Preliminary details

Contact information

For further information please contact

W/ro Genet Abera
General Manager, ABC International Business Plc.
Garad Building, Bole Road
Tel: 011

Document Control

Prepared by: Solome Solomon

Approved by: ABC International Business Plc. Board of Directors

Circulation:
Copy 01: Solome Solomon (March 12, 2010)
Copy 02: Ethiopian Commodity Exchange (March 12, 2010)

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Executive Summary

ABC International Business Plc is a private limited Import – Export Company. W/o Genet Abera,
the founder and general manager of the Company is an MA graduate in Leadership Studies from
Aztusa University of the United States and a distinguished ex-civil servant- often remembered by
her former colleagues for her strategic leadership and management of the public finance sector of
the Addis Abeba City Administration her until she resigned from her high profile post in 2006
and landed in the cut-throat competitive jungle of running private sector business.

Besides, Rakeb Abebe, an MBA graduate from George Washington University (USA), and
working in the capacity of an investment banker for the Dutsche Bank of America in New York
City, is also a partner in the business venture. Her training in the state-of-the art of modern
business as well as her treasured experiences with NASDAQ (The Technology Group) Fennie
Mae and the Dutsche Bank are supposed to assist ABC International Business Plc in exploring
the challenges and prospects of exporting quality Ethiopian Coffee and Oil Seeds and Pulses to
North American Markets.

The Product, Professional and Trade Services

Ever since its establishment in 2007, ABC International Business Plc has been operating in the
lines of businesses of:
1. Import and Distribution of:
a. Agro-chemical and fertilizers,
b. Industrial chemicals such as leather and textile dyes, water treatment,
c. Agricultural equipment,
d. Industrial products (durable and consumable)
e. Other marketable imported materials.

2. Professional Services such as:

a. Management Development Consultancy.
b. Event Organization Services such like bazaar, trade fair, concerts, festivals,
telethons.

3. Brokerage services is:

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 a. Selling and Buying of commodities transacted through the Ethiopian
Commodity Exchange platform by representing its clients;
b. Training/Capacity Building of its clients;
c. Provision of Technical/Administrative Assistance to clients in terms of
clearance and settlement process requirement of Ethiopian Commodity
Exchange platform.

Beginning from 2010, the Board of Directors of ABC International Business Plc, after an in-
depth review of the commendable performance of the Company and a thorough analysis of its
strengths and weaknesses versus its competitors in key areas of imported products, prices,
distributions as well as promotions, has unanimously endorsed the management proposal to
diversify its business by aggressively entering in to the export trade. To that end, therefore,
commencing from the end of the second quarter of FY 2010 ABC International Business Plc will
be focused on building the hard and soft wares required as essential for the export of marketable
agricultural commodities such as coffee, oil seeds and pulses and other exportable agricultural
outputs whose international market prospects is registering optimistically higher trends.

Further more, as of this calendar year ABC International Business Plc will be involved in service
provision to coffee, oil seeds and pulses producers, suppliers of export and wholesale distributors
via the good offices and modern infrastructural facilities of the Ethiopian Commodity Exchange
Market.

Company’s Corporate Strategy

Realizing that in a scenario of an efficient market, price reflects the actual value of a product and
service, more often than not, companies are always able to locate themselves in a very favorable
strategic position to effectively command higher price and generate higher added value or be
regarded as preferred suppliers provided they are competent enough to demonstrate the
possession of a set of distinctive capabilities.

Usually companies endowed with those unique capabilities -which are intangible in nature- are
discovered to be in no vulnerable or threatened position to be replicated easily by other

3
companies. Not only that, they have always far greater opportunities to outsmart and outperform
their business rivals and comfortably garner above average economic profit.

ABC’s business strategy thus focuses on identifying its capabilities by pulling together its
complementary assets and capabilities and maximizing and defending the economic profitability
generated as a consequence of acquiring those organizational attributes or institutional ‘silver
bullets’.

In this regard, ABC mobilizes three distinctive relational capabilities to achieve its competitive
advantage: architecture, reputation, and innovation. Hence, in order to:
 Create and institute a coordinated use of knowledge;
 Establish a kind of cooperative ethic;
 And successfully implant the organizational routines,
ABC will relentlessly commit itself to enhancing the commercial and social values of the
company-which have been distinctly developed since its establishment in 2007 as well as
strenuously consolidate the relational structures (i.e the architecture) that gave rise to the
emergence of such values.

To that end, ABC’s organization structure will be incrementally purpose-driven, process-centric,

simple in its modus oprandi and agile, Layers will be kept flatter and fewer. Under this
organizational arrangement, the role of top management will be fine tuned toward institution
building and that of middle management geared to coaching and coordination while as the
frontline staffs are transformed into entrepreneurs.

Meanwhile, it will also build its reputation over the business plan period through:
 Its consumers’ own experience;
 Its quality signals (often expressed through its competitive price and
aggressive promotion);
 Its demonstrations and free trials;
 Its self-imposed sanctions on product and service failure, such as
warranty and guarantee;
 Its word-of-mouth recommendation promoting high ratings, brand
leveraging and etc. In this instance, the company will be seriously

4
 committed to provide incentives for employees to work together to reduce
costs and increase or maintain quality by making individual members
responsible for that.

To implement the cost leadership strategy that aims at:

 Gaining advantages by reducing economic costs below the cost of all
competitors so as to keep the company products and services attractive
relative to substitutes;
 Its associating with reputation and endorsements of influential people;
 and staking once it is established.

Moreover, given its limited spheres of operations and experiences in the stock-of- trade, ABC
International Business Plc will try all its best to becoming the leading export firm in the market
by being progressively innovative in:

 Dealing with cost and uncertainty;

 Managing the business process; and
 Getting rewarded accordingly.

To that effect:
1. Regarding Management Control Systems
Tight control is exercised through frequent and detailed cost control reports -with
an emphasis on quantitative goals and targets, close monitoring of assignments,
raw materials, inventory and other costs.

2. Pertaining to Compensation Policies

In this case, ABC is committed to provide incentives for employees to work
together to reduce costs and increase or maintain quality. To that end
compensation polices will be tied to cost.

3. Organization Structure.
In making every effort to institute a cost leadership strategy ABC aspires to take a
leadership position by showing vision instead of improving the past. Due to this

5
overriding belief, ABC International Business Plc is set to launch an organization-
wide program that will place it substantially ahead of its competitors. It seeks to
achieve this goal by:
 Making systems thinking happen at all levels of the Company: at the
strategic, tactical (managerial) and operational levels;
 Mastering the Management System by understanding the management
cycle that links strategy and operations and knowing the right tools to
apply at each stage.

By so doing, ABC International Business Plc intends:

 To make management provide the overall guidance in a manner that
ensures the various puzzles fit together;
 To institute a performance management regime that measures up the
people and process performance;
 To align the target, execution, management and improvement activities
so as to distribute roles among different people in the organization. In
this regard, pragmatic process governance will be put in place.

