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Market Systems and Value Chain Development. Introduction to value chains and market systems Value chain development: process and targeting the poor Sharing.

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Presentation on theme: "Market Systems and Value Chain Development. Introduction to value chains and market systems Value chain development: process and targeting the poor Sharing."— Presentation transcript:

1 Market Systems and Value Chain Development

2 Introduction to value chains and market systems Value chain development: process and targeting the poor Sharing experiences: good practices, challenges and actions

3 Why are we interested in value chain approaches?

4 The value chain approach can be a powerful tool to create wealth in poor communities and to promote equitable economic growth

5 Why are we interested in market systems?

6 Value chains exist within market systems

7 VC

8 Value Chain (VC)

9 Full range of activities required to bring a product or service from the start, through different phases of production, delivery to final consumers, and final disposal after use

10 Full range of activities required to bring a product or service from the start, through different phases of production, delivery to final consumers, and final disposal after use

11 Bag of chickpeas Carton of milk T-shirt Education

12 Full range of activities required to bring a product or service from the start, through different phases of production, delivery to final consumers, and final disposal after use

13 Narrow sense = activities within a firm/business

14 Broad sense = activities implemented by various actors

15 Input Suppliers Producers Processors/Traders Wholesalers Exporters National Retailers Global Retailers

16 Group work: example of a value chains

17 A value chain exists when all the actors in the chain operate in a way that maximizes the generation of value along the chain

18 Value is added to the preliminary product

19 The value of the product increases as it passes through several stages of the value chain

20 Value = combination of other resources e.g. tools, manpower, knowledge and skills, other raw materials or preliminary products Source: Herr, M.L. and Muzira, T.J. (2009). Value chain development for decent work. ILO

21 Group work: identify costs and add value to your value chain

22 Core Function Supply Demand

23 Core Function Supply Demand Infrastructure Information Related Services SUPPORTING FUNCTIONS Informing & communicating Coordination R&D Skills & capacities

24 Core Function Supply Demand Infrastructure Information Related Services SUPPORTING FUNCTIONS Informing & communicating Laws Informal rules & norms Non-statutory regulations Sector-specific regulations & standards RULES Setting & enforcing rules Coordination R&D Skills & capacities

25 Core Function Supply Demand Infrastructure Information Related Services SUPPORTING FUNCTIONS Informing & communicating Laws Informal rules & norms Non-statutory regulations Sector-specific regulations & standards RULES Setting & enforcing rules Private sector Government Informal networks Not-for-profit sector Business member organisations MARKET ACTORS Delivering & resourcing different functions Coordination R&D Skills & capacities Work/employee member organisations Source: Springfield Centre The Market System

26 Group work: using your example of a value chain, build and example market system around that chain

27 VCD

28 Value Chain Development (VCD)

29 Making the consumer/ customer at the end of the value chain happy

30 Stakeholders along a particular value chain need to cooperate and coordinate their activities

31 VCD is a market-orientated approach

32 5 key drivers of change that could prompt VCD

33 1.System Efficiency Reduce costs and increase efficiencies

34 2. Product Quality Increase the quality of products

35 3. Product differentiation Competitive advantage – continuous innovation and learning

36 4. Social & Environmental Standards Improve social standards and minimize environmental impact

37 5. Enabling Business Environment Working to support not hinder value chain activities

38 1.System Efficiency 2.Product Quality 3.Product differentiation 4.Social & environmental standards 5.Enabling business environment

39 How do we do VCD programming?

40 1. Sector Selection

41 Sector?

42 Economic sectors: agriculture, industry and services

43 Narrower definition (subsectors) = tea, dairy, embroidery

44 Within a sector we often find several value chains

45 How do we select a sector?

46 Selecting sectors Define objectives and target groups Decide on selection criteria Rapid assessment of available sectors Application of selection criteria in consultative meeting with stakeholders

47 CriteriaProposed subsector RiceDairyHandicrafts Unmet market demand 312 Potential to increase rural incomes 212 Potential for employment generation 221 Government or donor interest/existing support for programs 321 Total weighted score1066 Application of selection criteria Rank 1 = low, 3 = high

