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An Introduction to Value Chain Analysis

An Introduction to Value Chain Analysis. 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?. Origins of value chain.

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An Introduction to Value Chain Analysis

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  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. Processing Retailing Wholesale Production Inputs

  9. Ginger Value Chain

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

  11. 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

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

  13. 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

  14. 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

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

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

  17. 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

  18. 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

  19. VCA Different Entry Points

  20. How does the VC approach help in Greening? • https://www.youtube.com/watch?v=cpYhgqPRivw • 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).

  21. 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

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