Aau gizeshwork

Quarterly publication of the Department of Management, AAU

1PageVolume2 Issue 3 MI Page| 5 Issue 1: March 2013

Quarterly publication of the Department of management

MIPage| 1 Issue 1: March 2013

Quarterly publication of the Department of management

MI

Management Insight College of Business & Economics

Department of Management

Inside Pages ...

College of Business & EconomicsDepartment of Management

Editorial

Welcoming speech

Opening Remarks

A keynote Address

Paper Presentations

Are we doing the Right thing Right?

Discussions

Has BPR failed and is Kaizen bound to fail in Ethiopia?

233

45

9

1213

The Department of Management, College of Business and Economics of the Addis

Ababa University held its 3rd panel discussion of the Executive Idea Exchange Forum on Thursday, June 27, 2013 at 2:00 PM at the College of Business and Economics Campus.

The theme of the third panel discussion was “Ethiopia’s Export Potential and Challenges”. The Forum was keynote addressed by the State Minister of

Trade, His Excellency Ato Yaekob Yalla and research papers were primed by the presentation of State Minister of Industry, His Excellency Ato Tadesse Haile.

Dr. Admasu Tsegaye, President of AAU, in his speech noted that the University is undergoing radical reforms. He said that “ as part of the Transformation Trigger Facilities (TTF) program, the University has laid down the foundation to establish Business

Incubation Center, and European and Ethiopian Business School that will be a center of business management excellence. The President further expressed AAU’s commitment to support the Executive Idea Exchange Forum (EIEF), and to strengthen and expand programs of the department of Management. Honorable guests of the Forum were welcomed by the Chairman of the department of Management, Dr. Mohammed Seid.The Forum was started through

The Third Executive Idea Exchange Forum Discussion Held

Volume 2 Issue 3 July 2013

EIEF 3rd Panel discussion participants

AAU President DR. Admasu Tsegaye Ministry of Industry State Minister, H.E Ato Tadesse Haile Ministry of Trade State Minister, H.E Ato Yaekob Yalla(from left to right)

MI


2PageVolume2 Issue3 MI

journalist, business executives, and the academia. The support gesture demonstrated to the Forum from all concerned were very encouraging and inspiring to the Department and those involved in organizing the events.

The importance of research for business and society cannot be overemphasized. Although knowledge and findings from research will not relieve managers and policy makers from making difficult decisions in complex global environment, it can provide them with insights that they should factor in when making these decisions.

Aside from drawing high level government officials, the 3rd panel was special in that three research papers were presented and heated discussions were made. The Forum beyond part of the Executive MBA program has been established with the purpose of further improving communications and enhancing understanding among stakeholders. The Forum aims to do this by fostering open discussion between the public policy arena, think tanks, academia, media, the business communities, and development partners, particularly dialogue based on Forum-supported business management-oriented research on various areas of common interests.

The 3rd panel was unanimous in its support for sustained and intensified engagement, communication, and cooperation between the stakeholders as a win-win opportunity for all. Above all, Ethiopia’s impending accession to WTO has generated strong imperatives for all players to deepen their collaborative spirit and consultative engagement as a matter of necessity. As a result of the EMBA program and the resultant EIEF, a new collaborative setting has materialized for Ethiopians to reflect on the world competitive landscape, create shared visions of the future and formulate innovative competitive strategies to achieve these visions.

The 3rd Executive Idea Exchange Forum (EIEF) discussion held on June 27, 2013 under the stewardship of the department of Management of AAU and the auspices of Initiative Africa was a grand success. It brought high level government officials, prominent business agents, and the university around a platform to pledge to work together for the enhancement of management excellence, understanding, partnership, and economic growth.

It was evident from what were observed during the EIEF consecutive sessions that anyone who is interested in expanding the capacity of managing businesses, elevating academics, and revitalizing government organs – from young academics/line managers to executives in large organizations/policy makers – will benefit from the panel discussions.

The Forum is unique in bringing to light personal anecdotes, best practices, and thoughtful scholarship. It focuses on the development and dissemination of insights on the management process, drawing the untapped experience and wisdom of participants, as well as on fostering contacts, understanding, trust, and partnership.

It is a platform filled with passion to ensure the prevalence of managerial excellence which will be instrumental to economic growth and poverty reduction. Without the economic growth that the GTP and MDG laid down, it is hard to imagine sustainable development and improvements in people’s lives. The EIEF seeks to close the ostensible gap between the business, the government, the academia and development partners and usher a new era of partnership among them.

Building up on the previous two panel discussion, the June 27 convention was a leap forward in that it involved two state ministers, Ethiopian Chamber of Commerce president, AAU president, as well as prominent

Editorial

While the core participants are leaders in academia, business, politics and civil society, promising young members of these communities are part of it as well.

The discussions had revealed enormous untapped information, knowledge and insight reserve that participants can unleash if this platform is sustained. Such unearthed knowledge and insights when brought to the surface will be rich source of research topics, further discussions, better policy and enhanced management practice.

The Department as well as its EMBA students should be proud of the progress they have made towards enhancing communication, trust, understanding, and partnership through dialogue among stakeholders destined to be partners for their common good. The Forum also has created the opportunity for participants to:

• Learn about the latest industry updates, government posture, and available business ideas that may revolutionize our management practice directly from executives and other industry experts.

• Interact with our peers in a small group setting to learn best

• Create invaluable relationships with fellow executives, industry experts, academics and government officials and, development partners.

• Meet people with whom we may make business

It should be obvious that if all involved can keep the momentum and passion they demonstrated, the Forum can unleash the fountain of knowledge, insights, research based policy input and practical solutions for sustainable economic activity, cultivate young academic talent; and establish understanding, trust, networking and partnership between academics, business, politics, media, and the public there by achieve management excellence for prosperity.

Management Knowledge Reserves Unleashed

MI


3PageVolume2 Issue 3 MI

welcoming speech by Dr. Mohammed, Chairman of Department of Management by extending his gratitude to the contributors of the program and welcoming the guests and guest of honors for their devotion of time. He said the aim of the Executive Idea Exchange Forum is to advance Management excellence. “As a pioneer of management education in Ethiopia, the department of Management of the Addis Ababa University together with its executive MBA students have launched this forum to complement the executive capacity development by bringing the government together with the private and the public sectors, management professionals, the academic community, and development promoters”, Dr. Mohammed said. He also stated this Forum is held quarterly “to exchange views, best practices, business encounters, and new developments on matters of common interests.”

