BDS market development guide.pdf - PACA

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22 on learning by doing and on more informal market assessment tools. Facilitators are better positioned in the market than donors but not in it; the market research they do should be systematic and appropriate to the context. Small commercial providers—by virtue of their market position—can rely more on customer feedback and test marketing than on formal, upfront market assessment because they are in frequent contact with customers. They receive regular feedback both in the comments of customers and their willingness to pay for services. The outcome of a market analysis will be used to answer the following questions: • Is there potential for intervention? • Where should interventions focus? • What type of intervention is appropriate? IS THERE POTENTIAL FOR INTERVENTION? The forgoing analysis looked separately at the relative effectiveness of demand and supply for a service. What makes a market is the interaction between the two: the greater the overlap, the more developed the market. The relative development of the market informs the potential for intervention. Figure 8 shows the relationship between the analysis of demand and supply and the potential for outside intervention. At either ends of the market continuum, there is little potential for intervention for different reasons. In a non-existent market, there is little to build on, especially for higher-end services such as training and consulting. There is also limited potential for intervention in effective markets because intervention might do more to distort than develop the market. Potential is greatest for intervention when there is some overlap, however weak, between demand or supply. Figure 8: BDS Market Development and the Potential for Intervention NON-EXISTENT LEVEL OF MARKET DEVELOPMENT EFFECTIVE No Supply No Demand Effective Supply/Weak, No Demand Effective Demand/Weak, No Supply Weak Supply/Weak Demand Effective Supply Effective Demand LIMITED POTENTIAL FOR INTERVENTION There is nothing to build on. In practice, total absence of demand and supplyside activity is rare: - Remote rural areas - Survival level microenterprises - Disaster situations. GOOD POTENTIAL FOR INTERVENTION Interventions have the ability to 'leverage' existing activity. In practice, this is a common situation in most developing economies. NEED FOR INTERVENTION IS LIMITED Markets are effective and the private sector is vibrant. Intervention may distort private sector behavior. However, intervention may be justified for expansion and equity reasons. Microenterprise Best Practices Development Alternatives, Inc.
23 WHERE SHOULD INTERVENTIONS FOCUS? Where potential does exist to develop markets for BDS, interventions should focus on overcoming the most critical constraints—on either the supply or demand side—that prevent the market from functioning more effectively for SMEs. Box 5 provides an illustrative real life example of matching interventions to an identified market weakness; it describes a case— an export promotion project in West Bank and Gaza—where effective demand for export services existed but supply of services was weak or non-existent. The Venn diagram in Figure 9 shows conceptually how this example illustrates the link between market diagnosis and intervention focus. The market evolves from a non-existent to an effective market as supply enlarges and aligns itself with demand. Demand for quality export services is high and is depicted by the large size of the ‘D’ circle. Supply ‘S’, however, is weak because there are few if any suppliers with the right type of export marketing services. Supply is depicted by the smaller ‘S’ circle. This scenario shows supply enlarging over time and eventually aligning itself with demand. The enlarged supply circle was the result of different interventions, including: • Supplier capacity building through links with foreign firms; • Information provision about requirements for exporters; • Bottom-line performance criteria to assess value; and • Matching grants for suppliers to overcome high initial start-up costs of developing the appropriate offer for exporters. Box 5: Matching Intervention to Identified Market Weakness in Gaza The Small Business Support Project (SBSP), working in the West Bank and Gaza, identified the service-supply constraint as the weak market factor and initiated a commercial approach to develop a reliable consulting service capacity locally for quality assurance services—such as ISO 9000 series manufacturing processes. Through a competitive procurement process, the project identified and selected three local companies that had the potential to deliver these services. With local demand in place and local service providers ready to team up with international experts, the project negotiated and facilitated commercial relationships between the local service providers and local manufacturers to cement the relationships and promote quality export services. Bottom-line targets, such as reduction in waste, increases in profitability and efficiency, and improved production management systems, changed perceived customer value over time. The initial ISO consulting project in 1996 took 12 months and cost $35,000, with the project financing 75 percent of the cost. By the end of the project in 1999, ISO projects took 6 months and cost only $16,000 on average. Today, more than 60 firms have achieved ISO certification with improved competitive performance. By focusing on the specific market weakness—attractive offers to SME exporters—the project was able to build the market for export consulting services. Three local consulting firms report continuing demand for ISO services without SBSP financial or technical involvement. Chapter Two—Where We Are Now—A Framework for Market Assessment and Intervention Choice
Page 1 and 2: BDS Market Development: A Guide for
Page 3: Alan Gibson is a co-founder of The
Page 6 and 7: ii CHAPTER FOUR HOW DO WE GET THERE
Page 8 and 9: iv Table 1 Implications of Differen
Page 10 and 11: vi How to Use This Guide: A Quick R
Page 12 and 13: 2 • To address poverty, governmen
Page 14 and 15: 4 • Potentially, a range of provi
Page 16 and 17: 6 Figure 2: Flows of Services in th
Page 18 and 19: 8 • Efficiency—The cost bases o
Page 20 and 21: 10 • Advocacy: for the business c
Page 23 and 24: 13 CHAPTER TWO WHERE WE ARE NOW—A
Page 25 and 26: 15 The flow diagram of an effective
Page 27 and 28: 17 KEY CHARACTERISTICS OF EFFECTIVE
Page 29 and 30: 19 Figure 7: Quadrant of Supply-sid
Page 31: 21 • Consumers—such as female-o
Page 35 and 36: 25 Figure 10: Matching Market Analy
Page 37 and 38: 27 CHAPTER THREE WHERE DO WE WANT T
Page 39 and 40: 29 Markets are institutions. Develo
Page 41 and 42: 31 What Needs to Be Done?—Key Sup
Page 43 and 44: 33 Box 7: Key Considerations in Ass
Page 45 and 46: 35 Figure 12: Functions of the Stat
Page 47 and 48: 37 Table 2: Sustainability Framewor
Page 49 and 50: 39 CHAPTER FOUR HOW DO WE GET THERE
Page 51 and 52: 41 Figure 13: Where to Intervene to
Page 53 and 54: 43 • Consistent Policies and Appr
Page 55 and 56: 45 • Have been developed to be pe
Page 57 and 58: 47 Avoiding overloading may involve
Page 59 and 60: 49 C For new product development, a
Page 61 and 62: 51 • Precisely, what are they goi
Page 63 and 64: 53 Existing MARKET (sub-sector, ent
Page 65 and 66: 55 To Reach Female-Owned Businesses
Page 67 and 68: 57 C Informal, and C Individuals. T
Page 69 and 70: 59 The drawbacks of tender-based se
Page 71 and 72: 61 CHAPTER FIVE HOW DO WE ASSESS OU
Page 73 and 74: 63 • How well?—the quality dime
Page 75 and 76: 65 day income * This highlights key
Page 77 and 78: 67 Beyond SMEs—Unchanged Indicato
Page 79 and 80: 69 Figure 16: Measurement Methods i
Page 81 and 82: 71 • Donors may be interested in
Page 83 and 84:
73 and poverty reduction? Or is the
Page 86 and 87:
A-3 KEY REFERENCES Anderson, Gavin,
Page 88 and 89:
A-5 Hitchins, R and Gibson, A; "The
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