faculty management sciences
TRANSCRIPT
I
FIRITIIBIH UNIVERSITY
OF SCIEI‘ICE nnD TECHI‘IOLOGY
Faculty of Management Sciences
Department of Management
QUALIFICATION: Bachelor of Business Management
QUALIFICATION CODE: O7BBMA LEVEL: 7
COURSE: SME Strategy COURSE CODE: BES7125
DATE: JANUARY 2018 SESSION: 08:00 - 11:00
DURATION: 3 hours MARKS: 100
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER: Chris van Zyl
MODERATOR: Rainer Ritter
THIS QUESTION PAPER CONSISTS OF 18 PAGES
(Including this front page)
INSTRUCTIONS
1. Answer all the questions of Sections A, B and C.
Answer the multiple choice questions of Section A on the attached
Multiple Choice Answers Sheet and attach it to your examination
script.
3. Write clearly and neatly.
Number the answers clearly.
PERMISSIBLE MATERIALS
1. Examination paper and examination script.
2. Calculator.
SECTION A
Multiple choice questions
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In order to revamp the value chain the following activity (ies) should not be considered:
Offer products with well-differentiated features and uses
Replace value chain activities with faster and cheaper technologies
Eliminate distributors and dealers
Relocate facilities to reduce distribution and handling activities
All of these
A differentiation strategy works best when:
Technology change is fast—pacedThere are few rival companies
There are many different ways to differentiate the productThe needs of buyers are diverse
All of these
”Communicate how product offering does the best job of meeting niche buyers’
expectations” describes the marketing emphasis of the following generic competitive
strategy the best:
Low-cost providerFocussed differentiation
Broad differentiation
Focused low-cost providerBest-cost provider
The following approach is not recommended in fast-changing market conditions:
Reduce investment in R&D in order to have sufficient cash available when customers
purchase less
Keep products fresh and exiting enough to stand out
The enterprise needs to develop quick—response capabilities
Strengthen relationships with strategic suppliersNone of these
Strategy Horizon 2, also referred to as ”medium jump”, as an approach for sustaining
rapid enterprise growth is best associated with:
Initiatives to fortify and extend current businesses
Immediate gains in revenues and profitsPotential for significant contributions to revenues and profits in 5-10 years
Moderate revenue and profit gains now, but significant gains in 2—5 years
None of these
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A fortify-and-defend strategy is not associated with the following:Reduce prices to the lowest possible levels and sacrifice qualityincrease spending on advertising and focus on customer service
Build new capacity ahead of market demand
Remain cost-competitive and technologically progressive
All of these
A condition that should not be considered as ideal for enterprise harvesting:Demand is gradually increasing
Marginal profits realised when applying efforts to rejuvenate the enterprise
Increasing costs with efforts to maintain enterprise growth
Inability to re-deploy freed resources in other areas of the business
All of these
A market penetration strategy could be associated with:
Educate your customers and make it easy for them to purchase your products
Expand the distribution network
Change the product designs
Adjust your prices
All of these
The key difference between a market penetration strategy and a market development
strategy is that:
The distribution network does not have to be expandedNo change is necessary in the product designsPrice changes are irrelevant
The definition of the target market must changeNone of these
The following cannot be associated with a product development strategy:
Research and developmentA thorough assessment of customer needs
Filling the gap between customer needs and the availability of products that serve those
identified needs
Brand extension
None of these
SUBTOTAL: 10 Mark
SECTION B
Short questionConsider the information provided in the table below with reference to a BCG Matrix application.
Forecasted Current MarketingSales in No of market market growth costs in
Company N$ Competitors growth rate rate NS
A 3.8 13 12% 5% 1.2
B 12 12 7% 10% 3.5
C 7.2 10 15% 15% 1.1
D 2.6 14 5% —5% 0.5
E 0.9 8 13% -10% 0.1
F 1.4 9 9% -15% 0.4
TOTAL 27.9 66 6.8
a) Calculate the relative market share position (RMSP) for each company.
[6 marks]
b) Draw a BCG Matrix with properly marked horizontal and vertical axes. Plot the positions of
companies A to F on the BCG Matrix and indicate next to each what their respective
coordinates are.
[12 marks]
c) Which specific strategies would you implement for companies B and D respectively?
[2 marks]
SUBTOTAL:
20 Marks
SECTION C
Case analysisEvaluate the case below in order to analyse it by applying a range ofstrategic management tools that are
known to you. You should extract the strengths, weaknesses, opportunities and threats plus other
relevant variables from the case below. Each of the variables in the case should be allocated an
importance rating (IR). You should motivate orjustify your IR’s with regards to all the respective variables
in the case. A performance rating (PR) needs to be assigned to each of the respective variables and each
has to be justified as well.
The main purpose of the analyses is to recommend a set of strategies designed to stimulate enterprise
growth. The suggested strategies would be based on the outcomes and interpretations of the various
strategic tools that were applied to analyse the enterprise. The strategies are therefore intended to solve
the enterprise challenges that are associated with slow growth and increasing competition in the market.
The following strategic tools should be used in the analyses:0 IE Matrix [15 marks]- SWOT Matching strategies (two strategies for each of the SO; ST; WC and WT quadrants)
[20 marks]a SPACE Matrix [20 marks]0 QSPM [15 marks]
A set offinal conclusions and recommendations of how the enterprise should implement the suggested
strategies should be provided towards the end.
