Green manufacturing competitiveness of the Ethiopian wood industry

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

2. Content • Defining green manufacturing competitiveness • Understanding competitiveness • Theories and frameworks for competitiveness • Frameworks of competitiveness for the Ethiopian wood industry • Following the diamond framework to understand competitiveness of the Ethiopian wood industry

3. Content • Following the diamond framework to understand competitiveness of the Ethiopian wood industry • Factor conditions • Demand conditions • Related and supporting industry • Firm strategy and rivalry • Institutionalizing competitiveness R&D • Summary of green manufacturing competitiveness in Ethiopian wood industry

4. 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?

5. 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)

6. Defining competitiveness • Competitiveness is defined at two levels • Firm level • National or country level

7. Defining competitiveness • Firm level competitiveness: • Defined based on productivity and market share • It 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

8. Defining competitiveness • 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

9. 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?

10. 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 ways • For easy understanding of competitiveness • A theory grounded in valid economics is needed • At least a valid framework should be available

11. 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

12. 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

13. 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

14. Frameworks for competitiveness • There are many frameworks so far proposed • Among them the following are the prominent ones. • 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

15. Frameworks for competitiveness • There are many frameworks so far proposed • Among them the following are the prominent ones. • Resource based view: assumes productivity to be a result of the way • Financial • Operational • Intellectual and other assets which are owned and handled

16. Frameworks for competitiveness • There are many frameworks so far proposed • Among them the following are the prominent ones. • 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

17. Frameworks for competitiveness • There are many frameworks so far proposed • Among them the following are the prominent ones. • Structural categorization , E.g. Deloitte (2010) • Proposed about three categories of drivers • Primary • Contributory • Localized

18. Drivers of manufacturing competitiveness (Deloitte 2010) • 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

19. 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

20. Drivers of manufacturing competitiveness (Govindan and Shankar, 2013) • Drivers for green manufacturing and products as ranked by Govindan and Shankar (2013) • Compliance with regulations • Financial benefit • Stakeholders • Company image • Competitors • Environmental conservation • Customers

21. Framework for the Ethiopian wood industry • Which one of them are valid for Ethiopia? • None of them are tested for Ethiopian conditions • However, the Porter’s framework has been applied in wood products industries • In Asia • In North America • What approach should we follow in Ethiopia?

22. 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)

23. 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

24. The diamonds of national advantage Firm structure and rivalry Factor conditions Demand conditions Related and supporting industries

25. 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 conditions

26. 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 conditions

27. Attributes of the national advantage • Factor conditions • Capital investment • Energy (cost , availability and rate of electrification) • R&D infrastructure • New or alternative raw material/ product development Factor conditions

28. 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 export Factor conditions Demand conditions

29. 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

30. Attributes of the national advantage • 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 Related and sup. Ind.

31. Attributes of the national advantage • Related and supporting industries Factor conditions Demand conditions Related and supporting industries

32. 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

33. The diamonds of national advantage Firm structure and rivalry Factor conditions Demand conditions Related and supporting industries

34. Institutionalizing competitiveness R&D • There are three institutional approaches • Cluster initiatives are organized to improve competitiveness of a specific sector or cluster efforts by • government agencies, • companies • others.

35. Institutionalizing competitiveness R&D • 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.

36. Institutionalizing competitiveness R&D • 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

37. 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

38. 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

39. 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 applicable • Develop alternative one • Institutionalize the competitiveness R&D to assure its sustainability

40. End of presentation Thank you for your attention!