CHAPTER ONE

INTRODUCTION

1.1. Background of the Study

The intent of this study is to assess application of export market orientation in the context of
Ethiopian export companies. First Let's define what export means. According to B. S. Rathor ,
Export marketing includes the management of marketing activities for products which cross the
national boundaries of a country. That means export marketing means marketing of goods and
services beyond the national boundaries The term export means shipping the goods and services out
of the port of a country. The seller of such goods and services is referred to as an "exporter" and is
based in the country of export whereas the overseas based buyer is referred to as an "importer". In
international trade, "exports" refers to selling goods and services produced in the home country to
other markets (UNIDO,2002).
On the other hand market orientation is a business approach or philosophy that focuses on
identifying and meeting the stated or hidden needs or wants of a given scope of customers. Market
orientation is generally regarded as the implementation of the marketing concept. The marketing
concept is a philosophy of doing business, which puts the customers needs at the centre
of the organization (Wrenn, 1997).
Therefore the study mainly investigate implementation of market orientation philosophy in
Ethiopian based export company. Ethiopia is one of Exporting country to various countries in the
world. Export from Ethiopia is steadily growing and the government encourages the export subsector. Coffee has always been Ethiopia's highest foreign currency earner. In terms of weight,
however, the most exported goods out of Ethiopia in the last five years were pulses, oil seeds and
spices. (ECCSA, Exporters' Guide 2011/12:03)
Currently there are more than 60 coffee exporters in Ethiopia according to a data from Ethiopian
coffee exporters association. Mullege Private Limited Company is one of the top coffee exporters,
where this study was conducted on.
Mullege PLC has been established since the early sixties mainly trading all sorts of commodities in
the local markets. It started in the southern region of Ethiopia known as wolayta and the city of
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Areka. The commodity trading has grown so rapidly where it became necessary to move the
establishment to the capital city forth coffee trading while continuing the other trading in Wolayta.
Mullege has been an exporting company since 1996 and have enjoyed the number ONE spot in
volume of coffee exported and has won several awards of excellence in services and quality product .
Therefore, the scope of my study mainly concentrates on investigation of Mullege's export market
philosophy.

1.2. Statement of the Problem

Any business can develop new products based on either a marketing orientated approach or a
product orientated approach. A marketing orientated approach means a business reacts to what
customers want. The decisions taken are based around information about customers' needs and
wants, rather than what the business thinks is right for the customer. Whereas a product orientated
approach means the business develops products based on what it is good at making or doing, rather
than what a customer wants. This approach is usually criticized because it often leads to
unsuccessful products - particularly in well-established markets. These days most markets are
moving towards a more market-orientated approach because customers have become more
knowledgeable and require more variety and better quality. To compete, businesses need to be more
sensitive to their customers needs otherwise they will lose sales to their rivals (Wrenn, 1997).
The export business in Ethiopia and coffee export in particular is suffering from getting proper
market share in world market. Lack of technological advancement in manufacturing and processing
sector and lack of enough foreign currency deposit in the country are two main reasons for not
getting in to world market demand as required. For example most export companies in Ethiopia
exports raw coffee to the world market without adding any value to it. By doing so most companies
are losing to earn more profit which they may get it better if the coffee being sold after roasting and
grinded. Export of raw coffee has a very low marginal price when exported in bean form compared
to processed coffee. That means those foreign companies who bought raw coffee from Ethiopian
export companies earn too much profit just by adding value to the raw coffee after roasting and
grinding and packing it with their own brand name, like Starbucks. This shows that most export
companies tend to use product oriented approach rather than market oriented approach, because they
always try to export what they get directly from coffee farmers.
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One of the biggest coffee exporting companies in Ethiopia is Mullege Plc. As mentioned above this
company uses product oriented approach as its export marketing activity. The current market
approach of the company is facing a big challenge in today's world market.

Therefore, the

researcher is interested to address a vital role of using market oriented export business approach and
implementation of a strong export market orientation, which should focus on world customer
demand and drive the export based on the demand. The core problem here is the use of product
oriented market strategy to sell out what they have to world market.

1.3. Basic research questions

To get a comprehensive understanding about Mullege's current marketing approach, this research
paper presents the following basic research questions for the company's marketing staff.
1. What is the current position of your company's export market activity compared to other
export companies and enterprises operating in Ethiopia?
2. What kind of market orientation system your company is using currently?
3. What are the benefits and drawbacks of your current market orientation system?

1.4. Objective of the study

1.4.1 General objective
General objective of this study is to provide a comprehensive and practical review of the use of
market oriented approach in alleviating export earnings.

1.4.2 Specific objective

The specific objective of this study is to address significance of market oriented approach in Export
market to increase sales volume of export quality coffee for Mullege plc.
More specifically the study attempts to assess the following activities:
To investigate current position of Mullege Plc's export business compared to other similar
export companies.
To investigate a kind of marketing philosophy that the company uses currently
To investigate a kind of marketing orientation used by Mullege plc.
To identify the benefit and drawbacks of current marketing orientation used by Mullege plc.

