Alumni Reunion - The Wharton School of the University of ...

More documents

Recommendations

Info

the removal of visible dirt. If their handsdidn’t appear dirty, then there was noneed to use soap. The potential presenceof millions of invisible infectious organismswas not part of their hand washingcalculus. The second hurdle was thatmost of the potential customers lived invillages without access to such mass mediaas radio and televisionThe solution HLL hit upon was tohire two-person “facilitator” teams to gointo village schools and initially teachyoungsters between the ages of 5 and 13about the problems that can be causedby invisible germs and how they canbe largely eliminated by washing handswith soap. Parents and village elders arethen approached with similar messages.Based on initial data, HLL’s soapsales are growing not only in areas inwhich the company initiated its teammarketing approach but also in otherparts of India. Managers are convincedthat providing their soap to the poorachieves product differentiation andtaps into an opportunity for growththrough increased soap usage.CEMEX: Credit andConcreteCommercial credit historically has beenunavailable to the very poor. Yet economistsmaintain that commercial creditis a central component of any marketeconomy. Access to credit in the UnitedStates has allowed even people of modestmeans to make major purchases,including houses, cars and educations.CEMEX, Mexico ’s largest cementmanufacturer and the third-largestcement company in the world, is atechnologically sophisticated firm witha competitive advantage derived froma distribution infrastructure that monitorsthe movement of every truck inreal time to insure on-time delivery ofcement. The company sells cement totwo distinct markets: the constructionindustry and the “do-it-yourself” customer.During the Mexican economiccrisis in 1994 and 1995, CEMEXfound its sales to the construction industrytumbled as much as 50% whilesales to the do-it-yourself market fellbetween 10% and 20%. It decided thento reduce its reliance on the cyclicalconstruction industry by placing moreemphasis on the do-it-yourself market.The company realized the key differencebetween the two markets was theaverage revenue per customer. Smallbut steady sales to individuals earningless than $5 a day could produce veryimpressive revenues.Market research showed that most ofthe cement sales to the do-it-yourself marketwere for the construction of one room,either an addition to an existing structureor the start of what would eventuallybecome a family’s house. It was obviousthat if potential do-it-yourself customershad access to credit, they could undertakeconstruction sooner and more often thanif they had to amass the entire purchaseprice of the cement at one time. In 1998CEMEX launched an experimental programcalled Patrimonio Hoy – Savings/Property Today – intended to enable verypoor people to pay for building materialsand services to upgrade their homes.The program initially targeted neighborhoodsin which the average dailyfamily income was about $5 to $15.Managers were sent into the neighborhoodto enroll women – traditionallyresponsible for saving and purchasingwithin a Mexican household – ingroups of three to form a “socio group.”The three members of each group agreeto take turns collecting small paymentsfrom each of the members that will besaved toward making cement purchases.Once the socio is formed, they are visitedby a technical advisor or architectwho, for a small fee, helps the membersdecide what will be the next room, howit will be laid out and how much materialwill be needed.At the end of five weeks PatrimonioHoy makes its first delivery of rawmaterials, valued at ten weeks worth ofcollections. Thus the program extendsfive weeks of credit to the socio members,further building credibility withinthe neighborhood. If the socio membersremain committed to the program, thecredit they are extended in the form ofas-yet-unpaid-for raw materials increases.In the second 10-week period, forexample, the raw material is deliveredafter the second week, in effect grantingeight weeks of credit.Margins to CEMEX distributorsparticipating in the Patrimonio Hoyprogram typically are smaller – 12% insome cases – than the 15% that is theaverage in the business. But distributorsare nevertheless enthusiastic becausethose smaller margins are more thanoffset by the steady demand for cementand other raw materials like sand andgravel. And while conducting businesson a credit basis with a low-incomepopulation with no regular stream ofpaychecks may appear riskier than traditionallending models, PatrimonioHoy managers contend that the risksare in reality very low. The default rateso far has been less than one half ofone percent, a consequence in part ofthe group commitment of socio members.After three years of operation,Patrimonio Hoy had 36,000 customersand over $10 million in extendedcredit. The customer base is reported tobe growing at the rate of 1,500 to 1,600per month.Connecting to the PoorTechnological advances, particularly incomputing and communicating, seemto be taking place almost entirely in thedeveloped world. Granted, India andsome of the Caribbean islands are providingthe staffing for sophisticated callcenters and India notably has a thrivingsoftware development industry. Butthe employees of those enterprises aremostly well-educated and come fromthe middle-class or affluent segments oftheir populations. The inhabitants ofurban slums and rural villages have notbeen targeted as a market for technologicallysophisticated products or services.Yet when technology has been madeavailable to them, Prahalad has foundContinued on page 3332 . S U M M E R 2 0 0 4 . N E X T U P A T W H A R T O N S C H O O L P U B L I S H I N G