48 CriteriaProposed subsector RiceDairyHandicrafts Unmet market demand (x2) 3 x 2 = 61 x 2 = 22 x 2 = 4 Potential to increase rural incomes (x3) 2 x 3 = 61 x 3 = 32 x 3 = 6 Potential for employment generation (x3) 2 x 3 = 6 1 x 3 = 3 Government or donor interest/existing support for programs (x1) 3 x 3 = 92 x 3 = 61 x 3 = 3 Total weighted score Application of selection criteria Rank 1 = low, 3 = high

49 Not always necessary – may be pre-defined

50 2. Research, Analysis and Mapping  Sector research  Value chain analysis (VCA) and research  Value chain mapping

51 Primary research and stakeholder analysis & initial value chain map

52 Cross-cutting issues – gender, environment

53 Value Chain Analysis (VCA) or research

54 Refine the value chain map

55 Input Suppliers (seeds, tools, fertilisers etc) Input Suppliers (seeds, tools, fertilisers etc) Sml/med scale processors (Local RMUs, storing, drying, milling, finance) Sml/med scale processors (Local RMUs, storing, drying, milling, finance) By-product traders By-product processors Village collectors Irrigated rice farmers Irrigated rice farmers Large-scale processors Sector- specific providers Cross-cutting providers including financial Government (BULOG) Sector- specific providers Cross-cutting providers including financial Government (BULOG) Rainfed rice farmers Rainfed rice farmers By-product traders Large Traders Wholesalers & Distributers N. Aceh Kiosks Medan retail/ restaurants Medan retail/ restaurants Medan Kiosks Biscuit & animal feed processors N. Aceh retail/ restaurants N. Aceh low-end consumers Medan high-end consumers Medan low- end consumers Biscuit consumers & animals N. Aceh high-end consumers Local enabling environment Regional enabling environment National enabling environment BULOG HH consumption

56

57 Use of recycled oil in frying (street vendors) Use of recycled oil in frying (street vendors) Opportunities Processin g Tofu food preparati on Retailing Consumpti on Input supply Use plastics in frying tofu to add crunch – health issues (street vendors) Use of formaldehyde & borax Inefficient production methods Waste water management problem Limited local soybean supply Dependence on soybean imports Low shelf life Lack of financial access Limited advocacy for tofu producers associated with good health practices Used cooking oil stoves (street vendors) Used cooking oil stoves (street vendors) Application of good health practices (street vendors) Application of good health practices (street vendors) Linking with formal markets Cleaner production knowledge Use of liquid waste for biogas Marketing information on healthy aspects of tofu Improving access to finance (links to MFIs, financial literacy ) Constraints High price of cooking oil Linkages with larger input suppliers

58 3. Finding upgrading solutions

59 Upgrading?

60 Acquiring technological capabilities and market linkages to increase competiveness and move to high- value activities

61 Types of possible upgrading – with a focus on the poor

62 1. Process upgrading: efficiency of production

63 2. Product upgrading: introduction of new products or improving old products

64 3. Functional upgrading: changing to a higher value-added level in the value chain

65 Look at the effect of the upgrade on the whole chain

66 Determine the most effective level to upgrade

67 Questions to consider when targeting the poor

68 Who are the local innovators?

69 What are the mechanisms present in the community to share, maintain and collectively develop skills and knowledge?

70 Can the poor afford it?

71 Can the poor copy it?

72 What will be the impact of the poor as….

73 Producers

74 Labourers

75 Consumers

76 VCD Project Cycle Source: Herr, M.L. and Muzira, T.J. (2009). Value chain development for decent work. ILO

77 The VC approach can be a powerful tool to create wealth in poor communities and to promote equitable economic growth Seeing producers as part of value chains, and value chains as part of market systems, offers the opportunity for systemic change rather than traditional subsidization approach

78 Promising practices, challenges and ideas to improve those challenges (TOPS and others)

79 This presentation was made possible by the generous support of the American people through the United States Agency for International Development (USAID) Office of Food for Peace. The contents are the responsibility of Save the Children and do not necessarily reflect the views of USAID or the United States Government.

80 Today’s sessions What was great What was not so great Recommendations for tomorrow or next time


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