 36 3 2.857143 0.5
scheduling effective
Inbound logistics Moderately
0 38 130 77 0 3.159184 0.667734
management effective
Table 4.2.2 shows respondents’ opinions on the inbound logistics management in the
value chain of garment companies. In this case, the respondents were asked to rate their inbound
logistics management from 1 (least effective level) to 5 (most effective level). The mean of the
opinions score for each variable indicates the effective level of inbound logistics management,
which the S.D indicates the deviation from the central value (mean score). Storing activity in
Garment Company is considered to be done efficiently with mean is 3.46 and S.D is 0.65. Others
are moderately efficient. They are receiving (mean = 3.22, S.D = 0.74), handling (mean = 3.30,
S.D = 0.58), inventory control (mean = 2.94, S.D = 0.66), transportation scheduling (mean = 2.85,
S.D = 0.5). In conclusion, inbound logistics is managed moderately efficient with mean = 3.15,
S.D = 0.66.
35
Value chain Management of Ethiopian garment companies
40
35
Reciving fabric and
30 accessory
storing
25
20 Handling System
15
Inventory control
10
Transportation scheduling
5
0
1 2 3 4 5
4.2.1.1.Operation management
Table 4.2. 3 production management of garment companies
Production Moderately
3.408163 0.70469
6 17 26
scheduling effective
Moderately
Pattern making 6 20 23 3.346939 0.69375
effective
Spreading and
1 18 30 3.591837 0.53690 Effective
cutting
Table 4.2.3 shows respondents’ opinions on the production management in the value chain
of garment companies. In this case, the respondents were asked to rate their production
management from 1 (not effective at all) to 5 (very effective level).
36
Value chain Management of Ethiopian garment companies
The mean of the opinions score for each variable indicates the effective level of production
management, which the S.D indicates the deviation from the central value (mean score). In the
table 4-8 spreading and cutting (mean = 3.59, S.D = 0.54), garment assembling (mean = 3.61, S.D
= 0.57) and machine maintenance (mean = 3.428571, S.D = 0.76) are managed effectively
however their means only a little above the moderately effective level. While others are managed
moderately effective, they are Production scheduling (mean = 3.41, S.D = 0.70), pattern making
(mean = 3.34, S.D = 0.69), finishing and packaging (mean = 3.18, S.D = 0.75). In general,
production is managed effective (mean = 3.428, S.D = 0.685).
35
30
25
20
1
15
10 2
5 3
0 4
5
37
Value chain Management of Ethiopian garment companies
Table 4.2.4 shows respondents’ opinions on the outbound logistics in the value chain of
garment companies. In this case, the respondents were asked to rate their outbound logistics
management from 1 (not effective at all) to 5 (very effective level).
The mean of the opinions score for each variable indicates the effective level of production
management, which the S.D indicates the deviation from the central value (mean score). The table
4-9 shows that warehousing (mean = 3.28, S.D = 0.61), order fulfillment (mean = 2.73, S.D =
0.60) and transportation (mean = 2.83, S.D = 0.65) are all managed moderately effective. In
general, outbound logistics is managed moderately effective (mean = 2.95, S.D = 0.66).
35
30
25
Product management
20
Price management
15 Place manegement
10 promotion management
0
1 2 3 4 5
38
Value chain Management of Ethiopian garment companies
Table 4.2.5 shows respondents’ opinions on the marketing mix in the value chain of
garment companies. In this case, the respondents were asked to rate their marketing mix
management from 1 (not effective at all) to 5 (very effective level) as following range. The mean
of the opinions score for each variable indicates the effective level of variables of marketing mix,
which the S.D indicates the deviation from the central value (mean score). The table shows that
three elements of marketing mix are managed slightly ineffective. They are product (mean = 2.48,
S.D = 0.84), place (mean = 2.53, S.D = 0.98) and promotion (mean = 2.55, S.D = 0.84). Only
price is managed moderately effective with mean = 2.75, S.D = 0.77. In general, marketing is
managed slightly ineffective with mean = 2.55.
35
30
25
Product management
20
Price management
15 Place manegement
10 promotion management
0
1 2 3 4 5
39
Value chain Management of Ethiopian garment companies
each variable indicates the effective level of sales management, which the S.D indicates the
deviation from the central value (mean score).
The table shows that from 4 companies only 16 respondents have retail activity and the other 20
companies have wholesale activity. Retail management in these 4 companies is managed
moderately with mean is 2.94, S.D is 1.12 and wholesale management in 20 companies is
managed moderately (mean = 3.17, S.D = 0.84). In general, sale management of those companies
is managed moderately.
18
16
14
12
10
Retail management
8
Whole sales menagement
6
0
1 2 3 4 5
Table 4.2.7 shows respondents’ opinions on the services in the value chain of garment
companies. In this case, the respondents were asked to rate their services management from 1 (not
at all effective level) to 5 (very effective level) on two variables: customer support and complain
handling. The mean of the opinions score for each variable indicates level of services
management, which the S.D indicates the deviation from the central value (mean score). The table
40
Value chain Management of Ethiopian garment companies
shows that services are managed moderately efficient (mean = 3.27, S.D = 0.65). Customer
support variable is managed moderately with mean = 3.28, S.D = 0.61 and complain handling
variable is managed moderately efficient with mean = 3.26, S.D = 0.70.
30
25
20
15 customer supports
complain handling
10
0
1 2 3 4 5
General
1 25 23 3.44898 0.542418 Effective
management
Planning
16 27 6 2.795918 0.644838 Moderately effective
management
Finance
11 26 12 3.020408 0.691911 Moderately effective
management
Quality
21 17 11 2.795918 0.790031 Moderately effective
management
Table 4.2.8 shows respondents’ opinions on the infrastructure in the value chain of
garment companies. In this case, the respondents were asked to rate their infrastructure
41
Value chain Management of Ethiopian garment companies
management from 1 (not at all effective level) to 5 (very effective level). The mean of the
opinions score for each variable indicates effective level of that variable, which the S.D indicates
the deviation from the central value (mean score). In the table, all of four infrastructures are
managed moderately effective. They are general management (mean = 3.45, S.D = 0.54),
planning management (mean = 2.79, S.D = 0.64), finance management (mean = 3.02, S.D =
0.69), quality management (mean = 2.79, S.D = 0.79). In conclusion, the infrastructure is manage
moderately effective with mean is 3.01, S.D. =0.72
30
25
20
General management
15 Planning management
Finanace menegement
10 quality management
0
1 2 3 4 5
Figure4:0:12 Infrastructure management of garment companies in Ethiopia
Salary and
28 21 3.428571 0.5 Effective
compensation
42
Value chain Management of Ethiopian garment companies
Table 4.2.9 shows respondents’ opinions on the human resource management in the value
chain of garment companies. In this case, the respondents were asked to rate their human resource
management from 1 (not at all effective) to 5 (very effective).
