1. An Introduction to Value Chain Analysis

2. Agenda What is a value chain? What is value chain analysis?
How Does VCA helps in understanding sectors?
How can we conduct value chain analysis?
How does the VC approach help in Greening?

3. Origins of value chain
Michael Porter,1990, Competitive Advantage of Nations
Gereffi, 2005, The Governance of Global Value Chains

4. Sector, Sub-sector and Value Chain

5. What is a Value Chain

6. What is a value chain
The full range of activities that are required to bring a product or service from its conception to its end use.

7. Goatery Value Chain

8. Retailing
Processing
Wholesale
Production
Inputs

11. Ginger Value Chain

13. Source: Linda Jones, VCA Presentation, Coady, 2012

14. A Value Chain System
An economic system that has a value chain and its transactions at its core
Places the value chain within a larger system
The system includes enabling environment, business environment, socio-cultural context, and support services including finance
In development, when people talk about ‘value chain development’ they are typically referring to the whole system

15. How does sub sector analysis help?
Vertical perspective
Cooperation
Competition – Cost advantage and product differentiation
Leverage
Source: Haggblade and Gamser, 1991

16. Value Chain (VC)
A sequence of related business activities (functions) from the provision of specific inputs for a particular product to primary production, transformation, marketing, and up to the final sale of the particular product to consumers.
This is the functional view of a value chain.
VC definitions adapted from the GTZ ValueLinks Manual, The Methodology of Value Chain Promotion, First Edition, Eschborn, 2007

17. Value Chain (VC)
The set of enterprises (operators) performing these functions i.e. producers, processors, traders and distributors of a particular product. Enterprises are linked by a series of business transactions in which the product is passed on from primary producers to end consumers.
This is the operational view of a value chain.
According to the sequence of functions and operators, value chains consist of a series of chain links or stages.
VC definitions adapted from the GTZ ValueLinks Manual, The Methodology of Value Chain Promotion, First Edition, Eschborn, 2007

18. Typical Value Chain (Actors Only)
Farmers (Formal and informal groups)
Suppliers
Transporters
Processing Factories
(Value Addition)
Retailers
Consumers at Formal Market
Wholesalers
Input Suppliers
Value Chain Operators
Commercial (and social) interests
Consumers at Informal Market

19. Typical Value Chain (Actors & Supporters)
National / International Enabling Environment
Farmers (Formal and informal groups)
Suppliers
Transporters
Processing Factories / Value Addition
Retailers
Consumers at Formal Market
Wholesalers
Input Suppliers
Value Chain Operators
Intra-chain / Inter-actor support, coordination, management. Improving efficiency and transparency of transactions
Commercial (and social) interests
Consumers at Informal Market
Interventions, business support
Support of development goals and public interests, payment
Value Chain Supporters / Service Providers
Research Bodies
NGOs
BDS Providers
Extension
State Bodies
Banks
Financial Services
Non-financial Services
Microfinance Institutions

20. Value Chain Approach: Key Principles
A system perspective
A focus on end markets
Understanding the role of value chain actors and governance
Recognition of the importance of relationships
Facilitating changes in enterprise behavior and relationships
Linkages and empowerment

21. How Does VCA helps in understanding sectors?
The approach helps visualize the big picture and the environment under which the economic activity operates
The value chain structure, processes and relationships
It can shed light on how firms, regions and countries are linked to the global economy
Identifies key stakeholders
Identifies opportunities and constraints (in order to achieve desired outcome)
Helps in assessing competitive potential
It allows for the analysis of ‘leverage’ – small focused inputs that generate commensurately larger outputs
Main Points/Highlights:
Instructions:
► Move to next slide.

22. VCA Different Entry Points
Primary area of interest
Entry point
What to map
Example
The global distribution of income
The final consumer in a sector
Backwards down the entire chain to
retailers, buyers and producers
In food, begin with
supermarkets
Gender, age
and ethnicity
Role of women at production
Use of female labor throughout
value chain
In clothing, women in
cotton farms, factories,
export agents, design
houses, advertising
agencies, retail stores
Informal
economy
producers and
traders
Home based workers,
street traders
Forwards to processors,
assemblers or third party
organizers/distributors, backwards
to retailers
Outsourcing in clothing
and shoes, recycling
cardboard cartons to
mills, street based tourist
handicrafts
Low carbon

23. How does the VC approach help in Greening?
The idea of value chain is associated with the concept of governance which is of key importance from greening standpoint
By mapping a range of activities along the chain, and within a relatively complex system, it can help to identify where greening, climate science fits
It can help to identify where public incentives (regulations, subsidies etc. ), and private incentives fit and how these can be aligned
Both push and pull strategy (not just provide the technology but the economic incentive to do that).

24. Steps in value chain analysis
Sub Sector/ Value Chain Selection
Mapping and analysis
Analysis of the markets
Analysis of potentials/opportunties and constraints
Analysis of solutions,
Design of interventions