C. Nature of Interfirm Relationships 

Inter-firm relationships: involve how stakeholders interact with each other within a value

chain. Vertical and horizontal collaboration is facilitated through supportive relationships. Value chain analysis

determines whether these relations are mutually beneficial or adversarial, or whether they are

sustainable or artificially crafted because of external pressure.

Horizontal Relationships

pertain to the relationship between players performing the same function/segment

1. Identify and analyze relationships whether it is: farmer-farmer, intermediaries-intermediaries, or lead firms-lead firms.

2. Present the analysis of memberships to FCAs/organizations versus individual/sole players.

3. Describe the relationship between and among identified VC players whether weak, moderate,or strong using the following criteria:

a) Information Sharing

b) Competition

c) Trust

d) Benefits from the collective initiative

4. The following guide questions or factors may be considered when determining whether the relationship of each player is weak, moderate, or strong:

a. Information sharing: Is there any informatiod shared between players? What is the nature of information shared? How often does information-sharing occur? How is the information disseminated? Do players have the same type of information at the same time? Are prices and marketing requirements of buyers known to all players in the same segment?

• Frequencies of joint activities such as knowledge sharing and meetings with other players of the same segment/function to share experiences, problems encountered and best practices. (e.g., farmer-farmer: level of info sharing in terms of input and output price information, technologies, benefits or assistance available, and efforts to maintain communal farm resources)

•  Network density in the region/provinces/municipality under study. This refers to the number of connections between players within a network/segment (the higher the network density is, the more players in the same segment/function have, the more convenient the communication between each player).

• Level of orientation/knowledge to a certain technologies/innovations and market information

b. Competition: Can happen if there are many players in the segment acting independently of each other. Competition among players can occur in pricing, quality standards, etc.

• What is the ease of entering the market? Are there any existence of barriers to entry such as: financial (e.g., high cost to enter a market), regulatory (e.g., existing laws/regulations/policies), or operational (e.g., limiting accessibility of trade channels)?

•  Level of stabilization of prices in a locality (do farm input stores refer to other stores when the product is not available in their inventory?)

• Working independently or interdependently with other players in the same segment?

• Concentration of players in the market (size of population of the same player in one location)

c. Trust: How do farmers/input suppliers or other players trust each other?

• Engagement with other players: How frequent is the engagement of the players with each other? How committed and confident are they in trusting their co-players?

• Partner Collaboration: How well do they collaborate with their co-players in the same segment? How transparent are they about their expectations, goals, and progress? How responsive are they to requests, issues, or suggestions of other players?

• Duration of relationship between players.

• Level of interaction between players.

d. Benefits from the collective initiative: Manifested when players are organized. For instance: cooperative accessing support from the national government; or able to meet volume requirements of buyers.

• Does presence of collective marketing and input provisioning (cooperatives/producers’ groups) and technical support exist?

• Are there any sharing of resources to reduce costs, extending the reach of products/services, and joint-promotion of products/services?

• Number of cooperatives/associations present in the region/province/municipality relative to the commodity/product under VC study.

5. The table below may be used as a template in presenting the analyses of horizontal relationships:

Vertical Relationships

refer to links between players in different  segments of the value chain

1. Identify and analyze relationships whether if it is: input suppliers-farmers, traders-processors, traders-assemblers, processor-assemblers, and farmers-processors. 

2. Describe the relationship between and among identified VC players whether weak, moderate or strong using the following criteria:

a) Procurement of supply

b) Information Sharing

c) Quality Control

d) Value added services

3. The following guide questions or factors may be considered when determining whether the relationship of each player is weak, moderate or strong: 

a) Procurement of supply: 

• Are there any repeated transactions between the farmer-trader or trader-processor? (Prevalence of persistent/suki network relations).

• Prevalence of spot market relations (e.g., delivery of the farmer directly to trader - ability to spot which of the traders offer higher prices)

b) Information sharing: Extent and frequency of sharing Technology and Price information among players.

