Group Work Sessions

1
Building Development Oriented Rural Enterprises
Training and Project Development Workshop
Group Work Sessions
Workshop Resource
2
DOCUMENT OVERVIEW
SESSION ONE Basic Business Process SESSION TWO
Organization SESSION THREE Strengthening the
Business SESSION FOUR Economic
Evaluation SESSION FIVE Marketing, Branding and
Promotion SESSION SIX The RRAC Framework SESSION
SEVEN Your RRAC Project
3
3. BASIC BUSINESS PROCESS

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

4
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
5
1 ON-FARM IMPROVEMENTS (WORKSHEET)
6
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
• 3. Assess the overall attractiveness of the
  strategy
• Make separate lists for strategies based on
  positive incentives, negative incentives, legal
  methods and community-building

7
2 SUPPLY MANAGEMENT WORKSHEET
8
3 POST-HARVEST PROCESS (TASK)

• You have been hired by a DORE based in Popayan
  that commercializes tree tomato
• Your task is to write a set of handling
  guidelines for
• Field handling
• Transportation
• Packing operations
• 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

9
3 POST-HARVEST PROCESS (WORKSHEET)
10
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

11
4 SALES (WORKSHEET)
12
DOCUMENT OVERVIEW
SESSION ONE Basic Business Process SESSION TWO
Organization SESSION THREE Strengthening the
Business SESSION FOUR Economic
Evaluation SESSION FIVE Marketing, Branding and
Promotion SESSION SIX The RRAC Framework SESSION
SEVEN Your RRAC Project
13
ORGANIZATION TASK

• You will be given a case study describing a
  program to set up a DORE to commercialize mint
  grown by farmers in Eastern Afghanistan
• Your task is to create an organization for this
  DORE
• This involves 4 tasks
• 1. Decide on an ownership model
• 2. Create an organization chart
• - Choose line units
• - Decide whether each line unit will be committee
  or individual, and if individual, a farmer or an
  outsider
• - Decide who will be on the main oversight units
  (how many people, where they will come from, etc)
• 3. Make a vision and goal
• 4. Design a performance management framework
• Use the accompanying worksheets and the methods
  from the presentation if they are helpful

14
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 plentiful 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, and 80 of men and 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 each owns basic equipment for
  drying, distilling mint water and extracting the
  oil, and they will sent them to the DORE to be
  packed, labeled and marketed
• The mint products are used medicinally in
  Afghanistan, and are very popular, so demand will
  be good

Production and Marketing
15
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
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
16
2. TASK (OWNERSHIP MODEL)
1. Fill in the table and, and using your results,
choose an ownership model for the DORE
17
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
18
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)
19
2. TASK (KEY PERFORMANCE INDICATORS)
5. Identify the stakeholders in this project and
their interests, and work out a KPI to measure
each one
20
DOCUMENT OVERVIEW
SESSION ONE Basic Business Process SESSION TWO
Organization SESSION THREE Strengthening the
Business SESSION FOUR Economic
Evaluation SESSION FIVE Marketing, Branding and
Promotion SESSION SIX The RRAC Framework SESSION
SEVEN Your RRAC Project
21
3 TASK
ACQUIRING AND MANAGING SERVICE PROVIDERS

• Draft a list of the service providers that a
  DORE will need to thrive in the long run, e.g.
• Agricultural extension
• Credit providers
• Research providers
• Market information
• In each area, identify sources of these services
  (e.g. internal staff, university staff,
  government agencies)
• For each source, identify the strengths and
  weaknesses, and make a conclusion about how this
  source could be managed
• Use the worksheet format and the manual if it is
  helpful

