WOLLO UNIVERSITY

SCHOOL OF GRADUATE STUDIES

DIPARTMENT OF MARKETING MANAGEMENT

Research thesis for the partial fulfilment of the

requirements of Master’s degree in marketing
management on the title the Effect of Distribution Strategy
on Organizational Profitability

(In case of BGI Ethiopia Brewery Factory kombolcha

branch)

By
Awol Assefa
Kombolcha customs Post clearance audit work process owner

ADVISOR

DESALEGNE TESFAW (ASS.PROF)

June, 2021
Dessie, Ethiopia
 1 Declaration

I Awol Assefa, Registration Number SGSE/246/11 have carried out independently a

research work, because I know that plagiarism is an illegal act, which is the use of
another person’s idea or published work to pretend that it is one’s own work.
Therefore it is theft, and we all know that theft is a crime, and hence each significant
contribution to and quotation in this work that I have obtained from other people’s
published or unpublished sources have been cited and fully referenced. With the
guidance and support of my advisor I have used the maximum effort to accomplish
this research on the title the effect of distribution strategy on organizational
profitability in BGI Ethiopia kombolcha branch for the partial fulfillment of the
requirement of masters of art in marketing management, do hereby declare that this
thesis is my original work and that it has not been submitted partially, or in full, by
any person for an award of any degree in any university/institution.

Researcher’s name…………………………..signature………………Date…………

This thesis has been submitting for examination with my approval as a university
supervisor.

Name of advisor………………………………signature……………….Date…………

ii
 2 Approval

The undersigned certify that we have read and hereby recommend to Wollo University to
accept the thesis submitted by Awol Assefa, and entitled, The effect of distribution
strategy on organizational profitability the case of BGI Ethiopia kombolcha branch,
for the partial fulfillment of the requirements for the award of masters degree in
marketing management.

Name of supervisor……………………………………….......Signature………………….

Date…………………..

Name of Internal Examiner………………………………….Signature…………………

Date…………………...

Name of External Examiner………………………………….Signature…………………

Date………………….

Name of Head of Department………………………………...Signature…………………

Date………………….

iii
 3 Acknowledgment

First and for most I would like to express my deepest gratitude for almighty ALLAH for
his abundant love, provision of good health and gift of wisdom that makes me pass
through all those obstacles and ups and downs, with a great patience and realize my
dream.

Second, I would like to express my thanks to Desalegne Tesfaw(ASS.PROF.) my

advisor, for his advice, critical comments, expert guidance, constructive criticism and
useful recommendations that are crucial for the completion of this paper.
Thirdly, I would love to thank the employees of BGI Ethiopia especially for the Sales,
Promotion and Distribution Department workers and the manager Ato Sisay Teklu for
their invaluable contribution for this paper.

Fourthly, I would like to express my heartfelt, thanks to all of my families, especially for
my wife Habiba mustefa for their pray and love, to all of my class and work mates, to the
whole of Wollo university, to all respondents of my questionnaire especially yenus
tobiaw who support me by coordinating the respondents to fill the questionnaire on time,
and all my friends, who helped me to the accomplishment of this work.

Finally, my thank is forwarded to all individuals or groups who helps me either directly
or indirectly for the achievement of this research, in which without whom this paper
would not be possible and unthinkable.

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 Table of Contents
Contents

1 Declaration………………………………………………………………………………….ii
2 Approval…………………………………………………………………………………….iii
3 Acknowledgment……………………………………………………………………………iv
4 Table of Contents……………………………………………………………………………v
CHAPTER ONE………………………………………………………………………………….1
1. INTRODUCTION…………………………………………………………………………...1
1.1 Background of the Study.......................................................................................………..1
1.2 Background of the Organization.....................................................................................4
1.3 Statement of the Problem................................................................................................5
1.4 Research Hypothesis.......................................................................................................6
1.5 Objective of the study.....................................................................................................7
1.5.1 General Objectives..................................................................................................7
1.5.2 Specific Objectives.................................................................................................7
1.6 Significance of the Study.................................................................................................7
1.7 Scope of the Study..........................................................................................................8
1.8 Limitation of the Study...................................................................................................8
1.9 Operational Definitions of Key Terms............................................................................8
1.10 Organization of the Study...............................................................................................9
CHAPTER TWO………………………………………………………………………………..10
2. LITERATURE REVIEW…………………………………………………………………10
2.1 Theoretical Concepts....................................................................................................10
2.1.1 Definition of Concepts..........................................................................................10
2.2 Theoretical Literature....................................................................................................14
2.2.1 Signaling Theory...................................................................................................14
2.2.2 Efficient Market Theory........................................................................................16

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 2.2.3 Stake Holders Theory............................................................................................18
2.3 Empirical Review.........................................................................................................20
2.4 Conceptual Model.........................................................................................................23
CHAPTER THREE……………………………………………………………………………..27
3. RESEARCH DESIGN AND METHODOLOGY………………………………………..27
3.1 Research Design...........................................................................................................28
3.1.2 Target Population..................................................................................................28
3.1.3 Sampling Methods and Techniques.......................................................................29
3.1.4 Sample and Sample Size............................................................................................29
3.2 Data Source...................................................................................................................30
DATA PRESENTATION, ANALYSIS AND DISCUSSION………………………………...32
4.1. Introduction.......................................................................................................................32
4.2. Demographic Data.............................................................................................................33
Table 4.1: Background Profile of respondents......................................................................................33
4.2.2. Age of respondents.....................................................................................................34
4.2.3. Level of education......................................................................................................35
4.2.4. Years of work experience...........................................................................................35
4.2.4. your relation with the company...................................................................................35
4.2.5. Questioners Response Rate.........................................................................................36
Table 4.2 Response Rate of questionnaires by the respondents...........................................................36
4.3. Reliability analysis.............................................................................................................36
Table 4.3: Reliability Statistics for dependent variable, independent variables & overall
reliability..................................................................................................................................................36
4.4. Effect of distribution strategy on organizational profitability............................................37
4.4.1. Level of planning of the company...............................................................................37
Table 4.4: Respondent’s response for statements related to planning.................................................38
4.4.2. Level of distributor capacity.......................................................................................39
Table 4.5: Respondent’s response for statements related to Level of distributor capacity................39
4.4.3. Level of Support of the company to Distributors........................................................42
4.4.4. Level of Distribution regulation..................................................................................44
4.4.5. The level of Communication between the company and distributor...........................47
Table 4.8: Respondent’s response related to Communication between the company and
distributors...............................................................................................................................................47

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 4.6. Level of company profitability..........................................................................................50
Table 4.8. Respondents’ response for statements related to company profitability..........................50
4.5. Problems of customs physical examination effectiveness..................................................53
Table 4.9. Effect of distribution strategy on organizational profitability...........................................53
4.6. Inferential statistics............................................................................................................54
4.6.1. Correlation analysis....................................................................................................54
5 Table 4.10: Correlation matrix of the dependent variable and independent variables..............56
4.6.1.1. Correlation between Planning and Company profitability.......................................56
4.6.1.2. Correlation between Distributor capacity and Company profitability..........................57
4.6.1.3. Correlation between Support of the company to distributors...................................57
4.6.1.4. Correlation between Distribution regulation and company profitability..................58
4.6.1.5. Correlation between Communication between the company and distributors and
company profitability............................................................................................................59
Table 4.11: Summary of correlation......................................................................................................60
4.7. Binary logistic regression model analysis........................................................................60
Table 4.16: classification table of the model..........................................................................................62
4.8.2. Test of model adequacy..............................................................................................62
4.8.3. Model fitting information............................................................................................62
Table 4.17 Hosmer and Lemeshow Test................................................................................................62
4.8.4. Evaluation of the regression model.............................................................................63
Table 4.18 Model Summary of pseudo R-square..................................................................................64
4.9. Test of significance of individual explanatory variables....................................................64
Table 4.19: Parameter Estimates of binary logistic Regression...........................................................65
4.9.1. Hypothesis on planning (VAR1).................................................................................65
4.9.3. Hypothesis on Support of the company to distributors (VAR3)..................................67
4.9.4. Hypothesis on distributors regulation (VAR4)............................................................68
4.9.5. Hypothesis on communication between the company and distributors (VAR5).........69
Table 4. 20: Summary of hypothesis testing results..............................................................................71
4.11. Regression Function of the model....................................................................................71
4.13. Summary..........................................................................................................................73
CHAPTER FIVE.....................................................................................................................................74
SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS................................74

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 1.1. Introduction..................................................................................................................74
1.2. Summary of Main Findings..........................................................................................74
1.3. Conclusion....................................................................................................................78
1.4. Recommendations.........................................................................................................79
1.4.1. Recommendations for practices............................................................................79
1.4.2. Recommendations for further studies....................................................................82
1.5. Contribution and implication of the study.....................................................................82
Time and budget schedule for the research...........................................................................................83
Time schedule..........................................................................................................................83
Budget schedule......................................................................................................................84
Reference.................................................................................................................................85
Annex I I...................................................................................................................................................90
Annex I.....................................................................................................................................................94

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ix
 CHAPTER ONE
1. INTRODUCTION
This chapter dealt about introductory concepts of the study, which includes background of
the study, statement of the problem, basic research questions, research objectives (general
and specific objectives), and scope of the study, significance of the study, limitations, and
definition of terms.

1.1 Background of the Study

According to Obaji (2011), the concept of distribution refers to where and how products
and services are to be offered for sale, all essential mechanism and logistical supports for
the transfer of goods and service as well as ownership of goods and services to the
customers.

Distribution channels are pathways along which products travel from producers and
manufacturers to the final users. They are routs along which products, information and
finance flow from the owner to the final consumers. While some companies deal directly
with their customers, most companies use a distribution channels to take products to
consumers. Considerable through, effort and investments are required to create and
maintain a distribution channel. Channel margins and the  expense of sales efforts in
managing channels can form a substantial proportion of total  marketing cost (Rnagan etal,
2010).

A distribution channel, a chain of intermediaries, is the how and where a good or service
reaches the end consumer. It comprises wholesalers, retailers, distributors and nowadays
the internet too. Many companies do not sell their products directly to end users. In mass
production and consumption industries in particular, many manufacturers rely on
distributors, representatives, sales agents, brokers, retailers or some combination of these
intermediaries to distribute their products (Hughes and Ahearne, 2010). On the same note,
the beverage industry is not exceptional either (The Drink Business, 2013). These
intermediaries perform a variety of functions and constitute a marketing channel, that is
also referred to a trade channel or distribution channel (Kotler and Keller, 2008).

1
According to Ramaseshan etal (2013) today, companies are faced with the choice of
distribution path or strategy that will make product readily available to potential customers.
Also the need for other institutions or intermediaries in the delivery of goods is sometimes
questioned, particularly since the profits they make are viewed as adding to the cost of the
product. The firm‘s performance can be determined by its marketing strategies with its
good planning, effective implementation, and evaluation & control mechanisms. In
addition to the above facts, the optimum firm outcome can be reached if the marketing
strategy formulation and execution can be aligned with the firm‘s external environment.

Since distribution is the one aspect of marketing strategy, there are different  advantages of
usages of multichannel of distribution system as a marketing strategy (Jain & Shaakshic,
2009).

According to Kotler &Armstrong (2012) the contribution of good distribution strategies, as

it can, create customer value and competitive advantage for a firm. Moreover, it has the
objective of adding value to the process of making products and services available to
business and household consumers.

The importance of channel intermediaries has grown in recent years, largely due to
increased size, improved level of product knowledge, technical competence, specialization
and various other factors (Kalafatis, 2000). In a typical distribution channel for consumer
goods, for example, manufacturers sell to retailers, which sell to consumers in markets.
Retailers break bulk, holds inventory, provide shelf space, create promotional displays and
advertising, create one-stop shopping convenience and a pleasant shopping environment,
all of which increases demand for the manufacturer’s product (Desiraju and Moorthy,
1997). Retailers gain a central position in many industries thanks to their increasing degree
of concentration and internalization, successful launching of retailer brands and by
controlling more and more of the value-adding functions with the distribution supply chain
(Burt, 2000; Dawson, 2000; Elg, 2003). However, Retailers are continuously adapting
themselves to changing market conditions. In support of Dobson et al.’s idea (2003) in the
retail business, consumer needs are met by the systematic management of category of
products and/or services (Holmström, 1997).
2
According to Kirin Beer University Report (2016), the global beer consumption has
declined by 0.6 % relatively to the previous year. But, in Africa consumption of beer grew
for six consecutive years, with an annual increase of 2.6% in 2016 which is caused by
factors of rising population, urbanization and GDP growth. According to access capital
report in 2008/ 2009, Ethiopia’s brewery annual production and sales capacity was 3.6 and
3.05million hectoliters respectively. The annual beer consumption from 2004 to 2009 has
showed an increment of 24 % per year (access capital report, 2008/9). According to UN
report (2005), adult’s per capita consumption of beer in Ethiopia has reached about 4.99
liters per annum. According to reporter News Paper (2016), the total beer consumption in
Ethiopia has reached at 12 million hectoliter and the per capita consumption is estimated to
be around 9 liters per annum. Still, Ethiopian beer market is untapped and breweries are
competing to exploit it. Ethiopia’s beer market is free for new entrants. This shows that the
beer market competition will be stiffer. So that, the brewery companies are forced to focus
on a timely delivery of customer orders, need to minimize supply chain cost, efficient at
supply chain asset management so as to get better market share and make profit over their
competitors. To get these advantages, breweries are highly pressured to measure their
distribution performance. In addition, a brewing company which measures its distribution
performance can get the access of a competitive advantage over its competitors.

At present time there are twelve breweries owned by seven companies at least 25 different
brands of beers operating in Ethiopia namely BGI Ethiopia, Dashen, Diageo (Meta),
Heinken, Habesha, Raya, and Zebidar Brewery (asokoinsight.com). The climate of the
Ethiopia’s beer industry has undergone major changes in the last 7 years. The entrants of
multinational companies coupled with the necessity of in meeting the timely increasing of
the demand and supply requirement made the competition to become stiff. Many kind of
distribution strategies are frequently used and played a crucial role in the sales of a
company. Beside the well-known factors of marketing mixes namely, price,
communication levels and product quality, many of companies have exerting their full
potential to penetrate the market through formulating different distribution strategies and
widening their destination ( Reuters,2015).

3
Currently the beer industry is the biggest sector of the Alcoholic Beverage industry in
Ethiopia in general and in kombolcha in particular.  In this competitive market, all the
companies are trying to deliver more quality and valuable  products to the customer
compared to their competitors. This enables distribution management to  be more important
in the current business environment as distribution performance has a crucial  effect in
companies’ competitiveness (the researcher personal observation). Therefore the
researcher will examine the effect of distribution strategy on organizational profitability in
case of BGI brewery in kombolcha branch.

1.2 Background of the Organization

BGI-Ethiopia is a large-scale brewery and beverage production wing of Castel Group
operating internationally in more than 53 countries. BGI, operating in Ethiopia since 1998
as BGI Ethiopia PLC., has been engaged in the production and distribution of beer, wine
and beverage products. BGI owns three breweries including the iconic St. George Brewery
in Addis Ababa, the Kombolcha Brewery in Kombolcha city and the Hawassa Brewery in
Hawassa city. This combined production capacity is 3.6 million hectoliters of bottled and
draft beer annually. BGI- Ethiopia PLC also owns and operates the Castel Winery and
Vineyard located in the town of Ziway.

St. George Brewery was established in 1922. It was nationalized in 1974/75 and had been
operating as a state owned enterprise. Since December 1998, it became part of BGI
Ethiopia through the privatization program. Its production Capacity was 200 to 300 bottles
per day in 1923 and has now reached 550,000 hectoliters per annum. The known brands
produced are St. George and Panach Beer brands in bottle and draught. At present, the
company is providing jobs for 956 permanent and 58 contractual employees (BGI-Ethiopia
manual, 2019).

The Kombolcha Brewery, located in Kombolcha Town, Wollo, Amhara Regional State,
368 KM. from Addis Ababa, was established in November 1998. Its production capacity
started with 450,000 hectoliters per annum in 2011 and grew to 780,000 hectoliters in
2013. After additional major upgrade and establishment of a second bottling line, the
brewery is now capable of producing 1,500,000 hectoliters per annum. Currently, it is
providing jobs for 449 permanent and 3 contractual employees (BGI-Ethiopia, 2019).
4
 1.3 Statement of the Problem
According to Valos&Vocino, (2006) distribution is  thought of as a competitive advantage
for those organizations which have built up distribution  clout and economies of distribution
through sheer size. Distribution plays a vital role in the  success of the sales effort by
ensuring the availability of the product in the right quantities at the  right time and at the
right place (Kotler & Armstrong, 2012).

Currently organizations in the Ethiopian context have exerting their full potential to
penetrate the market through formulating different distribution strategies and widening
their destination (Reuters, January 2015). However, the challenges posed to beer factories
can be illustrated in various ways, the most notable of which include the distribution gap; a
major characteristic of a distribution channel is that the retailer is closer to the end
consumer than manufacturer. This argument raises some vital issues regarding distribution
channel and the actors within this area includes:

The factors influencing the distribution channel system activity of the company. (e.g.,
Anderson et al., 1997; Rangan, 1987; Rangan and Jaikumar, 1991).

 The divergent objectives of retailers and manufacturers especially, in relation with

inventory measurement, whole sale margin and effect of gate price subsidy.
 Absence of well integrated and comprehensive approach to product availability and
distribution coverage, safety stock and reordering level, motivation scheme for
sales force.
 Poor channel management and monitoring system (periodical evaluation of channel
system and channel members. Marketers have, therefore looking up to the
appropriate adoption of distribution channel strategies. (Kotler, 2006).

