BAHIR DAR UNIVERSITY

COLLAGE OF AGRICALTURE AND ENVIRONMENTAL SCIENCE

Department of agricultural Economics

Value chain Analysis individual assignment

Done by ADUGNAW GASHAW…………...BDU1307508

Submitted to bossena(PHD) submission date 18/07/2016 E.C

1. Suppose that tomato producers in a district named “district A” produced 20000 quintals of tomato. They sold
20% directly to consumers, 10% to collectors,30% to retailers and 40% to wholesalers. Collectors sold the
whole tomato they collected to retailers; wholesalers sold 20% to retailers, 80% to processors; processors
sold 30% of processed tomatoes to retailers and 70% to wholesalers. Processed tomato wholesalers sold the
whole processed tomato to retailers and retailers sold to consumer. There are support institutions like input
suppliers, financial institution, office of agriculture, agricultural research center, market development office,
NGOs who support production and marketing of tomatoes. Based on the provided information draw the
value chain map of tomato of district A.
we can represent the flow of products from producers to consumers through various intermediaries.

1. Tomato Producers (20000 quintals): 4. Processors:

- 20% sold directly to consumers - Receive 80% of tomatoes from wholesalers
- 10% sold to collectors - Process the tomatoes
- 30% sold to retailers - Sell 30% of processed tomatoes to retailers
- 40% sold to wholesalers - Sell 70% of processed tomatoes to
2. Collectors: wholesalers
5. Processed Tomato Wholesalers:
Sell the whole tomatoes they collect to retailers - Receive all processed tomatoes from
processors
3. Wholesalers: - Sell the whole processed tomatoes to retailers
- Receive 80% of tomatoes from producers 6. Retailers:
- Sell 20% to retailers - Receive tomatoes from producers, collectors,
- Sell 80% to processors wholesalers, and processors
- Sell directly to consumers
Producer
40%
producer Wholesalers
20%
20%
Consumers 10%

Collectors 70%
80%

30% Processors

30%
Retailer
 This value chain map illustrates the flow of tomatoes from producers to consumers through various
intermediaries, including collectors, wholesalers, processors, and retailers

2. Why presenting finding of chain analysis through stakeholder workshop is required?

It is required for the following reasons:

Validation of Analysis Findings: A stakeholder workshop allows for the validation of the findings obtained during
the value chain analysis process. By presenting the results to stakeholders, it provides an opportunity to confirm if
the identified opportunities and constraints align with their experiences and perspectives within the value chain.

Filling Information Gaps: Stakeholders often possess valuable insights and information that may not have been
captured during the initial data collection phase. Through a workshop, these gaps can be filled by engaging with
stakeholders directly, gathering additional data, and enhancing the overall understanding of the value chain
dynamics.

Enhanced Understanding of Problems and Context: The workshop facilitates a deeper understanding of the
challenges faced within the value chain, as well as the broader context in which it operates. By involving
stakeholders, a more comprehensive view of the issues at hand can be achieved, leading to more informed decision-
making.

Prioritization and Decision-Making: Engaging stakeholders in a workshop helps in prioritizing key areas for
intervention or improvement within the value chain. By collectively discussing and analyzing the findings,
stakeholders can collaboratively identify critical areas that require attention and develop consensus on potential
solutions.

Developing Campaign Concepts or Messages: In some cases, stakeholder workshops can serve as platforms for
generating campaign concepts or messages aimed at addressing specific issues identified through the analysis. This
collaborative approach ensures that communication strategies are well-informed and resonate with key actors in the
value chain.

In summary, conducting a stakeholder workshop to present findings from a chain analysis is crucial for validation,
information enrichment, problem understanding, prioritization, decision-making, concept development, and
garnering support from key stakeholders involved in or impacted by the analyzed value chain.

3. What is the importance of analysis of cost and benefit in value chain analysis?

Importance of Analysis of Cost and Benefit in Value Chain Analysis:

Efficiency Improvement: By understanding the costs associated with each step in the value chain, a company can
identify areas where costs can be reduced or eliminated. This leads to increased efficiency in production processes,
ultimately lowering the overall cost of delivering a product or service.
 Competitive Advantage: Cost analysis helps companies determine where they can create value at a lower cost
compared to their competitors. This competitive advantage can be leveraged to attract more customers, increase
market share, and improve profitability.

Resource Allocation: Understanding the costs and benefits of each value chain activity allows companies to
allocate resources effectively. By investing more in high-value activities and optimizing low-value ones,
organizations can maximize their returns on investment.

Profit Maximization: Cost and benefit analysis directly impacts a company’s bottom line. By optimizing costs and
maximizing benefits across the value chain, businesses can enhance their profitability and financial performance.

Strategic Decision-Making: Analyzing costs and benefits provides valuable insights for strategic decision-making.
Companies can use this information to prioritize initiatives, streamline operations, and align their activities with
overarching business goals.

Risk Management: Identifying cost drivers and assessing potential benefits also helps in managing risks within the
value chain. By understanding where risks lie in terms of costs and benefits, organizations can develop mitigation
strategies to protect against financial losses.

