Selamawit Tesfaye

Addis Ababa University
School of Graduate Studies

Faculty of Technology
By
Daniel Tamerat
A thesis is submitted to the School of Graduate of

Addis Ababa University in partial fulfillment of the
Degree of
Masters of Science
in Mechanical Engineering
(Industrial Engineering stream)
Analyzing Industrial Development,

Market performance, and Competitiveness
Case study on
AWASH MELKASSA ALUMINIUM SULFATE
AND
SULFERIC ACID SHARE COMPNAY
Advisor
Mr. Gashaw Gebeyehu
MAY, 2006
135
ANALYSIS INDUSTRIAL DEVELOPEMNT, MARKET
PERFORMANCE AND COMPETITIVENESS
Case study on: Awash Melkassa Aluminum Sulfate
Sulfuric Acid Share Company
(AMASSASC)
By
Daniel Tamerat
Approved by Board of Examiners:
_________________________________ ___________________
Chairman, Department Graduate
Committee
__________________________________ ___________________
Advisor
__________________________________ ____________________
Examiner
__________________________________ _____________________
Examiner
_________________________ ________________
Acknowledgment
First and for most I would like to take the opportunity to thank the heavenly
father, GOD, for I His love, care, and being with me all the time. I would like to
express my gratitude to my adviser Mr. Gashaw Gebeyehu, program
coordinator of UNIDO for his numerous, valuable and positive reinforcement
advice and support throughout the completion of this thesis. This thesis could
not have been finalized without his regular valuable suggestions and
encouragement.
I would like to express my sincere appreciation to Awash Melksa Aluminum

Sulfate sulfuric Acid Share Company for permission, support and providing
necessary documents and information for the completion of the thesis. In
particular, Engineer Alemu who guided me through the thesis, never is
accepting less than my best efforts.
I would also take this opportunity to extend my appreciation to Mr. Lalisa, Mr.
Tesfay, and Mr. Mulunh in Marketing department of AMASSASC; for their
valuable ideas and support and want to thank Selame and Alem Tefera for
typing the thesis and also I would like to pass my sincere gratitude to Neronet
PLC workers for their willingness to help me in all stage of my work.
Last but not least, I would like to thank my beloved family, particularly my
father Tamerat and mother Yeshy and my sisters for her endless support, care
and valuable advice and encouragement in my education.
xi
CONTENTS
PAGE
TABLE OF CONTENTS…………………………………………………………… iii

LIST OF TABLES………………………………………………………………......vii
LISTS OF FIGURES………………………………………………………………..viii
LISTS OF ABRIVATION USED………………………………………………….. ix
ACKNOLEDEMENT………………………………………………………………..x
ABSTRACT…………………………………..……………………………………..xi
ii
TABLE OF CONTENT
Page
Chapter Description
No.
1.0 INTRODUCTION
1.1 Statement of the problem 1

1.2 Objective of the study 6
1.3 Significance of the study 6
1.4 Methodology 7
1.5 Sources of data and data collection process 9
10
2.0 BACKGROUND HISTORY OF AMASSASC
2.1 Background 10
2.2 An Overview of AMASSASC 10
2.3 The Historical Development of the Industry 12
2.4 Capacity utilization 14
2.5 Technology used 14
2.6 AMASSASC products 17

2.6.1 Uses of AMASSASC product 17
INDUSTRIAL DEVELOPMENT AND EFFECTS IN 20
3.0
DIFFERENT SUB-SECTORS
3.1 Background Information 20

3.2 Integrated Development AMASSASC 22
3.3 Relationships of company products with other industries 22
3.4 Contribution of AMASSASC product for other sectors 24
3.4.1 Contribution to Foreign Exchange 25
3.4.2 Contribution to Government Revenue 28
iii
Page
Chapter Description
No.
3.4.3 Direct and indirect taxes 28
3.5 Analysis the development of the industry 29
3.5.1 Current consumption of AMASSASC products 29
3.5.2 Previous consumption of AMASSASC product 30
Market Performance of AMASSASC 34

4.0
4.1 Back ground information 33
4.2 Problems in market performance of AMASSASC 41
4.2.1 Major Problems of the company market performance 35

4.3 Result Achieved 36
4.4 Analyzing the market performance of AMASSASC 40
4.4.1 Market performance of AMASSASC in Aluminum 40

Sulfate
4.4.2 Export Market in Aluminum Sulfate 40
4.4.3 Market performance of AMASSASC in Sulfuric 42
acid
4.4.4 Export Market in Sulfuric acid 44
4.5 Analyzing internal factors affecting Market performance 44
4.5.1 Marketing and distribution 45
4.5.2 Applied Technology 45
4.5.3 Research and Development 46
4.5.4 Innovation or Introduction of New Product 47
4.5.5 Training 47
4.5.6 Information Management System 48
4.5.7 Internal Working Condition 48
4.5.8 Product/Service Quality 49
4.5.9 Marketing Capability 49
iv
Page
Chapter Description
No.
4.6 Analyzing external factors affecting Market performance 49
4.6.1 PEST Analysis 50
4.6.1.1 Political Factors 50
4.6.1.1.1 Tax policy 51
4.6.1.1.2 Employment laws 53
4.6.1.1.3 Trade restriction and tariffs 54
4.6.1.1.4 Political stability 55
4.6.1.2 Economic Factor 56
4.6.1.2.1 Economic Growth 56
4.6.1.2.2 Exchange Rate 58
4.6.1.2.3 Inflations rate 58
4.6.1.3 Social Factors 59
4.6.1.3.2 Attitude towards the product 59
4.6.1.4 Technology 59
4.6.1.4.1 Automation 60
5.0
COMPETITIVENESS OF AMASSASC 62
5.1 Back ground information 62
5.2 Defining and measuring competitiveness 62
5.2.1 Definitions of competitiveness 63
5.2.2 Competitive advantages 64

5.3 SWOT Analysis 64
5.3.1 Strength 65
5.3.2 Weakness 65
5.3.3 Opportunities 66
5.3.4 Threats 68
v
Page
Chapter Description
No.
5.4 Evaluating AMASSASC by using SWOT matrix 70

5.4.1 W-O strategies 72
5.4.2 W-T strategies 75
5.5 Qualitative analysis on AMASSASC competitiveness 81
5.5.1 Measuring competitiveness using cause and 82
effect diagram
5.5.2 Interpretation of cause-and –effect diagram 84
5.6 Pareto Analysis 88
5.6.1 Interpretation of the Pareto analysis 97

5.7 Cost analysis 91
5.7.1 Cost analysis using Parato diagram 94
5.7.1 97
6.0 RECOMMENDATIONS
99
APPENDIX I 106
APPENDIX II 107
APPENDIX IIIA 110
APPENDIX IIIB 124
APPENDIX IVA 125
APPENDIX IVB 127
APPENDIX IVC 128
APPENDIX IVD 130
BIBLOGRAPHY 133
vi
List of tables
Table Page
1. Table 2.1 Material used for the production of sulfuric acid--------------------. 15

2. Table 2.2 Material used for the production of aluminum sulfate---------------.16
3 Table 3.1 End users of aluminum sulfate and sulfuric acid…………………....24
4. Table 3.2 Ethiopia import of aluminum sulfate (tones/annum)………………..27
5. Table 3.3 Sales of AMASSASC in birr ……………………………………...27
6. Table 3.4 Tasks AMASSC form each sales of the factory product
in year 2001-2005……………………………………………………………..28
7. Table 3.5 shows current optimal capacity of production in ton
from 2000-2005……………………………………………………………......29
8. Table 3.6 Ethiopian Aluminum Sulfate consumption in the year 1988-1994 …31
9. Table 3.7 Ethiopian’s import figures of sulfuric acid 1987-1993……………....30
10. Table 4.1 shows consumer of Aluminum sulfate product…………………......37
11. Table 4.2 shows the amount of sulfuric acid usage data 2000-2005………......38
12. Table 4.3 Quantity sold in the domestic market (ton)………………………..41
13. Table 4.4 Quantity sold in foreign market (ton)……………………………...41
14. Table 4.5 Shows the Sulfuric Acid sold in the domestic market
from 2000-2005………………………………………………………………..43
15. Table 4.6 shows the Sulfuric acid exported from 2000-2005……..……………44
16. Table 4.7 the Company expense for promotion advertising and marketing……46
17. Table 4.8 shows some type and level of taxation the company pays in birr……52
18. Table 4.9 shows the different proportional distribution of
Professional, technician, staff percentage distribution……………………… ...54
19. Table 4.10 shows the amount of Aluminum sulfate purchased ton per year…..57
20. Table 4.11 shows price of sulfur for one ton in Birr…...………………………58
21. Table 5.1 list of competitor year from 2000-2005………………………….......70
vii
22. Table 5.2 SWOT matrix……………………………………………………….71
23. Table 5.3 Weakness and Opportunities (W-O) strategies………………………72

24. Table 5.4 Weakness and Treats (W-T) strategies……………………….………75
25. Table 5.5 step-by-step summery of a SWOT analysis…………………………80
26. Table 5.6 lists of causes that make the company not competitive…….….……..88
27. Table 5.7 Costs of AMASSASC in three consecutive years………………….....91
28. Table 5.8 show the net sales of the company in consecutive years……………...93
viii
List of figures
Figures Page
1. Fig. 3.1 shows the relationships of sulfuric acid product with others sub-sectors…22
2. Fig. 3.2 shows the relationships of Aluminum sulfate product with others
Sub-sectors………………………………………………………………………….23
3. Fig. 3.3 Process of integrated to the market and economic development with
Sulfuric acid and aluminum sulfate industry ………………………………………23
4. Fig.3.4 production of aluminum sulfate and sulfuric acid in the year 2000-2005….30
5. Fig.4.1 quantity of Aluminum sulfate sold in the domestic market…………….…..41
6. Fig 4.2 quantity sold in foreign market (ton)……………………………………..42
7. Fig. 4.3 shows the Sulfuric Acid sold in the domestic market from 2000-2005....43
8. Fig. 4.4 shows the Sulfuric exported from 2000-2005……………………………..44
9. Fig. 4.5 eternal environment of an organization…………………………………...49
10. Fig 4.6 shows type and level of taxation the company pays in birr…...………….52
11. Fig. 4.7 shows the price variation sulfur for one ton……………………………..59
12. Fig 5.1 fish bone diagram ………………………………………………………..81
13. Fig. 5.1 shows cause and effect diagram………………………………………….83
14. Fig 5.3 Parato analysis diagram…………………………………………………..89
ix
List of Abbreviation used
1. Awash Melkassa Aluminum Sulfate and Sulfuric Acid Share Company AMASSASC
2. Ton per year tpy
3. Addis Ababa Water and Sewerage Authority A/AW.S.A.
4. Single Super Phosphate SSP
5. Sulfuric Acid H2SO4
6. Aluminum Sulfate Al2O3
7. Ethiopia Mineral resource Development Share company EMDSC
8. National Chemical Corporation NCC
9. Dicalcium phosphate DCP
x
Abstract
The purpose of this thesis is to analysis industrial development relative to the importance of
Awash Melkassa Aluminum Sulfate Sulfuric Acid Share Company product to different sub-
sector in Ethiopia. It is evaluated integrated development of AMASSASC products like
aluminum sulfate and sulfuric acid to other industries, and it is seen the contribution of the
company product with other sub-sectors and analysis contribution to the development of
industries. AMASSASC market performance and competitiveness is evaluated by considering
internal and external factors that affected its market and competitiveness. Some of the factors
included on this thesis that affected the company market performance and competitiveness are
analyzed based on the current economical, political, social and technological factors.
In order to evaluate its market performance and competitiveness of AMASSASC different

analytical tools are used, some of them are: PEST analysis, SWOT analysis, cause and effect
diagram, Pareto analysis and cost analysis are used. By using PEST analysis the market
performance it evaluated by considering the current political, economical, social and
technological conditions of the country. Using SWOT analysis the competitiveness of the
company is seen based on the strength, weakness, opportunities and threats the company has
and faced, and in this thesis it is looked mainly its weakness opportunities and weakness
threats. It is also described in the cause and effect diagram the possible causes why the
company is not competitive, and by using Parato analysis it is described the vital few and
trivial many problems that make the company not competitive.
The results of the study indicate that the company has low demand in the country, high idle
time expense, and has high production costs. The main consumer of the product of aluminum
sulfate is A/AWSA should be given much consideration by providing the pre-requisite product
hydrated lime, this could be achieved by working in coordination with product of hydrated
lime.It is observed that the successful development of the sub-sectors plays a main role for
AMASSASC to product at full capacity. It is therefore must focus on strategy in promoting
the product and look for market distributing channel, and study the domestic and neighboring
country demand and buying price.
xii
Chapter One
Introduction
1.1. Statement of the problem
Ethiopia is rich in agricultural and mineral resources; there are industrial raw materials that are
not adequately processed yet. The structure of industry is basically oriented to the production of
consumer goods and is overwhelmingly dependent on imported raw materials and other factor
inputs. Although there is scope for forward and backward integration of industries within each
sub-sector and between sectors (e.g. agriculture - industry linkage) there are problems in
industrial development, market performance and competitiveness in different sub-sectors.
Since the beginning of industrialization, different industries have emerged in the development of
one sector depending on others. One industry depends on raw material or input on the product
output of other industries. Due to many application of sulfuric acid, these days most industries
are dependent on sulfuric acid, and this product is considered to be a sign of the industrialization.
Most industries use aluminum sulfate and sulfuric acid as an input or as a raw material for
different processing stage.
The manufacturing industry in Ethiopian is a modest contributor to the country economy and
employment. The manufacturing industry among other major sub-sectors consists of the
chemical sub-sector that did not show significant growth and transformation over the past decade
due to very low capital investments and there are no large-scale in sub-sectors that take the
product as an input. But the chemicals industry’s significant role as producer of intermediate and
final products is beyond doubt. Efforts had thus to be made to promote industries in the sub-
sector, but there is not much progress seen in the users of chemical products.
This days the main products of AMASSASC are aluminum sulfate and sulfuric acid. Aluminum
sulfate is mainly used for the treatment of drinking water, cola, textile pulp, and paper production
industries are users of the product. Sulfuric acid is widely consumed by the manufacturing
industry sub-sector such as textiles, leather, car battery manufacturing factories and beverages
industries are some of the users.
1
The raw material inputs required for the production of aluminum sulfate are all locally supplied
except aluminum hydroxide, which has to be imported, but in small quantity. Kaolin is the main
raw material and it is supplied by the Ethiopia Mineral resource Development Share Company
(EMDSC) from Borena Zone of Oromia Region. Similarly, the inputs for the production of
sulfuric acid are supplied from domestic sources except sulfur, which has to be imported. Thus,
the project is partially based on local resources and it is expected to contribute considerably to the
development and exploitations of local resources.
Awash Melkassa Aluminum Sulfate and Sulfuric Acid Share Company uses relatively larger and
modern technology, but the company could not produce at its full capacity. Under the new
economic environment the project does not have sufficient market for its products. The existing
as well as forecasted demand provides sizable opportunity for the company but it did not allow it
to operate as a viable commercial entity above its break-even point current years. AMASSASC
could not produce at its full capacity and could not sell its product substantial quantity because of
different constraints. The first main reason is in the past one year the company could not produce
at its full capacity is due the Addis Ababa Water and Sewerage Authorities is not purchasing
aluminum sulfate for water purification instead using substitute imported product of
polyelectrolite chemicals. Neither such water purification plants come into existence in spite of
pure delivery of water needs of the country as anticipated during the feasibility study of
AMASSASC. In addition to the above problem industries or sub-sectors in Ethiopia do not have
large capacity to use AMASSASC’s product as a raw material, and most industries investigated
to be establish are not developed and there is slow industrial development in the country which
has affected the market performance of AMASSASC, the situation is common with most projects
that have huge investment costs. In addition there is poor marketing effort by AMASSASC to
sale the product for different customers.
The project was expected to operate at 52% capacity for aluminums sulfate during the initial year
producing 7027 tones and at 33% capacity for sulfuric acid producing 5722 tones. Capacity
utilization was also expected to increase steadily in the subsequent years as the demand for end
products increase. At full capacity, the project was expected to produce aluminum sulfate and
sulfuric acid at 13600 tones/annum and 17000 tones/annum, respectively, but part of the sulfuric
2
acid will be used as an intermediates input for the production of aluminum sulfate. To date the
company productions have not increased to reach even capacities expected of productions.
Though the company has capacity to produce 17000 ton per year of sulfuric acid, but it did not
sell more than 6000 ton per year in the past five years (2001-2005), one of the main reasons is
due to Addis Ababa Water and Sewerage Authority is using alternative product that substitute
aluminum sulfate, and also the product of AMASSASC these days have lesser demand in the
market. On the other hand occasionally those, which are imported, sold with lesser price. Even
though this company has capacity production of 13600 aluminum sulfate and 17000 sulfuric acid
ton per year, demand in the country is less than 7000 per year aluminum sulfate and on average
582.116 ton per year sulfuric acid sold in the domestic market.
.
The products of AMASSASC vital and necessary to many other industries in the country to
processed as raw material. Some of the industrial sectors that use sulfuric acid and aluminum
sulfate are: Leather, Soap, textile, Sugar, paper and pulp industries. In addition it is used in
flower production, mining areas, pharmaceutical, and water treatment, schools …etc.
Due to market difficulties and other constraints the company is becoming less competent in the
market, and could not produce at its full capacity and sell its product. Addis Ababa Water and
Sewerage Authority accounts for 66% of the sales of aluminum sulfate. It can be said the
existence of the factory as is entirely dependent on one organization and that is becoming a very
serious problem now because A/AWSA is using alternative product these days.
Ethiopia as developing country will have to reassess domestic industrial performance and
development and production with a view of taking advantage of the opportunities offered by
globalization. In addition to this, the free market policy in the country forces domestic industries
to compete with the developed countries, which is becoming very serious problem for the
industries, which are not using high technology. The government protection for this company is
invaluable in order to be competitive in the domestic market; consideration should be given for
domestic initiatives and investments, which is the most important contributors to the country’s
economic and industrial development. A great deal of potential for foreign and direct investment
should be explored.
3
AMASSASC is using larger and modern technology, but it has faced a number of problems in
producing at full capacity and even selling the product it produced and also has constraints to be
competitive in the market, some of the problems are:
• The company could not produce at its full capacity and sale all its products. Although the
company is considered to have a number of customers that use sulfuric acid and aluminum
sulfate such as: leather, soap, textile, Sugar, paper and pulp, flower production, mining areas,
Pharmaceutical, etc. However all of them purchase small quantity of the company’s products
.
• Major customers that purchase large number of quantity of aluminum sulfate is shifting to
other sellers and other alterative products. The existence of the factory is entirely dependent
on one organization major customers that utilize of aluminum sulfate accounting for about
66% of the factory product is Addis Ababa Water and Sewerage (that is very serious
problem now because in 2005 and 2006 Addis Ababa Water and Sewerage Authority
stopped buying the product).
• Some times production competitive dimension such as cost of selling of AMASSASC

product is relatively higher than the competitor selling price and those imported product of
sulfuric acid, aluminum sulfate are sold with lesser price than the company selling price..
• There is more machine idle time and failure, due to lesser demand in the market forces
AMASSASC to produce less quantity in less productions days.
• There is less flexibility in new product introduction and not many research done to improve
its production and market.
• Company selling price and production capacity is highly affected by external macro
environment factors in which the firm operates such as: tax policy, employment laws, trade
restriction and tariffs, political stability, interest and exchange rate, inflations rate etc...
4
• There is hardly any research work devoted to improve the industrial development, market
performance and competitiveness that indicates it is neglected industries in the chemical
sector.
These and other factors have affected its market performance and hinder the company’s
competitiveness. In spite of the potential dynamic role the company contribution to different
sectors in various economies and the company has great role for the development of other sub-
sectors, it is not well understood or provided with adequate support by government either in
domestic or foreign market because of different reasons.
First, the need is felt for a better understanding of the role played in industrial development and
market in different socio-economic settings. A search of the literature reveals no evidence that
research has been conducted to show the role and impact of the company production in the
industrial development and market and in the economy in general.
Second, it seems that the factory lacks appropriate recognition on the part of the Government or
other sectors. The amount of investment allocated on the sub-sector which makes the company to
produce at full capacity and sell its products, as well as the overall conditions instituted by the
government, the amount of research work devoted to improve the industrial development, market
performance and competitiveness indicate that it is neglected industries in the chemical sector.
Therefore, the need is also felt to indicate the appropriate conditions under which the industry can
play a more and effective role in the development of the industries of the sub-sectors by
improving market performance and its competitiveness. This thesis aims to cover trend analysis
of the industrial development, market performance and competitiveness of AMASSASC focusing
on especially in the area of market performance and competitiveness. In this thesis considerable
effort has been made to clearly indicate the direction for improving the market performance and
competitiveness of the company.
It is the recognition of these problems, which has given rise to the objectives of this study.
5
1.2 Objective of the study
The objective of this study is to analysis industrial development market performance and
competitiveness of Awash Melkassa Aluminum Sulfate and Sulfuric Acid Share Company
(AMASSASC) focusing on production, capacity utilization l, especially in the area of market
performance and competitiveness.
The specific objectives of this study are the following:
i. To analyze the role of aluminum sulfate and sulfuric acid in different sub-sectors
ii. To establish the relative importance position of the company product, in the light of the
analysis under the first objective;
iii. Evaluate and analyze the operational efficiency of the company, relative to market
iv. Investigate the reasons why the company has become less competitive and does not sale
its product fully and make recommendation.
v. Based on the above findings, making relevant recommendations in order to improve
the market performance and its competitiveness, and sustain existing production
with more efficiency within the existing business environment.
1.3. Significance of the study

