DEREJE ZELEKE PP FLOOR

MAT INDUCTRY

BUSINESS PLAN
FOR THE SUPPLY
OF PP FLOOR MATS

Final Report

October 2022

SENYO Business PLC

(Management Consultancy Service)

Lideta Sub City, Wereda 08, House No. New

On the way to Geja Sefer, Abdella Building, Room No. 501
Phone: +251 91 160 0631
E-mail: senyo.business@gmail.com
 TABLE OF CONTENTS

EXECUTIVE SUMMARY............................................................................................................................. 1
CHAPTER ONE – BACKGROUND AND DESCRIPTION OF THE BUSINESS.........................................4
1.1 COMPANY SUMMARY................................................................................................................ 4
1.2 VISION AND MISSION................................................................................................................ 4
1.2.1 VISION................................................................................................................................. 4
1.2.2 MISSION.............................................................................................................................. 4
1.3 COMPANY VALUES.................................................................................................................... 5
1.4 PRODUCT DESCRIPTION.......................................................................................................... 6
1.5 COMPANY LOCATIONS AND FACILITIES.................................................................................7
1.6 OBJECTIVES............................................................................................................................... 7
1.7 SWOT ANALYSIS........................................................................................................................ 8
1.7.1 STRENGTHS....................................................................................................................... 9
1.7.2 WEAKNESSES.................................................................................................................... 9
1.7.3 OPPORTUNITIES................................................................................................................ 9
1.7.4 THREATS.......................................................................................................................... 10
1.8 KEYS TO SUCCESS................................................................................................................. 10
CHAPTER TWO – MANAGEMENT SUMMARY.......................................................................................12
1.1 MANAGEMENT TEAM.............................................................................................................. 12
1.2 PERSONNEL PLAN................................................................................................................... 13
1.3 TRAINING.................................................................................................................................. 13
1.4 FEEDBACK AND CONTROL..................................................................................................... 14
CHAPTER THREE – MARKET ANALYSIS.............................................................................................. 15
3.1 MARKET SEGMENTATION....................................................................................................... 16
3.2 TARGET MARKET SEGMENT STRATEGY..............................................................................16
3.2.1 MARKET TRENDS............................................................................................................. 16
3.2.2 MARKET GROWTH........................................................................................................... 17
3.2.3 MARKET NEEDS............................................................................................................... 17
3.3 INDUSTRY ANALYSIS.............................................................................................................. 17
3.3.1 COMPETITION AND BUYING PATTERNS.......................................................................17
3.3.2 MAIN COMPETITORS....................................................................................................... 17
3.4 STRATEGIES AND IMPLEMENTATION SUMMARY................................................................18
3.4.1 VALUE PROPOSITION...................................................................................................... 19
3.4.2 COMPETITIVE EDGE........................................................................................................ 19
3.4.3 SALES STRATEGY........................................................................................................... 19
3.4.3.1 SALES FORECAST................................................................................................... 20
3.4.4 MARKETING STRATEGY.................................................................................................. 20
3.4.4.1 SERVICE PROVISION............................................................................................... 20
3.4.4.2 PRICING STRATEGY................................................................................................ 20
3.4.4.3 PROMOTION STRATEGY......................................................................................... 21
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 3.4.4.4 DISTRIBUTION STRATEGY......................................................................................24
3.4.4.5 PRODUCT MARKETING...........................................................................................25
3.4.4.6 PRODUCT PACKAGING...........................................................................................25
3.4.5 CORPORATE SOCIAL RESPONSIBILITY........................................................................25
CHAPTER FOUR – PRODUCTION SUMMARY.......................................................................................27
4.1 RAW MATERIALS SUPPLY...................................................................................................... 27
4.2 RECEIVING............................................................................................................................... 28
4.3 STORAGE.................................................................................................................................. 28
4.4 BY - PRODUCTS....................................................................................................................... 28
CHAPTER FIVE – FINANCIAL PLAN....................................................................................................... 29
5.1 IMPORTANT ASSUMPTIONS................................................................................................... 29
5.1.1 REPAIR AND MAINTENANCE COST...............................................................................29
5.1.2 DEPRECIATION AND AMORTIZATION............................................................................30
5.1.3 TERMINAL (SALVAGE VALUE)........................................................................................30
5.1.4 WORKING CAPITAL.......................................................................................................... 30
5.2 EXPENSE FORECAST.............................................................................................................. 31
5.3 PROJECTED PROFIT AND LOSS............................................................................................31
5.4 PROJECTED CASH FLOW....................................................................................................... 31
5.5 PROJECTED BALANCE SHEET............................................................................................... 32
5.6 BREAK-EVEN ANALYSIS.......................................................................................................... 32
5.7 KEY FINANCIAL INDICATORS................................................................................................. 32
CHAPTER SIX – MONITORING AND EVALUATION...............................................................................33
6.1 EVALUATION............................................................................................................................ 33
6.2 CONTINGENCY PLANNING..................................................................................................... 33
FINANCIAL SCHEDULES........................................................................................................................ 35
ANNEXES................................................................................................................................................. 41

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 EXECUTIVE SUMMARY

JOBAC POLYMER INDUSTRY is a medium-scale PP Floor Mats manufacturer that is

located in the Regional State of Oromiya within the Kimbibit wereda Sheno city. This is
a relatively new business having been incorporated recently.

The company is on the brink of penetrating a lucrative market in a rapidly-growing

economy. The current trend towards an increase in the number of entrepreneurs and
competition amongst existing companies presents an opportunity for JOBAC
POLYMER INDUSTRY to penetrate the market. The products will be positioned very
carefully. They will be of extremely high quality to ensure customer satisfaction,
supported by impeccable service to the customers. As JOBAC POLYMER INDUSTRY
prospers and grows, the communities will continue to benefit from both the value
created by JOBAC and its behavior as a corporate citizen.

Initial plans are to produce different type of PP Floor Mats which comes in different
designs. These products will be sold in different sizes. These products shall be
extensively distributed to remote, yet extremely viable areas where the market is
appreciative of readily available, good quality PP Floor Mats.

To prosper there is need for JOBAC to be flexible and responsive, to delight customers
by providing them with what they want, when they want it and before the competition.
From product concept to goods dispatch the company intends to ensure that every
policy and procedure, system and process must have the objective of improving the
flexibility and response of the whole company. There is a need for interaction between
all functional areas, particularly between marketing and manufacturing, if the
organization is to realize its full potential, with manufacturing being employed as a
strategic weapon.

The marketing strategy will be based mainly on ensuring customers know what need
the product(s) is able to fulfill, and making the right product and information available to
the right target customer. Hence the company intends to implement a market
penetration strategy that will ensure that it is well known and respected in the
respective industry. The company will ensure that the products' prices take into
consideration people's budgets and that these people appreciate the product and know
that it exists, including where to find it. However these prices will also take into
consideration the cost of production and distribution so as to ensure that the company
remains viable and operational. The marketing effort will convey the sense of quality
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and satisfaction in every picture, every promotion, and every publication. The
promotional strategy will involve integrating advertising, events, personal selling, public
relations and direct marketing. In the long term Internet marketing shall also be
undertaken, details of which are provided in the marketing section of the following plan.

The target markets will primarily constitute the corporate and working class who
appreciate good quality PP Floor Mats. The working class will range from the laborers,
who constitute a large portion of the market, to administrative personnel appreciative of
good quality traditional mats. The corporate or managerial segment will constitute those
managers who are aware of their image and reputation and easily accessible in the
urban areas.

JOBAC is primarily targeting a market share of 20% to attain sales of approximately Birr
449 million in the initial year. JOBAC will pride itself on its production ability, competitive
prices, its high standards of quality and its adaptability to changes in the market and in
the method of its practice.

It is important to recognize that the company does not intends that the tangible
resources alone will make the potent competitors but more so the intangibles, such as
the ability to relate to consumers, management style, corporate culture and
commitment. These elements will differentiate the company from the competitors and
contribute towards the development of a sustainable competitive advantage.

The company intends to compensate the personnel well, so as to retain their invaluable
expertise and to ensure job satisfaction and enrichment through delegation of authority.
The compensation will include health care, generous profit sharing, plus a minimum of
three weeks’ vacation. As an equal opportunity employer, the company respects the
diversity and human rights of the people, and strives to achieve optimal productivity,
while realizing each employee's full potential. Awards will be given out to outstanding
individuals, groups and plants for hard work and production so as to instill a sense of
fun and promote the maintenance of high standards. By encouraging all employees
close to the customers to think tactically about what JOBAC service offerings should
be, and by having enthusiastic, capable and empowered people interacting with the
customers, the company build the competitive advantage of being able to meet the
customers' needs better than anyone else.

JOBAC intends to provide the customer with more than just Floor Mats. The company
intends to provide a quality PP Mats that will not only be floor covering, but also

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satisfaction. The customers are assured of products that have been produced using the
highest quality standards.

