Analysis of Ethiopia for Business Opportunities

Analysis of Ethiopia for Business Opportunities 1. Introduction 1.1 The Country Ethiopia is almost five times bigger in the size of the United Kingdom and 27 times in the size of the Netherlands, is geographically located in the east of Africa with border line Somalia(1626 km) from east , Eritrea(912km) on north ,Sudan(1606 km) from the west and Kenya (830 km from the south. Ethiopia has geographically importance due to easy access to reach the Middle East and Europe, increase its importance in international trade. Geographically having an area of approximately 1.12 million square kilometers (444,000 square miles) out of which land is on 1,119 million square kilometers and water is on 7444 square meters. Ethiopia is high plateau with central mountain ranges almost over the country is divided by Great Rift Valley. The major rivers in Ethiopia are Blue Nile, Awash, Baro, Omo, Tekezie and Wabe Shebele. Ethiopia has also small amount of natural resources with small reserves of platinum, gold, potash, copper, hydropower and natural gas. 1.2 The People Ethiopia is country with around 80 million people, and in comparison to other country it comes on 14th rank in world. Almost more than 80 percent of the population still lives in the rural areas. The age structure in Ethiopia is 0-14 years are (46.1%),15-64 years are (51.2%) and 65 years and over are (2.7%).Ethiopia has average birth rate of 2.7%. In Ethiopia is total freedom of religious practice, and the Christianity and Islam are the two main religions in Ethiopia with other religions which are in very number most of them are located in south side. Almost two-third of the population used the three main languages Amharic, Oromiffa and Tigrigna the official language of the Ethiopian government is Amharic. In schools, colleges and university teaching and medium of instruction are in English, also used mostly in the banking, insurance and business transactions, Arabic and Italian languages are also widely used in Ethiopia. Almost the 42.7 % of over 15 years old people can read and write mean having basic literacy rate. The Ethiopian government is spending almost 5.5 percent of their GDP in education programs. 1.3 The Government Ethiopia is conventional short form of name, and conventional long form of name is Federal Democratic Republic of Ethiopia. The first time election was held in 1995 and country adopted a new constitution and the government there is known as the federal republic government. The government involves in the foreign policy and relations, defense system and common interest benefits. The Federal State divisions are in nine ethnically based states vested with powers for self administration. The FDRE represent the common peoples interest and peoples of the states, the federal government is structured as a lines of bicameral parliament, with the Council of Peoples representatives being the highest authority of the Federal Government the representative of Councils Members are elected democratically for six year term. 1.4 Cities and Towns Addis Ababa, the largest city and capital of the Ethiopia, also is the seat of the Federal Government of Ethiopia. The capital city was founded in 1887 and population of around about 3 million. Addis Ababa is the host city for Organization for African Unity and the United Nations Economic Commission for Africa; also there is more international organization with their headquarters and branch offices. Addis Ababa I also centre point for business, commerce and industries. In Addis can find different manufacturing plants located in and around the city. There are lots of entertainment and sport facilities in the city, with national parks. The main centre of point are resort centers with hot springs and lake, all of them are easily accessible through road. The other important and big cities in term of trade and industries having potential of expansion are Awassa, Dire Dawa, Gondar, Dessie, Nazareth, Jimma, Harar, Bahir Dar, Mekele, Debre Markos and Nekemte. All of them are interconnected with Addis through road,most of them have their historical importance with good infrastructure facilities. 1.5 THE ECONOMY The Ethiopian economy is totally dependable on agriculture which has 45% of the Gross Domestic Product (GDP), 65 % of total exports and 85% of employment. Coffee is the main export product and its alone having a share of over 85 % of total agricultural exports. In Ethiopia different crops in different area of the country cultivated but the main crops are cereals, pulses, coffee, cotton, tobacco, fruits, sugarcane and oil seeds. The industrial sector plays also big role in economy and having almost 11% of share in total GDP, which provides their product to local and global markets. The most important products in term of local market and export are textiles, foodstuffs, tiles, paper, beverages, cement, semi- processed leather, finished leather products and non-metallic products. In Ethiopia even it is small reserve amount of natural resources and it contribute only 1% to the total GDP, but still there are lots of opportunities in mining to explore and contribute in Ethiopian economy. Communications There is total monopoly of Ethiopian Telecommunications corporations over the telephonic services open-wire, microwave radio relay; radio communication in the HF, VHF, and UHF frequencies; 2 domestic satellites provide the national trunk service. Ethiopia has only 1 public TV broadcast station which broadcasting it nationally and only 1 public radio broadcaster with stations in each state, there are some commercial and dozens of community radio stations. Transportation Till 2010 in Ethiopia there 61 airports, out of which 17 airports are with paved runways and 44 airports are unpaved. The railway is under joint control of Ethiopia and Djibouti, but most of it is inoperable and need lots of improvement and expansion to improve the transportation. The conditions of Ethiopian roads are also not in very good conditions out of 36469 km long road only 6980 k are in better conditions other are unpaved around about 29849 km. Ethiopia has 9 merchant marine 8 cargo and 1 roll on/ roll off, they are landlocked and uses the ports Djibouti in Djibouti and Berbera in Somalia. In Ethiopia transportation is a big problem and effects also in the business. Ethiopian government takes this problem very seriously and many projects are on progress for improvement and modernization of Ethiopian transportation system. 1 .6 Banking Systems 1.6.1 Introduction In Ethiopia banking system was introduced in 1905 with the coordination of Bank of Egypt and the first name of bank was Bank of Abyssinia which is controlled by private company in Ethiopia. Later in 1931 it was replaced by the Bank of Ethiopia. During the Italian invasion period and subsequent British occupation Ethiopia become one of the important places for East Africa Currency Board. Later again it is renamed as State bank of Ethiopia having two active departments involves in the process of separate function of issuing banks and commercial bank. In 1963 the bank is divided into two parts two new bank national Bank of Ethiopia involves in the process of centralizing and issuing bank and the second one the commercial bank of Ethiopia. In 1974 there was merging of maximum of financial institutes available tat time including state owned also some of them are The Agricultural and Industrial Development Bank The Savings and Mortgage Corporation of Ethiopia The Imperial Savings and Home Ownership Public Association The Addis Ababa Bank The Banco di Napoli The Banco di Roma In 1975 change in government policy and change into Marxist government bring again lots of changes in banking system like nationalization of private financial institutes and insurance companies. The big and important commercial bank of Ethiopia is now known as Addis Ababa bank and the total control of all banks and financial institutes are under supervision of National Bank of Ethiopia. The Ethiopian Insurances corporation take all power and control for the all insurance companies and for the home loan and renovation loan is provide by the new Housing and savings bank. 1.6.2 Current Conditions The whole banking system condition is still undeveloped and need lots of improvement and development. In Ethiopia there is also no stock exchange and foreign bank as the banking system is still not globalized, while higher government authorities are afraid of losing control over the economy because of globalizing the banking system. Thats why they have full control over the banking system even they decide the interest rate as per the high inflation rate. Below provided table to have a look on the condition of ease of doing business in Ethiopia. Table 1 Business Climate of Ethiopia As National Bank of Ethiopia is Ethiopian central bank and the state owned Commercial Bank is one of the biggest and largest bank in Ethiopia having approx. control of more than 75% of total banking assets in Ethiopia, tables 2 tried to explain the banking system in Ethiopia. Table 2 Value of Ethiopian Bank Assets Insurance companies and other financial institutions In Ethiopia the Ethiopia Insurance Corporation controls 10 insurance companies performing business in more than 200 branches all over the country Below in the table the number of branches and their capital are explained figures available are from 2007 and till then only nine insurance companies are in business the 10th company (Lion Insurance Company) comes in business after 2007 thats why it is not mention in table. Table 3: Branches and Capital of Insurance Companies in Ethiopia (Capital in Millions of Birr) Stock Market No stock exchange exists Other Types of Finance/Financial Market Micro finance After the establishment of the government in 1994/1995. It started also and supporting for the development of microfinance industry, the purpose of Ethiopian government to developed the microfinance industry to help poor people in both rural and urban area. According to the 2005 microfinance industry report in Ethiopia that there are 23 microfinance industries and around about more than 1 million peoples are connected directly to the industry. As from above it is cleared that government had totally prohibited any kind of foreign company involved in the process of financial or banking services in country. In Ethiopia microfinance industry can be opened by people having Ethiopian nationality and having full 100% share in company or by those organization which are totally settled and have their registration under the law and having their head office in Ethiopia. As in country most of the microfinance initial capital comes from the foreign investors and which leads to the not clear transparency of microfinance industry, normally person investing in the microfinance industry local or foreigner must enlist as a shareholder. As government authorized high authorities decided interest rate according to the high inflation rate, and in microfinance industry there is no fixed interest rate on credit according to law minimum interest on credit is 3%, which is a loss for those people wants to open microfinance industry in rural areas because of added administrative cost in capital of investment. Top ten reasons to do business in Ethiopia Political and social stability; Macro-economic stability and growing economy; Adequate guarantees and protections; Transparent laws and streamlined procedures; Ample investment opportunities; Abundant and trainable labor force; Wide domestic, regional and international market opportunity; Competitive investment incentive packages ; Welcoming attitude of the people to FDI; and Pleasant climate and fertile soils. 2. Foreign Market Entry Strategy 2.1 Introduction 2.1.1 Strategy Strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations. 