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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.

Enterprise development plan

A key output of the market analysis and development approach is an enterprise development plan, which should have the following elements:

  • General description of the enterprise. What is the enterprise about? What are its mission and vision?
  • Products and services. What are the products and services that the enterprise will supply? What is their competitive advantage? How are they produced and commercialized?
  • SWOT (strength, weakness, opportunities and threats) analysis. What are the strengths and weaknesses of the enterprise? What are the main threats and opportunities?
  • Market development strategy. What are the objectives for marketing and sales? Which market segment will the enterprise target? Who are the customers and what is their profile (existing and potential)? Who are the competitors? What are they offering, and what makes them different? What makes the enterprise’s products and services attractive?
  • Resources management/environmental strategy. Assess whether the resource can regenerate (and in what time) and can be harvested sustainably. What are the costs involved in maintaining the resource for supplying the enterprise with its raw materials?
  • Social strategy. This element deals with the social and equity relationships among enterprise participants (both male and female) and ensures that participation, decision-making and the distribution of benefits are equitable.
  • Institutional strategy. This strategy addresses the legal aspects regulating the enterprise, the impact of policies on the enterprise, and the organizational structure needed to ensure that the enterprise maintains links with supporting institutions at all levels.
  • Technological strategy. This strategy sets out the technological options best adapted to the values and concerns of the entrepreneurs.
  • Operational plan. How will the enterprise operate in producing its products and services? What staff qualifications and training are needed to meet enterprise production and growth requirements?
  • Management and business support plan. This is the staff management strategy, the aim of which is to provide a supportive resource for business development (e.g. in terms of administration, information technology and work space).
  • Financial plan: What are the capital requirements? What is the financial strategy of the enterprise? What is the profit-and-loss projection, at least for the first years?

The process to be followed in developing the plan has four main phases.

Phase 1

Phase 1

Phase 1 is exploratory; its purpose is to investigate the existing situation. During this phase, potential entrepreneurs:

  • obtain an overview of tree and forest resources and potential products;
  • identify the constraints and opportunities of those resources and products;
  • shortlist a range of products; and
  • understand that working in a group can create a stronger market position.

Phase 1 should provide a realistic indication of enterprise prospects, taking into consideration the available resources, social conditions, financing, market demand and potential investors. The objective is to help potential entrepreneurs discover the products that are best suited to their economic situations while ensuring that the resource is used sustainably. To create viable enterprises and reduced risks, potential entrepreneurs learn to select enterprise ideas that take into account social, environmental, institutional and technological factors.

Phase 2

Phase 2

In Phase 2, the potential entrepreneurs gather the information they need to assess the viability of the products and services shortlisted in Phase 1 and decide on the most sustainable and appropriate type of enterprise. In-depth feasibility studies are conducted on shortlisted products and services to evaluate the scale of potential markets, analyse trends and identify constraints to market access. The most promising products and services are selected on the basis of these feasibility studies.

Phase 3

Phase 3

The aim of Phase 3 is to formulate an enterprise development plan that integrates all the strategies and services needed for the success of the new enterprise. The plan is then analysed to assess the assistance the entrepreneurs will need to start their enterprises.

Phase 4

Phase 4

In Phase 4, entrepreneurs are guided through the process of obtaining funds to set up their enterprises and the training they need, as identified in their enterprise development plans. Entrepreneurs are assisted in starting up their enterprises, and they learn to monitor the activities of their enterprises. In this pilot phase, entrepreneurs can test their capacity to link with business service providers and refine their operational and organizational mechanisms. Finally, entrepreneurs are trained to strengthen their abilities in marketing and natural resource management.

Important considerations

Important considerations

Business services. How to obtain financial services to provide investment, working capital, insurance and savings facilities is a crucial consideration in the enterprise development process. Businesses linked in the value chain can provide financial services to one another; financial institutions (e.g. banks) are another potential provider.

Non-financial business development services might be needed for a range of non-financial inputs, such as:

  • operational or generic services, to provide, for example, training and skills development and information and advice on technology information; and
  • strategic or specific services, such as networking and brokering, market information and research, packaging and advertising.

Supporting forest enterprise development. Support programmes for small and medium-sized forest enterprises should pay careful attention to the context in which they hope to operate. An assessment of potential areas of growth is critical to any preliminary analysis of enterprise support. Different approaches may be needed, depending on whether the target region is forest-rich or forest-poor and politically stable or in a post-conflict situation.

It is important to distinguish between support to help the very poor survive and avoid descending into greater poverty, and support that will build assets sufficient to climb out of poverty. Equity concerns should also be central to considerations throughout the support process.

Supporting institutions can help improve the business environment for small and medium-sized forest enterprises. The main components of the business environment are:

  • general macroeconomic policies;
  • the legal and regulatory framework, which translates policies into practical laws and regulations – with their associated costs of compliance; and
  • the institutional (or organizational) framework, which coordinates the regulation, promotion, monitoring and representation of both the macroeconomic environment and small and medium-sized enterprises.

The market analysis and development approach focuses on flexible, demand-led interventions. For it to succeed, it is critical that facilitators do not provide actual services but, rather, that they build capacity to provide the services and link service providers with those who most need them.

Further detailed guidance and support can be found in the tools and cases of this module.

Gender and development of forest-based enterprises

Gender and development of forest-based enterprises

Women and men can have different roles in establishing forest-based enterprises in developing countries. The entrepreneurship of women in forestry may be constrained by cultural, economic and social obstacles. Among them: centralized ownership and difficultly gaining access to natural resources, cultural barriers to access markets, and poor access to extension, technologies, training and credit.

Although many women have a high-level knowledge of sustainable management of forestry, species diversity and conservation methods, they often have few opportunities to apply this in their own enterprises. In fact, despite the lack of sex-disaggregated data, available research shows the trend is that women are mostly confined to small-scale retail trade, while men run larger businesses. Women work predominantly in the informal sectors, as primary collectors and sellers of Non-Wood Forest Products (NWFPs), while men dominate more formal sectors and the timber trade. Moreover, the presence of women at a managerial, technical and professional level is still low. This is mainly due to traditionally defined gender roles.

Important improvements would include collection of sex-disaggregated data, and the creation of networks and associations of women to increase their political and economic weight. It would be valuable to conduct gender-disaggregated value-chain analysis of mainstream forest timber and non-timber forest products to be considered in the policy-making process and technical research.