FIVE STAR HOTEL

PROJECT PROPOSAL

PROMOTER:- ABDUSELAM MUSE

YUSUF

JUNE, 2025
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 DIRE DAWA

Contents Page
1. Executive summary…………………………………………………………--………………3

2. Introduction …………………………………………………………………--……………...4

3. Background …………………………………………………………………-………………...5

4. Project rational ………………..………………………………………………-……………11

5. Description of the project ……………………………………………………………………

12

6. Objective of the project………………………………………………………………………12

7. Project area ……………………………………......…………………………………….. ……12

8. Market Situation ………………………………………………………………………. ……13

9. Organization and management ……………………………………………-

……………...13

10. Project cost

estimates………………………………………………………………………...13

11. Fixed Investment cost………………………………………………………………………..14

12. Operational Expenses ……………………………………………………--……………….17

13. Beginning balance sheet……………………………………....………………………… ……16

14. Project annual output statement ………………………….……………………………............……

17

15. Estimatedannual revenue …………………………………..............

……………………………...18

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16. Estimated Profit loss statement…………………….....….......………………………................
…...27

17. Depreciation ………………………………………….........…………………………--……………27

18. Project
impl.strategy ..............................................................................................--...................
..... 28

1. EXECUTIVE SUMMARY

In light of the current enabling policy environment formulated by FDRE for private
sector development both at national and regional level, create a favorable
condition for many foreign and domestic investors to invest their capital in various
sectors of the economy.

Thus, by realizing the current enabling investment climate in Ethiopia in general and
the investment opportunities in service sector in Dire Dawa Administration in
particular, the Owner of this project Mr.
Abduselam Muse Yusuf has planned to be engaged in establishment of Five
Star Hotel project.

The total investment capital of the project is estimated to be Birr 100,000,000 of

which Birr 90,000,000 is allotted for fixed investment while the remaining Birr
10,000,000 will be used as initial working capital. . Out of the total required
capital, birr 30,000,000 is expected to be obtained from bank on long term loan
basis while the remaining birr 70,000,000 will be covered by the owner.

The specific area proposed for the establishment of this project in Keble 03 specifically
namd as Kezira. The promoter of this investment project to be forwarded to the dire
dawa administration to acquire the required 10,000m2 of land for this project. The
proposed area for the establishment of this project is in Dire Dawa where there is
suitable land for this project. The promoter of this investment project to be

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 forwarded to the dire dawa Administration acquire required Land for this
project.

The project will accord employment opportunity for over 190 Ethiopian nationals

and will generate Birr 1,029,935 average annual income for government revenue

in the form of tax. The compatibility and harmony of the project with both internal

and external environments and its strong organization and management plan make

this project to be economically viable, socially desirable financially liquid and

technically feasible at large. Hence we recommend this project to be implemented

as soon as possible.

2. INTRODUCTION

A good investment climate fosters productive private investment. Investment is

the engine for growth and poverty reduction. It creates opportunities and jobs for
people. It expands the variety of goods and services available and reduces their
cost to the benefit of consumers. It supports a sustainable source of tax revenues
to fund other important social goals. Moreover, many features of a good
investment climate including efficient infrastructure, courts, and finance markets
improve the lives of people directly, whether they work or engage in
entrepreneurial activities or not. Improving the investment climate, the
opportunities and incentives for firms to invest productively, create jobs, and
expand is the key to sustainable progress in attacking poverty and improving living
standards (World Bank, 2005).

Despite the fact that, the significant role the private sector would play in
promoting national and regional development in the past few decades in Ethiopia,
the prevailed policy environment that has highly discouraged the participation of
private investors both foreign and domestic was made the potential to be far from
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relaxation. This has resulted in hindering national and regional socio-economic
progress in almost all sectors of the economy revealing the existing low productive
capacity of the economy and significant socio-economic losses in various
dimensions.

Recognizing the extent to which the past policy environment has highly impeded
the development of the national economy and the necessity to promote private
sector participation in various of investment ventures that are believed to be, more
rewarding and compatible with me current national and regional development
objects and priorities the new investment policy in the country has open the wider
opportunity for private sector participation. Based on this, at present the private
sector has started to mobilize and invest their knowledge and financial resources
in various investment activities, which they assumed to be beneficial for them and
to the country.

3. Background

General
After long years of civil war and poor socio-economic development, Ethiopia has
embarked up on structural change to repair the damage done to the economy by
the protracted civil war and bad policies. With a total population of over 70 million
Ethiopia stood as the fourth largest in size and the second most populous nation in
sub-Saharan Africa, the Ethiopia economy features peasant dominated agriculture
as the mainstay of the economy with GDP share of about 50% and accounting for
over 85% of export and total employment. The countries export is dependent on
primary agricultural commodity, coffee, hide, skin and accounting nearly 60% of
the foreign exchange earnings.

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The share of the manufacturing sector is minimal with a share of 4.5% of the total
GDP. On the other hand, the merchandise import of the country constitutes food,
energy other consumable goods, in intermediate and capital goods. The share of
capital goods is a mere 30% of the aggregate imported materials, a closer
examination of the rated of growth of import and export shows that the former is
increasing much higher than the latter. Import was climbing with an average
annual growth rate of 4.8% while that of export was 3.8%. Though the country’s
economy has been over shadowed by two decades of crisis, it possesses a
considerable potential for development.

The country’s development potential lies on the huge work force, arable land and
nature resources. It can be said that the overall national situation resembles a
paradox when viewed to the actual living standard and the potential that could
alter it. The basic reason for this situation was the bad polices and strategies
selected by the former regime and added to these were the abused practices of
implementing them. With the end of the command socialist economic system, the
new government was faced with numerous social and economic problems. Above
all the government has to face the task of engineering economic recovery to
address the long run needs of sustainable economic growth and development. To
that end, the economic reform measures were taken to reduce macro economic
imbalances, to liberalize trade, to decentralize economic management and most
important of all, to lift the restrictions imposed on the private sector.

This favorable policy environment has played a crucial role to attract private
investment in the country and it is to benefit from this situation that the private
investors are widely involved in different business activities.
The Region; Dire Dawa Administration
Physical features
Dire Dawa administrative council is located in the eastern part of Ethiopia between
90 27' and 90 49' North latitude and between 410 38' and 420 19' East longitude. In
the north, west, and east it is bordered by the Somalia national regional estate
which is in the south it shares a common boundary with the eastern Hararge zone
of the Oromia Natinoal regional State. It has a total area of 1997km 2 out of which is
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187km2 is urban and the remaining 1790 km 2 is rural. The climatic condition of
the region is characterized by a relatively warm weather and thus it fall in the semi
arid agro climatic zone. The average maximum and minimum temperature are
31.40 and 18.10c respectively. In relative terms May, June, July is the hottest
months of the year while November, December, and January are the coldest
months. The estimated average annual rainfall is round 603 mm. regarding the
topography of the region 25% hilly, 45% is sloppy and 30% plain. The major source
of water for both the urban and the rural population is ground water. There is a
large untapped potential of ground water, estimated well over 20 million cubic
meters, can be developed and used for irrigated farming in the vast plains of the
fertile soil around assoliso and melkajebdu. The region is also known as for its
mineral resource potential. A variety of non metallic and construction minerals, the
reserve of which is known are round within easy reach from the town of Dire
Dawa. A high quality sand, marble, limestone, sandstone is some of the
construction minerals, found in abundant quality. Non-metallic minerals found in
the region include Mica, Garnet, Feldspar, limestone, marble etc. The metallic
mineral available in the region includes Iron, Copper and Galena.

Socio-economic setting of the Administration

Administrative Structure
Dire Dawa Administration (DDPA) comprises Dire Dawa town and the surrounding
rural areas. It is divided into none urban kebeles and 38 rural kebeles.

