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Foundation of Female Entrepreneurs: Foundacion Mujeres Empresarias: Marie Poussepin Women Entrepreneurs Foundation: Sisters Marie Poussepin The case will introduce you to a real project, with real problems in developing a sustainable business model. Your role is to act as a consultant and make specific recommendations based on the information provided. Your job is to: 1) examine the various initiatives that the Women Entrepreneurs Foundation: Marie Poussepin (Foundation) has attempted. 2) Engage in strategic decision-making to develop recommendations for the Foundation. The goal is to use the various tools used in the semester to analyze the context and identify tactics to help the foundation reach their goal of developing a sustainable business. Background on the project: The religious order, the Sisters of the Epiphany Marie Poussepin (the sisters) was established in France in 1796. It was initially established with a mission to minister to the poor, their mission was focused on the education of girls and young women. As part of their mission, they have focused on using education to help poor women improve their incomes through the development of entrepreneurial skills. Early on this involved helping them gain marketable skills like sewing, knitting, and weaving so that they could produce and sell their wares. In the words of Blessed Marie Poussepin: “I wish with all my heart, and I entreat those who will succeed me in the Government of this Community, to keep alive the zeal for the education of poor girls who might need it for their spiritual and temporal good, as well as the spirit of poverty and the love of work.” The Foundation was established under the guidance of the sisters as a nonprofit organization that seeks to generate income opportunities for poor women in the town of San Cristobal Sur (Bogotá, Colombia). Our corporate purpose is aimed at training women as entrepreneurs of headed households in urban agriculture lines and ecological art. Mission: Forming successful entrepreneurs in the lines of urban agriculture and ecological art, through the development of the capacities and potential of women, managing the enterprise as a tool to improve the quality of life of their families and their social environment, based on values of responsibility, honesty and love of work, according to the charism of Marie Poussepin service. Vision: In 2020 the Foundation for Women Entrepreneurs Marie Poussepin Bogotá is recognized as the first Business Network Huertas Urban Agro Ecologic products and services that promote the encounter with nature, healthy eating and wellness, through entrepreneurship. Values: 1) Love of work 2) Service vocation 3) Responsibility 4) Honesty 5) Entrepreneurship and Innovation The Genesis of the Project: About ten years ago under the guidance of Ruth Vargas, a professor at a local university, the sisters started a project to help female head of households within the barrio of San Cristobal del Sur. The mission of the project is to help in the formation of female entrepreneurship within the sector of urban agriculture. The project was formalized into a foundation called Fundacion Mujeres Empresarias Marie Poussepin (the Foundation). The vision was to establish a network of urban gardens in Bogotá and throughout the country providing organic food and corresponding health benefits for its members and the broader community through the application of entrepreneurship skills. According to interviews with Professor Ruth Vargas: We decided to start planting and selling organic vegetables in 2008. In this year, we completed the ASSAIB project: Sustainable Social Partnership for Harnessing Agro Industrial Bio-diversity, which sought to provide phitoterapeuticas plants (ivy, thistle, dandelion, and passionflower) to Phitother laboratory. However, considering that the installed orchard’s capacity was small, the project did not achieve the needs of monthly demand requirements by the laborator. Therefore, to take advantage of the assembly structure already made, it was decided to sow organic products by the trend of market demand. The policies of the mayor at that time promoted and supported urban agriculture vegetables. 2 Essentially the goal was not to give these women a ‘fish’ but teach these women to ‘fish’. The project was very basic, but addressed many issues related to poverty such as marginalization, machismo, and nutritional deficiency. The plan involved the sisters providing the funding for the initial 12 gardens, allowing these families to grow nutritious food that they could scarcely afford. They would also be able to sell the surplus, allowing them to earn some much-needed cash to help cover some basic living expenses. This would help improve the physical and mental health of these women and the project would enable them to better take care of themselves and their families. The sisters provided an initial investment of $3,000 US (all the money has been converted into US