SUBTOTAL:
70 Marks
TOTAL MARKS 100
Nuru International: empowering farmers
to fight extreme povertyL; ‘1 .-: ”saute.—
Hristina Kostadinova Dzharova and Sudheer Gupta
Hristina Kostadinova
Dzharova is a Research
Assistant and
Sudheer Gupta is an
Associate Professor both
are based at Simon
Fraser University.
Vancouver. Canada.
Disclaimer. This case is written
solely for educational
purposes and is not intended
to represent successful or
unsuccessful managerialdecision making. The author/s
may have disguised names;
financial and other
recognizable information to
protect conlidentialily.
DOI 10.1fOB/EEMCS-OS-ZOM-OMS
Jake Harriman, the founder and CEO of Nuru International, together with his team were
evaluating two recent initiatives in the organization‘s efforts to help fight extreme poverty:
crop diversification for farmers in Kenya and expansion of company's operations in
Ethiopia. The year 2014 marked the onset of Nuru‘s new strategic initiative in Kenya where
its farmers would embrace crop diversification and grow crops other than maize. Crop
diversification affected Nuru's ability to enroll farmers in its programs and enable them to
address hunger and cope with economic shocks. The Nuru team anticipated diversification
to be a challenging task in Kenya, although farmers in Ethiopia were used to having a
greater diversity in their yields. However. commercralization of their crops was difficult and
Nuru needed to engage in providing access to markets for its beneficiaries. Besides crop
diversification and commercialization. the team wanted to prove that Nuru's approach to
eradicating extreme poverty was scalable and sustainable. The Ethiopian expansion was
essential for scaling and establishing the company's model across different socioeconomic
realities. Securing funding for scaling and expanding its impact, however. represented
another challenge for the Nuru team. The team recalled Nuru's valuable experience with an
online lending platform (Kiva) based on the principle of crowdfunding, and wondered
whether they could leverage crowdfunding strategies to finance the company’s efforts to
scale. Many other sources of financing were becoming available to social enterprises like
Nuru. and the Nuru team needed to evaluate all the options carefully.
Company background
Nuru International
Nuru International was founded in 2008 by a former US Marine, Jake Harriman. with the
ambitious goal to help "end extreme poverty throughout the world“ (Nuru. 2008d). Jake had
the vision and understanding that combating terrorism by force and power only reaped
short~term results. He was convinced that "extreme poverty (was) a contributing factor to
the causes of 21 st century terrorism and insurgency" (Nuru, 2008d), and envisioned a more
impactful and long-term solution by fighting extreme poverty. He believed that "desperate
people do desperate things" and coined this understanding as a major pillar underlyingthe work of Nuru International. As an MBA student at Stanford, Jake gained access to the
knowledge, networks and human capital needed to found Nuru international.
Nuru International was launched in Kenya. in the Kuria West district and started-off as a
non-profit organization with a strong commitment to help eradicate poverty. The
organization‘s name “Nuru”. meaning “light" in Kiswahili or Swahili language[1], was
inspired by the team‘s vision to empower people living in extreme poverty (Nuru, 2008d).
Nuru International expanded to Ethiopia in early 2013 (Nuru, 2008c).
VOL. 4 NO. 8 2014. pp, 1-21, © Emerald Group Publishing Limited, ISSN 2045-0821 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1
PAGE 2
In Kenya, Nuru engaged in five program areas: Agriculture, Healthcare. Community
Economic Development (focusing on savings and loans). Education and Water and
Sanitation[2] (Orton. personal communication. 27 February 2014; Nuru. 2013a). While the
organization aspired to achieve considerable results in each impact area. Jake and his
team realized the importance of the Agriculture program as an income generator for
smallholder farmers in Kenya and Ethiopia and as the backbone program for Nuru's other
impact programs (Orton. personal communication. 27 February 2014).
Nuru International further committed to a Leadership program and a Monitoring and
Evaluation program. These programs were initiated to equip their ground staff with
adequate knowledge. skills and attitudes to implement and scale poverty solutions actively
and independently in targeted areas. Nuru recognized the importance of such programs.
as many of the staff lacked relevant education. experience or both. Moreover. many staff
members that joined Nuru:
[, . .] were marginalized to different extents due to growing up in poverty and/or having
experienced asymmetrical relationships either as beneficiaries of aid or as employees of
western organizations. These marginalized statuses resulted in diminished agency affecting
staff's ability and willingness to become effective managers. decision-makers. and problem
solvers (K. Do. personal communication. 20 May 2014).
Leadership programs sought to overcome these challenges.
Nuru Social Enterprises
Nuru's team had a dual objective of achieving a sizable social impact. while maintaining
financial sustainability. The team acknowledged that as a non-profit organization. Nuru
International might lack the ability to sustain its operations financially. To address this need.
Jake together with Mrs Nisha Chakravarty[3]. founded Nuru Social Enterprises (NSE) as a
for-profit subsidiary of Nuru International in 2013. The team sought to develop a hybrid
organizational model, merging the value propositions of a non-profit with a for-profit (Nuru.
