Mango market chain in Burkina Faso
Market segmentation and marketing channel design
Joyce ten Broeke
Student number:
1226762
Supervisors University of Groningen:
Clemens Lutz and Eelko Huizingh
Supervisor SNV:
Ousmane Ouedraogo
Research conducted:
October 2005 - July 2006
University of Groningen
Faculty of Management & Organization Department of Marketing
SNV Dutch development organization Burkina Faso
Preface
In front of you is the dissertation for my Masters’ degree in Business Science at the University of Groningen.
In October 2005 my African adventure started: with mixed feelings of curiosity for the unknown I arrived in Burkina Faso. Soon the country with its warm people and colourful street scenes embraced me, and even faster I became familiar with the fruit that takes up the central position within this thesis: the mango. At this moment, July 2006, I am proud to be able to present to you the result of the research that I conducted on commission of the Dutch development organization SNV.
In the first place I would like to thank Clemens Lutz and Kees-Jan van Til, for initiating this project. They gave six Dutch students the unique opportunity to get acquainted with the challenges and constraints of doing research in a West- African context. I would like to thank our colleagues of SNV Bobo Dioulasso for sharing their practical knowledge, introducing us to clients and their overall interest in our research. Thanks to Ousmane Ouedraogo for his contribution as my supervisor at SNV Bobo Dioulasso. For their help during the writing of my dissertation I would like to thank my supervisors at the University of Groningen.
Clemens Lutz for the way he familiarized us with the application of the marketing channel approach and for always being available to answer our questions. Eelko Huizingh for his undivided support from the moment that we approached him for the project and the way he extended his role as second supervisor. I found our meetings stimulating and useful. Finally, thanks to my family and friends for coaching me through the graduation period.
Joyce ten Broeke
(joyce_ten_broeke@hotmail.com)
Management summary Context
SNV is an international development organization based in the Netherlands. It is active in 31 countries. In 2002, they implemented a new strategy, focused on capacity building and local responsibility instead of supplying expertise. This new strategy transformed SNV to an advisory organization. SNV has several field offices in developing countries. Two of these can be found in Burkina Faso, a landlocked country in the West-African Sahel. In Burkina Faso, local production of mangos takes place in the South-Sudanian region. One of the PAO
1-projects of SNV in Burkina Faso is giving advice to mango producing companies. This research aims to identify opportunities in existing and alternative market segments in the mango trade market to improve the position of mango producers in Burkina Faso.
Theoretical Framework
The starting point for this research is Coughlan’s marketing channel approach (2001). Additional theories with respect to market segmentation (Smith, 1956), institutions (North, 1997; Williamson, 2000) and resource dependency (Pfeffer and Salancik, 1978) are used. Due to their mutual coherence these theories provide a useful basis for understanding the economic and sociological perspectives of the mango market in Burkina Faso.
Conclusions
Though the export of fresh mangos from Burkina Faso has been developing well during the last couple of years, further expansion is restricted as a result of the high transportation costs of mangos from this landlocked country and the limited supply of required export varieties. With regard to processed mango products, Burkina has to cope with strong competition of Southeast Asia (e.g. Thailand, India and the Philippines) and Brazil. Processing activities in Burkina Faso are mainly on handicraft and semi-handicraft level, whereas export markets often require large scale production of processed products.
The domestic market offers perspectives for processed products. Opportunities for processed products lie in the urban areas where people lack time and alimentary needs are changing fast in the presence of money. Low priced processed mangos can serve as a substitute for fresh mangos in rural areas far away from the production zone (i.e. they guarantee a full place supply of mangos). Furthermore, processing activities make out of season consumption of the mango possible (guarantee of a full year supply).
The involvement of the producer in the execution of marketing flows is small, and there are several opportunities for mango producers to obtain a greater gross margin. First of all, the producer should extend his tasks on the maintenance of the orchard. He should gear his method of operation more towards the demands of the final consumer by the application of grafting techniques. Furthermore, he can integrate vertically in the marketing channel by fulfilling the function of commercialisation within the domestic and sub regional market himself.
Horizontal collaboration with other producers can solve limitations of equipment and financial means. The combination of security upon purchase of the mangos and the fixed prices offered by exporters make the European market very beneficial for the producer. However, participation requires investments in certifications and maintenance of the orchard. Here again, collaboration with other producers can bring relief.
1 Programme d’Appui aux Organisations locales et intermédiaires
The important task for the government is to define the rules that have to be respected by the authors in the market and, subsequently, to enforce these rules.
Corruption and problems concerning obtaining credit have to be eliminated and
investments have to be made in rural infrastructure, technology and human
capital. Another important task for the government is to develop and support
product and market development.