dollars to allow for easier comprehension and calculations) to build twelve urban gardens. This would cover the cost for all the raw materials (organic soil, netting, support posts, seedlings, etc.) necessary to build a garden. There is a waiting list of over 70 other women that would like to join this project within the Saint Christopher Barrio in southern Bogotá. The project was designed by the sisters and the newly established Foundation to be sustainable and self-funding. The sustainability model was premised in capturing 30% of future revenue from the agricultural production to be re-invested in the building of additional urban gardens as well as pay the operational costs associated with the project. The women would be able to keep 70% of the revenue to spend as they wished. The vision was that the project would grow from this initial investment to include hundreds of families in poor parts of the city. (photo of the Barrio San Cristobal) There is significant demand from women to join the initiative; currently there are over 70 women who have indicated that they would like to convert their backyards into an urban garden. Each garden typically costs $250. This price includes organic soil and seedlings as well as the necessary netting and posts to enclose the garden to eliminate contamination from animals. (photo of an Urban Garden with Clark University Students) 3 There was a belief that in order to maximize the potential of these urban gardens the women needed to develop entrepreneurial skills to succeed. As such, Ruth Vargas developed a series of workshops that were designed to teach basic agricultural techniques and basic business skills such as accounting. Agricultural Production in Bogota: Bogotá is situated in the middle of the country in the high plains. It is 8660 ft. above sea level, with a fresh climate and nearly constant year round temperatures. There is sufficient year-round rainfall and ideal temperatures allowing Bogotá farmers to have up to four complete growing cycles per year. Iteration: Pharmaceutical Production Dr. Ruth Vargas knew a senior manager at a local pharmaceutical company that mentioned that the company was importing vast quantities of ivy, thistle, dandelion, and passionflower, which were used in production. The plants could be locally grown, but as of yet they had been unable to find a suitable local supplier. Ruth proposed that the Foundation attempt to grow the needed plants within the twelve urban gardens. It appeared to be a win-win situation. The pharmaceutical company would participate in a local Corporate Social Responsibility (CSR) project and these twelve urban gardens would have a ready market for their production. The project began in 2008. However, there were problems from the onset, as these twelve urban gardens were unable to supply the company with the needed production. During the interviews, it is was never made clear how much land was required to produce the quantity of plants needed. Ruth simply said that there was not enough production to continue with the project. It was stated that the pharmaceutical company remains open to buying from the Foundation if they are able to supply the required quantities of plants. Iteration: Supplying a Grocery store As a result of the failure of the first initiative, Ruth continued to seek out opportunities within her network to help the initiative succeed. She was able to identify a new potential opportunity through a contact at a local grocery store in the North. After a series of discussions, the store agreed to carry a selection of herbs and vegetables from the gardens. The appeal to the store was that the produce was locally grown, organic, and had an element of CSR. The Foundation established a brand called ‘de las huertas’ (from the Gardens of Grandmothers to your table). 4 While selling at wholesale was not ideal, there was a belief that the women entrepreneurs would make up in volume for what they lost in margin. For example, the retail price of lettuce is $0.78 and the wholesale price is $0.68. However, the Foundation found it difficult to supply the needed stock in a predictable schedule. After 3 months, the grocery store abandoned the initiative, citing lack of sufficient deliveries. The grocery store remains open to renewing the relationship if the Foundation is able to guarantee the delivery of sufficient produce. Iteration: Direct sales As this project faltered, Ruth began exploring alternatives to make the initiative sustainable. This initiative was called de las huertas and focused on the growing interest of farm-to-table. Ruth began asking people that she knew to buy the products. She states that, The first customers were friends, acquaintances and employees of companies in which she consulted. The product was presented to the customers as a strategy of organic produce and support to enterprises of poor women as a corporate social responsibility program. The goal of moving the sales from the South to the North of the city were based on the