2013b). While NSE had a diverse stream of revenue-generating activities. its mission and
vision were wholly aligned with those of Nuru International. In agribusiness. NSEis main
goal was to develop and facilitate income-generating potential of farmers to increase their
ability to cope with economic shocks. One of the ways NSE achieved this goal was by
providing farmers with reliable access to markets where they could sell their surplus crops
at a fair value. thus creating a win—win situation for farmers and Nuru (K. Do. personal
communication. 20 May 2014).
Kenya and Ethiopia: country profiles
Kenya
Located in Eastern Africa and bordered by Southern Sudan and Ethiopia to the north.
Somalia to the east. Uganda to the west and Tanzania and the Indian Ocean to the south.
the Republic of Kenya had been described as the "cradle of humanity”[4] (BBC News.
2013b). Kenya had a stable macroeconomic environment[5]. and was considered to be
one of Africa‘s growing economies. However. it remained vulnerable to external shocks.
undermining prospects for poverty reduction and growth (WorldBank, 2014b). With a
population of nearly 43 million and an area of nearly 583.000 sq km (225.000 sq miles).
Kenya became home of 42 distinct groups of people (tribes) with diverse cultures and a
high dependency on agriculture for income-generating activities (BBC News, 2013b). Jake
and his team reckoned Kenya as a good starting point for unraveling Nuru‘s potential. Not
only could Nuru engage in poverty eradication initiatives in Kenya but there was also the
possibility that Nuru could use Kenya as a catalyst for expansion into other African markets.
EMERALD EMERGING MARKETS CASE STUDIES VOL. 4 NO. 8 2014
Ethiopia
Ethiopia embodied Africa‘s oldest independent nation. With an area of 1.13 million sq km
(438,000 sq miles) and a population of nearly 87 million, Ethiopia represented Africa's
second largest populated country (BBC News, 2013a). Situated in Eastern Africa, west of
Somalia, the country experienced a moderate economic growth over the period 2005-2012
that was mostly attributed to the expansion of its services and agricultural sectors
(WorldBank, 2014a). However, Ethiopia was extremely vulnerable to environmental
changes as a major part of its domestic product came from agriculture (83 per cent of the
county's population lived in rural areas (WorldBank, 2014d) and a vast majority depended
on agriculture). As Ethiopia often suffered periods of droughts and famines, civil conflicts
frequently arose, disrupting growth and intensifying poverty, thus bringing millions to the
verge of starvation (BBC News, 2013a).
Kenya and Ethiopia: poverty and impact
Staggering poverty haunted Kenya and Ethiopia, both being countries in Sub-Saharan Africa
where 49 per cent of the population[6] lived below the poverty line of USA$38 a month (or
USA$1.25 a day). In Kenya alone, poor living under USA$1.25/day represented 43 per cent.
those under USA$ 2.00/day represented 67 per cent, while the majority of the Kenyan
population (98 per cent) lived below USA$ 8.00/day (Exhibit 1) (WorldBank, 2014c).
More than three quarters of the Kenyan population lived in rural areas and relied solely on
agriculture for income generation. Smallholder farming generated most of Kenya‘s
agricultural output. About 70 per cent of the poor were located in the central and western
regions, living in areas with medium-to-high potential for agriculture with arid and semi-arid
lands (International Fund for Agricultural Development, 2013b). Recurrent droughts had
exacerbated poverty and food insecurity.
Nuru Kenya started operations in the District of Kuria, part of the Nyanza Province of Kenya.Divided into Kuria East and Kuria West, the district had a population of 256.086[7]. It was
predominantly agricultural and ranked among the poorest areas in Kenya, contributing to
over 40 per cent of the poverty incidences in the province of Nyanza and home to more
than 70 per cent of those that lived under the poverty threshold of USA$ 1.25/day (see
Nyanza Region Poverty Estimates) (WorldBank, 20149),
Similarly, Ethiopia was one of the poorest countries in Africa and the world. Poor livingunder USA$1.25/day represented 31 per cent, those under USA$2.00/day represented 66
per cent, while the majority of the Ethiopian population (99 per cent) lived under
USA$8.00/day (Exhibit 1) (WorldBank, 2014c). Food insecurity and hunger remained the
primary challenges. For example, only about 12.7 million smallholders in Ethiopia produced95 per cent of the agricultural gross domestic product (GDP) and they had always been
extremely vulnerable to natural disasters such as drought, unpredictable weather and crop
disease (International Fund for Agricultural Development, 2013a).
Nuru focused on the 80uthern Nations, Nationalities and Peoples' Region (SNNPR) in
Ethiopia, specifically the area of Boreda, Gamo Goia Zone (see, SNNPR Demographics).The SNNPR region accounted for more than 10 per cent of the country’s land area and had
a population of nearly 16 million, representing almost one-fifth of the entire population in
Ethiopia. The region was overwhelmingly rural, creating tensions on availability of land and
crops to feed its large population (Adugna, 2013), often experiencing prolonged hungerseasons during the pre-harvest periods.
