A comparison between OVOP and OTOP on a business model ontology

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  • 1. “Comparison between OVOP/OTOP on a Business Model Ontology Canvas” Kitin Sripuachareon1 and Dr. Kitti Setavoraphan2Abstract Business development and business model have been involved in many differenttypes of business, especially in the emerging and developing markets are competing inthe marketplace for more success. To small businesses, the biggest threat mostly comesfrom big businesses that have better infrastructure and finance. The key to be able tostand up against them is having a good business plan and model. Then, this study aims tocompare and illustrate the functions of two own-creative with same conceptualprinciples’ OVOP & OTOP models. By drawing up frameworks and comparing the twodifferent models. The outcome introduces a twofold result: firstly, propose a betterunderstanding of both business models. Secondly, allow the comparison of two differentperformance business models in order to improve the performances, representations,designs, and analysis of both business models. By generating a better operationalinfrastructure for OTOP program.Keywords: Business model, Conceptual principles, OTOP & OVOP model, Framework1. Introduction Business development and business model have been incorporated into manydifferent types of business. Today both terms play important roles in the way we conductbusiness. That is especially true in developing world where markets are still emerging andbusiness organization are fiercely competing in the current economy. Recently, Small andMedium Enterprises (SMEs) take a very important role in the economy. Knowledge sharingbecomes a vital part of our professional and personal lives. Plus in the last two decadestechnology has become inseparable from business and social life. However, it has notbeen fully integrated into the field of all careers. The integration of technology in livingand working is still challenging and developing in many circumstances. The conceptualization of OTOP’s Business model is based upon logic of earningmoney, focusing on the business problems in Thailand. Based on t he poverty situation isthe majority problem in Thailand. Part of handling poverty reduction is operated by therural development project in Thailand called “One Tambon One Product” or OTOP. 1
  • 2. Unfortunately, after performing for many years, OTOP never really showed itsachievement in term of real development. In the opposite of the original one “One-Village-One-Product” or OVOP project which has been successfully performed. Regardingthe government policy, OTOP project is a self-help development concept that wascreated to promote the development of the local community and empower thecommunity strength. OTOP has encouraged rural communities to depend on their localmaterial and local resources. OTOP is considered a way to create prosperity for thecommunity in the upgrading of rural livelihood through producing or managing localresources to become more value-added products. OTOP is based on the Japanese One-Village-One-Product (OVOP) concept which began in Oita and was initiated by localpeople at Oyama village in the Oita prefecture of Japan in 1961. It was promoted byformer Oita Governor Morihiko Hiramatsu since 1979 by Oita OVOP International ExchangePromotion Committee in 2006. OVOP is an endogenous development model and acommunity based model. It is based on three conceptual principles: 1) Local to global: To encourage rural entrepreneurs to produce at least oneglobally accepted product using available rural natural resources, local craftsmanship anddevelop all products by adding values to them. The product based on global standards. 2) Self-reliance and Creativity: To promote self-reliance from governmentsubsidies, they are not provided directly to OVOP group, but in term of technicalassistance and R&D support for product development, assist marketing and distribution.Also help reduce the transaction costs that local entrepreneurs have to carry if they areto execute product development and penetrate market themselves. 3) Human resource development: To have leadership training development,building up community in order to sustain the community, help the local people becomestronger with challenge and creative enthusiasm. The OVOP and OTOP concepts are very much in line with that proposed ineconomic development literature. Friedman (1987) and Mackenzie (1992) state that oneof the primary measures to boost economic development and hence economic well-being in rural areas is by enhancing rural entrepreneurship. Wortman (1990) defines ruralentrepreneurship as “the creation of a new organization that introduces a new product,serves or creates a new market, or utilizes a new technology in a rural environment”. However, the craft-based manufacturing sector was identified as a source ofcompetitive advantage that was not being properly valued and did not transform intoeither price premium or customer loyalty because the topic of Trustworthy brand.(Takano, 2007) Unfortunately, so far in international development practice it appears thatthe OVOP movement is being promoted as a quick fix for community development by 2