As the company grows it want to grow right. Initially pursuing organic development and
expansion it intends to undertake vertical integration in the future so as to be in total
control of the raw materials and goods dispatch. For example, the company realizing
that it has to be in constant touch with their stakeholders to ensure market knowledge
at all times. This is the nature of the channels the company deals with. Also, the
company intends to build the management team correctly. The company needs the
right people, in the right place, at the right time if it is to ensure optimum growth. The
company intends to develop the team so that the people can grow as the company
grows - a mutually beneficial relationship. The company shall strive to attain the primary
goal, which is to develop and strengthen the license to trade, bestowed by the
communities in which the company functions. As JOBAC prospers and grows, these
communities will continue to benefit from both the value created by JOBAC and its
behavior as a corporate citizen.

The financial plan depends on important assumptions. Some of the more important
underlying assumptions are:

 The company assumes a strong economy, without major recession.

 The company assumes the recent order of Ministry of Finance for the National
Bank of Ethiopia (NBE) to stop approval of foreign currency for 38 selected import
items (the company’s products are among the prohibited items) for indefinite
period of time, make the demand for the company’s products increases.

The working requirement would be financed by long – term bank loan. Accordingly Birr
133.37 million of working capital requirements is planned to be financed through bank
loan. The type of loan is further assumed to be a constant repayment bank loan, with a
loan repayment period of five years. The annual interest rate is taken to be 16.50
percent.

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 CHAPTER ONE – BACKGROUND AND DESCRIPTION OF THE BUSINESS

1.1 COMPANY SUMMARY

JOBAC POLYMER INDUSTRY is established on December 2014. Its main area of

business is establishing a manufacturing plant for PP floor mat production from plastic
materials and selling its products. It is already working in the field of plastic
manufacturing machines.

The owner of the company, Mr. DEREJE ZELEKE is a distinguished business man. Mr.
DEREJE has more than 12 years of experience in the sales of household products in
South Africa by establishing South African based import and export enterprise called
Benjamin Wholesaler. The enterprise has also valuable experience in the management
and marketing of its products at international market level.

It has importing various types of household products from China especially PP mats
from India and supplied to South Africa’s market. This physical presence of the
promoter’s enterprise helps to get foot hold in South Africa market, achieving market
access and increase the share over time. Thus, the major export market of the
company in the short run is South Africa.

Mr. DEREJE ZELEKE has keen business acumen to survey profitable projects and
execute them at a commendable pace. Its track record over past years speaks for itself.

The owner intends to operate the company as a full-fledged manufacturing enterprise

that would handle different services such as handling foreign purchases, technical
services for the plants and handling financial matters. Overall the owner has been
profitable over the years, showing a good management capability. The owner uses
Commercial Bank of Ethiopia and other private banks as its bankers and has good
working relationship with the banks.

1.2 VISION AND MISSION

1.2.1 VISION

Become one of the top five PP Mat Suppliers in Ethiopia by 2026.

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1.2.2 MISSION

JOBAC POLYMER INDUSTRY is sensitive to the design and look of good mats, as well
as affordable prices depending on the market. The company intends to provide the best
possible value to the customers who care about quality products at affordable prices,
and the company wants every money spent on the products to be well spent. Hence the
value proposition is to sell the benefit of satisfaction to the various consumers at
reasonable prices.

Internally the company intends to create and nurture a healthy, creative, respectful and
enjoyable office and plant environment, in which the employees are fairly compensated
and encouraged to respect the customer and the quality of the product it produce. In
addition follow-up will be mandatory so as to ensure customer satisfaction and make
any improvements as recommended by the customers in future. The company seeks
a fair and responsible profit, enough to keep the company financially healthy for the
short and long term, and to fairly compensate owners and investors for the money and
risk. The above is well summarized in the mission statement which goes as follows:

The mission of the company is to carefully attend to detail in the design in all the mats,
and to uphold superb quality at all levels of production to satisfy all the customers and
stakeholders.

1.3 COMPANY VALUES

JOBAC POLYMER INDUSTRY is committed towards an open governance system

whereby its activities are managed and undertaken ethically, transparently, and in the
interests of all concerned stakeholders.

This shall be undertaken through implementation of the following company values:

 The company intends to conduct the business ethically and transparently,

respecting all applicable laws.
 The company intends to be a responsible corporate citizen fulfilling the
obligations as an integral member of society. Hence the business decisions shall
give appropriate weight and consideration to social and environmental impacts.
 The company intends to provide products of uncompromising quality to meet the
needs of the customers.
 The company intends to seek mutually beneficial and enduring relationships in
all the commitments that it make, ensuring that they are straightforward and
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 honest. Hence the communication shall be open and accurate, internally and
externally.
 The company intends to optimize the creation of wealth to provide fair reward
and recognition for the contributions of the stakeholders.
 Ultimately the company intends to uphold all the above company values,
promoting the employees and respective third parties engaged by it to do
likewise.

Through promotion and implementation of the above stated company values, the
company will be able to attain the corporate and stakeholders' goals and objectives for
the benefit of all concerned, in particular the communities in which it will operate.

1.4 PRODUCT DESCRIPTION

Floor mat is a generic term for a piece of fabric or flat material, generally placed on a
floor or other flat surface.

Mats are manufactured in standard lengths or factory made to custom sizes. Linear
length mats are manufactured as rolls that can extend 20m up to 40m for long
production lines, assembly lines and packing lines.

The standard shapes of one-piece mat are rectangular, square, round and elliptic. One-
piece mats are produced in the huge variety of sizes and colors. Real and synthetic
materials are used for one-piece mats production.

Polypropylene is a thermostatic polymer. It is used in production of items that require

both flexibility and toughness. Products made out of polypropylene are bonded
thermally. When drawn in to fibers, the synthetic material is used in the production of
commercial-grade floor mats.

Because of the high-grade quality of the material, polypropylene mats are more
resistant to fatigue than most fibers. They resist most chemicals, and they are
considered to be one of the more rugged materials available. They are excellent
weatherproof floor mats because they resist wear from mildew, perspiration, rot, and
weather. Polypropylene floor mats are easy to clean by either vacuuming or washing
them. Because the colors are added during the creation of the fibers, the colors won’t
fade.

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Polypropylene floor mats are also available in various colors, shapes and designs such
as PP Mat Regular, PP Mat Egyptian Design, PP mats for home, light weight PP mats,
PP mats for prayer, PP matting rolls, indoor PP mats. The general dimension of PP
floor mats is shown in Table 2.1 below.

TABLE 2.1: PP FLOOR MATS GENERAL DIMENSION

Type Width Length Weight

PP Mat Regular 1,800mm 2,500mm 2,500gm
PP Mat Large 2,700mm 3,600mm 6,500gm
PP Mat Egyptian Design 1,800mm 2,500mm 3,500gm
PP mats for home 1,500mm 1,500mm 1,989gm
Light weight PP mats 700mm 1,500mm 928gm
PP mats for prayer 1,000mm 1,500mm 1,326gm
PP matting rolls 500mm 2,500mm 1,105gm
Indoor PP mats 1,800mm 2,700mm 4,296gm

These mats also available in accurate sizes and perfect finish as per the demands of
the customers.

1.5 COMPANY LOCATIONS AND FACILITIES

At present the company plants is located in the Regional State of Oromiya within the
Kimbibit wereda Sheno city. The location is accommodating with the availability of
electricity, telephone and water as well as proximity to raw materials and It is near to
the major customers.

1.6 OBJECTIVES

The business strategy of JOBAC POLYMER INDUSTRY will revolve around the need
to provide quality PP Floor Mats to various target customers, in the process fully
satisfying their needs. This shall be undertaken through the implementation of high
quality control standards and technological innovations, as well as the recruitment of a
professional production and sales team, and the production of good quality marketing
material designed to cater for various kinds of customers. This marketing material shall
be professionally done so as to be reflective of the intended image and reputation. The
company shall position itself as a quality manufacturer that strives to provide quench
fulfillment, enjoyment, reliability and a good image. It intends to establish a good
rapport with all the relevant stakeholders.

With time the company intends to establish its presence on the World Wide Web, which
will increase the knowledge of its products to the various market segments it shall be
targeting. Web presence is a natural objective in reaching the appropriate potential

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customers. Well-done brochures, company profiles and business cards often have a
triggering effect on clients contemplating on ordering the products. Hence this will
undoubtedly generate increased sales of the products.

The objectives the company will revolve around the following guiding principles:

 Provision of a great work environment, treating each other with respect and
dignity.

 Apply high-quality standards of excellence to all business processes.

 Develop enthusiastically-satisfied customers all of the time.

 Contribute positively to the communities and the environment.

 To continuously formalize and measure cross-functional working communication

so as to ensure that the various departments work harmoniously towards
attainment of company objectives.

 To instill a culture of continuous improvement in beating standards of customer

satisfaction and efficiency.

 Fully commit to supporting growth and development in the economy.

Ultimately the company intends to create a stable business platform that will create
prosperity for all those involved in the business venture at all levels, and to uplift
unemployed citizens who are prepared to participate in this venture.

1.7 SWOT ANALYSIS

The company is in a highly lucrative market in a rapidly growing economy. The

company foresees the strengths as the ability to respond quickly to what the market
dictates and to provide quality liquors in a growing market. In addition, through
aggressive marketing and quality management the company intends to become a well-
respected and known entity in the respective industry. The key personnel have a wide
and thorough knowledge of the local manufacturing market and expertise, which will
go towards penetrating the market. However the company acknowledges the weakness
of a medium-sized company without a lot of experience, and the threat of new
competition taking aim at the niche. Below are the summarized strengths, weaknesses,
opportunities and threats.

