Green manufacturing competitiveness of the Ethiopian wood industry Dr. Anteneh Tesfaye Tekleyohannes Researcher, FRC-EIAR June 11, 2013.

Green manufacturing competitiveness of the Ethiopian

wood industry

Dr. Anteneh Tesfaye Tekleyohannes

Researcher, FRC-EIARJune 11, 2013

Content

i. Defining green manufacturing competitiveness

ii. Understanding competitivenessiii. Theories and frameworks for

competitivenessiv. Frameworks of competitiveness for

the Ethiopian wood industryv. Following the diamond framework to

understand competitiveness of the Ethiopian wood industry

Content

iii. Following the diamond framework to understand competitiveness of the Ethiopian wood industry• Factor conditions• Demand conditions• Related and supporting industry• Firm strategy and rivalry

iv. Institutionalizing competitiveness R&Dv. Summary of green manufacturing

competitiveness in Ethiopian wood industry

Definitions

Green manufacturing competitiveness– A composite of two concepts• Green manufacturing and/or products• Competitiveness

– This requires presenting explanations for the following two questions:• What does green manufacturing describe in

manufacturing?• What does competitiveness mean in

manufacturing?

Defining green manufacturing and products

Green manufacturing is an optimal system– In which manufacturing wastes in resources,

energy and emissions are minimized through • Product design and optimization of products

attributes• Process design and optimization

Green product– Its manufacture and use has one of the lowest

emission of GHG and other toxic substances– Produced through green manufacturing– Designed for reuse, disassembly and

remanufacturing (has endless service life)

Defining competitiveness

Competitiveness is defined at two levelsi. Firm levelii. National or country level

Defining competitiveness

i. Firm level competitiveness:Defined based on productivity and market

shareIt is firm’s ability to: • provide products more effectively and

efficiently compared to competitors and to stay in business• have the capacity to exploit existing market

opportunities and generate new markets• secure and enlarge its sector market share• compete successfully in potential markets• increase in size, market share and profitability

Defining competitiveness

ii. Macro level: It is the ability of a country to: – render products and services which correspond

to market’s demands and standards when at the same time secures or increases the income per employed citizen(Cohen et al 1994)

– constantly improve quality of living for its citizens in a fully liberated market environment (OECD 1992)

– generate and maintain relatively high income and employment levels, while being exposed to external competition

Understanding competitiveness

Understanding what competitiveness means:– Knowing and explaining what factors affect it

and by what magnitude it is affected

– To have the ability to quantitatively predict the state and behavior of given competitiveness when the factors affecting it are changed by known quantity

– However, competitiveness is not yet fully understand.

Why?

Understanding competitiveness

Competitiveness is affected by a number of factors

Many of the factors are correlated or may affect one another at multiple scales– They interact with each other strongly– They are complexly related in various

waysFor easy understanding of

competitivenessA theory grounded in valid economics is

neededAt least a valid framework should be

available

Is there a theory for competitiveness?

Competitiveness has remained so far a relative concept and theory is about an exact explanation of a system or mechanism, therefore

– There is no adequate theory for competitiveness

– But there are many frameworks or models aspiring for some explanation

Frameworks for competitiveness

Frameworks create systematic categories for factors affecting competitiveness

– They usually have assumptions which are in line with other economic principles

– They enable investigating effects of the various factors on competitiveness with reduced complexity

They reduce the complexity in the relationship between the factors and competitiveness

Frameworks for competitiveness

The assumptions are the basis of differences among categories– Almost all assumptions are about productivity

– They allocate higher importance to certain factors than others

– They may consider some factor as insignificant

– They may be adequate to explain certain sectors

– None of them are adequate to explain all sectors

Frameworks for competitiveness

There are many frameworks so far proposed

– Among them the following are the prominent ones.

1. The porters framework: Focus on the best possible understanding of the diamond factors– Factor conditions,– Demand conditions, – Related and supporting industries – Context for firm’s strategy and rivalry

Frameworks for competitiveness

There are many frameworks so far proposed

– Among them the following are the prominent ones.

2. Resource based view: assumes productivity to be a result of the way

– Financial – Operational – Intellectual and other assets which are owned and

handled

Frameworks for competitiveness

There are many frameworks so far proposed

– Among them the following are the prominent ones.

3. Strategic management view: Assumes productivity/ competitiveness to be mainly affected by

– Streamlining of production – Promoting internal quality management procedures – Promotion of innovative product sells strategy

Frameworks for competitiveness

There are many frameworks so far proposed

– Among them the following are the prominent ones.