Population Characteristics
According to 1994 census conducted by the central statistical Authority (CSA) the
total population of the DDPA is projected to reach at 383,529 in July,2005, out of
which 192,095(50.1%) are male and
191,434(49.9%) are female. The majority of the population resides in urban areas,
i.e 283,773 (74%) and the remaining 99,756(26%) lives in rural areas. Out of the
total urban population of 283,773, the males constitute 142, 131(50.1%) where as
the remaining 141,663 are females. There are also 49,964(50.1%) males in the
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rural areas out of the total rural population of 99,756, and the balance
49,792(49.9%) is females. The population density of the DDPA estimated to be
316.13/km2. The urban area of the administration is highly populated, i.e about
16,050.5- person living/ km2. The rural area is sparsely populated; about 83.44
persons live per km2.

The eastern and western parts of the administration densely populated relatively
than the northern part, which dominantly inhabited by pastoralists. The average
household size from DDPA, based on the 1994 census, is 4.7 persons per
household. Rural areas have larger household sizes (on the average exceeds by
1.2 person per/household sizes in urban and rural parts of the administration are
4.4 and 5.6 respectively. Based on various assumption made with regards to
fertility, mortality and urbanization, the population of DDPA is estimated to reach
775, 964; 811, 837 and 867, 123, respectively by the year 2030 (low variant,
Medium variant and high variant). The population of the administration is, thus
expected to double within the coming 20 to 25 years.

Economic Activities
According to the 1994 census, activity rate for the administration in general and
for urban and rural population were 60.6%, 55.25% and 73.9%, respectively.
Trends on the economically active and inactive population of the administration
also shows that the activity rate more or less remained stable for the
administration in general and the urban centers in particular but slightly increased
for rural area and reached at 61.8%, 55.5% and 77.56%, respectively in the year
1999. Economic activity rate of the urban part of the administration has also
slightly decreased and stood at 54.2% in the year 2003. The rural part of the
administration is predominantly agrarian, and therefore, the majority (82.0%) of
the economically active persons found to be skilled agricultural and fishery
workers in the years 1994.
However, the overwhelming majority of the population lives in urban areas; and
among the economically active persons in the urban areas, service workers and
shop and market sales workers group ranked first constituting 30% followed by

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those engaged in elementary occupation, and craft and related trade workers
group making up 22.9% and 12.8%, respectively in the year. About a decade later,
in the year 2003, elementary occupation took the lead constituting for 35.43%
followed by service, shop and market sales workers, and crafts and related trades
accounting for 22.1% and 16.63% respectively. The total unemployment rate for
DDPA reported to be 24.1% in the year 1994. The unemployment rate for male and
females were 20.65 and 28.9%, respectively. About 10 years down the road, the
unemployment rate in urban areas increased by about 2.6% and reached 38% in
the year 2003.

Socio-economic Infrastructures Infrastructures

Dire Dawa is relatively equipped with good infrastructure facilities necessary for
the expansion of industrial and trade activities. In addition to the already existing
capacity, many of the infrastructures supplying government institution had already
began or have a further plan to enlarge their capacity to meet future demands of
the development activities in the region. Thus, one can say that the city has a
relatively:

Education: There are 74 primary, 9 secondary and 20 kindergarten schools in

DDPA. Out of the
primary schools, the government owns 52 whereas the community,
religious institutions, and the private sector own the remaining 20 schools.
Out of the 52 government schools, 38 of them are located in rural areas,
i.e., 73%. From the total number of primary schools, however the share of
rural areas is 49% and the remaining 51% are located in Dire Dawa town.
All of the secondary schools are found in the Dire Dawa town. All of the
secondary schools are found in the Dire Dawa town and the government
owns two of them while the rest are privately owned.
All the kindergartens are also located in Dire Dawa town (education Office
of DDPA). Moreover, there are two technical and vocational schools owned
by the government, five private colleges, and a university, i.e., an

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 extension of Haramaya University in Dire Dawa town and Dire Dawa
University.
Health: There are three hospitals, five health centers, 20 clinics, 34 health posts,
32 pharmacies and rural drug shops, and five drug venders in DDPA as of
June 2005. Out of these health facilities, two of the health centers and 29
health posts were found in the rural areas while the rest are located in Dire
Dawa town. There were also 274 hospital beds in the year 2003/04. Given
the current population of the Administration, 383,529, there are therefore,
one hospital to 127,843 persons, one health center to 76,705 persons, one
health post to 11,280 persons and one hospital bed to 1,399 persons.
Transportation and communication: Transportation and communication facilities
have a significant role
to the development of the Administration as they facilitate efficient
production, exchange, and distribution of goods and services as well as
information and people to and from the Administration. The DDPS is
served by all modes of transportation and communication with the
exception o f water transport. Road transport is one of the major modes of
motorized means of transportation in the administration. The DDPA is
accessed with 515 kms and 55 kms asphalts road to Addis Ababa and
Harar, respectively. It is also connected to Djibouti with 60 km all whether
gravel is also connected satisfactory gravel road. About 17kms of this road
is found within the Administration to the west of Dire Dawa passing
through Melka Jebdu town. All the peasant association in the rural areas
of the administration are accessed by either all weather or dry weather
roads branching from the asphalt and link roads to Harar, Djibouti, Hurso,
and Addis Ababa. The all weather RR50 standard road branching from the
Dire Dawa harar road is running east to Belewa for 43 km, the
construction of the road to the west to Lege oda for 35 km was, however,
suspended after partially covering a distance of about 14 km. dry weather
roads having a width of 4m have also constructed using the income
generating schemes (IGS in various parts of the administration. These

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 roads are, however, in bad condition, due to poor quality of construction
and absence of periodic maintenance.

The town is served with modern as well as traditional means of transportation. City
buses and three wheeled taxies are the major modes of transportation in the town.
Horse driven carts are also the traditional method of transportation in the rural
areas of the administration. There is an international airport in Dire Dawa with an
asphalt pavement having a railway length of 2700 m. It has also a terminal control
tower and weather station. The airport can land huge aircraft. The Ethiopian
Telecommunication Corporation provides fixed telephone, cellular mobile
telephone, telex, and fax and internet services in Dire Dawa town. Dire Dawa town
has an automatic telephone communication with an exchange capacity of 21,336.
The rural areas of the Administration are provided with wireless telephone
services.

Potable water supply: Dire Dawa had started to get potable water as early as the
1910s with the
contraction of lega hare spring by the French during the construction of the
Ethiopian Djibouti railway. The spring was designed with a capacity of
discharging 50 liters per second and it is still operational. In 1992, nine
boreholes were developed with a discharging capacity ranging from 25
liters/ second to 45 liters/ second, and the town’s water supply comes from
these spring and boreholes. Two of the boreholes are, however, currently
abandoned due to depletion water. The town water system is served with
three pumping stations and six reservoirs. The pumping stations are
sabian, addis ketema, Legehare pumping stations. The six reservoirs have
capacities ranging from 50 to 4000 m3. Melka Jebdu town now re named
keblele 01 of Dire Dawa has a separate water supply scheme. The source
of water for this kebele is ground water consisting of two boreholes drilled
in 1972 and 1991. As of 2005, there are 9042 customers in Dire Dawa
including Melka Jebdu, and about 20.5% of the total households have got
water connection. Public fountains tabs are also the other major mode of
water supply in the town and there are 175 public fountains in the town,

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 each serving on the average 200 houses. The source of water supply for
the rural areas is form protected and unprotected source constructed by
the government, aid agencies and community participation.

