Participatory Market Chain Analysis

for Smallholder Producers

Mark Lundy, María Verónica Gottret, Carlos Ostertag, Rupert Best, and Shaun Ferris Participatory Market Chain Analysis

for Smallholder Producers

Mark Lundy, María Verónica Gottret, Carlos Ostertag, Rupert Best, and Shaun Ferris i

Copyright © 2007 Centro Internacional de Agricultura Tropical Reprint edition published by Catholic Relief Services, Baltimore, 2008.

ISBN 0-945356-41-2

First edition published 2007 by

Centro Internacional de Agricultura Tropical

(International Centre for Tropical Agriculture)

Cali, Colombia

ISBN 978-958-694-092-4

For information, address

Catholic Relief Services

228 W. Lexington St.

Baltimore MD 20201

USA

www.crs.org

AGROVOC descriptors in English:

1. Small enterprises. 2. Rural areas. 3. Farmer participation. 4. Market research.

5. Farmers. 6. Small farms. 7. Markets. 8. Developing countries.

Local descriptors in English:

1. Participatory research. 2. Productive chains. 3. Rural agroenterprises.

AGROVOC descriptors in Spanish:

1. Empresas pequeñas. 2. Zonas rurales. 3. Participación de agricultores.

4. Investigación de mercados. 5. Agricultores. 6. Explotación en pequeña escala.

7. Mercados. 8. Países en desarrollo.

Local descriptors in Spanish:

1. Investigación participativa. 2. Cadena productiva. 3. Agroempresas rurales.

I. Gottret, María Verónica. II. Ostertag Gálvez, Carlos Felipe. III. Best, Rupert.

IV. Ferris, Shaun. V. Centro Internacional de Agricultura Tropical. VI. Tit. VII. Ser.

AGRIS subject category: E20 Organization, administration and management of agricultural enterprises or farms / Organización, administración y manejo de empresas agrícolas o fincas LC classification: HD 9000 .F8

Republication of this report is made possible by the generous support of the American People through the United States Agency for International Development (USAID) Bureau for Democracy, Conflict, and Humanitarian Assistance’s Office of Food for Peace under the terms of Catholic Relief Services’ Institutional Capacity Building Grant Award Number AFP-A-00-03-00015-00. The contents do not necessarily reflect the views of USAID or the United States Government.

ii

Contents

Page

Preface

ix

Acknowledgments

x

Introduction and Background to the Guide

1

THE THEORY

Section 1. An Area-based Approach to Rural Enterprise Development 5

Introduction

5

Food Security versus Income Security

6

Area-based Approach to Rural Enterprise Development

7

Agroenterprise as a Catalyst for Enabling Rural Innovation 10

Section 2. Market Chains and Service Providers: Basic Concepts 12

Introduction

12

Local Service Providers and their Role in Sustaining Market Chains 14

Using Marketing Skills to Reduce Rural Poverty

16

Situation Analysis

16

Section 3. Basic Steps in Developing a Competitive Market Chain Strategy 19

Introduction

19

Designing a Strategy for Increasing Market Chain Competitiveness 19

Vision of the Market Chain

20

A Wider Vision of the Market Chain

21

Market Chains and Innovation

23

Individual Enterprise Efficiency versus Market Chain Efficiency 24

Raising Competitiveness through Market Chain Quality Assurance 25

Raising Competitiveness through Mark of Origin (Apellation/Labeling) 25

Market Chains, Supply Chains, and Value Chains

25

Scale of Evaluation and Level of Participation

26

Considerations When Applying the Method at Diverse Scales of Intervention 26

Observations on the Use of Participatory Methods

28

Summary

30

Section 4. Guidelines for Adapting the Process to Local Needs 31

Introduction

31

Market Orientation

32

Market Chain Focus from “End to End”

32

Coordination among Different Actors to Identify and Develop Synergies 32

Working with the Private Sector

32

Selection of Key Informants in Decision-Making Processes 32

Respecting People’s Time, Needs, and Differences

32

Combining Research and Development Activities to Promote Innovation 33

Mixing Short-, Medium-, and Long-term Activities with Available Resources 33

Identifying a Process Facilitator

34

iii

Participatory Market Chain Analysis for Smallholder Producers Page

THE PRACTICAL WORK

Section 5. Selecting a Market Chain

37

Introduction

37

Selection Criteria Used to Choose an Appropriate Market Chain 38

Definition of Individualized Selection Criteria

40

A Methodology for Prioritizing Market Chains

40

Selection Tools

41

Merits of a Pilot Project to Test the Process

43

Section 6. Planning and Executing a Rapid Market Survey

45

Introduction

45

Planning for the Survey

46

Starting the Market Chain Analysis

47

Survey Teams

48

Checklists and Summary Sheets

48

Documenting Results

51

Using Results

53

Feeding Back Results

54

Section 7. Identification of Key “Actors” in Market Chains and Steps for Business Planning

55

Introduction

55

Identification of Actors

56

Differentiation of Actors within the Market Chain

57

Meetings to Convene the Actors

59

Organizing Workshops

59

Sources of Market Chain Information

60

Section 8. Participatory Market Chain Analysis

62

Introduction

62

Criteria for the Analysis of Complex Systems

62

Formation of Working Groups

64

Tools

64

Mapping the Market Chain

65

Provision of Business Development Services

68

Market Chain History

71

Section 9. Analysis of Critical Points in the Market Chain 74

Introduction

74

Identification of Limiting Factors

75

Analysis of Cause and Effect

78

Comparing the Market Chain to the Competition—“Benchmarking”

80

Prospective Market Tendencies and Defining a Simple Marketing Strategy 83

Designing a Logical Path to Increase Competitiveness

84

Visioning—Where Do We Want to Go and How Do We Get There?

85

Preparation of Business Plans

87

iv

Contents

Page

Section 10. Negotiating a Strategy to Increase Competitiveness 90

Introduction

90

Systematization of Results: Technical Document

91

Negotiation Workshop

92

Design of the Final Strategy to Increase Competitiveness 95

Section 11. Monitoring of Strategies to Increase Competitiveness: General Guidelines 98

Introduction

98

Monitoring and Evaluation

98

Possible Factors for a Monitoring and Evaluation System

99

Results on Livelihoods (by Gender, Population Groups, and Economic Status) 100

Appendices

1.

Marketing Checklist to Evaluate Key Points in the Market Chain for a Commodity 102

2.

Summary Information Sheet: Example from Banana Market Survey 103

3.

Outline of a Business/Investment Plan

104

Glossary

106

Bibliography

113

v

Participatory Market Chain Analysis for Smallholder Producers Page

List of Figures

1. Flow chart of key stages in the participatory agroenterprise development approach 8

2. Market chain and its business support services

13

3. Forward and backward market linkages for enterprise

14

4. Stages in the design of a strategy to increase competitiveness 19

5. Components of a market chain

20

6. Wider perspective of a market chain

21

7. Decision tree of rural agroindustrial committee of CIPASLA 41

8. Sources of primary information

49

9. Wider perspective of a market chain

56

10. Triangulation of data

63

11. Process of forming working groups

64

12. Coffee market chain map, municipality of Sulaco, Honduras 67

13. Analysis of critical points in the market chain

75

14. Example of a problem tree

79

15. Simple example of a general problem tree for a market chain 80

16. Complete example of a general problem tree for a market chain 81

17. Using a problem tree to identify solutions

82

18. Example of a solution tree

82

19. Definition of a logical path

86

20. Complete simple logical path with actions and results 86

21. Complete logical path with parallel actions and results 87

22. Example of a logical path for a strategy to increase competitiveness 88

List of Tables

1. Planning, organization, and timing for rural agroenterprise development 9

2. Service providers that support enterprise development 15

3. Enterprise relations: Production chain versus value chain 26

4. Considerations when applying the method at different scales 29

5. Identifying a process facilitator

34

6. Ansoff matrix for risk assessment

39

7. Growth prospects and product types

42

8. Technical and environmental issues against feasibility index 42

9. Organizational capacity assessment

43

10. Assessment of products by weighted scoring

43

11. Results of a rapid market survey for panela (unrefined sugar) 52

12. Actors identified by functional category in the market chain 57

13. Differentiation of actors in the functional category of production 57

14. Timeline of design workshops for a strategy development 61

15. Matrix of the analysis of services received (by clients) 69

16. Matrix of the analysis of services supplied

69

17. Example of production services supplied in Guamote

70

18. Example of production services received in Guamote

70

19. Example of the timeline of the farmer association development 72

20. Incomplete example of a pairwise ranking exercise

76

21. Complete example of a pairwise ranking exercise

76

22. Final ranking of limitations

77

23. Example of a consolidation of limitations in a market chain 77

24. Simple benchmarking tool

83

25. Market strategy opportunities for mango market chain of Ecuador 85

vi

Contents

Page

List of Tables

26. Market opportunities and requirements for broccoli in Ecuador 85

27. Example of a matrix of problems per activity and actor 93

28. Example of business opportunities matrix and investment plans 93

29. Identification of alliances by each stage of the market chain 94

30. Time and resources required to implement a marketing strategy 95

31. Indicators and sources of verification within the market chain 100

32. Indicators and sources of verification of the market 100

33. Indicators and sources of verification of livelihoods 101

List of Boxes

1. Organic cacao and sustainable advantages

24

2. Example of a value market chain: “Las Brisas,” Santa Cruz de Turrialba 27

3. Selection criteria used for discarding options

44

4. Some practical tips for conducting an interview 50

5. Example of an actor typology from Santa Cruz de Turrialba, Costa Rica 58

6. Black pepper in Pucallpa, Peru

96

7. Cut flowers in Cauca, Colombia

96

vii

Participatory Market Chain Analysis for Smallholder Producers About the Authors

Mark Lundy

Corresponding author, based in CIAT headquarters, Cali, Colombia. United States of America National.

Senior Research Fellow, Rural Agroenterprise Development Project.

E-mail: m.lundy@cgiar.org

María Verónica Gottret

Based in CIAT headquarters, Cali, Colombia. Bolivian National.

Senior Research Fellow, Rural Agroenterprise Development Project.

E-mail: m.gottret@cgiar.org

Carlos Ostertag.

Based in CIAT headquarters, Cali, Colombia. Dual Colombian/United States of America National.

Senior Marketing and Business Administration Officer, Rural Agroenterprise Development Project.

E-mail: c.ostertag@cgiar.org

Rupert Best

Based in FAO offices, Rome, Italy. British National.

Senior Technical Advisor for the Global Forum for Agricultural Research.

E-mail: rupert.best@fao.org

Shaun Ferris

Based in CIAT headquarters, Cali, Colombia. Dual British/Australian National.

CIAT Project Manager, Rural Agroenterprise Development Project.

E-mail: s.ferris@cgiar.org

viii

Preface

The Participatory Market Chain Analysis

2. A Participatory Guide to Developing

Guide was developed as a key step in the

Partnerships, Area Resource Assessment and

‘area-based approach to rural

Planning Together.

agroenterprise development’. The guide is based

3. Identifying Market Opportunities for Rural

on the principles of developing market-led

Smallholder Producers.

interventions that go beyond single intervention

4. Participatory Market Chain Analysis for

projects. The aim of this guide is to enable

Smallholder Producers.

service providers to work with a range of actors

5. Evaluating and Strengthening Rural

in selected market chains and design

Business Development Services.

interventions that initiate systemic changes in

6. A Market Facilitator’s Guide to Participatory

the marketplace.

Agroenterprise Development.

7. Collective Marketing for Smallholder

The approach seeks to empower producer groups

Producers.

to engage with markets more effectively and

8. A Guide to Rapid Market Appraisals for

strengthen their business linkage with other

Smallholder Agroenterprise Development.

entrepreneurs. The goal is to upgrade the level of

9. A Guide to Agricultural Marketing Extension.

competitiveness for all actors within a market

10. A Guide to Policy Analysis for Smallholder

chain and thus enable rural producers, traders,

Agroenterprise Development and Advocacy.

and processors to make the shift from

opportunistic and irregular market linkages to

Note to users

systematic players within growth value chains.

Service providers should read the guides in their

entirety, to absorb the ideas and concepts prior

This guide is the fourth in a series of documents to going to the field. Our experience has shown

designed to support agencies implementing

that best results are attained when these

participatory agroenterprise development

processes are not implemented in a mechanical

programs operating within defined geographical

manner; rather that the principles are

areas. The guide series currently includes:

interpreted and adapted to local conditions

based on the marketing environment, available

1. Strategy Paper: A Participatory and Area-

resources, and anticipated scale of

based Approach to Rural Agroenterprise

implementation.

Development.

Discover your Innovation

ix

Participatory Market Chain Analysis for Smallholder Producers Acknowledgments

This guide is the result of several years of · DFID in support of the Agroenterprise project participatory research in several pilot site

areas in Latin America, and more recently

· in Latin America and Africa.

SDC support to the Agroenterprise project in

in Africa and Southeast Asia. The guide has been Vietnam and Laos.

tested with farmer organizations, local and

international nongovernmental organizations,

This text attempts to document and share the

governmental organizations, and the private

work of these pioneers so that other rural

sector. Without the efforts and ideas from each

communities can apply what has been learned,

of the partners below this document would not

and thus contribute to improving their

have been possible. We would like to recognize

livelihoods.

particular support received from:

·

The authors also wish to acknowledge the

Communities of the Cabuyal River micro-

generous support provided by the MINGA

· watershed in Cauca Department, Colombia.

Program of the International Development

Support organizations in the Rural

Research Centre (IDRC) of Canada which

Agroindustrial Committee of the Consorcio

permitted the development of field activities, and

Interinstitucional para una Agricultura

the elaboration of this guide. The support of

· Sostenible en Ladera (CIPASLA).

many CIAT colleagues have served in a similar

Communities of the municipalities of Yorito

fashion, as have the queries of students in the

· and Sulaco, Yoro Department, Honduras.

First and Second International Courses,

Microenterprise Committee of the Comité

“Linking small-scale rural producers to market

Local para el Desarrollo Sostenible de la

chains: Design of strategies to increase

· Cuenca del Río Tascalapa (CLODEST).

competitiveness,” offered jointly with the Center

Members of the Consorcio para el

for Competitiveness of Eco-Enterprises of the

Desarrollo Sostenible de Ucayalí (CODESU) of

Centro Agronómico Tropical de Investigación y

· Pucallpa, Peru.

Enseñanza (CATIE), of Costa Rica.

CARE Nicaragua and in particular the

RENACER and FAROL projects located in

We give thanks to DFID for their logistic and

· Estelí and Matagalpa, respectively.

financial support over many years which have

CRS Eastern Africa and their support to the

enabled partners to learn, discover, and create

learning alliance development process in

this body of knowledge. Thanks also go to USAID

· Eastern Africa.

and CRS for providing funds to publish these

ASARECA and its support to agroenterprise

documents.

activities through the regional marketing and

· agroenterprise network FOODNET.

Technical and language editing of this document

PABRA and its support to agroenterprise

was done by Libby Finney. A special word of

development in Eastern and Southern Africa

thanks to Jorge Enrique Gutiérrez for his

through the Enabling Rural Development

drawings.

project.

x

Introduction and Background to the Guide

Introduction and Background to the Guide

Mr. Busy

Mr. Sam

Mr. Movit

Mr. Marco

Prof. Margaret

Mrs. Jemimah

Buyer for

Chairman

Rapid Transit

NGO Market

Market

Fruity

Best Fruit

Green Farmer

Traders

Facilitator

Researcher

Processors Ltd.

Supermarkets

Association

and Academic

Ltd.

The starting place for this guide is a

step. At this point you will have completed the

detailed participatory analysis of a

following tasks:

selected market chain, followed by an

evaluation of critical points that need to be

From the work in Guide 2 you will have:

addressed when designing an agroenterprise

project to engage in the selected market chain.

1. Selected a project area.

In cases when a service provider has already

2. Undertaken a biophysical and

selected a product or commodity to integrate

socioeconomic analysis of your area.

into an agroenterprise approach, this guide

3. Defined the rules of engagement and

maybe also be considered as the starting point

developed a vision for your community.

in the agroenterprise approach. For those who

4. Identified partners who will constitute the

are following CIAT’s Rural Agroenterprise

agroenterprise working group.

Development Strategy, this guide is the fourth

5. Identified farmer organizations interested in

developing agroenterprises.

1

Participatory Market Chain Analysis for Smallholders Producers From the work in Guide 3 you will have:

4. Guidelines for Adapting the Process to Local

Needs.

1. Undertaken a rapid market opportunities

5. Selecting a Market Chain.

identification survey to identify a long list of

6. Planning and Executing a Rapid Market

options that are or could be produced in

Survey.

your area.

7. Identification of Key “Actors” in Market

2. Used selection criteria to reduce many

Chains and Steps for Business Planning.

product options to develop a short list.

8. Participatory Market Chain Analysis.

3. Undertaken a production, financial, and

9. Analysis of Critical Points in the Market

market evaluation of short listed products.

Chain.

4. Discussed feasible options with farmer

10. Negotiating a Strategy to Increase

groups.

Competitiveness.

5. Selected possible options to develop into

11. Monitoring of Strategies to Increase

agroenterprise projects.

Competitiveness: General Guidelines.

Based on this previous work, the reader will

To facilitate better understanding, each section

have selected at least one product option for

is structured in the following way:

participatory market chain analysis. For service

providers with considerable marketing

· Guiding questions that introduce the

experience more product options maybe

themes and ask the reader to reflect on their

considered, but it is recommended that first

time users of this methodology test the process

· experience.

Conceptual support relating to the themes

with one option.

· introduced.

Appropriate tools to facilitate participative

This guide is divided into 11 sections. Each

processes of planning, analysis, and design

section is designed to explain the reasons

of strategies to increase competitiveness with

behind the methodology and steps that are

smallholders and the other enterprise actors

useful in the field. The sections in this guide

include:

· in the market chain.

Practical examples of experiences with this

methodology in Latin America related with

1. An Area-based Approach to Rural Enterprise

Development.

· the theme of the section.

A review at the end of the section that

2. Market Chains and Service Providers: Basic

restates the main ideas.

Concepts.

3. Basic Steps in Developing a Competitive

Market Chain Strategy.

2

THE THEORY

An Area-based Approach to Rural Enterprise Development SECTION 1

An Area-based Approach to Rural Enterprise

Development

Guiding questions

1. Why is being competitive in the marketplace more important today than 20 years ago?

2. Why have rural development approaches oriented towards agricultural productivity failed to improve rural family income?

3. What are the elements of an area approach for rural enterprise development?

4. Who are the local actors that participate in this approach?

5. Why is the formation of a local group for inter-institutional work important for facilitating processes of rural enterprise development?

6. Why is diversification a useful option for small-scale farmers?

Introduction

urbanization, generally fostered by

Traditionally farmers have made decisions on

industrialization, demand for food from urban

what they should grow, what they should keep

dwellers becomes dependent upon more

for home consumption, and what they are able

sophisticated arrangements that require

to sell at the marketplace. In former times sales

aggregation of farm produce, transportation,

would have centered on local markets and it

storage, wholesaling, processing, and retailing.

would have been rare for a farmer to venture far

As cities expand, food supply systems develop

afield in search of new market opportunities or

into increasingly longer and more complex

to consider developing new, higher value

market chains with many market channels and

products. This traditional form of agriculture

specialization of roles in the market chain

starts to change as communities and nations

based on product type, levels of added value

begin to modernize. Through processes of

and market segmentation.

5

Participatory Market Chain Analysis for Smallholder Producers In most cases marketing system work well,

Prices are no longer controlled by governments

however problems can occur in the food supply

but are subject to the laws of supply and

system when there are shocks, such as severe

demand. The role of government has reduced

drought, floods, major disease outbreaks or civil

to regulation while the operations of the

unrest which can disrupt market supplies. In

market are left to the devices of many

the case of agricultural markets, problems also

individuals, companies, and associations that

occur due to seasonal effects, which can be

make up the private sector. For many small-

exacerbated by the lag time between farmers

scale farmers, their position has changed over

observing a price trend or opportunity and

the past 40 years from being a free local agent,

being able to respond, after making decisions to

to a virtual government contractor and most

plant, grow, and harvest a specific crop or to

recently to an agent that has to compete with

rear animals. Consequently, changes in market

countries across the globe, even to supply

supply conditions in one year can lead to major

local markets. Farmers regardless of size must

swings in the supply and demand of

assume the full risk of doing business in this

agricultural goods in subsequent years. This is

new trading environment many smallholders

sometimes referred to as boom to bust

have to competing against farmers who receive

marketing cycles.

subsidies.

In an attempt to avoid problems in food

A large percentage of the rural population in

supplies and reduce price volatility within the

the developing world therefore finds itself

agricultural marketplace, governments in many

facing a crossroads, on the one hand,

countries have taken it upon themselves to

traditional products are steadily losing value

regulate the market, setting up support

in a rapidly globalizing market, and on the

measures such as subsidies, floor prices, and

other hand, their natural resource base is

quotas for specific commodities in an attempt to

being eroded due to pressures that place

match demand with supply.

today’s food and income ahead of care for

tomorrow’s resources. As a result, many

In the 1940-1950’s period, many countries in

families face an increasingly difficult future in

the developed and developing world managed

agriculture and increasing numbers of people

food systems through subsidies to support

are abandoning the countryside in search of

agricultural production. During this time

alternative options in cities and even abroad,

governments set prices, assisted with

without achieving or being able to contribute

cooperative development, and invested in public

towards dignified livelihoods for their family

storage and transport systems. This era of

members.

government support was good for farmers, as

the government shared the business risk and

Confronting this reality are governments,

farmers were able to plan production based on

donors, and development organizations that

a known price. Unfortunately most

aim to support rural development projects

governments were unable to adapt to changing

with an increasing focus on raising incomes.

times. Procurement agencies became weighed

Unfortunately, many development projects

down by poor management which led to

and development practitioners only look at

uneconomic internal price structures. Over

one part of the market chain, on-farm

time, farmers in developing countries were

production, and these projects often have

unable to compete on international markets

limited effectiveness on livelihood issues.

and maintaining high domestic support prices

led to massive internal debts. When internal

Food Security versus Income

debts could no longer be paid, the International

Security

Monetary Fund (IMF) and World Bank were

A focus on production is often justified by the

required to renegotiate loans. As a result, many

concept that smallholder producers should

developing countries had to adopt reform

focus their efforts on having sufficient food to

packages known as the Structural Adjustment

provide for the family first and thereafter base

Programs (SAPs).

their marketing strategies on surplus

production. The ability of a community to

The reform programs meant that governments

avoid famine is clearly a sensible approach

withdrew from agricultural markets and in the

and food security is a basic tenet in the

last 20 years, markets in most developing

development pathway. Unfortunately, the food

countries have been increasingly liberalized.

security approach has tended to dominate

6

An Area-based Approach to Rural Enterprise Development agricultural interventions for the past

Working with a specific community, the service

30-40 years, meaning that development

provider1 can build a clear understanding of

projects, regardless of market access issues,

local marketing conditions and how best to

have remained focused on increasing

work with farmers to resolve critical points in a

production of low value, staple food rather

particular market chain. Developing this

than taking on a broader concept of economic

knowledge with farmers is a key element in

security. This approach takes advantage of a

developing sustainable and competitive

more diversified approach to farm incomes

agroenterprises. Before investing in a sector the

based on local opportunities, local assets, and

service provider and for example, a lead farmer

the competitive advantages of the community

group, should evaluate the likely affects that

in which the project is located. Major

changes such as (i) increasing productivity,

development projects are all too often based

(ii) improving quality, and (iii) increasing

on macro economic analyses that attempt to

volume of sale, will have on their target market.

achieve growth through improving traditional

Our view is that projects designed with

food security cropping systems and, by doing

adequate market information can improve the

so, subject many thousands of communities

sustainability of development efforts and that

to a limited economic outlook, based on a

increased incomes are essential if rural

national perspective. In this scenario,

producers are to complement the resources

countries that are maize-based work on maize

provided by development actors.

production, countries that are rice-based

produce more rice. The first result of food

Most importantly, by taking a market or

security is achieved, but the communities are

enterprise approach, the end point in the

often unable to gain the skills to take on the

development process changes from a short-term

second step of finding and developing other

physical goal, i.e., increasing the amount of

supplementary income streams.

maize that is produced by a farm family, to a

longer term social goal in which people learn

An alternative “market driven” approach, as

skills that will enable them to adapt continually

outlined in this series of guides, aims to

in a changing environment, that is to be able to

empower rural communities with basic

innovate in the face of change.

marketing skills that will enhance their ability

to engage with markets in a more sustainable

Area-based Approach to Rural

and stable manner. To achieve the shift from a

Enterprise Development

production to a market orientation means that

To address these issues, CIAT’s Rural

farmers need to be more organized. They must

Agroenterprise Development Project (RAeD) has

acquire new skills in financial and business

developed methodologies that aim to respond to

management and be able to respond to

the entrepreneurial needs of rural development

changes in dynamic markets. Acquiring these

organizations. The overall process is entitled

skills also means that service providers,

“A Participatory and Area-based Approach to

involved in providing agricultural advice, also

Rural Agroenterprise Development” (Ferris

need to gain new skills to assist local

et al., 2006), which has been developed and

communities to plan and sell their goods and

tested with partners in Latin America, Africa,

services based on market demand, and to

and Southeast Asia. The approach comprises a

work on sustainability through markets

series of interconnected methodological steps

rather than on handouts.

that seek to improve local capacity in linking

farmers to markets. Within each element, there

The approach to rural agroenterprise

are sub-steps that guide the service provider

development begins with participatory

and community towards agroenterprise

processes to ensure the full involvement of

selection and market engagement: The key

community members. The conceptual

steps in the process are shown in Figure 1.

thinking starts from the marketplace but

planning for the market is undertaken with a

clear understanding of the needs, capacities,

1.

Service provider in this context refers to the agency

and desires of the clients, i.e., the rural

or group of actors that take on the mandate or role of

families being targeted by a specific

coordinating a development project or interventions

to support a community. The service provider could

development intervention.

also be referred to as the “change agent”.

7

Participatory Market Chain Analysis for Smallholder Producers Agroenterprise strategy paper

Guide 1

Identify intervention site

Reconnaissance survey

Form working group

Guide 2

Area-based resource assessment

Planning and monitoring systems

Identifying market opportunities for smallholder producers Guide 3

(Classify market options according to level of risk)

Strategy 1

Strategy 2

Lower risk, short term

Higher risk, higher value

Market assessment of existing products

Market opportunity identification

( focus on market penetration)

( seeking diversification)

Participatory market chain analysis for smallholder producers Guide 4

Design and establishment of new enterprise

Evaluating and strengthening of rural business development services Guide 5

Collective action for marketing

Guide 7

Approaches for scaling up and learning alliances

Evaluate process performance and impact

Knowledge management and advocacy

Figure 1. Flow chart of key stages in the participatory agroenterprise development approach.

Please note that Guide 6: “The Market Facilitator’s Guide” is a summary of Guides 2-5.

8

An Area-based Approach to Rural Enterprise Development Each of these elements is approached through a

agroenterprise development team composed of

series of participatory methods that address

various organizations and local actors with

issues of diagnosis, organization, planning,

skills and capacity to:

action research, learning, and socializing

information. These steps serve to generate,

(a) Identify competitive market opportunities for

systematize, and share information and

the project area, based on the needs of

knowledge with the aim of building agreements

diverse populations and/or ecosystems.

for action, and in turn to increasing the

(b) Analyze market chains and propose concrete

probabilities of market success. The information

actions in research and development to

in Table 1 shows a general timeline to complete

increase their competitiveness; and design

the first four stages; these timelines are guides

agroenterprise activities in which target

and implementing agencies need to negotiate

farmers can invest.

with their partners on actual investments in

(c) Coordinate supply and demand for specific

time and other resources as their funds and

business development services, and facilitate

availability allow.

markets for business development services

on a continual and dynamic basis.

At the end of these four stages in the process,

participants will have established an

Table 1. Planning, organization, and timing for rural agroenterprise development.

Planning and

Intermediate product(s)

Estimated time

Processes and actions to be

organization

established

Diagnosis of area

· Establishment of agroenterprise 2 to 3 months · Consensus on what to do, and Formation of RAeD

working group.

how and when to do it.

work team

· Development of partnerships.

· Agreement and coordination of

for implementation.

·

actions among actors.

Area diagnostic.

· Action plan (visioning).

· System of monitoring, evaluation,

and learning.

Identification of market

· Rapid market study (local,

3 to 4 months

· Establish relations with actors

opportunities

regional, and/or national).

·

in the markets.

Characterization of market

· Generation, analysis, and

options.

·

diffusion of market information.

Participative selection of

market options.

Participative analysis of

· A strategy to increase

3 to 4 months

· Implement research and

market chains

competitiveness designed for

per market

development actions of the

each prioritized market chain.

chain

strategy to increase the market

chain’s competitiveness and

income of its actors.

Implement the

· At this stage the agroenterprise Typically

enterprises

· This stage is when design is

agroenterprise option

team invest and establish their

turned to action and evaluation.

agroenterprise.

work around a

specific crop/

animal cycle

Identification of supply,

· Diagnostic of supply, demand, 3 to 4 months · Improve rural enterprise demand, and gaps in the

and gaps in enterprise

development services existing

local business

development services in the

in the area.

development services

area.

·

· Establish new rural enterprise

Design of strategies to

development services

strengthen the markets for

requested in the area.

enterprise development

· Links with external actors that

services in the area.

can offer the services requested

in the area.

9

Participatory Market Chain Analysis for Smallholder Producers Although the methodology for the

and facilitate farmers’ access to local

agroenterprise development process has been

business support services.

presented as a linear set of events with fixed

5. Transforming research from generators of

contents and times, the process should not be

new knowledge and technologies to service

considered a recipe. Each process of rural

providers for enterprise customers—

enterprise development will be different, based

government, NGOs, private sector, and

on the conditions of the area where the

farmer organizations.

approach is implemented, the capacities and

interest of the participants, and the needs that

The ability of smallholders in developing

emerge from this interface.

countries to address these issues is important

as they face an increasing imperative to

The methodology should be viewed as a set of

incorporate themselves into the market

principles and skills that are developed through

economy in order to generate cash income that

community action in a flexible and interactive

will allow them to meet their basic needs, and

manner. The service providers should take care

thereby improve their livelihoods. These

to encourage local adaptation and innovation.

smallholders have been accustomed primarily

The service providers should also take time for

to producing basic food staples for their own

periodic evaluation of the process according to

subsistence, with a little surplus to buy

the needs of the community, taking into

essentials. Many of the products that are

account their experiences and the context. It is

produced by small-scale farmers are of low

important to document and systematize local

value and even the so-called “cash crops” have

experiences so that information can be

experienced severe price declines in their real

socialized and shared with others, and thus

terms over the past 2 to 3 decades. The

lead to the identification of general rules and

increasingly harsh or competitive marketing

lessons learned, that enrich and improve the

reality within the agricultural sector is the

approach as well as the specific methods.

result of the trade liberalization process,

globalization, improved production efficiency of

Agroenterprise as a Catalyst for

medium to large-scale producers, and

Enabling Rural Innovation

oversupply of the major commodity markets,

Although there is a growing consensus that

agroenterprise development is a robust process

Among the options that smallholders have for

that offers many small farm families in Africa,

confronting this situation are:

Latin America, and Southeast Asia a ladder out

of poverty, there are a number of challenges

· Improving the competitiveness of the

that must be met in order to make this happen.

These include:

· products they grow.

Diversification, by incorporating into their

production system higher value crops or

1. Building the skills base and social capital of

livestock that have an identified market

farmers to enable them to gain a better

understanding of markets and how to

· demand.

Adding value to and/or achieving economies

respond to dynamic market needs.

of scale through collective action for both

2. Enabling small farmers to diversify their

production and marketing of their traditional

outputs so that their efforts can benefit from

high value market opportunities as well

· crops and livestock products.

Entering new and more equitable trading

support low value staple food systems and

arrangements with larger buyers through

thus take advantage of market opportunities

mechanisms such as fair trade and labeling

profitably.

based on method of production such as

3. Providing farmers with basic methods and

organic or by “mark of origin2” appellation

tools for group formation so that the many

systems.

millions of small-scale farmers can benefit

from economies of scale where it is

2.

Mark of origin or “appellation” is a method used by

which producers and processors to differentiate their

appropriate through collective action

produce and protect price premiums by legally

processes that are locally owned.

registering their products such that no other

4. Building the capacity of development

producers or processors can this name, title or logo,

oriented service providers to support

unless they produce the product within a legally

agroenterprise within a defined project area

recognized area or territory and use a specific and or

traditional method of production and/or processing.

10

An Area-based Approach to Rural Enterprise Development There are many simple ways in which farmers

pressure to ensure that production systems are

can add value to their produce, such as use of

environmentally sustainable. To achieve desired

improved uniform seed, bulking and grading

levels of competitiveness, farmers and their

products, and in many cases by working in

service providers need to build strategies that

marketing groups. Farmers can diversify their

incorporate the following elements:

production and use part of their land for higher

value crops and in some cases farmers can sell

· A clear market orientation, producing the

their produce into higher value marketplaces.

right product for the right buyer at the right

All of these methods aim to take advantage of

the rapidly changing market environment being

· time and price.

The establishment of production systems

led by urban consumers, who have more

that makes efficient use of existing financial,

sophisticated market needs such as organic

and fair-trade markets.

· human, and natural resources.

The incorporation of necessary post-harvest

In order to take advantage of these potential

· handling and processing techniques.

Appropriate business and marketing skills

options, farmers, however, must be able to

and organizational schemes which lead to

understand market opportunities and being

economies of scale by reducing costs and

able to respond to changing market needs.

Farmers must also provide products and

· increasing marketable volumes of produce.