• Frequencies of joint activities such as knowledge sharing and meetings with other players of different segment/function to share experiences, problems encountered and best practices.

• Degree of transparency in terms of price, costing, and market information (e.g., do traders inform the farmers whenever there are unexpected increase/decrease of price prior to delivery?)

• Is there an exchange of workflow and information in a manner that permits the introduction of innovation, better relationships and joint efforts to better respond to market demands?

c) Quality control: Practices to ensure quality of supplies, products, etc.

• Set of quality standards for certain commodities/products that serve as the basis for pricing (e.g., quality control is done only through visual inspection or moisture testing, automatic price deduction to compensate for any quality issues that could arise)

• Customer satisfaction as a result of high-quality services and products (e.g., are customers satisfied with the services or products purchased? Are there many or few complaints?)

• Compliance to all the safety measures, certification requirements, and existing product/services standards

• Efficiency of productivity (e.g., number of times something needs to be redone or a resource used during a process - this may affect budget reviews and delivery schedules)

d) Value-added services: are not usually part of arrangements between the players 

• Number of value-added services along the chain (e.g., credit provisions if ""suki"", hauling of products, free delivery, provision of free inputs and services, providing cash advances or financial assistance, provision of price incentives based on quality, provision of agriculture extension services, free use of soil and water testing facilities, access to market information services and access to tools and equipment for improving farmer productivity.)"

4 The table below may be used as a template in presenting the analyses of vertical relationships:

D. Price and Cost Structure

The next step is to analyze the financial performance of the value chain. This can entail the study of both past and current costs and margins that determine if the value chain has growth potential in the future. This will also provide an idea if the value chain is accessible to a particular actor/player, and whether it is a good source of income.

This section needs to demonstrate the value that is added at each stage of the VC as well as the relative financial positions of chain actors as they carry out their respective functions.

Included in this subsection are:

● Income and Profits

● Relative Financial Position

Income and Profits

1. Determine the value at each activity that adds to the process in the VC chain, along with the actual costs involved. It is important to understand the costs associated with each step in the process in order to determine ways to improve the value each transaction provides.

2. Gather data relative to productivity, profitability, cost centers, labor and material usage thru desk study, data collection and analysis, KII, FGD, and consultations with VC players

3. Analyze per VC segment (not only production segment), and per product form the following:

a) cost components (description and analysis and its implications to profitability)

b) cost and returns

c) comparable benchmarks (productivity, profitability, labor and material usage)

4. Quantitative supplementation of highlighted cases in the VC maps must happen in this section. If applicable, include in the discussion the following:

a) costs incurred and income received by farmers who are members of coop/organization versus those non-member farmers;

b) share of benefits among players in the VC for the chain with the presence of traders/middlemen versus the chain with no traders/middlemen;

c) share of benefits in the chain where farmers/fishers themselves support the production costs versus the chain where farmers/fishers are being contracted by processors;

d) share of benefits in the VC where the commodity is being exported as input (raw) versus local processing of the commodity before exporting

5. In computing cost and return, the following considerations must be done:

a) Use depreciated values for fixed assets (e.g. equipment, building, and are those that are being used in more than one cycle of operation). Below is the straight-line method of calculating depreciation:

b) Consider both operating (direct and non-direct) and fixed costs in the computation including taxes, land rental, interest on loans, etc. If applicable, include postharvest losses in computing the cost and returns.

c) Make the analysis on a per cycle/activity cycle basis for each segment, if there are no major difference in the activity cycles, hence more than one cycle analysis if there are salient differences per cycle.

6. In presenting the cost and returns analysis, the following template may be used: VC Template 7: Cost and Return Analysis

a. Fill in details such as product type/form, VC player in the segment, activity, activity cycle, and other relevant assumptions.

b. Compute for the total revenue generated in producing dried seaweeds

c. Compute for the total cost incurred in the production (fixed and variable costs)

d. Compute for the Value added per Unit, Return on Investment (ROI), Payback Period to guide the discussion and analysis

Relative Financial Position of Players

1. This section needs to demonstrate the relative financial positions of chain actors as they carry out their respective functions. Examine here the distribution of costs, profits and margins across the participants in a certain VC and the implications for risk, profitability, and competition.