Abbreviations
ACP African, Caribbean and Pacific Group of States
APIPAC Association des Professionnels de l’Irrigation Privée et des Activités Connexes
BAME Chambre of commerce
CDS Cercle Des Sécheurs
CEAS Centre Écologique de Albert Schweitzer DTA Département Technologie Alimentaire FEDAF Fédération des Agriculteurs Fruitières
FLO Fair-trade Labelling Organisation GAP Good Agricultural Practices
GIE Groupement d’Intérêt Économique GPS Groupement Professionnel des Sécheurs
INERA Institut de l’Environnement et de Recherches Agricoles INSD Institut National de Statistiques Démographique MARA Ministère de l’Agriculture et des Ressources Animales
NGO Non Governmental Organization
ONAC Office National de Commerce Extérieur
PAO Programme d’Appui aux Organisations locales et intermédiaires
PAPME Projet d’Appui aux Petites et Moyenne Entreprises SOBFEL Société Burkinabè des Fruits Et Légumes
SOCABE Société Coopérative de l’Agriculture de Bérégadougou UAFK Union des Agriculteurs Fruitière de Kénédougou UCOBAM Union des Coopératives Maraîchères du Burkina
UDPFK Union Départementale de Producteurs Fruitière de Koloko
UFMB Union Fruitière et Maraîchère du Burkina Faso
Table of Contents
Chapter 1: Introduction ... 8
1.1 Introduction of SNV ...8
1.2 Research background...8
1.3 Justification of the research ...9
1.4 Research objective ...10
1.5 Research statement and sub-questions...10
Chapter 2: Theoretical background ... 12
2.1 Review of literature ...12
2.1.1 Marketing channels approach...12
2.1.2 Market segmentation...14
2.1.3 Institutional theory...15
2.1.4 Resource dependency theory...16
2.2 Conclusions ...17
Chapter 3: Conceptual framework and methodology... 18
3.1 Conceptual framework ...18
3.2 Design of the research ...19
3.3 Data collection methods...20
3.4 Research period...21
3.5 Participants ...21
3.6 Data analysis...22
3.7 Limitations...23
3.8 Conclusion...23
Chapter 4: Practical background... 25
4.1 Introduction on Burkina Faso ...25
4.1.1 The country of underdevelopment...25
4.1.2 The importance of the agricultural sector...26
4.2 The mango in Burkina Faso ...26
4.3 The actors in the mango marketing channel...29
4.3.1 Producers...31
4.3.2 Processing organizations ...32
4.3.3 Traders ...32
4.3.4 Secondary actors...33
4.4 Conclusion...33
Chapter 5: Market Segmentation... 35
5.1 Types of mango products...35
5.1.1 Fresh mangos ...35
5.1.2 Processed mango products ...36
5.2 Description of trade markets...37
5.2.1 National and sub-regional market ...37
5.2.2 European market...37
5.3 Description of existing market segments ...40
5.3.1 Fresh mangos for the national/sub-regional market...40
5.3.2 Fresh mangos for European market ...41
5.3.3 Processed mangos for national/sub-regional market ...43
5.3.4 Processed mangos for European market ...44
5.4 Conclusion...45
Chapter 6: Positioning ... 48
6.1 Fresh mangos for the national/sub-regional market ...48
6.1.1 Transport ...48
6.1.2 Storage...49
6.1.3 Processing ...49
6.1.4 Distribution...49
6.1.5 Promotion ...49
6.1.6 Quality guarantee ...49
6.1.7 Finance ...49
6.1.8 Business relations...50
6.2 Fresh mangos for the European market ...51
6.2.1 Transport ...51
6.2.2 Storage...52
6.2.3 Processing ...52
6.2.4 Distribution...52
6.2.5 Promotion ...53
6.2.6 Quality ...53
6.2.7 Finance ...53
6.2.8 Business Relations ...53
6.3 Dried mangos for the European market...56
6.3.1 Transport ...56
6.3.2 Storage...56
6.3.3 Processing ...57
6.3.4 Distribution...57
6.3.5 Promotion ...57
6.3.6 Quality guarantee ...57
6.3.7 Finance ...58
6.3.8 Business relations...58
6.4 Conclusion...59
Chapter 7 Targeting... 60
7.1 Breakdown of marketing costs within the segments...60
7.2 Judgement on performance ...62
7.3 Favourable (potential) market segments for mango producers ..63
7.4 Recommendations for Channel Design ...64
7.5 Conclusion...65
Chapter 8: Conclusions ... 66
8.2 Positioning...67
8.3 Targeting ...67
8.4 Channel design...68
Bibliography ... 70 Appendix A: Overview of actors ... Error! Bookmark not defined.
Appendix B: Map of Burkina Faso ... Error! Bookmark not defined.
Appendix C: List of interviewed persons ... Error! Bookmark not defined.
Chapter 1: Introduction
1.1 Introduction of SNV
In the last couple of years the Dutch development organization SNV has been subjected to a major change. Before, SNV worked together extensively with the indigents and fulfilled a role within the execution of projects. After the turning point in 2002 SNV had to intensify its fulfilment of consultancy practices: from that moment on their role became purely an advising one. Nowadays, SNV is an organization whose core activity involves the worldwide transfer and exchange of knowledge, skills, ideas and technology. SNV uses qualified professionals to give disadvantaged populations in less developed countries a better outlook for the future.
SNV has several field offices in developing countries. Two of these can be found in Burkina Faso, a landlocked country in the West-African Sahel. In Burkina Faso, local production of mangos takes place in the South-Sudanian region. It is mainly in the hands of small and medium-sized producers. Some of these produce under contractual arrangements with processing units and export traders. One of the PAO-projects of SNV in Burkina Faso is giving advice to mango producing companies. This research aims in particular to identify opportunities to improve the position of mango producers in Burkina Faso.
1.2 Research background
With a production of more than 240,000 tons of fruits and more than 40,000 tons of vegetables a year, the fruit and vegetables chain contributes to 3.4% of the national production and to 2.8% of the export yield of Burkina Faso. The total revenue of this chain is an estimated 12 milliard FCFA (about 18 million euro).
This research focuses on a fruit that accounts for 55% of the total fruit production in the country: the mango.
Out of the roughly 160,000 tons of mangos produced each year, it is estimated that about 110,000 tons are consumed in the country or exported – the rest rots away in the area of production (Sicarex, 2000). This situation is dramatic for Burkina Faso, a country with a national balance of trade deficit and a scarcity of food.
The mango business can supply opportunities for poverty alleviation in Burkina Faso. There is a stable domestic demand for the fruits and international demand for exotic fruits is growing.
The export market differs from that of local- and sub-regional markets in the way it has to be served. This is partly due to its different background and characteristics. Where local and sub-regional markets can be described as informal markets with limited institutional influences, European markets are highly regulated. There are several environmental constraints that make it difficult for the actors in the Burkinian mango market to meet the export markets needs. These constraints include difficulties concerning the maintenance of the orchard, the lack of infrastructure and transport facilities, the absence of formal commercial contracts between actors, and, lastly, the financing of the activities.
Moreover, there is strong competition from neighbouring countries such as Mali and Côte d’Ivoire, but also worldwide from South America (a.o. Brazil and Peru), South Africa and Asia (a.o. India)
2. A clear vision and a strong organisation of the
actors is necessary for the market actors in Burkina Faso in order to gain a foothold in the international market.
Today, the area of commercialisation of mangos is complex: many actors and intermediaries are involved in the mango chain. More than 15,000 people work in the mango business, in all links of the chain (production, transport, transformation and commercialization). These people are producers, traders, seasonal workers, chauffeurs, and so on.
With this information as a background to the research, the management of SNV Burkina Faso has formulated their initial management question as follows:
“Investigate opportunities for mango producers from Burkina Faso: market segmentation and proper marketing channel design.”
