bausiness case assignemnt

8/10/2019 Bausiness Case Assignemnt

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A New Business Opportunity in Eritrea: Importing of Pasta

1.0 Introduction

Eritrea is a new nation which has engaged itself in nation building and the building

of export-oriented industrial economy, within liberal trade and investment policy in

which the private sector will play a leading role. To this end, the Government of the

State of Eritrea has formulated its macro policy and investment policies. The

policies provides incentives such as provision of investment credit from the

Agricultural and investment development an!, low tax and the provision of land

for building factory .

At the present, Eritrea is one of the least developed countries, and a large section of

the society is still categori"ed as poor. #n order to alleviate poverty, the Government

of the State of Eritrea has the policy encouraging small business enterprises as a

source of employment and income earning with the ob$ective to reduce poverty,

attain food securing and achieve a better living conditions of the largest section of

the population. To these ends, many entrepreneurs have got the opportunity to

have access to %nancial services which provide credits to small and

microenterprises & 'acob, ())*+

Eritrea as a small country with export-oriented development strategy also depends

on the imports of goods from dierent countries of the world. Thus there are plenty

of business opportunities in the import export activities. ne business opportunity

available is the importing of pasta from #taly which is one of the active trading

partners of Eritrea. #n Eritrea, people of all ages are great consumers of asta bothat home and in dierent restaurants. Thus establishment of business for importing

past is a viable business opportunity. This section analyses the new business

opportunity by establishing business which actively involves in importing and

exporting past is its main activity.

Any business establishment, however, has to have a clearly de%ned mission,

ob$ectives and strategies to ma!e it successful.

1.2 Demand and supply of pasta in the domestic market

Pasta is a basic foodstuff that is sold in refrigerated, frozen, canned, or dry forms. The past thatwe consider here is the dry form pasta that is all dry pasta egg and non-egg dry pasta (macaroni,

spaghetti) in packages of 5 grams. !n the sur"eys conducted it was found that, although the

different pasta Products had some distincti"e features# these features did not create clear di"idinglines between any of the dry pasta products in $ritrea. Therefore, in this particular case we

consider the dry form past of all kinds as one.

Demand for pasta in Asmara


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Demand. !n the original in"estigations, the %ommission The sur"ey found that that the demand

for dry pasta had increased steadily throughout the period of in"estigationEritrea is still food de%cient country. #t imports a large /uantity of wheat and wheat0our, pasta from Sudan, #taly and the 1iddle east countries. This means theestablishment of business for importing past from #taly in which Eritrea has colonialties and many Eritrean business people are familiar to the #talian food mar!et. Asample of 20 restaurantswas made during Saturday and Sunday, that is ctober-------- and ctober--------. The survey indicates that on the average the restaurantshost 233 customers per day and over *34 of the customers5 prefer pasta comparedto other foods in the restaurants. # also made interview with veimporters of pastaand the response suggests that that the pasta mar!et in Eritrea is not yet satis%ed,

on the other hand, the sur"ey found that that the demand for dry pasta had increased steadily.. 6rom the discussions made, the total amount of pasta imported per year by the%ve businesses is around (33, 333 /uintals of dierent types of dry pasta.

Local production of past in Eritrea (supply of locally produced pasta

!n $ritrea there are ---------------- industries that produce low &uality pasta, primarily macaroni.

This is domestic product which has similar in characteristics and uses of the imported pasta.

!nter"iews made with the local producers indicated that the producers ha"e serious shortagewheat flour and that they cannot meet the orderscoming to them from different public and pri"ate

institutions for dry pasta. This clearly indicates the e'iting pasta producing firms capacities are

constrained by shortage of basic inputs. !n addition the managers of the pasta producing firmssaid that they face tough competition from pasta importing firms , particularly those pasta

coming from $urope because they are of high &uality and it is more demanded by the consumers

although the price is relati"ely higher. That is the domestic pasta industry consisted of all

domestic producers of dry pasta ha"e low competiti"e power in $ritrea.The tate of $ritrea although small country is still an important market for imported dry pasta ( *inistry

of industry as source )

Esta!lishment of "asta importin# private limited company

"ossi!le $ission

The mission of the asta importing business is to contribute to nutrition of the

people by importing and supplying high /uality pasta to the Eritrean society.

"ossi!le %!&ectives

The ob$ective of the asta importing business is to earn more pro%t by importing

and distributing high /uality imported pasta throughout the country.

+hile analyzing the establishment of pasta importing firm as one business opportunitya"ailable in $ritrea , we conducted +T analysis which consider all rele"ant factors in order to

e"aluate whether the new pasta importing firm will operate profitably in $ritrea.

1.2 '%) Analysis


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Strength

Weaknesses

Opportunities

Threats

!mporting dry pasta from !taly faces little threats from low &uality producing local producers. ince,

, $ritrean pasta producer industries ha"e faced increasing cost of flour (raw material costs). !t is

unlikely that the industries will increase their production capacity or e'isting unused production capacity

in the foreseeable future (/- 5 years period). This means the importing firm will ha"e little threat from the

local producers. *oreo"er, taking into account that the dry pasta market is not likely to changesignificantly in the reasonably foreseeable future in $ritrea, the consumers would continue to prefer high

&uality !talian pasta compared to other pasta and that there is no discernible ad"erse impact coming from

domestic producers or importers from the *iddle $ast. Thus !talian pasta could e"en be priced higher

than the domestic product gi"en its percei"ed higher &uality and will continue to compete in the $ritrean

market with little threats coming from other competitors. The likely threat the !talian pasta importing firm

might face is from newly established many similar firms importing pasta from other $uropean countriessuch as 0rance, and Turkey. This is because in $ritrea there is little barrier to the importation of dry

pasta from other countries . uch e"ents might reduce the firm1s profitability and market share might be

reduced.

Sustainability of the business firm

2lthough domestically produced and imported dry pasta are generally substitutable, it is

underpinned there is &uality has important in purchasing decisions and !talian pasta possess an image of

higher &uality. !n fact consumers prefer more of !talian pasta and that the new business firm has

the chance of sur"i"ing and will e"en ha"e a greater market share. +hat is re&uired is ad"ertising

in the local mass media as a means of sales promotion and influencing consumer1s decisions infa"or !talian pasta.

CONC!SION

3ased on the market situation and consumers demand in $ritrea on dry pasta, The +T analysis made

indicates that the is ample opportunity for the establishment of new !talian pasta importing firm which

could operate profitability in the coming fi"e years.

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