A survey of value chain studies in Asia (Part-2)

A survey of value chain studies in Asia

Value chain analysis – Hilsa marketing, Bangladesh

Hilsa (Tenualosa ilisha) – national fish.
Most important single species, economically and emotionally.
30% of national fisheries prodcution.
88% marketed internally for domestic consumption.
12% exported to ethnic markets.
Fish marketing system are complex, traditional, and less competitive.

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Primary market

Purchase price (PP) 0.88
Marketing costs (MC) 0.05
Sales price (SP) 1.02
Market margin (MM=SP-PP) 0.14 (8%)
Marketing profit (MP=MM-MC)0.09
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Secondary market

Purchase price (PP) 1.02
Marketing costs (MC) 0.07
Sales price (SP) 1.39
Market margin (MM=SP-PP) 0.37 (23%)
Market profit (Mp=MM-MC) 0.30
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Retail market
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Purchase price (PP) 1.39
Marketing costs (MC) 0.04
Sales price (SP) 1.61
Market margin (MM=SP-PP) 0.22 (14%)
Market profit (Mp=MM-MC) 0.18

Market margin and Marketing Profit – Hilsa marketing

Vietnam’s seafood industry: A socially embedded division of state owned and local Chinese owned enterprises in regional value chains?

Seafood industry is the country's third largest exporter
Dominating position on the Japanese market and market of Mainland China has increased in importance
To illustrate how the structures of value chains are embedded in lead firms as well in the supplying firms in the value chain
State owned enterprises (SOEs) and the local Chinese dominated private seafood sector
Nature of the value chain as shaped by the institutional environments and the social actors, who give specific attributes to the different nodes of the chain in local, national, regional and global spaces
Shrimp Value chains are three types:
1. Local Chinese Owned Pvt. Companies:
i. Marginalized in HACCP standard procedure
ii. Minor group of enterprises succeed to upgrade to HACCP
2. State Owned Enterprises /SOE

***Overseas Chinese dominated shrimp value chains***

Shrimp value chain: SOE or Local Chinese owned private limited company.

Local Chinese Owned Pvt. Companies vs SOEs

01. Forward linkages with farmers
02. Provide feed, capital, antibiotics and other inputs to farmers
03. Price is higher (15%)
04. Use new technology; IT, market information, certification
05. New processing plants
06. Long term supplier contracts
07. Use ethnic networks to market products
08. Strong ties with Diaspora

Shrimp value chains to Japanese market

Overseas Chinese dominated shrimp value chains

1. Local Chinese Owned Pvt. Companies
Use regional relationships to enhance ;
market power, coordinating skills, market penetration, brand establishment, & entering into high value markets
2. Minor group of enterprises succeed to upgrade to HACCP

Use relationship in Diaspora communities to clear branding strategies, contact variety of regional and global retailers, developed market linkages through ICT
Products to ethnic markets: low level of value addition and traditional tastes, flavours, methods...

Similarities of fish marketing systems in developing vs developed countries

01. Both have to face the same basic challenge of providing safe food of right type and quality, to right place to right people those who are willing and able to pay

02. Market composed of mixture of local and imported fish and fishery products

03. Complex panorama of actors, enterprises and institutions

04. Important role of supermarkets in fish and fishery product retailing

05. Presence of hotel restaurant and institutional channels, and therefore some food service suppliers

06. Increasing role of regulations and standards


Differences of fish marketing systems in developing vs developed countries

01. Vastly different scale at system and enterprise level

02. Percentage of product handled formally lower in less developed countries

03. Share of fresh versus processed or manufactured much higher in less developed countries than emerging or developed countries

04. Supermarket share is rising still and fast in less developed countries to detriment of smaller retailers and wholesale markets

Challenges for developing country suppliers in general

1. Choosing between commodity and specialty markets
2. Retaining and expanding market access
3. Gaining and holding a position in lucrative value/supply chains
4. Penetrating, holding, expanding better markets
5. Raising productivity and competitiveness
6. Increasing value added
7. Dealing effectively with emerging standards

PESTLE analysis

Political Factors

Importance : Increasing   >; Unchanged  =; Decreasing  <

Low political interest among the general public and therefore little or no pressure on government   Low political pressure from fishermen and boat owners Low interest among politicians High interest among government to improve the situation on post harvest losses Frequent changes in policy due to rapid changes in politically elected authorities within the government affecting stability of practical resolutions Possibilities for fishermen- and vessel owner associations to influence future policy making and contributing to political decisions International agreements e.g. IOTC

