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Economic competitiveness

[ Summary ]


Chapter 2:
Analysing an area’s economic competitiveness


2.4 Links with markets [3]


Having identified all the businesses in an area, together with their degree of dynamism and performance levels, economic competitiveness can be analysed only by comparing such performance levels with those of their market competitors.

Economic competitiveness, defined in terms of creating value added and keeping it in the area, presupposes being able to position itself in the most lucrative, and hence most value-added-creating markets. However, factors other than business performance come in at this stage. A particular characteristic of rural areas is that businesses activities are to some extent geographically dispersed and remote from markets, which calls for specific forms of organisation. Several levels of analysis are required:

  • What is the area’s actual and potential offering?

  • In which market segments is this offering positioned and which niches is it is able to exploit in relation to the requirements of the different segments?

  • How well organised are producers for exploiting these segments, with particular regard to the area’s specific obstacles (dispersion, remoteness, etc.)?

  • How well do producers know the markets? In particular, what are the mechanisms, information channels, etc. that provide them with feedback and hence with information to enable them to improve their competitiveness?

a) Analysis of existing assets: the area’s offering

    A general analysis of the local offering should focus on the following questions: What products and services do the area’s businesses offer? How can such products and services be characterised in terms of regularity and seasonality?

    It is difficult to carry out an exhaustive analysis. One simple solution may be to evaluate the area’s offering in relation to a number of key questions, such as:

    • Are they mainly mass-produced, standard products?

    • Are there any “niche” or “exclusive” products? What elements of differentiation allow them to tap into these market niches: mass- production or limited production, a recipe, an old-fashioned production technique, a legacy of the area’s past, a quality label, a regional label or label of origin, organic or natural products, special or artistic packaging, etc.?

    • Are there any seasonal products? If so, are there guaranteed means of storing them?

b) Analysis of practices

    How is the area’s offering placed on the markets? Which market segments are more specifically exploited? At this point it is appropriate to identify the following elements for the area’s main products:

    • the various market segments that these products exploit, starting with the nearest and least demanding segments (local markets) and progressing to the most distant segments;

    • the general characteristics of these segments, in terms of volume, existing competition and price levels;

    • specific requirements in terms of quality, homogeneity and regularity of supply;

    • the implications for producers in organisational terms.

    This raises the question of what segments are exploited. Are they satisfactory or is it necessary to envisage targeting the offering at other segments? For example, for numerous local products there are sufficient outlets in the local market and producers are satisfied with the returns. In other cases, the emergence of competing products obliges producers to seek other market segments, such as the segments for the high quality products demanded by urban consumers.

c) Organisational structure to achieve market positioning

    The more remote and specific the market segments that are exploited, the higher the level of organisation required exploit them. The simplest sales system is direct selling to local consumers. In complete contrast, certain specific urban or international markets, such as specialised rural tourism, demand a very high level of organisation.

    It is therefore possible to evaluate whether producers are well enough organised to place their products on the market: How do they tap into potential markets? Where are there maladjustments? Have contracts or markets already been lost due to producers’ inability to deliver the required volume, within the required timeframe, or because they were unable to adapt the product format?

    There are two forms of organisation that allow producers to position themselves on markets: individual and collective organisation. For instance, a rural tourist operator may, through his personal contacts, succeed in selling all of his products and services through his own networks and acquaintances. By contrast, producers competing in a sector such as cheese making are increasingly resorting to group-marketing their products.

    In general, a collective form of organisation concerns:

    • remote and specific market segments that require a much more complex level of organisation than easily-accessible nearby markets;

    • downstream phases, such as promotion, defining common standards, and quality control;

    • anonymous, undifferentiated products, for which economies of scale are advantageous (as in the case of dairy cooperatives), rather than differentiated products whose individual distinctiveness makes them advantageous in terms of price and value added.

    The boundaries between individual and collective forms of organisation are therefore very complex and change depending on each individual situation. The first step is to identify which aspects of market access are organised individually and which collectively. The next step is to identify those aspects for which a more collective form of organisation would be desirable.

    In terms of individual strategies, how do businesses organise their promotion and marketing? What differences are there that depend on the business sector, business size, etc.?

    In terms of collective strategies, what forms of organisation have the players chosen in order to:

    • achieve sufficient economies of scale;
    • organise complementary offerings and product ranges;
    • enhance the quality and local character of products and services;
    • create new products through cooperation among the different sectors;
    • provide appropriate and differentiated services?

    Are there any marketing consortia, shared promotion/sales points, associations of operators providing package deals such as thematic routes (e.g. a wine route, craftsmen’s route, cheese route, etc.)? Are there any outlets in the area for selling local products?

    To what extent are such organisations able to influence institutional decision-making?

    How do consumers obtain information? Are there any information points in the area? For example, do hotels exhibit and promote local crafts? How are visitors to the area informed about local products? Is it possible to visit local businesses as part of a guided tour?

    What type of information is provided? Are the local characteristics that make the products “unique” identified and promoted? In what form?

    How is information conveyed to consumers: through direct personal contact, advertising? Are the promotion leaflets available in several languages?

    Are there prizes to reward innovation, the creation of new products, etc., or are there other mechanisms for promoting creativity and the area’s image?


      In the Bregenzerwald region (Austria), a prize for innovative farm products has encouraged the creation of new products, such as cosmetics made from by-products from dairy and cheese production.

d) Producers’ knowledge about markets

    The ability of businesses to improve their market position fundamentally depends on what feedback they receive about demand from consumers and distributors.

    How do entrepreneurs obtain information about market trends? Are there any intermediation structures for providing such information?

    Is there an efficient local system for circulating information?


      In Lisbon, the “Shop of the Rural World” which was set up by a partnership of local development associations and cooperatives, including several LEADER groups, enables producers to find out more about demand. By selling products from the shop they learn what types of customer are interested, what is the maximum acceptable price, whether product improvements are needed, etc. What importance do entrepreneurs accord to trade fairs? To what extent do they participate in local or regional fairs? Is any “fair” or other specific or thematic event held in the area in order to promote the area’s products? What is the impact of this event? Are evaluations made: types of visitor, attractiveness, scope of promotion, the volume of sales or number of contracts secured, etc.?


[3] A fuller analysis of short and long
distribution channels for marketing food products
was published by the LEADER European Observatory
in 1999. See the dossier entitled “Marketing
local products: short and long distribution
channels”, LEADER European Observatory,
“Innovation in rural areas” series,
dossier no. 7, 2000.

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