  • 3. focusing on product development and marketing whilst virtually ignoring communitycapacity issues. (UN-HABITAT, 2006) Whether OTOP program will survive in the long termdepends on continued government support of product development initiatives by peoplein local communities. However, OTOP is primarily interested in high-end products forexport and it has not shown any interest in promoting products that are connected to thedomestic market or domestic consumption patterns. This study proposes an OVOP basic conceptual model and compares the OVOPand OTOP models to understand the similarities and differences between these twomodels. The models were developed based upon the same conceptual principles,relevant literatures relating to OVOP and OTOP program, gear train system, and businessmodel ontology canvas in the concepts and details.2. Characteristics and Achievements of the OVOP movement The original OVOP movement was launched in 1979 in Oita prefecture byGovernor Dr. Morihiko Hiramatsu. He encouraged residents in villages and towns to selecta possible product or industry distinctive to their village or town and foster it to be anationally, or even globally marketable one. Previously, local people had worked aswoodcutters or seasonal migrant laborers to make ends meet. The challenging attempt ofOyama Town, whose motto was “let’s plant plums and chestnuts to go to Hawaii!”proved to be successful. As their income increased thank to the new products. After themovement that started in Oita prefecture has spread to other rural Japanese areas thathave been left out of the nation’s economic development and suffer from out-migrationand an aging population.1. The OVOP concept shares its focus on quality with otherJapanese concepts like Kaizen or the 5S-process. Yujiro Okura, one of the most prominentanalysts of the Oita OVOP movement, points out that the success of OVOP was due tothe continuous support given by local governments (Okura, 2007). 2.1 The Japanese OVOP and OTOP structure The most important component of the Japanese OVOP structure is the initiativeand practical innovation of local residents. Daily activities, nature and local entertainmentcan be turned into valuable products or services to be marketed. Activities such as “bigvoice” or shouting contests in Yufuin town and pond cleaning in Ajimu town attract1 Even in developing countries like China and Thailand, rapid urbanization and aging are becomingmajor constraints in rural areas. This is one of the reasons we should take a fresh look at the OneVillage One Product movement as a universal rural development policy. 3
  • 4. people from outside Oita. Sometimes, ideas from outside are implemented as localevents or activities that fully or partially make use of local resources, both material andhuman. Public offices, mainly local governments, but sometimes even national publicentities, serve as facilitators of OVOP activities by helping with technical innovation,production, and marketing for developments (JICA Research Institute, 2010). To illustrate the procedures and the supporters of OVOP and OTOP movement intwo countries by the frameworks (see figure 1 and 2). These indicate to OVOP procedures& supporters framework based on JICA Research Institute (2010) and Fujioka (2006), whoconducted a comparative study of OVOP and Thai OTOP implementation, concluded thatthe former operates from the bottom up while the latter is run from the top down. Supporterss Program OVOP Program Goal Goal promotion OTOP Sub councils committees Project Project Goal Goal Local Local Outputs Outputs Governments Sub- committee Inputs Inputs ‘Figure 1. OVOP-Procedures & Supporters’ ‘Figure 2. OTOP-Procedures & Supporters’ Fujioka (2006) examined the Thai OTOP and found out that it is different from theJapanese prototype in the sense that the Thai OTOP is a top-down scheme led by thecentral government while the Japanese OVOP is bottom-up led by the strong communityand local government supporters (see Figure 1 and 2). There are two developmentmethods ‘spontaneous’ and ‘extraneous’ method by using the extraneous methodmeans developing countries (or growing areas) tried to pursue its modernization byoutside resources introduction and commercial invitation, such as energy development,automobile and electric appliance industries as to spontaneous method, it means todevelop the district economy through maximizing the latent resources and capital in thearea, such as economic activities between Primary Industry and Second Industry thefarmers process the harvest for products of higher value-added. “OVOP” movement hasthe same definition with ‘Spontaneous Method’. (Kimoto Shoji, 2008)3. Theoretical Framework This part provides diagrams, frameworks and models; how the two businesses withsame conceptual principles are alike, different and related to each other in order toachieve the main objectives of this study. It presents reviewed theories and information 4