Several studies have been undertaken in the adoption of distribution channel strategies both
in manufactured goods, locally and internationally as well as in the service industry. Most
of this studies exhibits preferential use of certain distribution channel elements as opposed
to others and the trend differs from one industry to another, but the impact of distribution

5
strategy on organizational profitability across industries has not been studied. Even if this
is the case, it’s very difficult to find research findings on the subject.

According to the five year sales report of the company it has faced many problems in its
distribution activities and its performance becomes reduced continuously and this exposed
the brewery to lose its profitability (Annual report of the company, 2020). Efficient and
effective distribution is a vital for successful achievement of the objective of BGI-
Ethiopia. However, as the manager of BGI-Ethiopia Kombolcha branch put it forward, the
distribution is ineffective and inefficient. This means that there is lack of well-planned and
coordination among different departments, contracted transporters are very less in number
and in truck volumes, distributors lacks a capacity in holding ample of stock, the company
took longer time to place an order, distributors are place an order after they are out of stock
and lacks covering a wide range of the intended market share, and the manager suggests
that, it requires different distribution strategies for better organizational profitability. Thus,
the proposed study will attempt to critically assess the effect of Distribution Strategy on
organizational profitability in BGI-Ethiopia, Kombolcha branch.

1.4 Research Hypothesis

Based on the problem stated above the following Research hypothesis will address
by the study:-

Ho: Planning does not have a significance effect on the organization profitability.

H1: Planning has a significance effect on the organization profitability.

Ho: Distributor capacity does not have a significance effect on organizational profitability.

H1: Distributor capacity has a significance effect on organizational profitability.

Ho: Support of the company to distributors does not have a significance effect
on organizational profitability.

H1: Support of the company to distributors has significance effect on organizational
profitability.

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Ho: Distribution regulation does not have a significance effect on organizational
profitability.

H1: Distribution regulation has a significance effect on organizational profitability.

Ho: Communication between the company and distributors does not have a significance
effect on organizational profitability.

H1: Communication between the company and distributors has a significance effect on
organizational profitability.

1.5 Objective of the study

1.5.1 General Objectives
The overall objective of the proposed study will be to assess the effect of Distribution
Strategy on organizational profitability in BGI-Ethiopia, Kombolcha branch.

1.5.2 Specific Objectives

In addition to the above general objective the following specific research objectives will be
examined

 To examine the effect of planning on organizational profitability

 To assess the effect of distributors capacity on organizational profitability
 To investigate the impact of support of the company to distributors on organizational
profitability
 To investigate the impact of distribution regulation on organizational profitability
 To examine the effect of communication between the company and distributors on
organizational profitability
1.6 Significance of the Study
It can provide information to the concerned body to insure whether distribution strategies
are undertaken as required in BGI-Ethiopia Kombolcha branch. It creates good
opportunity for the researcher to get more practical knowledge about the area of
distribution channel. In addition; it can be used as an indication of problems in
distribution strategies in BGI-Ethiopia factory and to give appropriate corrective

7
measures by concerned body. It helps other as a secondary source of information for
further research to be made in the area.

1.7 Scope of the Study
The study will be delimited to consider only the effect of Distribution Strategy on
organizational profitability BGI-Ethiopia, Kombolcha branch by using both descriptive
and explanatory research methods bounded by the last five years.

1.8 Limitation of the Study

The researcher may face some limitations that constraint in conducting the study such
as, unwillingness of respondents to respond the raised questions due to COVID 19
disease, and busy schedule in his/her work. However, the researcher overcome such
challenges by using a different mechanisms such as taking appropriate precautions like
wear mask, clean my hands and keep a social distance, providing most clear and
unambiguous questionnaire.

1.9 Operational Definitions of Key Terms

Indirect Channel of Distribution (IDC): It is one kind of channel of distribution

when a company uses one or more levels of intermediaries to help bring its products to
final buyers (Kotler& Armstrong ,2012), 

Retailers: It is a natural or legal person, which have entered into contractual relations
with the Sub Distributor with the goal of selling and promoting a maximum number of
beer products in the assigned territory (BGI Ethiopia brewery S.C, Indirect Channels
Products and Services Distribution Agreement, 2016). : It deals with the activities
involved in selling goods and services to ultimate customers. And the buying motive
for a retail sale is always personal or  family satisfaction stemming from the final
consumption of the item being purchased (Stern, and El-Ansary,1977). 

Territory: It‘s a boundary in which distributors normally expect to receive full credit
for all sales in their territories, whether or not they did the selling (Kotler ,2003).

8
Direct Channel: It is marketing channel in which products are sold within its own
shops for the entire customers of the company (Kotler, 2003). 

Outlets ;- A liquor store is a retail shop that predominantly sells prepackaged alcoholic
beverages typically in bottles intended to be consumed off the store's premises
(en.wikipedia.org).

Strategic Compotator: is a competitor pursue the same type of marketing strategy,

same in terms of product differentiation, promotion, distribution and pricing (Source;-
BGI marketing strategy)

1.10 Organization of the Study

This research might be organized in to five chapters. The first chapter will presents the
introductory part which contains background of the study, background of the
organization, statement of the problem, objectives of the study, significance of the
study, scope of the study, limitation of the study, and
operational definitions of key terms. The second chapter will show the literature review
while the third chapter will contains description of the research methodology. The
fourth chapter will contain data presentation, analysis and discussion, and the last
chapter will present summary of major findings, conclusion and recommendations of
the study.

CHAPTER TWO
2. LITERATURE REVIEW

9
Introduction

This chapter dealt about theoretical and empirical review of the study. Moreover,
conceptual frame work is also included.

2.1 Theoretical Concepts

2.1.1 Definition of Concepts

Distribution
Distribution is the process of making a product or service available for use or consumption
by a consumer or business user, using direct means, or using indirect means with
intermediaries. Or are the movement of goods and services from the source through a
distribution channel, right up to the final customer, consumer or user, and the movement of
payment in the opposite direction, right up to the original producer or supplier. An order or
pattern formed by the tendency of a sufficiently large number of observations to group
themselves around a central value (Wren, 2007). The familiar bell-shaped curve is an
example of nominal distribution in which the largest numbers of observations are distributd
in the center, with progressively fewer observations falling evenly on the either side of the
center (average) line. See also frequency distribution, nominal distribution, and standard 
distribution (Wren, 2007).

Channel
The channel function concept has already been extensively discussed by academics (Jain &
Shaakshi,2009) argued that functions are considered to be the basic determinants of
channel
structure. That is, a system designed to carry out necessary tasks. Some researchers have
discussed channel structure in terms of the function performed by channel
members, (Wren, 2007) the basic idea was that channel functions could be allocated in
different combination.

10
Distribution Channel
Coughlan et al., (2006) defined a distribution channel as a set of independent organizations
involved in the process of making a product or service available for use or consumption.
The ultimate goal of a distribution channel is to bridge the gap between producers and
consumers by adding value to products or services (Wren, 2007). Typically, manufacturers,
intermediaries  (wholesaler, retailer, specialized) and end users are perceived as the key
actors of distribution channel (Coughlan et al., 2006). Based on these definitions, it is not
easy to determine where the distribution channel actually starts, since there might be
multiple producers involved in manufacturing the final products at different levels. Some
of these producers are close to the end at which raw material is supplied, while others are
closer to the end that deals with final buyers or users. Among various channel actors
depending on the characteristics of the channel (Wren, 2007). Channel functions are
categories of activities and services that add value to physical goods as they move from
manufacturers to customers (Jain & Shaakshi, 2009).

Indirect Distribution Channel
The indirect channel is used by companies who do not sell their goods directly to
consumers.
Suppliers and manufacturers typically use indirect channels because they exist early in the
supply chain (Aaker, 2001). Depending on the industry and product, direct distribution
channels
have become more prevalent because of the Internet. Distributors, wholesalers and retailers
are
the primary indirect channels a company may use when selling its products in the
marketplace.
Companies choose the indirect channel best suited for their product to obtain the best
market
share; it also allows them to focus on producing their goods (Aaker, 2001).

Direct Distribution Channel
A direct distribution channel is where a company sells its products direct to consumers.
While

11
direct channels were not popular many years ago, the Internet has greatly increased the use
of
direct channels. Additionally, companies needing to cut costs may use direct channels to
avoid
middlemen markups on their products. Selling agents and Internet sales are two types of
direct
distribution channels (Anderson et al, 2006). Selling agents work for the company and
market
their products directly to consumers through mail order, storefronts or other means. The
Internet
is an easy distribution channel because of the global availability to consumers (Bakosi et
al,
2006).

Wholesaling
Wholesaling includes all activities involved in selling goods or services to who buy for
resale or
business use. Manufactures use wholesalers because wholesalers can perform function
better and
more cost effectively than the manufacture can. These functions are not limited to selling
and
promoting, buying and building bulk barking, warehousing, and transporting financial risk
bearing dissemination of marketing information and provision of management services
consulting. Like retailers wholesaler must decide on target market, product assortment and
services promotion and place (Berman, 1996). The most successful wholesalers are those
who
adopt their services to meet and target customer's needs, recognizing that existing add
value to
the channel (Berman, 1996).
Retailing
Retailing includes all the activities involved in selling goods or services directly to find
consumer for their personal non-business use. A retailer or retail store is any enterprise

12
which
sales volume comes primarily from retailing. All marketer retailers must prepare marketing
plans
that includes decision on target market. So the marketing channels can be viewed as a set
interdependent organization with high potential for conflict. Then why would any business
chosen to become part of channel system (Berman, 1996).

Market Coverage
Channel selection depends on Coverage (Market Size).This refers to the intensity of
distribution
required by the manufacturer. The number of intermediaries required in a specific
geographical
area influences the market coverage or market exposure strategy. A manufacturer may opt
to
have intensive distribution, Selective distribution or exclusive distribution coverage for its
products or services (Berry, 2010). Intensive Coverage is adopted when many
intermediaries are
used at each level of the channel. This is typical of consumer convenience goods
distribution
where as many different outlets as possible are used. Exclusive Coverage refers to a highly
selective pattern of distribution where only a single selected intermediary is involved in
distributing the goods or services in a specific geographical area. In this situation
customers are
willing to search for the products or services extensively. Specifically goods are often
distributed
in this manner (Borden, 2004). Selective Coverage in between intensive and exclusive
Coverage
lays Selective coverage which refers to a distribution strategy where a few selected
intermediaries are used in this distribution channel. This is typical in the distribution of
consumer
convenience goods (Borden, 2004).

13
Consumer
A consumer is a person or group of people who are the final users of products and or
services
generated within a social system. A consumer may be a person or group, such as a
household.
The concept of a consumer may vary significantly by context, although a common
definition is
an individual who buys products or services for personal use and not for manufacture or
resale.

2.2 Theoretical Literature

The theories relevant to the study are the Signaling Theory, Efficient Market Hypothesis
and the
Stake-holders theory.

2.2.1  Signaling Theory

This theory was proposed by Brennan and Copeland (1988). According to the signaling
theory,
information acted as a means of passing information from managers to stakeholders. The
behavior of two parties that have access to dissimilar information can be described the
signaling theory. I this context, one party is the sender and the receiver is the second party.
The
signal moves from the sender to the receiver who then interprets it accordingly (Kamwenji,
2014).
(Kamwenji, 2014) refers to behavior whose main goal is to convey or signal some
information
about ourselves to others – regardless of whether it‘s true or not. This theory is applicable
in this
context to explain how distribution service performance influences market share through
the

14
interchange of information between cement companies and the relevant stakeholders in the
distribution network. It is hard to directly perceive most of the things we want to know
about
each other. Some of them include emotion states like being happy or not, inborn qualities
like
being smart, and the capacity to play a given role in future, for instance, being a loyal
friend.
Rather we need to consider signals that are perceivable indicators of these qualities that are
not
directly observable. Signaling theory gives a clear picture why some signals are reliable
while
others are not. It focuses on how a given quality is related to respective signal and the
aspects of
the surrounding community or signal that increases its reliability.  It‘s concerned with the
outcome of the unreliability of signals, that is, the amount of unreliability  than can be
accepted in a signal. Competitive environments are prone to signaling. Hardly do  the
sender‘s and receiver‘s interests align exactly, instead they are often misaligned. At times,
for instance with prey and predators, the competition can be overt and fierce. Potential prey
can send a message to predators that it might be very hard for them to hunt them or they are
too poisonous and can fight back really hard. If potential competitors are unevenly
matched, then they are
likely to signal their strength to each other. As a result, the situation whereby the weaker
may
lose in the battle and be costly to all of them can be avoided. If the signaling is between
agreeable acquaintances, then competition may be subtle. However, conflicts of interest
can still
arise even with cooperative relationships. In scenarios that are very competitive, one can
benefit from deception. One may avoid to eat a bug which presents itself as poisonous even
if in real sense it is not an individual is likely to  secure a job if he presents himself as more
competent and experienced than he really is. However, the signal may lose meaning if the
deception rate becomes too high. Therefore the rate of deception must be capped for

15
signals to be meaningful and for communication to occur. What  keeps the signal reliable is
the main concern for the signaling theory. Reliability of signal depends on its ability to
produce truthfully. Costs associated with reliability arise from punishment given when one
is caught cheating and
production costs. This theory is applicable in this research to explain the level and nature of 
competition for market share in the brewery industries in Ethiopia.

2.2.2 Efficient Market Theory

According to Fama and Samuelson (1992), the origin of this theory can be traced back to
the
1960s. According to efficient market theory, new information is quickly reacted upon by
the
stock market, and therefore at any instant, the market comprises of views of different
investors.
A market in which stock prices give a true picture of the available information can be
regarded
as an efficient capital market. According to Jain &Shaakshi (2009) the three types of
efficiency
are: weak, semi-strong and strong efficiencies. According to weak efficiency, 11 today‘s
stock
price reflects all the past prices of the very stock. Thus, it is hard to predict and beat a
market by
use of technical analysis. Semi-strong efficiency claims that the current share price of a
stock
incorporates all public information. It implies that neither technical nor fundamental
assessment
can be used to predict a market. Strong efficiency is the most desirable type of market
efficiency.
It incorporates the entire information of the market regardless of whether it‘s public or
private
and the information is integrated in the stock price. It does not favor any investor as it is

16
fair to
all. The market movement is random and thus very difficult to predict. This theory is
applicable
in this context to derive the relationship between distribution service performance and
market
share. Company valuations at the stock market contribute in the shaping of competition in
the
industry.

Valuation of firms is evaluated based on the available information regarding its worth.
Market
capitalization amount can be provided by an effective evaluation because it gives the
product of
the number of issued shares and the current share price. Nonetheless, the market price is
prone to
constant changes because of the available information. The investors may decide to buy or
sell
shares depending on the market trends and it can have an impact on the market price. The
market
efficiency assumption focus on the way information is processed on a stock market and
gives
clear insights on how flow of information can impact the valuation process. Based on
mobilization of the world and globalization, this assumption holds because information is
now
flowing much faster and modern technologies have enabled people to have free and more
reliable
access to information around the world.

2.2.3 Stake Holders Theory

It was initially founded by Fama and Samuelson (1992), This theory focuses on
organizational

17
management as well as business ethics. It explains on how an organization is supposed to
be
managed as per the morals and values. The stakeholder‘s theory is of the opinion that the
effectiveness of an organization is measured by its ability to satisfy both the agents and
shareholders who have a stake on the organization. While coming up a strategy, it is
imperative
for the management to set a clear interface between its competing demands as stipulated by
the
strategic goals. The top executives of a firm make choices or decisions that affect the
distribution
service performance of the company and thus its market share. Kotler (2003) defines a
stakeholder an individual or any group that is affected or can affect the achievement of the
objectives of a given organization. Stakeholder concept is a basic redefinition of an
organization.
Basically, the whole idea focuses on how the organization needs to be conceptualized. An
organization is a collection of stakeholders with a common objective of managing their
needs,
viewpoints and interests. It is the responsibility of the management team to fulfill this
stakeholder management. The administrators should manage the organization in a way that
safeguards the rights of
stakeholders by ensuring that they are actively involved in the decision making process.
The management should also act as the agent of the stakeholders to safeguard the long-
term
goals and ensure survival of the firm Kotler (2003) . The role of management, character and
purpose of organization and the stakeholder‘s definition  are highly contested and very
unclear in literature and has undergone serious changes over the  years. The founder of
stakeholder concept also altered his definition at some point. (Kamwenji,  2014), came up
with another definition of stakeholder were he regarded a stakeholder as a person  or group
that is critical survival and success of an organization. A new principle is added by  Kotler
(2003) and it reflects a new trend as far as stakeholder theory is concerned.
The management should always incorporate the stakeholder‘s perspective in their decision

18
making process. It is regarded as the stakeholder recourse principle. If the directors are
failing in their duties, then stakeholders have right to bring action against them (Kamwenji,
2014). Literature regards the normative stakeholder theory as an integration of principles
and thoughts of stakeholder concept. Normative stakeholder theory consists of directives
that should be followed by managers and stakeholders to enable them act in line with
ethical principles and purpose of organization (Brennan and Copeland, 1988). Descriptive
stakeholder theory is another theory that elaborates on stakeholder concept. The focus of
this theory is on the behavior of managers and stakeholders and perceptions towards their
roles and actions. The instrumental stakeholder theory is concerned with the actions of the
managers. For instance, if they want every thing in the workplace to favor them. Some
literature considers managers’ own interest as  the interest of the organization. In most
cases, such interests are concerned with maximization of profits or value of the
shareholder. The implication of this is that stakeholders are treated with  managers as per
the stakeholders‟ concept, and then the organization is likely to be more successful  in the
long term. As put by (Brennan and Copeland, 1988), the whole issues
regarding relationship between managers and stakeholders can be wrapped up in these
three categories that try to explain the basic stakeholder concept. These three categories
have for sure popularized stakeholder concept. In general, the theory is closely related to
the social responsibility theory. This theory fluctuates  between two ends: one that lessens
the firm's obligation to the achievement or maximization of profits for its shareholders, and
another that augments the obligation of the firm to include a wide range of actors with an
aim of improving the firm‘s performance. Although the stakeholder  theory can be more
appealing when looked at from an ethical perspective, it has been critiqued  because it lacks
a strong base that would be adequate to various schools of thoughts. However in  many
instances, it has been accepted on the argument that Stakeholders theory is based on  notion
of the common good and the mutual satisfaction of the all the players in an industry.
This theory is adopted for this study.