4. Structural categorization , E.g. Deloitte (2010)

– Proposed about three categories of drivers PrimaryContributoryLocalized

Primary drivers (market based)– Labor (availability, quality and cost)– Materials (availability and cost) – Energy (cost and type/ renewable vs.

nonrenewable)Contributory (Government or policy based)– Economic, trade, financial and tax system– Quality of physical infrastructure– Government investment in innovation and R&D– The legal and regulatory system

Drivers of manufacturing competitiveness (Deloitte 2010)

Localized drivers – Suppliers network– Dynamics of local business environment• Size of market opportunity• Intensity of local market competition• Collaborations such as business-to-business

(B2B) and public private partnerships (PPP)

– The quality and availability of health care

Drivers of manufacturing competitiveness (Deloitte 2010)

Drivers for green manufacturing and products as ranked by Govindan and Shankar (2013)1. Compliance with regulations 2. Financial benefit3. Stakeholders 4. Company image 5. Competitors 6. Environmental conservation 7. Customers

Drivers of manufacturing competitiveness (Govindan and

Shankar, 2013)

Framework for the Ethiopian wood industry

Which one of them are valid for Ethiopia?– None of them are tested for Ethiopian

conditionsHowever, the Porter’s framework has

been applied in wood products industries– In Asia– In North America

What approach should we follow in Ethiopia?

Framework for the Ethiopian wood industry

Approaches to follow in Ethiopia– Consider as many frameworks as

possible–Make comparative test on Porter’s

framework– Develop a framework better suited for

Ethiopia• Test the Porter’s framework for Ethiopia• Gain empirical evidence in Ethiopian context• Formulate a framework valid for Ethiopia• Upgrade the Ethiopian framework to theory

(see whether it is applicable across sectors)

Porter’s framework for competitiveness

According to Porter (1990) the diamonds of national advantage determine whether

– Firms maintain consistent innovations

– Acquire ever more sophisticated source of competitive advantage

– Overcome substantial barriers to change and innovation

– Keep ahead of the competitive edge

The diamonds of national advantage

Firm structure and rivalry

Related and supporting industries

Demand conditionsFactor conditions

Attributes of the national advantage

Factor conditions– Availability of land• Rural land• Rural population growth and density

– Availability and ease to harvest timber• Plantation• Ratio of plantation to natural forest• Corruption and ethics• Environmental performance and

sustainability

Factor conditio

ns

Attributes of the national advantage

Factor conditions– Logging operation and productivity• Rural labor availability• Gasoline price• Productivity per employment

– Skilled labor • Skilled labor availability• Labor cost• Efficiency

Factor conditi

ons

Attributes of the national advantage

Factor conditions

Factor conditions– Capital investment– Energy (cost , availability and

rate of electrification)– R&D infrastructure– New or alternative raw

material/ product development

Attributes of the national advantage

Demand conditions– Domestic consumption (sawnwood, chip,

particle board, fiberboard, furniture, pulp and paper)

– Per capita domestic consumption and behavioral dynamics

– Cost of exportDemand conditions

Factor conditions

Attributes of the national advantage

Related and supporting industries– Related upstream/ down stream industry– Natural forest endowments• Natural forest area• Per capita natural forest area• Overall forest stock• Accessible natural forest

Related and supporting industries

Attributes of the national advantage

Related and sup. Ind.

Related and supporting industries– Sawnwood production– Particle board, plywood, fiberboard,

pulp and paper production– Value added products

manufacturing– Adhesives and finishing materials

manufacturing industries– Hardware and metallic parts

industries– Plastic and textile industry

Attributes of the national advantage

Related and supporting industries

Related and supporting industries

Demand conditionsFactor conditions

Attributes of the national advantage

Firm strategy and rivalry–Managerial competencies– Firms commitment to innovations– Investment in new technology– Local and global market competition– Productivity per employee– Efficiency

The diamonds of national advantage

Firm structure and rivalry

Related and supporting industries

Demand conditionsFactor conditions

Institutionalizing competitiveness R&D

There are three institutional approaches

1. Cluster initiatives are organized to improve competitiveness of a specific sector or cluster efforts by • government agencies, • companies• others.

Institutionalizing competitiveness R&D

2. Competitiveness councils: Bring together key decision-makers – From the public and private sector – Operate as a steering committee for

cluster and other similar initiatives – Focus on specific cross-cutting issues

affecting competitiveness.

Institutionalizing competitiveness R&D

3. Competitiveness Institutes:

They are focused on the neutral assessment of regional, sector and cluster competitiveness over time as a way to enable outside impact on competitiveness policy

Summary of Green Manufacturing Competitiveness in Ethiopian Wood Industry

Maximizing productivity and minimizing wastes in the use of resources and energy during manufacturing of wood products

Green manufacturing competitiveness

Generally, greening manufacturing and wood products is a challenge but it is the effort exerted to overcome such challenges which makes companies:• Self learn at the leading edge• Become creative and innovative• To become effective problem solvers and

resilient to harsh business environment• Uncover unlimited discoveries and new

opportunities

Green manufacturing competitiveness

Green competitiveness does not disagree with Porter’s framework since it is the challenge that turns companies to be competitive, hence:• Green competitiveness can be evaluated as a

complex industrial challenge using Porter’s framework• Test how Porter’s framework can work well for green

competitiveness and if not: Explore under what conditions it is applicableDevelop alternative one

• Institutionalize the competitiveness R&D to assure its sustainability

End of presentation

Thank you for your attention!