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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