The mean of the opinions score for each variable indicates level of human resource management,
which the S.D indicates the deviation from the central value (mean score). In the table, salary and
compensation is managed effectively with mean = 3.42, S.D = 0.5. Recruiting (mean = 3.04, S.D
= 0.70) Staff training moderately effective and worker training (mean = 2.77, S.D = 0.71) are
moderately effective. In general, human resource management is at somewhat effective level with
mean = 3.01.
30
25
20
Recruiting
15 worker training
staff training
10 Salary and compensation
0
1 2 3 4 5
43
Value chain Management of Ethiopian garment companies
Table 4.2.10 shows respondents’ opinions on the technology development in the value
chain of garment companies. In this case, the respondents were asked to rate their technology
development from 1 (not at all effective level) to 5 (very effective level).
The mean of the opinions score for each variable indicates level of technology development,
which the S.D indicates the deviation from the central value (mean score).
The table shows that design and redesign is slightly ineffective with mean = 2.57, S.D = 0.67.
Sewing machine (mean = 2.87, S.D = 0.72, Cutting machine (mean = 2.77, S.D = 0.79) and iron
system (mean = 2.81, S.D = 0.78) are somewhat good but support equipment is not good with
mean = 2.59, S.D = 0.67. In conclusion technology development is somewhat effective in garment
companies with mean = 2.73, S.D = 0.74.
30
25
20
1
15
2
10 3
4
5
0
Design and Sewing Cutting Pressing and Others
redesgin System System ironing support
Development managemnt system equipiment
4.2.2.4.Procurement Management
Table 4.2. 11 procurement of garment companies
44
Value chain Management of Ethiopian garment companies
Table 4.2.11 shows respondents’ opinions on the procurement management in the value
chain of garment companies. In this case, the respondents were asked to rate their procurement
management from 1 (not at all effective level) to 5 (very effective level).
The mean of the opinions score for each variable indicates effective level of that variable, which
the S.D indicates the deviation from the central value (mean score). In the table, procurement of
stationary is managed effectively (mean = 3.61, S.D = 0.99). Others are managed moderately
effective. They are Procurement of materials (mean = 2.63, S.D = 0.83) procurement of machine
(mean = 3.18, S.D = 1.25), and procurement of services (mean = 3.16, S.D = 0.74). In conclusion,
procurement with mean = 3.03 is manage somewhat effectively.
30
25
procrument of fabric and
20 accessory
procrument of servicing
15
procrument of machines
10
procrument of stationary
5
0
1 2 3 4 5
45
Value chain Management of Ethiopian garment companies
1.00 – 1.80 1.81 – 2.60 2.61 – 3.40 3.41 – 4.20 4.21 – 5.00
46
Value chain Management of Ethiopian garment companies
Importance Level
The table 4.3.2 shows that Sig (2-tailed) is 0.779, which is more than 0.05. It would be
concluded that there is not a statistically significant difference in the mean inbound logistics
scores for respondents from garment companies (X = 4.12, SD= 0.80) and garment experts (X =
3.85; SD = 0.69) (Table 4.3.4). The mean difference is 0.28 (table 4.3.2) It can be seen that both
respondents and experts considered inbound logistics playing an important role in the value chain
of garment companies. However, this variance is rated a little bit more important for respondents
than experts.
4.3.1.2. Operations
Table 4.3. 5 Operations
Importance Level
Most
Respondents Frequency 0 4 45 4.918367 0.276642
important
The table 4.3.2 shows that Sig (2-tailed) is 0.085, which is more than 0.05. It would be
concluded that there is not a statistically significant difference in the mean operation scores for
respondents from garment companies (X = 4.92, SD= 0.27) and experts (X =4.14; SD = 0.69)
(table 4.3.5), the mean difference is 0.775. Table 4.3.2: shows that, operation is rated as very
important in the value chain of garment companies for both respondents and experts. However,
operation is evaluated more important for respondents from garment companies than experts.
47
Value chain Management of Ethiopian garment companies
Importance Level
Group
1 2 3 4 5 Mean S.D Indicator
4.204082
Respondents Frequency 1 7 22 19 0.763206 Important
As Sig in Levene’s Test for Equality of Variances is 0.849 (table 4.3.2), which is more
than 0.05, it would be expected to use result in first line of the table.
The table 4.3.2 shows that Sig (2-tailed) is 0.707, which is more than 0.05. It would be concluded
that there is not a statistically insignificant difference in the mean outbound logistics scores for
respondents from garment companies (X = 4.20, SD= 0.76) and garment experts (X = 3.85; SD =
0.69) (table 4.3.6). The mean difference is 0.347 (table 4.3.2) It can be seen that both respondents
and experts considered outbound logistics playing an important role in the value chain of garment
companies in Ethiopia. However, this variance is rated a little bit more important for respondents
than experts.
4.3.1.4. MARKETING AND SALES
Table 4.3. 7 marketing and sales
Importance Level
4.6875 Most
Respondents Frequency 3 9 37 0.58913
important
Most
Experts Frequency 1 6 4.857143 0.37796
important
The table 4.3.2 shows that Sig (2-tailed) is 0.229, which is more than 0.05. It would be
concluded that there is not a statistically significant difference in the mean of marketing and sales
scores for respondents from garment companies (X = 4.68, SD= 0.58) and experts (X =4.85; SD =
0.37) (table 4.3.7), the mean difference is -0.1696 (table 4.3.2)
48
Value chain Management of Ethiopian garment companies
Table 4.3.7 shows that, marketing and sales are rated as most important activity in the
value chain of garment companies in Ethiopia for both respondents and experts. However,
marketing is evaluated more important for experts than respondents from companies.
4.3.1.5. Services
Table 4.3. 8 services
Importance Level
Group 1 2 3 4 5 Mean S.D Indicator
3.387755 Moderately
Respondents Frequency 5 22 20 2 0.730762
Important
The table 4.3.2 shows that Sig (2-tailed) is 0.000, which is less than 0.05. It would be
concluded that there is a statistically significant difference in the mean operation scores for
respondents from garment companies (X = 3.38, SD= 0.73) and experts (X = 4.28; SD = 0.48)
(table 4.3.8), the mean difference is -0.794. Table 4.3.2 shows that, respondents rated service as
moderately important activity in the value chain of garment companies in Ethiopia but experts
rated it as an important activity.
49
Value chain Management of Ethiopian garment companies
Human
Technology
Infrastructure Resource Procurement
Development
Management
N 49 49 49 49
4.367347 3.857143
Mean 3.938776 4.2040482
Respondents
S.D 0.528121 0.719032 0.691911 0.57735
N 7 7 7 7
4.3.2.1. Infrastructure
Table 4.3. 11 infrastructure
Importance Level
3.938776
Respondents Frequency 14 24 11 0.719032 Important
The table 4.3.9 shows that Sig (2-tailed) is 0.680, which is more than 0.05. It would be
concluded that there is not a statistically significant difference in the mean infrastructure scores
for respondents from garment companies (X = 3.93, SD= 0.71) and garment experts (X = 3.86; SD
= 0.69). The mean difference is 0.0816 (table 4.3.9) It can be seen that both respondents and
experts considered infrastructure playing an important role in the value chain of garment
companies in Ethiopia. However, this variance is rated a little bit more important for respondents
than experts.