2.1.2 Strategic Decisions Strategic decisions are likely to be complex in nature. This complexity is a defining feature of strategy and strategic decisions and is especially so in organizations with wide geographical scope, such as multinational firms, or wide ranges of products or services. Strategic decisions may also have to be made in situations of uncertainty about the future. Strategic decisions are likely to affect operational decisions: for example, an increased emphasis on consumer electronics would trigger off a whole series of new operational activities, such as finding new suppliers and building strong new brands. This link between overall strategy and operational aspects of the organization is important for two other reasons. First, if the operational aspects of the organization are not in line with the strategy, then, no matter how well considered the strategy is, it will not succeed. Second, it is at the operational level that real strategic advantage can be achieved. Indeed, competence in particular operational activities might determine which strategic developments might make most sense. Strategic decisions are also likely to demand an integrated approach to managing the organization. Managers have to cross functional and operational boundaries to deal with strategic problems and come to agreements with other managers who, inevitably, have different interests and perhaps different priorities. Managers may also have to sustain relationships and networks outside the organization, for example with suppliers, distributors and customers. Strategic decisions usually involve change in organizations which may prove difficult because of the heritage of resources and because of culture. These cultural issues are heightened following mergers as two very different cultures need to be brought closer together or at least learn how to tolerate each other. Indeed, this often proves difficult to achieve a large percentage of mergers fail to deliver their ‘promise for these reasons. 2.1.3 Levels of Strategy Corporate-level strategy: Itis concerned with the overall purpose and scope of an organization and how value will be added to the different parts (business units) of the organization. Business-level strategy: It is about how to compete successfully in particular markets. Operational strategies: These are concerned with how the component parts of an organization deliver effectively the corporate and business-level strategies in terms of resources, processes and people. 2.1.4 Strategic Management Strategic management includes understanding the strategic position of an organization, strategic choices for the future and turning strategy into action. The strategic position is concerned with the impact on strategy of the external environment, an organizations strategic capability (resources and competences) and the expectations and influence of stakeholders. Strategic choices involve understanding the underlying bases for future strategy at both the business unit and corporate levels and the options for developing strategy in terms of both the directions and methods of development. Strategy into action is concerned with ensuring that strategies are working in practice. Strategy development processes are the ways in which strategy develops in organizations. 2.2 Environment The most general ‘layer of the environment is often referred to as the macro environment. This consists of broad environmental factors that impact to a greater or lesser extent on almost all organizations. It is important to build up an understanding of how changes in the macro-environment are likely to impact on individual organizations. A starting point can be provided by the PESTEL framework which can be used to identify how future trends in the political, economic, social, technological, environmental and legal environments might impinge on organizations. This provides the broad ‘data from which the key drivers of change can be identified. These will differ from sector to sector and from country to country. Therefore they will have a different impact on one organization from another. If the future environment is likely to be very different from the past it is helpful to construct scenarios of possible futures. This helps managers consider how strategies might need to change depending on the different ways in which the business environment might change. Within this broad general environment the next ‘layer is called an industry or a sector. This is a group of organizations producing the same products or services. The five forces framework and the concept of cycles of competition can be useful in understanding how the competitive dynamics within and around an industry are changing. The most immediate layer of the environment consists of competitors and markets. Within most industries or sectors there will be many different organizations with different characteristics and competing on different bases. The concept of strategic groups can help with the identification of both direct and indirect competitors. Similarly customers expectations are not all the same. They have a range of different requirements the importance of which can be understood through the concepts of market segments and critical success factors. 2.2.1 Key driver of change Key drivers of change are forces likely to affect the structure of an industry, sector or market. There is an increasing trend to market globalization for a variety of reasons. In some markets, customer needs and preferences are becoming more similar. For example, there is increasing homogeneity of consumer tastes in goods such as soft drinks, jeans, electrical items (e.g. audio equipment) and personal computers. The opening of McDonalds outlets in most countries of the world signaled similar tendencies in fast food. As some markets globalize, those operating in such markets become global customers and may search for suppliers who can operate on a global basis. For example, the global clients of the major accountancy firms may expect the accountancy firms to provide global services. The development of global communication and distribution channels may drive globalization the obvious example being the impact of the internet. In turn, this may provide opportunities for transference of marketing (e.g. global brands) across countries. Marketing policies, brand names and identities, and advertising may all be developed globally. This further generates global demand and expectations from customers, and may also provide marketing cost advantages for global operators. Nor is the public sector immune from such forces. Universities are subject to similar trends influenced by changing delivery technologies through the internet. This means, for example, that there is developing a genuinely global market for MBA students particularly where the majority of ‘tuition is done online. Cost globalization may give potential for competitive advantage since some organizations will have greater access to and/or be more aware of these advantages than others. This is especially the case in industries in which large volume; standardized production is required for optimum economies of scale, as in many components for the electronics industry. There might also be cost advantages from the experience built through wider-scale operations. Other cost advantages might be achieved by central sourcing efficiencies from lowest-cost suppliers across the world. Country-specific costs, such as labor or exchange rates, encourage businesses to search globally for low cost in these respects as ways of matching the costs of competitors that have such advantages because of their location. For example, given increased reliability of communication and cost differentials of labor, software companies and call centers are being located in India, where there is highly skilled but low-cost staff. Other businesses face high costs of product development and may see advantages in operating globally with fewer products rather than incurring the costs of wide ranges of products on a more limited geographical scale. The activities and policies of governments have also tended to drive the globalization of industry. Political changes in the 1990s meant that almost all trading nations function with market-based economies and their trade policies have tended to encourage free markets between nations. Globalization has been further encouraged by technical standardization between countries of many products, such as in the automobile, aerospace and computing industries. It may also be that particular host governments actively seek to encourage global operators to base themselves in their countries. However, it is worth noting that in many industries country-specific regulations still persists and reduces the extent to which global strategies are possible. Also, the early 2000s have seen a rise in citizen activism about the impact of globalization on developing countries most notably at meetings of the World Trade Organization Changes in the macro-environment are increasing global competition which, in turn, encourages further globalization. If the levels of exports and imports between countries are high, it increases interaction between competitors on a more global scale. If a business is competing globally, it also tends to place globalization pressures on competitors, especially if customers are also operating on a global basis. It may also be that the interdependence of a companys operations across the world encourages the globalization of its competitors. For example, if a company has sought out low-cost production sites in different countries, these low costs may be used to subsidize competitive activity in high-cost areas against local competitors, thus encouraging them to follow similar strategies. 2.2.2 Industries and sectors The macro-environment might influence the success or failure of an organizations strategies. But the impact of these general factors tends to surface in the more immediate environment through changes in the competitive forces on organizations. An important aspect of this for most organizations will be competition within their industry or sector. Economic theory defines an industry as ‘a group of firms producing the same principal product or, more broadly, ‘a group of firms producing products that are close substitutes for each other. This concept of an industry can be extended into the public services through the idea of a sector. Social services, health care or educations also have many producers of the same kinds of services. From a strategic management perspective it is useful for managers in any organization to understand the competitive forces acting on and between organizations in the same industry or sector since this will determine the attractiveness of that industry and the way in which individual organizations might choose to compete. It may inform important decisions about product/market strategy and whether to leave or enter industries or sectors. It is important to remember that the boundaries of an industry may be changing for example, by convergence of previously separate ‘industries such as between computing, telecommunications and entertainment. Convergence is where previously separate industries begin to overlap in terms of activities, technologies, products and customers. There are two sets of ‘forces that might drive convergence. First, convergence might be supply-led where organizations start to behave as though there are linkages between the separate industries or sectors. This is very common in the public services where sectors seem to be constantly bundled and un-bundled into ministries with ever-changing names (‘Education, ‘Education and Science, ‘Education and Employment, ‘Education and Skills etc.). This type of convergence may be driven by external factors in the business environment. For example, governments can help or hinder convergence through regulation or deregulation a major factor in the financial services sector in many countries. The boundaries of an industry might also be destroyed by other forces in the macro-environment. For example, e-commerce is destroying the boundary of traditional retailing by offering manufacturers new or complementary ways to trade what are now being called new ‘business models12 such as websites or e-auctions. But the real test of these types of changes is the extent to which consumers see benefit to them in any of this supply-side convergence. So, secondly, convergence may also occur through demand-side (market) forces where consumers start to behave as though industries have converged. For example, they start to substitute one product with another (e.g. TVs and PCs). Or they start to see links between complementary products that they want to have ‘bundled. The package holiday is an example of bundling air travel, hotels and entertainment to form a new market segment in the travel industry. 