As there are rapid growth of industries and market globalization, good market performance and
being competitive in the market are inevitable. A clear knowledge of these particular
circumstances are essential in order to better plan for the future and have strategy of development
in the industry and market. This is lacking in the Ethiopian case as substantiation by market
performance, competitiveness and globalization.
This study is a modest attempt to fill the information gap. Furthermore, the study will serve as a
beginning to arouse the interest of other researchers to undertake extensive and intensive studies
in this particular field.
The study would have significance to focus on some of the direction for improving the
competitiveness of the company, and show the relative importance of company’s products, in the
light of other sub-sectors.
6
1.4 Methodology
1. In pursuit of the first objective, analysis was made on f the following:
i. The historical development of the industry
ii. Evaluate the working condition of AMASSASC product comparing with the
output, employment, foreign exchange and government revenue in the
development of the industries
iii. Comparing the its market performance and competitiveness.
iv. Analyze the market performance by looking into the external and internal
influences on its market performance and competitiveness by using: PEST
analysis, by using this analysis evaluate the company market performance
considering:
1. Political factors,
2. Economic factors
3. Social factors
4. Technology factors
v. Evaluating the competitiveness of the company using strength, weakness,
Opportunity and threats (SWOT) analysis,
vi. Cause and effects diagram to see why the company is not competitive
vi. Evaluating the performance using Parato analysis considering the vital few and
trivial many , and also used cost analysis
Vii Analytical techniques such as average, percentages, figures as well as
Qualitative methods was made and cost analysis of AMASSASC also included
2. To establish the relative importance of the aluminums sulfate and sulfuric acid Producer
Company in the Ethiopia industrial development, and analysis will be made on the following:
i. The possible linkage effects within the sub-sector and different sectors of the
industries, i.e. the extent to which the sub-sector purchases domestically produced
inputs and production, other than importing the same products that would help the
production of the company relative to the market performance and
competitiveness;
ii. Government revenue, foreign exchange
7
The above-mentioned analysis would be made based on simple analytical techniques and
comparison would be made. It considers assessing the degree of efficiency of the enterprise, in
saving foreign exchange.
3. Consider determining productivity, market, performance and competitiveness situation of the
company.
i. The nature and quality of the raw materials used in the production process
employed to sell its product;
ii. The size and efficiency of plant;
iii. The continuity of production and the extent of effective utilization of human
resource;
iv. The demand of the product in the customers side and the distribution system of
the company’s final products
The methods to be employed to achieve these are; estimation of production function, Visit to
companies and gather all the available data, conduct interviews, proper consultation was
conducted with experts in the related fields and finally survey of literature and previous research
works on similar topics.
8
1.5 Sources of data and data collection process
This study relies on the data and information gathered from both primary and secondary sources
as follows: -
1. To analyze the industrial development, market performance and competitiveness of the
company, it is considered as source data obtained from the questionnaire and other source
including both published and unpublished records of the company and others literatures
are considered.
2. The data and information sources to provide the theoretical framework of aluminum
sulfate and sulfuric acid industry in different socio-economic settings referring published
documents of international agencies such as UNIDO, the World Bank, the United Nations
year Book of Industrial statistics.
3. Data and information for the case study was taken from the files and records of the
company finance, marketing, administrative, production, personnel departments from year
2000 to 2005.
4. From feasibility study of the company, marketing reports, international magazines,

website, was considered for the development of historical information of the
AMASSASC and its products.
9
Chapter Two
2. Background History of AMASSASC
2.1 Background of AMASSASC
The purpose of this chapter is to review the overall conditions of AMASSASC the only chemical
industry in Ethiopian producing sulfuric acid and aluminum sulfate. Awash Melkassa Aluminum
Sulfate and Sulfuric Acid Share Company (AMASSASC) is the biggest chemical factory in the
country established through the year 1982- 1987 with an initial investment of about 108 million
Birr on the total area of 14 hectares.
In any industrial establishment the main motive of implementing various techniques is profit
maximization with customer satisfaction reduced at production cost. Awash Melkassa Aluminum
Sulfate and Sulfuric Acid S.C. (AMASSA.S.C), with this motive produce the two major
chemicals stated as indicated by aluminum sulfate and sulfuric acid.
To achieve maximum production at lower cost and at desired quality with no doubt, effective
management of production, good market performance and effective competitiveness is a must.
The complete designer and supplier of the latest production machines and equipments is
‘CHEMADEX, Poland based company, which has started a similar plant in Egypt some months
before. The factory is designed to produce three major chemicals namely; Sulfuric acid,
Aluminum sulfate, and Oleum. Currently, it is only producing aluminum sulfate an sulfuric acid
[6].
2.2 An Overview of AMASSASC

Awash-Melkassa Aluminium Sulfate and Sulphuric acid Factory (AMASSAF) is located at
Awash-Melkassa, 15kms from Nazareth, 100kms from the capital, on the way to Assela, which
is at absolute 1600m above sea level. AMASSAF is one of the basic chemical industries
established in the country. The factory produces sulphuric acid, Oleum (currently blocked), and
aluminium sulfate utilizing mostly locally available raw materials.
10
The capacity of the plant is sufficient to fully cover the country’s requirement of aluminium
sulphate and sulphuric acid at the percent and for a number of years to come, thereby fulfilling
the import substitution objective of the country. The products are of very high quality tot meet
all necessary standards for technical application in the industries of the nation, as well as for
export market. It is believed that the availability of these products especially of sulphuric acid
shall spur the development of a number of technologies by users who have the vision of
harnessing local resources in their industrial endeavours.
The process design production capacity of the factory is 17,000 and 13600 tones per annum
(270 working days) for sulphuric acid (98% +or - 0.5 wt), Oleum (25% free SO3) and
aluminium sulfate (17% Al2 S O3), respectively.[2]
The factory is also able to produce battery acid provided that instead of process water,
demineralised water is used.
Main Applications of the products: -
I) Sulfhuric acid
It is a chemical used in the production as raw metrical or as a medium of production in
aluminium sulfate, Oleum, phosphate fertilizers (e.g., , single super phosphate), car battery, pulp
and paper, steel picking, textiles, refinery, beverages, leather, metals, etc...
II) Oleum
No end-user in the country for the time being. Otherwise it is used for sulphonation, dye
manufacture, nitro-geycerine, nitrocellulose, petroleum, weaker acid fortification, explosives,
etc...
III). Aluminium sulfate
It is a coagulant used in drinking water purification, industrial waste water treatment, paper
sizing, Dyeing, pharmaceutical, soap modification, tanning and etc... it is also used in leather
industries, textiles, food and beverages, metals, chipwood, plywood and others. The main raw
material for sulphuric acid plant, sulphur is bought from abroad and hydrated lone and
diatomaceous earths are auxiliary materials. For aluminium sulfate unit kaolin, which is locally
obtained, and aluminium hydroxide auxiliary raw material, imported from abroad.
11
2.3 The Historical Development of the Industry
Awash Melkassa Aluminum Sulfate and Sulfuric Acid Share Company (AMASSASC) in
recognition of the situation the Ministry of Industry launched a programmed in 1988-1990, which
gave priority to the establishment of chemical industries. The programs was aimed at substituting
imports of various chemical products for local consumption, and make the country self-reliant in
the supply of major chemical products due to their strategic nature. Among the projects
identified in the chemical sub-sector for implementation were the Aluminum Sulfate, Sulfuric
acid and Oleum factory project. Priority was accorded to this importance and the necessary
preparation including identification of foreign source of finance and technology choice was
finalized in the second half of 1980’s. The ex-National Chemical Corporation that was
responsible for the promotion of the chemical sub-sector made the necessary arrangements for the
propagation of a feasibility study and sponsored the British Sulfur Corporation Ltd. Co. to make
feasibility study. The company completed its feasibility study of the project in September 1986.
Awash Melkassa Aluminum Sulfate and Sulfuric Acid Share Company is the sole producer of
Sulfuric Acid and Aluminum Sulfate in Ethiopia. It is the biggest chemical factory in the country
established through the year 1982-1987 with an initial investment of about 108 million Birr .The
complete designer and supplier of the latest production machines and equipments is “Chemadex”,
Poland based company. The objective of the company is to produce aluminums Sulfate, sulfuric
acid and Oleum, which are found vital for the country. But the planned production of Oleum has
been suspended.
Sulfuric acid being one of the most important chemical products in the world with a wide
application in the chemical process industries in particular and in the manufacturing industry in
general has demand by many enterprises in the country. Induced by the demand, there have been
attempts since long times ago to study the possibility of establishing a sulfuric acid plant in
Ethiopia with a view of import substitution and production of various derived chemicals by
forward integration. However, economies of scale had made its implementation unattractive for a
long time until kaolin ore was found around the beginning of the 1980s in the Borena Zone at a
place called Bomba Wuha, 430 km south of Addis Ababa on the way to Adola, creating the
possibility of producing aluminum Sulfate, a chemical used mainly as a coagulant in the
12
purification of drinking water, in combination with sulfuric acid.
Accordingly, the ex-National Chemical Corporation (NCC) under the ministry of Industry
collected and prepared the necessary initial data for a feasibility study. British Sulfur
Corporation Ltd. of England in Sept.1986 conducted the feasibility study of the project. The
feasibility study considered the production of 7000 tpy Sulfuric acid, 13600tpy aluminum Sulfate
with and without the alternatives of producing sodium Sulfate within the complex. The capacity
of sulfuric acid was determined based on aluminum sulfate production and future expansion to
produce sodium Sulfate.
The inclusion of sodium sulfate unit in the complex was not economically viable and as such as
dropped for future consideration when the market capacity would justify its installation. Seeking
of financial sources took a few years and the implementation of the project was delayed till a
polish credit line was signed in Dec. 1978 between Ethiopia and Poland was allocated to the
project covering 85% of the cost of commodities imported from Poland. A contract was signed
between polimex Cekop Ltd. of Poland and the then National Chemical Corporation in , 1988 for
the design, supply, partial erection, supervision and commissioning of a 14000 tpy sulfuric acid
and 13600 tpy aluminum sulfate manufacturing units. Capacities of the units were determined on
a 270 working days per year basis. The contract came into force on October 31, 1988.
The capacity of the sulfuric acid unit was expanded due to the switch of production of dicalcium
phosphate (DCP) fertilizer to single super phosphate (SSP) fertilizer one of the small project then
under design in India, by request of the National Chemical Corporation (NCC) in conjunction
with the change of technology in the production of caustic soda from electrolysis to lime-soda
process which has no hydrochloric acid as a by-product. NCC also had a sulphonation plant
project study for production of di-decyl-benzene-sulphonic acid (DDBAS) underway. Demand
for sulfuric acid from different quarters was growing with additional requests to produce Oleum
(an enriched sulfuric acid with Sulfur trioxide) within the complex. And as such a supplementary
contract to include an Oleum unit with a capacity of 5000 tpy utilizing part of the sulfuric acid of
the complex was signed on March 17, 1989. the inclusion of the additional unit could be
accommodated due to the fact that sulfuric acid units usually operate 330 days/year and the
capacity of the sulfuric acid plant is not less than 17000 tpy in actuality.
13
Aluminum Sulfate is made from an aluminum source Kaolin being a suitable material in Ethiopia
by the action of sulfuric acid. As the only indigenous sulfur raw materials is pyrites, which is
expensive to transport and requires a much more expensive plant for its utilization than a sulfur
burning plant, the comparative economics of importing sulfur are examined and until this time
2006 sulfur is imported from abroad [6].
2.4 Capacity utilization

The production of aluminum sulfate and sulfuric acid are held in two production sections,
aluminum sulfate production section and sulfuric acid production section. aluminum sulfate
production (full capacity 13600 ton/year), In this manner aluminum sulfate and sulfuric acid plant
have been designed for production capacity of 13,600 & 17,000 tones per year at 270 working
days through out the year of the plant
2.5 Technology used

Aluminum sulfate and sulfuric acid are produced in the modern plant with respect to applied
equipment and process. The plant uses modern high duty apparatuses and equipments. Compared
with the other technologically developed countries like India or China the production scale of
AMASSASC is far lesser than 6% around 300,000 ton per year, which they produce. It uses
acid resistance material to many years work in the environment of sulfuric acid. The applied
coolers, not big in size and high over all heat transfer coefficient have the best reference. World
known, demisters, provide pure atmosphere by eliminating acid mist from waste gases.
The plant can be characterized by high heat recovery coefficient and equipment for steam
production is widely applied in numerous similar plants, the accepted process solution
temperature and concentration parameters provide many years futures plant operating. In this
manner aluminum sulfate and sulfuric acid plant have been designed for production capacity of
13,600 & 17,000 tones per year with concentration 16.3% Al2SO3 and 98.5% H2SO4
respectively. Due to machine failure there are costs that the company has for replacement of the
parts and maintenance until the year 2006, which would reduce the production capacity, and
additional cost in the production.
14
AMASSASC quality control department has built a good laboratory center that guarantees the
quality for all products supplied. The section is equipped with latest analytical technology
instrument. Nature of production system of AMASSAY.S.C is continuous for sulfuric acid and
batch type for aluminum sulfate. Since during sulfuric acid production all chemical reactions are
exothermic and chemicals which go through the steps should be accompanied by hot steam,
which otherwise solidify rapidly, the system is continuous.
2.5.1 Technology used for Sulfuric acid

general is required by many enterprises in the country. Induced by the demand, there has been
forward integration. However, economies of scale had made its implementation unattractive for a
long time until kaolin ore was found around the beginning of the 1980s in the Borena Zone at a
place called Bomba Wuha, 430 km south of Addis Ababa on the way to Adola, creating the
possibility of producing aluminum Sulfate, a chemical used mainly as a coagulant in the
purification of drinking water, in combination with sulfuric acid.
Table 2.1 Material used for the production of sulfuric acid
Material use Consumptions in tons per year

filtered sulfur Basic raw material 4678.6
process water SO3 absorption 1697-2554
Steam production
Diatomite Filter aid 1426
Hydrated lime Sulfur neutralization 23.4
Atmospheric air Sulfur burning
Converter cooling
15
2.5.2 Aluminum sulfate
Aluminum sulfate (or alum) is a metallic salt formed for commercial purposes by the action of
98% sulfuric acid on an aluminum source such as bauxite, kaolin, or aluminum oxide or
hydroxide. The alum is produced at an Al2O3 content of 14-18% in the form of slabs, lumps or
powder. The major end-uses employ the fact that alum hydrolyses reversibly to aluminum
hydroxide and sulfuric acid.
Table 2.2 Material used for the production of aluminum sulfate
Materials Reason for use

Kaolin Basic raw material
Aluminum hydroxide Alternate basic raw material
Neutralizing agent
Sulfuric acid Leaching agent
Process water For suspension
steam Leaching facilitator
In addition to sulfuric acid, a source of aluminum is required for aluminum sulfate production,
and frequently pure minerals like Kaolin or bauxite are used. Prepared materials such as
aluminum hydroxide may be employed, but it is also possible to use waster products including
coal-mining shale, or other alumino-silicate materials.
After treating the kaolin or other mineral with sulfuric acid, the insoluble silicates or silicates acid
are removed by filtration. The quantity of aluminum raw materials feed is determined by its
Al2O3 content: thus 0.486 tones of kaolin (36% Al2O3) is required per tone of product (17.5%
Al203), together with 0.515 tones of sulfur acid (100%). Aluminum oxide (i.e. 100% Al2O3) is a
world-traded commodity, which can be used for aluminum Sulfate production.
Aluminum sulfate production is based up on leaching of Al2O3 contained in Kaolin with H2SO4
under raised pressure and temperature. In result of successive operations, post reaction
suspension, filtration, filtrate concentration and then solidifying and crushing the received
16
product containing 16.3-17% of calculated A1203.
I another word Aluminum sulfate is produced by the action of 98.5% H2SO4 on either Kaolin or
Aluminum hydroxide, which are the raw materials of aluminum sulfate at high temperature of
145oC and pressure of 0.5 MPa in a result of successive operation.
According to the production process, it proceeds as follows:

1. Preparation of Kaolin wetted portion and mixed with water to make
water-kaolin suspension in the tank.
2. Filling the reactor with water-kaolin suspension as well as with measured concentrated
H2S04 and then heating by steam under pressure of 0.5Mpa.
3. Neutralization of excess H2SO4 by means of Aluminum hydroxide suspension.
4. After filtration of post suspension reaction in the filter press crystallization of aluminum
sulfate on open-air crystallization tray with 17% aluminum oxide is delivered to the market
in the for of powder.
2.6 AMASSASC product

2.6.1 Uses of AMASSASC product
The company product is used for different sub-sectors as a raw material. The company final
products are used for different purposes for various sub-sector.
a) The main uses of aluminum Sulfate are: -
I) Water Treatment
Most maturely waters contain undesirable constituents such as materials in suspension, co lour or
microorganisms. Alum is widely used to provide the gelatinous precipitate of hydroxide, which
captures and retains by physical and electrochemical means the suspension and colloidal matter.
Its main uses in Ethiopia are applications in the purification of drinking water from surface water
sources and other industrial uses. In Ethiopia, as is the case with most developing countries,
water and effluent treatment form by far the largest sub-sector of alum consumption. Its
consumption in the pulp and paper industry contributes the only other measurable requirement
for alum in the country.
17
II. Effluent Treatment
Effluent are of widely varying composition, the nature of the waste requiring treatment is not
critical and covers a wide ranger of effluents: including those from textile dyeing and bleaching,
paper making, sewerage plants, and food processing…etc.
It is also used to remove impurities in coarse suspension, colloidal suspension or true solutions.
III. Paper making
Major use of alum is in the pulp and paper industries where its functions are manifold, they
include: -
A) Precipitation of rosin size: This is the most important application as it renders the paper
impervious to penetration of by water or ink.
Conditioning of stock, the wood pulp is alkaline and alum is used to cover and control the
pressure steam within the limits used in paper making process.
IV. Other uses.
In addition to the major applications stated above alum can be used in a variety of industrial
processes including tanning, dyeing: fire extinguishing materials, Pharmaceutical, electroplating
and others
b) The current market study conducted indicates that the main users of sulfuric acid in the
country are as follows: -
I. For production of alum
Alum is prepared by the action of 98 % sulfuric acid on kaolin, or other sources of aluminum
(Oxide or hydroxide).
18
II. For production of Oleum (25%)
Oleum is produced by the absorption of Sulfur trioxide gas in Sulfuric acid. To produce, 6000
tones/annum of Oleum (25%) 5281.25 tones per annum of sulfuric acid equivalent is required.
III. For direct use by other Industrial sectors
Sulfuric acid is one of the most important chemical products and could be used as raw material
with multi-purpose uses: -
- Active reactant in a number of chemical processes e.g. in the
- Production of salts such as Sulfate, phosphates, acids, fertilizers, pharmaceutical,

dehydrating agent, catalyst, solvent, absorbent for bromine recovery from its
salts, refinery, etc.
IV. For production of single super phosphate (SSP)
By sulfuric acid treatment with raw phosphates or animal bones SSP with 18-21% P O content
can be produced. SSP is the first chemical/inorganic fertilizer manufactured by mankind.
V) Stiffening the sheet of paper
Addition of extra alum gives increased stiffness and “rattle “ to the paper.
VI) Fixing of colour
The dye or pigment is moderated to the paper enhancing the brightness and stability of the
colour.
19
Chapter Three
3. Industrial Development and Effects in Different Sub-Sectors
Industrial development should be supported by industrial technology and its continuous
innovative change, if properly shaped by market and policy incentives, makes an important
contribution to most sectors.
Economic development is crucially dependent on industrial development, both with respect to the
industrial sector's pivotal contribution to economic growth and even more conspicuously with
regard to the structural transformation of an economy. The importance of the latter is underlined
by the fact that economic development is largely thought of as being synonymous with
industrialization.
Although social development appears to be less closely linked to industry, it too is strongly
impacted by industrial development. Often, industrialization is seen as a motor behind many of
the processes usually termed "social transformation" and "modernization". More specifically,
there seem to be at least three ways in which industry helps to achieve the goals of social
development:
• (i) Industry's substantial contribution to economic growth helps to create a large portion
of the resources needed to fund social development programs.
• (ii) Creation of employment and hence generation of income take place in the industrial
sector directly and are indirectly fostered in other sectors -- like agriculture or services --
through their linkages to industry.
• (iii) Industry promotes various aspects of social integration through its general thrust
towards modernization and makes a specific contribution to the integration of women by
way of productive employment.
When it comes to measuring contributions to sustainable development, their sector-specificity

needs to be reflected in the attendant measures. This is particularly true for the industrial sector.
Hence, every system of indicators of sustainable development must contain several indicators that
feature developments in (or are closely related to) industry.
20
3.1 Background Information of AMASSASC
general is demand by many enterprises in the country. Stimulated by the demand, there had been
forward integration. After the establishment till 2006 there are many sectors and industries
emerged which demand AMSSSASC product. Even if the demand in different sectors increases,
there demand capacity is small.
The other product is aluminum Sulfate, which is used as coagulant in the purification of drinking
water. As drinking water requirement is growing at a high rate and its demand was expected to
increase. Recent changes in economic policy and structural adjustment could also affect the
forecasts favorably due to capacity expansion and realization of new projects and the nature of
the demand. Most of the remaining water treatment consumption is by the paper industry, leather,
textile and other, which operate water and effluent treatment units there are integration with other
sectors.
The purpose of this chapter is to review the effects of this industrial development of this chemical
industry in different sub-sectors and socio-economic settings and to see the industrial
development of the company. Its organizations includes the following main sections: Integrated
Development of aluminum sulfate and sulfuric acid, relation of company products to other
industries, contribution of the company product for other sectors, Contribution to the
employment, direct and indirect taxes and finally analysis the development of the industry.
21
3.2 Integrated Development AMASSASC
The world economic situation has led most developed countries to establish barriers to imports as
well as credit restrictions. These actions forced the developing countries to promoter policies for
a more integrated development among the different sectors within their own economies. Those
industrial sectors where future growth is very much affected by restrictive measures, as in the
case of Aluminum Sulfate And Sulfuric Acid Share Company in Ethiopia. The government
polices in the market area has big impact in the productions of this company.
Because of its significant role of supplying basic inputs to the main sectors of the industries as
well as to the economy by saving the foreign exchange the company production and selling in
developing. In contrary the company production is not increasing this would be seen as because
new industries, which demand in higher quantity, are not developed, and there are still imports of
the same products or alternatives products in which AMASSASC.
3.3 Relationships of company products with other industries
AS it is described in the second chapter the production of sulfuric acid is seen a as a sign of
development for the county. This is because of its final product is the source of inputs to other
industries which need they are using for the processing. More over the industries contributes a lot
for other sectors saving money, time, energy, resource, etc…industries for processing. Figure3. 1
and Figure 3.2 shows the integrations of the company with other sectors.
Fig. 3.1 shows the relationships of sulfuric acid product with other sub-sectors
Beverage sectors
Sugar factory Leather industry
Sulfuric acid
Textile industry Others