Seeking Fortune continued from page 32 The Value of Experience continued from page 22residents of the bottom of the pyramid to be readily acceptingof technology. In Bangladesh, women entrepreneurs withcell phones do a brisk business renting out the phone bythe minute to other villagers. Indeed, Prahalad finds in thespread of wireless devices proof of the size and viability of themarket at the bottom of the pyramid. By the end of 2003,for example, China had an installed base of 250 million cellphones. The market for wireless devices in India stood atabout 30 million installations and was growing at the rate of1.5 million handsets per month.Where connectivity exists it is resulting in major efficienciesin traditional occupations. Within three months of theinstallation of personal computers in some Indian villages thefarmers there were making decisions about planting basedon futures prices being quoted on the Chicago Board ofTrade. In Kerala, India, satellite-based images of fish shoalsare downloaded on village PCs and read and interpreted bywomen who then direct their husbands where to fish. Thehusbands, after a day of fishing, use their cell phones tocheck prices at various ports along the coast to obtain thehighest bid for their catch.To Prahalad, all these examples are evidence that there aremarket solutions to the problem of poverty. The task that hesets out for multinational corporations is to break out of thedominant logic that views the world’s poor as a distractionto be aided by governments and non-profit organizations.Involvement in markets at the bottom of the pyramid willchallenge many of the assumptions that managers of largecompanies have developed over the years, ranging from packagingand pricing to marketing and distribution. The resultof such efforts will not only be profitable, both for the largecompanies as well as the consumers, but it might also contributesolutions to the serious political and environmentalproblems confronting the developed world. ◆To purchase this book or learn more about WhartonSchool Publishing, visit .A New Strategy continued from page 29mation shades the risk in favor of the venture investor analogouslyto the way that card counting adjusts the odds inblackjack.” They also maintain that acquiring put optionsin transparent markets may be inherently less risky than anyunderlying venture investments made by the venture fund inthe potentially disruptive new company itself.As an angel investor, Hilliard feels comfortable enoughwith the strategy that he has requested such trading rightsin two recent terms sheets, including one concluded latelast year with a Pennsylvania-based software company in thewireless market. “There were no concerns from the otherside of the table; it was a complete non-issue,” Hilliard said.Whether that company proves to upset the market leadersremains to be seen. As Hilliard noted: “You never know.” ◆workers about nuts-and-bolts aspects of a business, everything fromaccounting and time-management to figuring out with a systemhow to know just when each worker would come and how muchshe would produce. Nolte said she is grateful that she found theGCP students, that she hopes it will be a turnaround for her workand for other non-profits around Latin America.“We’re improving our financial forms, and we will start workingwith the organic marketplace, which was one of the most importantrecommendations,” said Nolte. “We had a team that understoodthe benefits and difficulties of an enterprise with social responsibilityfrom the marketing and financial perspective.”For most of the for-profit Global Consulting Practicum projects,the firms want the student teams in for a stated time with astated consulting purpose, fitting quite well within the five monthsor so allotted for the course. But for the Mercomujer project, thestudents have decided to stay on to see how they can help on an ongoingbasis.“When you work with a non-profit, you get really into it.You get an intrinsic emotion. It grows itself organically,” said Lin.“When we first got there, they didn’t know if they were makinga profit on products or not. Were they charging enough for theirproduct? We asked them about capacity and they didn’t know whatcapacity was. They were dealing with eight different communitiesand each has subcommunities with different holidays and farmingschedules.“But that was the exciting thing. The GCP provided us with areal-life situation, not just some classroom work,” she said. “It willbe great to help our partners succeed long after the project itselfis over.” ◆Freelance writer Robert Strauss is a frequent contributor to theWharton Alumni Magazine.Brainy Winners continued from page 9Business 2.0 magazine. Entrepreneur John Osher, a formerWharton Entrepreneur-in-Residence, also served as a judge.More than 300 volunteers served as judges for earlier stagesof the competition and as mentors for the participants.WEP’s Cieri said the hefty number of participants, fromstudents to alumni and friends of Wharton, distinguishedthis year’s competitions from prior ones. “We had a 45 percentincrease in the number of judges,” she pointed out.This year’s competition also scored several firsts.For the first time, a team from Wharton West — ILAerospace Technologies — and two undergraduate teams— Distributed Resource Imagery and Integrated BiometricSolutions — made it to the finals. ◆To find out more, visit Get It Started at .W H A R T O N A L U M N I M A G A Z I N E .33
Page 4 and 5: Wharton NowMBA Class GiftsSet New R
Page 6 and 7: edge they need. Wharton’sonline b
Page 8 and 9: William Lauder, W’83,has been nam
Page 10 and 11: Brainy Winners: 2004 Business Plan
Page 12 and 13: Welcome New Alumni10 . S U M M E R
Page 14 and 15: ALUMNI RECONNECT IN HUNTSMANHALL AT
Page 16 and 17: REUNITING (for the past 50 Years)Bi
Page 18 and 19: JIMENEZ-MARCOS, WG’99, AND LIEB,
Page 21 and 22: fun, too. Over the course of the ye
Page 23 and 24: ON LOCATION IN PERU (LEFT TO RIGHT)
Page 25 and 26: Wharton Executive Education Program
Page 27 and 28: YOU BUYBY NANCY MOFFITT“Throughou
Page 30 and 31: http://knowledge.wharton.upenn.eduK
Page 32 and 33: Next Up at Wharton School Publishin
Page 36 and 37: Alumni Association UpdateAnother Ye
Page 38 and 39: WhartonWomen inBusiness:UPCOMINGCON
Page 40 and 41: Global.Wharton.ConnectionsWAVEThe W

Alumni Reunion - The Wharton School of the University of ...

Create successful ePaper yourself

Delete template?

Save as template?