There already is a lot of detailed knowledge about the mango market among the consultants of SNV. However, there is little experience in structuring and positioning this knowledge. This research can give SNV a renewed vision on the mango market by applying the marketing channel approach: segmenting the market, analyzing the role of the actors and their value adding activities in the market segments, looking after the business relations within the segments and interrelating these findings to the demanded service outputs. The way of thinking and the conclusions that follow from utilizing this approach are helpful in providing valuable advice.
1.3 Justification of the research
SNV Burkina Faso wants to involve the Faculty of Management and Organization, of the University of Groningen, in their consultancy practices in Burkina Faso. The proposed support consists of action oriented research projects in which local SNV- staff, students and lecturers of the University participate. Action oriented means that the research focuses on some clearly identified problems SNV staff and their clients are facing.
This research focuses on market identification and channel design in the mango market of Burkina Faso. It is part of a larger study which examines the whole mango market of Burkina Faso and aims to improve market access for mango producers in this country. Other research concentrates on:
- The organization and execution of commercial activities by mango-producers and the producer organisations (Kalbfleisch, 2006);
- The logistical opportunities and constraints in the mango market of Burkina Faso (Ravenshorst, 2006);
- Commercial collaboration possibilities between Burkina and Ghana (De Jong, 2006);
- Commercial collaboration possibilities between Burkina and Niger (Balving, 2006)
Because the research has been conducted in a French-speaking country, French
expressions will sometimes be used. These will be printed in italics.
1.4 Research objective
The objective, which gives the research a clear purpose and direction, is formulated as follows:
“Provide advice to SNV about the opportunities for mango producers on existing and alternative market segments in the mango trade market of Burkina Faso.”
How can producer organizations achieve a stronger market position? The answer can be found in the marketing channel strategy. Properly functioning markets serve both the producer at the one end of the marketing chain and the consumer at the other end. This research concludes with some recommendations for a proper design of the marketing channel. These recommendations are initially aimed at producer organizations, but they cannot and should not be realised without involving the other participants of the mango marketing channel.
1.5 Research statement and sub-questions
For this study the following research question can be formulated:
“Opportunities for mango producers in Burkina Faso: which market segments exist and which marketing channel designs are needed to serve the demand properly?”
To achieve maximal profit for all participants, the entire marketing channel should focus on satisfying the final consumer. This requires coordination of activities by the interdependent channel members.
Four sub-questions are important for answering the above stated research question:
1. Which market segments can be distinguished in the mango trade markets of Burkina Faso and what is the size of these segments?
For the first sub-question different market segments in the mango market in Burkina Faso will be identified. The segments are distinguished by crossing product types and trade markets. Every segment requires different service outputs to satisfy the demands of the final consumer.
2. How are the marketing channels organized for these segments?
Different demands mean a different organization of marketing channels. This
difference in demand calls for the development of new tasks and functions in the
marketing channel. Within the second sub-question, for every segment the
marketing flows will be described. Additional attention will be paid to the
description of business relationships between the participating actors.
3. Which market segments should be targeted by producer organizations?
For the third sub-question, the point of reference is the perspective of the producer. Opportunities for the producer might be founded in new market segments within the national, sub-regional and European market. Another possibility is extending the producer’s activities to marketing channels in which he already participates (e.g. activities that are in the present situation executed downstream in the value chain).
4. Which marketing channel design for these segments would satisfy producers’ interests and final consumers’ demands?
The way the mango market is currently organized does not satisfy all participants involved. This dilemma is of great importance for SNV Burkina Faso, because it hampers some of their clients in functioning well. The focus of the fourth sub- question is on the channel members’ division of the marketing tasks that have to be undertaken in order to improve the channel design.
Combining the answer to these sub-questions, their reflection of the present
market segmentation and the marketing channel design, will give us an answer to
the initial management question.
Chapter 2: Theoretical background 2.1 Review of literature
The theoretical background of this research is derived from Coughlan (2001).
Additional, theories with respect to market segmentation (Smith, 1956), institutions (North, 1997; Williamson, 2000) and resource dependency (Pfeffer and Salancik, 1978) are used. Due to their mutual coherence these theories provide a useful basis for understanding the economic and sociological perspectives of the mango market in Burkina Faso.
2.1.1 Marketing channels approach
The initial management question within this report can be simplified to one central theme: marketing channels. This theme is the principal point of departure for the further research. It is therefore useful to provide some background on the basic ideas and concepts behind a channel analysis.
Why is the marketing channel approach so important in analyzing the mango market? Marketing channels are behind every product and service that both consumer and business buyers purchase (Coughlan, 2001: 1). It is through marketing channels that a vast array of consumer demands (service output demands) is satisfied. Marketing channels make products and services conveniently available to consumers when, where and how they want them; the consumers often only see the end result. Marketing channels and the people who participate in them consist of complex and dynamic systems. The complexity of the system is made up of independent, partly competing and partly mutually dependent market actors. In this research we will map the process ‘behind the scene’ of the mango production: the channel from the producer to the final consumer.
Marketing channels are the downstream part of the value chain, and they consist of a number of channel members all involved in making the final product available for the final consumer. Coughlan (2001) considers those channel members as utility creating parties that help the end-users consume a combination of product and channel services that are attractive to them. The key members of a marketing channel can be divided in primary actors and secondary actors.
Primary actors are directly involved with carrying out of the marketing flows in order to serve final consumers (e.g. producers, processors, traders, etc.).
Supporting actors provide technical assistance, projects and programmes for development of the mango marketing channel (e.g. governmental services, NGO’s, banks, etc.).
The combination of primary activities and support activities (from here: flows) contribute to the establishment of the process. The ultimate goal of this process is the consumption of the mango by the final consumer, resulting in repeated purchases. Specific channel members may specialize in performing one or more flows and may not participate at all in the performance of other flows. According to Coughlan (2001), flows should be shared only among those channel members that can add value or reduce costs by bearing them.
Identifying what flows are performed in the marketing channel, by whom and at
what levels is helpful in several aspects of channel management. Coughlan
(2001) distinguishes between seven generic channel flows. In figure 2.1 an
example is given of the marketing channel flows within the local market.