There are 210 water supply schemes in the rural part of DDPA, of which 128 61%
of them are operational whereas the remaining 29 and 53 water supply schemes
are non functional and abandoned water supply schemes respectively. The major
reason for abandonment of most water schemes is drying of wells, which may
result from less treatment of catchments. Shortage of water is also more severe in
the lowlands especially in dry seasons due to fluctuations of the water table and
complete drying out of the sources because of non availability of perennial rivers
for continuous recharging of the ground water.
Electricity: Ethiopian electric power corporation is the main electric power supplier
in Ethiopia and the corporation applies two different power systems, namely, the
inter-connected system and the self contained system. The ICS supplied from
seven hydro powers, 13 diesels and one geothermal station. The SCS consists of
three hydro powers and a number of isolated diesel generators. Dire Dawa is
within the ICS and power is distributed to the town from three substations namely
the sabian, the Legehare, and the Hanz substation. There are 18,649 subscribers
in the year 2004/05, of which 15,911 85% are residences whereas the balance
15% was subscriber by the various industries found in the town, businesses and
government organizations. EEPC does not supply electric power to the rural
communities of the administration. Only schools and heath posts in the rural parts
of the Administration utilize the solar system and diesel generators to produce
power mainly for mass media purposes and vaccine refrigerators respectively.

Banking and Insurance services

All government as well as most private financial institution found in the country
operate in the administration and have branches in Dire Dawa town.

Basic Characteristics of the DDA Economy

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The Regional GDP has not been yet worked out to analyze the structure of the
economy of the DDA in terms of the contribution of each sector to the
Administration’s GDP. However, the proportion of people it employs can reflect the
relative importance of each sector. Accordingly, it was found out that the service
sector, mainly trading is the prime employer followed by the manufacturing sector.
Given the fact that about three-quarters of the population resides in the urban
areas, agriculture is not the dominant sector in the Administration unlike the other
regions of the country and the nation at large.

Hotel development is an important component of the tourism industry. The

establishment of standardized hotels makes immense contribution to tourism
development and meet the service required from other sectors. Hotel development
generates economic benefits to a large number of people. Its foreign exchange
earning capacity is also considerable.

It is expected that domestic tourism will grow considerably in the future owing to
the rising income levels and expanded role of the area. Business is expanding
both in terms of size and boundaries. Therefore, there is an exponential increase in
the number of business people, and tourists coming to the area.

The growth in tourism, business, and investment seen in the city now requires that
measures be taken to ensure the growth in standardized hotels and other essential
infrastructures to accommodate the large number of businessmen and tourists
coming to the city for business or visit.

The growth in investment will definitely lead to diversified social and economic
benefits. The public revenue generation capacity will be improved in the form of
income tax, service charge and other direct and indirect taxes generated in the
process of establishment and from the regular operational works. The project
implementation will create employment opportunity for the local residences and
other job seekers.
Therefore, it will contribute to alleviating the existing unemployment problem of
the city

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1. PROJECT AREA DESCRIPTION

Dire Dawa Administration is one of the self-administrating entities in Ethiopia. It

has a two-tiered administrative structure; that is, at Kebele and at central
administration level. In all, the administration has 9 urban and 38 rural Kebele
administrative units.

Dire Dawa City, which is the seat of the Dire Dawa Administration, is the second
most populated urban center in Ethiopia at present. It is a beautiful city with a
relaxing hot weather condition. It has all the modern amenities one can think of –
hospitals, schools, cinemas, hotels, communication, transportation facilities, water,
electric power, banks, insurances, and the likes.

It is a city where adherents of different religions co-exist peacefully, sharing their

happiness and misfortunes together. In fact, in terms of its friendliness and
hospitality, it is a city unrivalled by any other urban center in the nation. The city
has a great deal to offer to the cities which are daily experiencing sectarian wars,
and endless massacre of civilians in the world. The unique culture of tolerance,
mutual respect, and friendliness the residents of the city have over the years
evolved indeed has become like a second nature passing from one generation to
the next with great candor and pride.

6.1 Land availability and management: According to the DDA structural plan
(FUPI 2004) reserves sufficient land for activities in the service sector. The study
shows that efforts have been made to reserve sufficient areas in both the existing
built-up and the expansion areas to ensure that there is balanced service at all
levels of the city. Accordingly, the total area allocated for the service sector is
about 311ha.
From this, considerable size of this land is allotted for commercial services like
standard hotel development. The lease period for commercial activities has been
set as 70 years. The arrangement of the lease payment is based on advance

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 payment of 20% of the total lease cost (see annex 7 and 8). The rest of the
payment will be carried out within 20 years with a bank interest included.

Currently, the city administration of Dire Dawa has embarked re-development schemes
that is intend to recycle urban land, which would invariably require employing a land
and property valuation system to

pay adequate compensation for previous developments as well as allocate land for new
developments. Besides, the administration has delivered considerable land to
developers in pocket, transitional and expansion areas.

Land availability at prime location is a major factor for the success of the project.
According to the Hotel and Tourism Standard Requirement of 5 stars designated
standard hotels facility, the optimum land requirement of the project is preferred
to have a land size of 6500-7500m² with 3-4 story building set up. The main
building can restaurant, lobby, bed rooms, shopping center, and the like. Ware
house, swimming pool, outdoor games (if any), gymnasium and other safety rooms
can be established in a separate area.
1.1 Physical Infrastructure

Dire Dawa Administration has relatively well-developed infrastructures at present.

It has reliable electric power, water, and telecommunication services. Dire Dawa
City has road connections with all the major urban centers in the nation, the
neighboring countries: Djibouti, and Somaliland, and, of course, with all the rural
Kebeles in the administration.
All the same, being aware of the crucial role played by the availability of well-
developed infrastructures to attracting both domestic and foreign investment, \the
Dire Dawa Administration has recently embarked upon a comprehensive
infrastructural development program intended to improve and upgrade the
existing infrastructures. At present, a great deal of effort is being exerted to
develop nearly all the infrastructures including transport, telecommunications,
electric power, and drinking water.

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6.2.1. Transport and Communication
Transportation network
Transportation and communication facilities have a significant role to the
development of the Administration as they facilitate efficient production,
exchange, and distribution of goods and services as well as information and people
to and from the Administration. Both asphalt and gravel roads radiate from Dire
Dawa City to important neighboring countries like Djibouti and influential cities,
towns, regions and its own rural areas as well as to centers of commercial,
industrial and agricultural activity in the nation..

Dire Dawa City has also got a long-established international airport which plays
crucial role in the transportation of passengers and cargo both in the domestic and
international route especially for flights to and from Port Djibouti and Somaliland.
On the other hand, the old railway line which necessitated the establishment of the
city in 1902, has recently started to give service between Dire Dawa City and Port
Djibouti. The railway line will continue to give its service only between these two
cities for a long time to come. The construction work of another modern railway
line to link not only these cities but also other urban areas found in the north,
central, western, and southern parts is going on now.

Telecommunication
The Ethiopian Telecommunication Corporation provides fixed telephone, cellular
mobile telephone, telex, and fax and internet services in Dire Dawa City. The city
has an automatic telephone communication with an exchange capacity of 21,336.
The rural areas of the Administration are provided with wireless telephone
services. According Dire Dawa Administration Statistical Abstract (2011) report,
the number of subscribers has reached 12313 for fixed line, 110,000 GSM prepaid,
539 GSM post paid and 393 IX Dialup internet

Water supply
The main source of drinking water used by residents of Dire Dawa City comes from
its huge ground water resource. . . The ground water wells are designed to yield of

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the wells is 280 liters per second and the actual discharge rate of the wells is
about 200 liter per second. Dire Dawa had started to get potable water as early as
the 1910s with the contraction of a pipe line from Lega Hare spring by the French
company which operated the railway.

