ODA BULTUM UNIVERSITY

COLLEGE OF AGRICULTURE
DEPARTMENT OF AGRICULTURAL ECONOMICS

Title; BUSSINESS PLAN ON FOOD OIL PROCESSING

Group Member Name and ID No

1 Mohammed Ahmed……….0073/10
2 Habtamu Desalegn ………0067/10
3 Sefer Baye ………0078/10
4 Godada Tesfaye ………0066/10
5 Birtukan Aelemu ………0050/10
6 Atalel Aelemu ………0053/10
SUBMMITED TO: MASTEWAL MUKET. (MSc.)

CHIRO, ETHIOPIA
FEB, 2020
 Table of content
Content Page
Executive summary .........................................................................................................................2
Part One
1.1. Introduction /Background of the business ..........................................................................3
1.2. objective .............................................................................................................................4
1.3. Vision .................................................................................................................................4
1.4. Mission ...............................................................................................................................4
1.5. Considered in selecting the business...................................................................................4
1.6. business component ............................................................................................................5
1.7. Quality control of the product ...........................................................................................5
1.8. Location of the business .....................................................................................................5
Part two
2.1. Market and demand analysis ..............................................................................................7
2.2. Methods of promotion and distribution ..............................................................................8
2.2.1. Methods of promotion ........................................................................................................8
2.2.2. Methods of distribution ......................................................................................................9
2.3. Consumer ............................................................................................................................9
2.4. Raw materials .....................................................................................................................9
2.5. Organization structure ........................................................................................................10
2.6. Role and responsibility of the officer .................................................................................10
Part three
3.1. Financial analysis ...............................................................................................................12
3.2. Future income statement ....................................................................................................15
3.3. Opening balance sheet ........................................................................................................16
3.4. Cash flow statement ...........................................................................................................16
Part Four
4.1. Evaluate the business ..........................................................................................................17
Part Five
5.1. Environmental feasibility....................................................................................................18
Part Six
6.1. business implementation ....................................................................................................18

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Part Seven
7.1. Summary and Conclusion .........................................................................................................19

Executive Summary
This business plan report is concerned in the production of food oil in Amhara region,
Waghemra zone, in its specific site is in Amdework town, far from the capital city A.A by
820 km. The reason for the establishment of business is the present condition of high amount
of demand for food oil in the society. To satisfy this demand the business will be prepare. It
will be need a total capital of 466,479 from these around 54% is covered by the owners of the
business and the remain 46% will be covered by loans from commercial bank of Ethiopia.
The business normally needs machinery and different raw material includes Nug, Nut, Telba
and sunflower. The business reports include about the market and demanded analysis. It is
also including the organization structure of the business next to these the business reports
include the financial analysis. Under the financial analysis the cost that is the initial
investment cost including cost of fixed asset, raw material cost preproduction cost is
presented and also salary expense utility expense and supply expense presented. Next to these
the future income statement of the business is presented (2011-2015). The opening balances
sheet of the business, cash flow statement is presented. Also the business evaluation is also
presented. The pay back period of the business is 4yy, 7mm, 15dd year. The business report
includes environmental feasibility and business implementation. Lastly the business report
includes summary and conclusion.

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 Part One
Introduction
1.1. Background of the Business
People in many regions began to process found oils thousands of years ago. Utilizing what
ever food stuffs hand on hand to obtain oils for variety of cooking purposes. Early people
learned to use the sun, afire or an over to heat oil plant products until the plant excluded for
oil that could then be collected.
The Chinas and Japanese produced soy oil as early as 2000 B.C While southern Europeans
had begun to produce olive by 3 000 B.C.
In Mexico and North America peanuts and sun flowers seeds wave roused and beaten in the
paste before being boiled in water the oil that lose to surface was the skimmed off. Africa
also granted and boat palm kernels and coconut meat and then bounded the resulting pulp.
Some food oil products have become available recently or extraction of technology has
improved. Corn oil first becomes available in the 1990’s.

The owners of the business are three persons. They contribute 83,966.33 birr for the business
and the remaining 214,580 birr is found from the bank as alone.
We know that before 4 years ago the government of Ethiopia paln the five year
transformation and development strategies. In these plans the government give as
greatattention in consumption Products speciously in sugar and food oil products.