2.2.3 Competitors and market An industry or sector may be a too-general level to provide for a detailed understanding  of competition. For example, Ford and Morgan Cars are in the same industry (automobiles) but are they competitors? The former is a publicly quoted multinational business; the latter is owned by a British family, produces about 500 cars a year and concentrates on a specialist market niche where customers want hand-built cars and are prepared to wait up to four years for one. In a given industry there may be many companies each of which has different capabilities and which compete on different bases. This is the concept of strategic groups. But  competition occurs in markets which are not confined to the boundaries of an industry and there will almost certainly be important differences in the expectations of different customer groups. This is the concept of market segments. What links these two issues is an understanding of what customers value. Strategic groups are organizations within an industry or sector with similar strategic  characteristics, following similar strategies or competing on similar bases. These characteristics are different from those in other strategic groups in the same industry or sector. For example, in grocery retailing, supermarkets, convenience stores and corner shops are three of the strategic groups. There may be many different characteristics that distinguish between strategic groups but these can be grouped into two major categories .First, the scope of an organizations activities (such as product range, geographical coverage and range  of distribution channels used). Second, the resource commitment (such as brands, marketing spend and extent of vertical integration). Which of these characteristics are especially relevant in terms of a given industry needs to be understood in terms of the history and development of that industry and the forces at work in the environment. 2. Market segments The concept of strategic groups discussed above helps with understanding the similarities and differences in the characteristics of ‘producers those organizations that are actual or potential competitors. However, the success or failure of organizations is also concerned with how well they understand customer needs and are able to meet those needs. So an understanding of markets is crucial. In most markets there is a wide diversity of customers needs, so the concept of market segments can be useful in identifying similarities and differences between groups of customers or users. A market segment is a group of customers who have similar needs that are different from customer needs in other parts of the Market 2.2.4 Opportunities and threat The critical issue is the implications that are drawn from this understanding in guiding strategic decisions and choices. There is usually a need to understand in a more detailed way how this collection of environmental factors might influence strategic success or failure. This can be done in more than one way. This identification of opportunities and threats can be extremely valuable when thinking about strategic choices for the future. A strategic gap is an opportunity in the competitive environment that is not being fully exploited by competitors. By using some of the frameworks described in this chapter, managers can begin to identify opportunities to gain competitive advantage in this way: Opportunities in substitute industries Organizations face competition from industries that are producing substitutes. But substitution also provides opportunities. In order to identify gaps a realistic assessment has to be made of the relative merits of the products/technologies (incumbent and potential substitutes) in the eyes of the customer. An example would be software companies substituting electronic versions of reference books and atlases for the traditional paper versions. The paper versions have more advantages than meet the eye: no hardware requirement (hence greater portability) and the ability to browse are two important benefits. This means that software producers need to design features to counter the strengths of the paper versions; for example, the search features in the software. Of course, as computer hardware develops into a new generation of portable handheld devices, this particular shortcoming of electronic versions might be rectified. Opportunities in other strategic groups or strategic spaces It is also possible to identify opportunities by looking across strategic groups particularly if changes in the macro-environment make new market spaces economically viable. For example, deregulation of markets (say in electricity generation and distribution) and advances in IT (say with educational study programs) could both create new market gaps. In the first case, the locally based smaller-scale generation of electricity becomes viable possibly linked to waste incineration plants. In the latter case, geography can be ‘shrunk and educational programs delivered across continents through the internet and teleconferencing (together with local tutorial support). New strategic groups emerge in these industries/sectors. Opportunities in the chain of buyers It was noted that this can be confusing, as there may be several people involved in the overall purchase decision. The user is one party but they may not buy the product themselves. There may be other influencers on the purchase decision too. Importantly, each of these parties may  value different aspects of the product or service. These distinctions are often quite marked in business-to-business transactions, say with the purchase of capital equipment. The purchasing department may be looking for low prices and financial stability of suppliers. The user department (production) may place emphasis on special product features. Others such as the marketing department may be concerned with whether the equipment will speed throughput and reduce delivery times. By considering who is the ‘most profitable buyer an organization  may shift its view of the market and aim its promotion and selling at those ‘buyers with the intention of creating new strategic customers. Opportunities for complementary products and services This involves a consideration of the potential value of complementary products and services. For example, in book retailing the overall ‘ Analysis of Ethiopia for Business Opportunities Analysis of Ethiopia for Business Opportunities 1. Introduction 1.1 The Country Ethiopia is almost five times bigger in the size of the United Kingdom and 27 times in the size of the Netherlands, is geographically located in the east of Africa with border line Somalia(1626 km) from east , Eritrea(912km) on north ,Sudan(1606 km) from the west and Kenya (830 km from the south. Ethiopia has geographically importance due to easy access to reach the Middle East and Europe, increase its importance in international trade. Geographically having an area of approximately 1.12 million square kilometers (444,000 square miles) out of which land is on 1,119 million square kilometers and water is on 7444 square meters. Ethiopia is high plateau with central mountain ranges almost over the country is divided by Great Rift Valley. The major rivers in Ethiopia are Blue Nile, Awash, Baro, Omo, Tekezie and Wabe Shebele. Ethiopia has also small amount of natural resources with small reserves of platinum, gold, potash, copper, hydropower and natural gas. 1.2 The People Ethiopia is country with around 80 million people, and in comparison to other country it comes on 14th rank in world. Almost more than 80 percent of the population still lives in the rural areas. The age structure in Ethiopia is 0-14 years are (46.1%),15-64 years are (51.2%) and 65 years and over are (2.7%).Ethiopia has average birth rate of 2.7%. In Ethiopia is total freedom of religious practice, and the Christianity and Islam are the two main religions in Ethiopia with other religions which are in very number most of them are located in south side. Almost two-third of the population used the three main languages Amharic, Oromiffa and Tigrigna the official language of the Ethiopian government is Amharic. In schools, colleges and university teaching and medium of instruction are in English, also used mostly in the banking, insurance and business transactions, Arabic and Italian languages are also widely used in Ethiopia. Almost the 42.7 % of over 15 years old people can read and write mean having basic literacy rate. The Ethiopian government is spending almost 5.5 percent of their GDP in education programs. 1.3 The Government Ethiopia is conventional short form of name, and conventional long form of name is Federal Democratic Republic of Ethiopia. The first time election was held in 1995 and country adopted a new constitution and the government there is known as the federal republic government. The government involves in the foreign policy and relations, defense system and common interest benefits. The Federal State divisions are in nine ethnically based states vested with powers for self administration. The FDRE represent the common peoples interest and peoples of the states, the federal government is structured as a lines of bicameral parliament, with the Council of Peoples representatives being the highest authority of the Federal Government the representative of Councils Members are elected democratically for six year term. 1.4 Cities and Towns Addis Ababa, the largest city and capital of the Ethiopia, also is the seat of the Federal Government of Ethiopia. The capital city was founded in 1887 and population of around about 3 million. Addis Ababa is the host city for Organization for African Unity and the United Nations Economic Commission for Africa; also there is more international organization with their headquarters and branch offices. Addis Ababa I also centre point for business, commerce and industries. In Addis can find different manufacturing plants located in and around the city. There are lots of entertainment and sport facilities in the city, with national parks. The main centre of point are resort centers with hot springs and lake, all of them are easily accessible through road. The other important and big cities in term of trade and industries having potential of expansion are Awassa, Dire Dawa, Gondar, Dessie, Nazareth, Jimma, Harar, Bahir Dar, Mekele, Debre Markos and Nekemte. All of them are interconnected with Addis through road,most of them have their historical importance with good infrastructure facilities. 1.5 THE ECONOMY The Ethiopian economy is totally dependable on agriculture which has 45% of the Gross Domestic Product (GDP), 65 % of total exports and 85% of employment. Coffee is the main export product and its alone having a share of over 85 % of total agricultural exports. In Ethiopia different crops in different area of the country cultivated but the main crops are cereals, pulses, coffee, cotton, tobacco, fruits, sugarcane and oil seeds. The industrial sector plays also big role in economy and having almost 11% of share in total GDP, which provides their product to local and global markets. The most important products in term of local market and export are textiles, foodstuffs, tiles, paper, beverages, cement, semi- processed leather, finished leather products and non-metallic products. In Ethiopia even it is small reserve amount of natural resources and it contribute only 1% to the total GDP, but still there are lots of opportunities in mining to explore and contribute in Ethiopian economy. Communications There is total monopoly of Ethiopian Telecommunications corporations over the telephonic services open-wire, microwave radio relay; radio communication in the HF, VHF, and UHF frequencies; 2 domestic satellites provide the national trunk service. Ethiopia has only 1 public TV broadcast station which broadcasting it nationally and only 1 public radio broadcaster with stations in each state, there are some commercial and dozens of community radio stations. Transportation Till 2010 in Ethiopia there 61 airports, out of which 17 airports are with paved runways and 44 airports are unpaved. The railway is under joint control of Ethiopia and Djibouti, but most of it is inoperable and need lots of improvement and expansion to improve the transportation. The conditions of Ethiopian roads are also not in very good conditions out of 36469 km long road only 6980 k are in better conditions other are unpaved around about 29849 km. Ethiopia has 9 merchant marine 8 cargo and 1 roll on/ roll off, they are landlocked and uses the ports Djibouti in Djibouti and Berbera in Somalia. In Ethiopia transportation is a big problem and effects also in the business. Ethiopian government takes this problem very seriously and many projects are on progress for improvement and modernization of Ethiopian transportation system. 