6
Current Situation
Basic Company Data

Name of Company ABC Plc.

Status Import and Export Business, Registered under
Business License Number………………, Ministry of
Trade & Industry.
Addis Ababa Ethiopia, on ………………… 2007.
Capital Birr 2,561,742.00
Registered Office
Company No. …………………
Head Office Garad Building, Bole Road, Addis Ababa

Company’s: Vision, Mission Statement and Values.

ABC International Business Plc will operate with the following set of vision, missions and
values.

Vision

We aspire to see Ethiopian coffee beans, oil seeds and pulses as well as other
agricultural products attain their leading edge in the global market and playing their
strategic roles in ensuring sustained streams of export income for farmers, suppliers
and the economy by realizing the country’s vision of becoming a middle-income
country by the year 2030.

Mission:
 We aspire to provide a high return on investment by providing quality satisfaction to
ultimate customers through an employment of the state-of-the art of marketing
technology in the export of Ethiopia’s agricultural commodities.

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 We practically demonstrate genuine responsibility, professional and technical
competence to our stakeholders that conform to high standard of moral and ethical
conduct while providing the envisaged services.
 We formulate, communicate and implement business development strategies for
coffee, oil seeds and pulses that comply with the priorities of PASDEP of the
government and thereby, engage in research that can support the development endeavors
of the export and marketing of coffee, oil seeds and pulses as well as other potential
agricultural products of the country.

 We are dedicated to the total success of Ethiopian organic coffee, oil seeds, pulses,
and other agricultural products to promote and to build capacity of the supply chain to
market at global level.

 We give emphasis on design and development of technology-inputs that improve the

productivity and quality of agricultural products.

 We also seriously address the country’s need for coffee, oil seeds, pulses and other
agricultural products capacity building for the marketing intervention at the global
level.

 In this regard, we will conduct research, hire consultancy services and provide
training at a fair rate to disseminate the state-of-the-art of the technology and managing
the business. Up-to-date our suppliers with vital production and marketing information
in a manager that benefits the suppliers and exporters.

 We are equally dedicated to contribute toward economic development of our country

by being a good corporate citizen on a local, state, and national basis in all regions and
places in which we conduct business.

 We also share our obligation for the protection of the environment.

 Lastly, we are committed to recruit, develop, motivate, reward and retain responsible
citizens-with exceptional ability, character and dedication. In this case, we’re
determined to create good working conditions, facilitate opportunity for growth,
guarantee high degree of employment security to those employees who are endowed with
exceptional talent and always strive to excel in their performances.

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Values

Integrity: Nothing but the highest level of integrity will be acceptable.

Teamwork: Effective teamwork is key to our company’s success.
Individuality: Individuals are valued, trusted and respected aspects of the
company.

Performance: We expect a high level of achievement and contribution from all

employees. Employees will be compensated based on individual
Commitment andABC’s management and staff will always remain committed to
team performance.
and perform assigned duties to the best of their abilities. Employee
Involvement:
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made to develop and compensate employees is aimed at preparing
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Social Thetobusiness
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challenges of todayinand
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Responsibility:future.
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Quality: ABC believes that
economic its products/services
of citizens-via positive (Research, Consultancy
and gainful demandsand
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Quality will be ABC’s
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distinguishing clauses hall
corporate and mark.
spirits of the Federal
Constitution as well as the Company policies, procedures, rules,
and guidelines and other recognized and accepted company and
social mores and norms.
Accountability: We believe in taking up full responsibility for our performance
as individual employees and as an organization. We will be
accountable through establishing goals and measuring our
performance in achieving these goals. We are also legally9
bound to maintain all transaction documents and to pay all the
necessary tax payments that we are obliged to settle.
10
History and Current Status

ABC International Business Plc, in effect is in a start-up situation. However, in spite of its fresh
start in 2007, the Company confidently claims to have succeeded in all its business plans. By
navigating through the complexities of import- export business, it has registered quite promising
and stimulating track records.

Encouraged by the emergence of favorable policy environment, it has been able to win over as
many a customer by progressively conquering other competitors’ territory, products, and
services. Many have expressed their appreciations and satisfaction for its customers’
relationship.

Led by a team of few but highly experienced and enthusiastic experts in agricultural products
trade, business management, financial management and business economics, ABC International
Business Plc has attained a superior performance level in the provision of quality service-mainly
driven by transparency, efficiency, and effectiveness principles. Among the many products and
services that the Company renders the following are important worth mentioning:

In the spheres of import, export, production, distribution and retailing the Company is engaged in
the business of:
 Agro chemicals & fertilizers like /herbicides, insecticides, fungicides, pesticides.
 Industrial chemicals like/leather and textile dyes, water treatment.
 Medical equipments,
 Agricultural equipments.
 Agricultural outputs,
 Textiles,
 Leather products,
 Jewelries and cultural art-crafts,
 Metal and building materials,
 Computers and other office equipments,
 Electrical and electronic equipments,
 Stationeries,
 Engineering and surveying tools and equipments,
 Other fixed and consumable materials, commodities.
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 Import, export, produce, distribute, rent and retail: machineries, vehicles and spar parts,
 Provide management consultancy and brokers service,
 Undertake training need assessment and provide training,
 Provide even organization service like bazaar, trade fare, concerts, festivals telethon,
 Provide management service,
 Real-estate development,
 Serve as commission agent for different companies,
 And engaged in related other services.

Business Organization and Management

The management team comprises 6 experience-honed professionals with appropriate

qualifications, solid experience and complementary skills. Some of the critical staffs have had
long years of experience while working in various capacities. Besides, since joining ABC
International Business Plc, they have effectively demonstrated their capability in managing a
start-up business organization.

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 Organization Chart of
ABC International Business Plc.

General Assembly of
Shareholders/Partners

Board of Directors

Audit Legal Service

General Manager

Quality

Human Finance Procurement Marketing & Sales Customer’s

Resources Coffee, Oil seeds, Pulses Service
Development and other Agricultural
Products

Shareholders

Shareholders/Partners own the company and appoint directors at the proposal of the general
manager.

The Board of Directors

The board of directors is responsible for setting (or at least approving) strategic directions,
monitoring progress and ensuring that the Company complies with legal and ethical requirements
and communicating with shareholders.

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Managing Director
Appointed by the board and is responsible for executing the Company’s strategy.

General Management

General management- which is made up of the GM and other Department Heads is the highest
level of management without constant supervision.

Marketing and Sales Department

The Marketing and Sales Department is headed is in charge of leading the marketing and sales of
coffee, oil seeds and pulses as well as other exportable agricultural products. In collaboration
with other department heads he’ll explore niche markets across the globe. Establish networks
with suppliers and customers. Identifies competitors in the stock of trade, develops state-of-the
art marketing strategies.

The Customers Relationship Department

Given the variation of the socio-cultural environment, relationship management remains one of
the strategic functions in the promotion of the company’s export trade. The Department will be
headed by an experienced professional staff with marketing background.

