Post on 21-Jan-2016
The market for Business Development Services (BDS)
in Sri Lanka
The market for Business Development Services (BDS)
in Sri Lanka
Dr Chris Reichert, Verni Vijayarajah,
Maria Vitores
Presentation to the National BDS Conference, Colombo
February 11, 2003
ContentsContents
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
2.4. Market penetration and ‘market distortion’
2.5. Market segmentation - who buys or uses BDS?
2.6. The service providers – type, source of information about and reasons for choosing them
2.7. Reasons for not purchasing BDS
2.1. What did we do?
2.2. The sample
2.3. An overall picture of the BDS market
2.4. Market penetration and ‘market distortion’
2.5. Market segmentation - who buys or uses BDS?
2.6. The service providers – type, source of information about and reasons for choosing them
2.7. Reasons for not purchasing BDS
1. Introduction1. Introduction
Frustration about the results of 30 years of SME projects, and about the record of public sector interventions
The international discussion on SME promotion and BDS market development
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 offer?
Context of the studyContext of the study
2. The BDS market in Sri Lanka – results of the market survey2. The BDS market in Sri Lanka – results of the market survey
2.1. The study – what did we do?2.1. The study – what did we do?
a modified Usage – Attitude - Image (UAI) market survey on 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 (18)•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
N = 696 interviews with MSMEsN = 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 2.2. The sample structure
The sample compositionThe 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
LocationsLocations
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:2.3. An overall picture of the BDS market in Sri Lanka:
Awareness, trial and retention of BDS by individual services
retentiontrial
awareness
adve
rtis
ing
acco
un
tin
g ..
.
leg
al
com
mu
nic
atio
n
trad
e f
airs
bu
s in
fo
trg
fin
/acc
trg
hrd
trg
en
tre
trg
mk
t
trg
en
erg
y
trg
pro
d
con
s f
mg
t
con
s h
rd
con
s b
us
pla
n
con
s m
kt
con
s e
ne
rgy
con
s p
rod
0
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 on all services
(last 12 months/ fin. year)
Rs. 52 million(N = 696)
Total spending on all services
(last 12 months/ fin. year)
Rs. 52 million(N = 696)
Average spending (spenders only: N=621)Average spending (spenders only: N=621)
75 people (10.8%) did not spend at all (last 12 months) 75 people (10.8%) did not spend at all (last 12 months)
Total spendingTotal spending
Rs. 75,266per business per year
Rs. 75,266per business per year
Average spending (incl. non-spenders)Average spending (incl. non-spenders)
Rs. 84,356per business per year
Rs. 84,356per business per year
Extrapolation: total market (9 districts) in 2000/ 01: Rs. 10.9 bnExtrapolation: total market (9 districts) in 2000/ 01: Rs. 10.9 bn
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 2,259285
32,976
5,439
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
com
munic
atio
n
adverti
sing
acco
unting
legal
train
ing
consu
ltanci
es
trade fa
irs
business
info
There is a BDS market
with moderate spending
and relatively low awareness and trial rates
strong concentration on a few services, namely communication/ correspondence, advertising, accounting
quite small market for services traditionally promoted by public sector agencies and donors (training, consultancies, information)
2.4. Market penetration and „market distortion“2.4. Market penetration and „market distortion“
ever got for free %
ever purchased %
ever used %
ad
vert
isin
g
acc
ou
ntin
g/ a
ud
itin
g
leg
al
com
mu
nic
atio
n/ c
orr
tra
de
fair
s
bu
sin
es
s in
fo
tra
inin
g
con
su
ltan
cie
s
0
10
20
30
40
50
60
70
80
‚ever used‘ – ‚ever purchased‘ – ‚ever got for free‘ (%) (8)
Those provided on commercial terms
Those with a strong or majority share of free or subsidized service provision: consultancy, training, information
2 groups of services2 groups of services
2.4. Market segmentation:
Who buys BDS?
2.4. Market segmentation:
Who buys BDS?
By location
0
50,000
100,000
150,000
Col Gamp Kandy Matale K'negala Galle Matara H'tota Rat'pura Trinco
By economic sector
0100002000030000400005000060000700008000090000
commagric
manuf services trade
By respondent education
0
50000
100000
150000
200000
250000
300000
<"O" L "O" L "A" L techdipl
univgrad
postgrad
Average spending on all BDS, last 12 months/ fin. year, in Rs. (N=696)
Average spending on BDS, continuedAverage spending on BDS, continued
0
20000
40000
60000
80000
100000
120000
140000
160000
micro small medium
By sizeBy size
By business ownershipBy business ownership
0
20000
40000
60000
80000
100000
120000
Sinhala Tamil Moor
Average spending on individual BDS, last 12 months, by enterprise size (8)
micro
small
medium
ad
vert
isin
g
acc
ou
nti
ng
/a
ud
it
leg
al
com
mu
nic
/ co
rr
tra
de
fa
irs
bu
sin
ess
in
fo
tra
inin
g
con
sult
an
cie
s
0
10000
20000
30000
40000
50000
60000
Regional variations
Muslim owners spend double.
There is no 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 (R=.29/.000) and business size (R=.4/.000).
Larger enterprises do not only spend more, they also spend on a larger range of services.
The BDS budget of microenterprises seems to be basically their telephone bill.
2.6. The service providers2.6. The service providers
individualsmall firmlarge firm
adve
rtis
ing
acco
un
t/ a
ud
it
leg
al
com
m/ c
orr
trad
e f
airs
bu
sin
es
s in
fo
trg
fin
mg
mt
trg
hrd
trg
en
tre
p
trg
mk
tg
trg
en
erg
/ wat
/ was
te
trg
pro
d
con
s f
in m
gm
t
con
s h
rd
con
s b
us
pla
n
con
s m
ktg
con
s e
ne
rg/ w
at/ w
aste
con
s p
rod
0
10
20
30
40
50
60
70
Types of providers used
Service provision mostly dominated by larger firms/ organizations.
Individuals and small firms play a stronger role in advertising, accounting, and legal services.
Sources of information about service providers, % (N=2,121 answers)
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/ yellowpages
Reasons for choosing service provider, % (N=2,138 answers)
Reasons for choosing service provider, % (N=2,138 answers)
9.8 11.2
2.6
20.7
25.9
3.33.2
6.6
8.2
8.6
good name in market
comp price/ cheapest
colleagues/ friends/competitors
tailored to needs
comp professionals
free service
only 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 2.7. Reasons for not purchasing BDS
Reasons for not buying BDS, summarized, % ( N=8,107 answers)
Reasons for not buying BDS, summarized, % ( N=8,107 answers)
7.4
6.3
24.4
55.2
0.76.0
don't need it
get it done inhouse
too expensive
need it but don't knowwhere to get
got it for free
other
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 outsourcing and using of BDS are not useful or worthwile.
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 outsourcing and using of BDS are not useful or worthwile.
3. Conclusions: What do we learn from the survey?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 of project interventions, but it does not provide us with a prescription.
5. We are just starting to learn from international comparison of 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, etc.
Thank you
for your attention!
Thank you
for your attention!