But until this time the government and other private sector can not satisfy the demand of food
oil of the society.the government plan to alive the country from shortage and inflation of
consumption goods specially sugar and food oil products. According to some data that we are
reviewed the total industry production of food oil products increase in Ethiopia but still know
the supply of the product cannot satisfies the demand of the product. These create an
opportunity for our business.

1.2. Business objective I'm eagerly waiting your response.

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General
The business has the overall objectives of generating an income for the business member and
satisfies the existing demand of our target customers in Amdework town.
Specific
 Satisfy the demand of food oil of the town
 To help the government in its effort to increase the supply of food oil.
 To increase the income of the owner’s
 To create job opportunity
 To use efficiently locally raw materials and encourages farmers to produce the raw
materials for these product and can increase their annual production of seeds.

1.3. Vision
To become the main supplier of food oil in the sector in the town.

1.4. Mission
To build up modern facilities and to continuously produce food oil to satisfy the demand of
food oils of the town, as much as possible the country.

1.5. Consider in selecting the business

The main factor in selecting the business is:-
 There is lack of food oil in the market.
 There is a trend of increase demand of food oil from year to year.
 The business needs few raw materials and human resource for establishment.
 The government subsidise or support on these types of project in order to cover the
high amount of demand of the product.

1.6. Business component: the anticipated business will have two products.
1. Main product
Our food oil filtering business includes products such as vegetable oil, edible
oil, for some cooking food.
Our product will have the following manufacturing process.
 Cleaning and grinding
 Pressing

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  Extracting additional oil with solvents
 Removing solvent tracers
 Refining the oil
 Packaging

2. By product /waste
Our business will have a by product /waste. The most obvious by product of our business is
oil seed career, these kinds of seed career are used to make animal feeds and low grade
fertilizer other are simply disposed off these two by product i.e. animal feeds and low grade
fertilizer generate additional income for the business and satisfy our customer need in
addition to the business main product.

1.7. Quality control of the product

Our business product has quality control. The nuts and seeds that we will be used to make
food oil are inspected and graded after harvest by licensed inspectors in accordance with
Ethiopia Grain standard acts and the fat content of the incoming seed will be measured. This
activity is important for our customer for the confidence about the quality of our product and
creates a confidence on our customers by our business product related to their health
condition for the production of quality food oil. Our business will not be stored all seeds (raw
material) for a long period of time. Since storage increase the chance of deterioration due to
mold, loss of nutrients and.the seed will be stored in will ventilated ware house with a
constantly maintained low temperature and humidity, Pests also will be eradicated and mold
growth will be kipt to a minimum.
In addition our product will be free of impurities and meet the demands placed up on it for
use cooking to ensure this our product is tested under control conditions to see at what
temperature it begins to smoke, flash and catch on.

1.8. Location of the Business

The business located in Amhara region waghemra zone, Amdework town. The reason for the
selection of this location.
1. There is no food processing firm around these town
2. Availability of demand
We will need 2000 car meter square and we will gate these by rent and we will classify the
building to ware house, production, tons has product, raw materials, for effect for shop etc…

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 Share holder investment

Name Birr
Mohammed 83,966.33
Habtamu 83,966.33
Sefer 83,966.33

Total 251,899

Swot Analysis
 Strength:

We have state of the art food oil processing facility and equipment that has positioned us to meet
the demand of food oil in the town even if the demand tripled over night or if we have a massive
order to meet and emergency need.
Another factor that counts to our advantage is the background of our Chief Executive Office; he
has experience in the industry and also a pretty good academic qualification to match the
experience acquired which has placed her amongst the top business men in the town We are not
ignoring the fact that our team of highly qualified and dedicated workers will also serve as a
strength for our organization

 Weakness:

We do not take for granted the facts that we have weaknesses. In fact, the reality that we are
setting up a food oil processing business in a city there is food oil supplier in the town so this
pose a challenge for us in supplying sufficient food oil product in the market in Amdework.
In essence our chosen location might be our weakness. But never the less, we have plans to
launch out with a big bang. We know with that, we will be able to create a positive impression
and we have a proper handle when it comes to building on already gather momentum.