2. Compute and analyze the relative financial position in line with the result of the cost and return analysis.

3. Description and analysis may need to be province specific and value chain/market channel specific if there are obvious differences.

4. Compute the RFP on a per unit basis (e.g. per kg, per tons, per liter, etc.) for all segments of the VC.

5. Table below may be used as a recommended template for RFP Analysis in presenting data:

VC Template 8: Relative Financial Position

6. To guide the analysis of RFP, compute and discuss: %Added Unit Costs/Value added, % Profit Share, and % Unit Margin.

7. Based from the VC Template 8, use the stacked column chart to visually illustrate the share of % Added Unit Cost, % Profit, and % Margin per VC actor

8. After computing the RFP per chain actors, discuss the distribution of costs, profits and margins across the participants in a certain VC and the implications for risk, profitability, and competition.

E. Multi-factor Risk Assessment (UPDATED)

This section will cover the discussion of existing risks, its degree of potential impact to the commodity, and possible management measures.

To determine the vulnerability of the VC Segment to risks, the following are the methodologies/ tools that can be utilized:

1. CRVA

2. FishVOOL

3. GeoRisk

4. PRDP Risk Assessment Matrix

Climate Risks Assessment

Having the identified location of the VC segment from the Resilliency Mapping, determine the vulnerability of the segments to the identified climate risks through the CRVA data available in the PRDP Planners Portal.

Assess the level of exposure and select the risks with class value of 0.8 and above which entails high to very high exposure to risks.

For commodities not included in the CRVA, planners may utilize FishVOOL for fish and aquaculture commodities, and other climate risk assessments of the provincial government or local government unit.

Geologic Risks Assessment

Having the identified location of the VC segment from the Resilliency Mapping, determine the vulnerability of the segments to the identified geologic risks through the GeoRisk data available in the planners portal.

Assess the level of exposure and select the risks with high and very high exposure.

Animal, Plant Health, and Conflict

Determine the vulnerability of the commodity to pests and animal diseases through gathering of data from DA-BAI and DA-BPI. For local data ang information, the VC team may gather information from the Provincial Veterenary Office, Provincial Agriculture Office, and Local Government Units.

Assess which hazards are most likely to significantly harm investments and include it to the prescribed assessment table

Impact Classification

Determine the level of impact of the risks to the commodity value chain per segment. Below is the guide for assessment of severity of impact. In order to conduct the impact assessment, the VC Team should determine the estimated cost of the damages brought by the risks.

For the multi-factor risk assessment, the VC Team can generate supplemental data and analysis corresponding to the function of each participant to be identified through direct interviews of Farmers, Processors, and Traders involved in the value chain. Questionnaires to be used for interviews are provided in Annexes 4, 5 and 6.** Alternatively or complementarily, the TWG may also invite resource persons engaged in the production, processing, trading, etc. of the selected priority commodities. This template will generate important information towards better understanding the commodity value chain structure and relationships.

Assessment of Risk Management Measures

From the final list of existing risks affecting the commodity value chain, determine the appropriate measures to address significant hazards.

The VC Team may revisit the Climate Risk Profile for the potential interventions for climate risks.

For geologic risks, animal/plant health, and conflict, the relevant CPT members may be invited for a key informant interview to gather relevant interventions in managing the vulnerability of the VC segments to the risks.

Desk research and best practice sharing amonth other regions with similar commodity and identified risks may also be done.

Synthesize the result of the risk management measures assessment. These may serve as key factors in deciding on investment priorities for the value chain

Consolidate the data gathered through the table below.

For the CRVA, GeoRisk, and FishVOOL data, illustrate the existing risks through maps. Refer below for the sample map that can be generated through the Planner's Portal.

Triangulate the data gathered to depict the degree of potential impact of the risks to the commodity.

Synthesize and narrate the general impact of the existing risks to the commodity value chain.