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BDS Market Development A Workshop Presented by the SEEP Network and the International Labour Organization’s SEED Program BDS Market Development WORKSHOP GOAL To help enterprise development specialists understand commercially oriented business development services (BDS) initiatives.

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bds market development

BDS Market Development

A Workshop Presented by the SEEP Network and the International Labour Organization’s SEED Program

bds market development2
BDS Market Development

WORKSHOP GOAL

To help enterprise development specialists understand commercially oriented business development services (BDS) initiatives.

bds market development3
BDS Market Development

Introduction

5 Guiding Principles

Discussion: Risks & Rewards

success story
Success Story

Microenterprise:

Mrs. Jane Ondiek, small-scale farmer

Country: Kenya

Organization:ApproTEC

BDS: Access to technology

success story5
Success Story

Mrs. Jane Ondiek, Small-scale farmer, Kenya

  • Widow since 1997
  • Earned Kshs 7,000 ($93) per season
  • In 1999, bought an ApproTEC irrigation pump
  • Started growing high-value crops
  • Earned Ksh. 240,000 ($3200) in 1999
success story6
Success Story

Mrs. Jane Ondiek, small-scale farmer, Kenya

After the death of her husband, Jane’s 6 children almost dropped out of school due to lack of school fees, but with irrigation she now makes enough money to send them to college.

"I’m making enough money now to support my family fully without begging from relatives since my husband died!"

bds market development7
BDS Market Development
  • Subsidized BDS Program Approach
  • An NGO receiving donor fundsgave equipment to a women’s group.
  • Only women in the group had access to the technology.
  • If it didn’t work, the women did not complain because, after all, it was a gift.
  • If they wanted it repaired or wanted additional machines, they needed more help from the NGO.
  • Therefore, a limited number of people benefited and only for a short while.
bds market development8
BDS Market Development
  • Market Development Approach
  • A donor-funded NGO designs a machine and trains private manufacturers and distributors to make and sell it.
  • Customers able to afford a machine, buy it.
  • If they are not satisfied, they return it for a full refund. Repair services are also available.
  • The technology is sold by profitable businesses that have an incentive to reach as many people as possible, for as long as possible.
bds market development9
BDS Market Development
  • Specific Outcomes of ApproTEC Kenya Project(1996-1999)
  • 4,050 pumps purchased by farmers.
  • Each pump generated an average net annual profit of 69,000 Ksh ($940).
  • Each pump created 1.6 new jobs (for a total of 6,561.)
  • $3.8 million being pumped into the economy every year (in Kenya, this is enough money to keep 13,000 students in secondary school.)
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BDS Market Development

Market Development Approach

Basic Principles:

  • Impact-centered programs;
  • Specific, focused, tailored services;
  • Demand-driven services;
  • Sustainable service delivery; and
  • Development of competitive, vibrant BDS markets.
bds market development11
BDS Market Development

Principle 1: Impact-Centered Programs

The focus of BDS programming is to create a POSITIVE IMPACT.

The delivery of business services and the development of service markets are means toward that goal.

impact centered programs
Impact-Centered Programs

What kind of impact does your program seek to achieve?

slide13

Impact-Centered Programs

Outreach

IMPACT

Sustainability

Cost-Effectiveness

impact centered programs14
Impact-Centered Programs

Who does your program serve?

impact centered programs15
Impact-Centered Programs

SEs...

Micro, Small, and Medium- Sized Firms

and Small-Scale Farmers

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BDS Market Development

Principle 2: Specific, Focused, Tailored Services

Business Development Services must:

  • Address specific SE needs and wants;
  • Focus on high-priority issues; and
  • Be tailored to add high value to SE businesses.
specific focused tailored services
Specific, Focused, Tailored Services

What are

Business Development Services?

slide18

Business Development Services

Are More than...

Finance

Training

Technical Assistance

slide19

SE White Paper: Proposals to Improve SE Policy in South Africa

Business Development Services

They Are Also...

Market Access

Inputs & Infrastructure

Advocacy

Technology

Product Development

specific tailored focused services
Specific, Tailored, Focused Services

INSOTEC: Ecuador

Sector: Jeans manufacturing

Strategy: Help MEs improve quality

Services: Buttonholing, embroidery, input and equipment supply.

