Journal of Business and Administrative Studies (2018), Vol. 10, No.

Assessment of Challenges and Performances of Ethiopian

Export Market

Mesfin Lemma
Associate professor at International Leadership Institute, Ethiopia

Biniam Ali
Deputy CEO & Chief Strategy Officer – Private Trading Company, Ethiopia

Abstract
Export is an important ingredient for country’s economic growth and
sustainable development, like in Ethiopia; it is the back bone of the country’s
economy. The main objective of the study was to assess challenges,
opportunities and performance of Ethiopian export market in the past three
years (2015 -2017). The study was conducted by the relevant primary and
secondary data from the key staff member of the exporting companies, their
associations and the government bodies through questioners and deep
interviews. After the data has been collected, it was analyzed by using simple
statistical techniques which is tables and percentages. The findings of the study
showed that, there are many challenges in the internal and external
environment of the exporters. The major factors are strong international
competition, high transportation costs and ineffective national export
promotion programs. In the overall export performance as country wide was
deteriorating year after year and the firm’s perception about their
performance was extremely dissatisfied. However, the country has opened
many doors for promoting the sector in many incentive packages. Finally,
based on the findings, results and analysis of the study a general and policy
implication recommendations are forwarded. In general recommendations, top
management of the company should work on the improvement of their product
quality and uniqueness, the firm should be cost sensitive for their products by
minimizing costs and increase their competitive advantages in the global
market. In additional, the policy implications to increasing the availability of
credit facilities, simplifying export sector regulations and formulation short-
term and long-term export growth policies are essential to improve export
performance of the country.

Keywords: Competition, Export Performance, global market, marketing

strategy, Ethiopia.


Corresponding author and can be reached through: [email protected]
 Mesfin Lemma and Biniam Ali 34

1. INTRODUCTION

1.1 Background of the Study

Nowadays, export trade is vital for the nation’s economy. Export performance
and economic growth relations are becoming the main agenda in the
international and regional development programs around the world
(International Labour Office, 2015). Ethiopia is a developing East African
country going through political, economic, social and technological transitions.
The country’s development strategy has the objectives of promoting rapid
economic growth with a stable economic atmosphere and enhancing the
integration of country’s economy with a global economy (Allaro, 2012).

Ethiopia’s potential for export of manufactured goods lies in textile, leather

and leather products, as well as products of agro-processing. Exporters have a
good possibility of increasing export due to the availability of all-important
elements in the country at a reasonable price. These elements are, “raw
materials, low wages and low energy costs” (Abadi, 2015, p. 36). This is
highly important for a country to attract the industry investments and also it
gives a comparative advantage of other countries.

1.2 Statement of the Problem

To generate sustainable growth in the country, the government has developed
Growth and Transformation Plan to bring about a shift in the export sector.
Export items such as “flower, fruits, vegetables, coffee, sesame and cereals”
are the major exportable commodities of agricultural sector; however, during
the plan period, performance of these sub sectors fell short of the planned
targets (National Planning Commission, 2016, p. 65). Export is regarded as the
most common international market entry mode (Saravanavel, 2009). While,
countries want to achieve sustainable economy, it gives to priority for the
export sector. Ethiopia export sector is expected to serve as a key driver for
Journal of Business and Administrative Studies (2018), Vol. 10, No. 1

economic transformation through “expanding output, employment creation,

technology transfer and introduction of new products” (National Planning
Commission, 2016, p. 105). Thus, aggressively expanding the export sector
will be a key direction to ensure sustainable economic growth and
development. But, over the past three years, the weak performance of the
export sector was the main constraint in ensuring reliable and adequate supply
of foreign exchange required for imported capital goods and services that are
“essential for industrialization, infrastructure development and technological
upgrading” (National Bank of Ethiopia, 2017, p. 68). Therefore, the paper has
assessed and explored the challenges, opportunities and performance of the
country’s export market in the past three years from 2015 to 2017.
Consequently, attempts have been made to find answers for the following basic
research questions:
1) How is export trade performing during 2015-2017 and what is the level
of performance?
2) What are the main factors that influence performance of the export
market?
3) To what extent the opportunities available in the export sector?
4) What should be done to improve the performance of export trade?

2 LITERATURE REVIEW
2.1 Importance of Export Marketing
Exports are significant contributions for all developed or underdeveloped
countries. The International Journal of Fundamental Psychology and Social
Sciences (2011) article listed out the main advantages of export marketing at
the national level are:

i. Foreign exchange earnings: Exports are very important for exporting

countries by earning foreign exchanges. It is vital for the country to pay for
 Mesfin Lemma and Biniam Ali 36

the import of raw materials, components, spares, capital goods and advanced
technical knowledge.

ii. Balance of payment: Potential exports in the country are a capacity to

solve the balance of payment problems and enables the country to bring
favorable balance of payment positions.

iii. Promoting economic development: Exports are required for

encouraging industrial development and economic growth. Rapidly
rising of export business has bringing fast and sustainable economic
development in a country.