belief that the richer people in the North would be willing to pay a higher price for organic food that also had a CSR component. According to Ruth, Sales in the location area of the gardens also began at the end of 2012, as sales to other customers were not so high and there was a lot of production. Customers of the poor area pay a lower value (lower willingness to pay). For this reason, and to help generate a better income opportunity, (it is important that we sell the products in the north of the City) In an effort to develop additional sales channels in the North, Ruth used her network to find opportunities for the Women Entrepreneurs to set up a post in the lobby of an office tower. The project was presented as a CSR initiative that would help the businesses support and be a part of this project. Ruth has had some success in this initiative, with a small but growing number of re-orders. The customer buys the produce and pays an additional $1.71 ($5,000 pesos) delivery fee. Ruth states that the most successful customers are from companies. For these types of group orders, Ruth drops the delivery charge based on the assumption that she will be increasing her total sales. 5 Additionally, the Women Entrepreneurs’ set up a sales table on bi-weekly basis in one office building. The women entrepreneurs rotated this sales effort with three women travelling every two weeks. The women gather a selection of produce and travel on public transport to the North. The commute time each way is about two hours. The sales results from this initiative were never revealed to the researchers. Ultimately, this initiative faltered and appears to have stopped. We can only speculate as to the causes of the failure. It could have been from the lack of sales, inability to get consistent volunteers to travel to sell, or other problems. The produce delivery service continues as Ruth continues to use her network to build the customer base. In an effort to more accurately predict production, the Foundation has established a manual system of collecting information of available produce that is for sale. See the ‘sample order’ file in the appendix to view an example of an order form. The ordering process involves Omaira, one of the urban farmers, calling all the others to find out what produce is ready for picking. That information is relayed to Tami (a friend of Ruth), who compiles a list of available produce. Tami then calls each customer to see if they want any produce. The orders are imputed into an Excel sheet, which Tami then assembles. Tami e-mails the list to Omaira, who then contacts the eleven other gardens to see who is able to deliver. Ruth operates on a FIFO1 system, but has indicated that some of the other gardeners are complaining that Omaira always gets more orders while the others do not get their fair share. Tab 2 of the ‘sample order form’ shows that Omaira is indeed getting most of the orders. The file ‘sales over the years’ has a detailed list of the sales, which can be found in the tab ‘control facturacion.’ It has a detailed list of sales. In order to increase sales, Ruth has asked Tami to call customers. Reviewing the sales information we are able to note that on August 10, the Foundation was able to sell $22.51 ($66,000 pesos) to 6 people who all worked in an office in the northern part of the city. Ruth believes that this is a good initiative. Tami has agreed to continue calling the customers while she continues to look for more customers. Pivot: On their own As the formal efforts continued to falter from the lack of frequency, the women began to pursue divergent strategies. The farmers diversified to grow a product mix that they felt was best suited for their land and personal needs. When examining the current production of the twelve gardens, one is able to identify a dramatic divergence in focus of 1 FIFO is a first in first out inventory system used. 6 production. Some gardens continue to grow the herbs and vegetables found in the product list, while others have deviated radically. From my observations, people in the neighborhood come to these urban gardens to buy some of their produce. The women sell their produce within the community for 50-75% off of the retail price. For example, I observed a women sell a head of lettuce to a neighbor for $0.17, which is 75% off of the retail price. I asked Ruth about my observation and she indicated that the typical price is not that low and 50% off of retail is more typical for neighborhood sales. By her calculation, the women sell a head of lettuce for $0.34 ($1,000 pesos), of which, 30% is suppose be given to the foundation, but the women have never volunteered nor been asked to pay the Foundation this money. Ruth indicates that she believes that the women appear not to know how to keep accurate accounting of these cash sales. One woman is now growing mostly ‘aromatic’ plants that are used in a local hot drink called Aromaticas. In a conversation with her, she indicated that sales for the produce was