Group Work Sessions

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Building Development Oriented Rural Enterprises
Training and Project Development Workshop
Group Work Sessions
Workshop Resource
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DOCUMENT OVERVIEW
SESSION ONE Basic Business Process SESSION TWO
Organization SESSION THREE Marketing, Branding
and Promotion SESSION FOUR The RRAC Framework
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1. BASIC BUSINESS PROCESS

• The groups will be as follows
• GROUP ONE On-farm improvements
• GROUP TWO Procurement
• GROUP THREE Postharvest process
• GROUP FOUR Sales

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1 ON-FARM IMPROVEMENTS (TASK)
Identify the kinds on-farm improvements that are
most commonly needed in your area Using the
perspective of a DORE that will commercialize the
produce of local farms, identify how and to what
degree each improvement can - Help the business
to appeal to better customers - Improve the
economics for the farmer - Improve the economics
for the business - Solve distribution issues
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1 ON-FARM IMPROVEMENTS (WORKSHEET)
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2 SUPPLY MANAGEMENT TASK

• Suppose that you are running some kind of
  Business Advisory Service for rural enterprises.
  Managers often contact you and explain that
  farmers are breaking contracts with you and
  selling to independent traders. You want to make
  a list of possible strategies for solving this
  problem.
• Your task is to draft this list.
• To do this
• 1. Draft a list of strategies
• 2. Give some strengths and weaknesses of each
  approach (considering the impact it might have on
  the business and the relationship with suppliers)
• 3. Assess the overall attractiveness of the
  strategy
• Make separate lists for strategies based on
  positive incentives, negative incentives, and
  participation community commitment building.

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2 SUPPLY MANAGEMENT WORKSHEET
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3 POST-HARVEST PROCESS (TASK)

• You have been hired by a DORE based in Binchuan
  District in Yunnan province of Southern China
• The DORE buys about 3,000 MT of pomegranate from
  600 local farmers and sells them to exporters
  based in Kunming (the provincial capital)
• Farmers harvest the pomegranates themselves and
  bring them to local collection points, where the
  staff of your DORE collect them and transport
  them to a packing centre in Li Jao village (the
  district centre). They are prepared in the
  packing centre and then sent to the customer in
  Kunming
• Your task is to write a set of handling
  guidelines for
• Field handling (by farmers)
• Collection, Loading and Transportation (by
  Collection Staff)
• Packing operations (by Packing House staff)
• You should think about how to minimize post
  harvest losses, how to keep produce in good
  condition, and how to ensure good quality
• You should be as specific as possible

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3 POST-HARVEST PROCESS (WORKSHEET)
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4 SALES (TASK)

• Create a typology of the different kinds of
  customers that Development-Oriented Rural
  Enterprises can sell to
• Identify the ways that you can come into contact
  with each kind of customer (so as to make a sale)
• Identify some of the capabilities you have to
  have to reach each kind of customer
• Use the worksheet format provided if it is
  helpful

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4 SALES (WORKSHEET)
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DOCUMENT OVERVIEW
SESSION ONE Basic Business Process SESSION TWO
Organization SESSION THREE Marketing, Branding
and Promotion SESSION FOUR The RRAC Framework
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2. CASE STUDY BACKGROUND CONDITIONS

• The DORE is based in Botikot district of
  Nangahar province, in Eastern Afghanistan
• The land in Botikot is mostly flat and a mixture
  of farmland and unirrigated desert areas
• There is a good supply of water for most of the
  year because of snow melt in the central
  mountainous region draining through Nangahar in
  the direction of Pakistan
• Botikot is about one hour from the provincial
  capital, Jalalabad, which is a small city.
  Jalalabd is two hours drive from Kabul and two
  hours drive from the border with Pakistan
• Botikot has cold winters, with snow, and is hot
  and fairly arid for the rest of the year.
  Rainfall is low and the little rain that does
  fall evaporates quickly