“The ideas reflected, the findings presented, the discussions made, the insights gained are captured and disseminated through the quarterly publication called Management Insight”, Dr. Mohammed promised the participants on the occasion.

Dr. Admasu Tsegaye, president of Addis Ababa University, opened the workshop. The president appreciated the concerted effort of department of Management and it’s EMBA students. Organizing such an event to promote matured discussion on several management topics of interest is timely, he stressed. According to the president, the purpose of this Forum is “to enable the building of a productive dialogue and experience sharing between policy makers, business executives, development promoters and the academia.” The president reassured the participants the University’s commitment to this inspiring initiative.

Ethiopia has embarked on the Growth and Transformation Plan with the aim of meeting the Millennium Development Goals and becoming a middle income country by 2025, the president said. He cited the country’s economy growth at twice the rate of the rest of Africa, averaging 10.6% GDP growth per year between 2004 and 2011 as a testimony for Ethiopia’s progression on the right direction to achieve its development goals.

Addis Ababa University envisaging itself as a “pre-eminent African research University has made a decision to position graduate programs at the heart of its strategic plan. As part of meeting this vision, the University put in place a new structure that can enhance performance and reduce resource wastages, according the president. He added BPR is implemented and BSC is finalized to be employed.

“Appreciating the need to enhance the managerial and competitive capacity of Ethiopian business in a global environment, the University has launched an EMBA program”, the president indicated. “As part of the Transformation Trigger Facilities (TTF) program, the University has laid down the foundation to establish Business Incubation Center, and European and Ethiopian Business School that will be a center of business management excellence”, he added.

The president also heralded the launching of the PhD program in Management in the coming September. He described the program as the first of its kind in the country that is “expected to elevate the

Welcoming speech Opening Remarks By Dr. Mohammed Seid, Chairman, Department of Management By Dr. Admasu Tsegaye, President of AAU

“Appreciating the need to

enhance the managerial and

competitive capacity of

Ethiopian business in a global

environment, the University

has launched an EMBA program”

Continued on page... 4

MI



Opening...Continued from page... 3

capacity of management programs of regional universities to a higher level, set the stage for networking and partnership with European and American Universities, and hold back the brain drain the county has been experiencing”.

He extended his gratitude to the Department of Management and its EMBA students for their deep involvement in organizing this session, government officials for availing themselves from their crowded schedules, and Initiative Africa and SIDA for sponsoring the program. He expressed the University’s management support to the Forum and to the department of Management effort to strengthen and expand the programs it is running.

The president of Addis Ababa University, Dr. Admasu Tsegay finally called upon Ministry of Trade and Ministry of Industry, the business community, and development promoters to partner with the university to strengthen this initiative.

so as to make the achievement of the GTP a reality, Ato Yaekob indicated.

Trade in the market oriented economy will play a crucial role in the effective execution of GTP, H.E. Ato Yaekob said. “The Ministry of Trade has been working in strengthening domestic and foreign investment and trade, eradicating rent seeking behaviors, establishing a favorable environment for productive investors, promoting a competitive and efficient domestic trade and distribution system, ensuring customers rights, transparency, fairness, and accountability of the legal framework for the trade activities”, the State Minister said

The State Minister reminded the audience that “in addition to COMESA, SADC and the East African Community (EAC), Ethiopia can benefit from the duty and quota free market access to the EU and US markets through EBA and AGOA respectively. The unilateral quota and duty free market access offers by Japan, China, India, Canada and Korea under General System of Preference (GSP), and its proximity to huge Asian and Middle East markets also benefit the country at large”.

He expressed the Government belief that joining the WTO “will expedite the process of Ethiopia’s effort in the economic reforms and will also push forward the in-depth structural reform of foreign trade”. However, success in international trade, achievement of economic growth, and realization of poverty reduction depends of human capacity building particularly enhancement of managerial capacity beyond creating competitive trade related infrastructure services and improving Input and capital goods.

He emphasized the significance of having a sustainable regular gathering to exchange ideas, best practices, policy issues, and research findings to enhance management education, managerial capacity of our business to excel in the global market. The role such a dialogue among stakeholders will play to export promotion, national poverty reduction endeavor and realization of our GTP was underscored.

Finally, the state minister commended the Department of Management of the College of Business and Economics of the Addis Ababa University for taking this initiative and pledged to “continue to actively participate in and partner with the Department to enable it generate relevant policy inputs, enhance problem solving managerial capacity, and explore business opportunities and assist in areas where its involvement has relevance.

A keynote Addressby H.E. Ato Yeakob Yalla, State Minister of Ministry of Trade.

The State Minister expressed his appreciation to Addis Ababa University for giving him a

chance to deliver a keynote speech on the occasion. “The Ethiopian government has been pursuing economic growth as one of principal instruments for poverty eradication”, Ato Yaekob said. Economic growth is the ultimate goal of all countries in the world. The Ethiopian government proved its policies and strategies right by making the country one of the fastest growing economies in the world, he added. The government is also committed to sustain the accelerating and growing economy

The Ministry will “continue to actively

participate in and partner with the Department to

enable it generate relevant policy

inputs, enhance problem solving

managerial capacity, and

explore business opportunities and

assist in areas where its involvement has

relevance”.

MI




Ato Tadesse’s presentation started by mentioning the national vision of Ethiopia enshrined in the medium and long term plan to be middle income and high income advanced industrial economy, respectively. In the medium term plan, Ethiopia aspires to make agriculture more productive and modern, and the industry to be competitive and leading the economy. He also stated the ambition of the ongoing Growth and Transformation Plan (GTP). The overall objective of GTP is to realize rapid, equitable, and sustained economic growth of 11% per annum and attain the Millennium Development Goals (MDGS). Sustainability of growth is ensured by realizing all the objectives within a stable macroeconomic framework.