Figure 2.1: Mango marketing channel flows
Based on: Lutz, 2002
1. The first flow is the transport flow. Transport refers to the physical transfer of the mango through the channel. It borrows various means according to the nature of the product, the quantities collected and distances that have to be covered.
2. The second flow involves the storage of the product and refers to the physical keeping of the mango. This means the waiting time prior to further movements of the product along the chain.
3. The processing flow refers to the physical change of the state of the product. The product can be treated or the product is truly transformed to an unrecognizable state (e.g. dried mangos, mango juice, etc).
4. The distribution flow takes care of the commercialisation of the mangos.
The product is brought closer to the final consumer in variable quantities.
5. The promotion flow contains all public relation-activities that contribute to:
- increasing awareness of the product sold;
- providing information about the product’s unique characteristics and advantages to potential buyers;
- persuading potential buyers to actually buy the product.
6. The quality guarantee flow refers to the guarantee of a good quality mango. This can be based upon official acknowledged rules of guarantee (European markets) or self-maintained standards (national/sub-regional markets).
7. The finance flow refers to the availability of credit and risk taking of an undertaking. Risk necessitates contracts and price-guarantees that restrict the danger of losses. Financing flow costs may be carried by the manufacturer or an intermediary, or even by an outside channel member who specializes in these activities, such as a bank.
The concept of flows in the marketing channel helps to convey its dynamic nature. Changes, originating both from the demand-side as well as from the
STORAGE (2) TRANSPORT (1)
FINANCE (7) PROMOTION (5) DISTRIBUTION (4) PROCESSING (3)
TRANSPORT
PROCESSING
DISTRIBUTION
PROMOTION
FINANCE STORAGE
P
R O D U C E R S
W H O L E S A L E R
F I N A L
C O N S U M E R QUALITY
QUALITY (6)
TRANSPORT
STORAGE
PROCESSING
DISTRIBUTION
PROMOTION
QUALITY
FINANCE
R
E
T
A
I
L
E
R
supply-side, always take place. New forms of distribution emerge; different types of intermediaries appear in the channel while others drop out, unusual competitive structures close off some avenues of distribution and open up others.
Changing patterns of buying behavior and new forms of technology add yet another dimension of change. Channel flows must be adapted to these changes.
Innovative channel strategies (e.g. focusing upon new market segments) and effective and efficient channel management are needed to make this happen.
A judgment upon performance of the marketing channel can be based upon the criteria of effectiveness and efficiency. Effectiveness can be explained as the degree in which channel members in which the channel succeeds in offering the services in coherence with the final consumers’ demands. Within an effectively organised and structured marketing channel every channel member must be able to succeed the sale of his total supply. Efficiency is about the manner in which effectiveness is attained: when this occurs efficient, it should occur against the lowest costs possible. Marketing channels are said to be efficient if the price consumers ultimately pay adequately reflects storage costs, transportation costs and differences in price due to product form.
2.1.2 Market segmentation
One of the fundamental principles of marketing is the segmentation of the market. Markets have been segmented and products and services differentiated for as long as suppliers have differed in their methods of competing for trade (Dickson and Ginter, 1987). A market segment is a group of potential buyers (Alsem, 2005). Segmentation involves subdividing markets, channels or customers into groups with different needs, to deliver tailored propositions that meet these needs as precisely as possible (Leeflang, 2002).
Market segmentation is inextricably connected to product differentiation; hence, different opinions regarding the nature of this relationship exist. Some marketers and economists describe product differentiation as an alternative to market segmentation (Smith, 1956; Samuelson, 1976). Others treat product differentiation as a complement to or means of implementing a market segmentation strategy (Shaw, 1912; Chamberlin, 1965; Porter, 1976).
In its simplest terms, product differentiation is concerned with adapting demand to the will of supply (Smith, 1956: 5). It is an attempt to shift or to change the slope of the demand curve of an individual supplier. This strategy can also be employed by a group of suppliers such as a cooperative of mango producers, where members have agreed to work together. The definition of product differentiation seems very applicable in the practical situation as reflected within the domestic (national and sub-regional) market: the supply of mangos appears inexhaustible, but there are many niches within these markets that are not (yet) discovered.
Segmentation is based upon developments on the demand side of the market. It represents a rational and more precise adjustment of product and marketing effort to consumer or user requirements (Smith, 1956:5). In the language of the economist, segmentation is disaggregative in its effects and tends to bring about recognition of several demand schedules where only one was recognized before.
The meaning of segmentation in this context is very appropriate in comparison
with the export market where highly variable and tough demands have to be
fulfilled
Within the marketing channel approach, market segments are best defined on the basis of demands on the outputs of the marketing channel. Service outputs are the value added services created by channel members and consumed by end- users along with the product purchased (Coughlan, 2001:31). Consumers have varying demands for these service outputs. Understanding and responding to those demands can create new business opportunities for mango producers and processors. Grouping end-users in the market by demands for service outputs helps us define potential target segments for which we can design specific marketing channel solutions (Coughlan, 2001: 44).
2.1.3 Institutional theory
The institutional theory (North, 1997; Williamson, 2000) focuses on (both the written and unwritten) legislation in the channel. According to North (1991), institutions are “the humanly devised constraints that structure political, economic and social interaction”. This rather abstract description can be clarified by making the distinction between tangible ‘formal constraints’ (constitutions, laws, property rights, etc.) and intangible ‘informal constraints’ (such as sanctions, taboos, customs, habits and traditions) (Lutz, 2002: 130). Institutions can also be seen as a means of guiding behaviour. The performance of the mango market can be seen as a result of the combined action of institutions that coordinate the exchanges and the initiatives taken by individuals, governmental organisations and non-governmental organisations.
Williamson (2000) distinguishes between four types of institutions:
1. Informal institutions resulting from the social context.
The social context is made up of informal institutions in the marketing channel such as customs and religion. These types of institutions are of great importance in developing countries where many exchange relationships are based on ethnic or kinship ties (Habtom, 2006). Local culture can be measured by looking at cultural constraints that limit the trader in his business.
2. Formal institutions defining the rules of the game in the market.
The rules of the game are the rules that are imposed on the market. These rules are often enforced by the government or market authorities. A well- organized institutional environment should facilitate economic transactions, and the rules must be respected by all actors in the market. An important task for the government is to define the rules and, subsequently, to enforce them in order to guarantee that the market is a level playing field (Lutz, 1994, 2002).
