1. IPEC

2. Value Chain Development and Market Systems - Intro
Merten Sievers
Value Chain Development and Business Services Coordinator
Enterprise Department
ILO Geneva
Bangkok, June 2010

3. Structure of the presentation
MSEs, employment and the ILO
The changing landscape of Enterprise Support
Business Services and Value Chains
Value Chains and Markets

4. 1. Enterprise size and contribution to employment
Big
Medium
Small and
Micro enterprises

5. …being small has disadvantages…

6. Enterprise size and contribution to job quality
Employment contribution by enterprise size
Employment conditions by enterprise size:
High quality
Low quality

7. Typical government bias in enterprise support
What “weight” do different types of enterprises have for the government?

8. Why VC and Business Service Markets development?
To create employment and incomes at the bottom of the pyramid it is essential to
Identify market opportunities for micro and small enterprises
Increase the capabilities of these enterprises to take advantage of the opportunities
Reach huge numbers of these enterprises
Demonstrate impact on these enterprises and their employees

9. 2. The changing landscape of Enterprise Support
The traditional approach:
GOVERNMENT provides and pays for:
Financial Services
Micro and Small Enterprises and start-ups
Business Development Services (BDS)

10. The approach has changed…..
Government improves framework conditions
Financial and Business Service markets, based on market dynamics (Demand and Supply)
Developing market systems
Emphasizing commercial services and limits to subsidies
Providing an enabling environment
Micro and Small Enterprises and start-ups

11. 3. The BDS paradigm The « ideal » image: SE Provider SE
Buying and selling BDS
Donor/ Government
Facilitator
Provider SE
Provider SE SE SE
Public finance
Private market

12. Private BDS providers in Lima, Perú
Machine retail and mainte-nance
Shoe pattern designer
Lawyer and accountant
Private trainer

13. BDS Projects: Ugandan SME radio programmes

14. 4. Value Chains and the service market
The business service market model did not work everywhere and all the time…
Today more and more governments are working on a combined approach, and develop embedded services and business service markets in value chains…
VCD is not an alternative to other approaches but it helps to understand how markets are governed and can be influenced… we talk about:
Market Development approaches
Retail
Embedded
Services
Wholesale
Embedded
Services
Production
Embedded
Services
Input Supply

16. Value Chain Definition
A value chain refers to the “full range of activities which are required to bring a product or service from conception, through the different phases of production, delivery to final consumers” (Kaplinsky and Morris, 2001, p. 4).
We talk about VALUE CHAIN because at each link of the chain value is added to the final product
All companies are part of a Value Chain that competes against other Value Chains on a local or global level
Methodologies used all over…ie Kent (video)

17. 5. Value Chains and Markets
End market
Final Consumers
Global Retailers
National Retailers
Sector-specific providers
Exporters
Wholesalers
Internal Value Chain markets
Potential Business Service Markets
Cross-cutting providers
Buyers
Producers
Financial (cross cutting)
Input Suppliers

18. Employment: numbers and quality
Final Consumers
Global Retailers
Business Environment
National Retailers
Exporters
Sector-specific providers
Wholesalers
Embedded
Services
Cross-cutting providers
Buyers
Embedded
Services
Producers
Financial (cross cutting)
Input Suppliers

19. The Market System “Donut“ for assessing Value Chain potential
3. Supporting functions and services (factor conditions):
* training, technology, financial, legal, maintenance services
Strong + weak points?
1. Final Markets:
Type of demand,
prices, quality
Strong + weak points?
2. Main transactions in the Value Chain core market
Strong + weak points?
4. Rules and Regulations:
the role of the local and national state, informal rules and regulations
Strong and Weak points?

20. What is the link to LED? Please let me know…
What are the key challenges for VCD at the local level?
What are possible solutions to these challenges?
Who needs to take the lead in providing the solutions?

21. Thank You Merten Sievers: sievers@ilo.org Value Chains:
Linking Finance and BDS: