Harvard Case - Ten Thousand Villages of Cincinnati: The First Year and Beyond
"Ten Thousand Villages of Cincinnati: The First Year and Beyond" Harvard business case study is written by Mary Conway Dato-on. It deals with the challenges in the field of Entrepreneurship. The case study is 15 page(s) long and it was first published on : May 31, 2010
At Fern Fort University, we recommend that Ten Thousand Villages of Cincinnati (TTVC) focus on a multi-pronged strategy for sustainable growth. This includes: * Expanding product offerings and channels: TTVC should diversify its product portfolio beyond fair trade items, explore new online sales channels, and potentially consider partnerships with other retailers. * Optimizing operations and financial management: TTVC should implement activity-based costing to better understand product profitability, improve inventory management, and explore debt financing options for expansion.* Strengthening brand awareness and community engagement: TTVC should invest in marketing initiatives to increase customer awareness of its mission and products, while fostering stronger relationships with local communities.
2. Background
Ten Thousand Villages of Cincinnati is a non-profit organization that operates a retail store selling fair trade products from developing countries. The case study focuses on TTVC?s first year of operation, facing challenges in achieving profitability and building a sustainable business model. The main protagonists are the Board of Directors, led by the President, and the Executive Director, who are responsible for navigating the organization?s growth and financial stability.
3. Analysis of the Case Study
This case study presents a classic challenge faced by many non-profit organizations: balancing social mission with financial sustainability. To analyze TTVC?s situation, we can utilize a framework that considers both financial performance and social impact.
Financial Analysis:
- Profitability: TTVC?s initial financial performance is below expectations, with a low profit margin and a high cost of goods sold. This suggests a need for a more strategic approach to pricing, inventory management, and cost control.
- Cash Flow: TTVC faces challenges in managing cash flow, particularly during the initial phase. This highlights the importance of developing a robust cash flow forecasting model and exploring financing options to bridge any shortfalls.
- Capital Structure: TTVC relies heavily on donations and grants, which creates a volatile financial base. Exploring alternative financing options, such as debt financing, could provide a more stable and predictable revenue stream.
Social Impact Analysis:
- Mission Alignment: TTVC?s core mission is to promote fair trade and empower artisans in developing countries. This mission is commendable, but it needs to be balanced with the organization?s financial viability.
- Community Engagement: TTVC has built strong relationships with local communities, but needs to further leverage this engagement for increased customer awareness and sales.
- Product Differentiation: TTVC?s product selection focuses solely on fair trade items, which limits its market reach. Expanding the product portfolio to include complementary items could attract a wider customer base.
4. Recommendations
1. Expand Product Offerings and Channels:
- Diversify Product Portfolio: TTVC should consider adding a curated selection of non-fair trade items that complement its existing offerings, such as home decor, gifts, and accessories. This will broaden its appeal to a wider customer base without compromising its commitment to fair trade.
- Explore Online Sales Channels: TTVC should establish a strong online presence through an e-commerce website and utilize platforms like Etsy and Amazon to reach a wider audience. This will allow them to tap into a larger market and reduce reliance on brick-and-mortar sales.
- Strategic Partnerships: TTVC should explore partnerships with other retailers, such as boutiques or gift shops, to expand its reach and access new customer segments. This can be achieved through consignment arrangements, joint promotions, or co-branding initiatives.
2. Optimize Operations and Financial Management:
- Activity-Based Costing (ABC): TTVC should implement ABC to accurately assess the profitability of different product lines and identify areas for cost optimization. This will allow them to make informed decisions about pricing, inventory management, and product sourcing.
- Inventory Management: TTVC should improve its inventory management practices to minimize waste and optimize stock levels. This can be achieved through implementing a just-in-time inventory system, utilizing technology for inventory tracking, and collaborating with suppliers to ensure timely deliveries.
- Debt Financing: TTVC should explore debt financing options to fund expansion initiatives and improve its financial stability. This could involve obtaining a loan from a local bank or seeking grants from organizations that support fair trade businesses.
