Anlyising Value Chain Final-1

Haramaya University
Department of Agribusiness and Value Chain Management (ABVM)

2nd Semester, Academic Year 2012/13
Learning Task: Analyzing Value Chain
Learning Task Code: ABVM 03212 ECTS: 4
Target group: ABVM Regular – Year I
Schedule: May22 -June 4,2013, Lectures in the morning 8:30 – 12:00 am
Place (Room): CAES
Instructor: Beyan A. (BSc- Agribusiness Management, MSc- Agrieconomics)
The learning task is designed to equip students with full understanding of the knowledge and skill in the
analysis of activities required to bring a product or service from conception to end markets, knowledge
and skill in the areas of principles and procedures of value chain, chain mapping, chain governance and
approaches to value chain analysis.
Contents Page
1. INTRODUCTION.................................................................................................................................................... 1
2. CONCEPTS AND MEANING OF VALUE CHAIN................................................................................................ 1
2.1 VALUE CHAIN CONCEPT.................................................................................................................................................5
2.2 DIMENSIONS OF VALUE CHAIN....................................................................................................................................9
2.3 TRADITIONAL MARKETING SYSTEMS VERSUS VALUE CHAIN MARKETING SYSTEM..................................................10
2.4 VALUE CHAIN VS SUPPLY CHAIN..............................................................................................................................11
3. ELEMENTS AND ASPECTS OF VALUE CHAIN............................................................................................... 15
3.1 VALUE CHAIN ACTORS..............................................................................................................................................15
3.2 VALUE CHAIN MAPPING............................................................................................................................................ 16
3.3 VALUE CHAIN ASPECTS.............................................................................................................................................21
3.4 SWOT ANALYSIS IN VALUE CHAIN............................................................................................................................29
4 VALUE CHAIN ANALYSIS (VCA)...................................................................................................................... 31
4.1 PURPOSES OF VALUE CHAIN ANALYSIS.......................................................................................................................33
4.2 STEPS IN VALUE CHAIN ANALYSIS......................................................................................................................................35
Step One: Data Collection............................................................................................................................................35
Step Two: Value Chain Mapping..................................................................................................................................36
Step Three: Analysis of Opportunities and Constraints Using the Value Chain Framework......................................37
Step Four: Vetting Findings of Chain Analysis through Stakeholder Workshops.......................................................39
5. ANALYZING CHAIN GOVERNANCE................................................................................................................ 42
5.1 WHY DOES GOVERNANCE MATTER?...........................................................................................................................44
5.2 TRENDS IN CHAIN GOVERNANCE................................................................................................................................45
6. VALUE CHAIN APPROACHES........................................................................................................................... 46
6.1 THE NETHERLANDS DEVELOPMENT ORGANIZATION (SNV’S) APPROACH..................................................................48
6.2 GERMAN TECHNICAL COOPERATION (GTZ’S) APPROACH.........................................................................................53
6.3 NIMPF APPROACH TO VALUE CHAIN.........................................................................................................................55
6.4 THE ICEBERG APPROACH TO VALUE CHAIN.............................................................................................................56
7. REFERENCES....................................................................................................................................................... 58
|Analyzing Value Chain- Haramaya University 2015: Beyan A.

1. Introduction
For a large part of the world’s growing population, the increasing integration of the global economy has
provided the opportunity to achieve significant prosperity gains. For developing countries, the
globalization of manufacturing has opened up new prospects of upgrading their industrial and service
sectors. It also holds the promise of higher incomes, increasingly differentiated final products and a
greater availability of quality goods. Most notably, free trade agreements and other accords have created
new export opportunities – mainly for food products – as the demand for variety continues to grow in
developed countries. These market changes have encouraged governments and investors, including
farmers, to expand agro-industrial activities and linkages to export markets as a means of increasing
local food production, employment, business development and international trade. This has led to
competition among producers to meet export market demands in terms of cost, quality and delivery
times. Consequently, a wide range of companies have evolved to provide goods and services to help
agro-industries meet those demands. At the same time, policies, regulations, support services, tax and
trade instruments and their associated actors and institutions have also developed to become intrinsic
parts of so called “value chains.”
Such a move, globalization, is changing the environment in which poverty reduction strategies are being
implemented. In this new context, two things are clear: poverty alleviation cannot be sustained without
economic growth; and economic growth cannot be sustained in non-competitive industries. Hence, a
value chain approach which focuses on industries employing large numbers of the poor and with the
potential to become and remain competitive in global markets should be in place. This approach
therefore has relevance in a wide array of programs for which poverty reduction and/or wealth creation
is either the ends or the means.
In general globalization of markets ties the sustainability of firms to the competitiveness of the
industries in which they participate. Firms within an industry in a country or region must increasingly
compete—even in local markets—with firms and industries from across the globe. To succeed in global
markets, entire industries (or value chains) must be able to deliver a product to the consumer more
efficiently, with a higher quality and/or in a more unique form than the value chains in competing
countries. This tells us that competitiveness at the firm and industry levels is interdependent.
2. Concepts and Meaning of Value chain
What is Value? Value is defined as:
 A fair return or equivalent in goods, services, or money for something exchanged.
 The monetary worth of something: market price.
 Relative worth, utility, or importance.
 A numerical quantity that is assigned or is determined by calculation or measurement.
 Something (as a principle or quality) intrinsically valuable or desirable! Value is what makes
something desirable!
In connection to the value chain concept Porter (1985) defined the term ‘value’ as the amount buyers are
willing to pay for what a firm provides, and he conceived the “value chain” as the combination of value
added activities operating within a firm – activities that work together to provide value to customers. In
some cases value is a subjective experience that is dependent on context. For instance in the context of a
busboy clearing a table, a glass of water sitting there has no value, or even negative value – it’s just
more work for him. But for the man dying of thirst, that same glass of water is extremely valuable. On
the other hand value occurs when needs are met through the provision of products, resources, or services
– usually during some form of transaction or exchange. Hence, value is an experience, and it flows from
the person (or institution) that is the recipient of resources – it flows from the customer.
From this simple example (water – busboy and thirsty man), we see that value has meaning in a number
of contexts, including trading relationships, consumer purchases, and the interests of company
shareholders. For the value chain aspect we may focus on the context of value as linked to needs
satisfied and experience developed through the provision of goods and services in order to satisfy needs.
Most corporate initiatives are really about developing appreciation and awareness of customer needs and
values, and then organizing the firm’s activities around efficiently providing for those needs – quickly,
accurately, and at minimum cost. This is because value tries to express how customer needs are satisfied
through an exchange of products and/or services for some form of payment. The degree to which the
needs that are met exceed the price paid in the exchange is one objective way that value can be
measured. That is why paying $1,000 for a gallon of water in the desert when dying of thirst might seem
reasonable if there were no other alternatives.
A key distinction in defining value is whether the exchange that generates value is between firms – i.e.,
Business to Business (B2B) – or between a firm and a consumer – i.e., Business to Consumer (B2C).
There are three forms of value that occur in B2B commercial transactions:
• Technical (Resource Value);
• Organizational (Business Context); and
• Personal (Career and Idiosyncratic)
Technical value is intrinsic to the resource being provided and occurs in virtually all exchanges. For the
thirsty man, the water has a technical value regardless of the source or any other consideration. The
water will have technical value regardless of some aspects such as: the cup can be used or even dirty, or
the man providing it is a criminal.
Organizational value- It is value built upon the context of the exchange, and may derive from a range of
factors such as ethical standards, prestige, reliability, and association. Brand image may build
organizational value, as well as company reputation. When at a fine dining establishment, the label on
the water bottle generates value far in excess of the bottle’s content.
Personal value is derived from the personal experiences and relationships involved in the exchange of
resources and the benefits provided. While technical and organizational values accrue to the firms
involved in a commercial exchange, personal value accrues to the individual. Manager motivation,
preferences, feelings of comfort and trust create value for individuals that engage in trading relationships
on behalf of firms, and can be extremely influential in the determination of successful exchange.
Measuring Value
Before we try to measure, let’s see what gives things a value or importance. Or what makes something
desirable?
Things that make something desirable could be price (e.g. cheap or high value); Appearance (e.g. looks);
Experience (e.g. taste); Ease of use (e.g. fresh-cut and washed); Availability (e.g. year round like Coca
Cola). In all the attributes which make things desirable, consumer is the basis. In other words consumers
determine value.

Value to Customer involves branding (good feel, quality, image….), Product (quality, technical
specification, usability…), service (availability, customization, friendliness…) and other factors. These
will set what the consumers are willing to pay for that particular good or service.
Value to producer (Cost) involves costs for promotion (Advertisement…), operations (manufacturing,
logistics,), Management (human resource, organization structure, finance…) and other factors. These all
together set the cost of supplying a particular good or service.
Measuring the net value for both producers and consumers will give us consumer premium for
consumers (difference between willingness to pay and actual product price) and profit for producers
(difference between selling price and cost of production).
The diagram below illustrates what the different actors in chain value regarding a product or service
provision. It also shows how the values develop along the chain.
Figure 1: Measuring Value

In the diagram to measure value to customers, the value is increasing from mere product and service to
branding. Similarly cost for producers adds as we move from manufacturing to promotion activities to
sell the product. There are series of activities undertaken by different actors at different levels in chain.
In the concept of value chain, it is important to know what value added by each of these chain actors. So
it is important to have concept to measure the value added at each level. The diagram below illustrates
how the value added builds up along the chain (to chain actors)
Figure 2: Measuring Value Added
Value added for a product is accruing to the company (producer), customer, and consumer in both
diagrams indicated above. The value added at each
level is the result of efforts by chain actors in all the
processes to get the product to the end user. The value
added to each chain actor can be determined as the
difference between value of the product for current actor and value of the product for next chain actor.
In the second diagram value added to each actor is clearly indicated. For instance the value added for
various actors is given as follows:
 Company- sales minus cost of resources
 Customer- sales minus cost of ownership
 Consumer- benefits derived in return for
sacrifices made
2.1 Value Chain Concept

What are the value chains?
The term ‘Value Chain’ was used by Michael
Porter in his book "Competitive Advantage: Creating
and Sustaining superior Performance" (1985). “Value
chain” refers to all the activities and services that bring a
product (or a service) from conception to end use in a particular industry—from input supply to
production, processing, wholesale and finally, retail. It is so called because value is being added to the
product or service at each step.
The value chain is first and foremost a strategic concept, arising from a strategic theory of firm
competition. As companies struggle to compete in an environment of globalization and intense
competition, the focus shifts to alternative means to remain competitive. This creates an increasing
interest in Value Chains as a tool to model the extended enterprise and formulate strategies for how to
remain competitive. The growth in global sourcing and supply has begun a long-term process of leveling
the playing field for adding value worldwide.
The value chain is a concept which can be simply described as the entire range of activities required to
bring a product from the initial input-supply stage, through various phases of production, to its final
market destination. The production stages entail a combination of physical transformation and the
participation of various producers and services, and the chain includes the product’s disposal after use.

As opposed to the traditional exclusive focus on production, the concept stresses the importance of value
addition at each stage, thereby treating production as just one of several value-adding components of the
chain.
Furthermore, the value chain approach considers the general environment including the macroeconomic
landscape, policies, laws, regulations, standards and institutional elements such as research and
innovation, human resource development and other support services form the environment in which all
activities take place and therefore are also important actors and activities in the value chain. The chain
actors and supportive services in the value chain are illustrated in Figure 3 and Figure 4. The enabling
environment in the value chain concept viewed from national and international perspectives (Figure 4).

ENABLING ENVIRONMENT
MACROECONOMIC CLIMATE-POLICIES AND REGULATIONS
Figure 3: A generic Value Chain

Source: UNIDO (2009)
Figure 4: Value Chain in a national and global environment

In reality, value chains tend to be more complex for they may involve numerous interlinked activities
and industries with multiple types of firms operating in different regions of one country or in different
countries around the globe. For instance, agro-food value chains encompass activities that take place at
the farm as well as in rural settlements and urban areas. They require input supplies (seeds, fertilizers,
pesticides, etc.), agricultural machinery, irrigation equipment and manufacturing facilities, and continue
with handling, storage, processing, and packaging and distribution activities (Figure 5). Other elements,
such as power generation, logistics, etc., which form the chain environment, are also important factors
affecting the performance of value chains.

