Technology
Technology has always been the
key driver which redefined value chains. The use of technology covers a
large spectrum right from designing and applying a better tool to having
a complex inventory management system as in the case of a large format
store. When it comes to livelihood promotion we are often governed by
our ideologies, capabilities and preferences and this tends to produce
sub-optimal results for the community.
The key to identifying
appropriate technology is to take a customer‘s perspective. The question
which we need to reflect upon is whether a given step will result in a
better and uniform production, faster product delivery and lowering of
product management costs and therefore, whether it will benefit the end
consumer. If so then this should be our choice. Any enterprise which
adopts this strategy will be able to beat its competitors and create a
niche for itself.
Cost
The competitive advantage which
a producer may enjoy is a function of its ability to manage costs. A
producer with lower costs will always have an advantage.
In the context of livelihoods,
one is taking a broader view of the term ‘costs’. For a livelihood
enterprise costs include personal as well as social costs which the
owner expects to recover from the enterprise.
For example, during one of the
studies of retail enterprises in the rural areas of Jharkhand, I met
several enterprise owners who said that a large portion of their "sales"
actually consisted of household consumption by their large households.
What it told me was that we often refuse to acknowledge social costs as
an element of the cost of production. If this is taken into
consideration then the enterprise must generate very high returns to be
able to support this sort of cost structure.
This is not feasible as the
type of goods sold and quantities traded offer little scope for going
beyond subsistence returns. This is true as much for farming as it is
for livestock or trading.
Product Differentiation
The third dimension in managing
value chain is to create product differentiation. This is often referred
to as unique selling proposition as it allows a producer to redefine the
cost structure within a given value chain.
One of the best examples of how
product differentiation contributes to creating a Unique Selling Product
is the case of handloom saree. The base raw material is invariably
cotton or silk and yet one finds significant variations in terms of
designs, weaving pattern and colour, allowing the weaver to seek a
premium.
For enterprises that operate in
commodity business space, the opportunity to differentiate products is
limited and that restricts the ability of the producer to charge a
premium. This affects their earning potential. In such a situation, the
majority of the producers are likely to earn normal or below normal
returns.
Implications
The above discussion highlights
the key issues that need to be addressed by the implementing agency.
Once the value chain mapping is done, one can identify the best option
available in order to derive a competitive edge.
q
Sachin Mardikar
Sachin.Mardikar@reliancefoundation.org
ngpsachin@gmail.com