School of Commerce

Business Plan for Kuta Garments

Section 4, prepared by:

Hella Tafesse UGR/5435/14
Hermella Mebratu UGR/3123/14
Ibsa Getachew
Mikiyas Tesfaye UGR/8678/14
Samson Abuye

July, 2022
Addis Ababa, Ethiopia
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 Acknowledgement
First and foremost, we would like to thank our instructor, Dr. Zegeye M. for giving us this
opportunity to work on this business plan and expand our knowledge and skills. We would also
like to thank everyone that was involved in the making of this document, including the members
and everyone that helped us by giving us ideas, information and support.

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 Table of content
Acknowledgement ………………………………………………………………………………………………………..2
Table of Contents ………………………………………………………………………………………………………….3
Executive summary………………………………………………………………………………………………………..4
Market Analysis …………………………………………………………………………………………………………….4
SWOT Analysis ………………………………………………………………………………………………………………5
Product and Production………………………………………………………………………………………………...6
Marketing Plan………………………………………………………………………………………………………………8
Organization and Management ……………………………………………………………………………………10
Financial Plan………………………………………………………………………………………………………………..11
Critical Risks………………………………………………………………………………………………………………….13
Exit strategy………………………………………………………………………………………………………………….13
Appendix………………………………………………………………………………………………………………………14

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 Executive summary
Ethiopia’s garment and textile industry is one that is growing at a rapid pace in recent times.
There is a large growth in the production of cotton in the country and great attention has been
going to this sector from both domestic and foreign investors. The government has also been
giving this sector a lot of attention and incentivizing investment through many sectors. But even
with all these great opportunities, most consumers still choose to buy clothes that are imported
and not a lot of domestic investors invest in this sector. Many foreign companies such as H&M
and Calvin Clein outsource their products from Ethiopia while Ethiopia still imports clothes. And
even when cloth are manufactured domestically, consumers still tend to choose the imported
ones. The main reasons for these seem to be prejudice against Ethiopian products and the fact
that most Ethiopian brands concentrate on more occasional and traditional clothing. This is why
we have set out to create a brand of clothing that is comparable in quality and competitive with
foreign brands.
Thus, Kuta Garment’s initial aim to be able to replace imports by making quality clothes that go
with the trends of the times. Equipped with the motto By Ethiopians, for Ethiopians, this
company will try to penetrate into the market by giving the consumers products that are
modern with low prices and high quality.
Our mission is to create a brand that is completely Ethiopia but is also able to provide a
modern, casual alternative to imported products.
Our vision is to see Ethiopians respect and enjoy clothes that are produces locally.
This project is expected to create employment opportunities for around 200 employees, and
more as time passes. It is also expected to decrease the heavy import of clothes from foreign
countries by substituting them and taking over their market share.
This project is a partnership among HELLA TAFESSE, HERMELLA MEBRATU, IBSA GETACHEW,
MIKIYAS TESFAYE, SAMSON ABUYE.

Market analysis
Market area
The main targeted market area at start up is Addis Ababa. But in the long-run, it is planned to
expand into different parts of the country, specifically major cities like Bahir Dar and Hawassa.
Main customer
The main target audience is women between the ages of 15 and 40, since more than 75% of the
products are made for women. The rest 25% is targeted at men between the ages of 15 and 40.
Total demand
The total projected demand is approximately 1.8 million.

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Market share
Total revenue of the garment industry in the first 6 months of 2020/2021 3,677,737,700.
The total revenue of this project in its first 6 months is expected to be 113,400,000.
Accordingly, the market share in this time frame will be 2%.
Competitors
The main competitors for this project are Garment Evolution and Cottex due to the fact that
they are well known brands that specialize in cotton based clothes, even though our products
may be a little different.
Private retailers that directly import clothes will also be heavy competition for this project. This
project aims to provide the same quality, if not better quality of clothes, as imported ones.