2.3 Empirical Review

Fengyi. Wu, and Yuehhua. Lee (2009) in their study investigation channel power and
satisfaction in a marketing channel. He study adopted case study design in Guangzhou

19
province-china. It was found out that the competition faced by business organizations is no
longer mere inter-firm competition, but also inter-channel competition caused by adapting
to industry globalization. Considering this trend, this study found out that there was a
correlation between distribution channel power customer commitment and satisfaction. The
results provide non-coercive power had a positive and significant impact on the channel
firms’ communication and commitment, as well as the supplier communication and
commitment had a positive and significant impact on the economic satisfaction and non-
economic satisfaction of channel firms.

Nadin (2008) in his study “managing relationship in distribution networks: evidence from
the alcohol drinks market “The paper was concerned the relationship among alcohol drinks
manufacturer and its dealers, focusing, especially, on the trust determinants. The nature of
the rapport is controversial since asymmetrical power but at the same time, strong
exclusive bonds influence the perception and the decisions of the parties. In addition, a
recent evolution in the European retailing contract regulation has given new rooms for
improvement for the dyad but has also left dark areas as regards potential opportunistic
initiative. Based on the emerging theories on trust and the construct in relationship, the
paper explored the deep nature of relationship and trust in order to understand and
reinforce the distribution of products to the end users (customer). A field research, run in
the Italian domain (Nadin, 2008), has demonstrated the coexistence of power and trust
determinants as drivers of the relationship between the alcohol drink producers and the
dealer. It has suggested, furthermore, that alcohol drink producers can influence, by a
cause-effect chain approach, the feeling of dealer toward the relationship and consequently
can bust the dealer collaboration on an affective commitment base.

Accordingly with the results of the Lado, Dant and Tekleab (2007) study our research has
remarked too the importance of the competitive tenure in the relationship as determinant of
the innovation in the relationship and widely in the distributive network.

Daugherty (2009) in her study titled “reverse logistics in the automobile aftermarket
industry. The study employed case study design whereby 112 respondents participated in
the study data collection was done through the questionnaires and interviews. The results

20
indicated that trust exists when one party has confidence in an exchange partner’s
reliability and integrity. Trust involves an expectation held by an individual that another
can be relied on. The existence of trust is particularly important with respect to buyer-seller
exchange relationships. Buyer-seller relationships are almost always unequal; one party has
more power, better positioning, and/or more resources. Because of the unevenness of
power, the other party is likely to feel vulnerable unless trust is present. As such, trust is
the mutual confidence that no party to an exchange will exploit another’s vulnerabilities. It
was shown that downstream channel partners that trust suppliers exhibit higher levels of
cooperation and exert more effort on the part of the supplier. Channel partners that trust
suppliers also tend to be more committed to and intend to stay in the relationship. Trust is
viewed as a highly effective means of fostering cooperation across all types of inter-
organizational relationships. Thus, trust in their customers appears important for suppliers
who want to reap maximum benefits from the exchange relationship. In a recent review of
the literature on trust, Atuahene-Gima and Li found that both the academic literature and
the popular press have a “strong normative bias toward the inherent value of trust - that is,
trust is good for performance.” However, they continue, “there is little empirical evidence
to support the validity of this viewpoint”. One study by Smith and Barclay, however, did
find a positive relationship between trust and a firm’s ability to achieve superior
performance. The first hypothesis is offered to further explore the issue.

Atafar et al, (2011) in their study “Assessing the Effectiveness of Distribution Channel in
Isfahan Zamzam Company in their research, they gathered data by interviewing the top
marketing managers who have high experiences in marketing, finally the variables in the
research assumptions been used to incorporate flow table model for measuring the
Effectiveness of Distribution Channel in Isfahan Zamzam Co. The study revealed that
Zamzam distribution channel was successful in product transportation, gathering market
Information was effective in payment procedures but distribution channel of this company
is not been effective in trade promotion programs and communication with retailers and
wholesalers.

McFarland (2001) in his study “the marketing position of industrial distribution”; the
article discussed the position of industrial distributors in channels of distribution. The study

21
was conducted in Johannesburg, South Africa, interviews and questionnaires were
employed as methods of data collection. The result indicated that, doing business with
industrial distributors is more cost effective than doing business with sales branches, sales
offices and agents. The author notes that when compared to alternative agencies, the gross
margin required by industrial distributors is similar. Also it was noted that industrial
distributors are better qualified than alternative agencies to offer services such as
emergency deliveries, credit clearance and knowledge of sources of supply for buyers.

Torii et al (2004) On the Length of Wholesale Marketing distribution Channels in Japan.

The study adopted case study design; data collection was conducted through the use of
questionnaires and interviews. It was revealed that wholesalers enter distribution channels
to capitalize on their private information about demand and supply. The channels become
long only when such private information is valuable. Also, the result indicated that there
was a close link between wholesalers' private information and length of the marketing
distribution channel, based on analysis of panel data for five wholesale industries drawn
from the last three decades of Japan's Census of Commerce. Specifically, it was shown that
marketing distribution channels tend to be longer--that is, they have more wholesale steps--
where wholesalers tend to be in close geographic proximity to the final demanders, where
wholesalers tend not to be organized into distribution keiretsu by manufacturers, where
regional variation in demand tends to be idiosyncratic, where producers advertise less
intensely and distributors advertise more intensely, and where the density and
heterogeneity of retail outlets is greater. All of these are factors likely to be associated with
the value of wholesalers' private information.

David (2005) in his study “Distribution Keiretsu, Foreign Direct Investment, and Import
Penetration in Japan” based in directed marketing channel known in Japan as distribution
keiretsu are more likely than others to be headed by a primary wholesaler that is vertically
integrated with the manufacturer, which for foreign manufacturers entails their directly
investing in Japan-based wholesale subsidiaries. Briefly stated, vertical integration better
aligns the non-contractible wholesaler effort levels with the Manufacturer profit, but
necessarily forgoes the inherent advantage of an independent wholesaler at market-
widening efforts. This establishes a trade-off bearing on the decision to vertically integrate.

22
Where market-widening efforts complicate the resolution of retail externalities, it can be
better to forgo market widening efforts altogether and instead focus exclusively on
resolving the externalities, vertically integrating with the wholesaler in order to better
administer a distribution keiretsu.

Generally all the above studies do not assess the impact of Distribution Strategy on
organizational profitability comprehensively. Therefore this knowledge gap also motivates
the researcher to conduct comprehensive evaluation of the impact of Distribution Strategy
on organizational profitability of BGI-Ethiopia, Kombolcha branch.

2.4 Conceptual Model

The conceptual framework of the study was constructed based on interrelation ship
between distribution and profitability because if distribution pre-requisites are fulfilled and
exercised as per the demand of distributor‘s profitability will increase and the reverse is
true. This is because of the fact that, the study tries to see the determinants used to
enhanced distribution performance which is causative variables can have impacts and
contributes to the profitability of the company can be answered with the help of
interrelation ship diagram as shown below.

Planning

Distributor capacity

Support of the company

to distributors Organizational profitability

Distribution regulation

Communication
between the company
and distributors

Figure 1: Conceptual Framework

Source: Designed by researcher own framework (2020)

23
Distribution service performance defined in this study as the degree of efficiency achieved
by brewery companies in making their products available to consumers punctually,
adequately and at affordable prices (Dyer & Blair, 2012). Distribution efficiency has an
overall effect on the organization profitability. planning, distributor capacity, support of the
company to distributors, Distribution regulation and Communication between the company
and distributors are factors that affect the distribution efficiency in availing products to
consumer‘s hence influencing the profitability of brewery companies.

2.4.1. Determinants of dependent variables

The factors that will have an impact on market share can be varying between countries,
cultures, societies and in the international standards. And so many literatures were done on
the international level so as to examine the relationships based on the similarities and
differences of factors within and across countries. (Valos and Vocino, 2006) said that
research in distribution channels has highlighted a channel performance metric paradox‖
because of the fact that different systems and different channels necessitate particular
channel performance measurement. Here below the related literatures with regard to
distribution strategy and organizational profitability are compiled.
A. Planning
Demand for many products, however, changes frequently from period to period, often
because of a predictable influences. These influences include seasonal factors that affect
product as well as non-seasonal factor (eg. Promotions or product adoption rates) that may
cause large, predictable increase and declines in sales. Peter Meindl and Sunil Chopra
(2007). Demand forecasts from the basis of all supply chain planning. Consider the
Push/Pull view of the supply chain. All push process in the supply chain are performed in
anticipation of customers demand, whereas, all pull processes are performed in response to
customers demand. For push process, a manager must plan the level of activity, be it
production, transportation, or any other planned activity. For pull process, a manager must
plan the level of available capacity and inventory but not the actual amount to be executed.
In both instances, the first step a manager must take is to forecast what customer demand

24
will be. Peter Meindl and Sunil Chopra (2007).

B. Distributor Capacity
Is a potential strength of distributor to distribute products as the expectation of the
producing company and distributor capacity is vow thought financial strength, fixed and
moveable assets can enhance market share across territory. (Heineken unpublished
brochure)

C. Support of the Company to Distributors

According to Shoham et al., (2008), support types are described as the following;
―providing technical guidance, promotion materials or advertising, training, and visits by
headquarters‟ personnel, free samples, finance and trade allowance. Sufficient level of
support determines performance; to the contrary, insufficient and adapted level of support
might be hindering the performance of distribution channel firms.
They founded that positive significant outcome on the impact of standardized
representatives‟ support on performance and it has a significant outcome with cooperation,
esprit-de corps and commitment (Shoham et al., 2008).

D. Distribution Regulation
Mehta, et.al, (2000) described channel management, or the process of analyzing, planning,
organizing, and controlling (Dong et al., 2010) a firm's marketing channels includes seven
key decision areas: (1) formulating channel strategy, (2) designing marketing channels, (3)
selecting channel members, (4) motivating channel members (Dong et al., 2010), (5)
coordinating channel strategy with channel members (Kotler 2003), (6) evaluating channel
member performance, and (7) managing conflict. Management control is thus recognized
as an important performance indicator (Rajagopal, Pitt and Price, 2010). As Ramaseshan et
al., (2013) discussed about the controlling mechanism, it can enable effective
implementation of marketing strategies and control for deviations before they take place.
They further proved that, effective evaluation and control mechanism could have a positive
financial and strategic performance in a given company. Monitoring practices such as

25
frequent site visits and phone contact with customers develop the firm‟s channel tracking
capabilities, allowing managers to better monitor downstream activities (Wallace et al.,
2009), alleviate information asymmetry, detect future violations in the network and
strengthen the observer effects of punishment (Wang, Gu and Dong, 2013). Dong et al.,
(2010) said that when the governance strategies fit the distributors‟ roles, positive channel
outcomes, such as increased collaboration, greater relationship satisfaction, and better
exchange performance, should result. The key to effective channel governance is to design
mechanisms that successfully enhance the firm‟s own performance as well as motivate
distributors to cooperate and stabilize channel relationships. When distributors are satisfied
with their relationship with the manufacturer, they are willing to assume long-term channel
commitment, and superior channel performance is ensured. ughes & Ahearne (2010),
goals, plans, and control systems of manufacturers will have a marked impact, whereas
Rajagopal et al., (2010) added that higher market share can be gained by developing strong
and effective controls in sales activities. Standardized representatives‟ control with
performance was also partially supported (Shoham et al., 2008).

E. Communication between the Company and Distributors

Communication is a key component for successful distribution. However, complete and
timely information is a catalyst for fostering associations and long-term relationships
which drive channel equity (Mathur, 2013). Michman and Lynn said well-constructed
communication creates smooth relations, and also it creates harmonious relationships with
clearer, open, and systematic exchange of information‖ (Shoham et al., 2008). Positive
social tenor of interactions can be established using informational and relational
communication whereas explicit communication produces quicker and more efficient
agreements (Srivastava and Chakravarti, 2009). Strong ties are positively and significantly
related to access to rich information and knowledge transfer (Yu et al, 2013).
Communication frequency and bidirectional communication had direct positive effects on
the final outcome variable, joint action and on the two mediators, trust and satisfaction,
respectively (Johnston, Khalil, Jain, and Cheng, 2012). Chang and Wang (2008) found that
communication and interaction on e-business activity is positively related with sales
performance and (Shoham et al., 2008) added a relationship between standardized

26
communications with representatives to performance. Additionally, Shoham et al., (2008)
concluded that communication impacts were positive and significant for all three
behavioral outcomes cooperation, esprit de corps and commitments

CHAPTER THREE
3. RESEARCH DESIGN AND METHODOLOGY
Introduction
Under the research methodology section, the points will describe the research design,
sampling techniques, sample size determination, types, source & methods of data
collection and methods of data presentation.

3.1 Research Design

According to Kothari (2004), the research design is a plan, a roadmap and blueprint
strategy of investigation conceived to obtain answers to research questions; it is the heart of
any study.

27
This study will be using both descriptive and explanatory research design. The descriptive
type of research will be used to describe the data collected; to examine the relationship and
impacts between the distribution strategy and profitability of the company. Explanatory
studies clarify the relationship between two aspects of a situation or phenomena (Kumar,
2011). The Explanatory research approach will be chosen to examine the causal
relationship (association) between the dependent variable (profitability) and independent
variables (Distribution strategy of five variables).

3.1.1 Research Approach

In the proposed study; the researcher may use both qualitative and quantitative (mixed)
research approaches will be used to assess the effect of distribution strategy on
organizational profitability of BGI-Ethiopia, kombolcha branch. Combination of these
research approaches will give better interpretation as the other might address the
information missed by one and thus an enhanced and integrated result may emerge from
the analysis. As a result, both approaches will be applied for the effectiveness of this study.

3.1.2 Target Population
The population of this study comprises sales and finance department employees of BGI
Ethiopia, kombolcha branch; main agents, sub agents and outlets of the company.
Currently, there are 36 sales employees and 5 finance employees who are working in
kombolcha branch and 3 main agents, 20 sub agents and 156 outlets in Dessie, kombolcha
and kemissie town.

3.1.3 Sampling Methods and Techniques

BGI Ethiopia, kombolcha branch has four departments namely; human resource, finance,
sales and technical departments. For this study, only sales and finance department will be
considered.

The sampling method planned to be used in this study is probability sampling technique.
Since the target population is selected from the three towns, it needs to be stratified in

28
order to get a representative samples from each strata, and hence stratified probability
sampling technique will be applied. Furthermore the sales department has a direct
relationship with the distribution of the final product of BGI Ethiopia and finance
department also has a direct relationship with financial activity.

3.1.4 Sample and Sample Size

The study use probability sampling technique to determine the sample size which is
required to meet the objective. To select the sample proportionally by using stratified
sampling techniques from company sales and finance employees, main agents and outlets
the following formula will apply.

According to Yamane (1967), the sample size from the given population can be determined
based on the formula of:

n= N/ (1+N (e) 2)

Where, N=population, n=sample size, e=the level of precision (5%), z=confidence

level (95%),
To calculate the sample size by using the formula stated above:

Total number of company sales employees=36

Total number of company finance employees =5

Total number of main agents =3

Total number of sub agents =20

Total number of outlets =156

Therefore the sample sizes were calculated from 220 populations.

n= (220)/ (220*(0.05)2+1) =141.94, thus the sample size for the study will be 142.

Therefore the minimum sample size required for this research will be 142 respondents,
which are selected proportionally stratified random sampling techniques. i.e.

No Population of the study Proportional sample for each population

1 company sales employees(36) 36/220*142=23
2 company finance employees(5) 5/220*142=3
3 main agents(3) 3/220*142=2
4 sub agents(20) 20/220*142=13
5 Outlets(156) 156/220*142=101
Total sample from each population 142

29
 3.2 Data Source
This study will consider both primary as well as secondary data. Many secondary data
source will be utilized so as to get valuable information regarding the distribution and its
actual performance that might affect the profitability of the company.

3.3 Data Collection Methods

The questionnaire distributed to the employees, main agents, sub agents and outlets were
useful to evaluate and analyze the effect of Distribution Strategies on Profitability of the
organization.

All necessary care and diligence will be applied to ensure the validity, reliability and
accuracy of the data collection. The questionnaire comprises three sections. Section I
contains general information about the respondents (including sex, age, years of work
experience, length of service within the factory and educational level). In section II, a five
point Likert scale that range from1 = strongly disagree, 2 = disagree, 3 = neutral, 4 = agree,
5 = strongly agree were used to gather employees‟ opinion in relation with the effect of
distribution strategy on organizational profitability. Finally, section III items consist of
open ended questions which require respondents to give additional comments.

3.4 Method of Data Analysis

The data collected on the basis of the purpose of the study through questionnaire were
tailed, organized and categorized properly. The organizations of the data were followed
by tables which give detailed background information about the participants. And also
the collected data will presented by employing frequencies, tables and descriptive
phrases. Frequencies, percentages and quantitative descriptions were used to analysis
and discuss the collected data. Since The Statistical Package for Social Sciences (SPSS)
have the ability to cover a wide range of the most common statistical and graphical data
analysis.