1.5. Significance of the study

Ethiopia is the center of origin and diversity of coffee. Coffee plays a pivotal role in the socioeconomy of the country. It employs more than 20% of the economically active population and
contributes more than 25% of the country's foreign exchange earnings. Currently, Ethiopia is the
leading Arabica coffee producer in Africa, the fifth largest worldwide and the tenth in coffee exports
worldwide. The average annual production amounts to about 350,000 tons. The average yield is
about 0.71ton/ha. Ethiopian coffee is intrinsically organic and renowned for its superior quality.
However, Ethiopian coffee sectors share in the premium revenues earned by retailers, like Mullege Plc, has
historically been limited. In recent years, some efforts have been undertaken by government to begin global
enforcement of intellectual property rights for major Ethiopian coffee types. For example recently Starbucks
were by law enforced to acknowledge and give royalty fee for Ethiopian coffee whenever sold in its brand
name. This can be considered a first step, and continued branding and marketing can secure higher retailer
prices, and coordinated efforts throughout the Ethiopian value chain can help local actors all the way to the
smallholder to participate in the profits. Here the use of market oriented approach becomes inevitable to
achieve the required earning from the foreign market.
Therefore, the intent and significance of this study would be to implicate a way of market orientation
approach towards bringing the required property right for major Ethiopian coffee types and in return bring
more foreign currency earning to the country.

1.6. Scope of the study

As far as the scope of this study concerned it is mainly focused on implementation of the use of market
oriented approach in export business of Mullege Plc, one of Ethiopia's top coffee exporting company. study
focuses on implementation of market oriented approach and also addresses a solution to the existing problem
of the company by recommending a way to more earnings from the foreign market, which may arise from the
use of this market strategy. The scope of the study is just limited to mentioned topic due to time limitation and
makes the topic more specific.

In general, the scope of the study is limited to assessment of current marketing approach of
Mulleges coffee export activity in an international market and proposes a possible value addition on
their foreign currency earnings by implementation of a market oriented approach. This study covers
the time from the year 2012 up to 2015 E.C.

1.7. Research design and methodology

1.7.1 Research design
The design of a study defines the study type by implementing different framework that has been
created to seek answers to research questions presented by the researcher. The framework of the
study can be descriptive, casual or explanatory. In this study the research design is based on
descriptive frame work. Descriptive research design frame work depends on the type of data
collected.

1.7.2 Type of data collection

There are two types of data collection. Primary data and secondary data types. Primary Data is a data
observed or collected directly from first-hand experience. Whereas secondary data is one type of
quantitative data that has already been collected by someone else for a different purpose. Therefore
this study uses both types of data collection.

1.7.3 Method of data collection

Among the main data collection methods i.e. Document analysis, Questionnaire, Interviews and
Direct observations, the researcher uses interviews, questioner and observation as data collection
method to conduct the study.

1.7.4 Population and sampling method of the study

The target of the study was selected company employees who have better understanding about the
company's market strategy and export activities. The researcher was used non-probability sampling
technique that is convenient sampling approach for the study. Sometimes, the entire population will
be sufficiently small, and the researcher can include the entire population in the study. This type of
research is called a census study because data is gathered on every member of the population,
(Malhorta, 2006). In the case of this study the researcher's type of study is census as the number of
total employees is very few in size and selected respondents among them is close to the size of total
employees.

1.7.5 Method of data analysis

There are two types of data analysis methods. Qualitative and quantitative analysis methods. In this
study the researcher uses qualitative analysis method. Qualitative methods comprise a wide variety
of ways of collecting data, with distinct implications in terms of analysis.

1.8 Organization of the study

Organization of the study is in a way that to show the relevance of application of market oriented
approach to solve companies existing problem with regards to export marketing. The study is
categorized in to four chapters. Chapter one focus on background of the study, statement of the
problem, research questioner, objective of the study, significance of the study, scope of the study and
research design and methodology. Chapter two mainly focuses on related literature review. Chapter
three outlines data presentation, analyses and discussions in this study. Research design, data source,
data collection instruments, population of the study, sampling method, sample size, data analysis and
presentation was outlined in this chapter. Finally in chapter four conclusion and recommendation
was presented in the study.

1.9 Limitation
The case study in this research has been limited to one Export Company amongst several export
companies in Ethiopia. Hence, the generalization of this study is limited to the generality of other
export companies. Data was collected from few selected employees of the company, i.e Mullege plc,
which made the administered questionnaire limited. Results might be different if collected from
more than twenty employees. The interview was conducted only with the company's general
manager and not getting the views of other managers also limited the findings on the study. The time
period assigned for the study was also a constraint as it did not allow the opportunity to administer
more questionnaires and conduct more interviews.