For batteries
22
Fig. 3.2 shows the relationships of Aluminum Sulfate product with other sub-sectors
Leather
industry
AMASSASC Paper industry
Aluminum sulfate
Water supply
authorities Textile
Others
Fig. 3.3 Process of integrated to the market and economic development with sulfuric acid
and aluminum sulfate industry
Mining industry Man power

Transport
Capital goods Sulfuric acid & Aluminum

sulfate industry
Power supply
Consumable Other investment

goods
Various products of
AMSSASC
AAWSSA Textiles Leather

23 Pulp & Paper Others
industries industries industries
3.4 Contribution of AMASSASC product for other sectors
The company integrated with other sectors as shown in the Fig. 3.3 the company products used
for different sectors. Before the establishment of the AMASSASC most industries and sectors
were importing aluminum sulfate and sulfuric acid with foreign currency. The company has
contribution by saving time, resource, manpower, and foreign exchange etc. Some of the
companies, which were, importing these chemicals, were water supply authorities, pulp & paper
industry, tannery sector, textile sector, and agriculture sector. This indicate that the company
product is very valuable for different sectors shown as shown on Table 3.1
Aluminum sulfate and sulfuric acid are used in different industries and pants for different
purpose. The company product in Ethiopia would help a number of sub-sectors to get the product
without importing which would save the foreign currency and other costs some of the users
AMASSASC products are listed below. This indicates that the industrial development in the
country would have higher impact for the industrial development of different sub-sectors.
Table 3.1 End users of aluminum sulfate and sulfuric acid
No.
END USERS END USERS
END USERS OF ALUMINIUM END USERS OF SULPHURC ACID
SULFATE
1 WATER SUPPLY 1 FOR BATTERIES
AUTORITES
A/AW.S.S.A. ADDIS CAR BATTERY
W.S.S.A. ETH.TELE.A
2 PULP & PAPER INDUSTRY ETH.AIR LINES
PULP&PAPER S.C A.M.C.E

3 TANNERY SECTORS ADDIS MECHANICAL.F.
AWASH TANNERY NYALY MOTORS
24
ETH.TANNERY YEDILEFRE BATTERY
ETH.PRCKING & TANNERY PRIVATE-CAR.B.
AWASJ TANNARY RIES ENGINEER
MODJO-TANNARY DEFENCE INDUSTRY
COMBOLCHA-TANNARY 2 BEVERAGE SECTOR
ADDIS ABABA-TANNARY META-BREWARY
ETHIOPIAN-TANNARY n-ALCOHOL& LIQUOR.FACTOR
WALLIY-TANNARY HARAR-BREWERY
DIRE-INDUSTRY AWASH-WINERY
4 TEXTILE SECTOR STGEORGE-BREWEARY
AKAKI TEXTILE MILL 3 OTHER INDUSTRIES
DIRE-DAWA TEXTILE MILL UNITED ABILITIES
BAHIR DAR TEXTILE MILL ETH.PHARMICEUTICAL
DEBRE BREHAN METAHARA SUGER.FACTORY
BLANKET.F.
COMBELCHE MILL MUGAR CEMENT FACTORY
EDGET-YARN FACTORY ADDIS ABABA CEMENT FACTO
5 AGRICULTURE SECTOR A.S.P.F
SIDAMO-AGRO-DAV.ENP. ADDIS MACHINE TOOLS FACTO

TENDAHO-AGRO-DEV.ENP. LALIBELA CNGENRING
CONSTRACTION INTERPRISE
A.E.T.S.C. GATAT ENGINERING FACTORY
ABEBO-AGRO-DEV.
BELE-AGRO-DEV.
ARUSI-AGRO-DEV
MIDOLE-AWASH-AGRO-
DEV.
BAHIR-DAR-EDIBLE-OIL
GOJJAM-GONDER AGR.
WOLLEGAGR.DEV.EN.
25
6 OTHER SECTOR
ASSELA-MALTERY
ABAY-MESK-SOFT
MUGAR-CEMENT
BATU CONSTRAUCTION
ETH.LIVE STOCK &MEAT CO.
GONDER SOT DRINKS.F

BAHIR-DAR-EDIBILE OIL
AKAKI S.P.&H.T.F
EELPA
PROJECT 40720/DEFENCE
INDUSTRY
Source: An updated market and finance study of AMASSASC

3.4.1 Contribution to Foreign exchange
Before the establishment of the AMASSSSC Ethiopia’s entire requirement for aluminum sulfate
is imported from abroad using foreign exchange and this foreign currency were continually
increasing when the demand for water treatment increased. Not only for water treatment but also
for effluents which are of widely used for varying compositions which covers a wide range of
effluents, including those from textile dyeing and bleaching, paper making, sewage plants and
food processing. Aluminum sulfate is used to remove impurities in coarse suspension. All these
industries were buying from abroad with foreign exchange.
In case of developing countries, generally, with poor industrial base like in Ethiopia, the industry
made the least performance in the export sector. Generally it can be said that contribution of the
sulfuric acid and aluminum sulfate export earning is invaluable. Other than exporting, Ethiopia
would save foreign exchange by producing and selling this basic chemical like aluminum sulfate
and sulfuric acid for most industries in Ethiopia. In the past years Ethiopian was importing
aluminum sulfate and sulfuric acid expending foreign currency. Even if the country is producing
these products, still there are imports of the same products or alterative products due to
uncoordinated efforts of AMASSASC with customers and customers’ attitude to the domestic
26
product are the main factors that have affected the contribution of the AMASSASC products for
the country.
On Table 3.2 show Ethiopian imported of aluminum sulfate in year (1987-1994) and also on
Table 3.3 shows the net sales AMASSASC product from the year (2001-2005), which save
foreign currency.
Table 3.2 shows the amount of imported tones/annum of the year (1987-1994) [19].
YEAR IMPORT OF ALUMINUM SULFATE
1987 388
1988 1558
1989 1043
1990 243
1991 370
1992 430
1993 1143
1994 301
TOTAL 5175
AVERAGE 685
SOURCE: a) National Bank of Ethiopia
b) Custom and excise Administration: External Trade Statistics

Table 3.3 Sales of AMASSASC in birr
Years 2001 2002 2003 2004 2005
Sales 21,569,082 20,116,234 21,093,061 21,566,974 10,458,123
Source: AMASSASC finance department
27
3.4.2 Contribution to Government Revenue
Industrialization is one of the effective tools of increasing the national income of a country.
Among the other benefits, there is the contribution which industry makes by generating a surplus
(through indirect taxes and operating surplus). This social surplus provides funds to finance
government programmers and development projects. It is therefore important to assess relative
significance of the contribution of Awash Melkassa Sulfuric Acid and Aluminum Sulfate
Company implying that its sales of the product have significant value for government revenue
and easy accessibility of the product of AMASSASC for others sectors in the country. Even if the
company have a lot of expenses indirectly in the other sectors the contribution to government
revenue is significant.
3.4.3 Direct and indirect taxes

The contribution to Government revenue of different sectors varies according to the income and
sells of the company. This would contribute much in the area of direct tax. This shows that if the
company has good market it will have a lot to contribute to the direct and indirect income to the
Government.
As there are many factors that contribute for the final product of the company, when it produce
the final product there are many costs. These cost indirectly goes there are different taxes the
company pay. In addition to the company cost, there would be others company that they are
going to pay when the sell the product or by the product. These and other condition contributes as
income for the government.
Table 3.4 Tasks AMASSC form each sales of the factory product in year 2001-2005
List year
2001 2002 2003 2004 2005
Income tax 87,460 609,937
Sales tax 863,253 850,011 1,141030 1,415,301 1,048,249
Source: AMASSASC finance dep.
28
3.5 Analysis of the development of the industry
3.5.1 Current consumption of AMASSASC products
The development of the industry related to the term production quiet often means the same as
manufacturing. To carry out this process of manufacturing we need factors of production like
man to do the job, equipment, material, money etc…
When the company established it were considered the growth in domestic requirements would
increase and the company would produce with its maximal production capacity, like producing
13000 ton per year of Aluminum sulfate and 17000 ton per year of sulfuric acid and therefore the
size of production facilities necessary to meet future local demand depends entirely on the
establishment of industrial projects.
The current consumption of aluminum Sulfate in the year 2000-2005 in the country is to fall in
the rage of 1000-6000 tones per year. The quantities demand/consumed by the end users and
quantity available for consumption also reveals the same case as can be seen from Table 3.5
below.
New projects are currently being implemented which will provide a substantial increase in
aluminum consumption in the municipal water treatment, textiles, beverages, leather and other
sectors. Furthermore the company production is gradually decreasing its production due to poor
market performance and lesser demand in the market as well as the low development of other
industries which need the product contrary to the expectation. Generally, the tendency is towards
a reduction in the consumption of Aluminum sulfate and sulfuric acid is seen in deferent sub-
sectors. On Table 3.5 shows the optimal production in the year (2000-2005).
Table 3.5 shows current optimal production in ton from 2000-2005

Lists of products Years
2000 2001 2002 2003 2004 2005
Aluminum Sulfate 6944 6550 3962 6768 5448 1028
Sulfuric Acid 5362 2952 2364 4678 3620 804
29
Fig.3.4 production of aluminum sulfate and sulfuric acid in the year 2000-2005
7000
6000
5000
4000
Aluminum
3000 Sulphate
2000 Sulfuric
Acid
1000
0
2000 2002 2004
3.5.2 Previous consumption of AMASSASC product

As aluminum Sulfate is a coagulant used in the purification of drinking water and drinking water
requirement is growing at a high rate; its demand was expected to increase. Recent changes in
economic policy and structural adjustment also have affected the favorably of the product.
Hence, this shows that the past trends cannot be the only basis for future demand in the year. On
Table 3.6 shows Ethiopian aluminum sulfate consumption in the year 1988-1994 [6].
Sulfuric acid is the highest consumable inorganic chemical. In Ethiopia’s requirement of sulfuric
acid was solely met through imports, mostly from European countries. The import figures of
sulfuric acid from 1987-1993 years are shown below in Table 3.6 [6].
Comparing the product with the current consumption, the previous consumption requirement for
these products was: for Aluminum sulfate from 1988-1994 were in average 5,200-5,600.
Compared to the recent years demand the company in not showing progress in the production and
selling in the domestic market.
30
Table 3.6 Ethiopian Aluminum Sulfate consumption in the year 1988-1994
(TONNES/ANNUM)
No END USERS 1988 1989 1990 1991 1992 1993 1994
1 AAWSSA 4242 4242 4242 4242 4242 4242 4242
2 Other cities 400 400 400 400 400 700 700
3 Textiles 69 69 45 51 38 30 54
4 Leather 105 105 88 68 97 55 103
5 Pulp & Paper 379 279 366 171 209 296 350
6 Others 64 64 61 59 58 57 57
TOTAL 5259 5158 5202 4992 5044 5380 5548
SOURCE: AN updated market and financial study
Table 3.7 Ethiopian’s import figures of sulfuric acid 1987-1993
Years
Import of sulfuric acid (tonne)
1987 504
1988 584
1989 2783
1990 2020
1991 210
1992 132
1993 840
SOURCE: AN updated market and financial study
31
Comparison:
The demand in almost all sectors was expected to increase due to the importance of the product.
Ethiopia’s requirement for aluminum sulfate was purchased abroad using foreign exchange, and
imported.; establishment of an aluminum sulfate plant is to select the most appropriate
technology, size the plant and associated facilities and determine its overall financial and
economic viability, particularly in respect of savings in foreign exchanger. This sector has been
identified as the key which will determine the national sulfuric acid requirement
Comparing the two periods consumption of AMASSASC products from 2000-2005 Table 3.5,
shows current optimal production in ton on average it was 3296 ton of sulfuric acid and 5117 of
aluminum sulfate. And from Table 3.6 Ethiopian aluminum sulfate consumption in the year
1988-1994 on average it was 6097 ton and Table 3.7 Ethiopian’s import figures of sulfuric acid
1987-1993 is 1010 ton. From the above figures the consumption of both products are did not
show much progress compared the company maximum production capacity of 13600 ton per year
of aluminum sulfate and 17000 ton per year of sulfuric acid.
AMASSASC could not produce with its maximum capacity and could not sales all products to
the customers well as it is seen from Table 3.6, Table 3.7. In AMSSASC there is only one time
that the company exported to Sudan in 2003 30 ton of sulfuric acid and 10 ton aluminum sulfate.
The market performance would be seen in detail in the next chapters.
It is seen from Table 4.5 and Table 4 .6 the consumption in different sectors were small compared
to the basic contribution of the company to different sub-sectors.
Generally, the company is not developing in its production and selling which implies the
industrial development in the country is not considerably seen in different sub-sectors related to
the usage of this chemical products.
32
Summary
In Ethiopia, as is the case with most developing countries, the development and sub-sectors play
great role in the production of aluminum sulfate and sulfuric acid of this consumption would
contribute lot of advantages for the country. For direct use by other industrial sectors Sulfuric
acid is one of the most important chemical products and could be used as raw material with
multi-purpose uses like in active reactant in a number of chemical processes,. in the Production of
salts, s Sulfate, phosphates, acids, fertilizers, pharmaceutical, dehydrating agent, catalyst, solvent,
absorbent for bromine recovery from its salts, refinery, etc… The company has contribution for
different sub-sectors by saving time, resource, manpower, and foreign exchange etc... Some of
the companies which were importing these chemical were water supply authorities, pulp & paper
industry, tannery sector, textile sector, agriculture sector. Integrated development of aluminum
sulfate and sulfuric acid play great role in relation of company products to other sub-sectors.
AMASSASC has contribution to the employment, direct and indirect taxes, saving foreign
exchange etc… Regardless of these the company could not produce at maximum capacity and
sell it product to the customers. Comparing the product the current consumption with the
previous consumption requirement, the products were not showing progress in the product
maximization and sale in the domestic market. The sub-sectors capacity of purchasing of the
products is small.
33
Chapter Four
4. Market Performance of AMASSASC
4.1.1 Background information
AMASSASC has the capacity to satisfy the country’s requirement of aluminum sulfate and
sulfuric acid as well as it has potential to export the product to neighboring countries. Sulfuric
acid being one of the most important chemical products in the world with a wide application in
the chemical processing industries in particular in the manufacturing industries there is a market
need for the product. In general demand of aluminum sulfate and sulfuric acid by many
enterprises in the country is not increasing it can be said it is decreasing in the year 2000-2006
due to different reasons. Some of the basic reasons are: the main users of the products of
AMASSASC are shifting to other alternative products, the sub-sectors usage capacity is not in
large quantity, the product of the company is not exported, there are same types or alternative
products are imported into the country etc…
The market performance of AMASSASC is relatively poor in aluminum sulfate compared to the
company’s capacity of production and the demand of the customers as shown in Table 4.1.
Demand of aluminum Sulfate as water purification usage in the year 2005-2006 used in the
purification of drinking water requirement is decreasing at high rate This is due to AAWSA is
using alternative products that substitute aluminum sulfate, recent changes in economic policy,
market policy and structural adjustment has also affected the company’s maximum level of
production and its market performance. There are different reasons why the company could not
sell its product. Large-scale industries and large consumers of new projects are not fully
implemented as well as imported material forced the company not to be competitive, resulting in
lower volume of sales by AMASSASC.
The market performance of AMASSASC in the production of aluminum sulfate mostly depends
up on the high consumer of the product, Addis Ababa Water and Sewerage Authority and
regional water authorities. On the contrary; the market demands of these factories have changed
to other alterative product, which presumably substitutes aluminum sulfate, like polyelectrolyte.
34
Sulfuric acid, the other product of the company also has a poor market sell. Most of the
remaining consumers such as: leather factories, soap factories, textile factories, sugar factories,
paper and pulp factories, battery charging, beverage industries, cement factories, mining
industries, flower production firms, pharmaceutical factories, schools, transportation organization
etc... are consumer of small amount of sulfuric acid compared to the company’s capacity of
production
4.2 Problems in market performance of AMASSASC

The company market performance in the foreign market is not growing. The existence of the
company is only depend on one organization A/AWSA and some industries in the country. In
AMASSASC the market performance is not interacting with other functions, for example,
marketing and production determines price levels; marketing and human resources develop
customer service policies and relationship which create and support the image of an enterprise the
selling of the product to the customers. Marketing function doesn’t encompasses most activities
between the producer of a good or the supplier of a service and the consumers, it is not starting
with the consumer from whose needs the product gets its service ideas and to whom it will sell its
services. The company is dependent of its sells in Addis Ababa Water and Sewerage authority .
4.2.1 Major problems in the company market performance

The company has a major problem in selling its product in domestic as well as in near by
countries market or to export. It does not produce at full capacity or sell the product that it
produced. A company cannot survive today by simply doing a job or producing. The product has
to be promoted and interacted to the environment to achieve the desired exchange outcome to the
target market.
There are internal as well as external environment that has affected the company’s market
performance. Some of the major problems are:-
• The existence of the factory as a whole is entirely dependant on one organization. Addis
Ababa water and sewerage Authority accounts for 66% of the sales of aluminum sulfate.
(that is very serious problem now because in 2005 and 2006 Addis Ababa water and
sewerage stopped buying the product)
35
• The company could not produce with its full capacity and sell its product fully due to poor
integration with other sectors and with the responsible government bodies
• The organization that uses sulfuric acid and Aluminum sulfate such as: Leather, Soap,
textile, Sugar, paper and pulp, flower production, mining areas, Pharmaceutical, etc...
purchase small quantity of the company product even if it the company is considered to have
large number of customers
• Major customer that purchase large number of quantity are shifting to other sellers and other
alterative products example: Ethiopian water and sewerage authorities
product is relatively higher than the competitors cost
• Some times those imported product of Sulfuric acid, Aluminum Sulfate are sold with lesser
price than the company sells.
• There is machine idle time and failure
• Flexibility in the production and new product introduction speed is slow
• The company’s selling price and production capacity is highly affected by external macro
environment factors in which the firm operates such as: tax policy, employment laws, trade
restriction and tariffs, political stability, interest and exchange rate, inflations rate etc...
• There hardly is a research work devoted to improve the industrial development, market
performance and competitiveness that indicate that it is a neglected industry in the chemical
sector.
• The company is not finding new user for its products, reducing variable cost of the present
products and the fixed costs “being price oriented”, does not analyze competitors product.
4.3 Result achieved

The market performances of Awash Melkesa depend on one firm, which is the highest consumer
of aluminum sulfate, Addis Ababa Water and Sewerage Authority and regional water authorities.
As a result of this, customers specially Addis Ababa Water and Sewerage Authority account for
sell about of 66% of Aluminum sulfate of the company product have stopped buying. Because of
this the company has long weeks and months of idle time, and keeps stock in the warehouse for
longer time which is causing series problems in the existence of the company.
36
• Most of the remaining consumers of Aluminum Sulfate are paper industry, leather, textile
and other effluent treatment units that purchases less than 6,500 tones of aluminum sulfate
per year compared to 13,600 tones per year (tpy), the maximum capacity of the plant
production.
Table 4.1 shows consumer of Aluminum sulfate product