 Opportunities:

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The opportunities available to us are unlimited. Loads of people make use of food oil on a daily
basis and all what we are going to do to push our food oil to them is already perfected. Land
around the town is just ideal for food oil processing business because the land is ideal for farming
different inputs like nug, selata, telba, sunflower, plus the fact that inputs are cheaper in the town.

 Threat:

The threat that is likely going to confront us is the fact that we are not competing with other and
also there are no other entrepreneurs who are likely going to similar business within the location
of our business, this is difficult to get role model of our business from other, Of course, they will
not compete with other in winning over the available market.
Another threat that we are likely going to face is unfavorable government policies and economic
downturn. Usually economic downturn affects purchasing / spending powers and unfavorable
government policies can hinder our free – flow of exporting palm oil to other countries of the
world.

Part Two
2.1. Market and Demand analysis
This business is planned to explore the opportunity that is created in this time. There is high
amount of demand of food oil and there is not sufficient supply in own country, in
Amdework town also there is lack of food oil supply. So in order to fulfil the customer
demand our business make as possible as. In these time food oil is supplied by government to
the Amdework people but the government only supply the food oil which has only ID card of
the town. And also the people who have not ID card of the town they are not able to get the
needed amount of food oil.

So our 1st target customer is people who have not an ID card of the town. The other target
customer of our business will people who have not good attitude on packed food oil that the
government know supply to the society.The other customer of our business will be people
who have some health infection related to their consumption of packed food oil. Packed food
oil is not good for health. Some doctors say packed food oil has affected the health of the
consumer.so our business product is free from health infection these create an opportunity to
create additional target customer.

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Our business product also have a target customer of low income level in the town because
there low income level society in the town have no a potential to get food oil supplied by
government. Because of their income constraint, because in these times the government
supply food oil starting from 3 litters packed food oil. So this is unattainable for low income
level of the society live in the town.
We are trying to conduct some situational analysis and market survey. But we are not able to
get important information.But we can see there is no any food oil processing firm in
Amdework town around .so these enables us the successful of our business and some
customer are not able to get the needed amount of food oil from the government. So our
business will satisfy the demand of this society in the town.

We are also able to breakdown our demand based on the following.

 People who have no ID card of the town: as we said in the above the government
supply the food oil to the society only which have an ID card of the town.
 Society that have no good attitude about packed food oil. There are many people who
do not want to consume packed food oil they prefer locally produced food oil from
sun flower, ground nut, and etc….
 Unhealthy people who live in the town. Some medial person say that consuming
packed food oil is not advised for unhealthy people so our product satisfies the
demand of this society.
 Low income level society.
Generally our business product demand will be high because of at present time there is lack
of supply of food oil in the town.

2.2. Methods of promotion and distribution.

2.2.1. Methods of promotion
We know that there are print media and electric media for promotion proposes. Print media
include promotion in news paper, banners, and broachers and so on. Electronic media include
promotion on TV, Radio, etc. So for cost reduction proposes our business product promotion
is on print media. In banners, and broachers we will be use transportation advertisement. That
means we will point on taxi, Bajaj and bus and in different notice bored we will advertise our
business product.

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 2.2.2. Methods of distribution
There are two form of distribution. Direct channel and indirect channel. Direct channel means
directly sale a product to ultimate users of the product. Indirect channel means distribution
made by intermediaries. So our product distribute both direct and indirect channel. Directly
we will sale our product to the ultimate consumer in our site and indirectly we will sale our
project product to different shop and super market.

2.3. Consumer
Our business characterizes our consumer based on different aspects. As a business our
business product will have market segmentation that uses our business to identify our target
customer. We say some thing about our target customer in previous page. But know we
clearly seat the base for classifying our target customer.
Income segmentation:- these market segmentation on divide customers in to different
income level groups which include high income level, middle income level and low income
level,. From this segmentation the target customer of the project will become middle and low
level income customer.
Geographical segmentation:- dividing customer based on geographical location. Our
business target customers are customers who live in Amdework town, because there is no
food oil processing firm.