SWOT Analysis
Strength Weakness
 Firm organizational structure  Lack of adequate training for some
 Efficient production process staff
 Use of dangerous machinery
Opportunity Threat
 Government incentive for this sector  Prejudice against local products
 Growing interest in this sector from
investors
 Growing supply of cotton and textile

Product and Production

Product description
During this start up, the factory will produce 5 groups of products; sweaters, dresses, skirts,
cardigans and sweatpants. Each of these will have 5 different designs, each with 7 different
sizes and colors.
The initial designs for these products were chosen after careful consideration of the recent
fashion trends. The sweaters’ 5 designs consist of two for women and 3 for men, while the
sweatpants will consists of 2 for women and three unisex designs. All other products are for
women.
There will be seven different colors for each design; light blue, navy blue, dark burgundy, pastel
pink, paris green, white and black. There will also be 7 different sizes; XS, S, M, L, XL, XXL and
XXXL.

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Production process
The production process of these products starts with acquiring fabric. After getting the fabric
from a domestic textile factory, it will be stored in its designated area in the factory. Then fabric
is then cut into uniform piles and then spread manually. Next, garment forms—or patterns—
are laid out on top of the spread. Then, the fabric is cut to the shape of the garment forms
using manually operated cutting equipment.
What follows is laying of paper patterns. It helps one to plan the placement of the pattern
pieces in a tentative manner. Lay large pieces first and then fit in the smaller ones. When laying,
the length of the garment should be parallel to the selvedge of the material. Be sure the pattern
is placed in the correct grain. Fabrics drape and fall better on the lengthwise grain and also last
longer. Parts that have to be placed on the fold should be exactly on the edge of the fold and all
laying should be done on the wrong side of the material.
The marker planner uses full-size patterns and arranges them in an economical manner on
marker paper. This is a specially printed paper having symbols on it which enable the marker
planner to visually control the positioning of components according to specified grain lines.
Markers produced on paper are fixed to fabric with pins, staples or on an adhesive paper which
is heat sealed to the top layer of the fabric. The supervisors of marker planner plan and allocate
the cut orders to various operations to be carried out in the cutting room.
This is the major operation of the cutting room when they spread and cut into garments. Of all
the operations in the cutting room, this is the most decisive, because once the fabric has been
cut, very little can be done to rectify serious defects. A first planning consideration is whether
the totals arrived at in the cutting room are the same as those required to maintain full
production in the sewing room and subsequently the planned delivery schedule. Any cloth
problems created in the cutting room can affect the output in the sewing room. All cutting
operations are carried out by straight knife cutting machines. The cutting room will comprise of
50 employees, for which the above tasks will be allocated to. Assuming all components of
fabric, design, and trims are acceptable and correctly planned and cut, the next stage is to
extend the cutting room programme to the sewing room.
Stitching or sewing is done after the cut pieces are bundled according to size, color and
quantities determined by the sewing room. The products are sewn in an assembly line, with the
garment becoming complete as it progresses down the sewing line. Sewing machine operators
receive a bundle of cut fabric and repeatedly sew the same portion of the garment, passing that
completed portion to the next operator. These assembly lines will comprise of 20 people, with
5 assembly lines in total.
Quality control is carried out to ensure that no defective product makes it to the market. In this
stage, these inspectors will look for sewing defects, cosmetic problems like spots and stains,
and anything else that might decrease the quality of the product. Sewing defects and other
quality issues are worked out at sewing stations set out for this specific reason. Quality
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assurance is performed at the end of the sewing line to ensure that the garment has been
properly assembled and that no manufacturing defects exist. When needed, the garment will
be reworked or mended at designated sewing stations. Spots and stains are taken care of at the
in-house laundry.
The last step will be packaging and shipping. The packaging team will comprise of 50 people.
Fixed Capital

Type of capital Source Lifetime Cost Quantity Total cost

Industrial Zoya Inc., 25 years 18,500/machine 100 1,850,000
sewing China
machine
Semi- Mitra&Co, Replicable 15,000/machine 25 375,000
automatic India knife/5 years.
straight knife Full/ 15 years
cutting
machine
Garment Sun 25 years 10,000/table 25 250,000
cutting table Electricals,
India
Industrial Wuxi 14 years 55,000/set 1 55,000
washing and Unitex
drying machine Equipment,
China
Factory (Rent) Mr. Ayele 350,000/month 6 month 2,800,000
Bayachew initial deposit
(Private
owner)
Total Cost 5,300, 000

Raw Materials Needed

The following is a table of the raw materials needed for 6 months of production.