The spring was designed with a capacity of discharging 50 liters per second and it
is still operational. In 1992, nine boreholes were developed with a discharging
capacity ranging from 25 liters/ second to 45 liters/ second, and the drinking water
supply of the city started to come from the spring and boreholes.
Two of the boreholes, however, have recently been abandoned due to the
reduction in their water discharge.
The water supply system in the city consists of three pumping stations and six
reservoirs.

The pumping stations are Sabian, Addis Ketema, Legehare pumping stations. The
six reservoirs have capacities ranging from 50 to 4000 m 3. Melka Jebdu town now
renamed keblele 01 of Dire Dawa has a separate water supply scheme. The source
of water for this kebele is ground water consisting of two boreholes drilled in 1972
and 1991. As of 2005, there are 9042 customers in Dire Dawa including Melka
Jebdu, and about 20.5% of the total households have got water connection. Public
fountains are also the other major mode of water supply in the city and there are
175 public fountains in the city, each serving on the average 200 households. The
source of water supply for the rural areas is form protected and unprotected
source constructed by the government, aid agencies and community participation.

The new water source investigation has been conducted with core value to ensure
both source and facility reliability. To achieve this sources at different corners of
the town have been investigated to provide adequate water for all consumption.
Based on MS Consultancy report(2011), three areas indicated for future
groundwater development for Dire Dawa water supply scheme. These are South of
Melkajebdu town (Genderege), Boren and Tony areas.

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Electricity

Dire Dawa gets 163 megawatt of electricity from the national grid, out of which
nearly half has so far been utilized. The power is distributed to the city from three
substations it has. According to Dire Dawa Administration Statistical Abstract
(2011), there are 25066 private, 259 industrial, 338 government and 3613
commercial customers. The city keeps a diesel powered electric generator capable
of producing 40 mega matt electricity as a standby for use in the event there is
power failure.

Thanks to the various measures taken by the Ethiopian to increase the electric
power generated in the nation using renewable energy sources like wind,
geothermal, the water from its large rivers, it has recently started to sell electric
power to neighboring countries like Sudan, Kenya, and Djibouti, and so there is no
shortage of electric power in the country as a whole.

6.3 Availability of Service Facilities

Dire Dawa City has a number service rendering institutions including the branch
of the National
Bank, maritime transit office, customs office, quarantine service, branch office of
the Ministry of Foreign Trade, private and government banks and insurances. It
has a post office, and two private express mail and parcel delivering agencies.
.
6.4 Availability of Manpower:

Labor is an important element of the project requirements. The unemployment

situation of Dire Dawa City is higher compared to the situation of the major towns
of the country and the overall country total. Currently, the unemployment rate of
Dire Dawa City is estimated at 22.9 %. This includes educated unemployed too.
Therefore, the job seeker has significant number. On the other hand, there are

Page 18
 numerous public and private training centers engaged in offering different short
and medium term technical trainings.

People seeking better employment opportunities from the surrounding areas and
other parts of the country, and so the city receives thousands of job seekers
annually. Therefore, there is no shortage of both skilled, and unskilled, labor power.

2. PROJECT DESCRIPTION

2.1 General Description

Direct employment is one of the potential outcomes of developing tourism

enterprises. Tourism Enterprises are defined as business units which provide direct
services to tourist in a given tourist destination. Hotel service is among the tourist
service rendering firms.

The hotel industry consists of various different services such as accommodation,

restaurants, and cafes and catering. The market for the hotel industry, especially
classified hotels in a developing country like Ethiopia, is closely linked to the
tourism industry, because the majority of consumers of the services provided by
the sector come from [domestic] and international tourists.

The basic focus of this project profile is to establish 5- star designated hotels in
Dire Dawa City. With the implementation of this project, it is anticipated that there
will be an integrated facility that can provide diversified services to the users.

The proposed 5 stars standard hotel will provide service both for the international
and domestic tourists. This hotel operates for more hours a day, hosting guests
and offering various services and amenities. Guest bed rooms, public lobbies,
banquet facilities and restaurants, conference room and wedding areas, offices
and secretarial services, commercial retail outlets, and swimming pools are fixed
within the project site. Gym and game rooms scattered throughout. Laundries and
kitchens are typically located within the main hotel building. The variety of

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 services and amenities will be provided by the hotel though out its operation
period.

2.2 Major services provided by the Hotel

The hotel earns its income from the provision of different services like room
service, food and beverage, gym and related services, secretarial, and others. The
income from these services is computed based on the service quality, sales volume
and the local competitive price obtained from existing similar services, and from
city level prices.

A. Bed room: Bedroom service holds a significant portion of the income of the
hotel. As has been observed from the existing bed room service fee charged by
standard hotels found in Dire Dawa City, the minimum is Birr 220/bed while the
maximum extends up to Birr 3180/bed/day. The most commonly charged bed
room fee per day is around Birr 450. The bed room service expense is
dependent on room size, service type, in house facility and the likes.

The bed room fee of standard hotels is attractive in Dire Dawa City. The following
records are obtained from different hotels found in the city.

Based on the existing assessment, the average bed room fee to be charged by the
proposed project ranges from Birr 450 to 1200. The project will start its service at
75% of its capacity. This will grow to 85% in second year and reach to its maximum
capacity of 95% at year 7.3.

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B. Restaurant: Two sets of restaurants each (one international and the other
traditional) with a capacity of accommodating 200 people at a time each will be
established. The restaurants will basically serve meals like breakfast, lunch and
dinner and whatever foodstuff indicated in the hotel menu or the kind of dish
especially requested by the customer in advance. The hotel also prepares upon
request banquets for official evens, as well as weddings, and other festive
ceremonies.

C. Fast Food: One bar with full set of refreshment, Food and entertainment
services will be established within the hotel. The capacity of this Fast Food will
be 60 persons at a time. Luxuries and well-designed seats will be arranged
within the area.

D. Automatic Coffee Shop: Automatic small - cozy coffee shop will be

established with a capacity of 15-20 seats to serve coffee and the likes.

E. Kitchen: A modern kitchen with four sets of machine and equipment will be
fixed in the kitchen areas. The kitchen will have its processing unit, refrigeration
facility, cooking equipment, sanitary system, washing and sterilizing machine
and related facilities, which are to be fixed properly.

F. Multipurpose Conference Hall: The proposed capacity of multi-purpose

assembly hall is 350 seats. The hall is planned to provide multiple purpose
services like meetings, conference, wedding services and other public events. It
can be used for multi-purpose activities by rearranging the seats and adding
appropriate facilities. It is to be equipped with the necessary materials such as
sound system, safety and security devises.

Page 21
 G. Gymnasium and indoor game facility: The envisaged gymnasium with
machine room fitness center will be established in the hotel. The building used
for this purpose may be integrated with the main conference hall. The gym is to
give access to all the known forms of gym materials including those recently
developed ones to guaranty that the customers get all the entertainment they
enjoy.
.

H. Laundry Center: The laundry center provides in-house cleaning service to the
customers using the bed room service provided by the hotel. The main services
provided by the laundry are washing, and drying, folding and pressing (ironing).
The laundry center will have a daily capacity of providing 200 clean sets of
clothes on average.

I. Other facilities: The hotel will also have other facilities like safety and
security facility, hygienic facility, shopping and multimedia centers. It will
maintain the star designated standard of the hotel it represents at the
international level.

J. Machinery and equipment: The major machinery and equipment

requirement of the project identified are based on the experience of others and
the size of the project. The specified lists and quantity are indicated as follows.

2.3 Input and Raw Materials

The basic inputs and material requirements for running the hotel business are the
amenities and utilities. All the requirements are easily available at low costs.
Furthermore, the raw materials required for the operations of the project are
widely available in the local market. The basic inputs, and raw materials required
are discussed as follows.