4.3.2.2. Human Resource Management
Table 4.3. 12 human resource management
Importance Level
Group 1 2 3 4 5 Mean S.D Indicator
4.020408
Respondents Frequency 11 26 12 0.691911 Important
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Value chain Management of Ethiopian garment companies
The table 4.3.9 shows that Sig (2-tailed) is 0.033, which is less than 0.05. It would be
concluded that there is a statistically significant difference in the mean HRM scores for
respondents from garment companies (X = 4.02, SD= 0.69) and garment experts (X = 4.57; SD =
0.53). The mean difference is 0.3673 (table 4.3.9) It can be seen that respondents considered HRM
playing an important role in the value chain of garment companies in Ethiopia but experts
considered HRM is one of the most important activities in the value chain management of
garment companies in Ethiopia.
4.3.2.3. Technology Development
Table 4.3. 13 technology development
Importance Level
4.367347
Respondents Frequency 30 19 0.528121 Most important
The table 4.3.9 shows that Sig (2-tailed) is 0.767, which is more than 0.05. It would be
concluded that there is not a statistically significant difference in the mean technology
development scores for respondents from garment companies (X = 4.36, SD= 0.53) and garment
experts (X = 4.71; SD = 0.48). The mean difference is 0.347(table 4.3.9) It can be seen that both
respondents and experts considered Technology Development playing one of the most important
role in the value chain of garment companies in Ethiopia. However, this variance is rated a little
bit more important for experts than respondents.
4.3.2.4. Procurement
Table 4.3. 14 procurement
Importance Level
3.857143
Respondents Frequency 12 32 5 0.57735 Important
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Value chain Management of Ethiopian garment companies
The table 4.3.9 shows that Sig (2-tailed) is 0.041, which is less than 0.05. It would be
concluded that there is a statistically significant difference in the mean infrastructure scores for
respondents from garment companies (X = 3.85, SD= 0.57) and garment experts (X = 4.14; SD =
0.69). The mean difference is 0.2857 (table 4.3.9) It can be seen that both respondents and experts
considered procurement playing an important role in the value chain of garment companies in
Ethiopia. However, this variance is rated much more important for experts than respondents.
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Value chain Management of Ethiopian garment companies
5. The average logistic prices are fairly high compared to other producing nations. As a comparison: a
20ft container in Bangladesh would cost an average of 1800 USD which is 800 USD less than in
Ethiopia.
6. Merchandising as a functional activity is largely missing in Ethiopia, although most garment
companies are beginning to realize the importance of merchandising as a nodal and important
function. Most companies have little or no experience in sourcing fabrics, trims or
accessories, sampling, price quotation.
7. With regard to Marketing, only some companies are consciously marketing its products, but
even here, the larger focus of marketing seems to be the domestic, and not the export market.
Only a small percentage of apparel companies participate regularly in international Trade
Fairs (about 3 per year) in Hong Kong, Taiwan, Singapore, Germany, USA, and Thailand.
Trade mark of Ethiopian garment companies are not yet well known in the world.
8. Most of the raw materials (fabrics and trimmings) are imported, mostly from countries such
as Indonesia, Malaysia, Japan, UK, Korea, Taiwan, China, and Hong Kong. Only a limited
quantity and type (such as cotton) of fabrics are sourced from within Ethiopia.
9. Low level of compliance and bad housekeeping in Ethiopian factories. Since domestic sales
are not bound to any legislation or environmental or chemical compliance those sales are fare
easier than exports. Easy to realize and easy to grow the domestic business since low level of
workmanship is required and the size of the market grows.
10. Low level of IT use or Cad/ Cam. Due to “infant” stage of the industry the products designed
and sold are of very low standards. Assembly is possible for simple products like T shirts
and companies do not make use of IT nor Cad/ Cam design aid to extend the product mix.
Most products in Ethiopian domestic market are of low assembly standards and not suited for
exports.
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Value chain Management of Ethiopian garment companies
2. Globalization brings to Ethiopia many new opportunities, including textile and garment. Textile
and garment companies in Ethiopia will have chance to expand their markets in COMMESA, US,
EBA and other markets.
3. Domestic market with a population of above 95 million persons and increasing GDP per capita
will be enough big and profitable market to serve.
4. Big interest of buyers like: Primark, Tesco, PVH group (Tommy Hilfiger and Calvin Klein), H&M
amongst others.
5. Government commitment to support the sector and to improve key Sector policies and regulations,
infrastructure projects in order to facilitate the textile- and apparel industry.
Main policies and regulations
- 100% Duty free importation of machineries, equipment,
- Duty free importation of spare part of 15% of capital goods for the first 5 years of operation.
- It is possible to hire international expatriates free from income tax as far as they stay for no more than
two years.
- Reconciliation of VAT for materials purchased locally during the project period is possible if declared in
6 months’ time.
- On site (factory) customs inspection/clearance of imported raw materials and exportable products.
- State owned logistics enterprises (Ethiopian Shipping Line, Ethiopian Airline, Dry Port Services and
Maritime) provide their services at breakeven price.
- Those who are engaged in export business they will be entitled for fast custom service (low risk level).
- Capacity building through MOI- Ministry of Industry, TIDI and consulting service
6. Regarding research and education, there are 34 public and 4 private universities in Ethiopia and
among them Bahir Dar University which has an enormous technology division and a complete set
up with textile machinery and Adama Science & Technology University. Further education of the
sector is provided by Ethiopian Institute of Textile and Fashion Technology.
7. The MOI, Ministry of Industry is charged with the development of the textile- and apparel
industry. For both domestic producers as for foreign investors this Ministry is the main actor to
deploy the governmental strategy of this key priority industry. Together with other institutes like
ETGAMA and TIDI the policy as described above is implemented, corrected and expanded.
Challenges
1. Efficiency factories in garment assembly cost argument: Efficiency is a slow as 40-45% in
production both in textile/ garment assembly units. This is mainly due to bad processes and
lack of education. The given SCM per minute would be on paper as competitive as
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Value chain Management of Ethiopian garment companies
Bangladesh making Ethiopia just as compatible for 0,04 cents up to 0,05 cents a minute in
practice however the real number mounts up to 0,09 cents -0,10 . This is very uncompetitive
number once put in place to Cambodia- Ethiopia and Bangladesh.Workmanship is mediocre.
It is not easy for foreign Turkish investors to strive for improvement of efficiency since also
the backward and forward process in the industry can take as much as 3 months.
2. Cycle times and delivery: Cycle times with imports needed from abroad can be extended up to
150 days. Where companies make use of local Ethiopian cotton this can be reduced to 100 days on
average. The Ethiopian cotton can cover for 40% of the total need which leaves 60% of the need
unattended which inclines cotton has to be imported from either Turkey or India. Chinese fabrics are
generally heavily overpaid which makes the end product uncompetitive. Bureaucracy and lack of
foreign currency limit export growth considerably and make a future anticipation difficult. The cycle
time of production runs in that sense is 45 -60 days longer than in countries that offer comparable
products.