steady, she was very happy with her garden, and she planned to continue with this line of plants. There appears to be growing interest in the line of Aromatic plants, for example the woman farming the garden that Clark University set up in May of 2016 has indicated interest in using her portion of the garden to grow aromatic plants, not for sale, but for the establishment of a small stall selling hot Aromaticas in the neighborhood. One woman had converted most of her garden to fruit production. In my conversation with local partners, they indicated that the fruits she was growing were of high value. The woman seemed to be doing well and was happy with her decision to grow fruits instead of the prescribed product list. The rest of the gardens appeared to grow the items on the prescribed order form, but with varying degrees of focus. I observed a garden growing mostly lettuce, while another one appeared to focus mostly on spinach. When reviewing the ‘sales over the years’ file tab, ‘comparative ventas,’ you will notice that lettuce and spinach are the two most popular items. The typical seedling for lettuce or spinach costs $0.01, with a retail price of $0.78 for the lettuce and $0.75 for the spinach. Iteration: Additional projects Eco-art The Foundation also sells wall art instillations (muros). An example can be found on the Foundation’s website (http://fundacionmujeresempresarias.org). Customers are able to recruit the Foundation to build vertical organic gardens in a home or office. An engineer conducts a site visit and designs the unit to be 7 installed. Women Entrepreneurs build the necessary components and buy the required plants. The unit is then installed. The sales of these products are few, but when they occur are very profitable. In 2013, the Foundation sold a couple of wall art installations for gross sales of $939.13. Details can be found in the file ‘sales over the years’ tab, ‘comparative ventas’. The project is still active, but Ruth has been unable to find additional clients. There was an initial positive response to the wall art instillation project, however, issues of insurance have limited the growth of this initiative. The government requires that commercial ventures only hire federally registered contractors, which these Women Entrepreneurs are not. The danger in registering for the women is that once someone is registered into the formal economic sector, they cannot return to their informal status. Their informal status entitles them to free medical coverage within the national health system. Once they formalize, they must find and pay for their own health insurance from a private provider. Manual labor The Foundation provides day labor services to families and businesses that are interested in building their own urban garden. The women earn a daily salary for the work. The work consists of initially building the garden and then tending the garden. This project is running into the same challenges faced by the Eco-art project. Additionally, a number of private individuals have been unwilling to hire the Women Entrepreneurs for fear of liability insurance resulting from a slip and fall incident. So while this initiative had some initial success, there are many obstacles limiting the growth potential. Eco-tourism Ruth believes that she can capitalize on the growing interest in the farm-to-table movement by offering eco-tourism opportunities to people from the North and foreigners that are visiting Bogotá. She states that: It was decided to start with the rides’ agro urban tourism, which consist of bringing groups of people from the North and explaining to them the goals of the project, then inviting them to buy vegetables directly from the garden. The tour would consist of visiting a few gardens, giving the tourists an opportunity to see the production, and meeting the Women Entrepreneurs. She envisions bringing busloads of people to visit the various gardens, with the hope that the tourists will gain appreciation for the value of urban agriculture in 8 helping these women improve their lives. The hope is that these tours will generate produce sales for the gardens as well as potentially lead to installation of eco-art or manual labor in building these types of gardens for the tourists. Centerpieces The Foundation has developed a successful initiative selling centerpieces. Ruth developed this project. She had seen a similar project and thought that the Foundation could produce this for a profit. Ruth was able to pre-sell 100 centerpieces to one of her professional contacts as corporate gifts. Ruth initially set the retail price at $25.54 ($75,000 pesos), but the client found that price too high. They agreed at a final price of $15.35 ($35,000 pesos). One of the women that does not have an existing garden receives the administration fee of $0.68 per item sold ($2,000 pesos). See Appendix 1 for a detailed explanation of the costs associated with producing each item. After this sale was concluded, Ruth calculated the Cost of Goods sold