Harvard Case - One Earth Designs: A "One Country, Two Systems" Model to Build a Social Business
"One Earth Designs: A "One Country, Two Systems" Model to Build a Social Business" Harvard business case study is written by Paul Forster, Christine Chow. It deals with the challenges in the field of International Business. The case study is 29 page(s) long and it was first published on : Apr 28, 2017
At Fern Fort University, we recommend that One Earth Designs (OED) pursue a phased internationalization strategy focused on leveraging its "One Country, Two Systems" model to build a sustainable social business. This strategy should prioritize building strong partnerships with local NGOs and governments in emerging markets, emphasizing environmental sustainability and community development. OED should focus on replicating its successful model in countries with similar socio-economic conditions and environmental challenges, utilizing a combination of direct investment, joint ventures, and strategic alliances to achieve sustainable growth.
2. Background
One Earth Designs (OED) is a social enterprise based in the Philippines that manufactures and distributes eco-friendly building materials made from recycled plastic waste. OED's mission is to provide affordable and sustainable housing solutions while addressing the growing problem of plastic pollution. The company's 'One Country, Two Systems' model combines commercial operations with social impact initiatives, empowering local communities through skills training and job creation.
The case study highlights OED's success in the Philippines and its ambition to expand internationally. The main protagonists are:
- Dr. Aileen Bautista: OED's founder and CEO, passionate about social entrepreneurship and environmental sustainability.
- OED's team: Dedicated team of employees committed to OED's mission and the success of its 'One Country, Two Systems' model.
- Local communities: Beneficiaries of OED's social impact initiatives, receiving skills training, employment opportunities, and access to affordable housing solutions.
3. Analysis of the Case Study
OED's success can be analyzed through the lens of Porter's Five Forces framework:
- Threat of New Entrants: Relatively low due to OED's established expertise in manufacturing eco-friendly building materials and its strong social impact focus.
- Bargaining Power of Buyers: Moderate, as OED caters to both commercial and social clients, with potential for price sensitivity in the social sector.
- Bargaining Power of Suppliers: Low, as OED utilizes readily available recycled plastic waste and has established relationships with suppliers.
- Threat of Substitute Products: Moderate, as alternative building materials exist, but OED's focus on sustainability and affordability provides a competitive advantage.
- Competitive Rivalry: Moderate, with competition from traditional building material manufacturers and other social enterprises.
Key Strengths:
- Unique 'One Country, Two Systems' model: Combines commercial profitability with social impact, creating a sustainable business model.
- Strong social mission: Addresses pressing environmental and social issues, attracting investors and customers committed to sustainability.
- Proven track record: Demonstrated success in the Philippines, providing a strong foundation for international expansion.
- Strong team and leadership: Committed to OED's mission and equipped with the necessary expertise to drive growth.
Key Challenges:
- International market entry: Navigating unfamiliar regulatory environments, cultural differences, and competitive landscapes.
- Scaling operations: Maintaining quality and social impact while expanding production and distribution.
- Financial resources: Securing sufficient capital to fund international expansion and social initiatives.
- Building trust and partnerships: Establishing strong relationships with local NGOs, governments, and communities in new markets.
4. Recommendations
OED should pursue a phased internationalization strategy with the following key elements:
Phase 1: Market Selection and Partnership Development (Year 1-2)
- Identify target markets: Focus on emerging markets with similar socio-economic conditions and environmental challenges as the Philippines, prioritizing countries with strong government support for sustainable development and social enterprises.
- Conduct thorough market analysis: Assess market size, demand for eco-friendly building materials, regulatory environment, and potential partners (NGOs, government agencies, and local businesses).
- Develop strategic partnerships: Form alliances with local NGOs and government agencies to leverage their expertise, access local networks, and ensure social impact alignment.
- Pilot projects: Implement small-scale pilot projects in target markets to test the feasibility of the 'One Country, Two Systems' model and gather valuable market insights.
Phase 2: Expansion and Replication (Year 3-5)
- Establish local subsidiaries: Set up subsidiaries in target markets to manage operations, production, and distribution, fostering local ownership and employment.