USERS Al2SO4 2000 2001 2002 2003 2004
1 A/AW.S.S.A. 2609.4 5090.6 4500 4200 4203.55
2 Oromia W.S.S.A. 70 255 122 388 700
3 Ethio. PULP&PAPER S.C 380 340.65 444 490
4 Bargoba trading PLC - - - - 20
5 South W.S.S.A. 147 141.2 133 - -
6 Amara W.S.S.A. - - 80 152.4 103.9
7 Ethio. tanary PLC 70 84 60 110.3 80
8 Fincha Suger Facotry 60 210 35 65 144
9 Harir W.S.S.A 152 - - - 26.6
10 Muger cement Intr.44 44 66 66 88
11 Tigray W.S.S.A - 45 24 40 36
12 emada Textil 15 51.5 90 74 14.1
13 Alefora - 20 - 10 10
14 Akaki Testile 18.2 22 12.9 11 13.3
15 Seba Tannery - - - - 1
16 Alico Awash Taneery 16 - - 12 11
17 Mersa Tannery 6 - - 6 10
18 Bedele Bira PLC - - - - 7.5
19 Moha Leselas drink- - - - 9.5
20 Etho. Electirc Co. - - - - 10.5
21 Bahir Dar Textile - - - - 8
22 Awash water servic- - - - 17.10
23 Blue Nile Tannery - - - - 3
37
24 Dria Dewa Txtile - - - - 5.8
25 Gilegale Giba Hyro. Elc.- - 55 101.4 20
26 Others 54.9 80.1 41.75 35.2 5.45
27 Export to Sudan - - - 10 -
Total 3776.6 6286.05 5752.05 5836.5 5238.7
Source: AMASSASC marketing department
• When there is a bid other compactors win. The problems came at when AMASSASC set
selling price considers all the expenses incurred such as: wage of employee, promotion,
training, income tax or profit tax , sales tax, direct and indirect taxes, exchange rate,
inflations rate, rent, transport etc...These and other conditions force the company to sell
the products higher than the competitor’s price. On the other hand the competitors are
importing from Europe and Japan, which produce more than 300,000 tones per year
which are capable of selling as bulk product.
• Sulfuric acid is used for different industries for different purpose. In Ethiopia there are
small quantities of buyers of the product of AMASSASC relative to the capacity
production that is 17000 tpy. The reason why there is low demand to purchase the
product is slow industrial development in the county, which limits the AMASSASC
capacity of production. This indicates that industries in Ethiopia, which use this product,
have not developed yet. Sulfuric acid used in different sectors if the capacity and the
industries expand like cotton, cola production etc…
Table 4.2 shows the amount of sulfuric acid usage data 2000-2005
USERS of YEAR
SO4
I Direct use 2000 2001 2002 2003 2004 2005
1 Tannery 249 303 267 256 323 102
2 Textile 22 75 63 80 36 71
3 Beverage 28 51 32 37 45 39
38
4 Car Battery 13 25 21 25 30 53
5 Cotton farms 57 89 88 88 134 95
6 Flower farms - - - 2 8 26
6 Cola products 8 17 - 2 12 33
7 Others 413 611 544 546 658 700
TOTAL 790 1171 1015 1036 1246 1119
• The machine would be idle for some weeks or months for different reasons. Some of the
reasons are:
1. When there is less demand in the market or when there is large size of inventories.
One of the machines is producing sulfuric acid which is corrosive, When the
machine stops the acid corrode the parts of the machine and as a result it cause
additional cost for replacing the corroded parts and there is maintenance cost too.
Maintenance cost and spare part cost cause the price of the unite cost which would
affects the competitiveness of the firm.
2. When there is a machine failure parts should be purchased from aboard with
foreign currency. This would be additional cost on the company’s product and for
professionals who maintains the machine
• It could be seen that there is poor market penetration. In order to make the customer, the
company is not using means to penetrate to the market. Some of the penetrating means to the
market is giving free training to the customer. Training in the company is not seen to be an
essential factor ensuring a satisfactory order-book from the beginning and that can be
achieved only if an earlier program of training in sales. In AMASSASC marketing and
distribution basics has not created at least the nucleus of awareness campaign to encourage
uses of the home-produced products which has the same quality as imported ones.
• In this company it can be easily seen that neglecting the market and its development by
remaining production-oriented. It is also not noted the positive effects of an awareness
39
campaign of the type suggested in pulling through new enterprises and new uses of the home-
produced products. There is no much training given to employees of the marketing
department of AMASSC, and to customers considering alike is an essential part of such a
program to develop a good working relationship that would help the country development.
• There is no flexibility in new product introduction. United Nation (UN) and other aid
origination are buying thousands of water treatment small gram package called
"WATERMAKER" for rural area in Ethiopia. One small package used for water treatment of
20 litter and these organizations are buying WATERMAKER form south Africa and other
countries. Ethiopia is producing Aluminum Sulfate for water treatment; in order to expand the
market new product is not encouraged in the company, which affects its market performance
and competitiveness.
• The company selling price and production capacity is highly affected by external (macro-
environmental) factors in which the firm operates.
4.4 Analyzing the market performance of AMASSASC
4.4.1 Market performance of AMASSASC in Aluminum Sulfate

Aluminum sulfate, an essential water treatment chemical, is utilized for water Purification in
Addis Ababa and many other large Ethiopian towns, by tanneries, printers, the textile industry,
and the pulp and paper Companies. The demand in almost all sectors it was expected to expand
considering the implementation of new projects since the establishment of AMASSASC. The
market performance of this company is based on the small companies demand. Before the
establishment of the AMASSSSC all of Ethiopia’s requirement for aluminum sulfate were
purchased abroad using foreign exchange, at this time Addis Ababa Water and Sewerage
Authorities is importing substitute products for water treatment purpose. It can be said the
existence of the factory as a whole is entirely dependant on one organization which has become a
very serious problem now.
40
Table 4.3 Quantity sold in the domestic market (ton)
List of Aluminum sulfate quantity sold in the domestic market in ton
product
2000 2001 2002 2003 2004 2005/7 ms Average
Aluminum 6423 5560 5801 6387 2653 606 4571.667
Sulfate
Fig.4.1 Quantity of Aluminum sulfate sold in the domestic market
7000
6000
5000
4000
Alum inum S ulfa te
3000
2000
1000
0
2000 2001 2002 2003 2004 2 0 0 5 /7
m onths
It can be seen from the chart that the amounts of aluminum sulfate sold in the domestic market
have decreased in the year 2000-2005.
4.4.2 Export Market in Aluminum Sulfate

Exporting marketing performance function and related activities in an enterprise, advertising
small or large, ensure that an enterprise have access to other areas. It can be seen for the collated
data there is only one time that the company exported aluminum sulfate to Sudan from 2000-
2005.
Table 4.4 Quantity sold in foreign market (ton)

List product Aluminum sulfate quantity exported
2000 2001 2002 2003 2004 2005/7 months
Aluminum Sulfate - - - 10 - -
41
Fig 4.2 Quantity sold in foreign market (ton)
12
10
8
6
A lu m in u m Su lfate
4
2
0
-21999 2000 2001 2002 2003 2004 2005 2006
In the domestic and foreign market it can be seen that there were small amount quantity sold.
There are Major Problems that the company have faced, some of the problems are:
• The company could not produce with its full capacity and sell its product fully
• The organization that uses sulfuric acid and Aluminum sulfate such as: Leather, Soap,
textile, Sugar, paper and pulp, flower production, mining areas, Pharmaceutical, etc…
purchase small quantity of the company product even if it the company is considered to have
large number of customers
• Major customer that purchase large numbers of quantity are shifting to other sellers and
other alterative products example: Ethiopia water and sewerage authorities have shifted to
other alterative produce.
• In the exporting market other countries like China and India have highly controlled the
market in most African countries, these counties have established major tread roots . In the
case of AMASSASC have made little efforts to penetrate into the market. The company does
not make much efforts by sending its market professional to the different near by countries
in order to advertise its product
4.4.3 Market performance of AMASSASC in Sulfuric acid
Market of sulfuric acid in Ethiopia is very less relative to the company production capacity. One
of the reasons comes from there are no large industries which use thi s product in large quantity,
and there are only small quantity user of the company product. There is poor market penetration
that the company has less effort for advertising its product.
42
The other problem for its poor market performance is current police of the country which is
agricultural focused. Even if some industries are emerging they are not large scale industries, and
the company’s customers are purchasing small quantities such as: leather factories, soap
factories, textile factories, sugar factories, paper and pulp factories, battery charging, beverage
industries, cement factories, mining areas, flower production, pharmaceutical areas, schools,
etc…It can be seen form the data that less the 50% of the company production capacity is used.
Table 4.5 Shows the Sulfuric Acid sold in the domestic market from 2000-2005
List of Sulfuric Acid Quantity sold in the domestic in ton
product
2000 2001 2002 2003 2004 2005 /7 months Average
Sulfuric Acid 611 544 546 658 715 419 582.116

Fig. 4.3 shows the Sulfuric Acid sold in the domestic market from 2000-2005
800
700
600
500
Sulfuric
400 Acid
300
200
100
0
2000 2001 2002 2003 2004 2005
43
4.4.4 Export Market in Sulfuric acid
It can be seen for the collated that data there is only one time that the company exported. There
are small efforts done in the exports market.
Table 4.6 shows the sulfuric acid exported from 2000-2005

List of Sulfuric acid quantity exported
product
2000 2001 2002 2003 2004 2005 /7 months
Sulfuric - - - 30 - -
Acid
Fig. 4.4 Shows the sulfuric acid exported from 2000-2005
35
30
25
20
Sulfuric Acid
15
10
5
0
2000 2001 2002 2003 2004 2005
4.5 Analyzing internal factors affecting Market performance

Internal environmental analysis evaluates relevant factors in an organization in order to determine
its strengths and weaknesses. There are an internal factor that affects the company market
performance and competitiveness. Some of the internal factors that affect its market performance
are type of marketing and distribution, applied technology, research and development, innovation
or introduction of new product, training, applied technology, information management system,
internal working condition, product/service quality, marketing capability etc…
44
4.5.1 Marketing and distribution
There are some problems in AMASSASC that affect its market performance and competitiveness
in the marketing and distribution. As it was stated in the previous chapter two that the plant has
the capacity to satisfy the country’s chemical requirement as well as has good potential to export
to neighboring countries. The factory, with such vital and necessary product to many other
processes as raw material, should have been prosperous and profitable, by having a number of
customers.
Even if the company distributes its product to the customers and brings its sells department to
Addis Ababa and use its own transport to reach the product to the customers, and the marketing
division had arrived on export activity, there is inconsistence to hold customers and to penetrate
to the market and there still are problems in marketing and distribution.
Marketing department did not use the market opportunities considering Ethio-Sudan trade
relationship and near by road transportation system to export its product to Sudan, with one of
such chemical users who import about 7000 tone of aluminum sulfate and 200 tones of sulfuric
acid from China. If the company is priced focused than product focused it would becomes
competent with Chine, it will be prosperous in short time.
Marketing in AMASSAWC have not focusing on the new sectors like flower production,
schools, and any organization, which uses AMASSASC’s chemical at least in lab.
4.5.2 Applied technology

One of internal factors that affect the company market performance and competitiveness is
applied technology. Generally Aluminum sulfate and sulfuric acid produce in the modern plant
with respect to applied equipment and process. The plant uses modern high duty apparatuses and
equipments produced using the special material resistance to many years work in the environment
of sulfuric acid. The reason why market performance is affected by applied technology it nature
of production system of AMASSAY.S.C is continuous for sulfuric acid and batch type for
aluminum sulfate. During sulfuric acid production all chemical reactions are exothermic and
45
chemicals which go through the steps should be accompanied by hot Steam, which otherwise
solidify rapidly the system is continuous.
When the machine stops working due to either lesser demand in the market or machine failure,
since sulfuric acid is corrosive it would corrode surfaces in short time and it has an effect in the
market performance in the short run. Replacement of seriously part damaged and maintenance
have its own costs that affects the price adjustment against competitors. In the long run the
efficiency of the machine decrease and there would be high cost for maintenance and replacing
parts. Generally, the technology that the company uses with lesser capacity which is 13,600 tpy
of aluminum sulfate and 17,000 tpy of sulfuric acid compared to imports source country like
Chin which have production capacity of 300,000 tpy which would highly affects it market
performance.
4.5.3 Research and Development
In AMASSASC there is no research work done in the company promote its market performance
and competitiveness. The company does not have recent result of research to study in its market
development and competitiveness. One of the problems that affects the market performance is
there is only small research work done to improve the industrial development and the market of
this company. Much consideration is not given for research work to improve its market
These days it is appearing a number of alternative products as a substitute. As describe in chapter

two, one of the intimate customer that account 66% of its sales shifted to the alternative product
which cause the company not to produce at maximum capacity. Particularly researches the
market performances have not yet opened up yet in the chemical products in order to product the
need of customers. Even if the company does not give much attention for research and
development there are cost the company invested for promotion, advertising is shown in Table
4.7, below. Table 4.7 The Company expense for promotion advertising and marketing
List 2001 2002 2003 2004
Promotion, 68,622 21,430 49,644 15,363
advertising, marketing
46
The company does not consider recent market researches innovation of new product which is
imported to Ethiopia like “WATERMAKER”, in doing so; the company should allocate money
for research work in order to:
1. Search for basic chemicals or physicals relationship of products and process
2. Improve their products
3. Develop new products (capitalize the first word)
4. Reduce cost of present product
5. Analyze competitors product
6. Find new user for their products
7. Find profitable use of by products
8. Increase its market performance and competitiveness
4.5.4 Innovation or Introduction of New Product

The company is not only giving attention for research and development but also does not make
efforts for innovation of new product from the product it exists. Like some organization
importing thousands of packages of “WATERMAKER” to ruler areas for drinking water
treatment in Ethiopia.
4.5.5 Training
In AMASSASC one of an internal factor that affects the company market performance and
competitiveness is not giving training for employee and for the customers. The percentage of the
total employees trained in AMASSASC from 2001 to 2005 was 3% and the maximum length
employee received on the job training for the past five year is for 2 month. There is no training
given for the customers how they use their product, on the quality of the product etc...In order to
improve good market performance and to be competitiveness training for the employees and
customers should be seen as a part of the company process.
Customer training is seen to be an essential factor ensuring a satisfactory order-book from the
beginning and this can be achieved only if an earlier program of training in sales, marketing and
47
distribution basics has created at least the nucleus for the market.
In a project of this type, the only chemical producer in Ethiopia it can be easily seen neglecting
the market and its development by remaining production-oriented. The company is not aware of
the important training that has positive effects of an “awareness” campaign. Also by giving
training suggest in pulling through new enterprises and new users of the home-produced
products. Training of employee and customers in AMASSASC is not seen as an essential part of
a program to develop a good working relationship, initiate customers to be aware of the product.
It is important that a senior manager be appointed inland and oversees sales, handling and
distribution from an early stage, plan free training for customers in order to improve the market
performance.
4.5.6 Information Management System

Today information is becoming the basic input for any organization. Information system, usually
computerized ones, handles different data analysis and activities. Presently the factory has few
computers and hence no such services are held in each department, even though there lot amounts
of data’s to be analyzed. Most the work are done manually. Recent information of the factory
like inventory stock, spar parts stock, production level and capacity customers need, market
performance and forecast of sell etc... In addition there is no sufficient information and
communication in the neighboring country chemical requirement and demand. Without getting
the required information supported by latest technology, the market performance could not reach
all the direction to make decision for its product and sell.
4.5.7 Internal Working Condition

Internal working condition is one of the reasons that affect the company market performance and
competitiveness. There are many reasons that the company could not be competent in the country
as well as in the foreign market. Working environment, intimate relationship among each
departments, consistence in the production in holding customers, commitment to improve its
market performance and attract new customers, proposal preparation for the government in the
implementation of new industries which use aluminum sulfate and sulfuric acid etc...Are some of
48
the internal factors that affect the company market performance knowingly or unknowingly
4.5.8 Product/Service Quality
Product/service quality has become a major issue in almost all market today. In AMASSASC
product/service is to survive and grow it must be perceived in the marketplace as providing high
quality relative to its price. In this light an evaluation should be undertaken to evaluate the quality
of the firm’s major products(s) and service(s) relative to that of the competition. AMASSASC is
not developing direct feedback from customers, service and general customers acceptance are
some of potential sources of that should be considered that reflecting product /service quality.
4.5.9 Marketing capability

Closely allied with an organization’s product position, its marketing capability that is its ability to
deliver the right product or service at the right place at the right time and at the right price. Areas
that should be investigated regarding an organization’s marketing capability include its
distribution channels, the types of advertising and promotion used, and identification of the
specific markets being targeted etc….. Significantly affect the market performance of the
company. Related to this AMASSASC could not produce hydrated lime or does not work in
cooperated with other industries to produce hydrated lime which have affected the sell of 66%
for Addis Ababa Water and Sewerage authorities.
4.6 Analyzing external factors affecting Market performance

External factors or environmental analysis seeks to uncover relevant information, rather than
extensive information. Furthermore, the process must be future-oriented to provide for adequate
response time, whether the desired response it to capitalize on a trend or to influence its
direction. These forces can be classified as economic, technological, social, and political (or
regulatory). The nature of these forces varies with the geographical scope of the organization’s
operations [25].
External factors have significant effect in the market performance of AMASSASC as internal
factors affects the market performance. For this there are many reasons that the company could
not have good market performance and be competent in the country as well as in the foreign
49
market. Some of the external factors that affects the market performance of the company and
does not make it competent are: the economy policy of the country ,employment laws, tax
policy , economic growth, interest and exchange rate, inflations rate, the government subsidy.
In Ethiopian for this unique chemical industry there is no subsidy to the company to sell its
product in the country as well as in the foreign market. For example in China most sectors have
subsides for the country product and because of this the country is capable of competing in with
lesser price in the foreign market. Countries such as China and India which produce 300,000 ton
of sulfur per year compared to Ethiopian unique chemical company, AMASSASC, the
maximum capacity of production 17,000 ton per year it is becoming hared to cover even its own
expenses compared to the mass production of other countries and could sell it with lesser price.
Environmental analysis is a critical component of strategic management because it produces

much of the information required to asses the outlook for the future. The environment is a
significant source of change. Environmental analysis is concerned with examining those forces
that are not under the direct control of the organization or its industry but which can profoundly
influence the industry and organization within the industry [25].
Fig. 4.5 External environment of an organization
Environmental
forces
Industry Competitor
Environmental Environmental
forces AMASSASC forces
Competitor
Competitor
Environmental
forces
50
In order to see the external factor that affect its market performance and competitiveness, PEST
analysis is used to see some of the external factors that affected the market performance of
AMASSASC.
4.6.1 PEST Analysis

Using PEST analysis in this chapter try to see external Macro environment in which affect the
market performance of AMASSASC operate, and help to see some of the external factors that
affects the market performance.
A scan of external Macro environment in which the firm operates can be expressed in terms of
the following factors [25]
1. Political 2. Economic
3. Social 4. Technology
Environmental Scanning
External Analysis Internal Analysis
Macro environment Microenvironment
P.E.S.T
4.6.1.1 Political Factors
Political factors include government regulations and legal issues and define both formal and
informal rules under which the firm must operate. Some examples are:
• Tax policy
• Employment laws
• Environmental regulations
• Trade restriction and tariffs
• Political stability
From the above mentioned some of it is described blew how political factors would affects the
market performance of AMASSASC.
51
4.6.1.1.1 Tax policy
AMASSASC on the different stages of its market, there are different taxes it pay to the
government as well as for imported raw material like sulfur. In all the stage the tax policy highly
affects its market price. The company has different tax it pays, some of the taxation levels are:
income tax or profit tax, sales tax, directs and indirect taxes are some of the tax policy that it
affects the price of the goods and affect its market performance.
Table 4.8 shows some type and level of taxation the company pays in birr
List of taxation Years
2000 2001 2002 2003 2004
Income or profit tax - - 87,460 609,937 -
Sales tax 863,253 850,011 1,141,030 1,415,301 1,048,249
Source: AMASSASC
Fig 4.6 shows type and level of taxation the company pays in birr
1600000
1400000
1200000
1000000
800000 Income or profit tax
600000 Sales tax
400000
200000
0
2000 2001 2002 2003 2004
As it can be seen from the figure 4.6 sales tax is increasing up to 2004 each year. The company
can not survive today by simply doing a job. This job has to be advertised and has to be
interacted with the environment to achieve the desired exchange outcome with target market. In
this interaction in the market tax policy highly affects the unit price of the product and directly
affects the market performance of AMASSASC.
52
4.6.1.1.2 Employment laws
Employment laws have major effect in the company market performance. Human power
planning, which management determines how the organization should move from its current man
power position to its desired man power position, is the key department which strives to have the
right number and the right place, at the right time doing things which result in both organization
and the individual receiving maximum long term benefits. It deals with employment law
calculation of human power requirements of the present state and in future considering various
factors such as internal and external economics, social and political pressures, organizations
policy available and suitability of manpower requirements have effects with the law of the
employment.
The total number of the employees currently in AMASSASC is 239. In all the time the company
has to pay to the employee regardless of stopping of the machine or even in ideal time that the
machine stops for weeks or months. Personnel are a high cost element in an organization and
must be planned like other functions of enterprise such as marketing and finance. This calls for
proper determination of man power requirement, recruitment, selection, placement and
replacement of personnel to match the abilities and potentialities of the personnel with the
demand of various jobs condition considering the current market just have costs.
Formal and informal rules under which the firm operates merit rating is a systematic and orderly
approach to assess the relative worth of an employee working in an organization in terms of his
job performance, integrity, leadership, intelligence, behavior, etc…would affects the market
performance of the company.
Employment law affects the cost of the company considering merit rating is commonly referred
to as employee appraisal or staff reporting. It provides a record of the worth of the employees
they therefore can be put on the most appropriate jobs depending upon their capabilities. In merit
rating formal and informal rules under which the firm operates may help employee and thus helps
in employee improvement.
53
These laws may include:
I. wage increase II. Promotion III. Training IV. Transfer, and V. Discharge
When consider in wage increase promotion training the company has expenditure .These and
other factors employment law would affect the market performance and competitiveness.
Table 4.9 shows the different proportional distribution of professional, technician, staff
percentage distribution
List Percentage distribution
1 Engineers (B.A or Above) 3.2%
2 Professional staff (B.A or above) 2.76%
3 Diplomas 1.8%
4 College/ university attending now 13.8%
5 vocational/technical 1.84%
6 Other level lower level 48%
As it seen from table 9 the number of proportion of the employees varies. There are some formal
and informal employment laws that affect; wage increase, promotion, training, transfer, and
discharge which will affects directly or indirectly the market performance of the company.
4.6.1.1.3 Trade restriction and tariffs