22
3 WORKSHEET
23
DOCUMENT OVERVIEW
SESSION ONE Basic Business Process SESSION TWO
Organization SESSION THREE Strengthening the
Business SESSION FOUR Economic
Evaluation SESSION FIVE Marketing, Branding and
Promotion SESSION SIX The RRAC Framework SESSION
SEVEN Your RRAC Project
24
CASE THAI HERBAL SOAP
Your project area includes some protected forest.
At the moment the Forestry Department will not
allow any economic activities in the forest, but
you think that they may allow the community to
collect a wild herb that grows there. Your market
research has shown that the herb could be turned
into a kind of soap which would be popular in the
nearby city. You could set this up as a
community-owned business, but would it be a good
idea? Answer the following questions 1. Would a
herbal soap business be a good investment? 2.
How many bars of soap does the business have to
sell in year 2 in order to break even?
PROBLEM

• One bar of herbal soap costs 1.50 to make,
  including materials and packing, and uses 5 grams
  of the dry herb. Your research shows that about
  200 kilos of the herb (fresh weight) could be
  collected every year without over-harvesting.
• The business will need two people collecting the
  herb, and four people manufacturing the soap, who
  will each be paid 60 per month for part-time
  work. They will all be women. (The actual people
  doing the harvesting and manufacturing will be
  changed, so that many women in the village can
  benefit from the extra money.)
• Market research already done has shown that many
  spas and tourist locations would be willing to
  buy the soap. The preferred packing is packs of
  40, which will sell at 85 per box. However,
  getting a pack to market will cost 8 per box.
• The business should be able to continue
  indefinitely.
• There will be some costs needed to set up the
  business. In the first year, the village women
  will each be given 6 1-day training courses on
  the manufacturing process, on group management
  and on book-keeping. The women will be given 4
  days of training in year 2, and 3 days in year
  three. The cost of one day of training, including
  faculty time, materials and food for the trainees
  is 2000 per day.
• A small building will be constructed. This will
  be used for the manufacturing, for group
  meetings, for drying the herbs and for storage.
  The building will require 15,000 in materials
  and labour. It will also need a solar dryer that
  will cost 2,000. These assets will also need to
  a budget for maintenance and repair, equal to 10
  of their total cost, for every year.

COSTS BENEFITS
Use a discount rate of 15
DISCOUNT RATE
25
CASE THAI HERBAL SOAP (CONTINUED)
If you have time remaining after completing the
first two tasks, please re-calculate the Net
Present Value of the business in the following
scenarios GROUP ONE. The sale price of the soap
is 70 per box GROUP TWO. The labour cost is only
40 per month per person GROUP THREE. It takes 3g
of herb to make a bar of soap
SCENARIOS
26
WORKSHEET NET PRESENT VALUE
Divide by discount rate
27
WORKSHEET BREAKEVEN LEVEL
1. Calculate Capital Charge
3. Calculate Profit Per Box
4. Calculate Break-even point
2. Calculate Fixed Costs
28
DOCUMENT OVERVIEW
SESSION ONE Basic Business Process SESSION TWO
Organization SESSION THREE Strengthening the
Business SESSION FOUR Economic
Evaluation SESSION FIVE Marketing, Branding and
Promotion SESSION SIX The RRAC Framework SESSION
SEVEN Your RRAC Project
29
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

30
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

31
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
32
CASE INFORMATION SEGMENT ECONOMICS
NOTE
All figures in US Dollars, thousands
33
TASK ESTIMATE SEGMENT NPVs
Low Cost Domestic
34
TASK ESTIMATE SEGMENT NPVs
Luxury Domestic
35
TASK ESTIMATE SEGMENT NPVs
Export
36
1 ESTIMATE DIFFICULTY OF IMPLEMENTATION
37
TASK PRIORITIZE SEGMENTS
0
Difficulty
10
0
300
Net Present Value (, thousand)
38
TASK MAKE A BRAND
Subjective Attributes
Slogan
_________________________________________________
______________
Objective Attributes
39
TASK ALIGN OPERATIONS WITH BRAND
40
TASK PROMOTION STRATEGY
41
DOCUMENT OVERVIEW
SESSION ONE Basic Business Process SESSION TWO
Organization SESSION THREE Strengthening the
Business SESSION FOUR Economic
Evaluation SESSION FIVE Marketing, Branding and
Promotion SESSION SIX The RRAC Framework SESSION
SEVEN Your RRAC Project
42
CASE 1. BACKGROUND