30
 In this study, both descriptive and inferential statistical methods will be used.
According to (Hair et al. 1998), descriptive research sets out to describe and to interpret
what is. It aimed to depict the state of affairs as it exists and to describe some aspect of
a phenomenon, i.e., the status of a given phenomenon. Descriptive statistics
(percentage mean, mode, and median) will be used mainly to organize and summarize
the demographic data of the respondent. According to (Hair et al. 1998), multiple
regression analysis is a statistical technique used to investigate the relationships
between a dependent variable and two or more independent variables. Multiple
regression analysis is an analytical technique that allows researchers to predict
someone’s score on one variable based on their ratings on several other variables (Julie,
2005). Regression analysis will used to see how much the independent variable
influences the dependent variable companies’ profitability. And correlation analysis
will also used to measure the strength of the association between distribution strategy
and organizational profitability.

Finally, the conclusions parts of the study were discussed based on the findings. The
recommendation will also forward base on the conclusion of the study.

3.5. Validity Test and Reliability

3.5.1. Validity Test
Since validity of a research study is a conceptual and scientific soundness, the test focused
on eliminating or minimizing the effect of extraneous influences, variables and
explanations that might detract the accuracy of the ultimate findings. After the researcher
has constructed the questionnaire, pre-testing was done with persons who have knowledge
of the area by allowing them to read it. These persons provided comments on Amharic
translated questions on its ambiguities, the length, the structure and wording. This is done
to ensure that the questionnaire is clear to respondents and can be completed in useful way
(Adam et al., 2007). Then, the instrument was evaluated by academic advisor prior to the
data collection so as to maintain its validity and to increase the accuracy and usefulness of
the findings in which it allows greater confidences of the study.
3.5.2. Reliability Test

31
Reliability refers to the consistent of measurements throughout the entire finding of the
study and it is a determination of obtaining the same results within the sample respondents.
Therefore, the reliability checks for internal consistency of variables was done on 15
sample questionnaire using Cronbach‘s Alpha coefficient before distributing the entire 142
sample.
According to Joseph and Rosemary (2003), Cronbach‟s alpha reliability coefficient (α)
normally ranges between 0 and 1. And they further stated that, there is a greater internal
consistency of the items if the Cronbach‟s alpha coefficient closes to 1.0. Based on the
following rule of thumb of (George and Mallery, 2003, p. 231), if α > 0.9 „Excellent‟, >0.8
„Good‟, >0.7 „Acceptable‟, >0.6 „Questionable‟, >0.5 „Poor‟, and <0.5 „Unacceptable‟.
Since performing internal consistency test makes a greater confidence on the reliability of
the entire findings of the research, the survey result indicates in the below table-3.7., that
there is acceptable and good internal consistency of each independent variable’s
parameters used. And the study has the sum of the independent variables average
Cronbach‟s alpha value of (α = 0.969) and the reliability test of the study is located on
Acceptable range

CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND DISCUSSION

4.1. Introduction

The main objective of this study is to examine the effect of distribution strategy on
organizational profitability in BGI Ethiopia Brewery factory Kombolcha branch. In this
regard, this chapter presents the results and findings of the study as collected from the
sample population. The data was gathered from questionnaire as the research instrument.
The questionnaire was designed in line with the objectives of the study. To enhance quality
of data obtained, likert type questions were included where by respondents indicated their
level of agreement to which the variables were practiced in a five point likert scale and
open ended questioners by using cross-sectional data. Coded responses were entered into
Statistical Package for the Social Sciences (SPSS) version 25, for data analysis. The data
have been presented by tabulation. The result was presented by using both descriptive and

32
inferential statistical analysis. The report covers response rate and demographic
characteristics obtained from the respondents. The result of reliability analysis, the effect of
distribution strategy on organizational profitability, inferential statistics of correlation
analysis test was reported including test of reliability for binary logistic regression,
friedman test for related ordinal measures, research hypothesis testing and interpreted
parameter estimates. Finally, model summery of the regression function and conclusion of
the chapter were presented.

4.2. Demographic Data

In this section, the researcher analyzed and discussed demographic information of the
respondents which are relevant to the study were summarized on the tables here below,
the frequencies and percentages are calculated and described. Quantitative and qualitative
data analysis were analyzed by using SPSS version 25. In order to have clear
understanding about the results of the study, it is important to be familiar with
demographic characteristics of the sample respondents.

Out of 142 questionnaires distributed 135 respondents were returned the questionnaire, for
employees, main agents, subagents and outlets of the company.

The demographic profile of respondents by frequency and percentage were summarized

below.

Table 4.1: Background Profile of respondents

Demographic characteristics Options Frequency Percentage

Gender of respondents Male 82 60.7
Female 53 39.3
Total 135 100
Less than30 0 0
31-40 49 36.3
Age of respondents (in years) 41-50 59 43.7
Above 50 27 20
Total 135 100
Educational background Diploma and below 21 15.6

33
 BA/BSC 80 59.3
MA/MSC and above 34 25.2
Total 135 100
Less than 3 23 17
3-6 27 20
Years of experience (in years) 7- 10 50 37
Above 10 35 25.9
Total 135 100
your relation with the company Main agents 2 1.5
Sub agents 12 8.9
outlets 95 70.44
employees 26 19.3
Total 135 100
Source: Field Survey 2021, Output generated by SPSS

4.2.1. Gender of respondents

As it was illustrated in the table 4.1 above, the Gender status which accounts about 60.7%
male and 39.3% female respondents. This shows that there is no significance gender gap
for respondents which are included in the sample and also there is a significance number of
females who engaged in agents and outlets of the company.

4.2.2. Age of respondents

As it was illustrated in the table 4.1 above, the age status of range between 31-40
years which accounts about 36.3% and also the age status of 41-50 years which accounts
43.7% and above 50 years accounts for 20% of the respondents. This shows that majority
of the respondent in this study was in the age status between 41- 50 followed by 31-40 and
above 50 years simultaneously. This implies that substantial parts of the respondents are in
the age of not young and also not elderly person, and hence productive citizen respondents
were participated in filing the questions.

34
 4.2.3. Level of education

Educational background of respondents in the field survey are indicated in the

table 4.1 above, which means educational status of Diploma and below, BA/BSC,
MA/MSC and above comprise 15.6%, 59.3%, and 25.2% respectively. Accordingly,
majority of the respondents are bachelor degree holders, followed by MA/MSC holders
and Diploma and below simultaneously. This shows that the respondents were educated
and could understand and respond to the questionnaires in a simple way.

4.2.4. Years of work experience

As it is clearly shown in the above table 17% of respondents have a work experience of
less than 3 years, 20% of respondents have a work experience between 3-6 years, 37% of
respondents have a work experience between 7-10 years and 25.9% of them have a
working experience above 10 years. It can be seen that majority of the respondents have
working experience of 7-10 years, there are also a significance number of respondents who
has a work experience of above 10 years, 3-6 years and less than 3 years simultaneously.

4.2.4. your relation with the company

Respondents relation with the company in the field survey are indicated in the
table 4.1 above, which means relation of main agents, sub agents, outlets and employees
comprise 1.5%, 8.9%, 70.4% and 19.3% respectively. Accordingly, majority of the respondents are
outlets, followed employees, sub agents and main agents simultaneously.

4.2.5. Questioners Response Rate

The total number of questionnaire distributed were 142 for employees, main agents,
subagent, and outlets and a total of 135 were properly filled and returned, which represents
95.07% rate of return.

Table 4.2 Response Rate of questionnaires by the respondents

Response Rate Frequency Percentage

Responded 135 95.07

35
 Not responded 7 4.93
Total 142 100
Source: Survey Result (2021)

During the survey, a questionnaire was distributed to the respondents which consist of
employees, main agents, subagents, and outlets and 135 usable questionnaires were
collected with 95.07% response rate. According to Mugenda, (2003) a response rate from
50% - 60% is adequate, a response rate from 60% - 70% is good, and a response rate
greater than 70% is very well. Thus the response rate of 95.07% is a very well response
rate, which is adequate to made analysis based on this response rate.

4.3. Reliability analysis

Internal consistency of the questionnaires were measured by 15 pilot samples in chapter

three and now measuring the overall and each item reliability of the questionnaires which
is collected from 135 samples are essential to go in to the analysis.

Table 4.3: Reliability Statistics for dependent variable, independent variables &
overall reliability

Variables Cronbach's N of
Alpha Items
Company profitability (DV) 0.721 6
Planning (IV) 0.711 3
Distributer capacity (IV) 0.892 7
Support of the company to distributors (IV) 0.937 4
Distribution regulation (IV) 0.872 5
Communication between the company and 0.711 5
distributors (IV)
Overall reliability (DV&IV) 0.895 30
Source: Field Survey 2021, Output generated by SPSS

As it is shown in table 4.3 above, the value of cronbach’s Alpha is 0.721 for the dependent
variable company profitability, 0.711 for the independent variable Planning, 0.892 for the
independent variable Distributor capacity, 0.937 for the independent variable Support of
the company to distributors, 0.872 for the independent variable Distribution regulation,
0.711 for the independent variable communication between the company and distributors,
36
and 0.895 for the overall reliability of both the dependent and independent variables
together. From these we can see that the value of cronbach’s alpha for all variables were
greater than 0.70 these indicates that internal consistency of the questions in all the
variables were in a position to go for analysis.

4.4. Effect of distribution strategy on organizational profitability

The effect of distribution strategy on organizational profitability in BGI Ethiopia

kombolcha branch were asked using likert scale through which respondent shown their
level of agreement on the identified variables and to write their idea for open-ended
questions, by expecting to improve the level of profitability of the company. The
respondents were asked to indicate their agreement on the following measurement scales:
1=strongly disagree, 2=disagree, 3=neutral, 4=agree, 5=strongly agree.

4.4.1. Level of planning of the company

The level of Planning related to company profitability is expressed in terms of the company
never done every activity without a pre determined plan, enough experts in the planning
department of the organization and its status of planning. The result of the sample survey
indicated in table 4.4; below shows the degree of agreement or disagreement in Planning
for Company profitability.

Table 4.4: Respondent’s response for statements related to planning

Frequency with

Strongly disagree
Strongly agree
its percentage

N Statements
o
disagree
Number

Neutral
Agree

1. The company never done every activities F 13 43 9 50 20

without a pre determined plan 135
% 9.6 31.9 6.7 37 14.84
2. There are enough experts in the planning 135 F 16 45 6 51 17
department of the organization % 11.9 33.3 4.4 37.8 12.6

37
3. One of the main reason of the company F 43 27 11 37 17
for its unsuccessful is its status of 135
planning % 31.9 20 8.1 27.4 12.6
Source: Field Survey 2021, Output generated by SPSS

Table 4.4, above consists of three statements in relation to Planning. It can be seen from
the respondents response that in the statement of the company never done every activities
without a predetermined plan, it shows that out of 135 respondents 9.6% answered strongly
agree, 31.9% answered agree, 6.7% answered neutral, 37% answered disagree, 14.8%
answered strongly disagree.

According to the respondents response 51.8% was disagreed or strongly disagreed in this
question which replied that pre determined plan is one of the cause in company
profitability, and hence this was affected organizational profitability in the company.
Whereas 42.5% of the respondent replied that pre determined plan in company is not the
cause in organizational profitability by replaying the statement either agree or strongly
agree, and the remaining 6.7% of the respondent does not say anything by replaying neutral
about the question raised above.
The second question, which state that There are enough experts in the planning department
of the organization, and the above table shows that out of 135 respondents12.6% answered
strongly disagree, 37.8% answered disagree, 33.3% answered agree, 11.9% answered
strongly agree, and the remaining 4.4% answered neutral. Based on these response
majority of them 50.4% was disagreed or strongly disagreed in this question which replied
that the company has not enough experts in the planning department, whereas 45.2%
responded either agree or strongly agree, and the remaining 4.4% replied neutral .
The third question which says that one of the main reason of the company for its
unsuccessfulness is its status of planning, and the above table 4.3, indicates that out of 135
respondents 31.9% answered strongly agree, 20% answered agree, 27.4% answered
disagree, 12.6% answered strongly disagree, and 8.1% answered neutral. According to the
respondents response majority of them 51.9% was agreed or strongly agreed in this
question which replied that the main reason of the company for its unsuccessfulness is its
status of planning, this affects company profitability of the organization, whereas 40% of

38
the respondent responded either disagree or strongly disagree, and the remaining 8.1% of
respondents replied neutral.
Thus, it can be seen from the majority of respondents’ response that the company done its
activity without a pre determined plan, the company has not enough experts in the planning
department and generally status of planning affect organizational profitability.

4.4.2. Level of distributor capacity

Regarding to levels of distributors capacity on organizational profitability, table 4.5 below

shows that most respondents agreed with the statement of levels of distributors capacity
were affected organizational profitability.

Table 4.5: Respondent’s response for statements related to Level of distributor

capacity
Frequency with

Strongly disagree
Strongly agree
its percentage

No Statements

Disagree
Number

Neutral
Agree

1. Agents of the company has enough 135 F 15 48 8 44 20

potential to distribute the product for
% 11.1 35.6 5.9 32.6 14.8
the customers
Geographical settlements of the F 15 57 11 36 16
2. distributors’ is not comfortable 135 % 11.1 42.2 8.1 26.7 11.9
3. Agents and outlets has not enough F 9 62 3 53 8
financial capacity to distribute the 135
products as per the requirement of % 6.7 45.9 2.2 39.3 5.9
market situation on the ground
4. The sales territory we currently F 23 49 10 39 14
serving are not fit with our 135 % 17 36.3 7.4 28.9 10.4
potential to serve
5. The warehouse facility we have is F 12 63 4 39 17
not enough for our sales territory 135
% 8.9 46.7 3 28.9 12.6

39
 Agents and outlets has not enough F 10 57 2 52 14
6. numbers of tracks to distribute the 135
% 7.4 42.2 1.5 38.5 10.4
products
7 The company has not enough F 8 58 7 40 22
7. agents in terms of numbers 135
% 5.9 43 5.2 29.6 16.3

Source: Field Survey 2021, output generated by SPSS

In the first question, agents of the company has enough potential to distribute the product
for the customers, and the above table indicates that out of 135 respondents 11.1%
answered strongly agree, 35.6% answered agree, 32.6% answered disagree, 14.8%
answered strongly disagree, and 5.9% answered neutral. According to the respondents
response majority of them 47.4% was disagreed or strongly disagreed in this question
which replied that, Agents of the company has not enough potential to distribute the
product for the customers, whereas 46.7% of the respondent responded that either agree or
strongly agree, the remaining 5.9% of respondents replied neutral.

In the second question, which state that geographical settlements of the distributors’ is not
comfortable, the above table 4.5 indicates that: Out of 135 respondents 11.1% answered
strongly agree, 42.2% answered agree, 26.7% answered disagree, 11.9% answered strongly
disagree, and 8.1% answered neutral. According to the respondents response majority of
them 53.3% was agreed or strongly agreed in this question which replied that, the
distributors’ geographical settlements were not comfortable for customers, whereas 38.6%
of the respondents replied that either they are disagree or strongly, whereas 8.1% replied
neutral for the stated question.

In the third question, agents and outlets has not enough financial capacity to distribute the
products as per the requirement of market situation on the ground, the above table 4.4:
indicates that out of 135 respondents 6.7% answered strongly agree, 45.9% answered
agree, 39.3% answered disagree, 5.9% answered strongly disagree, and 2.2% answered
neutral. According to the respondents response majority of them 52.6% was agreed or
strongly agreed in this question which replied that, Agents and outlets has not enough
financial capacity to distribute the products as per the requirement of market situation on

40
the ground, whereas 45.2% of the respondent responded that they are either disagree or
strongly disagree, and the remaining 2.2% respond neutral.

In the fourth question, which says that the sales territory we currently serving are not fit
with our potential to serve, the above table 4.4, indicates that out of 135 respondents 17%
answered strongly agree, 39.3% answered agree, 28.9% answered disagree, 10.4%
answered strongly disagree, and 7.4% answered neutral. According to the respondents
response majority of them 53.3% was agreed or strongly agreed in this question which
replied that, the sales territory we currently serving are not fit with our potential to serve,
whereas 39.3% of the respondents answered for the stated question either disagree or
strongly disagree, and the remaining 7.4% respond neutral for the stated question.

In the fifth question, which says that the warehouse facility we have is not enough for our
sales territory, the above table 4.4, indicates that out of 135 respondents 8.9% answered
strongly agree, 46.7% answered agree, 28.9% answered disagree, 12.6% answered strongly
disagree, and 3% answered neutral. According to the respondents response majority of
them 55.6% was agreed or strongly agreed in this question which replied that, the
warehouse facility we have is not enough for our sales territory, whereas 41.5% of the
respondents answered for the stated question either disagree or strongly disagree, and the
remaining 3% respond neutral for the stated question.

In the sixth question, which says that Agents and outlets has not enough numbers of tracks
to distribute the products, the above table 4.4, indicates that out of 135 respondents 7.4%
answered strongly agree, 42.2% answered agree, 38.5% answered disagree, 10.4%
answered strongly disagree, and 1.5% answered neutral. According to the respondents
response majority of them 49.6% was agreed or strongly agreed in this question which
replied that, Agents and outlets has not enough numbers of tracks to distribute the products,
whereas 48.9% of the respondents answered for the stated question either disagree or
strongly disagree, and the remaining 1.5% respond neutral for the stated question.

