Group 13

Harsh Vardhan, 1211342

Gaurav Singh Dharmshaktu, 1211185

11th November 2013

Submitted to Prof. P. D. Jose

Corporate Strategy and the Environment

Term V, PGP 2012-2014

Indian Institute of Management, Bangalore

A refreshingly different “ethical” product

The Like-For-Like Business ModelDuncan Goose’s innovative model leverages ethical appeal to channel wealth between markets.

Business Model Issues & Challenges Business Expansion Recommendations Appendix

Like-For-Like Business Model Abstraction

Plowback Ratio Profit

Product Markets

Wealth MarketsNeed Markets

Project Focus Revenue Drivers

Business Model Details

Establish relationshipsacross the value chain:Sourcing, Manufacturing,Marketing & Distribution.

Partner with NGOs in theneed market and leveragetheir expertise in creatingproducts or solutions.

Value Chain Partnerships

Business Partners

Investment

NGO Partners

Causes or Needs

Retail sale of the product Preferred sale contracts CSR initiatives of firms

Likeness or Synonymy

Project Assessment Cost Drivers

Key Success Factors

Production and Distribution Non pro bono employees Marketing and advertisingspend in commodity markets

Choice of Geography Choice of NGO partners Product-Need synonymy

Monitoring of NGO work Defining key metrics to measure performance Investment efficiency

The model strategically chooses, manufactures and sells a product in a developed market, with a key differentiation that acertain percentage of the profit is channeled into solving a resonating problem in an underdeveloped market or geography. Key NGO partners with requisite expertise receive the investments and are responsible for developing andimplementing solutions for the targeted problem. In case of ONE water, this was solving drinking water crises in Africa.

Business & NGO Partnerships: Partnerships with businesses throughout the value chain is cardinal. With Radnor’smanufacturing & operational support and Roundabout’s expertise, ONE was able to create a footing in a crowded market Low Costs: By keeping low costs, products can be sold at thin margins, subsequently leading to a larger market share.

Present Issues & Challenges before ONE WaterBusiness model inconsistencies & scalability issues pose a significant growth challenge.

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Monitoring NGO Partners: Global Ethicsdoesn’t have a system in place to monitor howthe NGO’s carry out their work and whetherthe capital infused by ONE is indeed efficient.

Performance Measurement: The model lacksthe means to quantify the quality and amountof work done at each process level. This alsoleads to inefficient resource utilization.

Threat of Backward & Forward Integration:What is stopping Roundabout from selling itsown brand of water? What is stopping Radnorfrom partnering with an NGO on its own?

Pro Bono Volunteer Model: The currentvolunteer model is highly unsustainable in thelonger run. Stakeholders invest time & moneybut get low or even nil returns. Thestakeholders’ ability to volunteer can changeovernight in face of a poor bottom-lineperformance or worse a business crisis.

ONE needs to implement business purposerestructuring in the need market in order to beable to monitor the work done by NGOs. Fundsneed to be allocated based on efficiency.

ONE will need to develop key performancemetrics (such as no. of pumps installed or no.of people benefited) and report it on a weeklyor monthly basis to all stakeholders involved.

Stellar brand value, recognition from customersand communication of accomplishments will helpONE create a loyal customer base, thwartingbackward & forward integrations in the chain.

ONE needs to move away from relying oncharity work and focus on building anorganization with contractual business & NGOpartnerships. To achieve robustness ONE willalso have to do away with the policy ofplowing back 100% of profits. With a lowerplowback, ONE can acquire for-profit partners.

Business Model Issues & Challenges Recommendations Appendix

Issues at hand

Business ExpansionBusiness Model Issues & Challenges Business Expansion Recommendations Appendix

Scale

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es Ability of Partners & NGOs to Scale up: With

ONE’s rapid growth, the ability of partners,whether Radnor or Roundabout, to increasetheir capacities is a major concern for ONE.

Cost Management: Growing business willincrease average costs in the form of increasingsalaries, more investment in infrastructure,marketing & advertising expenditure, etc.

Availability of the Product: The presence ofthe product on retail shelves is all-important.While the consumer might be willing to makethe ethical choice, product availability is critical.

Differentiation: Apart from an ethicalappeal, what differentiates ONE water? Thereare many imitators in the market who areinterested in social causes. So how can GlobalEthics make a unique offering or a uniquevalue proposition to its customers?

Diversify the set of value chain partners. Bycreating a pool of business partners & NGOpartners, ONE will be able to match its growth orlack thereof by accessing the pool on-demand.

ONE needs to rethink its pricing policy forproducts. A minimum margin needs to bedefined. Targeting different segments of themarket will also help improve overall margins.

Build newer partnerships leveraging ONE’sstellar brand image and target strongdistribution network companies that areinterested in investing in CSR activities.

ONE needs to significantly increase itsadvertising spend on communicating itsunique ideology. It also needs to expand itsproduct line, cutting into other segmentsrelated to water, such as juices, flavored water,etc.