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1.7.1 STRENGTHS

 Strategic market segmentation and implementation strategies.

 Diversified market segments: ensuring the lack of dependency on one particular

market.

 Combination of skills in directorship. The directors intend to jointly develop

business strategy and long-term plans, having wide experience in product and
business know-how.

 Establishment and maintenance of strong capital base.

 An aggressive and focused marketing campaign with clear goals and strategies.

1.7.2 WEAKNESSES

 Lack of a reputation in comparison to the competitors.

 The introduction of new organizational practices and personnel who have not
previously worked together presents a challenge to the company.

 A limited financial base compared to the major players in the industry.

 Lack of clear-cut channels of distribution.

 Establishment on the Internet will produce technological challenges.

1.7.3 OPPORTUNITIES

 Specific niche: Appreciation for high-quality floor mats, enjoyment, and

refreshment (and integration therein).

 The new generation of individuals and families has a far greater appreciation of
attractive design (image conscious).

 Current drive by government and specialized institutions towards export of

locally manufactured products.

 Internet marketing and sales though still in its infancy.

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1.7.4 THREATS

The present growth in the market may result in market saturation, through competition.
This competition could emerge from a variety of given sources including:

- Established mass-market companies' development of new lines and vertically

integrating so as to be totally in control of supplies and products being sold on
the respective markets.

- New marketing strategies and tactics by established products and companies.

- Existing competition.

- Other start-up companies generated by healthy economic growth nationwide.

1.8 KEYS TO SUCCESS

The keys to JOBAC POLYMER INDUSTRY success will undoubtedly be effective

market segmentation through identification of several niche markets and
implementation strategies. Along these lines the company intends to implement
advertising, personal selling and direct marketing strategies aimed at the target
markets. The advertising marketing strategies will rotate around.

Hence the key success factors will include the following:

Excellence in Fulfilling the Promise: The Company intends to produce and provide
products of uncompromised quality to the customers. This is so as to meet the needs
and standards of the customers.

Effective and Efficient Distribution Network: The importance of such cannot be

overemphasized in the line of business. The Company intends to establish an excellent
distribution network that will enable it to rapidly respond to customers' orders, and be
available in remote areas the competitor has not yet exploited.

Production Technology: To ensure quality floor mats it is essential to utilize the latest
and most efficient production technology. Keeping abreast with technological
developments will ensure the company gain, and maintain, a competitive advantage
utilizing the latest production techniques.

Loyalty and Dedication: The loyalty and dedication of the employees shall be
essential to the prosperity of the organization. The Company recognizes that corporate

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commitment to success should lead to the survival and prosperity of the products, and
ultimately the organization as a whole.

Marketing Know-how: In an increasingly competitive market there is a need to

aggressively market the business so as to be continuously at the top of the prospective
and current client's minds.

Adherence to Stringent Values and Principles: JOBAC needs to acknowledge the

fact that the financial and strategic management of the business will ultimately
determine its prosperity and success. Hence the company intends to adhere to
stringent values and principles that will enable such to be achieved.

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 CHAPTER TWO – MANAGEMENT SUMMARY

JOBAC POLYMER INDUSTRY shall evaluate the jobs it provides, paying competitive
remuneration packages against market benchmarks to employees for their agreed and
set out tasks. Consonant with its efforts to create added value by employees, the
company seeks to negotiate the provision of incentive pay delivery mechanisms against
achievement of agreed targets relating to accomplishment in the areas of productivity
enhancement, savings and other specific successes, that is, the implementation of an
effective performance management system.

Hence the human resources strategy will revolve around:

 Communicating openly and transparently; addressing strong and trusted:

o Internal communication.

o External communication.

o Stakeholder inclusivity.

 Responding and promoting human rights issues, such as equity in the workplace
and in community relations.

 Adoption of a good remuneration policy aimed at developing our people through

employee benefits, training and group initiatives.

 Maintaining preventative health and safety structures for employees and support
for surrounding communities.

1.1 MANAGEMENT TEAM

The management team, mainly comprising of the owner, has wide expertise and broad
knowledge of the products and markets, which if well planned for, will enable the
business to realize its goals and objectives. Daily management will be the role of
technical and operations manager, and the General Manager in dealing with
government, corporate bodies, and public relations.

Management style will reflect the participation of the owner. The company intends to
respect its community and treat all employees well. The company will develop and
nurture the company as community. The company does not intend to be

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overly hierarchical. Management's ongoing initiatives to drive sales, market share and
productivity will provide additional impetus.

1.2 PERSONNEL PLAN

The company intends to compensate the personnel well, to retain their invaluable
expertise and to ensure job satisfaction and enrichment through delegation of authority.
The compensation will include health care, generous profit sharing, plus a minimum of
three weeks’ vacation. As an equal opportunity employer, we respect the diversity and
human rights of the people, and strive to achieve optimal productivity, while realizing
the full potential of each employee. Awards will be given out to outstanding individuals,
groups and plants for hard work and production so as to instill a sense of fun into the
work and promote the maintenance of high standards. JOBAC recognizes that the
employees contribute fundamentally to the company's long-term prosperity. The
company intends to enhance the capacity to attract and retain people of
quality, through benefits such as housing loan and family education grants.

Employee health shall be of extreme importance. This is because the health of the
people is an integral element of employee well-being at work and at home. Compliance
with relevant legislation is a minimum target in the organization. The company also
intends to minimize if not totally eliminate the number of isolated incidents of
intimidation in the workplace, so as to ensure that production and distribution are not
materially affected and sound relationships are maintained between employee and
employer and between employees as a whole.

Table 1.1 shows annual salaries during full capacity plant operation based on current
labor market estimate. A detailed list is also provided in Annex 3.

TABLE 1.1: PERSONNEL REQUIREMENT AND ANNUAL COSTS

Head Direct labor Indirect labor

No Description Count
Total
cost cost
1 Manager's Office 2 360,000 360,000
2 Administration & Finance 10 600,000 600,000
3 Sales & Purchasing 3 324,000 324,000
4 Production & Technical 134 3,744,000 540,000 4,284,000
Total 149 3,744,000 1,824,000 5,568,000

1.3 TRAINING

In-house training shall be continuous with regular external training being undertaken
particularly following any new developments in the market. This is so as to ensure that

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the company is continuously able to anticipate the market’s needs, a proactive
approach, which is so essential if it is to gain and maintain a competitive advantage.
Courses on mats processing will be undertaken with the established and reputable
firms. This will ensure that the personnel are exposed to the latest production
techniques and are able to set their standards, or benchmark, using these
organizations standards. Internal training will not only include product and technical
aspects, but also expand to give much greater knowledge of customers, market trends,
products, new technology aids, and time management amongst other such variables.
The company intends to conduct health education sessions for groups and individuals
on health risks in the workplace, balanced with lifestyle education and employee
assistance programs that incorporate rehabilitation and counseling in a range of
illnesses and social or personal problems. This is of particular importance in view of the
AIDS epidemic that has grappled the country and continent as a whole to unparalleled
levels.

The company acknowledges the fact that successful recruiting, motivation and
discipline procedures are keys to the growth of the organization. Hence the company
intends to promote and maintain good labor relations, strong morale and high quality
work per employee.

1.4 FEEDBACK AND CONTROL

1) The company intends to use employee satisfaction surveys to shape the

business, making sure that the employee understands the goals of the firm, is
customer focused, proud of their work and work as a team. This will encourage
employees to become entrepreneurial and customer responsible, in addition to
unifying staff in customer focus and values.

2) Important notices and developments will be continuously communicated to

employers so as to keep them abreast of developments and promoting a sense
of belonging and oneness in the organization.

3) The company will encourage the employees to put forward any suggestions they
might have regarding the improvement of any of the company's functions - an
open door philosophy. Such a culture will enhance innovativeness and creativity
in turn leading to job satisfaction and enrichment.

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 CHAPTER THREE – MARKET ANALYSIS

Currently in Ethiopia rapid growth experiencing in the economy of unsurpassed nature.

This has been brought about by (amongst other things) the relaxation of foreign
exchange policies and macroeconomic policies geared towards attracting foreign
investors into the country. The fiscal and monetary policies of the government geared
towards maintaining growth with social justice have largely contributed towards this,
evidenced by the economy averaging a growth rate of 8.2% since 2015; very high by
international standards.

The current drive and emphasis by the government on diversification of the industrial
base away from the minerals sector presents an opportunity for the company to make a
valuable contribution towards achieving this goal. This will result in implementation of
modern production techniques and transfer of knowledge. Having undertaken a
thorough and comprehensive research of the market the company realized that there
was a need for a manufacturer that focuses on producing affordable uniquely designed
PP mats tailored to satisfying client's needs. Though there are PP mats producers
currently on the market, some of whom have been in existence for a relatively long
period of time, the company believes that there is a market need for one that
particularly focuses on the low to medium earning individuals. The company intends to
provide products of extremely high quality--something that cannot be over-emphasized
in the international arena with the current drive towards globalization. The marketing
mix of the products has been carefully and strategically put together to position them in
the market.

