Participatory Market Chain Analysis For Smallholder Producers
Participatory Market Chain Analysisfor Smallholder ProducersMark Lundy, María Verónica Gottret, Carlos Ostertag, Rupert Best, and Shaun Ferris
Participatory Market Chain Analysisfor Smallholder ProducersMark Lundy, María Verónica Gottret, Carlos Ostertag, Rupert Best, and Shaun Ferrisi
Copyright 2007 Centro Internacional de Agricultura TropicalReprint edition published by Catholic Relief Services, Baltimore, 2008.ISBN 0-945356-41-2First edition published 2007 byCentro Internacional de Agricultura Tropical(International Centre for Tropical Agriculture)Cali, ColombiaISBN 978-958-694-092-4For information, addressCatholic Relief Services228 W. Lexington St.Baltimore MD 20201USAwww.crs.orgAGROVOC 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 agriculturalenterprises or farms / Organización, administración y manejo de empresas agrícolas o fincasLC classification: HD 9000 .F8Republication of this report is made possible by the generous support of the American Peoplethrough 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 CatholicRelief Services’ Institutional Capacity Building Grant Award Number AFP-A-00-03-00015-00. Thecontents do not necessarily reflect the views of USAID or the United States Government.ii
ContentsPageixPrefaceAcknowledgmentsxIntroduction and Background to the Guide1THE THEORYSection 1. An Area-based Approach to Rural Enterprise DevelopmentIntroductionFood Security versus Income SecurityArea-based Approach to Rural Enterprise DevelopmentAgroenterprise as a Catalyst for Enabling Rural Innovation556710Section 2. Market Chains and Service Providers: Basic ConceptsIntroductionLocal Service Providers and their Role in Sustaining Market ChainsUsing Marketing Skills to Reduce Rural PovertySituation Analysis1212141616Section 3. Basic Steps in Developing a Competitive Market Chain StrategyIntroductionDesigning a Strategy for Increasing Market Chain CompetitivenessVision of the Market ChainA Wider Vision of the Market ChainMarket Chains and InnovationIndividual Enterprise Efficiency versus Market Chain EfficiencyRaising Competitiveness through Market Chain Quality AssuranceRaising Competitiveness through Mark of Origin (Apellation/Labeling)Market Chains, Supply Chains, and Value ChainsScale of Evaluation and Level of ParticipationConsiderations When Applying the Method at Diverse Scales of InterventionObservations on the Use of Participatory MethodsSummary1919192021232425252526262830Section 4. Guidelines for Adapting the Process to Local NeedsIntroductionMarket OrientationMarket Chain Focus from “End to End”Coordination among Different Actors to Identify and Develop SynergiesWorking with the Private SectorSelection of Key Informants in Decision-Making ProcessesRespecting People’s Time, Needs, and DifferencesCombining Research and Development Activities to Promote InnovationMixing Short-, Medium-, and Long-term Activities with Available ResourcesIdentifying a Process Facilitator3131323232323232333334iii
Participatory Market Chain Analysis for Smallholder ProducersPageTHE PRACTICAL WORKSection 5. Selecting a Market ChainIntroductionSelection Criteria Used to Choose an Appropriate Market ChainDefinition of Individualized Selection CriteriaA Methodology for Prioritizing Market ChainsSelection ToolsMerits of a Pilot Project to Test the Process37373840404143Section 6. Planning and Executing a Rapid Market SurveyIntroductionPlanning for the SurveyStarting the Market Chain AnalysisSurvey TeamsChecklists and Summary SheetsDocumenting ResultsUsing ResultsFeeding Back Results454546474848515354Section 7. Identification of Key “Actors” in Market Chains and Steps forBusiness PlanningIntroductionIdentification of ActorsDifferentiation of Actors within the Market ChainMeetings to Convene the ActorsOrganizing WorkshopsSources of Market Chain Information55555657595960Section 8. Participatory Market Chain AnalysisIntroductionCriteria for the Analysis of Complex SystemsFormation of Working GroupsToolsMapping the Market ChainProvision of Business Development ServicesMarket Chain History6262626464656871Section 9. Analysis of Critical Points in the Market ChainIntroductionIdentification of Limiting FactorsAnalysis of Cause and EffectComparing the Market Chain to the Competition—“Benchmarking”Prospective Market Tendencies and Defining a Simple Marketing StrategyDesigning a Logical Path to Increase CompetitivenessVisioning—Where Do We Want to Go and How Do We Get There?Preparation of Business Plans747475788083848587iv