The pillar strategies of the GTP, as presented in the paper, are rapid, sustainable, and equitable economic growth, promote gender and youth empowerment and equity, building capacity and deepening good governance, enhancing expansion and quality of social development, ensuring expansion and quality of infrastructure development, creating conditions for the industry to play a key role in the economy, and maintaining agriculture as major source of economic growth.

GTP and the industrial policy are linked to reinforce one another. The GTP has set clear objectives, strategies, and targeted to create the necessary condition for the industry to play key role in the economy. As stated in the GTP: “Ethiopia’s narrow industrial base is a major constraint on the nation’s ability to generate foreign exchange and create job opportunities for its growing labor force. In the GTP period, the industrial sector will receive the highest level of support for export oriented and import substituting industries” (GTP, P.23).

In the GTP there are also clear directions put forward to develop manufacturing industry. Supporting the domestic private sector to play its role as an engine of economic growth, attracting FDI with the main objective of improving our production capacity through technology transfer, aggressively transforming our weak infrastructure with the aim of linking productive areas for investment and trade were cited as expected outcomes the GTP. Investing in human capital with the purpose of producing quality engineers, scientists and technicians at all levels, and creating institutional capacities to support productive sectors and accumulate

knowledge, to make sure that there is an effective investor support services, were also mention by H.E Ato Tadese Haile, as GTP targets.

Ethiopia has recorded rapid broad-based real economic growth of on average 10.6% since 2004, as indicated during the presentation. The GTP intends to sustain high growth through high investment by mobilizing domestic and foreign savings. The paper claimed as Ethiopia has been the fastest growing economies in the world for most of the last decade.

As indicated in the paper, Ethiopia is considered as one of the top ten fastest growing economies in the world. Economic Growth achieved in the last nine years is sectorally broad-based, rather than commodity driven. Although all sectors are growing, agriculture remained the major source of economic growth. Economic growth has been inclusive, creating jobs, and ensuring the participation of smallholder farmers and small urban businesses. The growth of Ethiopia, according to the paper, has been achieved amidst of the global economic crisis seen for the last several years. This shows the strong base the country has for making the growth inclusive and sustainable.

The paper discussed some priority areas for export and import in medium and large industry development. Textile and apparel, and leather and leather products are considered export priority areas while metal and engineering, chemical and chemical related, and cement dominate the import. Agro-processing, pharmaceutical, sugar and sugar products permeate both.

Ethiopia Export Performance, Challenges and prospects

By: H.E. Ato Tadesse Haile, State Minister of Ministry of Industry

Paper Presentations

MI



Export is growing promisingly in Ethiopia. Merchandise export earnings grew on average by over 22% per annum between 2006 and 2012, more than triple over the same period. In addition to tradition export items like coffee, new export products such as horticulture, leather (including finished leather products), and textile and garment products are becoming good hard currency earners. Ethiopia now is becoming among the top flower exporters in Africa. “Of course, sugar will come very soon and it will be exported after fulfilling local consumption. We are diversifying our manufacturing export products”, said the state Minister.

The paper presented the ‘support’ activities the government is rendering at present to enhance export growth. Supplying the necessary inputs for the manufacturing industry, attracting domestic and foreign investment in places and areas where comparative advantages are available, working on logistics, capacity building to improve productivity by implementing various benchmarking, organizing the exhibition & conference, organizing trade fair, sending and accepting business delegations and putting permanent stands (samples) at embassies abroad, preparing exporters’ and importers’ Profile, preparing brochures, booklets and films are taken as support

activities(strategies) to further enhance export. As indicated in the paper, Ethiopia’s export has shown a relative growth over the years. For example, Ethiopia’s export income rose to 3153 million USD in 2011/2012 from 483 million USD in 2002/2003, with an average growth of 24%.

In terms of export destinations of Ethiopian products, China took number one place followed by Germany, Somalia, Saudi Arabia, and Netherlands. In terms of continent Europe took the highest share (35.06%), Asia (28.12%), Africa (18.89%), and America (3.36%).

Key challenges of Ethiopia to the development of export were identified in the paper. The major challenge for the export industry is the continuing dominance of primary agricultural commodities. Another key challenges discussed in the paper was the weak linkage between fellow sectors such as agriculture, transport and logistics, finance, and industry. Transport and trade logistic problems such as very high cost of transport, long time transport so that goods are vulnerable to dear charges, and insufficient border regulation affect the export growth and competitiveness. The young private sector, which is characterized by low capacity, traditional management

style, poor level of technology transfer and market linkages, inadequate organizational structure, low level of productivity, lack of inter-industry linkages, and poor level of investment in training, is not strong in pushing forward for the development of export. The prevalence of rent seeking culture in terms of poor utilization of land and financial resources, abuse of incentives, and focus on short term goals retard the growth of export.

Despite all the above challenges, the paper tried to be optimistic about export performance at the end of GTP execution. The double digit growth macro economic performance of the country over the past 10 years and the expected growth movement of the economy in the same trajectory was taken as a prospect to export growth in the paper discussion. The paper also indicted as prospects that by the end of the GTP period structural shift in the economy towards the manufacturing sector is expected to be realized through its increased share of GDP. Rapid infrastructure development, education expansion that enhances productivity and competitiveness,

No. Sub-Sector Main Focus

Export Import

1 Textile & Apparel x2 Leather and Leather Products x3 Agro-Processing x x4 Metal and Engineering x5 Chemical and Chemical Related x6 Cement x7 Pharmaceutical x x8 Sugar and Sugar Products x x

Medium and Large Industries Development; Priority Industries

The growth of Ethiopia, ... has been achieved amidst of the global

economic crisis seen in the last several years.


Ethiopia Export ...Continued from page...5

MI



availability of industrial land through the development and better use of industrial zones, industrial parks and clusters were also taken as prospects for the development of export in Ethiopia.