and she found that the cost of each item was $15.86. As a result, the new retail price is set at $18.76 ($45,000 pesos). After the initial sale of 100 units to a corporate customer, some of the women have continued selling the centerpieces. The production is sold outside a local church after Sunday mass. However, a problem has emerged, as the carpenter, who seeing the final product, has decided to make and sell the succulent centerpieces himself, which undermined the initiative’s initial success. The Women Entrepreneurs are now competing with their own supplier; resulting in downward pressure on prices. They have switched suppliers, but the damage has been done, as there are now others selling in the market. Regardless of this competition, sales have been strong and there is an interest in expanding production and sales channels (perhaps in the north of the city). Direct sales to Restaurants Ruth has begun testing direct sales to local (North) restaurants. The goal is to supply local restaurants with organic produce. These restaurants are small and have some level of interest in organic food. This project is in an early stage, but Ruth has indicated that they have one restaurant that has indicated a willingness to buy thirty heads of lettuce a week. The current list price is $0.78 per head, but the wholesale price would be reduced to $0.61 per head with free delivery. The 9 Foundation has yet to make a delivery, though, because they need to be able to guarantee consistent produce. Leasing Public Land The Foundation is in negotiation with the National Police Department for the use of a 5-hectare plot of land that is nearby. The idea is that access to this plot of land would allow additional women to join the Foundation as sharecroppers on this land. The vision is to use this land as a central place to educate additional urban farmers. A group of women would work the land for six months (two growing seasons) and learn about urban agriculture. The goal is that after the six months, these women would be able to take what they learned and start their own garden. The production would be focused on potatoes since that is a produce that is in high demand, however, is not something that can be grown in the small backyard gardens. Conclusion: This case has outlined some of the key elements of this project. The project has encountered significant challenges in growing and becoming sustainable. This is a real project and remains active. Your assignment is to write a position paper that analyzes the case and makes recommendations to make this project sustainable. 10 Appendix 1 The top line is the cost for a small centerpiece costs $33,000 and retails for 35,000. The second line is for the large centerpiece that costs $46,500 and retails for 55,000 Wooden Planter Fee for planting soil labels Plants Coordinat Selling ion fee commission Transpor t Total Costo $ 14,000 $ 3,000 $ 1,000 $ 1,000 $ 6,000 $ 2,000 $ 3,000 $ 3,000 $ 33,000 $ 17,000 $ 8,000 $ 2,500 $ 1,000 $ 12,000 $ 2,000 $ 3,000 $ 1,000 $ 46,500 11 Running head: POSITION PAPER: PATAGONIA 1 Introduction Patagonia was a well-known outdoor-apparel company, which was known as a worldwide leader of environmentally responsible businesses. Patagonia contributes to a simple life and bans overconsumption. Indeed, this business concept is highly desirable and worth emulating. However, it is not at odds with optimal financial performance. After combining Patagonia’s environmental position and their business model with the business model Canvas. We found that Patagonia is not profitable and sustainable. This paper would evaluate the result by three main factors: Narrative of the supply chain, customers & channel are not wide enough and imbalance between cost and revenue. Analysis and Discussion Narrative of Supply Chain Patagonia has a very narrative supply chain. That is because they have unique cooperation conditions, limited sources and environmental benefits above the company’s benefit on key activities. This factor will also be limited to the sustainability of business and narrative the profit. Unique Cooperation Conditions and limited sources Running head: POSITION PAPER: PATAGONIA 2 Patagonia’s choice of business partners was driven by values, “not [by] commercial efficiency.” The company held its suppliers to its standards of quality and social and environmental responsibility. Since Patagonia is very focus on product’s quality and materials. Thus, they also ask for the lower defect rate. Rarely of manufacturing are capability with this high standard. Thus, in 2010, there are only 41 suppliers worldwide. Environmental benefit above company’s benefit on Key Activities Even Patagonia have a sharp insight, which is expanded the business internationally to Europe and Japan. However, they just only spent less than 1% of sales on marketing and advertising. This is far less than most apparel companies, for example, The North Face, Inc., Marmot Mountain Ltd., Mountain Hardware, and ARC’TERYX. However, Patagonia made