Pre-production Industrial processing & Marketing
Input supply Production Post-production
Agro-inputs: feed, seeds, fertilizers, pesticides Direct Sales
Harvest
Sales to Industrial Manufacturers
Tillage Operation
Food and Product Preservation
Food and Product Packaging
Transportation
Power Generation
Thermal Process
Water supply
Sewage Treatment
Figure 5: Links in food value chain

The concept of Value Chain emphasizes cost advantages and distinctive capabilities-the value
processes- of businesses at various stages of operations. Value chain concept allows alignment of
processes with customers which generates a competitive advantage. In general, the value chain concept
hinges from efficient business process or combinations for a successful business. Note that value chain
is not the same to supply chain.
In value chain approach, as value is derived from customer needs, activities that do not contribute to
meeting customer needs are “non-value-added”. Hence, there is a need for careful analysis of the tasks
and functions that occur in many of the industries we serve. If activities with no value added are still
available in the chain, processes to improve are required to uncover and reduce or eliminate those non
value added activities. By streamlining the processes that generate the goods and services that customers
value, the margin between customer value and the cost of delivery increases improving a firm’s profit
margin. This is the essence of corporate strategies that focus on operational excellence. In contrast,
innovation and marketing strategies focus on improving customer perceptions of the value of goods and
services by innovatively improving the perception of what is delivered. In either strategy, increasing the
margin between delivery cost and perceived value is the foundation for improved business performance.
Competitiveness and competition – in value chains

The most important tenet of the value chain approach is to understand the process of building
competitiveness and defining the competitive landscape correctly. Competitiveness of a product is
defined by how your end-customer perceives your product on important parameters/attributes like
quality/price/taste/aesthetics/shelf-life. Now the next question we need to ask ourselves is can one
company independently and without any inter dependence manage/control/deliver on all the above
parameters that the end-consumer desire?
In this context it would be relevant to ask specific questions for further clarity:
a) Can a processor deliver higher quality product if his raw-material by input supplier is a substandard
product of low quality?
b) Can the same processor deliver the right product of right quality at the right time in the right form
for the right price without the right support from the downstream players and service providers
(retailers, distributors and logistics service providers)?
The above analysis tells us that the success of a product is not in a single company’s hands but in the
hands of each value-adding player/actor within the chain. In-fact a company’s product is only as
strong/competitive as the weakest link in its complete chain (up and down stream). Hence, every
company within the chain has an incentive to work not only for its improvement but also for the
improvement of its chain partners.
As its name implies, the primary focus in value chains is on the benefits that accrue to customers, the
interdependent processes that generate value, and the resulting demand and funds flows that are created.
In each phase of the value chain the product/service gains some value. If a phase is malfunctioning the
chain will break down and the mission of generating value for the customer will not be accomplished.
The value chain process can be mapped via a flow diagram and then re-engineered to increase value or
reduce costs.
Value Chain Definitions:
 Sequence of business activities by which, in the perspective of end user, value is added to the
products and services produced and delivered by chain actors.
 Full range of activities that are required to bring a product or service from its conception to end use,
including all the market channels available to all firms
 A value chain can be defined as the full range of activities which are required to bring a product or
service from conception, through the different phases of production (involving a combination of
physical transformation and the input of various producer services), delivery to final customers, and
final disposal after use.
 The value chain is a series of activities a product/service must pass through until it serves its final
purpose of satisfying customer need.
 The series of value-adding activities connecting a company’s supply side (raw materials, inbound
logistics and production processes) with its demand side (outbound logistics, marketing and sales).
2.2 Dimensions of Value Chain
The value chain concept has several dimensions. The first is its flow, also called its input-output
structure. In this sense, a chain is a set of products and services linked together in a sequence of value-
adding economic activities. At its simplest, we can think of a chain as having five main sections. A
product is first designed, then raw materials are purchased and production takes place; the product is
then distributed through wholesalers and retailers. At each stage, services such as transport or finance
may be needed to keep the process running. As we will see when we start mapping real chains, some of
these stages may be subdivided and others combined or compressed. Nevertheless, the five stages -
design, inputs, production, wholesale, and retail - remain a handy device for understanding each step of
the process.
A value chain has another, less visible structure. This is made up of the flow of knowledge and expertise
necessary for the physical input-output structure to function. The flow of knowledge generally parallels
the material flows, but its intensity may differ. For example, the knowledge inputs at a product’s design
stage may be much greater than the material inputs. On the other hand production stage needs large
quantities of materials, but in many cases requires only standard or routine knowledge.
The second dimension of a value chain has to do with its geographic spread (coverage). Some chains
are truly global, with activities taking place in many countries on different continents. Others are more
limited, involving only a few locations in different parts of the world. A UK retailer may, for example,
have contractual agreement with an Ethiopian fabric supplier to deliver cloth to a garment producer in
Sri- Lanka. The finished goods will then be shipped directly to the UK retailer. It is also possible to
identify national, regional, or local value chains. These operate in the same way as the global chains, but
their geographic ‘reach’ is more limited.
The third dimension of the value chain is the control that different actors can exert over the activities
making up the chain. The actors in a chain directly control their own activities and are directly or
indirectly controlled by other actors. A retailer, for example, controls the way he sells, but may be
limited (indirectly controlled) by the range of goods available from wholesalers and producers. A home
worker may find that almost every aspect of her work is controlled by a distant retailer who has
specified the design, quantity, and quality of the garments she is producing. The pattern of direct and
indirect control in a value chain is called chain governance.
2.3 Traditional Marketing Systems versus Value Chain Marketing System
Traditional Marketing Systems
In the traditional marketing system, farmers produce commodities that are "pushed" into the
marketplace. Farmers are generally isolated from a majority of end-consumer and have little control
over input costs or flow of their goods. The primary exception is where local farmers sell produce in
local markets and where there is a direct link from farmer to consumer. In most traditional selling
systems farmers/producers tend to receive minimal profit though they put more effort in the production
process for longer period of time. Hence, any integration up or down the value chain can help to increase
the profit to this actors.
In this marketing system, marketing is “Push” based. This tends to be based on independent transactions
at each step, or between each node. Products may often be sold into a crowded and competitive market.
The farmers are largely isolated from the consumer, and from the demands and preferences of
consumers.
Research and Development is focused on production and on reducing costs of production, and may not
take in to account for instance other steps, links, or dependencies in ሀይ al or social costs).
Value Chain Marketing Systems
In a Value Chain marketing system, farmers are linked to the needs of consumers, working closely with
suppliers and processors to produce the specific goods required by consumers. Similarly, through flows
of information and products, consumers are linked to the needs of farmers. Using this approach, and

through continuous innovation and feedback between different stages along the value chain, the farmer's
market power and profitability enhanced.
Rather than leaving profits to one or two links (chain actors), players at all levels of the value chain will
benefit. Well functioning value chains are said to be more efficient in bringing products to consumers
and thus allowing all actors including small-scale producers and poor consumers benefit from value
chain development.
Here the system is market “Pull”. This is based on integrated transactions and information exchange.
Consumers purchase products that are produced according to their preferences. The farmer becomes the
core link in producing the products that the consumers desire.
Research and development, whilst including techniques targeted at increasing production, is also
focused on consumer needs, and attempts to take in to account of all of the links, and dependencies in
the value chain, e.g. processing, environmental and social costs or considerations, as well as issues of
health impacts, education and learning.
Communication is in both directions. It is important that both consumers and processors are made aware
of factors limiting production, just as much as farmers and other producers are made aware of consumer
requirements. This implies that in order to generate improvements in the supply or quality of any
product and service, one needs to consider all aspects of the range of steps in the chain of events from
production to consumption, including both opportunities and constraints, and the demand and supply of
necessary products and services.
An integral component of the value chain is the agricultural supply chain, and in the literature these
terms- value chain and supply chain- may at times be used interchangeably, or are at least closely
related. However, there is difference in between the two concepts. Let’s learn the difference between
value chain and supply chain in the following paragraphs.
Value Chain Vs Supply Chain

All actors with direct or indirect involvement in the production and selling of products like tomato,
meat, milk etc. are part of the value chain. It includes the end-consumers and the organizations handling
the waste (by-products). By definition, a value/supply chain comprises of interlinked value-adding
activities that convert inputs into outputs which, in turn, add to the bottom line and help create
competitive advantage.
Value Chain
A value chain is the full range of activities required to bring a product from conception, through the
different phases of production and transformation. Flow of seed to farmers and grain or tubers to the
market occurs along the chains. These can be referred to as value chains because as the product moves
from chain actor to chain actor e.g. from producer to intermediary to consumer it gains value. So, the
starting point of the value chains is market intelligence and they are demand driven. Such issues are
addressed by asking questions like what are the needs in the market (consumer, export market, major
clients like retailer or food industry).
Value chain players organize/align the work among themselves based on market signals and based on
their capabilities. They are always on the look-out to build new and complimentary capabilities (e.g.,
aggregators and traders focus to build primary processing, packaging and other value added
capabilities). This implies that value chains can be competitive only when they innovate and not by
maintaining the status-quo. With innovation a larger pie is created which provides greater incentives to
share which in turn fosters further innovation (as a result new and higher value products would come out
of the chain). This will result in innovatively processed products such as fresh fruits juices, smoothies…
coming out of the fresh produce value chain.
The innovation drives the chain facilitates. There is a need to deliver quality (as desired by the market),
continuous improvement and setting and upgrading the standards continuously. The operational
elements like forecasting, inventory, production planning and everything else are still very important.
However, they are designed based on market-demand and not on capacities. Under specific
circumstances, depending on the type of product and available seasons, an optimal push-pull
combination is used (e.g., raw material productions could be push-based because of seasonality, but
value addition better be pull based). A competitive value chain identifies and works towards achieving
the right trade-offs in push/pull based production plans. The value chains survive and prosper on work
alignment and incentive alignment. In essence, the value chains are by definition innovative, value &
market-driven and follow an optimal push-pull mechanism.
In summary value chain:
 Works aligned with consumers or end users- consumer and demand driven
 Value chains are concerned with what the market will pay for- market driven. Hence, the focus is
to make what you can sell profitably
 The main objectives of value chain management are to deliver quality as desired by the
customers/consumers
 Focus is on Pie-Growing, Coordination, Continuous Improvement & Innovation
 A chain in which all partners create added value and share value
Supply Chain
Supply Chain Management (SCM) emerged in the 1980s as a new, integrative philosophy to manage the
total flow of goods from suppliers to the ultimate user and evolved to consider a broad integration of
business processes along the chain of supply (Martha et.al. 1997).Supply chain is a term now commonly
used internationally – to encompass every effort involved in producing and delivering a final product or
service, from the supplier’s supplier to the customer’s customer. As the name implies, the primary focus
in supply chains is on the costs and efficiencies of supply, and the flow of materials from their various
sources to their final destinations.
To differentiate concept of supply chain from that value chain, let’s see some of the drivers for the
development of the so called modern supply chains. These drivers underlying the SUPPLY CHAIN
DEVELOPMENT INCLUDE:
 Increasing trend in the number of consumers residing in the cities due to rural-urban migration. This
Rural-Urban migration is/will create a need for effective and efficient food supply chains. Therefore,
feeding cities is/will be a huge challenge.
 The need for the reduction of import and to achieve a higher level of self-sufficiency at a national
level.
 The growing middle class population with more money to spend. There is a direct link between more
money to spend and the need for more animal proteins, higher added value product’s like juices,
ready to eat meals, one stop shopping (retail) etc. This type of consumption patterns demands not
only a higher added value but also a higher level of quality.