The paper stressed the need of reforms and support activities from the side of the government. It highlighted government positive measures taken to date: investment and export promotion laws and regulations have been revised; export promotion incentives and instruments are implemented; new export promotion schemes such as establishing bonded export factory, bonded supply warehouse, and Industry zones have been introduced. It proposed private sector-led development strategy to drive economic growth as a result of which export can be bolstered. Property rights, the right to have peace and stability in the country, macroeconomic stability, the right to have education and skill development, and infrastructure development were described as enablers for private sector-led development. Trade and credit policy incentives particularly for selected investments; manufacturing and export oriented investments; facilitation at licensing, registration, customs, taxation, land (industrial zone development); promoting privatization program where the private sector is actively investing; and dialogue and partnership with the private sector were also cited as important tasks the government and stakeholders need to do to develop export and the economy.

H.E. Ato Taddesse Haile concluded the paper presentation by pointing out “the great potential” Ethiopia has in exporting service products. He mentioned Ethiopian Airlines as a significant contributor to the service sector by providing high quality transport and travel service. ICT, tourism, and communications are the service sectors Ethiopia will make of export in the future, H.E. Ato Taddesse Haile pointed out.

Ato Alem started his presentation by explicating the basic reasons of promoting and implementing export for a country. Export provides wider market outlet beyond domestic market; creates significant exposure to the world market; encourages innovation; supports and eases foreign exchange constraints; leads to high rates of investment growth; and ensures sustainable balance of payment. These and other side benefits can be gained if export is promoted and implemented well in a country.

However, the presenter opts personally for promoting export if and only if products are in excess of local consumption. According to him, he doesn’t support import substitution by export promotion in the expense of local citizens. In whatsoever situation he didn’t deny the reality of export position of Ethiopia, for most part exported products are not excess. The paper discussed the list of export potential products as well as products by which Ethiopia is generating hard currency at present. Products listed include coffee, leather and leather products, meat and meat products, live animals, oilseeds and pulses, horticulture, floriculture, spices, textile and garment, and gold and minerals. The paper discussed the prevailing conducive environment for export development and promotion. Export

tax exemption, duty draw back scheme, export credit guarantee scheme, external loan & suppliers credit, foreign exchange retention, private – public partnership forum were some of the export incentives mentioned.

Other issues discussed by Ato Alem were opportunities that could enhance Ethiopia’s export performance. Ethiopia has an enormous resource base for export. “There are countries which don’t have raw materials to be manufactured in their countries. Rather they import raw materials for their industrial products” noted Ato Alem, while Ethiopia has a comparative advantage in this respect.

Additional important opportunities include favorable and enabling policy environment, availability of relatively cheap labor, home grown organic produce, and the growing demand of goods and services globally because of the rapid population growth and lifestyle change.

The industry location dynamics is also anticipated to change. Manufacturing industries especially light industries are expected to shift or move to poorer countries. Light industries are being pushed out of Europe, America, and China and are coming

Ethiopia’s Export Potential and Challenges

By: Ato Alem Asfaw, a business man in leather manufacturing


Ethiopia Export ...Continued from page... 6

MI



to Africa. In this conjecture Ethiopia will have and thus should grab the opportunity to attract such industries.

The preferential market access of the country to such platforms as AGOWA, COMESA, and European Union provide a great opportunity for Ethiopian export.

Despite all the favorable export environment and opportunities, there are prevalent challenges that could retard the growth of export in Ethiopia, as presented on the occasion. The lack of coherence in the private sector due to varying interest, size, and narrow focus, insufficient understanding of global environment, limited participation in the international trade, limited skills, low productivity, financial constraints, inadequate marketing and infrastructural facilities, inability to offer export standard products, and too much bureaucracy were cited as most glaring challenges of Ethiopian export.

Ato Alem suggested ways of overcoming some of the problems.

The creation of business clusters was indicated means of increasing the productivity with which companies can compete, nationally and globally. The Mauritius experience was used to demonstrate clustering instrumentality for enhancing export. “I was in Mauritius once. What I have observed in Mauritius was that the industrial zones have every materials and needs in their compound. Customs, garages, forwarding agent, and other relevant people and services are available in a compound so that export will be faster”, said Ato Alem. Lowering internal costs, providing international technical assistance through specialized consultants, improve quality of the product, developing training programs, developing small and medium exporting companies, and strengthening business associations were the other focus areas put forward by the presenter.

Finally Ato Alem noted that “promoting the competitiveness of the exporting sector and increasing the number of exporters in the Nation, will have a direct impact on the development”.

By: Ato Tsegabirhan W.Giorgis, Lecturer AAU-Department of Economics

The objective of this paper is to evaluate the performance of the Ethiopian exports in terms of its trend, structure and diversification over the period of 1997-2012.The paper embarked on showing the current account of export as is characterized by persistent deficit in balance of payment. Structural transformation of an economy is inconceivable without the structural change of the export sector in favor of high-value, knowledge intensive and diversified exports. The development of a competitive industrial and export sectors was mentioned as one of the pillars for the structural transformation of the Ethiopian economy. The study relied on secondary data from Ethiopian Revenue and Customs Authority (ERCA) and Ministry of Finance and Economic Development (MoFED). The study has complemented the secondary data by intimate discussions with higher government officials, middle management directors and experts from a number of industry development institutes, and industry associations.

Growth trends of the Ethiopian export sector since the imperial regime up to the present government

The Performance of the Ethiopian Exports: Trend, Structure and Diversification


Ethiopia’s Export PotentialContinued from page... 7


MI


9PageVolume2 Issue 3 MIContinued on page...18

was reviewed by the paper. In the imperial regime, Ethiopia got US$116.8 million in 1965, US$123.2 million in 1970, and according World Bank report (1971), coffee holding about 59% of total exports. In the Military period (1974-1991), Ethiopia got US$418.2 million in 1977/78, US$455.4 million in 1978/79 and US$608.3 million in 1979/80. Among these revenue, coffee accounted about 71% of total export products. At the end of the years of the military rule, exports collapsed to the level of late 1960s and early 1970s due to political turmoil of the country it experienced at that time. In 1991/92, 1992/1993 and 1993/94 Ethiopian exports were in million, US$154.1, 222.4 and 279.6, respectively. In the study period, 1997-2012, Ethiopian exports has picked up from the order of US$ 587million in 1997 to about US$2.7billion in 2012, having an average annual growth rate of 12.2%.