Improved links among market chain actors

services at a price that is competitive with rival

and flows of both market-based information

suppliers and there is increasing social

and new production technologies.

11

Participatory Market Chain Analysis for Smallholder Producers SECTION 2

Market Chains and Service Providers:

Basic Concepts

Guiding questions

1. What is needed to achieve effective and lasting rural poverty reduction?

2. What elements characterize the rural situation in your community?

3. What is the difference between “comparative advantage” and “competitive advantage”?

4. What is a market chain or sub-sector approach, and what are its advantages and disadvantages?

5. What other elements need to be included in a market chain approach and why?

6. How is a strategy to increase competitiveness defined, what is it for, and how is it executed?

7. What is the difference between a market chain and a value chain or value net?

8. What differences are there between the efficiency of an individual enterprise and the efficiency of a market chain as a system?

Introduction

actors, their level of business linkage, and the

A market chain is used to describe the

ability of services to overcome problems as they

numerous links that connect all the actors and

arise. This section will describe the basic

transactions involved in the movement of

concepts of a market chain, why it is important

agricultural goods from the farm to the final

and how we can use information on the

consumer (Figure 2). Supporting these activities

structure and performance of market chains to

are services that enable the chain to operate

help link farmers to markets.

efficiently. Agricultural goods and products flow

up the chain and money flows down the chain.

Many agricultural support programs focus only

The efficiency of the market chain is dependent

on increasing production with little regard to

upon how well information flows between chain

markets and business relationships. Increasing

12

Market Chains and Service Providers: Basic Concepts

Consumption

Retailing

Research

Trading

Transportation

Government policy regulation

Processing

Communications

Trading

Technical & business training & assistance

Post-harvest

handling

Market information and intelligence

Financial services

Production

Production input supply

Figure 2. Market chain and its business support services.

production is often achieved through the

demand led to commodity prices falling to a

provision of inputs supported by production-

40-year low. These prices are unlikely to

based research and agronomic assistance. A

increase dramatically unless new trade policy

typical intervention package is usually

or market trends lead to a major increase in

comprised of new high yielding varieties,

demand. One such option may be the increase

fertilizers, pesticides, and information on how to

in demand for biofuels, but we are yet to see

maximize yield. This type of intervention leads

the influence of such trends on global

to increased output and is measured in terms of

commodity prices.

yield per unit area cultivated. For food insecure

areas this approach has been highly successful,

One of the major contributory factors to the

but economic growth achievements have been

recent acceleration in downward prices for

less convincing.

agricultural goods is the process of

“globalization”. Globalization is the term used

Getting the balance right between production

to describe the recent impact of innovations in

(supply) and demand (the amount required by a

communications and transport systems on

market) requires attention to all points in the

trade and the increasing integration of world

market chain. All too often, local markets are

markets. This process has encouraged nations

unable to absorb rapid increases in yield from

to liberalize, or open, their economies with the

higher input farming systems and thus higher

aim of increasing their volumes of trade,

production is often translated into reduced farm

including the international trade of agricultural

gate prices.

products.

Unfortunately for smallholder farmers, gains in

The recent shift from national trade protection

agricultural research and trade polices over the

towards a free trade environment means that

last 100 years, have led to the steady decline in

many farmers need to alter their strategies that

prices of “commodities” including cocoa, coffee,

have focused on comparative advantages to

maize, rice, sugar, and tea. In the 1990’s,

adopting a “competitive” approach to marketing

oversupply of the global markets and weakening

their goods. Whereas comparative advantage

13

Participatory Market Chain Analysis for Smallholder Producers builds on access to local assets, such as climate

suppliers, etc., that enable a farmer to grow

and natural resources, competitive advantages

food products. Outputs markets focus on the

are achieved when farmers can manage their

distribution system and place where the farmer

resources to sell quality goods, at a profit and

sells his or her produce and who they sell to,

offer their customers better value than rival

e.g., traders, transporters, processors, and

suppliers. To be competitive in today’s

retailers who handle the product up to the point

marketplace, farmers in developing countries

of final purchase by a consumer. Service

need to be better organized, at both the

markets include the range of professional

enterprise and market chain levels. These

services such as advisory services, market

farmers need access to new technologies and

information, financial support, business

relevant market information and must take

services, local/international trade regulations

advantage of their low labor and energy costs

that facilitate more efficient trade. The links

to offer consumers unbeatable produce value.

within the various parts of the market chain are

Farmers also need to understand how their

sometimes referred to as backward and forward

markets function and how their enterprise can

links, as the entrepreneur views his or her links

be better positioned within a market chain

to the places and people involved in their input

to enhance their market performance.

and output markets (Figure 3).

To be successful in this environment, farmers

Local Service Providers and their Role

and their service providers need to learn new

in Sustaining Market Chains

skills and take a proactive approach in the

marketplace. Understanding how an enterprise

Another major gap in previous development

fits within a market chain allows the

strategies has been the lack of emphasis on

entrepreneur to make better business decisions,

local and national business support services. It

such as finding better market options,

has been assumed that profitable business

trustworthy buyers and learning to appreciate

support services will emerge as sectors develop,

the quality that is required by consumers at the

or that a local authority will provide business

end of the market chain.

support where it is needed. However, this has

not been the case in most developing countries

All of this requires a sound understanding of

and few efforts have made to address this

the basics of markets and how to monitor and

problem. A nonexhaustive list of service

respond to market changes. This

provision is provided in Table 2. These functions

responsiveness applies to their dealings with

are taken for granted in most developed

input markets, output markets, and service

countries and with this enabling environment,

markets. Input markets is the term used to

food production and distribution operates fairly

describe the physical products such as seeds,

efficiently.

irrigation, fertilizer, chemicals, plastic tunnel

Forward links to buyers

Raw materials

Main wholesalers

Retail wet market

Equipment supplies

The enterprise

Industrial processors

Retail shop

Credit and finance

Wholesalers

Retail internet

Packaging

Backward links to input suppliers

Figure 3. Forward and backward market linkages for enterprise.

14

Market Chains and Service Providers: Basic Concepts

Table 2. Service providers that support enterprise development.

Basic infrastructure

Production and storage support

Marketing and business support

· Roads and transportation.

· Production input supply merchants. · Market structural services.

· Communications.

· Farm machinery manufacturer and · Market information services.

· Rural energy distribution.

suppliers.

· Market intelligence.

· Water and irrigation access and · Extension services providing

· Chambers of commerce.

regulation.

“know how and innovation” to

· Trader and sector support groups.

· Products from agricultural

producers.

· Technical and business training

research (genetic and production

· Producer associations and

services.

hardware plus information for

cooperatives.

· Local marketing centers.

efficient productivity).

· Weather forecasting.

· Export promotion (trading houses).

· Storage infrastructure.

Financial support

Policy reform, regulation, incentives, and safety nets

· Credit services.

· Security.

· Banking services, note and

· Land tenure policy and taxation.

electronic.

· Government policy regulation for trading.

· Crop/farm risk insurance

· Safety net functions, such as food aid, price support schemes.

schemes.

· Investment grants.

· Trading exchanges.

· Arbitration and reform council-based dialogue between private sector

· Futures markets.

apex groups and government select committees.

· Legal reforms and dispute settlement.

· Regional and international trade policy groups.

The lack of investment in agricultural

agencies should be empowered at the expense

business development services (BDS) and

of local government capacity. To date the

deteriorating market linkages has meant that

reality is that NGOs continue to grow,

the agricultural sector has stagnated. For the

especially in the poorest areas, as they are

poorest communities in developing countries,

often considered to be more accountable and

this has meant that their only source of

show better value for investment than

income is very limited and explains the fact

government agencies.

that the highest levels of poverty are found in

rural areas.

This, however, leads to a second question, and

that is whether NGOs should provide services

The failure of governments to provide effective

with their own staff or whether they should

support services to stimulate agriculture has

build capacity in local services providers, both

opened a major gap for alternative publicly

public and private. Our contention is that

funded nongovernment organizations (NGOs)

NGOs should place far greater emphasis on

to provide local communities with access to

the facilitation of services and in their

“not for profit” goods and services. The

production and marketing projects. They

primary role of these organizations has been

should facilitate local services rather than hire

to build capacity in food security but this role

staff to provide such services. If NGOs are to

has expanded to include a gambit of other

enable local communities to create their own

support services including health, education,

opportunities for income growth, they need to

finance, and environment. It is clearly

be much more business oriented. NGOs

cheaper for developed nations to provide

should work from a market led approach to

prophylactic services to produce food locally

production and they should build enterprise

rather than the extremely expensive and

sustainability through strengthening of local,

highly distorting alternative of providing relief

national, and regional support services. As

food supplies.

this is a long-term endeavor, it is as

important to strengthen the ability of

Even though NGOs have proven to be an

service providers, as it is to build the

effective service provider, there continues to

capacity of farmers to produce for markets.

be debate about whether these external

15

Participatory Market Chain Analysis for Smallholder Producers Using Marketing Skills to Reduce Rural Poverty

Given this position, service providers need to be

Situation Analysis

able to empower local communities to engage in

the marketplace. To do this farmers and local

Client profiling/audit

entrepreneurs need to develop new skills and

When developing marketing strategies for a

therefore service providers also need to gain a

“community” or a set of farmer groups, a basic

far better understanding of markets and how

starting point is to undertake a social audit of

they operate. Farmers need to learn how to

the location in which you are operating, and to

identify profitable market opportunities, how to

assess your clients in terms of their assets,

adapt and improve their produce and to work

skills, levels of organization, market access, and

with others in a market chain to meet the

specific challenges. Challenges can often seem

increasing demands of the “globalized”

overwhelming, particularly for service providers

consumer.

working in areas affected by major shocks such

as drought, floods, conflict. In addition, many

As consumers become more aware, they seek

rural areas are also dominated or complicated

more choice, better quality, consistent year-

by problems associated with ethnic problems,

round supply, greater assurance of safe

language differences, illicit crop production,

production methods and as markets mature,

poor infrastructure, and weak services.

consumers want all of these factors at lower

However, we contest that in spite of all of these

prices. Understanding profitability,

problems, markets operate in the most difficult

competitiveness, and being attuned to changing

of circumstances and it is the robustness of the

market signals helps in making sound business

marketing system and its associated actors that

decisions. The promotion of a rural sector

needs to be built upon.

capable of managing and maintaining

connections with more diversified and growing

The partner analysis conducted in Guide 2 of

markets is presented here as an alternative

this series should provide you with much of the

strategy for rural development.

information required for a partner audit.

However, to recap, the information you need is

In conclusion, agri-food systems are in a phase

based around the following questions:

of rapid change with moves towards greater

business association of actors along market

·

chains (vertical integration) with the objective of

· Who are you working with?

What do they already produce for the

guaranteed quality, continuous supply, and

market? What provides highest income?

more competitive prices for consumers. Farmers

· What are the major demands in the market

and rural communities need to be equipped

place?

with effective market strategies to deal with

· Could you produce alternative products that

these changes if we are to make markets work

are in demand in the selected market or

better for the poor.

markets?

16

Market Chains and Service Providers: Basic Concepts

· How well organized are the farmers,

· Unskilled and uneducated, dependent upon

· individuals, groups, or associations?

low-waged, casual family labor.

What are their financial skills? Do they have

· Generally not involved in global food and

· financial assets?

fiber production.

Does the group have reliable business/

· marketing skills?

Most farm families that service providers work

What level of risk are your clients able to

with in the developing world are a combination

· adopt?

of Rural World 2 and Rural World 3. However,

Do local service providers have the skills to

within a project area there maybe some Rural

support promising enterprise options?

World 1 operators which may have specific

skills that you can use in your marketing

Issues of crop diversification have different

strategies. For the Rural World 3 producers,

implications for different smallholders and

asset levels are typically low but even in

options for enterprise development are generally

difficult circumstances, taking on more diverse

related to key aspects including: (i) market

markets can also help to reduce overall risk.

access, (ii) asset and skills base, and

The asset and skills audit will enable a

(iii) current level of commercialization.

knowledgeable service provider to develop

appropriate marketing strategies that enable

To differentiate groups, we can use the following

farmers to start on a pathway towards

descriptors, based on a recent evaluation of

incorporating higher value crops and

rural producer groups:

production systems into their market options.

Rural World 1: “Globally competitive”:

·

Farmer perspectives and intervention

Part of consolidated market chains—high

options

levels of collaboration (vertical integration)

Using rapid methods to assess the marketing

· with processors and retailers.

capacity of a rural community will assist

Have access to financial services and market

external agencies to decide upon specific types

information.

of marketing interventions they can use once a

market chain has been studied in more detail.

Rural World 2: “Shrinking middle”:

·

The following section gives insight into basic

Local orientation, generally supplying

intervention options that can be developed after

national markets, includes landowners,

the analysis in this Guide.

residual suppliers to wholesale or bulk

· commodity markets.

1. Individual rather than collective

This group is generally under capitalized,

competitiveness: Given the income

currently suffering from declining terms of

uncertainty faced by farmers in many rural

trade3.

areas, it is not unexpected to find that

individuals seek short-term solutions based

Rural World 3: “Fragile livelihoods”:

·

only on their needs as opposed to developing

·

initiatives that promote competitiveness

Limited access to productive resources.

through collective action. In areas that have

Multi-occupational migrants straddling rural

experienced managerial problems with

and urban residencies.

cooperatives, there are low levels of trust. As

a starting point, initiatives that can build

capacity to address market options as a

3.

Declining terms of trade relates to the changes in

group is a first step in working towards

relative value of specific products in the marketplace

over time. For many developing countries, producers

economies of scale and building better

of raw commodities face declining incomes as prices

business relations between actors.

for a given unit of product falls on the world market

compared to increasing prices received by producers

2. Focus on enterprise competitiveness: Poor of other goods. An example of relative prices

farmers in the Rural World 3 category tend

changes: farmers in developing countries sell coffee

into the world market but face a steadily falling

to focus on growing and selling produce with

buyers price, whereas producers of Mercedes Benz

no marketing strategy. Introducing

cars sell their goods at increasing prices over time.

marketing concepts will enable these clients

Therefore over time due to the declining relative

to understand their marketing options and

price of coffee, the coffee producer must continually

work towards being more competitive. This

sell more coffee to be able to buy the same car.

17

Participatory Market Chain Analysis for Smallholder Producers can be achieved through basic methods such

of their managerial skills. They have limited

as product aggregation and grading. More

capacity to identify and analyze critical

sophisticated marketing methods can lead to

points in their market chains; they do not

product differentiation4, market

fully appreciate the gains that can be made

segmentation5, and the development of

by building relationships with others in the

specific client niches.

market chain and are often unable to find

strategies or actions to improve their

3. Focus on strengthening market chains: business opportunities as they do not have

The links in the market chain (production,

the appropriate business skills to move into

post-harvest management, marketing, and

more lucrative markets and also to increase

business development services) are often

their competitiveness. Many producer

disjointed in agricultural markets,

cooperatives fall into this category. Using

generating an inefficient flow of information

market chain approaches is particularly

along the market chain. This lack of

relevant to these types of organizations, as

marketing information and coordination

many can learn the necessary skills from

along the market chain allows some actors

their business partners and through making

to exploit other market chain actors unfairly.

links to specialist business development

This type of exploitation is usually marked

services. Some service providers specialize in

by excessive profit, i.e. rents, being extracted

the area of business services and

by a particular market chain actor at one

interventions that cluster service providers

point in the market chain. This can be

to support large cooperatives or producer

overcome if market chain actors along the

associations can be a very effective means of

chain initiate a process of strengthening

unlocking the potential of organizations that

their business links to enjoy the benefits of

are unable to growth their business.

systemic market chain improvements. This

approach, often referred to as value chain

5. Lack of business development services: development, means that different actors

As has been discussed, one of the major

have shared goals and work to maximize

problems in poor rural areas is the lack of

their role in a specific market chain.

business development services to support

and sustain new initiatives in the

4. Strengthening managerial capacity:

agricultural sector. In the past most service

Many rural organizations are weak in terms

providers have focused on advice for

increased production. In many cases, service

providers do not have the right staff or skills

to offer such services to rural communities.

4.

Product differentiation: The act of taking a single

product and using product development methods to

In this case, steps in supporting this area

make different types of product from an original,

may require basic learning by the NGO first.

e.g., take a standard product such as a 50 kg of

Having acquired skills in business

unsorted, unwashed potatoes, and change this is

management, the service provider can

into (i) sorted washed potatoes, (ii) add value by

undertake interventions that identify

sorting and packaging into 10 kg, 5 kg bags of

potatoes according to use—baking potato, chipping

existing business support services with a

potato, boiling potato, add processing value by

view to strengthening them. In areas where

changing potatoes into precooked frozen chips,

such services are lacking, efforts should be

crisps, starch for soups, etc.

made to build such services so as to lay the

5.

Market segmentation: Generally related to dividing

foundations for more sustainable marketing

consumers into sales groups to target a specific

product (i.e., products which target children,

interventions by producer groups and local

families, rich people, middle income groups, etc.).

entrepreneurs.

18

Basic Steps in Developing a Competitive Market Chain Strategy SECTION 3

Basic Steps in Developing a Competitive

Market Chain Strategy

Introduction

identify key informants or contacts in the

The main stages in developing a strategy to

selected market chain.

increase the competitiveness of a market chain

involve a series of sequential steps shown in

Designing a Strategy for Increasing

Figure 4. If you have been following the

Market Chain Competitiveness

agroenterprise manuals in order, the

1. Collate information on market opportunities

information required for Steps 1 and 2 will have

and socioeconomic assets of the area and

been gathered previously. The next stage in the

target beneficiary group.

process is therefore to map your chain and

2. Select a market chain.

Identification and

Prioritized

Market contacts

convening of

production chain

identified

actors

Mapping

Analysis of

production chain

Support system

and interventions

Negotiation and

Analysis of

design of the

critical points

strategy

Timeline

Figure 4. Stages in the design of a strategy to increase competitiveness.

19

Participatory Market Chain Analysis for Smallholder Producers 3. Identify contacts including the different

The next step should be for the group to work

actors and interest groups that should form

through the other aspects of how their products

part of the analysis.

move from the initial buyer to a final consumer.

4. Map the market chain with participation

This visioning process needs to include all the

from representatives from the chain.

stages of preproduction, production,

5. Evaluate the level of business organization

post-harvest, processing, selling, and retailing.

along the market chain.

The three main components of a marketing

6. Review the services available to support the

chain with their links and functions are shown

selected market chain.

in Figure 5. It may help for the facilitator of this

7. Catalogue past interventions in the area with

process to work through these different aspects

particular attention to those which impact

with different people and then join the ideas

upon the selected chain and chain actors.

together so that time, and/or groups, can be

8. Analyze critical points for the development of

developed effectively.

the market chain.

9. Develop a long-term strategic vision based

Use of the market chain mapping approach has

on market prospects and possibilities for

several advantages:

product and process innovation.

10. Around this vision, design a set of strategies

1. It permits a more complete vision of the

to resolve the critical points, taking

market chain and the roles that different

advantage of opportunities that contribute to

actors play within a business framework.

an increased level of competitiveness for the

2. Divides the chain into discreet functions and

market chain and its actors.

enables the actors to see who performs

which functions and their relative

Vision of the Market Chain

importance. This allows the farmer group

Given the many challenges of the marketplace,

and service provider to begin to understand

a practical starting point in developing a

the market chain.

marketing strategy is to assist partners to

3. Access to more complete information

visualize their market chain from beginning to

facilitates the identification of critical points

end. The market chain should start at the point

impeding the development of a market chain,

that your partners, i.e., farmers, local traders

and where improved and/or alternative

and processors, know best; in the case of

interventions can be applied, so that

farmers, the activities on-farm and the

investment in a particular market chain can

production of basic goods. Outlining the market

be most effective.

chain should then work backwards to

4. Visioning the market chain with multiple

document the provision of inputs, before

actors facilitates the formation of alliances

working forwards to document where produce is

and synergies between the different actors

sold. At each point in the market chain, names

through the identification of common

of the people who sell input goods and buyers

interests, reduction of transaction costs, and

who purchase their goods should be recorded.

a more efficient use of available resources.

Post-harvest

Production

management,

Marketing

processing

Functions

Functions

Functions

· Planning and

· Collection

· Contacting buyers

organization of

· Selection

· Negotiating markets

production factors

·

· Packaging

· Negotiating price

Access to inputs

· Transformation

and purchasing

and resources

·

· Differentiation of

conditions

Production

·

the product

· Sale

Harvest

·

· Added value

· Delivering product

Sale of product

· Transport

·

to client

Sale of product

Figure 5. Components of a market chain.

20

Basic Steps in Developing a Competitive Market Chain Strategy This first impression of the market chain is a

services to find possible ways of improving the

useful way of starting to appreciate where

functioning and competitiveness of a selected

farming groups fit into a broader marketing

market chain. Understanding the relationship

context. However, this first look does not

between business development services and the

explicitly identify three important aspects that

bottlenecks that limit market chain

are key to understanding how a market chain

development is equally important. Often it is

operates. These include (i) the degree of

more helpful to identify necessary services that

business development of participating

do not exist or do not effectively respond to

organizations, (ii) the provision of business

market chain bottlenecks than to focus on the

development services, and (iii) the context in

evaluation of existing services.

which the market chain operates.

Finally, a general understanding of the context

A limitation of the traditional market chain

in which the market chain operates is critical.

approaches is that it tends to evaluate actors in

Specific issues include local and national

isolation and does not take into account the

policies, the climate for economic development,

combined business acumen held by the people

social issues, natural resource management

involved in a market chain. A good

concerns and the existing technology within a

understanding of the level of business

market chain.

organization along a market chain, and the

actors that make up this business support

To address these issues, we propose a wider

process, will allow for the design of strategies

view of the market chain that combines the

that play to existing strengths. Taking this into

basic buying and selling role of market

account when designing intervention strategies

chain participants, with an analysis of the

will be more representative of the marketing

business organization of the existing support

chain and builds in a higher degree of

systems and the overall context of the market

sustainability in the overall approach.

chain.

Traditional market chain analysis can also

A Wider Vision of the Market Chain

overlook the role of business support services—

The wider view of a market chain includes not

both public and private—that support critical

only the functional aspects of a market chain

areas within a market chain. As in the case of

(production—post-harvest—marketing), but

business organization, it is important to

also business organization, supporting services,

understand the quality, coverage, and

and the economic framework in which the

effectiveness of existing business development

market chain operates (Figure 6).

Contextual issues

Post-harvest

Production

management,

Marketing

processing

Business organizations

Business development services

Policy

Economic

Social

Technology

Environment

Figure 6. Wider perspective of a market chain.

21

Participatory Market Chain Analysis for Smallholder Producers By taking this broader view, this methodology

identify interventions that generate a more

aims to fill gaps that have been identified in

equitable distribution of benefits, and also

traditional market chain analysis and by doing

ensures that rural smallholders, their families

so contribute to the principles which we believe

and their communities are involved in the

are essential from the perspective of the poor

decision-making process. This aspect is crucial

rural producer. These principles include:

if the design of strategies is to achieve a major

goal in poverty reduction through the provision

1. Identifying chain actors and their

of benefits for producers, i.e., those with least

roles

resources.

Experience has shown that the success or

failure of a market chain intervention depends

3. Designing strategies

principally on the partnerships that are built

The use of the term “strategy” permits the

between actors and business organizations that

design and implementation of a series of

participate in a particular chain. This method

complementary projects guided by common

therefore requires that market chain actors are

and clear, demand-led objectives, and an

clearly identified and existing relations

overall competitive vision for the marketing

understood. This information enables the

chain.

individuals involved in the design of an

enterprise to develop strategies built on trust

4. Focus on competitiveness

and recognition rather than only focusing on

The methodology aims to generate a consensus

opportunities and balance sheets.

between actors involved in the market chain

with the view of facilitating better management

2. Seeking equity in the market chain

of intervention resources by focusing

Thorough analysis of the market chain and

investment on increasing the competitiveness of

developing strategies to increase

a market chain.

competitiveness is not only a matter of

maximizing profit; it should also take into

CIAT’s Rural Agroenterprise Development

account a fair distribution of gains along the

Project has developed the following working

market chain. As such the method seeks to

definitions of competitive strategies:

What is a marketing strategy to increase competitiveness?

A marketing strategy that increases competitiveness is a set of activities that are planned and carried out with the active participation of diverse actors within a market chain, that share common objectives, around which one or more business organizations and/or interest groups are linked.

Why focus on a strategy to increase competitiveness?

A strategy to increase competitiveness seeks to strengthen or establish a market chain that has been prioritized based on its market potential, sustainable production system, and capacity to generate income and employment for a given rural population.

How is a strategy to increase competitiveness carried out?

A strategy to increase competitiveness is carried out through short-, medium-, and long-term research and development activities in production, post-harvest management and processing, marketing, business organization, and business development services, involving multiple actors along the market chain and is based on an analysis of the critical points which limit the market chain’s competitiveness.

22

Basic Steps in Developing a Competitive Market Chain Strategy Market Chains and Innovation

production and receive a premium price for

Promoting processes of change or

their products. In this case, the innovation to

“innovation” is crucial when attempting to

increase market chain competitiveness was

increase competitiveness within market

organic certification.

chains. However, most opportunities for

innovation are situation specific, touching on

However, as illustrated in the case of organic

a few or many of the links in a market chain

cacao (see Box 1), simply taking on an organic

including: input supply, production, post-

“certification” based on a minimal financial

harvest management, processing, marketing,

investment without also taking on new skills or

business organization, and business

knowledge, may not confer long lasting market

development services. Ideally innovations

benefits. This is because when basic market

raise the competitiveness for the market

strategies show themselves to be successful,

chain as a system and thus capture added

many other producers can replicate the same

value that can be shared by many

“competitive advantage”. In economists’ terms,

participants within the chain. It is more often

the “barrier to entry” for this market innovation

the case that innovations assist particular

was low and, thus, the innovation was easily

actors or groups of actors along the chain

replicable by others, leading to oversupply of

enabling them to capture additional value.

the product.

The ability to capture added value at specific

points in a market chain should not be

Based on this experience with organic

confused with the highly negative connotation

cacao, what lessons can we learn about

associated with the extraction of “rents” that

innovation and competitive advantages6 ?:

is often laid at the door of unscrupulous

1. If an innovation is easily replicable by other

traders. Typically this type of exploitive

producers, it tends to be quickly copied and

behavior is symptomatic of highly inefficient

thus loses the advantage and added gain.

market chains that are manipulated through

2. Profitable innovations, no matter how

local political power. The approach presented

complicated, are copied sooner or later and

here aims to identify and remove such

thus the initial profitability will decline with

distortions.

time.

3. This indicates that processes of market

The use of innovation is particularly

information and innovation should be

important when attempting to differentiate a

continuous and require periodic updating

product in the market. The process of setting

and analysis to maintain competitive

a product apart from the rest adds overall

advantages and profitability.

value by attracting consumers and then

building product loyalty. Examples of this

Large multinational companies invest

approach include the use of logos, branding

considerable time and money in improving their

or labels that distinguish one product from

products and generating product brands to

many similar types, or places emphasis on

differentiate their products from rival products.

how a product was produced, such as

Branding is supported with large promotional

organic, sustainable, or socially responsible,

budgets that can make certain products such

or via new presentations and the development

as Coca-cola, Kiwi fruit, Manchester United,

of new products. These strategies are where

“household” names. It is often the case that the

innovation can play a major role in gaining

existence of an easily identifiable brand or label

longer-term added value for a product in the

translates into a more sustainable competitive

face of competition.

advantage in the long term rather than

innovations in systems of production and

Over the past decade, trading standards such

post-harvest.

as fair trade and organic production have

been developed as a means to gain higher

Does the power of branding have implications

market prices for small-scale producers. The

for the processes of rural enterprise

logic behind the organic strategy was that

development that are being promoted

many small-scale producers are by default,

nowadays? New approaches to market-based

often organic producers as they do not have

the necessary funds to apply chemical

6.

For wider discussion on this theme, consult

fertilizers or pesticides to their crops. These

Kaplinsky (2000). See also Kaplinsky and Morris

farmers can easily conform to organic

(2001).

23

Participatory Market Chain Analysis for Smallholder Producers Box 1

Organic cacao and sustainable advantages

When the El Ceibo cooperative in Bolivia entered the market for organic cacao and fair trade cacao in 1992, it was one of the first to offer this product. Initially, the novelty of both products provided much higher prices than those offered for traditional cacao. As other producers and their organizations found the same

“innovation”, profitability decreased as shown below.

Although the possibility of additional income remains, it is not at the same level as at the start of the innovation.

Comparison of price increase according to market and quality of product.

Year

Conventional cacao

Ecological cacao

Free market

Fair trade

Free market

Fair trade

(price in US$)

(price increase %)

(price increase %)

(price increase %)

1992

950

121

179

226

1993

1110

64

105

173

1994

1330

39

50

71

1995

1570

18

-

45

1996

1440

22

-

40

SOURCE: Adapted from Augstburger (1996).

Even when the initial additional income for the first innovators was good, these data show how an easily replicable competitive advantage loses value over time. The expansion of ecological cacao supply for the fair trade market is also increasing, as shown in the following figure.

Cocoa

1500

1000

500

0

1997

1998

1999

2000

2001

SOURCE: Data from Fenway Libraries Online (FLO)

(www.flo.org).

The combination of these two tendencies shows us that the competitive advantage conferred by the ecological certification and fair trade will tend to decline as more providers copy this strategy.

interventions need to take this point into

options to increase efficiency across a market

account if rural producers are to compete

chain. Focusing on upgrading one enterprise is

effectively in the future. The Fair Trade

probably the simplest starting point and is the

movement is one strategy that seeks to use

more common intervention. However, most

labeling or branding techniques to differentiate

market chains are comprised of several

their products in the marketplace from those

enterprises, which may be poorly linked. In

produced by large scale agribusiness and

these cases, individual gains can be lost

multinationals.

through inefficient marketing channels. Given

that most agroenterprise activities are not

carried out by a single enterprise, but by

Individual Enterprise Efficiency versus

various interrelated actors, achieving a

Market Chain Efficiency

competitive market chain requires improving

Strategies to increase competitiveness at the

organization along the chain. This requires

individual enterprise level are different from

establishing trust-based relations between

24

Basic Steps in Developing a Competitive Market Chain Strategy potential rivals. This challenges the service

products including dairy products, farm-raised

provider to facilitate a move beyond the

poultry and olives.

conflictive competitive relations that operate in

many market chains. When taking a market

While it does not guarantee quality, AOC does

chain focus, there are no good or bad actors,

impart important knowledge to consumers—

the approach should focus on a “systemic” level

they can follow regions with good crop years,

of efficiency that seeks to benefit all the

learn reputable producers and buy accordingly.

participants.

The AOC certificates essentially link the

Raising Competitiveness through

product with its locale and manner of

Market Chain Quality Assurance

production in such a way that it is easily

Another important issue in sustaining market

distinguishable from products having similar

performance is product quality. For products

characteristics produced by industrial firms. An

traded formally, e.g., internationally or through

example of this type of labeling by origin

major international supermarkets, products will

includes the exclusive drink of the rich,

only be accepted if they meet strict food safety

“Champagne”, an otherwise unremarkable

protocols such as ISO, HACCP7, and

sparkling white wine.

EUREPGAP8. These protocols are conducted

throughout the market chain and therefore it is

According to the mark of origin procedure, the

vital that all actors within a market chain

label “Champagne” can only be applied to wine

maintain these stringent quality procedures if

produced from the region of Champagne,

they are to avoid losing income or have their

according to traditional methods. Similar

produce downgraded. For consumers this mark

sparkling white wines that are grown elsewhere

of quality gives them greater confidence in

and sold at a fraction of the price of real

buying a product that has been approved by a

Champagne, is now labeled “Method de

market chain scheme. Measures such as

Champagne”, to disassociate it from the original

HACCP requires that actors along market

product.

chains work in a more coordinated manner and

by doing so, gain a greater market share.

The French government’s Institute of

Denomination of Origin expects eventually to

EUROTRACE is another legislative approach

achieve coverage of 20% of French products

being used by the European Union to track

sold. Currently, France sells US$18 billion

quality from point of sale back to point of

products with a certificate of denomination of

production. Retailers use this quality-based

origin (Becker, 2003). This method is now being

process as part of a market chain inventory

applied to high value traditional products in

process. EUROTRACE however offers another

other countries such as high quality coffee

opportunity to differentiate a product on the

origins and in many developing countries this

market, as it provides an avenue to reduce the

approach provides a lucrative opportunity for a

risk taken by a buyer when purchasing from

limited number of producers.

multiple sources across the globe. Once again

the emphasis is on recognition of roles and

Market Chains, Supply Chains, and

linkages between multiple actors within a

Value Chains9

market chain and this requires a high degree of

The terms production chains, supply chains,

coordination to be successful.

market chains, and value chains are often used

interchangeably, but there are some important

Raising Competitiveness through Mark

differences. In its simplest definition, the terms

of Origin (Appellation/Labeling)

production chain, supply chain, market chain

In France, the government has invested large

are synonyms used to describe all participants

sums of money in promoting the certification of

involved in an economic activity which uses

origin for agricultural products, known as

inputs and services to enable a product to be

“Appellation of Origin” Certification: First used

made and delivered to a final consumer. A value

in 1935 for validating wine vintages, the AOC

chain is understood as a strategic network

has expanded to include a range of agricultural

between a number of independent business

organizations. According to Hobbs et al.

7.

Hazard quality assurance at critical point.

8.

For more information, see www.eurep.org

9.

For more information, consult Hobbs et al. (2000).

25

Participatory Market Chain Analysis for Smallholder Producers (2000), a value chain is differentiated from a

Scale of Evaluation and Level of

production/supply chain because:

Participation

·

This methodology has been designed to be both

Participants in the value chain have a long-

scalable and flexible in terms of clients needs.

