| Abstract: | The main purpose of this study was to assess the effects of organizational value adding activities on profitability of selected leather product manufacturers in Addis Ababa. The study was conducted on eight selected leather product manufacturing firms. Descriptive survey method was used. Survey questionnaires were administered to 48 managerial positions and interview was also held with 8 general managers who were directly involved on the value adding activity to collect additional information. SPSS version 20 was used for analyzing the data. Narration and direct quotation were also used for analyzing the qualitative data. The finding of the study revealed, different value adding activities has been a common practice often conducted in leather product manufacturing firms, but with limited implementation of value adding activity resulted from lack of intervention training, skill and knowledge gap in conducting such value adding activity. P-value test analysis was conducted to see how significant the associations of the value adding activities performance levels of the organizations are with their profitability. Furthermore, inferential statistics and weighted mean testing was undertaken in the form of median tests and ANOVA to test the assumption that difference in performance level in the organizational value adding activities determines the variability in profit margins of the organizations. Also significant results from Analysis of variance taking operating profit margin of organizations as the response variable and performance levels of value adding activities as factors proved that organizational profitability is determined and depends on all primary and support value adding activities performance levels
Moreover, high cost of equipment for leather products manufacturing, limited access to finance, shortage of hard currency, storage and transport challenges, barriers to export markets and competition were observed as challenges affecting their business performance. To address the aforementioned problems, it is recommended that the whole process of value adding activity has to be modified by training |