Though there is a consistent average export growth in the country, according to the study, the achieved average annual growth rate is by far lower than the planned target of average annual growth rate of 20-25% per annum during both the PASDEP and GTP plan periods In addition to this, the export rate is fluctuating every year; trade deficit is persistently increasing with an average deficit growth rate of 23.43%; while the average annual growth rate of exports was 12.2%, the average annual growth rate of imports was 18%. With the same analogy, average share of exports of total imports between the study years is 26%, declined from the order of 53% in 1997 to 19% in 2008 and 29% in 2012.

The study compared Ethiopian performance of export against low-income countries. The average percentage share of exports of GDP of low-income countries for the period 2004-2013 is about 22% while that of Ethiopia is less than 14% of its GDP, signifying that Ethiopian export performance is low even by the standard of low income countries. The paper discussed the export structure over time. According to the paper, the Hirschman Herfindahl Index (HHI) has consistently fallen from the order of 0.47 to 0.13 in 2010 and slightly rising to 0.18 in 2012, showing the fact that there have been

quite visible diversification in the Ethiopian export sector. For example, share of coffee declined from the order of 65% in 1997 to the order of 32% in 2012. Share of oil seeds increased from the order of 10% in 1997 to the order of 33% in 2012. However, Agricultural commodities constituted the lion’s share, ranging from the order of about 80% in the early years of the study period and declining to only the lowest share of 52% in 2003 which then picked up to 86% in 2012. The diversification towards non-agricultural commodities has been confined fewer than 14% throughout the study period, specifically to the export of leather and leather products and to a limited extent to textile and clothing. The study mentioned the experience of other countries in this regard. For example, the share of exports of manufactured goods of the year 2010, reached to the tune of more than 90% for Bangladesh, 94% for China, 64% for India and 67% for Malaysia (World Bank, WDI 2012).

Ato Tsegabirhan, strongly recommended Ethiopia to stop comparing itself with Sub Saharan Africa; rather it should compare itself with other countries which have been achieving better in structural transformation “not because we do not want to be African, but because we have to think better than the poor performers.”

By: Teshome Bekele,Senior Lecturer

In the beginning there was darkness in our organization. Our CEOs and managers told us that we did our job in darkness. They “enlightened” us that they have come with a new recipe of management which they said, are magic and will pull us out of darkness. They called that management system “Bureaucracy”. They said, “It is the best, the most efficient, rational….” We were happy believed them and obeyed them for whatever they told us about bureaucracy and we waited for

Are we doing the Right thing Right?



MI



In the conclusion of this paper, a question was posed: “why is the performance of the export sector not up to the expectation?” It is because the performance of the export is not up to the expectation in terms of addressing the persistently increasing trade deficit of the country, and accordingly the export plan of the government is to grow at an average

of 20-25%. Another reason is that the apparent trend of diversification though encouraging in terms of its quantitative achievement, it is still confined to the export of primary products, which are generally believed to have inelastic (both price and income) demand.

The major reason for lower performance of the Ethiopian export is the low responsiveness of the private sector manifested in terms of low investment, low effort to enhance productivity and low effort to upgrade into higher value creating activities. This calls for further research to understand the real and genuine interest and problems of the exporters as there are indications that the export business are of secondary importance to the business people, having other business lines, to which they give more attention like real estate and import business.

Moreover, much needs to be done to improve the business climate of the country, as many of service providing government institutions are not operating up to what it is required to create globally competitive export sector. At the same time the paper noted that there have been very high diversifications of geographical destinations of Ethiopian exports. The increasing trend of South-South trade is quite encouraging. There has been a shift towards Asia, mainly China, Japan and Korea which is one indicator of an improvement in the export outlet of the country.

The paper presented marketing management capability as indispensable element for export success. “I don’t think export will be successful without effective marketing capability”, Ato Teshome stressed. The paper indicated marketing management capability is a keystone for the success of export earnings. Ethiopia regards export in its transformation strategic plan as a means of poverty reduction and elevating Ethiopia to middle-income country. At the same time marketing management capability have not gotten the attention it deserves. However, it was noted that successful countries use their marketing management capabilities to exploit the opportunities of export and mitigate its challenges.

Though the role of marketing capability is significant, developing countries including Ethiopia underplay the importance of marketing management capabilities in steering export performance. He expressed his serious reservation on the prevailing attitude of doing things traditionally and the tendency to believe that “marketing and management can be done by anybody”. He demonstrated how the Department of Management of Addis Ababa University can play a significant role in marketing management capability building.

Export earning is the major source of national development. Some argue that countries need to pursue export-led growth (ELG) strategy for successful national development (Bhagwatiand Srinivasan, 1978; Krueger, 1978; Kavoussi, 1984).

Building Marketing Management Capability for Export: Opportunities & ChallengesBy: Teshome Bekele, AAU-Department of Management

There has been a shift towards

Asia, mainly China, Japan

and Korea which is one

indicator of an improvement in the export outlet of the

country.


The PerformanceContinued from page... 9


MI



The paper described export as instrumental, among other things, to earning of foreign exchange, correcting of balance of payment, creating reputation in the world, helping optimum utilization of resources, and promoting national economic development

Ethiopia has an opportunity to grow export, as stipulated in the paper. The paper took Ethiopia being the second most populous country in Africa, who is more than 80 million people. With all its challenges such as seemingly cyclical draught and poverty Ethiopia can be characterized by good-sized landholdings, fertile soils and predictable climate that help Ethiopia produce as much organic food as Kenya, Tanzania and Uganda combined. It also has large grazing areas that hold half of the nation’s livestock, which account for over 90% of meat and live animal exports. All these present great export opportunities for Ethiopian but the marketing aspect of it has not yet received the attention it deserved and thus the country could not reap what its potential offers.

The paper discussed a report by the National Bank of Ethiopia which indicated from 2006 until 2012, Ethiopia’s balance of trade averaged negative 1496.24 million USD and a

record low of negative 2311.70 million USD in March of 2012. Consequently, Ethiopia encounters consistent trade deficits. The country is labeled as one of the ten fast-growing economies (2011-2015), positioned third place next to China (9.5% growth per annum) and India (8.1% per annum), according to IMF. It is a country that records highest growth in African soil and the third in the world. The paper took this as great opportunity for the growth of export.