· term strategic vision.

However, the reader should note that this guide

Participants recognize their interdependence

is biased towards a high degree of participation

and are disposed to work together to define

not only by the lead service provider, but also

common objectives, share risks and benefits,

from representatives from all relevant chain

· and make the relationship work.

actors. This bias is intentional as the method

It is oriented by demand and not by supply,

seeks to assist local service providers in

· and thus responds to consumer needs.

building community capacity and skills.

Participants have a shared commitment to

· control product quality and consistency.

The reader should be aware that there are

Participants have a high level of confidence

alternative methods for market analysis and

in one another that allows greater security in

most market chain studies do not seek to

business and facilitates the development of

transfer these skills and are therefore not

common goals and objectives.

conducted in such a participatory manner. This

approach is most appropriate for use at the

Table 3 presents other comparisons between a

local and provincial levels and in value chain

production market chain and a value market

development. However, there are other more

chain.

rapid methodologies that are less participatory

for sub-sector10 analysis. These methods

This guide seeks to provide a practitioner with a

include Guide 8 in this series entitled “A Guide

better understanding of a production chain and

to Rapid Market Appraisal” by Wandschneider

facilitate sufficient negotiations between

and Ferris (in preparation), and also the classic

participants to lay the groundwork for the

text on Methods for Rapid Market Appraisal by

formation of a value chain. The resulting value

Holtzman (2002).

chain will most likely involve a smaller group of

the participants than the production chain. Not

Considerations When Applying the

all participants are interested or willing to enter

into a value chain arrangement given the

Method at Diverse Scales of

transaction costs involved in negotiation,

Intervention

information exchange, and the risks or costs

This section seeks to present some of the

that may be incurred by changes along the

implications in terms of capacities, resources

market chain. Generally the process of change

and added responsibility within a value chain

adds costs.

10. Sub-sector is the term used to describe the various

levels of market chain activities that allows goods

and services to flow from sites of production to

The advantages of a value chain are that

consumption points. A sector is generally used to

complex strategies of product differentiation

describe a consolidation of activities, e.g., an

and innovation are easier to achieve, and thus

agricultural sector, a health sector, an education

contribute to building sustainable competitive

sector and within this context a sub-sector refers to

a specific branch of activities based around one

advantages over time. Box 2 gives an example of

commodity or product within a sector, e.g., a maize

a value market chain in a rural community.

sub-sector, livestock sub-sector.

Table 3. Enterprise relations: Production chain versus value chain.

Factors

Production market chain

Value market chain

Information flow

Little or none

Extensive

Principal focus

Cost/price

Value/quality

Strategy

Basic product (commodity)

Differentiated product

Orientation

Led by supply

Led by demand

Organizational structure

Independent actors

Interdependent actors

Philosophy

Competitiveness of the enterprise

Competitiveness of the market chain

SOURCE: Hobbs et al. (2000).

26

Basic Steps in Developing a Competitive Market Chain Strategy Box 2

Example of a value market chain: “Las Brisas, ” Santa Cruz de Turrialba

When the cheese factory Las Brisas began activities over 10 years ago, it functioned like all the other plants in the cheese-making cluster of Santa Cruz de Turrialba in Costa Rica. The company had unstable relations with suppliers and buyers. As the sector evolved and became more competitive, Las Brisas developed strategies to move from being just one more player in the production chain to carving out its own value chain.

This search led to the establishment of trust-based relationships with both suppliers and buyers. On the milk production input market side, La Brisas made its biggest milk provider a new partner in the business, and thus guaranteed 70% of its daily consumption.

On the output market side, Las Brisas pursued two market strategies. First, it developed contacts with one of its clients—a biscuit factory—to produce a special cheese for manufacturing biscuits. The two businesses jointly obtained support from the University of Costa Rica for specific research on the best type of cheese for the biscuits. Through this product development process, Las Brisas was able to enter a new market, in which no competition existed, as well as assisting the biscuit factory to expand production and sales. Secondly, Las Brisas consolidated relations with an important chain of supermarkets in San José, the country’s capital, through the application of a methodical quality control process for its own brand. This relationship has resulted in joint promotion and marketing strategies as well as the development and testing of new products based on consumer demands detected by the supermarket.

What are the results has Las Brisas achieved through its value chain strategy?

1. The quality of its products is recognized as being the best in the zone and, therefore, have high acceptance in the market.

2. Las Brisas is the only business from the cheese cluster in Santa Cruz that sells consistently directly to supermarkets in San José. In 2001, a promotion of cream was so successful that it contracted additional production with other plants of Santa Cruz, but under its supervision and brand.

3. Las Brisas suffers less than other businesses during times of milk shortage.

In summary, constituting a value market chain has given Las Brisas an important competitive edge over similar plants that share the same comparative advantages.

SOURCE: Personal interviews (November 2002).

Local

Refers to a scale ranging from a village to a

community/municipality. This scale is useful

when seeking to work closely with processes of

community development and community

management of natural resources.

Provincial/District

Includes more than a municipality and can

reach as far as a province or department/

district. This scale is useful for working with

more geographically dispersed agroenterprise

market chains, or those with more complex

required, and methodologies for this approach

interaction, such as clusters or local agri-food

depending on the scale of analysis. The term

systems.

“scale” refers to the geographic coverage in

which the market works. This guide works at

National

three scales (local, provincial, and national) that

Focuses on one single market chain at the

can be defined as:

national level and presents advantages when the

27

Participatory Market Chain Analysis for Smallholder Producers objective of the exercise is to formulate policies

Representation and level of participation

or plans in medium- or long-term to promote

What are the considerations for guaranteeing

national competitiveness in a given product.

active participation and adequate

representation of all actors and interests

As the scale shifts from local, through provincial

involved in the market chain? As we increase

to national, there are several changes that need

the geographical scope, the direct participation

to be considered. Some of the likely changes and

of our target beneficiaries is likely to fall, and

questions that should be answered before

these factors need to be discussed and resolved.

starting are listed below:

Recognition of actors

Clients and capacity to convene

How do we assure that we hear the needs of all

Who are the intended beneficiaries? How are they

actors in the market chain? This point requires

organized? Who are the key actors of the market

special care both with the market chain’s

chain and what are their roles? How will benefits

weaker actors (i.e., the poor, ethnic minorities,

from this process be shared between

women, among others) and those considered

beneficiaries and the wider community? Whom

negative (i.e., traders) whose ideas tend not to

should we convene for work at the scale

be taken into account.

proposed? Do we have the capacity to bring these

actors together?

Differentiated strategies

Your project design should have clarity in regard

How do we guarantee that the final strategy

to these issues before any work is undertaken.

includes differentiated solutions according to

Defining the client is probably the most important

the needs of the diverse actors? All

decision in the process.

agroenterprise market chains include

heterogeneous actors, and thus demand

Costs

differentiated solutions according to their needs

instead of “one size fits all” strategy.

What can we achieve with the available budget?

The definition of viable objectives with the

available resources is important and can have

Potential for impact

important implications for the scale at which we

What is the potential impact of actions at the

work. It is better to work at a smaller scale rather chosen scale in terms of number of

than attempting to work at a level where resources

beneficiaries, economic development, natural

are insufficient to guarantee results.

resource management, social and gender

equity, impact on class relations, or others?

Methodologies and level of detail

How do we choose an adequate basket of

Table 4 summarizes some of the considerations

methodologies for the scale at which we wish to

of scale in relation to the themes previously

work? Methods that work well at a local scale are

defined.

probably less effective at a national scale. This

consideration is related to the degree of

Observations on the Use of

participation that can be achieved at the different

Participatory Methods

scales, level of detail, information requirements,

This guide is based on participatory methods

and costs. What is the key information that we

adapted from the school of Participative

have to collect and analyze? Collecting additional

Learning and Action (PLA). These methods,

information, however interesting it may be,

which include focus groups, mapping,

implies more analysis and additional costs.

visualizations, social dramas, and other forms

of facilitated reflection, seek to prioritize not

Management, negotiation, and

only documented results, but also the process

implementation capacity

of application. Although a concrete result is

What implications does the chosen scale have in

generated at each stage in the process, i.e., a

terms of management and negotiation with

map, a matrix, a table, etc., these products are

important decision makers? How strong will our

not the central purpose of the exercise. Of equal

negotiating position be in relation to key decision

importance and benefit to the group members is

makers in the market chain as we expand the

the time and space they have invested in

area of coverage? Can we reasonably implement

analysis and reflection around the

a strategy at this scale?

methodological tool. The discussions and

28

Basic Steps in Developing a Competitive Market Chain Strategy Table 4. Considerations when applying the method at different scales.

Theme

Scale

Local

Provincial/District

National

Client identification,

High: Clients are easily

Medium: Clients can be

Low: Clients defined in terms

representation, and

defined; study is being

identified and integrated with

of income categories, less easy

participation

suited to their needs.

study at specific points.

to integrate clients with data

gathering and analysis.

Facilitates direct participation Need to select representatives of actors throughout process

from each group with the

Actors selected represent a

from each interest group.

capacity to clearly represent

larger group and therefore

the interests of all.

need to have recognized

ability/reason to share

information and credibility

within their group.

Capacity to convene

Good for local actors, but

Good with provincial actors,

Good with national actors, but

more difficult with external

although may leave some out

with little real representation

actors.

greater possibility of working

possibility of convening

with external actors.

national decision makers.

Costs

Low: Costs of participative

Moderate: Costs of workshops, High: Costs of workshops, workshops, generation and

generation and analysis of

generation and analysis of

analysis of information and

information, transfer, lodging,

information, transfer, lodging,

feedback to participants.

communication of results.

publication, and formal

communication of results.

Methods and level of

Participative, with local actors. Participative at times, but Emphasis on systematized

detail

More detailed, with direct

with the support of survey

data (databases, means,

information from individual

teams or systematized data.

surveys, etc.) with key

actors.

Less detailed, with

decision makers.

systematized data and

Mean data or national

averages for the province.

aggregates—sector trends.

Management,

Limited: Depends on local

Medium: Mix provincial

High: Good possibility of

implementation, and

resources and desires of

resources with external. May

obtaining resources, but

capacity to negotiate

participants. If advances are

fall into the trap of depending

difficulties in implementation

achieved they may be

on external actors and

if clear rules do not exist

sustainable.

resources.

among the actors.

Needs differentiation

This can be done by income, access to market, gender, class, technology employed, or any other criteria. It is necessary to ensure that all relevant groups are included.

Strategy

This can be done by income, access to market, gender, class, technology employed, or any differentiation

other criteria. It is necessary to ensure that all relevant groups are included.

Potential impact

Limited to the work zone,

Medium, with wider coverage. Higher, but with the and perhaps some

challenges in implementation

neighboring sites.

previously mentioned.

agreements reached are generally more

strengths, weaknesses, and the design of a

important than the final tangible result of the

shared strategy to increase its competitiveness

method.

requires listening to all voices equally. The role

of the facilitator in this process is to systematize

The use of participative methodologies in this

and document the information and present it

guide encourages members to air their views

back to the market chain actors so that they

and we aim to hear many voices speaking about

can use this analyzed information to make more

a single market chain. These points of view will

informed decisions on what to do, together, to

be quite different—what the rural producer

improve their economic activity.

thinks is very different to what a city trader

thinks—but all the viewpoints have important

The design of a strategy to increase

information regarding the reality of the market

competitiveness is a systematic way to generate

chain. To understand the market chain, its

an open, informed discussion among actors

29

Participatory Market Chain Analysis for Smallholder Producers from a market chain. But, at the end of the day,

production versus value market chains; some

those who decide what to do, design action

appreciations regarding the scale of

plans, and implement them are the actors

intervention; and finally, some initial ideas on

themselves.

the use of participative methodologies. In the

next section, we will look in more detail at the

Summary

principles behind this method. Many of these

In this section, we have reviewed some basic

principles relate to the concepts that we have

concepts about market chains; an initial

seen in this section, and together form a

definition of what the strategy to increase

philosophy that supports the design of

competitiveness can be, how it is designed, and

strategies to increase competitiveness.

how it is carried out; some key ideas on

30

Guidelines for Adapting the Process to Local Needs

SECTION 4

Guidelines for Adapting the Process to

Local Needs

Guiding questions

1. What are the principles behind a strategy to increase competitiveness?

2. What characteristics and qualities are required to facilitate the design of such a strategy?

3. Why is it important to keep in mind the heterogeneity of the market chain’s actors even within a single segment of the market chain?

4. How can research and development activities be combined in a strategy to increase competitiveness, in the short-, medium-, and long-term?

Introduction

context of an area or territorial approach to

In the previous sections, we reviewed basic

rural enterprise development. The methodology

concepts underlying market chains and the

includes support to both the market chain

basic steps in developing a strategy to increase

actors and to the businesses that support the

market chain competitiveness. In this section,

market chain. Local actors including

we will look at how to adapt and apply these

technicians, promoters, facilitators, and local

principles into the design of a local strategy.

leaders can apply the methodology without

having to rely upon external experts.

A strategy to increase competitiveness is based

Implementing actors should review and adapt

on a combination of innovation and building

the method to their needs, deciding which parts

agreements between chain actors that seek

of the method are most useful, and where

sustainable improvements in the competitive

changes will be required. To support the

performance of a particular market chain. This

process of adapting the method to local needs

market chain approach is applied within the

we recommend some basic guidelines.

31

Participatory Market Chain Analysis for Smallholder Producers Market Orientation

manage regarding the market chain and market

A competitive strategy should be considered as

potential.

a business tool, designed to support enterprise

activities that increase income and respond to

Working with the Private Sector

market demands. Before designing a market

An additional objective is the identification and

chain strategy, local facilitators should have a

development of synergies among actors along

clear idea of the strengths, weaknesses, and

the market chain. The organization facilitating

potential for enterprise development in their

the process should involve representatives of all

local area, and have up-to-date information on

actors along the market chain to highlight their

the market opportunities open to the project

interdependence and the possibilities of

area and the aims of the client group. Methods

improving their business activities. This does

to gather this information are dealt with in

not mean that all actors participate at all times

Guides 2 and 3 of this series.

in the design of the strategy. Most private sector

representatives will not attend long workshops

Market Chain Focus from “End to End”

and therefore the process facilitator may need

This methodology reviews all the functions of

to interview some market chain representatives

the market chain starting from input provision

to capture their opinions and relay these ideas

to the consumption of the final product. The

to the group in the design phase. Where

existing enterprise and available business

possible, private sector representatives should

development services are analyzed as well as

review the analysis of the market chain and be

the functions of input provision, production,

key participants in the final design of a market

post-harvest management, processing, and

chain strategy. Despite being less participative

marketing. This requires that key players in the

due to time constraints, these actors can often

system are identified and participate in the

help (or hinder) any proposed change in the

process of market chain analysis. Developing a

market chain, and therefore must be included.

multi-actor group and having a wide analytical

framework is important in understanding the

Selection of Key Informants in

market chain as a business system, and at the

Decision-Making Processes

same time identifying critical points where a

Understanding how a market chain functions

minimum of effort will generate maximum

and who the key players are, is vital to having

benefits.

good representation from the market chain.

These key informants range from input

Coordination among Different Actors

suppliers, producers, those who are involved

to Identify and Develop Synergies

with post-harvest management, processing, and

The methodology assumes that areas of

marketing of the final product, to business

common interest between diverse actors along

development service providers. Key informants

the market chain are not evident. For this

need to participate actively so that their

reason, the methodology seeks to incorporate

viewpoints are clearly heard and incorporated

and motivate a range of actors to define

into the information gathering and strategy

common objectives and strategies, thus

development.

permitting a coordinated effort between them.

In this approach, it is important to ensure that

Respecting People’s Time, Needs, and

key actors are included in the system. The

Differences

organization facilitating the process should

In certain circumstances it is better to separate

have friendly relations with key informants or

actors so that their time is used most

actors, or be disposed to build these

effectively. Traders for example are busy people

relationships during the course of the process.

and do not appreciate time spent discussing

Building contacts with actors in the private

other peoples business that is not relevant to

sector including enterprises, supermarkets,

their area of activity. The facilitator should

local, and external traders and those offering

therefore evaluate whether certain groups in the

business development services, etc., is

market chain are best interviewed within a

sometimes complicated, given time limitations.

mixed group, or interviewed separately. For

However, the ability to negotiate with these

example, if a market chain includes the

actors is critical because of the information they

participation of large-, medium-, and small-

32

Guidelines for Adapting the Process to Local Needs

scale producers, with diverse technologies,

or research centers, although these may

different access to resources, and thus different

participate, but rather a permanent focus of

opportunities and limitations, it is important to

innovation, learning, and diffusion that draws

have representatives of each group to design

on both experts, and the knowledge of market

effective support strategies to meet their

chain actors and their own capacity for

different needs. People or organizations involved

innovation.11

in processing activities are another example; the

use of different levels of processing technology

Mixing Short-, Medium-, and Long-

can affect processing efficiency, costs, and final

term Activities with Available

product quality. At a consumer level,

Resources

differentiation is also important. For example,

consumers of varying income levels may have

A strategy to increase competitiveness, which

varying demands based either on product

includes both research and development

quality or price, or a combination of the two.

activities, can be divided into short-, medium-,

The facilitator should take care to separate

and long-term actions and should be developed

these types of actors and groups as this will not

with a sound understanding of whether

only help to focus future interventions more

external resources are required or not. In the

appropriately, but will also use people’s time in

first instance, a strategy should be based on

a respectful and meaningful manner. The

local actions using local resources and

facilitator should constantly review people’s

knowledge, before seeking external support.

comments on the process, and if participants

This is useful because it promotes a positive

are bored, or feel their time is not being well

dynamic between the actors and helps a

used, the process needs to be changed.

community to realize that they can do things

themselves, without waiting or relying on

Combining Research and Development

external support. If a community is to embark

on a business strategy, it is always best to

Activities to Promote Innovation

develop processes and activities that are within

The final strategy to improve the

their financial reach. In the medium and long

competitiveness of a market chain can include

term, as a business idea advances, local and

both research and development activities, which

external resources and knowledge can be mixed

may take place at any point along the market

more effectively, and at the same time more

chain. Research actions may focus on

complex actions or strategies designed and

improving productivity, post-harvest

implemented to increase competitiveness.

management, processing, marketing, or the

provision of business development services with

There are three main reasons why it is

the purpose of improving market chain

important to think about time and resources

competitiveness. At the same time, other actors

from the start of the process:

may implement development activities seeking

to increase the market chain’s competitiveness.

1. A process initiated with local resources and

knowledge tends to strengthen local

Typically short-term activities focus on

capacities for analyzing and resolving

development outcomes, but as the strategy

problems, and thus assists in the

advances, and research results are obtained,

development of capacities for innovation.

other innovations are introduced which may be

2. Seeking solutions to market chain needs

of a medium to longer term nature. Several

based on existing local resources instead of

actors along the market chain often implement

waiting for external resources (or projects) to

the longer term interventions.

The process of innovation is typically long term

11. Three clear examples here are the master builders of and, if possible, permanent. A reasonably long

local processing plants who may be excellent

time horizon is important to improving market

adaptors and diffusers of improvements in post-

harvest technology, Local Agricultural Research

chain competitiveness. In other words,

Committees (CIALs, the Spanish acronym), that

improving the market chain quickly is

carry out applied research focused on crop

important, but if substantial, or sustained

production at the community level, and Research

improvements are sought, a more strategic

Groups in Rural Agroindustry (GIAR, the Spanish

research approach that facilitates innovation

acronym) that integrates post harvest technology

and production improvements to develop value

may be required. Strategic research is not

added products targeted towards a specific market

necessarily an action carried out by specialists

demand.

33

Participatory Market Chain Analysis for Smallholder Producers solve the problem results in faster and more

their competitive position and that of their

sustainable actions. Often the most efficient

market chain. The facilitating organization

solutions require more commitment from

should have certain basic capacities,

actors than financial support.

characteristics, and attitudes for the work, as

3. Grounding activities in local resources tends

outlined below. Table 5 is a generalization of the

to reduce the pressure of overestimating the

basic conditions, and therefore should be taken

market chain’s needs and possible

as a guide and not as a definitive list.

responses. A clear example is the choice of

technological options. When large- or

In summary, the design and implementation of

medium-scale funding is available, costly

a strategy to increase competitiveness has a

and complicated technological solutions tend

business orientation, responds to clear market

to be chosen; when solutions are based on

opportunities, analyzes the totality of the

local capacity for payment and maintenance

market chain with contributions from key

of the technology, the types of interventions

actors, seeks synergies between them to

are generally better matched with local

implement research or development actions,

needs and conditions, and outcomes are

and proposes actions at short-, medium-, and

often more sustainable.

long-term, with or without external resources.

Identifying a Process Facilitator

In this section we have discussed the principles

Finally, the design of a business strategy

that support and orient the analysis of a market

requires facilitation by an organization or

chain and the design of a strategy to increase

individuals. This organization can be a

competitiveness. Some characteristics and

Producers’ Association or other union (for

qualities were identified that are required of

example, a processors’ association), a local

organizations or persons intending to facilitate

Chamber of Commerce, one or various

the design and execution of strategies to

nongovernmental organizations (NGOs), a

increase competitiveness. The importance of

university, a private enterprise, or other group.

recognizing the heterogeneity of the market

In our experience, NGOs working with

chain’s actors and its implications was also

organizations of producers are the most

touched upon. Finally, the section closed with a

common facilitators, but in some cases other

brief discussion on how to combine research

combinations of actors have promoted market

and development activities in the short-,

chains. For example, a public-private regional

medium-, and long-term to generate

center for competitiveness assisted work in

innovations that permit increases in the market

Colombia, and a private support service

chain’s competitive position.

enterprise assisted market chain development

in Peru. These processes could be led by a

In the following sections, practical details of

strong private enterprise that seeks to improve

each step of the method will be developed.

Table 5. Identifying a process facilitator.

Key characteristics

Necessary

Recommended

Position of neutrality in the market chain

9

Experience with the management of participative methods and process facilitation 9

Convening capacity and at least some level of influence in support policies to the sector

9

Disposition to facilitate design of the strategy and seek funds and support for its implementation

9

Interest in participating in the implementation of the strategy 9

Trust of the actors and a reputation of acting with transparency 9

Interest in building or improving local capacities

9

Previous experience in rural enterprise development

9

Knowledge of market tendencies relevant to the market chain 9

Basic knowledge of the market chain

9

34

THE PRACTICAL WORK

Selecting a Market Chain

SECTION 5

Selecting a Market Chain

Guiding questions

1. What are some key criteria for selecting one or various market chains with which to work?

2. How can these criteria be classified according to their relative importance? Which one/ones is/are more important than the others, and why?

3. Once the criteria are identified, how can they be used to separate key market chains from those of lesser importance?

4. What are the advantages and disadvantages of using quantitative selection criteria and objectives compared with qualitative, more subjective ones for selecting a market chain?

Introduction

party or follow the recommendations of a

The previous sections have outlined the basic

previous marketing study. In other cases a

principles and concepts for the rural

decision can be based on what is mainly

agroenterprise development methodology

produced in the project area. These are passive

including an overview of a market chain,

arrangements and our experience indicates that

functions of the chain actors, the wider view of

if a market decision is taken from a third

the market chain, support services, and an

party’s perspective with no primary analysis by

outline of the basic steps in designing a strategy

the group that is about to engage in a

for increasing market chain competitiveness.

marketing process, the chances of developing a

This section will focus on the first practical step

sustainable or appropriate business are

in the design of the market chain strategy. This

reduced. Making a decision on which market

is the selection of a market chain.

chain to analyze is fundamental to the process

and therefore needs to be taken seriously.

Selection of a market chain can be based on a

If you have followed the RAeD process for

range of criteria. In some cases service

agroenterprise development, you will have made

providers will follow a decision made by a third

a selection based on the information in Guide 3

37

Participatory Market Chain Analysis for Smallholder Producers of this series, entitled “Identifying Market

money in a savings account? Profitability of

Opportunities for Smallholder Producers and

various products can be done by comparing

Processors”12. There is, however, no one correct

gross margins, or through calculating the

way for making a choice of markets since it is a

internal rate of return (IRR) of a product. We

decision of the organization that will implement

recommend that those, not familiar with the IRR

the agroenterprise process. Whatever the criteria

technique, seek advice from an accountant. In

used for selection, it is important to reflect upon

evaluating profitability, there are no hard and

the impact that the use of a particular set of

fast rules, given that the opportunity costs for

criteria may have on the success, or not, of the

labor tend to be low or nonexistent in many rural

market chain selected. Here are some helpful

areas. It is important that the product be

tips for selection criteria that have been useful in

sufficiently profitable for the producers at actual

previous applications of the methodology. This

market prices, and that the market demand be

section explains the ideas briefly, and ends with

sufficient to assimilate additional produce

the presentation of a concrete field experience.

without entering a state of oversupply and price

decline.

Selection Criteria Used to Choose an

Appropriate Market Chain

Feasibility of production

The following criteria may be useful but do not

Even though market demand exists for a

represent an exhaustive list and they should be

product, it is vital to be sure that it is possible to

modified according to the criteria of the

produce this product in the project area given

organization that will lead the process. However,

existing social, economic, and environmental

in most cases the following principles are a

conditions with the quality that the market

useful guide:

demands. Is the production system for this

·

product consistent with sustainable natural

Market options must be feasible in the

resource management? The selection of market

context of the small rural agroenterprise;

chains that adapt to existing conditions and

technological and investment requirements

coincide with the facilitating organization’s

must be in accordance to this socioeconomic

concept of natural resource management is

· context.

recommended. If this is not the case, the

The market option must be attractive as a

facilitating organization should identify

business; it should offer an adequate

strategies to resolve feasibility limitations (for

· profitability or cost-benefit ratio.

example, find a supplier of credit who can assist

The market option must be sustainable and

with installation costs of perennial crops such as

should not harm the environment.

fruits, simple systems of water harvest, micro-

irrigation systems, or the identification of

Market demand

improved post-harvest technologies). The

How much demand is there for the market

existence of feasibility questions should not

chain’s product? Is the market for this product

necessarily eliminate the product since solutions

growing rapidly or slowly? Is it stable or

can be included as part of the activities to

diminishing? We recommend working with

increase the market chain’s competitiveness.

products that show strong to moderate market

growth, as this usually implies the market can

Potential impact

absorb additional supply. In the case of new

How many families could benefit from a strategy

products, a survey of intent to buy can be done

to increase competitiveness in this market

to identify potential market size12. It is best to do

chain? Will this strategy generate strong,

your own study but you can use information

medium, or low impact, in terms of income for

from recent market studies, or surveys made by

producers? What impact will this strategy have

private or state institutions.

on least favored groups/on women as opposed to

men? It is also important to ascertain if the

Profitability

strategy will generate rural farm or non-farm

How profitable is the production or processing of

employment, and for whom. If the target

this product? How does the product’s

population of the project or organization is a

profitability compare with what a bank pays on

specific segment of the population (for example,

small-scale producers, women, indigenous

populations, youth, or others), it is important to

ask ourselves if this group will be able to take

12. For more information, consult Ostertag (1999).

advantage of the additional gains foreseen by the

38

Selecting a Market Chain

project. Strategies with greater impact generate

In assessing risk, the facilitator should consider

interest among possible participants and

the investment in a new market chain

contribute to the business development of the

intervention in relation to the existing farming

area as they bring in additional profits instead of

mix, and the potential to raise incomes with new

merely redistributing existing ones.

opportunities. New business opportunities need

to be discussed carefully with a client group in

Existing business organization

terms of land, labor, and capital availability. Also

Many researchers and public sector workers are

the farmer group should be assessed with regard

constraint oriented and can be highly risk

to their view of credit, the common use of labor

adverse. Traditional extension workers often look

and the innovation level they would like to accept.

for problems and then set programs to overcome

As a rule, profitability of an enterprise increases

them. A business approach is different; it seeks

with the level of risk and according to the Ansoff

opportunities and then evaluates business

matrix (Table 6), risk increases with the following

options, investment, cash flow, and profit to

types of products and markets, from 1 to 4.

make decisions. The lead organization should

Diversification, defined as presenting a new

assess aspects such as: What are the business

product into a new market, is the highest level of

organizations in the market chain like? Are there

risk in this matrix and herein lies a dilemma.

formal or informal groups of producers,

Analyses of products based on demand often

processors, or traders in this market chain? How

biases opportunities towards higher risk and

strong or weak are they in business terms? Is

towards diversification. Farmers who are seeking

there coordination among them now, or was

increased incomes are also aware that increasing

there in the past? Do not to leave out informal

their production of inelastic13 staple foods may

actors and organizations such as local and

not provide them with a better income. Therefore,

regional traders and their networks of suppliers,

it is not unusual for farmers to want to take on

who despite being informal are business

additional risk when they seek new business

organizations that exist and function with some

opportunities.

grade of effectiveness in the zone.

Table 6. Ansoff matrix for risk assessment.

Support agencies

Existing products

New products

How many support organizations are associated

Existing

1. Market

3. Product

with this market chain? What services do they or

markets

penetration

development

could they offer to the market chain? Are they

willing to facilitate or participate in the design of

New

2. Market

4. Diversification

markets

development

a strategy to increase competitiveness? Again, it

is important not to leave out the actors who are

associated with the market chain informally, in

aspects of technology, credit, or technical

The facilitator can guide groups towards a

assistance, since they can facilitate or limit the

sensible level of risk based on their experience,

design and implementation of the strategy.

skills, and track record. Facilitators may advise

newly formed farmer groups to select options that

Risk assessment

are based on market penetration and market

development. Farmers should engage with new

One of the more difficult criteria to assess is an

markets in a stepwise manner with test plots at

appropriate level of risk that a client group

first and market trials, before engaging in large

should take on. In formal terms, risk can be

scale supply. Groups with more experience in

measured in terms of exposure to credit (debt),

marketing, i.e., those with more assets, savings,

suitability of producing a particular product in a

ability to act collectively, can take on higher risk

selected area, other players in the market, level

of technology required for the new business,

price and volume volatility of the market,

13. An inelastic product is one in which demand does

number of buyers, cohesion of the group, and

not increase as buyers incomes increase, i.e., the

access to technical and financial services. Risk

amount of salt that people buys does not change

management is based on having sufficient

dramatically as incomes increase. A product

information to make an informed decision. If the

described as being elastic has market characteristics

that increase consumption as incomes rise, i.e.,

likely investment is low, less information is

people tend to buy more red meat as their incomes

required than if the investment is high.

increase.

39

Participatory Market Chain Analysis for Smallholder Producers strategies. Key questions: Where does your

The steps to follow in this process are:

selected product fit in the risk matrix? Do you

have savings to support this new business or

Identification of criteria

will you need credit? If you need credit, will

(a) Select two people in the group to organize

your business plan pay the necessary capital

results, one to facilitate and the other to

and interest payments? How much of your land

document the decisions.

(%) will you give to this product? What would be

(b) Ask each participant to write a list of three

the consequences if the business venture

criteria in response to the question: “What

failed? Are you planning to test the new

are the most important criteria for selecting a

business in a small plot at first? Where do you

market chain with which to work in our

feel there is most risk in this new business? Do

area?” Each answer should be recorded on a

you have plans to overcome these areas of risk?

card given to the facilitator.

Do you have partners who will share your risk?

(c) The facilitator reads out each card and places

it where it is visible to all participants

Environmental sustainability

without additional comments. Only clarifying

A final but important criterion that must be

questions are permitted at this time.

addressed is the sustainability and

(d) Once all ideas have been read out, they are

environmental impact of the new business. For

grouped by common themes. Some cards do

most cases, the scale of the activity may not

not fit in any group, they are put aside for

merit a full study on this, but the group should

later discussion and revision.

be aware of issues such as pollution, soil

(e) The facilitator invites participants to revise

degradation, run off, types of materials, and

each group of cards to see if one or more

chemicals being used. In each case, the group

common criteria emerge or can be developed.

should ask if there are any hazards with the

(f) When work with the groups of cards is

new business venture. Does the group need any

completed, the outlier cards that were not

specific training or knowledge on how to use a

initially classified are reviewed again, to see if

new chemical or material? Is there any risk of

the idea is already in another group or if it is

pollution? If there are hazards, long- or short-

worthwhile including it as a separate theme.

term, what are the measures being taken to

(g) Once the themes are defined, there should be

address these hazards?

a list of selection criteria to apply to the

market chains of a given area.

Definition of Individualized Selection

Criteria

At this point it is useful to review all the criteria

selected and decide on which are the most

Each organization or group of organizations

critical for the decision-making process, i.e., for

should develop their own selection criteria.

action. We recommend a list of three to four

There are several methodological options for

criteria with easily measurable indicators. Once

selection ranging from simple (voting or

the criteria are selected, the group moves to

discussion) to more complex (technical studies).

identify indicators and measure each one.

Simple methodologies are quick, while technical

methods permit more analysis and greater

Using the criteria

security in the decision made. Essentially the

Based on the list of criteria identified, the group

decision-making process should be undertaken

proceeds to define indicators for each. For

in a systematic manner and in a way that takes

example, if one of our criteria is “potential

note of the participants desires and

impact”, we need to define how impact will be

perspectives.

measured (persons, families, communities,

municipalities, etc.) and where the data will be

A Methodology for Prioritizing Market

sourced. The end product from this session will

Chains

be a list of operational criteria with their

We recommend a brainstorming session to

respective forms of measurement and data

agree on selection criteria. This exercise can be

sources.

done internally within the facilitating

organization or among various organizations, if

Prioritizing criteria according to relative

there is a committee for rural enterprise

importance

development or other area organizations with

The next step is to prioritize the criteria and

this focus.

their indicators: To evaluate this, the group

40

Selecting a Market Chain

should consider questions such as: Are market

interests of community groups, the Rural

chains that involve more producers of higher

Agroindustrial Committee (RAI) of the Consorcio

priority than those that are more profitable? Is

Interinstitucional para una Agricultura

it more important that the activity be

Sostenible en Ladera (CIPASLA) developed the

sustainable in environmental terms, or

decision tree presented in Figure 7. The

profitable? This step gives a specific weight to

objective was to compare a list of market chains

each criterion with the purpose of enlarging

with market opportunities, favorable conditions

the differences between the options and thus

for production in the zone, and with some

facilitating the selection of market chains. At

degree of interest or organization of producers.

the end of this process, the group should have

The process was carried by four local NGOs, a

arranged the criteria, from the most to the

governmental organization, and a producer

least important, with a weight or score

association in three 2-hour meetings and was

assigned.

useful for the members of the RAI.