3. Strengthen Brand Awareness and Community Engagement:
- Marketing Initiatives: TTVC should invest in marketing campaigns to increase customer awareness of its mission, products, and brand. This can include online advertising, social media marketing, email campaigns, and public relations outreach.
- Community Engagement: TTVC should build stronger relationships with local communities through events, workshops, and collaborations with local organizations. This will create a sense of ownership and loyalty among customers.
- Partnerships with Local Businesses: TTVC should seek partnerships with local businesses, such as cafes, restaurants, or art galleries, to promote its products and generate cross-promotional opportunities.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of TTVC?s financial performance, social impact, and competitive landscape. They consider the following factors:
- Core Competencies and Mission Consistency: The recommendations align with TTVC?s core mission of promoting fair trade and empowering artisans, while also ensuring financial sustainability.
- External Customers and Internal Clients: The recommendations cater to the needs of both external customers seeking unique and ethical products and internal clients, including the Board of Directors and staff, who are committed to the organization?s mission.
- Competitors: The recommendations take into account the competitive landscape, including online retailers and other fair trade organizations, and aim to differentiate TTVC through its unique product offerings, community engagement, and commitment to social impact.
- Attractiveness: The recommendations are expected to enhance TTVC?s profitability and financial stability, as evidenced by the potential for increased sales, improved cost control, and access to new financing options.
6. Conclusion
By implementing these recommendations, Ten Thousand Villages of Cincinnati can achieve a balance between its social mission and financial sustainability. The organization can expand its reach, optimize its operations, and build a stronger brand presence, ultimately creating a more resilient and impactful business model.
7. Discussion
Alternatives:
- Focusing solely on fair trade products: While this aligns with TTVC?s mission, it could limit market reach and profitability.
- Expanding solely through online channels: This could alienate existing customers who prefer in-store shopping experiences.
- Seeking a strategic partnership with a larger organization: This could provide access to resources and expertise but could also compromise TTVC?s autonomy and mission.
Risks and Key Assumptions:
- Market acceptance of expanded product offerings: There is a risk that customers may not be receptive to non-fair trade items.
- Success of online sales channels: The online market is competitive, and TTVC needs to invest in effective marketing and customer service strategies.
- Availability of debt financing: Securing a loan may be challenging, particularly for a non-profit organization.
Options Grid:
| Option | Benefits | Risks | Assumptions |
|---|---|---|---|
| Expand product offerings | Increased market reach, higher sales | Customer resistance to non-fair trade items | Customers will be receptive to the new product mix |
| Explore online sales channels | Wider audience, lower overhead costs | Competitive online market, need for marketing investment | Online sales will be profitable and sustainable |
| Seek debt financing | Improved financial stability, access to capital | Interest payments, debt burden | Loan approval, ability to repay debt |
8. Next Steps
- Phase 1 (Months 1-6):
- Implement activity-based costing to assess product profitability.
- Develop a strategic plan for expanding product offerings and channels.
- Begin exploring debt financing options.
- Launch a marketing campaign to increase brand awareness.
- Phase 2 (Months 7-12):
- Implement inventory management improvements.
- Launch online sales channels.
- Seek partnerships with local businesses.
- Evaluate the success of marketing initiatives and adjust as needed.
- Phase 3 (Months 13-18):
- Secure debt financing if feasible.
- Expand product offerings and channels based on initial results.
- Continue building community engagement and partnerships.
- Monitor financial performance and adjust strategies as needed.
By following these steps, Ten Thousand Villages of Cincinnati can build a sustainable and impactful business model that balances its social mission with financial success.
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Case Description
Ten Thousand Villages (TTV) is a nonprofit fair trade retail organization with a store located in Cincinnati, Ohio. During the store's opening and first two years of operations (2002-2004), Karen, the chair of the board of directors, and Cheryl, the store manager, struggle to develop a customer-focused plan to ensure sales increases for their unique operation. Marketing issues ranging from store location selection to inventory selection and promotion are presented. In addition to covering an alternative method of doing business - nonprofit enterprise - the case provides a platform for customer relationship management (CRM) implementation in a small, nonprofit environment.
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