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[[Business enabling environment]]
Laws, regulations, policies, norms, customs, international trade agreements and public infrastructure (roads, electricity, etc.) that either facilitate or hinder the movement of a product or service along its value chain. This can be at the local, national and Villa in Phuket international levels.
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The history of microenterprise began a long time ago. Here is a link to Value Chain Development. And furthermore, we have some interesting information on Remittance History.
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>==First Section==
yes sir
According to scientists, the Sun is pretty big.<ref>E. Miller, The Sun, (New York: Academic Press, 2005), 23-5.</ref>
Some people prefer Chipotle to the Well-Dressed Burrito.<ref>John Smith: Burrito Preference Circular. August, 1932.</ref>
go to <a href="#xyz">the spot.</a>
Scientists inconclusive about existence of burritos.
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Contents |
End Market Structure and Analysis
Value chains are driven by end markets, and a product or service may have different market channels within an industry. The structure of end markets refer to how end markets work, how large is the buyer pool, how much power do buyers have over producers and whether information exchange takes place within the channel.
Market channel can have various destinations; international wholesalers and retailers, national and local buyers, as well as different markets within one location. End markets define the universe of opportunities for placing the product in those markets and they define the attributes of the product.
End markets are structured according to the “refinement” required by the end consumer. The horticulture value chain in Tanzania has several distinct channels, each structured differently. One channel provides products for the hospitality sector (hotels and restaurants). It is characterized by producers having direct links to a few buyers, and under contract they receive buyer specifications regarding quantity and quality. Another market channel is destined to supply the domestic vegetable market (wet market). It does not like the producer directly with the buyer, but contains numerous intermediaries and buyers, often with little information exchange. Buying and selling takes place daily with whoever offers the best price. The export market channel requires the producer to meet announced standards, timing and international regulations, which together impose more disciplined structure up and down the chain.
From the end markets, we learn about what it takes to compete in the chain from the perspective of quality, size, design information product standards, frequency and speed of delivery and possibly market trends. Chain Information gathered during the data collection is analyzed in terms of the chain’s present and potential capacity to respond to end-market specifications.
Chain Structure and Analysis
Chain analysis is an assessment and prioritization of critical constraints to opportunities along the value chain that limit the industry putting into operation its competitive advantage into real growth. The process of identifying and prioritizing interventions requires running all the constraints through filters defined by the vision of competitiveness and the potential impact. To get to the stage requires quantitative and qualitative data collected from interviews (principally with stakeholders), document and desk research. The data is organized using the value chain framework in a way that moves the analysis from firm-level concerns to chain-level perspectives.
Chain analysis consists of the following components: value chain mapping, defining the structure of the end market, analysis of the business enabling environment, vertical and horizontal linkages and supporting markets.
Value chain mapping
Value chain mapping is the process of developing a visual tool that shows the basic structure of the value chain. The map lays out participants, linkages, supporting markets and relationships, illustrates the way the product flows from raw material to end markets. It is a compressed visual of the data collected at different stages of the value chain analysis and supports the narrative description of the chain.
The purpose of a visual tool in the analysis process is to develop a shared understanding of the market structure and the place of its participants in the market. By giving a snapshot of product flow as it exists today, the exercise and the map form a shared platform for multi-stakeholder discussions that can reveal opportunities and spot bottlenecks to be addressed in the project design phase. Maps help to identify information gaps that require further researching.
The business enabling environment (BEE) must be reviewed for the opportunities it provides to the industry, or the constraints, which will be considered in the competitiveness strategy phase of project development.
End markets It is through the analysis of end markets that we are able to identify the investment needs that will drive chain upgrading.
Other characteristics of end markets:
They allowing us to understand how much work is needed to place the product into a more competitive posture.
The characteristics of a product or service define how competitive advantage can be achieved.
End markets informs on what buyers think about the country the value chain is being analyzed and the position of value chain vis-à-vis the competition. The end market analysis is conducted for the industry within the present global market place whether the product is exported or only sold domestically.
Business Enabling Environment
Chains operate within a business enabling environment that concerns policies, institutions and operating context for businesses that create constraints and opportunities for industries’ growth. Both present opportunities for market expansion, but both can be costly to MSEs and can prevent a developing country from being competitive. A positive business enabling environment should create incentives for private sector growth and involvement in the policy process.
The analysis looks at the enabling environment from several levels; the international enabling environment requires one to investigate conventions, treaties, agreements, and market standards that engage a country or require it to abide to norms and standards applicable to the target value chain. This includes researching the extent to which the country is signatory and bound to bilateral and multilateral conventions. While trade agreements, such as the Lomé Convention or AGOA can open opportunities for firms, international standards such as EurepGap and USDA’s APHIS program can as well close the same opportunities.