Selection Tools

This decision tool was applied using the

following criteria and measurements: each

Using the list of criteria with the indicators

option studied received a score out of the total

and sources of information, the final step is

possible of 21 points. The criteria and

the construction of a selection tool. This tool

measurements used were:

can take the form of a decision tree (see

Example 1) or a simple weighted scoring

Market demand

matrix (see Example 2). Once the tool is

established, it is applied to all potential

The growth of market demand is organized in

market chains in an area.

three categories:

1. High—annual growth in demand above 6%.

Example 1: The decision tree of CIPASLA,

2. Medium—annual growth in demand between

Colombia

3% and 5%.

To facilitate selection of market chains,

3. Low—annual growth in demand between

agendas of support organizations, and

0% and 2%.

Existence of the crop (1)

Yes - 1

No - 0

Association (2)

Yes - 2

No - 0

Existing organizations (3)

Strong - 3

Strengthening - 2

Economic feasibility

Incipient - 1

Nonexistent - 0

High profit

Medium profit

Technical and

Bank profit

environmental feasibility

+

+/-

-

Technical

2.5

1.5

0

Environmental

2.5

1.5

0

Market demand

Total

5

3

0

High growth - 6

Medium growth - 4

Low growth - 2

Figure 7. Decision tree of rural agroindustrial committee of CIPASLA.

SOURCE: Authors’ adaptation of RAI workshop information with CIPASLA, 2000.

41

Participatory Market Chain Analysis for Smallholder Producers Note: In the case of CIPASLA, indicators on the

3. Bank profitability: The product’s IRR is level of growth of each product were taken from

equal to the bank’s savings account interest

“Market studies for products of small-scale

rate.

producer economy of the zone of the Cabuyal

River micro-watershed”.

Existing organization

The level of business organization in each

Following these criteria, we created the

market chain is assessed using the following

following distribution of products (Table 7).

criteria (Table 9).

Technical and environmental feasibility

A strong organization fulfills all four criteria.

The matrix is read in the following way as

An organization growing in strength fulfills

shown in Table 8.

some, but not all, criteria.

An incipient organization fulfills none of the

Economic feasibility

defined criteria.

Market chains are grouped according to three

levels of profitability:

Support agencies

Selection of the partner organization was based

1. High profitability: The product’s IRR is on the principle that the organization was

6 points or more over the bank’s savings

interested in working with a range of

account interest rate.

participants in the market chain, i.e., would

work with producers, traders, processors,

2. Medium profitability: The product’s IRR is retailers in a process that would strengthen the

between 1 and 5 points over the bank’s

market chain in a systemic manner.

savings account interest rate.

Existence of the crop in the zone

Table 7. Growth prospects and product types.

The crop or product exists in the zone, and thus

is known by local producers.

Growth

Products

High

Mangos, blackberries, oranges, plantains

For each product identified with market

options, and of interest to CIPASLA partner

Medium

Lulos, pineapples, lemons, potatoes,

grapes, passionfruit, chonto tomatoes,

organizations or producers, relevant

capsicums, carrots, green beans,

information was collected for each point above.

free-range chickens, milk products

Once the information was completed, possible

Low

Tree tomatoes, broccoli, pears, soursop,

points for each criterion were assigned, and

cauliflower, Batavia lettuce, bananas,

total points generated for each product. To

guavas, apples, uchuvas ( Physalis) , onions, select the products for which to first elaborate

melons, coconuts, avocadoes, passion fruit,

strategies to increase competitiveness, scores

dry beans, beetroot, spinach, green beans

were compared to identify those that best

responded to the criteria of the RAI of CIPASLA.

Table 8. Technical and environmental issues against feasibility index.

Feasibility

Highly feasible

Medium feasibility

Not feasible

++

++/--

--

Technical

Production is feasible in the

Production is feasible in the

Production is not technically

zone and does not present

zone, but presents limiting

feasible in the zone

major technical nor

technical and mangerial

managerial problems

factors that require training

and research solutions

Environmental

Production does not generate

Production generates a

Production generates a highly

negative environmental

negative environmental

negative environmental impact

impacts in the zone such as

impact, but it is manageable

with no known form of mitigation

erosion, contamination, or

with good production practices

deforestation

42

Selecting a Market Chain

Table 9. Organizational capacity assessment.

Criteria

Level of organization

Strong

Growing in strength

Incipient

Legal

Legal incorporation

Legal incorporation is in

No legal incorporation

incorporation

process or does not exist

Achievements

Sustained achievements over

Some recent achievements

No achievements as yet

various years

Capacity for

Internal processes functioning

Incipient processes of planning

No processes of either

planning and

for planning and evaluation

and evaluation

planning or evaluation

carrying out

actions

Business

Effective accounting and

Incipient accounting and

No accounting and

practices

administrative controls

administrative controls

administrative controls

Table 10. Assessment of products by weighted scoring.

Selection criteria

Weight (W)

Product A

Product B

Evaluation

W * E

Evaluation

W * E

(1 to 10)

(1 to 10)

Potential positive impact on

25%

8

2.00

6

1.50

smallholders

Potential employment generation in

35%

6

2.10

4

1.40

relation to total local employment

Value added potential of the product

20%

6

1.20

6

1.20

Size of the market chain’s market

10%

8

0.80

10

1.00

Potential employment generation

10%

4

0.40

10

1.00

for vulnerable groups (women, youth)

Total

100%

32

6.50

36

6.10

Example 2: Simple weighted scoring

market chains is the first step in the design

matrix14

of a strategy to increase market chain

Another way to implement a decision-making

competitiveness.

process using the criteria identified is to use a

weighted scoring matrix as shown in the

Merits of a Pilot Project to Test the

following example (Table 10).

Process

When the agroenterprise process was applied in

This system attempted to combine a simple

Madagascar, the service provider, Catholic

scoring system with the relative importance of

Relief Services (CRS) led the process (Box 3).

the selected criteria to achieve an objective

CRS is leading a development project in four

decision-making process. In this example,

provinces of Madagascar and before applying

Product B had a higher overall score but when

the agroenterprise approach to a large project

the weighted criteria are applied, Product A

zone, the field teams and agricultural advisors

comes out highest.

at the management level wanted to test the

methodology at a pilot level, during a short

This section has presented some criteria that

off-season. This use of a pilot project enabled

have been useful for selecting market chains

the staff to gain experience in a 3- to 4-month

within an area. The identification of prioritized

period, observe the opportunities and

limitations of the process, and also find out

what criteria farmers use to assess new crop

14. Adapted from Van der Heyden and Camacho (2004),

options.

p. 18.

43

Participatory Market Chain Analysis for Smallholder Producers Box 3

Selection criteria used for discarding options

The product selection criteria used by CRS staff were in six categories. If a product failed in more than one category it was rejected. This was a rapid process that was completed by the field staff.

Selection criteria

1. Ease of production

Is the crop grown in the area?

Can the crop be grown in the area?

Are people already growing this crop?

Is the crop grown in the off-season?

Does the crop need any special inputs, such as irrigation, pesticides, and fertilizer?

Can the product be produced in the off-season?

2. Market demand

Is there strong market demand?

Is demand based on season or festival? And does that fall into the intended production phase?

Is the demand for high volume or a niche market?

Are there many buyers or only 1?

3. Financial cost of production

Does the production required a high investment?

Is credit required for this production?

4. Social

Does the product have any special social significance? Is the product subject to any taboos?

5. Environment

Does the production come with any hazards or potential harm to the environment?

6. Storage

Is the product to be stored? Is the technology available for storage?

How long can the product be stored if market changes?

A rapid market survey questionnaire was

The group developed the discard criteria, the first

developed by the agroenterprise team. The

level of discard was based on whether the crop

teams conducted the survey with a range of

could be grown in the area and this reduced

sales points/market actors in a 10-day period

products from 50 to 31. The next level of

using four teams. The survey focused on the

discard used their own 14-point criteria and this

major local market town of Ansirabe, and other

enabled them to reduce the number from

local markets in the area. No information was

31 to 11 possibilities. The three market

collected on national or international markets.

opportunity matrices, e.g., production, marketing

A CRS Project Officer led each team. The

and financial analysis were used to reduce the

information was synthesized at a group

possibilities to six options. Farmers reviewed

meeting and results presented to farmers. The

these options prior to planting.

timeframe for the development of the

questionnaire was 3 days.

All six options from the Market Opportunity

Identification survey were tested by some

Considerable preparation time was spent in

farmers. Project staff found that the more

developing a simple questionnaire and

progressive farmers, located on the main road

translating it into Malagasy. The Project Officers

wanted to try more exotic ideas, whereas the

focused on two questions in their questionnaire,

poorer farmers in the remote areas were not keen

(i) what do people buy most and (ii) what is

to try any new ideas. The major point is that the

scarce in the market.

marketing study clearly encouraged innovations

to take place, but farmers wanted to match their

risk profile with their investments.

44

Planning and Executing a Rapid Market Survey

SECTION 6

Planning and Executing a Rapid Market Survey

Guiding questions

1. What are the key steps in planning for a rapid market survey?

2. Why is secondary data important?

3. Why is it useful to have up to date market information for the market chain’s products before beginning the analysis?

4. What information is it useful to have about the product or products, the market, the rules of the game, and the buyers?

5. How can we generate reliable information on the market in a quick and efficient way?

6. What decisions can be made based on up-to-date market information, and what implications do these have for elaborating a strategy to increase competitiveness?

Introduction

farmer groups. To undertake this analysis, we

Following the selection of one or more market

recommend reviewing existing data and

chains, the next step is to gather commercial

carrying out a rapid survey with known or

information on the product and market chains

potential buyers of the product. This phase of

identified, to identify buyers, and determine

the method seeks to place the agroenterprise

issues of price, quality, and delivery that are

design process on a firm footing with reliable

acceptable to an identified buyer, who is

market data, and at the same time to identify

seeking to undertake new business with your

and get to know the actors in the market chain.

45

Participatory Market Chain Analysis for Smallholder Producers Likewise, this is a good opportunity to invite

· Draw a theoretical map of your survey zone

key market chain actors to participate in the

and market channels to be included in the

analysis of the market chain and to assist in

survey. Make sure you collect all the

developing a strategy to increase

information you need to develop a business

competitiveness. The following sections outlines

plan and later link up with particular actors

the steps in planning data gathering through

secondary data mining and conducting a

· in the market chain.

Find key informants to give you background

market survey. It takes into account the type of

information and insights into the most

market, the skills of the team, and the time and

useful people to interview prior to setting out

financial resources that are available.

on the survey.

Planning for the Survey

Make a list of people to contact, use key

A good survey must be well planned and have

informants as a guide

clear objectives. The group involved in the data

· As part of your theoretical map, include

gathering and survey need to discuss the level

information sources and types of people that

of information required, geographic scope of the

you will interview and the numbers of

survey, people to be involved, and their roles

interviews that you plan to make at each

and responsibilities. The following section

point in the market chain. We recommend

outlines some aspects that the survey team

that four to five persons at one point in the

should consider as part of this exercise.

chain are interviewed so that data can be

crossed check, triangulated, and confirmed

Formulate the survey team according to

skills and size of the study

·

· with other market chain actors.

Use your key informant’s information to

The survey team should ideally include

guide this process. A key informant can be

representation from the service provider,

(i) a leading agent in this market chain,

research, accountancy, and one or two

(ii) an ex-researcher who knows the sector,

representatives of the relevant farmer

or (iii) a retired schoolteacher who is familiar

groups. Depending on the type of product

with the area. The key informant should act

selected, it is an advantage if one of the

as your soundboard during the survey and

group members has some expertise in this

as a source of constructive criticism.

area, i.e., a livestock specialist if the dairy

· sector is being evaluated.

Select sites/locations/industries to be

Team size should be relative to the scope of

visited and plan for follow up visits based

the study. The team should consider how

on information from first meetings

many surveys will be conducted, their

· Depending on the nature of the market

locations, and the logistics required to

chain being investigated, plan your visits,

enable the survey team to get to these points

and be well prepared when visiting each

· in the market.

interviewer. Do not go to an interview

A budget should be developed which meets

without having the purpose of the visit

the needs of the survey team and provides

resources to write up results in addition to

· clearly in your mind.

Be observant, do the answers from the

· the field time.

person fit the situation? Use local

We recommend that teams of two or three

observation to color your interview.

persons conduct market interviews. One

person will ask questions and engage the

Design interview checklists and pretest

interviewee, a second person will record

· Develop checklists that will guide you

notes and observe gaps in the information,

and a third person can monitor the process

· through an interview.

Train your interviewers using pretests so

and keep time.

that you are sure they will collect the correct

Make sure the survey is focused on the

· information.

Adapt checklists, where needed to specific

selected market chain

·

types of interviewee, e.g., a checklist for a

When formulating your plan avoid collecting

processor is different from a checklist for a

information that is interesting but not

relevant to the needs of the enterprise/client

· market retailer.

It is often useful to split the appraisal and

group.

checklists into two parts:

46

Planning and Executing a Rapid Market Survey

(i) Demand questions focused on urban and

It is unfortunately the case that many projects

market outlets.

do not invest time into secondary data

(ii) Supply chain questions focused on actors

collection and often miss opportunities and

in the market chain often rurally located.

waste resources because of this. In some

cases this is due to incentives that pay for

Collate information and write report

·

fieldwork rather than data collection and

Select one person in the group who will

analysis. We recommend that this aspect of the

collate data and be responsible for writing

work be taken seriously as there is a lot of

up results.

·

information available. Review of this

The findings from the results should be

information may lead to avoidance of false trails

reviewed by the team and debated.

and may produce good contacts who could

assist with the efficient collection of primary

Use of results

data.

· The final report should be presented orally to Collection of primary market chain data

the relevant farmer groups and

agroenterprise team.

·

In the context of this methodology, a “rapid

A written document should outline the

market survey” should not be confused with a

process, major findings, and

complete sub-sector marketing study. A rapid

recommendations.

·

market survey identifies critical aspects in the

The document should also provide

flow of a particular commodity or product from

information on key informants or actors

the point(s) of production to the point(s) of sale.

within the market chain who may be

Specifically the market chain survey aims to

interested in participating in the design of a

gather information that will reveal new

market chain competitiveness strategy.

business opportunities or identify key

bottlenecks in the market chain. This

Starting the Market Chain Analysis15

information is vital when moving to design the

market chain strategy. The required information

Collection of secondary data

can be divided between data about the product,

As with any type of research or analysis, the

buyers, linkages between buyers, and other

starting point in an investigation should be a

specific observations defined by the

serious review of existing information with

agroenterprise group prior to the survey. It is

regard to the product, how the product is

important to define the types of information

grown, and the main markets. Secondary

required for making business along the market

information is extremely valuable as it is low

chain more dynamic, i.e., the data being

cost, the work has been done by others and it

gathered should focus on opportunities for

usually only requires systematizing. Accessing

business development.

good secondary data will save you considerable

time and money. Sources of secondary

In addition to providing marketing information,

information include those listed below:

the survey will also enable farmer groups and

service providers to identify key actors in the

Sources of secondary information:

·

chain with the view of establishing new

Market information services.

·

business options. It also permits the

Consultancy reports.

·

identification of possible strategic partners

Research institutions (CGIAR and others).

·

within the design of the strategy to increase

Chambers of Commerce.

·

overall market chain competitiveness. Hence the

Trade associations.

·

market survey should not be considered as an

Wholesalers.

·

end point, but as essential groundwork for the

Internet.

·

next steps.

Development projects (NGOs).

· Agribusiness development centers.

·

Data about the clients:

Press, specialized trade/commodity journals.

·

The basic data needed about the clients are:

Export promotion boards.

· Name.

15. This section presents a simplified version of a rapid

· Location (exact address, city, department,

etc.).

market survey. For a complete explanation on

identifying market opportunities, consult Ostertag

(1999).

· Contact information (telephone, fax, cellular

phone, electronic mail, etc.).

47

Participatory Market Chain Analysis for Smallholder Producers

· Type of client (i.e., position in the chain:

The composition of the team members will

trader, supermarket, restaurant, hotel,

change according to market type. For a local

· institution).

market, the producers themselves or

What other products are bought.

secondary school or university students can

carry out the market survey, with limited

Data about the product and the market

training. However, as the market survey

chain:

·

becomes more complex and requires analysis

Commodity characteristics (grades, types,

of large urban markets, far from where

· varieties).

producers live, it is recommended to organize

Presentation of the product (weight,

a mixed group of producers, extension

· packaging, etc.).

workers, researchers, agents from the

Product volumes (aggregate market size,

facilitating organization, and students to

· individual buying conditions).

conduct the survey.

Frequency and site of product delivery

· (dates, periods, market site, on-farm).

Checklists and Summary Sheets

· Consumption patterns (seasonality, trends). The simplest way of performing a market Supply situation, production (demand,

survey is by means of a structured or semi-

· storage, trade flows).

structured interview with actors in the market

Product price and form of payment, price

chain. Checklists for interviews should be

· paid (cash, credit, for how many days).

designed beforehand and pretested by the

Price relationships (seasonal, cyclical,

facilitating organization. Training should be

· supply–demand).

given to those persons involved in data

Actors in the chain (market channels,

collection, i.e., producers, extension workers,

· marketing arrangements).

students, or any other suitable group. As the

Marketing behavior (practices, vertical

market chain becomes more extended, the

· integration, market power).

pretesting of the checklist requires more

Legal requirements for selling products

attention.

(sanitary registration, bar codes, packaging,

· legalized invoices, etc.).

The survey group should participate in the

Market infrastructure (roads, markets,

design of the survey instrument (checklist) and

· communications).

be involved in formulating questions to make

Government (regulation, marketing, price

sure they understand them. Once the survey

· fixing).

instrument is designed, it should be tested

Global Trade (world market situation, tariffs,

with local actors to: (a) verify that the

sanitary and phytosanitary regulations,

information sought is obtained; (b) identify

· technical barriers to trade).

possible gaps, and (c) ascertain that the

Timing of the study (timing of study relative

survey can be carried out in a reasonable time.

to market cycle).

Logistics and costs of the survey can be based

on the information gathering process at the

Survey Teams16

pretest phase.

The complexity of the survey and the

requirements for interviewees vary according to

Likewise, the forms that will be used for

the type of market being analyzed. If the study

recording the data should be tested, and their

is focusing on sales in a local market, then a

ease of use verified. When the tools are ready,

small team of two or three people working for

groups of researchers are formed to perform

2-3 days may be sufficient. In estimating the

the survey, and each is assigned tasks.17 A

time required for the survey it should be

sample checklist for a market chain analysis is

considered that excluding transportation, a

given in Appendix 1.

standard interview might take 30 minutes to

1 hour. In some cases it may take 2 hours when

an interviewee has many products to discuss,

17. These groups can be composed of a single person or

or is a key actor.

up to three or four persons. According to CIAT

experience, groups of two to four persons are best

since it is difficult for a single person to interview

16. For a full discussion on the theme of methodologies, and document answers at the same time, while large

consult Ostertag (2000).

groups tend to intimidate those being interviewed.

48

Planning and Executing a Rapid Market Survey

Selection of sites

Guiding interviews to key informants18

The survey team should draw up a list of

Identifying and interviewing a small selected

market sites and types of market chain

sample of “key informants” in a commodity

actors for implementing the survey. To

market chain is a critical part of market

facilitate the process we recommend that the

survey. Key informants are defined as people

survey be initially divided into two aspects:

who have extensive knowledge of a particular

(i) demand and (ii) supply. Possible sites in

part of the market chain, they may be a major

the demand and supply are indicated in

player in the market or have extensive

Figure 8.

experience in their market position and can

therefore provide sound insight into their

Where to start a market chain analysis

function and give reliable information on costs,

Market surveys can begin wherever you feel

trends, problems, and opportunities at their

most comfortable. This can be with a review

point in the market chain. To identify these

of farmer production methods or at a target

people takes some investigative work but this

market. When working from the market end

can be done by working from the larger actors

first, your selection of market will depends

on the demand side of your market survey and

upon the limitations of the work, whether it

asking who should be interviewed, based on

is at a local, district, or national level. At the

their market share and number of years in the

demand end of the market survey, the survey

business. Equally, a first question in a large

teams should find out as much information

market where it may be difficult to assess

as possible concerning where and how the

people is to ask for the most experienced

product is sold, how the primary product is

person to interview (Box 4).

differentiated into different products, and

how products are segmented for different

Cross-referencing information

types of clients. Following the demand

It is frequently stated that business people

analysis, the survey team will follow the

never tell the truth, so how is it possible to

product down the supply chain, back to the

interview traders? Our experience is quite

point of production, in the selected project

area. At each point in the chain the team will

gather information on actors, product prices,

18. Key informant: Term used to describe a person who

and most importantly opportunities and

plays an important role within a market chain and

constraints at each point of transaction. The

can provide you with accurate and relevant

key issue is to systematically follow the

information on the structure and performance of the

chain. The use of key informants in the survey

project from production to sales.

enables you to be rapid and work from a small

sample size.

Checklist

Checklist

Checklist

Checklist

Checklist

Checklist

Types of

1

2

3

4

5

6-10

retailers

DEMAND

DEMAND

Supply

Retailers

Market stall

holder

Supply

Urban

Street vendor

wholesalers

Supply

Traveling

Kiosks

traders

Supply

Local market

Small shops

wholesaler

Supply

Local traders

Supermarkets

Producers

Number of persons to be interviewed at each stage

4-5

4-5

4-5

4-5

4-5

15-20

Figure 8. Sources of primary information.

49

Participatory Market Chain Analysis for Smallholder Producers Box 4

Some practical tips for conducting an interview

Pre-interview

· Be prepared with your checklist.

· Have a notebook.

· It is advisable to work in pairs.

· Book an appointment and give a correct and convincing reason for visit (telephone, visit).

· Try to memorize the key issues to be asked.

· Have ample background knowledge about the sub-sector, so that you can discuss the product with the interviewee.

During the interview

· Keep your interview to an agreed time.

· Introduce yourself and the purpose of the visit and the institutions you work for, use business cards and letters of introduction.

· Ask open ended questions.

· Avoid interrupting the host’s responses, switch off your phone, don’t talk while s/he is talking, and always be polite.

· Engage the person, the more s/he learns from you, the more information s/he will trade with you.

· Use this interview to learn who to talk to next.

· Be flexible and conscious of the hosts’ time.

Post-interview

· Maintain relations and deliver all you promise.

· Pass on a copy of the study when completed.

· Return all borrowed material.

· Treat detailed material confidential if asked.

· Maintain contact for future.

different, if you are well organized, have

(ii) Interviewing informants at different stages in

planned your survey well, and can explain why

the chain and asking questions that will

you are doing the work, most business people

verify previous results. If several people give

are interested in helping, providing you keep to

the same information, it is usually reliable.

a strict timeframe and are engaged in your

(iii) Cross-checking price data against secondary

work. However, nobody tells the exact truth, so

data, to confirm validity.

you should expect to hear versions of the truth.

In some rare occasions, you may be unfortunate

Finally at the end of each interview, the team

enough to interview someone who gives you

should ask for the names of other credible

unreliable information. To offset these problems

people or other key informants to interview. We

all answers need to be cross-checked against

have found that key actors are well known in a

what the interviewee is doing, how they behave,

particular market chain and you can be guided

what the team observes, and what other

to them by asking people to assist you.

informants say about the constraints and

opportunities they identify. Cross-checking can

Timing of the survey

be done by:

Several research teams can carry out the survey

in a single day or a lesser number can do so over

(i) Interviewing several actors at one point in

a longer period. Given that markets are not

the market chain and comparing their

static, it is important to carry out the surveys in

responses.

a timely fashion; within 1 to 2 weeks at most is

50

Planning and Executing a Rapid Market Survey

best so that data captured can be easily

enables the enterprise team to rapidly review

compared. If the selected market is large, an

results some days after the event, with a view to

urban center for example, the work should be

making specific contacts for linkage into the

divided amongst several groups of researchers.

design strategy.

At the end of the day it is useful for the groups

to meet to review results, compare notes, and

Documenting Results

decide how to manage any difficulties and how

Once the survey is complete, results should be

to proceed on subsequent days. All the data

analyzed and written up as soon as possible.

should be written up at the end of each day and

There are many ways of documenting and

be handed over to one person who is

systematizing survey results. It is important to

responsible for documenting the process.

choose a format that permits a useful

comparison of information, and that makes

Use of alternative information types

sense to the participants. Information to be

If the actors hope to use the survey results to

included in the format can include:

motivate changes in the form of production or

product quality, it is useful, in addition to

·

qualitative and empirical data, to gather graphic

· Name of the company or client.

evidence of the visits to the market and the

· Location and contact information.

Quantity of the product bought by day,

products. Photographs or videos can be used for

demonstration at a later date, and to facilitate

· week, month, or year.

Means of delivery of the product [(with or

the socializing of information with other market

without processing and required packaging

chain actors. Sometimes, being able to clearly

show the differences between the quality of one

· (bag, basket, tray, etc.)].

Present source of the product being bought

product and another, or a new form of

packaging, is enough to motivate a change in

· and present suppliers.

the market chain.

· Prices and form of payment.

Special requirements (health registration,

Going beyond observation to identifying

· bar codes, etc.).

Possibility of selling to this client.

future partners

In addition to standard marketing data, one of

In the case of market chains that include

the aims of the survey will be to identify

multiple products, it is useful to generate a

whether any of the buyers in the chain would

table for each product. For example, when

be interested in finding new suppliers of a

gathering information for a dairy market chain,

product and whether s/he would be interested

there will be multiple products and therefore

in participating in a more strategic long-term

interviews will be needed with buyers for fresh

relations with groups of producers. One of the

milk, pasteurized milk, cheese, yogurt, and

main objectives of the survey should be to

other sub-products. Each specific product has

identify actors in the chain with whom a

different characteristics that are important to

commercial relation can be established.

identify and document. Table 11 presents an

Therefore the marketing survey is a process that

example format that has been used in the past

goes beyond simply establishing whether

for this type of survey.

“market demand exists” and how products flow,

to identifying people with whom the client group

Responsibility for writing up the results

and service providers can later negotiate.

At the outset of the survey, one person should

be designated to collate the information from

When the survey team finds an actor(s) in the

the interview teams and be responsible for

chain that express reservations about working

writing up the final report. The analyst and

with small-scale producers, it is important that

writing position is crucial to the success of the

the group perseveres to find other buyers who

survey and therefore the groups should select

are more amenable to the process. To assist in

someone who has a track record of writing good

the process of follow up activities, the survey

reports and has the time to fulfill this task

team can record details of each interview onto a

within a 2-3 week period form the end of the

summary sheet at the end of each day. A

survey. Most importantly, this person should

summary sheet for interview evaluation and

agree to the task and be remunerated

follow up is given in Appendix 2. This sheet has

accordingly.

been used to good effect in other surveys; it

51

Participatory Market Chain Analysis for Smallholder Producers Possibilities

of sale

Good

Good

Good

None

Medium

is

panela

on

of

the

Cali

Requirements

Label

source,

codification in

Cali

Sanitary

registration,

packaging does

not matter

Sanitary

registration,

packaging does

not matter,

depends what

is offered

Depends

Cali,

codification

through Cali

Label of

panela source,

Codification

in

days

days

days

5

0

0

Payment

30 days

1

3

30 days

3

n.d.

Price

9,900

8,900

9,800

(pesos)

10,800

10,400

18,000

11,000

10,000

11,000

32,149

41,860

19,870

20,540

21,767

24,112

28,130

30,363

25,898

2000).

Dulce–extra

Dulce–

ORPOTUNÍA,(C

Suppliers

Caña

Caña

corriente

Olímpica

Estrella

Buen Gusto 400 g

Palestina

Estrella

Palestina

Palestina

Palestina

Estrella

Buen Gusto 400 g

Palestina 500 g

Buen Gusto 400 g

Olímpica

AA

Triángulo

Lucerna

Palestina

Palestina

Lucerna

Source

Candelaria

Palmira

Candelaria

Candelaria

Candelaria

Candelaria

Medellín

Cali

Candelaria

Bugalagrande

Candelaria

Candelaria

Bugalagrande

para el Desarrollo de Tunía

units

Packaging

Bag/24 pkt

Bag/24 pkt

Bag/24 pkt

2

2 units

2 units

Bag

Bags

Vitafilm

None

Vitafilm

Vitafilm

Vitafilm

Vitafilm

Vitafilm

(unrefined sugar).

g

panela

k

Form

Round

Powdered

Round

Round

Round

Round

Round

Powdered

Powdered

Powdered

Round

Round

Round

Round

Round

8 squares

1

8 squares

1 kg

a

)

5

5

0

0

0

0

0

2

1

1

1

4

8

8

n.d.

n.d.

Weekly

quantity

( arrobas

City

B/ventura

B/ventura

B/ventura

B/ventura

Buga

5 lb.

= 2

arroba 1

Company

Olímpica

Distrib.

Casa Blanca

Merka Mar

La 14

Olímpica

Table 11. Results of a rapid market survey for

a.

SOURCE: Authors’ adaptation of information from the Corporación 52

Planning and Executing a Rapid Market Survey

Results from the analysis for the enterprise

indication of the types of product(s) in demand

development stage:

·

and information on volumes and prices of

Identified market opportunities for an

produce entering the market. Information such as

· enterprise.

how much of the product the market is presently

· Key constraints in the market chain.

absorbing and at what price (a rough proxy for

Technology requirements to enter a specific

product demand) is important. The survey results

· market.

will also provide a clearer idea on product

Promising partners in the market chain, or in

delivery and the form of payment presently used.

research, that may be able to assist in

Based on this information, the differences

· developing an idea to a pilot stage.

between the quality of this product or its

Names of potential business partners that

packaging and existing market norms can be

may want to test a new product.

identified. Also, it is possible to revise the

mechanisms of payment managed by the clients,

Essential results from the demand side of

analyze which is the most favorable for the

the market chain analysis:

market chain’s producers, and what would be the

·

implications of beginning negotiations with

· Identify the major products and market chains. different types of buyers19.

Provide figures on the size of these markets,

and a figure of the total market demand for

Second, the survey should provide initial ideas on

· the product in question.

opportunities and constraints in the system and

At the product level, information is required

areas of inefficiency or excess rents in the market

on price, volume, trends, quality criteria,

chain. These aspects of the study highlight areas

· current uses, and potential uses.

for innovation. Finally, the survey will also

The results should prioritize products in

provide a list of contacts of people in the market

terms of where the enterprise can increase

chain that have expressed an interest in further

sales, increase product value, and volume of

participation in developing the enterprise

· trade (i.e., how to be more competitive).

strategy. This is essential, as it is these actors

The process of demand analysis should record

who will be crucial in bringing together and

the names of traders, buyers, and processors,

participating in new agroenterprise initiatives

so that any future intervention can be

that feed into the market chain concept.

developed in partnership with these actors

after the analysis of the results have been

Based on the survey, clients can be classified

made.

according to the possibility of selling to them or

Essential results from the supply side of

their strategic value for the market chain. Some

the market chain analysis:

useful criteria in this exercise can be the volume

·

that each client manages, the segment s/he

A map of the zone being analyzed with major

attends, the use s/he gives to the product20, the

· production zones, of the selected commodity. price s/he pays or is prepared to pay, and For a commodity, the study should provide

disposition (or not) to establish strategic relations

· information on seasonality of production.

Trend information on prices of the target raw

commodity and if possible for processed

19. A good evaluation of the requirements and rules of

products derived from the raw material (i.e.,

the game that reign in different segments of the

cassava roots, cassava chips, cassava flour,

market is useful. At times a “good” market turns out

· cassava starch, etc.).

to be not so good when these factors are analyzed. A

Marketing costs along the market chain,

concrete case is the supermarkets that tend to

showing costs paid by and to the

extend payments to their suppliers for 30 days or

more, and at the same time discount money for

intermediaries and from the farmer to the

product not sold. At the outset, their prices and

consumer. This information should include

volumes are favorable, but it may not be the most

· margins along the chain.

profitable segment for small-scale producers.

Flows of the commodity through the main

20. If clients exist that use the product in different forms supply chains, coming from the major areas

(for example, the extraction of essential oils from

aromatic plants), it is important to take them into

of production.

account. Sometimes these non-traditional

businesses have greater possibilities of growth and

Using Results

demand for strategic relations than the traditional

channels. Furthermore, because of being relatively

The results of a rapid market survey are useful

new, there is possibly less competition in these

in various ways. First, the results give an

segments.

53

Participatory Market Chain Analysis for Smallholder Producers with other members of the market chain. At this

Where they are located and how to contact

·

time, it is important to make sure that

information generated covers the market(s) in

· them.

The rules of the game that govern the market

which we hope to work.

· and its most important segments.

The quality requirements for diverse market

Finalizing the process of information and market

contacts, the organization or facilitating group

· segments.

Which of the clients should participate

should have a clear idea of:

(directly or indirectly) in the design of a

·

strategy to increase competitiveness?

Who the clients of the market chain’s

product(s) are.