 Growing population- To feed the increasing population the first step is to improve productions and
also to reduce the post-harvest losses especially in fresh products. This requires focusing on logistics
(transport and warehousing) and information (what is available, where is it available and the
information on volumes and transparency in pricing along the food chain
Such analysis helps us to set the departing point of supply chain from value chain. The supply chain
concepts are supply driven and are not completely value/demand driven. In a supply driven approach
every company looks to maximize its capacity utilization and pass the products to the next downstream
player within the chain instead of focusing on the main objective which is to maximize the satisfaction
of the end user. The core operational elements like forecasting, inventory, production planning are
designed with an objective to maximize capacity utilization. Such approach can lead to huge inventories
along the entire chain, higher risk of obsolescence (outdated products) and all other challenges
associated with inventories. The risk of post-harvest losses is also quite huge in this case.
Mostly, the supply chain approach doesn’t take into consideration all the businesses, processes,
incentives of the actors etc. from product origination to final destination. Hence, it is very likely that
some/many players do not add direct/real value to the product or core activities of the product/service
chain. Nevertheless, they may add costs and create non-transparency for the chain actors.
In supply driven systems the focus is rarely on quality delivery and quality improvement but mostly on
capacity utilization within a given quality specification range (lower end).The focus is always on pie-
sharing rather than on pie-growing. Almost always the incentives are not aligned fairly. For instance in
most cases the farmer who puts in the most effort for the longest period of time gets the least return. In
contrast the middlemen take a greater share of the pie with least efforts for a shorter time period. In
essence, the supply chains are push based systems. By definition the organizations within the chain work
to maintain the status-quo rather than to innovate.
On the other hand when we talk about supply chains, the focus is on a downstream flow of goods and
supplies from the source to the customer. Value flows the other way. The customer is the source of
value, and value flows from the customer, in the form of demand, to the supplier. That flow of demand,
sometimes referred to as a “demand chain”, is manifested in the flows of orders and cash that parallel
the flow of value. Hence values flow in the opposite direction to the flow of supply. Thus, the primary
difference between a supply chain and a value chain is a fundamental shift in focus from the supply base
to the customer need. Supply chains focus upstream on integrating supplier and producer processes,
improving efficiency and reducing waste, while value chains focus downstream, on creating value in the
eyes of the customer. The supply chain:
 Supply driven
 Supply chains are concerned with what it costs and how best we can utilize our capacity
profitably (individual business profit).
 The main objectives of supply chain management are to maximize capacity utilization
 Focus is on Pie-Sharing, Capacity and Profit optimization, maintaining status-quo
Hence, creating a profitable value chain therefore requires alignment between what the customer wants,
i.e., the demand chain, and what is produced via the supply chain. So, supply chains focus primarily on
reducing costs and attaining operational excellence, while value chains focus more on innovation in
product development and marketing.

Figure 6: A comparison of Value Chain with Supply Chain
3. Elements and Aspects of Value Chain
Value chain approaches have been used to analyze the dynamics of markets and to investigate the
interactions and relationships between the chain actors. In the following sub-sections we will discuss
value chain elements more formally ‘actors’ and the value chain aspects.
3.1 VALUE CHAIN ACTORS

A value chain is made up of a series of actors (or stakeholders) from input (e.g. seed) suppliers,
producers and processors, to exporters and buyers engaged in the activities required to bring product
from its conception to its end use. Value chain stage defines the various chain actors and their roles for
the functioning of the entire chain. Accordingly, the various actors in the value chain can be grouped
under three levels or stages based on the roles they play. They are:
1 Value chain main actors: The chain of actors who directly deal with the products. Activities of value
chain main actors regarding a specific product or group of products involves producing, processing,
trade and owning the produces. Actors in a value chain may include input suppliers, producers,
itinerant collectors (small and mobile traders who visit villages and rural markets), assembly traders
(also called primary wholesalers who normally buy from farmers and other itinerant collectors and
sell to wholesalers), wholesalers (who deal with larger volumes than collectors and assemblers and
often perform important storage functions), retailers (who distribute products to consumers), and
processors (firms and individuals involved in the transformation of a product).
2 Value chain supporters: The services provided by various actors who never directly deal with the
product, but whose services add value to the product. Closely related to the concept of value chains
is the concept of business development services or value chain supporters. These are services that
play supporting role to enhance the operation of the different stages of the value chain and the chain
as a whole. In order for farmers to engage effectively in markets, they need to develop marketing
skills and receive support from service providers who have better understanding of the markets,
whether domestic or international. Local business support services are, therefore, essential for the
development and efficient performance of value chains. The business development services can be
grouped into infrastructural services; production and storage services; marketing and business
services; and financial services.
Basic infrastructural services include market place development, roads and transportation,
communications, energy supply, and water supply.
Production and storage services in value chain include input supply, genetic and production material
from research, farm machinery services and supply, extension services, weather forecast and storage

infrastructure.
Marketing and business support services include market information services, market intelligence
which tells a company about its environment in the market (Supply and demand for its products,
Drivers that influence demand, Who the buyers and suppliers are, Overall economic outlook for the
product), technical and business training services, facilitation of linkages of producers with buyers,
organization and support for collective marketing.
Financial services include credit and saving services, banking services, risk insurance services, and
futures markets.
Nevertheless, roles of the business development services have mostly been neglected. The neglect
was a result of the mistaken assumption that profitable business development services will emerge as
value chains develop or that the public will provide business development services where they are
needed and when markets are insufficient to provide profitable niches for competitive services to
develop.
3 Value chain influencers: These are the third group of chain actors. These include the regulatory
framework, policies, etc. Specific policy and regulatory service elements influencing value chain
performance include land tenure security, market and trade regulations, investment incentives, legal
services, and taxation.
3.2 Value Chain Mapping
Value chain analysis is used to map chain actors and their functions in production, processing,
transporting and distribution and sales of a product or products. Through this mapping exercise,
structural aspects of the value chain such as characteristics of actors, profit and cost structures, product
flows and their destinations, and entry and exit conditions are assessed. A value chain map allows one to
depict all activities, actors, and relationships among segments of the chain, and the interactions between
producers and intermediaries.
Mapping a value chain facilitates a clear understanding of the sequence of activities and the key actors
and relationships involved in the value chain. Mapping exercise is carried out in qualitative and
quantitative terms through graphs presenting the various actors of the chain, their linkages and all
operations of the chain from pre-production (supply of inputs) to industrial processing and marketing.
When dealing with value chains where benefits are sought for the poor and the marginalized, it is also
important to give special consideration to poverty, gender and environmental factors.
The mapping diagrams are prepared through an iterative process which can be divided into two stages:
First, an initial map is drawn which depicts the structure and flow of the chain in logical clusters: the
main actors and the activities carried out at the local level, their links to activities at other domestic or
foreign locations, the supporting services and their interactions, the links to the final market, and some
initial indications of size and importance.
The second stage is quantifying the value chain. This involves adding detail to the basic maps drawn
initially (structure and flow). Though there is variation depending on the level of detail needed, this
stage of mapping focuses on elements such as size and scale of main actors; production volume; number
of jobs; sales and export destinations and concentration.
What is important in mapping value chain is to note that we can’t speak of one final map. In general, the
outcome is several maps (to avoid information overload), providing different (but interlinked) chain
information. Sample questions to be answered for mapping a value chain are given below:
 What are the main activities carried out in the value chain to manufacture the final product (or
category of products)? These activities will vary depending on the type of chain being analyzed
(agricultural commodities, industrial products or services). However, it is advisable to identify
not more than six or seven main activities between the start of the production process and sale to
the final customer.
 Who are the operators (actors) involved in these activities and what are their roles? It is
important to differentiate the actual owners of the products. If they source out or sub-contract
processes to other businesses, the latter should be categorized as operational service providers.
Other factors to map out at this stage are the poverty ranking, the locations of the various actors
(community, district, province, country, etc.) and their legal status.
 What are the flows of products, information and knowledge in the value chain? These flows can
be both tangible and intangible, for instance, products, money, information and services.
 What are the production volumes, the number of actors, and the number of jobs? This
information helps picture the size of the various channels within the value chain. The dimension
of the vulnerable segment of the population in the chain (including gender differentiation) and
employment opportunities can also be portrayed.
 Where does the product (or service) originate from and where does it go? Map captures the
physical flow of the product or service and illustrates regional variations, such as the transaction
costs related to transport.
 How does value change through the value chain? This factor is useful in measuring the
competitiveness of each operator within the chain (and of the chain as a whole). The simplest
method of picturing this element is by computing value addition at each stage of the chain – the
value of output at market price minus the value of all intermediate inputs (materials or services)
purchased from other firms.
 What types of relationships and linkages exist among the various chain actors? These may
include a market relationship, a persistent network relationship between independent firms, a
vertical integration, etc.
 What types of business services are feeding into the chain, including the regulatory and policy
framework in which the sector is operating? This map will illustrate the external sources of
competitiveness and highlight the need for potential interventions outside the value chain.
 What is the market share of the value chain? This variable can be defined as the percentage of
the sales value in the overall market.
 What are the main strengths and weaknesses of the chain? Through SWOT analysis
Value chain mapping is preferably conducted by an interdisciplinary team of experts using observation
of chain activities, interviews with chain actors, and participatory workshops to develop and obtain
feedback on the chain maps. Apart from its contribution to the mapping exercise, the participation of the
key chain actors is important as it helps them build a shared vision of the problems to be overcome,
develop a collaborative upgrading strategy and take joint decisions regarding future interventions.
A value chain map is a visual tool that allows us to understand and present how the industry works,
including functions, actors and relationships between value chain participants. It can be used for
showing quantitative data (number of enterprises, volume sold, returns, etc). It is useful in identifying
bottlenecks and there can be basic and highly detailed types of maps.
Basic map includes functions (product life cycle from conception to end use), participant(s) at each
function, Linkages between participants –horizontal and vertical. Detailed map contains additional
information besides what is included in the basic map. The additional information in a detailed map
includes added vale or gross margin of each function, number of firms performing each function,
volumes moving between levels. So, we need to know which type basic or detailed map that is to be
repapered for a given value chain. Steps to prepare a basic map are illustrated below (Mozambique oil
seeds value chain is used for illustration).
Value Chain Mapping: Basic Map
Four steps:
Step1: Identify the functions (Retail, Wholesaling, Processing, Assembly, Production, Input Supply)
Step 2: Identify the Participants (Village Stockists, Input Supply Companies, Small Scale Producers,
Producer Associations, Medium-scale and Commercial Producers, Oil Processors, Wholesalers,
Retailers
Step 3: Participant Function Work Sheet

4. Draw the initial map
Value Chain Mapping: Detailed Map.

The detailed value chain mapping procedure involves all the four steps for basic mapping. The fifth step
(analysis of overlays) is the additional information to be included in detailed map.
Steps in preparing a detailed value chain map
1. Identify the functions 3. Complete the work sheet
2. Identify the participants 4. Draw the initial map
5. Analysis of overlays- this step involves including further data in the basic map on the actors,
activities, and value added for each stage. In general the detailed value chain map includes the
following information
– Number of actors performing each function
– Volumes moved between one level to another
– Value added/gross margins at each chain

3.3 Value Chain Aspects
The figure below depicts components of value chain for any commodity.
Chain strategy
Chain formation Chain logistics
Quality Assurance
Information and Communication

Chain structure
Financial arrangements/contracts
Chain development Compliance with environmental & social norms
Chain management Aligning Production
Gender
Institutional Environment
A. Value Chain Strategy

The set of statements and guidelines at chain level with the purpose to guide the future development of
the chain and its links, and based on the shared ultimate goal of the chain. Chain strategies cover
domains as market coverage, co-ordinated investments, extension of the chain with new participants,
innovation. Besides chain (oriented) strategies every link in the chain has its own (supplementary)
strategies. There are three strategies for chain development:
I. Low cost strategy or Chain optimization
Due to increasing competition, producers and retailers are forced to minimize costs. Dealing with
individual parts in isolation may strengthen the economic efficiency of one part, but at the expense of
others. Therefore, the successive links must together minimize costs. This can happen by employing ICT
facilities, logistics and elimination linkages. Key issues in this strategy are efficiency and effectiveness.
II. Integral chain care
Consumer choices are increasingly being determined by requirements in the area of health and safety.
Care for the environment and animal-friendly production methods are becoming more important.
Striving for sustainability is the new goal set by the western society. All companies in the chain must co-
operate together in order to avoid loss of consumers confidence. Here quality assurance is the key.
Isssues that should get attantion in this strategy are cconsumers’ concerns, quality, sustainability, safety
& health and animal welfare.
III. Market segmentation or Chain differentiation
The other chain strategy option is market segmentation or differentiation. Market segmentation or
differentiation refers to providing product or service to the users by the elasticity that a user has for the
service or product. This enables producers to meet their customer needs by different value creation and
product differentiation.

