Market systems analysis (MSA) is a critical aspect of programming using the MSD approach. It is used to understand the complex dynamics of markets and identify opportunities for effective and sustainable interventions. MSAs are meant to move beyond conventional value chain analyses to examine the broader ecosystem of actors, rules, supporting functions and power dynamics that shape market performance. The following outlines some critical steps in undertaking an MSA.
This figure from the Operational Guide for M4P, outlines the key steps in an MSA, which we will address in turn.
Defining the scope and objectives
Before embarking on an MSA, it’s crucial to define the scope and objectives clearly. This step informs the entire process, from data collection to analysis and interpretation. It involves:
- Identifying your target market system:
Start by defining the specific market system you intend to analyse. This could be a product market (e.g. cocoa, dairy), a service market (e.g. financial services, business development services), or a cross-cutting market function (e.g. access to finance). Clearly articulate the boundaries of the system and the actors involved. - Establishing the purpose of the MSA:
What decisions will the MSA support? Are you designing a new MSD programme, refining an existing one, or seeking to influence policy? Defining the purpose ensures that the analysis is focused and relevant. MSAs are primarily tools for decision-making and should be specifically designed with the goal in mind. - Defining your target group:
Who are the intended beneficiaries of the market system? Clearly defining the target group (e.g. smallholder farmers, women entrepreneurs, youth) helps to focus the analysis on issues that are relevant to their livelihoods and opportunities.
This framework for change tool provides a very simple guide for establishing the boundaries of a market systems analysis.
Conducting your MSA
The MSA process involves a combination of secondary research, primary data collection and rigorous analysis. Every MSA is unique, but most generally follows these steps:
- Secondary research:
Begin by gathering and reviewing existing data and information on the market system. This includes industry reports, market studies, government publications, academic journals and online databases. - Primary research:
After reviewing the secondary literature and understanding where there are evidence gaps, gather first-hand data from market actors and stakeholders through interviews, focus group discussions, surveys and observations. Primary research helps to validate and refine insights gleaned from secondary sources and to uncover new information. - Market mapping:
Once you have gathered primary and secondary data, systematically map the market system, identifying key actors, relationships, flows of goods and services, rules and regulations, and supporting functions. Tools such as value chain maps, stakeholder maps and network diagrams can be used to visualise the system. - Identifying underlying constraints:
Identify the underlying factors that enable or inhibit desired change. This involves examining the power dynamics, incentive structures, norms and beliefs, and institutional arrangements that shape market behaviour. - Prioritisation:
It is critical to prioritise constraints based on their potential to drive meaningful change, the feasibility of addressing them, and the willingness of actors to adopt that change Evaluate and analyse all the secondary and primary research to form evidence-based hypotheses. - Validation of findings:
Validate the MSA findings with main stakeholders, including market actors, government agencies and development partners. This helps to ensure that the analysis is accurate, relevant and credible.
On identifying market failures
Markets are not perfect entities. They can be places of corruption, dispute and unfair practices. Market system approaches seek to tackle these failures to make markets more inclusive for people living in poverty.
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Categories of market failure include market systems that are technically functional but only benefit vested interests, and market systems that are thin or non-existent. When markets function but benefit few people, market failure is a symptom that something else is wrong. Common examples include monopolies, concentration of market power, and coordination failures. In this scenario, analyse the deeper causes of market failure and work with local partners to change behaviours.
The list of common analytical frameworks provides an overview of all the different tools and frameworks at your disposal when conducting an MSA.
The Participatory market systems development (PMSD) toolkit for market systems selection explains how to go about undertaking an MSA that closely involves local stakeholders in the analysis process.
Utilising MSA findings
The ultimate goal of the MSA is to inform the design of effective interventions that promote systemic change. The ‘good enough’ approach requires a shift in focus from extensive upfront data collection to ongoing learning and adaptation throughout the programme's implementation. The MSA should not be a ‘one and done’ but rather analysis and learning needs to be embedded throughout the programme cycle. This implies:
- Continuous monitoring and evaluation (MEL):
Establish a robust MEL system to track your programme's activities, as well as changes in the market system. MEL should collect both quantitative and qualitative data. - Regular reflection and sense-making:
Dedicate time for the team to reflect on MEL data and make sense of what is happening in the market system. This may involve internal team discussions, as well as consultations with external stakeholders. - Adaptive management:
Be prepared to adjust the programme's strategy and interventions based on the ongoing learning and adaptation efforts. This requires flexibility and a willingness to experiment with new approaches. Adaptive management provides further guidance.
In All analysis, no action? the ILO sought to identify trends in overall MSA quality and programme use to understand when an MSA was actually used, or not, for programme design or implementation. The case studies and recommendations provide a useful basis to help get the most out of your MSA.