The paper explicated export in terms of international and national environment, and marketing management capabilities. These three factors have a paramount importance to the development of export. International environment is getting market access for exports (preferential trade agreement, standards and technical regulation, international rule, competition and so forth). National environment is policy environment such as market-based reforms, infrastructure, and the institutional environment. Marketing management capabilities are knowledge, skills, and abilities on how to manage international business and export.

Marketing programs operate to

satisfy societies’ and individuals needs and wants by creating values. Marketing management capability is an integrative and a driving force for economic development. Empirical researchers have identified Marketing capability as a crucial competitive advantage factor for export success (Cavusgiland Zou, 1994). According to McCarthy (1963), emphasis is often placed upon the development of techniques for increasing production and production efficiency rather than marketing. But, as a challenge, marketing program management capabilities do not hold a meaningful position in most developing countries, as the paper strongly noticed.

Marketing research, marketing strategy, market segmentation, targeting, positioning, product programs, pricing programs, distribution programs, and promotion are mentioned in the paper as components of marketing management capability.

Building marketing capability, as discussed in the paper, is crucial for the development of export. If Ethiopia were to succeed in its export performance and achieve its ambition of reaching middle income country and fighting and winning poverty, as concluded in the paper, it needs to emphasize export operations which in turn require marketing management capability. To support this endeavor, the paper finalized, Addis Ababa University, the College of Business and Economics, particularly the department of Management has the capacity and readiness to play the role in building marketing capability of Ethiopian businesses to move the export forward

MI



. Following all speeches, keynotes, and paper presentations, participants were invited to pose questions, to provide comments and suggestions, and to express their feelings on what has been done in the half afternoon day occasion.

The discussion began with appreciation to the overall management of the Forum. The event was described as the best of its kind

in terms of organization and quality of presentations. Following that issues regarding export control particularly in mining, lack of institutions and institutional capacity to regulate the export task, lack of strong and committed private sector for export were scrutinized. Clarity and policy predictability related to foreign direct investment, provision of land for investment, and taxation were also raised as concerns of businesses.Flower export promotion experience

was cited during the discussion to exemplify the lack of institutional capacity (both government and the private sector) and coordination between the government offices and the private sector. Once, the government earmarked 3.1 billion birr in the Development Bank of Ethiopia for flower exporters. Some exporters borrowed and used from this fund 600 million birr but after long seven years, the income from flower export was only around 70 million birr, panel participants reflected. Although

Discussions


Ato Amare Aregawi, General Manager(MCC),Managing Editor, and HAPI Executive Director


MI



1. Background The Ethiopian Civil Service was founded in 1961 when the Central Personnel Agency (CPA) was established modeled after the American Civil Service. The first radical measure to build the capacity

of the civil service was initiated with the implementation at the Public Sector Capacity Building Program that has begun in earnest in 2005. Ethiopia has been undergoing Business Process Reengineering (BPR), also known as Business Process Redesign, Business Transformation, or Business Process Change Management, as a management approach aiming at improvements by means of elevating efficiency and effectiveness of the processes that exist within and across organisations. BPR is defined as defined by Hammer is the fundamental re-thinking and radical re-design of business process to achieve dramatic improvements in critical, contemporary measures of performance such as cost, quality, service and speed.”

This definition contains four key words. It is fundamental: a fresh start, clean sheet, challenging the status quo concentrating on “What should be” -- unlearn all rules, assumptions, principles and techniques that underpin the way organisation is organised. It is radical: going through the root of things, not improving what

already exists, throw away the old and restart the new one. It is dramatic: not marginal, it is a quantum leap in performance i.e. cost, speed, quality and service, achieving break through: 50% and above. It is processes oriented: inter related tasks or activities that together create value for the customer. The key to BPR is for organisations to look at their business processes from a “clean slate” perspective and determine how they can best construct these processes to improve how they conduct business. This will largely assist the nation to accomplish most of the determinants stated above except those that fall within the government’s economic policy of protecting the finance, power and communication institutions from foreign competition.

2. Achievements of the Ethiopian BPRA survey, which was conducted between March and May in 2005, reveals a notable transformation of service delivery in each organisation. Very high levels of user satisfaction and spectacular improvements in

Has BPR failed and is Kaizen bound to fail in Ethiopia?

Costantinos BT Costantinos, PhD College of Business & Economics, AAU


W/ro Gizeshwork Tessema, GIZE PLC Managing Director

MI



the marketing strategy employed, consignment, was blamed for this fiasco, absence of responsible body to carry out the flower export plan might have been the prime factor. The institutional capacity and ethical practices were also raised doubting the quality of information the country has regarding, for example, the amount of bond that are being sold, level of production, and amount of tax being collected.

The paradox of exporting primary products such as skin and hides and oil seeds and importing leather bags or edible oil was mentioned as matter of utmost concern..

Ideas were also reflected on the question “If we consider export performance is low, who is to blame for it?” Both the government and the private sectors were considered responsible for the low performance. It was noted that the private sector motive and performance measure is rate of return and chasing high return commensurate to the risk the investment entails by the private sector is natural and thus should not be frowned upon. If the private sector shies away from the export sector because of profit motive, then the strategy of those concerned should be to create an environment that will make export business attractive. From experience, export is not that much profitable business right now when it is compared with other business ventures of similar risks. Cost of transportation as one impediment to export was highlighted. Considering export to china for example, the cost of transporting a shipment from Addis to Djibouti was shown to be higher than transporting the same shipment from Djibouti to China.

The Ethiopian government export related policies were appreciated save their implementation. To describe the position of Ethiopian export products in the global market, South American and Asian countries were cited as examples of nations producing similar materials that Ethiopia is producing in a better quantity and quality. The existing poor infrastructure, lack of sufficient electric power, frequent black out of power, human capital, and existing poor machineries, and low productivity among others were said to have fettered Ethiopian private sector competitiveness in the international market.

