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Development and Evaluation of a Simple Market Feasibility Assessment Methodology 10MEAR2

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Development and Evaluation of a Simple Market Feasibility Assessment Methodology

Marketing and Economic Analysis Research 2 (10MEAR2)/Study/Mexico (A) and Peru (B)

Collaborating Institution
Instituto de Investigaciones de la Amazonia Peruana, Peru
      Fernando Alcántara Bocanegra

Universidad Juárez Autónoma de Tabasco, Mexico
      Wilfrido Contreras-Sánchez

University of Arkansas at Pine Bluff
     Carole R. Engle

Objectives
1) Develop a methodology for rapid assessment of market feasibility for aquaculture species.

2) Evaluate the methodology developed for rapid assessment of market feasibility for aquaculture species.

Significance
Comprehensive marketing studies are very expensive and resource intensive. They require a great deal of manpower, funding, and expertise. Yet, all too often, efforts to develop aquaculture industries fail due to market conditions, not lack of production technology expertise. There is a significant need to attempt to develop some simplified and rapid market assessment techniques that are applicable to the Latin American context.

Polling firms in the U.S. have identified indicator questions and variables that can be used as predictors of behavior (Burns and Bush, 1998). These are based on analysis of comprehensive survey data and statistical analyses that develop relationships among different variables and parameters. For new industries like aquaculture in developing nations without the plethora of databases, surveys, and census information that some other countries have available, these types of convenient shortcuts are not possible. The surveys conducted in Work Plan 9, however, provide a wealth of information related to fish and seafood markets in Central America. If a reliable subset of key parameters can be developed, it may be possible to develop a simplified and relatively rapid market assessment tool. The tool would need to be evaluated carefully to define its usefulness to other regions of Latin America and with species other than tilapia. If successful, the potential impact and value of this tool would be quite high.

Rapid assessment tools have been developed for other types of development initiatives. For aquaculture ICLARM is actively using a spreadsheet-based resource allocation interactive tool to assist with community and farm development (Prein et al., 1996). This tool has successfully been used to identify sustainable approaches to resource use and economic development. Hatch and Falck (2001) are working to develop a rapid assessment tool to assess economic risk in tilapia production in Honduras. A spreadsheet program is used that allows for distributions of costs, yields, and prices, to be entered to assess the effects of economic risk in production. However, there is no indication in the literature of the development of such a rapid assessment methodology for addressing marketing feasibility.

Quantified Anticipated Benefits
Direct beneficiaries of this project will be aquaculture growers in Peru and Mexico where the methodology developed will be tested. The testing efforts will provide valuable market information on markets for tilapia and for other important native species.

The Mexican student who will use this project as a basis for an MS degree in Mexico will benefit from this effort as well as provide for human capital development in marketing analytical techniques.

This methodology has potential to be a valuable tool for many areas where aquaculture is a new technology, or where a new species or product is to be introduced.

Research Design
Location of Work: The methodology will be developed at the University of Arkansas at Pine Bluff using survey data obtained in the Ninth Work Plan. The methodology will then be tested in both Mexico and in Peru.

Methods: The econometric and statistical analyses to be conducted in the discrete choice models previously described will identify statistically significant variables related to market characteristics for farm-raised tilapia. These significant variables will be compiled into a short survey instrument. Other, non-significant variables will be selected at random under each major heading on the survey (sales, supply, attitudes, socio-demographic characteristics, and economic characteristics) for inclusion in the short survey instrument. These non-significant, randomly selected variables, will provide a basis for considering errors of omission in the rapid assessment methodology.

The study on marketing costs (LP analysis) will provide insight into those costs and factors that present the greatest risk to tilapia farmers and those that are the most important determinants of market feasibility. These cost factors will be condensed into a second short survey instrument.

The rapid market assessment tool will be composed of these three components: market characteristics (including price points), marketing costs and margins, and production costs. The decision criterion for determination of feasibility is whether market price minus marketing cost minus production cost is greater than zero. If it is, then the market segment in question is deemed to be feasible. If the result is less than zero, then targeting that particular market segment is deemed infeasible.

Testing of the market assessment tool will be carried out in Mexico and in Peru. In Mexico, the principal market area and population center is Mexico City. Both tilapia and native cichlid species are sold in Mexico City. Native cichlid species are highly desired products by Mexican consumers and have potential as native species for development of culture techniques. In Peru, Lima is the major population center, and will be used as a testing site. Both tilapia and Colossoma spp. are sold there. However, Peru offers the interesting alternatives of Iquitos, a significant population center in the Amazon region where tilapia is banned, but Colossoma spp. are sold along with other freshwater species. Tarapoto further offers a study area in an aquaculture production area characterized by low income, small-scale aquatic farms. In each study site, a random sample of restaurants and supermarkets will be drawn from telephone listings. In open-air fish markets, vendors will be selected randomly using systematic spatial sampling techniques (Burns and Bush, 1998).

Direct personal interviews will be conducted using the short survey instruments developed. Statistical comparisons will be made between the responses for variables that were significant in the Central American surveys and the responses to questions related to variables that were not significant. This comparison will provide an indication of whether the selection of variables for the short survey omitted some key factors.

Data will be processed to determine price points for product sizes and forms along with projected sales volumes as determined by the first short survey for various market outlets. Data from the second short survey will be synthesized into an estimate of marketing costs for various product sizes and forms. Production cost estimates will be developed from enterprise budgets. Production and marketing costs will be subtracted from the relevant price points for various product sizes andforms for the different market channels and segments. Positive values will indicate feasible markets.

Regional Integration
The Regional Plan for South America refers specifically to the identification of marketing strategies to optimize economic returns. Research needs reiterate the importance of determining optimal marketing strategies for Colossoma spp.

Schedule
7/1/01 Initiate project.
12/31/01 Rapid market assessment methodology developed.
7/31/02 Complete testing in Mexico City.
12/31/02 Complete testing in Peru.
4/30/03 Complete final evaluation of effectiveness of rapid market assessment methodology and submit final report.

Literature Cited
Burns, A.C. and R.F. Bush, 1998. Marketing Research. 2nd Edition. Prentice-Hall, Inc., Upper Saddle River, New Jersey.

Hatch, L.U. and J. Falck, 2001. Assessing economic risk in tilapia production in Honduras. Abstract. Book of Abstracts. Aquaculture 2001, World Aquaculture Society, Orlando, Florida.

Prein, M., J.K. Ofori, and C. Lightfoot, 1996. Research for the future development of aquaculture in Ghana. ICLARM Conf. Proc. 42, International Center for Living Aquatic Resources Management, Manila, Philippines, 94 pp.

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