Trade restriction and tariffs have the major effects in the market performance of the company.
These days Ethiopia is following free market system it is becoming challenging to compete with
those which produce thousands of ton. Not only their mass production but also their government
subsidy in the foreign market affected the Ethiopia market. Ethiopian's companies including
AMASSASC getting hard to penetrate into the domestic as well as foreign markets due to
imported goods.
These days on the chemical product like aluminum sulfate and sulfuric acid there are neither
restriction to import to the country nor has restriction or higher taxation for those who import
54
aluminum sulfate and sulfuric acid to encourage the domestic product. Because of no trade
restriction and tariffs in the country for imported chemical product, highly affects the market
performance of the company product. There is a certain amount of cross-border trade in sulfuric
acid, notably to Sudan. Ethiopia would not be in a position to be competitive as a supplier of
small tonnages into markets within the region. Substantial subsidies would be required to enable
Ethiopian product to be competitive in neighboring markets which would not justify larger scale
production than recommended to meet the countries domestic requirements.
There is no trade restriction for importing this chemical product and could not sell its entire
product even the cost base is too high to enable export from Ethiopia, and to be competitive with
imports from low-cost sulfuric acid producers in Europe and Japan. High inland freight costs
from Ethiopia to other countries would if anything also favors imports from outside Africa. The
Preferential Trade Area currently imports around sulfuric acid, mainly from Western Europe.
Even in Ethiopian market AMASSASC to sell it product, it has to compete with other importers
in Ethiopia, which are importing sulfuring acid in lesser cost than AMASSASC sells. AS there
are no trade restrictions to protect the domestic product, which would contribute higher means of
income in foreign, contribution of the company product to other sectors, contribution to the
employment market performance is affected.
4.6.1.1.4 Political stability

Political stability has an effect on the market performance of AMASSASC. When the company
established there is different study were done in Derge regime. This sector has been identified as
the key, which will determine the National sulfuric acid requirement; it is also assumed new
projects would be implemented and provides a substantial increase in aluminum sulfate
consumption in the municipal water/sewage treatment sector. Even if in the past years Addis
Ababa water and sewage authority were using aluminum sulfate for water treatment it has
stopped this year. When the company establish it had target on this projects and other projects
that would be expand use AMASSASC product, but political stability and different market policy
have an effect on company market performance. Similarly, the remaining regional water
authorities, and have large scale expansions in water supply planned, which seem likely to be a
55
high national priority using the product of AMASSASC. These days the regions have their own
authorities to buy the product in the free market policy. Thus, political stability has an effect on
the market performance of the company product.
4.6.1.2. Economic Factor
Economic factors affect the purchasing power of potential customers and the firm's cost of
capital. The following are some of factors in the macro economy:
• Economic growth
• Interest and exchange rate
• Inflations rate
From the above described there are description how economical factors would affects the market
performance of AMASSASC below.
4.6.1.2.1 Economic Growth

Economic growth has an impact on the market performance of every company especially in
AMASSASC. Economic growth directly or indirectly effect the powers of buyers .When buyer
power is strong, the relationship to the producing industry is near and any amount of Aluminum
sulfate for sulfuric acid produced it would be sold in the market. If the economic growth is low
the buyer purchasing power would be less, and expansion and development of new industries
would be slow and affects the market performance.
The economy growth of the country is slow and thus, there are no implementation of larger size
industries, which consume aluminum sulfate and sulfuric acid in large size. The existing
factories and industries are not developed much or they have lesser production capacity and are
consuming small amount of the company product.
As shown in Table 4.10 the quantity that the industries or customers by sulfuric acid ton per year
less as the economy scale or production capacity do not allow them to use sulfuric acid in large
amount.
56
Table 4.10 shows the amount of Aluminum sulfate purchased ton per year
USERS 2000 2001 2002 2003 2004 2005
A/AW.S.S.A. 2609.4 5090.6 4500 4200 4203.55 1300
Oromia W.S.S.A. 70 255 122 388 700 N/A
Ethio. PULP&PAPER S.C 380 340.65 444 490 217 N/A
Bargoba trading PLC - - - - 20 N/A
South W.S.S.A. 147 141.2 133 - - N/A
Amara W.S.S.A. - - 80 152.4 103.9 N/A
Ethio. tanary PLC 70 84 60 110.3 80 N/A
Fincha Suger Facotry 60 210 35 65 144 N/A
Harir W.S.S.A 152 - - - 26.6 N/A
Muger cement Intr.44 44 66 66 88 N/A
Tigray W.S.S.A - 45 24 40 36 N/A
Alemada Textil 15 51.5 90 74 14.1 N/A
Alefora - 20 - 10 10 N/A
Akaki Testile 18.2 22 12.9 11 13.3 N/A
Seba Tannery - - - - 1 N/A
Alico Awash Taneery 16 - - 12 11 N/A
Mersa Tannery 6 - - 6 10 N/A
Bedele Bira PLC - - - - 7.5 N/A
Moha Leselas drink- - - - 9.5 N/A
Etho. Electirc Co. - - - - 10.5 N/A
Bahir Dar Textile - - - - 8 N/A
Awash water servic- - - - 17.10 N/A
Blue Nile Tannery - - - - 3 N/A
Dria Dewa Txtile - - - - 5.8 N/A
Gilegale Giba Hyro. Elc.- - 55 101.4 20 N/A
Others 54.9 80.1 41.75 35.2 5.45 N/A
Export to Sudan - - - 10 -
The economy growth encourages larger investment, as well as increase the purchasing power the
industries. As it can be seen in Table 4.11 the industries are buying small quantity of aluminum
sulfate.
57
4.6.1.2.2 Exchange rate
Exchange rate is one of the factors that affect the market performance of most companies
including AMASSASC. In the past ten years from 1994 to 2006 there is a gradual increase of the
exchange rate. The current exchange rate policy induces a bias against exports in favor of
imports. Maintaining an overvalued currency has its benefit in terms of the repayment of foreign
debt, but has a detrimental effect on the ability of domestic manufacturers to penetrate the
international markets or to compete with “cheap” imports.
Exchange rate affects AMASSASC in different ways. As there are raw material like sulfur is
imported, increase exchange rate affect the price of imported material and the price of shipments
of these products and would also increase the freight cost. The company would be forced to
increase the unit price which also affects the market performance of the company products. When
there are failures to machine parts in order to maintain this machine some spare parts have to be
imported. As the exchange rate increase the cost of the purchasing price increase and also affect
the market performance of the company.
4.6.1.2.3 Inflation rate

Inflation rate is another factor that affects the company market performance. The increase of
price is affecting the selling price of AMASSASC. Before 2006 and still now there is a trend in
the increase of the price of good, due to some economical or political factors in the world there
is high inflation rate. Some of the raw material AMASSASC imports, like sulfur and spare parts
price have increased, in which directly affect the production cost. These and other factors of
inflation have affected AMASSASC market performance.
Table 4.11 shows price of sulfur for one ton in Birr
List of raw Unit cost of raw material sulfur in Birr
material imported
2000 2001 2002 2003 2004 2005
Sulfur 1949 1509 1444 2027 1783 -
Source: AMASSASC
58
Fig. 4.7 shows the price variation sulfur for one ton
2000
2001
2002
2003
2004
4.6.1.3 Social Factors

Social factor is one of the reasons that affect the market performance of the company. Social
factors include the demographic and cultural aspects of the external macro environment. These
factors affect customer needs and the size of potential markets. Some of the social factors
include:
• Health consciousness
• Attitude towards the product
4.6.1.3.2 Attitude towards the product
Attitude towards the product factor highly affect the company like AMASSASC. This is another
problem that the company has faced. With the same quality and capacity of supply of the product
the customers want to import the same product even with higher price than it is sold in the
country, these attitudes of the customers cause AMASSASC not to be competing in the domestic
market.
4.6.1.4 Technology
Technological factors can lower barriers to entry, reduce minimum efficient production levels,
and influence outsourcing decisions. Europe and other developed countries product sulfuric acid
as by-product in mass and selling the product with lesser price compared to AMASSASC limited
capacity of production and lesser capacity of technology used which affects its competitiveness.
Some technological factors include:
• Automation, rate of technological change, etc.....
59
4.6.1.4.1 Automation
Automation is another factor that affects the producer and the customers need. If there is
continues production with large amount and there is a market and the company could sell its
product relatively lesser price than those which product with the goods. Nature of production
system of AMASSASC is continuous for sulfuric acid and batch type for aluminum sulfate. In
AMASSASC there is continuous production of sulfuric acid the capacity of production is lower
and small market boundary compared to other country which product continuously and have
larger market boundary. Thus, automation affects its market performance of the company.
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Summary
The market performance of AMASSASC relatively poor in aluminum sulfate compared to the
company capacity of production and the demand of the customers. Demand of aluminum
Sulfate in 2005-2006 used in the purification of drinking water requirement is decreasing at high
rate, contrary to the company sell expected to increase. AMASSASC have faced problems due to
not selling the entire product that it produced, and these days it is not possible for the company to
produce with its full capacity. In Ethiopia there are small quantity buyers of the product of
AMASSASC relative to the capacity production. Some of the users are: Leather, soap, textile,
Sugar, paper and pulp, flower production, mining areas, Pharmaceutical, etc… purchase small
quantity because of the limited capacity of production.
It could seen that there is poor market penetration, in order to win the customers the company is
not using means to penetrate to the market like giving free training to the customer. There are an
internal factor that affects the company market performance and competitiveness. Some of the
internal factors that affect its market performance are type of marketing and distribution, applied
technology, research and development, innovation or introduction of new product, training,
applied technology, information management system, internal working condition etc…
External factors have significant effect in the market performance of AMASSASC as internal
factors affects the market performance. Some of the external factors that affects the market
performance should be in a scan of external macro environment in which the firm operate can be
expressed in terms of the following factors: 1.Political , 2.Economic, 3.Social, 4.Techonolgy.
Some of the external factors for the company could not be competent are: the economy policy of
the country, employment laws, tax policy, economic growth, interest and exchange rate,
inflations rate, the government subsidy etc...
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Chapter Five
Competitiveness of AMASSASC
5.1 Back ground information

In AMASSASC there are different constraints that the company faced to be competitive in the
domestic as well as foreign markets. AS a reason for customers not to buy the product of
AMASSASC the price is seen as one factor. There are no alternative product the company
product which makes company to be more competitive and there is poor flexibility in new
product introduction. These times company is product oriented than reconsidering the selling
price that is becoming more challenge the company to be competitive. On This chapter to
analysis the competitiveness of the company SWOT analysis and cause and effect diagram and
cost analysis are used.
5.2 Defining and measuring competitiveness

There are different measurement may be used to analysis the competitiveness to some industries,
businesses, companies etc…The development potential of a country or an economy is determined
by its ability to foster competitiveness and to generate, attract economic activities that will ensure
Success in the developing income means. Given the choices that customers face today, how do
they decide which product or service to buy? Different customers are attracted by different
attributes. Same customers are primarily interested in the cost of the product and correspondingly
some companies attempt to position themselves to offer the lowest price. The major
competitiveness measure in the competitive dimension that forms the competitive positions of a
company includes the following [11].
Cost- "Make it cheap" - although price is the competitive weapon used in the market place,
profitability is related to the difference between price and cost. Therefore effect of location,
product design, equipment used, labor productivity, and good inventory management and so on
contribute to the resulting cost.
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Quality-"Make it good"- the effect of this factor has been highlighted by Japanese marker
dominance, where product quality has often been sighted as a reason for preferring the product
purchased, customer and clients are often willing to pay more for or wait delivery superior products.
Other competitive dimensions are:-
Delivery speed -"Make it fast"
Delivery reliability -" Deliver it when promised"
Flexibility and new product introduction speed- “Change it” [11]
5.2.1 Definitions of competitiveness

There are different type definition of competitiveness given in different industries and sectors.
Some of the definitions of competitiveness are:
Competitiveness is usually used to refer to firm performance. The discourse of firm

competitiveness comes from two principal sources. The first of these is the discourse of the
economics profession, where competitiveness is regarded as a somewhat abstract quality
conferred upon successful firms by the markets within which they operate. Thus, ‘the market is
the impartial and ultimate arbiter of right behavior in the economy and competitiveness simply
describes the result of responding correctly to market signals’
Competitiveness has thus become inescapably associated with ideas of fitness and unfitness, and
these in turn with the implied premise of merit, as in ‘deserving to live’ and ‘deserving to die’.
Secondly, competitiveness is also the discourse of the business community where it represents the
fundamental external validation of a firm's ability to survive, compete and grow in markets
subject to international competition. This provides a pervasive and powerful means of explaining
almost any behavior i.e. a firm ‘must do X in order to be competitive’ [13].
63
5.2.2. Competitive advantages
When a firm sustains profits that exceed the average for its industry, the firm is said to possess a
competitive advantage over its rivals. The goal of much of business strategy is to achieve
sustainable competitive advantages [12].
Some to the competitive advantages are:

i) Cost advantage ii) Differentiation advantage
A competitive advantage exists when the firm able to deliver the same benefits as competitors but
at a lower cost (cost advantage). Deliver benefits that exceed those of competing products
(differentiation advantage).
Thus, a competitive advantage enables the firm to create superior value for its customers and
superior profits for itself.
Cost and differentiation advantages are knows as positional advantages since they describe the
firm’s position in the industry as a leader in either cost or different [7].
5.3 SWOT Analysis

In AMASSASC there are different dimension of competitiveness in the domestic as well as foreign
market. This time the company concern is not how much to produce, but how and where to sell its
products. By using SWOT analysis it is seen the strength, weakness, opportunities and treats of the
company and see the competitive advantages the company has.
The SWOT matrix shall be developed in such a way that to analysis the strength, weakness,
opportunity, and treats of AMASSASC. Moreover, in this section it is described strength-
opportunity, weakness-opportunity, strength-threats, and weakness- threats. In this section critical
areas to be looked in are Weakness-opportunity and weakness-threats [9].
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5.3.1 Strength
• Has modern e technology and machineries for the production of aluminium sulfate and
sulphuric acid
• Availability of free area in the compound for construction of other related chemical(s)
producing plant(s)
• Sole producer of aluminium sulfate and sulphuric acid in the country
• Becoming competitiveness in the market with imported products
• Give transportation service to the customers to deliver the products to their sight.
5.3.2 Weakness
• Not able to produce at maximum capacity of sulphuric acid and aluminium sulfate
• Occurrence of technical problems due few months production (especially sulphuric acid
unit) and repeated start-up and shut down periods
• Under usage of steam energy obtained from the sulphuric acid plant due to limited period
of production
• High production cost that lead to negative response for aluminium sulfate and sulphuric
acid market demand inland and abroad
• Repeated technical problems in addition to raised costs, lead to maintenance expense high
and make the factory uncompetitive. This also has brought lessening product quantity and
that leads to idle period facoty expense
• Skilled manpower is one of the possible weakness problems identified in the area of
limited specialists in production, and market area.
• Lack of more trained manpower, laboratory facility and equipment for introduction of new
product
• Lack of information on available technological options and size of the market,
• Poor access to information and technology due to this lack of access to international buyer
information
• Unstable local market and lack of price stabilisation mechanism.
• Lack of market information on price, quality, supply, exports etc...
65
• Under developed research capacity and uncoordinated research work for developing the
market performance , competitiveness, studying the neighbouring country chemical need
quantity, and buying price .
• lack of advise & technical assistance in the production and market
• Lack of access to the key distribution channel near by countries like Sudan, Kenya,
• Lack of proper attention by researcher in the company production of aluminium sulfate and
sulphuric acid
• Not able to develop new products
• Remaining only production-oriented
• Lack of information on available technological options, size of the market etc…
• In the company training customers is not seen as essential part of market performance
and to develop competitiveness and to have good customer’s relationship.
• Under capacity utilization of existing plants
• Shortage of research inputs and out puts, in general inadequate attention from concerned
bodies. The company doesn’t have a development strategy in the alternative chemical
production
• Shortage of trained manpower
• More idle factory expense
• Poor access to information and technology and lack of access to international buyer
information
• High price of company product compared to the low purchasing power of customers
5.3.3 Opportunities
AMASSASC’s products are a critical element for manufacturers sectors to achieve the necessary
increasing in production. Increased market sizes should hinge on two elements, firstly,
strengthening and joining regional market groupings and, secondly, exploiting market access
opportunities. Some of the opportunities for AMASSASC are listed below
• Future industrial developments in the country create more market opportunities for the
company’s product. AMASSAC products would be used as a source of raw material for
66
other sub-sectors. There are product diversification in the company production to
produce:
Sodium Sulfate, magnesium Sulfate (from dolomite and sulphuric acid)
Aluminium hydroxide (from soda ash and aluminium sulfate )
Single super phosphate (ssp) from animal bone and sulphuric acid
• The small domestic market makes it difficult to achieve economies of scale and to invest
to achieve the required goal these days. Future expansion of in larger size potential
industries and market, and larger sub-sectors my help AMASSASC to produce at its full
capacity.
• Removal of international trade barriers, globalization could create opportunities to sale its
products in different countries
• Aluminum sulfate and sulfuric acid plant have been designed for production capacity of
13,600 & 17,000 tones per year
• Expansion of sub-sectors and availabilities of new technologies
• Unfulfilled customers needs
• Raw material Kaolin is produced in Ethiopia
• In Ethiopia, as is the case with most developing countries, water and effluent treatment
form by far the largest sub-sector of alum consumption
• Introduction of foreign technology and innovative methods to improve productivity and
implementation of new project
• The factory, with such vital and necessary product to many other processes as raw
material, by having a number of customers and future expansion of the sub-sectors would
create an opportunity for AMASSASC. For example organizations which use these
products are:-
Leather, soap, textile, sugar, paper and pulp cement factpries
Battery charging – Tele
Beverage industries, mining areas
Flower production, pharmaceutical areas, schools, Transportation organization etc
Water treatment
Any organization which uses chemical at least in lab
67
• In addition to the major applications, aluminum sulfate can be use in a variety of
industrial processes including tanning, dyeing, fire extinguisher materials, and
pharmaceuticals and electroplating.
5.3.4 Threats
• Technology and economies scale in Ethiopia is not playing critical role in establishing
large scale industries which use chemical product of AMASSASC and reducing
production costs particularly in the chemical industries
• Emergency of substitute product

• Dependability of spare parts on specific origin (country) and thus being under the cost of
the supplier power
• All the spare parts are bought from abroad by foreign currency
• There has not been much progress in terms of upgrading technology and improving the
production structure of the sub-sector
• Small domestic market makes
• A lack of cost-competitive infrastructure is one of the most critical factors constrain. This
can remain a constraint well into the future as most infrastructure resources are expensive
to create and require significant economies of scale to reduce the user costs to acceptable
levels and take time to plan and implement. Although, utilities / infrastructure such as
electricity, roads and ports are the current focus in Ethiopia, all resources should be
viewed holistically and are treat for AMASSASC
• The company production capacity and the customers demand do not much. As it stands
now, the industry has a maximum production capacity of 13,600 ton of aluminum sulfate
and 17,000 ton of sulfuric acid. But it is using less than 50% of the capacity production.
• Other country production capacity of not less thank 300,000 ton per year as by product
and sell their product in Ethiopia market. From the point of view the production of
AMASSASC is quite small compared to competitors, and market in Ethiopia to sell its
product in competitive price may get harder.
68
• Increase of taxation in the country may affect factories earning and selling price. This
heavy tax burden has two adverse effects either it may create high constrains the resource
available for industrial development and investment, and it puts extra wedge on
competitiveness especially in the export market.
• Foreign countries competition in Ethiopia using the opportunities in the free market
policy, producers in the European and Asia countries may enjoy economies of scale in
production could become more suppliers of aluminum sulfate and sulfuric acid at reduced
prices to areas that are taken for granted as secured trade domains of Ethiopian chemical
company, including domestic markets.
• AMASSASC not yet establish trade line in neighboring countries. Some Europe and Asia
countries selling there products to the neighboring countries of Ethiopia due to long time
establishing trade line in which Ethiopia could use this opportunity due to its nearness and
market agreement in Sudan Kenya etc…. Failure to confirm to international standards is
also a potential threat to win markets.
• Slow industrial development in the country
• Despite the country's great potential in developing different sub-sectors, there are many
constraints that limit the company production and selling. Some of the major ones are: -
o Shortage of skilled manpower and training institutions.
o Shortage of research inputs and out puts, in general inadequate attention from
concerned bodies. The country doesn’t have a development strategy and policy for
the chemical sectors.
o High price of production equipment compared to the low purchasing power of the
customers, poor infrastructure for exporting the product.
o General absence of policy to assist the development of the sub-sector
• The potential for exporting aluminum sulfate into neighboring countries is negligible
where there is domestic sulfuric acid production or where distribution of European and
Asia products has been long established so far
• Element sulfur as a raw material imported thus, it is purchased on the world market at a
predicable price, there might be inflation in the price
69
• Poor infrastructure and low support industries and services and charging/taxation in the
marketing chain and price of raw materials and spare parts imported
• Not sure on the quality of raw material imported and lack of access to the best natural
resource
• Strong competition in the export market and declining price trends and financial
constraints and Shortage of trained manpower and training institutions
• Sifting of customers desire away from company’s product
• There are number of local importers in the country which import Aluminum Sulfate and
sulfuric acid. Some of lists of computers are:
Table 5.1 list of competitor year from 2000-2005

