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

2. Content i.Defining green manufacturing competitiveness ii.Understanding competitiveness iii.Theories and frameworks for competitiveness iv.Frameworks of competitiveness for the Ethiopian wood industry v.Following the diamond framework to understand competitiveness of the Ethiopian wood industry

3. 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&D v.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 i.Firm level ii.National or country level

7. Defining competitiveness i.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 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

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. 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

15. 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

16. 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

17. 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  Primary  Contributory  Localized

18.  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)

19.  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)

20.  Drivers for green manufacturing and products as ranked by Govindan and Shankar (2013) 1.Compliance with regulations 2.Financial benefit 3.Stakeholders 4.Company image 5.Competitors 6.Environmental conservation 7.Customers Drivers of manufacturing competitiveness (Govindan and Shankar, 2013)

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 Related and supporting industries Demand conditions Factor conditions

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  Factor conditions –Capital investment –Energy (cost, availability and rate of electrification) –R&D infrastructure –New or alternative raw material/ product development

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 Demand conditions Factor 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 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

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

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 Related and supporting industries Demand conditions Factor conditions

34. 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.

35. 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.

36. 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

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!