It was also mentioned that foreign investors have taken unfair advantages of the Ethiopian export incentive schemes, exploiting our enthusiasm for growth and lack of institutional capacity to regulate such behaviors. The countries of such foreign companies who exposed Ethiopia to capital flight and have perpetrated unfair and dishonest

the cost of transporting a shipment from

Addis to Djibouti was shown to

be higher than transporting the same shipment from Djibouti to

China.

DiscussionsContinued from page... 12


Ato Temesgen Genetu (ACCA, FCCA)

Ato Tassew Bekele, Senior Economist, CES Consulting Engineers Salzgitter GmbH

MI



The Ethiopian government was reported to be one of the highest investor in the world while the private sector of Ethiopia is among the six bottom-line countries in the world. In addition, the private sector involvement in and motivation for manufacturing is described to be low. Even the limited heavy manufacturing machineries imported are out of date and refurbished ones. Given this reality combined with the problems mentioned before such as untrained labor, low productivity and bureaucratic red tape, developing competitive export industry and achieving export growth were reckoned challenges. Mechanisms to regulate heavy machinery importing practices and determine suitability of machineries need to be introduced.Further issues raised were regarding the similitude between traditional farmers and destitute mechanized farming, enhancement of dialog and partnership among stakeholders, and WTO accession implications to Ethiopian growth. The discussion was warm, captivating, educational, and binding.

Finally, the discussion concluded the occasion with great satisfaction of what was done on the day and hoped that the next theme of the EIEF will dwell on one of the major issues raised.

business practices were mentioned by name

Some of such companies borrow huge amount of money in the name of export and export their product to their own affiliates in another country which will rig the lowest possible purchase price. While the product is sold at handsome price in the foreign country with awesome profit for the affiliated company in effect the exporter, Ethiopia receives a meager foreign currency in return.

The recent abscondence of a Middle East investor who borrowed huge amount of money from Development Bank was also mentioned as challenges facing the export promotion effort of the country. The foreign investors have shown the tendency to abuse the policy which allows a foreign investor to switch business lines after five years of export activity. It was emphasized that acquiring institutional capacity and implementation regulations to curb such scandals and close the cracks amenable to national treasury plunder should get attention sooner than later.

Other issues raised include re-institutionalization of internship and the role of the private sector, media coverage of the Forum, and stay the course of the research presentation session by government officials.

performance were also recorded as a result of the introduction of Business Process Reengineering. Although the change process in both organisations tended to be sluggish, these improvements appear to be outstanding within the context of Ethiopia’s system of public administration. However, one challenge will be for the government to maintain the momentum of reform and to cascade BPR and other elements of the reform to other divisions, departments, and work units in the government. Putting in place incentive schemes and an appropriate monitoring system should protect the reform from backsliding. Despite the pessimistic accounts of public sector reform in African countries, this article reveals that there are positive findings of interest to the field of development administration.

3. Shortcomings of the BPR Process3.1. Bad reputation Re-engineering has earned a bad reputation because such projects have often resulted in massive layoffs. In spite of the hype that surrounded the introduction of Business Process Reengineering, partially due to the fact that the authors of Reengineering the Corporation reportedly bought huge numbers of copies to reach the top of the bestseller lists, the method has not entirely lived up to its expectations. The main reasons seem to be that: BPR assumes that the factor that limits organisation’s performance is the ineffectiveness of its processes. This may or may not always be true.

Also BPR offers no means to validate this assumption. BPR assumes the need to start the process of performance improvement with a clean slate, i.e., totally disregard the status quo. BPR does not provide an effective way to focus the improvement efforts on the organisation’s constraints. Sometimes, or maybe quite often, a gradual and incremental change may be a better approach


BPR in Ethiopia:Continued from page... 12

Ato Tamirat Shawoel, Head, Economic Research & Planning, Wegagen Bank S.C.

MI



the light. After a while, our bosses told us that bureaucracy is an iron cage that fettered our organization and kept us backward in darkness and that they have a new management system which they said is flexible and participative and told us that they will abolish bureaucracy-the iron cage. Every time our organization failed to achieve its objectives or what they called strategy, they continued to come up with series of new management models like magicians, which they say will shower us with light and clean us from the sins of mismanagement just like The Holly Water. We believed them and obeyed them and we did exactly as we were told happily hopping for the light. Sometimes we felt like asking our bosses in earnest. “Are we doing the right thing right?”

However, we were told that bosses are always right, and we continued believing in them.

Every time new bosses came they continued telling us directly and sometimes implied that our previous managers (CEOs) have led us in darkness. Time after time, again and again they told us that their new magic management formula will bring a quantum leap success and pull us out of darkness.

We obeyed them and we did whatever they told us to do, hopping for the light. But in vain, success was not forthcoming. “Are we doing the right thing right?”

Quite recently our bosses told us about more management systems which they said are magic and “root pulling” systems that will take us to light. Some of the recent management systems are Business Process Reengineering (BPR), Lean and Mean Management, TQM, Six Sigma, Restructuring, Balanced Scorecard (BSC), Kaizen, Result Oriented Performance Management, Self Study, Achieving Competitive Excellence (ACE) and many more. The list of the management systems seems endless. It is surprising to note some of the so called management systems which are introduced by our managers are old and have existed for several years. However, they are only publicized to an extreme level. Some say that some of the new models that our managers come with are the same management system that existed before except they are in a new perhaps distorted form. They are only like “old wines in new bottles”.

However, if our bosses tell us their systems and models are new, of course they are new because the “bosses are always right” although they may not be right sometimes. Every time bosses instruct us to implement new and magic systems which they said is a remedy, we workers obeyed them.

Once our friends, who were working in a construction firm told us that their managers gave them a blueprint to construct a railway line. The bosses told the workers that the blue print was the best and first of its kind. Our friends obeyed them and did exactly as they were instructed and without question. However, the result of their effort was awful and wasted as shown in the figure bellow.

The bosses told our friends to “Do it all over again.

