Abstract
In this study, Porter’s framework is used to analyse the forces that coordinate and control the market for agroforestry tree seedlings in the Nyando basin in Western Kenya where smallholder farmers were assisted by non-governmental and research organisations to start tree seedling nurseries, with a view to fostering adoption of agroforestry in the region. In addition, financial viability of the enterprise is assessed and the resources and interventions required to improve the operators’ competitiveness and make the enterprise sustainable are identified. Primary data collected from eight nursery operators and sixty agroforestry farmers are used and supplemented with secondary information obtained from relevant literature to gain an insight into the tree seedling industry within and outside the region. The results indicate that the tree seedling industry is highly competitive and is characterised by several small-scale operators who employ similar strategies and produce and sell nearly homogenous products. Consequently, competition is based on price rather than on strategies that require capital investments such as branding, product differentiation and product promotion. The enterprise is financially viable but the gross margins, particularly those of timber tree seedlings, are sensitive to low seedling prices suggesting that competitors are exerting pressure on prices and profitability. Thus, to gain an edge over the competitors, the small-scale operators need to build competitive advantage by adopting strategies that allow them to charge higher prices for their products, maintain customer brand loyalty and understand the coordination, control and relationships within the industry.
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Notes
(Jandil 2008) is one such study that attempts to simulate the ex ante impact of subsidy on the adoption of agroforestry practices in Western Kenya, but pays limited attention to the demand side of the equation.
The gross margins do not imply profitability since the computation of profitability requires inclusion of fixed costs such as those of land, establishing nursery shade, depreciation cost of the nursery shade and farm tools. Nevertheless, the estimated gross margins should provide an insight into the most feasible channel that the operators should explore holding constant fixed costs.
NGO ‘s and Institution’s channels herein refer to sale of tree seedlings by nursery operators to NGOs, such as CARE Kenya and SSC-Vi Agroforestry, and government institutions such as the Ministry of Agriculture and schools,respectively.
To the extent that the tree seedling enterprise is a recent business venture in the Nyando basin, the sampled operators were drawn from those who were participating in the project under donor-driven market conditions. Consequently, the findings presented on nursery operators might not adequately reflect those confronted by seedling producers operating in a market driven environment.
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We are grateful to Coady International for funding this study and our internal reviewers for their insightful comments. The contents of the paper are the responsibility of the authors and do not represent the views of the funding organisation.
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Oduol, J.B.A., Franzel, S. Assessing Market Potential of Agroforestry Tree Seedlings in Western Kenya. Small-scale Forestry 13, 281–298 (2014). https://doi.org/10.1007/s11842-013-9254-2
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DOI: https://doi.org/10.1007/s11842-013-9254-2