1 .6 Banking Systems 1.6.1 Introduction In Ethiopia banking system was introduced in 1905 with the coordination of Bank of Egypt and the first name of bank was Bank of Abyssinia which is controlled by private company in Ethiopia. Later in 1931 it was replaced by the Bank of Ethiopia. During the Italian invasion period and subsequent British occupation Ethiopia become one of the important places for East Africa Currency Board. Later again it is renamed as State bank of Ethiopia having two active departments involves in the process of separate function of issuing banks and commercial bank. In 1963 the bank is divided into two parts two new bank national Bank of Ethiopia involves in the process of centralizing and issuing bank and the second one the commercial bank of Ethiopia. In 1974 there was merging of maximum of financial institutes available tat time including state owned also some of them are The Agricultural and Industrial Development Bank The Savings and Mortgage Corporation of Ethiopia The Imperial Savings and Home Ownership Public Association The Addis Ababa Bank The Banco di Napoli The Banco di Roma In 1975 change in government policy and change into Marxist government bring again lots of changes in banking system like nationalization of private financial institutes and insurance companies. The big and important commercial bank of Ethiopia is now known as Addis Ababa bank and the total control of all banks and financial institutes are under supervision of National Bank of Ethiopia. The Ethiopian Insurances corporation take all power and control for the all insurance companies and for the home loan and renovation loan is provide by the new Housing and savings bank. 1.6.2 Current Conditions The whole banking system condition is still undeveloped and need lots of improvement and development. In Ethiopia there is also no stock exchange and foreign bank as the banking system is still not globalized, while higher government authorities are afraid of losing control over the economy because of globalizing the banking system. Thats why they have full control over the banking system even they decide the interest rate as per the high inflation rate. Below provided table to have a look on the condition of ease of doing business in Ethiopia. Table 1 Business Climate of Ethiopia As National Bank of Ethiopia is Ethiopian central bank and the state owned Commercial Bank is one of the biggest and largest bank in Ethiopia having approx. control of more than 75% of total banking assets in Ethiopia, tables 2 tried to explain the banking system in Ethiopia. Table 2 Value of Ethiopian Bank Assets Insurance companies and other financial institutions In Ethiopia the Ethiopia Insurance Corporation controls 10 insurance companies performing business in more than 200 branches all over the country Below in the table the number of branches and their capital are explained figures available are from 2007 and till then only nine insurance companies are in business the 10th company (Lion Insurance Company) comes in business after 2007 thats why it is not mention in table. Table 3: Branches and Capital of Insurance Companies in Ethiopia (Capital in Millions of Birr) Stock Market No stock exchange exists Other Types of Finance/Financial Market Micro finance After the establishment of the government in 1994/1995. It started also and supporting for the development of microfinance industry, the purpose of Ethiopian government to developed the microfinance industry to help poor people in both rural and urban area. According to the 2005 microfinance industry report in Ethiopia that there are 23 microfinance industries and around about more than 1 million peoples are connected directly to the industry. As from above it is cleared that government had totally prohibited any kind of foreign company involved in the process of financial or banking services in country. In Ethiopia microfinance industry can be opened by people having Ethiopian nationality and having full 100% share in company or by those organization which are totally settled and have their registration under the law and having their head office in Ethiopia. As in country most of the microfinance initial capital comes from the foreign investors and which leads to the not clear transparency of microfinance industry, normally person investing in the microfinance industry local or foreigner must enlist as a shareholder. As government authorized high authorities decided interest rate according to the high inflation rate, and in microfinance industry there is no fixed interest rate on credit according to law minimum interest on credit is 3%, which is a loss for those people wants to open microfinance industry in rural areas because of added administrative cost in capital of investment. Top ten reasons to do business in Ethiopia Political and social stability; Macro-economic stability and growing economy; Adequate guarantees and protections; Transparent laws and streamlined procedures; Ample investment opportunities; Abundant and trainable labor force; Wide domestic, regional and international market opportunity; Competitive investment incentive packages ; Welcoming attitude of the people to FDI; and Pleasant climate and fertile soils. 2. Foreign Market Entry Strategy 2.1 Introduction 2.1.1 Strategy Strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations. 2.1.2 Strategic Decisions Strategic decisions are likely to be complex in nature. This complexity is a defining feature of strategy and strategic decisions and is especially so in organizations with wide geographical scope, such as multinational firms, or wide ranges of products or services. Strategic decisions may also have to be made in situations of uncertainty about the future. Strategic decisions are likely to affect operational decisions: for example, an increased emphasis on consumer electronics would trigger off a whole series of new operational activities, such as finding new suppliers and building strong new brands. This link between overall strategy and operational aspects of the organization is important for two other reasons. First, if the operational aspects of the organization are not in line with the strategy, then, no matter how well considered the strategy is, it will not succeed. Second, it is at the operational level that real strategic advantage can be achieved. Indeed, competence in particular operational activities might determine which strategic developments might make most sense. Strategic decisions are also likely to demand an integrated approach to managing the organization. Managers have to cross functional and operational boundaries to deal with strategic problems and come to agreements with other managers who, inevitably, have different interests and perhaps different priorities. Managers may also have to sustain relationships and networks outside the organization, for example with suppliers, distributors and customers. Strategic decisions usually involve change in organizations which may prove difficult because of the heritage of resources and because of culture. These cultural issues are heightened following mergers as two very different cultures need to be brought closer together or at least learn how to tolerate each other. Indeed, this often proves difficult to achieve a large percentage of mergers fail to deliver their ‘promise for these reasons. 2.1.3 Levels of Strategy Corporate-level strategy: Itis concerned with the overall purpose and scope of an organization and how value will be added to the different parts (business units) of the organization. Business-level strategy: It is about how to compete successfully in particular markets. Operational strategies: These are concerned with how the component parts of an organization deliver effectively the corporate and business-level strategies in terms of resources, processes and people. 2.1.4 Strategic Management Strategic management includes understanding the strategic position of an organization, strategic choices for the future and turning strategy into action. The strategic position is concerned with the impact on strategy of the external environment, an organizations strategic capability (resources and competences) and the expectations and influence of stakeholders. Strategic choices involve understanding the underlying bases for future strategy at both the business unit and corporate levels and the options for developing strategy in terms of both the directions and methods of development. Strategy into action is concerned with ensuring that strategies are working in practice. Strategy development processes are the ways in which strategy develops in organizations. 2.2 Environment The most general ‘layer of the environment is often referred to as the macro environment. This consists of broad environmental factors that impact to a greater or lesser extent on almost all organizations. It is important to build up an understanding of how changes in the macro-environment are likely to impact on individual organizations. A starting point can be provided by the PESTEL framework which can be used to identify how future trends in the political, economic, social, technological, environmental and legal environments might impinge on organizations. This provides the broad ‘data from which the key drivers of change can be identified. These will differ from sector to sector and from country to country. Therefore they will have a different impact on one organization from another. If the future environment is likely to be very different from the past it is helpful to construct scenarios of possible futures. This helps managers consider how strategies might need to change depending on the different ways in which the business environment might change. Within this broad general environment the next ‘layer is called an industry or a sector. This is a group of organizations producing the same products or services. The five forces framework and the concept of cycles of competition can be useful in understanding how the competitive dynamics within and around an industry are changing. The most immediate layer of the environment consists of competitors and markets. Within most industries or sectors there will be many different organizations with different characteristics and competing on different bases. The concept of strategic groups can help with the identification of both direct and indirect competitors. Similarly customers expectations are not all the same. They have a range of different requirements the importance of which can be understood through the concepts of market segments and critical success factors. 2.2.1 Key driver of change Key drivers of change are forces likely to affect the structure of an industry, sector or market. There is an increasing trend to market globalization for a variety of reasons. In some markets, customer needs and preferences are becoming more similar. For example, there is increasing homogeneity of consumer tastes in goods such as soft drinks, jeans, electrical items (e.g. audio equipment) and personal computers. The opening of McDonalds outlets in most countries of the world signaled similar tendencies in fast food. As some markets globalize, those operating in such markets become global customers and may search for suppliers who can operate on a global basis. For example, the global clients of the major accountancy firms may expect the accountancy firms to provide global services. The development of global communication and distribution channels may drive globalization the obvious example being the impact of the internet. In turn, this may provide opportunities for transference of marketing (e.g. global brands) across countries. Marketing policies, brand names and identities, and advertising may all be developed globally. This further generates global demand and expectations from customers, and may also provide marketing cost advantages for global operators. Nor is the public sector immune from such forces. Universities are subject to similar trends influenced by changing delivery technologies through the internet. This means, for example, that there is developing a genuinely global market for MBA students particularly where the majority of ‘tuition is done online. Cost globalization may give potential for competitive advantage since some organizations will have greater access to and/or be more aware of these advantages than others. This is especially the case in industries in which large volume; standardized production is required for optimum economies of scale, as in many components for the electronics industry. There might also be cost advantages from the experience