41
The last question of these variable was, the company has not enough agents in terms of
numbers, the above table 4.4, indicates that out of 135 respondents 5.9% answered strongly
agree, 43% answered agree, 29.6% answered disagree, 16.3% answered strongly disagree,
and 5.2% answered neutral. According to the respondents response majority of them 48.9%
was agreed or strongly agreed in this question which replied that, the company has not
enough agents in terms of numbers, whereas 45.9% of the respondents replied either
disagree or strongly disagree for the question asked, and the remaining 5.2% respond
neutral. Thus, it can be seen from the respondent response that the level of distributors’
capacity affects company profitability of BGI Ethiopia kombolcha branch.

According to the result, majority of the respondents (51.12% averagely) response that there
was lack of distributors’ capacity that affects company profitability.

4.4.3. Level of Support of the company to Distributors

Regarding to level of support of the company to distributors on on organizational

profitability table 4.6 shows most respondents agreed support of the company to
distributors affect company profitability.

Table 4.6: Respondent’s response for statements related to Support of the company to
Distributors
Frequency with

Strongly disagree
Strongly agree
its percentage

No Statements Disagree
Number

Neutral
Agree

1. The company has not give technical F 22 53 14 33 13

support for the effective 135 % 16.3 39.3 10.4 24.4 9.6
performance of the distributers
2. The company has not providing us F 26 54 2 40 13
credit scheme (financial assistance 135 % 19.3 40 1.5 29.6 9.6
3. The organization not give on job F 31 51 2 31 20
training for the distributers 135
% 23 37.8 1.5 23 14.8

42
 4. The company is not sending F 27 47 10 31 20
professionals to assist our business 135
% 20 34.8 7.4 23 14.8

Source: Field Survey 2021, Output generated by SPSS

In the first question, the company has not give technical support for the effective
performance of the distributers, the above table 4.6, indicates that out of 135 respondents
16.3% answered strongly agree, 39.3% answered agree, 24.4% answered disagree, 9.6%
answered strongly disagree, and 10.4% answered neutral. According to the respondents
response majority of them 55.6% was agreed or strongly agreed in this question which
means they agree on the company has not give technical support for the effective
performance of the distributers, whereas 34% of the respondents responded that they are
either disagree or strongly disagree, and the remaining 10.4% responds neutral.

In the second question, the company has not providing us credit scheme (financial
assistance, the above table 4.5: indicates that out of 135 respondents 19.3% answered
strongly agree, 40% answered agree, 29.6% answered disagree, 9.6% answered strongly
disagree, and 1.5% answered neutral. According to the respondents response majority of
them 59.3% was agreed or strongly agreed in this question which specified that, the
company has not providing us credit scheme (financial assistance), whereas the remaining
39.2% of the respondents replied that either they are disagree or strongly disagree on the
question stated above, and the remaining 1.5% of respondents said neutral.

In the third question the organization not give on job training for the distributers, the above
table 4.5, indicates that out of 135 respondents 23% answered strongly agree, 37.8%
answered agree, 23% answered disagree, 14.8% answered strongly disagree, and 1.5%
answered neutral. According to the respondents response majority of them 53.2% was
agreed or strongly agreed in this question mentioned that, the organization not give on job
training for the distributers, whereas 37.8% of the respondents replied either disagree or
strongly disagree for the question asked, and the remaining 1.5% of respondents who said
neutral.

43
 In the last question of this variable, the company is not sending professionals to assist our
business, the above table 4.5, indicates that out of 135 respondents 20% answered strongly
agree, 34% answered agree, 23% answered disagree, 14.8% answered strongly disagree,
and 7.4% answered neutral.

According to the respondents response majority of them 54.8% was agreed or strongly
agreed in this question replied that the company is not sending professionals to assist our
business, whereas 37.8% of the respondents replied either disagree or strongly disagree for
the question they are asked, and the remaining 7.4% said neutral.

Thus, it can be seen from the respondents response that majority of them (55.73% on
average) responded that the company has not give technical support for the effective
performance of the distributers, the company has not providing us credit scheme (financial
assistance), the organization not give on job training for the distributers, the company is not
sending professionals to assist our business, and these affects more for organizational
profitability of BGI Ethiopia Kombolcha branch.

4.4.4. Level of Distribution regulation

Regarding to the level of distribution regulation on organizational profitability table 4.7,

clearly shows that most respondents agreed with the statement of levels of distribution
regulation was affect organizational profitability. Respondent‘s response on questions of
levels of distribution regulation are discussed below.

Table 4.7: Respondent’s response related to distribution regulation

Frequency with

Strongly agree
its percentage

No Statements
Disagree

Strongly
disagree
Number

Neutral
Agree

1. The company has not enact F 25 52 10 36 12

distribution regulation 135
% 18.5 38.5 7.4 26.7 8.9
2. The distribution regulation were F 19 59 3 40 14

44
 not respected by the organization 135 % 14.1 43.7 2.2 29.6 10.4
3. The distribution regulation were F 21 53 6 42 13
not respected by the distributers 135 % 15.6 39.3 4.4 31.1 9.6
4. Regulation of the distribution is F 27 42 9 35 22
not clear 135 % 20 31.1 6.7 25.9 16.3

5. Regulation of the distribution F 30 52 2 26 25

does not helps for the company 135 % 22.2 38.5 1.5 19.3 18.5
to get more profit
Source: Field Survey 2021, Output generated by SPSS

Table 4.7, above consists of five questionnaires in relation to regulation of the company. It
can be seen from the respondents response, the company has not enact distribution
regulation, the table indicates that out of 135 respondents 18.5% answered strongly agree,
38.5% answered agree, 26.7% answered disagree, 8.9% answered strongly disagree , and
7.4% answered neutral. Based on their response majority of them 57% was agreed or
strongly agreed in this question which said that, the company has not enact distribution
regulation that affect organizational profitability, whereas 35.6% of the respondents replied
either they are disagree or strongly disagree on the statement asked to reply, and the
remaining 7.4% of respondents replied as neutral.

In the second statement which said that the distribution regulation were not respected by
the organization, the table above 4.7, indicates that out of 135 respondents 14.1% answered
strongly agree, 43.7% answered agree, 29.6% answered disagree, 10.4% answered strongly
disagree, and 2.2% answered neutral. According to the respondents response majority of
them 57.8% was agreed or strongly agreed in this statement which state that, the
distribution regulation were not respected by the organization, whereas 40% of the
respondents were replied either disagree or strongly disagree on the stated statement,
and the remaining 2.2% respond as neutral.
In the third statement which said that the distribution regulation were not respected by the
distributers, the above table 4.6, indicates that out of 135 respondents 15.6% answered
strongly agree, 39.3% answered agree,31.1% answered disagree, 9.6% answered strongly
disagree , and 4.4% answered neutral. According to the respondents response majority of
them 54.9% was agreed or strongly agreed in this question which replied that, the

45
distribution regulation were not respected by the distributers, whereas 40.7% of the
respondents replied either disagree or strongly disagree, and the remaining 4.4% of
respondents replied as neutral.

In the fourth statement which state that regulation of the distribution is not clear, the above
table 4.6, indicates that out of 135 respondents 20% answered strongly agree, 31.1%
answered agree, 25.9% answered disagree, 16.3% answered strongly disagree, and 6.7%
answered neutral. According to the respondents response majority of them 51.1% was
agreed or strongly agreed in the statement, which said that regulation of the distribution is
not clear, whereas 42.2% of the respondents were replied either disagree or strongly
disagree, and the remaining 6.7% of respondents said as neutral.

In the fifth statement said regulation of the distribution does not helps for the company to
get more profit, the above table 4.6, indicates that out of 135 respondents 22.2% answered
strongly agree, 38.5% answered agree, 19.3% answered disagree,18.5% answered strongly
disagree, and the remaining 1.5% answered neutral. According to the respondents response
majority of them 60.7% was agreed or strongly agreed in this statement which indicated
that, regulation of the distribution does not helps for the company to get more profit,
whereas 37.8% of the respondents replied either disagree or strongly disagree, and the
remaining 1.5% of respondents said as neutral.

Majority of the respondents (56.3% on average) replied that distribution regulation is not in
a position to support organizational profitability, and hence the level of distribution
regulation was affect organizational profitability in BGI Ethiopia kombolcha branch.
Respondents also respond that geographical position of stakeholders is a serious problem.
On average 62.3% of the respondents replied that stakeholders coordination has impact on
physical examination of goods, followed by ethics of examiners (60%), skills of examiners
(59.5%) and customs law (58.7%) respectively.

46
 4.4.5. The level of Communication between the company and distributor

Table 4.8: Respondent’s response related to Communication between the company

and distributors

Frequency with

Strongly disagree
Strongly agree
its percentage
No Statements

Disagree
Number

Neutral
Agree
1. There is not a strong relation F 22 80 7 21 5
between the organization and the 135
distributers % 16.3 59.3 5.2 15.6 3.7
2. The company is not known his F 31 74 3 25 2
distributers 135
% 23 54.8 2.2 18.5 1.5

3. There is not a strong F 38 61 7 27 2

communication between the 135
distributers and the company % 28.1 45.2 5.2 20 1.5
4. There is not enough F 45 60 8 16 5
communication infrastructure to 135
communicate each other % 33.3 44.4 6.7 11.9 3.7
5. The two parties faces high F 46 58 4 21 6
communication gap 135
% 34.1 43 3 15.6 4.4
Source: Field Survey 2021, Output generated by SPSS

In the above table 4.8, consist of five statements in relation to communication between the
company and distributors effect of organizational profitability. It can be seen from the
respondents response in the statement of there is not a strong relation between the
organization and the distributers, the above table indicates that out of 135 respondents
16.3% answered strongly agree, 59.3% answered agree, 15.6% answered disagree, 3.7%
answered strongly disagree, and 5.2% answered neutral. According to the respondents
response majority of them 75.6% was agreed or strongly agreed in this question which
replied that there is not a strong relation between the organization and the distributers, only
19.3% was disagreed or strongly disagreed on this specified statements, and 5.2% was

47
answered neutral, this implies that there is not a strong relation between the organization
and the distributers that affect company profitability.

In the second statement, the company is not known his distributers the above table 4.7,
indicates that out of 135 respondents 23% answered strongly agree, 54.8% answered agree,
18.5% answered disagree, 1.5% answered strongly disagree, and 2.2% answered neutral.
According to the respondents response majority of them 77.8% was agreed or strongly
agreed in this statement which replied that the company is not known his distributers,
whereas 20% was disagreed or strongly disagreed on the stated statement, and 2.2%
answered neutral, these shows that majority of the respondent agreed on the company is
not known his distributers, this affected the profitability of the company..

In the third statement which said that there is not a strong communication between the
distributers and the company, the above table 4.7, indicates that out of 135 respondents
38.1% answered strongly agree, 45.2% answered agree, 20% answered disagree, 1.5%
strongly disagree, and 5.2% answered neutral. According to the respondents response
majority of them 73.3% was agreed or strongly agreed in this statement which replied that
there is not a strong communication between the distributers and the company, whereas
21.5% was disagreed or strongly disagreed on the stated statement, and the remaining 5.2%
answered neutral, these shows that majority of the respondent agreed on there is not a
strong communication between the distributers and the company, this affected the
profitability of the organization.

In the fourth statement, there is not enough communication infrastructure to communicate

each other, The above table 4.8, indicates that out of 135 respondents 33.3% answered
strongly agree, 44.4% answered agree, 11.9% answered disagree 3.7% answered strongly
disagree, and 6.7% answered neutral. According to the respondents
response majority of them 77.7% was agreed or strongly agreed in this statement which
replied that there is not enough communication infrastructure to communicate each other,
whereas 15.6% was disagreed and strongly disagreed on the stated statement, and the
remaining 6.7% answered neutral, these shows that majority of the respondent agreed on

48
the statement that there is not enough communication infrastructure to communicate each
other this affected the profitability of BGI Ethiopia Kombolcha branch.

In the last statement, the two parties faces high communication gap, the above table 4.7,
indicates that out of 135 respondents 34.1% answered strongly agree, 43% answered agree,
15.6% answered disagree 4.4% answered strongly disagree, and 3% answered neutral.
According to the respondents response majority of them 74.1% was agreed or strongly
agreed in this statement which replied that, the two parties faces high communication gap
in general, whereas 20% was disagreed and strongly disagreed on the stated statement, and
the remaining 3% answered neutral.

So, as it was depicted on the above table 4.7 that respondents were asked to reply their
level of agreements for the statements about, majority of the respondents (75.7% on
average) replied that profitability of BGI Ethiopia Kombolcha branch affected by
distribution strategy of the organization in general. Respondents’ response on open ended
questions shows that in effective planning, lack of distributors’ capacity, and lack of
support of the company to the distributors, in effective distribution regulation, lack of
communication between the company and distributors affect profitability of the
organization.

In general in order to evaluate the profitability of BGI Ethiopia Kombolcha branch the
researcher propose five explanatory variables, and request for the respondent to put their
level of agreement on the stated statements for each explanatory variables. As it is shown
majority of the respondent were answered either strongly agreed or agreed on the non-
effective practice of company profitability. According to the respondents response
distributors capacity is the highest factor which affect company profitability, planning of
the company, support of the company to distributors, distribution regulation and
communication between the company and distributors respectively, but without objective
statistical test it is difficult to generalize, which means it is necessarily to test statistically
whether their responses are statistically significant or not. Based on the data listed above, a
total of five factors that contributed to affect the profitability of the organization were

49
 identified, ranked and analyzed. The low mean indicated in the above table having the
greatest influence on the profitability of the organization.

4.6. Level of company profitability

Table 4.8. Respondents’ response for statements related to company profitability

Frequency with

Strongly disagree
Strongly agree
its percentage
No Statements

Disagree
Number

Neutral
Agree
1. The company’ profitability were F 23 72 10 26 4
decreased from time to time 135
% 17 53.3 7.4 19.3 3
2. The level of profitability of the F 30 64 6 30 5
company is un predictable 135
% 22 47.4 4.4 22.2 3.7

3. The level of profitability of the F 32 65 7 29 2

company achieve without a 135
% 23.7 48.1 5.2 21.5 1.5
systematic planning
4. Profitability of the company F 33 69 6 25 2
decrease due to ineffective 135
distributions of the product % 24.4 51.1 4.4 18.5 1.5

5. Profitability of the company is not F 39 60 6 28 2

in a good position due to bad 135
% 28.9 44.4 4.4 20.7 1.5
communication between the two
parties
6 Haven’t Multi-dimensional F 45 62 4 20 4
support of the organization for the 135 % 33.3 45.9 3 14.8 3
distributers affect the profitability
of the company

In the above table 4.8, consist of six statements in relation to organizational profitability. It
can be seen from the respondents’ response in the statement of the company’ profitability
were decreased from time to time, the above table indicates that out of 135 respondents
17% answered strongly agree, 53.3% answered agree, 19.3% answered disagree, 3%
answered strongly disagree, and 7.4% answered neutral. According to the respondents

50
response majority of them 70.3% was agreed or strongly agreed in this question which
replied that the company’ profitability were decreased from time to time, only 22.3% was
disagreed or strongly disagreed on this specified statements, and 7.4% was answered
neutral, this implies that majority of the respondent agreed on company’ profitability were
decreased from time to time.

In the second statement, the level of profitability of the company is un predictable the
above table 4.7, indicates that out of 135 respondents 22.2% answered strongly agree,
47.4% answered agree, 22.2% answered disagree, 3.7% answered strongly disagree, and
4.4% answered neutral. According to the respondents response majority of them 69.6%
was agreed or strongly agreed in this statement which replied that the level of profitability
of the company is un predictable, whereas 25.9% was disagreed or strongly disagreed on
the stated statement, and 4.4% answered neutral, these shows that majority of the
respondent agreed on the level of profitability of the company is un predictable, this
affected the profitability of BGI Ethiopia kombolcha branch.

In the third statement which said that the level of profitability of the company achieve
without a systematic planning, the above table 4.7, indicates that out of 135 respondents
23.7% answered strongly agree, 48.1% answered agree, 21.5% answered disagree, 1.5%
strongly disagree, and 5.2% answered neutral. According to the respondents response
majority of them 71.8% was agreed or strongly agreed in this statement which replied that
The level of profitability of the company achieve without a systematic planning, whereas
23% was disagreed or strongly disagreed on the stated statement, and the remaining 5.2%
answered neutral, these shows that majority of the respondent agreed The level of
profitability of the company achieve without a systematic planning, this affected the
organizational profitability of BGI Ethiopia kombolcha branch .

In the fourth statement, Profitability of the company decrease due to ineffective

distributions of the product, The above table 4.8, indicates that out of 135 respondents
24.4% answered strongly agree, 51.1% answered agree, 18.5% answered disagree 1.5%
answered strongly disagree, and 4.4% answered neutral. According to the respondents
response majority of them 75.5% was agreed or strongly agreed in this statement which

51
replied that Profitability of the company decrease due to ineffective distributions of the
product, whereas 20% was disagreed and strongly disagreed on the stated statement, and
the remaining 4.4% answered neutral, these shows that majority of the respondent agreed
on the statement that Profitability of the company decrease due to ineffective distributions
of the product, this affected the organizational profitability in the branch.

In the fifth statement, Profitability of the company is not in a good position due to bad
communication between the two parties, The above table 4.8, indicates that out of 135
respondents 28.9% answered strongly agree, 44.4% answered agree, 20.7% answered
disagree 1.5% answered strongly disagree, and 4.4% answered neutral. According to the
respondents response majority of them 73.3% was agreed or strongly agreed in this
statement which replied that Profitability of the company is not in a good position due to
bad communication between the two parties, whereas 17.8% was disagreed and strongly
disagreed on the stated statement, and the remaining 4.4% answered neutral, these shows
that majority of the respondent agreed on the statement that Profitability of the company is
not in a good position due to bad communication between the two parties, this affected the
organizational profitability in the branch.

