The market for Business Development Services (BDS) in Sri Lanka - - PowerPoint PPT Presentation

The market for Business Development Services (BDS) in Sri Lanka

Contents

• 1. Introduction
• 2. The BDS market in Sri Lanka –

results of a market survey

• 3. Conclusions: What do we learn

from the survey?

2.1. What did we do? 2.2. The sample 2.3. An overall picture of the BDS market – awareness, trial and retention of services, sample market size, average spending, types of BDS 2.4. Market penetration and ‘market distortion’ 2.5. Market segmentation - who buys or uses BDS? 2.6. The service providers – type, details, source of information about and reasons for choosing them 2.7. Reasons for not purchasing BDS

• 1. Introduction

The international discussion on SME promotion and BDS market development Frustration about the results of 30 years of SME projects, and about the record of public sector intervention Can markets play a bigger role? And what do we know about BDS markets? Not much! Let‘s better understand BDS markets! And use established market research tools! Questions: Is there a market for BDS in Sri Lanka? Demand side: Do MSME spend? Who spends? How much? And for what services? What reasoning? Supply side: Are providers available? And what do they

• ffer?

Context of the study

• 2. The BDS market in Sri Lanka –

results of the market survey

2.1. The study – what did we do?

a modified Usage – Attitude - Image (UAI) market survey

• n BDS in Sri Lanka

Objective: to get an overview of the demand for and supply of various BDS in Sri Lanka modified UAI: included many services rather than 1 less in-depth information designed to get a first overview of the market

The services studied

• Advertising services
• Accounting & auditing services
• Legal & paralegal services
• Communication (phone, fax,

e-mail, internet) & correspondence services

• Participation in trade fairs
• Business & market information
• Training on finance management,

accounting & taxation

• Training on human resource

development

• Training on entrepreneurship &

business planning

• Training on marketing & sales
• Training on energy, water and

waste management

• Training on production,

productivity & technical skills

• Consultancy on finance

management, accounting & taxation

• Consultancy on human resource

development

• Consultancy on business

planning and management

• Consultancy on marketing &

sales

• Consultancy on energy, water and

waste management

• Consultancy on production,

productivity & technical matters

(18)

N = 696 interviews with MSMEs

Micro: 1 – 4 full-time employees (incl. owner) Small: 5 – 20 full-time employees Medium: 21 – 200 full-time employees in 10 districts of Sri Lanka conducted by Key Research, in 2001 funded by GTZ CEFE and ESSP and Swisscontact quota sampling procedure (for locations, enterprise size, economic sector) not representative for enterprises in Sri Lanka in general however, major groups and places are represented, and extrapolations are possible

2.2. The sample structure

The sample composition

9.8% 9.8% 18.8% 9.3% 9.3% 9.8% 10.6% 7.3% 9.2% 6.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% Col Gamp Kandy Matale K'gala Galle Matara H'tota Ra'pura Trinco

Locations

23.40% 24.7% 25.4% 26.6%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

agriculture manufact services trade

Economic sectors Enterprise size groups

29.7% 44.4% 25.9%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% micro <5 small 5-20 medium >20

2.3. An overall picture of the BDS market in Sri Lanka: awareness, trial, and retention of services sample market size average spending types of BDS

Awareness, trial and retention of BDS by individual services

retention trial awareness advertising accounting ... legal communication trade fairs bus info trg fin/acc trg hrd trg entre trg mkt trg energy trg prod cons fmgt cons hrd cons busplan cons mkt cons energy cons prod

10 20 30 40 50 60 70 80

Limited awareness and understanding of most services High trial rates for communication, advertising, accounting Relatively low trial rates for all other services High retention only for communication, accounting, marketing consultancies i.e. even if people tried a service, repeat use is not very probable for most services 2 groups of services: the ones used often and regularly by many people the ones tried occasionally and often not used again

Total spending

• n all services

(last 12 months/

• fin. year)
• Rs. 52 million

(N = 696)

Average spending (spenders only: N=621)

75 people (10.8%) did not spend at all (last 12 months)

Total spending

• Rs. 75,266

per business per year

Average spending (incl. non-spenders)

• Rs. 84,356

per business per year

Extrapolation: total market (9 districts) in 2000/ 01: Rs. 10.9 bn

42.5% 21.6% 14.2% 7.6% 3.0% 2.8% 1.4% 1.3% 1.1% 1.0% 0.8%0.4%0.7% 0.3% 0.4% 0.8% 0.1% 0.0%

communication/ corr advertising accounting/ auditing legal trade fairs trg energ/ wat/ waste cons prod trg mktg trg hrd trg fin mgt cons mktg cons fin mgt trg entrep trg prod bus info cons hrd cons energ/ wat/ waste cons busplan/ mgmt

Total (sample) market by type of BDS (18)

Total (sample) market by type of BDS (8)

7.6% 7.2% 3.0% 0.4% 3.4% 14.2% 42.5% 21.6%

communication/ corr advertising accounting/ auditing legal training consultancies trade fairs business info

Average spending per BDS (8), last 12 months (Rs.)