2.4. Raw materials

The average bottle of the business contains edible oil which no additive preservatives or
special flavouring. The oil comes from various parts of seeds.in most causes from what are
commonly caused seeds including nug, Sunflowers, Gomenzer, Telba, nut. The raw material
supplier will be small scale farmers around our business location. In addition to farmers we
will use merchants in an important situation.
The source of revenue comes from mainly from sales of food oil.

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 No Item Description
1 Revenue from sales of food oil annually 40birr X 5000 lit 200,000
2 Revenue from sales of waste product 5 birr x 1983 kg 9,915
Total revenue 209,915

2.5 Organizational structure

CEO

Vice president of Vice president of Vice president of

finance manufacturing human resource

Plant supervisor
Training Benefit
specialist administration

 The business CEO will be Ato Mohammed Ahmed

 V.P of finance of the business will be Habtamu Kasaye
 V.P of manufacturing of the business will be Sefer Getu
 V.P. of human resource of the business will be Godada Belachew
 Training specialist of the business Birtucan Sisay
 Benefit administration of the business Atalel
 plant supervisor of the business will be Mohammed Ahmed

2.5.1 Role and responsibilities of the officer

Chief executive officer

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The CEO will be responsible for leading the development and exaction of our company’s
long term strategy with a view to creating a value added to the business product.
CEO have ultimate responsible for all day to day management decision and for implementing
the business short term and long term plan. In addition to these the following are additional
role and responsibilities.
 Lead in conjunction with other member
 Lead and over see the implementation of the business long and short term plan in
accordance with the strategy
 Ensure the business appropriately organized and staffed and to have the authority to
like and terminate staff as necessary to enable it to achieve the approved strategy
 Ensure that the business will have appropriate system to enable it to conduct its
activities both low fully and ethically.

Vice President of finance
The vice president of finance will have the following role and responsibilities.
 Provide leadership and vision on the financial affairs of the business
 Promote sound financial climate and encourage responsible toward ship and value for
money utilization of the business develop and support strong external relationship
with bankers investment advisor, auditors and other provider of finance service of the
business.
 Monitor best practices and trends in the business finances and service and implement
beneficial changes.
 Assisting the CEO and other department in creating and leaving financial and mission
value
 Provide financial information, analysis and reports requested by the government and
other external and internal users of financial information

Vice president of HRM
The role and responsibilities of V. president of human resource management will be the
following.
 Plan, develop, organize, implement, direct and evaluate the organization human
resource function and performance of the business

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  Participate in the development of the business plans and prospective of the impact on
the people.
 Translate the strategic and tactical business plans in to human resource strategic and
operational plans for the business
 Evaluate and advise on the impact of long range planning of new program are
regulatory action as these items impact the attraction, motivation, development and
retention of the people resource of the business.
 Manage the budget and the financial measurement of the human resource department.
 Manage other areas, such as reallocation, employee communication, and employee
safety and health and communication relations.

Vice president of manufacturing

The vice president of manufacturing will have the following role and responsibilities in the
business.
 Review and approve adequate plans for the control of planned out puts, budget
spending, labourefficiency, materials efficiency, customer service….
 Review performance against operating plans and standards. Provide reports to
subordinates on interpretation of results and approves change in direction of plans.
 Review and approves change in direction of plans.
 Review and approves cost control reports, cost estimates and man power and facilities
requirements forecast.
 Coordinates and collaborates with other departments of the corporation in establishing
and carrying out responsibilities
 Reviews and approve the setting of budget through out the operation department.
 Develops plan for new area of technology for the manufacturing function along with
sufficient planning areas that support the mission of the business with in operation.

