Chapter 4: Enabling Environment for Value Chain
Development
Business Enabling Environment(BEE)
The enabling environment for business is critical to value chain
development and growth of a vibrant private sector and firms.
The business environment of the value chain comprises the macro-
level conditions that affect all value chain actors.
These include a wide range of issues such as:
public policy and administrative governance,
The level of bureaucracy
BEE…
laws and regulations,
market regulation through grades and quality standards,
the trade regimes and regulations for importing inputs and exporting
products
the capacity and quality of infrastructure and utilities, and
the availability of public and private services
the business culture of public and private actors
The level of financial sector modernization and regulation;
Levels of trade access
Enabling Environment…
Constraints in the enabling environment can limit business growth
through:
■ Increasing costs
■ Decreasing competitiveness
■ Decreasing product and service quality
■ Increasing business and investment risk
■ Decreasing foreign and domestic investment
■ Constraining businesses’ willingness to pursue long-term Strategies
A poor business environment not only limits local firms’ capital
investments, it also obstructs foreign investment.
BEE: Improving Business Services
Profitable value chains are supported by services
that allow the chain to grow, be more efficient, and
enhance its competitiveness.
The range of services that can add value and
strength to a value chain is vast.
Examples include:
Input supply
market information and product development
support
Business management and consulting
Transportation and logistics,
Quality assurance (including certifications)
Skills, extensions and training, and
credit and other financial services.
Cluster and Network Development
“Clusters are geographic concentrations of interconnected companies,
specialized suppliers, service providers, and associated institutions in a
particular field that are present in a nation or region.”
Associated institutions can include trade organizations, funding
organizations, universities, research organizations, and labor unions,
among others.
Cluster…..
As a collection of related firms, the cluster benefits from proximity and can
increase those firms’ competitiveness in the marketplace by exploiting
synergies and linkages such as:
■ Improved market access
■ Firm specialization
■ Access to information and market intelligence
■ Bargaining power
■ Policy change
■ Collaboration
■ Implementation of standards
■ Producer-marketer collaboration
■ Supply chain management
■ Branding and image
■ Shared investment in workforce development, certification and skills,
technology, and services
RELATIONSHIP BETWEEN VALUE CHAINS AND CLUSTERS ….
At their core, clusters are centered on elements of one or
many value chains.
Because clusters emphasize locational factors or other
commonalities, they can incorporate many value chains or
portions of them that operate across clusters.
Clusters can form across many links in the value chain or
deepen a specific link.
From a development perspective, assistance to the value
chain is part of the cluster approach.
Clustering is a tool to strengthen firm relationships
Advantages of Clustering
Clusters help small firms over-come constraints
associated with size, promote technological
development, and enhance their ability to compete
in local and global markets.
The gains of clustering include localized external
economies, particularly economies of scale and
scope
Geographical proximity also creates possibilities for
local co- operation, between firms and through
Support to Small and Medium agro-enterprise…
The favored approach for upgrading capabilities of SMEs has been to
provide Business Development Services (BDS).
BDS continue to be favoured by donor and government agencies.
These services include market access, product design, quality control,
and production training
Supporting participation in trade fairs is an important service for
enterprises that operate in markets in which many producers face
many buyers.
In markets dominated by few buyers, helping producers to access
these buyers and visit their chains is a valuable service.
Types of Ethiopian Government Support for SMEs:
Working premises with least leasing
price,
Product display center with least leasing
price,
Technical and business management
training,
Counseling service
Loan provision,
Market linkage
Exhibition, trade fair organization
Access to technology
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