Aware of the fact that the company will be operating in a predominantly monopolistic
market structure it intends to ensure that the marketing strategies are considerate of the
importance of the fit between the products capabilities and benefits, and the target
market, so as to develop a strong sustainable competitive position in the market. As a
result the company intends to implement a niche marketing strategy, focusing on
certain target markets, particularly in view of dominance of few companies on the
market. The initial overall target market share shall be 20% of the local market.

The company appreciate that entering such a market is not a bed of roses, particularly
as it is monopolistic. Hence the company intends to implement an aggressive marketing
strategy, well supported by the other business functions. The above prognosis
influenced the decision to enter the mats industry.

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3.1 MARKET SEGMENTATION

JOBAC POLYMER INDUSTRY will be focusing on the corporate and working class
who appreciate good quality PP Mats. The working class will range from the miners
who constitute a large portion of the market, to administrative personnel appreciative of
good quality traditional mats. The corporate or managerial segment will constitute those
managers who are aware of their image and reputation and easily accessible in the
urban areas.

Based on type, the market is segmented into polypropylene absorbent mats, PVC
absorbent mats, nitrile absorbent mats, rubber absorbent mats, and others. Based on
end-use, the market is segmented into food processing, industrial manufacturing,
healthcare, and others.

3.2 TARGET MARKET SEGMENT STRATEGY

The marketing strategy will be based mainly on making the right product available to
the right target customer. The company will ensure that the products' prices take into
consideration peoples' budgets and that these people appreciate the product and know
that it exists, including where to find it. The marketing will convey the sense of quality in
every picture, every promotion, and every publication. There is already a sense of
segment strategy in the way we define our target market. We are choosing to compete
in areas that lend themselves to local competition, service and channel areas that
match the strengths, and avoid the weaknesses.

The strategy calls for the development of relationships with suppliers, distributors and
retailers to support the business. Regular visits will be undertaken to these areas so as
to ensure that they are meeting their expectations.

3.2.1 MARKET TRENDS

The target markets are increasingly growing towards recognizing the difference
between poor quality mats and those of high quality. This development is an important
trend for the company as it represents the target market. The company now is having
an increasing number of people who appreciate the good quality mats. With this in mind
the company intends to ensure that the packaging is respectable and attractive.

Page 16
3.2.2 MARKET GROWTH

During the period 2011-2020, the maximum total supply (apparent consumption) of PP
Floor Mats to the local market was 8,051 tons (year 2020), while the minimum 3,324
tons was registered in year 2011. In the remaining years, apparent consumption was
fluctuating between these two extremes, around a mean figure of 5,428 tons.

During the period under consideration (2011 – 2020) apparent consumption of PP

Floor Mats though characterized by a noticeable growth trend exhibits fluctuations from
year to year. During the period 2011– 2020 supply has exhibited constant growth
registering a growth rate that ranges from 5% to 8% annually.

3.2.3 MARKET NEEDS

JOBAC POLYMER INDUSTRY will set out to provide good quality products that will
help instill a jovial environment. The company intends to provide the customer with
more than a mat to cover floor. We intend to provide quality mat that not only cover
floor but enables one to enjoy them and be proud of it. The quality of raw materials and
production technology evident in the products will serve to enhance the appearance of
the customers, in turn adding to their status. The large market is due to the fact that
unique design mats.

3.3 INDUSTRY ANALYSIS

Industry analysis information is presented in the following subtopics.

3.3.1 COMPETITION AND BUYING PATTERNS

The key element in purchase decisions made at the JOBAC POLYMER INDUSTRY
customer level is the availability of an affordable and good quality product. The most
important factor in this market is the distribution network. This is particularly so
considering the good distribution network that enabling to produce products that are
constantly in demand throughout the country.

3.3.2 MAIN COMPETITORS

The competition in the mats manufacturing market as a whole is not that intense (in
terms of numbers) at the current time due to the dominance of few companies, which
has been on the market for a relatively long period of time. However upon closer

Page 17
research the company identified several niches in the market that it may exploit, not
wanting to confront the companies one-on-one.

In general, the competition will be stiff, as the company intends to penetrate the low to
medium earning customer. At the same time the company shall be differentiating itself
from the dominant companies. The company intends to market itself in such a way that
with time competitor customers will choose the products over competitors' on the basis
of the higher quality products. The main competitors in the same strategic group as the
company are:-

- JARDIN MEUBLES PLC

- MEBRUK PLASTIC PRODUCT PLC

- DERASA PLC

3.4 STRATEGIES AND IMPLEMENTATION SUMMARY

The marketing strategy emphasizes focus. This will be the key. The company is
relatively new company and hence must focus on certain kinds of products with certain
kinds of consumers. Initially JOBAC POLYMER INDUSTRY will focus on the local
market and in the remote and previously inaccessible areas where there is a large
market for the products. Hence the form of growth that shall be initially pursued will be
that of organic growth mainly due to limited resources and the need to instill confidence
in the products. The target customers will include key decision-makers in the retail
market who often order or recommend on behalf of the whole organization, the aim
being to obtain an initial order and fully satisfy the customer from then on.

 The company is currently building image and awareness through consistency

and distinctiveness in the product provision.
 The company intends to focus on delivering quality products that in turn produce
good referrals, which can then generate revenue. The company intends to
always have a relatively heavy personal selling component to the marketing
strategy as previously discussed. Hence the company intends to always be
active in personal relationships with clients and strategic allies keeping abreast
of their needs and wants.
 The company is focusing advertising on several key media.

Page 18
The company intends to achieve growth by creating a more enthusiastic customer
culture than that of the competitors. All criteria from price competitiveness to staff
attitudes are to be initially measured six-monthly, and then on a more regular basis as
time goes on. The results will go down to depot level and be compared with the overall
target. This form of consistent measurement of strategic goals will ensure that the
organization remains focused on its goals and objectives, making any necessary
adjustments where need be.

3.4.1 VALUE PROPOSITION

The value proposition is offering the customers satisfaction at reasonable prices

ensuring peace of both body and mind. Hence the company intends to:

1. Market the benefit, not the product.

2. Ensure customer satisfaction.
3. Develop long relationships.
4. Market the company.

This value proposition shall be communicated through advertisements, personal selling,

sales literature and catalogues, and referrals that emphasize how the company is able
to provide refreshment, enjoyment and fulfillment to the customers.

3.4.2 COMPETITIVE EDGE

The competitive edge will be the dominance of access to previously remote areas,
customer orientation and high-quality mats through stringent quality control. Although
few companies dominate the local market, they do not penetrate the remote areas as
much as the company intends to.

Though the company shall be serving different market segments it intends to focus on.

3.4.3 SALES STRATEGY

The company intends to focus on improving the implementation, by working on key

objectives and better coordination of marketing efforts. For the short term at least, the
selling process will depend on personal selling and advertising to lure and inform
potential clients about the products the company offer and the benefits of consuming
the products. The marketing does not intend to affect the perception of need as much
as knowledge and awareness of the product categories.

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3.4.3.1 SALES FORECAST

Based on the factory gate price and sales increment projection the annual revenue
generated by the company is estimated at Birr 449 million at the first planning year. At
the end of the projection year, this amount will rise to Birr 641 million. Details are shown
in Schedule 1.

3.4.4 MARKETING STRATEGY

One core element of the marketing strategy will be that of differentiation from the
competitors. In terms of promotion, the company intends to sell the company as a
differentiated strategic ally, not just the products. In price, the company intends to offer
extremely reasonable prices in comparison to the competition and the company needs
to be able to sustain that. Market penetration through lower prices shall be undertaken
where need be, while premium pricing will be the case of the upper-end of the market.

3.4.4.1 SERVICE PROVISION

The service aspect of JOBAC POLYMER INDUSTRY marketing mix shall constitute an
important element in delivering total quality. This is due to the high degree of exposure
the competitors already have. As such the company intends the customer service to be
key to the retention of customers. The company shall follow-up with the clients on a
regular basis so as to ensure they are satisfied with the products and delivery times.
This is mainly because the company intends the customers not to be one-time buyers
but regular order seekers. The establishment of a rapport and understanding between
the customers and the company is going to be an ongoing process.

The company intends to implement database marketing whereby it shall be targeting

customers based on their previous purchases, in terms of size, frequency and actual
products, so as to forecast their demands and establish long beneficial relationships.
Customer service shall be enhanced through infrastructure support in the form of
merchandising and credit facilities, and alternative distribution facilities where possible
and viable.

3.4.4.2 PRICING STRATEGY

Initially the prices will not be under the company’s control but dictated by the market
conditions prevailing at the particular time. This is particularly so in the case of products
which are also produced by the competitors, as they are often representing a scale for

Page 20
consumers. However the company realizes that it must charge appropriately for the
quality and work it shall be providing, in addition to the distribution of the products.
Hence the company intends the price will accommodate the mark ups prevailing in the
industry, as well as its own costs. To be competitive in the market the company intends
to offer discounts to customers making bulk orders, which are in competition with the
industry. This will also assist in the establishment of customer loyalty.

The company intends the income structure to match the cost structure, so as to ensure
that the salaries paid to assure good workmanship is balanced by the price charged.
The company will make sure that it charges for the product, workmanship and delivery
with the aim being to achieve a reasonable gross profit margin in the initial years of
operation. All in all the company intends the prices to be extremely competitive on the
market.