On another levels, information for the analysis is needed on national and local policies, duties, business licensing procedures, enacted regulations and the state of public infrastructure. In Guatemala, national export policies imposed tariffs that reduced the ability of craft exporters to compete on a global market. On a local level, poor local government operations and infrastructure as well as poor enforcement of legal and regulatory regimes increases transaction costs that limits investments and upgrading incentives. In Madagascar, lack of local investments in farm to market infrastructure over the years significantly reduced the production and resulting drop of export of lima beans, which at one time had made Madagascar a key supplier of lima beans to the US.
The analysis process must determine whether and how the business enabling environments facilitate or hinder the performance of the value chain, and if they hinder, where can they be improved?
Vertical Linkages
Chain analysis looks at how firms interact with each other and how power, learning and benefits are distributed in value chain. Understanding the relationships helps to understand why there are constraints and how and by whom they can be resolved.
Vertical linkages analysis looks at the degree of cooperative relationships that exist among vertically linked firms up and down the value chain. These relationships can be assessed as being strong, weak, organized, and/or dynamic and can be analyzed in terms of the degree of knowledge sharing, skill transfer and trust foster or hinder growth and expansion of the value chain. If it is determined that in the studied value chain there is little or no knowledge sharing between producer and collectors/first line traders, or if there is a lack of confidence between the two levels, there are chances transaction costs will be high and the small producer, with little or no information of what the raw product will be used for in the destination market might disregard quality standards. On the other hand the buyer of the raw product may have a vested interest in helping SME producers and thus inform or provide training to the small producer in meeting production standards requiring new skills. In conducting the analysis we look for signs of win-win or lose-win situations among functional levels and firms.
Example: vertical relationship analysis: A value chain analysis of the aromatic and medicinal plant sector in Madagascar revealed that most wildcrafters (women who gathered plant parts in the wild) knew little of how the plants they were gathering were being used. Collectors would come by irregularly to announce they wanted only a certain type of plant, by a specific date, in a set quantity and would pay a fixed price. The collectors repeatedly complained about the poor quality of the plants delivered, and wildcrafters indicated the efforts required to gather the plants did not match the low prices being paid. By comparison, firms that provided training, visited wildcrafters in the field and explained the reasons for quality standards were able to establish relationships of trust that translated into more loyal suppliers.
Horizontal linkages
Analysis of horizontal linkages looks at the relationships among firms performing the same functional line work and to what degree horizontal collaboration affects transaction costs. Effective collaboration among firms allow them to either bundle purchasing of inputs from suppliers, thus reducing unit cost or bulking the production thus reducing for the buyers an easier time to work with small suppliers. By allowing for bulk transactions, horizontal linkages generate economies of scale, contributing to small firms’ competitiveness and bargaining power.
Supporting markets
Supporting markets are for-profit firms and individuals who provide multiple services to firms and individuals operating in the value chain. They include input and service providers that are sector specific, such as agricultural input suppliers, technical services specializing in a particular sector such as cotton, and cross-cutting providers, such as training institution, financial services and institutions, business management and development services and information technology.
For financial institutions, the analysis must look at the number and availability, use and quality of financial institutions serving the industry; i.e.; how close and present they are to customers, how they actually perform in comparison to what they promote and how are they at responding to MSE needs.
These services must be provided by markets, but can be provided by actors in the chain, such as input suppliers, who if they provide support and assistance to their customers, embed the cost of service into the price of the product.
The degree of development of supporting services is a function of the expansion of the studied value chain. During the research and analysis, look for the growth or contraction of supporting markets; are supporting markets migrating towards clusters of value chain firms and are MSEs among their clients? Are there projects that target upgrading and training supporting markets? What types of supporting markets are absent and missing? Are there MSEs providing support services? During the research and analysis, look for supporting markets in the most unsuspecting services areas. If the value chain involves a large number of MSEs, probe studies that include informal sector service providers. A study of the informal sector in Dakar revealed significant supporting markets compose of a number of MSEs that provided neighborhood services, from small tools rentals such as hammers, glassware and shovels by the hour or day to scaffolding, table cloths and extension ladders.
Example: In Zambia, the target value chain was beef. However when a project conducted a analysis, it became apparent that further analysis was needed of the veterinary service since that supporting market alone was a value chain and the performance of the veterinary services affected the competitiveness of the beef production. Both had to be tackled in order to increased the efficiency and productivity of both.
DYNAMICS
Value Chain Governance
A distinguishing dimension of value chain analysis is the emphasis not only on the dynamics of end markets but also on the importance of understanding the dynamics and shifts in relationships. How a value chain is managed or coordinated and what is the degree of power between buyers and sellers defines the “governance structure” of a chain. When conducting a value chain analysis, we must identify and understand the type of “governance structures,” as it will significantly determine the nature of interventions selected to increase competitiveness.
To determine what the current pattern is and perhaps where chain stakeholders want to move in order to upgrade competitiveness, it is useful to distinguish between governance types of value chains. The Figure below illustrates at least four these different governance types, followed by a description of each:
- The example on the left describes market-based relationships, which are characterized by transactions in which there is little power difference between buyer and seller. Exchange of goods and services are negotiated daily on the basis of the market price. There is little information exchange and learning from the interaction. It is an “arm’s length” transaction. There is little or no formal cooperation among participants.