In conclusion, analyzing costs and benefits within the framework of value chain analysis is essential for companies
looking to enhance efficiency, gain a competitive edge, allocate resources wisely, maximize profits, make informed
strategic decisions, and manage risks effectively.

4. Why product quality and specification are considered as among the triggers of value chain
development?

Product quality and specification are considered among the triggers of value chain development due to their
significant impact on various aspects of the value chain. Here’s why they play a crucial role in driving value chain
development:

1. Enhanced Customer Satisfaction: High product quality and adherence to specifications lead to increased customer
satisfaction. When products consistently meet or exceed customer expectations in terms of quality, performance, and
features, it enhances customer loyalty and retention. Satisfied customers are more likely to make repeat purchases
and recommend the product to others, thereby driving demand along the value chain.

2. Competitive Advantage: Maintaining high product quality and meeting specifications can provide a competitive
advantage in the market. In today’s competitive business environment, customers have numerous options to choose
from, and they tend to prefer products that offer superior quality and reliability. By focusing on product quality and
specifications, companies can differentiate themselves from competitors, attract more customers, and capture a
larger market share.

3. Value Chain Efficiency: Product quality and specification influence the efficiency of the entire value chain. When
products meet predefined standards consistently, it reduces rework, defects, and delays in production processes. This
leads to smoother operations, reduced costs, improved productivity, and ultimately enhances the overall efficiency of
the value chain.
4. Supplier Relationships: High product quality often requires suppliers to adhere to specific standards and deliver
inputs that meet defined specifications. By setting clear quality requirements for suppliers, companies can build
strong relationships based on trust and reliability. Effective supplier partnerships contribute to smoother value chain

5. Market Access: Meeting stringent quality standards and specifications is often a prerequisite for accessing certain
markets or securing partnerships with key stakeholders in the value chain. Compliance with industry regulations,
certifications, or customer-specific requirements opens up opportunities for businesses to expand their reach
geographically or collaborate with larger entities within the value chain.

In conclusion, product quality and specification serve as critical drivers of value chain development by influencing
customer satisfaction, competitive positioning, operational efficiency, supplier relationships, innovation capabilities,
and market access opportunities.

5. Why setting parameters by governing firm (organization or institution) is required in value chain
governance?

Setting Parameters by Governing Firm in Value Chain Governance

In value chain governance, setting parameters by the governing firm is required for several reasons:

a. Product Design and Specifications: The governing firm sets parameters related to what is to be produced,
including product design and specifications. This ensures consistency and quality across the value chain,
aligning products with market demands and standards.

b. Production Processes: Parameters are established on how the product is to be produced, defining production
processes such as technology usage, quality systems, labor standards, and environmental considerations. This helps
maintain efficiency, quality control, and compliance with regulations.

c. Production Scheduling and Logistics: The governing firm determines how much is to be produced and when,
which involves production scheduling and logistics management. This ensures timely delivery of products to meet
market demands and optimize operational efficiency.

d. 2. Risk management: Parameters set by the governing firm can help in identifying and managing risks
within the value chain. By establishing clear rules and regulations, the governing firm can mitigate potential
risks and ensure smooth operations.

e. Compliance Monitoring: By setting parameters, the governing firm can monitor and enforce compliance with these
rules throughout the value chain. This oversight helps maintain consistency, quality assurance, and adherence to
legal requirements.

f. Lead Firm Role: The firm that sets these parameters becomes the lead firm in the value chain. As the lead firm
exerts control over other firms in the chain, it plays a crucial role in shaping industry practices, standards, and
relationships.
g. Industry Competitiveness: Setting parameters allows lead firms to drive industry competitiveness by ensuring
alignment with best practices, innovation, cost efficiency, and sustainability goals. It also fosters collaboration
among chain actors for mutual benefit.

h. Knowledge Transfer and Innovation: Governance through parameter setting facilitates knowledge transfer within
the value chain, enabling smaller enterprises to learn from lead firms’ best practices, adopt innovations, and enhance
their capabilities.

In essence, setting parameters by the governing firm in value chain governance is essential for establishing
standards, ensuring compliance, driving industry competitiveness, mitigating risks, fostering innovation, and
promoting sustainable practices throughout the value chain.

6. in which value chain governance structure do suppliers make product to a customer`s specification?

Modular. This is the most market-like of the chain network governance patterns. Typically, suppliers in modular
value chains make products or provide services to a customer's specifications.

In modular value chain governance structure, suppliers make products to a customer’s specifications. This
governance pattern is the most market-like among the chain network governance types. Suppliers in modular value
chains typically take full responsibility for process technology and produce goods or provide services according to
the customer’s specific requirements. They often use generic machinery that allows them to cater to a wide customer
base, keeping switching costs low and limiting transaction-specific investments. Despite complex interactions
between buyers and suppliers, the relationships are more substantial than in simple markets due to the high volume
of information exchange across the inter-firm link.

Therefore, in the modular value chain governance structure, suppliers tailor their products or services to meet the
exact specifications outlined by the customer.