3.4.4.3 PROMOTION STRATEGY

The promotion strategy will be based primarily on informing potential customers of the
company’s existence and making the right information available to the target customer.
Since the company shall be targeting different segments, the promotional tools and
messages may vary slightly to match the intended market. However in all cases the
marketing will convey the sense of quality in every promotion and every publication.
The promotional activities shall be focused towards driving the organization's overall
strategy relentlessly, developing internal consistency and prepare it to confront any
radical changes that may arise. In such a market the company cannot afford to appear
in, or produce, second-rate material that make the products look less than they are. The
company intends to leverage the presence using quality brochures and other sales
literature, including promotional material such as pens, complimentary slips and
stickers. Due to the fact that the products are in the introductory phase on the market,
promotional expenses are high in order to generate customer attention and knowledge
of the products existence.

The company intends to spread the word about the business through the following:

Advertising

In view of the fact that the company is entering a market largely dominated by few
companies that have an approximate market share of 75% the company intends to
undertake extensive advertising of the products in addition to the brand name -
company name. This is so as to instill awareness and knowledge of the existence in the
Page 21
market place, which hopefully shall convert into market share. Whilst the company is
committed to providing products of uncompromising quality to meet the needs and
expectations, the company believes its products should be advertised and promoted in
an honest and ethical manner that respects the values of the consumers' societies. A
constant look out will also be made of any special editions in the local newspapers,
which may provide an opportunity to advertise.

Events

These are increasingly becoming important as more firms establish in the country and
hence the need to be known. The organization aims to participate in trade shows. Not
only will these increase awareness of the products, but if a particular product were to
gain recognition, for example through being chosen #1 at quality check, the
organization will be able to take advantage of this in all its promotional campaigns,
adding leverage to its reputation and image. Undoubtedly this would add confidence
and pride in the staff complement as their hard work would be recognized often at the
highest levels. Communicating such achievements often gives customers a feeling that
they can rely on the product, and this builds strong customer loyalty. The exchange of
technologies, ideas, and contacts will serve as a fertile ground for the blooming of
healthy trade relationships and partnerships.

The company also intends to participate at International Trade Fair so as to expose the
business to potential customers and suppliers. Such fairs serve as important eye
openers for both potential customers and the company. With time it shall be necessary
for the company to participate in regional trade shows and fairs such as the East
African Exhibition Show so as to gain awareness and ultimately orders from outside the
country.

Public Relations

Recognizing that the company is relatively new on the market there will be a need to
organize an event, of grandeur nature, introducing itself onto the market. At this the
company intends to invite potential customers, senior officials, including the Minister of
Industry, and other stakeholders so as to penetrate the market. In collaboration with this
the company also intends to place news stories and features in magazines and
newspapers to keep stakeholders updated on the latest developments and to increase
awareness. The company’s efforts on community service will show that the company
has its community at heart, contributing towards the establishment of a good and

Page 22
reputable image. Homes for the under privileged will be also be built in the medium, to
long term as we plough back into the society we operate in. In addition the company
intends to pursue educational sponsorship for the less advantaged but promising young
individuals in the community. This will constitute some of the corporate social
responsibility details of which are provided in the respective section.

The company also intends to experiment with a road show in the various often-
neglected remote areas giving out caps, bags, and other such prizes to individuals who
answer questions correctly. This will also enable the business name and products to be
better known by the respective communities. However the company is extremely
confident that these road shows if well planned will be a success as they encourage
community participation. Tours shall also be arranged with interested stakeholders
including school children and college students. This is so as to increase awareness of
the facilities and products and also showing confidence in the production process and
standards. Hopefully visitors will leave impressed and confident in the products, adding
to the possibility of positive referrals. These same tours will also be arranged with
prospective clients/order-takers.

Personal Selling

This shall be undertaken in the form of sales calls whereby a sales person will go out to
potential customers and distributors informing them what products the company are
able to offer them. In addition the sales person will listen to client's needs at close hand,
so as to ensure that the product is delivered timely and that it is the right product as
demanded by the surrounding community. Close analysis shall also be undertaken of
the demand patterns of the respective communities, that is whether they prefer larger or
smaller sizes. This will ensure that the products are customized as much as possible to
the surrounding community's needs and wants. In cases where there is the opportunity
of obtaining a large order it may be necessary for the top management to go out
personally, especially considering the fact that the company is still a relatively new firm
in the market.

Direct Marketing

This will be used, but only to a limited extent, in the form of telemarketing and informing
potential customers and obtaining referrals where possible. In the case of telemarketing
it will involve the targeting potential customers/distributors of the products and informing
them of the existence and the products the company offer. The company may then

Page 23
arrange for an appointment with the respective decision-maker/order-maker, with the
intention being to lure them into ordering one or more of the product lines.

Internet Marketing

The increasing growth of the Internet as an information source provides an

opportunity that the company may exploit. This is particularly so in view of the
increasing investment and global trade amongst countries, as both large and
small organizations look at obtaining the best deal possible. More often than not these
organizations will seek out potential clients over the Internet due to the cost of transport
and accommodation, apart from the obvious time factor, which is increasingly becoming
of importance in view of the dynamic environment. However this will require adequate
planning and research so as to establish a professionally done website. This will mainly
serve foreign customers and other stakeholders including potential investors.

In all the above the company intends to communicate the ability to manufacture good
quality mats that will satisfy the customers’ needs. Hence the messages will influence
the buying decision of prospective customers and distributors by emphasizing the
unique selling proposition, and persuade prospective buyers that the company is
different from the competitors. All the above promotional tools shall be well integrated
and utilized in tandem so as to maximize their effect.

3.4.4.4 DISTRIBUTION STRATEGY

The company believes that through the obsession for improvement, and commitment to
a leadership position in the respective markets, the company can overcome the
traditionally binding constraints of resource base, firm size and narrow
conceptualization of the business domain. This shall be undertaken through
coordination and logical integration of the distribution operations. The company aim to
reduce cycle time for key processes, eliminate rework and waste, and optimize the
human resources utilization. Trade Channels:

 Wholesale Distribution Channels.

 Retail Distribution Channels

The company intends to ensure that production facilities are located close to the major
distribution centers not only to minimize costs but also to enable the products to be
easily available, in the best condition, in the different markets nationwide. By engaging
and establishing good relationships with distributers the company intends the products
Page 24
to be readily available to the target market. In terms of actual delivery for every vehicle
the daily fuel used, kilometers driven, repairs and maintenance costs must be recorded
and compared with the set standard.

3.4.4.5 PRODUCT MARKETING

The product marketing will emphasize the benefits of consuming the products, including
enjoyment of top-quality mats. The company intends to sell the opportunity to enjoy
oneself amongst friends, family and/or colleagues. This will come out in the advertising,
delivery and collateral such as sales literature and business cards. The product
marketing's most important challenge will be the problem of being accepted and
appreciated on the market as a provider of quality products. Hence the company
intends to not only meet customers' expectations but to exceed them, initially targeting
a market share of 10%.

The company intends to provide a thorough understanding and appreciation of the

products to the customer and the benefits of consuming them.

3.4.4.6 PRODUCT PACKAGING

The product packaging shall be of utmost importance, as it will definitely influence the
potential customers on whether to try out the products or not. As such the company
shall ensure that it is not only attractive to consumers but also strong. As time
progresses the company intends to have packaging that enables the container to be
used for other purposes after consumption. In the medium to long term the company
intends the product packaging to also be recyclable and hence more environmentally
friendly; a continuous improvement process. Continuous improvement on packaging
will also be undertaken so as to maintain, if not improve product appeal.

Currently the products are packed internally with PE sheet and externally with PP
sacks. However depending on the dictates of the market, there might be needed to
introduce new product packs. Hence the company intends to ensure that it is flexible if
such changes are to occur.

3.4.5 CORPORATE SOCIAL RESPONSIBILITY

JOBAC POLYMER INDUSTRY intends to be involved in a wide range of social

responsibility engagement programs to invest back into the community in which it
operates. Through the social responsibility program the company can assist in

Page 25
improving people’s lives. If the company contributes to development in a sustainable
way, it needs to support projects that communities bring to it, rather than strictly
creating its own solutions for the communities. This is because if the company imposes
the solution and drive a project it is an artificial response, and the risk is that the project
will then always 'belong' to it. Whenever the project comes up against a new challenge,
the company will be expected to fix it, and will be forced to stay in a situation where it
has to look after the same few projects forever. Rather the company intends to fund
several projects that belong to, and will be driven by, the community and become
sustainable. However, before the company commits itself to projects it intends to
ensure that skills will be transferred, communities are involved and the projects will be
able to become self-sustaining. The company knows that it cannot address all the
development needs of the society. Where the company can, it assists and sometimes
may form partnerships so as to increase capacity.

The company intends to be involved in the following activities:

- Community

- Education

- Health

- Environment

- Arts and Culture

Page 26
 CHAPTER FOUR – PRODUCTION SUMMARY

The production system shall strive to attain service excellence in addition to

manufacturing safe, quality products. This shall be undertaken through the engagement
of modern production techniques using up-to-date production technology. This will also
result in low production costs being attained by the company. The company also
intends to ensure that the suppliers it engages are committed and reliable so as not to
let down the final consumer in terms of the quality of the product and time of delivery.

