InclusIve BusIness M o d e l s T R A I N I N G M O D U L E S InclusIve BusIness Models T R A I N I N G M O D U L E S Food and Agriculture Organization of the United Nations Rome, 2017 The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations (FAO) concerning the legal or development status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The mention of specific companies or products of manufacturers, whether or not these have been patented, does not imply that these have been endorsed or recommended by FAO in preference to others of a similar nature that are not mentioned. The views expressed in this information product are those of the author(s) and do not necessarily reflect the views or policies of FAO. 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Cover photographs: ©FAO/Giulio Napolitano; ©FAO/Ishara Kodikara; Anne Wangalachi/CIMMYT contents Acknowledgements iv Abstract v Acronyms vi IntRoductIon 1 oveRvIew 3 SeSSIon 1 Opening session 7 SeSSIon 2 What does inclusive business models mean? 9 SeSSIon 3 Buyers’ perspective on procurement from smallholders 11 SeSSIon 4 Principles for inclusive and competitive business models 15 SeSSIon 5 Facilitating inclusive business models – entry points 27 SeSSIon 6 IBM approach – A methodology for implementation 37 SeSSIon 7A Business model analysis 39 SeSSIon 7B Visit to a market or an agribusiness 47 SeSSIon 8 BM tools: SWOT, Ansoff Matrix and Porters’ Five Forces 53 SeSSIon 9A Identifying common priorities 65 SeSSIon 9B Designing upgrading activities 67 s l e SeSSIon 10 d o Closing session 71 M s s e n i s u B e v i s u l c n I iii Acknowledgements This training package is the result of a participatory process involving a broad range of experts under the leadership of Siobhan Kelly (Agribusiness Economist, FAO). Special recognition is owed to Cora Dankers (Agribusiness Officer, TCIB, FAO), Natalie Vergara (Consultant, FAO), Moussa Djagoudi (Agribusiness Officer, FAO, Ghana) and Florence Tartanac (Senior Officer, ESN, FAO) for their guidance and feedback in the development of these materials. Acknowledgements are also given to Shane Hamill (Consultant, ESA, FAO) and Elena Ilie (Consultant, ESA, FAO) for providing a final review. Sincere thanks are due to Simone Morini (Publishing Expert, ESN, FAO) and Daniela Verona (Publishing Consultant, ESA, FAO) for design and publishing coordination. s l e d o M s s e n i s u B e v i s u l c n I iv Abstract Various types of inclusive business models (IBMs) can connect small producers to agricultural value chains. These include traders, agrifood processors, retailers and contract farming arrangements with large buyers. Supporting these business models and strengthening the linkages that connect smallholders to markets can improve the overall competitiveness of a value chain and reduce poverty. The training targets designers and implementers of farmer-market linkage projects including ministries, development organizations and NGOs, and can add value not only to smallholder-based development initiatives but also to the business activities of other actors involved in agricultural value chains including processors and buyers of agricultural produce. The IBM training package consists in a facilitator’s manual accompanied by a series of PowerPoint presentations. The manual provides guidance to the facilitator on how the sessions should be organized as well as on expected outputs, preparatory activities, reference notes, description of suggested activities and additional tools such as case studies or templates for group work. s l e d o M s s e n i s u B e v i s u l c n I v Acronyms AABM Macenta Banana Merchants Association BIF Business Innovation Facility BM business model Bs Blue Skies Ltd. cIAT International Center for Tropical Agriculture cTA Technical Centre for Agricultural and Rural Cooperation eu European Union FAo Food and Agriculture Organization FcI Farm Concern International Fo Farmers Organization GIdA Ghana Irrigation Development Authority GIZ German Agency for International Cooperation HQcF High Quality Cassava Flour HR human resources IBlF International Business Leaders Forum IBM inclusive business model IFAd International Fund for Agricultural Development leAF Linking Environment and Farming MBPu Macenta Banana Producers Union Mv Millennium Village nGo non-governmental organization sFl sustainable food lab sMAe small and medium agro-enterprise sMe small and medium-sized enterprise s l e snv Netherlands Development Organization d o Tss Transaction Security Service M s undP United Nations Development Programme s e n usAId United States Agency for International Development i s u WBcsd World Business Council for Sustainable Development B e v i s u l c n I vi Introduction Various types of inclusive business models (IBMs) can connect small producers to agricultural value chains. These include traders, agrifood processors, retailers and contract farming arrangements with large buyers. The IBM concept is based on the underlying idea that both the business community and poor farmers benefit from integrating smallholders into markets. The ‘inclusive’ and ‘business’ elements of IBMs often involve trade-offs if enterprises are expected to make profits and address smallholder constraints at the same time. However, when the needs and concerns of both small producers and buyers who constitute the main linkage of farmers to markets are considered, IBMs have the potential to contribute to poverty reduction, improved food and nutrition security, as well as to more competitive agricultural value chains. This IBM training package has been developed to support the design and implementation of smallholder-based market linkage initiatives and is the result of a participatory process involving a broad range of experts. Targeting designers and implementers of farmer-market linkage projects including ministries, development organizations and NGOs, these training materials have been developed to serve as guidance in training field practitioners on the IBM concept and approach. The training can add value not only to smallholder-based development initiatives but also to the business activities of other actors involved in agricultural value chains including processors and buyers of agricultural produce. These training materials represent one instrument by which FAO aims to fulfil its vision under Strategic Programme 4 on “enabling more inclusive and efficient agricultural and food systems” and Strategic Programme 3 on “poverty reduction”. General guidelines The IBM training package consists in a facilitator’s manual accompanied by a series of PowerPoint presentations. The manual provides guidance to the facilitator on how the sessions should be organized as well as on expected outputs, preparatory activities, reference notes, description of suggested activities and additional tools such as case studies or templates for group work. With the exception of the first and the last, each Module is accompanied by a PowerPoint presentation to be delivered by the trainer in a face-to-face setting. Additionally, detailed comments to guide the facilitator on the content that should be covered in each session can be found in the notes section of the presentation. It is expected that the facilitator is knowledgeable on market approaches for smallholder-based development such as the value chain approach. Depending on the targeted audience and its needs, the trainer can deliver the whole programme or select appropriate sessions as needed. To use the material in the most effective way, it is advisable for the trainer to consider the following: s l  Assess the target audience’s level of expertise on market approaches to design the training based on their e d needs. When possible, participants should have more or less the same level of expertise, which will allow for o M higher level of participation and dynamic discussions. s  Prepare the final agenda considering available budget and time. s e  Review in detail the suggested cases to decide if they are appropriate for the target audience. Choose cases n i and examples that are most relevant taking into account the interests of the target audience. s u  When developing new cases, keep them short (1 page) and ensure all relevant information regarding the B e session’s objective is included. v i  Plan the training ahead in time (minimum one month) in order to take care of all the logistical and s u administrative activities. l c n I 1 Throughout the training, reference is made to the document Inclusive Business Models: Guidelines for improving linkages between producer groups and buyers of agricultural produce. This publication provides a number of tools to complement the training. At the end of the training participants should be able to:  Understand the Inclusive Business Model concept and approach.  Reflect on assumptions related to linking farmers to markets – including the roles of value chain actors.  Identify trade-offs between competitiveness and inclusiveness to promote win-win situations.  Identify and use practical tools to promote inclusive business models within market linkage projects. s l e d o M s s e n i s u B e v i s u l c n I 2