Part Three
3.1. Financial analysis

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The business will start the operation with birr of 251,899 Financed by the owners and birr
214,580 loan arrangement to pay with in 4yy, 7mm, and 15dd. So 54% of the total investment
is financing by the owners while the rest 46% will be financing by through short term loan.
The investment arrangement and expenditure expected is presented on the following
consecutive table with their respective category.
Fixed cost
S/N Description Measurement Quantity Unit price Total price
1 Machinery - 1 195,000 195,000
2 Boillor - 1 1,000 1,000
3 Office equipment - - 5,000 5,000
4 Office furniture - - 3,000 3,000
Total birr 204,000

Raw material expenditure

S/N Description Measurement Quantity Unit price Total price
1 Nug Kuntal 10 1300 13,000
2 Telba Kuntal 10 2300 23,000
3 Nut Kuntal 5 1400 7,000
4 Sun flower Kuntal 5 1600 8,000
Total birr 51,000

Pre-Production expenditure
S/N Description Measurement Quantity Unit price Total price
1 Installation 600 600
2 Pre investment cost 100 100
3 Advertising 400 400
4 Training cost 400 400
5 Promotion 200 200
6 Repair & maintenance 300 300
7 Electric mentions 3000 3000
Total birr 5,000

Initial investment

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Fixed asset cost……………………..204,000
Raw material cost……………………51,000
Pre-production expenditure…………..5,000
Initial investment cost………………………260,000
Book value
 Machinery No book value deprecation expense for one year if estimated useful life 15
years.
195,000
=13,000
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 Office equipment No book value deprecation expense for One year will be 500 .if
estimated useful life 10 year.
5,000
=500
10
 Office furniture No. book value deprecation expense for one year will be 375. If
estimated useful life 8 year.
3,000
=375
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Man power and salary expense

S/N Description Measurement Quantity Salary Salary Total
monthly year price
1 CEO BA 1 1500 18000 18000
2 Vice president of BA 1 1200 14,400 14,400
manufacturing
3 Accountant BA 1 1200 14,400 14,400
4 Human resource BA 1 1200 14,400 14,400
officer
5 Technical Diploma 1 8000 9,600 9,600
6 Direct labour Grade 6 2 1000 12,000 12,000
7 Guards Grade 6 2 300 3600 3600
Totals 86,400

Utility expense
S/N Description Measurement Quantity

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 1 Electric 300 3,600
2 Water 100 1,200
Total 4,800

Supply expense
S/N Description Measurement Quantity Salary Salary year
monthly
1 Ventilator - 3 2000 6000
2 Bermile - 5 120 600
3 Rental expense One year - 2000 24,000
Total 30,600

Annual cost
Salary expense 86,400
Utility expense 4,800
Supply expenses 6,600
Rental expense 24,000
Interest expense 9,500
Total 131,300

3.2 Food oil processing form

Income statement
For the year ended Sene 2011-2015
Description 2011 2012 2013 2014 2015
Revenue 209,915 319,927 410,501 516,625 556,665
Expense
Salary expense 86,400 120,000 122,000 130,000 136,000
Rent expense 24,000 24,000 24,000 24,000 24,000
Utility expense 4,800 5,200 5,900 6,300 7,000
Interest expense 9500 9,000 7500 5000 2500
Depreciation expense

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  Machinery 13,000 13,000 13,000 13,000 13,000
 Office equipment 500 500 500 500 500

 Office furniture 375 375 375 375 375

Operation expense 138,575 172,075 173,275 179,175 183,375

Operation income (71,340) 147,852 237,226 337,450 373,290
Tax 20% - 29570 47,445 67,490 74,618
Net income (71,340) 118,282 189,781 269,960 298,632

3.3. Food oil Processing

Opening balance sheet
Hamle 1, 2011
Cash ........................................................................................................206,479
Investment for machinery .......................................................................195,000
Investment for furniture .........................................................................3,000
Raw material cost ...................................................................................51,000
Pre-production cost ................................................................................5000
Investment for equipment………………………………………………5000
Boiler ......................................................................................................1,000
Total asset .............................................................................………466,479

Liability
Account payable .....................................................................................214,580

Capital
Owners equity ........................................................................................251,899
Total liability and owners equity ................................................466,479

