Technology/ Product Development

Example of Subsector Analysis

Identifying a Product Market or “Subsector”

Save the Children launched a program in the Philippines in 1993 focused on the “retaso” subsector within the garment sector. Retaso is the Tagalog word for remnant fabric. In this subsector, women use scrap fabric from garment factories as the raw material for weaving or sewing floor mats, children’s clothes, cleaning rags, hair ribbons, and other products. After looking at 14 different subsectors in which low-income women worked, Save the Children chose the retaso subsector because it employed approximately 50,000 women in metropolitan Manila and surrounding regions and it appeared to be a growing market. Demand for the products was increasing by approximately 7 percent per year, and opportunities existed to secure contracts for retaso products with large corporations in the Philippines’ fastest-growing industries. And although unfavorable government policies toward the retaso subsector presented a threat, SC believed it could mitigate the problem by integrating education and advocacy in its program.

Social Enterprise goals: create economic opportunities (self-employment and/or jobs) for low income women in urban Manila.

Subsector Selection Criteria  High number of clients (low-income women)  Growth potential and demand  Positive regulatory environment  Favorable strategic environment: (-) threats and (+) opportunities

Potential # of Market Regulatory Strategic Subsector Women Demand/ Environment Environment: Micro- Growth Threats/ entre- Opportunities preneurs Rice Hundreds of Growing High government Very political product; thousands interest-positive controlled by a few distributors Balut (Filipino Mostly men Growing Medium Pollution is killing delicacy from duck government ducks in metropolitan eggs) interest-positive Manila; high risk Fish (trading) Thousands Growing Medium High competition with government large companies interest-positive Christmas Thousands Growing slowly High government Seasonal; difficult to handicrafts and interest-positive meet quality needs of ornaments the market

Designing High Impact Social Enterprises Alter/Nicholls Example of Subsector Analysis

Potential # of Women Market Regulatory Strategic Product Sector Micro-entre- Demand/ Environment Environment: preneurs Growth Threats/ Opportunities Retaso Thousands Growing fast High Proximity of government women; many interest- companies buy negative products (retaso trading Limited raw- is illegal) materials supply

Shoes Hundreds Steady or Medium Use of hazardous growing slowly government chemicals is a current interest-positive problem Soap Hundreds Shrinking Low Soap made in communities is being replaced by manufactured soap Recycling waste Thousands Steady or High government Many different products growing slowly interest products; many need to focus more

Cooked-food Thousands Steady or Medium-neutral A lot of competition vending growing slowly

Cut flowers Hundreds Export market Medium Mainly larger growing companies, not microenterprises Wig making A few Shrinking Low Cheaper imports hundred being used

Effect of Government Policies in the Retaso Subsector

The garment industry in the Philippines is required to dispose of fabric remnants as waste and is restricted from selling them as raw material. And if manufacturers sell garment waste, they are subject to taxation on these sales because textiles are imported. Consequently, raw material acquisition in the retaso enterprise is an illegal activity, which poses a threat to the operations of this microenterprise. Despite the legal constraints, because of the high volume of entrepreneurial activity by poor women in this industry, Save the Children program designers saw an outstanding potential to increase women’s income through a social enterprise intervention. Therefore, they sought to mitigate this threat by adding an advocacy component in the design of the retaso social enterprise.

Opportunities for social enterprise in “retaso” Subsector

RETASO SUBSECTOR MAP

Markets: Consumer Industrial

F Retailing Stores

U Distribution Product Traders

N Wholesaling

Micro- Small

C Sewing entrepreneurs Enterprises

Assembly

T Cutting

I Retailing Retaso Retaso Traders

O Sorting Retaso

N Wholesaling Garment Factories Retaso

Analyzing the Subsector to Determine Viability of Microenterprise Social Impact to Client

Viability Issues for Microentrepreneurs Activity 1 Activity 2 Activity 3 (MES)

Subsector health 1. Is it healthy and growing? 2. Sensitive to economic fluctuations? 3. Are forecasts positive? Market 4. Is the market clearly identified? 5. Is the market growing or shrinking? 6. Is it large enough to support a growing number of MES? 7. Is the cost of reaching market reasonable? Competition 8. Is there a lot of competition (other than from MES)? 9. Do competitors dominate the market? 10.What comparative advantages do MES have? Financial resource needs 11.Are profit margins wide enough that the business is not vulnerable (based on costs of doing business vs. reasonable selling price)? 12.Is credit available for MES at reasonable terms? Skill capacity 13.Do MES have appropriate skills for this activity to be profitable? 14.Can requiredskills be learned? Legal considerations 15.Are there laws or regulations that negatively impact any aspect of MES (market, suppliers, distributors)?

Operational concerns 16.Does the current infrastructure support MES growth? 17.Do MES have access to transportation to support their business needs? 18.Are technology inputs needed for MES and are they available? 19.Are required communications available to MES?

Suppliers/distributors 20.Are raw materials or input sources close to the MES? 21.Are suppliers reliable? 22.Are distributors reliable?

TOTAL SCORE

Designing High Impact Social Enterprises Alter/Nicholls