3. Institutions defining the play of the game in the market.
The play of the game concerns the mutual arrangements between actors involved in a transaction. The actors involved in a transaction can agree on conditions of transaction and responsibility of partners in contracts.
4. Institutions defining resource allocation inside the firm.
These institutions are situated on a micro-level (inside the firm) and are often
the consequence of the preceding institutions. Because of their dependency,
these institutions can change constantly when markets and economic
conditions change. Within this research this level of institutions will be
neglected as a consequence of the research scope.
Institutions prescribe the arrangements between actors (the coordination mechanism) for the flows within the marketing channel and they may accommodate the execution of these flows. The institutional theory can make a valuable contribution to the marketing channel approach, by analyzing the contribution of existing institutions on transactions made between the various actors of the Burkinian mango market.
2.1.4 Resource dependency theory
The resource dependence theory (Pfeffer & Salancik, 1978) assumes that every organisation in the channel needs certain critical resources to function and to survive. The theory relates the behavior of an organization to its critical resources and suggests that no organization is self-sufficient.
Every organization needs access to resources that it does not control and must acquire those resources by interacting with external groups or organizations. A crucial activity for organizations is to find ways of eliminating or reducing dependence on outside resources, or to achieve stability in its relationships with those on whom it depends for resources.
The concept of dependence is strongly related to the concept of channel power:
Emerson (1962) considers dependency as the opposite of power. Channel power is the ability to alter another organization’s behaviour. According to Coughlan et al. (2001) the power of the marketing channel is determined by and equal to its weakest link. In other words: the success of the overall channel structure is directly dependent on the performance of the individual channel members.
Seeing power as dependence focuses the channel analyst on the issue of replaceability, an important aspect of power. Marketing channel members must work together to serve end-users. But this interdependence does not mean that what is good for one person is good for everybody. Channel members are always looking for new ways to reduce uncertainty and manage dependence. Through (in)formal linkages they try to get access to their resources and to stabilize their outcomes. Who gets what and how much of the relationship, depends on the bargaining power of the parties involved.
Used in the marketing channel approach, the resource dependence theory views the organization of marketing channels as the challenge how to generate the resources needed to manage the marketing channel functions (Tesfom et al, 2004). In this research, by resources we mean the resources to fulfil the transport, storage, processing, distribution, promotion and finance flows in the mango marketing channel. In general, these flows should be shared only among those channel members who can add value or reduce cost by bearing them.
However, specialization increases interdependencies in channels, and thus creates the need for close cooperation and coordination in channel operations. Three elements that determine the degree of dependence of other actors in the mango marketing channel can be distinguished (Pffeffer and Salanzik, 1978):
1. the importance of the resource for the organization (the higher the importance, the higher the dependence)
2. the discretion over the resource (the extent to which others control the resource: the higher the discretion, the higher the dependence)
3. the number of alternatives for the resource (the fewer the alternatives, the
higher the dependence)
According to the resource dependency theory, to avoid dependency, to maximize power, to get access to resources and to manage uncertainty of the supply of resources, the subsequent actors in the mango marketing channel can develop different organizational forms of relationships. In brief, the practical implication of the resource dependency theory is uncovering the factors that lead to an actors’
dependence, power influence, and control mechanisms.
2.2 Conclusions
After having introduced the theories separate from each other, it is useful to give an abstract of their main conclusions in table 2.1.
Table 2.1: Main conclusions theoretical background
Theory Key concepts Interfaces with this research
Marketing Channel Approach
(Coughlan et al., 2001)
• Marketing channels
• Service output demands
• Channel members (actors)
• Channel flows
• Complex and dynamic systems
• Performance connected with degree in which service output demands are fulfilled
• Flows should be shared only among channel members who can add value or reduce costs by bearing them Market segmentation and
product differentiation (Smith, 1956)
• Market segmentation
• Product differentiation • Segmentation is subdividing markets into groups with different needs (point of departure is demand)
• Differentiation is concerned with the bending of demand to the will of supply (point of departure is supply) Institutional theory
(North, 1997; Williamson, 2000)
• Written and unwritten legislation
• Formal vs. informal constraints
• Types of institutions (informal institutions, rules of the game, plays of the game, resource allocation)
• The performance of the marketing channel can be interpreted as a result of the combined action of institutions
Resource dependency theory
(Pfeffer and Salanzcik, 1978)
• Types of critical resources (importance, discretion, alternatives)
• Dependency
• Channel power
• The actors within the marketing channel are not self-sufficient, but have to develop different
organizational forms of relationships to avoid dependency and to
maximize power
Chapter 3: Conceptual framework and methodology
3.1 Conceptual framework
The conceptual framework serves as a leading guide in answering the main research questions. It includes the theoretical concepts that were presented in Chapter 2. The structure of the framework is based on the channel design process of Coughlan (2001). The framework involves in sequence the phases of segmenting the market, identifying optimal positioning responses to segments’
demands and targeting the segments on which to focus the channel’s efforts.
These steps can be found back in figure 3.1.
Figure 3.1: Conceptual framework
Based on: De Jong, 2006
The first step is segmentation. Segmentation initiates the structuring of strategic decisions by determining products and consumer markets. According to the marketing channel approach, segmentation is based on the service output demands of consumers in every segment. Key segments are chosen based on size, opportunities and service output demands.
The second step is positioning. Activities and relationships are arranged in a certain way as a response upon the service output demands of a market segment. In this research a description of the most important mango marketing channels in Burkina Faso will be provided. Therefore, within the positioning phase, the activities as well as the business relationships between the actors in the channel are described. The activities will be discussed according to the marketing flows as introduced in section 2.1.1. Business relationships are explained by the institutions as classified by Williamson (2000) in section 2.1.3 and by the factors that determine resource dependence between actors as sorted by Pfeffer and Salanzik (1978) in section 2.1.4.