In the last statement, Haven’t Multi-dimensional support of the organization for the
distributers affect the profitability of the company, the above table 4.7, indicates that out of
135 respondents 33.3% answered strongly agree, 45.9% answered agree, 14.8% answered
disagree 3% answered strongly disagree, and 3% answered neutral. According to the
respondents response majority of them 79.2% was agreed or strongly agreed in this
statement which replied that, Haven’t Multi-dimensional support of the organization for the
distributers affect the profitability of the company, whereas 17.8% was disagreed and
strongly disagreed on the stated statement, and the remaining 3% answered neutral.

So, as it was depicted on the above table 4.7, that respondents were asked to reply their
level of agreements for the statements about organizational profitability, majority of the
respondents (73.29% on average) replied that organizational profitability of the company
low.

52
In general in order to evaluate the organizational profitability of the branch the researcher
propose six explanatory variables, and request for the respondent to put their level of
agreement on the stated statements for each explanatory variables. As it is shown majority
of the respondent were answered either strongly agreed or agreed on the non-effective
practice of organizational profitability in the branch. According to the respondents
response distribution capacity is the highest factor which affect organizational profitability,
followed by planning, support of the company to the distributors, Distribution regulation,
and Communication between the company and the distributer, but without objective
statistical test it is difficult to generalize, which means it is necessarily to test statistically
whether their responses are statistically significant or not. Based on the data listed above, a
total of five factors that contributed to affect the organizational profitability, ranked and
analyzed.

4.5. Problems of customs physical examination effectiveness

The researcher identified the major factors that affect organization profitability by ranking
the mean value of the respondent’s response. The factors listed in the questionnaire derived
from the primarily data mainly affecting organizational profitability. The overall rankings
of factors that affect the company profitability have been established as shown in table 4.9
below.

Table 4.9. Effect of distribution strategy on organizational profitability

Variable which have impact on company profitability N Mean Rank

Planning 135 2.86 2
Distributers capacity 135 2.65 1
Supports of the company to the distributers 135 2.91 3
2.95
Distribution regulation 135 4

3.63
Communication between the company and the distributer 135 5

Source: Field Survey 2021, Output generated by SPSS

53
As it is clearly shown in the above table, a total of five factors that contributed to affect the
profitability of the organization were identified, ranked and analyzed. The low mean
indicated in the above table having the greatest influence on the profitability of the
organization. Therefore lack of distributors capacity is a serious problem in the company
followed by planning, support of the company to distributors, distribution regulation,
communication between the company and distributors’ respectively.

4.6. Inferential statistics

Inferential statistics is the procedure by which conclusions about a population is made

based on the information contain in the sample which was drawn from respondents, and it
is also a techniques that allow the researcher to use a random samples to make
generalizations about the populations from which the samples were drawn. Therefore,
among inferential statistics this study was applied in binary logistic regression model to
investigate the research hypotheses.

The implication behind why the researcher used this binary logistic regression model is to
predict an outcome of the dichotomy dependent variable (profitable or not profitable of the
organization) which is categorical from predictor variables that are also categorical.

4.6.1. Correlation analysis

Correlation analysis is a method of statistical evaluation used to study the strength of a

relationship between two variables. This particular type of analysis is useful when a
researcher wants to establish connections between variables. If correlation is found
between two variables it means that when there is a systematic change in one variable,
there is also a systematic change in the other; the variables alter together over a certain
period of time. If there is correlation found, depending upon the values measured, it may be
either positive or negative. Positive correlation indicates a direct relationship between the
two variables, and negative correlation on the other hand shows inverse relation between
the two variables. Spearman rank correlation requires the data to be sorted and the value to
be assigned a specific rank with 1 to be assigned as the lowest value. Moreover, in case of
data value appearing more than once, equal values will be specified their average rank. It

54
aims to see the extent of strength and weakness of relationship among variables in
regression model (Brook, 2008). Spearman correlation were used to compute the
correlation because spearman correlation helps to calculate correlation for categorical data,
and also, a significance of p=0.05 is generally accepted conventional level in social
sciences research and this indicates that 95% the researcher can be sure that there is a true
correlation between the two variables and there is only a 5% chance that the relationship
does not truly exist. Therefore p-value indicated the probability of significant relationships
of the variables.

4 Table 4.10: Correlation matrix of the dependent variable and independent

variables

Com Planning Distributor Support of Distribution Communicat

pany capacity the regulation ion b/n the
profit company to company

55
 abilit distributor and
y distributors
Spear Company Correlation 1.00 .266** .172* .193* .276** .195*
man's profitability Coefficient 0
rho Sig. (2- . .002 .046 .025 .001 .023
tailed)
N 135 135 135 135 135 135
**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).

Source: Field Survey 2021, Output generated by SPSS

4.6.1.1. Correlation between Planning and Company profitability

From the Spearman correlation analysis result on table 4.10 above, we have to test whether
their correlation is significance or not.

H0:p=0(There is no significance correlation b/n customs law & examination effectivenes)

H1:p ≠0 (There is a significance correlation b/n customs law & examination effectivenes)

Where p is the true (population) coefficient of correlation, and rs=0.266

Decision rule- Reject Ho, if p-value is less than α value, p-value (sig.=0.002)<1%

Decision- Reject Ho, since the null hypothesis is rejected, then the sign of rs indicates the
direction of relationship between the two variables, if it is positive, direct relationship
exists between the two variables; otherwise the two variables have an inverse relationship.

Conclusion- There is a significance direct (since the sign of rs is positive) correlation

between customs law and examination effectiveness at the 1% level of significance. This
means when clear plan applied, there is increase the company profitability and vice versa.

4.6.1.2. Correlation between Distributor capacity and Company profitability

From Spearman correlation analysis test whether their correlation is significance or not.

56
H0:p=0(There is no significance correlation b/n distribution capacity & company
profitability)

H1:p ≠0 (There is a significance correlation b/n distribution capacity & company

profitability)

Where p is the true (population) coefficient of correlation, and rs=0.172

Decision rule- Reject Ho, if p-value is less than α value, p-value(sig.=0.046)<5%

Decision- Reject Ho, since the null hypothesis is rejected, then the sign of rs indicates the
direction of relationship between the two variables, if it is positive, direct relationship
exists between the two variables; otherwise the two variables have an inverse relationship.

Conclusion- There is a significance direct (since the sign of rs is positive) correlation

between distributors capacity and company profitability at the 5% level of significance.
This indicates that when distributors have high capacity, company profitability can also be
increased and vice versa.

4.6.1.3. Correlation between Support of the company to distributors

From the Spearman correlation result to test whether the correlation is significance or not.

H0: p=0(There is no significance correlation b/n support of the company to distributors &
organization profitability)

H1: p ≠0 (There is a significance correlation b/n support of the company to distributors &
organization profitability)

Where p is the true (population) coefficient of correlation, and rs=0.193

Decision rule- Reject Ho, if p-value is less than α value, and p-value (sig.=0.025)<5%

Decision- Reject Ho, since the null hypothesis is rejected, then the sign of rs indicates the
direction of relationship between the two variables.

57
Conclusion- There is a significance direct (sign of rs is positive) correlation between
support of the company to distributors & organization profitability at the 5% level of
significance. This means when the company support the distributors, organizational
profitability were increased and vice versa.

4.6.1.4. Correlation between Distribution regulation and company profitability

From the Spearman correlation to test whether the correlation is significance or not.

H0:p=0 (There is no significance correlation between distribution regulation and company

profitability)

H1:p ≠0 (There is a significance correlation between distribution regulation and company

profitability)

Where p is the true (population) coefficient of correlation, and rs=0.276

Decision rule- Reject Ho, if p-value is less than α value, p-value(sig.=0.001)<1%

Decision- Reject Ho, since the null hypothesis is rejected, then the sign of rs indicates the
direction of relationship between the two variables.

Conclusion- There is a significance direct(the sign of rs is positive) correlation between

distribution regulation and company profitability at the 1% level of significance. This
indicates that when there is clear distribution regulation, organizational profitability can
also be improved and vice versa.

4.6.1.5. Correlation between Communication between the company and distributors

and company profitability

From the Spearman correlation to test whether the correlation is significance or not.

58
 H0:p=0 (There is no significance correlation between communication between the
company and distributors and organizational profitability)

H1:p ≠0 (There is a significance correlation between communication between the company

and distributors and organizational profitability)

Where p is the true (population) coefficient of correlation, and rs=0.195

Decision rule- Reject Ho, if p-value is less than α value, p-value(sig.=0.000)<5%

Decision- Reject Ho, since the null hypothesis is rejected, then the sign of rs indicates the
direction of relationship between the two variables.

Conclusion- There is a significance direct(the sign of rs is positive) correlation between

communication of the company and distributors and organizational profitability at the 5%
level of significance. This indicates that when there is strong communication among
distributors, organizational profitability can also be increased and vice versa. From
spearman correlation analysis result, five independent variables have a positive and
significant relationship with the dependent variable in organization profitability of BGI
Ethiopia kombolcha branch, and all of the explanatory variables are statistically significant
at 99% and 95% confidence level or correlation is significant at the 1% or 5% level of
significance.

Table 4.11: Summary of correlation

Relationship between
Correlation
Independent variables p-value Dependent & Independent
coefficient
Variables
Planning 0.266 0.002 Significantly &Positively

59
 Distributor capacity 0.172 0.046 Significantly &Positively
Support of the company to Significantly &Positively
0.193 0.025
distributors
Distribution regulation 0.276 0.001 Significantly &Positively
Communication between the Significantly &Positively
0.195 0.023
company and distributors
Source: Field Survey 2021, Output generated by SPSS

4.7. Binary logistic regression model analysis

Binary logistic regression models are logistic regressions that estimate the change among
binary values as a function of each unit increased by the predictor. it is used to predict
dichotomy dependent variable given one or more independent variables. The dependent
variable is company profitability, in which its coding is:

Table 4.14. Dependent Variable coding

Original Value Internal Value

Profitable 0
Less profitable 1
Source: Researcher’s coding generated by SPSS (2021)

The independent variables are: Planning, Distributor capacity, Support of the company to
distributors, Distribution regulation, and Communication between the company and
distributors. The qualitative explanatory variables together with their categories and coding

Table 4.15: Categorical Variables Coding

Freque Parameter coding

Planning Well planned 1 .000
weak plan 108 1.000

Distributor capacity High capacity 2 0.000

Low capacity 133 1.000
Support of the company High support 1 0.000
to distributors Low support 134 1.000

Clear regulation 27 0.000

60
Distribution regulation Ambiguous regulation 108 1.000
Communication b/n the Well communication 1 0.000
company and distributors Low communication 134 1.000
Source: Researcher’s coding generated by SPSS (2021)

For categorical (qualitative) explanatory variables, the category that is assigned the value
zero is called the reference category. Thus comparisons are made with reference to this
category.

4.8.1. Classification table

The Hosmer-Lemeshow goodness-of-fit test is used to assess whether the number of

expected events from the logistic regression model reflect the number of observed events
in the data. The data are ranked according to the predicted probability of the outcome from
the model that is being evaluated. Within each group the expected number of outcomes,
sum of predicted probabilities, is compared to the observed number of outcomes. The
goodness of fit of a statistical model is commonly assessed by describing how well the
model fits the observed data. Many tests for goodness of fit evaluate the differences
between the observed values, the actual data, and the expected values from the model.
Goodness of fits often used to assess how well a given probability distribution fits the data
as well as how a statistical regression model fits the data. In this research the interest lies in
evaluating translations of the Hosmer-Lemeshow goodness-of-fit test for logistic
regression. It tells us how good the fitted model is for prediction purpose.

As it can seen below, of the 135 individuals included in the analysis 80% of them (0 +
108=108) are correctly classified. The classification table is just a descriptive measure, and
it is not a standalone method of determining whether the fitted model is adequate or not.

Table 4.16: classification table of the model

Classification Table
Observed Predicted
Level of company profitability

61
 profitable Less profitable Percentage
Correct
Company Profitable 12 12 50
profitability
Less profitable 0 111 100
Overall Percentage 91.1
Source: Field Survey and Output generated by SPSS (2021)

4.8.2. Test of model adequacy

Binary logistic regression is a type of logistic regression analysis, when the response
variable is categorized in to two outcomes. Under binary logistic regression analysis one
can deal about model fitting information, goodness of-fit, pseudo R-square, and parameter
estimates of odds ratios.

4.8.3. Model fitting information

Before a model is relied upon to draw conclusions or predict future outcomes, one should
check, as far as possible, that the model that is assumed is correctly specified. That is, the
data do not conflict with assumptions made by the model. For binary outcomes logistic
regression is the most popular model approach, Hosmer-Lemeshow goodness of fit test for
logistic regression. Therefore before looking the individual predictors, it needs to answer
the question Is the model a good fit? To answer this, hosmer and lemeshow test were
applied.

Table 4.17 Hosmer and Lemeshow Test

Chi-square Df Sig.
4.631 6 0.592
Source: Field Survey 2021, Output generated by SPSS

The null and alternative hypothesis of this test is:

H0: The model fits the data well

62
 H1: The model does not fit the data well

Decision rule- Reject Ho, if p-value less than α value, P-value(sig.)=0.592 >5%

Decision- Do not rejects Ho

Conclusion-The model fits the data well. Therefore there is a significant relationship
between organizational profitability and at least one of the independent variable included in
the model.

4.8.4. Evaluation of the regression model

Model summary describes whether the overall regression is successful in predicting the
dependent variable. It gives a value of pseudo R-square, which measures how much of the
variability in the outcome is accounted for the predictors. Therefore working on those
selected factors has positive impact on organizational profitability. There are several-like
statistics that can be used to measure the strength of association between the dependent
variable and independent variables. In the nonlinear regression model, the coefficient of
determination R-square summarizes the proportion of variance in the dependent variable
associated with independent variables, with larger R-square values seems to indicating that
more of the variation is explained by the model. It is a goodness-of-fit statistic. Its value
bounded between zero and one (inclusive), that is the largest value that pseudo R-square
can assume is one or 100% (in which case all observations fall on the regression line, plane
or surface), and the smallest it can assume is zero. but small number of pseudo R-square
does not mean the model is unfitted, because pseudo R-square may be small due to a
number of important variables were missed even if the included variable is relevant, these
results pseudo R-square to be small but the model is adequate. In model fit information the
p-value is less than 5%, the final model gives a significant improvement over the hosmer
and lemeshow test.

The following methods are used to estimate the coefficient of determination. Cox and Snell
(1989) R-square is based on the log likelihood for the model compared to the log
likelihood for a baseline model. However, with categorical outcomes, it has a theoretical
maximum value of less than 1, even for a model. Nagelkerke (1991) R-square is an

63
adjusted version of the Cox & Snell that adjusts the scale of the statistic to cover the full
range from 0 to 1. The model with the largest R-square statistic is best according to this
measure. In this study of binary logistic regression model the researcher used Nagelkerke R
square because of Nagalkerke R-Square is the latest version of Cox and Snell R-square.

Table 4.18 Model Summary of pseudo R-square

-2 Log likelihood Cox & Snell R Nagelkerke R Square

Square
63.099 0.374 0.616
Source: Field Survey and Output generated by SPSS (2021)

Where:-Pseudo R-squared is the proportion of variation in the dependent variable

explained by the independent variables. The overall enter method of binary logistic
regression model summarized in the table 4.18 above, indicates that Pseudo R-squared
(Nagelkerke) is 0.616 or 61.6%. Therefore it pointed out that 61.6% of the variations in
organizational profitability were explained by the five independent variables (planning,
distributor capacity, support of the company to distributors, distribution regulation and
communication between the company and distributors) in BGI Ethiopia in kombolcha
branch. The remaining 0.374 or 37.4% of the variation was affected or explained by other
variables which are not included in this study.

4.9. Test of significance of individual explanatory variables

In the parameter estimates table 4.19 below presents, the coefficients, their standard
errors, the Wald test, df(degrees of freedom), associated p-values, and odds ratios are
presented. If p-values are less than alpha level (5%) they are statistically significant;
otherwise not significant.

Table 4.19: Parameter Estimates of binary logistic Regression

Variables in the Equation

B S.E. Wald Df Sig. Exp(B)

64
 planning -2.310 0.834 7.674 1 0.006 0.099
Distributor capacity 2.273 1.120 4.120 1 0.042 9.704
Support of the company to -2.303 1.045 4.856 1 0.028 0.100
distributors
Distribution regulation -1.885 0.723 6.801 1 0.009 00.152
Communication b/n -3.913 1.296 9.111 1 0.003 0.020
company and distributors
Constant 4.305 0.828 27.048 1 0.000 74.070
Source: Field Survey and Output generated by SPSS (2021)

To achieve objectives of the study and to test the related hypotheses of the regression
model statistics computed in the above table were considered and demonstrated by
parameter estimates the level of significance (sig-value) and odds ratio attained by each of
the independent variables. The logistic regression results obtained from the model were
utilized to test these hypotheses. The hypotheses sought to test for a significant influence of
planning (PL), Distributor capacity (DC), Support of the company to distributors (SD),
Distribution regulation (DR) and Communication between the company and distribution
(CD) on direct effect of Organizational profitability (OP). In binary outcome, the odds
ratio for the logit model represents the odds of one outcome as compared to the other
outcome. Therefore the hypothesis to be tested based on the regression output on the above
table were shown as follows

4.9.1. Hypothesis on planning (VAR1)

If the odds ratio of an independent variable is less than one, the smaller value of Exp(B)
shows that more sensitive the predicted probability of unit change in the variable, and if the
odds ratio is greater than one the larger value of Exp(B) shows more sensitive the predictor
probability to a unit change in the variable (Long, 1997). These indicate that by using the
sign of B value, it is possible to check the sensitivity of explanatory variables on the
predicted probability. Since the first hypothesis of this research is related to planning, then
the hypothesis is:

65
H1: Planning has significant effect on Company profitability in BGI Ethiopia kombolcha
branch. To test significance of the regression coefficient, the null and alternative
hypotheses are:

H0: β1= 0 (Planning has no a significant effect on organizational profitability)

H1: β1 ≠ 0 (Planning has a significant effect on organizational profitability)

Where, sig-value = 0.006 < 0.05 and β1 is the population regression coefficient of
Planning

Decision rule- Reject Ho, if p-value is less than α value, p-value (sig. =0.006) <1%.