In order to improve productivity in the plants the company intends to reduce waste and
duplication in the production by streamlining administrative functions and promoting and
instilling a business culture that focuses on the teamwork rather than individual
productivity. By the undertaking the above, the company will optimize the productivity
given the available resources.

4.1 RAW MATERIALS SUPPLY

Currently the company obtains the vast majority of its raw materials from abroad. In
latter year (after increasing capacity of the recycling unit) the company sources its raw
materials from local recycle materials suppliers. The major advantage of sourcing from
local suppliers being higher margins, faster payments and lower risks of payment
default. Through the use of economies of scale the company aims to maintain low input
and production costs.

Hence the company intends to establish good rapport with all the suppliers and hence
long mutually beneficial business relationships. This shall be undertaken through
working closely with suppliers to ensure uninterrupted deliveries.

The estimated annual requirement for raw materials and packing materials at full
capacity of production are given in table 4.1 below.

TABLE 4.1: LIST OF RAW MATERIALS AND COST AT FULL CAPACITY

Unit Cost Total Cost

Raw materials Unit in Birr
Consumption
(000’ Birr)
Raw Materials
PP Granule kg 200.00 1,755,000 351,000.00
PP Granule Recycle kg 110.00 195,000 21,450.00
Calcium Filler kg 120.00 487,500 58,500.00
PP Yarn kg 520.00 121,875 63,375.00
Pigment kg 960.00 3,900.00 3,744.00

Page 27
 Unit Cost Total Cost
Raw materials Unit in Birr
Consumption
(000’ Birr)
Border Tape m 2.39 3,228,000 7.71
Auxiliary Materials
Packing sacks m 8.96 129,120 1,156.92
Thread kg 1,080.00 4,035,000 4,357.80
Rope kg 210.00 8,070,000 1,694.70
Utilities
Water M3 11.60 9,684 112.33
Electricity kWh 1.53 266,310 407.45
Grand Total 505,805.92
Note that as of October 18, 2022; 1USD = 53.8098 Birr

4.2 RECEIVING

Recognizing that the receiving of the raw materials is an essential element in the entire
business, the company intends to ensure that it is done by responsible persons who will
be present during offloading to check the quantity and condition of the consignment.
During the actual offloading the receiving bay personnel will mass check on the
consignment. Non-confirming raw materials in terms of quality will only be approved
with the consent of the managing director who would have undertaken further analysis
of it.

4.3 STORAGE

It shall be the policy of the company to ensure that all raw materials are stored in a
secure, clean and pest free manner. Stock takes and reconciliations shall be
undertaken on a regular basis, initially done at least once a week. The stock principle of
First in First out (FIFO) shall be implemented. Whenever stock is taken out it shall be
recorded on a separate stock or bin card, with reconciliations of raw materials issued to
the production, losses, opening and closing stock taken. Should any deviations arise
these must be explained.

4.4 BY - PRODUCTS

JOBAC POLYMER INDUSTRY intends to utilize every resource it has to the fullest
possible extent. The company realizes that there shall be a lot of by-products that will
be produced from the production of the main product lines. However not wanting to
pollute the environment, and the community at large, the company plans to utilize by-
products whenever possible. This will ensure that the resources are fully utilized.

Page 28
 CHAPTER FIVE – FINANCIAL PLAN

The company wants to finance growth mainly through cash flow and loan. The most
important factor in the case is collection days, particularly with the bulk order
customers. The company can't push the customers hard on collection days, because
they are extremely sensitive and will normally judge the company on the terms. Hence
they tend to have a certain degree of financial authority. Therefore The Company needs
to develop a permanent system of receivables financing systems, using a well-
coordinated accounting department. In turn the company intends to ensure that the
investors are compatible with the growth plan, management style and vision.

Compatibility in this regard means:

 Fundamental respect for giving the customers value, and for maintaining a
healthy and congenial workplace.

 Respect for realistic forecasts, and conservative cash flow and financial
management.

 Cash flow as first priority, growth second, profits third.

 Willingness to follow the company and contribute valuable input to strategy and
implementation decisions.

5.1 IMPORTANT ASSUMPTIONS

The financial plan depends on important assumptions. Some of the more important
underlying assumptions are:

 The company assumes a strong economy, without major recession.

 The company assumes the recent order of Ministry of Finance for the National
Bank of Ethiopia (NBE) to stop approval of foreign currency for 38 selected import
items (the company’s products are among the prohibited items) for indefinite
period of time, make the demand for the company’s products increases.

5.1.1 REPAIR AND MAINTENANCE COST

The annual cost of spare parts, repair and maintenance usually increases with the
increase in the service life of machinery and equipment and other facilities. In this

Page 29
business plan, considering the heavy wear and tear of some of the machines a value
equivalent to 3% and 5% of the cost of machinery and equipment is assumed for the
annual cost of spare parts during the first three years and the remaining years of the
projection, respectively. The same assumption is also used for the annual cost of repair
and maintenance of the production plant. The annual cost of repair and maintenance of
other facilities is taken to be 2% of the cost of fixed assets other than land, machinery
and equipment during the first three years, and 3% of the same thereafter.

5.1.2 DEPRECIATION AND AMORTIZATION

Based on the Federal Income Tax Proclamation No. 979/2016 and Council of Ministers
Regulations 2017, the following depreciation rates are applied to depreciate the assets
of the company under the straight-line method:

 Buildings and associated civil works 5%, linear to scrap value

 Machinery and equipment 15%, linear to scrap value
 Computer and software products 20%, linear to scrap value
 Pre-production expenditure 10%, linear to scrap value

5.1.3 TERMINAL (SALVAGE VALUE)

Salvage value of the project is computed based on the following rates

 Building 50%
 Machinery and equipment 20%
 Vehicles 15%
 Working Capital 100%

5.1.4 WORKING CAPITAL

The working capital requirement is calculated on the basis of the minimum days of
coverage needed for the different elements of the working capital. Hence, the minimum
days are specified as follows:-

TABLE 5.1: MINIMUM DAYS OF COVERAGE

No Item Minimum Days of Coverage

1 Raw Materials
- Local 30 days
- Foreign 120 days
2 Work in progress 1 day
3 Finished product 15 days
4 Cash in hand 30 days
5 Accounts receivables 30 days
Page 30
 6 Accounts payable 0 day

The working requirement would be financed by long – term bank loan. Accordingly Birr
133.37 million of working capital requirements is planned to be financed through bank
loan. The type of loan is further assumed to be a constant repayment bank loan, with a
loan repayment period of five years. The annual interest rate is taken to be 16.50
percent (Schedule 5).

5.2 EXPENSE FORECAST

Operating cost includes direct and indirect material cost, labour cost, depreciation
expense and other factory overhead cost as shown below in Table 5.2 for a selected
year. The detailed cost breakdowns are indicated in Annex 1.

TABLE 5.2: COSTS OF PRODUCTION (YEAR FIVE IN 000’ BIRR)

Cost
Items % share
(in 000 Birr)
Raw material 505,286 93.05%
Utilities 694 0.13%
Repair and maintenance 2,253 0.41%
Labor 4,284 0.79%
Labor overhead costs 1,071 0.20%
Marketing cost 3,615 0.67%
Administrative costs 11,672 2.15%
Depreciation 4,844 0.89%
Financial costs 9,336 1.72%
Total 543,055 100.00%

5.3 PROJECTED PROFIT AND LOSS

Based on the projected profit and loss statement shown in Schedule 2, the company
will generate a profit throughout its projection years. Annual net profit after income tax
increases from Birr 31 million to Birr 79 million. Net profit as % of sales revenue lies
between 7 to 12%. Net profit to equity and net profit to total investment or return on
investment (ROI) are also attractive.

5.4 PROJECTED CASH FLOW

The projected cash flow shows that the company would generate positive net cash
flows throughout the projection years. Cumulative cash flow generated towards the end
of the first planning year will amount to Birr 21 million. At the end of the projection year,
this amount will rise to Birr 549 million. Details are shown in Schedule 3.

Page 31
5.5 PROJECTED BALANCE SHEET

The positive financial performances are manifested in the balance sheet. As can be
seen from the projected Balance sheet depicted in Schedule 4, the net worth at the first
planning year, which is about Birr 108 million, will rise to Birr 775 million at the end of
the projection year.

5.6 BREAK-EVEN ANALYSIS

The break-even analysis establishes a relationship between production costs and

revenues. It indicates the level of production at which costs and revenue are in
equilibrium. To this end, using full capacity operation costs of year five, the break-even
point for capacity utilization and sales value is computed as followed.