No. List of compactors which imports List of compactors which imports
aluminum sulfate Sulfuric Acid
1 Genera; chemicals Meleka Trading
2 Ajeca Ghin Industrial and chemical
3 Waldosa International Zeki Iaris
4 Tinsa International Iydetco PLC
5 Tamba International
6 Tech. Plc
7 Integrated Solutions
8 Gift Trading
9 Trade Path
10 MGK Ethiopia
11 Benyasi Chemical Engineering
12 Afro-German chemical
Source: AMASSASC
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5.4 Evaluating AMASSASC by using SWOT matrix
In this section critical areas to be looked in are Weakness Opportunity and Weakness Threats
AMASSASC. Identifying opportunities and treats in industry and competitive analysis and
environmental scanning are useful in defining the company’s opportunities and threats.
Opportunities are favorable conditions in the company’s external environment, industry, or
competitive dynamics. Threats are unfavorable trends in the environment, industry, or
competition [25].
To develop strategies that take into accounts the SWOT profile, a matrix of these factors can be
constructed the SWOT matrix [9].
Table 5.2 SWOT matrix
Strengths Weakness
Opportunities S-O strategies W-O strategies
Threats S-T strategies W-T strategies
S-O strategies: pursue opportunities that are a good fit to the company’s strategies
W-O strategies: overcome weakness to pursue opportunities
S-T strategies: identify ways that the firm can use its strength to reduce its vulnerability
to external threats
W-T strategies: establish a defensive plan to prevent the firm’s weaknesses form making it
highly susceptible to external threats[10].
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5.4.1 W-O strategies
In AMASSASC there are weaknesses that make the company not to be competitive and have
opportunities. In this section we look in weakness and opportunity of the company.
Table 5.3 Weakness and Opportunities (W-O) strategies
Weakness and opportunities of AMASSASC
Weakness Opportunities
• AMASSASC not able to produce Future industrial developments in the
sulphuric acid and aluminium sulfate country create more market
at maximum capacity opportunities for the company’s
product.
AMASSAC products would be used
as a source of raw material for many
sub-sectors.
Product diversification in the company
production to produce:
Sodium Sulfate
Magnesium Sulfate
(from dolomite and sulphuric acid)
Aluminium hydroxide
(from soda ash and aluminium sulfate )
Single super phosphate (ssp)
From animal bone and
sulphuric acid
• Occurrence of technical problems Arrival of new technologies
due few months production
(especially sulphuric acid unit) and
repeated start-up and shut down
periods
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Cont. Weakness Opportunities
• Unstable local market & Lack of • The factory, with such vital and
price stabilisation mechanism necessary product to many other
• Lack of information on available processes as raw material, by having a
technological options, size of the number of customers and future
market is a constraint to enter into expansion of the sub-sectors would
different industry. create an opportunity for
• Poor access to information and AMASSASC. For example
technology and there is lack of organizations which use these
access to national and international products are:-
buyer information Leather factories
Soap factories
Textile factories
Sugar factories
Paper and pulp factories
Battery charging – Tele
Beverage industries
Cement factories
Mining areas
Flower production
Pharmaceutical areas
Schools
Transportation organization etc
Water treatment
Any organization which uses chemical
at least in lab
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Cont. Weakness Opportunities
• Not considering the production and Raw material Kaolin is produced in

price, related to domestic and Ethiopia and the removal of
foreign demand international tread barriers
• Lack of market information on the Introduction of foreign technology and

area of advertising the product, innovative methods to improve
promotion, price, quality, supply productivity and implementation of
exports. There is no introduction of new project. In Ethiopia, as is the case
new product like “WATERMAKER” with most developing countries, water
small packages for water treatment, and effluent treatment form by far the
not able to develop new products largest sub-sector of alum consumption
etc...
• Under capacity utilization Future expansion of in larger size

potential industries and market, and
development of larger sub-sectors,
which would help AMASSASC to
produce at full capacity. There are
unfulfilled customers needs. And the
plant have been designed for
production capacity of 13,600 & 17,000
tones per year aluminum sulfate and
sulfuric acid respectively
Proposal: as it is seen on Table 5.3 there are weaknesses that the company has and also there are
Opportunities Company faces. By using W-O strategies overcome weakness to pursue
opportunities
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5.4.2 W-T strategies
In AMASSASC there are weaknesses that make the company not to be competitive and have
opportunities in which the company could. In this section we look in weakness and treats of the
company establish a defensive plan to prevent the firm’s weaknesses.
Table 5.4 Weakness and Threats (W-T) strategies analysis

Weakness and Treats of AMASSASC
Weakness Threats
• Shortage of skilled manpower is one Despite the country's great potential in
of the possible weakness identified in developing different sub-sectors, there
the area of limited specialists in are many constraints that limit the
production, and market area. company production and selling. Some
of the major ones are:
Shortage of skilled manpower
and training institutions.
Shortage of research inputs and
out puts, in general inadequate
attention from concerned
bodies. The country doesn’t
have a development strategy
and policy for the chemical
sectors.
High price of production
equipment compared to the low
purchasing power of the
customers, poor infrastructure
for exporting the product.
General absence of policy to
assist the development of the
sub-sector
75
Cont. Weakness Threats
• High production cost that lead to A lack of cost-competitive
high selling price create negative infrastructure is one of the most critical
response for aluminium sulfate and factors constraining. This can remain a
sulphuric acid market inland constraint well into the future as most
infrastructure resources are expensive
to create and require significant
economies of scale to reduce the user
costs to acceptable levels and take time
to plan and implement. Although,
utilities / infrastructure such as
electricity, roads and ports are the
current focus in Ethiopia, all resources
should be viewed holistically.
Strong competition in the export
• Poor market access to the key market and declining price trends. The
distribution channel near by capacities the company produce and the
countries like Sudan, Kenya etc… customers demand do not much.. From
and lack of advice & technical the point of view the production of
assistance. Under capacity AMASSASC is quite small, and market
utilization of existing plants in Ethiopia to sell its product is very
narrow.
• Not much effort is done on the In general inadequate attention from
company to convince the concerned bodies about the market
government in order to improve the policy. Lack of information on
company sells available technological options, size of
the market. Shortage of research
inputs and out puts. Country doesn’t
have a development strategy in the
chemical sectors
76
• Remaining only production- Foreign countries competition in
oriented. Ethiopia is increasing using the
opportunities in the free market policy.
Producers in the European and Asia
countries such as the China, India that
enjoy economies of scale in production
could become more suppliers of
aluminum sulfate and sulfuric acid at
reduced prices to areas that are taken
for granted as secured trade domains of
Ethiopian chemical company, including
domestic markets. These countries
exporting to the neighboring countries
due to long time establishing tread line
in which Ethiopia could have used this
opportunity due to its nearness and
market agreement in Sudan Kenya
etc…. Failure to confirm to
international standards is also a
potential threat to win markets.
Dependability of spare parts on specific

origin (country) and thus being under the
cost of the supplier power. There is an
increase in taxation, tax burden has
adverse effects. It constrains the resource
available for development and
investment, and it puts extra wedge on
competitiveness especially in the export
77
market. All the spare parts are bought by
foreign currency Increase the price of
company equipment compared to the low
purchasing power of customers.
Industrial developed countries Increasing
their production of Aluminum Sulfate
and sulfuric acid as by product and sell
the product at low price
• Limited specialists in production, and Emerging of substitute product, Shifts of

market area and lack of trained customer’s desire away from company’s
manpower, laboratory facility and product.
training institutions for introduction
of new product.
• Under developed research capacity More technological development, and

and uncoordinated research work for more research work in the world for
developing the market performance , production of alternative product
competitiveness, studying the
neighbouring country chemical need,
and buying price .
• Training customers is not seen as Lack of proper attention by researcher in

essential part of market performance the company production of aluminium
and to develop competitiveness and sulfate and sulphuric acid
to have good customer’s
relationship.
78
• Repeated technical problems and Increase of local importers in the country
dependence of spare parts from which import aluminum sulfate and
foreign country and lack of access sulfuric acid.
to international buyers of the
product
Not sure on the price of raw material

• High production cost imported. Price of raw materials and
spare parts purchased from abroad.
Goods are purchased on the world market
Are not at a predicable price, there might
be inflation in the price
Proposal: as it is seen on Table 5.4 there are weaknesses that the company has and also there are
theats the company faced. W-T strategies the company should establish a defensive strategies
prevent the firm’s weaknesses from making it highly susceptible to external threats.
79
Table 5.5 step-by-step summery of a SWOT analysis
Step 1 Step 2 Step 3 Step 4

Broad external Competitive Internal environmental SWOT analysis
environment analysis analysis
analysis
Areas for analysis Areas for analysis Areas for analysis Areas for analysis
1. political 1. industry 1. Product/service position 1. Strength
2. Economical structure 2. .Product/service quality 2. Weakness
3. Social 2. importer 3. Marketing capability 3. Opportunities
4. Technological competitor 4. Research and development 4. Threats
capability
6. Condition of facility and
equipment
Procedure Procedure Procedure Procedure

1. Identify the 1. Analyze the 1. Analyze each of the 1. Assess the
key forces competitive above areas attractiveness
that are most nature of the 2. Identify the internal of the
likely to affect industry strength and organization
the 2. Identify and weakness as a result situation
organization. analyze of the analysis 2. Draw
2. Monitor competitors conclusion
information 3. Identify key responding
on the key strength and for need for
environmental weakness of strategic
forces the action
3. Select the organization
method to be as compared
used in to those of its
forecasting competitors
these forces 4. Identify the
4. Identify the threats and
threats to and opportunities
opportunities for the
for the origination
organization
on the basis of
the forecast of
these
80
5.5 Qualitative analysis on AMASSASC competitiveness using cause and
effect diagram
The cause-and-effect diagram is also called the Ishikawa diagram (after its creator, Kaoru
Ishikawa of Japan), or the fishbone diagram (due to its shape). It was created so that all possible
causes of a result could be listed in such a way as to allow a user to graphically show these
possible causes. From this diagram, the user can define the most likely causes of a result. This
diagram was adopted by Dr. W. Edwards Deming as a helpful tool in improving quality [15].
The cause and effect diagram is used to explore all the potential or real causes (or inputs) that
result in a single effect (or output). Causes are arranged according to their level of importance or
detail, resulting in a depiction of relationships and hierarchy of events. This can help you search
for root causes, identify areas where there may be problems, and compare the relative importance
of different causes.
Causes in a cause & effect diagram are frequently arranged into four major categories. While
these categories can be anything, you will often see:
• manpower, methods, materials, and machinery (recommended for manufacturing)

• equipment, policies, procedures, and people (recommended for administration and
service)
The C&E diagram is also known as the fishbone diagram because it was drawn to resemble the
skeleton of a fish, with the main causal categories drawn as "bones" attached to the spine of the
fish, as shown below[16]
Fig. 5.1 fish bone diagram
81
5.5.1 Measuring competitiveness of AMASSASC by using cause and effect diagram
As it is mentioned in chapter four there are many factors that affected the market performance
and competitiveness of the company. By using cause and the effect diagram as the first step in
problem solving it is possible to generate list of possible causes. In developing the cause and
effect diagram the possible causes that AMASSASC is not competitive are collected from
various possible sources.
Different sources are used in order to make the cause and effect diagram. Some of the sources
used for making cause and effect diagram are: observations of the company working processes,
interviewing marketing, finance and personnel departments and it is also considered from the
collected data of different departments. Finally interviewing customers are taken into
consideration.
Some of the possible causes for AMASSASC not to be competitive are listed in the cause and
effect diagram.
Fig. 5.2 Shows cause and effect diagram
82
Poor inspection
Skilled man
Power
Low market Political
Frequent machine failure
demand factors
Insufficient attention Less information
Higher price technology
Small domestic Machine
market ideal time Small number skilled
Uninformed manpower
Exchange rate
Economic
Market policy factors
People attitude
Poor customer
relationship Poor training
Under estimate Interest
domestic products
inflations
Unstable demand Tax policy: No innovation AMASSASC is
not
Errors in competitive
Less advertising High spare parts equipment
cost
High production low support
technology
Cost
Less attention Not latest

technology
given Few investments P lit
Machine Ideal On large scale
time Poor
Dependability of infrastructure
spare parts
Inadequate
research High production
Slow industrials
cost
development
5.5.2 Interpretation of Cause-and –Effect Diagram
It is seen in the cause and effect diagrams that the main causes for the company not to be
competitive. It is observed that low market demand, High production cost , slow industrial
development in the country, skilled man power, people attitude to the domestic product,
inadequate research done on the market performance and competitiveness are the main cause for
the company not to be competitive. Other causes that make the company not competitive are:
small scale industries, political factors, and market condition and market policy are the main
causes for the company not to be competitive.In the company there are signs that show something
has gone wrong and the company has more cost in different stages of production and does not
produce at its fully capacity and sell its entire product. The main causes that made the company
not to be competitive are explained below, some of the main causes that made the company less
competitive are as flows:.
I. Low market demand
Market itself has caused the company not to not to produce at full capacity and sell its product
fully. The main cause the company to other expenses is Addis Ababa Water and Sewerage
authorities which account 66% of its sell. Some of the reasons that the company is not buying the
product is due to cease of the production of hydrated lime which would be used with aluminum
sulfate. In year 2006 there is low demand in the market and does not sell it product and due to
this aluminum sulfate production machine has stop producing. Idle period of machine cause
sulfuric acid machine to be corroded the parts. This corrosion needs maintenance and
replacement of parts, in which the parts would be bought with high price in foreign currency
which cause high production cost.
People attitude is another factor that cause low market demand this days people prefer to buy the
imported product. Also there is no much efforts done in the government and private sectors
encouraging buying the domestic product. In case of AMASSASC even if produce the same
quality compared to the imported chemical, the customers buying the imported product in foreign
currency. There are also other factors related to the low market demand that affect th
competitiveness of the company, some of the factors are:
84
a. Poor coordination between the company and the customers
b. Small domestic demand due to small scale industries and the same type of
product imported with lesser price than the company selling price
c. Market policy which allows the free market system which forces the company to
compete with imported product from developed countries
d. Unstable demand due to poor customer relationships that does not make the
customers consistence
e. Company selling price, etc…
II. High Production cost

High production cost is another factor that made the factory not to be competitive in the market.
Due to long machine ideal time, less working hours, and also due to its ideal time the parts
become exposed to corrosion and crate for another damage on the machine parts. In addition,
there are high spare parts costs the company has in order to replace the corroded parts which
would add on the unit cost of production to sell its product higher than the competitors. These
and other conditions make the company not to be competitive in the market.
III. Political factor

Political factor is another cause that affects the company production and selling price. Some of
these factors are:
Increase of utility good, tax policy on different materials in which the company
uses which forces the company to increase the unite price
Economic factors such as :
Higher exchange rates that make AMASSASC imported raw material and spare parts
price to increase. This also indirectly affects the company selling price
Inflation also cause the company working material to increase in price and force the
company selling price to increase relative higher than the compactors selling price.
85
IV. Inadequate research
On of the reasons for the company not to be competitive is that there is inadequate research done
to improve the marketing department to promote the product. Insufficient attention given for
research work have influence in identifying where the weakness and the strength of the company
in order to sell its product. Emergency of substitute product, Shifts of customers desire away
from company’s product should have been studied with adequate research. Because of not giving
good attention for research activities, the company could not identify which areas would affects
its market performance and the competitiveness. In addition, under developed research capacity
due to improper attention given and uncoordinated research work for developing the market
performance, competitiveness, studying the neighbouring country chemical need, and buying price
in the company is poor are the main causes.
V. Skilled man power
Skilled man power is one of the causes that affect the competitive of the company. In the
company the percentage of employees who are engineers (B.A or above) are 3.2%, Professional
staffs (B.A or above) are 2.76%, Diplomas 1.8%, these percentage ratios indicate that there are
relatively small number of skilled man power as compared to the company production and goal.
There is also less than 5% training given to the employees in the past 5 years from 2001-2005
which would affect the working condition as well as its competitiveness in the market. There is
hardly found information and communication technology to study the market demand in the
country well as in the foreign market.
There are frequent machine idle time due to either market demand or working condition which
would affects the competitiveness of the company. There are insufficient skilled man power to
give attention to the market condition and to analysis the market performance and propose to
concerned bodies or to the government the ways that helps the company to increase the market
sell in the country as well as in foreign market.. This and other factors related with skilled man
power have affected competitiveness of the company.
86
VI. Low industrial development
Slow industries development in the country is other factors that affect the competitiveness of the
company. Even if there are large numbers of customers of AMASSASC, the customers are
buying in small quantity compared to the company production capacity. Because of few larger
investments in large scale industries established in the country the purchasing power of the
customer is small.. And also there are lesser technology in the country that demand less quantity
of the company product, which affects the sales, production capacity of the company and its
competitiveness. These and other factors such as: human errors in the operations, faults in
operations, idle time of the machine, changes in the market environment, errors in monitoring
equipment, measuring tools cause the company production cost and its competitive.
5.6 Pareto Analysis

In order to determine the vital few and trivial many that made the company not competitive, there
Are some reasons described. Some of the reasons that hinder the company not competitive are:
Market, political factors, skilled man power, inadequate research, people attitude, small scale
industries etc…In order to determine the vital few and trivial many that made the company not
competitive it would be used Pareto analysis.
Pareto Principle 80/20 Rule

The Pareto Principle states that only a "vital few" factors are responsible for producing most of
the problems. This principle can be applied to quality improvement to the extent that a great
majority of problems (80%) are produced by a few key causes (20%). Or 80% of world resources
are consumed by 20% of world population [14].
Identifying the vital few causes that are responsible for AMASSASC competitiveness are
analyzed. Data taken from the response of different section in AMASSASC is considered and
the response was summarized on Table 5.6
87
Table 5.6 lists of causes that make the company not competitive
Lists of causes Total Points

Low market demand 41
High Production cost 20
Low industrial development 14
Skilled man Power 10
Political factors 7
Inadequate research 5
others 3
List of causes observed in these data summarized from the questioner.
Major causes identified that affected competitiveness of the company are:

Market demand: Small domestic market, higher selling price, unstable demand,
Poor coordination, market policy, people attitude in under estimate domestic products,
favoring imports
High Production cost: Machine Ideal time, high spare parts cost
Slow industrial development: not latest technology, few investments on large scale, High
production Cost, dependability of spare parts, poor infrastructure
Political factors: Tax policy, economic factors, inflations, exchange rate
Inadequate research: Less attention given, less advertising
Others: working hour, efficiency of the machine, efficiency of workers
In order to analysis using Pareto analysis tool frist it is arranged from the main causes to the
possible list causes then cumulative total, individual percentage and cumulative percentages are
calculated.. The major causes that made the company not competitive are listed on Table 5.7.
88
Table 5.7 Parato data analysis
Causes that make not to be competitive
Cumulative Individual Cumulative

Se. No.
Causing not to be competitive Points Total Percentage Percentage
1 Low market demand 41 41 0.41 .41
2 High production cost 20 61 0.2 .61
3 Low industrial development 14 75 0.14 .75
4 Skilled man Power 10 85 0.1 .85
5 Political factors 7 92 0.07 .92
6 Inadequate research 5 97 0.05 .97
7 Others 3 100 0.03 1
Fig 5.3 Parato analysis diagram
Lists of factors
n=100
100 100%
97%
92%
90%
87.5
85%
80%
75 75%
70%
62.5 61% 60%

points
50 50%
41
41% 40%
37.5
30%
25 20
20%
14
12.5 10
7 10%
5
3
0 0%
Low market High production Low industrial Skilled man Political factors Inadequate Others
demand cost development Power research
lists of facrts affecting
89
5.6.1 Interpretation of the Pareto analysis
Pareto diagram used for identifying major problems and their main causes for not to be
competitive. Great majority of problems (80%) are produced by a few key causes (20%), the
same holds true as above on the diagram.
From the analysis and the Pareto Diagram it is observed that the few most vital problems, which
comprise about 75% of the trouble, cause by the first three factors. The major factors that make
the company not competitive are as a result of few types of factors such as: low market demands,
high production cost, small scale industries, contribute the totals as:
Low Market demand 41 %

High production cost 20 %
Low industries development 14 %
In the case of Pareto diagram used for identifying major causes and their main causes for the
company not to be competitive, the same holds true as above. If the company is able to improve
market system and promote and advertise its products, and create communication with
responsible bodies, it can solve about 75% of the cause that makes it not to be competitive.
The major problems the company not to be competitive are s is as a result of few types of
problems. So focusing on these few but vital problems by investigating their root causes, will
resolve 75% of the market problem and its competitiveness.
90
5.7 Cost analysis
In the AMASSASC there are operational costs in different years of production. Some of the
operational costs are under fixed and variable cost and also there is operating cost.
Lists of costs are:
Fixed costs are: maintenance (labor and material), operating labor, laboratory costs,
supervision, plant overheads, capital charges, rates and insurance are some of them.
Variable cots are: raw material cost, miscellaneous operating material, utilities or services
are included.
Operating expense which includes general overheads, research and developments costs,
sales expense etc….
On Appendix IVA and Appendix IVB shows all the costs of goods statement for the year
2002/03, 2003/04, 2004/05
A. Variable Cost
Table 5.7 Costs of AMASSASC in three consecutive years
Lists of Variable Cost 2002/03 2003/04 2004/05
3,880,644.01 7,013,490.92 4,480,651.08

Raw Materials used
Production employees' Benefits 155,518.68 321,555.91 206,812.48
651,007.16
Indirect labor 564,527.23 798,672.47
Depreciation _ Factory Machinery & Bldg. 1,998,098.62 2,428,521.45 2,345,143.42
Heat, Light, Power & Other energy. 1,820,928.27 2,302,533.14 2,546,242.11
Factory supplies used 473,504.25 699,441.22 351,601.55
Add - Finished Goods Inventory (Beginning 1,027,624.73

of the year) 3,276,547.64 471,113.36
Idle period factory expenses 3,988,819.93 2,468,477.84 3,892,185.07
TOTAL 16,158,588.63 16,503,806.31 15,501,267.60
91
Source: AMASSASC
IDLE PERIOD EXPENSES DETAIL 2002/03 2003/04 2004/05
Factory supplies 55,316.69 478.28 716.58
Indirect labor 699,992.71 419,889.77 503,655.57