Feeding Back Results

The team leader or lead writer should prepare

producers or processors, since these actors are

written and oral/PowerPoint slide

in a good position to evaluate the results, give a

presentations. The results should be circulated

reality check where needed, and assist in

to the group and be fully understood by the

diffusing survey results to their neighbors and

farmer groups. Hence the presentation needs to

acquaintances.

be well rehearsed and provide the most

important details of the study, i.e., essential

In this section, we reviewed the principal

information, that has been mentioned but also

reasons for carrying out a rapid market survey

what this means in terms of potential

if we do not have access to up-to-date data on

application as related to the:

the products and markets with which to work. A

·

short list of the key data to collect regarding

· Enterprise/market opportunities.

clients, product characteristics, form of

Research, development, and service provider

payment, and other strategic themes were

· innovation opportunities.

discussed. Finally, some simple methods, forms

Local administration and policy development

of documenting the results, and their

opportunities.

usefulness for a strategy to increase

competitiveness were mentioned. In the next

In the reporting stage it is highly recommended

section, we will proceed to identify the key

to include several of the market chain’s key

actors and design strategies to convene them for

the strategy’s elaboration.

54

Identification of Key “Actors” in Market Chains and Steps for Business Planning SECTION 7

Identification of Key “Actors” in Market Chains

and Steps for Business Planning

Guiding questions

1. Who are the key actors in the market chain that should be consulted for their point of view?

2. Are there important differences between actors that participate in the same link of the market chain? What are they? Why do they exist?

3. Why is it useful to differentiate the actors along the market chain? What are some advantages or disadvantages of doing this?

4. Which actors have the capacity to lead processes of innovation in the market chain? Which factors are important for promoting lasting changes in the market chain?

Introduction

In this section, we will cover the final step of

Up to this point in the practical section of the

preparation prior to developing the market chain

guide we have covered two steps which

strategy. Having undertaken a rapid market

contribute towards our aim of developing a

survey, the group will have made contact with

strategy to increase market chain

numerous actors in the market chain. This

competitiveness:

section provides methods to identify key actors in

the market chain and a strategy for the

(i) Selecting the market chain in which to work.

organization of workshops for the development of

(ii) Executing a market survey.

the new market chain strategy. At the end of this

55

Participatory Market Chain Analysis for Smallholder Producers section, the facilitating organization will be

product(s). This category can include

ready to call a joint meeting with participants

preproduction, production, harvest, or

and design a participative strategy for the

extractive activities.

selected market chain.

Post-harvest and processing

Identification of Actors

Actors whose functions are directly related to

The identification of key actors in a market

post-harvest management (cleaning, sorting,

chain has two basic steps: (1) an analysis of

packaging) or processing of basic goods into

functional categories within the market chain

value added products (for example, processing

and (2) an analysis within each functional

milk into cheese, sugarcane into panela (whole

category. The first step seeks to collate the

sugar block), or other types of processing).

market chain’s general participants by

These activities may be in the hands of

functional category (production, post-harvest

individual actors or rural or urban companies,

management, processing, marketing, and

within or outside the area.

provision of business development services),

locate them geographically, and obtain some

Trading

data about them. Results from this step include

Actors whose functions are related to the

a list of actors (people, groups, companies, etc.)

buying and selling of the market chain’s

by function. Based on this information, each

product(s). In general, these actors move the

functional category is reviewed to assess if we

product from the area to the end markets (as

can deal with all actors as single group or if

traders), but wholesalers located in urban

they should be further divided based on social,

centers can also be included. Various

gender, economic, geographic, technological or

marketing actors can be involved depending on

other criteria. The differentiation of the actors

the geographic extension of the market chain

constitutes the second step of their

under analysis.

identification.

Providers of business development services

Identification of the market chain’s actors

by functional category

Individual actors, organizations, or companies

that offer business development services to the

The identification of actors by functional

market chain. The services offered by these

category is based on Figure 9.

actors can be tangible (transport, machinery,

storage, among others) or intangible (technical

Actors are grouped by the following functions:

assistance, training, etc.), and formal (NGOs,

state agencies, companies, etc.) or informal

Production

(transporters, local traders, other farmers, etc.)

Actors whose functions are directly related to

basic agricultural production, including input

In operational terms, actors can be identified

provision, for elaborating the market chain’s

through brainstorming with a small group that

Contextual issues

Post-harvest

Production

management,

Marketing

processing

Business organizations

Business development services

Policy

Economic

Social

Technology

Environment

Figure 9. Wider perspective of a market chain.

56

Identification of Key “Actors” in Market Chains and Steps for Business Planning knows the market chain. If the participants do

others? How does access to markets or business

not have information on some functional

development services vary? Are the problems or

categories, then interviews may be necessary to

opportunities sufficiently different in each site

generate reliable data about the actors in this

to merit a disaggregated analysis?

part of the market chain. However, much of this

information will have been collected in the

Access to capital21

market survey work. At the end of this process,

Is there important differentiation in terms of

results can be documented in a table such as

access to capital? Are there some who have

Table 12.

better or worse access to productive resources?

An analysis of access to capital could be useful

Differentiation of Actors within the

for grouping actors into each functional

Market Chain

category.

Once a list of actors by function has been

generated, the differences between them are

Capacity to innovate

examined. The framework of analysis here is the

Do certain groups of actors along the market

functional categories, which are assessed one at

chain have more or less capacity to innovate?

a time. Within each functional category, actors

Who are they? What are their motivations to

are reviewed to see if there is sufficient variance

innovate in the market chain? In some cases,

among them to merit differentiating them into

the clients promote innovation through

sub-categories. Some criteria for differentiation

changing product standards, but in other cases

include:

the agroenterprises processing the product

want to improve their market position through

Technology

the development of new products.

Are there important differences between the

technologies used by different actors within the

At the end of this process, actors in each

functional category? Examples of these

functional category are differentiated based on

differences are production or processing

a set of criteria developed by the group and a

technologies that vary from the rudimentary to

decision is made on which groups should

the modern. If we group actors by technology

participate in the design of the strategy to

used, do diverse groups emerge?

increase competitiveness. Table 13 shows one

way to systematize the data.

Geographic location

Are the actors grouped in a single site or spread

among several? What implications does location

21. Capital refers to tangible active products such as

land, tools, or money, and intangibles such as

have? Are there producers with better land than

access to support networks.

Table 12. Actors identified by functional category in the market chain.

Function in the market chain

Production

Post-harvest and

Marketing

Business development

processing

services

Actor 1

Actor 1

Actor 1

Actor 1

Actor 2

Actor 2

Actor 2

Actor 2

Actor 3, etc.

Actor 3, etc.

Actor 3, etc.

Actor 3, etc.

Table 13. Differentiation of actors in the functional category of production.

Principal production

Geographic location

orientation

Zone A

Zone B

Zone C

Commercial

6 producers

None

2 producers

Semi-commercial

5 producers

4 producers

8 producers

Subsistence

10 producers

12 producers

12 producers

57

Participatory Market Chain Analysis for Smallholder Producers If more than two criteria are used, a name is

For each actor typology identified, a brief

defined for each group of characteristics. For

description with the most salient points can be

example, a small-scale subsistence producer can

prepared including the number of actors in this

be one that is (a) located in hillsides, (b) has

category, their social, ethnic or gender

traditional technology, and (c) has limited

characteristics, position in the market chain,

access to production assets. The facilitating

capacity to assume risks and innovate, or other

organization defines appropriate local criteria

relevant criteria as show in Box 5.

for differentiating actors.

Box 5

Example of an actor typology from Santa Cruz de Turrialba, Costa Rica

This example identifies and describes three types of traders active in one dairy market chain in Costa Rica.

For each typology an easily recognizable name was selected and the salient details noted as follows.

Tigers

Group 1: 5 or 6 traders

Largest, most

established traders

· Buy pasteurized cheese from industrial plants.

focused on pasteurized

· Sell principally to supermarkets in the capital city of San José.

cheese for formal,

· Have no commercial ties to artisan cheese producers.

urban markets.

· Have access to specialized transportation and cold market chains.

· Develop and use marketing strategies such as publicity.

· Provide personalized attention to their clients.

· Possess sufficient working capital to pay cash for cheese.

· Add value to the product through packaging and branding.

· Develop alliances with industrial plants and other traders.

· Do not assume any risks as sub-quality cheese is returned to processors.

· Set local purchase price and influence final sales prices.

Road runners

Group 2: 25 traders

Mid-sized traders who

sell pasteurized and

· Buy artisan, non-pasteurized cheese from on farm cheese producers.

non-pasteurized cheese

· Buy small quantities of pasteurized cheese from diverse industrial plants.

to informal local and

· Do not have employees but buy, sell, pack, sort, and transport their product directly.

urban markets.

· Tend to be from the same communities with good relationships with local producers.

· Tend to pay cash for the product although some pay a week later.

· Principal market are large traders in the capital city of San José.

· Also sell to corner stores and even house to house.

· Assume risks—sub-quality cheese or unsold cheese is aged and converted into cheese slices.

· Sell fresh cheese with no added value.

Jack of all trades

Group 3: 11 producer/traders

Not true traders but

producers who sell their · Not really traders but rather vertically integrated milk and cheese producers.

own non-pasteurized

· Tend to sell artisan, non-pasteurized cheese.

products to selected

· Sell primarily in farmer’s markets and local corner stores.

local markets.

· Do not manage large quantities of cheese.

· Entire productive process (cattle-milk-cheese-sale) involves most or all of the family.

· Assume all the risks.

· Do not have strong ties to other traders or actors in the market chain.

SOURCE: Lundy and Gottret (2003).

58

Identification of Key “Actors” in Market Chains and Steps for Business Planning The objective of this exercise is not to

developing new products for the market, or

complicate the selection process of participants,

entering an alliance with producers can have

but rather to verify that groups representative

great influence. The final buyers of the product

of the all market chain functions will be

have purchasing power, and if they participate,

included in the design phase. The main

they can facilitate rapid and lasting changes in

justification for this is to ensure that we will

the relations between other actors. Finally, the

receive the most complete view possible of the

support organization(s) (including the one that

market chain. If, for example, we only include

facilitates the market chain analysis) has

processors using modern technology, the

negotiating power with the diverse actors.

identified problems and support options will be

Often, this power is used to negotiate better

adequate for them, but not for the other

terms of exchange between the different actors,

processors that use more rudimentary

and at the same time verify that all are

technology. The same occurs with the

complying with what was agreed on. In this

geographic location of the market chain actors.

sense, all of the identified actors are reviewed

Hillside producers, for example, commonly face

and the most appropriate selected for the

different problems than do lowland producers.

exercise.

What is important is to ensure that all groups

expected to participate in market chain analysis

An observation on numbers

and in the final strategy are identified and

A common error is to attempt to involve

included. This approach correctly identifies

everyone. Provided that good representation of

limitations and constructs adequate solutions

the different actors exists, there is no benefit in

for their diverse conditions.

having a larger number of participants. In

practice, producers are the most numerous

Meetings to Convene the Actors

participants, followed by processors and

Once a market chain’s actors have been

support organizations. The group that least

identified and analyzed, representatives from

participates in workshops, but not in the

each group are selected to participate in

implementation of the strategy, tends to be

designing the strategy to increase market

traders or buyers. Try to assemble the most

competitiveness. It is neither necessary nor

active, respected and knowledgeable people.

desirable to convene all of the actors, but rather

to choose a subgroup of strategic actors for this

Organizing Workshops

process. The definition of strategic depends on

Workshops with identified actors for mapping

the objectives of the strategy. If we are seeking

the market chain, identification, and analysis of

to improve the links of small-scale hillside

problems and of final negotiation are the

producers with an intermediate urban market,

principal form of obtaining information,

and finally with various export companies, then

discussing difficulties, seeking possible

strategic actors should be selected from each of

solutions, and achieving agreements among the

these groups.

actors. Within the workshops, the main factors

to keep in mind are: explaining the process of

For the selection of these actors, two general

elaborating a strategy to increase

criteria have been useful: (1) interest in

competitiveness, the site and the time needed

participating and (2) capacity to improve the

for each workshop and for the whole process,

market chain. The second criterion is important

the expected results and benefits, and the use

since it leads us to analyze which of the actors

of the results. Each factor is described below.

can influence the market chain most and

includes these powerful actors, sometimes

known as market chain “captains”, in the

Selection of an adequate site

exercise. These persons and companies exercise

The elaboration of the strategy requires various

diverse forms of influence on the market chain.

spaces for group work, plus a central site where

For example, a producer or group of producers

all participants can be brought together. The

that has experience in developing innovative

following steps of the method explain when to

production technologies can exert a lot of

do group work and when to hold plenary

influence on how production occurs. In a

sessions. If separate sites are used for different

similar fashion, a processing company that is

actors, we recommend they are close enough to

interested in new forms of product presentation,

facilitate plenary sessions.

59

Participatory Market Chain Analysis for Smallholder Producers

Scheduling

of the process, systematized results should be

The methods described in this guide require

shared with all participants in a timely fashion.

time. It is important to clarify with the

participants how much time is needed, and how

Ownership of results

much time they are prepared to invest.

Given that most of the information comes from

the market chain actors, their contributions

The process

must be recognized in whatever document or

At the start of the first workshop or informative

presentation comes out of the process. We

meeting, it is important to explain to

recommend listing the names of the chain

participants why increased competitiveness is

actors who have participated in each workshop

important, how the process will function, who

on the first page of the report, not only to give

will participate, at what times, and the expected

credit where it is due, but also as a way of

results and benefits. Highlighting that this

building ownership of the process. The

process seeks synergies among actors is

facilitating organization should be recognized

important to clarify that the process does not

for its work, but it must be remembered that

intend to exclude actors, but rather to improve

the real owners of the information are the

the overall functioning of the market chain.

market chain actors themselves.

Presentation of participants

Timeline for workshops

Once the process is clarified, we recommend a

Developing a strategy to increase

round of presentations to provide background

competitiveness usually requires four 6-hour

on the roles and experience of the actors

workshops, and which can be organized over

present. There are many ways of doing this,

3 or 4 months, depending on the availability of

such as choosing a method that promotes

the actors. These workshops cover:

contacts along the market chain, for example,

traders present producers, processors present

(i) Market chain analysis.

support organizations, and then vice versa. The

(ii) Identification of limiting factors.

idea is to show to the group who the

(iii) Proposed solutions to these limiting factors.

participants are, their role in the market chain,

(iv) Negotiation among the market chain actors

and what their expectations or interests are in

for the final strategy.

the process.

The information in Table 14 shows a timeline

Expected outputs

used by an NGO in Colombia. However, under

At the start, it is a good idea to explain the

different circumstances and at different levels of

expected outputs of the process. Generally,

intervention, these timeframes can change. In

these results seek to increase the market

Madagascar, which initially developed the

chain’s competitiveness, but it may be that the

process within a pilot project, all four workshop

facilitating organization wishes to highlight

exercises, for 6 market chains, focused in at a

additional benefits for the market chain actors.

district level of intervention, were completed

For example, explaining to those that offer

within one 3-day residential meeting. While this

business development services that the results

was efficient, leaving time between meetings has

can be used to present funding proposals to

certain benefits in that it allows a wider

improve the market chain, or to the traders that

diffusion of results and opportunities for

results will include shared quality criteria along

informal discussions among participants that

the market chain.

may facilitate the later process of negotiation.

Use of results

Therefore, the service provider needs to adapt

this methodology to the situation, based on

From the start it is necessary to make clear that

available resource of time and money.

the results of this process will be shared among

the participants, may form part of future

projects, and are the basis for negotiation at the

Sources of Market Chain Information

end of the process. If there are any concerns in

As we enter into the design phase, the sources

this regard, it is good to clarify them at this

of primary information on the market chain will

time or achieve specific agreements about the

tend to be from the actors themselves. This

use of the information. At the end of each stage

information may be limited as some market

60

Identification of Key “Actors” in Market Chains and Steps for Business Planning Table 14. Timeline of design workshops for a strategy development.

Workshop

Contents

Results

1

· Presentation of the process and expected

· Map of the market chain.

outcomes.

·

· Historic graphic of activities of support and

Presentation of participants.

·

innovation in the market chain.

Mapping the market chain.

·

· Supply, demand, and quality of business

History of the market chain.

·

development services.

Business development services.

2

· Identification of critical points by functional · Problem trees for each functional category.

category.

·

· General problem tree for the market chain.

Analysis of causes and effects of the critical

points.

3

· Identification of possible solutions.

·

· Solution tree for the market chain.

Generation of a provisional logical path.

· Provisional logical path for discussion.

4

· Negotiation among market chain actors.

·

· Agreements among actors for market chain

Definition of the final strategy to increase

improvement.

competitiveness.

· Inputs for the strategy to increase competitiveness.

chain actors, i.e., traders, will not be able to

actions to improve the market chain are

fully participate in the workshops because of

negotiated and defined.

their business activities or interests. This is

where the previous market information

As well as primary information from market

gathered through the market survey work is

chain actors, secondary information contained

critical. Furthermore, for the service provider,

in reports, books, or other available documents

having undertaken the market survey, this

about the market chain is useful. In the case of

places them in a well-informed position to play

secondary information, it is important to share

the honest broker in the design and

and validate this information with participants

negotiating phases.

in the workshops.

If additional information is required from key

By the end of this section, the facilitating

market actors in the next step, the facilitating

organization will have identified market chain

organization should think of other ways of

actors by functional category, ascertained if it

collecting their points of view. Some

is necessary to differentiate among subgroups

techniques that have been of use by CIAT

in each functional category, selected strategic

included: interviews (semi-structured and

actors for strategy design, and organized the

structured), visits, and focus groups. The

details of the workshops. The next section

participation of all strategic actors in the final

explains the first step of market chain analysis:

negotiation sessions is critical as this is where

the mapping of the market chain.

61

Participatory Market Chain Analysis for Smallholder Producers SECTION 8

Participatory Market Chain Analysis

Guiding questions

1. What are the important criteria for analyzing complex systems such as market chains?

2. Why can it be useful to divide market chain actors into differentiated groups to analyze the system?

3. What are some techniques that permit us to generate a common language and understanding around the market chain? What are the advantages and disadvantages of the use of participative tools to this end?

4. What can we better understand by mapping the market chain? Is there additional information that is difficult to capture in this way? Why?

5. Why is understanding of the business development services offered along the market chain important? What important information can we collect in this area?

6. What can we learn by carrying out a historic analysis of market chain development over the last few years? When might this be useful? When is an extensive and formal revision necessary, and when is a rapid analysis sufficient?

Introduction

Criteria for the Analysis of Complex

This section explains how to begin the analysis

Systems

of the market chain by forming working groups,

The method described in this guide engages

mapping the market chain, identifying of

diverse actors along the market chain. Given

business development services offered, and the

that each group of actors plays a distinct role in

constructing of a brief history of the market

the system, they tend to have different points of

chain.

view about the limiting factors and

62

Participatory Market Chain Analysis

opportunities that affect the market chain. This

different positions. Each one can see a part of

diversity is positive, since a market chain is a

the object, but not the whole. If we ask them to

complex system where actors know their part of

draw the object, we get three points of view that

the system well, but do not necessarily

need to be combined into a fuller picture of the

comprehend other aspects of the overall picture.

object. Each one sees the system from their

The effective analysis of complex systems

perspective, and therefore can describe what

requires the application of some simple criteria.

they see or experience, but they are partially

blind to the realities of the other actors. To have

Listen to everyone

a more complete picture, all the points of view

Given the diversity of roles along the market

must be combined—or triangulated—as shown

chain, actors have different points of view. The

in Figure 10.

producers know a lot about what happens on

the farms (production difficulties, pests,

Actor A

varieties, yields, etc.), but progressively less as

the product leaves their community or goes into

marketing, trading and processing. Actors who

are concerned with post-harvest processes,

equally, know a lot about this theme, but may

know less about production. Similarly, the

actors involved in marketing the product(s) of

the market chain may have general knowledge

about the entire market chain but possess more

complete and profound information about the

Reality

aspects that directly concern them. Support

actors ought to be knowledgeable about the

entire market chain. However, in practice, it is

common to find that they also have specific

Actor B

Actor C

focuses according to their objectives or

capacities.22

Figure 10. Triangulation of data.

To overcome the compartmentalization of

In practice, triangulation implies combining

information requires listening attentively to the

and contrasting data from various viewpoints. It

voices of diverse actors along the market chain.

is common to find that actors describe issues

All have valuable information about their

that, under revision, turn out to refer to aspects

particular activities and can contribute general

of the same problem. For example, producers

data about the whole system. However, no one,

tend to talk of low prices for their products,

including the technical actors, is knowledgeable

while processors and traders talk of the

about the market chain in its entirety.

problems of quality and continuous supply. All

are describing the same problem (lack of

Triangulate the data

information on what to produce, when and how)

If it is accepted that all the actors are partly

from their own points of view. When data from

correct, then a process of triangulation is useful

diverse actors is compared, relationships

to understand the larger picture of the market

become clear, and solutions that benefit the

chain. What is triangulation? It can be

market chain as a system, and not a specific

understood as a relation between three or more

group of actors, are more evident.

persons who are examining the same thing from

Managing power relationships

In a complex system with multiple actors it is

common to find unequal power relationships.

22. For example, many NGOs have an explicit focus

towards specific populations (small-scale producers,

Some may have more economic resources and

rural women, youth, indigenous, etc.) or one or other

formal education than others. Some actors feel

link of the market chain (technical assistance or

comfortable talking to outsiders, whereas others

credit in production, access to transformation

will not speak more than necessary.

technology or storage of the product for marketing).

The same occurs with informal support actors. The

valuable thing about these actors is their profound

In market chain analysis, technicians and

knowledge of certain aspects of the market chain,

people with a certain degree of formal or

and their capacities to support it in some way.

informal education speak easily from the start.

63

Participatory Market Chain Analysis for Smallholder Producers While these actors may have valuable

Formation of Working Groups

knowledge to share, they tend to dominate the

Initial working groups are formed based on the

scene, obscuring the others (persons with little

functional categories in the market chain.

or no education, youth, women, ethnic

Those who are involved in production are

minorities, etc.). As a result, only part of market

grouped, and those involved in post-harvest

chain reality is heard. How do we manage these

management or processing, marketing, and

power relations to ensure more equitable

business development services are also

participation among diverse market chain

grouped together. Once grouped, a decision is

actors?

made whether the organization of subgroups to

capture diverse geographic, social,

While many methods exist, experience has

technological, class, ethnic, age, or gender

shown that the formation of separate groups to

viewpoints is needed. These decisions can be

map the market chain, analyze business

discussed with participants so that all are clear

development services, and review market chain

about the different groups and their objectives.

history is useful. Separate groups develop

Figure 11 shows this process.

different points of view that can be heard more

clearly, and with these diverse views, the final

Once the working groups are formed, the

strategy to increase competitiveness will be

exercises are explained. When everyone is clear

more complete and firmly grounded. This

about what to do, each group should work

practice implies separating producers,

separately on the exercises without the

processors, traders, and those offering business

intervention of the other actors. This process is

development services into different groups. In

much easier if all the work locations are in the

addition, if there are important subgroups

same zone.

within each functional category (as previously

identified in Section 7), it may be necessary for

Tools

them to work separately. This is especially

important if the strategy focuses on a specific

The tools used for market chain analysis

population group (small-scale producers with

include:

certain characteristics, groups of women, old or

young people, ethnic minorities, etc.), since the

(i) Market chain mapping.

problems and solutions analyzed should

(ii) Identification of business development

correspond to the focal group, and not to other

services offered.

actors in the market chain.

(iii) Market chain history.

All chain actors

Separation by functional categories

Production

Processing

Marketing

Business

development

services

Differentiation

Differentiation

Differentiation

Differentiation

Small

Small

Small

Small

producers

producers

producers

producers

Medium

Large

Modern

Traditional

Local

Urban

Formal

Informal

producers

producers

technology

technology

traders

traders

organizations

actors

Figure 11. Process of forming working groups.

64

Participatory Market Chain Analysis

The most important of these are mapping and

On the following pages, the objective of each

the identification of supply and demand for

tool, time required for its use, necessary

business development services. The review of

materials, steps, facilitating questions, and

market chain development is an optional step

examples are provided.

that provides useful information for analysis.

Mapping the Market Chain23

Objective

on the floor with local materials (e.g., pebbles/

Visualize product flows, business development

twigs on a dirt floor). What is important is to

services, and inputs along the market chain,

describe the flow of the product(s) in such a way

from primary production, to sale to wholesalers,

that all the actors can see and discuss it.

from diverse points of view.

Process

Time

Divide the groups using the functional categories

About 3 hours in total. One hour for the

of the market chain and ask them to draw the

elaboration of the maps by each group, 1 hour

market chain, as they know it. To begin the

for the socialization and construction of a

visualization, it is a good idea to identify the

consolidated map, and 1 hour for identifying

actors and place them spatially (in their

and filling gaps in the information.

community or city) by functional category. As the

process advances, other questions are asked that

Materials

provide additional details. These details are then

added to the basic market chain initially drawn.

This exercise can be carried out using flipcharts

This exercise could take between 45 and

and markers, blackboards, and chalk, or even

60 minutes. At the end, each group explains its

vision of the market chain in the plenary session,

23. This same technique can be used to analyze not only

and a more complete vision is completed,

physical product flows but also intangible aspects of

drawing on all viewpoints. The facilitator of the

the chain such as relationships between actors,

information flows, sources and spread of innovation,

exercise is responsible for eliciting additional

among others.

information on key topics.

65

Participatory Market Chain Analysis for Smallholder Producers

Facilitating questions

like? Which groups gain more and which

Some basic facilitating questions for this

less, and why?25

exercise appear below. We recommend

organizing key questions into a checklist for

Business development services:

those facilitating the group work. Some of these

· Who (in each link of the market chain)

questions can be formulated to start or support

the process of visualization, while others are

· supports us?

How do they support us? What services do

more suited for later stages or for reviewing the

final maps, identifying gaps, and

· they offer (in each link of the market chain)?

What is the quality of the services offered?

complementing the data already generated by

Here, care must be taken to visualize the

the group. The results of the questions should

support received by informal actors

be noted on the map itself or by one of the

(intermediaries, moneylenders, etc.) that at

facilitators of the process in his/her notes.

times are more effective than that of the

These replies greatly enrich the original map

other support groups.

and show participants how much they already

know about the market chain.

Rules of the game:

· What is the form of payment at each stage of

Actors:

·· Who are they?

· the market chain?

· What are the quality requirements?

· Where are they located?

What are their functions in the market

· What is the buying frequency?

Describe the relations between market chain

actors. Are they happy with the existing

· chain?

relationships? Why or why not?

How do they relate to one another? Are

· relations good, average, or poor? Why?

If the facilitating organization has more specific

What are their characteristics (gender, class,

questions, these can be included in the final

age, education, abilities, know-how, etc.)?

facilitation tool, making the necessary

adaptations so that they are of maximum help

Markets:

·

in visualizing and understanding the market

Where do we sell what we produce (in each

chain. Additional tools can be combined with

link of the market chain)?

the mapping exercise to document specific

information of interest to the participants and

Product characteristics:

the facilitating organization. One example is

·

that of gender analysis, where the relative roles

· What are the characteristics of the product? of women, men, and children can be analyzed What are the volumes of production,

along the market chain in the various

· monthly or annually?

productive activities. A more complete analysis

How much of the product is sold in the

in this sense could examine not only roles and

markets, monthly or annually?

responsibilities but also access to resources,

knowledge, and gendered decision making by

Costs, yields, and distribution of the

market chain actors.

market chain’s value:

· How much does it cost us to produce (in

If, at the end of the exercise, there are parts of

· each link of the market chain)?24

the market chain with major gaps, it is probable

What are the buying and selling prices at

that we have left out one or more key actors in

each stage of the market chain? Are they

these functional categories. A strategy to elicit

· stable during the year, or do they fluctuate? and include their points of view is needed.

How efficient (yields by area planted,

conversion factors, etc.) are the diverse

Example from Honduras

· activities in the market chain?

Figure 12 presents an example of a market

What is the distribution of the total income

chain map generated by a group of coffee

from the market chain between the actors

25. In this part, it is a good to review the role of each 24. Commonly no one has any idea about this, but

group in the market chain bearing in mind the risks

sometimes one or more producers can provide an

assumed, value added, and access to information or

approximate idea.

key contacts.

66

Participatory Market Chain Analysis

growers in the Municipality of Sulaco, Honduras.

per manzana 27 of land, the cost of depulping the The map shows that the producers have a fairly

coffee (2.5 lempiras28 per liter of coffee), and the

complete vision of their market chain, covering

use of the final product.

functions from production to export, and that

they have managed to identify most of the actors.

Reviewing the map, what gaps need to be

When examined in greater detail, however, it was

clarified?

clear that most of the information on the map

related to the relationship between the

·

producers and one large regional trader. Details

· Production costs.

Existence of depulping machines in the zone

about what happens in the market chain

between Yoro26 and product export are less clear.

· (Do people usually pay for this service?).

Number of coffee farms in the zone, total

hectares under production (approximately) or

The facilitator raised the importance of quality.

volume of coffee produced.

In this example, traders, exporting firms, and

support organizations did not participate

Sometimes it is easier to find this data with

actively. As a result, gaps remain that must be

intermediaries who, for example, have good

filled through workshops, focus groups, or semi-

knowledge of production volumes, or with

structured interviews with the missing actors.

support organizations that manage more formal

data such as extension, yields, and average costs.

Production and transformation

If market chain analysis methods are required to

The map gives information about the production

fill the gaps, the reader should refer to Section 6.

system at the farm level in the municipality of

Nevertheless, it is important to ascertain what

Sulaco. Here, we can see the average production

producers know about the activity since these

data tend to be more accurate and up to date

than most “official” figures.

26. Yoro is a region in north-central Honduras, with

many poor smallholders that has undergone rural

27. A manzana of land is equivalent to about 80 m2.

development efforts since the 80s.

28. US$1 is equivalent to 18.2 Honduran lempiras.

SUPPORT SERVICES

Coffee

}

Technical

IHCAFE

assistance

Growers’

Fund

}

A H P R O C A F E

a n d

SERTEDESO

training

C O O P A C Y L (foncredit)

Victor

Future purchase

Credit

Manuel

6 units/m2

of inputs

Coffee

Middleman

Macario

L 1

Dorila

15 00

Chonica

G e r m á n

coffee

coffee

coffee

C o m m o n

coffee

Cost per unit

coffee

coffee

coffee

Margarita

coffee

L 60000

Household

Purchase L 75000/unit

Common coffee

consumption

(40 gallons)

Cost L 70000

Yoro 75 km

Export

B N D A

$

Golden coffee

Warehouse

from the farm

Kelvin

Inputs

S P S

L 10000

Outsourcing

Moist or

dry coffee

Purchase

L 85000/unit

Sulaco group

B e c a m o

Sulema

Transnationals

Nelson

}

I N C A R S A

Edilberto

Kenton

D I C O N C A F E

Octavio

Doña Alma

Wilson

Carlos

Romel

Nahín

Figure 12. Coffee market chain map, municipality of Sulaco, Honduras.

SOURCE: Authors’ adaptation from the Producers of Sulaco, Strategy to Increase Competitiveness of Coffee Workshop, 2000.

67

Participatory Market Chain Analysis for Smallholder Producers

Marketing

· More details on the relations between local

The map helps us appreciate Sulaco’s system of

and regional traders. In addition to buying

coffee marketing. The data included are:

the coffee, what role does the regional trader

(a) price of production per load of coffee;

(b) traders’ purchase price; (c) names of local

· play?

More information on the business

traders with an indication of which ones are

development services provided by support

most important; (d) sales price to regional

organizations. Are they efficient, of good

traders; (e) names of regional traders with an

quality, sufficient? Does everyone have

indication of which is the most important;

access to these services? Do they respond to

(f) final destination of the coffee—San Pedro

producers’ needs?

Sula; and (g) names of the export firms known

by producers.

The map was generated in a relatively short

amount of time (less than 1 hour) by a group of

This exercise provides key information to plan

small-scale producers. At the same time, other,

future research activities, such as semi-

less complete maps were generated by other

structured interviews with the local and

groups. After reviewing all maps, it was decided

regional traders and visits to export firms in

to use this one as the base map for the analysis

San Pedro Sula.

of the coffee market chain in Yorito and Sulaco.

Another interesting point is the level of detail

What are the gaps in this information?

(names, for example) that appears for the

·

informal actors. This contact information is of

Prices between Yoro and the export firms

great use to identify key sources of information

and the price of Honduran coffee in

for follow-up work.

· international markets.

The use of “futures” by local traders to

Provision of Business Development

guarantee volume at favorable prices. Who

Services

provides the funding for this? Local traders

Objective

or regional traders? What are the advantages

or disadvantages of this system for the

To make a simple list of business development

· actors involved?

services that exist along the market chain and

The support lent by intermediaries to

to qualify their quality and identify gaps for

producers (services provided, costs, volumes,

future improvements.

and frequency).

Time

Support system

About 2 hours in total; 1 hour for identifying,

The support system, both formal and informal,

describing, and qualifying the services by

is clearly defined. In this case, producers

functional category, and another hour for

receive formal assistance (technical assistance,

socializing the results and comparing them

training, and some credit) from public and

amongst the groups.

private firms (see Figure 8), while business

support (marketing, transport, inputs, and

Materials

advances of working capital through future

This exercise can be done using flipcharts and

purchases) come from traders.

markers, blackboards, and chalk, or even on

the floor with local materials (e.g., pebbles,

In the case of the traders, a more complex, two-

twigs, chalk, etc.). What is important is to

way relationship is shown, than with support

describe the services supplied and received in

organizations. In this space, what data are

such a way that all the actors can see and

missing?

discuss them.