3.4. Cash flow statement

Source of cash 2011 2012 2013 2014 2015

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Profit before tax with interest
added back (61840) 156,852 244,726 342,450 375,790
Deprecation of furniture 375 375 375 375 375
Deprecation of equipment 500 500 500 500 500
Deprecation of machinery 13,000 13,000 13,000 13,000 13,000
Total source of cash 147,965 170,727 258,601 356,325 389,665
Uses of cash
Payment of interest 9500 9,000 7500 5,000 2500
Payment of tax - 29570 47,445 67,490 74,618
Payment of long term loan 42,916 42,916 42,916 42,916 42,916
Total uses of cash (52,416) 81,486 (165,361) (115,406) 120,034
Surplus /deficit 100,381 89,241 93,240 240,919 269,631
Opening balance - (100,381) 11,140 104,380 345,299
Cash ending balance (100,381) 11,140 104,380 345,299 614,930

Part Four
Evaluate the business
1. Pay back period (PBP)
Year Cash in flow Cumulative cash inflow
2011 (100,381) (100,381)
2012 11,140 (89,241)
2013 104,380 15,139
2014 345,299 360,438
2015 614,930 975,368
Unrecoverd cost
PBP= Y1rs before full recovery +
cash flow during next plan
260,000−15,139
PBP = 4 + =4.71 means
345,299
= 4.71 means 4 years with 7 month with 15 days

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 2. Net present value (NPV) PV of cash flow at 10%
Year Cash in flow
2011 (100,381)…………………………. (100,381) x 0.909 = (91,255)
2012 11,140……………………………..11,140 x 0.826446 = 9.207
2013 104,380……………………………104,380 x0.751315 =78,422
2014 345,299…………………………….345, 299 x 0.683013 = 235,844
2015 614,930…………………………..…614,930 x 0.620921 = 381,817
Total PV cash inflows 614,035
Less PV of cash outflow 260,000
= 354,03
Therefore this business is feasible because the different between PV of cash inflow and cash
out flow is positive.

3 Benefit cost Ratio (BCR)

PV of cash infloes 614,035
BCR = = = 2.3617 so the business is feasible
PV of cash out flows 260,000

Part Five
Environmental feasibility
Environmental assessment is an element while designing the business. The impact of the
business on the environment and the environmental impact on the business should be clearly
examined
Our business is concerned on projection of food oil. There is no a hard condition that creates
to the environment the only that will be expect to influence the normal condition of the
environment may be the waste product threat is a scrap ending waste material of our business.
Even if our business will have this waste material it can not create disasters to the
environment because we will use it at a source of income by properly drying this waste
material and make a feeds for animals and fertilizers for soil. So these is purposeful while
serve as a feeds for animals besides these it will use by farmers as fertilizers.

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 Part Six
Business implementation
Like other business implementation phase of our business implementation phase of our
business requires the assistance of different business man who has an experience on these
types of business.
As we know in these time there is lack of supply’s of food oil and the government try to
increase there supply of these product by subsidizing different forms which involves in these
business our business analyzing the essential condition of the business and reached in to the
conclusion we follows.
- Order for machinery have to be placed
- Contract to be signed
- Selecting of raw materials
- Marketing activities will be done including promotion and advertisement.
We use different technique that we are going to use for our business implementation.
We expect to face some changes during this stage the problem related to
 Delivery of machinery
 Problem related to promotion and advertising

Part Seven
Summary and conclusion
Food oil is one of an important consumption in all society that is lives weather in town nor in
country side we can say that most things related to food need the contribution of food oil that
makes foods too delicious.
But at present time the society demanded for food oil is not covered by the local industry of
food Oil Company and the government try to satisfy the demand of this product to the society
by subsidizing local food Oil Company and by importing food oil products from the foreign
countries. These things will have an impact on the country balance of payment by increasing
the amount of birr that the country pays to import goods.
The country is endowed by different raw material for food oil. So inorder to exploit these
potential the government should consideration of creating local producer of food Oil

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Company to gain the country resource fruit to the whole society by satisfying the current
demand of food oil of the society by locally producer of these product. Its main objective is to
sale a quality and healthy food oil to the customer and making the present condition of
sealing the food oil by using simple technology that can enables to sell the food oil by
packing in different letter, starting from 1 letter, 3 letters, and 5 letter and so on... Our
business company will be the member to this association and can increase the sales, of food
oil and satisfy the demand of the target customer.

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