2.2 Overview of the Ethiopian Export Sector

Ethiopia is a developing East African country going through political,
economic, social and technological transitions (Allaro, 2012). The country’s
development strategy has the objectives of promoting rapid economic growth
with a stable economic atmosphere and enhancing the integration of country’s
economy with a global economy. Ethiopia’s potential for export of
manufactured goods lies in textile, leather and leather products, as well as
products of agro-processing. Clothing offers a good possibility of increasing
export due to the availability of all-important elements in the country at a
reasonable price for the development of textile industry. These elements are,
“raw materials, low wages and low energy costs” (Abadi, 2015, p. 36). This is
highly important for a country to attract the industry investments and also it
gives a comparative advantage of other countries.

2.3 Determining Factors of Ethiopian Export Performance

As NPC (2016) report identified the constraints of the export sector was
shortage of investment land, inputs, electricity; weak trade and custom services
facilitations, regulations, weak administrative and logistics support and
Journal of Business and Administrative Studies (2018), Vol. 10, No. 1

monitoring system; the production capacity and the investment flow to the
manufacturing sub-sector was not sufficient and the performance of the
existing manufacturing industries was also weak in terms of volume and
quality during the GTP I period. Debas (2006) study concluded that, “market
access, low level of private investment, high transaction costs, infrastructural
deficiencies, delays in service delivery, limited market knowledge and shortage
of skilled work force” are the main constraints and challenges of Ethiopian
export sector (p.103). The World Bank (2016), in a report entitled 3rd Ethiopia
Economic Update: Strengthening Export Performance through Improved
Competitiveness have considered exchange rate overvaluation, low level of
investment in the economy, coffee surtax, inadequate marketing infrastructure,
high tariffs on imports of raw materials, high trade costs and insufficient
adjustment of producer prices are some of the limiting factors to the country’s
export growth.

2.4 Improving Market Access with Global and Regional Economic

Integration
Agreements for the objectives of increasing export market and to reduce tariff
and non-tariff barriers between two and more countries in a regional,
continental or worldwide level for achieving a common goal of the free flow of
goods and services between them is referred to as economic integration.
According to the World Bank, Country Department for Ethiopia (2014),
Ethiopia has market access to Common Markets for Eastern and Southern
Africa (COMESA), Access to African Growth and Opportunity Act (AGOA),
for Everything But Arms (EBA) trade and Generalized System of Preference
(GSP) into the European Union. Especially, under the AGOA program, like
other countries in the region, Ethiopia has also eligible for the US market as a
duty and quota free access. In similar way, the country is entitled to get a free
 Mesfin Lemma and Biniam Ali 38

market access for many products in other countries market (United Nations
Development Program, 2014). Some of these countries are; Canada, Japan,
Australia, Russia, United Kingdom and most European Union member
countries under different economic integration programs.

Africa is moving toward regional integration. There are eight Regional

Economic Communities approved by the African Union (AU). These are:
Community of Sahel Saharan States (CEN-SAD), Common Market for Eastern
and Southern Africa (COMESA), East African Community (EAC), Economic
Community of Central African States (ECCAS), Economic Community of
West African States (ECOWAS), Inter- governmental Authority on
Development (IGAD), Arab Maghreb Union (UMA) and Southern African
Development Community (SADC) ( (Ethiopian Investment Agency, 2016).
Ethiopia has preferential trade agreements with key international markets.
Some of these are: The African Growth and Opportunity Act (AGOA) offers
market access privilege to the US market, Everything but Arms (EBA) of the
EU offers market access privilege and Duty free and quota free (DFQF)
privilege extended by international markets of China, India, Japan and Korea
(Ethiopian Investment Agency, 2016).

2.5 Synopsis of Ethiopian GTP II Export Sector at a Glance

The export sector is expected to serve as a key driver for economic
transformation through “expanding output, employment creation and
technology transfer and introduction of new products” (Muhabaw, 2014, p.
76). It broadens market opportunities through serving as outlets for local
producers. Export is critical for sustainable economic growth and development
by enhancing competitiveness of the overall economy and expanding market
opportunities. In the long run, it leads to increased competitiveness in
international markets, increases efficiency in production and marketing, in the
Journal of Business and Administrative Studies (2018), Vol. 10, No. 1

process showing other domestic producers the possibilities to penetrate into the
global market. Emphasis will be given to revamping the merchandize export
sector given its crucial role through boosting and sustaining overall economic
growth and development. Hence, efforts will be made so as to bring a
significant shift in export performance during the Growth and Transformation
Plan II (GTP II) period (National Planning Commission, 2016).