Business Model Issues & Challenges Business Expansion Recommendations AppendixT

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Present Issues & Challenges before ONE WaterBusiness model inconsistencies & scalability issues pose a significant growth challenge.

Tactics to address themIssues at hand

Business Expansion and Model ImprovementsPartnership development and professional management are critical for sustainable growth.

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Business Partnerships: To expand market share, Global Ethics should partner withhypermarkets, establish sales outlets at Railway & Bus stations & enter into contracts withairport authorities and sports complexes. Similarly, ONE should acquire a pool of bottled watermanufacturers, marketers and distributers whose CSR objectives resonate with Global Ethics.

NGO Partnerships: With multiple NGOs, ONE can look at alternative solutions simultaneously.

Geographical Expansion: Global Ethics can target wealth markets other than UK, such as otherEuropean countries and United States. ONE will need new business partners in thosecountries. Similarly, ONE can also look beyond Africa as its need market (Ex: Middle East, Asia).

Product-Line Expansion: ONE can look beyond bottled water as a product. Other product-problem tuples could be (Condoms, HIV/AIDS) or (Credit Cards, Micro Finance), etc.

Full-Time Employees & For-Profit Partners: The best talent in the market might not be willingto work for free. As ONE grows it’ll need professional management and dedicated employees.Similarly, the most efficient business partners may have a significant profit objective.

Reduce Plowback Ratio: ONE needs to invest in growth. This investment can be raised bylowering the plowback ratio, which currently stands at a whopping 100%.

Conventional Product Pricing: A flexible pricing model not only leaves ONE at the mercy ofbuyers, but also drives away those who are more accustomed to conventional pricing systems.ONE needs to establish a pricing structure that allows a pre-decided charity margin,wherefrom negotiations with buyers can start from.

• To manage impending growth, ONE needs to acquire a pool of partners that can scale appropriately

Create a pool of business partners across sourcing, manufacturing, marketing & distribution functions

• Apart from being able to handle scale, multiple NGO partners will also enable ONE to look at morethan one solution to the target problem. Ex: ONE could work with NGOs specializing in water reuse.

Partner with multiple NGOs, with different interest or expertise areas, in the need markets

• With a proven concept, consider its application to other product-problem tuples: (Condoms,HIV/AIDS), (Credit Card, Micro Finance), (Bread, Wheat Grain), (Milk, Cattle/Dairy), etc.

• Tap into other wealth markets where the ethical appeal of the product will work. Ex: United States.

Expand business horizontally (geographically) as well as vertically (across product-lines)

• ONE needs to spend money for growth. This money can be raised from the total profit ONE makes.

• To reduce the risk of non-performance of partners, contract with for-profit institutions as well.

Reduce the plowback ratio & build a professional organization with for-profit employees and partners

• The original intention behind the name-your-price strategy was to onboard as many buyers aspossible. However, now that the brand can sell itself, ONE should attach minimum margins in allpricing negotiations. This will also help attract buyers who prefer conventional pricing.

Now with selling power, ignore pricing flexibility and demand greater margins from buyers

Summary of Recommended Course of ActionsWhile ONE needs a major overhaul to prepare for growth, partnerships, pricing & professionalism are key.

Business Model Issues & Challenges Business Expansion Recommendations Appendix

Option Analysis Additionality Assessment Portfolio Analysis Recommendations Appendix

Is the non-profit nature of ONE sustainable in the long-term? Is doing-good a good enough motive for partners to stick? Should ONE try to acquire its own manufacturing capabilities and free itself from its dependence on partners? Should ONE attempt to back-integrate and establish its own NGO arm to carry out its work in need markets?

Open Questions

Peeking into ONE’s Future (2007-2013)

ONE diversified its product-line by entering the flavored water & fruit juice segments. ONE has also started selling eggs, kitchen wrapping foil and toilet tissue papers. While focus has remained in Africa, ONE has expanded into Australia as well (working for the aboriginals). On 2nd Sep. 2013 ONE Water became the exclusive bottled water sold in Starbucks stores in the UK. ONE sponsors not just a Rugby club (Saracens), but also a full blown Rugby championship (World Club 7s). ONE defined its criteria of choosing need markets as those where 30% of the population lives below the extreme povertyline – less than $1.25 (PPP) per day. Unsurprisingly, imitators emerged in hordes, ranging from ‘O.N.E Water’ to ‘World One Water’. However, the ONEbrand has remained robust.

Appendix ItemsCollection of due diligence questions, observations and articles.

Miscellaneous Articles

Duncan Goose interviewed by Juliet Harrison in 2011 - http://www.emeraldinsight.com/journals.htm?articleid=1923653(paper accessible from IIM Bangalore) ONE’s current Product Line - http://onedifference.org/one-drinks/ & http://onedifference.org/other-ones/ Complete set of projects in progress in Africa - http://onedifference.org/projects/ ONE Water Australia - http://www.doonegoodthing.com.au/one-water ONE’s Newsfeed - http://onedifference.org/news

Business Model Issues & Challenges Business Expansion Recommendations Appendix