2. MARKET SYSTEM DYNAMICS
In market systems people relate in two
ways:
they Compete … or they Cooperate
Limited
Growth
No Poverty
Reduction
Growth with
Poverty
Reduction
Effec0ve
market
system
performance:
Ongoing upgrading
More inclusive benefit flows
-
-
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3. DEFINING
SUSTAINABILITY
TIME
Growth
with
Poverty
Reduc5on
Bad Competition:
Good Competition:
• Drives resistance to
improvement
• Drives improvements
• Competition between
people/firms doing
different things
• Competition between
people/firms doing the
same thing
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4. DEFINING
SUSTAINABILITY
TIME
Growth
with
Poverty
Reduc5on
Bad Cooperation:
Good Cooperation:
• Collusion to ensure
win/lose
• Responsive to joint threats
and opportunities leading
to win/win
• Short term, distrustful
• Long term, trusting
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5. DEFINING
SUSTAINABILITY
TIME
Growth
with
Poverty
Reduc5on
Unsupportive Benefits:
Supportive Benefits:
• Benefits isolated to a
few
• Broader distribution of
benefits
• Social/economic
benefits often at odds
• Social and economic
benefits mutually
reinforcing
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6. ASSESSING
DRIVING
FORCES
OF
COMPETITION
AND
COOPERATION
How do relationships, rules and interconnected systems influence effectiveness?
Degree of VC Effectiveness
Best
Norm:
Constant
upgrading
Innovation/Differentiation
HIGH
Bad
Joint Marketing
Transparent
rules
Zero-‐sum
tac5cs
Competition
Better
Embedded Services
Poli5cal
Favori5sm
Collusion
Anti-compete rules
HIGH
Specialised Services
Joint
response
to
opps.
&
threats
Compe55ve
response
internalised
Better
Norm:
Constant
upgrading
Best
LOW
Cooperation
Bad
HIGH
7. EFFECTIVE COMPETITION AND COOPERATION
• Effec5ve
compe55on
drives
improved
performance
• Compe55on
to
win
a
nego5a5on
(i.e.,
between
func5onal
levels)
oLen
creates
the
wrong
incen5ves
driving
win/lose
outcomes
• Effec5ve
coopera5on
is
not
organisa5onally
defined
–
it
is
behavioural
defined
• Ongoing
performance
improvements
and
beQer
outcomes
for
a
wider
set
of
market
actors
–
especially
the
poor
• Coopera5on
that
focuses
on
shiLing
power
to
win
nego5a5ons
does
not
address
the
underlying
systemic
constraints
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8. Rice FARMERs
What do these imply about the relationships:
1. “When my neighbor does well it is a reflection on his
selfishness and he should act more like the rest of the
community”
2. “ We have tried to pool our money to buy larger amounts of
inputs to get a better deal, but we couldn’t get it to work as many
of us could not hold cash long enough to get organized”
3. “I try to learn from my neighbor because I know he gets better
yields. But he is tight-lipped about how. I don’t know anybody
else to learn from.”
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9. AVOCADO TRADER
1. “I don’t work in the business of avocados. I buy. I
sell. I am looking for a quick return. It makes no
sense to think long term”
2. “When farmers come to sell to me, I know that they
are desperate so I make them wait”
3. “I need a reliable supply from a group of farmers,
but other traders that do not provide their farmers
with credit and other services often offer a higher
price, and my farmers take it”
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10. MILLER/PROCESSOR
1. “I didn’t spend $1million in this milling plant to
become a trader - that is someone else’s job”
2. “I want to source more maize from small maize
farmers, but I have had trouble with a few
aggregators thinking short-term and cheating me so
I am not sure how to start”
3. “I need to generate loyalty with my suppliers and
limit pirate buying, so embedding services and
providing performance incentives should help keep
my utilization rates high”
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11. AGRODEALER
1. “I know my future depends on smallholders, but I
don’t know how to get to my future and it seems too
far away”
2. “Smallholders do not have money and never will, so
government or NGOs should just buy my inputs to
give to them”
3. “I heard another agrodealer on the radio, so I
called my cousin in the tax authority to check on how
they can afford advertising”
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12. IMPORTER
1. “I know there are local opportunities to buy and sell beans, but
it would require me to work with smallholders, investing time and
money while my competitors continue to make money on
imports”
2. “I know that if my competitors start investing in smallholder
production, I can get smallholders to sell to me for a bit more
money, because the rice is higher quality. I can then make the
other guy pay for increasing my supply”
3. “As importers we would be interested in investing in local
smallholder production if we could get some government
support, but when we get together to talk about this we just
argue or accuse each other of bad business practice”
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