3. RESEARCH METHODOLOGY
A descriptive study explores and describes the way things are. It is also
concerned with the assessment of attitude, opinions, performance,
demographics, practice and procedure (Kothari, 1990). For these reasons, to
answer the basic research questions, this study adopts a descriptive survey
method. The study used both quantitative and qualitative data that will collect
from both primary and secondary data sources. The primary data was collected
by self-administered questionnaires including both open and close ended
questions and interviews by purposive sampling methods of the country’s
major valuable exportable commodity exporting companies which is
represented by their associations. The secondary sources such as reports,
magazines, different published and unpublished materials, journals and articles
from National Planning Commission, Ministry of Trade and Industry,
Ethiopian Customs Authority, National Bank of Ethiopia, Ethiopian
Investment Agency and Ethiopia chamber of commerce sources will be
utilized.

To conduct this study, the researchers chose the non-probability sampling

techniques. This method is appropriate when the study places special emphasis
upon the control of certain specific variables. At the World’s Top Exports
(2017) and National Bank of Ethiopia (2017) report indicated that the top 10
most valuable export product categories are representeing 92% of the overall
 Mesfin Lemma and Biniam Ali 40

export market of the country in 2017. These are; those products exporting
company has establish their own associations for facilitating administration and
other operational issues in different category. These are: depending on the two
tables below, the researchers tried to select the top three most valuable export
products, which accounts of 68% for the study samples. These products are
coffee, tea, spices, vegetables and oil seeds.

Table 1: Top ten export products in Ethiopia

S.N Product Amount Percent of the
(USD Million) total exports
1. Coffee, Tea, Spices 963.0 33.6
2. Vegetables 538.4 18.8
3. Oil Seeds 446.3 15.6
4. Plants, Cut Flowers 221.9 7.8
5. Gems, Precious Metals 125.7 4.4
6. Meat 97.1 3.4
7. Raw Hides, Skins Not Fur Skins, Leather 74.8 2.6
8. Live Animals 61.9 2.2
9. Electrical Machinery, Equipment 56.2 2
10. Footwear 45.5 1.6
Total 2,630.8 92
Source: Addis Ababa Chamber of Commerce and Sectoral Associations (2018)
Journal of Business and Administrative Studies (2018), Vol. 10, No. 1

Table 2: Exporters Association in Ethiopia

R. No Name of the Association Number of Percentage
Companies
1. Ethiopian Coffee Exporters Association 61 19.1
2. Ethiopian Pulses, Oilseeds and Spices 45 14.1
Processors Exporters Association
3. Ethiopian Horticulture Producer and 34 10.6
Exporters Associations (EHPEA)
4. Ethiopian Tanners, Footwear and Leather 38 11.9
Products Manufacturing Association
5. Natural Forest and Forest Products Exporters 7 2.1
6. Live Animal Exporters 11 3.4
7. Ethiopian Textile and Garment 49 15.3
Manufacturers Association
8. Ethiopian Handicraft Manufacturers and 16 5
Exporters Association
9. Ethiopian Honey and Beeswax Producers and 26 8.1
Exporters Association
10. Ethiopian Meat Producers Exporters 4 1.3
Association
11. Other Agricultural Related Export Companies 29 9.1
Total 320 100
Source: Addis Ababa Chamber of Commerce and Sectoral Associations (2018)

The top ten exportable products are also represented by their 10 associations.
From those associations, Ethiopian Coffee Exporters Association, Ethiopian
Pulses, Oilseeds and Spices Processors Exporters Association and Ethiopian
Horticulture Producer and Exporters Associations are an umbrella of 140
companies. It means that, they are 43.8% of the total exporters in the country
and produced more than 65% of the country’s total export value. Through these
expressive data, the researchers used a sample size of 140 export companies
which means 43.8% of the country exporters represented by their three
associations are selected by purposive sampling methods for attained the study
objectives during 2015 - 2017.
 Mesfin Lemma and Biniam Ali 42

4. RESULTS AND DISCUSSION

4.1 Characteristics of Firms

1) Firm Competencies and Characteristics
Many of exporting companies are established from 1990 – 1997, these are 64%
of the total. The other 7%, 18% and 11% are before 1990, between 1998-2007
and 2008-2017 respectively. On firm size, 79% are more than 100 employees
and 21% of them are below 100 employees.