· Information on the actual relationships

Process

between traders and producers. Is it a stable

Continuing with the same groups used for

relationship, or do producers feel exploited?

mapping, the groups should proceed to examine

What is the real flow of funds like in this

supply and demand of formal and informal

relationship? The trader advances resources,

business development services in each function

but what is the final cost of these resources

of the market chain. The groups of producers,

for the producer?

processors, and traders analyze their respective

68

Participatory Market Chain Analysis

links based on results of the mapping, while the

· Who supplies services to this link in the

business development service providers look

specifically at the services they supply. After

· market chain?

about 1 hour of working in groups, results are

· What services are supplied?

revised in a plenary session, and matrices are

· What cost does this service have?

How useful is this service? Does it solve

generated of supply and demand in each

your problem?

functional category.

The results can be organized in the following

It is important to make a special effort to include

matrix (Table 15).

informal service suppliers since they are more

difficult to identify. Examples of informal

In the case of service providers, useful

suppliers of services include farmer extension

questions include:

agents or smallholder farmers with additional

knowledge on production themes; metalworking

· What services are supplied to each link in

shops that make or repair agricultural or simple

the market chain (production, post-harvest,

processing machinery; workshops that rent out

processing, marketing, business

machinery for processing; transporters; traders;

moneylenders, among many others. Emphasis is

· organization)?

placed on informal suppliers of business

· Who are the clients of the service?

What portion of the service cost does the

development services because: (a) they exist in

service client cover? What portion is

almost all market chains; (b) their services tend

covered by other sources (donor or

to be more sustainable that those supplied by

formal actors; (c) their costs are lower; and

· government subsidy)?

How effective is the service? Does it

(d) their quality is key in understanding the

manage to solve the problems of the

function of most market chains.

· client?

How much does it cost to supply the

Facilitating questions

service?

The following questions are basic for facilitating

this exercise with the groups of producers,

Results can be organized in a matrix such as

processors, and traders.

the one shown below (Table 16).

Table 15. Matrix of the analysis of services received (by clients).

Service by link of

Supplier

Cost

Benefit

Comments

the market chain

(recipient perspective)

Production

Who supplies the

Paid for the service

☺ High utility

Additional information

service?

in cash or kind

about each service

Processing

Medium utility

Marketing

Low utility

Organization

Table 16. Matrix of the analysis of services supplied.

Service by link of

Clients

Cost

Benefit

Comments

the market chain

(supplier perspective)

Production

Who receives the

Paid by service in

☺ High utility

Included total costs of

service?

cash or kind

services

Processing

Medium utility

Is the service direct?

Marketing

Low utility

Organization

69

Participatory Market Chain Analysis for Smallholder Producers Once the supply and demand of services has

Example from Guamote, Ecuador29

been identified, a simple review can be made

This methodology was applied to a dairy market

in the plenary session to compare the

chain in the Municipality of Guamote, Ecuador.

services noted by the clients (producers,

Results are given in Tables 17 and 18.

processors, and traders) and the service

providers. Often this revision generates

interesting discussions, given that services

29. For a complete version of the application of this

appear that were unknown up till now, or

methodology in Guamote, Ecuador, and an extensive

discussion on the theme of local business

that the evaluation of quality varies

development services, consult IICA-CIAT-COSUDE-

substantially.

MCCH (2001).

Table 17. Example of production services supplied in Guamote.

Service

Whom for

Costs

Benefits

Observations

Credit

Rural and urban

18%-21.7% annual

☺

Individuals,

marginal producers

interest rate

associations, funds

Cattle ranching

Milk producers

US$6.00

☺

2 visits + products 1

technical

Credit fund:

Extra visit $1.70

cow

assistance

Acción Rural

US$1.70 +

Without credit:

Product

Great demand

Acción Rural

·

US$2.00 +

A-R partners

·

Product

Non-partners

Storage

All those interested

Same as Riobamba

Non-partners

Cheaper than Riobamba

Partners

Training in

Livestock owners

US$0.25/person

☺

Minimum 15 persons

livestock management

Training in milk

Milk suppliers of the

US$5.00

☺

5 days

management

consortium

Real cost US$12.0

Training in milk

Cheese makers’

US$15.00

☺

15 days

processing

consortium

Real cost US$36.0 per

person

Follow-up in

Trained cheese makers

milk processing

Partners

$1.70

No data

Being started

Non-partners

$2.00

Table 18. Example of production services received in Guamote.

Service

Who offers ita

Cost

Benefit

Comments

Veterinary

Private individuals

Warehouse discount 30% to 40%

☺

of the cost of medicines

Expert farmers

☺

Rural Action (NGO)

None

Never arrives on time

MAG-CONEFA (NGO)

Fuel

☺

CDL

None

Credit

FEPP (NGO)

22%

Very expensive

Acción Rural (NGO)

No data

Inputs

Shops

Varied

Expensive

Acción Rural (NGO)

No data

a. MAG-CONEFA = Ministerio de Agricultura-Comisión Nacional de Erradicación de la Fiebre Aftosa; CDL = Comité de Desarrollo Local; FEPP = Fondo Ecuatoriano Popularum Progressio.

70

Participatory Market Chain Analysis

When the tables of clients and service providers

service quality was identified—more effective

were compared, a long discussion ensued, as

service promotion.

the client groups lists did not include many of

the services provided by local NGOs. At the end

A second result was that best evaluated

of the process, it was established that the

services were those that were fee-based.

promotion of existing services was deficient and

Although the full example is not shown here,

that few milk and cheese producers where

it was clear that the services best reviewed by

aware of their existence. Through this process,

the clients were paid services, while free

a simple, rapid, and cheap way to improve

services were not well accepted.

Market Chain History

Objective

market chain’s evolution. Start with a

To identify key moments in the market chain’s

brainstorming session to identify key

evolution, positive and negative aspects and

moments, clarify each one, and organize them

lessons learned. This can be applied generally

chronologically. Build a timeline as a column,

(key milestones of the market chain), or with an

and proceed to identify additional information

emphasis on previous projects or support

on each event and evaluate lessons learned.

received by the market chain.

The exercise ends with a socialization of the

results between the groups, and clarification of

Time

gaps. After this workshop, the facilitating

About 1 hour in total.

organization will mould all the timelines into a

single one.

Materials

Facilitating questions

This exercise can be carried out using flipcharts

and markers, blackboards, and chalk, or on the

The facilitating questions for the timeline are:

floor using local materials. What is important is

to describe the history in such a way that all

· What have been key events in the market

the actors can see and discuss it.

chain’s evolution during the last 10 years?

Process

· In what year did each one occur?

Who participated in this event? What were

their roles?

Using the same groups from the mapping

exercise, proceed to define key dates in the

71

Participatory Market Chain Analysis for Smallholder Producers

· Was there external support during this time? Market chain history from CIPASLA,

· Who facilitated it?

Cauca, Colombia

· What was good about this event?

The following example (Table 19) is from a dairy

· What was negative about this event?

products market chain in Cauca, Colombia. In

What did we learn from this event?

this case, the tool was applied to a producers’

Table 19. Example of the timeline of the farmer association development.

Year

Event

Who

Who

Evaluation

participated

supporteda

The good

The bad

What we learned

1994

Congreso

2 milk

CIAT,

Idea of

-

-

Internacional

producers

CIPASLA

organizing

de Leche–

ourselves

Medellín

1994

Launching the

CIPASLA

CIPASLA

Knowing

-

-

idea, survey of

production

producers

dates and

options

1994

Trip to

Producers

FIDAR

-

-

Organizing

La Arboleda

process of the

group, how to

organize a milk

products plant

1995

Training in the

Producers

FIDAR,

-

-

Everything

milk business

CIPASLA

related with

milk processing

1995

Organization

Producers

FIDAR, FES

-

-

Importance of

of the group,

organization,

buying of

practice in

equipment

processing

1996

Buying of lot,

Producers

CIPASLA,

-

Not coordinated

How to manage

construction

PRODAR, DRI,

with public

resources

and

Econorca,

health

Projects can

organization of

CETEC

carry on when

the business

organized

1997

Inauguration

Partners

SENA, FIDAR,

The plant

-

Achieve the

of the plant

CIPASLA

proposed

objective

1997-

Independence

Partners,

Jairo Balanta

Know that it

Organization

Despite

1999

of the plant

Board of

(paid by

can be done

(sense of

setbacks, we

Management

partners),

relevance) and

have made real

CIPASLA-AIR

Board of

progress

Management

(low profile)

1999

Market study

-

CIPASLA-AIR

-

-

-

and sanitary

registration

transaction (in

process)

a. CIAT = Centro Internacional de Agricultura Tropical; CIPASLA = Consorcio Interinstitucional para una Agricultura Sostenible en Ladera; FIDAR = Fundación para la Investigación y el Desarrollo Agroindustrial Rural; FES = Fundación para la Educación Superior; PRODAR = Programa Cooperativa de Desarrollo Agroindustrial Rural; DRI = Fondo de Desarrollo Rural Integrado; Econorca = Empresa Cooperativa del Norte del Cauca; CETEC = Corporacíon para Estudios Interdisciplinarios y Asesoría Técnica; SENA = Servicio Nacional de Aprendizaje; AIR = Agroindustrial Rural committee of CIPASLA.

SOURCE: Authors’ adaptation from the Workshop Formulación de Estrategia de Competitividad para Lácteos, Asociación de Empresarios Agroindustriales de la Sub-Cuenca del Río Cabuyal (ASERCA), 1999.

72

Participatory Market Chain Analysis

association within the market chain to

identified in this way are key when new changes

facilitate a process of reflection on its

in the market chain are proposed later in the

evolution and growth and to motivate future

analysis process.

activities.

In this section, we have discussed how to form

A variation on the market chain history

working groups and three tools for market

exercise is one focused on local processes of

chain analysis: mapping; supply and demand of

innovation to support the market chain or

business development services; and a market

generate new products. If these processes are

chain history. Together, these tools permit a

investigated, it is important to include a space

first analysis of the market chain and prepare

to note the sources of the innovation(s), their

us for the next step, which is the identification

channels of dissemination, and the results

and analysis of factors limiting the market

they have had in the market chain. Actors

chain’s competitiveness, and possible solutions.

73

Participatory Market Chain Analysis for Smallholder Producers SECTION 9

Analysis of Critical Points in the Market Chain

Guiding questions

1. How can we identify the critical points that limit a market chain’s development?

2. Is differentiating market chain actors and their opinions valid when we seek to identify the critical points? Why or why not?

3. If we identify differentiated critical points with market chain actors, how can we connect them later in the analysis?

4. Why is it important to identify not only the critical points, but also understand their causes and effects on the market chain?

5. Is it possible to connect various critical points along the market chain?

6. Once the critical points are identified, how can we use them to plan processes of innovation and market chain development?

7. Can we find critical points that influence the market chain more than others? What would happen if they were resolved? Could strategies to resolve these points lead to dramatic increases in market chain competitiveness?

8. Why is benchmarking important for understanding the limitations in the selected market chain?

Introduction

All exercises described in this section will be

This section provides a method to identify

carried out by groups of strategic actors

critical points where the market chain faces

previously identified by functional categories

internal or external limitations, analyze the

along the market chain. See Sections 7 and 8 for

causes and effects of these limitations, identify

more information on the selection of strategic

solutions for these bottlenecks, compare the

actors. An explanation of how to identify factors

market chain with the competition, and finally

limiting competitiveness, how to analyze their

design a logical path towards increased market

causes and effects, and a way of translating

chain competitiveness.

limitations into opportunities follows. The

process is explained graphically in Figure 13.

74

Analysis of Critical Points in the Market Chain

All chain actors

Separation by functional categories

Production

Processing

Marketing

Business

development

services

Differentiation

Differentiation

Differentiation

Differentiation

Small

producers

Medium

Large

Modern

Traditional

Local

Urban

Formal

Informal

producers

producers

technology

technology

traders

traders

organizations

actors

Limiting

Limiting

Limiting

Limiting

factors

factors

factors

factors

Chain limitations

Cause and effect

Solutions

Logical path towards chain competitiveness

Figure 13. Analysis of critical points in the market chain.

Identification of Limiting Factors

effectively conveys the idea of the author.

This tool has two steps: (1) a brainstorming

Similar ideas should be grouped. Once ideas

session focused on identifying existing limits in

have been grouped, define the central ideas of

the system, both internal and external and

the group in one phrase on a different colored

(2) the selection of the most critical limitations.

card. This summary card is placed on top of the

This exercise is carried out by actors grouped

group of individual cards so that everyone can

by functional category followed by a plenary

review whether or not the key ideas have been

session to share the results.

captured. At the end of this process (of 15 to

30 minutes), the final cards are placed on the

Brainstorming session

wall where all participants can see them and

read them out loud (see below for example).

First, ask the group to identify the limits that

they see as important in the market chain.

Each idea should be written on a card

Access to funds

Access to inputs

according to the following rules: (a) one idea per

(credit for working

(lower production

card, (b) not more than three lines long, and

capital and credit)

costs)

(c) in big letters so that everyone can read the

comments. (In groups where level of schooling

Training and

is limited, drawings representing ideas can be

technical assistance

Improvement of

breeds

used.)

(in production)

Once the ideas have been collected and put

Improvement of

Marketing

onto cards (leave 15 to 20 minutes for this

pastures

exercise), clarify ideas and find out if the card

75

Participatory Market Chain Analysis for Smallholder Producers

Prioritization of limitations

funds, for example) and each pair will be

There are various ways of arranging the

compared once only (for this reason only half

identified problems. If the group is relatively

the matrix will be filled in); (2) the facilitator

homogeneous in terms of participation (no

asks, “between access to funds and access to

single person dominates the group), and if the

inputs, which should be solved first?; (3) the

group has a limited number of problems

group discusses the question in an attempt to

(eight maximum), the pairwise ranking tool

reach a consensus; (4) the answer is written

described below can be used. If there is a

on the card and the group proceeds to the

marked tendency for one or more persons to

next pair of problems; (5) notes should be

influence the decisions of the group or if there

taken on the rationale behind the decision

are large number of problems, it is better to opt

(for example, why are pastures more critical

for a secret vote to capture more clearly the

than access to funds). The logic behind the

opinion of the group and not just that of the

decisions is sometimes more illustrative

most vocal members.

than the decision itself. Depending on the

group, this exercise takes between 30 and

45 minutes. At the end of the exercise you

Pairwise ranking

should have something similar to the

A pair wise ranking process uses a matrix

following matrix (Table 21).

where the identified problems are placed in

identical rows and columns as seen in the

Next, each factor is scored based on the

following example (Table 20).

number of times it appears and assigned an

order of priority according to this frequency.

Based on this example, work proceeds in the

To clarify, explain to the participants that the

following fashion: (1) identical themes are not

votes received by each limitation will be

compared (access to funds against access to

counted, and thus determine which factor is

Table 20. Incomplete example of a pairwise ranking exercise.

Problems

Access

Access

Training

Improvement Pastures

Marketing

to funds

to inputs

and

of breeds

technical

assistance

Access to funds

Access to inputs

Training and technical assistance

Improvement of breeds

Pastures

Marketing

Table 21. Complete example of a pairwise ranking exercise.

Problems

Access

Access

Training

Improvement

Pastures

Marketing

to funds

to inputs

and

of breeds

technical

assistance

Access to funds

Funds

Training

Funds

Pastures

Marketing

Access to inputs

Training

Improvement

Pastures

Marketing

of breeds

Training and technical assistance

Training

Training

Training

Improvement of breeds

Pastures

Marketing

Pastures

Marketing

Marketing

76

Analysis of Critical Points in the Market Chain

the most urgent to resolve. Table 22 shows the

if they use different terms to describe basically

results of this scoring for the example being

the same problem. If doubts or inconsistencies

developed.

exist among the results, they can be clarified

at this time.

Consolidation of limitations

Once the factors are ranked by each group of

At the end of the socialization process, a

actors, the results are shared in a plenary

consolidated list of limiting factors is

session. Each group explains its final ranking

generated. At this time, similar or related

results, focusing on the rationale behind their

limitations are grouped as in the

decisions and why one factor is more important

brainstorming exercise. The rank assigned to

than the others. The facilitators should note

each limitation by each group is also noted as

limitations that are similar across groups, even

shown in Table 23.

It is common for groups to rank limiting

Table 22. Final ranking of limitations.

factors that are exclusive to them highly.

Despite this, the facilitators should focus on

Limitations

Frequency

Order

Observations

identifying limitations that are valid along the

of priority

whole market chain—such as marketing in the

Training and

5

1

Notes on why

previous example—to highlight the relations

technical

each decision

between limiting factors in each link and the

assistance

was made

overall competitiveness of the market chain. At

Marketing

4

2

this point it is useful to refer to the market

Pastures

3

3

chain map and review which of the ranked

limitations have causes and effects in more

Financial

2

4

than one link.

Improvement

1

5

of breeds

Following this exercise, the most common or

Purchase

0

6

strategic limitations are identified amongst all

of inputs

the actors to be analyzed in more detail. The

identification of common limitations is done by

Table 23. Example of a consolidation of limitations in a market chain.

Limitations

Order of importance for each group

Producers

Processors

Support

system

Training and technical assistance for milk production

1

-

6

Marketing (publicity, presentation, transport, suitability of sales points) 2

1

3

Pasture improvement (low yields)

3

-

8

Access to working capital and credit

4

-

4

Improvement of breeds (low performance)

5

-

8

Cost of inputs

6

-

-

Training and technical assistance in processing milk products

-

2

9

Weak organization and lack of internal regulations

-

3

1

Need to construct new infrastructure for the processing plant

-

4

-

Management of processing sub-products (whey and cream)

-

5

-

Requirements of team and machinery

-

6

-

Business capacity

-

-

2

Legal limitations

-

-

5

Deficient quality control

-

-

7

SOURCE: Authors’ adaptation from the Workshop Formulación de Estrategia de Competitividad para Lácteos, Asociación de Empresarios Agroindustriales de la Sub-Cuenca del Río Cabuyal (ASERCA), 1999.

77

Participatory Market Chain Analysis for Smallholder Producers comparing the prioritized lists and seeking

Problems trees to analyze limitations

similar or related themes among the actors (the

A problem tree (or cause and effect analysis)

marketing example noted previously). In the

includes the following steps:

case of strategic limitations, a wider discussion

on market chain competitiveness is facilitated

1. Put the selected limitation half way down

to identify the causes of the common

the workspace (paper, wall, floor), explaining

limitations. This second process becomes easier

clearly to participants the reasons why it

as causes and effects of each limitation are

was selected. Care must be taken in

analyzed, as described in the following section.

explaining the problem clearly—and

achieving a consensus on this—since the

We recommend selecting between three and five

validity of the analysis depends on a

common or strategic limitations to analyze. It is

common understanding of the problem.

normal to find that many of the other

2. Ask participants about the causes.

limitations ranked by the different actors

Questions should be structured in the

appear as causes or effects of one or more of the

following way: Why are there low yields, poor

strategic limitations. By seeking common

quality, and little supply planning of cassava

limitations to analyze, the focus of the group is

roots? Each time that participants reply, the

squarely centered on finding solutions that

idea should be noted on the card and placed

benefit most actors, generate positive synergies

underneath the initial problem. Once the

along the market chain, and help solve other

card is placed, the question is repeated—

minor limitations that are specific to each

Why?—and the answer noted on a new card.

functional category.

The objective is to generate chains of

causality to understand not only the central,

Analysis of Cause and Effect

visible problem, but also its causes. It is

As a result of the

important to discuss and clarify as much as

ranking exercises, a

possible the diverse causes of each problem,

list of limitations is

and the relationships between problems.

generated to analyze

Normally, analysis is continued to the

in greater detail. This

second level of causality, although this work

list must be

can extend—or deepen—to provide greater

manageable (a

analysis of a particular point if necessary.

maximum of five is a

good rule of thumb),

Once the causes of the limitation are analyzed,

respond to the

the facilitator initiates the analysis of the

concerns of the

effects using the phrase: What are the effects or

actors, and should

results of this limitation? The effects analysis

contain limitations

then follows the same logic as described above.

whose solution

For effects, analysis is also carried through to

generates benefits for

the second level of effects. If the facilitator

more than one group

wishes to analyze the links between the

of actors in the

limitation and wider themes—livelihoods, for

market chain. The

example—the analysis can be amplified further.

common limitations

can be worked on

At the end of the exercise, a much clearer idea

first among the actors in each segment of the

should be held about the real causes of the

chain, followed by those that have been

problems, their effects, and how to enter to

identified as strategic among all participants.

improve the situation (Figure 14).

As the analysis of causes and effects advances,

the multiple relationships between limitations

Once relevant problems trees have been defined

will become clear (for example, some limitations

for the selected limitations, the next step is to

are causes or effects of others), so that it is

identify the relationships between limitations.

hardly ever necessary to work with more than

As noted previously, it is common to find that

five limitations.

some limitations are in fact causes or effects of

others.

This analysis is carried out using the technique

of problems trees.

78

Analysis of Critical Points in the Market Chain

Tendency in the long run to produce

supply of cassava roots, noncompetitive

prices, and low quality

Disincentives

to cassava producer

Effects

High fluctuation

High fluctuation

Soil erosion

in prices of cassava

in supply of cassava

roots

roots

Low yield, low quality for processing,

Limitations

and little planning of supply

Low adoption of

Low adoption of

management of

improved varieties

cassava crop in

hillsides

Causes

Producers neither

Limitations of capital

Low availability of

know nor have

Low diffusion of

do not permit applying

seed of improved

evaluated improved

practices of crop

crop management

varieties

varieties

management

practices

Figure 14. Example of a problem tree.

General problem tree for the market chain

limitations. If this process is carried out

Based on the problem trees for selected

effectively, it provides a solid starting point to

limitations, a general tree is constructed to

identify possible solutions to the market chain’s

represent the difficulties facing the market

limitations.

chain at the time of analysis. The level of detail

in this final tree can be less than in the specific

Figure 15 shows an example of a general

trees. The goal is to link all the trees in a logical

problems tree for a market chain. The

fashion. Normally, the sum of market chain

limitations with a shaded background are those

limitations adds up to low levels of

that were analyzed in the specific trees.

competitiveness, but on occasions some

limitations may actually be effects of others.

This analysis clearly identified the principal

causes of the market chain’s low

When constructing an overall cause and effect

competitiveness and the effects of this on

analysis for the market chain, facilitators must

producer livelihoods. In this case, the problem

clearly identify the logical relations between

tree was generated by chicken producers, and

causes and effects that appear in the tree.

thus reflects their viewpoint more than that of

Equally, it is important to review the relations

other chain members. A more complete example

between levels of causes and effects so that the

for the market chain for plantain in the

more profound causes are clearly related, and if

Dominican Republic is shown in Figure 16.

possible causally linked, with the identified

79

Participatory Market Chain Analysis for Smallholder Producers Low income for

participating families

Low prices, limited

Increasing cost of

profitability

production

Overproduction for small,

local markets

Low productivity per

participating family

The organization does not resolve

its problems effectively

The market chain for fattened

chickens is not competitive

Weak organization

Restricted and

Costly inputs (chickens, feed)

disorganized market

with no guarantee of quality

Socialization

Dispersed

Work plan has

Inadequate

Lack of a

No production

mechanisms

purchase of

not been

processing

production

of raw materials

nonfunctional

chicks (individual

implemented

and transport

and marketing

for feed on local

facilities

plan

farms

and not group)

Figure 15. Simple example of a general problem tree for a market chain.

SOURCE: Authors’ adaptation from the Proyecto Productivo Integrado (PPI) for chicken rearing, Asociación de Productores y Expendidores de Pollos del Norte de Cauca (ASOPROEX), and Corporación para Estudios Interdisciplinarios y Asesoría Técnica (CETEC), Colombia, 2001.

From limitations to solutions

is easier to begin with the central limitation and

In addition to providing a more profound

move downwards (that is to say, change the

understanding of the challenges within a

causes into specific objectives or into activities),

market chain, problem trees can be useful for

and then repeat the process upwards

identifying possible solutions. Causes can be

translating direct effects into progress and

translated into objectives or activities of a

impact indicators. Given that most market

project with the central limitation as the general

chains contribute to economic aspects of

objective, while effects become either indicators

livelihoods, it is difficult to maintain total

of progress or impact. Figure 17 explains this

causality at this step. If we need to know

process.

specifically how much a market chain

contributes to a particular livelihood strategy,

If the problem tree has been carefully

this requires further analysis with market chain

constructed—with clear logical links between

participants and the use of complementary

the different levels—this process should be

livelihood analysis tools.

relatively simple. If it is difficult to translate

problems into objectives, the tree’s logic should

Comparing the Market Chain to the

be revised to find gaps or inconsistencies.

Competition—“Benchmarking”

Before moving to the design of a strategy to

To facilitate this exercise, the participants

increase competitiveness, it is useful at this

should work to transform the negative points

stage to compare key competitive aspects of our

form the problem tree into a positive expression

market chain with other similar market chains.

that is placed in the solution tree (Figure 18). It

This process is known as benchmarking. The

80

Analysis of Critical Points in the Market Chain

Incipient

national level

organization

High seasonal

supply variability

chain actors

defined and

arch Project implemented by

Lack of discussion

spaces for market

Lack of clear, well

aggressive public

policy for the sector

planning

farmer

parameters

Inadequate

information

flow market-

Lack of production

No common quality

High price

variability

harvest

the field

Inadequate

Bunch not

harvest, post-

management

protected in

life

a limited

shelf life

Plantain has

Climate affects

plantain shelf

profitability

fruit size,

thickness

Problems with

Variable, low crop

High percentage of

rejection for quality

black

sigatoka

planting

material

the opening of new markets for the market chain

Spread of

nationwide

Use of pest

susceptible

Loss of competitiveness reduces the possibility of export and Low

density

planting

material

productivity

Low planting

Low quality

are not

renewed

High unitary

Plantations

The crop is

perennial

production costs

managed as a

Authors’ adaptation from field work in the Dominican Republic by the Public Private Partnerships for Agroindustrial Rese ISNAR and CIAT and supported by BMZ, Germany.

Complete example of a general problem tree for a market chain.

SOURCE:

Deficient

irrigation

systems

16.

Lack of good

crop nutrition

management

Figure

81

Participatory Market Chain Analysis for Smallholder Producers Problem tree

Solution tree

Result to which

Result to which

they contribute

5

they contribute

Direct

Direct

Progress

Progress

effect 1

effect 2

4

indicator 1

indicator 2

Central limitation

General objective

1

Specific limitation

2

Specific objective

Cause 1

Cause 2

3

Activity 1

Activity 2

Figure 17. Using a problem tree to identify solutions.

Greater income for

participating families

Higher prices, increased

Descresed cost of

profitability

production

Production linked

to market demands

Increased productivity per

(volume, dates, and quality)

participating family

The farmer organization resolves

problems effectively

The market chain for fattened

chickens is competitive

Strong farmer

Ample and organized

Competitively priced inputs

organization

market access

(chickens, feed) of

guaranteed quality

Production

No production

Dispersed

Information

Work plan

Adequate

and marketing

of raw

purchase of

mechanisms

designed and

processing

plan designed

materials for

chicks

functioning

implemented

and transport

and

(individual and

facilities

feed on local

implemented

farms

not group

Figure 18. Example of a solution tree.

SOURCE: Authors’ adaptation from the Proyecto Productivo Integrado (PPI) of rural chickens, Asociación de Productores y Expendidores de Pollos del Norte de Cauca (ASOPROEX), and Corporación para Estudios Interdisciplinarios y Asesoría Técnica (CETEC), Colombia, 2001.

82

Analysis of Critical Points in the Market Chain

market chains selected for comparison may be

competitive variables in a systematic fashion. At

direct competitors—i.e., in the same markets or

the end of the visit, a short meeting to

market segments—or indirect competitors—i.e.,

document and share the findings should be

in other markets or market segments. If a

held. Information obtained can be organized in

similar market chain serving a more attractive

a simple table (Table 24).

market segment can be found, this is a good

point of reference, as it can show market chain

Prospective Market Tendencies and

actors how close or far they are from being able

Defining a Simple Marketing Strategy31

to enter a potentially more lucrative market

Prior to designing a strategy to increase the

segment. If no such market chain exists,

competitiveness of our market chain, it is

comparing key competitive variables with the

important to analyze the competitive potential

direct competition is useful.

of our chain. This process is known as a

prospective market analysis. Such a process

Key competitive variables to keep in mind for

helps clarify the marketing strategy or

this analysis include30:

strategies most suited to our chain as well as

·

identify the need for specific strategic activities

Access to key markets (distance, road links,

to increase our chance of success. A useful

· communication).

starting point for this analysis is the

· Product quality.

identification and characterization of existing

· Product quantity.

markets for existing products from our market

· Productivity and technology employed.

chain. Much relevant information has already

been gathered in the rapid market survey (see

· Production costs or sales price.

Section 6) and can be reviewed here. In addition

· Product presentation or packaging.

to existing products and markets, we should

· Distribution channels.

also examine potential new markets, the

Production peaks and shortages throughout

opportunity for new product development, and

· the year.

the potential to diversity towards new products

· Brand or product image.

and markets. The Ansoff matrix presented in

Associated services.

Section 5 is a useful to organize this analysis.

Information for this exercise is best gathered by

While this tool was initially developed to classify

organizing cross-visits to competing market

the diverse growth alternatives for individual

chains by the market chain actors. Prior to

firms, it can also be used to facilitate an

these visits, the market chain actors should

analysis of a combination of actors linked along

develop simple questionnaires that allow them

a market chain. In this sense, the market chain

to quickly gather impressions on key

replaces the product or individual firm in the

30. Adapted from Van der Heyden and Camacho (2004),

31. Adapted from the Public Private Partnerships for

p. 57.

Agroindustrial Research Project implemented by

ISNAR and CIAT and supported by BMZ, Germany.

Table 24. Simple benchmarking tool.

Competitive variables

Current situation

Competing market

Competing market

in our market chain

chain 1

chain 2

Market access

Product quality

Product quantity

Productivity and technology employed

Production costs/sales price

Product presentation

Distribution channels

Production peaks or valleys

Brand or product image

Associated services

83

Participatory Market Chain Analysis for Smallholder Producers original analysis. For our purposes, the strategies

market chain? What do we need to take full

contained in matrix may be defined in the

following way:

· advantage of this potential?

What new markets, products, or sub-

products from the market chain show the

1. Market penetration

greatest potential for growth? What are the

Assess if, in the medium term, we can increase

requirements (quality, packaging, minimum

sales of products from our market chain to

volumes, etc.) for these new markets? Can

existing market segments, without changing the

the products or sub-products from our

product we offer.

market chain compete in these markets?

What are the technical and financial

2. Market development

Identify new market segments for existing

· implications of competing in these markets?

In what markets, products, or sub-products

products from the market chain. Examples

include expanding into new geographical

· is there unmet demand?

In which markets, products, or sub-

areas (from provincial markets to the capital city)

products does the area have competitive

or selling to new segments of the population who

advantages? How can we capitalize on these

do not currently consume products from our

advantages?

market chain but could potentially do so in the

future.

The output from this analysis is a list of

possible future opportunities in new and

potential markets and products for the market

3. Product development

chain with their respective requirements.

Detect opportunities for new or modified products

Table 25 shows an example for the mango

from the market chain for existing clients and

market chain in Ecuador.

market segments. Examples include product

differentiation through new packaging, brands, or

Once all the potential opportunities for market

additional processing, among others.

penetration, market development, new product

development and, if applicable, diversification

4. Diversification

are listed, the service provider and the chain

Detect opportunities for new products for

actors select those that are of most interest to

new clients or markets.

them. For these opportunities, care should be

taken to characterize in greater detail both the

In a prospective market analysis we should

market potential as well as the technical and

consider alternatives in all four quadrants of the

financial requirements necessary to take

matrix, while bearing in mind that the relative

advantage of this potential. In some cases, it

risk increases as we move from a relatively simple

may be necessary to enlist the support of

strategy of market penetration to a complex one

external market experts to provide additional

of diversification. The level of risk that the chain

information about these issues, especially if the

actors are willing and able to assume should

markets in question are global.

guide the final selection of marketing strategies.

The final result of this exercise is a table listing

To develop this analysis, the service provider, in

the products, markets, and requirements for

collaboration with chain actors, identifies the

each opportunity selected. A partial example is

level of risk that the market chain can assume

shown in Table 26. Once this exercise is

over the next 5 years. Based on this risk

completed, the service provider and chain

assessment, a basket of potential strategies

actors are ready to design a local path to

(quadrants) can be selected and compared. It is

increase the competitiveness of the market

likely that the market chain actors will opt for a

chain.

mixed approach, including more than one

strategy to reduce risk while leaving the door

Designing a Logical Path to Increase

open for greater returns.

Competitiveness

With a general solution tree, a simple

To facilitate this exercise the following questions

benchmarking exercise to review competitive or

are useful:

alternative options, and an initial marketing

·

strategy for the market chain the group is

What is the growth potential of the existing

ready to design a strategy to increase

markets, products and sub-products from the

competitiveness.

84

Analysis of Critical Points in the Market Chain

Table 25. Market strategy opportunities for mango market chain of Ecuador.

Existing products

New markets

Existing markets

· Fresh mango without hydrothermal

· Fresh mango with hydrothermal treatment

treatment in Europe, Canada, Colombia,

in Japan and China.

and the national market.

·

· Mango pulps and juices.

Fresh mango with hydrothermal treatment

in Chile, Mexico, and USA.

· Mango pulps and juices.

New products

· 100% natural mango juices with no water

added and less viscosity.

· Clarified or carbonated 100% natural

mango juice.

· Mango pulp with antioxidant properties

and increased carotene content.

· Dried mango, mango chips, pickled

mango.

· Mango slices in clarified juices.

· Carotene extracts.