Nuru International: strategic constituents
Philosophy
Nuru‘s vision was to “create a world where people living in extreme poverty can make
meaningful choices to improve their lives in a sustainable way" (Nuru, 2008b). This vision
VOL. 4 NO. 8 2014 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3
relied on three major pillars: empowerment of the disenfranchised. provision of the
necessary tools to enable meaningful choices and building an ecosystem where
individuals could thrive and act on their decisions (Nuru. 2008b). Embracing this bold
vision. Jake and his team were driven to some of the most remote places in Africa where
others could not or would not go. Indeed, that became Nuru lnternational’s foremost
distinctive feature and a clear competitive advantage, as the areas they selected in Kenya
and Ethiopia had not been targeted by other organizations before (S. Orton, personal
communication, 27 February 2014).
Nuru focused on working with farmers in remote rural areas who often experienced
starvation in the months prior to seasonal harvests. Nuru secured and provided agricultural
input loans for seeds and fertilizers to farmers. The crop with highest potential was maize
as it represented Kenya's main staple food, was easily marketable throughout the country
and was less labor-intensive. Growing maize with its small scale farmers, Nuru‘s ultimate
objective became to help increase farmers' yield to an amount sufficient for them to make
a decent living. in the long run. Nuru sought to enable farmers achieve a yield surplus that
farmers could sell for additional income (Nuru, 2008b).
The model
Nuru business model relied on four major components (Figure 1):
1. mobilize and empower local leaders;
2. develop a holistic and integrated approach;
3. provide a toolkit of proven poverty fighting interventions: and
4. build a sustainable funding engine.
Adhering to its mission and vision. Nuru leveraged its ability to mobilize and empower local
leaders within the communities it intended to target. To identify. cultivate, train and develop
potential leaders was essential for the successful realization of Nuru's mission. Focusing on
service-minded individuals with leadership potential. Nuru attempted to instill
self-confidence and belief in their own decision-making and ability to build solutions
addressing the needs of their communities. Nuru team members were determined to
develop a holistic and integrated approach. instead of starting-off with a designated set of
solutions, Nuru would work in close collaboration with local staff and community leaders in
Kenya to understand their fundamental needs. Following a rigorous data collection and
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PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 4 NO. 8 2014
data mining process. Nuru would identify opportunities and address these deploying not
only its tangible resources but also the organization's intangibles such as the field leaders’
social capital and reputation[8]. Subsequently, Nuru would engage in research along its
impact program areas to identify best practices and build a toolkit that it could later provideto local leaders. Thus. Nuru aimed to lay the groundwork for the model’s scalability and
sustainability by equipping communities with the necessary tools. To support its long-term
commitment, Nuru's research would be flexible and tailored to community-specific
regulations. country-specific environmental conditions and community members‘
predispositions. Further, Nuru used demonstration plots to educate farmers about benefits
associated with high quality crops. In this way. Nuru incentivized farmer-to—farmer learning.
developed trust-based relationships and showcased the positive impact its agricultural
program could have for farmers in Kenya and Ethiopia. Aspiring to build the first
“self—scaling. self-sustaining model to help end extreme poverty". Nuru incorporated its
subsidiary. NSE. into its model. thus building a sustainable funding engine entrenched in
the local environment. NSE engaged in empowering local entrepreneurs and helping them
access new markets and capital. Successful entrepreneurial ventures had other multiplier
effects and ultimately benefited the local communities where Nuru worked (Nuru. 2008b).
Proof of concept and exit criteria
The Nuru team realized that the goals they set for Nuru were ambitious. and they needed
to prove the functionality of the model. The team identified three criteria to establish proofof concept:
1. Local staff needed to be engaged in the expansion and management of Nuru
International impact programs. funded by NSE-generated revenues.
ix) international staff should leave the community within five-seven years on the
development of a completely self-sustaining operational unit[9].
3. International staff should engage and launch new projects in other developing
countries in need of Nuru services. so as to attest the validity of the model and show
that it had not been a one—time country-specific phenomenon (Nuru. 20088).
Evaluating impact. scalability and sustainability along these criteria became a prerequisitefor Nuru international to subsequently exit served communities within the timeframe of
five—seven years (8. Orton. personal communication. 27 February 2014). The functionality
of its model and its scalability, however. were contingent upon Nuru’s ability to successfullydeliver programs that would raise farmers‘ incomes and. at the same time. generate diverse
revenue streams and sources of financing to sustainably fund its operations.
To attain financial sell-sustenance. Jake and his learn had to evaluate different financing
options in terms of their fit with the organization's hybrid goals and suitability in enablingNuru‘s expansion plans.
Agricultural initiatives: loans, crop diversification and regional expansion
Since issuing its first agricultural loan in 2009. Nuru disbursed 15.213 loans for seeds and
fertilizers to its farmers in Kenya. As of 2012. nearly 97 per cent of Nuru members repaidtheir loans. and. between 2011 and 2012. Nuru farmers enjoyed an average increase of 118
per cent in maize yield compared to non-Nuru farmers (Exhibit 2) (Nuru. 2012). Additionally.between 2011 and 2013. Nuru implemented the Multi—dimensional Poverty Assessment
Tool (MPAT)[10] to measure its impact on poverty alleviation in Kenya. MPAT represented
a survey-based 10-component thematic set of indicators consisting of a household-level
survey of approximately 70 questions and a village-level survey of approximately 20
questions (Cohen. 2009). A comparison between Nuru and non-Nuru farmers using MPAT
indicators for the period 2011-2018 showed statistically significant higher scores for Nuru
farmers on 7 out of 10 components. including farm assets (land quality and tenure and crop
inputs), non—farm assets (employment and skills) and resilience to external shocks.