Table 3: Firm competencies and characteristics

Total Sample (n=28)
Statements Frequency Percent Cumulative
Period Percent
Firm’s years Before 1990 2 7 7
of establishment 1990 - 1997 18 64 71
1998 - 2007 5 18 89
2008 - 2017 3 11 100
Size of the firm 0-50 - - -
51-100 6 21 21
>100 22 79 100
Export product Coffee 12 43 43
Categories Oil Seeds & Spices 9 32 75
Plants & Cut Flowers 7 25 100
Effect on country Not at All - - -
of origin Unsure - - -
Rarely 7 25 25
Frequently 21 75 100
Quality control Yes 23 82 82
certification No 5 18 100
Source: Authors’ survey result (2018)

The companies’ major export products category is different, of this 43% are
coffee products, 32% of oil seeds and spices and 25% are plants & cut flowers.
Furthermore, customers’ perception on the quality of those products in the
country of origin is frequently perceived by 75%. But 25% of them are
Journal of Business and Administrative Studies (2018), Vol. 10, No. 1

responded as rarely feedbacks. From these exporting companies 82% of them

are certified by quality management system and 18% has not certified.

2) Firm’s Level of Access

Firm’s level of access is one of the measurements between company and
external bodies who is involved in the export sector. In the modern theory of
international trade, the Heckscher–Ohlin theory stated that; the capital rich
countries are export capital intensive goods and import labor intensive goods.
On the other hand, labor rich countries are exporting labor intensive goods and
import capital intensive goods (Verter, 2015). This theory is absolutely true for
Ethiopia, because Ethiopia exports labor intensive goods and imports capital
intensive goods. Because, exporting companies in Ethiopia had shortage on
capitals.

Table 4: Firms’ level of access

Not at All Rarely Frequently Convenient
Firm’s location
Freq. % Freq. % Freq. % Freq. %
Access to necessary sources of 5 18 3 11 16 57 4 14
supply.
Access to government agencies. - - 2 7 4 14 22 79
Access to export services such as - - 16 57 8 29 4 14
financial, freight, insurance
services and advice.
Access to the necessary general - - - - 18 64 10 36
labor skills
Access to networking opportunities - - 7 25 2 7 19 68
Source: Authors’ survey result (2018)
 Mesfin Lemma and Biniam Ali 44

As the World Bank (2016) Ethiopia economic updates report identifies that,
poor access of finance, low level of investment, inadequate marketing
infrastructure, high tariffs on imports of raw materials are stated as some of the
limiting factors to the country’s export growth (The World Bank, 2016). So, as
the data explained, export companies access to the necessary sources of supply
was in convenient access only by 14%. The other firms are not getting
sufficient access for exporting their products. In addition, government agencies
access to exporting companies are by 79% of convenient. This means, the rest
21% are not access in the right time and right quality of services from them.
Similarly, exporting company’s access to export related activities such as
finance, fright, insurance services and networking opportunities are not in
convenient levels. Insufficient access of government service was listed the
prior determining factors of the country’s export performance reported by
National Planning Commissions in 2016 (National Planning Commission,
2016).

4.2 Firm's Strategy and Export Performance

1) Firm’s Export Marketing Strategy
Firm’s position compared to their competitors in the safety of production and
products, average cost of production, uniqueness of the product and company
reputation are the major advantages by 79, 93, 82 and 86 percent’s
respectively. Proximity to foreign markets are 57% advantage in the
company’s competency. In addition, quality of personnel in the exporting
companies is very essential. As stated in the Heckscher–Ohlin theory, labor
rich countries are exporting labor intensive products. For exporting these
products, the quality of personnel was very critical for the firms by 80%. For
other 20% firms were not that much advantage, because those firm’s higher
Journal of Business and Administrative Studies (2018), Vol. 10, No. 1

number of employees working as daily laborers especially in the farm area of

plants and cut flower companies.

Table 5: Firms export competencies

Statements Major Disadvantag Advantage Major Advantage
Disadvantage e
Freq. % Freq. % Freq. % Freq. %

Safety of production & - - - - 6 21 22 79

products
Average cost of - - - - 2 7 26 93
production
Product uniqueness - - - - 5 18 23 82
Quality of personnel 2 7 4 14 9 32 13 47
Export marketing - - 5 18 11 39 12 43
knowledge
Company reputation! 4 14 24 86
Goodwill - - 1 4 16 57 11 39
Proximity to foreign
markets
Source: Authors’ survey result (2018)

About the firm’s major competitive advantage, the export products uniqueness
was 79%, but 21% of the company’s product were not unique at all. Standards
of the quality like in superior levels were not by 43%. But, 39% had products
of superior quality and 18% were not sure about their product’s superior
quality. Depending on the price competitive, 60% of the company’s product
was not competitive at all. Only 29% of the product was competitive in price.
In promotional campaigns, 68% are not successful at all. Only 18% are
certainly a successful promotional campaign.
 Mesfin Lemma and Biniam Ali 46