3. Power cuts, low penetration of telecom networks and use, low density and speed of internet
and the habit of Ethiopians to arrange things by phone rather than by email. Digital processing
in business will take another 3-5 years at least.
4. Strong competitiveness from China, India, Bangladesh, Srilanka, Ethiopia and Indonesia.
5. Low production of local cotton. Ethiopia cultivated cotton on 75,000ha of land in 2010/2011. It
planned to cultivate 265,000 ha by the end of 2014/2015.
6. Local production of cotton in 2010 was 2,500 ton which was equal to the demand of textile factories
and even had a surplus. The year after the production surged to 79,500 ton while the demand stood at
39,000 ton. Matching supply and demand has been a grant challenge for the industry up till date.
7. Average productivity capacity usage of the textile factories was 40% in 2010 with an aim to rise to
90% in 2015. The average capacity utilization of garment factories however stands at 54%.
4.4.3. The Policies that Ethiopian Government Should Implement to Help Garment
Companies in Ethiopia Improving Their Value Chain Management
Some of experts said that Ethiopia should pay much more attention to improving
management skills in product development, upgrading production and distribution channel,
training adequate human resources to carry out product design and development process, and, not
least important, expanding to highly-demanded domestic market.
Relating to development of upstream industries through actively investing in those, many scholars
keep their skeptical views on this strategy due to likely decline in the demand for domestic
textiles if import duties are reduced in 2006. By that time, the upstream industry may face with
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Value chain Management of Ethiopian garment companies
difficulties. If the country insists on developing upstream industry, it should limit to areas leading
to enhancing quality and customer confidence. However, enhancing competitiveness of upstream
industry through selective investment is not enough for increasing the content ratio. Opportunity
for and facilitators of production linkage should also be established and enhanced. The issue of
what are the roles of the government in the development process of this industry is also debated.
Interviewees thought that the government and ETIDI should play as the facilitators for the
development of the industry though provision of information, development of physical
infrastructure, and institutional support. The role of ETIDI should be realigned to become an
agency providing services such as training, designing, testing and research to the enterprises.
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Value chain Management of Ethiopian garment companies
CHAPTER FIVE
CONCLUSIONS, DISCUSSIONS AND RECOMMENDATIONS
This chapter includes three sections.
Section 1: The results and conclusions of the study.
Section 2: Discussions
Section 3: Recommendations
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Value chain Management of Ethiopian garment companies
mean=4.92, S.D = 0.27 while experts considered operation have an important role in the value
chain of garment companies with mean 4.14 and S.D 0.69. The mean difference is 0.77.
Outbound logistics is considered as an important activity in the value chain by respondents (mean
= 4.20, S.D=0.76) and experts (mean=3.85, S.D=0.69), the mean difference is 0.35. Both
respondents and experts thought that marketing and sales playing very important role in the value
chain of garment companies with mean = 4.82 and 4.85 respectively. There is a significant
difference between rate score of respondents and experts about importance of service in the value
chain. Respondents considered service as a moderately important activities (mean = 3.49,
S.D=0.804) in the value chain of garment companies but experts thought that it is a very
important activity (mean = 4.29, S.D = 0.48). With support activities, both respondents and
experts considered technology development playing a very important role in the value chain of
garment companies in Ethiopia. Mean score of respondents is 4.36 and mean score of experts is
4.71. Infrastructure is considered as an important activity in the value chain of garment companies
by both respondents (mean=3.94, S.D=0.72) and experts (mean=3.86, S.D =0.69).
There is a significant difference in mean score of HRM between respondents and experts.
Respondents considered HRM is an important activity with mean=4.02, S.D = 0.69 while experts
considered HRM is a very important activity with mean=4.57, S.D = 0.53 in the value chain of
garment companies, the mean difference is 0.367. Even both respondents and experts considered
procurement playing an important role in the value chain of garment companies but there is a
significant difference between the mean score of respondents (mean = 3.85, S.D =0.57) and
experts (mean = 4.14, S.D=0.69), the mean difference is 0.285. Another purpose of the study is to
recommend the appropriate policy to improve the value chain of garment companies. In order to
improve the value chain management of garment companies in Ethiopia, recommendations are
needed for both government’s side and firms’ side. That one will be delivered in next part of this
chapter.
5.2. Discussions
This study found many interesting finding about the value chain management of garment
companies in Ethiopia. This investigation was conducted by questionnaire and interview. The
strength of this study can be considered not only primary but also secondary data. In this part the
results and findings from the study are discussed as following
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Value chain Management of Ethiopian garment companies
5.2.2. Operations
A production system uses operations resources to transform input into some desired output
(Daniels, John D and L.H Redebangh, 1998). Operation management may be defined as the
design, operation and improvement of the production systems that create the firm’s primary
products or services. So operation is considered managing effectively when it has a good design
and operated at high productivity and save of inputs. Table 4.3.5 shows that, operation is
evaluated more important for respondents from garment companies than experts (mean of
respondents is X = 4.92, SD= 0.27 and mean of experts is X =4.14; SD = 0.69). There is a fact that
fashion now a day’s changing very fast; the delivery time is one of the most important factors to
get the order. Respondent from garment companies with doing CMT orders, still focus on
production, while garment expert more focus on marketing of view. On the other hand, the
finding in questionnaires shows that operation activities are manage somewhat between
moderately efficient and efficient with mean = 4.14 (table 4.2.4) by rating efficient level of
spreading and cutting and garment assembling, while production scheduling, pattern making
finishing and packaging and machine maintenance are moderately efficient. So it needs some
manages to be improved. Productivity in garment companies in Ethiopia is not high due to some
reason such as: slow material flow. In marketing point of view, if HRM and technology of
garment companies in Ethiopia is improved, the operation management of garment companies in
Ethiopia will be more effective.
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Value chain Management of Ethiopian garment companies
5.2.5. Services
Table 4.3.8 shows that, respondents rated service as moderately important activity (X =
3.49, SD= 0.804) but experts rated it as an important activity (X = 4.28; SD = 0.488) (table 4.3.8),
the mean difference is 0.79. There are facts that garment companies in Ethiopia of doing CMT
order still focus on production. Even they start to consider marketing as an important function but
they still are weak at communication with buyer. When buyers come to their factories they still
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Value chain Management of Ethiopian garment companies
don’t know how to make them feel good, and offer buyer efficient services (Till Freyer, 2004). In
their value chain this activities is managed moderately effective with mean = 3.27, in details
customer support and complain handling is managed moderately effective. This finding shows
that garment companies not yet have a clear business view in the new conditions. They may think
that services are not very important with manufacturers like them and garment products are
something that no needs to have service after sales. They may not see the fact that support
customer service can make their companies are different compare with their competitors.
This issue was discussed with experts and they suggest that the garment companies in
Ethiopia, especially state own and non state own enterprises should consider this activity is more
important and need to be improved because “nowadays, the customers will walked in to your
factory only they have good image about your service, both before and after sales”.