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2.4 Raw Materials and Other Supplies

The hotel operation will consume different raw materials from the local and nearby
markets.. The raw materials may either be processed and none processed and
includes items such as food, beverage, gardening, sanitary, stationary, and other
raw materials. The materials thus procured from the local market will be stocked in
the store of the hotel for timely supply of the required quantity of raw material.
Regarding the raw materials supply and availability of the project management will
procure the required quantity of materials through bulk procurement from
competitive markets. With respect to food and beverage supplies, place and time
utility will be maximized through transportation and preservation and prolonging
shelf life through refrigeration and proper storage.

Utilities

Among the major utilities required by the project includes electricity, water and
telephone. By undertaking the necessary dealing with the authorized suppliers of
these utilities, the hotel management should endeavor to have the utilities
installed prior to the completion of the hotel building itself.

Electric power is a major source of energy for the hotel, and it will be obtained
from EPCO connected electric source. However, the hotel needs to have its own
diesel powered electric generator as a standby power source. A 3-phase-
connection capacity of electric system needs to be installed to fill the lighting,
cooking and refrigeration, communication, conference hall and related energy
requirements in the event there is power failure from the main line. The average
annual electric consumption of the hotel is expected to be up to 250000KWH.

The project will use water for sanitation, food preparation, gardening, swimming
pool, fire protection, drinking purpose and the likes. The major water supplier of
the hotel will be the urban water supply connection system. However, the hotel
can have its own water well dug up, and having installed the required pumping

Page 23
devises can use it as a standby in case of water shortages, and for complimenting
its daily water consumption. The project will also use recycled water from boilers
and swimming pool. The expected annual water consumption of the hotel is
estimated at 180000 m3.
Telephone and related electronic communication are among the indispensible
services that the project seeks. Each bed room and other facilities will be provided
with telephone and internet infrastructures. Besides, .telephone lines will be made
available around the shopping centers and different corners of the compound.
International call centers will be arranged around the shopping areas. As observed
from the investment assessment study, all parts of the city is almost networked to
the telephone line. Therefore, the project can easily get the telephone service it
seeks.

4. OBJECTIVE OF THE PROJECT

The major objective of the project and its core for establishment as Five Star
Hotel project are:
● To establish and provide a high standard hotel services to customer at
reasonable price

● To create job opportunity to local people.

● To contribute towards the development of the region and to serve as a
demonstrative investment ventures.

5. PROJECT AREA

The specific area proposed for the establishment of this project in Keble 03 specifically
namd as Kezira. The promoter of this investment project to be forwarded to the dire
dawa administration to acquire the required 10,000m2 of land for this project. The
proposed area for the establishment of this project is in Dire Dawa where there is
suitable land for this project. The promoter of this investment project to be

Page 24
 forwarded to the dire dawa Administration acquire required Land for this
project.

6. MARKET SITUATION

There are a number of tourism attractions in Dire Dawa City, and the rural environ
of the Administration. Furthermore, Dire Dawa City has strategic location as all
tourists traveling by air have to land in the city, register in one of the standardized
hotels, and travel to the walled-city of Harrar City and most of them return to Dire
Dawa City round eight o’clock in the evening. The same is true for thousands of
Ethiopian and foreign tourists coming to St. Gabriel Church at Kulubi on religious
pilgrimage or to visit two times every year. What is more, the existence of other
tourist attractions like the elephant sanctuary at Babile, and the fascinating granite
monuments at Daketa, also accentuate the role played by Dire Dawa City. The
massive business visit to the area, and in fact, the historical, cultural, and the
archeological heritage sites of the administration have been attracting increasing
numbers of tourists in recent years. Therefore, wide range of tourism endowment
is available. This includes, the business tourism, heritage tourism, conference
tourism, cultural and religious tourism, eco tourism and the like

The service sector assessment study report (Dire Dawa, 2013), also describes the
tourism situation of Dire Dawa Administration as follow. Dire Dawa City annually
hosts thousands and thousands of Ethiopians from the other parts of the country,
who come twice in July, and December, to attend St. Gabreal Church at Kulubi. The
city, moreover, serves as a second-home for thousands of Djiboutian fleeing from
the unbearable four-month-long heat that Djibouti experience from July to
September. In addition to these, the city also benefits from tourists coming to visit
the UNESCO registered walled city of Harar – as it has a number of standardized
hotels than Harar. The prospect of the growth of tourism in the administration is all
the more accentuated by the existence of on-going projects, and planned activities
intended to take place before long. Some of these are the following:-

Page 25
The record obtained from BOFED, Dire Dawa(2011) annual average tourists
growth rate is 53.70%. The domestic tourist’s growth of the city holds an annual
average growth rate of 39.14%. However, the foreign tourist inflow growth is
relatively higher. The predominant tourist inflow is from the Africa continent.
This growth is very significant and expected to proceed with this pace in the
coming years.

Even though the standard of hotels in the city is growing, none of them are above
3 star designated hotels, and so they are not compatible with the growing trend
that most users seem to follow. Besides, there are at present in the city very few
hotels that have the potential to be upgraded to star designated standard hotels. It
s not difficult to imagine the acute shortage of accommodation the city nowadays
has from the increase in the number of tourists, increased role of the city and
increased human mobility versus the existing slow trend of the hotel growth
prevailing in the city.

In the past few years, Dire Dawa City has seen a substantial incr3ease in the size
of domestic and foreign tourists. According to the Dire Dawa Administration Annual
Statistical Abstract, (BOFED, Dire Dawa, 2011), the growth rate of tourists from
2008/09 to 2011/2012 was estimated to be 53.70.

According to the study conducted by IPS on Addis Ababa Profile On International/

Tourist Standard Hotel the average hotel stay of tourists is calculated at 4 days.
Besides, the same source put an assumption that the there is 365 working days for
room services. Then, the total room capacity of 478 standard hotel rooms annual
tourist night room capacity will be 174470. In the case of Dire Dawa City, the
average tourist hotel stay is calculated on the basis of 3 days.

Therefore, the result of the computation shows that there is unsatisfied gap which
is estimated for 2013 as 28315 tourist night. This will continue to persist in the
future unless necessary hotel development intervention is undertaken.( see the
detail in annex 3). It indicates that there is a huge potential for private investments
in this sector.

Page 26
 7. ORGANIZATION AND MANAGEMENT

9.1 The basis of organization and MGT

Organization is a managerial process of planning, coordination and control of
company on and off site activities, resources, process and output effectively and
efficiently. Organization is among the most important tolls which enable all
stakeholders to have shared understanding of company objectives, act
independently and yet collectively to achieve common goals. Without appropriate
and sound organization and management. It is not possible to benefit from
available resources and satisfy the demand for the output of the business. Inability
to benefit from optimal utilization of resources and satisfy the needs and
requirements of customers would definitely lead to failure planned business
objectives. The argument which states that there is no bad business but bad
management clearly defines the roles and significances of organization and
management. Under normal condition every manager needs his or her company to
be profitable, competitive and maintain leadership position. To successfully
achieve the above ambitions of managers, attainment of management efficiency
and effectiveness is a must. To this effect existence of sound organization and
management capacity has found out to be an important tool.
Analysis if fundamental aspects of optimal organization and organizational
capacity assessment tools and procedures reveal that; existence of clearly
identified and defined company vision, Missions, Values, Short nad long term
objectives including the following are among major indicators of sound
organization and management.
❖ Existence of shared understanding among company stakeholders
❖ Existence of compatibility of company missions with company organizational
structure
❖ Existence of fully staffed and operational organizational structure
❖ Existence of clearly identified and defined lines of authority, responsibility, lines of
communications and
guide lines.
❖ Existence of clearly identified and defined administrative and working systems
procedures and guide lines

Page 27
 ❖ Existence of leadership, management and supervisory skills, experience and
capabilities.
❖ Existence of adequate and desirable professional, technical and other support staff
etc.
Business process are central to the functioning of an organization. Yet, they have been
neglected for a long time in managerial studies mainly due to the fact that departments in
companies are structured in a functional or product oriented way. Many companies, under
business process improvement are breaking away from this type of organizations and
intend to establish process based organizations in order to cope with the increasing
complexity and dynamics of the economic environment.
To distinguish process based organizations from other types of organizations it is essential
to start with the definition of business process. Davenport (1993, p.5) defines a business
process as <<... a structured, measured set of activities designed to produce a specific
output for a particular customer of market>>. Hammer and champy (1993, p.35) defines.
<<... a business process as a collection of activities that takes one or more kinds of input
and creates an output that is of value to the customer>>.