Table 6: Firms’ major competitive advantage

Statements Not at All Not sure Certainly

Freq. % Freq. % Freq. %

Are your export products 6 21 - - 22 79

unique?
Are your export products 12 43 5 18 11 39
of superior quality?
Are your export product 17 60 3 11 8 29
prices competitive?
Are your export promotion 19 68 4 14 5 18
campaigns successful?
Source: Authors’ survey result (2018)

As National Planning Commission (2016) and World Bank (2016) report

identified that, country’s export sector was inadequate marketing
infrastructure, poor marketing strategy, weak custom services facilitation,
regulations and logistic supports (The World Bank, 2016). In addition, firm’s
country of origin effect on customers’ perception about their products was a
higher negative response. And also, in the interview session, poor
communication facilities, less export management and planning skills and poor
promotional activities are the major drawbacks of their performance. The
above studied major factors and firm’s response about the promotion
campaigns were showed that, the exporting companies’ promotional campaigns
were unsuccessful.

In export country destinations, 43% of the firms are exporting below 5

countries. 32% of the firms are exporting to 5-10 countries and 25% of them
are exporting destinations for more than 10 countries. Depending on the
continents in the export destinations, Europe is the major one by 36%. Asia
Journal of Business and Administrative Studies (2018), Vol. 10, No. 1

(25%) and North America (21%) are followed, but South America is the lowest
by 7% of export destination continents.

Table 7: Country’s Destination of Exports

Statements Total Sample (n=28)
Frequency Percent Cumulative Percent
Numbers of regularly exporting countries
 <5 12 43 43
 5 – 10 9 32 75
 >10 7 25 100
Most important continents for exporting
 North America 6 21 21
 South America 2 7 28
 Europe 10 36 64
 Asia 7 25 89
 Africa 3 11 100
Source: Authors’ survey result (2018)

2) Firm’s Export Performance

Firm’s performance on their export objectives in the market share are
dissatisfied by 29%. Only 21% are satisfied by their performance. These results
are also similar in the market share growth. In the firms export sales value,
volume and growth 75% of them are dissatisfied. Only 14% are very satisfied
and 11% are satisfied. The firms export profitability and its growth is very
satisfactory by 39%, but 25% of them are dissatisfied. By new country market
penetration, 82% are satisfied and very satisfied. Only 18% are dissatisfied.
Like country’s plan in export sector, every exporting firms were their own
objectives for the total turnover and export division turnovers. From the table
12 firm’s information gave a clear image about turnover performance of the
firms.
 Mesfin Lemma and Biniam Ali 48

Table 8: Firm’s Performance on Export Objectives

Objectives Dissatisfied Not Sure Satisfied Very Satisfied

Freq. % Freq. % Freq. % Freq. %

Export market share 8 29 11 39 6 21 3 11

Export market share 8 29 11 39 6 21 3 11
growth
Export sales value 21 75 - - 3 11 4 14
Export sales volume 21 75 - - 3 11 4 14
Export sales value 21 75 - - 3 11 4 14
growth
Export sales volume 21 75 - - 3 11 4 14
growth
Export profitability 7 25 - - 10 36 11 39
Export profitability 7 25 - - 10 36 11 39
growth
New market 5 18 - - 9 32 14 50
penetration
Source: Authors’ survey result (2018)

Firm’s turnover performance depending on number of companies from 2015 to

2017 was different with up and down growth. Number of firm’s which
achieved USD 501,000 to 1 million turnovers was decreased from 2015 to
2016 by 14% and remained in the same number in 2017. Decrease in number
of firms means, firms were shifted to the next higher-level turnover ranges. It
was a good indication for the firm, because their turnovers were growing. From
USD 1 to 5 million accomplished numbers of firms were increased by 6% from
2015 to 2016 and decreased by 19% in 2017. Firms from lower level were up
warded in 2016 and out from this range by 2017 went to the next category.
USD 5 to 10 million turnover firms were increased year after year by 11% up
Journal of Business and Administrative Studies (2018), Vol. 10, No. 1

to 2016 and 7% by 2017. This was a good sign, because number of firms was
growth from lower level and their turnover was increased. More than 10
million USD turnover performance firms were increased from 32% in 2015 to
43% in 2017 by 14% incremental rate. This was an excellent performance for
the firms as well as the country, because turnover growth was a solution for
liquidity problems, increasing efficiency and increase inflow of foreign
currencies to the country. So, the turnover performance of the firms was
increased from 2015 to 2017. In 2017, 43% of the exporting firms were more
than 10 million USD turnovers per annum.