Brake Even Sales Value = Fixed Cost + Financial Cost = Birr 163,066,823
Variable Margin ratio (%)

Brake Even Capacity utilization = Brake even Sales Value X 100 = 25.40%
Sales Revenue

5.7 KEY FINANCIAL INDICATORS

In financial analysis financial ratios and efficiency ratios are used as an index or
yardstick for evaluating the financial position of a firm. It is also an indicator for the
strength and weakness of the firm. Using the year-end balance sheet figures and other
relevant data, the most important ratios such as return on sales which is computed by
dividing net income by revenue, return on assets (operating income divided by assets),
return on equity (net profit divided by equity) and return on total investment (net profit
plus interest divided by total investment) has been carried out over the period of the
planning and all the results show that the company is highly liquid and has sound
financial performance. (See Schedule 2)

Page 32
 CHAPTER SIX – MONITORING AND EVALUATION

6.1 EVALUATION

The local PP Mats market has been growing steadily over the last few years due to
increases in people's disposable income and opening of the economy. With this in mind
the company intends the marketing programs to expand accordingly. The introduction
of quality catalogues and sales literature will enable JOBAC POLYMER INDUSTRY to
market to potential customers. The company projects sales to increase accordingly,
though slightly slower as it establish a reputation for itself. With time, a presence on the
Internet and participation in regional trade shows will be key milestones to expanding
sales and marketing potentials through the utilization of new channels and identification
of potential customers.

Throughout the year the company intends to undertake regular evaluations of the
marketing programs so as to ensure that it is in-line with the intended objectives.

In summary the company intends to undertake the following:

1) Tracking and follow-up: The Company intends to have the discipline, as an

organization, to track results of the business plan and make sure that it
implement.

2) Market segment focus: The Company intends to have the discipline to maintain
the market segment focus.

3) Saying no: Though difficult initially, the company intends to be able to say no to
special deals that take it away from the target focus and are unprofitable.

6.2 CONTINGENCY PLANNING

1) The company intends to watch the results very carefully. The company may
need to drop production of certain products if it cannot get the margin up or
material becomes difficult to obtain. The company might be able to avoid the
straight competition with the major companies by focusing more on the selected
products.

2) Another possibility is the introduction of a new company(s) in the niche. Hence

the need to undertake aggressive marketing and networking.

Page 33
3) An established PP Mats manufacturer may begin targeting to the target market
niche. Hence the need for commitment in the work and striving of total quality in
the organization.

4) Though country overall is rather secure on the labor front in terms of strikes the
company intends to have in place a mechanism that will ensure that were this to
occur the negative effects would be minimized. However further research and
analysis into the above is still being undertaken.

Page 34
FINANCIAL SCHEDULES

Page 35
 Schedule 1: Sales Projection

('000 Birr)
No Selling Current Projection Years
Description
. Price/unit Year 1 2 3 4 5 6 7 8 9 10
Capacity utilization 50% 70% 80% 90% 100% 100% 100% 100% 100% 100% 100%
1 Production Programme
PP Mat Regular 6*8 Pcs 234,000 327,600 374,400 421,200 468,000 468,000 468,000 468,000 468,000 468,000 468,000
PP Mat Large 9*12 " 13,500 18,900 21,600 24,300 27,000 27,000 27,000 27,000 27,000 27,000 27,000
PP Mat Egyptian Design " 156,000 218,400 249,600 280,800 312,000 312,000 312,000 312,000 312,000 312,000 312,000
2 Total Sales Revenue 320,955 449,337 513,528 577,719 641,910 641,910 641,910 641,910 641,910 641,910 641,910
PP Mat Regular 6*8 650.00 152,100 212,940 243,360 273,780 304,200 304,200 304,200 304,200 304,200 304,200 304,200
PP Mat Large 9*12 1,530.00 20,655 28,917 33,048 37,179 41,310 41,310 41,310 41,310 41,310 41,310 41,310
PP Mat Egyptian Design 950.00 148,200 207,480 237,120 266,760 296,400 296,400 296,400 296,400 296,400 296,400 296,400

Page 36
 Schedule 2: Projection Profit and Loss Statement

('000 Birr)
Projection Years
Description
1 2 3 4 5 6 7 8 9 10
Total Sales Revenue 449,337 513,528 577,719 641,910 641,910 641,910 641,910 641,910 641,910 641,910
Less Cost of Goods Sold 369,513 415,234 466,350 518,432 518,432 518,432 516,823 513,604 513,604 513,604
Gross Profit 79,824 98,294 111,369 123,478 123,478 123,478 125,087 128,306 128,306 128,306
Gross Profit Margin 18% 19% 19% 19% 19% 19% 19% 20% 20% 20%
Less Administrative and Marketing Expenses 12,434 12,894 13,372 15,293 15,287 15,219 15,100 14,868 14,862 14,855
Profit (loss) before Interest and Tax 67,390 85,400 97,996 108,185 108,191 108,259 109,988 113,438 113,444 113,451
Less Interest (Financial Costs) 22,006 18,838 15,146 10,846 5,836 (0) (0) (0) (0) (0)
Profit (loss) before Tax 45,384 66,562 82,850 97,339 102,355 108,259 109,988 113,438 113,444 113,451
Less Income Tax (30%) 13,615 19,969 24,855 29,202 30,706 32,478 32,996 34,031 34,033 34,035
Net Profit (Loss) 31,769 46,594 57,995 68,137 71,648 75,782 76,991 79,407 79,411 79,415
Cumulative Net Profit (Loss) 31,769 78,362 136,357 204,494 276,143 351,924 428,916 508,322 587,734 667,149
Profit (loss) before Tax (w.o. ex. financing) 67,390 85,400 97,996 108,185 108,191 108,259 109,988 113,438 113,444 113,451
Less Income Tax, w.o. ex. financing (30%) 20,217 25,620 29,399 32,455 32,457 32,478 32,996 34,031 34,033 34,035
Net Profit (Loss), w.o. External Financing 47,173 59,780 68,597 75,729 75,734 75,782 76,991 79,407 79,411 79,415
Cumulative Net Profit (Loss) 47,173 106,953 175,550 251,280 327,014 402,795 479,787 559,193 638,605 718,020
* Tax holiday period
Ratios (%)
Return on sales (net income by revenue) 7% 9% 10% 11% 11% 12% 12% 12% 12% 12%
Return on equity (net profit divided by equity) 29% 43% 53% 63% 66% 70% 71% 73% 73% 73%
Return on assets (operating income divided by assets) 31% 35% 36% 35% 32% 27% 23% 21% 18% 17%
Return on total investment (Net profit + interest to 50% 90% 140% 198% 260% 324% 395% 468% 542% 615%
investment)

Page 37
 Schedule 3: Projection Cash Flow (Source and Application of Funds)

('000 Birr)
Description Production Years Book Value
1 2 3 4 5 6 7 8 9 10 11
Total Cash Inflow 174,064 55,518 66,920 77,062 80,573 84,647 84,140 83,122 83,126 83,131 226,492
1. Inflow of funds 133,370 - - - - - - - - - -
Total equity - - - - - - - - - - -
Borrowing (term loan) 133,370 - - - - - - - - - -
Borrowing (medium term) - - - - - - - - - - -
Borrowing (overdraft) - - - - - - - - - -
Increase in overdraft - - - -
2. Inflow from operation 40,693 55,518 66,920 77,062 80,573 84,647 84,140 83,122 83,126 83,131 -
Profit after tax 31,769 46,594 57,995 68,137 71,648 75,782 76,991 79,407 79,411 79,415 -
Depreciation 8,925 8,925 8,925 8,925 8,925 8,866 7,149 3,715 3,715 3,715 -
3. Other income - - - - - - - - - - 226,492
Salvage value of assets - - - - - - - - - - 37,191
Recoverable assets - - - - - - - - - - 189,302
Total Cash Outflow 152,573 40,564 44,935 49,442 35,372 (0) (71) (142) (0) (0) -
4. Investment
Fixed investment - - - - - - - - - - -
Pre-Production expenditures - - - - - - - - - - -
Incremental working capital 133,370 18,193 18,873 19,079 (0) (0) (71) (142) (0) (0) -
5. Loan repayment
Term loan (Principal) 19,203 22,371 26,062 30,362 35,372 0 0 0 - - -
Overdraft (Principal) - - - - - - - - - - -
Net cash flow 21,491 14,955 21,985 27,620 45,201 84,648 84,211 83,264 83,126 83,131 226,492
Cumulative Net cash flow 21,491 36,446 58,430 86,051 131,251 215,899 300,110 383,374 466,501 549,632 776,124