Table 26. Market opportunities and requirements for broccoli in Ecuador.

Product

Existing market(s)

Potential market(s)

Requirements

Frozen

USA.

·

France.

·

To enter other European

·

broccoli

Canada (low export volume,

·

Southern zone countries

·

countries, new presentations, and

good potential for growth).

(e.g., Brazil imports from

additional value adding is needed.

European Union (Germany,

·

Belgium).

The difficulty with Brazil is the

·

Italy, United Kingdom

Asia (non-producing

·

need for exclusive containers for

most important).

countries like Malaysia).

broccoli. One option is via Manaus.

Japan.

·

Eastern Europe

·

Entering Asia may be difficult with

·

(especially Russia).

China and India, although China

has pest and pesticide residue

problems.

Fresh

· National market

· USA.

· The national market is small and

broccoli

·· Europe.

requires promotional strategies.

Andean Region

· Additional work is needed on

(specifically Colombia

conservation techniques in

and Venezuela).

· containers.

Changes needed in harvest and

post-harvest practices

(bacteriological control, rapid

temperature reduction).

A useful first step at this stage is the design of a

general objective is defined and the specific

logical path. A logical path is nothing more than

objectives are placed on cards and read out to

the organization of the specific objectives in

remind participants. Next, the central limitation

chronological order, plus the definition of a

is placed at the left end of the workspace and

common vision of the future for the market

the general objective at the right, thus showing

chain. Why is this step important? Principally

both where we are and where we hope to end

because one or more of the specific objectives

up. The participants are then asked to define in

facilitates, drives or is a prerequisite for other

few words both extremes bearing in mind the

more complex changes planned for the market

results of the benchmarking study.

chain. A logical path helps build consensus

focus limited resources to achieve the greatest

Visioning—Where Do We Want to Go

possible impact in the shortest amount of time.

and How Do We Get There?

The facilitation of this process is an exercise in

How can we describe our current situation?

logic. Based on the general solution tree, the

How can we describe where we hope to arrive?

85

Participatory Market Chain Analysis for Smallholder Producers These ideas are noted on cards and placed below

·

each extreme. At this point, it is recommended to

· Which one or ones come first?

Is there one or several objectives whose

focus more on the right-hand extreme—

achievement would leverage important

commonly known as the vision—to clearly define

a desired future for the market chain. The vision

· changes in the others?

can be a few lines or a paragraph, what is

· Are there objectives that depend on others?

Where do we begin, and why?

important is to pick up the feelings of the

participants, place them in a concrete timeframe

In our experience, at the end of the debate, one

(within 5 years, for example), and define

or two objectives with the potential to catalyze

measurable or verifiable changes. Depending on

change tend to emerge. These specific objectives

the size of the group, it can be useful to work

are placed a little to the right of the central

initially in subgroups, with each subgroup

limitation previously identified.

responsible for generating some words or short

key phrases for the market chain’s future. Then

The process continues with the placement of

the facilitators collect all the contributions and

other specific objectives in a logical pattern

construct a shared future vision.

flowing from right to left until all the specific

objectives have been placed between the two

Once the two extremes are clear, the specific

ends (see Figure 19).

objectives from the objective tree are reviewed to

identify a logical order for their implementation.

Once the objectives are logically organized,

Facilitators can use phrases such as “starting

activities and results are defined for each

from where we are now we hope to reach our

objective. At this stage, the logical path clearly

desired future in 5 years by achieving the

identifies the key entry point or points

following objectives...”

followed by additional linked objectives to guide

the market chain to the desired future

The following questions tend to generate debate

(Figure 20).

amongst the participants.

Today

Tomorrow

General

General

limitation

Objective 1

Objective 2

Objective 3

objective

Description of

Description of desired

present situation.

future situation.

In few words,

In few words, where

where are we?

do we want to be?

Figure 19. Definition of a logical path.

Activities

Activities

Activities

1.1

2.1

3.1

1.2...

2.2...

3.2...

Today

Tomorrow

General

General

limitation

Objective 1

Objective 2

Objective 3

objective

Description of

Description of

present situation.

Products

Products

Products

desired situation.

In few words,

1.1

2.1

3.1

In few words,

where are we?

1.2...

2.2...

3.2...

where do we want

to be?

Figure 20. Complete simple logical path with actions and results.

86

Analysis of Critical Points in the Market Chain

In most cases, reality is much less logical and

(d) contain a timeframe for implementation. The

linear than Figure 15. In these cases, the logical

final investment plan should be concise—about

path can be represented with diverse parallel

5 pages is a good rule of thumb—and include

objectives that are necessary prerequisites for

sufficient information to assess the relative costs

others further ahead. The objective of this

and benefits of intervening or not in this area of

exercise is to visually chart a future course that

the market chain.

is understood by all participants in the strategy

to increase competitiveness. An example of a

Inputs for this investment plan come from the

more complete version of a logical path appears

logical path (each objective becomes the center of

in Figure 21.

an investment plan) as well as from other

information gathered during the analysis of the

An example of a logical path is shown in

market chain. In addition to this information,

Figure 22.

the preparation of short investment plans

requires that the service provider and market

Preparation of Business Plans

chain actors review the cost and expected

To facilitate the implementation of the logical

benefits of intervening in the chain at the

path, the development of simple investment

selected point, assess the potential risks of this

plans for each objective is recommended. These

intervention, and develop a timeframe for this

plans should, for each objective: (a) clearly state

work. The following steps can facilitate this

the projected activities and expected outcomes

process:

in this area; (b) provide a solid estimate of the

financial requirements and expected returns on

1. Service provider and market chain actors

this investment; (c) outline an assessment of

review each objective of the logical path and

the risks entailed in work on this topic; and

their respective activities and products. If

Activities

2.1

2.2...

Activities

Activities

1.1

Objective 2

4.1

1.2...

4.2...

Products

2.1

Today

2.2...

Tomorrow

General

General

limitation

Objective 1

Objective 4

objective

Description of

Activities

Description of

present situation.

3.1

desired situation.

In few words,

3.2...

In few words,

where are we?

where do we want

to be?

Products

Products

1.1

4.1

Objective 3

1.2...

4.2...

Products

3.1

3.2...

Figure 21. Complete logical path with parallel actions and results.

87

Participatory Market Chain Analysis for Smallholder Producers in the zone

Additional demand requires

extension of processing capacity

highly

and cattle

Market demand generates

Training to improve the · management of pastures, animals, and animal health. Implement more efficient · production systems (milk measure per hectare) according to region. Implement improved breeding · strategies that include incentives for supply of bulls, heifer selection, and supply of productive cows. Management of financial · resources.

Production of feed for cattle has

been increased and diversified

(green forage, proteins, harvest

subproducts, etc.).

There are sustainable production

systems in pilot phase.

Production losses and morta due

to parasite incidence and other

diseases are reduced.

Production of milk/animal per

day has been increased.

incentives for improved pastures

·

· ·

·

their products

Gaining of market contacts · (research, trips, and participations in events). Association with implementation · of the marketing plan (launch of the brand, promotion sales points, sale, difficulties, package design, and prices). Definition of the sales structure. · Management of working capital. ·

Strengthened enterprises win an

Enterprises collect and process

an average of 200 L.

Enterprises manage to widen

their client base through new

purchasing agreements.

Enterprises manage to place all

their production on the market.

extensive and constant market for

· ·

·

contributing a better quality of life for its population.

milk production in the zone, thus generating employment, income, and recognition for the zone, and Processing enterprises are

Meetings in focal groups to · define support priorities. Design of strategies and · methodologies to strengthen the enterprises. Strengthening process through · workshops and consultancies on technical (quality and conversion factors), administrative, accounting, marketing, and organizational themes, and the legal framework of the enterprise. Organizational strengthening in · social themes with ASERCA. Association for legal transactions · and implementation of what has been learned.

Milk processing enterprises in the Pescador area manage to effectively collect, transform, and commercialize Enterprises have a business

plan.

Enterprises have a marketing

plan.

Managerial practices are in use

by enterprises.

Enterprises fulfill legal

requirements (INVIMA, invoicing,

IVA, brand registration, bar

codes).

strengthened in managerial terms

· · · ·

A

c

t

i

v

i

t

i

e

s

P

r

o

d

u

c

t

s

Figure 22. Example of a logical path for a strategy to increase competitiveness.

88

Analysis of Critical Points in the Market Chain

these are judged appropriate they are

In our experience, the development of specific

adopted as the projected activities and

investment plans can be assigned to groups of

outcomes for the objective.

market chain actors and staff from the service

2. Activities are listed in chronological

provider as an activity to develop between the

fashion—what comes first and what comes

end of the workshop on the logical path and

later—and costs assigned to each. Assigned

prior to the final negotiation session with all

costs should be as accurate and honest as

chain actors. In this case, a space of 2 weeks

possible with the information available, as

should be sufficient to develop a business plan

they will provide an important point of

for each objective of the logical path. These

analysis once outcomes and expected

plans may be shared as soon as available but,

benefits are included.

in any case, will be presented and discussed at

3. Expected outcomes and benefits are

the final session with all market chain actors.

reviewed for each objective to assure that

For an example of the format for a business

they can be met with the proposed activities

plan, see Appendix 3.

and financial resources. For each objective,

the service provider should estimate the

In this section we have explained how to carry

return on investment by quantifying the

out an analysis of critical points, from their

proposed outcomes or benefits and

identification to their translation into objectives,

comparing that figure with the sum of the

and their inclusion in a logical path to increase

required investments. The return on

the market chain’s competitiveness. In addition

investment usually has a longer timeframe

we have presented simple exercises to assess

than the investment plan but, as a rule of

the competitive position of the market chain

thumb, should not exceed 5 years32.

with regard to similar market chains and select

4. Costs and benefits are compared to assess

marketing positions to build on or strengthen

the relative return for the planned

the competitive position of the market chain.

investments in each objective.

With the logical path and investment plans in

5. Information generated in this exercise is

hand, the facilitating organization is ready to

documented and the short investment plans

systematize all the information generated up to

prepared as inputs for the final strategy.

now and share it with the market chain actors.

Based on this information, discussions will be

facilitated, decisions made, and resources

32. The participation of an accountant or someone

committed to strengthen the market chain. The

versed in simple financial analysis using Excel is

next section explains how to facilitate the

recommended at this stage, especially if no one in

the support organization of chain actors has

negotiating process between the actors and

experience in this kind of calculations.

design the final strategy.

89

Participatory Market Chain Analysis for Smallholder Producers SECTION 10

Negotiating a Strategy to Increase

Competitiveness

Guiding questions

1. Which of the inputs generated in the previous steps are important for facilitating negotiations between market chain actors?

2. How can we use the previous analysis to clarify the interdependence between market chain actors? Does this information identify areas where collective action by one or more actors could collaborate to improve their situation?

3. Does the existence of complete and shared information along the market chain permit decision making and facilitate agreements between actors to increase market chain competitiveness?

Why or why not?

4. What kinds of agreements can we expect from a negotiation workshop? For whom is this space useful?

Introduction

have been identified—for examples key

This section focuses on the negotiation and

buyers—they may be invited to this session,

design of the strategy to increase

even if they have not actively participated in

competitiveness among representatives of the

previous work.

market chain. Before arriving at this point, the

service provider must have systematized the

The technical report communicating the results

results of the market chain diagnostic

of the market chain diagnostic as well as a suite

workshops in a technical document as well as a

of investment plans should be available to all

suite of investment plans. These documents are

workshop participants prior to the event, and

an input for the negotiation workshop and the

serve as a starting point for the process of

discussion about how to increase the

negotiation. Based on these documents, the

competitiveness of the market chain.

workshop reviews the results of the diagnosis,

The list of participants for the negotiation

the proposed investment plans, and establishes

workshop comes from previous work with care

possible alliances for short-, medium-, and

taken to ensure the representation of key actors

long-term activities focused on increasing

either directly or indirectly. If additional actors

market chain competitiveness. Finally, the

90

Negotiating a Strategy to Increase Competitiveness

logical path and investment plans are improved

b. Characterization of the market chain’s

or accepted and action plans developed for their

actors

implementation.

· Geographic location (where they are

Below, we revise step by step how to facilitate

· located).

Role within the market chain (what

the design of a strategy to increase

function is carried out: production,

competitiveness.

processing, support, accounting,

Systematization of Results: Technical

· marketing, transport, etc.).

Level of organization (what grade of

Document

business organization each player has)

Before the negotiation workshop, we

and type of organization (farmer

recommend providing a technical document to

organization, community development

participants, if this has not already been done,

with the results from previous workshops. The

· organization, business firm, etc.).

Managerial capacity (what managerial

contents of this document may follow the model

practices are used such as

below or another identified by the facilitating

administration, accounting,

organization.

· management capacity, marketing, etc.).

Disposition to participate in market

Suggested contents

chain improvement (your perception of

1. Market chain selection: A brief description each player’s desire to participate in

of how and why the market chain was

selected.

· activities to improve the market chain).

Possible alliances identified between

actors and their motivations. What

2. Market survey, by select team: Key results possible alliances are visualized,

of the market survey with special emphasis

between whom, what are the factors that

on demand aspects including retail prices,

make the alliance possible? (For

price trends, product qualities, market

example, motivations such as income

trends, and opportunities for new markets or

gains, increased volume, improvement

new products.

of product quality, opening new markets,

etc.).

3. Identification of actors: Using the information from the summary interviews

This last question is important since the

sheets and based on meetings, this section

necessary details will be worked on in the

should outline who are the actors convened

negotiation workshop with all market chain

for the design of the strategy to increase

actors.

competitiveness. Why were they selected?

Who was excluded and why?

c. Business development services

Includes the business development services

4. Participatory analysis of the market

demanded and supplied along the market

chain by selected actors:

chain. The analysis of these data can be

based on the following questions:

a. Market chain map

· Presentation of the final market chain

· Who supplies business development

map where product flows, actors’

services to the market chain in the

relationships and business development

· services identified.

· different links?

How is the quality and effectiveness of

A report on price formation, including

the services perceived both by the clients

production costs for producers (if

possible for the intermediaries and

· and suppliers?

Are there gaps between available

wholesalers), as well as the purchase and

services and those needed for increasing

· sales prices for each player.

market chain competitiveness? What are

A report on income distribution along the

market chain focused on gross margin

· they?

Are there services that have many

(inputs-outputs) and what percentage of

the final price reaches each actor.

· suppliers and few clients?

Which services are paid for, and which

require subsidies to function? Is there a

91

Participatory Market Chain Analysis for Smallholder Producers relationship between the quality of the

but are key to taking advantage of the business

service and whether it is paid for or

opportunities open to the market chain.

subsidized?

Negotiation Workshop

d. The timeline and past interventions

Objectives

Share the table of market chain history with

1. Share and discuss the market chain

the actors.

diagnosis with a representative group of

·

market chain actors.

Analyze the types of support offered to

2. Identify key points of common interest

· whom and on what themes.

among the different actors.

If people have catalogued this support as

3. Negotiate possible alliances and collective

· negative, analyze why.

actions (between more than one actor) to

Share the outcome of previous

take advantage of market opportunities.

interventions and identified local

capacity to effect positive change.

Participants

The participation of key actors along the market

5. Analysis of critical points: Include copies chain—especially those necessary to take

of the general limitation tree and the general

advantage of specific business opportunities—is

solution tree with ranked limitations and

vital for this workshop. In this case, the service

their analysis. If discussions are anticipated,

provider should make every effort to involve key

it may be useful to have all the problems

actors who may have not participated actively

trees generated available.

in other parts of the analysis but are key to

chain development. This is often the case with

6. Logical path for the market chain:

major clients or traders with whom useful

Include a copy of the logical path generated

discussions are more feasible, based on the

for the market chain with its respective

information contained in the market chain

activities and results.

analysis.

7. Options for investment plans to be

Other types of actors can also be invited, such

presented by group members: Present the as specialist service providers who already

short investment plans with the following

provide or may provide business development

information for each objective in the logical

services to the market chain, as well as NGO

path:

managers to evaluate the results depending on

·

the needs of the market chain. In addition, a

The projected activities and expected

banker/accountant may be useful to assist in

· outcomes in this area.

the revision of the investment plans.

A solid estimate of the financial

requirements and expected returns on

Development of the workshop

· this investment.

An assessment of the risks entailed in

The following steps are recommended for the

negotiation workshop. The service provider and

· work on this topic.

A timeframe for implementation.

market chain actors should revise their

applicability, and adapt or change them

In addition, give credit for data collection and

according to their best criteria. Combining the

analysis to participants and facilitators in the

following list with less formal activities—i.e.,

workshops in the summary document.

coffee breaks, lunch, mixers, or round-table

discussions—is useful as well as serving to

We recommend providing this technical

reinforce the informal relations between diverse

document with participants in the negotiation

actors along the market chain.

workshop ahead of time so that they can review

the contents. It is also useful to kick off the

Presentation of limitations and

workshop with a brief presentation highlighting

opportunities by actors

the most important results from the diagnostic

At the start, the problems found in the market

process. This aspect is important as some of the

chain can be shared by each group of actors.

actors present in the negotiation workshop may

An easy way of communicating this information

have been absent from the previous workshops,

is by means of a matrix where the functional

92

Negotiating a Strategy to Increase Competitiveness

categories of the market chain appear with the

investment plan. If different actors have

points of view of the different actors as shown

used different terms to refer to the same

in Table 27.

problem or opportunity, it is important that

either all the terms appear (so that everyone

This matrix should be adapted to the market

can clearly see their point of view

chain’s needs since the problem is unlikely to

represented), or else a short phrase that

be as general as post-harvest management, but

attempts to pick up the essence of the

rather something more specific such as “lack of

problem/opportunity. If the second option is

adequate packaging material”.

selected, the facilitator of the meeting must

explain where the phrase comes from, and

Once this information has been shared, the

that this intends to reflect the terms used by

service provider and the market chain actors

the participants.

should present the results of the business

2. It is a good idea to leave a space for the

opportunities identified for the chain and their

participants to provide feedback on the

respective investment plans (Table 28).

diagnostic by giving their opinions and

clarify points that are confusing.

Facilitating notes

3. It is important to emphasize not so much the

1. The information needs to be presented to the

diversity of viewpoints, which will certainly

actors in an easily understandable and

occur, but rather to emphasize common

comparable way according to the rank that

issues where a collective solution to the

each group has given the limitation or the

limitation may be found.

Table 27. Example of a matrix of problems per activity and actor.

Activity

Actorsa

Producers

Processors

Traders

Buyers

Support service

providers

Production

-

-

Post-harvest management

Processing

-

Marketing

Business organization

-

a. More indicates a more important problem.

Table 28. Example of business opportunities matrix and investment plans.

Investment plans

Actorsa

Producers

Processors

Traders

Buyers

Support service

providers

Organization of farmer

☺☺

☺☺☺

☺☺

☺☺

☺☺

collective marketing group

Introduction of new varieties

☺☺

☺☺☺☺

☺☺☺☺

Introduction of a market

☺☺☺☺

☺☺☺

☺☺☺

information system among

market chain actors

Introduction of common

☺☺☺

☺☺☺

product standards and

grades along the chain

Development of new, value

☺

☺☺☺☺

☺☺☺☺

☺☺

added products for the

urban market

a. More ☺ indicates support to a particular investment plan.

93

Participatory Market Chain Analysis for Smallholder Producers 4. The objective of this space is to show the

focus should be on how to generate positive

participants that their problems are

solutions for most if not all participants, not

intimately interrelated. The links between

actors and their difficulties serve as inputs to

· gains for some at the expense of others.

It is better to identify relatively simple

identify common causes and as a way of

activities in the short term and increase the

visualizing possible gains for various actors

level of complexity and difficulty over time

from changes made in one part of the market

even though complete solutions represent

chain.

more gains than partial ones. We

recommend this approach as most of the

Negotiation between market chain actors

actors in the market chain do not know one

and service providers

another well, and many have histories of

The second stage of the workshop seeks to

adversarial relationships. To achieve

facilitate discussion among participants, market

complex objectives, therefore, requires a

chain actors, and specialist service providers to

process of incremental positive experiences

identify the best way to improve market chain

through which actors can build trust in each

functionality. This process should flow from the

other and confidence in the process of

problem and opportunity analysis included in

market chain improvement.

the first part of the workshop. The objective is to

identify joint activities or areas in which joint

Identification of possible alliances for

activities could be generated, in the short-,

generating and implementing solutions

medium-, and long-term that can improve the

In the third step of the workshop, potential

market chain. Ideally, these activities will

opportunities for collaboration are identified.

represent some type of gain for most market

This starts by listing investment plans and the

chain actors or, at least, for more than one of

actors who wish to participate, and what they

them. It is important to avoid focusing on

are willing and able to contribute (Table 29).

solving one problem that principally affects one

actor as the other participants will misinterpret

A good method at this stage is to divide the

this as favoritism.

investment plans by timeframe (short-,

medium-, and long-term) and by resources

In this stage, the real interest of the

(local, mixed and external resources). It is

participants in supporting collective action in

important to note that the concept of short-,

the market chain is put to the test.

medium-, and long-term varies by market

chain. One of the tasks of the negotiation

Facilitating notes

·

workshop is to identify a feasible timeframe

The role of the workshop facilitators is

with market chain actors for a given task. We

critical at this stage since equilibrium must

recommend starting with pilot actions that

be found among the distinct actors. The

show quick, tangible results—in a few months—

Table 29. Identification of alliances by each stage of the market chain.

Stage

Activities

Participants

Contributions

Production

Investment plan 1

·

People, knowledge, time,

Investment plan 2

·

Organizations and names of

people directly responsible

funds, etc.

Post-harvest

··Investment plan 1 Organizations and names of People, knowledge, time, Investment plan 2

people directly responsible

funds, etc.

Processing

··Investment plan 1 Organizations and names of People, knowledge, time, Investment plan 2

people directly responsible

funds, etc.

Marketinga

··Investment plan 1 Organizations and names of People, knowledge, time, Investment plan 2

people directly responsible

funds, etc.

Business organization

··Investment plan 1 Organizations and names of People, knowledge, time, Investment plan 2

people directly responsible

funds, etc.

a. Marketing in this context can refer to either trade or retail. These are general categories and should be adapted or changed based on the needs of the market chain.

94

Negotiating a Strategy to Increase Competitiveness

to generate a positive dynamic around the

on the use of local resources since the

strategy to increase competitiveness. In this

attainment of external resources is a long,

sense, a reading of the participants’ degree of

risky process. By choosing this path,

patience is important. More patient groups can

solutions may take more time, but they will

opt for more ambitious initial results, while

not be subject to external decision-making

groups with pressing needs or low levels of trust

processes divorced from local realities.

need rapid results to achieve simple, but

important, achievements (Table 30).

Revision of the logical path

Based on the above discussion, the logical path

This is similar to the idea of developing one or

prepared previously is presented to the

two pilot activities along the chain as a jumping

workshop participants for discussion and

off point for more ambitious processes of

improvement.

market chain improvement. A good pilot activity

should:

At the end of the negotiation workshop, the

following products should be available to serve

1. Be feasible to achieve in a reasonable

as input to the preparation of the final strategy:

amount of time—6 months—and generate

tangible, measurable results for more than

· Identification of possible alliances to solve

one actor in the market chain.

market chain problems and clear

2. Lay the groundwork for more ambitious

activities by showing the utility of working

together.

· commitments in this respect.

Anticipated investment plans, with times

3. Include a simple monitoring system that

allows market chain members to assess the

· and external resource needs.

Revised and improved logical path for a

strategy to increase competitiveness.

advances of the activity and make changes

in a timely fashion if needed.

4. Be relatively low-cost and, where possible,

Design of the Final Strategy to

draw principally on locally available

Increase Competitiveness

resources, people, and knowledge.

Based on the corrected technical document, the

5. Focus on building positive relationships

systemized results of the negotiation workshop,

among market chain actors.

and the agreements achieved between the

actors, a final version of the strategy to increase

Facilitating notes

·

competitiveness can be designed. Staff from the

At this stage the goal is for market chain

service provider can carry out the actual write-

actors to commit to collaborate. Details can

up of the document; however, the final version

be worked out in the final strategy to

should be shared with and reviewed by the

increase competitiveness, and further revised

market chain actors to ensure validity.

and improved upon in additional workshops

as the necessary confidence between the

This document can be a more extensive version

· actors grows.

of the technical document, adding the results

The workshop facilitator should try to

and agreements of the negotiation workshop, or

emphasize solutions that focus principally

can be a new document with more details.

Table 30. Time and resources required to implement a marketing strategy.

Resources

Timeframe

Short < 6 months

Medium 6 to 12 months

Long > 12 months

Own

What can we do in the next

What can we do in the next

What can we do in 1 year or more

6 months using principally our

6 to 12 months by mixing

based on local capacity and a

own resources?

local resources with targeted

judicious use of external support?

external help?

External

If there is no sure source of

What key activities in the

What key activities require

funds in the short term, it is

next 6 to 12 months should

external support over the long-

best focus on solutions that

be prioritized for limited

term (i.e., targeted research)

use local resources and

external support?

to help promote market chain

knowledge.

competitiveness?

95

Participatory Market Chain Analysis for Smallholder Producers Generally, various details from the negotiation

actions and for developing funding proposals

workshop remain open for discussion, such as

precludes a set structure. We do recommend,

responsibilities, costs, and dates. These details

however, that the market chain have a logical

should be developed and put in the final

general framework for the market chain

document either by the service provider or by a

improvement that all actors can agree upon and

working group of market chain actors. In this

collectively seek to implement. This is especially

sense, the final strategy is an on-going process.

true in big market chains where the total cost for

Two short case studies of final strategies and

implementing the complete strategy at once is

their implementation are shown in Boxes 6

prohibitive. In almost all cases, it is recommended

and 7.

to divide the strategy into specific sub-projects

focused on specific funding opportunities while,

CIAT does not recommend a specific format for

as the same time, not loosing sight of the

the final strategy, as its use for planning joint

relationships between each sub-project.

Box 6

Black pepper in Pucallpa, Peru

Black pepper was identified as having a substantial market demand in Peru with Pucallpa is the only producing area in the country. The application of the method to increase market chain competitiveness substantiated this opportunity and showed farmers that the prices they received for their products was only a small part of the value that this same product received in Lima. Price differences of between 600% and 1000% were found in this chain. Based on this information, 45 small producers formed a private business (Piper S.A.) and decided to implement the strategy for chain improvement. In the first 6 months, they improved and homogenized their local post-harvest practices through a horizontal (farmer to farmer) process and entered into negotiations with an industrial buyer in the city of Huancayo. As a result of the first process, participating producers differentiated their product, achieving 20% more for each kilo of pepper than non-participants in the local market. In addition, Piper S.A. sold 1.5 MT (approximately 10% of the local harvest) to the buyer in Huancayo in two lots. The price paid for the first lot was 58% above local market price while for the second lot, a 30% increase was achieved. After the second sale, imports from Ecuador decreased prices limiting further sales. Piper S.A. has purchased technical and marketing assistance from CRESE S.A., a private for-profit organization applying CIAT’s area approach.

In addition to the short-term gains achieved in 2001, local producers have developed a clear business vision of where they hope to go in the mid- and long-term. During fieldwork in October 2001 (after prices collapsed), farmers said things like, “now that we understand the market better, we realize that we can achieve better prices by improving quality and linking to buyers. But this is only the beginning. This year (2001) we sold pepper in Huancayo for more than 10 soles per kilo when local prices were, at best, 5 soles. But if we grind our pepper and package it for the local market, that same kilo is worth 22 soles. We are now looking for funds for a grinder and later on will see if we can grow and process for a large Lima company”.

Box 7

Cut flowers in Cauca, Colombia

The production of cut flowers—Anthurium—has traditionally been a women’s concern in the Department of Cauca, Colombia. When good market opportunities appeared for this product, a market chain analysis was facilitated by CORPOTUNÍA, a local NGO, with three groups of women. The analysis of the farm to market chain revealed that profit was largely captured by flower shops in the departmental capital of Popayán while the producers themselves were barely covering costs. Armed with this information, a negotiating session occurred between representatives of the women’s groups and possible buyers. This process resulted in a 24%

price increase for producers who, in return, agreed to sort, grade and pack the flowers based on their customers needs. More important than this initial gain, however, is the business vision which the women’s groups have developed that involves the establishment of a direct sales point in the city and, in the long run, the sale not of cut flowers, but of floral arrangements.

96

Negotiating a Strategy to Increase Competitiveness

In general terms, the strategy can be

document, but rather as the first step in a

understood as a road map that defines a path

process of discussion, collaboration, and

for increasing the competitiveness of a market

support between actors focused on changing

chain. The way in which the strategy is

their relationships in a substantial way, and

implemented depends on the actors themselves.

therefore the functioning of the market chain.

There are examples of strategies of

competitiveness that are implemented by local

In the following and final section, some general

actors (formal and informal) with a minimum of

guidelines for the monitoring and evaluation of

external help, and others that have managed to

strategies to increase competitiveness are

obtain significant funding. It is important,

presented.

therefore, not to view the strategy as a

97

Participatory Market Chain Analysis for Smallholder Producers SECTION 11

Monitoring of Strategies to Increase

Competitiveness: General Guidelines

Guiding questions

1. What are some key factors for the design of a monitoring and evaluation system that can be used by the market chain actors?

2. What factors are key to measure changes that increase competitiveness along a market chain?

3. What factors can we use to compare the market chain we are supporting with others that compete with it?

4. What are the indicators that permit us to measure the competitive performance of the market chain in selected markets?

5. What are the livelihood impacts on market chain actors over time?

Introduction

achieved by these strategies. They should be

The implementation of a strategy to increase

taken as guidelines rather than as fixed rules.

competitiveness can take many forms ranging

Naturally, each facilitating organization should

from tacit agreements between groups of actors

revise, adapt, eliminate, or add to this list to

to form value chains, to the financing of

develop a system that is most useful for their

important development projects whose aim is to

needs.

improve one or various market chains in a rural

area. Facing this diversity, it is difficult to

Monitoring and Evaluation

design a single system for monitoring and

Before beginning the design of a monitoring and

evaluation. This section intends rather to

evaluation system for a strategy to increase

present some key parameters at different levels

competitiveness, it is useful to reflect upon

that can be useful for measuring the changes

several questions. First, who are the intended

98

Monitoring of Strategies to Increase Competitiveness: General Guidelines users of the data generated by the proposed

Within the market chain

monitoring and evaluation system? Will the

· Production costs: Evolution of production users be technicians, donors, or managers of

costs in the market chain’s different links.

the facilitating organizations, market chain

Are the costs stable, increasing, or

actors, the government, or a mixture of these?

How will the data be used by different groups?

· declining?

Yields per unit: Evolution of the yields, or Depending on the users, a system or various

productivity per unit, invested or employed

systems should be designed in response to their

in the market chain. For example,

needs, desires, and capacities. If a particular

production per hectare planted or quantity

group is expected to help collect or analyze data

in the process, it is important to ascertain if the

· of cheese produced per liter of milk.

Value of final product: Evolution of the

group’s interests are clearly represented in the

commercial value (in constant currency) of

proposed system.

the final product or products of the market

chain. Is the value of the product increasing,

Second, the proposed system should be

sufficiently simple or complex to respond to the

· stable, or declining?

Profitability: Evolution of the product’s needs of its users. If the monitoring and

gross or net profit for the market chain.

evaluation of the strategy will be implemented

Profit can be calculated in each link as an

with market chain actors, the system should be

easy way to identify which actors capture a

designed with their participation so that it

greater percentage of the benefits. Are

responds to their needs by generating

overall profits increasing, stable, or

information useful for their decision-making

processes.

· declining?

Distribution of benefits: How does the distribution of final product or products

Third, what are the objectives of the monitoring

value along the market chain and amongst

and evaluation system? Is it a system to help

diverse actors evolve over time? Who retains

respond to the donor’s demands for

the most value, and how does this

information? Is it a system that intends to show

distribution change over time? This indicator

the actors how near or far they are from the

is of special interest in projects focused

levels of competitiveness of other similar market

chains? Does it capture stories of positive

· towards poverty reduction.

Improvement of the market chain

changes for publicity reports? Does it

products and efficiencies: There are collectively learn about what works in improving

various ways of improving a market chain.

a market chain and share it with others? Having

Kaplinsky and Morris (2001) identified four

clarity about the rational behind the system is

important so that it is designed correctly.

· key trajectories.

Process improvement: Increases in the

efficiency in internal processes both in

Finally, a monitoring and evaluation system to

individual enterprises, and between

be effective must continue to function over time.

enterprises in a market chain. Examples in a

Who will manage the system? Who will take

market chain are the frequent and timely

charge of collecting, processing, and feeding

delivery of products with the required

data into the system? How often? Will local

quality as well as the ability of service

persons or external experts carry out these

providers to support market led/enterprise

activities? How will the management of the

system be paid for? The system should be

· innovations.

Product improvement: Introduction of new

designed to be feasible to manage, maintain,

products or improvements in existing

and use.

products more quickly than by rivals. This

implies changes in the processes of

Possible Factors for a Monitoring and

developing new products within and between

Evaluation System

Some possible factors to take into account for a

· enterprises.

Functional improvement: Increases in the monitoring and evaluation system are set out

added value by means of changes in the

below with their respective sources of

activities managed within an enterprise (for

information. Again, this list does not intend to

example, taking responsibility for quality

be either complete or unique; it should be used

within the market chain) or moving the

as input for the design of a system that

focus of activities to different links of the

responds to users’ needs.

99

Participatory Market Chain Analysis for Smallholder Producers market chain (for example, from production

product reach a segment that is highly

· to marketing).

profitable, profitable, or only slightly

Market chain improvement: The market

profitable? Has this changed as a result of

chain passes from a basic product to a

processed one of greater value.

· the strategy?