The Procurement Department

The department grapples with inbound commodity procurement as per the strategic, tactical and
operation plans of the company. The department head will be recruited and be assigned soon
once he or she secures the approval of the board of directors.

The Finance Department

Is in charge of the management of the Company’s corporate finance. He runs the accounts and
transacts on matters related to financial management.

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The Human Resource Department

The department is responsible for the personnel administration and human resource development
of the company. It is in charge of recruitment, selection, promotion, compensation, retirement,
training, mentoring, coaching, and career growth of the Company’s employees

Human Resource Profile

In order to run the newly expanded company ABC International Business Plc will have a total
staff members of 19 strong. Out of these 17 are permanent while the rest two are pooled on
contractual basis as deemed necessary.

Table -1- Human Resource Profile of ABC International Business Plc.

Total No. of Employment status
No. Title
Employees Occupied Vacant
1 General Manager 1 
2 Executive Secretary 1 
3 Procurement Officer 1 
4 Marketing & Sales Officer 1 
5 Finance Officer 1 
6 Human Resource Officer 1 
7 Customer Relationship Officer 1 
8 Procurement Clerks 2 
9 Marketing& Sales Clerks 2 
10 Accounting Clerks 2  
11 General Services 4 
12 Legal Advisor 1  (contractual)
13 IT Officer 1  (contractual)
14 Coffee Tester 1  (contractual)
Total 19

Infrastructures:

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ABC International Business Plc is currently operating from a rented office located in Bole Road,
Addis Ababa. Once the Company enters full-swing into the export trade the management will
negotiate a satisfactory lease for inbound and outbound supplies both in the Capital as well as
coffee oil seeds and pulses growing areas. It will start to utilize those premises form the 1st
month of the Company’s start-up. Most of the warehouse will be satiated in places close to
suppliers and the export gateways so as to efficiently and effectively reach customers.

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Products

Not with standing such institutional encumbrances, ABC since its establishment has attempted to
gather information from informal venues as well as some published materials on the trade as well
the company’s competitors.

Coffee’s contribution to Ethiopia’s merchandize export earning, ranges in between 50-60 percent.
Besides, due to the current high international coffee price level, Ethiopian coffee growers are
fetching relatively higher income. Furthermore, concerted efforts are being made by
government. This in turn is motivating coffee growers as well as modern investors in the trade to
substantially increase the volume and composition of their marketable surplus. In particular,
with the adoption of the policy of commercialization of agriculture and pursuit of a
geographically differentiated strategy, chances are, coffee production is expected to grow by
leaps and bounds when seen in light of developments, such as:
 Massive construction of farm to market roads;
 Development of agricultural credit markets;
 Extension of specialized extension services for differentiated agricultural zones
and type of commercial agriculture;
 The development of national business plans and tailored packages of identified
export crops (such as oil seeds & pulses, spices, coffee, etc)
 Measures being taken to improve land tenure security, and make land available
where feasible for large-scale commercial farming;
 Reforms undertaken to improve the availability of fertilizer and seeds; and,
 Better functioning of the agricultural markets for both inputs and outputs, and
institutions, including improved value chains, information flow, quality and
standard support, and cooperatives that strengthen the positions in the market.

Coffee is produced in more than 50 developing counties providing income for approximately 25
million small holder producers (DFID 2004; Oxfam 2002b) and employing an estimated 100
million people (NRI 2006). In 2005/2006, 52 percent of world production was accounted for by
the three main producers (Brazil, Colombia, and Vietnam)

The top five consumers are (in order the USA, Brazil, Germany, Japan and France, while the
NORDIC countries are known to have registered the world’s highest per capita consumption.

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About 65 percent of the world supply of coffee is Arabica, while Robusta currently make up
around 35 percent compared to 25 percent 20 years ago.

In the case of Ethiopia, two coffee species are currently used for commercial purposes: Coffee
Arabica and coffee Canephona (also known as Robusta) Ethiopia only produces Arabica coffee,
which is widely believed to have originated there.

Arabica coffee still grows wild in the forests of the south-western part of the country, which
remains an important source of genetic resources for the world coffee industry. Coffee farming
systems are conditionally divided into four categories: forest coffee, semi-forest coffee, garden
coffee and semi-modern plantation yields are estimated to be 200kg per ha for forest coffee and
around 450-750kg per ha for semi-modern coffee plantation pesticides or herbicides.

An accurate estimate is difficult because part of the harvest is gathered from semi-wild and wild
forests, and a good proportion is consumed on farm or locally. Most recent estimates suggest
that over the past five years annual production has fluctuated between 2.8 and 5 million (60kg)
bags (International Coffee Organization (ICO) statistical data base), while the United States
Department of Agriculture forecasts a harvest of 5.5 million bags in 2006/07 (USDA, 2006)

In this regard, an assessment of the production and export trends in the pre and post International
Coffee Agreement (ICA) regimes indicates that during 1982-1989 the period under the ICA
regime average production has reached a level of 90,099 thousand bags. So also total production
had grown from 84685 thousand bags in 1982 to 94120 thousand bags in 1989 registering a total
growth of 11 percent.

In the meantime, the share of Ethiopia’s coffee production has risen from 45 percent during the
ICA period to that of 48 and 50 percents in the following respective periods. However, the share
of its export in the world coffee market has plummeted from 2 percent of the ICA period to that
of 1.8 percent in the post ICA period.

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 Table -2- Coffee Harvest between 1997/98-2001/2002 E.C. (In Tons) by Region
Total %age % change
No Region 1998 1999 2000 2001 2002 Share from 1998
supply
1 SNNPCS 107140 134832 136470 73367 169464 451,809 28.3 58
Sidama 29364 45175 33562 14313.2 50000 70
Gedio 29223 34380 32000 11371.2 43257.1 48
Kefa 18700 22000 15301 5075 13433.6 -28
Benchmaji 13009 10507 14000 14770 17678.4 36
Sheka 6468 6600 8400 13802.2 10066 56
Others 10376 16170 33207 14035.4 35028.9 238
2 Oromia RS 198178 181063 213100 206633 308875 1107849 69.3 56
Jimma 50600 44000 49775 39775 62778 24
West Wollega 44880 37400 50629 40629 61231 36
Illubabore 40619 38685 26802 26802 48431 19
West Harerga 18397 14718 15042 20874 17559 -5
Borrena 9263 12350 12475 12475 9220 0
Guji 4550 6500 13386 12184 28816 533
Other 29869 27410 44991 53894 80840 171
3 Gambella RS 3250 3250 4000 3000 2282 35782 2.24 -30
Total 308568 315895 349570 283000 480621 1595440 100 56
Source: Ministry of Agriculture & Rural Development.