Table 1: Stages in chain strategy development
Element 1st generation 2nd generation 3rd generation
1980-1995 (Europe) 1995-present Present- ….
Linkages 2 4 Several
Focus Product Service Experience
Approach Rationalize Organize Evolution
Driver Industry Consumer Society
Scope Cross border Mondial Londial
ICT EDI - electronic data ECR-efficient consumer Internet
interchange response
Business Competition Cooperation Cocreation
Over time we see a development of chain strategies. Shift of the focus from product to service to
experience. We see also a shift in drivers, from industry to consumer to society; technology shift and a
shift in how to do business with each other.
B. Chain formation
Important points to consider in chain formation are: chain formation & organization, chain design, chain
behavior and chain culture.
Chain Formation is all the activities and conditions necessary to design as well as implement
collaborative relations between chain links with the purpose to support the productive functioning of the
chain efficiently.
Chain behavior refers to interaction of a chain with its environment at a cognitive, an evaluative and an
active level, as well as the interaction between the constituting links of the chain.
Chain culture is the norms and values shared by the links of the chain with respect to mutual interaction
as well as interaction with the outside world. Outside the shared norms and values there will be a set of
individual norms and values within each link in the chain too. This fact is the ground for subcultures
within a chain.
C. Chain Structure
The structure of a value chain includes all the firms in the chain. Value chain structures can be used to
draw conclusions on the participation of the poor and the potential impact that value chain promotion
can have on poverty reduction. Value chain structure can be characterized in terms of seven elements:
I. Chain marketing
In chain marketing two things are found to be important: Understanding the consumer and the client,
and Category management and retail concepts
1. Understanding the consumer and client
In chain marketing it is instrumental to distinguish the difference between customer and a consumer. A
customer is a business partner which is the next downstream link within the value chain. Focus is on
Reliability, stability etc. A consumer is the final point of the product flow for which all the businesses
within the value chain work for. Focus is on Product variety, Variability, etc.
2. Category management & retail concepts
The second issue that needs concern in chain marketing is category management and retail concepts.
Here it is mandatory to understand key consumer trends. There are three key components of consumer
trends i.e. health, convenience and pleasure. Pertaining to health consumers is conscious of their
wellbeing in consuming a product or service. Hence, a product or service to be delivered must be
healthy. Health is explained in different manner at different societies. In modern societies healthy foods
are foods which are organic, and so on. Regarding convenience there is time factor. The appropriateness
of time which the product is being delivered is related to the convenience that the consumer gets out of
the consumption of a given product. The third consumer trend component is pleasure. Pleasure is related
to the sensory experience that our customers and/or consumers have to the product matters. Below is the
pictorial presentation of key consumer trends.
Key consumer trends
Figure 7: Key consumer trend

Why is demand driven important?
Why is demand driven important in value chain is because consumer is very often forgotten, which is
the very centre of any business. Innovation should also be demand driven (client, consumer, and internal
clients) and not technology driven because it is the consumer who will use the product, not the
technology, finally. In this respect fashion, design, life style is very important but must be demand
driven.
While adding value to a product or service one need to take in to consideration the following points:
primary function, user friendly, healthy to work with, design (taste and style), visual relation with
culture and values, communities, values of the brand, quality of life (social and emotional), and the
buyer needs uniqueness, he or she is special, status, social identity.
II. Chain logistics
Logistics is about the right amount at the right place, at the right time and at the right quality. Agri food
logistics is the art of moving agricultural and food products from farm to fork. As a result, logistics
management currently is embedded in close cooperation and communication between companies.
The simple idea of a nicely organized one-dimensional chain is just a simplified model of reality. In
reality one might better speak of a multi dimensional network.
Logistics originate from the military. When we speak of agri-logistics or agri-food logistics we focus on
the transport, handling and storage of agricultural goods and food products. Somewhere halfway the last
century, probably in the military, the term logistics was coined to address the specialized control of these
functions. Since then, logistics has grown into a highly specialized profession, which outsiders may find
difficult to access by its managerial jargon and abbreviations. But as the old joke says: logistics is a
combination of logic and mystics. If one recognizes both sides of the medal, and looks through the latest
buzz-words, it all makes better sense.
Agri-food logistics are the art of cooperation. The complexity of the business and the high demands of
clients lead to an increasing level of cooperation. Agri-food logistics are an essential part of business
strategy. The importance of agri-food logistics for agricultural business can never be underestimated.
The wrong logistics strategy, though operated optimally, will kill your business, as was proven by the
Dutch tomatoes case. The right business strategy could be defined as the best strategy to capture the
different values in the value chain.
The rapid evolvement of technologies and skills enables the agricultural supply chains to develop
appropriate logistic concepts and deliver solutions. In the nineteen fifties, the most important decision
for transporters was to leave horse-traction for automobiles. Major technological breakthroughs have
shaped our world of today, allowing global sourcing, cheap transport and communication. Road trains,
roll-on/roll-off trucks, fully automated warehouses, intelligent tags on containers and consumer
packages, when fit into the right logistic concepts, will dominate the future movement of our products.
III. Quality Assurance
Food quality versus food safety
Most of the time people understand food quality and safety as one concept but it has different meaning.
Food quality is related to what you (consumer or other chain partner/s) expect; mostly observable by
sensory elements(visible, smell, texture etc.); more easily controlled by taking precautions and less
controlled by government agencies. While food safety could be measured objectively only after

laboratory investigation, which takes time and money. Realisation of food safety is a supply chain
related issue and it is high concern for government agencies.
Table 2: Types of food hazard
Physical Chemical Physiological Microbiological
Stones Environmental and Fytotoxins produced by the Mycotoxins in animal
industrial contaminants plant (like cyanide in cassave) feed and food
Pesticides, PCB, heavy or alkaloid (solanine) in
metals potatoes
Metal pieces Veterinary drugs Toxins (saxitoxins) in Infectious agents
(antibiotics) shellfish (Salmonella, E.coli etc.)
Plastic parts Spore and toxin
producing micro
organisms
Radioactive
contamination
IV. Information & communication Technology (ICT)

Now a day barcode & RFID (Radio Frequency Identification) are being used to give information about
the product for the consumers. This is due to developemnts and innovations in information and
communication technology (ICT) and also because there is language difference around the world.
Product data is put on some form of label (RFID-tag or barcode sticker). By scanning this label by hand
or automatic it is possible to recognize the content of the product. Tags are the labels that are put on
products to carry the information. The best known examples are barcodes, passive tags and smart tags.
In the fruit and vegetable value chain, the different partners in the chain have their own barcode.
Figure 8: Barcode reader and barcode types
V. Value chain finance

Value chain finance is considered as financial products and services flowing to and/or through a value
chain to address the needs of those involved in that chain, be it a need for finance, a need to secure sales,
procure products, reduce risk and/or improve efficiency within the chain
Value Chain Finance Relevance
1. The value chain finance is useful for expanding rural finance and for developing enterprises.
2. Value chain finance builds on business relationships and transactions to screen & monitor
borrowers, enforce contracts and manage risks & costs.
3. Value chain finance is rooted in buyers' and suppliers' desire to expand markets, and to secure or
increase product quality and quantity.

4. Value chain finance takes a variety of forms in addition to cash lending, such as advances and in-
kind lending.
5. The success and limits of value chain finance are tied to the quality of cooperation between
actors.
Figure 9: Finance along the value chain

During the early stages of the value chain life cycle finance is a critical bottleneck. Value chain finance
can facilitate smooth information flow and fair allocation of incentives and it is the key to convert
agriculture to agribusiness by promoting entrepreneurship. Value chain approach with Innovation and
market-driven approach can facilitate robust, competitive and sustainable value chains.
Value chain finance is an intervention in the value chain organisation. And it needs: trust: long standing
relations, short-term small amounts of finance, transparency (market prices), skills, training how it
works, third trusted party (cash flow control).
Demand side Needs of finance
Input suppliers Seeds, fertilizers, pesticides, livestock feed, medicines, farm eq
Growers
Farmers, Dairy Units, fisheries and other livestock growers
Processors
Processing plants, packaging facilities etc
Retailers & wholesalers
Inventory, trading and marketing
Exporters
Pre & post-shipment commitments
Figure 10: Demand side need of finance in the value chain
Supply side

Commercial banks Input suppliers
Credit unions Equipment suppliers
Co-op banks Marketing companies
Agriculture & Dev. banks Traders & wholesalers
Microfinance institutions Exporters
Lead farms/firms
Non-bank financial inst.
Corporations
Leasing companies Farmers’ organizations
Insurance companies Producers’ companies
Venture capital investors Family & friends
Private investor funds
Governmental subsidies on inputs and exports and tax incentives may also contribute as a source of finance
Figure 11: Finance suppliers for Value chain

VI. Sustainability
Sustainability refers to social responsibility of the value chain. A given value chain said to be
sustainable when it meets the needs of the present consumers without affecting the needs of the future
generation in terms of minimizing environmental impact, improve social impact and animal welfare in
the value chain in order to guarantee the needs of future consumers. Currently, sustainability issues
include: climate change, biodiversity, exploitation of land and/or water, social aspects, animal welfare,
product safety, waste- and packaging reduction. Issue of sustainability has about seven core subjects
under it. These core subjects are depicted in the figure below.
Figure 12: Subjects of sustainability
VII. Gender
What is Gender?
It is a social meaning given to being a man or a woman or characteristics used to define a man or woman
that do not stem from biological differences. While sex is the biological difference that man and woman
has.
Gender as a social relation
Gender relations are specific to societies and time. Gender relations change in response to wider changes
-- they are not fixed for all time. There are differences among women (and men) - class, caste, religious
community, race etc. Gender influences division of tasks, access to information, knowledge, networks
etc and therefore upgrade opportunities exist in this regard. Gender relations are social relations of
power.
Meaning of being a woman or a man differs in every society and changes over time. In a value chain all
actors are related and these relations are relations of power. Gender is a cross cutting power issue
between these actors (which is also related to education, position in the chain, access to information etc).
Power for example can be expressed in terms of access to information, knowledge, education, networks
etc. Women generally have less access to all these issues, which can be revealed in a gender analysis.
A buzzing future for honey in Ethiopia - YouTube.flv
3.4 SWOT analysis in Value chain
In the requirements to map a value chain the last question is ‘what are the strengths and weakness of a
chain?’ These factors can be identified by carrying out a SWOT analysis which can then be integrated in
the mapping exercise. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. SWOT
Analysis is a useful technique for understanding organization’s Strengths and Weaknesses, and for
identifying both the Opportunities and Threats. Used in a business context, a SWOT Analysis helps you
carve a sustainable niche in your market. Used in a personal context, it helps you develop your career in
a way that takes best advantage of your talents, abilities and opportunities.
SWOT is a widely used framework for organizing and using data and information gained from situation
analysis. It encompasses both internal and external environments. A SWOT analysis generates
information that is helpful in matching an organization’s or a group’s goals, programs, and capacities to
the social environment in which they operate
The aim of any SWOT analysis is to identify the key internal and external factors that are important to
achieving the objective. These come from within the company's unique value chain. SWOT analysis
approach groups key pieces of information into two main categories: internal and external
a. Internal factors- The internal factors may be viewed as strengths or weaknesses depending upon
their impact on the organization's objectives. Note that what may represent strengths with respect to
one objective may be weaknesses for another objective.
Strengths (S) - Positive tangible and intangible attributes, internal to an organization. They are within
the organization’s control.
Weaknesses (W) - Factors that are within an organization’s control that detract from its ability to attain
the core goal. This provides areas in which the organization might improve.
b. External factors – Opportunities and Threats
Opportunities (O) - External attractive factors that represent the reason for an organization to exist and
develop. What opportunities exist in the environment which will propel the organization? Opportunities
identified by their time frame
Threats (T) - External factors, beyond an organization’s control, which could place the organization’s
mission or operation at risk. The organization may benefit by having contingency plans to address them
should they occur. Threats classified by their “seriousness” and “probability of occurrence
The external factors may include macroeconomic matters, technological change, legislation, and socio-
cultural changes, as well as changes in the marketplace or competitive position.
What steps can you take to next? Once the factors affecting an organization are identified using the
SWOT analysis, the next step is to prepare plan of action. Plan of action is prepared in order to:
– Capitalize on your strengths
– Overcome or minimize your weaknesses
– Take advantage of some new opportunities
– Respond to the threats
Example: SWOT Analysis of oil seeds value chain in Ethiopia
Figure below presents the various factors affecting oilseeds value chain in Ethiopia. Using the SWOT
analysis approach, the factors both external and internal to chain are given in map.

