Social Entrepreneurship mindset

There is a new trend in business which is focused on addressing the needs of the poor by setting business ventures which they call social enterprises. Microfinancing is one type of social enterprise. I would think being a country where we still have a lot of poor people we would have a lot of them already. But I think the likes of Jollibee and Goldilocks will not be one of them even if they see the economics of the market (huge market). I guess you have a social conscience to do this to be able to have the focus and dedication to serve the poor. It can’t be another CSR (Corporate Social Responsibility) initiative otherwise it will be just another PR approach of the company to improve its image to the public.
I am currently exploring starting one there and am in the midst of finding what type it would be. Food service would be idle but I need to get a business partner who is a chef or at least good cooking. One I know best having a career in banking and financial services is setting up a bank. However, the capital requirements for this are too big for me to satisfy. One alternative is starting an enterprise incubator to help other people do their own start-ups. Let’s see.
From BusinessWorld Philippines

Strategy: targeting the poor

TWO iconic Philippine brands — Jollibee and Goldilocks — adopted widely divergent strategies to address slowing domestic markets and growing overseas customers. For the sake of the Philippine economy and our national pride, we can only hope that both, not only one, will grow.

Facing declining middle-class purchasing power, Jollibee went mass market with “Manong Pepe,” a modern incarnation of the age-old Filipino carinderia.

Goldilocks targeted the upscale market with a niche brand, “Luxe,” aside from aggressively opening more franchisee-financed stores north of Manila to be served by a planned commissary in Pampanga.

BUY, NOT BUILD

Replicating its earlier acquisition of Red Ribbon for much less than the cost of building equivalent own stores, Jollibee bought majority control of “Mang Inasal” (chicken barbecue) to dominate chicken retail sales. Jollibee’s Chicken Joy sells more than its hamburgers.

Overseas, Jollibee is acquiring local brands and improving profitability by increasing efficiencies. It bought another restaurant chain in China. In contrast, Goldilocks said in a press statement it planned to open more outlets, including two stores in Thailand and a US commissary to serve Filipino communities from Chicago to the East Coast.

Two companies adopting strikingly different strategies.  Strategy is choice, and market  success will determine ultimately which one is making the smart choices.

$5-TRILLION MARKET

Almost two-thirds of the world’s estimated 6.6-billion people — some four billion — live under the poverty line.  The World Bank’s private sector arm, the International Financial Corp., and the think tank World Resources Institute estimate this underserved market to be worth some $5 trillion in purchasing power.

The IFC-WRI study measured the size of this market using income and expenses from household surveys.  It found that families with incomes below $3,000 a year mainly work in the informal sector, have no bank accounts or modern financial services, and lack access to clean water, electricity and basic health care.

The study, “The Next Four Billion Market Size and Business Strategy at the Base of the Pyramid,” examined consumers at the base of the pyramid (BoP).

The study found that the four billion BoP consumers yearly spend $20 billion for water, $51 billion for technology, $158 billion for health, $433 billion for energy, and $2.89 trillion for food (!).

TARGETING THE POOR

In celebrating its 30th anniversary years ago, Jollibee announced that, with its product lines well-developed and its store operating systems well in place, the company would focus on “creating a formidable brand” locally and expanding overseas, targeting a part of the four billion customers with a purchasing power of $5 trillion, with more than half of that spent on food (the BoP).

In an unpretentious spot in Edsa Central at the corner of Shaw Boulevard, an experimental store quietly tested the concept: marketing to the poor. In just the right site, Jollibee market-tested the idea of applying the quick-service-restaurant operating system to the age-old Filipino carinderia, probably as old as another cultural icon, the sari-sari store.

The pilot restaurant was called “Tio Pepe’s Karinderia.”  Within a year after that store opened, the president of Jollibee’s ChowKing operation renamed Tio Pepe to Manong Pepe.  Then Robby De la Rosa, who also ran Manong Pepe, opened two more stores.

At its annual stockholders’ meeting before the financial markets collapsed in late 2008, CEO Tony Tan Caktiong announced that Jollibee was paring down local store expansion plans because of weakening consumer demand.

But he was optimistic the company could continue growing by acquiring fastfood chains in China, which he would make more profitable not by rebranding to Jollibee but by improving efficiencies.

Subsequently, De la Rosa announced that Manong Pepe was opening nine more stores, bringing the number to 12.  “We are top of mind among call-center employees, vendors, and jeepney drivers,” De la Rosa said, indicating core markets at the base of the pyramid.

SOFT UNDERBELLY

Tan Caktiong says low-priced Filipino food is the largest segment in the eating-outside-the-home market, but only one of five Filipinos can afford the food served in over 1,500 outlets of the Jollibee group, which include ChowKing, Greenwich, and Red Ribbon.

Manong Pepe was to target customers across the broad socioeconomic class D, to which most of the once-lucrative class C customers slid down after losing purchasing power.

And so it was with some tepidation that the market received the announcment that Jollibee was shutting down its Manong Pepe stores in a so-called business rationalization move after acquiring the “Mang Inasal” chicken chain, which also targets the mass market, a segment apparently being served adequately by Jollibee’s aggressive “Value Meals” promotion.

As more customers trickle down to the base of the pyramid, two iconic Philippine brands are adopting diametrically opposed strategies to sustain momentum.

The jury is still out on the results of Goldilocks’ bold foray into the upscale market.  It is a family-owned business that is not traded in the stock market, so it is not required by law to submit public reports to shareholders.

With its quick exit from the Manong Pepe market, Jollibee is displaying the adroitness and dexterity of its entrepreneurial roots.  It does not become enamored of any strategy: The best strategy is what works best in the market, regardless of theory.  That is why it is so successful.

(For comments, send e-mail to mibc2006@gmail.com)

Article location : http://www.bworldonline.com/content.php?section=Opinion&title=Strategy: targeting the poor&id=56084

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