Harvard Case - Propais: Striving for the Future of Micro-Franchising in Colombia
"Propais: Striving for the Future of Micro-Franchising in Colombia" Harvard business case study is written by Nunzia Auletta, Maria Helena Jaen, Nathalia Franco, Omar Cifuentes. It deals with the challenges in the field of Entrepreneurship. The case study is 17 page(s) long and it was first published on : Sep 6, 2021
At Fern Fort University, we recommend Propais pursue a strategic growth plan focused on business model innovation and disruptive innovation within the Colombian micro-franchising landscape. This plan should prioritize technology and analytics to enhance operational efficiency, market segmentation for targeted expansion, and entrepreneurial financing to empower aspiring entrepreneurs.
2. Background
Propais, a Colombian company, operates in the micro-franchising sector, offering low-cost, scalable business models to aspiring entrepreneurs. Founded by Juan David, the company has experienced significant growth, but faces challenges in scaling its operations and navigating the complex Colombian market.
The case study highlights Juan David?s ambition to expand Propais nationally and potentially internationally, while ensuring the sustainability and success of its franchisees.
3. Analysis of the Case Study
Strategic Framework: Porter?s Five Forces analysis provides a comprehensive understanding of the competitive landscape:
- Threat of New Entrants: High, due to the low barriers to entry in the micro-franchising sector.
- Bargaining Power of Buyers: Moderate, as franchisees have choices but are reliant on Propais for support.
- Bargaining Power of Suppliers: Low, as Propais works with numerous suppliers.
- Threat of Substitutes: Moderate, as other business opportunities exist for aspiring entrepreneurs.
- Competitive Rivalry: High, as the micro-franchising sector is fragmented with numerous players.
Key Challenges:
- Scaling Operations: Propais needs to develop a scalable model to manage franchisee growth and ensure consistent quality.
- Market Segmentation: Identifying and targeting specific market segments will be crucial for effective expansion.
- Financial Sustainability: Propais needs to secure funding to support its growth and provide adequate support to franchisees.
- Technology Adoption: Leveraging technology and analytics can improve operational efficiency, streamline processes, and enhance franchisee support.
4. Recommendations
1. Business Model Innovation:
- Develop a Technology-Driven Platform: Implement a comprehensive digital platform for franchisee management, including training, communication, inventory management, and performance tracking. This will enhance operational efficiency, reduce costs, and improve franchisee satisfaction.
- Optimize Franchisee Selection and Training: Implement a robust selection process to identify entrepreneurs with the right skills and motivation. Develop comprehensive training programs that equip franchisees with the knowledge and tools for success.
- Focus on Scalable Business Models: Prioritize micro-franchises with low startup costs, high profit margins, and minimal ongoing expenses. This will attract a wider pool of potential franchisees and ensure sustainable growth.
2. Disruptive Innovation:
- Develop Innovative Micro-Franchise Concepts: Explore new, disruptive micro-franchise models that address emerging market needs and leverage technology. This could include online-based businesses, mobile services, or innovative product offerings.
- Partnerships for Growth: Collaborate with other organizations, such as NGOs, government agencies, or educational institutions, to reach new markets and provide support to aspiring entrepreneurs.
3. Entrepreneurial Financing:
- Develop a Micro-Financing Program: Offer affordable financing options to franchisees, including loan programs, equity investments, or crowdfunding platforms. This will lower the barrier to entry and enable entrepreneurs to access capital.
- Partnerships with Financial Institutions: Collaborate with banks, microfinance institutions, or venture capital firms to provide financial support to franchisees.
4. Market Segmentation:
- Identify Target Market Segments: Conduct thorough market research to identify specific market segments with high potential for micro-franchising. This could include rural communities, women entrepreneurs, or youth with limited employment opportunities.
- Tailored Marketing Strategies: Develop targeted marketing campaigns that resonate with each identified market segment. This could involve leveraging social media, community outreach programs, or partnerships with local organizations.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies: Propais?s expertise in micro-franchising and its commitment to empowering entrepreneurs are key strengths. These recommendations leverage these strengths and enhance them through technology and innovation.
- External Customers: The recommendations focus on attracting and supporting franchisees by addressing their needs for affordable financing, comprehensive training, and technology-driven support.
- Competitors: Propais needs to differentiate itself from competitors by offering innovative business models, targeted market segmentation, and a strong focus on technology.
- Attractiveness: The recommendations are expected to increase franchisee satisfaction, improve operational efficiency, and drive sustainable growth, leading to increased profitability and market share.
6. Conclusion
Propais has the potential to become a leading player in the Colombian micro-franchising sector by embracing a strategy of business model innovation and disruptive innovation. By leveraging technology, focusing on market segmentation, and providing access to entrepreneurial financing, Propais can empower aspiring entrepreneurs and contribute to the economic development of Colombia.
7. Discussion
Alternatives:
- Maintaining the current business model: This approach carries a high risk of falling behind competitors who are embracing innovation and technology.
- Focusing solely on international expansion: This could be premature without first establishing a strong foundation in the Colombian market.
Risks:
- Technology adoption: Implementing a technology-driven platform requires significant investment and expertise.
- Market segmentation: Identifying and targeting the right market segments requires thorough research and analysis.
- Financial sustainability: Providing financing to franchisees carries inherent risks.
Key Assumptions:
- The Colombian micro-franchising market will continue to grow.
- Propais can successfully implement its technology-driven platform.
- Franchisees will be receptive to the new business models and financing options.
8. Next Steps
Timeline:
- Year 1: Develop and implement the technology-driven platform, launch innovative micro-franchise concepts, and pilot the micro-financing program.
- Year 2: Expand into new market segments, refine the franchisee selection and training process, and secure partnerships with financial institutions.
- Year 3: Evaluate the success of the growth strategy and adjust as needed.
By following these recommendations, Propais can achieve its goal of becoming a leading player in the Colombian micro-franchising sector and contribute to the economic empowerment of aspiring entrepreneurs.
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Case Description
Propais is a non-profit organization founded in 1994 in Bogota by the public and private sectors and supported by 76 partner organizations. In October 2018, Maria Lucia Castrillon, general manager of Propais, was concerned about the future of the micro-franchising project (MFP) that had been active since 2012. The MFP was core to Propaís's mission of promoting "the development of micro and small businesses through strategic work, carried out jointly by public and private agents". It promoted the creation of 70 new enterprises that generated 350 direct jobs and produced over USD 1 million in annual sales. The IDB-MIF, a co-financer of the project with a total investment of USD 2,540,150, had recently announced its decision to withdraw in May 2019, generating great uncertainty about future feasibility. Propais had invested time and money to become a reference point in franchise structuring. Without MFP support both franchisers and franchisees could lose the opportunity to do business, and the potential would be lost to create five direct jobs at each franchise. Two options to keep the project going were: 1. Propaís could continue to manage the project but would need new financial resources from donors and investors, and 2. Propais could transfer its knowledge and processes to its partners (such as the Ministry of Commerce, Medellin Chamber of Commerce, private foundations or companies) so that they could in turn scale up the micro-franchise model. However, both options implied a long negotiation process and IDB-MIF support would end in just seven months. Moreover, Propais did not have enough resources to support the project alone during a transition.
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