Figure 13: Sample SWOT analysis of the oilseeds value chain in Ethiopia
4 Value Chain Analysis (VCA)

Value chain analysis typically involves identifying and mapping the relationships of four types of
features:
a. the activities performed during each stage of processing;
b. the value of inputs, processing time, outputs and value added;
c. the spatial relationships, such as distance and logistics, of the activities; and,
d. the structure of economic agents, such as suppliers, the producer, and the wholesaler
Value chains can become more complex when they reflect multi-stage production systems with multiple
types of firms operating in different locations in one country or multiple countries around the world. The
value chain analysis may involve three integral stages:

Value chain analysis describes the activities within and around an organization, and relates them to the
analysis of the competitive strength of the organization. Therefore, it evaluates which value each
particular activity adds to the organizations products or services. This idea was built upon the insight
that an organization is more than a random compilation of machinery, equipment, people and money.
Only if these things are arranged into systems and systematic activates it will become possible to
produce something for which customers are willing to pay a price. Porter argues that the ability to
perform particular activities and to manage the linkages between these activities is a source of
competitive advantage.
Value chain analysis facilitates an improved understanding of competitive challenges, helps in the
identification of relationships and coordination mechanisms, and assists in understanding how chain
actors deal with powers and who governs or influences the chain. Developing value chains is often about
improving access to markets and ensuring a more efficient product flow while ensuring that all actors in
that chain benefit. Changing agricultural contexts, rural to urban migration, and resulting changes for
rural employment, the need for pro-poor development, as well as a changing international scene (not
least the increase in oil prices) all indicate the importance of value-chain analysis.
Value chain analysis plays a key role in understanding the need and scope for systemic competitiveness.
The analysis and identification of core competences will lead the firm to outsource those functions
where it has no distinctive competences.
Value chain analysis is useful for identifying constraints and opportunities for the provision of financial
services. Its helps to identify demand for financial services within value chains; recognizes that optimal
levels of investment require a range of services from a range of providers, including financial
institutions and value chain actors; and prioritizes needs for donor intervention in financial services and
limits of Value Chain Finance are tied to the quality of cooperation between actors.
In sum, the concept of value chain provides a useful framework to understand the production,
transformation and distribution of a commodity or group of commodities. With its emphasis on the
coordination of the various stages of a value chain, value chain analysis attempts to unravel the
organization and performance of a commodity system.
The issues of coordination are especially important in agricultural value chains, where coordination is
affected by several factors that may influence product characteristics, especially quality. The value chain
framework also enables us to think about development from a systems perspective.
Key issues addressed through the value chain analysis
 Share of benefits and costs from value chains and market development.
 Distribution of added value along the chain.
 Market share of the different actors and corresponding size of sub-sector.
 Institutional and legal framework, such as regional production and processing zones, trade
protocols, regulations on movement of people, agriculture marketing policies and financial
institutions.
 Growth potentials (nodes with market potential).
 Infrastructure development.
 Potential for poverty reduction and rural income generation.
 Potential for sustained food supply at affordable competitive prices for consumers.

 Potential for maximization of returns on capital investment at different levels of the value chain
strategy.
 Potential for strengthening sector and regional complementarities and interdependence through
implementation of horizontal and vertical integration approaches in the commodity production
value chains strategy.
4.1 Purposes of value chain analysis
Value chain analysis is conducted for a variety of purposes. The primary purpose of value chain
analysis, however, is to understand the reasons for inefficiencies in the chain, and identify potential
leverage points for improving the performance of the chain, using both qualitative and quantitative
approaches. Value chain analysis is a useful analytical tool that helps understand overall trends of
industrial reorganization and identify change agents and leverage points for policy and technical
interventions. It is increasingly used by donors and development assistance agencies to better target their
support and investments in various areas such as trade capacity, enterprise competitiveness, income
distribution and equity among value chain participants.
Value chain analysis involves breaking a chain into its constituent parts in order to better understand its
structure and functioning. Thus, the analysis consists of identifying chain actors at each stage and
discerning their functions and relationships; determining the chain governance, or leadership, to
facilitate chain formation and strengthening; and identifying value adding activities in the chain and
assigning costs and added value to each of those activities. The flows of goods, information and finance
through the various stages of the chain are evaluated in order to detect problems or identify opportunities
to improve the contribution of specific actors and the overall performance of the chain.
By going beyond the traditional narrow focus on production, value chain analysis scrutinizes
interactions and synergies among actors and between them and the business and policy environment.
Thus, it overcomes several important limitations of traditional sector assessments which tend to ignore
the dynamic linkages with and among productive activities that occur outside the particular sector under
assessment or involve informal operations.
Value chain analysis also reveals the dynamic flow of economic, organizational and coercive activities
involving actors within different sectors. It shows that power relations are crucial to understanding how
entry barriers are created, and how gain and risks are distributed. It analyses competitiveness in a global
perspective. By revealing strengths and weaknesses, value chain analysis helps participating actors to
develop a shared vision of how the chain should perform and to identify collaborative relationships
which will allow them to keep improving chain performance. The latter outcome is especially relevant in
the case of new manufacturers – including poor producers and poor countries –that are seeking to enter
global markets in ways that can ensure sustainable income growth.
Value chain analyses are conducted through a combination of qualitative and quantitative methods,
featuring a further combination of primary survey, focus group work, participatory rapid appraisals
(PRAs), informal interviews, and secondary data sourcing. The information is useful by itself to
understand the linkages and structure of the value chain and serves as the basis for identifying many of
the key constraints and policy issues that require further exposition.
In general, agricultural value chain analysis can be conducted for the purposes:
- Understand how an agricultural value chain is organized (structure), operates (conduct) and
performs (performance). Performance analysis should concern not only the current performance
of the value chain, but also likely future performances, as well.
- identify leverage interventions to improve the performance of the value chain
- analyze agriculture–industry linkages
- analyze income distribution
- analyze employment issues
- assess economic and social impacts of interventions
- analyze environmental impacts of interventions
- guide collective action for marketing
- guide research priority setting
- conduct policy inventory and analysis
In summary, the concept of value chain provides a useful framework to understand the production,
transformation and distribution of a commodity or group of commodities. With its emphasis on the
coordination of the various stages of a value chain, value chain analysis attempts to unravel the
organization and performance of a commodity system. The issues of coordination are especially
important in agricultural value chains, where coordination is affected by several factors that may
influence product characteristics, especially quality. The value chain framework also enables us to think
about development from a systems perspective.
4.2 Steps in Value Chain Analysis

Value chain analysis is a process that requires four interconnected steps: data collection and research,
value chain mapping, analysis of opportunities and constraints, and vetting of findings with stakeholders
and recommendations for future actions. These four steps are not necessarily sequential and can be
carried out simultaneously.
The value chain team collects data and information through secondary and primary sources by way of
research and interviews. Mapping helps to organize the data, and highlights the market segments,
participants/actors, their functions and linkages. The collected data is analyzed using the value chain
framework to reveal constraints within the chain that prevent or limit the exploitation of end market
opportunities. The resulting analysis of opportunities and constraints should be vetted with stakeholders
through events such as workshops, focus groups or “reporting-out” days.
Step One: Data Collection
Good value chain analysis begins with good data collection, from the initial desk research to the targeted
interviews. The value chain framework—that is, the structural and dynamic factors affecting the chain—
provides an effective way to organize the data, prioritize opportunities and plan interventions.
The desk research consists of a rapid examination of readily available material. The aim is to familiarize
the team with the industry, its market and the business environment in which it operates, as well as to
identify sources for additional information. Information such as statistics on exports/imports,
consumption reports, global trade figures, etc., can be obtained through the Internet, phone calls and
documents from trade, commerce and industry ministries, specialized industry journals, and professional
and trade association newsletters. Once the desk research is conducted, an initial value chain map can be
drafted for refinement during the primary research phase.
Interviews are conducted with 1) firms and individuals from all functional levels of the chain, and 2)
individuals outside the value chain such as writers, journalists or economists. In addition to providing

information about the movement of product and the distribution of benefits, the interviews should
inform on value chain actors’ current capacity to learn; how information is exchanged among
participants; from where they learn about new production techniques, new markets and market trends;
and the extent of trust that exists among actors. Interviews can help to identify where chain participants
see opportunities for and constraints to upgrading. Missing or inadequate provision of services necessary
to move the value chain to the next level of competitiveness can be identified locally, regionally or
nationally.
In addition to individual interviews, focus group discussions are a useful way to explore concepts,
generate ideas, determine differences in opinion between stakeholder groups and triangulate with other
data collection methods. The group may consist of 7-10 people who perform the same or a similar
function in the value chain. Guided discussion better captures the social interaction and spontaneous
processes that inform decision making, which is often lost in structured interviews.
The qualitative data gathered by these methods will reveal dynamic factors of the value chain such as
trends, incentives and relationships. To complement this, quantitative analysis of the chain is necessary
to provide a picture of the current situation in terms of the distribution of value-added, profitability,
productivity, production capacity and benchmarking against competitors. Analyzing these factors
highlights inefficiencies and areas for reducing cost.
Step Two: Value Chain Mapping

Value chain mapping is the process of developing a visual depiction of the basic structure of the value
chain. A value chain map illustrates the way the product flows from raw material to end markets and
presents how the industry functions. It is a compressed visual diagram of the data collected at different
stages of the value chain analysis and supports the narrative description of the chain.
Porter distinguished two important elements of modern value chain analysis: The various activities
which were performed in particular links in the chain. Here he drew the distinction between different
stages of the process of supply (inbound logistics, operations, outbound logistics, marketing and sales,
and after sales service), the transformation of these inputs into outputs (production, logistics, quality and
continuous improvement processes), and the support services the firm marshal to accomplish this task
(strategic planning, human resource management, technology development and procurement).
The importance of separating out these various functions is that it draws attention away from an
exclusive focus on physical transformation.
Porter distinguishes between primary activities and support activities. Primary activities are directly
concerned with the creation or delivery of a product or service. They can be grouped into five main
areas: inbound logistics, operations, outbound logistics, marketing and sales, and service. Each of these
primary activities is linked to support activities which help to improve their effectiveness or efficiency.
There are four main areas of support activities: procurement, technology development (including R&D),
human resource management, and infrastructure (systems for planning, finance, quality, information
management etc.).
Some thought about the linkages between activities: These linkages are crucial for corporate success.
The linkages manifested through flows of information, goods and services, as well as systems and
processes for adjusting activities. A certain commodity value chain can be mapped as:

Figure 14: A comprehensive value chain map
The purpose of a visual tool in the analysis process is to develop a shared understanding among value
chain stakeholders of the current situation of the industry. The mapping exercise provides an opportunity
for multi-stakeholder discussions to reveal opportunities and bottlenecks to be addressed in subsequent
stages of the chain development. Maps also help to identify information gaps that require further
research.
Step Three: Analysis of Opportunities and Constraints Using the Value Chain Framework
Step three uses the value chain framework as a lens through which the gathered data is analyzed. The
framework is a useful tool to identify systemic chain-level issues rather than focus on firm-level
problems. While interviews give the value chain team the chance to gather information from individual
firms, the value chain framework helps to organize this information in such a way that the analysis
moves from a firm-level to a chain-level perspective. If the chain cannot be competitive, the success of
individual firms is compromised. Therefore, taking a systemic approach is key to sustaining the
competitiveness of the chain and the micro and small enterprises (MSEs) operating within it.
The factors affecting performance of the chain are further analyzed to characterize opportunities and
constraints to competitiveness. These factors are classified under structure and dynamic components.
The structure of the value chain influences the dynamics of firm behavior and these dynamics influence
how well the value chain performs in terms of two critical outcomes: value chain competitiveness and
MSE benefits.
Structure
The structure of a value chain includes all the firms in the chain and can be characterized in terms of five
elements:
1. End market opportunities at the local, national, regional and global levels—the framework
prioritizes this element because demand in end markets defines the characteristics of a successful
product or service.
2. Business and enabling environment at the local, national and international levels—this includes
laws, regulations, policies, international trade agreements and public infrastructure (roads,
electricity, etc.) that enable the product or service to move through the value chain.
3. Vertical linkages between firms at different levels of the value chain—these are critical for
moving a product or service to the end market and for transferring benefits, learning and
embedded services between firms up and down the chain.
4. Horizontal linkages between firms at the same level of the value chain—these can reduce
transaction costs, enable economies of scale, increase bargaining power, and facilitate the
creation of industry standards and marketing campaigns.
5. Supporting markets—these include financial services, cross-cutting services (e.g., business
consulting, legal advice and telecommunications) and sector-specific services (e.g., irrigation
equipment, design services for handicrafts).
Dynamics
The participants in a value chain create the dynamic elements through the choices they make in response
to the value chain structure. These dynamic elements include:
1. Upgrading—increasing competitiveness at the firm level through product development and
improvements in production and marketing techniques or processes
2. Inter-firm cooperation—the extent to which firms work together to achieve increased industry
competitiveness
3. Transfer of information and learning between firms—this is key to competitiveness since
upgrading is dependent on knowledge of what the market requires and the potential returns on
investments in upgrading.
4. Power exercised by firms in their relationships with each other—this shapes the incentives that
drive behavior and determines which firms benefit from participation in an industry and by how
much
Each plays a role in influencing value chain competitiveness. Using a table format, these factors of the
value chain framework can be evaluated in terms of offering opportunities for upgrading and the
constraints to taking advantage of these opportunities.
Value chain Framework
What arrangements?
What is their role/s? Network structure What is the level of integration of processes?
Who are the members? Who performs which process?
Chain objectives Chain management Chain business process Chain performance
Governance?
What type of contracts? Chain resources
What management structure used in each
Figure 15: Value chain framework

