Value Chains for Integrating Small Producers into Market: Small-Scale Organic Turmeric Processing Enterprises in Orissa

The paper analyzes the value chains of small-scale organic turmeric processing enterprises in Kandhamd district of Orissa state in India. The key sections of the paper provide the background of evolution of these enterprises, their business operations, various chain participants and their functions in the value chain. The value chain analysis reveals strong inter-firm relations in the chain that facilitate the integration of small producers in the market. The paper concludes that an increasing demand for the organic turmeric products from both domestic as well as international markets offers scope for further growth and development of these enterprises.IntroductionMicro and Small Enterprises (MSEs) represent a diverse group of economic activities. In the absence of a universally accepted definition, composition and typology of the small-scale enterprise sector, researchers, policy makers and academicians seem to use a range of terms interchangeably to describe the enterprises that make up the small business sector. Various terminologies in use include: micro-enterprises, informal enterprises, small business, small firms, small enterprises, small-scale enterprises, small- and medium-sized enterprises, medium-and small-scale industry, self-employment and income-generating activities, etc. (Hailey, 1991). However, one generally accepted view among practitioners and academicians is to visualize economic activities in a continuum with income generation at one end of it and micro enterprise some distance away from it, after which came small, medium and large enterprises (Ramachandran, 1993).The role of small-scale enterprises as an agent of economic development is well-recognized. A large number of them are characterized as survival enterprises owned and operated by the economically weak and form a major source of their livelihood. It is well-recognized that access to market is very critical to small enterprise development. However, small-scale enterprises in general are constrained by a host of factors ranging from limited access to resources, skills, technology, support services and access to market. It is argued that integration of the small firms to high value market helps them: (1) increase the efficiency of its internal operation; (2) develop inter-firm linkages that reduce transaction costs; and (3) upgrade along the value chain (introduce product branding, new products, and improved version of existing products in the market faster than the rivals) (Kaplinsky, 2000). Studies also revealed that forging extensive collaborative ties between the firms facilitates sharing of knowledge, technologies and inputs (Storper, 1997); develops greater responsiveness to global demands (Canina et al., 2005); and helps attain greater export levels as a result of collective efficiency (Schmitz, 1995) and improving competitiveness.Over the years, there is a shift in approaches to small enterprise development. Moving away from the traditional approaches of provision of subsidized credit and inputs, the small enterprise development field has passed through cluster development, subsector approach and market development. In recent years, value chain approach is widely used as a facilitation tool for small enterprise development. The value chain development programs focus on improving the competitiveness of the industry/sector in which the firm operates (Jones, 2011). The concept of value chain was introduced by Michael Porter in his famous book, Competitive Advantage. Porter (1985) defined value chain in terms of combination of nine generic functions consisting of: customer order, design, bill of materials, procurement, purchase order, production and shipment order, operating within a firm that work together to provide value to customers. In fact, the value chain describes the flow of goods from producers to final consumers and the value addition taking place at each level in the chain (Kaplinsky, 2000). Value chain includes input suppliers, producers, processors and buyers. …