Should the restaurant choose? most appropriate? What kind of industries can this be applied to?
CASE STUDIES
has potential risks. Ethiopia's political instability may cause problems
in the future. In addition, due to underdeveloped infrastructure, the
working conditions might not be up to the standards that many com-
panies are used to and the delivery time for products to reach buyers
in Europe could be weeks longer than buyers in China
Discussion Questions
Outsourcing: Ethiopia
It isn't unusual for Western companies in the textile industry to out-
source manufacturing to South Asia and Southeast Asia. Countries
like China and India are manufacturing hubs for fashion products,
supplying a large chunk of the world's apparel. However, with
China's labor, raw material, and tax costs rising over the last couple
of years, the fashion landscape is getting a makeover.
Ethiopia has emerged as a key destination for outsourcing for sev-
eral companies, including H&M Levi's, and Guess, due to the avail-
ability of cheap and abundant labor force. According to Bloomberg
reports," the base e salary of workers can be about $25 per month. The
Ethiopian government offers an exemption from income tax for the
five years to incentivize foreign companies. While this has created
thousands of jobs for Ethiopian market in the last year, the goal is to
create 2 million manufacturing jobs by 2025, which would transition
the
country from a primarily agrarian nation to a manufacturing one.
While H&M and Gap currently source production from local
facilities only. some companies are taking a step further and are
planning to set up factories in the East African country due to the
extreme competitiveness of the fashion industry. These include brands
like Levi's, Under Armour, Calvin Klein. Tommy Hilfiger. Giorgio
Amani, and Hugo Boss. At the same time, outsourcing Ethiopia
1. What are the major pros and cons for companies to set up pro-
duction in Ethiopia?
2. How could inferior working conditions influence the efficiency
of production for companies?
3. What factors influence productivity of the companies that
decide to set up operations in Ethiopia?
*Bill Donahue, "China is Turning Ethiopia into a Giant Fast-Fashion
Factory." Bloomberg Businessweek. March 12, 2018
Don-Alvin Adegeest. "Horw China Is Outsourcing Fast Fashion to
Ethiopia." http:ashionunited, ul/newMarch 27, 2018 and Aaron
Maasho. "Ethiopia Bets on Clothes to Fashion Industrial Future."
Reuters, Noember 21.2017.
Source: Dr. Viktor Miklos Kiss Metropolitan State University of Demer.
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