built through wider-scale operations. Other cost advantages might be achieved by central sourcing efficiencies from lowest-cost suppliers across the world. Country-specific costs, such as labor or exchange rates, encourage businesses to search globally for low cost in these respects as ways of matching the costs of competitors that have such advantages because of their location. For example, given increased reliability of communication and cost differentials of labor, software companies and call centers are being located in India, where there is highly skilled but low-cost staff. Other businesses face high costs of product development and may see advantages in operating globally with fewer products rather than incurring the costs of wide ranges of products on a more limited geographical scale. The activities and policies of governments have also tended to drive the globalization of industry. Political changes in the 1990s meant that almost all trading nations function with market-based economies and their trade policies have tended to encourage free markets between nations. Globalization has been further encouraged by technical standardization between countries of many products, such as in the automobile, aerospace and computing industries. It may also be that particular host governments actively seek to encourage global operators to base themselves in their countries. However, it is worth noting that in many industries country-specific regulations still persists and reduces the extent to which global strategies are possible. Also, the early 2000s have seen a rise in citizen activism about the impact of globalization on developing countries most notably at meetings of the World Trade Organization Changes in the macro-environment are increasing global competition which, in turn, encourages further globalization. If the levels of exports and imports between countries are high, it increases interaction between competitors on a more global scale. If a business is competing globally, it also tends to place globalization pressures on competitors, especially if customers are also operating on a global basis. It may also be that the interdependence of a companys operations across the world encourages the globalization of its competitors. For example, if a company has sought out low-cost production sites in different countries, these low costs may be used to subsidize competitive activity in high-cost areas against local competitors, thus encouraging them to follow similar strategies. 2.2.2 Industries and sectors The macro-environment might influence the success or failure of an organizations strategies. But the impact of these general factors tends to surface in the more immediate environment through changes in the competitive forces on organizations. An important aspect of this for most organizations will be competition within their industry or sector. Economic theory defines an industry as ‘a group of firms producing the same principal product or, more broadly, ‘a group of firms producing products that are close substitutes for each other. This concept of an industry can be extended into the public services through the idea of a sector. Social services, health care or educations also have many producers of the same kinds of services. From a strategic management perspective it is useful for managers in any organization to understand the competitive forces acting on and between organizations in the same industry or sector since this will determine the attractiveness of that industry and the way in which individual organizations might choose to compete. It may inform important decisions about product/market strategy and whether to leave or enter industries or sectors. It is important to remember that the boundaries of an industry may be changing for example, by convergence of previously separate ‘industries such as between computing, telecommunications and entertainment. Convergence is where previously separate industries begin to overlap in terms of activities, technologies, products and customers. There are two sets of ‘forces that might drive convergence. First, convergence might be supply-led where organizations start to behave as though there are linkages between the separate industries or sectors. This is very common in the public services where sectors seem to be constantly bundled and un-bundled into ministries with ever-changing names (‘Education, ‘Education and Science, ‘Education and Employment, ‘Education and Skills etc.). This type of convergence may be driven by external factors in the business environment. For example, governments can help or hinder convergence through regulation or deregulation a major factor in the financial services sector in many countries. The boundaries of an industry might also be destroyed by other forces in the macro-environment. For example, e-commerce is destroying the boundary of traditional retailing by offering manufacturers new or complementary ways to trade what are now being called new ‘business models12 such as websites or e-auctions. But the real test of these types of changes is the extent to which consumers see benefit to them in any of this supply-side convergence. So, secondly, convergence may also occur through demand-side (market) forces where consumers start to behave as though industries have converged. For example, they start to substitute one product with another (e.g. TVs and PCs). Or they start to see links between complementary products that they want to have ‘bundled. The package holiday is an example of bundling air travel, hotels and entertainment to form a new market segment in the travel industry. 2.2.3 Competitors and market An industry or sector may be a too-general level to provide for a detailed understanding  of competition. For example, Ford and Morgan Cars are in the same industry (automobiles) but are they competitors? The former is a publicly quoted multinational business; the latter is owned by a British family, produces about 500 cars a year and concentrates on a specialist market niche where customers want hand-built cars and are prepared to wait up to four years for one. In a given industry there may be many companies each of which has different capabilities and which compete on different bases. This is the concept of strategic groups. But  competition occurs in markets which are not confined to the boundaries of an industry and there will almost certainly be important differences in the expectations of different customer groups. This is the concept of market segments. What links these two issues is an understanding of what customers value. Strategic groups are organizations within an industry or sector with similar strategic  characteristics, following similar strategies or competing on similar bases. These characteristics are different from those in other strategic groups in the same industry or sector. For example, in grocery retailing, supermarkets, convenience stores and corner shops are three of the strategic groups. There may be many different characteristics that distinguish between strategic groups but these can be grouped into two major categories .First, the scope of an organizations activities (such as product range, geographical coverage and range  of distribution channels used). Second, the resource commitment (such as brands, marketing spend and extent of vertical integration). Which of these characteristics are especially relevant in terms of a given industry needs to be understood in terms of the history and development of that industry and the forces at work in the environment. 2. Market segments The concept of strategic groups discussed above helps with understanding the similarities and differences in the characteristics of ‘producers those organizations that are actual or potential competitors. However, the success or failure of organizations is also concerned with how well they understand customer needs and are able to meet those needs. So an understanding of markets is crucial. In most markets there is a wide diversity of customers needs, so the concept of market segments can be useful in identifying similarities and differences between groups of customers or users. A market segment is a group of customers who have similar needs that are different from customer needs in other parts of the Market 2.2.4 Opportunities and threat The critical issue is the implications that are drawn from this understanding in guiding strategic decisions and choices. There is usually a need to understand in a more detailed way how this collection of environmental factors might influence strategic success or failure. This can be done in more than one way. This identification of opportunities and threats can be extremely valuable when thinking about strategic choices for the future. A strategic gap is an opportunity in the competitive environment that is not being fully exploited by competitors. By using some of the frameworks described in this chapter, managers can begin to identify opportunities to gain competitive advantage in this way: Opportunities in substitute industries Organizations face competition from industries that are producing substitutes. But substitution also provides opportunities. In order to identify gaps a realistic assessment has to be made of the relative merits of the products/technologies (incumbent and potential substitutes) in the eyes of the customer. An example would be software companies substituting electronic versions of reference books and atlases for the traditional paper versions. The paper versions have more advantages than meet the eye: no hardware requirement (hence greater portability) and the ability to browse are two important benefits. This means that software producers need to design features to counter the strengths of the paper versions; for example, the search features in the software. Of course, as computer hardware develops into a new generation of portable handheld devices, this particular shortcoming of electronic versions might be rectified. Opportunities in other strategic groups or strategic spaces It is also possible to identify opportunities by looking across strategic groups particularly if changes in the macro-environment make new market spaces economically viable. For example, deregulation of markets (say in electricity generation and distribution) and advances in IT (say with educational study programs) could both create new market gaps. In the first case, the locally based smaller-scale generation of electricity becomes viable possibly linked to waste incineration plants. In the latter case, geography can be ‘shrunk and educational programs delivered across continents through the internet and teleconferencing (together with local tutorial support). New strategic groups emerge in these industries/sectors. Opportunities in the chain of buyers It was noted that this can be confusing, as there may be several people involved in the overall purchase decision. The user is one party but they may not buy the product themselves. There may be other influencers on the purchase decision too. Importantly, each of these parties may  value different aspects of the product or service. These distinctions are often quite marked in business-to-business transactions, say with the purchase of capital equipment. The purchasing department may be looking for low prices and financial stability of suppliers. The user department (production) may place emphasis on special product features. Others such as the marketing department may be concerned with whether the equipment will speed throughput and reduce delivery times. By considering who is the ‘most profitable buyer an organization  may shift its view of the market and aim its promotion and selling at those ‘buyers with the intention of creating new strategic customers. Opportunities for complementary products and services This involves a consideration of the potential value of complementary products and services. For example, in book retailing the overall ‘

The Olay Brand Called Olay Evolution Marketing Essay