14
12
10
8
6
4
2
0
2015 2016 2017
501,000-1,000,000
1,000,001-5,000,000
5,000,001-10,000,000
>10,000,000

Figure 1: Number of Exporting Firms

Source: Authors’ survey result (2018)

The firm’s export sales performance was different from company to company
and there were its own goals depending on their characteristics. But, all the
companies were engaged in export business, they are expecting to all sales in
 Mesfin Lemma and Biniam Ali 50

the company were generated from export sales. In this understanding, as table
12 depicts, firms less than 100,000 USD sales were increased by 7% in 2017
from 2015. Growth the number of firms to lower sales range means decreased
the firm’s sales performance from year 2015 to 2017. While from USD 100 to
500 thousand sales in number of firms also increased by 7% from 2015 to
2017. More than USD 1 million export sales company in 2015 was 22 and in
2017 this number was decreased to 16. It means number of firms whose export
sales were more than USD 1 million had decreased by 27% in 2017 from 2015.

As presented in table 8, the firm’s turnover performance was in good status and
increased from year to year. But their export sales were deteriorated. Because,
exporting companies were dependence on short term liquidity through working
capital requirements. Then, the firm were focused on domestic markets than
international. The foreign market has many hassles, unpredictable changes in
exchange rates, low production capacity, less commitments for facing
exporting challenges and poor quality of products in export standard are the
major reasons of the firm to focus on domestic markets than foreign markets
(Berman & Berthou, 2011). Because of these effects the company’s total sales
turnover was in good progress, but export sales performance was decreased.
Journal of Business and Administrative Studies (2018), Vol. 10, No. 1

Table 9: Export Sales Performance of Firms

In US Dollar 2015 2016 2017
Frequency Percent Frequency Percent Frequency Percent
<100,000 2 7 - - 4 14
100,000 - 500,000 1 4 3 11 5 18
501,000 – 3 11 8 28 3 11
1,000,000
1,000,001 – 11 39 12 43 13 46
5,000,000
5,000,001 – 7 25 3 11 2 7
10,000,000
> 10,000,000 4 14 2 7 1 4

Source: Authors’ survey result (2018)

Firm’s turnover and export sales performance was discussed in above. In the
below table, firm’s satisfaction level of their export performance was assessed.
As firm’s performance in terms of export sales were dissatisfied by 97%. This
means, the company was not doing well in export sales performance.
Additionally, firm’s percentage of export sales were dissatisfied by 96%. The
company’s main business was export sales, but it couldn’t be equal with their
turnovers.

The main strategic goal of exporting company was increasing sales and growth
their profits. However, their export sales showed poor performance and
unsatisfactory (82% of them responded unsatisfactory). The less export sales
were a negative impact on the firm’s long-term profitability ratio. However,
export sales were profitable and firms also satisfied by 85%. In overall export
performance, 94% of firm’s were not satisfied. This was a similar result
reported by National Bank of Ethiopia (2017) and National Planning
 Mesfin Lemma and Biniam Ali 52

Commission (2016). These reports concluded that, the country’s export

performance was at weak level and needs improvement in GTP II period.

Table 10: Firms’ Export Performance Satisfaction Level

Statements Extremely Dissatisfied Satisfied Extremely
Dissatisfied Satisfied
Freq. % Freq. % Freq. % Freq. %

Firm’s performance 19 68 8 29 1 3 - -
in terms of export
sales
Export sales as a 16 57 11 39 1 4 - -
percentage of total
sales
Export profitability 1 4 3 11 11 39 13 46
Strategic goals 12 43 11 39 2 7 3 11
achieved
Overall export 17 61 9 33 1 3 1 3
performance

Source: Authors’ survey result (2018)

4.3 Firm’s Export Challenges

1) Similarity on export and domestic markets
Depending on the similarities between export and domestic markets, 94% of
consumer products behavior is not similar. In buying characteristics of the
consumer 96% are not similar, only 4% were similarities between them. In
purchasing power (89%), socio-economic characteristics (93%) and
distribution channel characteristics (94%) are not similar. But legal
frameworks between export and domestic market were similar by 15% and not
similar by 67%. 18% were not sure their similarities. To explore market
similarity was very essential for expanding export markets in different
countries.
Journal of Business and Administrative Studies (2018), Vol. 10, No. 1

Table 11: Similarity in Export and Domestic Markets

Characteristics Not Similar Not Sure Similar Very Similar

Freq. % Freq. % Freq. % Freq. %

Consumer product 26 94 1 3 1 3 - -
behavior
Consumer buying 27 96 - - 1 4 - -
characteristics
Customer purchasing 25 89 - - 2 7 1 4
power
Socio-economic 26 93 - - 2 7 - -
characteristics
Legal framework 19 67 5 1 3 1 1 4
8 1
Distribution channel 26 94 1 3 1 3 - -
characteristics
Source: Authors’ survey result (2018)

2) Export Trade barriers

The firm’s trade barriers of tariffs (78%), social and cultural barriers (50%) and
lack of adequate distribution channels by 57% are important. The political
situation of export target country (61%) and social & cultural barriers (46%)
are very important barriers for export trade. But quota is not important by 68%.
 Mesfin Lemma and Biniam Ali 54

