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Marketing Safe Water to the Base of the Pyramid–Lessons for Scaling up a Social Enterprise in Guinea

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Marketing Safe Water to the Base of the Pyramid–Lessons for Scaling up a Social Enterprise in Guinea UNIVERSITY OF ST.GALLEN Master in International Affairs and Governance (MIA) Master Thesis Marketing safe water to the base of the pyramid–lessons for scaling up a social enterprise in Guinea November 10, 2014 Author: Alain Bühlmann Referee: Dr. Urs Heierli Scaling up Social Enterprises at the Bottom of the Pyramid November 2014 Abstract Market based approaches to safe water development are a promising tool with several advantages to the conventional donor approach. Not only can profit-oriented businesses achieve long-term financial sustainability but also do they have the potential to grow in size. Furthermore, successful social enterprises might be replicated in other countries. Despite this, doing business at the bottom of the pyramid is no easy task. This thesis addresses the question of how locally successful projects can be scaled up in a financially sustainable way. Based on literature research and a case study the analysis shows that “microfranchising” is among the most promising strategies to address that challenge. I Scaling up Social Enterprises at the Bottom of the Pyramid November 2014 Acknowledgements I am grateful to my referee Dr. Urs Heierli whose expertise was of great help. I am also grateful to Pierre-Gilles Duvernay who, on behalf of Antenna Technologies, mandated me with the analysis of Tinkisso-Antenna’s strategy in Guinea in March and April 2014. The resulting report and the field experience I had a chance to gain are an indispensable basis for the case study of this thesis. Many thanks go to Aboubacar Camara and the entire team of Tinkisso-Antenna who devoted numerous hours to provide me with relevant information and who made my first stay in Africa an unforgettable experience. [Please note that the use of financial or any other data relating to or generated by Antenna Technologies or Tinkisso-Antenna must not be used without their explicit consent (Antenna Technologies: "[email protected]"; Tinkisso-Antenna: "[email protected]").] II Scaling up Social Enterprises at the Bottom of the Pyramid November 2014 Table of Content Abstract ............................................................................................................................. I Acknowledgements .......................................................................................................... II List of Figures .................................................................................................................... V Abbreviations .................................................................................................................. VI I. INTRODUCTION ................................................................................................................... 1 1. Problem Definition and Research Question ................................................................... 1 1.1 Conventional and new approaches to development ....................................................... 2 1.2 The HWST- approach ........................................................................................................ 4 II. THE STATE OF THE ART ........................................................................................................ 6 2. The Bottom of the Pyramid: Proposition, Promises and Critique .................................... 6 3. The Main Challenges at the BoP and the 4-As Framework .............................................. 8 3.1 Availability ........................................................................................................................ 9 3.2 Affordability .................................................................................................................... 10 3.3 Acceptability ................................................................................................................... 11 3.4 Awareness ...................................................................................................................... 12 3.5 Additional challenges at the BoP ................................................................................... 12 4. Two main Tasks: Supply and Demand .......................................................................... 13 4.1 Market- and demand creation ....................................................................................... 13 4.1.1 Need-based product development ........................................................................ 14 4.1.2 Marketing and promotion ..................................................................................... 14 4.1.2.1 Social marketing ............................................................................................. 15 4.1.2.2 Commercial marketing ................................................................................... 17 4.1.2.3 Interaction of social and commercial marketing ........................................... 17 4.2 Effective Supply .............................................................................................................. 18 4.2.1 The last mile challenge .......................................................................................... 19 4.2.2 Managing distribution channels ............................................................................ 20 4.2.3 Options for expansion ............................................................................................ 20 4.2.4 Franchising at the BoP ........................................................................................... 21 4.2.5 Microfranchising .................................................................................................... 22 4.2.6 Village-level entrepreneurs (VLEs) ......................................................................... 24 III Scaling up Social Enterprises at the Bottom of the Pyramid November 2014 5. Choosing the “right” Organizational Form ................................................................... 25 5.1 NGO versus enterprise for market and demand creation ............................................. 26 5.1.1 The R&D phase for need-based product development ......................................... 26 5.1.2 Marketing and promotion ..................................................................................... 26 5.2 NGO versus enterprise for effective supply ................................................................... 28 5.2.1 The business creation phase .................................................................................. 29 5.2.2 The replication- or scaling-phase ........................................................................... 31 6. Discussion ................................................................................................................... 33 III. CASE STUDY .................................................................................................................. 36 7. Guinea: A BoP country ................................................................................................ 36 8. Tinkisso-Antenna’s Safe Water Business: Project History ............................................. 37 9. Tinkisso-Antenna’s Safe Water Business: Scaling up .................................................... 38 9.1 Basic strategic approach for scaling up .......................................................................... 39 9.2 Strategy for demand creation ........................................................................................ 40 9.3 Strategy for effective supply .......................................................................................... 41 10. Discussion and Recommendations ............................................................................. 42 10.1 Problems with demand creation .................................................................................. 42 10.2 Problems with effective supply .................................................................................... 43 10.3 Economic viability of the current business model ....................................................... 47 10.3.1 Changing cost structure ....................................................................................... 48 10.3.2 Modeling transportation costs ............................................................................ 50 10.3.3 Breakeven Analysis .............................................................................................. 52 10.4 Proposing a new business model for Tinkisso-Antenna .............................................. 53 10.4.1 Applicability of the microfranchise approach for Tinkisso-Antenna ................... 53 10.4.2 Implementation of the microfranchise approach ............................................... 55 10.5 Conclusion case study .................................................................................................. 56 IV. CONCLUSION ................................................................................................................. 58 12. References ................................................................................................................ 60 12.1 Literature ...................................................................................................................... 60 12.2 Internet ......................................................................................................................... 64 13. Annex ......................................................................................................................
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