• Community is located in the north-west tip of
  the Thai highlands, close to Myanmar border
• The soils are poor quality due to over-farming
  and erosion
• Tropical highland climate- monsoon, hot season
  and cool season, with characteristics in each
  season exaggerated compared to normal tropical
  climate
• Access roads and secondary roads are okay
  (usable 90 of year) and primary road is excellent

Physical Conditions

• There are 600 families in 4 villages
• The communities are mainly Palong and Muser
  ethnic groups who emigrated from Myanmar and who
  have been in Thailand for 10-30 years
• The families are very poor by Thai standards
  (average income about 500 per household per
  year) but mostly have enough to eat
• Ability to speak, read and write Thai depends on
  age/generation- 90 of young people, 50 of
  middle-aged people, 20 of old people
• There is a village headman but his influence is
  weak, and there are no other community groups

Socio-Economics

• Each household has about 1.5 hectares divided up
  amongst several plots
• Most popular crops are green beans, kidney beans
  and cabbage
• The total annual production of each is green
  beans, around 200MT, potatoes around 700MT,
  cabbage, around 500MT, although any can be /-30
  or more depending on weather, market conditions,
  what the farmers plant, etc .
• Farmers have to purchase their own planting
  material and inputs in a nearby town
• Farmers mostly use commercial varieties but the
  produce quality is very mixed because of lack of
  cultivation skill and lack of technical support
  (i.e. no extension services)
• Farmer productivity is also low for the region
  due to poor soil quality, low levels of input use
  and low farmer skill
• Potatoes are bought by an agent who specializes
  in selling to contract farming companies who have
  failed to hit their purchasing targets, beans and
  cabbage are sold to small local traders.

Production and Marketing
43
CASE 2. LOCAL MARKET CHAIN FOR BEANS
Small traders
Medium trader
Super-market
Wholesaler

• Buy from individual farmers _at_THB12/kilo
• Buy loose, ungraded
• Have small facilities in nearby village to do
  basic sorting and packing with 4-5 staff
• Purchase about 200-500 kilos at a time
• Sell about 2-5MT at a time
• Total annual sales about 50MT

• Buy from small traders _at_THB16/kilo
• Buy in sacks of three grades
• Have facilities in nearest town to check grading
  and put into large crates, 10 staff
• Purchase about 2-5MT at a time
• Sell about 10-20MT at a time to wholesaler of
  grade 1 or 2
• Bottom grade (50) sold to local wet markets
• Total annual sales about 200MT

• Buy from medium traders _at_THB20/kilo
• Buy large crates of grade 1 or 2
• Has large facility in city to check produce and
  pack for delivery to customers with 30 staff
• Purchase about 10-20MT at a time
• Sell between 100kg and 1MT at a time in
  individual plastic bags containing 1 kilo each,
  good quality
• Total annual sales about 1000MT

• Buy from wholesaler _at_THB22/kilo
• Buy crates with individual kilo bags in batches
  of 100kg-1MT at a time
• Sell directly to retail customers in stores at
  THB38/kilo
• Stores are all large supermarkets in city
  centres with 40-50 staff
• Total annual sales about 2000MT

44
CASE 2. LOCAL MARKET CHAIN FOR CABBAGE
Small traders
Medium trader
Super-market
Wholesaler

• Buy from wholesaler _at_THB14/kilo
• Buy crates with individual kilo bags in batches
  of 100kg-1MT at a time, superior quality

• Buy from individual farmers _at_THB6/kilo
• Buy loose, ungraded
• Have small facilities in nearby village to do
  basic sorting and packing with 3-4 staff
• Purchase about 300-800 kilos at a time
• Sell about 4-8MT at a time
• Total annual sales about 100MT