Material Supplier Cost (Birr) Quantity Total cost

Textile Akaki Textile, 30/m 2.1 million
Ethiopia 63,000,000
Yarn thread Edget Yarn and 120/roll 5000 roll 600,000
Sewing Thread,
Ethiopia
Elastic Guangzhou 25/m 5000m 125,000
Incfon Garment
Accessory, China

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 Button Wenzhou Lishun 3/pc 10,000 30,000
Button, China
Packaging Crown 10/pc 810,000 8,100,000
Packaging and
Plastics, Ethiopia
Total cost 71,855,000

Labor
The total labor requirement of this project is 200, 50 for cutting room, 100 for sewing and 50
for packaging, checking and shipping. This number does not include administrative positions.
The wage per person is 2,000 birr. The total cost per month is 400,000 Birr. For the first 6
months, it will amount to 2,400,000.
This project requires mostly semi-skilled and unskilled labor, which Ethiopia has an abundance
of. We plan to give a few days training to make sure that they know the correct procedure.
Planned and Future Capacity
The planned capacity in hours of this factory will be 2000 taking into account that there are 100
sewing machines with 10 hour shifts. Production wise, the company is predicted to produce
around 4,500 pieces each day.
In the future, it is planned that the sewing machine numbers will be raised to 500 and raise the
working time into two 10 hour shifts, which will raise the production capacity to 10,000.
Production Cost
The production cost includes the labor, raw material and other capitals included in the direct
production of the products.
Cost of raw material: 71,855,000
Cost of fixed capital: 5,330,000
Cost of labor: 2,400,000
In total, it is 79,585,000.

Marketing Plan
Marketing strategy
This project will be heavily branded as a high quality but cheap option of clothing. The main
promotional outlets will be main stream media, social media and physical promotions.

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For main stream media, initially it will start out with radio promotion to establish a name and
familiarize people with the product. Following that, it will move on to television advertisements
which clearly showcase the different products of the company. For the first year, we will have
only radio promotions. A sponsorship for a good radio channel is 6000 birr. If we can advertise
twice every week, it will be 12,000 birr. Annually we will spend 144,000 on promotions.
As for social media, it will concentrate on building a large social media presence so as to draw in
more customers and update the customers about new products and such. This social media
campaign will include paid ads, interactive social media accounts that aim to address customers
individually as well as cross promotion with other companies in the same field. A professional
website that is correctly set up and advertised will also be included. For the paid ads, we will
allocate 10,000 birr.
Physical promotions will take place in different phases. The door-to-door approach will be used
to get the name out there among wholesalers and retailers. The next step will be attending
exhibitions and bazaars to let the customers familiarize themselves with the brand. There will
also be the use of billboards during launch to get the customers interested. 120,000 birr will be
allocated to the billboards, and 5000 birr for other miscellaneous ways of promotion.
Another way that we plan to penetrate into the market is with the use of wholesalers. At
startup, we plan to directly sell to whole sellers to reduce distribution cost and get our product
out there.
In total, the marketing cost for 6 months will be 300,000 birr.
Location
This project will be located at a factory in Dukem, Oromia Region, Ethiopia, which is locates in
the Oromia special zone surrounding Finfine, 37 Kilometers south west of Addis Ababa, and 10
Kilometers northwest of Bishoftu.
Selling Price
Our main unique selling point is going to be the low prices we have. Using the mark-up method
of price determination, the selling price range of clothes will be from 250-600.
Dress: 600 birr
Skirt: 450 birr
Sweater: 350 birr
Cardigan: 250 birr
Sweatpants: 450 birr

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This price will be applicable for the first 6 months. The price will be adjusted as time goes on,
depending on many factors including competitors and cost of input.