What resources (ICT, human, techno) are used in each process by each member of VC?
Step Four: Vetting Findings of Chain Analysis through Stakeholder Workshops
Value chain analysis helps develop a private-sector vision to reflect stakeholders’ interest in improving
the efficiency and competitiveness of the chain. The fourth step, vetting findings, uses value chain

analysis through a structured event (or series of events) like a workshop or reporting-out day to facilitate
discussion with and among selected participants.
The objective of these events is to bring participants together who are responsible for critical market
functions, service provision, and the legal, regulatory and policy environment. The goal is to have these
participants—who have an incentive to drive investments in upgrading—to develop and assist in
implementing a private sector-led competitiveness strategy. To develop this strategy, the stakeholders
will need to prioritize the opportunities and constraints identified during the value chain analysis. With
an open format, such structured events foster buy-in to the analysis process.
Participants are selected based on the role they play in the value chain, or their responsibility for critical
market functions. There should also be MSE, medium and larger firm and association representatives
who, during the interview phase, exhibited an understanding of the issues related to the value chain
(especially the opportunities), a strong interest in the types of questions posed during the interview, and
leadership skills among peers or the community.
Vetting events can take on several forms from simple one day reporting-out sessions to more structured
workshops that stretch to two or three days. The events are planned to reinforce the importance of
knowing and understanding the end market. In presenting the findings of the value chain analysis,
workshop leaders should stress that to remain competitive, stakeholders and other participants must
continuously learn what end markets demand in terms of product specifications, quality, and other
requirements.
It can be powerful to have a series of buyers present at the workshop. Where not possible, a phone call
or pre-recorded video interview can be an effective means for stakeholders to see and hear directly from
the buyer.
The event should include facilitated discussions, review and adjustments of value chain map and a
review of the analysis table. For this exercise, it is recommended that the completed table be projected
on a screen, and additions and modifications made during discussions inserted with the computer
projecting the table. This assures a participatory process and on-the-spot adjustment witnessed by
attending participants. If changes are made, the updated table can be immediately printed and distributed
to participants before they leave.
In environments characterized by a number of donor partners working with the same group of firms,
burn-out and skepticism particularly among the most important change drivers is likely. In some
instances, the firms most important to driving change may not attend a full-day workshop even though
they may be highly committed to the upgrading process and strategy for making the industry more
competitive. If time allows, the analysis team can meet with these firms in advance of the workshop to
convince them of the value of the competitive planning process. If this is not possible, the analysis team
should meet with these firms soon after the workshop to vet findings and secure buy-in or commitment
to the industry competitiveness planning process.
In most industries, it is rather unusual that a single company performs all activities from product design,
production of components, and final assembly to delivery to the final user by itself. Most often,
organizations are elements of a value system or supply chain. Hence, value chain analysis should cover
the whole value system in which the organization operates. Within the whole value system, there is only
a certain value of profit margin available. This is the difference of the final price the customer pays and

the sum of all costs incurred with the production and delivery of the product/service (e.g. raw material,
energy etc.). It depends on the structure of the value system, how this margin spreads across the
suppliers, producers, distributors, customers, and other elements of the value system. Each member of
the system will use its market position and negotiating power to get a higher proportion of this margin.
Nevertheless, members of a value system can cooperate to improve their efficiency and to reduce their
costs in order to achieve a higher total margin to the benefit of all of them (e.g. by reducing stocks in a
Just-In-Time system). For instance hierarchy firms are vertically integrated, so that they can directly
control all or most of the activities of the chain
Some value chains can best be described as balanced networks. Firms form networks and in a balanced
network the power relations among them are fairly equal, no one firm or group of firms dominates the
network. In balanced networks supplier and buyer jointly define the product and combine
complementary competencies. An example might be collaboration between producers of ‘eco-friendly’
knitted fabric and garment manufacturers who make this fabric into fashion garments. Since both are
involved in high value-added production, they can work together more or less as equals.
Other value chains are governed by lead firms. We call these directed networks. The lead firms do not
merely buy goods in the market. Rather they specify what is to be produced by whom, and they monitor
the performance of the producing firms. In some cases, the networks are directed, or “driven”, by large
producers such as transnational corporations or other large integrated industrial enterprises. The
automobile industry is a good example of a producer driven value chain. The large automobile
companies dominate the chain by setting the specifications that must be followed by firms joining their
networks of component suppliers.
Other chains are driven by the buyers of the products. In clothing and footwear, many leading brand-
name companies do no production themselves. Instead, they concentrate on design and marketing. Their
strength as buyers enables them to dominate certain value chains. They determine what fabrics will be
used, what styles will be produced, and in what colors.
Finally, some chains are characterized by vertically integrated firms. In these cases, firms, acting
through their own decision-making hierarchy, can directly control chain activities.
Value Chain Analysis - YouTube.flv
5. Analyzing Chain governance
Governance refers to the role of coordination and associated roles of identifying dynamic profitable
opportunities and apportioning roles to key players (Kaplinsky and Morris 2001). Governance implies
that interactions between firms along a value chain reflect organization, rather than randomness. The
various activities in the chain, within firms and between firms, are influenced by chain governance.
Value chains are characterized by repetitiveness of linkage interactions. The governance of value chains
emanate from the requirement to set product, process, and logistic standards, which then influence
upstream or downstream chain actors and results in activities, actors, roles and functions. Therefore,
power asymmetry is central in value chain governance. In other words, some key actors in the chain
shoulder the responsibility to allocate roles (inter-firm division of labour) and improve functions.
Power in value chain governance can be categorized into three: setting basic rules for participation in the
chain, monitoring the performance of chain actors in complying with the basic rules, and assistance to
help chain actors adhere to the basic rules (Kaplinsky and Morris 2001). It must, however, be noted that
some value chains may exhibit very little governance at all, or very thin governance. In most value
chains, there may be multiple points of governance, involved in setting rules, monitoring performance
and/ or assisting producers. The powers of governance may be vested within the chains themselves, in
local communities, or in business associations.
Chain governance should also be viewed in terms of ‘richness’ and ‘reach’, i.e in terms of its depth and
pervasiveness (Evans and Wurster 2000). Richness or depth of value chain governance refers to the
extent to which governance affects the core activities of individual actors in the chain. Reach or
pervasiveness refers to how widely the governance is applied and whether there are competing bases of
power. In the real world, value chains may be subject to multiplicity of governance structures, often
laying down conflicting rules to the poor producers (Kaplinsky and Morris 2001)
Governance can also be referred to as the inter-firm relationships and institutional mechanisms through
which non-market coordination of activities in the chain is achieved. Within global value chains, for
example, leading supermarkets in European country may exercise control over their fresh vegetable
supply chains. Not only do they specify the type of products they wish to buy (including varieties,
processing and packaging), but also processes such as the quality systems that need to be in place. These
requirements are enforced through a system of auditing and inspection and, ultimately, through the
decision to keep or discard a supplier. Clearly, governance in value chains has something to do with the
exercise of control along the chain. At any point in the chain, the production process (in its widest sense,
including quality, logistics design, etc.) is defined by a set of parameters. The four key parameters which
define what is to be done are:
a. What is to be produced? We refer to this as product definition.
b. How it is to be produced. This involves the definition of production processes, which can include
elements such as the technology to be used, quality systems, labour standards and environmental
standards.
c. When it is to be produced.
d. How much is to be produced.
To these four basic parameters one might add a fifth parameter, price. Although prices are usually
treated as a variable determined in the market, it is frequently the case that major customers (particularly
those competing more on price than, for example, product quality) insist that their suppliers design
products and processes in order to meet a particular target price. From the point of view of the analysis
of inter-firm linkages in the global economy, the critical parameters for value chain governance are the
first two: what is to be produced, and how it is to be produced. These parameters are often set by buyers.
In each case, the level of detail at which the parameters are specified can vary. In the case of product
definition, the buyer can provide different levels of specification. It can set a design problem for the
producer, which the producer then solves by providing its technology and design. The buyer might
provide a particular design for the producer to work on, or the buyer might even provide detailed
drawings for the producer. Buyers can also specify process parameters. This has been most evident
through buyer involvement in their suppliers’ quality systems, but it is also increasingly evident in
specification of process parameters in relation to labour and environmental standards. Once again, these
can be specified at different levels of detail. In some cases, the buyer may merely refer to the process
standards to be attained. In other cases, the buyer will specify precisely how particular standards should
be attained by requiring and perhaps helping to introduce particular production processes, monitoring
procedures, etc. When the buyer plays this role, we refer to it as the ‘lead firm’ in the chain.