VOL. 4 NO. 8 2014 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5
PAGE 6
Though its agricultural loan programs had been successful in raising maize yields and
reducing poverty among its farmers, Nuru decided to diversify its crop offerings as an even
stronger indictor of its farmers‘ ability to cope and recover from climatic changes and
hence build crop resiliency.
Starting early in 2014, Nuru offered inputs other than maize. The new package comprisedof maize, brown sorghum. finger millets and Grevillea trees, and it was a “no
pick—and~choose option” as farmers received the complete solution (8. Orton. personal
communication, 27 February 2014). Prices for the new crops package did not deviate much
from what Nuru farmers used to pay in the early years of 2013 and 2012, as the difference
in pricing was approximately 200ksh[11] (USASS) (Exhibit 3). Despite Nuru’s compellingcost and price optimization. Nuru's team acknowledged that convincing farmers to
embrace diversification could be a challenging task. Farmers' resistance to accept the new
solution could undermine Nuru‘s strategic initiatives.
Additionally, Nuru had just set foot in Ethiopia. Farmers in Ethiopia were used to growingmore diversified crops which Nuru considered an opportunity. Among these were the sweet
potatoes. taro and enset[12]. The latter was also referred to as the "false banana"[13] and
was popular among Ethiopians, but it was rarely the only food source for households and
seldom their main marketed item (Adugna, 2013).
Nuru realized that Ethiopian crops, being primarily subsistence foods, had little commercial
value and could not be easily marketed through loans repayable by cash (Nuru. 2014b).
Alternatives such as maize, haricot and coffee had greater potential as income-generating
crops but their cultivation practices used by Ethiopian farmers produced poor yields.
Hence, Nuru needed to identify, promote and commercialize the most economically
favorable crops among Ethiopian farmers.
Operations, revenues and financing
Nuru was committed to transparency and reported annual financials for its Kenya
operations (Exhibit 4). As Nuru Kenya program areas advanced, the organizationaccumulated diverse streams of revenues and expenses. The primary share of its revenues
(64 per cent) came from donors and grants, and the second largest share (36 per cent)
from income generated through its impact programs. While revenues generated through its
programs in Kenya were not enough to fully sustain its operations, the results were very
encouraging (Nuru, 2012).
While Nuru had incorporated a for—profit subsidiary to assist in reaching financial
sustainability, the team knew that, like most social entrepreneurs, they would need external
sources of financing to fund Nuru's efforts in developing the markets in their initial stages.
Nuru had to not only incentivize farmers to participate in its agricultural programs but it also
needed to help build the ecosystem around it. This entailed the development of proper
collaborating environment, distribution channels and trust-building among farmers in
Kenya and Ethiopia. Many investors perceived these initiatives as highly risky which
deterred Nuru’s seed investment opportunities from the private and impact investing
space.
Sources of financing
The Nuru team, which had a dual objective of combining social impact with financial
returns, was already familiar with three general sources of finance for social enterprises like
private markets, philanthropic markets, and the impact investing space (D. Thorpe, live
interview with J. Harriman of Nuru International: Forbes. 2014). The private market was
the largest source of financing as capital flew from diverse sources ranging from private
investors to lending institutions and multinational corporations. However, investors often
anticipated immediate financial returns and had other expectations in terms of preferred
EMERALD EMERGING MARKETS CASE STUDIES VOL. 4 NO. 8 2014
target markets and growth rates. For example, expectations of 10-15 per cent short-term
returns were common, which in social enterprise contexts was hardly feasible.
The philanthropic space was evidently growing with an increasing number of
philanthropists engaged in trying to meet broad societal needs. While they were well
predisposed toward financing social initiatives. with the growth in the sector, most
philanthropists started to tie their grants to deliverables to ensure the realization of specific
strategic targets. Higher expectations made access to philanthropic funding viable for a
limited number of social ventures.
The impact investing space was relatively small. but was growing fast and was highly
competitive. Social entrepreneurs attempted to get access to impact investors who did not
expect immediate financial returns and were willing to undertake entrepreneurial risks for a
broader social cause. Although this looked like the most attractive financing option for
social enterprises, lack of clear metrics and acceptable trade-offs between financial
expectations and social returns made access to this space tricky for many social
enterprises.
Mulling over all three options, the team had to pitch the most favorable funding
opportunities for Nuru to unlock the potential of its hybrid business model.
Partnerships
Partnerships were very important to help leverage Nuru's capabilities. in addition to
working closely with local communities, Nuru's program leaders and strategists were
continuously seeking external partners that could provide funding, strategic advice and/or
other complementary capabilities. For the initiatives discussed in this case, two
partnerships were particularly relevant.
One Acre Fund. Prior to founding Nuru International, Jake interned with One Acre Fund
during the summer of 2007 (S. Orton, personal communication, 27 February 2014). One
Acre Fund, an NGO founded in 2006, operated in Rwanda. Kenya, Tanzania and Burundi,
with the mission to improve farmers’ yields and help lift them out of poverty (OAF. 2006).