  • 5. from published books, theses, journals, and other reports. The diagrams emphasize inespecially the efficiency of OVOP and OTOP models. The study includes the original OVOPconceptual principles, both business models and frameworks, comparison of bothframeworks. In additional, the other diagrams and frameworks have been created anddesigned to merge all their business components as same as the transferring of OVOP &OTOP’s principles, and strategy into a blueprint of the business revitalization plan. 3.1 OVOP and OTOP Basic Conceptual Principles Diagrams OVOP and OTOP model originally presented in this paper are based on the sameOVOP’s conceptual principles and basic components. However, when environment,purposes and business structure has changed, the type of OVOP became in a differenceway like OTOP. Figures below here are illustrated by using the concepts of ‘Mechanical Gears orGear ratio’ it is easily to explain how OVOP’s principles and components are related. Infigure 3 below, it has been drawn up to show the first original OVOP principles, thencombining with the gear system concept, it became the original OVOP conceptualprinciple diagram in figure 4 (see below) and OTOP’s diagram in figure 5 (see below). ‘Figure 3. First Original OVOP principles’ From Figure 3, the original OVOP basic conceptual principles diagram begins from‘self-reliance & creativity’ to ‘human resource development’ and to ‘local to global’.Then, using three ‘spur gears’ apply to show the labels for the interlocking conceptualprinciples and the ‘arrow shapes’ show how they relate and affect one another. Self- Human Local reliance & Resource to creativity Develop Global ‘Figure 4 .The original OVOP basic conceptual principle diagram’ After merging OVOP’s principles with spur gear concept they become the originalOVOP conceptual principle diagram above in figure 4. There are three sectors or gears:starting from a ‘self-reliance & creativity’ biggest gear (see the black arrow) to a’ Human 5
  • 6. resource development’ the middle gear use less power and more less in a ‘local toglobal’ while the smallest gear turns at the same speed. The reason is the more selfreliance and creativity run the more of human resources development or villagersbecome powerful as well as challenges. Then the smallest gear ‘local to global’ component is turning faster to keep up,meaning that a community easily to offer the globally standardized products becausethey have their own supports from the community. Having more self-reliance and creativity help economics grow faster, means thatany business problem would solve with the more capabilities and flexibilities. Also it isbetter for the innovative products with costs less. In the meantime, it saves operatingcosts. As well, the wasted costs. Then OVOP has achieved the purpose ‘Local to global’ Local to Self - Human reliance global Creative resource develop ment ‘Figure 5 .The OTOP basic conceptual principle diagram’ From figure 5, OTOP project starts from turning a ‘self-reliance & creativity’ small spurgear same the black arrow’s direction, to turn other bigger gears with the same speed itneeds more power than turning the equal-sized gears. Next turning ‘human resourcedevelopment gear’ (Idler gear) is done by fostering villagers with more know ledges andcreative spirits to operate this gear. Then, the bigger local to global gear, it is too bigcomponent for OTOP’s project that start from a small source of ‘self-reliance & creativity’which is not enough own capabilities power to turn the bigger gears. Thus, the projects orvillages need more supports from government in order to adding more facilities, subsidiesand other supports. On the other hand, if the community or village required more outsidesupporters, the self-reliance has less to run itself. 3.2 The Nine components of OVOP framework The nine components of OVOP project based on community , urban area, localmaterials, local labors, environments, villagers, cultures and traditions, society, behavior,governments, and many more components. By using nine jigsaws and three triangle layersexplain the nine components of OVOP framework. After selecting the right ninecomponents then classify them into three layers, which are: 1) Essential layer is required a set of a local material resource (LMR), local laborresource (LLR) and local skills & capabilities (S&C). 2) Structure layer is required a set of a community based model (CM), anendogenous structure (ES) and a strong community (SC). 6