ContentsPageSection 10. Negotiating a Strategy to Increase CompetitivenessIntroductionSystematization of Results: Technical DocumentNegotiation WorkshopDesign of the Final Strategy to Increase Competitiveness9090919295Section 11. Monitoring of Strategies to Increase Competitiveness: General GuidelinesIntroductionMonitoring and EvaluationPossible Factors for a Monitoring and Evaluation SystemResults on Livelihoods (by Gender, Population Groups, and Economic Status)98989899100Appendices1. Marketing Checklist to Evaluate Key Points in the Market Chain for a Commodity2. Summary Information Sheet: Example from Banana Market Survey3. Outline of a Business/Investment Plan102103104Glossary106Bibliography113v
Participatory Market Chain Analysis for Smallholder 15.16.17.18.19.20.21.22.of FiguresFlow chart of key stages in the participatory agroenterprise development approachMarket chain and its business support servicesForward and backward market linkages for enterpriseStages in the design of a strategy to increase competitivenessComponents of a market chainWider perspective of a market chainDecision tree of rural agroindustrial committee of CIPASLASources of primary informationWider perspective of a market chainTriangulation of dataProcess of forming working groupsCoffee market chain map, municipality of Sulaco, HondurasAnalysis of critical points in the market chainExample of a problem treeSimple example of a general problem tree for a market chainComplete example of a general problem tree for a market chainUsing a problem tree to identify solutionsExample of a solution treeDefinition of a logical pathComplete simple logical path with actions and resultsComplete logical path with parallel actions and resultsExample of a logical path for a strategy to increase .17.18.19.20.21.22.23.24.25.of TablesPlanning, organization, and timing for rural agroenterprise developmentService providers that support enterprise developmentEnterprise relations: Production chain versus value chainConsiderations when applying the method at different scalesIdentifying a process facilitatorAnsoff matrix for risk assessmentGrowth prospects and product typesTechnical and environmental issues against feasibility indexOrganizational capacity assessmentAssessment of products by weighted scoringResults of a rapid market survey for panela (unrefined sugar)Actors identified by functional category in the market chainDifferentiation of actors in the functional category of productionTimeline of design workshops for a strategy developmentMatrix of the analysis of services received (by clients)Matrix of the analysis of services suppliedExample of production services supplied in GuamoteExample of production services received in GuamoteExample of the timeline of the farmer association developmentIncomplete example of a pairwise ranking exerciseComplete example of a pairwise ranking exerciseFinal ranking of limitationsExample of a consolidation of limitations in a market chainSimple benchmarking toolMarket strategy opportunities for mango market chain of 778385vi
ContentsPageList26.27.28.29.30.31.32.33.of TablesMarket opportunities and requirements for broccoli in EcuadorExample of a matrix of problems per activity and actorExample of business opportunities matrix and investment plansIdentification of alliances by each stage of the market chainTime and resources required to implement a marketing strategyIndicators and sources of verification within the market chainIndicators and sources of verification of the marketIndicators and sources of verification of livelihoodsList of Boxes1. Organic cacao and sustainable advantages2. Example of a value market chain: “Las Brisas,” Santa Cruz de Turrialba3. Selection criteria used for discarding options4. Some practical tips for conducting an interview5. Example of an actor typology from Santa Cruz de Turrialba, Costa Rica6. Black pepper in Pucallpa, Peru7. Cut flowers in Cauca, Colombiavii859393949510010010124274450589696
Participatory Market Chain Analysis for Smallholder ProducersAbout the AuthorsMark LundyCorresponding author, based in CIAT headquarters, Cali, Colombia. United States of America National.Senior Research Fellow, Rural Agroenterprise Development Project.E-mail: m.lundy@cgiar.orgMaría Verónica GottretBased in CIAT headquarters, Cali, Colombia. Bolivian National.Senior Research Fellow, Rural Agroenterprise Development Project.E-mail: m.gottret@cgiar.orgCarlos 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.orgRupert BestBased in FAO offices, Rome, Italy. British National.Senior Technical Advisor for the Global Forum for Agricultural Research.E-mail: rupert.best@fao.orgShaun FerrisBased in CIAT headquarters, Cali, Colombia. Dual British/Australian National.CIAT Project Manager, Rural Agroenterprise Development Project.E-mail: s.ferris@cgiar.orgviii