As indicated in Table 2 over the last five years Ethiopia’s coffee production has increased by 56
percent. As reported by Africa Beverage Project, of the total world production roughly 27
million bags of coffee were consumed by the producing countries themselves. This is estimated
to be equivalent to one quarter of the total global production. Of this quantity, about half is
consumed in Brazil. Of the major coffee producing countries, Indonesia, Ethiopia, Colombia and
Mexico are know to consume significant proportions of their coffee production domestically.
Ethiopian consumption is well over 50 percent of its total production.

According to the official report, in 2007 some 43 percent of the world’s coffee output was
consumed by countries in the European Union, among which Germany, France and Italy are the
leading consumers. In terms of market share the United State is the largest accounting for some
21 percent of the world consumption in 2007. Surprisingly, despite the multi-dimensional
bilateral relation between Ethiopia and the United States Ethiopia seems to utterly trail behind to
in benefiting from the US market.

Table -3- Ethiopia Value of Eports USD million, 1999-2005

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 Item 1999/2000 2000/01 2001/02 2002/03 2003/04 2004/05
Total Export 485.9 462.7 452.4 482.7 600.4 817.0
Coffee 262 182.0 163.3 165.2 223.6 335.4
Coffee as percentage 53.5 39.3 36.1 34.2 37.2 41.0
of Total

 Oil Seeds and Pulses

According to the official statistics of the Ministry of Agriculture and Rural Development, the
other agricultural produces that are significantly contributing to the foreign exchange
earnings of Ethiopia are oil seeds and pulses. As recently as 2001 E.C, the total export value
of these agricultural produces has reached a total amount of USD 354,075,000. Compared to
the same period’s coffee export value of USD 375,838,500 the performance of this sub-sector
is a prodigious achievement. It accounted for 94.2 percent of coffee’s performance of the
same calendar year.

Table -4- Oil Seeds and Pulses Export (1998-2001 E.C.) In Tons
Percentage
Produce 1998 1999 2000 2001 Total
Share Change
Sesame 238307 208919 124291 238804 810321 86.6 0
Niger 21790 14056 26642 44654 107142 11.5 105
Lin 1278 354 24 41 1697 0.2 -97
Caster 1260 320 - 324 1904 0.2 -74
Ground Nut 199 138 167 61 565 0.1 -69
Pumpkin Seed 193 - 133 138 464 0.05 -28
Cotton Seed 183 707 - 143 1033 0.11 -22
Sunflower 3 1 8 6 18 - 100
Rape Seed 1 500 214 752 1467 0.2 76200
Others 38 10795 382 17.7 11232.7 1.2 -53
Total 263252 235790 151861 284940.7 935843.7 100 8

As evidently reflected in the above Table the leading agricultural produce assuming the sector
leadership of the oil seeds and pulses sub-sector is sesame-which accounts for 86.6 of the total
supply. Surprisingly enough, unlike coffee out of which 50 percent of the total production is
consumed locally, the domestic consumption of sesame is practically nil. However, in the sphere
of international production of sesame, on the average Ethiopia’s share is among the least. In a
five consecutive years production performance of major producing countries Ethiopia ranked
sixth.

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 Table -5- Production Quantity of Sesame (2001-2005E.C.) In ‘000Tons
CY
Country Share in
2001 2002 2003 2004 2005 Total Qty
Percent
China 804.73 895.76 593.59 704.31 625.47 3623.86 38.9
Ethiopia 18.88 38.9 61.46 115.39 148.86 383.49 4.1
India 698.00 441.3 782.10 674.1 641.00 3265.5 35.1
Sudan 296.00 122.00 325.00 399.0 277.00 1419.0 15.3
Uganda 102.00 106.00 110.00 125.0 161.00 604.0 6.6
Total 3920.61 3605.96 3875.15 4021.8 3858.33 9295.85 100
Source FAO (2006)

Contrastingly, Ethiopia, comprising 4.1 percent of total production has registered an annual
average growth rate of 56.76 percent. Compared to other major producing and exporting
countries Ethiopia’s performance in production is startling. Not only that; within the same time
frame Ethiopia’s export performance has grown drastically. In a matter of five years Ethiopia’s
export market share has registered phenomenal growth.

Table -6- Ethiopia’s share in the export of sesame.

Calendar Year Percentage Share
2001 6.9
2002 13.9
2003 17.4
2004 19.1
2005 42.6
Source FAO (2006)

As shown in the Table 5, Ethiopia’s export performance has increased significantly. In between
2001 and 2005 the percentage share has grown from 6.9 percent in 2001 to 42.6 percent
registering 617.39 percent growth. This achievement is mainly attributable to the zero-level
local consumption of the produce. In countries such as China and India the domestic
consumption level has reached as high as 46.9 and 36 percent respectively. According to 2005
FAO data, sesame is highly consumed both in China (49.8 percent) and India (36.5 percent) Due
to that, among the major importing countries of sesame namely Germany, Japan and South
Korea, China take the lion’s share (36.7 percent) following Japan.

Table -7- Sesame Import Quantity (2001-2004E.C.) In Tons

Total Percentage
Country 2001 2002 2003 2004 2005
Import Share
China 53101.05 48892.72 117678.10 135436.46 209559.30 564667.71 36.7
Ethiopia 298.42 440.72 917.13 2251.19 1928.24 5835.7 0.4

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Germany 30944.63 29744.15 36568.79 40375.78 48433.43 186116.78 1.2.1
India 1079.13 1967.66 1668.1 3075.42 7948.10 15738.41 1.02
Japan 149428.20 154551.64 151273.38 158654.46 167971.14 781878.82 50.8
Sudan 261.09 160.44 252.89 207.14 288.96 1170.52 0.08
Uganda 15.04 41.43 39.3 59.89 61.94 217.6 0.01
Total 237128.56 237800.76 310400.69 342064.34 438196.11 1555625.54 100
Source FAO (2005)

Of the total import, Japan ranks first by registering a 50.8 percentage share - being followed by
China (36.7) and Germany (12.1) respectively. Besides, in terms of importing Ethiopia’s sesame,
China takes the leadership. It accounts for 51.3 percent - being accompanied by Israel, Saudi
Arabia, Turkey and Jordan respectively. Hence, this is another lucrative export corridor that
ABC will be exploring once it manages to enter into the US coffee market.

Cereals
According to the 2002 E.C. Ethiopian Commodity Exchange Market Brochure Ethiopia’s
production of maize places it as the second largest producer in Africa and a significant cereals
producer with a total production of 14 million tons. Given the adoption of the
Commercialization of Agriculture Policy of the Federal Government and an increasing interest
on the part of foreign investors to invest in commercial agriculture the prospects of Ethiopia
joining the list of major exporters of cereals is astoundingly high. Hence, in light of this
prospect, ABC Plc will undertake serious research to monitor the realization of the Federal
Government’s New Agriculture Policy.

Core Competencies

Despite its infancy, the ABC’s International Business Plc Management Team has acquired a lot
of insightful experiences in the organization and management of import-export trade. It has also
managed to realize that trade is ‘an engine of a country’s economic growth.’ Moreover, it has
recognized the significant role of culture in managing business.

