Harvard Case - Dharavi: Developing Asia's Largest Slum (A)
"Dharavi: Developing Asia's Largest Slum (A)" Harvard business case study is written by Lakshmi Iyer, John D. Macomber, Namrata Arora. It deals with the challenges in the field of Business & Government Relations. The case study is 26 page(s) long and it was first published on : Jul 21, 2009
At Fern Fort University, we recommend a multi-pronged approach to revitalize Dharavi, focusing on sustainable development, entrepreneurship, and community empowerment. This strategy involves a collaborative effort between the government, private sector, and local residents, leveraging public-private partnerships and foreign investment to create a thriving and inclusive ecosystem.
2. Background
Dharavi, a sprawling slum in Mumbai, India, is a microcosm of the challenges faced by developing countries. Despite its informal nature and lack of basic infrastructure, Dharavi is a vibrant hub of economic activity, home to a diverse population of entrepreneurs and micro-enterprises. However, the lack of sanitation, inadequate housing, and limited access to essential services pose significant threats to the well-being of its residents.
The case study highlights the complexities of Dharavi's situation, including the challenges of government policy and regulation, infrastructure and urban development, poverty, and environmental sustainability.
3. Analysis of the Case Study
The case study can be analyzed through the lens of various frameworks:
a) Porter's Five Forces:
- Threat of New Entrants: High due to the informal nature of Dharavi and the lack of significant barriers to entry.
- Bargaining Power of Buyers: Low, as residents have limited options for alternative housing and employment.
- Bargaining Power of Suppliers: High, as Dharavi relies on external suppliers for raw materials and essential services.
- Threat of Substitutes: Moderate, as some industries within Dharavi are susceptible to competition from more formal sectors.
- Competitive Rivalry: High, as competition for resources and customers is intense within the slum.
b) SWOT Analysis:
Strengths:
- Entrepreneurial spirit: Dharavi is a hub of small businesses and entrepreneurial activity.
- Resilience: Residents have demonstrated remarkable resilience in adapting to challenging conditions.
- Cultural diversity: The diverse population brings a wealth of skills and experiences.
- Economic potential: Dharavi's informal economy contributes significantly to Mumbai's overall economy.
Weaknesses:
- Lack of infrastructure: Inadequate sanitation, housing, and access to essential services.
- Informal economy: Limited access to formal financial services and legal protection.
- Environmental challenges: Pollution and waste management issues.
- Limited education and skills: Low literacy rates and lack of technical training.
Opportunities:
- Public-private partnerships: Collaboration between government, private sector, and residents can unlock potential.
- Foreign investment: Attracting foreign investment can bring in capital and expertise.
- Infrastructure development: Investing in sanitation, housing, and transportation can improve living conditions.
- Skill development: Providing training and education can empower residents and enhance their economic prospects.
Threats:
- Government policies: Unfavorable policies can hinder development and investment.
- Political instability: Political instability can disrupt economic activity and investment.
- Environmental regulations: Stringent regulations could force businesses to relocate or shut down.
- Competition from other developing countries: Dharavi faces competition from other emerging markets for investment and resources.
c) Stakeholder Analysis:
- Residents: The primary stakeholders with a vested interest in Dharavi's development.
- Government: Responsible for providing infrastructure, services, and regulation.
- Private sector: Potential investors, developers, and businesses seeking opportunities in Dharavi.
- NGOs: Organizations working on community development, poverty alleviation, and environmental sustainability.
- International organizations: Entities like the World Bank and UN agencies providing financial and technical support.
4. Recommendations
1. Sustainable Infrastructure Development:
- Public-private partnerships: Encourage partnerships between the government and private sector to invest in sanitation, water supply, and electricity infrastructure.
- Community involvement: Involve residents in the planning and implementation of infrastructure projects to ensure their needs are met and ownership is fostered.
- Green technologies: Promote environmentally friendly solutions, such as solar energy and waste management systems, to ensure long-term sustainability.
2. Entrepreneurship and Skill Development:
- Incubators and business support: Establish incubators and provide business training, financial assistance, and access to markets for micro-enterprises.
- Vocational training: Offer vocational training programs to equip residents with skills in demand in the formal economy.