The Olay Brand Called Olay Evolution Marketing Essay INTRODUCTION The Procter Gamble Company (PG) is one of the worlds largest consumer goods companies. It markets more than 300 brands in the beauty, health, fabric, home, baby, family, and personal care product categories. The company operates in the Americas, Europe and Asia. It is headquartered in Cincinnati, Ohio, and employs about 135,000 people. CORPORATE OBJECTIVES The objective of Procter Gamble is that They will provide branded products and services of superior quality and value that improve the lives of the worlds consumers, now and for generations to come. As a result, consumers will reward us with leadership sales, profit and value creation, allowing our people, our shareholders and the communities in which we live and work to prosper. (http://www.uk.pg.com/company/aboutPG/purposeValuesPrinciples.html) CORPORATE STRATEGY Procter Gamble (PG), one of the worlds largest consumer goods companies is also a pioneer in the use of mass media. The company has used newspaper advertisements, radio and soap operas to advertise its popular brands like Crest, Pampers, Pantene and Folgers. During 1990-2000, however,  its rate of growth took a plunge. When AG Lafley took over as CEO in 2000, he gave PG a complete makeover with the focus on innovation and advertising. Since 2000, PG has been increasingly embracing targeted, viral and on-line marketing. (http://www.uk.pg.com/company/aboutPG/purposeValuesPrinciples.html) PROPOSED PRODUCT olayLogo87_Jul06.jpg Evolution Olay is a worldwide leader in skin care and have been trusted by women for fifty years. Graham Wulff, an innovative and entrepreneurial South African chemist developed the original formula at the beginning of the 1950s. Olay has eight global product lines offering a multiple of product. Product such as; Olay professional pro-X, Olay Definity, Olay Regenerist, Olay Total effect, Olay complete, Olay hydrate cleanse, Olay clarity, Olay body lotion, Olay touch of sun and Olay body cleansing (http://www.docstoc.com/docs/14719894/Oil-Of-Olay-Products). Skin care is evolving faster than ever with independent clinical trial and new standards in natural and organic cosmetics. Olay evolution will be a combination of Olay total effects (7 seven powerful anti-ageing in one) and Olay Definity (fight wrinkles, brown spot and discolouration). Many consumers want products that offer more than one benefit. So this product is expected to moisturize, fight free radicals and give the skin a more youthful appearance. This product would offer the costumer an ideal combination of the world most powerful skin care solution. Anti-aging is the fastest-growing skin segment, standing at $567.6 million, now representing the biggest category in skin care, surpassing facial cleansers which stand at $559.2 million. (http://www.allbusiness.com/population-demographics/demographic-groups/5517853-1.html) product-landing-definity_v6.jpg product-landing-total-effects.jpg Women are very particular when dealing with their face. They need to be convinced the product will deliver all the promised benefits. Women are willing to try new things and spend more money to look better and younger. Skin care attracts customers from all income level as most women like to take care of their appearance. The increase number of women working equates women with more money to spend and skin care is one of the favourite avenues for their spending. Based on Procter Gamble F4Q10 (Qtr End 06/30/2010) Earnings Call Transcript, Female Skin Care grew volume double digits with positive share trends. In the U.S., Olay all-outlet value share of the Facial Moisturizer segment was up almost two points behind the continued strength of the Olay Pro-X line and the Olay Regenerist Roller ball Eye Treatment innovation. Olay also had strong results in developing markets, more than doubling shipments in India, Saudi Arabia and the Philippines. Organic sales increased 5%, driven by 8% organic volume growth. (http://seekingalpha.com/article/218380-procter-gamble-f4q10-qtr-end-06-30-2010-earnings-call-transcript) Rate of Global skin care market 2002 and 2007 Country 2002 ( £M) 2009 ( £M) US 6,752.2 8,059.2 FRANCE 2,391.1 4,368.0 GERMANY 1,975.1 3,239.3 ITALY 1,440.0 2,340.4 SPAIN 956.4 1,897.9 UK 1,612.7 2,937.6 Source: Euro monitor international Below are the analyses of the business environment to back up the proposal. ANALYSIS OF BUSINESS ENVIRONMENT Every Business operates within an environment, these environments directly and indirectly affects the way those businesses function. Competition in the skin care industry tends to be more intense and there are many changes that can be regarded as threat and opportunity that it is important for managers to cope with. MACRO Political The political environment Relates to the pressures and opportunities brought by changes of the government and their views toward the skin care industry. Each government always have a mandate to regulate the use on non organic ingredients in most skin care product. Economic This Refers to economic factors and structures and such variables like the stock exchange, interest and inflation rates, the nations economic policies and performance, exchange rates, etc. Although PG is based in the US, it earns revenues, pay expenses, own assets and incur liabilities in countries using currencies other than the US dollar. As a result, increases or decreases in the value of the US dollar against other major currencies will affect the companys net operating revenues, operating income and the value of balance sheet items denominated in foreign currencies. Social Middle-aged women are very interested in skin care items that help them retain a more youthful appearance and complexion. Observing social factors helps organisations maintain their reputation among stakeholders. Technological Changes in technology can affect a company competitive position. Industries merge; new strategic groups emerge; currents products improve and the cost of production gets reduced by process innovation. Because the skin care industry is very competitive, the company necessitate taking advantage of the latest technology and revolutionary substances to create new product in order to maintain customers interest and loyalty. Environmental With global warming and carbon foot prints being big concerns, governments and scientists are encouraging companies and individuals to be more environmentally aware. PGs policy is to: Ensure its products, packaging and operations are safe for their employees, consumers and the environment. Reduce or prevent the environmental impact of products and packaging in their design, manufacture, distribution, use and disposal whenever possible. They support the sustainable use of resources and actively encourage reuse, recycling and composting. MICRO Buyer Power;  Consumer products companies face weak buyer power because customers are disjointed and have little influence on price or product. But considering the buyers of consumer products to be retailers rather than individuals, then these firms face very strong buyer power. One good example is the business relationship between wall-mart and PG (see swot analysis). Supplier Power; the company could face some amount of supplier power simply because of the costs incurred when switching suppliers. Notwithstanding, suppliers that do large amount of business with the company also are somewhat obliged to their customers; nonetheless, bargaining power for both the firms and their suppliers is probably limited. Threat of New Entrants;  Given the amount of capital investment needed to enter the skin care industry, the assumption is that threat of new entrants will be fairly low. Threat of Substitutes;  Within the skin care industry, brands thrive in helping to build a competitive advantage, but even the pricing power of brands can be scoured with substitutes. Threats to this product may arise from other anti-aging products such as; Avotone, Revitol, Ceramide C etc. Degree of Rivalry; Skin care industry is a very competitive market, taking advantage of the latest technology and revolutionary substances to create new product in order to maintain customers interest and loyalty will be very important. In doing so it will increase the companys competitive advantage over other top brands like Avon and Nivea Visage. INTERNAL The internal environment constitutes variables and forces within the control of the organisation. These variables are; conditions, entities,  events, and  factors  within an organization which  influence  its  activities  and  choices, its philosophy, particularly the  behaviour of the  employees. Other variables include; the  organisation mission statement,  leadership style, and its  culture. SWOT Analysis; this is a planning method use to evaluate the strength, weaknesses, opportunities and treat to a business. It involves specifying objectives of a business at the same time identifying the internal and external elements that will affect the business both positive and negative in the race to attain its stated objectives. Strengths Weaknesses Leading market position geared on a strong brand portfolio. Significant RD and market investment. Robust cash productivity Increase instances of product recall. Excessive dependant on Wal-mart. High product prices translated into sales volume decline and market share loss. Opportunities Threats Future growth plans- Increase concentration on its core attractive businesses and enhancing its customer base. Increase investment in manufacturing capacity in developing countries. Acquisitions to expand portfolio Counterfeit goods. Changing global retail scenario and rise of private labels. Commodity cost and currency exchange rate. Rising cost of energy prices Economic slowdown in US and Euro zone. (www.datamonitor.com) STRENGTHS Leading market position garnered on a strong brand portfolio With revenues of $79,029 million, PG is the worlds largest consumer products manufacturer, with its products reaching 4 billion people worldwide. PG is the 20th largest company in sales and the 9th largest company in profit among the Fortune 500 companies. The companys market capitalization in 2009 was roughly $150 billion, making it one of the 10 most valuable companies in the US. PG holds leading global market shares in a variety of categories, including baby care (33%), blades and razors (70%), feminine protection (37%), and fabric care (33%). The companys leadership position is built on its strong brand portfolio. Strong brand portfolio enables the company to achieve economies of scale in distribution and retain a strong bargaining position with retailers. Leading market position provides PG with significant competitive advantage as well as stabilizes the companys financial growth Significant RD and market investment. Being a consumer products company, PG relies heavily on innovation and continued marketing investments in order to establish a significant competitive advantage. As a result, the company has made significant investments in RD and marketing. Over the last decade, PG has invested more than $2 billion in consumer and market research (nearly twice that of its closest competitor, Unilever; and equal to the combined total of its other major competitors; Avon, Clorox Company, Colgate-Palmolive Company, Energizer Holdings, Henkel, Kimberly-Clark, LOreal, and Reckitt Benckiser). Virtually, all the organic sales growth delivered by PG in the past nine years has come from new brands and new or improved product innovation. PG also involves external innovation partners to boost its internal innovative capability, an approach it calls Connect and Develop. Currently, more than half of all product innovation coming from PG includes at least one major component from an external partner. PGs strong RD capabilities and a marketing-driven understanding of consumer needs are backed by significant marketing investments. The company invests more than $7 billion in advertising annually, consistently making PG one of the worlds largest advertisers. Strong focus on research and development allows PG to renew its product line at regular intervals, which boosts customer loyalty and revenue growth. Significant marketing investments to support its brands and a broad product portfolio help PG to remain at forefront in a competitive market. Robust cash productivity PGs cash productivity: the percentage of earnings converted into cash has averaged over 100% since 2001, consistently among the very best in the industry. This is primarily due to PGs strong focus on productivity, working-capital management and cost reduction. Furthermore, PG is equally rigorous about managing costs. The company has reduced overhead costs as a percentage of sales by more than 300 basis points since 2001. The cash productivity allows PG to maintain the companys excellent credit rating, to pay strong dividends, and to have the flexibility to invest in the business organically or through mergers and acquisitions. Therefore, robust cash productivity ensures that PG has the flexibility