Sales volume: Evolution of total volume of

Benchmarking

· sales measured in kilograms.

Sales value: Value of sales of the market Based on the first five indicators used to

measure changes within the market chain,

· chain measured in constant currency.

Product differentiation: Results from

comparisons can be made between similar

strategies to differentiate the market chain’s

market chains. This process is useful if a

products in a specific market and thus gain

similar, more advanced, market chain can be

a competitive advantage.

identified and data of the two market chains

shared with the actors so that they can see

Table 32 lists some possible indicators and

what can be achieved. In the same way, if there

sources of verification.

is access to data of other similar market chains,

existing good management practices could be

Results on Livelihoods (by Gender,

identified and adapted to local needs. Table 31

lists some possible indicators and sources of

Population Groups, and Economic

verification.

Status)

Participation of market chain income in

In the market

·

the overall livelihood strategies of the

Market penetration: How is the market

target populations

position of products from the market chain

Evolution of the percentage of the target

evolving? Is the participation of the products

population’s income originating from activities

increasing, stable, or declining? In the same

related to the market chain. This measurement

way, the segment of the market where the

can include the sale of products, employment,

product is sold can be researched. Does the

or reduction of purchases as a result of the

Table 31. Indicators and sources of verification within the market chain.

Indicators

Source of verification

Production costs

Interviews or periodic workshops with strategic differentiated actors of the market chain.

Yields per unit

Interviews or periodic workshops with strategic differentiated actors of the market chain.

Value of final product

Survey of final value of product in the market.

Profitability

Interviews or periodic workshops with strategic differentiated actors of the market chain.

Distribution of benefits

Interviews or periodic workshops with strategic differentiated actors of the market chain.

Improvement (processes,

Direct observations, interviews, or periodic workshops with strategic differentiated products, functions,

actors of the market chain.

market chain)

Table 32. Indicators and sources of verification of the market.

Indicators

Source of verification

Market penetration

Periodic interviews or workshops with differentiated strategic actors of the market chain.

Periodic surveys in the target markets of the market chain.

Sales volume (in kg)

Periodic interviews or workshops with differentiated strategic actors of the market chain.

Periodic surveys in the target markets of the market chain.

Sales value

Periodic interviews or workshops with differentiated strategic actors of the market chain.

Periodic surveys in the target markets of the market chain, revision of secondary data on market prices.

Product differentiation

Periodic interviews or workshops with differentiated strategic actors of the market chain.

Periodic surveys in the target markets of the market chain.

100

Monitoring of Strategies to Increase Competitiveness: General Guidelines Table 33. Indicators and sources of verification of livelihoods.

Indicators

Source of verification

Income generated by the market chain as a percentage

Periodic interviews or workshops with differentiated

of local livelihood strategies

strategic actors of the market chain

Diversification and security of income sources

Periodic interviews or workshops with differentiated

strategic actors of the market chain

Use of the market chain’s added income

Periodic interviews or workshops with differentiated

strategic actors of the market chain

Employment generation

Periodic interviews, secondary government data

Participation in the local economy

Government data (if they exist)

strategy to increase competitiveness. How do

decides upon the use of the added income

the activities supported by the strategy

generated by the market chain?

contribute in the generation of livelihoods, and

how do these contributions evolve? Are those

Employment generation

who benefit from the market chain women or

How does the market chain contribute to

men? What population or income groups benefit

temporary or permanent employment

the most or the least from improvements in the

generation disaggregated by gender, ethnicity,

market chain? Why?

or age. Who from within the community gains

most from these opportunities?

Diversification of income sources and

income stability during the year

Participation in the local economy

How market chain activities affect the income

How does the relative importance of the market

diversity and security of the target population

chain change over time in relation to other

during the year?

economic activities in the local economy?

Use of added income of the market chain

Table 33 lists possible indicators and sources of

How does the target population use added

verification.

income generated by the market chain? Who

101

Participatory Market Chain Analysis for Smallholder Producers APPENDIX 1

Marketing Checklist to Evaluate Key Points

in the Market Chain for a Commodity

Topic

Sub-topics

Questions/Comments

Personal

Name

For established firms try to get a business card, or mobile phone number for information

Physical address

purposes of future reference

Telephone

Type of

Value addition

How does the respondent add value along the market chain? Does he change business

Physical functions

the form of product (processor) or just move the product (transporter) or Experience

just store the product (wholesaler) or is he a retailer or consumer. Is there any vertical integration?

Demand

Quantity

Quantity sold normally, e.g., per day, week.

Type of buyer

To whom do you sell?

Seasonality

Are there changes in volume of sale over time?

Variety

Are there different varieties? If so, what is their respective demand/

Consumer

preference?

Preferences

What is the price variation as per variety differences?

Price data

Are there changes in prices over time?

If so, what are the reasons?

Do you find problems selling your products? If so, which ones?

Supply

Source by area

Which are your supply areas (geographically)?

Source by type of

From whom do you buy?

person

From where do you buy? (Meeting pt.)

Price

At what price do you buy the variety?

Quality

Does the price change over time? If so, why? and how?

Do you have problems getting products? If so, which are they?

Quality

Perishability

What is the quality of products along the chain?

Post-harvest

What is the shelf-life of the products?

issues

Storage

Quantity

How much do you usually store?

Time

For how long?

Storage problems

Do you have any storage problems?

Do you experience storage losses?

Transaction

Forms

What are your transaction costs?

costs

Proportions

What is their proportion?

Grading and

Grading incentive

Do you grade or sort?

sorting

Do better grades fetch higher prices?

Market

Sources

Do you get market info? (e.g., on prices?)

information

Spatial arbitrage

If so from whom and how?

Is there a relationship between prices in different areas at a given time?

Price formation

Market power

Who determines the price?

How is the price determined?

If firm/individual is a price taker, find out why?

Institutional

Associations

Do you belong to an association?

and legal

Are there any market regulations? If so, which are they and how do they framework

affect your business?

Market

Competition

No. of sellers

structure

Is there price competition?

Is there non-price competition? If so, how (interlocking markets)?

Credit

Sources and type

Are there any credit institutions?

availability

Do you use them?

What are their rates of interest?

102

Appendices

but

to

on

and

in

like

volumes

solar

remarks

with

discuss

groups

only

to

methods

and

and

groups

research

supply

General

Interested

attending a

meeting

farmer

would

come when they are

ready

costs

of

Would be interested

to make links with

new

would like to work

with

pests

drying

of

ripening

and

banana

fruit

up

steps

products

packaging

fresh

Next

follow

Return visit to

explore interest in

research into control

of

cultivar

and

dried

into

to

on

spread

cure/

of

ripening

links

wilt

disease)

a

know how to

research

to

restart

packaging

Potential

Research and

Development

Collaboration

Fusarium

(Panama

Research

prevention

Need

control ripening.

How to start, stop,

and

Suggest

temperature control

and

Interest in exploring

EU tastes

double

overcome

situation

Fresh—

could

if

Dried—About

problem

tons/month

kg/month.

Current

Exports:

approximately

1-2

Solar

400

Banana. Volume is

growing

(Problem is irregular

insufficient sunshine)

Suggest

volume

drying

banana

UK

snacks

Summary Information Sheet:

Relation to product

Export fresh and

solar dried

cultivar to Germany

and

Solar dried fruits

used in breakfast

cereal, ice cream,

and

Example from Banana Market Survey

exporters

information

Basic

Organic fruit and

vegetable

Own farm in Kanero

and 62 Out growers

in Rakai and

Bugurari

2

and

Uganda

Director

Farms

Plattz

PPENDIXA

Organization

key person

Organo

P.O. Box 29078

Kampala,

Yicrav Smit

Managing

Tel.: 077 501144

E-mail:

Yicrav@yahoo.com

Kevin

Consultant

Tel.: l077 502330

E-mail:

Kevin@yahoo.com

103

Participatory Market Chain Analysis for Smallholder Producers (Continued)

annexed.

ood points of your

arket chain studies.

branding

attract customers?

linked.

about

Comments

Think

This clause indicates that the information should not be shared beyond the interested parties.

Paragraphs should be clear, concise, and easily understood. Values can focus on ecological, ethical, and fair trade aspects.

This section should be brief, any detail should be

Information for this section will come from your analysis of the target market chain.

This section needs to be upbeat, highlighting the g

business unit and the value of the products.

This information will be summarized from your m

This section is the core of the plan, you should focus attention here so that the plan is well structured, concise, and that each stage is logically

What will

This can be very simple if you plan for one product over one season which needs little investment and you have full knowledge of the product. However, financial planning can rapidly become more complicated as planning includes cash flow, loan costs, multiple years, multiple products, and sales outlets. Seek assistance from persons with experience if you have any difficulties.

product(s)

and

sheet

what

assets,

does

site,

balance

clause

who

your

of

of

income,

even

requirements

Outline of a Business/Investment Plan

Overview · Describe your strategy, i.e., how you will get to your goal · Describe the stepwise activities that will make up your · operational plan Objectives · Results · Introduction · Sales volumes · Production costs · Selling price of product · Profit and loss account · Costs, · Cash flow · Break · Loan · Return to investment ·

Essential information

Title, date, company name

Confidentiality

Name, physical address, email, phone number

Company/group name, capital value, office address,

vision, mission, company values, brief history of the

company/group, latest financial statement

Organization, organizational diagram; can include short

description

Description

Product type, target market locations, segments, area of sales, competitors

products

and

competitive

3

organization

page

and

data

Sections of a business plan

Cover

Small print

Contact

List of contents

Executive summary

Basis

Business

Infrastructure

Market

analysis

Business strategy and

operating plan

Sales records and

projections

Financial analysis

PPENDIXA

1

2

3

4

6

7

8

9

0

1

2

3

1

1

1

1

104

Appendices

in how

ou are selling

plain how

forecast.

sales

the

match

should

timeframe

arrived at your results.

Comments

This section should outline the key risks you have considered with some analysis of what would happen if there are changes in the marketplace. This section will be more easily tackled if you have attempted a pilot project.

The type of sales forecast will depend upon the product y and the timeframe of production, i.e., sub-annual, annual, perennial.

The

Budget notes, to explain the costs outlined in the budget.

The figures need to be supported with a written text to ex you

The figures need to be supported with a written text to expla you arrived at your results.

and

period

production

asset

and

month

the business plan

your

costs

6-12 a

over

calculated

material

you

raw

to

forecast

how

of

sales

related

and

information

overview

Essential

Risk assessment, test results based on risk studies,

assumptions

feasibility, sensitivity analysis based on most critical cost factors

Production

Costs of being able to produce the intended product

Full and part time staff, including details of direct costs and other costs such as benefit packages if applicable

(including in kind benefits, meals, transport, bonus

payments, etc.)

Utilities, rent, furniture, depreciation, communications, computers, sales costs, legal fees, consultancy fees,

insurance, local administration fees, extraordinary fees, etc.

Summary of payments over the period of

Summary of all costs, incomes, and resulting profit

Detailed

liabilities

Monthly analysis of your costs and incomes, to show how

your cash flow will develop during the forecasted initial planning period

account

costs

costs

loss

(Continued.)

outlays

sheet

forecast

and

flow

Sections of a business plan

Risks

Sales

Capital

Employee

Operating

Expenditure

Profit

Balance

Cash

4

5

6

7

8

9

0

1

2

Appendix 3.

1

1

1

1

1

1

2

2

2

105

Participatory Market Chain Analysis for Smallholder Producers Glossary

Actor

Benchmarking

Person or business that plays an active role

The process of comparing the company’s

within a market chain.

products and processes to those of a

competitor or leading firm in other industries

Advertising

to find ways to improve quality and

Any form of marketing communication in the

performance.

paid media.

Biodegradable products

Agent

Products made from biological materials that

A channel institution which represents one or

break down within a relatively short period of

more suppliers for a fee.

time when disposed of or left to degrade under

natural conditions. These products are not

Agribusiness

considered harmful to the environment as

Involves the manufacture and distribution of

they break down into non-noxious products.

farm supplies, production operation on the

farm and the storage, processing, and

Biotechnology

distribution of farm commodities and items

New area of biological science pertaining to

made from them.

propagation, transformation, and the

recombination of genetic materials that is

Agricultural extensification

conducted in controlled, sterile conditions.

Using more land or animals to increase

This technology often uses sophisticated

agricultural output.

non-traditional methods for enabling genetic

propagation and genetic manipulation. It is

Agricultural intensification

used to produce genetically modified

Increased agricultural output from increased

organisms (GMO’s).

productivity or yield per unit of land.

Brand

Agroenterprise

A name, term, sign, symbol, logo, phrase

A business or firm, typically small-scale in

intended to identify the goods or services of

nature, often based in a rural location that

one seller to differentiate them from those of

produces and sells agriculturally-based

competitors. A recognized brand is one which

products or services.

has strong customer loyalty.

Appellation

Broker

System by which a product is legally protected

A channel institution which puts a specific

to support marketplace differentiation based

buyer(s) and seller(s) in contact with one

on its place or origin or method of processing.

another in one or more commodity(ies) or

service(s) with a view to achieving a sale or

Arbitrage

benefit.

The simultaneous purchase and sale of a

commodity in two different markets to take

Budget

advantage of differences in prices of that

An amount of money set aside to cover the

commodity in the markets.

total cost of a communication campaign or

other marketing activity.

Assets

Items of money value owned by a business or

Business Development Service (BDS)

person, including such items as land,

Any business or business entity that offers

buildings, machinery, tools, etc.

information and activities in the marketing

system that facilitates a second business,

Barrier to entry

thereby improving its operational and pricing

Costs or conditions that must be met in order

efficiency. In some cases the term BDS is used

to gain access to a particular type of market.

to capture all of those business services other

than financial services, such as input supply,

Barter

processing, advisory services.

The direct exchange of goods and services

between two parties, often without cash

considerations.

106

Appendices

Glossary

Capital

Customer satisfaction

Productive resources (goods) that are

The extent to which a product’s perceived

available, as a result of past human decisions,

performance matches a buyer’s expectation. If

to produce other want-satisfying goods.

the product’s performance falls short of

expectations, the buyer is dissatisfied. If

C.I.F.

performance matches or exceeds expectations,

A contract of sale “cost, insurance freight” of

the buyer is satisfied or delighted.

the documents of title, not the goods, whereby

the buyer is under an obligation to pay

Demand

against the shipping documents irrespective of

The quantity of products that the consumers

the arrival of the goods.

can buy.

Collective action

Discount

Term used to describe group activities, used to

A reduction in price on purchases during a

increase economies of scale.

stated period of time.

Collusion

Process through which traders artificially fix

Distribution channel

prices above the price they would achieve in a

An institution through which goods or

situation of perfect competition.

services are marketed giving time and place

utilities to users.

Commodity

Product for sale in the marketplace. Term

Dumping

originally coined to differentiate products that

The selling of goods or services in a buying

were essential, termed utilities, with new

country at less than the production unit price

products such as coffee and cocoa that was

in the selling country, or the difference

considered to be exotic and desirable.

between normal domestic price and the price

Nowadays, commodities tend to be used for

at which the product leaves the exporting

products in high volume trading.

country.

Comparative advantage

Duty

One country enjoying a lower production ratio

The actual custom duty based on an imported

(input to outputs) than another country under

good either on an ad valorem, or specification

total specialization, due to resource

amount per unit or combination of these two.

endowments.

Economic rent

Comparative analysis

Return in excess of opportunity cost, often

Comparing the same set of statistics within a

enabled through political protection.

category of one country with another for the

purpose of estimating potential demand.

Effective market demand

When needs and desires are supported by the

Competition

ability to pay.

A product, organization, or individual, in

either the same or another category which can

Elastic supply

be directly substituted one for the other in

A supply elasticity coefficient of more than one

fulfilling the same needs or wants.

indicates an elastic supply, the percentage

increase in supply being greater than the

Competitive advantage

percentage increase in price.

The ability of a firm to complement traditional

comparative advantage with additional

Entrepreneur

attributes related to its cost structure and

Person who organizes resources to produce

core competencies, such as the business

and market goods and services.

strategy, quality of the business environment,

and demand conditions that gives market

Exchange

superiority for one firm or cluster of firms

The act of obtaining a desired object by

relative to competing firms.

offering something in return.

Competitive strategy

Exchange rate

The adoption of a specific target market and

The ratio of exchange of one currency to

marketing mix stance in the marketplace.

another.

Cooperative

Exporting

A collection of organizations or individuals,

The marketing of surplus goods produced in

pooling their resources in order to gain

one country into another country.

commercial or non-commercial advantage in

buying, selling, or processing goods and/or

services.

107

Participatory Market Chain Analysis for Smallholder Producers Fair trade

Gross marketing margin

Marketing strategy used to differentiate

Is the sum of all marketing costs plus profits.

products produced by smallholder farmers

and sold through equitable and transparent

Gross national product (GNP)

trading systems. This system is used as an

The market value of all goods and services

alternative to less equitable trading systems

outputted by residents of a country in one

being used by some larger corporate agencies

year including income from aboard.

in commodity trading.

Hedging

Firm

A mechanism to avoid the risk of a decline in

A decision-making business entity that uses

the future market of a commodity, usually by

resources hired from households to produce

entering into futures markets.

goods and services for sale to households or

other consuming units.

Horizontal integration

The combination of two of more enterprises or

Fixed costs

firms operating at the same point in the

Those costs incurred for resources that do not

market chain.

change as output is increased or decreased.

Human capital

F.O.B.

The educational investment that improves the

A contract of sale “free on board” whereby the

knowledge and productivity of people.

seller undertakes to place the goods on board

a named ship at a named port and berth and

Human need

carry all charges up to delivery over the ships

A state of deprivation that can be addressed

rail.

or reduced by a product.

Focus group

Human wants

A small sample of typical consumers (or

The form that a human needs takes as shaped

interest group) under the direction of group

by culture and individual personality.

leader, who elicits their reaction to stimulus

such as an advertisement, an idea, a

Income elasticity measurements

question, or concept.

A description of the relationship between the

demand for goods and changes in income.

Foreign exchange

Facilities business across national

Income elasticity of demand

boundaries, usually expressed in foreign

The responsiveness of quality purchased to a

currency bought or sold on the foreign

1 percent change in income, ceteris paribus.

exchange market.

Income per capita

Futures option

The market value of all goods and services

A legally binding contract to deliver/take

outputted by a country divided by the total

delivery on a specified date of a given quality

number of residents of that country.

and quantity of a commodity at an agreed

price.

Inelastic supply

Products that have a supply elasticity between

Gatekeepers

zero and one the supply elasticity is

People in the organizations buying center, or

considered to be inelastic. The percentage

point in a market chain, who control the flow

change in supply is less than the percentage

of information to others.

change in price.

Global products

Inflation

Products designed to meet global market

A condition where demand outstrips supply or

segments.

costs escalate, affecting an upward change in

prices.

Globalization

The integration of international transport,

Information system

finance, and communications systems and

A system for gathering, analyzing, and

services to enable transnational trading of

reporting data aimed at reducing uncertainty

goods and services.

in business decision making.

Gross domestic product (GDP)

The value of all goods and services produced

by a country’s domestic economy in one year.

108

Appendices

Glossary

Innovation

Local products

An idea, service, product, or technology that

Goods or services seen only suitable in one

has been developed and marketed to a

single market.

consumer who perceives it as novel. It is a

process of identifying, creating, and delivering

Logo

new product or service values that did not

Symbol or emblem used to identify a specific

exist before in the marketplace.

product and for marketing purposes to

differentiate a specific product from similar

Input markets

items.

Markets focused on products that supply

production-based activities; in agriculture this

Mark of origin (appellation)

typically means market actors that supply

System by which producers and processors

seeds, tools, finance, and agrochemicals.

can legally register their products so that no

other producers or processors can use this

Interest

name, title or logo, unless they produce the

The charge made for borrowed money. The

product within a legally recognized area or

rate at which we discount future economic

territory and use specifically laid down

goods.

methods of production and/or processing.

Interest rate

Market

The price of borrowed money.

The set of all actual and potential buyers of a

product or service.

Intermediaries

Distribution channel firms or persons that

Market chain

help to find the customer or make sales to

Term used to describe the multiple market

them, including bulking agents, wholesaling,

channels through which a product or service

retailers that buy and resell goods.

moves until reaching the consumer.

International products

Market efficiency

Goods or services seen as having extended

A comparison of the value of output to the

potential into other markets.

value of inputs used in the marketing process.

Joint ventures

Market entry

An enterprise in which two or more investors

The way in which an organization enters

share ownership and control over property

foreign markets either by direct or indirect

rights and operations.

export or production in a foreign country.

Key informants

Market information services (MIS)

Active and leading members of the market

People, equipment, and procedures to gather,

chain.

sort, analyze, evaluate, and distribute needed,

timely, and accurate information to marketing

Key observers

decision makers.

People who are knowledgeable about a market

chain but are not directly involved in the

Market mix

business operations of the market chain.

The set of controllable tactical marketing

tools—product, price, place, and promotion—

Letter of credit

that a firm blends to produce the response it

A method of international payment whereby

wants in the target marketplace.

the buyer instructs his own country bank to

open a credit with the seller’s own country

Market positioning

bank specifying the documents which the

The adoption of a specific market stance,

seller has to deliver to the bank for him/her to

leader, challenger, follower, flanker, or

receive payment.

adopter, vis à vis competition.

Levy

Market research

A tax imposed by government to meet a

The function that links the consumer,

specific objective.

customer, and public to the marketer through

information—information used to identify and

Licensing

define market opportunities and problems to

A method of foreign operation cooperation

generate, refine, and evaluate marketing

whereby an organization in one country agrees

actions; to monitor marketing performance

to permit a firm in another country to use the

and to improve the understanding of the

manufacturing, processing, trademark,

marketing process.

know-how, or some other skill provided by the

licensor.

109

Participatory Market Chain Analysis for Smallholder Producers Market segment

Net marketing margin

A group of consumers who respond in a

Excludes normal marketing costs, thereby

similar way to a given set of marketing

providing a measure of the profit realized. Net

stimuli.

marketing margins may however also include

the remuneration of the trader or processor’s

Market segmentation

labor, in which case it is not an exact profit

Dividing a market into distinct groups of

indicator.

buyers with different needs, characteristics, or

behavior, who might require separate

Niche marketing

products or marketing mixes.

Adapting a company’s offerings and products

to more closely match the needs of one or

Market speculation

more sub-segments where there is often little

A marketing strategy whereby buyers hold

competition.

stocks of a product in the hope that prices will

increase, so that they can maximize profits

Non-tariff barriers

when they decide to sell. Physical speculation

Measures, public or private, that cause

requires that a lot or amount of produce is

intentionally traded goods or services to be

purchased and stored. There are costs

allocated in such a way as to reduce potential

associated with storage and for a speculation

real world income.

to be profitable the final sales value must be

more than the costs of storage.

Opportunity cost

The value of other opportunities given up in

Market supply

order to produce or consume any good.

The quantity of products that is offered for

sale.

Option

Marketing

A bilateral contract giving its holder the right,

Planning, executing, and controlling the

but not the obligation to buy or sell a specified

conception, pricing, promotion and

asset at a specific price, at or up to, a specific

distribution of ideas, goods and services in

date. Type of financial instrument that gives

order to build lasting, mutually profitable

the holder the right to buy or sell futures

exchange relationships satisfying individual

contracts.

and organizational objectives.

Output markets

Marketing costs

Markets where harvested products are

Agricultural marketing refers to the activities

sold—these are the more traditional assembly,

involved in taking a product from the farm

wholesale, and retail markets.

gate and delivering it in the form, at the time

and to the place that the buyer requires. Such

Packaging

costs are therefore incurred through handling,

Activities involved designing and producing

transport, storage, processing, packaging,

the container or wrapper for a product.

market fees, risk management, brokerage,

export handling, and others.

Patenting

Legal mechanism used to protect products

Marketing process

from being copied by other entrepreneurs. The

The process of analyzing market

patent scheme usually lasts for a designated

opportunities, selecting target markets,

period of time, 10 years, after which time the

developing a marketing mix, and managing

scheme either elapses or the inventor or

the marketing effort.

owner provides evidence of innovation to

renew the patent to protect the value of the

Marketing strategy

given intellectual property.

The marketing logic by which the business

unit hopes to achieve its marketing objectives.

Penetration price

The charging of a low price in order to gain

Media

volume sales conducted under conditions of

Any paid for communication channel

little product uniqueness and elastic demand

including television, radio, posters, etc.

patterns.

Middleman

Physical distribution

Person who trades in goods, a buyer and seller

The act and functions of physically

of goods and services.

distributing goods and services including the

elements of transport, warehousing, and order

processing.

110

Appendices

Glossary

Place

Quota

All the company/firm activities that make the

A specific imported amount imposed by one

product or service available to the target

country on another, when once filled cannot

customer.

be exceeded within a given time. When a

quota is in force the price mechanism is not

Price

allowed to operate.

The amount of money charged for a product or

service or the sum of the values that

Relationship marketing

consumers exchange for the benefits of having

The process of creating, maintaining, and

or using a product or service.

enhancing strong value laden relationships

with customers and other stakeholders.

Price ceiling

The maximum price which can be charged

Rent

bearing in mind competition and what the

Return in excess of opportunity cost, often

market can bear.

enabled through political protection or

advantaged access to commercial information.

Price elasticity of supply

Defined as a measure of the percentage

Retailer

change in quantity supplied in response to a

A channel institution which acts as an

percent change in price. A supply elasticity of

intermediary between other channel

0.4 for cotton in the short run means that the

institutions and the end user and who usually

quantity supplied increases 0.4% for a 1%

breaks bulk, charging a margin for its

increase in the price of cotton.

services.

Price escalation

Secondary data

The difference between the domestic price and

That data which already exists in other texts.

the target price in foreign markets due to the

application of duties, dealer margins, and/or

Sector

other transaction costs.

Relates to the all activities under the mandate

of one government ministry, such agriculture,

Price floor

health, education, justice.

The minimum price which can be charged

bounded by product cost.

Services

Activities, benefits, or satisfactions that are

Primary data

offered for sale.

That data which is collected and generated as

part of a survey. Unpublished data from

SMS

individuals or organizations.

Short message service, text used to transfer

information via mobile phones.

Product

Anything that can be offered to a market for

Speculation

attention, acquisition, use of consumption

The purchase or sale of title to goods or

that might satisfy a want or need. It includes

financial obligations in the expectation of

physical objects, services, persons, places,

favorable price movements.

organizations, and ideas.

Standardization

Product strategy

Same goods or services marketed in either

A set of decisions regarding alternatives to the

product, distribution, or advertising form,

target market and the marketing mix given a

unchanged in any country.

set of market conditions.

Strategic business unit

Promotion

A self-contained grouping of organizations,

Activities that communicate the product of

products, or technologies which serve an

service and its merits to target consumers and

identified market and competes with identified

persuade them to buy. The offer of an

competitors.

inducement to purchase, over and above the

intrinsic value or price of a good service.

Strategic plan

A plan that describes how a firm will adapt to

Quality

take advantage of opportunities in its

The totality of features and characteristics of a

constantly changing environment, thereby

product or service that bear on its ability to

maintaining a strategic fit between the firm’s

satisfy stated or implied needs.

goals and capabilities and its changing market

opportunities.

111

Participatory Market Chain Analysis for Smallholder Producers Sub-sector

Transaction

A part of a sector. In agriculture, a sub-sector

A trade between two parties that involves at

focuses on one area, such as grains, fish,

least two things of value, agreed upon

livestock, etc., or can be more detailed to all

conditions, a time agreement, and a place of

that relates to one particular commodity only,

agreement.

such as the maize, rice, cassava, beef sub-

sectors.

Transaction costs

Transaction costs relate to the non-price costs

Substitutes

of making a commercial exchange. These are

Two different goods or resources between

expenses incurred in finding someone to trade

which a choice is made to satisfy human

with, time spent negotiating a deal and the

wants (or to produce a product).

costs involved in ensuring that contracts are

honoured, all fall under the general category

Super brand

of transaction cost.

A product that has world renowned

reputation, for providing customer satisfaction

Value

and delight, e.g., the soft drink Coca-Cola, the

The consumer’s assessment of the product’s

NIKE sports shoe.

overall capacity to satisfy his or her needs.

Value added

Tariff

The contribution to final produce value by

An instrument of terms of access normally the

each stage in the production, delivery, and

imposition of a single or multiple excise rates

marketing process. Also, includes

on an imported good.

transformation processing of goods from

primary to final state offered to a consumer.

Traceability

System by which a product is tagged, such

Vertical integration

that it can be traced from source of origin to

The linkage of firms (enterprises) in different

final user. This process may become

stages of producing and/or marketing under

mandatory in formalized food markets.

the ownership of a single firm.

Trade Mark

Wholesaler

Legally recognized name, symbol, or title,

A channel institution which purchases and

which can only be used for marketing

sells in bulk from either original suppliers

purposes by the originating or owning

and/or other channel intermediaries, charging

company.

a margin for its services.

112

Appendices

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113

About the Partners

ASARECA FOODNET (Association for Strengthening Agricultural Research in Eastern and Central Africa) FOODNET is ASARECA’s post harvest and market research network for East and Central Africa. The network was established in 1999 and focuses on market analysis studies, market information, agroenterprise development, and related business development support services. FOODNET works in collaborative partnerships with research and development partners from the public and private sector.

CARE

CARE International is a global humanitarian organization working with over 45 million people in 70 of the world’s poorest countries. CARE tackles underlying causes of poverty so that people can become self-sufficient. Recognizing that women and children suffer disproportionately from poverty, CARE places special emphasis on working with women to create permanent social change. Women are at the heart of CARE’s community-based efforts to improve basic education, prevent the spread of HIV, increase access to clean water and sanitation, expand economic opportunity and protect natural resources. CARE also delivers emergency aid to survivors of war and natural disasters, and helps people rebuild their lives.

Catholic Relief Services

Catholic Relief Services (CRS) was founded in 1943 by the Catholic Bishops of the United States. Their mission is to assist the poor and disadvantaged and promote development of all people and to foster charity and justice throughout the world.

CRS operates on 5 continents and in over 90 countries. CRS aids the poor by first providing direct assistance then encouraging these people to help with their own development.

CIPASLA

Cipasla, an inter-institutional consortium that fosters sustainable agriculture in hillsides, was founded in 1993 and is based in Pescador, a village in northern Cauca department, located in south-western Colombia. In its first phase Cipasla included twelve public and private agencies and its structure involved a support committee consisting of community representatives. Cipasla’s agenda encompasses community organization, environmental education, soil and water conservation, integrated crop management, marketing and agro-industry. Several CIAT projects have been implemented research activities in this region which is considered as a pilot site.

CLODEST

CLODEST is a local inter-institutional committee that promotes sustainable development agriculture in the pilot region of Yorito-Sulaco, in north-central Honduras. This region includes plains and hillsides. CLODEST members include farmer associations, development NGOs and CIAT. CLODEST conducts activities around community organizations, environmental education, soil and water conservation, integrated crop management, marketing and agro-industry. Several CIAT projects have implemented research activities in this region, which is considered as a pilot or reference site in Central America.

Corpotunia

Corpotunia, a local rural development NGO was founded in 1986 by community leaders and development NGOs and operates in the Cauca Department, located in south-western Colombia. Corpotunia executes development projects funded by the Colombian government and international donors. Its is a member of a research and development network in which CIAT also participates, and makes use of participatory methods and tools with a business and market orientation, developed by CIAT’s Rural Agroenterprise Development Project.

SNV

SNV is a Netherlands based international development organization that provides advisory services to nearly 1800 local organizations in over 30 developing countries to support their fight against poverty. SNV is dedicated to a society where all people enjoy the freedom to pursue their own sustainable development. SNV works with organizations that operate at district and provincial level and function as linking pins between national policies and frameworks and the people living in towns and communities. Its clients include private, governmental and civil society organizations.

About the Donors

CIDA

Canadian International Development Agency’s mandate is to support sustainable development in developing countries to reduce poverty and contribute to a more secure, equitable, and prosperous world. The Agency’s work is concentrated in the poorest countries in Africa, Asia, and Latin America. CIDA’s program is based on the Millennium Development Goals, which it contributes through four key areas: social development, economic well-being, protection, conservation, and management of the environment and governance.

DFID

The Department for International Development (DFID) is the part of the UK Government that manages Britain’s aid to poor countries and works to reduce extreme poverty. DFID’s work aims to bring people out of poverty through programs that settle conflicts, increase trade and improve health and education.

IDRC

The International Development Research Centre (IDRC) is a public corporation created by the Parliament of Canada in 1970 to help developing countries use science and technology to find practical, long-term solutions to the social, economic, and environmental problems they face. Support is directed toward developing an indigenous research capacity to sustain policies and technologies that developing countries need to build healthier, more equitable, and more prosperous societies.

NZAID

NZAID is the Government’s International Aid and Development Agency. NZAID places a high priority on building strong partnerships and concentrates its development assistance on activities that contribute to poverty elimination by creating safe, just and inclusive societies, fulfilling basic needs, and achieving environmental sustainability and sustainable livelihoods. NZAID supports projects in the Pacific region, Asia, Africa and Latin America.

SDC

The Swiss Agency for Development and Cooperation (SDC) is organized and funded by the Swiss government and operates by financing programs both directly and in partnership with other agencies to countries around the world.

USAID

The United States Agency for International Development is an independent federal government agency that aims to further America’s foreign policy interests in expanding democracy and free markets while improving the lives of the citizens of the developing world. USAID supports long-term and equitable economic growth and advances U.S. foreign policy objectives by supporting: economic growth, agriculture and trade; global health; and, democracy, conflict prevention and humanitarian assistance.

228 W. Lexington Street

Baltimore, MD 21201-3413 USA

Tel: 410.625.2220 • www.crs.org

ISBN 0-945356-41-2