Furthermore, being aware that Ethiopia has been a country whereby the state used to have a
paramount role in the management of the economy, the Company has established the need for
recruiting local agents ‘who know the ropes.’ in every sense. One way or another familiarity
with how things work on the ground is regarded as an essential recruitment requirement for

22
employees that deal with suppliers and government agencies. It strongly believes that Africa
(including Ethiopia) is a continent of many nations unlike countries such as India which is a
single nation of many peoples. In Ethiopia you’re required to deal with communities; while as in
India you are expected to bargain with individuals pursuing their own individual interests.

External Environment
Ethiopian Economy

The Ethiopian economy is essentially agricultural based and highly dependent on small scale
household agricultural activities.

The Performance of the economy is guided by the performance of the agricultural sector. It is
agricultural commodities that take the lion’s share of the export basket. Among these export item
coffee takes the leadership. However, with the deepening of the commercialization process the
share of non-coffee exports is rising remarkably. In contrast, the share of non-agricultural
exports is very slim. Among them the major ones are leather and leather products, frozen meat,
sugar and textiles.

Ever since the downfall of the communist regime in 1991 the Ethiopian economy has recorded a
promising growth performance for the country entered a sustainable growth momentum.

Table -8- Growth rate of Real GDP and Real Export under the Three Consecutive Regimes.
Real Perceepta
Regime Period Real GDP Real Export
GDP
Imperial 1960/61-1973/74 3.87 8.20 1.90
Derg 1974/75-1990/91 1.80 4.70 -0.84
EPRDF 1991/92-2003/04 5.92 23.58 0.84
1960/61-2003/04 4.21 13.04 0.41

Since 1992, Ethiopia under the support of the IMF and World Bank has undergone Trade
Liberalization and Enhanced Structural Adjustment Programs (SAPs) to restrain internal and
external imbalances of the economy. One among the goals of the new policy regime has been to
increasingly open the economy to foreign competition with a view of benefiting the economy
from expanded markets.

23
The tools deployed include:
 Devaluation of the national currency Birr and step-by-step liberalization of the foreign
exchange market.
 Streamlining import and export licensing system.
 Tariff reduction, and provision of incentives to exporters.
 Abolishing tax on exports and subsidies to parastatal exporting enterprises.
 Encouraging export-oriented investment.
 Introduction of duly draw back and foreign exchange retention scheme.
 Minimizing administrative and bureaucratic procedures.

Institutional the Federal Government:

 Promulgated an Export-led Development strategy,
 Established Export Support Institutions
 Instituted export specific incentive schemes such as
o Foreign exchange retention scheme.
o Export duty incentive schemes such as duty draw back scheme, voucher scheme
and bonded manufacturing warehouse scheme.
o Export credit guarantee scheme.
o External loan and suppliers or Foreign Partners’ Credit. (For further detail
refer to Annex-9)

Table -9- Sectoral Contribution to GDP Growth

1998/99 1999/2000
Agriculture 1.7 0.8
Industry 1.3 0.5
Services 3.3 4.2
Distributive 1.1 1.4
Other 2.2 2.8
GDP Growth 6.3 5.4
Source:

Table -10- Employment Share by Major Economic Sector.

Sector 1984 1994 1999
Agriculture, Hunting, Forestry & Fishier 88.6% 89.3% 79.6%

24
Mining & Quarrying 0.1% 0.1% 0.1%
Manufacturing 1.6% 1.8% 14.4%
Construction 0.3% 0.3% 0.9%
Electricity, gas & water supply 0.1% 0.1% 0.1%
Wholesale, Retail Trade & catering 3.8% 4.2% 0.6%
Transport, storages & communication 0.4% 0.6% 0.5%
Financial Intermediate 0.1% 0.4% 0.4%
Other Service 5.1% 3.6% 4.4%
Total 100% 100% 100%
Source:

Market Analysis
The Industry/Trade

In spite of its long history, with the advent of information technology the art, the science and the
craft of running modern business has radically changed. Therefore, this time round entering into
the world of trade critically needs the gathering, retrieving and management of information. For
this reason, market intelligence has turned out to be a vocation in its own right. In content, this
engagement is wider than market research. However, regardless of such stupendous
developments in the field of information technology and infrastructure as well as vitality in
managing trade, in Ethiopia the culture of gathering, retrieving and managing information
through the utilization of your own business files, competitors brochures and reports, or visiting
competitors websites, etc isn’t that widespread; it is at an embryonic stage. In addition, due to
the predominance of collectivist culture in managing business, gathering of information about
ones own competitors is as labyrinthine as managing relationships.

Here in Ethiopia, because that people have been accustomed to live with perpetual life
adversities and uncertainties, building trust is an uphill marathon-demanding the artistry of
longer time of acquaintance. Given this kind cultural environment reliable pieces of information
and reflections about any thing are hard to come by.

Our Market

25
The current export-markets for coffee, oil seeds and pulses as well as other agricultural produces
are territorially and culturally segmented. At the moment, the major importers of coffee, oil
seeds and pulses are North Americans (mainly the US), Western Europeans (in particular
members of the European Union) and North East and South and North East Asians (such like
China and Japan). These three geographical areas- that are believed to make up the bulk of the
niche market-aren’t one and homogeneous when it comes into business practices, attitudes,
behaviors, cultures and relationships.

 The Anglo-Saxons (USA and Britain)

Are individualistic and highly impersonal organizations are seen as markets in which
people negotiate what has to be done. They dwell more on managing relationships
rather than managing authority and uncertainty. Trust extends more readily beyond
friends and family so contacts and contracts with people about whom nothing is
known personally can be relied on. Privacy is highly valued. They put financial
performance first whenever they are assessing achievement. For this reason, unlike
the longer view -typical among Asian managements- they tend to encourage short-
termism. However, due to historical factors there are marked differences among the
British and their North America counterparts regarding managing time. The British
have the greatest concern with the past while the North Americans are optimistically
future-orientated. Together with their assertiveness, they are achieving people,
always setting goals to accomplish.

 Continental Europe (Germany, France)

Unlike the Anglo-Saxons they are less pressured by short-term financial goals of
share holders. Their belief in planning is high. They favor commitment and
continuity. In managing relationships, culturally they are more or less similar to the
Anglo-Saxons. Conversely, in managing uncertainty they are found at the higher end
of uncertainty avoidance.

26
  The Asians (China, Japan)

Managing relationships in a harmonies way runs through both countries. It is

regarded as vital in work as much as outside to maintain a good network in which
citizens in both countries accept and respect. Mutual trust and confidence are built in
relationships and patiently; and it is the person with whom business is done that
matters most. Hence, it is this collectivist culture that gathers the Asians in the same
slice of the culture care. Last but not least, in managing time -due to their patience to
work for the future- the Asians are known to have no ‘immediate’ need for return here
and now.

