Harvard Case - The Social Economy and the Traditional Market: The Dilemma of Justa Trama
"The Social Economy and the Traditional Market: The Dilemma of Justa Trama" Harvard business case study is written by Carolina Turcato, Luciano Barin-Cruz. It deals with the challenges in the field of General Management. The case study is 20 page(s) long and it was first published on : Jun 18, 2013
At Fern Fort University, we recommend Justa Trama adopt a hybrid model combining its social mission with a commercially viable business strategy. This approach involves leveraging its existing strengths in fair trade and sustainable practices while strategically expanding into new markets and product lines. By embracing innovation, fostering strategic partnerships, and implementing a robust marketing strategy, Justa Trama can achieve sustainable growth and positive social impact.
2. Background
Justa Trama is a non-profit organization operating in Guatemala, dedicated to promoting fair trade and sustainable practices in the textile industry. They face a dilemma: balancing their social mission of empowering marginalized artisans with the need to generate sufficient revenue for long-term sustainability. The organization currently struggles with limited resources, fluctuating demand, and competition from larger, more established companies.
The main protagonists are:
- Maria Eugenia L'pez: The founder and director of Justa Trama, passionate about social justice and committed to empowering artisans.
- The artisans: Skilled weavers and artisans who rely on Justa Trama for income and a platform to showcase their craft.
- The Board of Directors: Responsible for overseeing the organization's strategic direction and financial stability.
3. Analysis of the Case Study
To analyze Justa Trama's situation, we can utilize a combination of frameworks:
1. SWOT Analysis:
- Strengths: Strong social mission, skilled artisans, unique product offerings, established reputation for quality and ethical practices.
- Weaknesses: Limited resources, fluctuating demand, lack of marketing expertise, dependence on a single market.
- Opportunities: Growing demand for ethically sourced products, potential for expanding into new markets, collaboration with international brands, leveraging technology for marketing and distribution.
- Threats: Competition from larger companies, fluctuations in raw material prices, changing consumer preferences, economic instability in Guatemala.
2. Porter's Five Forces:
- Threat of New Entrants: Relatively low, due to the specialized nature of the craft and the social mission focus.
- Bargaining Power of Buyers: Moderate, as consumers are increasingly conscious of ethical sourcing but may be price-sensitive.
- Bargaining Power of Suppliers: Low, as Justa Trama sources materials from local artisans, fostering a strong relationship.
- Threat of Substitutes: Moderate, with alternatives like mass-produced textiles and synthetic fabrics.
- Competitive Rivalry: High, with competition from other fair trade organizations and larger companies offering similar products.
3. Strategic Analysis:
Justa Trama's current strategy is primarily focused on social impact, neglecting the need for a robust business model. This leads to financial instability and limits their ability to scale their operations.
4. Financial Analysis:
The case study doesn't provide detailed financial data, but it highlights the need for Justa Trama to increase revenue and manage costs effectively. This can be achieved through strategic pricing, efficient operations, and exploring new revenue streams.
4. Recommendations
To address Justa Trama's dilemma, we recommend the following:
1. Hybrid Business Model:
- Social Mission: Maintain their commitment to fair trade and sustainable practices, empowering artisans and contributing to the local economy.
- Commercial Viability: Develop a commercially viable business model with a clear focus on profitability. This involves identifying target markets, developing a competitive pricing strategy, and exploring new revenue streams.
2. Market Expansion:
- New Markets: Explore new markets beyond Guatemala, targeting consumers who value ethical and sustainable products. This could include online platforms, international retailers, and collaborations with NGOs and social enterprises.
- Product Diversification: Expand their product portfolio beyond traditional textiles, exploring new product lines like home decor, accessories, and sustainable fashion.
3. Strategic Partnerships:
- International Brands: Collaborate with international brands interested in incorporating ethically sourced materials and promoting social responsibility.
- NGOs and Social Enterprises: Partner with organizations aligned with their mission to leverage resources, expand reach, and create joint ventures.
4. Innovation and Technology:
- Digital Marketing: Invest in digital marketing strategies to reach a wider audience, including social media marketing, online marketplaces, and e-commerce platforms.
- Technology Adoption: Explore new technologies like AI and machine learning for production optimization, inventory management, and supply chain efficiency.
5. Organizational Development:
- Leadership Development: Invest in training and development programs for leadership and management to enhance their business acumen and strategic thinking.
- Team Building: Foster a collaborative and innovative work environment by promoting team building activities and encouraging open communication.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations align with Justa Trama's core competencies in fair trade and sustainable practices while ensuring long-term financial viability.
- External Customers and Internal Clients: The recommendations consider the needs of both external customers seeking ethical products and internal clients, the artisans, who rely on Justa Trama for income.
- Competitors: The recommendations address the competitive landscape by exploring new markets, diversifying product offerings, and leveraging technology to gain a competitive edge.
- Attractiveness: The recommendations are expected to generate positive financial returns through increased revenue, improved efficiency, and expanded market reach.
- Assumptions: The recommendations assume a growing demand for ethically sourced products, the availability of skilled artisans, and the willingness of Justa Trama to embrace innovation and adapt to changing market dynamics.
6. Conclusion
By embracing a hybrid business model, expanding into new markets, fostering strategic partnerships, and leveraging technology, Justa Trama can achieve both social impact and financial sustainability. This approach will empower artisans, create economic opportunities, and contribute to a more sustainable and ethical textile industry.
7. Discussion
Other alternatives not selected include:
- Focusing solely on social impact: This approach would prioritize the social mission but could lead to financial instability and limit the organization's ability to scale.
- Merging with a larger company: This option could provide access to resources and expertise but could compromise Justa Trama's independence and social mission.
Risks and Key Assumptions:
- Market demand: The success of the hybrid model relies on a sustained demand for ethically sourced products.
- Competition: The market is becoming increasingly competitive, requiring Justa Trama to continuously innovate and adapt.
- Financial resources: Implementing the recommendations requires sufficient financial resources, which may necessitate securing additional funding or investment.
8. Next Steps
To implement these recommendations, Justa Trama should:
- Develop a detailed business plan: outlining the hybrid model, market expansion strategy, and financial projections.
- Secure funding: explore grant opportunities, impact investments, and partnerships with socially responsible investors.
- Build a strong marketing team: with expertise in digital marketing, branding, and market research.
- Invest in technology: adopt new technologies for production optimization, inventory management, and customer relationship management.
- Develop a clear communication strategy: to effectively communicate their mission and value proposition to stakeholders.
By taking these steps, Justa Trama can navigate the dilemma of the social economy and the traditional market, achieving sustainable growth while remaining true to its social mission.
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Case Description
This case is about Justa Trama, a network created in 2005 in Porto Alegre, Brazil, composed of six organizations working in different fields across Brazil. The network involves a complete production chain of clothing and accessories made from organic cotton, from planting to the consumer. This network employs more than 700 workers and its primary goal is the elimination of all intermediaries in the production and commercialization process. The main dilemma is how to reconcile the different members' views on the commercialization process by creating alternative strategies to grow and increase profit without compromising the social economy principles.
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