5.2.6. Infrastructure
Both respondents and experts considered infrastructure playing an important role in the
value chain of garment companies in Ethiopia (mean of respondents is X = 3.94, SD= 0.719 and
mean of garment experts is X = 3.86; SD = 0.69). However, this variance is rated a little bit more
important for respondents than experts. The mean difference is 0.082 (table 4.2.9). By rating the
effective level of general management, planning management, finance management, quality
management, all of these activities are somewhat effective. In conclusion, infrastructure is
managed somewhat effective with mean = 3.01. This activity needs some more efforts to be
improved because nowadays, the top management of garment companies is still weak and trapped
in a bulk and ineffective administration system (Duc Vuong, 2001).
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Value chain Management of Ethiopian garment companies
in Ethiopia are not trained well before working. Moreover, most of garment companies in
Ethiopia pay workers by pieces not by working hours, but there is a waste of time in material
flows so productivity in garment companies in Ethiopia is still low.
5.2.9. Procurement
It can be seen that both respondents and experts considered procurement playing an
important role in the value chain of garment companies in Ethiopia. However, this variance is
rated much more important for experts than respondents (mean of respondent is X = 3.85, SD=
0.57 and mean of garment experts is X = 4.14; SD = 0.69). The mean difference is 0.02 (table
4.2.7) Procurement is built up by many activities. By rating the effective level of those activities,
procurement of materials, machine, and services are managed moderately effective. Procurement
of stationary is considered efficient with mean = 3.61 (table 4.2.12). In conclusion, procurement is
managed moderately effective in garment companies in Ethiopia. In experts’ perception, in
procurement, procurement of material is very important and there is a fact that one of weak points
of garment companies in Ethiopia is input. Most of fabric and accessories are imported but most
of garment companies in Ethiopia are weak of buying materials (Till Freyer, 2003).
5.3. Recommendations
Garment is a consumer-oriented industry employing standard, 'mature' technology.
Significant capital investment is not required; what is highly important is knowledge of
international marketing channels, attention to quality control, management of stocks, and a
capacity to deliver reliable supply.
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Value chain Management of Ethiopian garment companies
The mission formed the view producers in the industry tend to adhere to a
'production/engineering approach' rather than a 'market/efficiency approach'. Both approaches of
course are needed, but in such labor-intensive consumer-oriented industries, the latter is arguably
more important. The overwhelming impression of the mission is that Ethiopia's industry is almost
entirely passive in its marketing approach - firms are adept at producing products efficiently and
reliably for buyers, but the initiative to seek out new buyers, understand and engage international
marketing networks, and experiment with new designs and products is rarely taken. There is
concern that firms are producing low value added products, and that they are to some extent at the
mercy of international buyers, particularly at present following the sharp devaluations in some
competitor countries. As long as this passive approach persists, Ethiopia's firms are likely to be
locked into a low value added production cycle, with little scope to upgrade.
There is no simple solution to overcome this problem, but the key general point to
emphasize is that the country will need to strengthen its international connections in a variety of
ways.
First, 'country reputation' is important. As Arkebe Oqubay (May, 2015) and others have
demonstrated. Ethiopia is in the early stages of creating such a reputation, but its reputation is still
very much that of a late-comer, and much needs to be done to cement its place.
Secondly, it needs to be emphasized that the establishment and strengthening of
international linkages is not a large-scale, one-off process. The channels consist of many, often
small-scale, commercial agents, involving repeat transactions. Third, it makes sense for a country
to exploit whatever international connections it possesses to facilitate commercial success.
Ethiopia's international exposure is still quite limited, but it is not entirely absent. Besides that,
there are many works to do with the government as well as the firms to maintain and improve the
value chain of garment companies in Ethiopia.
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Value chain Management of Ethiopian garment companies
Governments can assist the process of shifting to best-practice, higher value added activities
by overcoming problems of market failures in the provision of key inputs. These initiatives need
to be linked to - and indeed will only work if accompanied by - enterprise and institutional
reforms. The issue is not so much the government itself undertaking a major modernization and
re-equipment of the industry, but rather in creating a commercial environment in which firms
have the incentive and capacity to undertake these themselves. In such an environment, the
government could make a great contribution through facilitating the establishment of industry-
driven research institutes which quickly disseminate the latest information on global trends in
markets, fashion, and design, together with more technical production know-how. In order to
maintain and improve the value chain of garment companies in Ethiopia, Ethiopian government
should have proper policy for development of the industry. Some recommends are as following:
1. Design a proper strategy for development of the textile and garment industry. Key target
should be the expansion of the garment sector by strengthening backward integration.
2. Import protection for the industry should take the form of lower tariffs and be consistent
with Ethiopia's obligations under WTO.
3. Through budget funded or foreign aid projects, help enterprises in technical assistance to
implement agreements, such as trademark registration, research and development, and
training.
4. Establish concentrated trade centers in potential market in order to support enterprises in
marketing, exhibition and show, trademark advertisement, organize and provide funding
to regular study tours, trade fair abroad for enterprises.
5. Support in human resource training and legal aid: • The government needs to have a policy
for training of human resource for the textile and garment industry, using the budget or
foreign aid • expand TVET institutes around the new industry parks • Establish
representative office abroad to provide legal counsel to local enterprises in doing business.
6. The government should help textile and garment related services, such as industrial
software, equipment and parts supply, technical services, trade promotion, trade mark
development, franchise, design, training, quality control, management etc. to get the
foreign investment.
7. The government should play as the facilitators for the development of the industry though
provision of information, development of physical infrastructure, and institutional support.
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Value chain Management of Ethiopian garment companies
The role of ETIDI should be realigned to become an institute providing services such as
training, designing, testing and research enterprises.
8. If import duties are reduced it will be likely decline in the demand for domestic textiles.
By that time, the upstream industry may face with difficulties. If the government insists on
developing upstream industry, the government should have policies to enhance
competitiveness of upstream industry through selective investment and opportunity for
and facilitators of production linkage should also be established and enhanced.
65
Value chain Management of Ethiopian garment companies
3. Invest in marketing Garment companies in Ethiopia should more focus on marketing for
example: Having a close look and constant research to overseas/global markets and
customers and getting started to use all kind of sources of information frequently, for
example visit of international Textile fairs. Brand name, fashion cycle, and labeling are
mentioned as important factors to be successful in garment business in Chapter 2 (Gini
Stephens, 2001).
4. Improve service by improving office image and sample room. The appearance of the
entire office, workplace and personality leave a lasting impression on customers. They are
very much part of a company image. Most buyers are likely to come from Europe or the
USA and are used to modern surroundings. Garment companies in Ethiopia so should
welcome them in a similar atmosphere and make them feel “at home”. Normally, the
visitor looks around as soon as he enters the office. He makes a “quick inspection” of
working desks, samples on tables, shelves (and sometimes floor) whether it is orderly or
messy and thinks “this is an efficient (or inefficient) operation”. The result will influence
his decision to make the order or not (Till Freyer, 2004). So a neglected, dirty building
needing repairs and painting puts off a visitor immediately. It is worthwhile to invest in
the reception and give it a modern look. The sample room is a very vital facility in
garment exports. It allows a visiting buyer to choose a fabric for a desired style (Gini
Stephens, 2001). So garment companies in Ethiopia should keep shown samples up-to-
date and keep the room clean and in good order. Each hanger should describe the quality,
width, supply source (coded), price. Normally buyer comes from a modern, affluent
country with excellent facilities including shops. So it is necessary to make it easy for him
to imagine what products will look like in his retail outlets. The ideal showroom is set up
like a retail outlet. It should provide space for both hanging and folded garments. Up-to-
date styles, fabrics and colors should be present to prove that the company is following
fashion trends. Full information therefore needs to be shown on hangtags on each style.
