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

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

Contents 2.1. What did we do? 2.2. The sample 2.3. An overall picture of the BDS market – awareness, trial and 1. Introduction retention of services, sample market size, average spending, types of 2. The BDS market in Sri Lanka – BDS 2.4. Market penetration results of a market survey and ‘market distortion’ 2.5. Market segmentation - who buys or uses BDS? 3. Conclusions: What do we learn 2.6. The service providers – type, details, source of from the survey? information about and reasons for choosing them 2.7. Reasons for not purchasing BDS

1. Introduction

Context of the study � 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 offer?

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 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 • Training on energy, water and (18) waste management • Advertising services • Training on production, • Accounting & auditing services productivity & technical skills • Legal & paralegal services • Consultancy on finance • Communication (phone, fax, management, accounting & e-mail, internet) & correspondence taxation services • Consultancy on human resource •Participation in trade fairs development •Business & market information • Consultancy on business • Training on finance management, planning and management accounting & taxation • Consultancy on marketing & •Training on human resource sales development • Consultancy on energy, water and •Training on entrepreneurship & waste management business planning • Consultancy on production, •Training on marketing & sales productivity & technical matters

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 Locations 18.8% 20.0% 18.0% 16.0% 14.0% 9.8% 9.8% 9.3% 10.6% 12.0% 9.3% 9.8% 9.2% 10.0% 7.3% 8.0% 6.0% 6.0% 4.0% 2.0% 0.0% Col Gamp Kandy Matale K'gala Galle Matara H'tota Ra'pura Trinco Economic sectors Enterprise size groups 25.4% 26.6% 30.0% 24.7% 23.40% 50.0% 44.4% 25.0% 40.0% 29.7% 20.0% 25.9% 30.0% 15.0% 20.0% 10.0% 10.0% 5.0% 0.0% 0.0% micro <5 small 5-20 medium >20 agriculture manufact services trade

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 80 70 60 50 40 30 20 10 0 cons prod cons energy cons mkt cons busplan cons hrd cons fmgt trg prod trg energy trg mkt trg entre trg hrd trg fin/acc bus info trade fairs communication legal accounting ... advertising retention trial awareness

� 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

Average spending Total spending (incl. non-spenders) Total spending Rs. 75,266 on all services per business per year (last 12 months/ fin. year) Average spending Rs. 52 million (spenders only: N=621) (N = 696) Rs. 84,356 per business per year 75 people (10.8%) did not spend at all (last 12 months) Extrapolation: total market (9 districts) in 2000/ 01: Rs. 10.9 bn

Total (sample) market by type of BDS (18) 0.8% 0.8%0.4%0.7% 0.1% 0.3% 0.0% 0.4% communication/ corr 1.0% 1.1% 1.3% 1.4% advertising 2.8% accounting/ auditing 3.0% legal trade fairs trg energ/ wat/ waste 7.6% cons prod 42.5% trg mktg trg hrd trg fin mgt cons mktg cons fin mgt 14.2% trg entrep trg prod bus info cons hrd cons energ/ wat/ waste cons busplan/ mgmt 21.6%

Total (sample) market by type of BDS (8) 3.0% 0.4% 3.4% communication/ corr 7.2% 42.5% advertising 7.6% accounting/ auditing legal training consultancies 14.2% trade fairs business info 21.6%

Average spending per BDS (8), last 12 months (Rs.) 35,000 32,976 30,000 25,000 20,000 16,306 15,000 10,699 10,000 5,749 5,439 5,000 2,584 2,259 285 0 advertising accounting legal training consultancies trade fairs business info communication

� 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 used‘ – ‚ever purchased‘ – ‚ever got for free‘ (%) (8) 80 70 60 50 40 30 20 10 0 ever used % consultancies training ever purchased % business info trade fairs communication/ corr ever got for free % legal accounting/ auditing advertising

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?

Average spending on all BDS, last 12 months/ fin. year, in Rs. (N=696) By location 150,000 100,000 50,000 0 Col Gamp Kandy Matale K'negala Galle Matara H'tota Rat'pura Trinco By respondent education By economic sector 300000 90000 250000 80000 70000 200000 60000 50000 150000 40000 100000 30000 20000 50000 10000 0 0 comm manuf services trade <"O" L "O" L "A" L tech univ post agric dipl grad grad

Average spending on BDS, continued By business ownership 120000 100000 80000 60000 By size 40000 20000 0 Sinhala Tamil Moor 160000 140000 120000 100000 80000 60000 40000 20000 0 micro small medium

Average spending on individual BDS, last 12 months, by enterprise size (8) 60000 50000 40000 30000 20000 10000 0 consultancies training medium business info trade fairs small communic/ corr legal micro accounting /audit advertising

Average spending on individual BDS, last 12 months, by economic sector (8) 45000 40000 35000 30000 25000 20000 15000 10000 5000 trade 0 services consultancies manufacturing training business info trade fairs comm agric comm/ corr legal account/ audit advertising

� 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 on a larger range of services. � The BDS budget of microenterprises seems to be basically their telephone bill.

2.6. The service providers

Types of providers used 70 60 50 40 30 20 10 0 cons prod cons energ/ wat/ waste cons mktg cons busplan cons hrd cons fin mgmt trg prod trg energ/ wat/ waste trg mktg trg entrep trg hrd trg fin mgmt business info trade fairs comm/ corr legal account/ audit advertising individual small firm large firm

� 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) 2.0 colleague/ friend 11.5 2.0 newspaper/ radio/ tv assoc/ chamber 47.7 15.1 gvt office leaflet/ newsletter tel directory/ yellow 21.8 pages