STRATEGY TAKING ACTUAL DESIGN
1. SEGMENTATION
• Products
• Consumer markets Selection criteria:
• Size
• Opportunities
• Service output demands
2. POSITIONING
ACTIVITIES Marketing flows:
• Transport
• Storage
• Processing
• Distribution
• Promotion
• Quality
• Finance
RELATIONSHIPS Institutions
• First level
• Second level
• Third level Dependence
• Importance
• Discretion
• Alternatives
3. TARGETING Challenges and opportunities for improved channel design
Definition of service output
demands Provide a
description of the key marketing
channels
Identify improved business opportunities for mango producers
Improvement of performance of the market chain
The third step, targeting, is a result of the phases of segmentation and positioning. For the actual channel design considerations have to be made on what segments to target and how to organize the marketing channel flows.
Proposed challenges and opportunities have to be in accordance with the service output needs of the final consumers.
Segmentation (concept 1) and positioning (concept 2) together form the strategy taking part of the conceptual model. There is a mutual dependency between the identification of segments and definition of channels, as reflected by the mutual arrow between these concepts. The choice of segments determines the channels that serve these segments. At the same time, the activities that occur in the channel influence the selection criteria for targeted segments.
Targeting (concept 3) covers the actual design part of the model. As indicated by the arrow between the positioning and targeting phases: the description of segments and marketing channels (concept 1 and 2) determines the main challenges that arise in the chain (concept 3). The implementation of these challenges requires new considerations of segmentation- and positioning decisions, as indicated by the returned arrow from targeting to segmentation.
3.2 Design of the research
In the research structure model (figure 3.2) the distinction between strategy taking and actual design is once more reflected, just like the concepts of segmentation, positioning and targeting. In the following part the content of the subsequent chapters will be described.
Figure 3.2: Research structure model
ACTUAL DESIGN
Chapter 5: Market Segmentation withinBurkina Faso: identify and forecast national, sub-regional and European
user segment’s needs
Chapter 6: Competitive Positioning;
describe channel flow performance for each segment, including institutional
factors and resource dependency
Recommendations for (the management of an) improved mango marketing system
for Burkina aso
STRATEGY TAKING
Chapter 7: Targeting: end judgement concerning performance and opportunities within new market
segments, and Chapter 4: Practical background
Chapter 4 (Practical background) gives an overview of the characteristics of Burkina Faso in order to better understand the context in which the research takes place. It also presents additional practical background information concerning the mango market and its participants.
In Chapter 5 (Segmentation) the existing segments within the mango trade markets of Burkina Faso will be considered. These segments will be defined on the basis of size, opportunities and service output demands. Key segments will serve as point of departure for Chapter 6.
Chapter 6 (Positioning) will give a description of the marketing flows in the channels of the key segments. By putting all flows on a file, the activities in the commercial mango channel are discussed in a structured manner. The business relations in the marketing channels will also be looked at: the role of institutions and dependency in the flows.
Chapter 7 (Targeting) starts with reflecting the construction of the mango prices in the different marketing channels. The qualitative and quantitative analyses as presented provide background information so that the performance within the mango market can be judged. The focus will be on effectiveness and efficiency.
Furthermore, some favourable (potential) market segments will be discussed.
There might be some unexpectedly attractive segments to target, for example:
the specialized channel can be seen as an opportunity to enter new markets with processed mangos. It is conceivable that the producers or other participants can fulfil more, or other functions within these mango marketing channels. We must try to interpret this in the perspective of the present situation and the outlooks of the producer organisations.
The research will conclude with recommendations for improvement of the current channel design in the mango trade markets of Burkina Faso in Chapter 8.
3.3 Data collection methods
This study is structured according to the research process-model of Saunders et al. (2000). Although Saunders represents research as a multi-stage process, he remarks that the process for undertaking research is rarely straightforward. There is no best way for undertaking research: it is always situation dependent. The method of Saunders fits well with the transdisciplinary approach that is needed for doing market research in Burkina Faso. To structure the data collection in this research, four phases can be distinguished:
1. Desk research: consultation of scientific literature (The Netherlands and Burkina Faso)
During this phase the preparations for the research were undertaken: a research proposal was written and the theoretical framework was constructed, all on the basis of scientific literature.
2. Desk research: consultation of internal and external documents (Burkina Faso)
During this phase, time was spend on reading about the subject of mangos
and scanning the documentation available at SNV Bobo Dioulasso and other
institutions.
3. Field research: conducting interviews (Burkina Faso)
During the fieldwork, research data was collected through the survey method:
interviewing- and observation techniques were used. The field research started with exploratory interviews with the consultants of SNV to obtain an overall view of the mango market and its participants. Based on the desk research (phase 2) and these exploratory interviews, the different market segments could be distinguished. Participants that could contribute to the collection of information about the marketing flows and business relations in the key segments were selected. In paragraph 3.5 these participants are introduced. The interviewing was centered in the area around Bobo Dioulasso, Banfora and Orodara (the principal production and commercialization zone) and the area around Ouagadougou (the second commercialization zone). The demands for the service outputs by the final consumers where retrieved by their preceding actors; it was not possible to do a consumer research study as well.
4. Desk research: theoretical aligning of collected information (The Netherlands)
The desk research in the Netherlands consisted of interpreting the data. In addition, we mutually exchanged the information collected during the field research amongst the four students. Therefore, it should be remarked that some information in this report is taken from the reports of Ravenshorst (2006), De Jong (2006) and Kalbfleisch (2006).
3.4 Research period
In the beginning of March 2005, Eva de Jong and I got familiar with the project started in cooperation between the University of Groningen (Mr. C.H.M. Lutz) and SNV (Mr. K.J. Van Til). The writing of the research proposal took place in May 2005. After this proposal was approved, the research into the marketing channel approach could start during the summer of 2005.
Accompanied by Ewoud Ravenshorst, I arrived in Burkina Faso in the beginning of October 2005. The desk research started in the office of SNV in Bobo Dioulasso.
This, together with the completion of the literary framework took quite some time. My first interview took place in the end of November 2005, and the field research was finished in the end of February 2006. After a short break, the structuring of the collected information and the theoretical aligning started in the beginning of April 2006. The final report is presented to SNV and the University of Groningen at the end of July 2006.
3.5 Participants
Conversations with a vast amount of participants, all with varying backgrounds in the mango market, helped to collect valid answers to the formulated research questions. The selection of these actors took place in coherence with the snowball sampling method. Snowball sampling is commonly used when it is difficult to identify members of the desired population (Saunders et al., 2000), which was the case in Burkina Faso. In appendix A an overview of the actors that were spoken with can be found.