5. Improve Human resource of their companies, should invest in training of personnel (in
terms of marketing, merchandising, design, production management and selling) because
the study (primary data and secondary data) shows that human resource of garment
companies in Ethiopia is weak. Human resource management should deal with all human
aspects of an organization in accordance with Management’s directives and Government
rules with wide ranging responsibilities.
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Value chain Management of Ethiopian garment companies
6. Technology and Development: Ethiopia is a labor intensive and capital scarce country,
enterprises should invest in appropriate technology. Even plentiful labor resources cannot
substitute state-of-the-art machinery to increase added value and backward integration.
The industry needs a strategy how to upgrade technological standards and use new
technology more effectively. Fashion is the expression and preference of a specific target
group’s approach towards life (Gini Stephens, 2001). So garment companies in Ethiopia
should invest to have a design team, which have the task of accurately forecasting and
recognizing future trends and translating them into wearable fashion garments. Design
teams obtain their inspirations from international “Trend Shows”, magazines, talking to
sales staff in shop and closely follow what their target group” wears in the street, office
and at home. They then should produce sketches and propose fabrics and colors of what
will – hopefully – be “fashion” and in demand next.
7. Finally, Garment companies in Ethiopia should try to manage the value chain via
intranets, extranets and proprietary networks to reduce time of information flows. As Till
Freyer in his research (2005) suggested: computer software are very much part of every
days’ work. Special programs, developed for the specific tasks of each department support
and speed up the work process and control of deadlines. Most work procedures and
control systems incl. communication (e-mail) can be supported by computer programs.
Information Department or Administration Department or Technical Department can be
responsible for the networks. The managers so can use these networks to manage the
information flow.
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Value chain Management of Ethiopian garment companies
profile in questionnaire was limited. The rating score of respondents from garment companies,
especially for production activity may not very reliable.
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Value chain Management of Ethiopian garment companies
BIBIOGRAPHY
Abreau, M. de Palva, 1995, "Trade in manufacturers: The outcome of the Uruguay Round and
developing countries", chapter 3 in Martin, W. and Winters, L.A. (eds): The Uruguay Round
and the Developing Economies, World Bank
Alan Rushton John Oxley Phil Croucher, 2000, The handbook of Logistics and
Distribution Management, Second Edition, The Institute of Logistics and Transportation,
Bell and Brain Ltd,
Arkebe Oqubay., (May 2015) Made in Africa, Industrial Policy in Ethiopia
Bair, J. and Gereffi, G., 2001, "Local clusters in global chains: The causes and
consequences of export dynamism in Torreon's blue jeans industry", World Development
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Bello, D.C and N.C Williamson. 1985, “Contractual Arrangements and Marketing
Practices in the Indirect Export Channel.” Journal of International Business Studies 13,
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Bernardin H. John, Joyce E.A Russel. 1993. Human Resource Management-An
experiential Approach, McGraw Hill. United States.
Carl M. Guelzo. 1986. Introduction to Logistics Management. Prentice-Hall, Englewood
Cliffs, New Jersey.
Cavusgil, S. Tamer, S. Zou and G. M. Naidu (1993), “Product and Promotion Adaptation
in Export Ventures: An Empirical Investigation,” Journal of International Business
Studies, Third Quarter, pp. 479-506.
Chandra, C. 1997, “Enterprise architectural framework for supply chain integration”,
Proceedings of the 6th Annual Industrial Engineering Research Conference, 17- 18 May,
Florida, Institute of Industrial Engineers, Norcross, GA, pp. 873-8.
Chase, R.B, Aquilano, N.J and Jacobs, R.F. 1998, Production and Operation: Manufacturing
and Services, Richard D. Irwin, Homewood, IL.
Duc Vuong. 2001, May 21. “Textile and Garment Exports Have to Overcome many
challenges” Economics Times: 6.
Daniels, John D. and L. H. Radebangh (1998), International Business: Environments
and Operations, USA: Addison Wesley-Longman.
Francois. J.F., Glisman, H.H. and Spinanger, D., 2000, "The cost of EU protection in
textiles and clothing", Kiel Institute of World Economics, Working Paper no 997.
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Value chain Management of Ethiopian garment companies
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Value chain Management of Ethiopian garment companies
Links
http://www.investethiopia.gov.et/why-ethiopia/economic-indicators
http://www.ethiopians.com/Ethiopia_GTP_2015.pdf
http://www.enlba.org/index.php?option=com_content&view=article&id=1491:bottlenecks-in-the-
textile-industry-should-be-adequately-abated&catid=46:news-feed&Itemid=249
http://addisfortune.net/columns/textile-puzzle/
http://addisfortune.net/articles/textiles-exports-fail-gtp-i-targets-by-more-than-half/
http://www.capitalethiopia.com/index.php?option=com_content&view=article&id=5357:export-
targets-missed-throughout-gtp-i&catid=35:capital&Itemid=27
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Value chain Management of Ethiopian garment companies
APPENDIX 1
LETTER FOR INTERVIEW’S APPOINTMENT
Date:
To whom it may concern:
My name is Zerihun Abebe, a team leader for Garment monitoring and evaluation directorate
under ministry of industry. I’m studying MBA in industrial management at University of Addis
Ababa Science and Technology University (AASTU) Addis Ababa, Ethiopia. I am conducting a
research on the topic entitled “Value chain management of garment companies in Ethiopia” to
fulfill my MBA degree. The main purpose of my research is to describe the value chain of
garment companies in Ethiopia and how effectively are activities in the value chain managed. I
would be very grateful if I could have a depth interview with you about your opinion and work
experiences in order to complete the research process. I will give you a call to discuss with you
about appointment. I promise that your information will be treated confidentially and will only be
used for academic purpose.
My contact number is 0967281622; email address: zersh2016@yahoo.com
Sincerely yours,
Zerihun Abebe
MBA, Master of Business Administration
Addis Ababa Science and Technology University
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Value chain Management of Ethiopian garment companies
APPENDIX 2
TOPICS FOR FACE TO FACE INTERVIEWS
Topic title: “Value chain management of garment companies in Ethiopia”
Profile of interviewees:
Name of interviewee: --------------------------------------------------------
Position: ----------------------------------------------------------------
Organization: ----------------------------------------------------------------------
Contents of the interview: --------------------------------------------------------------
Introduce and explain the purpose of the interview, explain about value chain model and value
chain management.
1. How do you evaluate the importance of primary activities and support activities in the
value chain of garment companies in Ethiopia, explain why?
