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As the long awaited expansion of Africa Avenue has begun, some of the readers may not be able to take the same route to work today as they used to. Road construction and expansion has been the order of the day over the past few years and we have started enjoying the benefits of all this hard work, while we soon forget the inconveniences during the time of construction. Some road works take longer for reasons I fail to comprehend while others progress reasonably well. Meanwhile we bite the dust and learn to accept the jams, detours, water supply interruptions, name it. Mind you, some expanded roads, while meant to be able to absorb more traffic, become very dangerous roads indeed as many if not most drivers take advantage of the smooth wide lanes and step on the gas as if they are not in a residential area. Observing speed limits is something that very few drivers do in Addis Abeba.
Anyway, where not too long ago there was a spacious parking lot in front of a rather new shopping mall, this parking lot may now have to make way for the expanding road. Customers who used to frequent the mall have no parking space anymore and as a result the shops, coffee bars and restaurants in the mall are quickly loosing their clients. The owner of a building may soon see the shop owners terminate their rent and leave as well. Come to think of it. What looked like a thriving business opportunity at a prime location, all of a sudden turns into a loosing enterprise. As I drive around town I see more similar examples. Spaces in front of buildings and residences are taken away to make place for expansion of the road network. While I am of the opinion that road network expansion is a good thing and quite necessary to accommodate the growing traffic, I wonder how much of the expansion plans was known to the investors before they decided to invest in building in a specific area. Did they know? Will they be compensated?
Which brings me to the issue of making a risk analysis and the need to continuously scan the environment and market of the particular business that investors – domestic and foreign – are into. It is critical before deciding to invest and also after the investment is made and the business is operating to continuously scan the environment for opportunities and for threats that may come in the way of the business. While identifying potential risks, the next step will then be to think of ways how to respond to the situation in a proactive manner. A proper risk analysis and market scan will help in making initial investment decisions (“Will I enter this market or not?”) and will help in making contingency plans which can be implemented when the need arises. Waiting and seeing while sucking our teeth will not be a very effective way of dealing with certain situations.
Issues that require continuous scanning include economic developments and trends, political developments, social structure, infrastructure, growth trends for your products, cultural acceptance of your products, market data, market size, tariffs, existing and potential competition, sales projection, production costs and potential profits.
Like we discussed over the past few weeks, while making a risk analysis and market scan it is important to consider external factors like the ones mentioned above and ask yourself, whether you have any influence over them. If you have an influence over a factor, it means there is something you can do about it. If you don’t have an influence over it, there is nothing you can do about it so you better don’t waste your time trying to. Instead try and find out how to deal with it or think of ways in which you may be able to extend your influence over that particular factor. And if there is not much you can do about a certain issue by yourself, joining forces with investors in the same position may help. That is why it is important to have trade unions for example or owners associations, as members of a particular important market sector may be able to lobby for their common interests.
In the example of road expansions, shop owners will not be able to reverse the road expansion works but perhaps they can together work out a way of dealing with the consequences. And had they been aware of the future road expansion plans, they perhaps could have considered this in their own designs, outlines and planning.
Now, scanning markets and analysing risks is not about being pessimistic or negative. It is about being realistic, about being informed and about being prepared. It is about having contingency plans in case things work out differently than initially expected. It is about having a “Plan B” in place. I know it is in our nature in Ethiopia to wait and see what will happen tomorrow, sleep over it, and to respond to situations as they arise. Once a crisis is beginning to unfold we happily go into our crisis management mode and we are good in crisis management in this country. Being prepared, knowing what and what not to do and dealing with developments in a proactive manner before they turn into a crisis will be more effective though.