= >  = >  >   >   >

Economical Factors

Importance : Increasing   >; Unchanged  =; Decreasing  <

Low average catches affect fishermen’s incomes and availability of capital to invest in improvements  Low purchasing power among a large group of customers in the  domestic market Un equal income distribution and growing upper middle class  Limited knowledge in financial accounting affects operation of small and medium sized fishermen’s businesses The ongoing civil conflicts in Asia affects governmental expenditures and decreases the possible funding of development in the fisheries sector The tsunami disaster had severe effect on the Indonesian, Sri Lankan, and Thailand fisheries sectors e.g. on development and capacity

01.                  =     02.                  >    03.                  >    04.                  <  05.                  >  06.                  <

Sociological Factors	Importance : Increasing   >; Unchanged  =; Decreasing  <
01. Acceptance of low quality fish 02. Lack of awareness 03. Food safety and health problems due to low fish quality 04. The attitude of fishermen 05. Lack of specialized education among fishermen 06. Religious sentiments affecting industrial practices	1.      <  2.      <  3.      >    4.      >  5.      >  6.      =

Technological Factors	Importance : Increasing   >; Unchanged  =; Decreasing  <
Lack of infrastructure (e.g. facility, machinery, tools, practices) Inferior boat design Inferior harbor design Insufficient availability of freezing facilities Inadequate processing facilities Selectivity of fishing gear (i.e. gillnets) Lack of technological improvements (e.g. freezers, insulating boxes etc.) Lack of proper hygienic practices Inadequate transport facilities	1.      <    2.      >  3.      >  4.      >    5.      >  6.      = 7.      >    8.      >  9.      =

Legal Factors	Importance : Increasing   >; Unchanged  =; Decreasing  <
Legal Factors   •       Lack of regulations, monitoring and enforcement on:  Quality standards  Food safety  Hygiene standards  Fish handling  Illegal inland fishing •        Regulations in foreign export markets (e.g. EU, USA and Japan) •       General trade agreements and tariff	>    >  >  >  >  >  >    =

Environmental Factors

Importance : Increasing   >; Unchanged  =; Decreasing  <

Environmental Factors •       Insufficient availability of clean water •       Tropical weather conditions and climate change •       Pollution in harbor basin water •       Lack of adequate sewage management •       Oil spills in harbors •       Hygienic conditions onboard boats and in harbors •       Sustainability of fish stocks •       Stock size (When stocks are large and catches good, post harvest losses tends to increase)

>   >    >  >   = >    <  =

Drivers and governors of change on the demand side…

01. Demographics: growth rate; age distribution; ethnicity; race; geographic distribution; extent of travel; exposure to food-related information and retailer promotion
02. Consumer preferences: price vs. quality/condition; convenience; year-round availability; variety; nutritional content; safety; greenness; fair trade; luxury goods
03. Buyer specifications: volumes; presentation; labeling; private standards; certification; price point; service
04. Technology: marketing information systems; category management methods; progress in supply chain management; transport and handling advances
05. Regulatory change: official standards and associated certification; labeling (nutrition, COOL, allergens); market access; environmental protection; OSHA; labor rights; animal rights
06. Market access: tariffs; quarantine restrictions; other non-tariff trade barriers (NTBs)
07. Factor costs in distribution and retailing: energy; transport; labor
08. Economic growth trends: GDP; disposable income; levels and use of consumer credit; inequality of wealth

Drivers and governors of change on the supply side…

1. Product/market conditions: effective demand; prices; competition
2. Procurement practices: value chain integration; compliance with private standards; preferred supplier arrangements; new terms of sale
3. Factor prices and availability for production and shipping: land; capital; labor; energy; transport
4. Producer preferences: overall investment per crop area; price levels and their variability; production risk
5. Technology: marketing information systems; supply chain management; quality assurance regimes; transport and handling technologies; post-harvest and production technologies
6. Regulatory change: capacity to deal with market access requirements and standards; dealing with local and national restrictions on land use, inputs, labor contracting and treatment
7. Demographics: availability of seasonal labor; existence of a local market for seconds and an urban market for export-quality product

Conclusions and Implications

Different institutional contexts of end-markets are linked to different forms of coordination and control of value chains. Economically and socially important species and value chains are differ widely across Asia. Networks both local and regional enhance the value addition.

1. Need to develop vision on: learning, investment, market access, sales, and exports
2. Make sure the policy environment as favorable as possible, but don’t assume that will be enough
3. Identify and support promising value chains with assistance at key point in the supply chain based on collaborative analysis of challenges, joint definition of priorities, and expert assistance from industry-experienced people
4. Take a cluster approach only as the starting point for value chains, not as an end in itself.
5. Concentrate on competitiveness and productivity
6. Look for and exploit multiple ways to add value once initial success has been attained with a single deal
7. Seek sustainability within value chains, not in the development programs or projects
8. Recognize that some keys to success require mainly public sector intervention, others only private, and some a mixture of the two
9. Seek private sector alliances at all stages of supply and value chains