Ethiopia Case Study Report FINAL.docx - Table of Contents...

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Table of Contents Executive Summary ....................................................................................................................... 1 Introduction .................................................................................................................................... 2 Ethiopia: An Attractive Investment Opportunity? ..................................................................... 2 Country Overview ................................................................................................................................. 2 Political Environment ........................................................................................................................... 2 Industrial Policies .................................................................................................................................. 3 Infrastructure ........................................................................................................................................ 3 Market Opportunity ............................................................................................................................. 4 Human Resources .................................................................................................................................. 4 Key Success Factors and Entry Decisions ................................................................................... 4 CareCo: An Evaluation ................................................................................................................. 5 Financial Projection .............................................................................................................................. 6 Recommendations ................................................................................................................................. 6 ShoeCo: An Evaluation ................................................................................................................. 6 Financial Projection .............................................................................................................................. 7 Recommendations ................................................................................................................................. 8 MedCo: An Evaluation .................................................................................................................. 8 Financial Projection .............................................................................................................................. 9 Recommendations ................................................................................................................................. 9 Appendix A: .................................................................................................................................. 10 Appendix B: CareCo Projection ................................................................................................. 11 Appendix C: ShoeCo Projection ................................................................................................. 12 Appendix D: MedCo Projection ................................................................................................. 13 Bibliography ................................................................................................................................. 14
Executive Summary A growing number of multinational enterprises have been seeking destinations through which they can take advantage of expanding their operations and new markets. Three companies that are contemplating to expand outside their region have turned their attention to the emerging Ethiopian market. Starting with the historical background of Ethiopia, the case explores the attractiveness of this sub-Saharan country in terms of global expansion. With the relatively stable political environment, the Ethiopian government has implemented a lot of industrial policies to facilitate foreign investment and cultivate domestic businesses, intending to capture oversea capitals to boost local economic growth in the long run. While foreign investment utilizing the appealing policies and limited competition of Ethiopia, the case also warns about some weaknesses of this rapidly developing country, including poor infrastructure, inadequate experienced labor, and fragmented distribution channels, among others. Regardless of the risks, Ethiopia is an attractive market opportunity for a firm with the right risk tolerance. In addition to the evaluation of current market opportunity of Ethiopia, the case also presents four primary entry modes that most multinational companies will apply when they enter a new market. Exporting merchandise through local agents and importer is a low-risk way of expanding to Ethiopia whereas establishing wholly-owned subsidiary in Ethiopia is the riskiest option of expansion. Licensing and joint ventures are two options that allow multinational companies to maintain control over management and to benefit from Ethiopian policies at the same time. CareCo, a well-established brand founded in 1961, has had mix results regarding the approach of expanding through local importers. Therefore, the company is evaluating feasibility of the subsidiary approach. With high awareness of the brand in Ethiopia, the projection we conducted shows the company will be able to achieve positive EBIT beyond year 2 and has its initial investment paid back around year 6. CareCo may consider the joint venture approach as a conservative option since the projection is based on a list of optimistic assumptions.

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