Physical Conditions

• The DORE will support 500 farming families,
  divided into 30 farmers groups (1st-level CBOs)
• The families have an average income of under
  1000 per year and have serious food security
  problems
• Only 30 of men and 10 of women have been
  formally schooled. Despite low schooling 80 of
  men are literate. But only 10 of women are
  literate
• All the normal government departments exist in
  the area, but they provide almost no services of
  any kind- what little health, education and
  infrastructure that is provided is provided by
  NGOs and development agencies
• The villages have a traditional village
  leadership system called Jirgas, in which the
  village elders exert a very strong influence over
  their communities

Socio-Economics

• Most families produce wheat, vegetables and also
  mint
• Wheat and vegetables are sold through local
  traders, but mint is sold through the DORE
• The farmers groups already owns basic equipment
  for drying, distilling mint water and extracting
  the oil, and they will send them to the new,
  proposed DORE for packing, labelling and
  marketing
• The mint products are used medicinally in
  Afghanistan, and are very popular, so demand will
  be good

Production and Marketing
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2. CASE-STUDY BUSINESS PROCESS
6. Pays supplier group, after deducting marketing
cost
4. Label and pack, then dispatches ordered produce
2. Grow mint, and turn into dried mint, mint oil
and mint water, send to office
Sales Marketing Unit
Jalabad Office
Suppliers groups
Customers
3. Customer places order
1. Provides training on cultivation and processing
International NGO
5. Pays for produce
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2. TASK (OWNERSHIP MODEL)
1. Fill in the table and, and using your results,
choose an ownership model for the DORE
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2. TASK (ORGANIZATION DESIGN)
2. Make an organization chart- say what kinds of
people/groups will play each role, and what the
role is
Composition and Role
Composition and Role
Composition and Role
Composition and Role
Composition and Role
Composition and Role
Composition and Role
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2. TASK (SETTING MISSION AND GOAL)
Methods to achieve target (mission)
4. Set your mission and goal, using this
worksheet if it is helpful
Overall target (goal)
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2. TASK (KEY PERFORMANCE INDICATORS)
5. Identify the stakeholders in this project and
their interests, and work out a KPI to measure
each one
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DOCUMENT OVERVIEW
SESSION ONE Basic Business Process SESSION TWO
Organization SESSION THREE Marketing, Branding
and Promotion SESSION FOUR The RRAC Framework
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TASK INSTRUCTIONS

• Prioritize a customer to focus on by estimating
  the NPV and difficulty of serving that group
• Make a brand that will appeal to that group
  including
• - A list of objective attributes the product will
  have
• - A list of subjective attributes the product
  will have
• - A slogan that sums up the project
• Make a list of things that the DORE must do, and
  must not to, to be consistent with the brand
• Make a promotional strategy for the DORE

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2. CASE STUDY PROPOSED DORE

• Located in the northern highlands of India
• Fertile soils with good level of forest cover
• Tropical highland climate- monsoon, hot season
  and cool season, with characteristics in each
  season exaggerated compared to normal tropical
  climate
• Very poor access roads and secondary roads

Physical Conditions

• The DORE will support 800 farmers
• The families are very poor and have food
  security problems
• All of the villagers have received primary
  education, and 70 have received secondary
  education
• There is a high literacy rate
• The government is present in the area and tries
  to provide basic services
• There are several community forest groups in the
  area that conserve the forest and organize the
  harvesting and sale of Non-Timber Forest Products

Socio-Economics
Production and Marketing

• Farmers produce tea and many other crops in an
  agro-forestry setting
• The cultivation skill for the tea is adequate
  but not excellent
• Currently they dry the tea themselves but the
  process is not very well done
• Produce is currently sold in large sacks to
  local traders who then do basic packing and sell
  it in the local market

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CASE INFORMATION SEGMENT PROFILES
Service Requirement
Customer Characteristic

• High total production
• Low cost production
• Consistency of supply
• Ability to forecast output and make sure
  customer gets what they ordered

• Small and medium-sized wholesale buyers
• Mainly interested in quantity and reliability of
  supply
• Buy in large volume
• Very price-sensitive