Functionally organized companies have considerable problems taking a customer’s

perspective, because process that produce value for the customer. E.g fulfilling funds
transfer order cut across several departments. However, the latter only report to higher
level managers, so that a customer perspective can be realized only at that level. Frontline
managers will be reluctant to take the same perspective since they are not accountable
for the outcomes of other departments taking part in the same process.

Companies organized along product lines also have problems taking customers
perspective as well. A product structure leads to poor coordination across product lines
which are a major drawback when divisions serve the same customers. Information
systems in different units are likely to be incompatible with each other, resulting in a
fragmented approach of customers, which in turn leaves lost of possibilities untouched to
create value from them. Because most product divisions are functionally structured the
same shortcomings o functionally organized companies are applicable on the business
level of product-based companies.

Page 28
 8.2 Workflow process organization & MGT
Based on the above basic principles and procedures the development of project
workflow process has planned to be organized and managed.
A Operations Core Process
The parking and garage, the shopping, offices and hall rental day to day operations
shall be carried out by operations/ customer core process. The operations core
process shall have retail customer group, corporate customer group, engineering
and technology group and treasury group.
B. Development Core Process
The development core process shall be entrusted in creating fertile ground,
designing and developing systems and strategies which would help the company
to expand business development horizons, markets, customers etc. Accordingly,
this core process shall have the following business groups
Research and development group
Business development group
Market new and development group
Systems and strategies design and development
C Support and Control Core Process
The support and control core process shall be responsible to provide necessary
inputs, facilities enabler and related support to the operations and development
core process and ensures the validity of their performance against pre-planned
budget and use of resources, etc at large. Accordingly, the support core process
shall have the following major business groups.
Human resources and personnel mgt group
Finance and accounts mgt group
Materials, property and logistics mgt group
Supervision and control business group

Page 29
 8.3 Project admin levels

The entire project activities, resources, process and output shall be planned,
coordinated, implemented managed and controlled through three management
and administrative levels.
A The Owners/Promoters
The general meeting of the project promoters shall be the top management and
ultimate decision making organ. The major duties and responsibilities of this
administrative level shall be,
- To provide strategic plan and leadership support to the project general
management
- To appoint the general manager and supervisory level managers
- To determine and approve the wages, salary and benefits of the general
manager and supervisory level managers
- To approve the plans and budget proposals of the general management office
- To review and comment on the performances and achievement results of the
project.

B. General management office

The project day to day activities shall be planned, coordinated and controlled by
the general manager. General Manager shall be reporting to the general
meeting/president of the promoters. General Manager shall be responsible to
monitor, control support and facilitate the individual and team efforts of all core
process staff
C Supervisory MGT level
There shall be three supervisory management level operations, marketing and
business development, support and control core process heads/team leaders. The
supervisory level managers shall be reporting to the general manager
Each supervisory level manager shall be responsible to plan, coordinate and
control the activities, resources; process and output of his/her respective core
process in an efficient, effective and economical manner.

Page 30
 8. PROJECT COST ESTIMATES

The total investment capital of the project is estimated to be Birr 100,000,000 of

which Birr 90,000,000 is allotted for fixed investment while the remaining Birr
10,000,000 will be used as initial working capital. . Out of the total required
capital, birr 30,000,000 is expected to be obtained from bank on long term loan
basis while the remaining birr 70,000,000 will be covered by the owner.

8.1. Fixed Investment cost

8.1.1. Building, civil works and installation of utilities

No Description total cost

1 G+6 building 32,800,000
2 Swimming pool 10,200,000
3 Infrastructure 7,000,000
Total 50,000,00
0

Machinery and equipment

No Description total cost
Restaurant and bed room equipment and
8,780,000
furniture
kitchen utensils 1,140,000
Multipurpose hall furnishing 5,140,000
Gymnasium, sauna base and physiotherapy
5,140,000
equip.
stand by- generator 1,340,000
sound system and musical instrument 1,360,000

Page 31
 office equipment &furniture 1,380,000
service mini-buses 5,110,000
hotel shuttle (one caster bus) 5,205,000
Isuzu light vehicle 5,205,000
10.2 Operational cost
Operating cost includes all the necessary expenditure required for the project on a
day today activity, which labour cost and input expenses are the main ones. As it
has been described on the previous sections, the nature of the project is not
seasonal and it has 365 effective working days within a year. It is with the
consideration the required operating cost calculated for the project life. It includes
the following cost category.
Salary &wages
No Description Required monthly total yearl
number salary salary y

General manager 1 28,800

business manager 1 20,400

food &beverage
1 15,600
officer
senior accountant 1 19,200

junior accountant 1 11,760

main casher 2 19,200

daily casher 2 12,000

personnel 1 11,700
administrator
Head waiter 2 23,520

Waiter 14 67,200

Receptionist 4 36,000

Head cook 2 21,600

Page 32
 Ass.cook 4 28,800
Housekeeping 4 28,800
supervisor
house keeper 8 28,800

life saver 1 12,000

security head 2 14,400

security guard 6 21,600

Restaurant man 8 33,600

Store keeper 2 14,400

Entertainment 2 21,600
specialist
music expert 2 17,280
trainer 2 21,600
Driver 4 24,000
Gym instructor 2 21,600
Gardner 4 14,400
total 83 589,860
Food items cost
food percentage of estimated
year
sales expense expense
1st 730,000 32% 365,000

2nd 876,000 33% 438,000

1,022,0
3rd 34% 511,000
00
1,168,0
4th 35% 584,000
00
1,752,0
5th-10th 35% 876,000
00

Page 33
Beverage costs
Year beverage percentage of estimated
sales expense expense

1st 36,500 56% 204,400

2nd 525,600 55% 289,080

3rd 715,400 54% 386,316

4th 934,400 53% 495,232

5th-10th 1,576,800 52% 819,936

Other expenses: this includes the expense required to cover the purchase of raw
materials and preparation of ice cream, coffee tea, snacks and sweets, soft drinks
and purchase of internet bills.
Year total percentage cost of estimated
income sales cost

1st 1,332,250 65% 865,963

2nd 1,588,452 65% 1,032,494

3rd 1,844,655 65% 1,119,026

4th 2,100,856 65% 1,365,557

5th-10th 2,357,058 65% 1,532,088

Employee’s benefits
Employees benefit includes, benefits includes, pension contribution, uniform, and
working cloth. The total employee benefit is assumed to be 11.5% of the total
salary, which is, birr 67,834.
Administrative expense: is the expense needed for day-today operation of the
hotel. It included office supplies, general supplies, vehicles, &equipments
maintenance and repaid costs.
Description Cost

office supplies 30,000

Page 34
 General supplies 40,000

Training manual 10,000

repair &maintenance 24,000

Total 104,000
Utilities
Description Cost

Electricity expense 42,000

Water 25,000

telephone 45,600

Total 112,600
Fuel oil &maintenance expense: maintenance expense is estimated to be 10%
of the cost of vehicles, 2% of the construction, and 5% of the other
machineries and equipments while the total expenses for fuel and oil is
estimated by assuming 15 liters of fuel per car per day. This amount will
require birr 197,100. The total expense of fuel oil and maintenance is
estimated to be birr 372,139.
Depreciation: the depreciation expense for fixed asset is estimated on a straight
line method of 25 years
life for buildings and civil works, 15 years for equipments, furniture’s and 10 years
for vehicle.