No. Activities in the value Least important Most important
chain 1 2 3 4 5
1 Inbound logistics
2 Operations
3 Outbound logistics
4 Marketing
5 Sales
6 Service
7 Infrastructure
8 Human Resource
Management
9 Technology
Development
10 Procurement
2. What are strengths and weaknesses of garment companies in Ethiopia?
3. Policy regime for garment trade in Ethiopia.
4. Opportunities and challenges of garment companies.
5. The policies that Ethiopian government should implement to help garment companies in
Ethiopia improving their value chain.
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Value chain Management of Ethiopian garment companies
APPENDIX 3
LETTER FOR QUESTIONNAIRE SURVEY
Date:
To whom it may concern:
My name is Zerihun Abebe, a team leader for Garment monitoring and evaluation directorate
under ministry of industry. I’m studying MBA in industrial management at University of Addis
Ababa Science and Technology University (AASTU) Addis Ababa, Ethiopia. I am conducting a
research on the topic entitled “Value chain management of garment companies in Ethiopia” to
fulfill my MBA degree. The main purpose of my research is to describe the value chain of
garment companies in Ethiopia and how effectively are activities in the value chain managed. I
would be very grateful if you fill in the questionnaire in order to complete the research process.
There will be no right or wrong for the answers as they depend on each applicant’s opinion and
experience. Your responses will be treated confidentially and this will only be used for academic
purpose. Please answer all the questions and return it back as soon as possible. If you have any
question please feel free to contact me at 0967281622 or email me at: zersh2016@yahoo.com
Thank you for your participation in this questionnaire.
Sincerely yours,
Zerihun Abebe
MBA, Master of Business Administration
Addis Ababa Science and Technology University
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Value chain Management of Ethiopian garment companies
APPENDIX 4
QUESTIONNAIRES
Research title “The value chain management of garment companies in Ethiopia”
Thank you very much for spending your time and effort to fill this form.
The questionnaire is divided into 3 parts:
(I) Company profile
(II) Primary activities management
(III) Support activities management.
The value chain management means managing integrated information about product flow from
suppliers to end users to reduce defects and inventories, speed time to market and improve
customer satisfaction.
Part I: Company profile
1. Company’s name: ………………………….
2. Your position:
[ ] Director
[ ] Vice Director
[ ] Import export manager
[ ] Marketing manager
[ ] Production manager
3. Number of year that the company operate in garment trade field (check one)
[ ] < 5 years [ ] 5 – 10 years [ ] >10 years
4. What type of your company?
[ ] State-owned enterprise
[ ] Limited liability company
[ ] Joint stock company
[ ] Private company
[ ] FDI
6. What was the main type of your orders in the year 2015/16?
[ ] FOB: 0 - 25% (CMT: 75 - 100%)
[ ] FOB: 25 – 50% (CMT: 50 - 75%)
[ ] FOB: 50 – 75% (CMT: 25 – 50%)
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Value chain Management of Ethiopian garment companies
The value chain includes 5 primary activities (Inbound logistics, operations, outbound
logistics, marketing and sales, service) and 4 support activities (Firm infrastructure,
human resource management, technology development and procurement).
Inbound logistics: receiving, storing, handling, inventory control, transportation
scheduling of fabric and accessory
Operations: cutting, making, trimming, packaging, equipment maintenance, and testing
Outbound logistics: warehousing, order fulfillment, transportation, distribution
management to bring products to customers
Marketing: channel selection, advertising, promotion, pricing
Sales: Selling, retail management, wholesale management
Service: customer support, complain handling
Infrastructure: general management, planning management, legal, finance, accounting,
public affairs, quality management, etc,.
Human Resource Management: recruiting, development (education), retention and
compensation of employees and managers
Technology Development: Research and Development, Process automation, design,
and redesign
Procurement: Procurement of raw materials, servicing, spare parts, building machine,
etc.
8. How do you evaluate the importance of following activities in your company’s value chain?
No. Activities in the value Least important Most important
chain 1 2 3 4 5
1 Inbound logistics
2 Operations
3 Outbound logistics
4 Marketing
5 Sales
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Value chain Management of Ethiopian garment companies
6 Service
7 Infrastructure
8 Human Resource
Management
9 Technology
Development
10 Procurement
From question 9 to question 18, you can skip activities that not exist in your company. In 5
point rating questions you can compare your company’s performance with your competitors’ if
it is necessary.
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Value chain Management of Ethiopian garment companies
11. How are outbound logistics activities done in your company in 2015/16?
78
Value chain Management of Ethiopian garment companies
No. Activities in the value chain Not at all effective Very effective
1 2 3 4 5
1 Recruiting
2 Worker training
3 Staff training
4 Salary and compensation
5 Human Resource Management
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Value chain Management of Ethiopian garment companies
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Value chain Management of Ethiopian garment companies
APPENDIX 5
List of garment companies in Ethiopia
81
Value chain Management of Ethiopian garment companies
4157
11 CBA Garment 2005 140 Shirt 250 per Oromiya Gelan tel Mr. Bilal
Factory plc day +251 114 713 145 Sabri(GM)
12 Concept 2006 239 Woven and knit 2916000 Addis Ababa nifas Mrs. Lily
International garment silk lafto tel +251 Betru
Ethiopia plc 114 422 602 (ma.Dir.)
13 Desta plc 2009 254 Woven and knit 3026000 Addis Ababa Gerji Mr. Eyob
garment tel +251 16299951 Bekele(GM
)
14 EDE Garment 2013 40 Overcoats, jacket, 19700 Addis Ababa kolfe Mr. Eyasu
and Textile poloshir t-shirt Rain pcs keranyo woreda Ermiyas(G
Engineering plc coats 01 tel +251 tel M&
+2510 105 254 owner)
15 Edget Garment 1996 100 Uniform, gowns 250pcs/ Addis Ababa Mr.Birhanu
plc shirts readymade day Shiro meda tel Degefa
cloth +251 111 236 320 (MGR)
16 Eltex Textile & 2004 1150 Knitted garment 5000000 US and Addis Ababa Mr. Eliyas
Garment fatory UAE Kality tel +251 Tesfayae(G
114 390 464 M)
17 EMD Garment 2004 63 Suit 100ps/d Addis ababa nifas Mr. Elias
ay silk lafto Mulugeta
mekanissa tel (GM)
+251 113 212 907
18 Feleke Garment 2006 210 Knitted and woven 899 000 USA& Addis Ababa nifas Mr.
plc garment EU silk lafto lebu Mahitsentu
industry zone Feleke
(Ma. Dir.)
19 Getachew 2011 65 Polo shirt, t-shirt, 240000p - Addis Ababa Mr.
Ayinalem and work wear, bags cs Mekanissa tel Getachew
Yeshareg towels +251 911113344 Molla
partenership
Garment and
textile factory
20 GG Super 2005 240 t-shirt polo shirt, top 1812000 USA, Oromya Liyu zone Mr.
garment plc tank EU Bishoftu tel +251 Getachew
114 337 502 Biratu(GM
)
21 GMM garment 2004 120 Home textiles 234000 German Addis Ababa Mr. Zewlde
plc , Italy Nifas silk lafto Tekleab(G
USA lebu industry M)
zoneTel +251114
197 374
22 Gullele Garment 1983 100 Polo shirt, t-shirt, 2700000 Addis Ababa Mr. Berihu
S.c work wear, night Kolfae keranyo Leake (Ma.
wear, jeans Tel +251 112 702 Dir.)