Outreach: 4,450 in the year 2000

Sustainability: Break-even in 2000

slide21

BDS Market Development

Principle 3: Demand-Driven Services

  • Respond to SE wants and needs;
  • Are paid for by SE, or commercial actors with vested interest;
  • Put immediate financial pressure on the supplier to provide relevant services.
demand driven services
Demand-Driven Services

SEs pay fees for the services

or

Acquire services such as advice from buyers or suppliers as part of a business deal.

charging fees
Charging Fees

Veterinary Services in Nepal

  • CECI/MARD trains entrepreneurs to supply veterinary services to farmers;
  • Veterinarians sell services to farmers;
  • 40 village veterinarians selling;
  • Vets earn profits of 40 - 50%.
services through business deals
Services Through Business Deals

PROARTE, a Nicaraguan handicraft company initiated by MEDA

  • Markets traditional handicrafts;
  • Buys from about 100 rural artisans;
  • Supplies inputs, product designs, training;
  • Earns 15% profits in 1997.
other financing strategies
Other Financing Strategies

Mutually Beneficial Services…

FIT Business Connect Magazine

  • Publishes free business-to-business magazine – circulation 10,000 – in Zimbabwe;
  • Financed by advertising revenue from small and large firms with...
  • Large firms buying big ads, paying more;
  • Small firms buying small ads, paying less; and
  • Micro firms benefiting for free.
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BDS Market Development

Principle 4: Sustainable Services

BDS should be made available to SEs over the long run through financially sustainable delivery mechanisms, institutions, and markets –

In sum, through the PRIVATE SECTOR.

sustainable services
Sustainable Services

Sustainability Depends On…

  • Private Sector financing (demand-driven services);
  • Cost-structure in-line with SE and market ability to pay; and
  • Independent, financially viable institutions and delivery mechanisms.
criteria for viable bds suppliers
Criteria for Viable BDS Suppliers
  • Good capacity to deliver the service;
  • Close to SEs in culture, operating environment, and geography;
  • Low cost structures;
  • Commercial focus and business culture;
  • Commercial accounting and management systems;
  • Organizational independence, especially from donor funds;
  • Organizational stability; and
  • Sufficient focus on services, SEs, or BDS.
sustainable services29
Sustainable Services

Institutional Sustainability More Likely When Subsidized and Commercial Activities Are Separated

  • Supplier or provider delivers (commercial) services directly to SEs; or
  • Facilitator supports the (commercial) supply of BDS by other (sustainable) institutions.
bds market development30
BDS Market Development

Principle 5: Develop Vibrant, Competitive, BDS Markets

Success is...

  • A vibrant, competitive BDS market with...
  • A range of SEs accessing...
  • A wide selection of BDS supplied by...
  • Numerous, commercial suppliers…

...SEs choose to patronize.

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MSME

Donor

Service

Provider

BDS Market Development

Subsidized Program Model

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BDS Market Development

Subsidized Program Model

  • Donors support 1 or few providers;
  • NGOs provide free or highly subsidized services;
  • Small number of SEs gain access to services designed by Donor/NGO;
  • Program lasts as long as funding is available.
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BDS Market Development
  • Donor or facilitator supports numerous suppliers with TA rather than grants;
  • Suppliers are commercially oriented and competing to serve SEs;
  • Suppliers provide services SEs want;
  • Suppliers service numerous SEs;
  • Suppliers earn profits and provide services over the long term.
slide35

BDS Market Development

BDS Market Development is new and many questions remain…

slide36

1. Market functions

Research and development …Product development … Delivery of services …Information Co-ordination …

Skills enhancement … Regulation… Advocacy

3. Who does?

4. Who pays?

Private sector

(for-profit)

Business membership organisations

Business networks

State

Not-for-profit sector

2. Key supply-side players

slide37

BDS Market Development

Start with understanding the existing

PRIVATE SECTOR

market for services.

slide39

BDS Markets are Bounded by …

Target SEs

Geography

BDS Market

BDS Type

slide40

BDS Market Development

BDS MARKET ASSESMENT

Why assess markets?

What do we do with this information?

  • Understand current supply and demand;
  • Pinpoint specific constraints / opportunities SEs face in accessing desired services; and
  • Investigate sustainable service delivery strategies.
select appropriate interventions
Select Appropriate Interventions

MATCH...

Constraints To Interventions

Weak Supply

Product development &

capacity building

Weak Demand

Promotions, financing, discounts

Few Transactions

Linkages & information services

slide42

BDS Market Development

  • Small-Scale Water Pump Market in Kenya

ApproTEC introduced appropriate technology

  • Supply dominated by expensive & complex mechanized pumps;
  • Most farmers use bucket irrigation – limited area and season;
  • Big demand for irrigation during dry seasons when prices are high;
  • Farmers typically buy inputs from rural hardware and agro-chemical suppliers.
slide43

Vouchers

Networks

Biz.