The organization had a long-standing record of successfully educating and coaching local
farmers through its own leadership program. It had developed and operationalized best
practices to address sustainable planting techniques. provision of high quality fertilizers to
the doorsteps of its farmers and farmers‘ ability to adapt diversified agricultural inputs
(OAF. 2014). Because One Acre Fund had a presence in Kenya and was familiar with the
local environment, it could channel best practices to Nuru operations and facilitate Nuru’s
expansion. Further, as a much bigger organization, One Acre Fund invested heavily in
research and had generated considerable knowledge in managing farmers’ expectations.
coping with climatic changes and low-quality crops. Via this partnership. Nuru could gainaccess to tacit knowledge and mitigate operational risks by deploying some of One Acre
Fund’s best practices (8. Orton, personal communication, 27 February 2014).
Kiva. To expand its reach to African farmers, Nuru (via its subsidiary, NSE) began
partnering with Kiva, a non-profit organization that enabled people throughout the world to
lend small amounts of money to entrepreneurs in developing economies (Kiva, 2014). Kiva
had been operating on the basis of “crowdfunding”, utilizing a Web-based platform to
enable access to funds for those excluded from formal financial services.
As Nuru offered agricultural loan inputs, debt collection on behalf of farmers was onlyfeasible upon completion of the harvesting season. Therefore, Nuru often experienced
cash-flow challenges arising from these inputs' distribution that took place at a single
period during the year. Partnering with Kiva helped bridge that gap as funding
opportunities became available year—around and expanded beyond Nuru's cash resources
(Nuru, 2014a). While support from Kiva was not a substantial part of Nuru's funding, it
helped augment NSE's diverse stream of revenue generation activities.
VOL. 4 N0. 8 2014 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7
Challenges
Maintaining Nuru’s duaI mission of measurable social impact and financial sustainability
throughout the expansion process was crucial. Hence, Jake and his team leaders had to
comprehensively explore Nuru's financing options. They were considering available capital
options such as the private market, the philanthropic market and the impact investing
space, but as the number of social entrepreneurs grew, competition in all three intensified.
Having successfully partnered with Kiva, the team wondered whether soliciting funds
through crowdfunding might be a feasible way to fund operations in Ethiopia. They were
increasingly interested in equity crowdfunding, but were also a bit skeptical about what
equity investors‘ incentives might be. The team acknowledged the need to continue
seeking private philanthropy dollars, but wanted to emphasize revenue generation throughNSE to accelerate growth. In addition, questions remained as to whether Nuru's crop
diversification program would be fruitful for its mission. How would Nuru incentivize Kenyanfarmers to accept the new crops package and commercialize the most favorable Ethiopian
Keywords:MODS?
Poverty alleviation, Jake and his team acknowledged the huge responsibility they bore for the company and
Social venture, more importantly for the farmers in Kenya and Ethiopia that trusted Nuru. Jake. in particular,
Hybrid organizational design, envisioned that if Nuru International was still around in 30 years, he would have failed his
Behavioral change, life’s mission to help end poverty (D. Thorpe, live interview with J. Harriman of Nuru
Crowdfunding, International: Forbes, 2014). Making the right choices in the decisions the team faced was
Strategic management key to continuing the journey toward achieving Nuru's mission.
Notes
1. Mother tongue of the Swahili people and widely spoken by various communities inhabiting the
African Great Lakes region and other parts of Southeast Africa, including Tanzania, Kenya,
Uganda, Rwanda. Burundi, Mozambique and the Democratic Republic of Congo.
2. Nuru‘s Water and Sanitation program was embedded in its Healthcare program.
3. Mrs Nisha Chakravarty had been the Chief Financial Officer (CFO) of Nuru International since 2012
and the President of NSE since 2013.
4. In the Great Rift Valley. the Republic of Kenya, paleontologists discovered some of the earliest
evidence of man‘s ancestors.
5. Despite relative economic stability. rivalry for power and resources between the new counties and
the national government had increased pressure on public resources.
6. As of 2010, estimates indicated a Sub-Saharan Africa population size of 854 million, number of
poor living at or below US$1.25 a day (default poverty line set by the World Bank) of 414 million,
representing a headcount of nearly 49 per cent.
7. Population size derived from the 2009 census.
8. For example. Nuru Kenya greatly benefited from the network ties and influence of Mr Philip
Mohochi. the Chairman of Nuru Kenya and a native of Kuria, Kenya.
9. Nuru defined a "self-sustaining operational unit" as a community where local leaders could
understand the problems, evaluate potential solution and design interventions together to continue
delivering and scaling impact after the international staff left the project.
10. MPAT had been developed by the International Fund for Agricultural Development (IFAD), a
specialized agency of the United Nations, to assess multi-dimensional aspects of poverty (Cohen.
2009)
11. Ksh stands for Kenyan Shillings. US$ 1-66.6ksh.
12. Enset: a crop unique to Ethiopia. largely confined to the southern part of the country as a
staple.
18. Enset leaves resembled those of the banana plant.
14. The “wisdom of the crowd" argument states that a crowd can at times be more efficient than
individuals or teams in solving problems.
15. An interview with Daniel lsenberg, Professor of Management Practices at Babson Global.
PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES VOL. 4 NO. 8 2014
16. One example of a group-based financial initiative is the Accumulated Savings and Credit
Association (ASCA): self-selected community members form a group to contribute an equalamount to a common fund. Once the fund has accumulated to an agreed-upon sum or duration,
the group starts lending the savings fund to its members.