Other than the above illustrated cultural diversities, the export commodities that ABC is planning
to focus on -in its export business- are defined to go to a kind of markets with more or less fairly
homogeneous buying characteristics.

The Company’s Competitors

Export-trade or international trade, in-spite of its long history, with the advent of information
technology has radically changed in terms of volume and composition as well as management.
For this reason, this time round entering into the world market is requiring the gathering,
retrieving and management of plethora of information. Due to these developments, nowadays
market intelligence has turned out into becoming a vocation in its own right. Content wise this
trade is wider than the traditional market research.

However, here in Ethiopia, regardless of such startling developments in the fields of information
technology and infrastructure as well as the skill of managing trade, the culture of collating
information-through the browsing of ones own company files, competitors brochures and
reports, or visiting competitors websites, etc is found toddling. In addition, due to the prevalence
of collectivist culture in managing business, gathering of information about competitors is as
intricate as managing relationships. Because, people in this country, have been accustomed to
live with perpetual adversities and uncertainties building trust is an uphill marathon demanding
longer time of acquaintance. Hence, given this kind of inhibitive cultural environment reliable
pieces of information and reflections are hard to come by.

27
Notwithstanding such institutional encumbrances, ABC International Business Plc has opted out
to assemble information from informal sources as well as some written materials referring to our
competitors in generic terms such as ‘foreign’ and ‘local’.

In this trade, ABC’s International Business Plc competitors are divided into two broad categories:
foreign and domestic.

Foreign Competitors

Virtually all coffee production is carried out in low and middle income countries of Africa, Asia
and Latin America. Currently, there are more than 80 countries including Ethiopia, who cultivate
export and re-export coffee as raw, roasted and soluble product to more than 165 countries world
wide. More than 121 countries export and re-export coffee. More than 50 developing countries,
25 of them in Africa, depend on coffee as a major export commodity, with 17 countries earning
more than 25 percent of their foreign exchange from coffee.

With the exception of African countries, Ethiopia’s competitors in Latin America and Asia fall at
the higher end of labor and land productivity scales. In the latter countries, coffee cultivations
ate highly backed by intensive research and development undertakings, sophisticated marketing
strategies and modern infrastructure. Their human resource potential -in terms of profession,
skill and vocation- is equally tremendous. Besides, their percentage share of the global market is
also extraordinarily enormous.

Local Competitors

Until the beginning of the 1990s, the trade has been monopolized by the state. The share of the
private sector was around 15 percent of the total export. Concomitantly, Ethiopia’s performance
in coffee export has been very sluggish. In an unpublished survey conducted under the auspices
of the then Office of the National Committee for Central Planning, in 1985/86 Ethiopia’s coffee
export performance was said to reach a level of 60 percent of what had been achieved prior to the
first half of the 1970s. This trend has continued to prevail until the unceremonious downfall of
the Derg regime in 1991. But with the adoption of free market policies in the early 1990s, the
volume of trade has started to pick up and the country’s foreign exchange earning has steadily
increased. None the less, the cultural environment of the trade hasn’t changed, much. In stead of

28
attempting to modernize the trade, businessmen engaged in the stock of trade are carrying out
their business in the most traditional way. In place of trading openly and transparently they are
often discovered employing traditional networking mechanisms. For this reason, at the moment
out of the 120 registered traders it is only the 20’s which are said to be the frontline operators of
the export trade. Data regarding their percentage share in the market is not systematically
organized; and their respective shares of their export-out of the total production of the
commodity-is not officially released. Due to that, -Ethiopia though naturally endowed with an
immense potential to expand- her production is trailing far behind international competitors in
boosting and marketing her God-given high quality coffee.

Regarding the domestic marketing supply chain, from growers to export-market participants are
numerous and include small holder coffee farmers, primary collectors, suppliers, processors,
service cooperatives, unions, exporters. Participants are required to have specific licenses for
their respective functions. Normally, until recently the Ethiopian coffee ought to have passed
through action centers However, beginning from 2009 the trading are conducted through the
facilities of the Ethiopian Commodity Market Enterprise.

29
Strategy and Plans

ABC International Business Plc strongly believes that ‘to stay in business it needs to have
customers.’ This being its central business motto the company underscores the necessity of
putting in place of an effective marketing plan to communicate with, motivate and secure
customers as vital for its survival and sustainable thriving.

To that effect, the Company is determined to employ marketing as a strategic tool to enhance
customers’ awareness and deliver its core message.

In full appreciation and recognition of the social context in which the business operates-in
particular in the case of local suppliers-ABC’s marketing strategy is organically linked with its
avowed commitment to forge solid networking so as to reach potential and reliable suppliers and
referral sources through informal activities such as joining social organizations, seriously
attending industry events or taking people to social and private occasions on its own expenses.

In terms of handling customers of the export commodity, ABC’s strategic position stakes out of
becoming a ‘low-price leader’ by supplying customers with quality commodity in a manner that
tells them of what they get rather than detailed specifics of what the commodities are.

In this instance, unlike the traditional marketing practices of cajoling customers through
product/service, price, locational convenience and décor and promotion, ABC will emphasize
more on identifying:

 How the product or service is meeting the customers’ concrete needs?

 How the purchase of the commodity affects the ultimate/or end customers financial
situation.
 How convenient is to purchase or order the product or hire the service?
 How the customers feel about ABC International Business Plc and its products/or
services?
 How customers are going to deal with ABCs International Business Plc export
products and provision of brokerage services over time? To what extent customers
are secured and in secured?

30
Subsequently, in assessing the attractiveness of the business area ABC International Business Plc
has explored that:

 The markets for both coffee and sesame as well as other agricultural products are
large; and
 The market is growing in size due to fast economic growths taking place in many
parts of the worked.

Regarding ABC’s International Business Plc competitive position, given the size of the market,
the company will strive to increase its market share through:

 Cost leadership, and

 Employment of key skills and resources that provide it the competitive advantages
over its competitors or business rival.

Hence, ABC International Business Plc intends to put in place two complementary business
strategies i.e forward, horizontal and backward integration strategies and market intensive
strategies so as to penetrate the coffee and sesame markets to successfully attain its business
vision of becoming ‘a world class exporter, importer and management consulting firm’ with
the aim of being a leading private sector economic actor in the country as well as a dedicated
development partner of the incumbent entrepreneurial government.

Through horizontal integration, ABC International Business Plc will outsource activities
outside its core competencies whenever its market share increases; and backward integration
when the Company aspires to take control of the supply chain by making suppliers earn high
profit margins.

ABC International Business Plc as a consumer-oriented business entity:

 Focuses on ultimate consumers;

 Emphasizes on efficiency and effectiveness;
 Relies on thorough marketing research;
 Exerts its maximum effort to live up to diligently meeting the ever-changing
satisfactions requirements of customers;
 Aims at long term relationship with both suppliers on the supply chain and
customers on the value chain.