The question of governance arises when some firms in the chain work according to parameters set by
others. When this happens, governance structures may be required to transmit information about
parameters and enforce compliance.
Product and process parameters can also be set by agents external to the chain. Government agencies
and international organisations regulate product design and manufacture, not only with a view to
consumer safety, but also in order to create transparent markets (for example, by defining standard
weights and sizes or technical norms). Examples of such parameter setting by agents external to the
chain include food safety standards, norms with regard to the safety of products such as children’s toys,
electrical equipment and motor vehicles and control of hazardous substances in a wide range of
products. Once again, these norms can refer to the product (are its physical characteristics and design in
conformance with requirements?) or to the process (is it being produced in ways which conform to
particular standards?). In some cases, process norms are pursued as a means to achieving product
standards (for example, hygienic food preparation systems are designed to produced safe food) and in
others because of the intrinsic value of particular types of processes (for example, animal welfare
requirements). Governments may set standards which are compulsory and have legal force. Standards
may also be set by non-legal agreements (code of conduct, etc.) and by a variety of unofficial agencies,
such as NGOs, which pressure for compliance with labour and environmental standards.
Parameters set from outside the chain lead to chain governance when one agent in the chain enforces the
compliance with parameters of other agents or translates the parameter into a set of requirements which
it then monitors and/or enforces. This situation usually arises when agents at one point in the chain
might be held responsible for actions by agents (or the consequences of these actions) at other points in
the chain.
Governance can be exercised in different ways, and different parts of the same chain can be governed in
different ways. Governance, in the sense of arrangements that make possible the non-market
coordination of activities, is not a necessary feature of value chains. Many goods are traded in markets
through a series of arm’s-length market relationships between firms. The parameters are defined solely
by each firm at its point in the chain. So, for example, a firm might make a product according to its own
estimations of market demand (‘make to forecast’), using a design that has no reference to any particular
customer (i.e. either a completely standard product, or a product developed in-house) and using its own
processes. The buyer then encounters a ready-made and ready-to-buy product. There are various ways in
which inter-firm relationships can differ from this pattern. For example, the decisions about ‘when’ and
‘how much’ will be made jointly by the producer and the buyer when production is scheduled according
to ‘make-to-order’ rather than ‘make-to-forecast’. This is typical when products have many possible
variants, which renders make-to-forecast uneconomic.
Generally speaking, we can identify three governance regimes: Open spot market which is based on
price, quality standards and bargaining and negotiation (every batch); partnership which is based on
trust, network agents or family, quality differentiation, contracts, coordination and co-operation; and
fully vertical integrated based on ownership.
5.1 Why does governance matter?
The issue of governance in value chains is important for the following reasons:
a) Provide market access to small growers or producers in developing countries
b) Fast track to acquisition of production capabilities: lead firms transmit best practices and
provide hands-on advice on how to improve layout, production flows and raise skills.
c) Distribution of gains: Understanding the governance of a chain helps to understand the
distribution of gains along the chain
d) Leverage points for policy initiatives: The fact that some chains are governed by lead firms from
developed countries provides leverage for influencing what happens in supplier firms in
developing countries. This leverage point has been recognised by government and
nongovernmental agencies concerned with raising labour and environmental standards.
e) Funnel for technical assistance: The central idea is to combine technical assistance with
connectivity. The lead firms of chains become the entry point for reaching out to a multitude of
distant small and medium sized suppliers.
5.2 Trends in chain governance
What trends in value chain governance do we anticipate with changing development aspects in the
globalized world?
a) The general increase in chain governance is connected to the big changes in retailing in the
advanced countries. There has been an enormous concentration in retailing, in many developed
countries. Concentration in retailing does not necessarily lead to concentration in sourcing but
the scenario which is emerging is increasingly clear; an increasing number of developing country
producers engage in contract manufacturing for a decreasing number of global buyers.
b) Brands play an increasingly important role in enterprise strategy, particularly in consumer
products such as garments and footwear. The enormous investment required to create (or
maintain) brands is increasingly made by retailers or other companies which have no (or only
limited) production facilities of their own. Product and process definition, however, is a strategic
part of their operation. Because brands stand for high quality or well-defined images, they need
to define and enforce product and process parameters. Branding and chain governance thus tend
to go together. Chain governance is not however limited to the sourcing of branded products.
c) It has been noted that the risk of supplier failure is a key driver of chain governance. The risk of
suppliers not being able to produce to the required specification is highest in emerging producer
countries. Over the last two decades, many new producer countries have been able to export to
advanced country markets under the tutelage of the global buyers. As the competence of these
suppliers increases, chain governance through the buyers can be expected to loosen – provided
that the increasing competence of suppliers is accompanied by the emergence of local agents
who can monitor and enforce the compliance with general or buyer specific standards. Some of
the formerly new producers will become world leaders in producing promptly to the
specification of the foreign buyer.
d) There is however a counter-tendency. While non-price factors (quality, brand, speed) have come
to play an increasing role for competing in global markets, price competition continues to be
unrelenting, leading to a downward pressure on prices, particularly in labour intensive products
sourced from developing countries. The resulting profit squeeze leads buyers to scout
continuously for new producers who offer lower labour costs.
e) Business-to-Business (B2B) electronic commerce is being promoted world-wide as a means of
enabling developing country producers to sell in advanced country markets and transform the
relationship between producer and buyer. For the producer, one of the main advantages of
ecommerce is thought to lie in side stepping the intermediary or avoiding control by the buyer.
Reality is unlikely to become this simple and the governance mechanisms those are in use will
probably continue to be most relevant because: (i) B2B e-commerce is diffusing only very
slowly in trade between developing and developed countries; (ii) some of the established buyers
are investing in the application of e-procurement methods; (iii) where existing intermediaries are
circumvented, trade tends to be conducted through new ‘info-mediaries’ (portals); (iv) all forms
of e-procurement are likely to require mechanisms to contain buyer risk, such a certification.
Monitoring and accreditation agencies will be of increasing importance.
f) On the other hand, there may be a shift to parameter setting and enforcement by agents outside
the chain. The more conformance/compliance with parameters can be codified, generalised and
credibly applied, the less need there is for governance from within the chain.
6. Value Chain Approaches
It is said that value chain refers to all the activities and services that bring a product (or a service) from
conception to end use in a particular industry—from input supply to production, processing, wholesale
and finally, retail. It is so called because value is being added to the product or service at each step.
Taking a “value chain approach” to economic development means addressing the major constraints and
opportunities faced by businesses at multiple levels of the value chain.
Value chain analysis uses this framework to examine the structure and the dynamics of the value chain.
The structure of the value chain influences the dynamics of firm behaviour and these dynamics influence
how well the value chain performs in terms of critical outcome: value chain competitiveness indictors –
cost, time and value added.
Value chain approaches have been used by development practitioners and researchers alike to capture
the interactions of increasingly dynamic (and complex) markets and to examine the inter-relationships
between diverse actors involved in all stages of the marketing channel. Such approaches may alert us to
inequities in power relationships based on the governance of the supply chain and highlights potential
points of entry (and exclusion) for smallholders. Moreover, by going beyond firm- or activity-specific
analysis, value chain analysis allows for an assessment of the linkages between and amongst productive
activities. The value chain approach thus provides a framework to analyze the nature and determinants
of competitiveness in value chains in which small farmers can participate. It also provides the basic
understanding needed for designing and implementing appropriate development programs and policies
to support their market participation. Indeed, many development interventions now utilize the value
chain approach as an important entry point for engaging small farmers, individually or collectively, in
high value export markets (GTZ, 2007).
Value chain approach is used to understand trends in global and national markets and conditions under
which micro and small enterprises (MSEs) can contribute to and benefit from the increased
competitiveness that globalization brings. The value chain approach can be applied to sector, subsector,
product or products. Basically the value chain approach has objectives. The specific objectives include:
- Improve the growth potential of VCs with large numbers of small firms
- Enhance small firm contributions to VC growth
- Ensure small firms benefits
In this regard the value chain approach involves the following functions to achieve these objectives
- Links theoretical understanding of how economies work with practical approaches to making
them work better
- Informs donor-funded economic growth activities and private sector investment

- Allows stakeholders to drive the process
Illustrative uses of the Value Chain approach in different areas are given below.
 Economic growth—through the mobilization of industry participants, the value chain approach
can be used to increase the competitiveness of industries and the sustainability of donor
interventions in support of economic growth.
 Financial services—value chain analysis can identify mechanisms for financial service delivery
embedded in market transactions and assist lending institutions with expanding their definition of
creditworthiness.
 Natural resources management—the value chain approach can be used to strengthen the
competitiveness of natural resource-based industries and to develop competitiveness strategies
that are beneficial both to the environment and to local business development.
 Health—value chain tools can be used to mobilize industry participants to identify and address
health-related constraints to competitiveness and can be used to increase the effectiveness of
service delivery in the health industry itself.
 Conflict mitigation and management—value chain analysis can prioritize industry constraints
and opportunities in post-conflict situations and value chain tools can bring together diverse,
even antagonistic, stakeholders to work towards a common economic vision.
In this aspect four different approaches to value chain, some of these are based on experiences in
Ethiopia, are given the following paragraphs.
6.1 The Netherlands Development organization (SNV’s) Approach

The Netherlands Development Organization (SNV) is a non-governmental organization (NGO)
operating through funding mainly from the Netherlands Government. The SNV Business Organisations
and their Access to Markets (BOAM) programme, financed by the Embassy of the Kingdom of the
Netherlands and the Irish Embassy, supports the delivery of vital businesses and organisational
development services in Ethiopia along the whole of the following selected agricultural value chains: oil
seeds and edible oils, milk and dairy products, honey and beeswax, pineapple, apple and mango.
SNV’s BOAM programme considers that enhancing the participation of small farmers in local, national
and global value chains is a good strategy to increase production, income and employment opportunities
for these small farmers. It follows a demand driven value chain development approach which is
characterized by the combination of strengthening whole sectors as well as supporting individual
businesses as traders/exporters, processors and farmer organizations and their business to business value
chain relationships. Sector development provides new opportunities to the actors in the sector; business-
to-business development assures that the opportunities are turned into concrete results. These results are
related to the increased number of business to business value chains, increased volumes, value added,
faire distribution of margins, higher efficiency and overall competitiveness of individual businesses and
the value chain(s). SNV and other service providers are providing services, which will be increasingly
market based and with increased volumes to match the up-scaling requirements of the value chains. To
achieve a sustainable up-scaling of the approach to new sectors and value chain(s), SNV works on
knowledge development and increased service provider capacity building.
Key interventions areas for this demand driven value chain approach are identified as: sector
development; business development; knowledge development and learning; and Service capacity
development (see Figure 16). Letters in figure from bottom-up represent chain actors:
I= input F= Farmer Producer C= Coops
P= processor/exporter
R= Retailer
C= Consumer Market
Figure 16: SNV’s Value chain development approach

Source:
Now let us consider what SNV is doing in each intervention area in order to develop and enhance
demand driven value chain.
Sector development
Sector development is seen as providing opportunities for business development to turn these
opportunities into concrete results. A critical number of value chain actors and other stakeholders are
instrumental to steer the sector development. In particular prominent private sector actors in trade and
processing are important to make use of business opportunities. Furthermore these private sector actors
can develop good relationships with the public sector and stimulate the interest of the public sector.
Other relationships between direct value chain actors, between actors and private and public service
providers provide a multitude of potential win-win relationships.
Associations and stakeholder events are important in defining critical and implementable sector
development interventions. The enabling environment can be supportive with, for example favourable
policies, intelligence, control and standardization, accreditation and sector or value chain promotion,
providing the necessary incentives for decreased transaction costs. This will then result in increased
efficiency and improved sector competitiveness. However, small informal “spot” market transactions
and monopolistic market arrangements are dominant, creating limited opportunities for business
development. This requires financing critical sector projects as public good or as temporary
interventions in particular in the embryonic stages of value chain development.
To support sector or institutional development SNV provides the following products as services:

(1) Multi Stakeholder Platforms (MSP) - Promoting efficient and equitable linkages for the
economically active poor along the value chain. Promote strategic partnerships with key stakeholders
using the Public Private Partnership (PPP) model. Promote “meaningful dialogue” focusing on impacts
and economic performances, strategic planning, cooperative implementation or action, collective
monitoring and mutual learning;
(2) Sector Association Strengthening (SAS) - Developing the capacities of associations so that they are
able to provide services to members in a sustainable way and are recognized representatives by other
stakeholders;
(3) Market Intelligence (MI) - Promoting access “to both” supply and market information in an
interactive manner along the segments of the value chain capturing market signals (trends, requirements,
standards, new technologies and new products) and fostering pro active reactions about VC “resilience”;
(4) Effective Public Policy Management (EPPM) - Facilitating processes of design, implementation, and
evaluation of public policies under an analytical framework for effectiveness and inclusion.
(5) Value Chain Financing (VCF) - Facilitate sustainable business linkages between service providers
and their clients along the segments of the value chain. Advocate for strategic and digressive “grants”,
“subsidies”, and “debt” and “equity” instruments to kick off and spur the growth of value chain actors.
(6) Appropriate Technology Promotion (ATP) – Disseminating and propagating locally developed and
successfully tested appropriate technology innovations.
Business development
Business development is seen as turning the opportunities created by sector development into concrete
results. These results are related to the increased number of business to business value chains, increased
volumes, value added, equitability of margins, efficiency and overall competitiveness of individual
businesses and the value chain(s).
Important are here the linking of businesses to new or existing markets in, for example new processors
to farmer organizations, new products for existing markets or new retail or export markets. Different
arrangements can be used like the usage of a joint venture, setting up trade relations, development of a
linkage (e.g. with processing company). In many value chains there is a change from a transaction based
relation towards a contract based relation. Part of the formal or informal contracting is often all kinds of
embedded services provided by private service providers or own staff. So besides price per volume and
differentiated qualities, arrangements are made about logistical, technical and financial service
provision, quality control and measurement, market information and even organizational services. These
services can include the services provided by the public sector and other development facilitators. New
type of products and qualities means often different input material, of which the commercial availability
is very important to keep up with the demand. Innovative business strategies and arrangements are
needed for matching the demand and supply of inputs. These strategies and arrangements contain
substantial risks for the individual business or the business to business value chain relationship, which
justifies testing in the form of subsidized pilots.
Value chain development means that farmer (organizational) development is coordinated by the
downstream private sector in the business to business value chain. Thus farmer organizations are
receiving technical, financial and organizational services however the actual delivery is often the
mandate of the public sector and other development organizations. From the perspective of the value

