WOLLO UNIVERSITY

KOMBOLCHA INSTITUTE OF TECHNOLOGY

COLLEGE OF ENGINEERING
SCHOOL OF TEXTILE, LEATHER AND FASHION
TECHNOLOGY

LEATHER ENGINEERING DEPARTMENT (BSc.)

Business Management
5th Year 1st Semester
CHAPTER THREE
Business project planning
Ethiopian economy and contribution of
various sub-sectors in the economy
Economic Sector
▪ Agriculture

▪ Services

▪ Industry
 Agricultural Sector in Ethiopia
▪ The economy is predominantly agricultural.

▪ Agriculture accounts for about

o 46.3% of GDP

o 85% of Employment

o 83.5% of Export Earning,

▪ Since 2004/5 the average growth rate of agricultural has been about
8% per year of the total agricultural value added: crop, livestock and
forestry, respectively, contribute to the agricultural sector.
▪ A large part of commodity exports are provided by the small

agricultural cash-crop sector.

▪ Major agricultural products: coffee, tea, oilseeds, cotton, tobacco,

fruits, pepper, sugar cane, fish and livestock.

▪ Exports are almost entirely agricultural commodities.

▪ Coffee is the largest foreign exchange earner.

 Industry Sector in Ethiopia
▪ The industry and manufacturing sector plays an important role in the
economy by supplying consumer goods, generating employment
opportunities, absorbing agricultural raw materials and earning foreign
exchange through exports.

▪ The industrial sector in Ethiopia has been characterized by a low level of

development, even by the standards of many least developed countries.

o It accounts for 11% of the GDP,

o 9.5 % of total employment

o 21.2% of export earnings.

▪ This sector comprises light manufacturing products such as construction
materials, metal and chemical products as well as basic consumer goods
such as food, beverages, leather, clothing and textiles.

▪ Production is concentrated in and around Addis Ababa and mostly caters to

the domestic market, although the number of exported goods is steadily
growing.

▪ Major industrial products: food and beverages, textiles, leather, cement,

metal products, paper, plastic products, automotive and tractor assembly,
tires, and certain chemicals.
 Service Sector in Ethiopia
▪ The service sector contributed to about 40.4% to real GDP while
recording 9.2% growth in 2005/06.

▪ The Share of the service sector has been growing up slowly but steadily
in recent years reaching 40.8 percent in 2006/07 from its level of 36
percent in 1996/97.

▪ This mainly the result of the fast growth of education; real state;
renting and business activities; wholesale and retail trade; and hotels and
restaurants sub-sectors, which In the last five years registered an
annual average growth of 11.6%, 10.2%, 11.3% and 13.7% respectively
Contribution of MSME sectors
in the national economy
▪ MSMEs (Micro-Small and Medium-sized Enterprises) are the backbone
of economy of a country in terms of sustainable growth, employment
generation, increasing trade, development of entrepreneurial skills and
contribution to export earnings.

▪ Generally, all the businesses start either as small business or as a small

enterprise initiated by individual(s).

▪ The development of MSMEs is seen as the way to accelerate the

achievement of wider socio-economic goals, including poverty alleviation.
▪ MSMEs generally operate close to a locality, thus offering employment

opportunity to the local people who would acquire the required skills and

knowledge.

▪ It also provides desirable sustainability and innovation in the economy.

▪ Many people transact with the MSMEs directly and indirectly.

▪ MSMEs contribute immensely to government revenues through the taxes

and duties they pay.

▪ In developing countries, the MSME segment plays a major role in

alleviating poverty and propelling sustainable growth.

SME’s AND GLOBALIZATION
 Definition of Small Medium Enterprises

▪ SMEs are a heterogeneous population of firms whose contributions to

the innovation system are wide ranging and include not only based on the

new products and services, but also improved designs and processes and

the adoption of new technologies.

 Definition of Globalization

▪ Globalization refers to all the economic activity around the world.

▪ Globalization is a fact of life for virtually all manufacturing firms.

▪ Either firms have new, potentially profitable opportunities in foreign

markets, or they face new competition from foreign firms in their

home markets.
IMPORTANCE OF SMEs TOWARD
GLOBALIZATION
▪ Providing technical innovation

▪ Providing Employment

▪ Providing competition

▪ Filling Needs Of Society And Other Business

▪ Importance to Big Business

Group Discussion
G1: Globalization is the process by which ideas, knowledge,
information, goods and services spread around the world. However,
it has its own advantage and Dis advantages. Discuss the
advantage and Disadvantage of Globalization towards SMEs

G2: what are the Investment Opportunity of Leather sector?

Q: The main Problems and Constraints for Development of
Ethiopian Leather Industry is antemortem, slaughter and
Postmortem defects. List and explain in detail those defects.

G3: Antemortem defect(Poor livestock management)

G4: Slaughter defect

G5: Postmortem defects

Advantages of Globalization toward SME’s

▪ Greater employment opportunities

▪ Availability of Greater Variety of Goods

▪ Business companies Access to wider markets

• Increased competition

• Improved international relations

• Increased labor mobility

• International recruitment
Disadvantages of Globalization toward SME’s
Leather manufacturing industry
problems and opportunity
 Problems and Constraints for Development of the
Leather Industry
Some of the major constraints to the proper development of the leather sector are:
o Poor livestock management
o Poor quality raw material supply as a result of ante-mortem and post-
mortem handling of hides and skins
o Low off-take and recovery rates
o Lack of skills, technology, intermediate inputs and processing equipment
o Stiff competition among the existing tanners
o Low utilization of industry capacity
o Lack of or poor policies for the specific development of the sector
o Poor linkages among different organizations involved with hides and skins
Defect assessment and percent rejection of semi-
processed samples from one tannery

Defect %

Defect of ecto-parasite (Ekek/Disease) >50%

Putrefaction 20%
Flay cuts 15%
Other defects 15%
Natural defects (% of total) 50%
Man- made defects (% of total) 50%
 Environmental /
natural causes Pre-slaughter
/ ante-mortem Post mortem /
Defects due to external defects slaughter defects
parasites and disease

Fungal Diseases
Ringworm
Breed /Type
Bacterial Diseases
Improper ripping
Dermatitis
Sex / Age Abrasions Small size
Viral Diseases
pox Bruises Incorrect shape
Nutrition External Parasites Brand marks Veininess
Mites Soiling by Cuts/holes
urine
Climate Scabies or Mange Gauge marks
Ticks Putrefaction
Warble Crack Grains
Keds
Cockle/ “Ekek”
Lice
Investment Opportunity in Leather
footwear, garment and products
There are opportunities in:

1.Leather Footwear,

2. Leather Glove and other Goods (bags, wallets, belts, saddlery, cases
and containers, jewelry beauty boxes, purses, etc.),

3.Leather Garment,

4.Leather Chemicals,

5.Accessory and components for leather products (Molds, Lasts, Sole,

Shoe Box, Cutting dyes, Insoles, Shanks, etc.),

6.Upper leather, intermediate products, leather sole,

7.Leather Upholstery (High quality sofa, chairs and vehicles seats..

Thank you!!