31
  Nurtures market-oriented management.
On its long march toward the fulfillment of the above-cited institutional goals, the Company is
committed to employ the following set of tactical steps:

In Organization:  Sets up a marketing and sales functions on an equal footing

with other functional areas;
In Strategic Planning:  Bases its Strategic Business Plan on systematic market
research so as to keep the company effort truly attuned with
markets;
 Tries to project market trends sufficiently far into the future
by providing adequate lead-time for developing programs and
facilities for future markets.
In Control:  Institutes tight feedback system to check results so as to
enable itself take timely remedial;
In Research in  Investigates consumer wants, need desires, problems, habits,
views, satisfaction and dissatisfactions by establishing
Consumer Behavior
necessary communication links to consumers and …………
strategies accordingly;
In Global Marketing:  Adjusts strategies to specific environments by aligning
business activities to particular market circumstances by ……
the chances for success;
In Marketing  Identifies target markets that are emerging, neglected or
Strategy: poorly served so as, in the long run breed loyality;
In Pricing:  Sets prices in line with the products market value as perceived
by the consumers by ensuring optimum salability;
In Promotion:  Stresses more on the benefits that consumers are to derive by
providing consumers good and convincing reasons to by the
goods and services of ABC International Business Plc;
 Positions products and services properly viz-a-viz competition
by giving the products and services clear-cut profile in
consumers’ minds;
 Aids dealers via displays, point-of-purchase materials and
generous advertising in order to generate consumer business
and agent loyality;
In Selling:  Advises customers on how they can derive their most profits
from the export commodity instead of over loading them with
stock by making the sales people welcome for they bring

32
 profit;
 Trains agents in export commodity knowledge and sales and
purchase techniques to enable them do long-term business;

Complementing the above-listed tactical measures, ABC International Business Plc will adopt
the following business strategy.

Business Strategy

The market analysis indicates that ABC International Business Plc can take the advantage the
unexploited US coffee market and penetrate the other markets dominated by other competing
Latin American and Asian countries by supplying the European and Japanese Markets with
quality organic Ethiopian coffee. Regarding sesame and other agricultural products the
Company will continue to exploit the existing advantage that the country has in terms of zero
domestic consumption by identifying new markets outside China. By providing research backed
technical advice to producing farmers to improve the quality of their produce ABC International
Business Plc will try its best to win the global market for sesame. In essence, the Company will
continue to employ an adaptive strategy that effectively responds to the complexities of the
global market environment.

Specifically, the Company’s set of strategies for the forthcoming five consecutive years in the
spheres of the product; pricing and promotion are as follows:

Product:

For the product element of the marketing mix is essentially concerned with the customers’
perceptions and expectations of the goods and services, and for it covers a broad variety of
aspects, ABC -through its business partner Rakeb Abebe- has planned to undertake conjoint
analysis on price and coffee variety. By applying this technique, the Company will try to assess
the attributes of the export commodity that are important to targeted American customers. By so
doing, ABC projects the market share and sales volume of the Ethiopian Coffee Beans.

33
It will also establish a recency system to monitor its performance in attracting and retaining its
customers. It periodically measures the number of customers that it will manage to retain over
time.

Price

In setting a price premium to evaluate its products pricing in the context of market competition
ABC is committed to measure its export crop compared to that of its competitors here and
abroad. It also assesses the amount customers are willing to pay for its products. Said differently,
the Company will construct reservation prices of potential customers to establish market
demand. Mean time, in order to establish demand via another means, the Company will make
use of a percent good value approach so as to determine the proportion of customers who
consider the value of the Ethiopian Coffee Bean of a good value. In so doing, the Company will
be able to evaluate the maximum pricing latitude for its export products Last but not least, the
Company is determined to employ a residual elasticity method so as to measure the
responsiveness of quantity to change in the international coffee market price after taking into
account for international and domestic competitors’ reactions to those changes.

Promotion
One strategy that ABC International Business Plc introduces is the adoption of a pass-through
and a price water fall promotion strategies. Through price offers customers will be persuaded to
approach ABC directly.

34
Financial Analysis
Export Volume and Sales Forecasts

Annual sales volumes of coffee and oil seeds and pulses will be as shown in Annex 1 With the
target of reaching 2.5 percent of the export market share out of which 10 percent is handled via
the share of the intermediary market ABC is planning to export a total volume
of tons of coffee worth birr . Related to sesame, oil seeds and
pluses export in a period of five years the Company aims at exporting a total volume of
tons of sesame (including other oil seeds and pulses) which is birr
tons worth birr .

Staff Costs
Total spending on salaries based of the salary levels indicated in Annex ………… amounting birr
.

Managers Stipends
There is a birr 10,000 salary a month to cover the General Manager basic living costs and
commitments. They will be increased toward market levels once the business is generating
sustained positive cash flow.

Contract Staff

To avoid the commitment associated with increasing the permanent staff compensation and to
add to the range of resources available, three technical staffs will be employed on contract basis
at a total monthly compensation of birr .

Operational Expenditure

The Company will incur an annual operating expense of birr 11,309,318.

Profit and loss account

The revenues and costs are brought together in the profit and loss account in Annex 4.

Balance Sheet

35
A summarized balance sheet for FY 2010 is shown in Annex 5. By the year 2011 retained
earnings exceed birr 8,968.94.

36
Cash Flow and Funding Requirements

Monthly cash inflows start to exceed outflows by birr 236,070 and the Company moves into
surplus by month January 2011. Our maximum funding requirement is birr 244,790.46.

Sources of Finance
Equity or Capital

To raise finance ABC International Business Plc, as it is a limited company, mobilizes the value
of its resources from its owners and family members and close friends and associates. The land
and buildings, the vehicle, the office equipment and furniture, vehicle warehouses in addition to
cash are assigned to the capital account for each of the proprietors.

Overdrafts

The Company will also utilize the facilities of bank overdrafts as deemed necessary.

Loan Guarantee Schemes

Ever since the calendar year 2005 the Federal Government of Ethiopia has introduced a loan
guarantee scheme to encourage development banks to lend to new and small firms like ABC
which are unable to offer an unconditional security. Under this scheme the government would
guarantee up to75 percent of the value of the loan. The Development Bank of Ethiopia would
stand the risk of the other 25 percent. ABC will make use of this opportunity to finance its
business short and medium-term business activities through the bank loans made available by the
commercial Banks. In addition members and close associates will fill the short fall.

37
Risk Analysis (SWOT)
Strengths

The market for primary agricultural products is highly competitive. The number of countries
cultivating and exporting the products are to too many. And income elasticity of demand for
primary agricultural products is inelastic. Alongside competitiveness the commodities are
subject to cyclical fluctuations. Prices change frequently-many a time on a downward spiral.

One strategic means of winning customers is quality leadership. Despite the Ethiopian Coffee’s
competitive advantage in easily winning customers tastes and preferences due to its organic
content the methods it is being produced its too traditional to meet international quality
requirements. Due to that the cost overruns are too high negatively influencing the demand for
Ethiopia Coffee.

