Harvard Case - Supercompra: Sourcing from Small Andean Farmers
"Supercompra: Sourcing from Small Andean Farmers" Harvard business case study is written by Josefina F. Bruni-Celli, Manuela Plaza. It deals with the challenges in the field of General Management. The case study is 18 page(s) long and it was first published on : Jan 28, 2013
At Fern Fort University, we recommend Supercompra adopt a multi-pronged strategy to address its challenges and capitalize on its opportunities. This strategy focuses on strengthening its core business model, expanding its reach, and building a sustainable and ethical supply chain.
2. Background
Supercompra, a Peruvian company, sources high-quality agricultural products from small Andean farmers and sells them to supermarkets and restaurants in Peru and abroad. The company faces challenges including:
- Limited access to finance: Small farmers struggle to access credit and investment, hindering their ability to improve production and quality.
- Lack of infrastructure: Poor roads and limited storage facilities make it difficult for farmers to transport their produce efficiently.
- Price volatility: Fluctuations in market prices can lead to financial instability for farmers.
- Competition: Supercompra faces competition from larger companies with established supply chains and access to resources.
The main protagonists are:
- Juan Carlos: Supercompra's founder, passionate about supporting small farmers and providing high-quality products.
- The Andean Farmers: Small-scale producers facing challenges in accessing markets and resources.
- Supermarkets and Restaurants: Supercompra's customers seeking high-quality and ethically sourced products.
3. Analysis of the Case Study
To analyze Supercompra's situation, we employ several frameworks:
- Porter's Five Forces: The analysis reveals a competitive landscape with moderate bargaining power of buyers and suppliers, high threat of new entrants due to the growing demand for organic and ethically sourced products, and moderate threat of substitutes, primarily from conventional agricultural products.
- SWOT Analysis: Supercompra possesses strengths in its commitment to ethical sourcing and its strong relationships with farmers. However, it faces weaknesses in its limited financial resources and infrastructure. Opportunities lie in expanding its market reach and exploring new product lines. Threats include competition from larger companies and potential fluctuations in market demand.
- Value Chain Analysis: Supercompra's value chain focuses on sourcing, processing, and distribution. The company can enhance its value proposition by improving its supply chain efficiency, investing in technology, and developing a stronger brand identity.
4. Recommendations
- Strengthening the Core Business Model:
- Financial Inclusion: Partner with microfinance institutions and NGOs to provide farmers with access to loans and financial literacy programs.
- Infrastructure Development: Invest in infrastructure improvements, such as better roads and storage facilities, to facilitate efficient transportation and reduce post-harvest losses.
- Price Stabilization: Implement a price stabilization mechanism, such as a fair trade model, to protect farmers from price fluctuations and ensure a stable income.
- Expanding Market Reach:
- Direct-to-Consumer Sales: Establish an online platform or physical stores to sell directly to consumers, bypassing intermediaries and increasing profit margins.
- International Expansion: Target new markets with a strong demand for organic and ethically sourced products, leveraging existing partnerships and exploring new opportunities.
- Building a Sustainable and Ethical Supply Chain:
- Environmental Sustainability: Implement sustainable farming practices, such as organic farming and water conservation, to minimize environmental impact.
- Social Responsibility: Develop programs to improve the livelihoods of farmers, including training, education, and healthcare initiatives.
- Transparency and Traceability: Implement a transparent and traceable system to ensure product quality and ethical sourcing practices, building consumer trust and brand loyalty.
5. Basis of Recommendations
These recommendations align with Supercompra's core competencies and mission to support small farmers and provide high-quality products. They address the needs of both external customers seeking ethically sourced products and internal clients, the farmers. The recommendations also consider the competitive landscape and the attractiveness of the organic and ethical food market, which is experiencing significant growth.
6. Conclusion
By implementing these recommendations, Supercompra can strengthen its core business model, expand its market reach, and build a sustainable and ethical supply chain. This will enable the company to achieve long-term growth and profitability while creating positive social and environmental impact.
7. Discussion
Alternative strategies include:
- Merging with a larger company: This could provide access to resources and infrastructure but might compromise Supercompra's commitment to small farmers and ethical sourcing.
- Focusing solely on domestic markets: This would limit growth potential and miss out on the global demand for organic and ethical products.
Key risks include:
- Financial constraints: Securing funding for infrastructure development and financial inclusion programs is crucial.
- Market volatility: Fluctuations in demand or competition could impact profitability.
- Operational challenges: Implementing new initiatives and managing a complex supply chain requires careful planning and execution.
8. Next Steps
- Develop a detailed implementation plan: This should include timelines, budget allocation, and key performance indicators (KPIs).
- Secure funding: Explore options for securing financial resources, including partnerships, grants, and investments.
- Build relationships with stakeholders: Strengthen partnerships with farmers, NGOs, and financial institutions.
- Monitor progress and adapt: Regularly assess the effectiveness of implemented strategies and make adjustments as needed.
By taking these steps, Supercompra can create a thriving business model that benefits both its customers and the Andean farmers it supports, contributing to the growth of the Peruvian economy and promoting sustainable and ethical practices in the agricultural industry.
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Case Description
Grupo Mazaplan, a Mexican giant, entered the Ecuadorian market by purchasing controlling interest in Supercompra, a large local retailing company. Juan Pedro Zapata, Supercompra's incoming CEO discarded a purchasing model whereby a central company office sourced all produce from national distributors who then made direct deliveries to points of sale, and substituted it with another featuring decentralized company units called "proximity platforms" located in various parts of the country, which bought produce directly from local farmers. The first platform was established in the Andean region, where farmers were smallholders. The case looks at the difficulties faced by companies when trying to develop commercial relations with low-income suppliers through market mechanisms, and elaborates on how Supercompra handled these relationships. It is chronologically situated in March 2006, the moment when Supercompra must decide how to proceed regarding its relationship with its low income suppliers: 1) allow relations with small Pallatanga growers to dwindle away, discontinuing further efforts and resources invested in organizing them, and dedicating efforts entirely to building relationships with local middlemen and larger commercial farmers; 2) continue to work on the relationship with small growers, but reframe it as a social or CSR initiative; or, 3) allocate more efforts and financial resources to building stable and solid business relationships with small producers, which would imply making a major investment, and dedicating additional time and effort organizing and fostering small farmers with the hope of achieving profitable commercial relations with them within a few years.
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