The resilience of producers in developing countries depends on their ability to adapt to constant change in domestic, regional, and international markets. Changes in end-markets—primarily driven by technological advances—changes in consumer demand, and changes in regulations greatly affect market growth patterns. These changes in turn influence the requirements that producers must meet to access markets and remain competitive. Keeping on top of these trends should be a key part of any economic strengthening initiative.

DAI has put end-markets at the core of its value chain work since the 1990s. In 2006, DAI developed an end-market analysis methodology to analyze export markets, focusing on global trends, buyer requirements, market segmentation, and competitor benchmarking. In-depth end-market analysis is fundamental to our value chain approach.

For example, a global market analysis for Haitian handicrafts in 2006 identified a growing opportunity in the home accessories market for “global-style” handicrafts that combine ethnic elements with contemporary design. Consumer tastes for that style opened up a niche for Haitian producers to leverage their creativity and adjust their traditional designs. Market analysis also unveiled an emerging opportunity among independent outlets in the United States. Home accessory retailers were found to be looking for distinctive, high-end products to compete with generic big-box discount stores—a market channel new to Haitian artisans.

Similarly, in Indonesia, an end-market analysis performed in 2008 identified an opportunity in the growing demand for home accessories made from natural, recycled, and renewable materials—a segment for which Indonesian producers were uniquely positioned. End-market analysis helped the Indonesian producers understand consumer demand for sustainable products and prepare a roadmap for developing sustainable production.

In other situations, alertness to upcoming market changes has helped industries withstand the disruptions of changing global markets. In Lesotho, for example, the garment industry was able to prepare for the end of the Multi Fiber Agreement — which governed global trade in textiles until 2005 — by addressing key productivity and market linkage constraints in the value chain. As a result, Lesotho showed considerable resilience in the wake of the agreement’s expiration and actually delivered sustainable industry growth. By 2008, its garment industry had grown into the largest employer in Lesotho, including thousands of poor women, with a net increase in employment of 38 percent. By comparison, key competitors Kenya and Swaziland saw a drop of more than 50 percent in garment industry employment.

While attention to the supply side of value chains is obviously important, to focus on supply-side issues without due regard for global and domestic end-markets is to risk investing in declining market segments, missing out on more lucrative market opportunities, or failing to prepare for upcoming market shifts—all of which weaken producer resilience in the long term. Analysis of end market dynamics must be a key element in both the design and implementation of economic strengthening projects.

Takeaways

• For producers in developing countries, the more alert and responsive they are to end-markets, the more resilient they will be.
• While supply-side assistance is crucial for economic strengthening projects, end-market analysis to target investments, identify opportunities, and anticipate threats is equally important.