PrefaceT2. A Participatory Guide to DevelopingPartnerships, Area Resource Assessment andPlanning Together.3. Identifying Market Opportunities for RuralSmallholder Producers.4. Participatory Market Chain Analysis forSmallholder Producers.5. Evaluating and Strengthening RuralBusiness Development Services.6. A Market Facilitator’s Guide to ParticipatoryAgroenterprise Development.7. Collective Marketing for SmallholderProducers.8. A Guide to Rapid Market Appraisals forSmallholder Agroenterprise Development.9. A Guide to Agricultural Marketing Extension.10. A Guide to Policy Analysis for SmallholderAgroenterprise Development and Advocacy.he Participatory Market Chain AnalysisGuide was developed as a key step in the‘area-based approach to ruralagroenterprise development’. The guide is basedon the principles of developing market-ledinterventions that go beyond single interventionprojects. The aim of this guide is to enableservice providers to work with a range of actorsin selected market chains and designinterventions that initiate systemic changes inthe marketplace.The approach seeks to empower producer groupsto engage with markets more effectively andstrengthen their business linkage with otherentrepreneurs. The goal is to upgrade the level ofcompetitiveness for all actors within a marketchain and thus enable rural producers, traders,and processors to make the shift fromopportunistic and irregular market linkages tosystematic players within growth value chains.Note to usersService providers should read the guides in theirentirety, to absorb the ideas and concepts priorto going to the field. Our experience has shownthat best results are attained when theseprocesses are not implemented in a mechanicalmanner; rather that the principles areinterpreted and adapted to local conditionsbased on the marketing environment, availableresources, and anticipated scale ofimplementation.This guide is the fourth in a series of documentsdesigned to support agencies implementingparticipatory agroenterprise developmentprograms operating within defined geographicalareas. The guide series currently includes:1. Strategy Paper: A Participatory and Areabased Approach to Rural AgroenterpriseDevelopment.Discover your Innovationix
Participatory Market Chain Analysis for Smallholder ProducersAcknowledgments··This guide is the result of several years ofparticipatory research in several pilot siteareas in Latin America, and more recentlyin Africa and Southeast Asia. The guide has beentested with farmer organizations, local andinternational nongovernmental organizations,governmental organizations, and the privatesector. Without the efforts and ideas from eachof the partners below this document would nothave been possible. We would like to recognizeparticular support received from:·········DFID in support of the Agroenterprise projectin Latin America and Africa.SDC support to the Agroenterprise project inVietnam and Laos.This text attempts to document and share thework of these pioneers so that other ruralcommunities can apply what has been learned,and thus contribute to improving theirlivelihoods.The authors also wish to acknowledge thegenerous support provided by the MINGAProgram of the International DevelopmentResearch Centre (IDRC) of Canada whichpermitted the development of field activities, andthe elaboration of this guide. The support ofmany CIAT colleagues have served in a similarfashion, as have the queries of students in theFirst and Second International Courses,“Linking small-scale rural producers to marketchains: Design of strategies to increasecompetitiveness,” offered jointly with the Centerfor Competitiveness of Eco-Enterprises of theCentro Agronómico Tropical de Investigación yEnseñanza (CATIE), of Costa Rica.Communities of the Cabuyal River microwatershed in Cauca Department, Colombia.Support organizations in the RuralAgroindustrial Committee of the ConsorcioInterinstitucional para una AgriculturaSostenible en Ladera (CIPASLA).Communities of the municipalities of Yoritoand Sulaco, Yoro Department, Honduras.Microenterprise Committee of the ComitéLocal para el Desarrollo Sostenible de laCuenca del Río Tascalapa (CLODEST).Members of the Consorcio para elDesarrollo Sostenible de Ucayalí (CODESU) ofPucallpa, Peru.CARE Nicaragua and in particular theRENACER and FAROL projects located inEstelí and Matagalpa, respectively.CRS Eastern Africa and their support to thelearning alliance development process inEastern Africa.ASARECA and its support to agroenterpriseactivities through the regional marketing andagroenterprise network FOODNET.PABRA and its support to agroenterprisedevelopment in Eastern and Southern Africathrough the Enabling Rural Developmentproject.We give thanks to DFID for their logistic andfinancial support over many years which haveenabled partners to learn, discover, and createthis body of knowledge. Thanks also go to USAIDand CRS for providing funds to publish thesedocuments.Technical and language editing of this documentwas done by Libby Finney. A special word ofthanks to Jorge Enrique Gutiérrez for hisdrawings.x