and the resources to invest in growth even in the most challenging environments. WEAKNESSES PG has been registering increasing instance of product recalls. One case in point is in November 2009, the company voluntarily recalled three lots of its Vicks Sinex nasal spray in the US, Germany and the UK. The recall was a precautionary step after finding the bacteria B. cepacia in a small amount of product made at its plant in Gross Gerau, Germany. In March 2010, PG voluntarily recalled its Pringles Restaurant Cravers Cheeseburger potato crisps and Pringles Family Faves Taco Night potato crisps in response to a recommendation from the Food Drug Administration (FDA) to the food industry to protect consumers from potential Salmonella exposure. Most recently in June 2010, PG voluntarily recalled a small percentage of 1-liter bottles of Scope Original Mint and Scope Peppermint mouthwash with malfunctioning child-resistant caps in the US and Canada. Recurrent product recalls could affect the brand image of the company, which would lead to low customer loyalty and brand equity. Excessive dependent on Wal-Mart PG is heavily dependent on Wal-Mart Stores (Wal-Mart) and its affiliates for generating major part of its revenue. Sales to Wal-Mart and its affiliates represented approximately 15% of its total revenue since 2006. High dependence upon a Wal-Mart reduces the bargaining power of the company. Also, Wal-Mart could use its bargaining power to impose unfavourable terms on the company. Any decrease in revenue from Wal-Mart could have a negative impact on the companys businesses. Hence, the loss of this customer will lead to a sharp decline in PGs revenues and also a loss of its market share. OPPRTUNITIES Future growth plans In order to grow in a highly competitive environment, PG is pursuing a clearly drafted strategy with focus on two areas: increasing concentration on its core attractive businesses and enhancing its customer base. The company is sharply focusing on its core attractive businesses (the beauty and health market segments and several household care categories) as these are fast-growing businesses. For instance, the global market for personal care products has annual sales of over $39.5 billion and is growing at a rate of around 5% annually. PG intends to increase its customer base by acquiring under served and unserved consumers. In line with this, the company is targeting developing markets; extending its distribution systems; and expanding its brand and product portfolio. Developing and emerging economies are expected to account for 90% of the worlds population by 2010, and this is expected to drive demand for fast moving consumer goods. Increased investment in manufacturing capacity in developing countries PG is planning the biggest increase in its manufacturing capacity in order to expand into categories and countries where it doesnt have a brand presence. The company is investing 4% of sales in capital spending, including funding for new manufacturing capacity to support future growth. Over the next five years, PG plans to add 20 new manufacturing facilities. Almost all of these facilities are in developing markets, and almost all will be multi-product category facilities. By focusing on developing markets, the company would reduce the cost of serving these markets while also being closer to regions with the greatest long term growth potential. Acquisitions to expand portfolio PG has made significant acquisitions in the recent past. For instance, in June 2009, the company acquired the Zirh skincare brand. Zirh is a leading super premium, male grooming brand available in high-end department stores, specialty outlets and online. Later in May 2010, PG entered into an agreement to acquire Natura Pet Products, a privately-held pet food business. Most recently, in July 2010, the company concluded its purchase of the Ambi Pur Brand from Sara Lee Corporation. Ambi Pur is a leading global air care brand with presence in 80 countries, and also has several toilet care products, with strong presence in Western Europe and Asia. These kinds of acquisitions will strengthen PGs presence across a range of categories and in turn augment its top line and bottom-line. THREATS Changing global retail scenario and rise of private labels PGs products are sold in a highly competitive global marketplace which is experiencing an increased trade concentration and the growing presence of large format retailers and discounters. With the growing trend toward retail trade consolidation, it is increasingly dependent on key retailers. Some of these retailers have a greater bargaining strength than PG. They may use this leverage to demand higher trade discounts, allowances or slotting fees, which could lead to reduced sales or profitability. Commodity cost and currency exchange rate instability places tremendous pressure on PGs business. Not to mention the unexpected and dramatic devaluations of currencies in developing or emerging markets reduce profits. Counterfeit goods Trade of counterfeits and pass-offs products is negatively affecting the growth of FMCG companies like PG. The top two brands within any category be it cosmetics, detergents, or soaps are effected the most by counterfeit. It is estimated that the loss due to counterfeit products convert into around  £6 billion ($8.5 billion). Furthermore, with the advent of digital channels there has been a surge in the sale of counterfeit products and online sales of these products increased by 9% in 2009. Besides revenue losses, counterfeits and pass-offs also affect the companys brand as they are unsafe. (Swot analysis Source: www.datamonitor.com ) The best strategies accomplish an organisation mission by exploiting an organisation opportunity and strength, while neutralizing its treat and avoiding its weakness. Ansoff matrix Ansoff matrix highlight four possible market strategy for the propose product. ansoff_matrix-124013-1.jpeg (http://www.brothersoft.com/ansoff-matrix-124013.html). Product development: as this is a new product in the range, much emphasis will be to offer the product to the existing customer base. Using the competitive advantages and brand image of previous products to lunch the propose product. With the companys focus on advertising, (worlds largest advertisers) it can use the advertising power to push the product to recognition. Sixty percent (60%) of the strategy will be on product development. Diversification: One of the opportunities available to the company is launching into new markets and developing economies. Forty percent (40%) of the strategy will be to launch the propose product in an entirely new market. Market Penetration: this occurs when the company sells its existing product in its existing market, perhaps through greater promotional efforts. As this is a new product this strategy might be considered in the future. Market Development: this occurs when the company tries to sell it existing products in new and emerging markets. This strategy as well might be for future considerations.

religion :: essays research papers

The Religion Of Huckleberry Finn Religion is a simple concept to learn. Webster's dictionary defines religion as: "belief in a divine or superhuman power or powers to be obeyed and worshipped as the creator(s) and ruler(s) of the universe." Although it is understood what religion is, not everyone has the same views. There are numerous varieties and sub-vrieties of religions. In fact, religion can be so diverse that one might say that he or she is of the same religion as another person but the way he or she demonstrates their beliefs may be dramatically different. In the novel, The Adventures of Huckleberry Finn, Mark Twain, writes about a young boy's growing and maturing experiences one summer as he travels down the Mississippi River. One of the things that this boy, Huck Finn, discovers is how religion affects his lifestyle. Huckleberry Finn's views of religion have an impact on many essential points in the episodic novel. Religion has an effect on three of Huck's major decisions throughout the novel. His religion is tested when he first decides to help Jim run away. His religion is tested when he lies to most of the people he meets traveling down the Mississippi River, and Huckleberry's religion is tested when he decides to help Jim escape from slavery for good. Huckleberry Finn was raised without a strong religious influence. Huck's father being a raging alcoholic, and Huck living mostly on his own, were two of the factors that contributed to this. Pap came to visit him one night and expressed his negative thoughts on school and religion. "First you know you'll get religion, too. I never see such a son" (Twain 20). Despite these warnings, the Widow Douglas continued to teach Huck. Later in the novel, these teaching have consequential effects on Huck. Huck's religious morals are first tested when he decides to help the Widow's slave escape to freedom. During the time that The Adventures of Huckleberry Finn took place, slavery was not uncommon. In the beginning of the story,

Immigrants Do NOT Increase Crime Rates Essay -- Undocumented Immagrant

The thought of arriving immigrants in any host country has been accompanied by reactions of exclusion, and continues to expand throughout the years. During any social illness, immigrants tend to be the first to be held responsible by their recipient societies. Most crimes are associated with immigrants due to the fact that they may not posses the same socio-economics status as natives. Another contributing factor is the media that conducts numerous stories that highlight the image of immigrant crimes to recall the alleged difference between native and foreign born. Undoubtedly, the correlation between immigration and crime has become one of the most controversial discussions in current society. As we enter a new era, immigrants will have more impact on society than ever before (Feldmeyer, 2009). There can be numerous reasons to believe immigrants are more prone to commit crimes, for example, they have to learn to adapt into the cultural traits and social patterns of the harboring country, as natives do not (Desmond & Kubrin, 2009). However, despite such claims, empirical studies have revealed that immigrants are understated in criminal statistics. Throughout the years many texts and scholarly articles have been published further analyzing and proving that immigrants are less prone to committing crimes than their native peers. Furthermore, researchers examine the reason as to why immigrants are weighed as a whole even though ethnic groups among immigrants have different rates of crime. For example, Hispanic immigrants are far more prone to commit crimes than a Japanese immigrant. This makes it unfair to consider that because a Japanese is an immigrant, they are also more prone to commit crimes. Much like in the past, the publ... ...untries. International Journal of Comparative Sociology, 52,115-131 http://cos.sagepub.com.libaccess.lib.mcmaster.ca/content/52/1-2/114 Desmond, S. A., & Kubrin, C. E. (2009). THE POWER OF PLACE: Immigrant communities and adolescent violence, The Sociological Quarterly, 50, 581-607 http://www.gwu.edu/~soc/docs/Kubrin/Immig_Communities.pdf Feldmeyer, B. (2009). Immigration and violence: The offsetting effects of immigrant concentration on Latino violence. Social Science Research, 38, 717-731 http://journals2.scholarsportal.info.libaccess.lib.mcmaster.ca/tmp/9506051508484483171.pdf Nielsen, A. L., & Martinez, R. (2011). Nationality, immigrant groups, and arrest: Examining the diversity of arrestees for urban violent crime. Journal of Contemporary Criminal Justice, 27, 343-360 http://ccj.sagepub.com.libaccess.lib.mcmaster.ca/content/27/3/342

Hierarchical Databases Essay