References
Adugna. A. (2013), “Ethiopian demography and health". available at: www.ethiodemographyandhealth.
org/SNNPR.htmI (accessed March 2014).
BBC News, A. (2013a). "Ethiopia profile“. available at: www.bbc.com/news/world-africa-13349398
(accessed 7 March 2014).
BBC News. A. (2013b), “Kenya profile". available at: wwwtbbc.com/news/worId-africa—13681341
(accessed 7 March 2014).
Cohen, A. (2009), “The multidimensional poverty assessment tool: design, development and
application of a new framework for measuring rural poverty", International Fund for Agricultural
Development, available at: www.ifadIorg/mpat/resources/book.pdf
International Fund for Agricultural Development, I. (2013a), “Rural poverty in Ethiopia", available at:
www.ruralpovertyportal.org/country/home/tags/ethiopia (accessed 7 March 2014).
International Fund for Agricultural Development, l. (2013b), “Rural poverty in Kenya", available at:
wwwtruralpovertyportal.org/country/home/tags/kenya (accessed 7 March 2014).
Kiva (2014), “Kiva", available at: www.kiva.org/ (accessed March 2014).
Nuru (2008a). “Benchmarks to achieve proof of concept". available at: www.nuruinternationalorg/blog/
news/new-nuru-country-project—in—ethiopia/ (accessed March 2014).
Nuru (2008b), “The model", available at: www.nuruinternational.org/model/ (accessed March
2014).
Nuru (2008c). "Nuru international locations", available at: www.nuruinternational.org/Iocations/ethiopia/ (accessed 10 March 2014).
Nuru (2008d). “Our story". available at: www.nuruinternational.org/story/ (accessed 10 March
2014).
Nuru (2012). “Nuru international annual report", available at: annualreport.nuruinternational.org/
Nuru (2013a), “From Kenya to Ethiopia and beyond", available at: www.nuruinternational.org/story/(accessed 10 March 2014).
Nuru (2013b), “Introducing Nuru social enterprises”, available at: www.nuruinternational.org/blog/
nuru—sociaI-enterprises/nuru-rd-merges-with—social-enterprises/ (accessed 8 March 2014).
Nuru (2014a), "Kiva helps Nuru reach more farmers”, available at: www.nuruinternational.org/blog/
nuru-social-enterprises/kiva-helps-nuru-reach—more—farmers/ (accessed 10 March 2014).
Nuru (2014b). "Nuru Ethiopia's diversified loan package: food security and the agricultural foundations
for economic development", available at: www.nuruinternational.org/blog/uncategorized/nuru-
ethiopias-diversified-loan-package~food-security—and—the-agricuIturaI—foundations—for~economic-development] (accessed 5 March 2014).
OAF (2006), "One acre fund", available at: www.0neacrefundprg/ (accessed 10 March 2014).
OAF (2014), "Encouraging adoption of best planting practices in Burundi", available at: www.
oneacrefund.org/blogs/tag/burundi/118
Orton, S. (2014), "Personal Communication". (accessed 27 February 2014).
WorIdBank (2014a), “Ethiopia overview", available at: www.worldbanktorg/en/country/ethiopia/overview (accessed 7 March 2014).
WorldBank (2014b), “Kenya overview", available at: www.worldbank.org/en/country/kenya/overview(accessed 7 March 2014).
WorldBank (2014c). "Poverty estimates on Kenya and Ethiopia", available at: httpzl/iresearch.
wcrldbank.org/PovcalNet/index.htm?2
WorIdBank (2014d), “Rural population in Ethiopia". available at: wwwttradingeconomics.com/ethiopia/
rural-population-percent—of—total-population-wb-data.html
VOL. 4 NO. 8 2014 EMERALD EMERGING MARKETS CASE STUDIES PAGE 9
WorIdBank (2014e), “Small area poverty map of Kenya". available at: http://econ.worldbank.org/
WBSlTE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTPROGRAMS/EXTPOVRES/O.contentMDK:
20306724~menuPK2791412~pagePK264168182~piPK264168060——theSitePK:477894.00.html
Exhibit 1
Figure 51 Toverlii-lav-17.9.19...»Kéfiiiéféfieififhiééie.201 f)’
'
ll-leadcount ofpoor S US$1.25
L20 l Headcoum ofpoor 5 US$2.00ii l'lcadcount ol‘puor S US$8.00
l.00
ll
°0.80 »
a
d. |
c p0.60
0 0
" u0.40
I! l’
l
0.20
0
f 0.01)
Kenya Ethiopia
Note: *Latest data available for 20l0
Source: http://ircscarch.worldbank.org/Povcalth/indcx.htm?2,
(accessed March 2014)
Table El ["3"Poverty line (PPP$/month)
set at or below Headcount of poor No. ofpoor (mil/ion)
Country Year US$7.25/day s US$1.25 s US$1.25 Population (million)