• Buy from small traders _at_THB8/kilo
• Buy in sacks of two grades
• Have facilities in nearest town to check grading
  and put into large crates, 12 staff
• Purchase about 4-8MT at a time
• Sell about 30-40MT at a time to wholesaler
• Total annual sales about 400MT
• Low grade produce sold to local wet markets

• Buy from medium traders _at_THB10/kilo
• Buy sacks from medium-sized trader
• Has large facility in city to check produce and
  pack for delivery to customers with 25 staff
• Purchase about 30-40MT at a time
• Sell between 100kg and 1MT at a time in
  individual plastic bags containing 1 kilo each
• Total annual sales about 2000MT

Local Restaurants

• Buy from wholesaler _at_THB12/kilo
• Buy crates with loose produce in batches of
  20-50kilos per time, average quality

45
CASE 3. MARKET CHAIN FOR POTATOES
Contract Farming Co.
Agent
Frito Lay

• Buy from individual farmers _at_THB5/kilo
• Buy loose, ungraded
• Has a large facility in the nearby town to pack
  produce, and several collection staff
• Purchase about 800kg-1000kg at a time
• Sells all produce in 2 batches per year to
  contract farming company, usually around 500MT
  per year

• Buy from agent _at_THB9/kilo
• Buy large batches and ships in trucks to Frito
  Lay
• Has large facility in Chiang Mai with extensive
  packing, sorting and cold storage, refrigerated
  trucks, etc
• Purchase around 250MT from agent twice a year,
  to make up for shortfall in supply from
  contracted farmers
• Sell about 10,000MT p.a. to Frito Lay

• Buy from contract farming companies _at_THB12/kilo
• Receives large crates of potatoes properly
  graded and cold-stored at Chiang Mai facility
• Has facility to peel, cut. Fry, flavour and pack
  potatoes into potao chips, 20,000MT p.a.
  capacity, 120 workers
• Produces potato chips for sale in Thailand and
  export

46
OUTPUT CUSTOMER AND CROP
47
OUTPUT HANDLING PROCESS

48
OUTPUT BUSINESS DEVELOPMENT PLAN
Rapid Roll-Out
Stable Business
Years __-__
Years __-__

Management Systems

Infrastructure Postharvest Process
Purchasing/Contracts

Marketing

Extension
49
OUTPUT ORGANIZATION CHART
Composition and Role
Composition and Role
Composition and Role
Composition and Role
Composition and Role
Composition and Role
Composition and Role
50
OUTPUT GOVERNANCE DEVELOPMENT PLAN
51
DOCUMENT OVERVIEW
SESSION ONE Basic Business Process SESSION TWO
Organization SESSION THREE Strengthening the
Business SESSION FOUR Economic
Evaluation SESSION FIVE Marketing, Branding and
Promotion SESSION SIX The RRAC Framework SESSION
SEVEN Your RRAC Project
52
1 PROJECT AREA PROFILE
Physical Conditions
Socio-Economics
Production and Marketing
53
2 PRIORITIZE CROP
Market Acceptance
Quantity Produced
54
3 IDENTIFY PRODUCT AND CUSTOMER
55
4 DESIGN THE HANDLING PROCESS

Process
Equipment
56
5 ESTIMATE THE BUDGET
57
6 ESTIMATE THE BREAKEVEN LEVEL
1. Calculate Capital Charge
3. Calculate Profit Per Sale
4. Calculate Break-even point
2. Calculate Fixed Costs
58
7. ORGANIZATION CHART
Composition and Role
Composition and Role
Composition and Role
Composition and Role
Composition and Role
Composition and Role
Composition and Role
59
8. PLAN BUSINESS DEVELOPMENT
Rapid Roll-Out
Stable Business
Years __-__
Years __-__

Management Systems

Infrastructure Postharvest Process
Purchasing/Contracts

Marketing

Extension
60
9. PLAN GOVERNANCE DEVELOPMENT
61
10. SERVICE PROVIDER STRATEGY
62
11. SET MISSION AND GOAL
Methods to achieve target (mission)
Overall target (goal)
63
12. SET PM FRAMEWORK
64
Thank you