We believe that management tools such as strategy, BPR are like any tools that people use to fix their problems. For example like a hammer used to drive a nail to fix an object. Driving a nail into a hard object requires the right type of of nail and a and the right hammerer. A rubber nail and a rubber hammer may not be helpful to nail into a stiff and solid object. And unskilled (unprofessional) hammerer will spoil the nail and the object,

Supposing we consider management tools such as BPR, BSC and others as nails, they need to be the right nails and be produced execute by the right professionals. There are several instances where BPR and BSC have failed for reasons they are not used right. Continued on page... 17

Are we doing ...?Continued from page ... 9

MI



Models to be used need to be the right thing and they should be done right also. Being the right thing means-being the thing that drives both performance and behavior towards the accomplishment of organizational objectives. Management models:

1. Need to be right stuff-that fit the situation and capable of solving the root problem.

2. Need to be designed by professionals.

3. Need to be implemented by the right persons

According to Mary Parker Follet, management is a process of getting things done through people. Thus, one cannot expect CEOs (top managers) to be all knowledgeable but they need to have certain level of wit and intelligence to help them carry out their role of being leaders by working with and through other people.

One of the big challenges managers face is choosing the right people professionals that help to produce quality ideas and quality performance output.

According to Crosby, quality is free. Crosby stated that effective quality management, to be practical and achievable, must start at the top. As Crosby emphasized, “do it right the first time”. CEOs must make “Zero defects” as standard of all of their activities. Doing things right saves an organization from horror that may ensue as sighted in the case of the railway line presented above. In many organizations, when new bosses come, often they embark in restructuring their organizations, hatch new units, discard or rename existing units etc,

Ventures such as structuring are serious jobs that need professional skills. One can take an organization as a system-a living thing, for example like a tree or a human being. Restructuring living things say human beings require sturdy and serious qualified professionals (medical) who

(such as -- Kaizen). BPR is culturally biased towards the US way of thinking. When Kaizen is compared with the BPR method is it clear the Kaizen philosophy is more people-oriented, more easy to implement, but requires long-term discipline and provides only a small pace of change. The BPR approach on the other hand is harder, technology-oriented, it enables radical change but it requires considerable change management skills. It is doubtful whether it can be implemented in the private sector.

3.2. Some observed challenges: There is no as such survey and assessment so far conducted on the challenges of BPR. However, since critical observation preferably is accepted following challenges are notified for this purpose.

• Planning phase: Leadership problems have been reflected in the essence of not considering the change as personal agenda. This is supported with failing to get focused and become too busy with routine activities they tend to delegate the transformation agenda to others and failure to start from end outcome and starting at functional department perspectives rather than process perspective and writing organisational goals and confirming as a process. Selecting the designing teams who have no sufficient knowledge, skill and exemplary behaviour and yet not assigning the designing teams as full-time worker on reengineering.

• Understanding phase: Spending too much time analysing the existing processes and identifying operational problems rather than process problems;

• Redesigning Phase: Conduct benchmarking without making enough preparation, not proceeding to the next step without making a benchmarking

process, not clearly pin pointing the distinction between stretched objective of business process and objectives of an operational strategic plan, using Problem-Rule-Assumption for analysis or solution rather than generating creative idea that could break the assumption and failure to ensure well-designed and well-organised new business process;

• Implementation phase: Lack preparing action plan that include commutation plan and change management strategies, not ensuring the partition or wall is rejected and functional boundaries are dissolved and not incorporating feedback from employee, customers and stakeholders to the new process design;

3.3. Creating a meritorious civil serviceEthiopia requires a proactive and innovative managerial and entrepreneurial team with capacities and will power. The crux of the challenge therefore, is creating, retaining and putting to productive use peoples with such qualities throughout the economy. It is about having the ability and willingness to identify, sequence and execute human-centered development priorities and programs, to be able to participate meaningfully in the global economy. It boils down to formulating and executing national and sectoral policies that would enhance Ethiopia’s aggregate commitment, will power and capacities to mobilise, develop, motivate, encourage and utilise all segments of the population. Hence neither BPR nor kaizen would be a solution unless the recruitment process, procedure and criteria are transformed and the remuneration structure transformed to match the private sector and the cost of living index.


Has BPR failed...?Continued from page... 12


18PageVolume2 Issue3

AddressDepartment of Management, College ofBusiness and economics,Addis Ababa University

Tel: +251-11-1229611E-mail: [email protected] [email protected]

www.aau.edu.et/management

MI

“In the past, the U.K. got away with selling things that weren’t unusual. Now it’s no use trying to export without having something that’s unusual and better.” -

James Dyson

“Quality is doing the right thing when no one is looking.”

Henry Ford

“When everything is a priority, nothing is a priority.” -

Karen Martin

“Our greatest glory consists, not in never falling, but in rising every time we fall.”

Oliver Goldsmith

“If you’re in a bad situation, don’t worry it’ll change. If you’re in a good situation, don’t worry it’ll change.”

John A. Simone, Sr.

Tips and Quotes

have the capacity to diagnose, define the problems prescribe solutions and take the right action, not witch doctors or magicians. Changing names of an organization or part of the organization is just like changing the name of a person. When names are changed persons or organizations lose their identity.

Managers are not expected to be professionals in diagnosing the problems of their organizations and prescribing solutions. However, they need to use the right professionals which will do the right thing. Regarding working with and through people, of professionals, sidekicks, consultants and advisors managers need to know that there are Good, BAD and Ugly professionals, consultants, and sidekicks.

Managers need to avoid bad and ugly professionals who distort management models, incubate and hatch unhealthy models, and contaminate organizations with malfunctioning.

Who are the good, bad and ugly professionals, consultants and advisors?

By the way, is bureaucracy gone or reinforced, made tougher than ever before? Are the new models BSC, BPR, Kaizen etc. armors and beautiful rappers, new bottles for the old bureaucracy? To be contin ued.

Dale, Ernest. (1981) Management Theory and practice 4th Edition. McGraw-Hill International Book Company Tokyo.

Philip B. Crosby. Quality Is Free. The Art of Making Quality Certain. (New York: McGraw-Hill, 1979).

Up coming events• 4th Executive Idea Exchange Forum on

“Implications of WTO Accession For Ethiopian Businesses” will be conducted at Addis Ababa universty, Eshetu Chole Hall on September 26, 2013

• PhD program in Management will commence in September 2013

Are we doing...?Continued from page... 18



Pictures Gallery

MI



Pictures Gallery

Education

Aau gizeshwork