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Sustainable Forest Management (SFM) Toolbox

Market Analysis and Development of Forest-Based Enterprises

The Market Analysis and Development of Forest-Based Enterprises Module is intended for forest managers, forest user groups and landowners wishing to establish forest-based enterprises to generate sustained cash income from forests. The module outlines the principles that should be considered in a market analysis and development approach to the creation of forest enterprises, the key elements of enterprise development plans, and the steps to be taken in developing such plans. The module also provides links to tools and case studies to foster effective markets analysis and development of forest-based enterprises.

Market analysis and development of forest-based enterprises contributes to SDGs:

This module is intended for forest managers, forest user groups and landowners thinking of establishing forest-based enterprises to generate sustained cash income from forests.

What is market analysis and development?

In most developing countries, an estimated 80–90 percent of forest businesses are small and locally run, and small-scale enterprises generate more than 50 percent of total forest-sector employment. With increasing demand for forest products and services, helping such businesses operate in a profitable, socially beneficial and environmentally sustainable manner is a pressing challenge.

An approach called “market analysis and development” provides a framework for planning local forest enterprises. It consists of four main phases that guide potential entrepreneurs through a simple, clear, participatory process to plan and develop their enterprises. Partnerships with relevant national and subnational government institutions , civil-society organizations, international organizations and the private sector are likely to be most effective in assisting local entrepreneurs to pursue the market analysis and development approach.

Principles

The following basic principles should be considered in a market analysis and development approach to creating forest enterprises:

sustainability – refers to processes that increase economic benefits and improve livelihoods without causing negative social or environmental impacts;

screening the five aspects of the business environment that need attention in enterprise development – market/economy/finance; environment; social/cultural; institutional/legal; and technology/product research and development;

strategic alliances – between entrepreneurs and service providers and among businesses in the value chain;

participation – relevant if supporting enterprise development as facilitator;

capacity development – relevant if supporting enterprise development as facilitator; and

gender sensitivity – relevant if supporting enterprise development as facilitator.

Minimum conditions

Minimum conditions

In embarking on a market analysis and development approach, the following conditions should apply:

  • The business environment is conducive to enterprise development (for example, there are suitable administrative, legal and fiscal facilities), including long-term access to, or tenure of, forest resources.
  • National, provincial or district administrations or other political authorities are supportive (e.g. they facilitate access by small forest enterprises to financial institutions and government incentives, minimal red tape is involved in, for example, the registration of businesses, and infrastructure for moving, storing and marketing, etc., is accessible).
  • There are markets for forest products or services at the local, national or international levels, as well as relevant trade channels and service-delivery organizations.
  • There is sufficient capital or a financial strategy to cover initial capital needs.

Four phases

Four phases

The four phases of enterprise development (see an illustration of the process here, and in more depth provides a detailed explanation) generally involve the following activities:

  • An assessment of the existing situation to identify realistic enterprise prospects, with the aim of providing an overview of tree and forest resources and potentially marketable products and services, as well as of the constraints and opportunities for those resources, products and services. The net result will be a shortlist of potential resources and products.
  • Surveys to assess the viability of short-listed forest products and the selection of those products and services most relevant to the new business.
  • The formulation of an enterprise development plan that integrates all the strategies and services needed for the success of the new enterprise.
  • Resource mobilization, and networking with business service providers.
  • The continuous monitoring of operations and adjustments, as required, in the light of changes in any of the five areas of the business environment (i.e. market/economy/finance; environment; social/cultural; institutional/legal; and technology/product research and development).