Decision- Reject Ho, Then independent variable, Planning is significant at the 1%

significance level of α or 99% confidence interval. Therefore Planning has a significant
effect on Company profitability in BGI Ethiopia kombolcha branch. Wald test of 7.674
which is different from zero is also an indication of Planning has significance effect on
Company profitability.

Interpretation: Since the sign of β is negative the probability of less company profitability
is higher for the reference category, reference category is in effective planning. When the
value of Exp (B) is positive and less than one, then comparison is made by deducting the
Exp(B) value from 1(100%). This means 1 – 0.099 = 0.901 (100% - 9.9% = 90.1%). Then
the odds/probabilities/likelihood of less company profitability is 90.1% higher for in
effective planning as compared to effective planning, keeping all other explanatory
variables constant. This means that when the company has in effective planning, then the
probability of less company profitability is 90.1%.

4.9.2. Hypothesis on distributor capacity (VAR2)

H2: Distributor capacity has a significant effect on organizational profitability in BGI

Ethiopia kombolcha branch.

To test significance of the regression coefficients, the null and alternative hypotheses are:

66
 H0: β2= 0 (Distributor capacity has no a significant effect on organizational
profitability)
H1: β2 ≠ 0 (Distributor capacity has a significant effect on organizational
profitability)
Where β2 is the population regression coefficient of Distributor capacity, sig-value = 0.042
< 0.05

Decision rule- reject Ho, if p-value is less than α value, p-value (sig. =0.042) <5%

Decision- Reject Ho, and then independent variable Distributor capacity is significant at
the 5% significance level of α or 95% confidence interval. Therefore Distributor capacity
has a significant effect on the organizational profitability in BGI Ethiopia kombolcha
branch. Wald test of 4.120 which is different from zero is also an indication of Distributor
capacity has significance effect on organizational profitability.

Interpretation: Since the sign of β is positive the probability of organizational profitability

is higher for the reference category. In this study low distributor capacity are categorized as
a reference category. When the value of Exp (B) is positive and less than one, then
comparison is made by deducting the Exp (B) value from 1(100%). This means 1 – 0.188 =
0.812 (100% - 18.8% = 81.2%). Then the odds/probabilities/likelihood of ineffective
customs physical examination is 81.2% higher for unskilled examiners as compared to
their skilled counter parts, keeping all other explanatory variables constant. This means that
when examiners are unskilled, then the probability of ineffective customs physical
examination is 81.2%.

4.9.3. Hypothesis on Support of the company to distributors (VAR3)

H3: Support of the company to distributors has a significant effect on organizational

profitability in BGI Ethiopia kombolcha branch.

To test significance of the regression coefficients, the null and alternative hypotheses are:

H0: β3= 0 (Support of the company to distributors has no a significant effect on

organizational profitability)

67
 H1: β3 ≠ 0 (Support of the company to distributors has a significant effect on
organizational profitability)
Where, sig-value = 0.023 < 0.05 & β3 is population regression coefficient of ethics of
examiners

Decision rule- Reject Ho, if p-value is less than α value, and hence p-value (sig.
=0.028)<5%

Decision- Reject Ho, then independent variable, Support of the company to distributors is
significant at the 5% significance level of α or 95% confidence interval. Therefore Support
of the company to distributors has a significant effect on organizational profitability in BGI
Ethiopia kombolcha branch. Wald test of 4.856 which is different from zero is also an
indication of Support of the company to distributors has significance effect on
organizational profitability.

Interpretation: Since the sign of β is negative the probability of ineffective customs

physical examination is higher for the reference category, reference category is unethical
examiners. When the value of Exp(B) is positive and less than one, then comparison is
made by deducting the Exp(B) value from 1(100%). This means 1 – 0.100 = 0.9 (100% -
90% = 10%).

Then the odds/probabilities/likelihood of less organization profitability is 10% higher for

not support distributor as compared to the company Support distributors, keeping all other
explanatory variables constant. This means that when the companies not support the
distributors, then the probability of less company profitability is 10%.

4.9.4. Hypothesis on distributors regulation (VAR4)

H4: distributors regulation has a significant effect on organizational profitability in BGI

Ethiopia kombolcha branch..
To test significance of regression coefficients, the null and alternative hypotheses are:

H0: β4= 0 (distributors regulation has no a significant effect on organizational

profitability)

68
 H1: β4 ≠ 0 (distributors regulation has a significant effect on organizational
profitability)
Sig-value = 0.009 < 0.01 & β4 is population regression coefficient of distributors
regulation
Decision rule- Reject Ho, if p-value is less than α value, and hence p-value
(sig.=0.009)<1%
Decision- Reject Ho, and then the independent variable, distributors’ regulation is
significant at the 1% significance level of α. The conclusion is, distributors’ regulation has
a significant effect on organizational profitability. Wald test of 6.801 which is different
from zero is also an indication of distributors’ regulation has a significance effect on
organizational profitability.
Interpretation: Since the sign of β is negative the probability of organizational
profitability is higher for the reference category, reference category is distributors’
regulation. When the value of Exp(B) is positive and less than one, then comparison is
made by deducting the Exp(B) value from 1(100%). This means 1 – 0.152 = 0.848 (100% -
84.8% = 15.2%). Then the probabilities of less organizational profitability are 15.2%
higher for ambiguous regulation as compared to clear regulation, keeping all other
explanatory variables constant. This means that when there is ambiguous regulation, then
the probability less organizational profitability is 15.2%

4.9.5. Hypothesis on communication between the company and distributors (VAR5)

H5: communication between the company and distributors has a significant effect on
organizational profitability in BGI Ethiopia kombolcha branch.
To test significance of regression coefficients, the null and alternative hypotheses are:

H0: β4= 0 (communication between the company and distributors has no a

significant effect on organizational profitability)
H1: β4 ≠ 0 (communication between the company and distributors has a significant
effect on organizational profitability)
Sig-value = 0.003 < 0.01 & β4 is population regression coefficient of communication
between the company and distributors

69
Decision rule- Reject Ho, if p-value is less than α value, and hence p-value (sig. =0.003)
<1%
Decision- Reject Ho, and then the independent variable, communication between the
company and distributors is significant at the 1% significance level of α. The conclusion is,
communication between the company and distributors has a significant effect on
organizational profitability. Wald test of 9.111 which is different from zero is also an
indication of communication between the company and distributors has a significance
effect on organizational profitability.
Interpretation: Since the sign of β is negative the probability of organizational
profitability is higher for the reference category, reference category is distributors’
regulation. When the value of Exp(B) is positive and less than one, then comparison is
made by deducting the Exp(B) value from 1(100%). This means 1 – 0.152 = 0.848 (100% -
84.8% = 15.2%). Then the probabilities of less organizational profitability are 15.2%
higher for ambiguous regulation as compared to clear regulation, keeping all other
explanatory variables constant. This means that when there is ambiguous regulation, then
the probability less organizational profitability is 15.2%

4.10. Summary of hypothesis testing

70
The hypothesis that is already tested shows all independent variables has statistically
significant effects on the dependent variable. This summary shows in table 4.20 below.

Table 4. 20: Summary of hypothesis testing results

Hypothesi Null hypothesis (Ho)and Alternative hypothesis
P-value Decision
s (H1)
Ho: Planning has no a significant effect on organizational
profitability Reject
H1 0.006
H1: Planning has a significant effect on organizational Ho
profitability.
Ho: Distributor capacity has no a significant effect on
organizational profitability Reject
0.042
H2 H1: Distributor capacity has a significant effect on Ho
organizational profitability
Ho: Support of the company to distributors has no a
significant effect on organizational profitability Reject
H3 0.028
H1: Support of the company to distributors has Ho
a significant effect on organizational profitability
Ho: distributors regulation has no a significant effect on
organizational profitability Reject
H4 0.009
H1: Distributors’ regulation has a significant effect on Ho
organizational profitability.
Ho: communication between the company and 0.003
distributors has no a significant effect on organizational Reject
profitability Ho

H5
H1: communication between the company and
distributors has a significant effect on organizational
profitability

Source: Field survey 2021, output generated by SPSS

4.11. Regression Function of the model

Regression analysis is a statistical method to deal with the formulation of mathematical

model depicting relationship amongst variables which can be used for the purpose of
prediction of the value of dependent variable, given the value of independent variable(s)
(Kothari, 2004).
Multiple regression analysis is an analysis of association in which the effects of two or
more independent variables on a single, interval-scaled dependent variable are investigated

71
simultaneously (William and Barry, 2010). In this study, multiple regression analysis was
conducted to test the effect of independent variables on the dependent variable. The
function of logit typical application evenly distributed categories is calculated in the form
of log(pi/(1-pi) ). Therefore the general form of multiple logistic regression models is:

Yi = 1, if high organizational profitability

0, other wise

Ln (odds ratio)=Logit (Pi) =β0 + β1X1 + β2X2 +β3X3 + β4X4 +Ɛ. + β5X5 +Ɛ

Logit (Pi/1-Pi) =β0 + β1X1 + β2X2 +β3X3 + β4X4 +Ɛ. + β5X5 +Ɛ

Logit (Pi/1-Pi) hat=4.305- 2.310PL+2.273DC – 2.203SD – 1.885DR-3.913CD

(0.828) (0.834) (1.120) (1.045) (0.723) (1.296)

The number placed in parenthesis are standard error of respective relevant coefficient
estimates.

Pi= The probability that the event occurs (less organizational profitability),

1-pi=The probability that the event does not occur (high organizational profitability),
β0= is a constant, and value of the dependent variable when all the independent variables
are zero.
X1 = PL=planning, X2 = DC=distributor capacity, X3 = SD=support of distributors,
X4=DR=distributors regulation, X5 = CD=communication between distributors, β1, β2,
β3, β4, β5 =Regression coefficients of independent variables or change induced by; PL,
DC, SD, DR, and CD respectively, P hat =expected proportional response for the logistic
model with regression coefficients.

72
 4.13. Summary

This chapter has presented and analyzed data collection from primary sources through self-
administered questionnaire and observations. Organized data that gathered through
different methods has presented by using tables to integrate the results of the data obtained
from the questionnaires, so as to address the research hypotheses to achieve the main
objectives of the overall research. Data that was gathered from primary source were
analyzed by using SPSS version 20 and inferred to generalize the result. Descriptive
analysis has been adapted for primary sources of data to triangulate the result obtained
from inferential analysis. Depending on the results obtained from this analysis, the next
chapter thus presents summary of main finding, conclusion of the finding and forward
possible recommendations.

73
 CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSIONS AND

RECOMMENDATIONS
1.1. Introduction

In this chapter summary of findings are provided and conclusions are drawn in light of
the objectives of the study. The researcher presents recommendations for improvement by
the organization under investigation and highlights suggestion for further study by other
researchers in the future. This chapter is organized in to three sections. The first section
highlighted summary of main findings, the second section discussed about conclusions
based on the research objectives and hypotheses of the study and the last section presented
recommendations suggested for the practitioners in the area of organizational profitability.
It also indicated that the implications for further research, contribution & implication of the
study.

1.2. Summary of Main Findings

The study was intended to investigate the effect of distribution strategy on organizational
profitability in BGI Ethiopia kombolcha branch. To achieve the objective of this research
the data has been collected from the primary source using questionnaire by distributing for
142 respondents and collect 135. The data were analyzed using statistical techniques of
descriptive and inferential statistics. Based on the detailed analysis, findings and
discussions were made in chapter four; the main findings of the analysis result are
summarized and presented as follows:

According to the descriptive statistics the existence of excessive laws and regulations in
customs, application of outdated customs laws and problems related to the distribution of
even the updated laws on time in customs, the laws and regulations were not coincide with
the international conventions, even the regulation of customs (Article 37) is contradict with
the constitution.

74
These in turn end up with ineffective customs physical examination and hence majority of
respondents indicated that customs law in the branch impacted on customs physical
examination effectiveness. From spearman’s correlation coefficient, there is found to be a
significant and positive correlation between customs physical examination effectiveness
and customs law with a correlation figure of 0.342, P<0.01. The inferential statistics of the
regression result showed that, customs laws has a significant effect on examination
effectiveness.

Respondents also replied that the current customs proclamation is not in a position to
threat customers fairly and also the directives. From the regression model, the probability
of customs physical examination ineffectiveness is 79% higher for ambiguous customs law
as compared to clear customs law, keeping all other explanatory variables constant. That
means clear customs law leads to effective customs physical examination and ambiguous
customs laws could be reason for ineffective customs physical examination. since; the p-
value was less than 5% we reject the null hypothesis and conclude that customs laws has a
significant effect on examination effectiveness.

According to the descriptive statistics, majority of respondents indicated that, examiners

does not get inductive training before starting examination of goods, examiners does not
gate on job training to examine goods based on skill, examiners of the branch office are not
coming from related field of specialization, surprise check also does not properly follow
goods examination and examiners does not have technical skill to examine goods
effectively and hence skill of examiners affected customs physical examination
effectiveness in the branch. From Spearman’s correlation coefficient, there is found to be a
significant and positive correlation between examination effectiveness and skill of
examiners with a correlation figure of 0.443, P<0.01. From the regression model, since; p-
value was less than 5%, it was found that skill of examiners has a significant effect on
examination effectiveness, and the probability of customs physical examination
ineffectiveness is 81.2% higher for unskilled examiners as compared to their skilled
counterparts, keeping all other explanatory variables constant.

75
Skill of examiners affect customs physical examination effectiveness in the sense that lack
of adequate training for examiners related to examination of goods, unrelated educational
background of examiners and inadequate support of surprise check to examiners results
them to carry out duties without professional manner and these influences the effectiveness
of customs physical examination. Respondents indicated that effective customs
examination can only be achieved by recruiting competent employees having related field
of specialization and giving continuous on job training.

Regarding to ethics of examiners, majority of respondents indicated that there is a delay in

physical examination of goods, management does not properly follow ethical behavior of
examiners, lack of serious controlling mechanism of examiners ethics results inefficient
physical examination, customers of the branch office leads examiners to accomplish their
work unethically, examiners of the branch office do not have know how about the code of
ethics. Therefore ethics of examiners and customs physical examination effectiveness are
significantly correlated. From Spearman’s correlation coefficient, it was clear that there is a
significant positive correlation between examination effectiveness and ethics of examiners
as shown by a correlation figure of 0.432, P<0.01. From the regression model, one can see
that ethics of examiners has a significant effect on examination effectiveness. That means
ethical behavior of examiners leads to effective customs physical examination and
unethical behavior of examiners could be reason for ineffective customs physical
examination. Since; the p-value was less than 5% we reject the null hypothesis and
conclude that ethics of examiners has a significant effect on examination effectiveness.
Then the probability of customs physical examination ineffectiveness is 81.5% higher for
unethical examiners as compared to their ethical counterparts, keeping all other
explanatory variables constant. Ethics of examiners affect customs physical examination
effectiveness in the sense that lack of adequate training for examiners about the code of
conduct and code of ethics, lack of strategic controlling mechanism of the management for
examiners, and unethical relationship of examiners with customers results ineffective
customs physical examination in the branch.

76
According to the descriptive statistics majority of respondents agreed that stakeholders of
the branch office does not clearly known, inexistence of regular discussion with them,
uncomfortable geographical position and working hours of stakeholders affect customs
physical examination effectiveness. From Spearman’s correlation coefficient, there is a
significant positive correlation between examination effectiveness and stakeholders
coordination with Spearman’s correlation coefficient of rs =0.482, P<0.01. From the
regression model, it is shown that coordination of stakeholders has a significant effect on
examination effectiveness. That means presence of strong coordination among stakeholders
leads to effective customs physical examination and vice versa. since; the p-value was less
than 5% reject the null hypothesis and conclude that stakeholder coordination has a
significant effect on examination effectiveness. It is shown that the probability of customs
physical examination ineffectiveness is 95.8% higher for the absence of coordination
among stakeholders as compared to the presence of coordination among them, keeping all
other explanatory variables constant. coordination among stakeholders affect customs
physical examination effectiveness in the sense that stakeholders of customs are not clearly
known, there is no regular discussion with them, geographical position and their working
hours are not coincide with customs.

Finally based on the descriptive statistics the status of coordination among stakeholders
were the most influential factors which affect customs physical examination effectiveness,
followed by ethics of examiners, skill of examiners and customs laws. By using friedman
test on related ordinal measures, it is obtained that there is a significant median rank
difference among the test variables, and comparison was made to know which of the
explanatory variable affect the dependent variable more. The result obtained from
wilcoxon signed rank test shows that coordination among stakeholders and ethics of
examiners were the most influential factors of customs physical examination effectiveness,
followed by skill of examiners and customs law is the least influential factor of customs
physical examination effectiveness.