9. Project Cost Summary

No Description Cost in Birr

1 Fixed Investment Cost 90,000,000

● Construction &installation cost 50,000,000

● Land lease initial payment 4,450,000
● Design &engineering 156,000

● Restaurant and bed room equipment 8,780,000

Page 35
 &furniture
● Kitchen utensils 2,140,000
● Multipurpose hall furnishing 5,140,000
● Gymnasium, sauna base and 5,140,000
physiotherapy

● Stand by generator 1,340,000

● Sound system and musical 1,360,000
instruments
● Office equipment and furniture 1,380,000
● Service mini-buses 5,110,000
● Hotel shuttle 5,205,000

● Isuzu light vehicle 5,205,000

2 Operational cost
122,178,257
● salary &wages 12,589,860

● food items 21,233,600

● beverages 12,204,400

● Employee benefits 267,834

● Administrative expense 1,104,000

● utilities 1,112,600

● others 32,865,963

working capital 10,000,00

0
Total project cost
100,000,000

Page 36
 10. Beginning balance sheet

1. Asset

Current Asset

Cash on hand …………………………………. 10,000,000

Fixed Asset……………………………………….90, 000,000

Total Asset ……………………………………………………………100,000,000

2. Liability

Bank Loan ………………………….70, 000,000

3. Capital

Owner’s Equity ……………………………. .30,000,000

Total capital …………………………-----………… 100,000,000

11. Estimated profit loss statement

Page 37
NO Description Project Years

1 2 3 4 5 - 10
84,715,6 101,271,2 111,788,3 123,357,8
1 Total revenue 92,603,983
50 88 58 28
1,694,31
2 Sales tax 1,852,080 2,025,426 2,235,767 2,467,157
3
83,021,3 99,245,86 109,552,5 120,890,6
3 Net Revenue 90,751,903
37 2 91 71
4 Operational 68,953,9 76,021,729 79,822,815 83,813,956
expense 49 72,401,646

6 Depreciation 123513 123513 123513 123513 123513

8 Total 69,077,46 72,525,159 76,145,242 79,946,328 83,937,469
Operating 2
expense
24177111. 25383805.65 26650834. 27981214. 29378114.
9 Income tax
7 7 8 15
44,900,35 47,141,353 49,494,407 51,965,113 54,559,355
Net profit
0

15. Depreciation

Description Expected Original

life value

Building & Construction 42 years 1,270,610

Machineries & equipment 30 years 2,491,040

Office furniture & fixture 15 years 51,500

Cafeteria equipment & furniture’ 10 years 78,940

Page 38
16.1. PROJECT IMPLEMENTATION STRATEGY 16.1 Project Formulation and
Establishment A. exchange of views and creating shared understanding
The project proposal and strategic planning management document shall be
distributed to all potential stakeholders such as concerned members of the family,
government institutions and to selected financer with a view of creating satisfactory
exchange of views and promote shared understanding in advance.
B. Determination of establishment phase target activities
During the project formulation and establishment phase, the following major tasks
are required to be successfully accomplished.
Registration, licensing and acquisitions of operations commencement
authorization
Acquisitions of construction permits
Preparation of every legally required document
Appointment of strong and capable implementation team
C. Promotion and Fund Raising
To prepare promotional strategic planning mgt guidelines
To prepare promotional ideas, materials, logistics and facilities
To conduct promotional tasks and build strong constituency of support
To evaluate the process of promotion and progress
To prepare fund raising strategic planning guideline
To assess and identify major project donors
To assess and identify the interests, rules, regulations and conditions of targeted and
prioritized financers
To prepare all necessary requirements of financers and apply for fund
To undertake follow ups and secure fund
D. Organizational Builds up
Establishing and organizing project office
Preparing project working and administrative systems and procedural guidelines
Commissioning construction

Page 39
 Purchase of all on and off site durable and consumer goods
Staff recruitment, orientation and employment
To conduct pre operational trial runs, checking the validity of all activities
16.2 Budgeting Implementation strategy
A. Budgeting concept Definition
The realization of any strategic decision needs proper identification and
understanding of project objectives, and necessary activities. Moreover,
determination of time phase out process and resources to the completion of each
task which calls for budget making process and existence of effective strategic
budgeting is a key implementation strategy for the success of project objectives. In
consideration to the significance of sound budgeting system and procedures, it has
been selected and proposed as one of the best implementation strategy.
There is no doubt that the internal and external activities, resources, process and
output of any organization should be managed effectively and efficiently. To attain
short and long term objectives of the project the management must chart the entire
tasks in advance in a comprehensive and coordinated manner. A budget is a
comprehensive and coordinated plan expressed in financial term for the operation
and resources of a project for some specific period in the futures. A budget is the
plan of project’s expectation in clear & formal terms to avoid confusion and to
facilitate their attainability. Thus the roles and significances of budgeting are;
● To state the project’s expectation in clear and formal terms, to avoid confusion
and to facilitate their attainability
● To communicate expectation to all concerned
● To provide a detailed plan of action for reducing uncertain and proper direction of
institutional group and individual efforts
● To provide a means of measuring and controlling performance
● To coordinate all institutional, group and individual efforts towards the success of
project objectives.
Thus, it is inconsideration to the above roles and significance of budgets and
budgeting that we select it as the best implementation strategy.
B kinds/types of budgets & budget setting process
Although, there are various kinds/types of budget items, to simplify it, the types of
major budgets have been categorized in to four.

Page 40
Sales budget
Operations budget
Financial budget
Capital budget
Statement of Smart objectives and goals is probably the starting point and pace
maker for all other types of budgets. The sources of sound project objectives/goals
are again the internal and external environments. Analysis of the patterns of project
internal and external environments, pinpointing project opportunities and challenges
with a focus on the demand for the project services, existence of external
opportunities and internal capabilities, it is pertinent to define project objectives and
goals in clear and formal terms at the outset.
The objectives and goals of any project emanate the operations, financial and capital
budget needs. The project corporate level objectives and goals, operations and
capital budgets are required to be further apportioned for all core process which
together form corporate budget.
The process of setting sound budget is a complex and complicated process, because
of the involvement of various factors in it. However, budget setting process starts
with the determination of limiting factors at the outset. The most important project
limiting factors are,
The demand for the project services
The economic life of the project
Existence of factor and non factor inputs
External opportunities supporting the project ideas and internal capabilities to
establish, operate, manage and control etc are some among others. Based on the
above limiting factors, the first step of budget setting process starts with definitions
and establishment of project basic objectives and goals
Second step: at this stage, it is necessary to identify and describe all on and off site
activities necessary to successful achievement of stated objectives and goals,
determination of logical sequence of activity execution process, time phase out to
complete each task in clear and unambiguous terms. Third step: at this stage, it is
very important to assess identify and define the resource needs of all activities,
measure, quantify and state in clear and formal terms.
Fourth step
Page 41
 Group all activities according to their similarities
Establish major budget centers
Allocate the resources required to major and sub budget centers
Prepare objectives/goals, operations, financial and capital budgets at corporate, core
process and sub process and assign centre of responsibilities
B. ESSENTIALS OF BUDGET MGT
To make the objectives and purposes of budgets productive and positive impact
generating we propose the following budget administration. It should be well
recognized that corporate and functional levels budgets are prepared by line
executives while the organization and implementation of budgeting is a staff
function. Joint efforts of all line execution and a staff function in the preparation,
administration organization and implementation of budgeting should be done in a
coordinated manner. To this effect there should exist the following systems of budget
administration.
The budget committee consists of all members of the management committee which
bring together all activities of different project functional unites.
The primary function, of the budget committee is to decide on the general policies of
the project and directs all project functional unites to prepare their respective budgets.
● Budget director/officer

The budget officer shall have the following tasks;

▪ To draw a detailed time table for the preparation of budgets.