  • 7. 3) Maintenance layer is require a set of an awareness of OVOP (AO), initiative andpractical innovation (I&PI) and trustworthy and value added (T&V). The nine jigsaws of OVOP component below are related and supported to eachother, as well as classified the three layers component. (see figure 6) ‘Figure 6. The Nine Components of OVOP framework within three layers’ From figure 6 (see above), after combining the nine jigsaws and became OVOPframework, those classifications of three layers are organized the nine components inorder to facilitate the systems. See also figure 7; an alternative choice or a replacementplan helps fixing and solving any challenges.‘Table 1. A description of the nine OVOP components’Layer Component Resource Usefulness Importance Local material Rural areas (all or part of it), Supporting Marketing- resources Work in process or Goods in local opportunity, (LMR) process from other economies Reducing Cost resources. Structures Local labor Local residents / Villagers More job Revitalization,Structur Essential Layer resource (LLR) opportunities Less moving out Local skills & Traditions, Cultures, Life Valuable and Product quality, capability style (sociology), impressive Singularity, (S&C) Knowledge, Practices products Employability Community Community development Understanding Stabilization,e Layer based model plans, Community’s the real Easy and well (CM) problems problems realization 7
  • 8. Endogenous OVOP’s infrastructure, Local Ability to plan Flexibility and structure (ES) government (Self-governing & control Agility towns) Strong Their cooperative, Local Independence Manageability, community governments, Mayors and & more Dominance (SC) Councils flexibility Awareness of Maintenance status, Motto Sustainable Internal OVOP (AO) and Business plan by JICA business, controls, Limitations Controllable business Initiative & Economic revitalization, Motivation and New creativities, Practical Local government and Economic Innovative ideas,Maintenance Layer innovation Community, Social life incentives Singularity (I&PI) Trustworthy & Proudness, Meticulous Royalties and Longevities and Value added procedures , Honesty, Valuable Sustainability (T&V) Motivation, Business products systems, Customer services According to the details on the above will be able to demonstrate a shortlist ofthe Resources that indicates ‘Where do they come from’, the Usefulness indicates ‘Whatare their benefits’ and the Importance indicates ‘Why they are needed’ (in the table 1). The table 1 above indicates the sources of nine components, the essentials andbenefits of the nine components. These results will be useful information and beneficialprocesses to perform any similar OVOP projects at a later time. 3.3 The nine components of OVOP and OTOP basic conceptual models The purpose of creating a model is help to understand, describe and forecast byexploring a simplified representation of a particular entity. Business model is representinghow a company earns money from buying and selling goods and services (Osterwalder,2004). According to figure 7 and 8, after combining figure 4 with figure 6 (from the above)into an OVOP model (figure 7) and figure 5 with figure 6 into an OTOP model (figure 8). The small ovals indicate OVOP/OTOP components, the three spur gears indicateoriginal OVOP conceptual principles, the black-arrow indicates a starting gear/concept, thebig oval indicates OVOP/OTOP structures, and the curved arrows indicate the rollingdirection of the OVOP’s conceptual principles under the spur gears concept. 8
  • 9. Figure 7 below shows the development process of OVOP business model. Startingfrom the nine ‘OVOP’s components’ into ‘OVOP structure’ by transferring all componentinto OVOP structure. It is operated by three gears ‘OVOP conceptual model’. The structure begins to perform with a self-reliance and creativity concept. It helpsmotivating a human resource development concept to operate a local to global concept.The concept of local to global is originated from traditional knowledge and local skills tomeet with the global standard concept. ES CM SC S&C AO ‘OVOP Structure’ LLR Self- I&PI Human Local reliance & Resource to creativity Develop Global LMR T&V `vvV‘Figure 7. OVOP Nine Components with Basic Conceptual Model (based on Metaphysics-Ontology)’ ES CM SC S&C AO ‘OTOP Structure’ Local to LLR Self- reliance Human global I&PI Creative Resource Develop ment T&V LMR PI‘Figure 8. OTOP Nine Components with Basic Conceptual Model (based on Metaphysics-Ontology)’ The figure 8 is an