The first primary actors interviewed were producer organizations. This was done
in order to get an idea of the type of members that join a producer organization
and the benefits of this collaboration for the members. It clarified the way producer organizations help producers with the commercialisation of their products, and their contribution to the execution of the marketing flows.
We chose to focus on the local and sub-regional market first. Conversations with a variety of traders and sales women on the regional fruit market in Bobo Dioulasso helped to get a clearer picture of the (informality of the) domestic market. A few subjects of discussion: cooperation, regulation and governance influence. There were additional questions about the buying and selling of their products. Furthermore there was focus on the preferences and considerations of final consumers within the local market with respect to the buying of mangos.
Actors operating in the processing of mangos and/or the commercialisation of processed mangos were also spoken with. Transformers (mango driers, juice producers, jam makers, etc.), local sellers and exporters were contacted in order to gain more information about the direct and indirect difficulties concerning the processing of mangos. Special attention was paid to the financing of their activities and development of processing techniques.
In order to collect additional information, secondary actors have been visited (e.g.
Techdev, ONAC, MARA, PAPME, etc.).
Every interviewee was questioned about his role with the execution of the marketing flows. During the interviews we listened carefully to discover information about mutual business relationships. Every interview ended with some questions about the structure of the mango market, the perspectives for this market and the competition, entry barriers and price sensitivity within national, sub-regional and European markets.
3.6 Data analysis
The conceptual framework (figure 3.1) shows how the research statement is
embedded in literature. The concepts were introduced Chapter 2, and this section
explains how these concepts were made measurable with the help of the
qualitative approach. The data analysis mainly concerns processing the data
collected through interviews and desk research: the theoretical aligning of the
collected information.
Table 3.1: Measurement of concepts Concept Measured by Segmentation
• Segmentation matrix: characterize the mango market along two dimensions: type of products and consumer groups
• Segments distinguished upon demanded service outputs (demanded by each segment, supplied by the marketing flows)
• Selection key segments based upon size, opportunities and service output demands.
Positioning
• Qualitative description marketing flows3: - Which actors do execute the flow?
- What happens within the flow?
- Which problems can be distinguished?
- What is the role of institutions in the flow?
- To what extent is there dependency in the channel?
• Price construction (cost-price ratio):
- What are the costs and the gross margin for every actor?
- Are the gross margins equally distributed amongst the actors?
Targeting
• Channel performance:
- Efficiency: are the channels properly working?
- Effectiveness: are the actors doing what they are asked to do by the market?
3.7 Limitations
The main limitation during the research was the limited knowledge of the French language, both from the side of the researcher as well as from the interviewees.
Though Burkina Faso is officially acknowledged as a French speaking country, for many people it is a second language after vernaculars such as Dioula (dialect within the region of Bobo Dioulasso) and Mossi (dialect within the region of Ouagadougou). The language barrier sometimes made it difficult to understand the answers given by the interviewees or to ask the right counter questions.
Secondly, it took some time to get adapted to the differences in culture. However, it was very valuable and special to get acquainted with all kinds of culture dependent variables during the research.
The overall lack of registration and reliability of statistics hampered in providing a solid base for my findings and conclusions. As an important consequence of the lack of registration of commodities, there is no correct and univocal data available on the exact quantities of mango production in Burkina Faso. This is also true, of course, for rates of national and sub-regional consumption. Authorities fail to keep their files accurately up to date and have difficulties with the collection of data.
3.8 Conclusion
This chapter has discussed the methodological aspects of the study. It explained how and where the research study was carried out in order to obtain answers to our main research question. Table 3.1 gives an overview of the research design and the methods used for data collection.
3
Appendix D: Marketing channel flows
Table 3.2: Summary of the research design, methods of data collection and actors/institutions interviewed to answer the research questions.
Classification STRATEGY TAKING ACTUAL DESIGN
Research
questions 1. segmentation 2. organization preceding marketing channels
3. opportunities within (new) market segments
4. channel design
Research type Explorative research
Survey strategy Explorative research
Survey strategy Explorative research
Survey strategy Explorative research Survey strategy Methods of data
collection • Interview
• Secondary data • Interview
• Secondary data • Interview
• Secondary data • Interview
• Secondary data Actors and
institutions interviewed4
• Consultants SNV • Mango producers
• Representatives producer organizations
• Representatives transformation units
• Local traders:
grossistes, demi- grossistes, vendeuses
• Pisteurs
• Exporters
• Institutions (e.g.
banks, chamber of commerce, etc.)
• Mango producers
• Representatives producer organizations
• Representatives transformation units
• Local traders:
grossistes, demi- grossistes, vendeuses
• Pisteurs
• Exporters
• Institutions (e.g. banks, chamber of commerce, etc.)
• Mango producers
• Representatives producer organizations
• Representatives transformation units
• Local traders:
grossistes, demi- grossistes, vendeuses
• Pisteurs
• Exporters
• Institutions (e.g.
banks, chamber of commerce, etc.)
4 See appendix A for a more precise list of the actors spoken with.
Chapter 4: Practical background
4.1 Introduction on Burkina Faso
4.1.1 The country of underdevelopment
Burkina Faso is a landlocked country in West Africa, surrounded by six countries:
Mali (to the north), Niger (to the east), Benin (to the south east), Togo and Ghana (to the south) and Côte d’Ivoire (to the south west). Its former name was the “Republic of the Upper Volta”, but in 1984 the former president Sankara decided to give the country its present name, which translates into “land of the upright people” in Mossi and Dioula (the two main languages spoken in the country). The country became independent of France in 1960. Governmental instability during the 1970s and 1980s was followed by multiparty elections in the early 1990s. At present, the country is governed by Blaise Compaoré
5. Table 4.1 shows several important economic and human development statistics about Burkina Faso in the years 2000, 2003 and 2004.
