Application of Market Analysis for the Retail Industry in Ethiopia

Topics: Inflation, Economics, Macroeconomics Pages: 17 (4346 words) Published: November 7, 2010
Application of market analysis for the retail industry in Ethiopia


In Ethiopia, according to a census carried out by Central Statistics Agency (CSA) in 2004, there were 672,484 business enterprises of which 671,627 (99.9%) were private owned, 823 government owned and only 34 enterprises were owned by joint venture. These figures are including formal business establishments, informal business establishments, and those neither formal nor informal.


Source: Central Statistics Authority

Among the private owned companies, the number of those which are engaged in the wholesale and retail business were 291,482 (43.39%), of which the formal establishments which had a business licence were only 97,743 which was 33.53% of the industry.


Source: Central Statistics Authority

The purpose of this paper is to analyze the retail market environment of Ethiopia by considering the fundamental components of marketing environment. To this end major macro environment forces are discussed and opportunities, challenges and factors affecting the retail industry are highlighted.

1-Industry Analysis (Macro Environment)

Successful companies Recognize and respond profitably to unmet needs and trends in the macroenvironment. Unmet needs always exist. Companies could make a fortune if they could solve any of these problems: a cure for …, and affordable housing.1

Companies and their suppliers, marketing intermediaries, customers, competitors, and publics all operate in a macroenvironment of forces and trends that shape opportunities and pose threat. These threats form the “noncontrollables”, which the company must monitor and respond to.

Every organization is subject to these general forces that are felt in many industries and that are not usually amenable to influence by single organization. These forces can be classified as political, economical, technological, and social.

1.1- Regulatory/Legal and Political Environment

Marketing decisions are strongly affected by developments in the political and legal environments. This environment is composed of laws, government agencies, and pressure groups that influence and limit various organizations and individuals. Political conflicts can also influence how a number of industries operate, especially those with tight global ties. The outcomes of elections and judicial court decisions, as well have their impact on the macroenvironment. Sometimes these laws also create new opportunities for businesses.

Since the retail industry is the 3rd class taxpayer, all the activities that are performed should be monitored by Inland Revenue and Customs Authority and other concerned government bodies. Mostly cosmetics products and other equipments are imported from abroad to resell in domestic market. The imported cosmetics products and other equipments come through government transportation and these builds a great link between the retailers and different government bodies that has to be monitored. These bodies are the Foreign Minister, Inland Revenue & Customs Authority, National Bank, and other related Government bodies.

1.2-Economic Environment

During the fiscal year 2007/08, real GDP grew by 11.6 percent. This high growth rate was achieved for the fifth time in a row (i.e. 11.7 percent in 2003/04, 12.6 in 2004/05, 11.5 in 2005/06 and 11.5 in 2006/07), which places Ethiopia among the top performing economies in the Sub-Saharan Africa. A ll sectors contributed to this relatively high economic growth with the service expanding by 17.0 percent and contributing about 62.8 percent to the overall real GDP growth. The agriculture and industry sectors also grew by 7.5 and 10.4 percent, respectively. Furthermost real GDP is projected to grow by 11.2 percent in 2008/09.


Source: National Bank of Ethiopia

According to the World Bank report, Ethiopia is experiencing an unprecedented spell of economic growth, although this...
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