OTOP basic conceptual model, it’s similar with OVOP, beginswith nine OTOP’s components go into ‘OTOP structure’ by transferring all componentsinto OTOP structure. It is operated by three gears ‘basic OVOP conceptual model’. The model has first performing based on a tiny self-reliance & creativity concept torun a human resource development concept, then human resource developmentconcept operated the model by turning a local to global concept, the concept mostlysupports by local and central governments including a few traditional skills, knowledgeand global standards. Lastly, the main differences between the two business models are: ‘OVOP’ is good because the outcome grow up very fast, able to catch up market’sneeds in due time with the high quality products, but OVOP model is not very good yetbecause it really can not process the big orders or transactions. The reason is the whole 9
  • 10. processes needed a specific time frame for the meticulous products. But this case may has already been fixed by using a franchise strategy. ‘OTOP’ is good because its goal local to global, expected lot of orders, running the small gear of ‘self-reliance and creativity’ would probably affect the quality of product. The government tries more support in generating and supporting. So, the community is not being able to improve their products. 3.4 Comparison OVOP and OTOP framework by Main Characteristics In this category is comparing of two business frameworks based on theirs characteristics and functions, to have more understanding in factors and problems, the analysis and improvement of both business models. The study is aims to identifying the similarities and differences of both frameworks in order to find out about their transformations throughout the process. However, it is necessary to have a true understanding of both frameworks for knowing their differences and overlaps in their organizations (see table 3). ‘Table3. Comparison nine building blocks of OVOPOTOP frameworks by Benefits.’Pillars OVOP’s style OTOP’ Shared Main Benefits Characteristics of OVOP model Differentiation, Popular-trendy Traditional Knowing whatValue Proposition Proudness, Meticulous products/services , knowledge, Local to offer to products, Innovative Too many brands in skills& capabilities, customer. offers ,Trustworthy brand same category, Product quality name Competitive pricing control Strong community, Central government Local government Knowing howKey Partners Villagers, Local banks agencies, Outsider agency, SMEs to manage the and cooperatives, supports, Nation Bank systems. Regional training Schools 10
  • 11. The initiative and A self-help Local government Knowing what practical innovation. A development supports, should replace community based model, program, Exogenous Residential or adjust the Endogenous structure, structure, Central participants, system forKey Activities Cooperative, Strong government control, Logistics more flexibility. community organizing, SMEs, Supporters, R&D Own R&D, Word of by supporters mouth Awareness of OVOP, A Customer(market) ’s Local material Knowing what community revitalization needs/interested, and labor should purpose, Self-reliance Government &Others resources, Local business lookKey Resources and creativity, directed supports, wisdom, Skills & for or have and Trustworthy & Value New entrepreneurs& knowledge, why. added customers Culture, Distributions ways Website& own surveys, Government & Website, Events, Knowing Business advisors, Supporter’s Surveys (feed what/how toRelationships Training Program & researches and back) do with yourCustomer Dispatch lecturers, Word surveys, Websites customer of mouth relationship management Local customer, Regular Middlemen Tourists, Exports, Knowing who customer, Exports, (Wholesalers, Retailers SMEs, Online shouldCustomerSegments Franchise customer. agents), customers business has relationship with. Antenna shops, Local OTOP shops, Direct Trade fairs, Knowing how festivals (matsuri), Micho selling, Middleman Exhibitions, Micho to get in touchChannels ofDistribution no eki, Franchises (reseller) no eki (roadside w/ customer, stations) reducing logistics costs. Research &Development Middleman costs, Local material & Knowing moreStream Structur cost labor costs, ways to saveRevenue Cost logistic costs costs e Regular customers, Visitors, traders, Affairs, Online, Knowing more Royalty customers, Middlemen Traders, SMEs business Franchises channel 11