Organization and management

Form of business
This project will be an equal partnership among the partners; HELLA TAFESSE, HERMELLA
MEBRATU, IBSA GETACHEW, MIKIYAS TESFAYE AND SAMSON ABUYE.
Organizational Structure
This organization will have two main departments; the production and the administration.
1, Production
Each division of this department (i.e. cutting, sewing, packaging and shipping) will have a
manager. Each manager is in charge of training new recruits, monitoring activities and reporting
to the administrative.
The department head is in charge of monitoring and managing the production side of the
company. Their main
2, Administrative
a, Executive Manager
The manager will be at the head of all activities. They will manage, monitor and lead the
company. Their main tasks will include:
• Controlling the overall activities and production of the organization.
• Devising new policies and strategies that will improve the quality.
• Planning and organizing the human and non-human resources.
• Adoption of new ideas and technologies important to enhance the productivity
b, Marketing manager
This department is responsible for:
• It will conduct proper market analysis
• Developing new strategies for the marketing plan in the future
• Is going to find different ways of attracting customers
• Handling all the marketing activities in the market
c, Financial Manager

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The main responsibilities of this department are to:

 Keep track of the finances of the company

 Do financial analysis and make projections
 Formulate financial strategies and plans
 Prepare the annual plan of the company

Manager

Production Marketing Financial

Manager manager Manager

Production Marketing Financial

team leaders team team
Administrative Expenses

Equipment Price Quantity Total price

Chairs 10,000 6 60,000
Table 13,000 5 65,000
Cabinet 15,000 1 15,000
Printer 20,000 1 20,000
Desktop 25,000 5 125,000
Total Cost 285,000

Financial plan
Project Cost
This includes the production cost, marketing cost and administrative expense.
Production Cost: 79,585,000
Marketing Cost: 300,000

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Administrative Cost: 285,000
The total project cost comes up to 80,170,000.
Financing Plan and Loan Requirement
This project will mainly be financed personally and through loan. The partners (Hermella, Hella,
Ibsa, Mikiyas, Samson), will cover 30% of the cost (24,051,000). The rest 70% (56,119,000) will
be covered by the Development Bank of Ethiopia.
The loan will have a grace period of 5 years, with the payback period of 15 years, excluding
grace period.
For collateral of the loan, the partners have provided 3 houses and 2 lands that have been
appraised to be worth 60,000,000 Birr.
Profit and Loss Statement, and Break-even Point
With the projected sales of 810,000 in half a year, the project is expected to experience a profit
of 36,215,000. If the project fails to sell more than 36,755 items, it will experience a loss.
In this calculation, we have considered that the cumulative price (the sum of the price of each
item if we sell the same amount of each) is 2,100 birr. If this cumulative price falls anywhere
below 1429.35, then the project will experience a loss.
To sum up, if the price is set at 1,429.35 or exactly 36,755 items are sold, there will be no profit
or loss, making this the break-even point.
Balance Sheet
Assets
Noncurrent assets
Machinery 5,350,000
Office appliance 285,000
5,635,000
Current asset
Investment 24,051,000
Inventory 71,855,000
95,906,000
Total 101,541,000

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Liabilities
Loan 56,119,000
Total equity 45,422,000

Return on Investment (ROI)

The return on investment of this project is:
113,400,000-80,170,000 × 100% = 41.4%
80,170,000
Thus in this set time, this project will return 41.4% of its investment.

Critical Risks
As any other business, this project is also not completely free of risks. Some of the main risks
include:
Technical risks

 Since this factory operates using some technologies that can only be imported, there
needs to be frequent checkup of the machinery, so as not increase their life.
 There needs to technical knowledge of these machines in how to operate and use them
effectively and we run the risk of misuse or inefficiency.
Physical Risks
 Due to the nature of the machinery in this field, accidents may happen to workers
operating them.
 Since the work environment is tight, there are risks of fires and explosions.

Financial risks
 Since this is a high investment project, it runs the risk of an initial loss or even lack of
investment.
Exit Strategy
If this company is not able to continue at its predicted pace and potential, or if it incurs loss and
cannot compete anymore, the partners will decide to either sell it to a new owner or merge
with another garment factory. Which option they choose will depend on:
 The state of the industry at the time
 The existence of a friendly buyer
 The financial state of individual partners

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Appendix
A few samples of planned products

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