Kenya 2010 38 0.43 15 35.61
Ethiopia 2010 38 0.81 25 82.95
Poverty line (PPP$/month)set at or below Headoount of poor Number of poor (mil/ion)
Country Year US$2.00/day s US$2.00 s US$2. 00 Population (million)
Kenya 2010 60.8 0.67 24 35.61
Ethiopia 2010 60.8 0.66 55 8295
Poverty line (PPP$/month)set at or below Headcount of poor Number of poor (million)
Country Year US$8.00/day s US$8.00 5 US$8.00 Population (mi/lion)
Kenya 2010 243.3 0.9753 35 35.61
Ethiopia 2010 243.3 0.9896 82 82.95
Note: 'Latest data available for 2010 add above source
Source: http://iresearch.worldbank.org/PovcalNet/index.htm?2. (accessed March 2014)
PAGE 10 EMERALD EMERGING MARKETS CASE STUDIES VOL. 4 N0. 8 2014
Exhibit 2
Figure E2 Nu' u’Intemati'onal,‘agricultural impact as of 2012’” ‘_'
'1'! . '2
Increasedyieldsfor 2.783 farmers
producing an approxirrme [oral of ES 744 bags (‘30 kg)
or 3937 mum: tonnes or rmizc;
Onowrage, lumen new in Nuru In via 2012 long rims
season expemnced .1 123% erld Increase
In cornmriscn min 30!! long mint yield;
WWWWWWWWinitiated 2013 mg rains season through larmk recruitment
events and him inpuls'mm, putting the Agrltullure
Magma-n on"3:1: to mac: the mleaom or distributingagricultural loansto 4,500 farmers Outing
2013 [mg ram
Source: Nuru (2012)
i‘
'
Damaged :- model to determinemat wrlh a 12394 yield
Note:** A shifl inthe average maize yield increase (from 123 to [18 per cent) 01'
Num fanners compared to non-Nuru farmers had been observed attributed to
slightly revised measurement tools deployed by Nuru International
New farmers averaged 12.9bags(oathweighing 90 kgi per acre In 2012 long ram; season
cemoatod l0 5 8
'bagsper acre in 2011 long rams season
Increase for 2012. Nuru tanner: two the potential to
increasetheir gross income by 135%(IEl/inue’m‘nm cos: cl [arm mputs! compared tome
income oi non-Hum Inn-nee; on average per aria oi
mam firmed
.ml
it. December 31 7012 acmmda
96.80% agriculture loan repayment.
Table Ell
Yield 2012 2017
Non Nuru farmers
Nuru farmers
Note: '1 acre = 0.404686 hectare
Source: Nuru (2012)
7.37 bags/acre
(2.98 bags/hectare“)12.95 bags/acre(5.24 bags/hectare")
7.01 bags/acre
(2.84 bags/hectare‘)5.81 bags/acre(2.35 bags/hectare‘)
Exhibit 3
Table EIII iiCicistl-iand'sizepfilon> raln‘c 9.93.“, ‘
Year Offering Total cost
2014 1 acre package with 1/2 acre maize, 1/4 acre millet 8,050ksh ($98)and 1/4 acre sorghum. limited distribution of this
same package at 2 acres
2013
2012 1, 2, or 3 acres of maize
1 or 2 acres of maize, limited 7,850ksh ($90)6.810ksh ($78)
Source: Interview with Sarah Orton. Executive Assistant, Nuru international, March 2014
VOL. 4 NO. 8 2014 EMERALD EMERGING MARKETS CASE STUDIES PAGE 11
Exhibit 4
Figure E3
PUBLIC SUPPORT AND REVENUES
I Donations & (imnts
ll’mgmm Rcvenuc
E Exchtmge Gains
EXPENSES
I Healthcurc Program
I Education Program
H Community liconumic Dev
I Agriculture Program
3 Leadership
D Monitoring & Evaluation
1-: IGA
1: IGA - Cusl offlootls Sold
Management and
Adininistmtivc
KENYA FINANCIAL INFORMA'I'ION
PUBLIC SUPPORT AN D REVENUES
Donations & Grants
Program Rfl‘CIIlIL'
Exchange Gains
854 464
Sill 324
4 R77
Total Revenue I 390 665
EXPENSE SUM MARY
I’mgmm SI’rI'iL-m
lictilthcare Program 3‘) 753
Education Program 31 tilt:
Cuminmity Economic Dev 23 982
Agriculmrc Program 112 558
Leadership IS 809
Monitoring at limitation 27 724
IGA 94 293
KM — (.‘usi uI‘thls Sold 562 2I9
'I'ulal Program Expenses 9ll l5-l
ASSETS
Management and Administmtn'r'
‘24
Total Functional Expenses I 096 978
Cash 185 927
Program Lin-m Rcccivuhlc.‘ It} 309
ngmm Imentories 448 $55
TolulCm1'enl.‘\sscls 73l [)9]
Fixed Assets 538 435
Olhcr Long Term Asscls 16 208
TnInl Asst-Lt I 285 734
LIABILITIES AND EQUITY
Current thilhics 28 SI I
TtIIflI th Asscts (Unrestricitd) I 257 11‘:
Tolul liabilities and Net Assets 1 255 734
Change. in Mt Assets 293 (>88
lit-ginning Net Asses 96} 536
Ending NM ASSL‘IS I 257 224
Source: Nuru International, Annual Report (2012)
Corresponding author
Hristina Kostadinova Dzharova can be contacted at: [email protected]
PAGE 12 EMERALD EMERGING MARKETS CASE STUDIES VOL. 4 N0. 8 2014
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