  • 12. The above table 3 compares characteristics between OVOP and OTOP frameworksand the main benefits of OVOP model that had been missing during the process oftransferring to become OTOP. Both models based on Metaphysics-Ontology which arerelated to environments, society, traditions, cultures and much more. Then the design oftheir models rely on their information some are same some not, it depends on theirbusiness purposes. In spite of, they have the same conceptual principles; the out comewill be difference. The most important structure of frameworks is the differentiationbetween two frameworks. The differences are; orderly, methodology and the purpose ofcreating a framework. On the other hand, the challenges of OTOP need to resolve in aright place and way. Otherwise, it will be wasted more time and cost. The research of thispaper is provided OVOP & OTOP’s information as well as the classification between thetwo. It will also be useful and very beneficial of this project in the near future.4. Discussion Both businesses models have similarly purpose, they aim to improve theireconomies, but they have many different purposes which are the characteristics like Self-Reliance, Business purpose, Knowledge management, and Management structure. Self-Reliance is the most important characteristic in OVOP model becauseoriginally OVOP’s concept aims to support local community that they are able to takecare themselves by own self-sufficiency with reliable and sustainable occupations. WhileOTOP project did not realized that they did reduced community’s self reliance with moredirect subsidies. Not only does the unclear position of improper component capability intoday’s market, it also impairs progress on the development of OTOP program and itscapability. However, OTOP project has to be truly understanding with the real problembefore they would be able to get things fix properly. Business purpose is the topic that stimulates the business plan. OVOP purpose ismaintaining the community living specially in the rural area to be longevity andrevitalization for the village life, but for the OTOP purpose is making money and havingcareer did not think about become strong community which is an important part of OVOPconceptual model. Based on the components in the business model, product, customer,infrastructure, management and finance several business models can be created. Actually, every business model can be perceived as a unique one, depending onthe significance and difference of the variables. The success depends on the inequality inthe equilibrium between cost and revenue drivers. As for any different sector componentsof OTOP business model are also demonstrate in the business models of OVOP project.Actually, new business model is emerging from one sector find their way and applicationin other sectors. A relatively new type of business model is the open innovation business 12
  • 13. model. The basic principle of an open innovation business model is the partnering withothers for better technology, products and services. It is also that business model istypical for all knowledge where innovation, singularity and business creation are verycritical for securing a competitive edge.5. Conclusion In this paper is about OVOP and OTOP business structures, the comparisonbetween two differences models with same conceptual principle and how it is affected tothe business and economic. Both business models are operating based on sameconceptual principle but different purposes. And both businesses continue maintenances,innovate products and service offering by doing as best as they can within theircapabilities and responsibilities in developing the suitable way. Even though OTOP isimproving in efficiency and capability, it will still need a better model with more flexibilityand adjustable solution. There for, a business model is a conceptual tool that contains a set of elementsand their relationships and allows expressing a companys logic of earning money. It is adescription of the value a company offers to one or several segments of customers andthe architecture of the firm and its network of partners for creating, marketing anddelivering this value and relationship capital, in order to generate profitable andsustainable revenue streams. The business model ontology is a set of elements and theirrelationships that aim at describing the money earning logic of a firm. As outlined abovethe ontology contains nine business model building blocks, so-called business modelelements. Further research would include the way to adjust the difference between all kindof OVOP models, especially in OTOP model. The purpose of future research will be ableto enable the capability and adjusts the configurations to develop the model andstructure. By every business model elements can be decomposed into a set of definedsub elements and recreate into a new one.References Friedman, R. E. (1987). The role of entrepreneurship in rural development, inB.W.Honadle and J.N. Reid, (Ed), National Rural Entrepreneurship Symposium, SouthernRural Development Centre, Knoxville, pp.1-6. 13
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