Introduction and Background to the GuideIntroduction and Background to the GuideMr. BusyBuyer forBest FruitSupermarketsLtd.TMr. SamChairmanGreen FarmerAssociationMr. MovitRapid TransitTradershe starting place for this guide is adetailed participatory analysis of aselected market chain, followed by anevaluation of critical points that need to beaddressed when designing an agroenterpriseproject to engage in the selected market chain.In cases when a service provider has alreadyselected a product or commodity to integrateinto an agroenterprise approach, this guidemaybe also be considered as the starting pointin the agroenterprise approach. For those whoare following CIAT’s Rural AgroenterpriseDevelopment Strategy, this guide is the fourthMr. MarcoNGO MarketFacilitatorProf. MargaretMarketResearcherand AcademicMrs. JemimahFruityProcessors Ltd.step. At this point you will have completed thefollowing tasks:From the work in Guide 2 you will have:1. Selected a project area.2. Undertaken a biophysical andsocioeconomic analysis of your area.3. Defined the rules of engagement anddeveloped a vision for your community.4. Identified partners who will constitute theagroenterprise working group.5. Identified farmer organizations interested indeveloping agroenterprises.1
Participatory Market Chain Analysis for Smallholders ProducersFrom the work in Guide 3 you will have:1. Undertaken a rapid market opportunitiesidentification survey to identify a long list ofoptions that are or could be produced inyour area.2. Used selection criteria to reduce manyproduct options to develop a short list.3. Undertaken a production, financial, andmarket evaluation of short listed products.4. Discussed feasible options with farmergroups.5. Selected possible options to develop intoagroenterprise projects.Based on this previous work, the reader willhave selected at least one product option forparticipatory market chain analysis. For serviceproviders with considerable marketingexperience more product options maybeconsidered, but it is recommended that firsttime users of this methodology test the processwith one option.This guide is divided into 11 sections. Eachsection is designed to explain the reasonsbehind the methodology and steps that areuseful in the field. The sections in this guideinclude:1. An Area-based Approach to Rural EnterpriseDevelopment.2. Market Chains and Service Providers: BasicConcepts.3. Basic Steps in Developing a CompetitiveMarket Chain Strategy.24. Guidelines for Adapting the Process to LocalNeeds.5. Selecting a Market Chain.6. Planning and Executing a Rapid MarketSurvey.7. Identification of Key “Actors” in MarketChains and Steps for Business Planning.8. Participatory Market Chain Analysis.9. Analysis of Critical Points in the MarketChain.10. Negotiating a Strategy to IncreaseCompetitiveness.11. Monitoring of Strategies to IncreaseCompetitiveness: General Guidelines.To facilitate better understanding, each sectionis structured in the following way:·····Guiding questions that introduce thethemes and ask the reader to reflect on theirexperience.Conceptual support relating to the themesintroduced.Appropriate tools to facilitate participativeprocesses of planning, analysis, and designof strategies to increase competitiveness withsmallholders and the other enterprise actorsin the market chain.Practical examples of experiences with thismethodology in Latin America related withthe theme of the section.A review at the end of the section thatrestates the main ideas.
THE THEORY
An Area-based Approach to Rural Enterprise DevelopmentSECTION 1An Area-based Approach to Rural EnterpriseDevelopmentGuiding questions1.2.3.4.5.6.Why is being competitive in the marketplace more important today than 20 years ago?Why have rural development approaches oriented towards agricultural productivity failed toimprove rural family income?What are the elements of an area approach for rural enterprise development?Who are the local actors that participate in this approach?Why is the formation of a local group for inter-institutional work important for facilitatingprocesses of rural enterprise development?Why is diversification a useful option for small-scale farmers?IntroductionTraditionally fa
2. A Participatory Guide to Developing Partnerships, Area Resource Assessment and Planning Together. 3. Identifying Market Opportunities for Rural Smallholder Producers. 4. Participatory Market Chain Analysis for Smallholder Producers. 5. Evaluating and Strengthening Rural Business Development Services. 6. A Market Facilitator’s Guide to .
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Participatory Action Research (PAR) Participatory Action Research Steps Similar to popular education, participatory action research is a pro-cess of collective inquiry to reach a deeper understanding of the context and causes of a problem impacting a community. As with popular education, the ultimate goal of participatory action research .
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