- Replicate the 'One Country, Two Systems' model: Adapt the model to local context, incorporating cultural nuances and addressing specific needs of the target market.
- Develop local supply chains: Source recycled plastic waste and other materials locally, minimizing transportation costs and supporting local economies.
- Scale up production and distribution: Expand production capacity and establish efficient distribution networks to meet growing demand.
Phase 3: Growth and Sustainability (Year 5 onwards)
- Develop new product lines: Expand OED's product portfolio to meet diverse needs and market demands, leveraging innovation and local expertise.
- Strengthen brand awareness: Develop global branding strategies to promote OED's mission and products, leveraging digital marketing and social media.
- Foster innovation: Invest in research and development to create new sustainable building materials and technologies, staying ahead of the competition.
- Build a global network: Establish strategic alliances with international NGOs, corporations, and government agencies to expand OED's reach and impact.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: OED's core competencies lie in manufacturing eco-friendly building materials and implementing social impact initiatives. The recommended strategy leverages these strengths while remaining true to OED's mission of providing sustainable housing solutions and addressing plastic pollution.
- External customers and internal clients: The strategy addresses the needs of both commercial and social clients, providing affordable and sustainable building materials while empowering local communities.
- Competitors: The strategy positions OED as a leader in the sustainable building materials sector, differentiating itself through its unique social impact model and strong partnerships with local stakeholders.
- Attractiveness ' quantitative measures: The phased approach allows OED to manage risk and maximize return on investment by focusing on high-potential markets and building a strong foundation for sustainable growth.
- Assumptions: The recommendations assume that OED can secure sufficient funding for international expansion, build strong partnerships with local stakeholders, and adapt its model to different cultural contexts.
6. Conclusion
By pursuing a phased internationalization strategy focused on partnerships, sustainability, and social impact, OED can successfully expand its 'One Country, Two Systems' model to new markets, achieving sustainable growth while making a positive impact on the world.
7. Discussion
Alternative Options:
- Franchising: While franchising could offer rapid expansion, it may compromise control over quality, social impact, and brand reputation.
- Joint Ventures: Joint ventures could provide access to local expertise and resources, but require careful selection of partners and management of potential conflicts.
- Acquisitions: Acquisitions could provide immediate market entry, but require significant capital investment and integration challenges.
Risks and Key Assumptions:
- Political and economic instability: Expanding into emerging markets carries inherent risks related to political and economic instability, requiring careful risk assessment and mitigation strategies.
- Cultural differences: Navigating cultural differences in new markets requires sensitivity and adaptation, ensuring effective communication and collaboration with local partners.
- Competition: OED may face intense competition from established players in target markets, requiring a strong competitive strategy and differentiation.
8. Next Steps
OED should prioritize the following steps to implement the recommended strategy:
- Year 1: Conduct thorough market analysis, identify target markets, and develop strategic partnerships with local NGOs and government agencies.
- Year 2: Implement pilot projects in target markets, gather data, and refine the 'One Country, Two Systems' model for local contexts.
- Year 3: Establish local subsidiaries in target markets, secure funding, and begin scaling up production and distribution.
- Year 4-5: Continue expanding operations, develop new product lines, strengthen brand awareness, and build a global network.
By taking these steps, OED can build a sustainable and impactful social business that addresses global challenges while creating opportunities for communities around the world.
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Case Description
In 2008, a team of students from Harvard, MIT, and Wellesley College in the US and Qinghai Normal University in China worked together as One Earth Designs ("OED") to create technologies to help off-grid communities in western China. These communities often have no access to readily available energy sources, nor clean air and safe water. The initial success of OED's first product in China - SolSource, a solar concentrator for clean cooking -encouraged the organization to build a global business to bring efficient and affordable solar energy to the world. OED has a unique business model for a social business: while many businesses with social goals cooperate with charitable foundations at arm's length and through partnerships, few have set up a non-profit and for-profit integrated group structure with technology licensing business relationships between the two distinct arms. Scot Frank and Catlin Powers, the co-founders of OED wondered how they could scale their business model and keep their vision.
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