Seven BDS Market Development Strategies

Links

Product Dev.

Training

TA

Information

Venture Cap.

slide44

BDS Market Development

  • Voucher Programs
  • Training Services in Paraguay
  • Between 1995 and 1999:
  • 30,000 vouchers provided to…
  • 13,700 microenterpreneurs...
  • Who purchased training from...
  • Over 40 private sector suppliers.

50% off!

slide45

BDS Market Development

Information Services

FIT Uganda SE Radio Program

Since 1999:

  • CBS broadcasts bi-weekly...
  • To 90,000 listeners;
  • Reaping profits with sponsorship from 2 firms; and
  • Replicating program in rural Uganda and Ghana.
slide46

BDS Market Development

SE Cluster and Network DevelopmentUNIDO

  • Helps groups of firms access services in Honduras, Nicaragua, Mexico, Jamaica, and India.
  • Knitwear producers in India approached ITC training to adapt course to their needs – 500 firms reached.
  • Membership fees sustain the groups.
slide47

BDS Market Development

Business Linkages

Manicaland Business Linkage Project

  • Facilitates sub-contracting from large to small firms;
  • 1996-2000: 110 linkages, 1,000 jobs;
  • Large firms mentor small firms.
slide48

BDS Market Development

Technical Assistance to Suppliers

ACDI/VOCA Training and Technical Assistance to Polish Business Support Organizations (BSOs)

  • Project strengthened supply and demand for Business management training and consulting services;
  • Project trained 38 BSOs, 131 consultants, 223 SEs in
  • Trainers and consultants served more than 30,000 clients on a commercial basis.
slide49

BDS Market Development

Product Development and Commercialization

IDE Irrigation Technology: Treadle Pumps

  • IDE designs pumps, trains manufacturers and distributors;
  • Bangladesh in 2000: 65 manufacturers, 700 dealers and 5,000 installers sold over 1 million pumps.
slide50

BDS Market Development

Social Venture Capital

MEDA & PROARTE in Nicaragua

  • MEDA & individuals invested venture capital in PROARTE;
  • PROARTE marketed traditional Nicaraguan crafts for 100 producers in 1997;
  • MEDA plans to dis-invest over time.
slide51

BDS Market Development

From this experience, and applying basic market thinking, a set of guiding principles has emerged.

Although not all examples represent all principles,

these are the principles to strive for!

guiding principles
GUIDING PRINCIPLES

Focus:

Target interventions to address BDS market constraints.

guiding principles53
GUIDING PRINCIPLES

Tread Lightly:

Minimize interventions to avoid BDS market distortions.

guiding principles54
GUIDING PRINCIPLES

Provide market assessment, training, TA – not direct services.

Demand

Supply

Transactions

Intervene here!

NOT here!

Intervene here!

guiding principles55
GUIDING PRINCIPLES

Promote Competition.

Develop a range of suppliers and service products in the same market – offer SEs choice.

guiding principles56
GUIDING PRINCIPLES

Develop business relationships with suppliers,

mutually beneficial contracts, not grants for direct services to SEs.

guiding principles57
GUIDING PRINCIPLES

Remain Flexible to Rapid Change,

in SE markets and in BDS markets.

guiding principles58
GUIDING PRINCIPLES

Coordinate with other BDS Stakeholders.

Suppliers offering subsidized services undermine efforts to develop BDS markets.

guiding principles59
GUIDING PRINCIPLES

Develop a clear exit strategy.

Plan to leave behind a vibrant, competitive, BDS market.

slide60

BDS Market Development

Risks & Rewards of BDS Market Development

slide61

BDS Market Development

What are some of the risks and rewards of a BDS Market Development Strategy?

bds market development62
BDS Market Development

THE MARKET DEVELOPMENT APPROACH

Basic Principles:

  • Impact-centered programs;
  • Specific, focused, and tailored services;
  • Demand-driven services;
  • Sustainable service delivery; and
  • Development of competitive and vibrant BDS markets.
slide63

BDS Market Development

Resources

  • www.seepnetwork.org/bdsguide.html
  • http://www.ilo.org/public/english/employment/ent/sed/bds/seminar/index.htm
  • http://www.ilo.org/public/english/employment/ent/sed/bds/donor/index.htm
bds market development64

BDS Market Development

A Training Presented by:

The SEEP Network

and

The International Labour Organization’s SEED Program