Regarding sales, provided ABC is committed to low-cost and quality leadership the volume of
sales are definite to recurrently rebound. To that end, ABC will strengthen its quality assurance
and control mechanisms and instruments so as to sustain its business reputation and export sales.
In this regard, Ethiopia has quite a lot of knowledge workers who can render their professional
services.

Given the enormous encouragement that the incumbent Ethiopian Government is offering to
investors engaged in the export-trade the resource constraints aren’t immediate problems to
hamper the realization of ABC’s visions and short, medium and long term objectives.

Off course the issues of productivity and capacity are real challenges worth addressing. Related
to investment in marketing, training, career development the Company is ready to solicit and
allocate resources. The application of information technology is a moot issue to emerge
successful in the global market.

38
Weakness
ABC International Business Plc though successful in its three years in the import business the
scale of operation has been very limited, compared to the vast export market it is planning to
enter. Unlike the import market the export market has suppliers and customers quite district
from the former. In the export market the suppliers and the domestic competitors are
traditionalists in their respective business operations. Instead of formal trading they often
indulge in informal business dealings. Besides, due to the prevalence of two decades of
command economic regime prior to 1991, rent seeking altitude is very much rampant among
civil servants working in the sector. With all those challenges in the trade, it may take longer
period than anticipated now to overcome the challenges before emerging successful in the trade.
Thus, ABC’s limited experiential knowledge may not enable the Company to envisage an out
right immediate success in its business venture.

Of course, late coming has an advantage of quick and safe learning. In entering into the export
market, ABC will attempt its utmost to search for local and foreign role models in the business
and intelligently bench mark to creatively and diligently emulate.

Opportunity
Globalization makes trade an engine of sustained economic growth. It opens up the venue of
trade wide so that countries can efficiently and effectively exploit wielding their respective
comparative and competitive advantages. For countries like Ethiopia, production and export of
agricultural products provide paramount advantages readily available to easily and conveniently
harness. Hence, provided that Ethiopia strenuously strives to take advantage of this opportunity,
chances are, the country is in a better position to overcome the challenges of poverty and attain
its national vision of becoming a middle income country by the year 2030 as early as possible.
To that effect, the incumbent government has committed itself to encourage investors to
aggressively enter into the export market. Favorable trade and investment policies are enacted
and promptly put in place. Government-private sector consultation forums are established and
regularly facilitated. Export guarantee schemes-as high as 80 percent –have been made
operational. Generous tax holidays are offered to those businessmen and companies engaged in
the production and export of goods and services. All these and other complementary measures
39
strongly motivate ABC International Business Plc to determinedly expedite lofty visions of
becoming world class company by radically turning the challenges of the export trade into an
opportunity worthy of optimally benefiting itself, its staffs and the country in the years ahead.

Threats
Given the enormous unmet demands of the global agricultural commodity market the
probabilities of success in the trade are enormously high. Besides the 2009 global economic
crises has clearly demonstrated the inability of our world to feed its population. The scientific
and technological utopias that the world would have surpluses to feed its growing population
have turned into a mere nightmare. Never the less, this emerging phenomenon hasn’t
fundamentally reversed the inelasticity of agricultural products to rising personal or household
income. Moreover, the number of countries that produce and export agricultural products are too
many. Put differently, the competition in the export of agricultural products is intensely high.
Due to this and other related inhibiting factors, the export market is vulnerable to price shocks.
In addition, the volatility in the currency market could also jeopardize the trade.

Risk Analysis
The Company in deciding to enter into the export market has endeavored to identify all possible
risks and position itself appropriately. The major risks that the Company seriously considered
and attempted to eliminate or minimize include the following.

Purchasing and Supply

The feasibility and cost of the coffee export process is known. To that effect,
ABC will employ quality assurance staffs from the Ethiopian Standard
Organization which is regally mandated with quality procedures that ensure as to
whether the export is meeting ISO standards while conducting its own quality
control sampling at is premises.

Sales
We pass breakeven when we sell more than at a minimum price of
.

40
 The likelihood of failing to breakeven is low because coffee export is not
something new. It has been a major export commodity for several decades. The
market is well established.

Sensitivity Analysis
The Company’s assessment of a 5% increase in key variables show the following

Will change these Net

A 5% increase in Profit Birr 000 Borrowing ROE
Birr 000 %
Sales volume
Sales price
Marketing expenditure
Raw material prices
Labor costs
Other costs

A 5% decline will have approximately the opposite effect.

Responding to Currency Risk

In case of managing the impact of fluctuation in exchange rates ABC International
Business Plc will resort into utilizing instruments such as forward exchange contracts or
can enter into a cross-currency swap or future deal. This type of transaction is believed to
provide the Company a complete hedge against any movement in the Birr/Dollar
/Euro/Yen/ exchange rate-adverse of factorable. For there isn’t any derivative market
ABC’s price of its export commodities and services are linked to USD and Euro.

Responding to Interest Rate Risk

In order to manage interest rate risk the Company may resort to employing is as forward
rate agreement (FRA). In such as instance, what ABC might do is to borrow for a further
period. In other words, this will fix ABC’s interest obligation now for borrowing in the
future, giving it total risk cover.

Responding to Commercial Risk

41
 In this case risks related to input and outputs are managed using purchase and supply
contracts. These include take-and-pay and take-or-pay for what ABC procures and
delivers. For input supplies the Company enters into long-term contracts for the supply
of input with in put suppliers.

Responding to Liquidly Risk

These risks are managed by the adoption of proper contractual arrangements.

42
Conclusion

ABC International Business Plc has subjected this business plan to the most possible analysis
and the business appears to be viable under all realistic scenarios.

The Company firmly believes that it has identified a business opportunity that Ethiopia has a
comparative advantage in terms of successfully prevailing in the global market. The conclusion
from the analysis is that ABC International Business Plc has its own competitive advantages to
outperform its competitors provided it employ the state-of-the art of business management and
strategy by lining up highly experienced and visionary and enthusiastic staffs equipped with the
required skills. Based upon the analysis, ABC International Business Plc has developed an
adaptive business strategy to enable it to rapidly move into the major coffee and progressively
sesame global markets and consolidate its competitive positions.

Not only that; the Company has closely examined the potential risks and is confident to turn
many of them into opportunities, by eliminating others and reducing the rest into manageable
level.

ABC International Business Plc has also aligned the business organization to its immediate needs
and so as to sustain the rapid growth that will follow. To that end, the Company has a well
qualified management team with well proven relevant experience and educational training. In
addition, the company is in the process of identifying additional staff of the higher quality to
complement the existing team.

The financial projections are modestly optimistic export targets indicating a very profitable
business accomplishment. As explained earlier on, with our ambition and solid conviction to out
perform our foreign and domestic business competitors our commitment to become fast learners,
we are confident to grossly exceed those projections by a wide margin.

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