- Microfinance initiatives: Provide access to microfinance loans and financial literacy programs to support small businesses.
3. Community Empowerment and Social Inclusion:
- Education and healthcare: Improve access to quality education and healthcare services for all residents.
- Community engagement: Facilitate community participation in decision-making processes to ensure local ownership and accountability.
- Social welfare programs: Implement social welfare programs to address poverty, unemployment, and other social issues.
4. Government Policy and Regulation:
- Streamlined regulations: Simplify and streamline regulations for businesses operating in Dharavi to encourage formalization and investment.
- Tax incentives: Offer tax incentives to businesses operating in Dharavi to encourage investment and job creation.
- Land tenure security: Provide clear land tenure rights to residents to encourage investment and improve living conditions.
5. Foreign Investment and International Collaboration:
- Investment promotion: Develop a comprehensive investment promotion strategy to attract foreign direct investment.
- International partnerships: Seek partnerships with international organizations, NGOs, and businesses to leverage expertise and resources.
- Transparency and accountability: Ensure transparency in all investment and development projects to build trust and attract long-term investment.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with the need for sustainable development, economic growth, and social inclusion.
- External customers and internal clients: The recommendations address the needs of residents, businesses, and the government.
- Competitors: The recommendations aim to create a competitive advantage for Dharavi by attracting investment and developing a skilled workforce.
- Attractiveness: The recommendations are expected to generate positive returns on investment, improve living conditions, and foster economic growth.
6. Conclusion
Revitalizing Dharavi requires a holistic approach that addresses the interconnected challenges of infrastructure, poverty, and social inclusion. By fostering public-private partnerships, promoting entrepreneurship, and empowering residents, Dharavi can become a model for sustainable development in developing countries.
7. Discussion
Other alternatives not selected include:
- Relocation: Relocating residents to new settlements, which could be disruptive and costly.
- Demolition and redevelopment: Demolishing existing structures and redeveloping the area, which could displace residents and destroy the existing informal economy.
Risks and key assumptions:
- Political instability: Political instability could disrupt development efforts and deter investment.
- Lack of government commitment: Lack of government commitment to the project could hinder its success.
- Resistance from residents: Some residents may resist change or have different priorities.
8. Next Steps
Timeline:
- Year 1: Develop a comprehensive master plan, establish public-private partnerships, and begin infrastructure development.
- Year 2-3: Implement skill development programs, establish business incubators, and attract foreign investment.
- Year 4-5: Monitor progress, evaluate impact, and adjust strategies as needed.
Key milestones:
- Secure funding: Secure funding from government, private sector, and international organizations.
- Establish partnerships: Establish strong partnerships with key stakeholders, including residents, businesses, and NGOs.
- Implement infrastructure projects: Complete infrastructure projects, including sanitation, water supply, and electricity.
- Create jobs: Create jobs through entrepreneurship and skill development programs.
- Improve living conditions: Improve living conditions for residents through access to housing, healthcare, and education.
By taking these steps, Dharavi can be transformed from a slum into a vibrant and sustainable community, showcasing the power of collaboration and innovation in addressing the challenges of developing countries.
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Case Description
Maharashtra state is accepting bids to redevelop Dharavi, the largest slum in Asia. A real estate developer assesses the risks and tenders a bid. The bid conditions include providing new free housing to tens of thousands of slum dwellers. The cost of constructing the housing is anticipated to be paid for from the revenues from developing and selling market-rate housing. While the primary concerns are cost of construction, cost of capital, and revenues from sale of units, the analysis must consider many aspects of risk, including political risk, foreign exchange risk, market risk, and execution risk. Further, the discussion covers social aspects, including whether the slum should be redeveloped at all, whether it should be redeveloped by government or by the private sector, and whether to accomplish it in large chunks or in smaller increments. Additional topics that can be covered include consideration of what happens to commercial activities formerly run from slum dwellings, whether the market-rate units will indeed sell for high prices if there are tens of thousands of former slum dwellers housed nearby, and whether the slum dwellers will be allowed to resell their units or whether they must remain in them. Other issues include timing of the project, guarantees to and from the government and the private parties to mitigate risk, and whether this model, if successful, can be extended to other slums in Asia.
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