Saturday, June 23, 2012

61 - Value chains

What is a value chain? A value chain is a sequence of activities or services related to some product or service that are necessary or valuable for the profitable marketing of that product or service.
Let us use an example. Let us say we are planting beans for sale. 
To produce beans we need tools, we need seeds, we need water, fertilizer, we need sacs, a storage place, we need buyers, we must transport the beans to the buyer, we need a bank where we can borrow money and we need a bank account where we can save the money from the sale of the beans. And we probably need a few more things. 
Each and everyone of us could try to provide all these things. And in some cases it may be possible, but when we are trying to grow seeds we may not be able to leave and take our product to the market. 
At some point we will find that it is better if we provide for some of our own needs and buy the other needs from someone else. For these services we pay someone. And this forms a value chain.
What one person sells another will buy. A service that I need will be provided by someone else. This sequence of activities and services creates opportunities for people to make money. This sequence is the value chain.
Most of us know this. But when we decide to produce something, like the beans in our example, it is important to understand the value chain that will support our work.
If we do not have tools, if we do not have a place where we can buy our tools, or our seeds, or our fertilizer, and if we do not have buyers for our beans our work will not be properly rewarded.
In communities where there is an active and well established market place most of these services are available and we only have to find someone who will do this or that specific job.
But in communities where there is no market place, like in most rural areas of our countries, the community needs to develop its value chain.
So, in a small community, an agricultural community, we need to be smarter. We need to know what each person can produce and that can be sold in the community, and we need to know what we can sell outside our community.

Each community needs to figure out what its own value chain needs to be.

We will look at this in another blog.

No comments:

Post a Comment