in-kind donations, providing various services and donating about $200,000 worth of its products annually to environmental groups. As a company, concerning about social or environmental issue is a very good method to increase their reputation. Most companies will use it as a chance to gain more profit. However, Patagonia has its own believe, it believed in Zen philosophy. The philosophy is about if you put profit in priority, then you will not gain profit. Thus, you only have to think what you want to do rather than how much you want to Running head: POSITION PAPER: PATAGONIA 3 earn. This idea sound not reality as a company, they should consider more about what is the best for long term operation. Customers & Channel Are Not Wide Enough We could analyze this factor from Patagonia’s product structure and its channel. Patagonia’s main product structure is Sportswear (casual clothing including cotton shirts), Technical Outerwear (insulation garments such as technical shells), Technical Knits (baseliners with special fabric treatment) and Hard Goods (packs, luggage, and accessories). From this structure, we can find out Patagonia’s product structure is very simple, lack of diversity. Therefore, their customers will be very limited. For example, climbers, outdoor sports lovers, outdoor group (club), outdoor sporting goods rental store and outdoor apparel company. Nearly 90% of customers buy Patagonia’s product is for specific needed. Even the main core of their products is simple, functional and multifunctional. It is still more focused on the diversity of outdoor activities, rather than the diversity of customers. Second, Patagonia pursued four sales channels: wholesale (~44% of sales), retail (~33%), catalog, and internet (~23% combined). The wholesale and direct channels sold nearly 100% of the product line, while the retail channel offered an estimated 80%. Aiming their sales channel on the mass mall is easy to control the minimax’s Running head: POSITION PAPER: PATAGONIA 4 order. However, it is also a loss of a lot of chances to build a connection with customers. Lack of connection with customers will influence the marketing arrangement. That is because Patagonia is not able to know what the most popular products in the market in time. The change of marketing is constantly, to have a better understanding of customer’s preferences. The best way is to do the research and keep connecting with customers. Thus, the narrative channel will also affect Patagonia’s revenue. Imbalance Between Cost and Revenue Since Patagonia’s goal to be an environmentally friendly company. That is because Patagonia thinks “business should take responsibility to the environment.” We can also say Patagonia contributes to Corporate social responsibility (CSR). However, The company needs to pay the price for it. First, Patagonia company’s catalogs were distinctive from its competitors, with only 60% devoted to “selling space” compared to other firms’ 90-95%. On the contrary, Patagonia spends a lot of money on products, service and environmental care. For example, invest $3 million in research and develop raw materials, donate 1 %of revenue to environmental causes, guarantee to repair, refund, and replace any product that did not meet the customer’s satisfaction and that cost Patagonia $350,000. Patagonia spends most of its money on strength their products bases, which are quality, service and business reputation. However, Running head: POSITION PAPER: PATAGONIA 5 they just only use part of the budget on sale. For an enterprise, the imbalance of cost and revenue will affect the possibility of sustainable operation. Conclusion To sum up, from the business model of Patagonia, its ideals and company interests are against each other. Setting strict conditions for selecting partners will limit their possibility of cooperation. Moreover, this will also cause to lack of room to negotiate on production costs. The strategies on customers and channels also play a very important role in a company. these are the key elements for exploring markets. Last but not least, the balance between cost and revenue is the basic condition that the company should consider with. Therefore, in order to change the situation that Patagonia has; we will recommend: 1. Patagonia should do more research on their partner. I believe every company has their advantage and their disadvantage. Only cooperate with the manufacturer who can help to maximin Patagonia’s profit and relax restrictions on partnership. 2. Developing more diversity channels. For example, department stores, single stores and colorful their online store. 3. Rearrange their budget structure. Again, concerning about environment is good marketing material. However, the company’s profit is also as important as environmentally caring. Patagonia has a high opportunity to become a CSR company, which is able to win people’s respect and gain profit. Running head: POSITION PAPER: PATAGONIA Appendix 6
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