Page 38
 Schedule 4: Projected Balance Sheet

('000 Birr)
Current Projection Years
Description Year 1 2 3 4 5 6 7 8 9 10
Fixed assets
Fixed investment 108,375 108,375 108,375 108,375 108,375 108,375 108,375 108,375 108,375 108,375 108,375
Pre-production expenditures 157 157 157 157 157 157 157 157 157 157 157
Total Fixed Assets 108,532 108,532 108,532 108,532 108,532 108,532 108,532 108,532 108,532 108,532 108,532
Less accumulated depreciation & amortization - 8,925 17,850 26,774 35,699 44,624 53,490 60,638 64,354 68,069 71,785
Net fixed assets 108,532 99,607 90,682 81,758 72,833 63,908 55,042 47,894 44,178 40,463 36,748
Current assets
Cash on hand & at bank - 21,940 36,949 58,988 86,668 131,869 216,516 300,727 383,990 467,117 550,248
Debtors (receivables) - 14,773 16,883 18,994 21,104 21,104 21,104 21,104 21,104 21,104 21,104
Stocks - 118,149 134,177 150,885 167,794 167,794 167,794 167,723 167,582 167,582 167,582
Total current assets - 154,861 188,009 228,866 275,566 320,767 405,414 489,554 572,676 655,803 738,933
Current liabilities
Creditors (payables) - - - - - - - - - - -
Overdraft - - - - - - - - - - -
Total current liabilities - - - - - - - - - - -
Total working capital - 154,861 188,009 228,866 275,566 320,767 405,414 489,554 572,676 655,803 738,933
Total net assets 108,532 254,468 278,691 310,624 348,399 384,675 460,456 537,448 616,854 696,266 775,681
Financed by
Paid-up capital 108,532 108,532 108,532 108,532 108,532 108,532 108,532 108,532 108,532 108,532 108,532
Loan and Credit - 114,168 91,797 65,735 35,372 (0) (0) (0) (0) (0) (0)
Retained profits (Losses) - 31,769 78,362 136,357 204,494 276,143 351,924 428,916 508,322 587,734 667,149
Total 108,532 254,468 278,691 310,624 348,399 384,675 460,456 537,448 616,854 696,266 775,681

Schedule 5: Repayment of Loan (Debt Financing Schedule)

Page 39
 ('000 Birr)
Loan amount 133,370.4
4
Payment period in year 1 2 3 4 5 6 7 8 9 10
Total payment amount 41,208.68 41,208.68 41,208.68 41,208.68 41,208.68 - - - - -
Interest (16.5%) 22,006.12 18,837.70 15,146.49 10,846.23 5,836.42 - - - - -
Principal 19,202.56 22,370.98 26,062.19 30,362.45 35,372.26 - - - - -
Balance - Year End 114,167.8 91,796.90 65,734.71 35,372.26 - - - - - -
8

Page 40
ANNEXES

Page 41
 Annex 1: Annual Costs of Production and Expenses

('000 Birr)
Operation years
Cost item
1 2 3 4 5 6 7 8 9 10
I. Total Costs of Production 369,513 415,234 466,350 518,432 518,432 518,432 516,823 513,604 513,604 513,604
1. Direct & auxiliary materials 359,095 404,229 454,758 505,286 505,286 505,286 505,286 505,286 505,286 505,286
2. Spare parts 966 966 966 1,609 1,609 1,609 1,609 1,609 1,609 1,609
3. Utilities 364 416 468 520 520 520 520 520 520 520
4. Labour, direct 3,276 3,744 4,212 4,680 4,680 4,680 4,680 4,680 4,680 4,680
5. Factory Overheads 5,812 5,880 5,947 6,337 6,337 6,337 4,727 1,509 1,509 1,509
Salaries & wages (+ benefits) 473 540 608 675 675 675 675 675 675 675
Repair & maintenance 386 386 386 644 644 644 644 644 644 644
Depreciation & amortization 4,844 4,844 4,844 4,844 4,844 4,844 3,234 16 16 16
Insurance 13 13 13 13 13 13 13 13 13 13
Supplies & services 97 97 97 161 161 161 161 161 161 161
II. Selling and Marketing Costs 2,652 2,973 3,294 3,615 3,615 3,615 3,615 3,615 3,615 3,615
Salaries & wages (+ benefits) 405 405 405 405 405 405 405 405 405 405
Marketing costs (0.5% sales) 2,247 2,568 2,889 3,210 3,210 3,210 3,210 3,210 3,210 3,210
III. General & Adm. Expenses 9,782 33,261 28,751 25,682 21,008 16,272 11,485 11,253 11,247 11,241
1. Administrative Overheads 9,782 9,921 10,079 11,679 11,672 11,604 11,485 11,253 11,247 11,241
Salaries & wages (+ benefits) 840 960 1,080 1,200 1,200 1,200 1,200 1,200 1,200 1,200
Land lease 297 292 286 280 274 268 262 256 250 244
Repair & maintenance 1,524 1,524 1,524 2,286 2,286 2,286 2,286 2,286 2,286 2,286
Depreciation 4,081 4,081 4,081 4,081 4,081 4,022 3,915 3,700 3,700 3,700
Insurance 10 10 10 10 10 10 10 10 10 10
Fuel & lubricants 1,295 1,295 1,295 1,943 1,943 1,943 1,943 1,943 1,943 1,943
Travelling and perdiem 126 144 180 180 180 180 180 180 180 180
Supplies & services 1,143 1,143 1,143 1,143 1,143 1,143 1,143 1,143 1,143 1,143
Miscellaneous 466 472 480 556 556 553 547 536 536 535
2. Financial costs (interest) - 23,340 18,672 14,004 9,336 4,668 (0) (0) (0) (0)
Total Operating Costs 381,947 451,468 498,394 547,729 543,055 538,318 531,922 528,472 528,466 528,459

Page 42
 Annex 2: Net Working Capital Requirement

( '000 Birr)

Days of Production Years

Description Coverage
1 2 3 4 5 6 7 8 9 10
1. Current assets 133,370 151,563 170,436 189,515 189,515 189,515 189,444 189,302 189,302 189,302

1.1 Accounts receivable (debtors) 30 14,773 16,883 18,994 21,104 21,104 21,104 21,104 21,104 21,104 21,104
1.2 Inventory 118,149 134,177 150,885 167,794 167,794 167,794 167,723 167,582 167,582 167,582

a) Materials

- Local materials 30 5,488 5,766 6,486 7,207 7,207 7,207 7,207 7,207 7,207 7,207

- Imported materials 120 96,225 109,971 123,717 137,464 137,464 137,464 137,464 137,464 137,464 137,464

b) Spare parts in stock 90 238 238 238 397 397 397 397 397 397 397

c) Work-in-Progress 1 1,012 1,138 1,278 1,420 1,420 1,420 1,416 1,407 1,407 1,407
d) Finished Products 15 15,185 17,064 19,165 21,305 21,305 21,305 21,239 21,107 21,107 21,107
1.3 Cash-in-hand 30 449 503 558 618 618 617 617 616 616 616

2. Current liabilities - - - - - - - - - -

2.1 Accounts payable (creditors) - - - - - - - - - - -

3. Working capital

3.1 Net working capital (1) - (2) 133,370 151,563 170,436 189,515 189,515 189,515 189,444 189,302 189,302 189,302

3.2 Increase in working capital 133,370 18,193 18,873 19,079 (0) (0) (71) (142) (0) (0)

3.3 Foreign component (%) 72.3% 72.7% 72.7% 72.7% 72.7% 72.7% 72.8% 72.8% 72.8% 72.8%

Page 43
 Annex 3: MANPOWER REQUIREMENT AND ESTIMATED ANNUAL LABOUR COST

Head Monthly Salary (Birr) Annual Salary

S/No. Description
Count Rate Total (Birr)

I Manager's Office 2 30,000.00 360,000.00

1 Plant Manager 1 25,000.00 25,000.00 300,000.00

2 Executive Secretary 1 5,000.00 5,000.00 60,000.00

II Administration & Finance 10 50,000.00 600,000.00

1 Administration and Finance Head 1 15,000.00 15,000.00 180,000.00

2 Accountant 1 8,000.00 8,000.00 96,000.00

3 Cashier 1 4,000.00 4,000.00 48,000.00

4 Store Keeper 1 5,000.00 5,000.00 60,000.00

5 Driver 0 3,000.00 - -

6 Guard 6 3,000.00 18,000.00 216,000.00

III Sales & Purchasing 3 27,000.00 324,000.00

1 Marketing Head 1 15,000.00 15,000.00 180,000.00

2 Sales Representative 1 7,000.00 7,000.00 84,000.00

3 Purchaser 1 5,000.00 5,000.00 60,000.00

IV Production & Technical 134 357,000.00 4,284,000.00

1 Production Head 1 15,000.00 15,000.00 180,000.00

2 Extruder Operator 15 4,000.00 60,000.00 720,000.00

3 Extruder Helper 15 2,000.00 30,000.00 360,000.00

4 Warping Operator 3 3,500.00 10,500.00 126,000.00

5 Warping Helper 3 1,500.00 4,500.00 54,000.00

6 Head Weaver 3 4,000.00 12,000.00 144,000.00

7 Weaver 18 2,000.00 36,000.00 432,000.00

8 Doffers/Transporter 6 3,000.00 18,000.00 216,000.00

9 Mat Cutter 6 3,000.00 18,000.00 216,000.00

10 Sticher 9 3,000.00 27,000.00 324,000.00

11 Packing Operators 6 3,500.00 21,000.00 252,000.00

12 Recycling Operator 6 3,500.00 21,000.00 252,000.00

13 Recycling Helper 6 1,500.00 9,000.00 108,000.00

14 Floor Cleaner 12 1,500.00 18,000.00 216,000.00

15 Laborer 18 1,500.00 27,000.00 324,000.00

16 Senior Mechanics 1 6,000.00 6,000.00 72,000.00

17 Mechanic 3 4,000.00 12,000.00 144,000.00

18 Electrician 3 4,000.00 12,000.00 144,000.00

Total, monthly/annual salary 149 464,000.00 5,568,000.00

Page 44
Annex 4: BUSINESS LICENSE OF THE
CONSULTANT

Page 45
Page 46