Supervisory and labor - 147,237.50 54,412.73
Employees' benefits 176,484.03 147,237.50 154,664.94
Heat, light, power 142,667.75 116,463.74 197,930.81
Depreciation expenses 2,140,253.27 1,403,587.05 2,025,870.43
Miscellaneous expenses 774,105.48 355,873.50 954,934.01
3,988,819.93 2,590,767.34 3,892,185.07
B. Fixed Cost
Lists of Fixed Cost 2002/03 2003/04 2004/05
Direct labor. 285,521.42 417,364.24 378,005.31
Supervisory labor Costs 151,939.33 164,978.43

TOTAL 437,460.75 582,342.67 488,772.92
C. Operation Expenses
Lists of Operation Expenses 2002/03 2003/04 2004/05
Miscellaneous overhead costs 645,459.00 1,207,882.31 1,297,502.26
TOTAL 645,459.00 1,207,882.31 1,297,502.26
2002/03 2003/04 2004/05

Direct production cost = A+B = 16,596,049.38 17,086,148.98 15,990,040.52
Annual production cost=A+B+C= 17,241,508.38 18,294,031.29 17,287,542.78
92
By subtracting In-Process Inventory and Finished goods Inventory the final cost of the
company in three consecutive years were:
2002/03 2003/04 2004/05
18,342,209.99 16,621,605.39 11,946,493.47

Total Company costs were
Considering all the e costs of the company the net sales given below on table 5.8
Table 5.8 show the net sales of the company in consecutive years
years 2001 2002 2003 2004 2005
Sales 21,569,082 20,116,234 21,093,061 21,566,974 10,458,123
By analyzing all the costs of the company, it is observed that the company has higher cost
compared to the net sale in consecutive years.
93
5.7.1 Cost Analysis using Parato Chart
Case I year 2002/03

No. 2002/03 Cumulative Individual Cumulative
List of all costs total percentage percentage
1 Idle period factory expenses 3,988,819.93 3,988,819.93 23.13 23.13
2 Raw materials used 3,880,644.01 7,869,463.94 22.51 45.64
3 Add - Finished Goods Inventory
(Beginning of the year) 3,276,547.64 11,146,011.58 19.00 64.64
4 Depreciation _ Factory Machinery
& Bldg. 1,998,098.62 13,144,110.20 11.59 76.23
5 Heat, Light, Power & Other energy. 1,820,928.27 14,965,038.47 10.56 86.79
6 Miscellaneous overhead costs 645,459.00 15,610,497.47 3.74 90.54
7 Indirect labor 564,527.23 16,175,024.70 3.27 93.81
8 Factory supplies used 473,504.25 16,648,528.95 2.75 96.56
9 Direct labor 285,521.42 16,934,050.37 1.66 98.21
10 Production employees' Benefits 155,518.68 17,089,569.05 0.90 99.11
11 Supervisory labor Cost 151,939.3 17,241,508.38 0.88 100.00
Cost of 2002/03
n=17241508.38
17,241,508.38 97% 98% 99% 100%
91% 94%
15,086,319.83 87% 90%
80%
12,931,131.29 76%
70%
65%
Cost in Birr
10,775,942.74 60%
8,620,754.19 50%
46%
6,465,565.64 40%
30%
4,310,377.10 23% 20%
2,155,188.55 10%
0.00 0%
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Lists of costs
94
Case II Year 2003/04

1 Raw Materials used 7,013,490.92 7,013,490.92 38.34 38.34
3 Depreciation _ Factory Machinery
& Bldg. 2,428,521.45 11,910,490.21 13.27 65.11
5 Miscellaneous overhead costs 1,207,882.31 15,420,905.66 6.60 84.30
6 Indirect labor 798,672.47 16,219,578.13 4.37 88.66
8 Add - Finished Goods Inventory
(Beginning of the year) 471,113.36 17,390,132.71 2.58 95.06
9 Direct labor. 417,364.24 17,807,496.95 2.28 97.34
11 Supervisory labor Costs 164,978.43 18,294,031.29 0.90 100.00
Cost of 2003/04
n=18294031.29
18,294,031.29 97% 99% 100%
92% 95%
16,007,277.38 89% 90%
84%
78% 80%
13,720,523.47
70%
65%
Cost in Birr
11,433,769.56 60%
9,147,015.65 52% 50%
6,860,261.73 38% 40%
30%
4,573,507.82
20%
2,286,753.91 10%
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List of Costs
95
Case III Year 2004/05

1 Raw Materials used 4,480,651.08 4,480,651.08 25.92 25.92
4 Depreciation _ Factory Machinery 2,345,143.42 13.57
& Bldg. 13,264,221.68 76.73
5 Miscellaneous overhead costs 1,297,502.26 14,561,723.94 7.51 84.23
6 Add - Finished Goods Inventory 1,027,624.73 5.94
(Beginning of the year) 15,589,348.67 90.18
7 Indirect labor 651,007.16 16,240,355.83 3.77 93.94
8 Direct labor. 378,005.31 16,618,361.14 2.19 96.13
11 Supervisory labor Costs 110,767.61 17,287,542.78 0.64 100.00
Cost of 2004/05
n=17287542.78
17,287,542.78 100%
15,126,599.93 90%
80%
12,965,657.09
70%
Cost of Birr
10,804,714.24 60%
8,643,771.39 50%
6,482,828.54 40%
30%
4,321,885.70
20%
2,160,942.85 10%
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List of costs
96
5.7.2 Interpretation of the cost using Pareto analysis
In three cases on the above Pareto diagram it is identified the major costs of the company. On
Case I, year 2002/03 by solving the three problems idle period factory expenses, raw materials
used and finished goods inventory the company can solve 65% of the problem. On Case II year
2003/04 the major two costs of the company were raw materials used and idle period factory
expenses by solving this problems it can solve 52% of the problem. On case III year 2004/05 the
major three costs raw materials used and idle period factory expenses, and heat light power and
other energy by solving this 63% of the problem could be solved.
It is observed that the major costs of the company; are high cost in raw material which causes in
tied up capital in the idle period which also cause inventory cost, and the company ideal period
expense which holds highest cost and few most vital problems, which comprise highest value.
Idle factory period expense which is the caused by low demand for AMASSASC’s product, that
made the company not to produce continuously. The main reason why it has highest cost in idle
period factory expenses such as: factory supplies, indirect labor, supervisory, employees’
benefits, heat, light, power etc. is due to consumer of aluminum sulfate, Addis Ababa Water and
Sewerage Authorities (A/AWSA) has stopped buying high quantity of aluminum sulfate. Great
majority of problems are produced by a few key causes, not selling the product to A/AWSA. By
solving this vital cause the company would solve the major problems.
The company costs associated with preventing, finding, and correcting idle period factory
expenses which is the highest cost the company has, based on improvement in the promotion of
the product and the company could solve vital problem these costs that is huge. These costs can
be significantly reduced or completely avoided. There are costs in the AMASSASC due to poor
capacity utilization to produce during a given time period, with an upper limit imposed by the
availability of space, machinery, labor, materials, or capital. It is seen from the cost analysis that
the company has high production cost in different stages of production. Ideal time cost contribute
higher cost in the company overall cost analysis.
Full recommendation is given on chapter 6
97
Summary
The company has its strength, weakness, opportunities and threat thus, at the list of its
weakness and opportunity should overcome weakness to pursue opportunities. And also by
studying the possible weakness and threats should establish a defensive plan to prevent the
firm’s weaknesses form making it highly susceptible to external threats, to develop strategies the
company should take into accounts the SWOT analysis. By using cause and the effect diagram as
the first step in problem solving the possible problems were generated by list of possible
causes. In developing the cause and effect diagram the possible main causes for the company not
to be competitive is observed. Some of the problems are low market demand, High production
cost, slow industrial development in the country, few skilled man power, people attitude to the
domestic product, inadequate research done. By using Parato analysis the possible problems are
identified are: low market demand which include small domestic market, higher selling price,
unstable demand, poor coordination with other sub-sectors, market policy,
people attitude in under estimate domestic products and favoring imports are the main problems
identified. There are also other problems identified that cause problems in the competitiveness of
the company. Some of the problems are: high production cost which include machine ideal time
and high spare parts cost, slow industrial development in the country, political factors like tax
policy, economic factors, inflations, exchange rate, and inadequate research done to improve the
market performance etc are some of the points that are identified.
98
Chapter Six
6. Recommendations
• The market performance of AMASSASC in the production of aluminum sulfate mostly
depend up on the high consumer of the product, Addis Ababa Water and Sewerage
Authority and regional water authorities. On the contrary; the market demands of these
factories have changed to other alterative product which presumably substitutes aluminum
sulfate, like polyelectrolyte. AAWSA need hydrated lime. The company should co-work
with the producer of hydrated lime which would be needed for additional chemical for
water treatment used with aluminum sulfate. The company should work in coordination
with other companies to produce hydrated lime that Addis Ababa Water and Sewerage
authorities and other regional water authorities put as prerequisite to use aluminum sulfate
for water treatment. AMASSAC should put consistence effort on other product which the
customers put as per- requisite to use AMASSASC product. One of the major customer
specially Addis Ababa Water and Sewerage Authority consumer of 66% of aluminum
sulfate needs other product in order to use Aluminum Sulfate. Thus, AMASSASC should
encourage other sub-sectors and make efforts to contact with the responsible bodies for
the production of hydrated lime that customer’s per-requisite product in order to improve
the market performance and competitiveness.
• Low market demand for both aluminum sulfate and sulfuric acid which are the main
products of the company. The plant should endeavor towards maximizing sales in order to
substitute imports of similar products completely. Accordingly a good advertisement
program and direct contact with end users is highly recommended. The plant should
organize itself in such a way that it can sell its products to all large scale and small
quantity users both at factory gate and at Addis Ababa, which is the best center for
distribution all over the country
• In order the company to produce at full capacity and sale its product completely, the
company should develop customization the product and develop one- to-one relationship
with the customers. AMASSASC can not survive today by simply producing and waiting
99
the customers to come and by the product. Its job has to be advertised and has to be
interacting with the environment to achieve the desired exchange outcome with target
market. In this competitive market customers are not expected to look for a firm’s product
rather, the firm has to look for them. Thus, success of AMASSASC is not determined
only by producing good product, it should advertise its product, go to customers and
create one-to-one relationship, and to some extent giving free service, training for the
customers concerning the company product and different activities etc..
• AAWSSA is the major consumer of the product. The main thrust of the factory would,
therefore, be to provide aluminum sulfate at a competitive price to win AAWSSA from
using substitute chemical which are imported
• The company should establish or strengthen the existing standardization bodies through
the provision of training, setting up of sub-sectors encourage using domestic product in
order to sell its product fully and to penetrate into the market.
• The company should develop defensive strategy to external treats and also try to reverse a
negative trend or to overcome a crisis or problems situation. Consequently, defensive
strategies usually are chosen as a short-term solution.. The company shoud providing
alterative products, working with coordination with the government and other sub-
sectors and should encourage the production of hydrated lime, in order to improve its
sells
• The company should choose the channel to distribute the products at lower price and
should be flexible in the price comparing competitor’s price. The company should hold
customers, especially in areas of comparative advantage in the long run.
• The company should give attention and make reforms considering different customers are
attracted by different attributes. AMASSASC customers are primarily interested in the
cost of the product offered the lowest price. Cost- "Make it cheap", Quality-"Make it
good", Delivery speed -"Make it fast", Delivery reliability -" Deliver it when promised".
Thus, the company should hold customers and attract new customers by considering the
cost, quality, and delivering speed.
100
• The company should have flexibility in new product introduction speed. The company
should produce new product using its final product which produce. As it its mention in
pervious chapters in ruler areas in Ethiopia, aide organizations are buying
WATERMAKER for water treatment in small packages in thousand of dollar, this in
which the company product Aluminum Sulfate for water treatment. The company should
give consideration in producing this product and distribute it with lesser price. When
aiming producing this product there needs additional laboratory study and investment for
the new product. This would help the company to have product diversification and helps
to sell it product and help to maximize production capacity.
• Instead of expecting the customers to come and ask for the product, the marketing
department should create new customers by going to the companies and advertising the
product.
• The company should take time to identify its strength, weakness, opportunity, and Treats.
The company should seriously give attention for its strength, weaknesses,
opportunities and treats. By looking at the list of its weakness and
opportunity should overcome weakness to pursue opportunities. And also by studying
the possible weakness and threats should establish a defensive plan to prevent the
firm’s weaknesses form making it highly susceptible to external threats.
product is relatively higher than the compotators cost. In order to overcome this problem
the company should not be product focused but price focused. Especially in the bid by
selling its product occasionally lower than the competitor’s price and discourage the
competitors through time to knock them out of the market.
• In order to penetrate into the market, the company should giving free training to the
customer about its quality, how they use the product etc... AMASSASC should seriously
take training the customers is an essential factor ensuring a satisfactory order-book from
the beginning and this can be achieved only if an earlier program of training in sales take
place.
101
• The company should create marketing function encompasses most activities between the
producer of a good or the supplier of a service and the consumers. Also it should include
planning and executing the conception, pricing, promotion, and distribution of ideas to the
customers need and services to create exchanges that satisfy customers and organizational
objectives.
• In the company R&D is not coordinated with production and development programs, little
use is made of R&D results. Studies results end up merely as reports or as published
articles in periodicals and journals. The company should establish R&D programs to
discover the reasons why it lacks of competitiveness. And research coordination should
develop a clear mechanism for activities in order to improve the market sell and its
competitiveness.
• The company should strengthening of the relationship between the private sector and
research institutions with reference to its productivity and how the company use its full
potential to sell its product in the competitive domestic as well as international market.
• Both the Government and the company should consider undertaking joint marketing and
research activities that how it would sell its product in the domestic market as well as in
the foreign market. Study investment plans that use the company’s product.
• The company should increased market sizes center on strengthening cities and regional
market and exploiting market access opportunities in foreign market by advertising,
promotion etc…
• Those industrial sectors, customers of AMASSASC, where future growth is very much
affected by restrictive measures, as in the case of Aluminum Sulfate And Sulfuric Acid
company in Ethiopia the government polices in the market area has big impact in the
productions of this company and in its selling price. Protection of the sector by the
government, lifting the excise tax imposed on the raw material etc… are some of the
condition that the government should take measure in order AMASSASC to be
competitive in domestic as well as international market.
102
Proposed Actions:
Allow the real exchange rate to depreciate to a slightly undervalued (or competitive)
level; and
Manage the real exchange rate to remain at a competitive level once achieved
• Measures should be taken in the government to assist this chemical company achieve
appropriate means of selling in the global competitiveness as any other countries do, to
encourage the domestic producer, the government should encourage giving different
opportunities in order it would able to compete in global market.
• The Government should consider tax policy reforms, as well as incentives and protective
measures aimed at facilitating the domestic product development. Introduce various
incentive mechanisms for the production of industrial raw materials like sulfuric acid.
• The government should give consideration to market investment opportunities for

domestic product that they may be able to penetrate especially the newly industrialized
countries especially in the neighboring countries. Thus there is a need to expand the
capacity of Ethiopian plants or sub-sectors.
• In the country there should develop large scale industries which us aluminum sulfate and
sulfuric acid. Thus, foreign investors are sensitive to political instability, and the business
environment should be perceived as being conducive to sustainable economic growth and
industrial development. The government should be determined to promote larger scale
industries that use Aluminum sulfate and sulfuric acid that leads to industrial
development.
• AMASSASC to sell its product to the neighboring country there should be improvement
in the infrastructure. Thus, there is a need to strengthen the infrastructure for transporting
the product inside the country as well as neighbor’s country, as well as other support
services to improve the price selling relative to competitors products.
• AMASSASC should be aware of perspective of globalization, related production and

services are looking for worldwide outsourcing and supply opportunities in a continuous
quest for increased competitiveness. In this environment, only the most efficient and
productive businesses can survive. AMASSASC should make efforts to enhancement
103
competitiveness though restructuring, upgrading, and continuous improvements, trying to
get customer that account more than 66 % of it sells by providing pre-request product like
hydrated lime thus constitute the foundations for success. Additionally, developing the
company to achieve higher levels of productivity through the use of modern management
techniques and technologies and exploit economies of scale or identify targeted market. In
line with this, the company should reveal for the government that it is developing the
countries economies by saving the foreign exchange and in transition need to be assisted
further to gain access to value chains or production systems, and to encourage and support
the use of modern industrial linkages as a means of promoting further economic
development, and competitive on a global basis.
104
APPENDIX
105
APPENDIX I
ORGNIZATION_STRUCTURE
BOARD OF DIRECTORS
BOARD OF DIRECTORS
GENERAL MANGER
MANAGEMENT
INFORMATION ETHICS AND ANTI
&SERVICE & PLANNING CORRUPTON
PRODUCTIV
ITY
MANAGEMENT IMPROVEM
QUALITY CONTROL INFORMATION ENT &
SERVICE &SERVICE & PLANNING CUSTOMER
S SERVICE
ADIMINSTRATION COMMERCIAL FINANCE PRODUCTION

DEPARTMENT DEPARTMENT DEPARTMENT & TECHINCAL
DEPARTMENT
PERSONNEL PROPERTY COST AND PRODUCTION

&H.R.D ADMINISTRATION BUDGUT DIVISION
DIVISITON DEVISTION CONTROL
DIVISTION
PROPERTY TECHNICAL
GENERAL ADMINISTRATION DIVISION
SERVICE & GENERAL
DEVISTION ACCOUNTS
TRANSPORT
DIVISITON DIVISTION
MARKET & SALES
106
APPENDIX II Chart 1
Diatomaceous earth sulphur Hydrated line Atmosphere

Steam
Melting pit Blower & air
filter
Condensate steam
West cake Candle filter

Moisture
absorption tower
(air dryer)
Condensate steam
Melted Sulphur
storage
Condensate
Sulphur to So2
furnace
Process gas Steam

coaling
4-bed
converter
(SO2—SO3)
Water
Process gas in Steam
beds coaling
Stack gas
Absorption tower Absorption
(for aleum) tower (forH2SO4)
Coaling water coaling water
Oleum Sulphuric Acid

(H2SO4.xSO3)
_________________________
107
Chart II
Process Flow Diagram of sulfuric acid plant
Sulfur melting
Pit
Sulfur vertical
pump
Sulfur candle
filter
Filtered sulfur
tank
Air Sulfur burner

(B 202) Diesel
Heat exchanger
(E 501)
Converter
(R 204)
Absorption
tower
Dilution
Drying Circulating tank tower
tower (V 302)
Demister Stack
Acid pump
(P 303)
Storage tank
(V 401) Chart III
108
Process Flow Diagram of Aluminum Sulfate plant
Kaolin charging bin

(V901)
Kaolin suspension
Al(OH)3 suspension
(V903)
Tank (V907)
Reactors (R909)
Boiler (E502)
Post suspension
Sulfuric acid tank Reaction (V910)
(V904)
Filter one tank

Filter two tank
(V919)
(V922)
Evaporator (E921)
Crystallization tray
Crushing (milling)
109
Appendix III A
AWASH MELEKAS ALUMUNUM SULFATE AND SULPHURIC ACID
SHARE COMPANY (AMASSASC)
STUDY QUESTIONNAIRE
Objective
The purpose of this questionnaire is to obtain information which will be used to analysis
industrial development market performance and competitiveness of AMASSASC. Therefore,
respondents are kindly requested to fill the requited information as accurately as possible. The
information required is for the period of 2001 to 2005.
General information
• Name and mailing address of firm

________________________________________________________________________
________________________________________________________________________
_________________________________.
• Location
________________________________________________________________________
________________________________________________________________________
• Position title of the respondent

___________________________________________________________________________
_____________________________________________________________________
• Qualification of the respondent (indicate the highest educational level attained)
______________________________________________________________________
• Date of filling the questionnaire

________________________________________________________________________
110
Annex III A – Questionnaire for:
Analyzing industrial development, competitiveness and market performance
survey
1) Name of enterprise/company: _________________________________
2) Location: - city/region: ________________________________________
3) Date of establishment _______________________________________
4) Total number of employees: __________________________________
5) Products of the company: ____________________________________

____________________________________
6) Current optimal capacity of production:
List of 2000 2001 2002 2003 2004 2005

product
7) Ownership structure
Privately owned State and private State
(Indicate percentage
private ownership)
%
8) Percentage of state ownership:
%
9) Percentage of foreign ownership
111
2. Efficiency of the plant and size
1) The nature and quality of the raw materials and production process employed
01. High quality

02. Medium quality
03. Low standard
04. Not known
2) Is there disruption of production process due to machine and equipment breakdown.
01. Often
02. Sometimes
03. Rarely
3) If is there is no timely repair of machinery what are the reasons?

(Please rank them in order of importance from 01 to 04)
Rank
01. Luck of skilled technicians
02. Problem in getting spare parts.
03. Machine is old to permit quick maintenance
04. Bureaucratic procedure
05. Other (specify) _____________________________________
_____________________________________
4) What is the approximate rate of capacity utilization of the machine in the last six
years?
Year 2000 2001 2002 2003 2004 2005 2006
Capacity in
percentage (%)
5) Is the capacity utilization decreasing?
01. Yes 02. No
112
6) If yes, what are the reasons for the decrease of the capacity utilization?
01. Due to the capacity of the machine
02. Frequent machine failures
03. Lower demand
04. Shortage of raw material
06. Shortage of skilled manpower

07. Other (specify) __________________________________________
__________________________________________
7) If your enterprise had been working less than full capacity , which of the following are
the primary causes?
(Please check the appropriate degree of cause)
No. reasons Primary Secondary minor
01 Due to less market condition
02 Due to less competitiveness in the market.
03 Due to less market performance
04 Shortage of supply of raw material
05 Competition from Smuggled substitutes
06 Competition from legally imported
substitutes
07 Due to lesser technology usage
08 Shortage of specialized skills
09 Frequent machine break-down
10 Lower demand
11 Skilled labour shortage
12 Semi/unskilled labour shortage
10 Other specify _______________________________________
__________________________________________________
113
3. Skilled man power on all job categories and finance
1) Total number of employees currently?
2) Is there a problem of hiring new employees at the right time to fill an open Vacancy?
01. Yes 02. No
3) If yes, what are the reasons? Please rank them as 1,2 etc. in order of importance
inform of the applicable box.
01. Length of employment process
02. Shortage of qualified candidate
03. Unattractive salaries and wages
04. Un-conducive work environment
05. Other (specify) ____________________________________
____________________________.
4) Are employees receiving on-the-job training for the last 5 years, how long?
01. Yes 02. No .