DOMESTIC LOW-COST BUYERS

• Good cultivation skill
• Excellent postharvest handling
• Good postharvest handling and processing
  equipment
• Good packing, labeling
• Promotion and marketing may be needed
• Some method to reduce food safety problems is
  helpful

• Middle and high-income retail customers,
  supermarkets, expensive hotels and restaurants
• Require high quality
• Has issues with food safety
• Good quality packing and labeling can strongly
  influence buying decision
• Flexible buying practices- may buy a lot or a
  little depending on availability
• Not very price sensitive

LOCAL LUXURY MARKET

• Excellent cultivation skills
• Certified handling process (HACCP and EurepGAP)
• Multiple production certification systems-
  Organic and Fair Trade
• High ability to monitor and control production
• Good farmer skills in record-keeping
• Strong community organization

• Small European companies that use produce as
  ingredient in their processing
• Buys medium sized amounts, reasonably flexible
• Quality must be good
• Wants to convey a message of healthiness, and
  also Corporate Social Responsibility
• Willing to pay a very high price

EXPORT MARKET
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CASE INFORMATION SEGMENT ECONOMICS
NOTE
All figures in US Dollars, thousands
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TASK ESTIMATE SEGMENT NPVs
Low Cost Domestic
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TASK ESTIMATE SEGMENT NPVs
Luxury Domestic
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TASK ESTIMATE SEGMENT NPVs
Export
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1 ESTIMATE DIFFICULTY OF IMPLEMENTATION
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TASK PRIORITIZE SEGMENTS
0
Difficulty
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0
300
Net Present Value (, thousand)
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TASK MAKE A BRAND
Subjective Attributes
Slogan
_________________________________________________
______________
Objective Attributes
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TASK ALIGN OPERATIONS WITH BRAND
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TASK PROMOTION STRATEGY
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DOCUMENT OVERVIEW
SESSION ONE Basic Business Process SESSION TWO
Organization SESSION THREE Marketing, Branding
and Promotion SESSION FOUR The RRAC Framework
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TASK DESCRIPTION

• The proposed DORE will buy maize in Houaphan
  province and use it to manufacture pig feed,
  which can be sold in the province, and,
  eventually, nationally
• The idea is that this will replace the current
  source of pig feed, which is imported pig feed
  from Vietnam (some of which is actually made with
  grain from Houaphan)
• It is expected that the new feed will sell
  easily provided it can be sold for less than the
  Vietnamese feed (which sells at 0.55/kilo in
  either 25kg or 50kg bags) and it is of similar
  quality (i.e. has a similar nutrient mix)
• The DORE will therefore have to have the
  following functions
• Purchasing and Collection
• Processing/Manufacturing
• Sales and Distribution

Proposed DORE

• You must develop the project concept for this
  DORE, using the Rapid Rural Agricultural
  Commercialization Framework
• Using the information in this case study, the
  presentation and your general knowledge, complete
  the following tasks
• Specify the customer and crop
• Design a 3-stage business process, specifying
  what happens at each stage and what assets are
  needed
• Estimate the breakeven level and make any
  changes or recommendations needed based on the
  breakeven level
• Plan the development of the business
• Make an organization chart
• Create a governance development plan

Task
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CASE STUDY LAOS PDR

• Laos is a mostly mountainous, landlocked country
• Laos shares borders with Thailand, Cambodia,
  China, Myanmar and Vietnam
• Laos is a very poor country
• Its GDP is only 7b and the National Income per
  person is only 400
• It is ranked 130 out of 170 countries in the
  Human Development Index
• The country has a communist government that
  exercises a high degree of control over most
  activities in the country
• Laos used to be the second largest producer of
  opium in South-East Asia, but most of the opium
  has now been eradicated, and the government is
  focusing on improving the livelihoods of former
  opium farmers
• The level of commercial cash-cropping has
  increased rapidly over the last few years, driven
  mainly by cross border trade and investment from
  Vietnam, Thailand, and, especially China