266
23 Hay garment 2012 142 Pajamas, Shirts Addis Ababa gerji Mr.Zelale
Manufacturing m
plc Belay(G>
82
Value chain Management of Ethiopian garment companies
M)
24 Haibo 2015 440 Kids and ladies 4000 Oromiya Dukem Mrs. Mr
Manufacturing garment pcs kids industry zone Haybo Zou
plc per day
25 HG Garment plc 2006 97 Woven garment , 790,000 Addis Ababa nifas Ato Haile
uniform, kids wear silk lafto lebu Ghebreegz
industry zone abher
26 HIrdaramani 2015 300 Sammar garment ( 3243000 SNNPRS, Mr.
Garment plc polo shirt) HAwassa industry Channa
park Gunawarda
na
27 Hua Xia 2015 16 T-shirt, sports pants, Addis Ababa nifas Mrs. XU
Technology Plc underwear, leggings silk lafto saris
industry zone
28 ISIK textile 2014 230 Garment products 250,000 Oromiyaa Mr.
factory plc Legetafoo Nejashi
(owner)
29 Jay Jay Textile 2014 649 Kids wear, Woven 9,472,00 Addis Ababa bole Mr.
plc garment 0 lemi industry park Alberto(G
M)
30 KEI Industrial 2014 54 Uniform, shirts, 1,550,00 USA, Addis Ababa Bole Mrs. Chang
Engineering plc trousers 0 EU & lemi industry park Rang
middle Koong
east (GM)
31 Knit to Finsh 2004 400 Knitted and sport 3744000 Oromia Liyu Zone D/r Worku
wears) Akaki near to Zewde(GM
Gelan )
32 Linda Ethiopia 2014 400 Trouser, short, suit, 1472000 Oromya Liyu zone Mrs.Jerry(
Garment plc coat eastern industry GM)
zone, Dukem
33 Lucy Garment 2011 133 Shirting Fabric, Addis Ababa nifas Mr.
Industry plc interlining material silk lafto saris Mikiyas
industry zone Hailu
+251114426188 (Man. Dir.)
34 Mantel Garment 2007 45 Knitted and woven 529920 Addis ababa kality Mr.Aleheg
plc garment ne
Assefa(GM
)
35 Nazarthe 1991 500 Pants, Shirts,overall 540,000 USA, Oromyaa, east Mr. Avi
Garment S.c showa Adama Manes(GM
)
36 New Wide 2014 352 Garment 60,000,0 USA, Addis Ababa bole Mr.
Garment 00 lemi industry park sanjay
(operationa
l manager)
37 Novastar 2005 635 Knitted and woven 1997000 USA, Oromiyaa Gelan Mr.
Garment Factory garment mohammed
plc Umer
(ASS.GM)
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Value chain Management of Ethiopian garment companies
38 Oasis Abyssinia 2007 118 Knitted and woven 1560000 Addis Ababa nefas Mr. Yilkal
plc silk saris industry bisenebit(G
zone M)
39 Rainbow 2013 440 Polo shirt, t-shirt USA, Addis Ababa lebu Mr.
Garment plc and uniform industry zone Solomon
Hailu
40 Shints ETP 2014 1629 Woven and knitted German Addis ababa bole Mr. Kim
Garment plc jacket, motor cycle , Italy lemi industry park Dongsan
jacket USA,
41 TOTO Garment 2008 100 Knitted 1,750,00 Oromiya liyu zone Mr.
plc garment(lady’s 0 sebeta town Getenet
body, tshirt..) Aregawi(A
.Gm)
42 Vestes Garment 2013 900 Garment export 2500000 Addis ababa bole Mr.
plc world wide lemi industrial Kidanae
park Woldegi.(
GM)
43 Village industry 2009 150 Shopping bags, 750000 Italy,Du Addis Ababa nefas Mr. camillo
plc pilot bags bai and silk lafto addis calamai(G
canvass,jackets… USA industry zone M)
+251 114 404 864
44 Vitcon plc 2005 50 Home textile and 340000 Addis Ababa Bole Mr. Goshu
apparel of shirts sub city Gerji Negash(G
M)\
45 Wosssi Garment 2007 32 Ladies wear, blouse 152,000 USA, Addis Ababa nefas Mrs.
Design factory skirts,tousears,.. itaky silk lafto saris Wossen
plc German industry zone Hailu
y,
England
46 YAbets textile 2005 80 Knitted Addis Ababa Mr. Adane
factory fabric/jogging nifasi silk lafto Egata(GM)
cloth,childeren lebu industry zone
47 Yonis Garmenet 2004 130 Woven and knitted 3120000 Addis ababa nefasi Mr.
plc garment silk lafto saris Solomon
industry zone Debebe(G
+251114403450 M)
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Value chain Management of Ethiopian garment companies
ETHIOPIA AFRICA
OFFICIAL NAME: Federal Democratic Republic of Ethiopia
POLITICAL SYSTEM: Federal with multi-party system
CAPITAL CITY: Addis Ababa, which is also the seat of the African Union
(AU) and United Nations Economic Commission for Africa (ECA).
LOCATION: Ethiopia is located in the North-Eastern partof Africa known as
the “Horn of Africa”. It enjoys a unique location at the crossroadsbetween
Africa, the Middle East and Asia.
AREA: 1.14 million square kilometers
ARABLE LAND: 513,000 square kilometers (45%)
IRRIGATED LAND: 34,200 square kilometers (3%)
POPULATION: 96.6 million (2014/15)
POPULATION DENSITY: 74.4 per square kilometer (2012/13)
LANGUAGE: Amharic is the working language of the federal government, while Oromiffa and Tigrigna are widely
spoken. English is taught in schools and is the main business language.
EDUCATION: Primary school enrolment rates have reached 85.7% in 2012/13. By 2009/10 there were 200,000
students enrolled in higher education institutions, proportionately twice the number enrolled in universities in Kenya
in 2012 Deloitte, 2014).
GDP PER CAPITA US$575(2014/2015)
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Value chain Management of Ethiopian garment companies
BIOGRAPHY
Zerihun Abebe was born on July 12, 1972 in Oromia Region, Town of Adama.
He received his Degree of Bachelor of Textile Engineering at Bahir Dar University of Technology in
1995.
He also holds a Certificate of Clothing and Garment Design for Developing Countries sponsored by
the Ministry of Commerce, organized by Fujian Foreign Trade and Economic Cooperation Officials,
The People Republic of Chaina, on June 2nd, 2016.
And also holds certification upon the successful completion of Market System Development
Approach on August 5th, 2016 from Ethiopian Management Institute.
He is working for Ministry of Industry Department of Textile and Garment Sector as a Team leader.
86