chain(s) increased market and business orientation is however required as part of the services delivered
to farmer organizations.
Access to capital for input suppliers, processors, traders and farmer organizations to finance investments
is important to make sure that tested business to business pilot innovations are being copied or up-
scaled by other value chain actors. Information on sector development, key figures, risk profile etc. is
therefore needed to give interested outsiders the right information to make an investment decision.
To support business development SNV provides the following products as services:
(1) Producer Group Strengthening (PGS) - Facilitating the growth and graduation of informal
businesses, producers and natural resource users, to the formal sector. Strengthening legitimacy,
credibility and viability of the different forms of the economic group is required.
(2) Business-to-business support (B2B) – Facilitate the development of business relationships and
arrangements between downstream traders, processors and farmer organizations on one side and small
farmers and their organizations on the other side, to guarantee that a reliable supply and market outlet is
assured.
(3) Private Sector actor Strengthening (PSS) - Develop the capacities of private sector actors like
processors and traders so that they are able to improve business operations in terms of market response,
business partnerships and the accessibility to financial and other market services.
(4) Value Chain Financing (VCF) - Facilitate sustainable business linkages between service providers
and their clients along the segments of the value chain. Advocate for strategic and digressive “grants”,
“subsidies”, “debt” and “equity” instruments to kick off and spur the growth of value chain actors.
Knowledge development and learning
To achieve a sustainable up-scaling of the approach to new sectors and value chain(s), knowledge
development and learning is critical. Knowledge areas related to constraints from embryonic to maturity
stages of value chain development are however important. Learning in the form of testing innovative
business to business value chain pilots, exchanging sector development experiences and overall program
level documentation will have to assure that critical knowledge is generated.
Replication takes place in the form of up-scaling business to business value chains within a specific
sector, up-scaling sector development to other sectors and up-scaling the overall value chain approach in
new programs.
Business development service provider development
A strong service sector is critical to address the increasing demand for services in the up-scaling of
business to business value chains. It is expected that these services will have to become increasingly
market based, since customer confidence will improve with the increasing volumes and use of the
services in the up-scaling of the business to business value chains. Therefore service providers are
promoted in providing services from the start of any value chain support intervention and are integrated
in business to business value chain pilots. On top of this specific capacity development programs are
developed as the young professional program and competency pool to assure a substantial increase of
the supply of quality services.
To achieve a sustainable up-scaling of the value chain approach to new sectors and value chain(s), these
service providers will increasingly take over SNV services or products. To support service capacity
development SNV provides the following services:
(1) Service Providers Strengthening (SPS) - Developing the capacities of services providers so that they
are able to capacitate both economic chain actors as well as non-economic actors.
(2) Local Capacity Development Facility (LCDF) - increase the access to funds for local capacity
development in a way that empowers local actors and allows them to acquire tailor-made services,
geared towards their needs.
For practical example of SNV’s value chain development approach, please read its intervention program
in honey and beeswax value chain development (SNV report .... 2011). In short, SNV, in collaboration
with the Honey Exporters Organisation (EHBPEA), organised national honey promotion events,
connecting the Ethiopian Honey Sector with partners worldwide. This resulted in new business
relationships, among others for the export of honey to the EU. In order to concretize these opportunities,
Ethiopia was listed for EU accreditation for the imports of honey from Ethiopia. Four honey processors
are now operating, or are in the process of opening, company apiaries in the production areas. BOAM
facilitates the training of rural producers who are now entering into out-grower agreements to supply
honey according to market requirements.
6.2 German Technical Cooperation (GTZ’s) Approach

German Technical Cooperation (GTZ) is also a non-governmental organization engaged in rural
development activities through funding mainly from German government.
Following the definition by Kaplinski and Morris (2003) that ‘value chain describes the full range of
activities which are required to bring a product or service from conception, through the different phases
of production (involving a combination of physical transformation and the input of various producer
services), delivery to final consumers and final disposal after use’, GTZ promoted value chain of honey
in Nepal focusing on two areas: 1) market orientation meaning the greater volume sold and/or better
end price gained, 2) income distribution- the poor benefit at least equally or above average from the
income generated (poor get their “share of the cake”). GTZ interventions are targeted to strengthening
the relationship between actors at different level of value chain (production, processing, trading).
GTZ used the following value chain integration map to explain its experience in value chain
development in SiriLanka.
Figure 17: GTZ Value chain integration

The following table shows key intervention areas of GTZ in value chains of two commodities (spices
and rubber products).

Table 3: GTZ Value Chain Analysis result matrix
Value Key intervention Rationale Status Result
chain area level
Acute shortage of
Critical skills Cinnamon peelers and Preparation/feasibility on
Output
upgrading difficulty in harvesting establishing a Cinnamon
twice a year processing training academy
Standards,
certification & Poor quality produce & Good Agricultural and
Output
quality non-compliance with Manufacturing practices
Spice
improvement HACCP manuals: Cinnamon and Pepper
Organizational Establishment of Pepper Circles
output
development Un-organized workers in the Central Region
Facilitation of Contacts between
Linkage the Spice council/Auction and Use of
Marketing difficulty
development Pepper circles in the Central output
Region
First series of technical training
Critical skills workshops (e.g. compounding)
output
upgrading Poor technical know- were conducted & 2nd series
Rubber how in manufacturing planned
Products Inconsistent raw
Organizational material supply& lack Facilitation of establishment of Use of
development of sub-contracting a Peoples Company for bulk output
opportunities purchasing & marketing
As Table 3 shows GTZ has intervened to upgrade critical skills, in the process of standardization,
certification and quality improvement, and in organizational and linkage development. This is an
important gap filling intervention for a country with low level of technical know-how, when there is
poor quality of produce and non-compliance to certain (HACCP) standards, and when there are un-
organized growers with market difficulty.
Generally, GTZ’s approach in value chain promotion in Nepal considered the following steps: Selection
of subsectors, Mapping and analysis of value chains, Development of intervention strategies,
Interventions and implementation of activities, and Monitoring and evaluation.1
1
For the details of each step, please read GTZ experience report by Surendra Raj Joshi (2008), on Honey in Nepal:
Approaches, Strategy and Intervention for Subsector Promotion.

Figure 18: Value Links - GTZ‘s Value Chain Approach
Source: Christian Heneckes (2009).
6.3 NIMPF approach to value chain
NIMPF approach follows eleven steps in four phases for value chain development (see Figure 19).
Figure 19: Phases of NIMPF approach to value chain
As we can see from Figure 19, the first step at the diagnosis phase is to decide on the scope of the value
chain, in terms of what level to consider (sector or business to business), what objectives (transitional or
innovation objectives) and which linkages to consider, etc. Then, as a second step, we carry out
stakeholder analysis to identify key actors, their roles, driving forces, internal and external relations,
visions, values, power relations, dependencies, and effect or role in the project. The third step is to
undertake network analysis and identify possible relationships such as dynamics in the network,
transactions, transformations, value flow or added value, transactions and coordination costs, risks and
incentives. The fourth step in this phase is very important step as it helps us to identify and prioritize
bottlenecks and opportunities in the value chain. We can use a multilevel SWOT analysis; identify
incentive structures, assess infrastructure, socio-cultural, natural, economic and political conditions.
These processes will lead us to the second phase.
The second phase is known as device change phase. In this phase there are three steps. The first is to
invent improvement possibilities which to be followed by valuing and effecting analysis of each
improvement activity. In this step we can also identify decoupling points (the points where we can make
changes for improvement). In this phase, the last step is to develop different scenarios from which we
select to implement.
The third phase is to carry through change which involves steps of trying out as a first step and thereby
entering into full implementation. The third step in this phase is consolidation. Phase four is all about
evaluation (process and results evaluation). In most conventional project evaluations, the focus is on the
results/outputs. The value chain approach gives emphasis to the process (who, how, etc.) equal to that of
results.
6.4 The ICEBERG approach to value chain
The Iceberg approach is similar to the NIMPF approach that we discussed above. However, the Iceberg
principle is a model considering not only the visible, subject-logic level, but also the invisible emotional
level. According to the iceberg principle, the subject-logic level (strategy, structures, processes and
functions) amounts to 10% of the overall human capacity, and the cultural level (relationship processes,
social skills, attitude and motivation) to 90%. This principle is valid for corporate entities too. The
following figure implies that each phase is dependent on the process and prior results from previous
phases. For example, inventing improvements in the second phase is nearly impossible or would be
misleading without a carefull identification of stakeholders, their roles and networks as well as carefull
analysis of bottlenecks and opportunities in the first phase.
Figure 20: The Iceberg approach to value chain

From the four approaches that we have seen above, we can identify four key dimensions of a value
chain:
 It is consumer and demand driven  All partners add vale and share value; and
 It is based on collaboration between links;  It is a complex network of actors.

7. References
Christian Henckes, (2009). Value Chain Promotion in Agriculture. GTZ.
Cooper, Martha C., Douglas M. Lambert and Janus D. Pagh, “Supply Chain Management: More Than a
New Name for Logistics,” The International Journal of Logistics Management, Vol. 8, No. 1 (1997), pp.
1-14.
Fathi Elloumi, 2001. Value chain analysis: a strategic approach to online learning. Athabasca
University.
Free Press, New York
John Humphrey and Hubert Schmitz (2001). Governance in Global Value Chains. Institute of
Development Studies, IDS Bulletin 32.3, 2001.
John Humphrey, (2005). Shaping Value Chains for Development: Global Value Chains in Agribusiness.
German Technical Cooperation (GTZ), Eschborn. Micro report number167, USAID, ACDI/VOCA.
M. Porter (1985), Competitive Advantage, Creating and Sustaining Superior Performance, The
Mike Coates, Richard Kitchen, Geoffrey Kebbell, Catherine Vignon, Claude Guillemain and Robin
Hofmeister (2011), Financing Agricultural Value Chains in Africa, - Focus on Coffee and Sesame in
Ethiopia, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, Eschborn, Germany
Olaf Van Kooten, 2011. Value chain Management in Horticulture Lecture Note.
Paul van Hal, and Gert Jan Hofstede, 2004. Netchain IMProvement Framework: Framework for chain
and network diagnosis and change. Version 3.5. GJH PVH.
RTRS International Technical Group (ITG), 2010. RTRS Standard for Responsible Soy Production. As
an output of their meeting to review the RTRS Principles and Criteria for Responsible Soy: Field
Testing Version 1.0. (Sao Paulo, Brazil 24-27 March 2010).
Ruerd Ruben, Aad van Tilburg, Jacques Trienekens and Martinus van Bokel (2009?? ). Linking market
integration, supply chain governance, quality and value added in tropical food chains. In: Ruerd Ruben,
Martinus van Bokel Aad van Tilburg, and Jacques Trienekens (eds.), Tropical Food Chains: Governance
Regimes for Quality Management.
Ruth Cambell, (2010). Implementation Best Practices for Value Chain Development Projects.
Sebastiaan Hetterschijt, 2011. Lecture note on Sustainability: An Introduction.
Sergio G. Lazzarini1, Fabio R. Chaddad & Michael L. Cook, (2001). Integrating supply chain and
network analyses: The study of net chains. Chain and network science.
SNV, (2010). Private Sector Development in Ethiopia: SNV takes up the challenge in the value chains.
The Netherlands Development Organization (SNV): http://www.business-ethiopia.com.
SNV, (2011). SNV’s value chain development approach. The Netherlands Development Organization
(SNV): http://www.business-ethiopia.com.
Surendra Raj Joshi, (2008). Honey in Nepal: Approach, Strategy, and Intervention for Subsector
Promotion. German Technical Cooperation/Private Sector Promotion-Rural Finance Nepal (GTZ/PSP-
RUFIN).
Timothy J. Sturgeon (2008). From Commodity Chains to Value Chains: Interdisciplinary Theory
Building in an Age of Globalization. In: Frontiers of Commodity Chain
UNIDO (2009), AGRO-VALUE CHAIN ANALYSIS AND DEVELOPMENT, The UNIDO Approach.
A staff working paper. UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ,
Vienna.
Vijayender Reddy, 2011. Lecture Note on Value Chain Finance.
Vijayender Reddy, 2011. Lecture Note on Value Chain Marketing.
Vorst, Van der J.G.A.J., A.J.M. Beulens and P. van Beek (2005), Innovations in Logistics and ICT in
food supply chain networks, in: Innovations in Agri-Food sysyems, (Eds) W.M.F. Jongen & M.T.G.
Meulenberg, Wageningen Academic publishers, Wageningen,
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Haramaya University

Department of Agribusiness and Value Chain Management (ABVM)

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

Figure 1: Measuring Value

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

Figure 2: Measuring Value Added

2.1 Value Chain Concept

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

Figure 3: A generic Value Chain

Figure 4: Value Chain in a national and global environment

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

Agro-inputs: feed, seeds, fertilizers, pesticides Direct Sales

Food and Product Preservation

Food and Product Packaging

Figure 5: Links in food value chain

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

Value Chain Vs Supply Chain

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

3.1 VALUE CHAIN ACTORS

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

Value Chain Mapping: Detailed Map.

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

Chain formation Chain logistics

Information and Communication

Chain development Compliance with environmental & social norms

Chain management Aligning Production

A. Value Chain Strategy

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

Figure 7: Key consumer trend

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

IV. Information & communication Technology (ICT)

Figure 8: Barcode reader and barcode types

V. Value chain finance

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

Figure 9: Finance along the value chain

Input suppliers Seeds, fertilizers, pesticides, livestock feed, medicines, farm eq

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

Figure 12: Subjects of sustainability

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

4 Value Chain Analysis (VCA)

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

4.2 Steps in Value Chain Analysis

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

Step Two: Value Chain Mapping

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

Chain objectives Chain management Chain business process Chain performance

Figure 15: Value chain framework

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

|Analyzing Value Chain- Haramaya University 2015: Beyan A.

6.1 The Netherlands Development organization (SNV’s) Approach

Figure 16: SNV’s Value chain development approach

|Analyzing Value Chain- Haramaya University 2015: Beyan A.