- Moving towards the right, the large arrow pointing both ways describes a more balanced governance in which decision making is fairly equal among the participants. The relationships usually create mutual dependence. There is cooperation among buyers and sellers and no one dominates over the other.
- Again moving to the right, a “directed” relationship is typical where small suppliers (in this case craft products are transactional-dependent on much larger buyers. The supplier is “controlled” by one or several lead firm who determine product specifications and trade rules. We should determine whether the supplier is “captive” to the buyer by the his/her cost of shifting to another firm.
- The governance on the right (hierarchical) is when the value chain has a dominant player who sets or controls various functions along the chain and has a tendency to want to govern the chain. The lead firm determines the overall character of the chain and can be a vertically integrated enterprise.
In conducting the value chain analysis, we must understand the relationships between lead firms and local producers and the opportunities and constraints that result from SME or even MSE entering such a relationship.
Inter-firm relationships embedded in vertical and horizontal linkages
How do we measure and analyze relationships? To understand and measure relationships we look at:
- how market power is distributed within a value chain
- how information and learning flow; are there learning systems in place; are association activities geared to knowledge transfer?
- how power, learning and benefits are distributed? To what extent are links established between MSEs and businesses at different levels of the value chain and with support markets?
- How information and learning takes place in crucial to create and sustain competitiveness. It is a pre-condition for upgrading, and learning can effect benefit and incentives. Thus if small producers are to compete and upgrade to respond to market opportunities, chain analysis must look to see if small producers have access to new skills, know-how and learning on a continuous basis, rather than on a one shot event such as a workshop or a training cycle.
Where do we look to see if learning and acquiring new skills take place on a continuous basis? Initially, knowledge about alternative markets and market opportunities is acquired through horizontal linkages among same line operators. Buyers generally are not the source of such information.
Where do we look to see if knowledge and skills are acquired about how to produce and deliver a product according to the market standards and requirements? This usually comes from through vertical linkages and usually from buyers.
Upgrading – Incentives, risks and benefits
Upgrading is the process sought for firms and value chains to increase their competitiveness as well to impact in a positive manner social development. In value chain analysis, we must find if there are catalysts to firm and chain upgrading. The starting points are where learning takes place, and if it takes place, are there indicators that learning is continuous?
Learning is a pre-condition to upgrading at the firm level, and continuous learning comes from fostering improved vertical and horizontal relationships between buyers and sellers. We need to know if improvement in these inter-firm relations is taking place within the chain.
Learning can improve benefits, and benefits over time can change power. Benefits create incentives (or disincentives) for upgrading and thus affect competitiveness.
Information exchange
Value chain analysis must determine where learning comes from over time. If buyers are the catalysts for change and learning, is there evidence that some buyers are pushing for change and learning? What drives them to push and can it be replicated?
If input suppliers are the sources of information, is there evidence that they are providing reliable and transparent information on matters like seed germination rates and the types of diseases that can be treated with the insecticide they stock and are marketing? What would drive them to become agents for product information dissemination?
If traders are to be disseminators of innovation and new products, is there evidence from interviews that they are fulfilling these tasks? What incentives would entice traders to share product and technical innovation?
If service providers are to be contributions to learning at different levels of the chain, is there evidence that value chain firms are hiring them as trainers or consultants, and have the firms become repeat customers of the service provider? In a market system, what is missing to increase sector specific or cross-cutting presence of service providers in the value chain?
In summary, relationships among actors in a value chain are important because relationships can be improved without creating market distortions, and can be modified through effective leadership, incentives, increased knowledge sharing and trust building that increase benefits not only to SMEs trying to participate and gain more from the value chain, but will drive enterprises to move into higher value added activities.
Data collection
A good analysis begins with good data collection, from initial desk research to targeted interviews. Data collection involves interviewing value chain participants, buyers and industry experts with an objective of discerning participants’ perception of opportunities and constraints, and the extent to which learning and benefits flow to participants.
From the outset, the value chain analysis team must agree on the structure for organizing the data, permitting analysis of opportunities, constraints and interventions. The value chain framework (factors affecting competitiveness) provides such a structure for organizing firm-level and systemic opportunities and constraints collected during the data collection step.
Who to interview?
Representatives of firms and individuals who operate presently in the industry. Included are:
- representatives of all functional categories; input suppliers, producers, traders, processors, wholesalers, retailers and importers
- support market/service providers such as transportation providers, business support services and financial services
- government officials (local, regional/national and global)
- Representatives of stakeholders of what the industry could become:
- be on the alert for potential catalysts (firms that pursue positive change) during data collection and analysis, even though they may not be identified them at the outset during the interviews.
- "champions” recognized for their innovative approaches who have adopted new technologies and foster knowledge sharing. Interviews with these are useful to help understand the value chain and clarify inconsistencies, but they are not meant to be statistically meaningful.
Analysis of data:
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One cat
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Lots of fish
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colors?
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