How long? ________
%
5) If yes, what percentage of the total employees was trained?
6) What is the proportional distribution of your professional, technical, staff of education
of employee in percentage?
Engineers (B.A or above) %
Professional staff ( B.A or above) %
Vocational / Technical %
On-the job trained technicians %
114
7) Does the factory face financial shortages in order to train the employees?
01. Yes 02. No

8) If the factory has faced financial shortage, what are the most important reasons for
the problem? (Please Mark in the box)
01. Unreliable supply of raw materials causing under
utilization and unrecoverable costs
02. Ageing machinery and equipment frequent
breakdowns and high maintenance cost
03. Failure or delay of payment for inter-factory
credit sales
04. Excessive stock of finished goods and raw material
05. Rising cost of raw materials
06. Heavy reliance on the quantity of production than

Cost of production as a measure of enterprise
performance
07. Other (specify) ____________________________
9) Sources of capital for training (indicate % of total)?
Own savings Funds from Bank loan Loan from a Others

government (local or money (specify )
international) lender
115
4. Market performance
1) what factors are likely limit your capacity to sale your product fully ?
(Please mark in the box)
01. Insufficient demand for products
02. Cost of credit
03. Lack of credit
04. Tax structure
05. Access to raw materials
06. Lack of financial resources (Internal reserves)
07. Lack of managerial skills and investment support
2) Does your enterprise usually sell on credit?
01. Yes 02. No

3) What are the sources of the raw materials in your company?
01. Domestic 02. Foreign 03. Both

4) If it is from Both what is the percentage o the raw materials used in your company
from
each sources?
01. % Domestic % 02. Foreign

5) Does your company face usually rising cost of raw materials?
01. Yes 02. No
116
6) If it faced a rise of raw materials, what are the reasons for the rise? ( please put marks)
01. Rise of price in international market
02. Rise of government tax
03. Problem of transport to move from the port
04. Problem related to storage facilities
05. Other (specify)
________________________________
___________________________________
7) What is the normal reaction of the enterprise management to such conditions?
(Please rank as their importance)
01. Rising selling prices of the products

02. Use of available substitute raw materials to off set the
cost
03. Generate sufficient reduction in other controllable costs
to absorb the rising cost
04. Deal with the customer on the price
05. Keep the price as others seller
06. Others (specify)
__________________________________________________
8) Stock of finished goods and raw materials at the end of the year ?
Finished goods Raw materials
Year Total product Year end stock Estimated Year end stock
requirement
2001
2002
2003
2004
2005
117
9) If the stocks have the tendency to increase overtime, what so you think are the
reasons? (Please Mark in the box)
01. Poor market performance
02. Lesser demand in the market
03. Of poor quality of production
04. Of high prices of products
05. of Low capacity of distribution of organization
06. Of low customer contact
07. Average domestic sale price per unit of production is

high
08. Access of the market information is poor
09. Average export sale price per unit of production
10. Other _______________________________________
118
5. Competitiveness
1) How do you measure the company performance in competitiveness of the market?
01. By the quantity of production that sold in the

market
02. By measuring the capacity utilization
03. By the cost it is produced and sold
04. On the size of the domestic market
05. By selling price
06. Other ( specify) _____________________________
2) What are the sales in Birr in this in these consecutive years?
Years 2000 2001 2002 2003 2004 2005
Sales
3) What is the cost to your company for the following list within these 5 years?
Lists year
2001 2002 2003 2004 2005
Market Research
Rent
Electricity
Other energy (fuel, gas etc.)
Transport
Telephone and IT services
Promotion, advertising and
marketing
Maintenance and repairs of plant
& equipment
Raw materials
Salaries and wages
Training
4) Type and level of taxation to enterprise (Birr)

Lists Year
2001 2002 2003 2004 2005
Income tax
Import duties
Sales tax
Excise tax
119
Other direct taxes
Other indirect taxes
5) What are the net profits in listed years?

Year 2000 2001 2002 2003 2004 2005
profit
6) Is transportation a problem to curtail the timely distribution of industrial production to
the market?
01. Yes 02. No

7) Do you think that there is inadequacy of warehouse facilities?
01. Yes 02. No

8) If yes, at what level
01. At factory l 02. At market 03. Both
9) Whose task is to transport products of the factory to the market area?
01. The company 02. Customers 03.Others

___________
10) How are the prices decided?
01. Based on the cost of production
02. Based on demand condition

03. Others (specify)
___________________________________________________
11) Is revision made of prices usually depending on circumstances?
01. Yes 02. No
120
12) Please indicate the circumstances responsible for the revision of prices in the past?
01. The rise of the cost of raw material
02. The rise in the cost of labor
03. Market demand
04. Due to competitor sales with lower price than you do
05 Due to increase taxation
06. Others (specify) ------------------------------------------------------
13) Do you export the factory’s production?
01. Yes 02. No

14) If yes, please writer the annual average value contribution of exports to the total sale
for the last 6 years.
Birr ____________________________ and in % of the total _________________
15) Do you devote any part of your annual investment expenditure to market research
and development?
01. Yes 02. No

16) Please give your approximate average annual expenditure for the market research
and development of total expenditure in the space provided.
• Less than 1%
• 1% to 5%
• 6% to 10%
• 11% to 15%
• Over 15%
121
17) Quantity of Product sold in the market
List of
products 2000 2001 2002 2003 2004 2005
18) Total Revenue in Birr
List of
products 2000 2001 2002 2003 2004 2005
19) List of Customers who are buying the products Aluminum Sulfate
01) Quantity Aluminum Sulfate that the customers bought
Lists of 2000 2001 2002 2003 2004 2005

customers
122
20) List of Customers who are buying the products
01) Quantity Sulfuric acid that the customers bought
Lists of 2000 2001 2002 2003 2004 2005

customers
21) List of competitors
Lists of competitors
2000 2001 2002 2003 2004 2005
22) Comments:
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
____________________________________________________.
Thank you Very much for you cooperation
123
APPENDIX III B
Questioner to make Parato Analysis, cause and effect diagram

Q. 1 List the possible causes that make the company less competitive
in percentage.
Please give the points as in the level they are affecting the competitiveness:
Very highly 5
Highly 4
Medium 3
Low 2
Very low 1
Lists of causes points

People attitude on the product quality
Due to less infrastructure in the country
small scale industries
Skilled man Power
Political factors
Inadequate research
Efficiency of workers
Low market demand
Internal management system
Less attention given by concerned body
High Production cost
Others
Please list if there any other things that affects the market performance and competitiveness of
the company
___________________________________________________________________
__________________________.
124
APPENDIX IV A
AWASH MELKASSA ALUMINIUM SULPHATE & SULPHURIC ACID S.Co.
COST OF GOODS STATEMENT, FOR THE YEAR ENDED 2004
Alum. Sulfate Alum. sulfate
from Sulfuric
from Kaolin Alu.Hydr. Acid 2003/04 2002/03
(Actual) (Actual) (Actual) TOTAL TOTAL
1. Goods in- process inventory (Beginning of the Year ) 1,571,814.97
2 Raw Materials used 3,792,607.48 415,233.08 2,805,650.36 7,013,490.92 3,880,644.01
3. Direct Labour. 302,160.67 26,856.57 88,347.00 417,364.24 285,521.42
4. Production employees' Benefits 215,362.90 15,327.81 90,865.20 321,555.91 155,518.68
5. Indirect Labour. 589,106.37 52,957.20 156,609.90 798,673.47 564,527.23
6. Depreciation _ Factory Machinery & Bldg. 1,635,528.15 144,786.23 648,207.07 2,428,521.45 1,998,098.62
7. Supervisory Labour costs. 112,441.04 20,134.94 32,402.45 164,978.43 151,939.33
8. Heat, Light ,Power & Other energy. 1,940,144.88 186,693.04 175,695.22 2,302,533.14 1,820,928.27
9. Factory supplies used 306,977.84 27,830.01 364,633.37 699,441.22 473,504.25
10. Miscellaneous Overhead costs 848.975.45 60,799.80 298,107.06 1,207,882.31 645,459.00
11. Total cost of Goods In- process (during the year) 9,743,304.78 950,618.68 4,660,517.63 15,354,441.09 11,547,955.78
12. Less Goods In- process Inventory. (End of the
year) 531,060.91 - 113,741.26 644,802.17
13. Cost of Goods Manufactured/Produced/ 9,212,243.87
125
950,618.68 4,546,776.37 14,709,638.92 11,547,955.78
14. Add - Excise Tax - - -
15. Total Cost of Goods manufacture/Produced/ 9,212,243.87 950,618.68 4,546,776.37 14,709,638.92 11,547,955.78
16. Add - Finished Goods Inventory (Beginning of the
year) 44,353.53 43.56 426,716.27 471,113.36 3,276,547.64
17. Cost of Goods (products) Available for Sale 9,256,597.40 950,662.24 4,973,492.64 15,180,752.28 14,824,503.42
18. Less: Finished goods Inventory (End of the year) - 81,402.39 946,222.35 1,027,624.73 471,113.36
19. Cost of Goods (Products) sold 9,256,597.40 869,259.86 4,027,270.29 14,153,127.55 14,353,390.06
20. Add : Idle period factory expenses 1,383,655.94 - 1,084,821.90 2,468,477.84 3,988,819.93
21. Total factory expenses 10,640,253.34 869,259.86 5,112,092.19 16,621,605.39 18,342,209.99

IDLE PERIOD EXPENSES DETAIL
Factory supplies 239.14 - 239.14 478.28 55,316.69
Indirect labour 298,415.60 - 146,422.17 444,837.77 699,992.71
Employees' benefits 97,482.79 - 49,754.71 147,237.50 176,484.03
Heat, light, power 58,231.87 - 58,231.87 116,463.74 142,667.75
Depreciation expenses 774,251.03 - 629,336.02 1,403,587.05 2,140,253.27
Miscellaneous expenses 155,035.51 - 200,837.99 355,873.50 774,105.48
1,383,655.94 - 1,084,821.90 2,468,477.84 3,988,819.93
126
APPENDIX IV B
AWASH MELKASSA ALUMINIUM SULPHATE & SULPHURIC ACID S.Co.

COST OF GOODS STATEMENT FOR THE YEAR ENDED 2005
Alum. Sulfate Alum. sulfate
from
from Kaolin Alu.Hydr. Sulfuric Acid 2004/05
(Actual) (Actual) (Actual) TOTAL
1. Goods in- process inventory (Beginning of the Year ) 531,060.91 - 113,741.26 644,802.17
2 Raw Materials used 1,646,343.84 810,220.16 2,024,087.08 4,480,651.08
3. Direct Labour. 283,103.28 24,525.42 70,376.61 378,005.31
4. Production employees' Benefits 116,481.63 9,821.87 80,508.98 206,812.48
5. Indirect Labour. 439,647.36 44,396.15 166,963.65 651,007.16
6. Depreciation _ Factory Machinery & Bldg. 1,553,319.44 224,034.67 567,789.31 2,345,143.42
7. Supervisory Labour costs. 66,619.55 12,852.65 31,295.41 110,767.61
8. Heat, Light ,Power & Other energy. 2,068,920.99 354,164.62 123,156.60 2,546,242.11
9. Factory supplies used 270,542.58 43,639.29 37,419.68 351,601.55
10. Miscellaneous Overhead costs 1,080,589.76 42,093.56 174,818.94 1,297,502.26
11. Total cost of Goods In- process (during the year) 8,056,629.24 1,565,748.39 3,390,157.52 13,012,535.15
12. Less Goods In- process Inventory. (End of the year) 585,966.86 - - 585,966.86
13. Cost of Goods Manufactured/Produced/ 7,470,662.38 1,565,748.39 3,390,157.52 12,426,568.29

14. Add - Excise Tax - - - -
15. Total Cost of Goods manufacture/Produced/ 7,470,662.38 1,565,748.39 3,390,157.52 12,426,568.29

16. Add - Finished Goods Inventory (Beginning of the
year) - 81,402.38 946,222.35 1,027,624.73
127
17. Cost of Goods (products) Available for Sale 7,470,662.38 1,647,150.77 4,336,379.87 13,454,193.02
IDLE PERIOD EXPENSES DETAIL
Factory supplies 358.29 - 358.29 716.58
Indirect labour 354,150.95 - 149,504.62 503,655.57
Supervisory & Labour 38,360.97 - 16,051.76 54,412.73
Employees' benefits 79,108.61 - 75,556.33 154,664.94
Heat, light, power 98,965.40 - 98,965.41 197,930.81
Depreciation expenses 1,069,283.27 - 956,587.16 2,025,870.43
Miscellaneous expenses 665,945.19 - 288,988.82 954,934.01
2,306,172.68 - 1,586,012.39 3,892,185.07
128
APPENDIX IVC
FIXED ASSETS
Balance at Transfers/Adj Balance at

COSTS 30/06/2003 Additions (disposals) JUNE 30, 2004
Birr Birr Birr Birr
Building 43,193,889.83 - - 43,193,889.83
Other Civil Construction 656,741.73 656,741.73

Plant Machinery &
Equipment 56,077,380.08 1,818,288.32 57,895,668.40
Machinery Not Installed 829,423.93 - 829,423.93
Furniture,Fixture & Fittings 624,329.07 11,566.40 635,895.47
Office Equipments 531,376.50 41,865.74 573,242.24
Specialized Equipments 3,174,468.34 61,340.97 3,235,809.31
Motor Vehicles 5,828,036.88 90,805.45 276,726.43 6,195,568.76
Small Tools 364,489.76 15,358.52 - 379,848.28

Construction in progress - - -
Capital goods in transit 276,726.43 773,313.07 (276,726.43) 773,313.07
Total 111,556,862.55 2,812,538.47 - 114,369,401.02

DEPRECIATION
129
Building 16,889,417.23 2,159,694.50 19,049,111.73
Other Civil Construction 394,241.43 32,837.09 427,078.52

Plant Machinery &
Equipment 48,844,939.51 1,547,500.95 50,392,440.46
Motor Vehicles 4,796,264.65 255,358.70 5,051,623.35
Small Tools 323,248.05 11,240.91 334,488.96
74,411,723.77 4,262,223.68 78,673,947.45

NET BOOK VALUE 37,145,138.78 35,695,453.57
130
BIBLIOGRAPHY
[1] Aluminum Sulfate end-users and their consumption for the last 8 years.& Sulfuric acid
end users and their eight years consumption figures. UPDATED MARKET 1996
[2] An Updated Market and Financial Study Aluminum Sulfate Factory Project (1995)
[3] B.S.C Market study Ethiopian sulfuric acid consumption for direct use and high case.
(1995- 2004)
[4] B.S.C Market study Ethiopian aluminum Sulfate consumption low case. (1995-2004)
[5] B.S Market study Ethiopia aluminum Sulfate consumption high case. (1995-2004)
[6] Consultancy Studies ,Feasibility Study, The establishment Of Aluminum Sulfate Plant
: ministry of industry, national chemical cororation
[7] Catch Up and Convergence: A Model of Cumulative Growth, in :International Review
of Applied Economics, 7 (1), AMABLE, B. 1993 AMABLE, B. 1993.
[8] ETHIOPIAN INVESTMENT AUTHORITY. 2000. Investment Manual 3, Pre- and
Post-
Investment Approval Services and Incentives in Ethiopia.
[9] http://www.quickmba.com/strategy/swot/
[10] http://www.quickmba.com/strategy/value-chain/
[11] http://www.quickmba.com/marketing/market-share/
[12] http://www.quickmba.com/strategy/competitive-advantage/
[13] http://www.quickmba.com/marketing/mix/
[14] http://www.isixsigma.com/tt/pareto/
[15] http://deming.eng.clemson.edu/pub/tutorials/qctools/cedm.htm
[16]http://www.isixsigma.com/offsite.asp?A=Fr&Url=http://www.skymark.com/resources/
tools/cause.htm
[17] Implementing Quality on the Shop floor, QR, USA, NY. Ishihara K (1992)
[18] Manual for the preparation of Industrial Feasibility Studies: UNITED NATION ,
NEW YOURK 1978 ,UNITED NATION INDUSTRIAL DEVELOPMENT
ORGANIZATION VIENNA
[19] Market study in AMASSASC 2002
[20] Production and Operation Management, 5th edition, ELBS. UK. Avon Lockyer K.
etal (1988)
[21] Process Control Theory and Practice, Chapman and Hall UK, London ] Wetheril G.,
Brown W. (1994)
133
APPENDIX IV D
FIXED ASSETS
Balance at Transfers/Adj Balance at
COSTS 30/06/2004 Additions (disposals) JUNE 30, 2005
Birr Birr Birr Birr
Building 43,193,889.83 - - 43,193,889.83
Other Civil Construction 656,741.73 656,741.73

Plant Machinery &
Equipment 57,906,136.18 53,601.42 818,956.15 58,778,693.75
Machinery Not Installed 818,956.15 - (818,956.15) -
Furniture,Fixture & Fittings 635,895.47 15,678.37 - 651,573.84
Office Equipments 573,242.24 100,053.02 - 673,295.26
Motor Vehicles 6,195,568.76 716,593.07 6,912,161.83
Small Tools 379,848.28 600.00 380,448.28

Construction in progress - 11,620.57 - 11,620.57
Capital goods in transit 773,313.07 4,284,880.40 (921,274.96) 4,136,918.51
Total 114,369,401.02 4,481,590.34 (204,681.89) 118,646,309.47
131
DEPRECIATION
Building 19,049,111.73 2,159,694.50 21,208,806.23
Other Civil Construction 427,078.52 32,837.09 459,915.61

Plant Machinery &
Equipment 50,392,440.46 1,925,940.16 52,318,380.62
Motor Vehicles 5,051,623.35 369,385.36 (126,987.20) 5,294,021.51
Small Tools 334,488.96 9,093.43 343,582.39
78,673,947.45 4,743,966.14 - 83,290,926.39

NET BOOK VALUE 35,695,453.57 35,355,383.08
132
[22] Shreve’s Chemical Process Industries: GEORGE J.AUSTRN , FIFTHE EDITION
1976
[23] Statistical Quality Control, 7th edition , Mc Grawhill, Grant & Leaveworth (1996)
[24] Sustainable Industrial Development and Competitiveness Ministry of Trade and
Industry United Nations Industrial Development Organization May 2004
[25] Strategic Management by : Lloyd L.Byars, Leslie W.Rue, Shaker A.Zahra
[26] The Quality Technicians Handbook. Second Edition, Prentice Hall, USA Griffith,
Gary K (1992)
[27] The Manufacture of sulfuric Acid edited by :WERNER W.DUECKER AND JAMES
R.WEST 1959 EDITON
134

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Selamawit Tesfaye

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Addis Ababa University

School of Graduate Studies

A thesis is submitted to the School of Graduate of

Analyzing Industrial Development,

Approved by Board of Examiners:

I would like to express my sincere appreciation to Awash Melksa Aluminum

TABLE OF CONTENTS…………………………………………………………… iii

1.1 Statement of the problem 1

1.3 Significance of the study 6

1.5 Sources of data and data collection process 9

2.2 An Overview of AMASSASC 10

2.3 The Historical Development of the Industry 12

2.4 Capacity utilization 14

2.5 Technology used 14

2.6 AMASSASC products 17

3.1 Background Information 20

3.3 Relationships of company products with other industries 22

3.4 Contribution of AMASSASC product for other sectors 24

3.4.1 Contribution to Foreign Exchange 25

3.4.2 Contribution to Government Revenue 28

3.4.3 Direct and indirect taxes 28

3.5 Analysis the development of the industry 29

3.5.1 Current consumption of AMASSASC products 29

3.5.2 Previous consumption of AMASSASC product 30

Market Performance of AMASSASC 34

4.1 Back ground information 33

4.2 Problems in market performance of AMASSASC 41

4.2.1 Major Problems of the company market performance 35

4.4 Analyzing the market performance of AMASSASC 40

4.4.1 Market performance of AMASSASC in Aluminum 40

4.4.3 Market performance of AMASSASC in Sulfuric 42

4.5 Analyzing internal factors affecting Market performance 44

4.5.1 Marketing and distribution 45

4.5.2 Applied Technology 45

4.5.3 Research and Development 46

4.5.4 Innovation or Introduction of New Product 47

4.5.6 Information Management System 48

4.5.7 Internal Working Condition 48

4.5.8 Product/Service Quality 49

4.5.9 Marketing Capability 49

4.6 Analyzing external factors affecting Market performance 49

4.6.1 PEST Analysis 50

4.6.1.1 Political Factors 50

4.6.1.1.1 Tax policy 51

4.6.1.1.2 Employment laws 53

4.6.1.1.3 Trade restriction and tariffs 54

4.6.1.1.4 Political stability 55

4.6.1.2 Economic Factor 56

4.6.1.2.1 Economic Growth 56

4.6.1.2.2 Exchange Rate 58

4.6.1.2.3 Inflations rate 58

4.6.1.3 Social Factors 59

4.6.1.3.2 Attitude towards the product 59

5.1 Back ground information 62

5.2 Defining and measuring competitiveness 62

5.2.1 Definitions of competitiveness 63

5.2.2 Competitive advantages 64

5.4 Evaluating AMASSASC by using SWOT matrix 70

5.6 Pareto Analysis 88