77
1.3. Conclusion

The objective of this study was to investigate factors that affect customs physical
examination effectiveness in the case of KCCBO, the research questions and objectives
were answered both by descriptive and empirical justifications, describes the relationship
of these factors with examination effectiveness. The researcher concludes that there is a
significant relationship between the dependent and all of the independent variables. the
correlation shows that they have a significant and positive correlation with all examination
factors. According to these independent variables examination effectiveness is working
under poor performance and providing inefficient services for customers and fail to meet
its target (revenue collection, trade facilitation and protecting the society from harm).
generally the study shows that customs law, skill of examiners, ethics of examiners and
stakeholders coordination affect positively for examination effectiveness. the most
important factors which affect customs physical examination effectiveness is coordination
among stakeholders and ethics of examiners.

The existence of excessive laws results difficulty to apply it in a simple manner, and this
results lack of clarity in the law which end up with ineffective customs physical
examination. And also, customs law has a significant effect on examination effectiveness
in the branch.

Skill of examiners does not came from inductive and on job training rather it is obtained
from working for a long period of time in the examination position, and these leads to
examiners to be ineffective until they acquire skill, which results application of ineffective
examination, and skill of examiners has a significant effect on examination effectiveness in
the case of KCCBO.

There is lack of ethics in examiners, in order to perform their tasks properly. These is due
to the fact that they are not know even the code of conduct and code of ethics, management
of the branch office does not follow examiners ethical situation regularly,

78
 The researcher also observe that lack of necessarily logistics for examiners (service)
results examiners to make unnecessarily relation with customers, which end up with
doing their work unethically. Therefore ethics of examiners has a significant effect on
examination effectiveness in the case of KCCBO.

There is lack of effective coordination of customs with related stakeholders. Even the
commission did not know the stakeholders critically, geographical position of these
stakeholders is not comfortable to accomplish tasks in a coordinative way. The researcher
also observe that the office of stakeholders of KCCBO is found either in Dessie or Addis
Ababa. And also coordination among stakeholder has a significant effect on customs
physical examination effectiveness in the case of KCCBO.

1.4. Recommendations

In order to improve the profitability of BGI Ethiopia kombolcha branch, the researchers
suggest the following possible recommendations based on the results of the study obtained
from findings and conclusions.

1.4.1. Recommendations for practices

Based on finding of the study and conclusions drawn in line with the study objectives, the
following points are suggested by the researcher in order to improve customs physical
examination effectiveness in the branch.

 Those organs who have the power to enact customs proclamation, regulation,
directives, and circulars shall/ make the law clear/ unambiguous, tenable to
implement and coincide with other laws including the constitution. Customs
regulation number 155/2000, article 37 violate the constitution, which says that
anyone who is suspected by the director general will dismissed without any court
decision, and cannot have a right to present appeal, on the contrary of the
constitution.

79
 The researcher suggests that the laws shall be in line with the international customs
organizations (such as WCO ) and international conventions (such as RKC), in
order to apply uniform customs process with the international levels. The time
standard applied for goods examination in the branch is much more higher than the
standard applied in the international level.

 The rules and regulations shall be articulated according to the international

situations of globalizations and distribute the articulated rules and regulations on
time for whom it may concern in order to apply uniform customs process
throughout the country. Customs proclamation of the country concentrates more on
control rather than trade facilitation, which is on the contrary of the international
practice. the proclamation is applied for a long period of time in this dynamic world
and this creates a gap between the application of the proclamation and what is exist
on the ground.

 Top management of the branch office shall be adapt strong supervision, control and
supporting mechanism over physical examiners of the branch in order to overcome
effective physical examination. Since the position of physical examination is more
exposed to corruption it needs special support, supervision and control; by
integrating with internal stakeholders (surprise check and intelligence) and external
stakeholders (transitors, importers and the whole of the society).

 Since there is no adequate logistics supply in the branch, including laboratories,

sample galleries, scale, caliper, meter, etc, that helps to increase the decision
making capacity of examiners. Therefore the branch shall fulfill the required
logistics to come up with effective customs physical examination.

80
 The researcher suggests that the commission shall enhance its employees
competency as a way of achieving examination effectiveness, through continuous
training related to physical examination of goods. Prepare inductive training for
new physical examiners, on job training for the existing examiners periodically, and
apply bench mark from other branch of the commission about physical examination
of goods in order to apply the law uniformly.

 At the time of hiring the commission shall select qualified employees having
related field of specialization, check background profile of candidates, give
inductive and on job training to make them competent, to minimize knowledge gap
about physical examination of goods and also arrange review meeting about
examination. Customs physical examiners recruit in customs were a graduate of
business and economics, however some goods spare parts, garments, food,
medicines and chemicals required technical knowledge to differentiate their
components and names. Therefore the commission shall recruit examiners that have
technical knowledge about such products.

 The commission shall first identify clearly its stakeholders, create strong
coordination with them, advisable to have regular discussion to each other in order
to accomplish tasks together and try to settle working hours as well as geographical
position of their offices. Since effectiveness of customs physical examination is
depend up on the status of integration with its stakeholders, failure in any of
customs stakeholders results failure in customs, especially in physical examination
of goods. Since one of the most influential factor of customs physical examination
effectiveness is coordination among stakeholders the commission shall give special
attention for the issue.

 Finally, the researcher suggest that physical examination were improved,

through applying the measurements suggested above, by giving special attention for
coordination among stakeholders and ethics of examiners first, followed by skill of
examiners and finally for customs laws respectively, according to their seriousness
of the problem in the branch office.

81
 1.4.2. Recommendations for further studies

The following points are recommended for further researchers: The result of this study
demonstrated that there are other factors that significantly affect customs physical
examination effectiveness in the case of KCCBO and it is important to investigate such
other factors by future researchers. Because of the limited time and resource, this study has
been conducted in one branch office of the commission. However, this may not represent
the situation of examination effectiveness across different branches of the commission and
it is difficult to generalize at the country level. An interesting finding may come up by
conducting studies at national or country wide by incorporating other independent
variables that may determine physical examination effectiveness in customs. This study
was conducted by using binary logistic regression model because of the categorical,
dichotomy and discrete nature of the dependent variable. so the researcher recommended
for future researchers to undertake the study by using any other regression models and
evaluate whether the finding is similar or different. The study also limits itself to four
factors, which explain about 62.3% of the variation, which affects customs physical
examination effectiveness. That means the remaining 37.7% is explained by other factors
which are not actually included in the regression model.

1.5. Contribution and implication of the study

This study has its practical implications of the information affecting to various
dimensions of examination effectiveness which helps to improve the area. since customs is
the backbone of the country by collecting necessarily revenue to cover the country’s
expenditure, it is advisable to give a quality service to customers, and one of the main
service delivered by customs is goods examination. Thus applying effective examination of
goods results overall effectiveness in customs process and this would encourage importers
to pay the right amount of duties and taxes for the government on the voluntarily basis.

Therefore this research helps for customs commission to look backward and forward to
learn more and to decide on future activities. And also the information obtained regarding
follow up and control mechanism, lack of clarity in the customs law, existence of unethical
examiners, weak coordination among stakeholder and lack of skill of examiners was affect

82
examination effectiveness. specially now a day the function of customs physical
examination is not only for revenue collection but also keeping security of the society.
Therefore to achieve these objectives the examination division of customs should be
examined.

Time and budget schedule for the research

Time schedule

83
 The time plan that will allocate for the accomplishment of the thesis will present in the
following table.

Months and years (2020/2021)

Activities
Nov. Dec. Jan. Feb. Mar. Apr. May Jun

Title selection

Preparation of thesis proposal

Submission of first draft to the advisor

Submission of second draft to the advisor

Approval of the proposal by the advisor

Data collection

Data verification and coding

Data Entry

Data analysis and interpreting

First draft thesis submission

Second draft thesis submission

Final thesis submission of approved report

Thesis presentation /Defense

Budget schedule

84
 The budget plan that will require for the accomplishment of the thesis will present in the following
table.
1. Stationery and Related Expenses

S.N Items Units Amount Price/unit/Birr Total price/birr

1 Photo copy services Page 960 1.00 960.00
2 Duplicating paper Packet 3 92.00 300.00
3 Printer paper Packet 5 95.00 1000.00
4 Pen Packet 1 3.00 40.00
Sub-Total 2,300.00 birr

2. Travel, food and other Expenses

S.N Items Units Amounts Rate/day/Birr Total expenses

1 Transport cost 2,000.00
(Birr)
2 Food - - - 4,000.00

3 Telephone, internet and 1,000.00

others
4 Hard disk 1 5,000.00

5 Miscellaneous 2,000.00

Sub-Total 14,000.00 birr

3. Aggregate Cost Components

S. No Cost Category Amount(in Birr)

1 Total stationery and related costs 2,300.00

2 Transportation, food and other cost 14,000.00
3 Contingency(10%) 1,630.00
Grand-Total 17,930.00

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 Annex I I
Wollo University

Collage of Business and Economics

Department of Marketing Management

Questionnaires for Employees, main agents, subagents and outlets of the company

Dear respondents:

My name is Awol Assefa, I am a graduating class in Wollo university Department of

Marketing Management. I prefer your company to do a thesis, and I expect you to help me
more for the achievement of the research by filling the questioners prepared for this
purpose. The aim of this questionnaire is to prepare a thesis on the title “The Effect of
Distribution Strategy on Organizational Profitability”. (The case of BGI Ethiopia
Brewery Factory Kombolcha Branch).

The outcome of the study will be used to suggest possible solutions for the problems
identified while conducting the study. I kindly request you to spent your precious time to
fill the questioner as frank as you could be and reasonable as possible. I would like to
inform you that the information you provide will be used for academic purpose only. The
information that you give is confidential and you are not expected to write your name and
any other personal secret information. Thank you in advance for your willingness to give
your crucial idea and without your valuable response the purpose of the study will not be
achieved.

If you have any suggestion, question, or comment you can contact the researcher by:

Telephone: +251914057357

E-mai: - asefaawol@gmail.com

Put tick (√) mark in the box in front of each questions (statements) and explain your
opinion for open ended questions in the space provided (you can explain your idea in
Amharic also).

90
 Thank you in advance again!

Part One: The profile/ background of respondents

1. Sex A. Male B. Female
2. Age A. 18-30 B. 31 – 40 C. 41 – 50 E. Above 51
3. Educational Background
A. Below grade 10 and Grade 10 completed B. Grade 12 completed
C. TVET completed D. Diploma E. Degree F. above degree

4. Work Experience in BGI Ethiopia Beer Company?

A. 1 to 3 years B. 3 to 6 years C. 6 to 10 years D. above 10
years

5. Work Position
A. General sales Manager B. Sales employees’ C. Finance manager
D. Distribution supervisor

Part Two: Elements of Distribution Strategy and Organizational profitability

Please put tick (√) in the table provided for each given statement using the following scales
1= strongly Disagree; 2=disagree; 3=Neutral; 4=Agree; 5=Strongly Agree
Part I:- Distribution Strategy

No. Statements
Scale
5 4 3 2 1

1 Questions related to Planning

1.1 The company never done every activities without a pre determined plan
1.2 There are enough experts in the planning department of the organization
1.3 One of the main reason of the company for its unsuccessful is its status of
planning

91
2 Questions related to Distributor capacity
2.1 Agents of the company has enough potential to distribute the product for the
customers
2.2 Geographical settlements of the distributers is not comfortable
2.3 Agents and outlets has not enough financial capacity to distribute the products
as per the requirement of the market situation on the ground
2.4 The sales territory we currently serving are not fit with our potential to serve.
2.5 The warehouse facility we have is not enough for our sales territory.
2.6 Agents and outlets have not enough numbers of trucks to distribute the
products.
2.6 The company has not enough agents in terms of numbers
3 Questions related to Support of the company to Distributors
3.1 The company has not give technical support for the effective performance of
the distributers
3.2 The company has not providing us credit scheme (financial assistance).
3.3 The organization not give on job training for the distributers
3.4 The company is not sending professionals to assist our business.
4 Questions related to Distribution regulations
4.1 The company has not enact distribution regulation
4.2 The distribution regulation were not respected by the organization
4.3 The distribution regulation were not respected by the distributers
4.4 Regulation of the distribution is not clear
4.5 Regulation of the distribution does not helps for the company to get more
profit
5 Questions related to Communication between the company and
distributors
5.1 There is not a strong relation between the organization and the distributers
5.2 The company is not known his distributers
5.3 There is not a strong communication between the distributers and the company
5.4 There is not enough communication infrastructure to communicate each other
5.5 The two parties face high communication gap
6 Questions related to organizational profitability

92
6.1 The company’ profitability were decreased from time to time
6.2 The level of profitability of the company is un predictable
6.3 The level of profitability of the company achieve without a systematic
planning
6.4 Profitability of the company decreases due to effective distribution of the
product
6.5 Profitability of the company is not in a good position due to bad
communication between the two parties
6.6 Haven’t Multi-dimensional support of the organization for the distributers
affect the profitability of the company

25. Would you please rank the following factors from higher level of seriousness of the
problem to lower (1 up to 5) in the organizational profitability of the company?

Factors Rank

Planning

Distributers capacity

Supports of the company to the distributers

Distribution regulation

Communication between the company and the distributers

26. If you have anything you want to say related to the Effect of Distribution Strategy on
Organizational Profitability.
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------

93
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------

Thank you very much for your cooperation!

Annex I
Wollo University

Collage of Business and Economics

Department of Marketing Management

Questionnaires for Agents and outlets of the company

Dear respondents:

94
My name is Awol Assefa, I am a graduating class in Wollo university Department of
Marketing Management. I prefer your company to do a thesis, and I expect you to help me
more for the achievement of the research by filling the questioners prepared for this
purpose. The aim of this questionnaire is to prepare a thesis on the title “The Effect of
Distribution Strategy on Organizational Profitability”. (The case of BGI Ethiopia
Brewery Factory Kombolcha Branch).

The outcome of the study will be used to suggest possible solutions for the problems
identified while conducting the study. I kindly request you to spent your precious time to
fill the questioner as frank as you could be and reasonable as possible. I would like to
inform you that the information you provide will be used for academic purpose only. The
information that you give is confidential and you are not expected to write your name and
any other personal secret information. Thank you in advance for your willingness to give
your crucial idea and without your valuable response the purpose of the study will not be
achieved.

If you have any suggestion, question, or comment you can contact the researcher by:

Telephone: +251914057357

E-mai: - asefaawol@gmail.com

Put tick (√) mark in the box in front of each questions (statements) and explain your
opinion for open ended questions in the space provided (you can explain your idea in
Amharic also).

Thank you in advance again!

Part One: The profile/ background of respondents

1. Sex A. Male B. Female
2. Age A. 18-30 B. 31 – 40 C. 41 – 50 E. Above 51

95
 3. Educational Background
A. Below grade 10 and Grade 10 completed B. Grade 12 completed
C. Diploma E. Degree F. above degree

4. Work Experience in BGI Ethiopia Beer Company?

A. 1 to 3 years B. 3 to 6 years C. 6 to 10 years D. above 10
years

5. Work Types
A. Main agents B. Sub agents C. Outlets

Part Two: Elements of Distribution Strategy and Organizational profitability

Please put tick (√) in the table provided for each given statement using the following scales
1= strongly Disagree; 2=disagree; 3=Neutral; 4=Agree; 5=Strongly Agree
Part I:- Distribution Strategy

No. Statements
Scale
5 4 3 2 1

1 Planning
1.1 The company never done every activities without a pre determined plan
1.2 There are enough experts in the planning department of the organization
1.3 One of the main reason of the company for its success is its status of planning
2 Distributor capacity
2.1 Agents of the company has enough potential to distribute the product for the
customers
2.2 Geographical settlements of the distributers is comfortable
2.3 Our firm has enough financial capacity to distribute the products as per the
requirement of the market situation on the ground
2.4 The sales territory we currently serving are fit with our potential to serve.
2.5 The warehouse facility we have is enough for our sales territory.
2.6 Our firm has enough numbers of trucks to distribute the products.
The company has enough agents in terms of numbers

96
3 Support of the company to Distributors
3.1 The company give technical support for the effective performance of the
distributers
3.2 The company providing us credit scheme (financial assistance).
3.3 The company is sending professionals to assist our business.
3.4 The organization give on job training for the distributers
4 Distribution regulations
4.1 The company enact distribution regulation
4.2 The distribution regulation were respected by the organization
4.3 The distribution regulation were respected by the distributers
4.4 Regulation of the distribution is clear
4.5 Regulation of the distribution helps for the company to get more profit
5 Communication between the company and distributors
5.1 There is a strong relation between the organization and the distributers
5.2 The company know very well his distributers
5.3 There is a strong communication between the distributers and the company
5.4 There is enough communication infrastructure to communicate each other
5.5 The two parties does not face any communication gap

Part II. Organizational profitability

Please put tick (√) in the table provided for each given statement using the following scales

97
 How do you rate the following statements by considering the last five year Organizational
profitability?
1= strongly Disagree; 2=disagree; 3=Neutral; 4=Agree; 5=Strongly Agree

No. Statements Scale

5 4 3 2 1

1.1 The company’ profitability were increased from time to time

1.2 The level of profitability of the company is predictable
1.3 The level of profitability of the company did not achieve without a systematic
planning
1.4 Profitability of the company increases due to effective distribution of the
product
1.5 Profitability of the company is in a good position due to smooth
communication between the two parties
1.6 Multi-dimensional support of the organization for the distributers helps for the
profitability of the company
25. Would you please rank the following factors from higher level of seriousness of the
problem to lower (1 up to 5) in the organizational profitability of the company?

1= strongly Disagree; 2=disagree; 3=Neutral; 4=Agree; 5=Strongly Agree

Factors Rank

Planning

Distributers capacity

Supports of the company to the distributers

Distribution regulation

Communication between the company and the distributers

98
26. If you have anything you want to say related to the Effect of Distribution Strategy on
Organizational Profitability.
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
-----------------------------------

Thank you very much for your cooperation

99