There are four structural types of database management systems: hierarchical, network, relational, and object-oriented. Hierarchical Databases (DBMS), commonly used on mainframe computers, have been around for a long time. It is one of the oldest methods of organizing and storing data, and it is still used by some organizations for making travel reservations. Related fields or records are grouped together so that there are higher-level records and lower-level records, just like the parents in a family tree sit above the subordinated children. Based on this analogy, the parent record at the top of the pyramid is called the root record. A child record always has only one parent record to which it is linked, just like in a normal family tree. In contrast, a parent record may have more than one child record linked to it. Hierarchical databases work by moving from the top down. A record search is conducted by starting at the top of the pyramid and working down through the tree from parent to child until the appropriate child record is found. Furthermore, each child can also be a parent with children underneath it. The advantage of hierarchical databases is that they can be accessed and updated rapidly because the tree-like structure and the relationships between records are defined in advance. Hierarchical databases are so rigid in their design that adding a new field or record requires that the entire database be redefined. Types of DBMS: Network Databases Network databases are similar to hierarchical databases by also having a hierarchical structure. There are a few key differences, however. Instead of looking like an upside-down tree, a network database looks more like a cobweb or interconnected network of records. In network databases, children are called membersand parents are called owners. The most important difference is that each child or member can have more than one parent (or owner). two limitations must be considered when using this kind of database. Similar to hierarchical databases, network databases must be defined in advance. There is also a limit to the number of connections that can be made between records. Types of DBMS: Relational Databases In relational databases, the relationship between data files is relational, not hierarchical Relational databases connect data in different files by using common data elements or a key field. Data in relational databases is stored in different tables, each having a key field that uniquely identifies each row. Relational databases are more flexible than either the hierarchical or network database structures. Types of DBMS: Object-oriented Databases (OODBMS) Able to handle many new data types, including graphics, photographs, audio, and video, object-oriented databases represent a significant advance over their other database cousins. an object-oriented database can be used to store data from a variety of media sources, such as photographs and text, and produce work, as output, in a multimedia format. Object-oriented databases have two disadvantages. First, they are more costly to develop. Second, most organizations are reluctant to abandon or convert from those databases that they have already invested money in developing and implementing. COMPUTING TYPES: CLUSTER COMPUTING: clustering means linking together two or more systems to handle variable workloads or to provide continued operation in the event one fails. Each computer may be a multiprocessor system itself. For example, a cluster of four computers, each with two CPUs, would provide a total of eight CPUs processing simultaneously. When clustered, these computers behave like a single computer and are used for load balancing, fault tolerance, and parallel processing. Two or more servers that have been configured in a cluster use a heartbeat mechanism to continuously monitor each other’s health. Each server sends the other an I am OK message at regular intervals. If several messages or heartbeats are missed, it is assumed that a server has failed and the surviving server begins the failover operation. That is, the surviving server assumes the identity of the failed server in addition to its identity and recovers and restores the network interfaces, storage connections, and applications. Clients are then reconnected to their applications on the surviving server. The minimum requirements for a server cluster are (a) two servers connected by a network, (b) a method for each server to access the other’s disk data, and (c) special cluster software like Microsoft Cluster Service (MSCS). The special software provides services such as failure detection, recovery, and the ability to manage the service as a single system. Benefits of Clustering Technology Availability, scalability and to a lesser extent, investment protection and simplified administration are all touted as benefits from clustering technology. Availability translates into decreased downtime, scalability translates into flexible growth, and investment protection and simplified administration translate into lowered cost of ownership. Clustered systems bring fault-tolerance and support for rolling upgrades. The most common uses of clustering technique are mission-critical database management, file/intranet data sharing, messaging, and general business applications. PARALLEL COMPUTING: The Message Passing Interface (MPI) standard provides a common Application Programming Interface (API) for the development of parallel applications regardless of the type of multiprocessor system used. In the recent past, the Java programming language has made significant inroads as the programming language of choice for the development of a variety of applications in diverse domains. IPV4/IPV6: What is Internet Protocol? Internet Protocol is a set of technical rules that defines how computers communicate over a network. There are currently two versions: IP version 4 (IPv4) and IP version 6 (IPv6). What is IPv4? IPv4 was the first version of Internet Protocol to be widely used, and accounts for most of today’s Internet traffic. There are just over 4 billion IPv4 addresses. While that is a lot of IP addresses, it is not enough to last forever. What is IPv6? IPv6 is a newer numbering system that provides a much larger address pool than IPv4. It was deployed in 1999 and should meet the world’s IP addressing needs well into the future. PROTOCOLS: File Transfer Protocol (FTP) is a standard network protocol used to transfer files from one host or to another host over a TCP-based network, such as the Internet. The Hypertext Transfer Protocol (HTTP) is an application protocol for distributed, collaborative, hypermedia information systems.[1] HTTP is the foundation of data communication for the World Wide Web. Hypertext is a multi-linear set of objects, building a network by using logical links (the so-called hyperlinks) between the nodes (e.g. text or words). HTTP is the protocol to exchange or transfer hypertext. Secure Sockets Layer (SSL), are cryptographic protocols that provide communication security over the Internet. SSL encrypt the segments of network connections at the Application Layer for theTransport Layer, using asymmetric cryptography for key exchange, symmetric encryption for confidentiality, and message authentication codes for message integrity. In computing, the Post Office Protocol (POP) is an application-layer Internet standard protocol used by local e-mail clients to retrieve e-mail from a remote server over a TCP/IPconnection.[1] POP and IMAP (Internet Message Access Protocol) are the two most prevalent Internet standard protocols for e-mail retrieval.[2] Virtually all modern e-mail clients and servers support both. The POP protocol has been developed through several versions, with version 3 (POP3) being the current standard. Most webmail service providers such as Hotmail, Gmail and Yahoo! Mail also provide IMAP and POP3 service. Simple Mail Transfer Protocol (SMTP) is an Internet standard for electronic mail (e-mail) transmission across Internet Protocol (IP) networks. While electronic mail servers and other mail transfer agents use SMTP to send and receive mail messages, user-level client mail applications typically only use SMTP for sending messages to a mail server for relaying. The User Datagram Protocol (UDP) is one of the core members of the Internet protocol suite, the set of network protocols used for the Internet. With UDP, computer applications can send messages, in this case referred to as datagrams, to other hosts on an Internet Protocol (IP) network without prior communications to set up special transmission channels or data paths. UDP is suitable for purposes where error checking and correction is either not necessary or performed in the application, avoiding the overhead of such processing at the network interface level.

American Bureaucracy and Its Budgetary Decisions

A Budget is a management tool that is an expression of planned expenditures and revenues. â€Å"Budgets serve many important functions in government. In one sense, budgets are contracts annually agreed on by the executive and legislative branches that allow executive agencies and departments to raise and spend public funds in specified ways for the coming fiscal year, as stated by Stillman in â€Å"The American Bureaucracy† He also says that budgets impose a mutual set of legal obligations between the elected and appointed officers of public organizations with regard to taxation and expenditure policies, therefore, is a legal contract that provides a vehicle for fiscal controls over subordinate units of government by the politically elected representatives of the people. Budgetary decisions are made, according to Rubin in her book The Politics of Public Budgeting, by envisioning governments as â€Å"not merely technical managerial documents† but rather â€Å"they are also intrinsically and irreducibly political. † Her ideas are similar to that of general budget concepts over balancing expenditures and revenues, but differ in fundamental ways according to Stillman. The open environments within which budgets are developed, the variety of actors involved, the constraints imposed as well as the emphasis on public accountability, give budgets special and distinctive features in the public sector. † The differences between microbudgeting and macrobudgeting are just what their prefaces imply. â€Å"On the one hand there are a number budget actors, who have all individual motivations, who strategize to get what they want from the budget. The focus on the actors and their strategies is called microbudgeting. They do not bargain with one another over the budget. They are assigned budget roles by the budget process, the issues they examine are often framed by the budget process, and the timing and coordination of their decisions are often regulated by the budget process, according to Rubin. She goes on to say that actors are not free to come to budget agreements alone. They are bound by the environmental constraints. There are decisions that they are not permitted to make because they are either against the law, the courts disagree, or previous decision makers have bound their hands. Budgetary decision making has to account not just for budgetary actors but also for budget process and the environment. This more top-down and systematic perspective on budgeting is called macrobudgeting. † Budget strategies are affected by environment, budget process, and individual strategies, all of which influence the outcomes. The level of certainty of funding influences strategies as well. â€Å"Attention will focus on what is available now, and going after whatever it is, whether it is what you want or not, because what you really want may never show up and hence is not worth waiting for. â€Å"The effect of different strategies on the outcomes is hard to gauge. It seems obvious, however, that strategies that ignore the process or the environment are doomed to failure. Budget actors have to figure out where the flexibility is before they can influence how that flexibility will be used. Strategies that try to bypass superiors or fool legislators generally do not work; strategies that involve careful documentation of need and appear to save money are generally more successful. † There are four phases of a budget cycle; environment, process, individual strategies, and outcomes. In this causal model, or schema, the environment, budget process, and individuals† strategies all affect the outcomes. â€Å"The environment influences budgetary outcomes directly and indirectly, through process and individual strategies. The environment influences outcomes directly, without going through either budget process or individual strategies, when it imposes emergencies that reorder priorities. † The environment influences the budget process in several ways, including the level of resources available, the format of the budget, and the degree of centralization of decision making. â€Å"Environment in the sense of the results of prior decisions may also influence process. † â€Å"Changes in process take place in response to individuals, committees, and branches of government jockeying for power; in response to changes in the environment from rich to lean, or vice versa; in response to changes in the power of interest groups; and in response to scandals or excesses of various kinds. â€Å"