Table 4.1: Economic and human development indicators of Burkina Faso
Economic indicators 2000 2003 2004
GDP (current US$) 2.6 billion 4.2 billion 4.8 billion
GDP growth (annual %) 1.6 6.5 3.9
GDP per capita (PPP US$) -- 1,1746 1,2007
Agriculture value added (% of GDP) 33.9 31.0 30.8
Industry value added (% of GDP) 16.2 18.9 19.9
Services value added (% of GDP) 49.9 50.1 49.4
Export of goods and services (% of GDP) 9.1 8.5 8.6 Import of goods and services (% of
GDP) 25.3 23.4 22.9
Official development assistance and
official aid (current US $) 336.0 million 507.2 million 610.0 million
Human development indicators 2000 2003 2004
Population total 11.3 million 12.4 million 12.8 million.
Population growth (annual %) 2.9 3.2. 3.2
Poverty headcount ratio at national
poverty line (% of population) -- 46.4 --
Life expectancy at birth 46.8 47.7 48.1
Literacy rate, adult total (% of peoples
ages 15 and above) -- -- 21.8
Primary completion rate, total (% of
relevant age group) 25.2 28.2 29.5
School enrolment, primary (% gross) 44.3 48.3 53.0
School enrolment, secondary (% gross) 10.9 12.1 12.1
School enrolment, tertiary (% gross) -- 1.5 --
Surface area (sq. km) 274,000 274,000 274,000
Forest area (sq. km) 69,140 -- 67,940
Agricultural land ( % of land area ) 36.9 39.8 --
Source: World development indicators database, World Bank, April 2006
Remarkable are the negative balance of trade and the contribution of international aid to the economic activity of the country. Other problems
5 Source: www.wikipedia.nl
6 Figure based on the Human Development Report statistics 2005
7 Figure based on the CIA World Factbook, estimation for the year 2005
hampering the human development that are not reflected in table 4.1 are the flagrant inequality and the struggle against diseases such as aids and malnutrition.
4.1.2 The importance of the agricultural sector
The agricultural sector is one of the mainstays of the economy with a contribution of 30.8% to the gross domestic product and a share in the working population of 84% in 2004
8. However, it faces two critical constraints:
• The farming system is liable to natural influences
The country has suffered heavily from the dry period of 1968 to 1974; and even after that, agriculture continued to suffer from dryness. The use of natural resources, as a consequence of lack of other energy sources, causes erosion (deforestation and desertification). However, the south-western region of the country (South-Sudanian) is very fertile and therefore suitable for the production of agricultural products. The agrarian sector as a whole remains a risk full working space.
• Institutional forces block adaptation of the market to developments such as globalization and liberalization
Since the adoption of the Structural Adjustment Programme, the program of structural adjustment, in 1991, the government has undertaken reformative measures to develop a durable agriculture. Several supporting reports
9were introduced and several governmental organizations
10were founded as a part of this strategy. Despite the liberalisation of the fruit and vegetables chain, many difficulties persist. The effects and results of government interference are difficult to measure since support is offered in a fragmented and non- structured way.
4.2 The mango in Burkina Faso
The mango is native to southern Asia (especially Eastern India) and has been cultivated there since ancient times. The mango tree has been cultivated in Africa since the beginning of the 19
thcentury. The first engrafting of the mango occurred on the Antilles and was named ‘Amélie’. This race has been popularized in West-Africa in the Sudanian region at the end of the 19
thcentury
11.
The mango tree grows in the intertropical zone at a height of 200 to 400 meters.
It needs a minimum of rain: approximately 400 mm per year. The mango tree is located in forested or grassy savannas. In Burkina Faso, the main production zones are the regions Kénédougou, Comoé and Houet, where approximately one out of ten households have an orchard. About 11,000 orchards can be found in this zone, 3000 orchards are located elsewhere in the country
12. An orchard consists on average of 30 trees and produces about 30,000 mangos per season.
8 Source: CIA World Factbook, 2006
9 Examples: Document d’orientation Stratégique (DOS), du Plan Stratégique Opérationnel (PSO), de la Stratégie Nationale de Sécurité Alimentaire (SNSA), de la Lettre de Politique de Développement Rural Décentralisé (LPDRD), du Cadre Stratégique de Lutte contre la Pauvreté (CSLP), de la Stratégie de Développement Rural (SDR), etc.
10 Examples: Flex Faso, INERA, DTA, PAPME, BAME, etc.
11 Source: Séminaire de Saly au Sénégal, PADCLA, 19-23 April 2005.
12 Source: INSD, 1996.
The mango varieties can be subdivided into three types, based on the production period: precocious (end of February), mid-season (April, May and June) and late (end of July). The most common varieties of the mango in Burkina Faso are Amélie (precocious), Lippens, Kent and Springfield (mid-season) and Keitt and Brooks (late). These varieties are so-called grefféés: they are developed with the help of grafting techniques executed on trunks of wild traditional mango varieties.
Grafting techniques are very important: they help to improve the yield of the orchard and to adapt the varieties (supply of mangos) to the demands of the final consumers
13.
Table 4.2: Mango harvest in Burkina Faso
Varieties March April May June July Aug Sept Oct
Amélie Kent Keitt Brooks Lippens
Source: SICAREX, 2000
During our research the local vendors often seemed unfamiliar with the scientific names of the mangos. They talked about greffée (Amélie), rétard (Brooks and Keitt), mangue papaye (Springfield), mademoiselle (Lippens) and mangue sauvage (local ‘wild’ varieties).
Table 4.3: Main mango varieties in Burkina Faso
Production period Variety Characteristics
Precocious Amélie Weight 300-600 g
Green-yellow colour, tasty flavour, no fibres Convenient specie for drying or other processing Most cultivated mango in West-Africa
Mid-season Lippens Weight 500 g
sweet taste, juicy and average size
Convenient specie for drying or other processing National market
Kent Weight: 750-800 g
Colour: greenish yellow with red shoulder Characteristics: flesh rich, fibreless Long life span
Late Brooks Weight 450-910 g
Sensible for fruit flies
National/ sub-regional market
Convenient specie for drying or other processing
Keitt Weight: 500-700 g
Colour: green
Characteristics: flesh rich, fibre only around seed Long life span
Figure 4.1 illustrates the distribution of the mango varieties in the principal mango producing regions. The figure shows that in 2002 the main export varieties Kent and Keitt together represented only a quarter of the total surfaces of the orchards. Nowadays grafting techniques are applied at an orchard-level to change the original mango varieties into the kinds that are more suitable for
13 Source: INERA, 2006