▪ To calculate and consolidate individual budgets into the project master budget.

▪ To design and develop necessary budgeting systems and procedures.

▪ To design and develop budgeting formats.

▪ To generate accumulate and transfer budgeting parameters information data and

indicrs.

▪ To undertake satisfactory exchanges among all project concerned stakeholders on

budgets and budgeting

▪ To educate all concerned on budget and budgeting

▪ To undertake monitoring evaluation and control activities

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▪ To prepare periodic or extra ordinary budgeting reports

▪ To disseminate the feedbacks of budgetary monitoring and evaluation to all

concerned stakeholders

▪ To suggest sound and workable recommendations for immediate corrective

measures
● Budget manual
The budget manual is a written set of instruction which serves as a rule book and
reference for the implementation of a budget.

● Budget management principles o Existence of

top management support o Specific measurable
achievable realistic and time bound goals.
o Existence of clearly defined assign ment of authority and responsibility
o Creation of canters of responsibility o Existence of appropriate
accounting system o Budget education and effective communication o
Flexibility

18.3 PERFORMANCE MGT AND CONTROL

A. monitoring, Evaluation and control strategy

The success/ failure of any planned objectives should be known with certain degree
of accuracy. To this effect all activities, resources process and output should be
monitored evaluated and controlled timely and regularly. To undertake monitoring,
evaluation and controlling activities timely and regularly there should exist.
Clearly identified and defined description of planned objectives, outcomes output
and inputs.
Existence of, sound, and appropriate, indicators, which show, the success/ failure, of
the planned objective outcome, output and inputs used.
Appropriate source and means of verifying that the planned, objective outcome,
output and inputs were in accordance with/ deviated from the planned
Clearly stated important assumption with/without which the planned objective
would/would not be successful.

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 The role and significance of monitoring evaluation and control are briefly
described as follows.
● Monitoring
Monitoring is a continuous and process oriented information gathering, and data
mining on what has happened, who did it, when, how much, for whom etc. aimed at
measuring the magnitude, time quality and impact of the initiative. Monitoring helps
to compare the input human, material financial etc output product/service result and
the outcome (achievement against the planned tasks. Effective monitoring must be
completely integrated into all tasks. Existence of sound monitoring system, enable
organization to make appropriate and timely decision making and ensures
transparency and accountability.
● Evaluation

Evaluation is the process of analyzing information and data gathered during

monitoring process. The evaluation system helps to think critically and search into
ways of achieving desirable results. It is a periodic process of reviewing monitoring
data and drawing sound conclusion from it. Good evaluation system enables
organization to analyze the pre and post patterns of existing and future plans and
search into ways of achieving desirable results.
● Control

Control is a managerial process of detecting errors of principles system, procedures

etc aimed at avoiding resource miss allocating unemployment, fraud, wastage and
all other misfortunes which hinder the success of planned objectives. Control enables
organization to continue their production of goods/ products without jeopardizing
internal and external resources for better future. Thus, an integrated monitoring and
evaluation system in a single whole enables organizations optimally benefit from
available resources through satisfaction of existing and potential customers in their
best interests.
The monitoring evaluation and control system should be designed to serve both the
strategic and operational phases. The monitoring evaluation and control system
designed for both strategic and operational phases are described as follows.
This is a continuous and systematic monitoring evaluation and control of the validity
of basic assumption under which it operates. Thus, a regular and continuous

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 proactive check against the validity of planned strategy aimed at changing or
improving the condition of vital assumption.
Performance management and control is a managerial process of designing and
developing sound indicators parameters means and sources of verifications
necessary to measure activities resources, process and output of individuals, groups
and institutions against the targeted standards and come up with logical results
which would help to make sound decisions. Although there are numerous areas
whose performance are needed to be well managed and control, the most important
areas and performance management indicators used in laundry and dry cleaning
business are briefly identified and described as under.
Operational control strategy is designed to guide monitor and evaluate the progress
of all planned activities against their respective planned objectives as in meeting
targets representing the planning horizon. Accordingly, all planned activities shall
have the following basic system to be used as a monitoring evaluation and control
mechanisms.
● Components of narrative description
⮚ Objectives
⮚ Outcome
⮚ Output
⮚ Input
● Indicators that show

⮚ Objectives have been achieved

⮚ Planned outcome has been attained
⮚ Desired output has been obtained
⮚ Input are properly allocated and employed in all terms
● Source and means of verification

Relevant means and source of verification shall be clearly identified and

employed accordingly;
⮚ Strategic planning documents
⮚ Audit report

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⮚ Field visit and on site survey
⮚ Past data etc shall be used

18.4 CHANGE MANAGEMENT IMPLEMENTATION STRATEGY

In connection with the application of the project strategic plan, certain changes are
inevitable and these changes may take place in a continuous/discontinuous process.
The fact that all types of changes must result in supportive, adverse or neutral
effects, necessitate management needs to identify and understand the types and
impacts of each planned changes, to be able to benefit from change offers and deal
with the challenges of changes.
In general, transformational, transactional, transitional and Incremental changes in
the project workflow process organizational culture and behavior are expected to
occur both at strategic and operational dimension of this proposal. The impact of all
of these changes should be managed in favor of the project at large The following
major implementation strategies are proposed to manage these changes.
● Work flow process

This is a targeted economy of scale process intervention, aimed at attaining cost

minimization, profit maximization, efficient service delivery and customer
satisfaction. To do this it is pertinent to understand the dynamics of project realities
in the changing world. To change the workflow process to desirable small scale the
following implementation strategy are proposed.
❖ To undertake a detailed task analysis and determine the condition, process and
time phase out for each task.
❖ To determine the resource requirements availability quality magnitude and cost
❖ Determination of technology and system requirements
❖ Determination of skill, profession and experience requirement
❖ To design and develop strategic fit and incorporating human resources into
system integration
❖ Acquisition of top management support.

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● Organizational culture change implementation strategy

Change in organizational culture refers to change in project belief, values, strategy,

purpose and expectations. Conductive conditions to cultural changes proposed are
⮚ To create appropriate environment for team work, process focus, action oriented and
low level decision making
⮚ Outstanding and effective trial of many alternative tools and techniques and selecting
the most appropriate
⮚ Building the skills and competence of management and staff
⮚ Setting standards to measure performance
⮚ Analysis and initiating corrective measures
● Behavioral change implementation strategy

Organizational behavior refers to employee individual and collective behaviors. The

most challenging task is to manage employees’ behavior towards the success of
desired changes.
The following strategies are proposed for project organizational behavioral change
implementation and management
✔ Involving employees in planning and decision making process
✔ Promotion of rewarding and incentive system
✔ Promotion of employee career and skill development operational plan
✔ Avoiding under/over employment
✔ Promotion of transparent, accountable and non discriminatory data based
decision making practices
✔ Provision of clearly defined job description, evaluation, lines of authority and
responsibilities as well as lines of communication and information flows.
✔ Provision of management and leadership support and guidelines.
✔
● Staff motivation strategy

Experiences has demonstrated that the most difficult and resistance to

organizational transformation and improvement process is the behavior of employee,
unless employees are properly managed motivated and participated in the process

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the efforts of achieving planned objectives would carry meaningless. Moreover, the
fact that there are various knowledge skill, experience dedication commitment sense
of ownership belongingness moral ethics honesty, reliability etc. among employees
there exist differences in their effort contributing and performance results.
Employers contributing extra efforts and time require recognition need reward and
development. Because recognition, reward and development.

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