Using Value Chain Approaches in Agribusiness and Agriculture in Sub-Saharan Africa

From microLINKS Wiki

This guide by JE Austin for the World Bank presents a range of concepts and tools with good, detailed case studies and examples to illustrate methodologies. It is a good source of definitions and distinctions between various concepts such as supply chain, value chain, and cluster, and includes a literature review (which mentions some AMAP publications). The guide identifies a common weakness of these approaches as the focus on cost efficiency, which is insufficient for making decisions about implementation for value adding, not merely cost reduction (USAID approach addresses these weaknesses related to dynamism of value chains and markets and environment).

There are 13 implementation tools, and a good diagram showing where in the project cycle the tools are used. The tools are summarized below.

1. Selection: Tool uses Revealed Comparative Advantage (RCA) index. Also uses Domestic Resource Cost (DRC) coefficient, which measures the dollar cost in domestic resources of earning or saving a net dollar of foreign exchange to show comparative advantage or disadvantage. These data must be tested using a sensitivity analysis and considered with other important decision criteria. Among these criteria are market strength, domestic capacity, and level of commitment. The tools explains how to measure each.
2. Strategy: Developing a strategy requires first analyzing value chain data, conducting a SWOT analysis, and using a competitiveness diamond analyzing four factors: 1) factor (input) conditions; 2) demand conditions; 3) related/supporting industries; and 4) context for firm strategy and rivalry. The tool provides methods for then assessing strategic and operational productivity, quality of supply chain management, human resources, business environment.
3. Benchmarking: The tool recommends benchmarking overall value chain performance, then breaking down into key performance components (yields, transport efficiency, market access, unit price, etc) and individually benchmarking each to identify relative strengths and weaknesses. The next step is to determine the course of action with stakeholders. The guide includes steps and methods for collecting data, as well as gap analysis tools.
4. Upgrading and deepening the value chain: Upgrading means increasing competitiveness by moving in a new direction. Deepening means addressing gaps, specializing, vertical integration, new technologies. This is a tool to prioritize opportunities and add activities.
5. Identifying business models for replication: Successful models can be identified through value chain analysis, and then pilot enterprises launched to test them and encourage replication. Replication can also be encouraged through promotional campaigns, business associations, technical assistance, etc. Example from Pakistan dairy: a public-private institution to promote the dairy sector facilitating replication of collection centers.
6. Forward and backward integration: Considers context and operational benefits/concerns.
7. Horizontal collaboration: Identifies areas for join operation with increased efficiency and effectiveness, and then formalizes arrangement.
8. Positioning products and value chains for greater competitiveness: The tools uses a 2x2 matrix to describe product scope (value added, complexity) and differentiation (price point, attributes, customer perceptions), and then explains how to use this to understand possibilities and requirement for repositioning. #Applying standards and certifications: Not really a tool.
9. Identifying needed support services: This tool involves mapping the services currently being provided (their sustainability, quality, and location within the chain), potentially viable services. After mapping, interventions can be designed to introduce a service where there is demand. Feasibility studies, etc.
10. Improving the operating environment by promoting public-private dialogue: Components of public-private dialogue and steps for promoting it. Sample checklist of issues to address. Effective groups, characteristics, etc.
11. Achieving synergies through clustering: Relationship between VC and clusters, list of linkages to exploit, five phases of a clustering initiative. Cluster evaluation.
12. Monitoring achievements in value chain performance: Two questions: 1) what to monitor and 2) what level. The tool relies on the PAID framework, which measures process indicators, action indicators, investment indicators, delivered results indicators.

Back to Resources