Houaphan Province
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CASE STUDY MAIZE FARMING IN HOUAPHAN

• Houaphan Province is in the north-east of Laos,
  on the border with Vietnam
• The area is mountainous with a high level of
  primary forest cover, although forest is being
  cleared for farming
• The area has three seasons- a monsoon season
  (with high temperatures, humidity and rainfall),
  a cold season (with low overnight temperatures
  and little rain) and a hot season (with little
  rain)
• Primary and secondary roads have improved in the
  last few years but access roads are still poor

Physical Conditions

• The total population in Houaphan is about
  280,000 people
• The majority of the population have food
  security but minimal additional disposable income
• Over the last few years, most of the people in
  the province have been given access to basic
  health and education services, but many of the
  non-school-age people in the rural areas have not
  been educated and are only marginally literate
• The government is quite active in the area and,
  working with international organizations, is
  providing basic extension and investment
  programs, but these are at quite a low level and
  have not been at a large scale for very long (so
  there is a lot of work to do)
• There are some basic community groups that have
  been set up, but they are not yet well-organized
  and are not conducting many activities
• The main source of income is selling of
  Non-Timber Forest Products and maize. NTFPs are
  also kept for household consumption.
• One of the main expenditures is animal feed-
  farmers in Houaphan buy 300-400MT of feed per
  year for their animals

Socio-Economics

• The farmers in the province produce about 80,000
  MT of a commercial variety of maize
• The quality of the maize is fairly low but is
  starting to improve
• Almost all of the maize is sold to small and
  medium-sized traders who come over the border
  from Vietnam, purchase the maize and then sell it
  to animal feed manufacturers in their home
  country
• The traders provide seed and make an informal
  purchase agreement with the farmers to buy either
  at the future market price or a pre-agreed price
• The farmers thresh the maize before it is
  collected by the traders

Production and Marketing
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FINANCIAL INFORMATION

• One kilo of feed should be two-thirds dried
  maize. The farm-gate price of fresh maize is at
  most 0.15/kilo, but drying and removing foreign
  matter reduces it in weight by 25.
• The other one-third of the mass is made of a mix
  of ground fish bone, dicalcium and a vitamin
  mixture. This will cost an additional 0.12 per
  kilo. (With these nutrients, the feed will be the
  same or better quality as the imported Vietnamese
  feed.)
• Packing material costs 0.10 per kilo

Input Costs of Feed Manufacture

• The DORE will hire a General Manager who will
  cost 1,000 per month to employ, and there will
  also be additional staff costing 8,000 per year
  and labour costing 5,000 per year.
• The land on which the factory will be built will
  be leased for a cost of 6,000 per year
• Electricity for the factory, fuel for the
  delivery trucks and other utilities will cost
  10,000 per year
• There will be a budget for other services of
  5,000 per year

Operating Costs

• In addition to the operating costs, there should
  be a fixed cost of 20 of the total capital
  invested in the business. This will be
• The feed factory, worth 40,000 plus 10,000 of
  machinery and office equipment
• 20,000 worth of vehicles
• 50,000 of working capital

Capital Charge
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OUTPUT CUSTOMER AND CROP
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OUTPUT BUSINESS PROCESS
Processes

Assets Needed
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OUTPUT BREAKEVEN ANALYSIS
Operating Costs (USD)
Fixed Costs (USD)
Capital Charge (USD)
Breakeven Level (units)
Sale Price Per Unit (USD)
Profit Per Unit (USD)
Input Cost Per Unit (USD)
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OUTPUT BREAKEVEN CHART
Profit
0
0
Units
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OUTPUT BUSINESS DEVELOPMENT PLAN
Rapid Roll-Out
Stable Business
Years __-__
Years __-__

Infrastructure Postharvest Process
Purchasing/ Contracts

Marketing

Extension
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OUTPUT ORGANIZATION CHART
Composition and Role
Composition and Role
Composition and Role
Composition and Role
Composition and Role
Composition and Role
Composition and Role
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OUTPUT GOVERNANCE DEVELOPMENT PLAN