Table 12: Export trade barriers

Barriers Not Important Not Sure Important Very
Important
Freq % Freq. % Freq. % Freq. %

Tariffs 3 11 - - 22 78 3 11
Quotas 19 68 2 7 5 18 2 7
Political situation of - - 2 7 9 32 17 61
export target
country
Social and cultural - - 1 4 14 50 13 46
barriers
Lack of adequate 2 7 4 14 16 57 6 22
distribution
channels

Source: Authors’ survey result (2018)

3) Challenges encountered during exporting

In the firms export activity, highly repeated problems are: insufficient
information for overseas market (68%), difficulty to identify capable
collaborators in the host country (57), strong international competition (78%),
high transportation costs (78%), ability of the company to adopt new
challenges (53%) and ineffective national export promotion programs by 78%.
As Debas (2006) study about the main constraints and challenges of Ethiopian
export sector was limited market knowledge and delays in service delivery. In
addition, the World Bank (2016) study also identified that inadequate
marketing infrastructure is one of the factors. In the export firm’s response also
showed that, there was no any government or private agencies in the country to
interpret and analyze international marketing data in continual bases.
Journal of Business and Administrative Studies (2018), Vol. 10, No. 1

Furthermore, the country’s promotional programs were ineffective, because of

limited skilled manpower with less expertise in international advertising and
promotion (Gebreyesus & Demile, 2017).

Table 13: Problems during export activities

Statements Never Not Sure Rarely Always
Freq. % Freq. % Freq. % Freq. %

Insufficient information - - - - 9 32 19 68
for overseas markets
Difficulty to identify - - - - 12 43 16 57
capable collaborators in
the host country
Strong international - - 1 4 5 18 22 78
competition
Lack of qualified 3 11 2 7 14 50 9 32
personnel for exporting
High transportation 2 7 1 4 3 11 22 78
costs
Financial risks (e.g. 13 46 8 29 2 7 5 18
country-related and
business risk)
Ability of the company 2 7 3 11 8 29 15 53
to adopt the new
challenges
Ineffective national 1 4 2 7 3 11 22 78
export promotion
program
Source: Authors’ survey result (2018)

On top of the above challenges, the researchers investigated from interview

that lack of export management experience, poor systemization of export
planning and lack of price competitiveness as challenges faced by firms. In
addition to this, minimum production level and growth, poor communication
facilities, different legal norms in the exported country, different customs and
cultures, and finally the firm’s low quality, high price and poor promotional
activities are the main drawbacks of those companies. The most common
 Mesfin Lemma and Biniam Ali 56

problems, which were also identified by the international organizations are:

poor quality and high cost of products, inadequacy of trade information
systems, unfavorable world prices and lack of competitiveness with limited
production capacity, inability to produce to potential client’s standard, lack of
reliable suppliers of inputs or raw materials and poor quality of institutional
supports. Furthermore, lack of finance, differences in weights, measures and
technical specifications, intense competition and fluctuating of costs are the
main determinants of the export sector in Ethiopia.

5. CONCLUSION AND RECOMMENDATION

The main objective of the study was to assess challenges, opportunities and
performance of Ethiopian export market from 2015‒2017. Based on data
collected, the research attempted to explore the recent export performance of
the country. Depending on results and analysis of the study, the following
major conclusions are identified. Most employees in the export sector are
young and middle-age peoples. But those are mostly male and first-degree
graduates. And also, there work experience is under 10 years. Many firms are
established before 27 years, but many employees working experience are under
10 years, it showed that, employees’ turnover is very high in the sector. In
addition, many employees are working under the top management position.
This may cause to lack of industry experiences in high positions.

Customer’s perception in the country of origin effect is very high rate. This is a
negative impact in the country’s export product categories. Because, Ethiopia
is the under developed country and their export product on the consumer
perception is highly negative effect by their country of origin. However, the
exporting companies knew this effect and tried to solve it by improve the
product quality management system. About 96% company has a general
Journal of Business and Administrative Studies (2018), Vol. 10, No. 1

awareness about the importance of this certification and more than 80% of this
are already certified. This is one step to ahead for decreasing the consumer
perceptions about the products effect in country of origin.

To achieve in company base or country wide of the exporting objectives, the

exporters should get the full access for many facilities. In the study, the
convenient access is only 42%. This result shows that, without the radical
improvement and change about the facility access for all exporters, the country
exporting sector will be in slow move and the company also have no
significant contribution in the country’s GTP. The important issue that the
study identified about the product is product quality and price competitiveness
in the export market. As the result, quality and price competitiveness of the
product has a challenged for the firm as well as for the country. Currently,
there are plenty of market opportunities around the globe, this is most
important for the developing countries like Ethiopia for needs of export
market. 86% of the firm knew this market opportunity as a global wide. But,
the current export destination countries are small. 75% of the exporting
countries are under 10, which is mostly Europe. As the result showed that,
coffee is the most exported product in the country and the number of countries
is small, the country’s export performance in general is in trouble.