16,306 10,699 5,749 2,584 2,259 285 32,976 5,439

5,000 10,000 15,000 20,000 25,000 30,000 35,000 communication advertising accounting legal training consultancies trade fairs business info

There is a BDS market with moderate spending Strong concentration on a few services, namely communication/ correspondence, advertising, accounting Small market for services traditionally promoted by public sector agencies and donors (training, consultancies, information)

2.4. Market penetration and „market distortion“

ever got for free % ever purchased % ever used % advertising accounting/ auditing legal communication/ corr trade fairs business info training consultancies 10 20 30 40 50 60 70 80

‚ever used‘ – ‚ever purchased‘ – ‚ever got for free‘ (%) (8)

2 groups of services Those provided on commercial terms Those with a strong or majority share of free or subsidized service provision: consultancy, training, information

2.4. Market segmentation: Who buys BDS?

By location

50,000 100,000 150,000

Col Gamp Kandy Matale K'negala Galle Matara H'tota Rat'pura Trinco

By economic sector

10000 20000 30000 40000 50000 60000 70000 80000 90000 comm agric manuf services trade

By respondent education

50000 100000 150000 200000 250000 300000

<"O" L "O" L "A" L tech dipl univ grad post grad

Average spending on all BDS, last 12 months/ fin. year, in Rs. (N=696)

Average spending on BDS, continued

20000 40000 60000 80000 100000 120000 140000 160000 micro small medium

By size By business ownership

20000 40000 60000 80000 100000 120000 Sinhala Tamil Moor

Average spending on individual BDS, last 12 months, by enterprise size (8)

micro small medium advertising accounting /audit legal communic/ corr trade fairs business info training consultancies 10000 20000 30000 40000 50000 60000

Average spending on individual BDS, last 12 months, by economic sector (8)

comm agric manufacturing services trade advertising account/ audit legal comm/ corr trade fairs business info training consultancies 5000 10000 15000 20000 25000 30000 35000 40000 45000

Regional variations Muslim owners spend double. Although spending by the agicultural sector is lower, there is no strong relationship between economic sector and the size of spending on BDS. The training market is stronger in manufacturing and services than in other sectors. Trade and services seem to be more communication- intensive than other sectors. Strong positive correlation of BDS spending with education and business size. Larger enterprises do not only spend more, they also spend

• n a larger range of services.

The BDS budget of microenterprises seems to be basically their telephone bill.

2.6. The service providers

individual small firm large firm advertising account/ audit legal comm/ corr trade fairs business info trg fin mgmt trg hrd trg entrep trg mktg trg energ/ wat/ waste trg prod cons fin mgmt cons hrd cons busplan cons mktg cons energ/ wat/ waste cons prod 10 20 30 40 50 60 70

Types of providers used

Service provision mostly dominated by larger firms/

• rganizations.

Individuals and small firms play a stronger role in advertising, accounting, and legal services.

Sources of information about service providers, % (N=2,121 answers)

11.5 2.0 2.0 47.7 21.8 15.1

colleague/ friend newspaper/ radio/ tv assoc/ chamber gvt office leaflet/ newsletter tel directory/ yellow pages

Reasons for choosing service provider, % (N=2,138 answers)

9.8 11.2 2.6 20.7 25.9 3.3 3.2 6.6 8.2 8.6

good name in market comp price/ cheapest colleagues/ friends/ competitors tailored to needs comp professionals free service

• nly ones I know

close to workplace used before/ comfortable provider is friend/ relation

Word of mouth/ recommendations are the most important information sources about service providers. Mass media and information through organizations (chambers, government offices) are also relevant. Directories and newsletters are not much used. In selecting service providers, quality and price considerations compete. Most arguments (56%) are related to quality (good name, competence, tailored service, recommended), the second biggest group (29%) is related to price (competitive, cheapest, free service).

2.7. Reasons for not purchasing BDS

Reasons for not buying BDS, summarized, % ( N=8,107 answers)

7.4 6.3 24.4 55.2 0.7 6.0

don't need it get it done inhouse too expensive need it but don't know where to get got it for free

• ther

The perception that a service is not needed or that it can be done inhouse are the most important reasons for not buying BDS. On the one hand realistic: Not everybody needs all the services all the time. On the other hand: constraint to BDS market

• development. Market development will have to overcome

the relatively low awareness levels and the perception, that

• utsourcing and using of BDS are not useful or worthwile.

• 3. Conclusions: What do we learn from

the survey?

1. A fresh look at things! We see many things (services, providers, demand) which we did not see before. 2. There is a market – MSME spend on BDS – and there are providers for various types of BDS. 3. The market is divided into a purely commercially functioning part and a sector with a lot of non-market interference or ‚distortion‘. 4. An overview of the BDS market – it can inform the design

• f project interventions, but it does not provide us with a

prescription. 5. We are just starting to learn from international comparison

• f BDS markets.

6. Data can also inform BDS providers: which market segments to target for what service?

• 7. Market data can suggest demand as well as supply side
• interventions. Weak awareness and demand could justify

interventions to generate awareness and stimulate demand (business education, social marketing and marketing of BDS). Constraints in provision would result in product development and supplier qualification interventions.

• 8. This survey is a first step and learning experience. Other

market research instruments can be applied to generate more specific information for matching demand and supply in the BDS market: Focus Group Discussions, Product Concept Tests, Price Sensitivity Tests, etc.

Thank you for your attention!