As the study general result about the firms export performance in terms of
market share, sales volume, its growth and export strategic goals are extremely
dissatisfied by 94%. This shows that, the firm as well as the country has major
challenges about the sectors performance. The export firm has many internal
and external challenges. More than 78% of the firm’s challenge is internal
especially related to the quality and price of their products. In addition, the
government’s poor support and minimal monitoring and evaluation in the
 Mesfin Lemma and Biniam Ali 58

sector has a negative impact of the export performance. But the exporting
companies are failed to use properly the incentive packages those initiated by
the government to strengthen the export. The country’s export performance
was incapacity to finance the import expenditure was forced the country to
suffer from shortage of foreign currency which is crucial to import capital
goods and other intermediate inputs that are required to sustain growth. All
data and reports showed that, how the country’s export sector is going to in
trouble. Without sufficient export trade, the country will be in big problems as
the shortage of foreign currency and high inflations. These effects will be
showed up directly in the manufacturing industry, because, more of inputs used
by many industries are importing from other countries. The industries are
waiting longer time to get foreign currency could be a direct impact on
operations of the company and not far to see closing of such industries.
Furthermore, the country will work strongly for increasing export destination
countries around the world. When the country will reach many countries by
their export items, it will increase the volume and congruently raises export
value. This will help to attract foreign currency inflows to the country.
However, the government has an interest to strengthen the sector by
establishing different strategies for the local and international exporting
companies through the country. Some of the strategies are promoting different
incentive package and implementing the country’s export strategy by GTP II.
More than this the government also tries to implement trade free zone, regional
coordination for trade improvement with other countries throughout the world.
Journal of Business and Administrative Studies (2018), Vol. 10, No. 1

Based on the findings of the study the following recommendations are

forwarded:
 The firm’s top management should work to balance the male and female
employees’ ratio at least to 60:40. There are a superior talent and skill in
female employees special in the promotional campaign activities.

 Top management of the company should work on the improvement of their

product quality and uniqueness. In addition, the firm should be cost
sensitive for their products by minimizing costs and increase their
competitive advantages in the global market.

 The firm will establish a separate promotion and advertising team and
implement unique strategy for increasing promotional campaign in the
existing and new markets around the world.

 The government should work with the major business stakeholders and
partners to facilitate the ambitions to join World trade organization (WTO)
for helping the international trade benefits to reduce tariffs and other
challenges in the exporting sector and maintains the country export growth.

 To develop and improve different facilities, policies and procedures in the

export sector is very crucial. Government services for the firms should be
very accessible and convenient for all exporting participants, this helps to
increase production capacity and quality products with a competitive price
in the global market for exporters.

 To Advance and upgrade the knowledge, experience and skills of the key
members on the export sector like, supplier, processors, exporters,
associations, commercial chambers and the regulatory bodies are very
essential for the growth of the sector. Without the strong private sector
economic participation in the economy, the government will be paralyzed.
 Mesfin Lemma and Biniam Ali 60

 The government, exporters association and export companies could be

establish bi-annually or annually meeting schedules to assess, evaluate and
experience sharing with other stakeholders in finding solutions for their
challenges and barriers.

 The government has responsibility to aware the quality certification and

control mechanisms and also will assess continuously for fully certified
exporting companies in the country.

 The government will restructure the export sector policy and strategy for
giving the fully convenient access for all exporters in terms of many
facilities what they want from them.

 The government should asses the implementation procedure about the

incentive packages. Some policy and strategies are good for the exporters
but, there is a big problem in implementing the policy. When the
government assigned a separate institution for the exporting sector, this
institution will have a regular contact with the exporters and it will be easy
for supporting and strengthen the firm’s activity in the regional or
international markets with a continual base.
 Increasing the availability of credit facilities: the availability of credits
especially long -term credit is very important to exporters. The government
will consider these facilities for aiming to increase the country’s overall
economy growth.

 Simplifying export sector regulations: the government should shorten the

export sector regulations in every aspects of the operations. It also
increases their capacity about the collection and dissemination of the global
market’s information as a continuous base.
Journal of Business and Administrative Studies (2018), Vol. 10, No. 1

 Establishing and improving cooperation with the regional and global

economic actors: export growth is getting by the cooperation activities with
many stakeholders. The government will facilitate the cooperation
programs and increase their connection with the highly experienced global
companies.

 Formulation short-term and long-term export growth policies: the

formulation of short- and long-term policies is crucial for the growth of
export performance in the country. Especially the government support for
the sector including the incentive packages is important.

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