Harvard Case - Farmacias Ahumada S.A. and the Fundacion Las Rosas
"Farmacias Ahumada S.A. and the Fundacion Las Rosas" Harvard business case study is written by Mladen Koljatic, Monica Silva. It deals with the challenges in the field of Social Enterprise. The case study is 17 page(s) long and it was first published on : Jul 23, 2003
At Fern Fort University, we recommend that Farmacias Ahumada S.A. (FA) formalize its partnership with Fundaci'n Las Rosas (FLR) into a strategic alliance, leveraging their combined strengths to create a sustainable social enterprise model. This alliance will focus on providing accessible and high-quality healthcare services to vulnerable populations in Chile, while simultaneously generating social and financial returns for both organizations.
2. Background
This case study examines the partnership between FA, a leading Chilean pharmacy chain, and FLR, a non-profit organization dedicated to providing care for the elderly and individuals with disabilities. FA's strong market position and FLR's expertise in providing care for vulnerable populations create a unique opportunity for a collaborative venture. The case highlights the challenges and opportunities of integrating corporate social responsibility (CSR) initiatives with core business operations.
The main protagonists of the case study are:
- Farmacias Ahumada S.A. (FA): A leading pharmacy chain in Chile, with a strong brand reputation and extensive retail network.
- Fundaci'n Las Rosas (FLR): A non-profit organization dedicated to providing care for the elderly and individuals with disabilities.
- Carlos Heller: The CEO of FA, who is committed to integrating CSR into the company's strategy.
- Sister Carmen Gloria: The director of FLR, who is passionate about providing quality care to vulnerable populations.
3. Analysis of the Case Study
This case study can be analyzed through the lens of Social Entrepreneurship, a field that combines business principles with social mission. FA and FLR can leverage this framework to create a hybrid organization that addresses the needs of vulnerable populations while generating sustainable financial returns.
Key Considerations:
- Triple Bottom Line: The partnership should focus on achieving a triple bottom line, considering social, environmental, and financial impacts.
- Shared Value Creation: The alliance should be structured to create shared value for both FA and FLR. This can be achieved through cost-sharing, revenue-sharing, and joint marketing initiatives.
- Impact Investing: FA can use its financial resources to invest in FLR's initiatives, providing capital for expansion and innovation. This aligns with the growing trend of impact investing, which seeks to generate both financial and social returns.
- Social Innovation: The partnership can be a platform for social innovation, developing new models of healthcare delivery that are more efficient and accessible to vulnerable populations.
- Strategic Planning: A comprehensive strategic plan is crucial for the success of the alliance. This plan should define the goals, objectives, and key performance indicators (KPIs) for the partnership.
4. Recommendations
Phase 1: Formalizing the Partnership (Short-term)
- Establish a Joint Venture: Formally establish a joint venture between FA and FLR, with clear ownership structures and governance mechanisms. This will provide a legal framework for the partnership and facilitate collaboration.
- Develop a Shared Mission Statement: Define a shared mission statement that reflects the values and goals of both organizations. This will guide the strategic direction of the alliance and ensure alignment between partners.
- Create a Joint Management Team: Establish a joint management team with representatives from both FA and FLR. This team will be responsible for overseeing the day-to-day operations of the alliance and ensuring effective collaboration.
Phase 2: Expanding Healthcare Services (Mid-term)
- Develop New Healthcare Models: Leverage FA's retail network and FLR's expertise to develop innovative healthcare models that are accessible to vulnerable populations. This could include:
- Mobile Clinics: Deploying mobile clinics to remote areas to provide basic healthcare services.
- Community Health Centers: Establishing community health centers in underserved areas to provide primary care and preventive services.
- Telemedicine: Utilizing telemedicine technology to connect patients with healthcare professionals in remote areas.
- Develop Affordable Healthcare Products: Partner with pharmaceutical companies to develop affordable generic medications and healthcare products specifically for vulnerable populations.
- Implement a Social Marketing Strategy: Utilize FA's marketing expertise to raise awareness of the alliance's services and promote access to healthcare for vulnerable populations.
Phase 3: Building Sustainability (Long-term)
- Develop a Sustainable Business Model: Implement a business model that generates revenue to support the long-term sustainability of the alliance. This could include:
- Government Contracts: Partner with the Chilean government to provide healthcare services to vulnerable populations under government contracts.
- Social Impact Bonds: Explore the use of social impact bonds to attract private investment in the alliance's initiatives.
- Microfinance: Offer microfinance loans to vulnerable populations to improve their access to healthcare.
- Develop a Social Impact Measurement Framework: Implement a robust social impact measurement framework to track the alliance's progress in achieving its social goals. This will provide valuable data for reporting and accountability.
- Foster a Culture of Innovation: Encourage a culture of innovation within the alliance to develop new solutions to address the healthcare needs of vulnerable populations.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Mission: The recommendations align with FA's core competencies in retail and distribution, and FLR's expertise in providing care for vulnerable populations. The partnership leverages these strengths to create a sustainable social enterprise model.
- External Customers and Internal Clients: The recommendations address the needs of both external customers (vulnerable populations) and internal clients (FA and FLR). The alliance aims to provide accessible and high-quality healthcare services while generating social and financial returns for both organizations.
- Competitors: The recommendations consider the competitive landscape in Chile's healthcare sector. The alliance can differentiate itself by focusing on serving vulnerable populations and developing innovative healthcare models.
- Attractiveness: The recommendations are attractive from a financial perspective, as they leverage FA's financial resources and market position to support FLR's initiatives. The alliance can generate revenue through government contracts, social impact bonds, and microfinance, ensuring long-term sustainability.
6. Conclusion
By formalizing their partnership and developing a sustainable social enterprise model, FA and FLR can create a win-win situation for both organizations. The alliance will improve access to healthcare for vulnerable populations in Chile, generate social and financial returns, and position both organizations as leaders in social responsibility and innovation.
7. Discussion
Alternatives:
- FA could continue its CSR initiatives independently: This option would limit the impact of FA's efforts and potentially lead to duplication of efforts with other organizations.
- FLR could seek funding from other sources: This option would limit FLR's capacity to scale its operations and potentially lead to a dependence on external funding.
Risks:
- Lack of alignment between FA and FLR: The partnership could fail if there is a lack of alignment between the two organizations' values, goals, and operational styles.
- Financial sustainability: The alliance could face challenges in achieving financial sustainability, particularly if it relies heavily on government funding or social impact bonds.
- Social impact measurement: It may be difficult to accurately measure the social impact of the alliance's initiatives, particularly in the short term.
Key Assumptions:
- FA and FLR are committed to the partnership: The success of the alliance depends on the commitment of both organizations to collaborate and achieve shared goals.
- The Chilean government is supportive of the alliance: The alliance will need government support to secure contracts and funding for its initiatives.
- The Chilean healthcare system is receptive to innovation: The alliance will need to navigate the complexities of the Chilean healthcare system to implement its innovative healthcare models.
8. Next Steps
- Establish a Joint Task Force: Form a joint task force to develop a detailed strategic plan for the alliance, including a comprehensive business plan, social impact measurement framework, and governance structure.
- Pilot Project: Implement a pilot project to test the feasibility of the alliance's proposed healthcare models and business model.
- Secure Funding: Seek funding from government agencies, impact investors, and other philanthropic organizations to support the alliance's initiatives.
- Develop a Communication Strategy: Develop a comprehensive communication strategy to raise awareness of the alliance's mission and activities.
By taking these steps, FA and FLR can create a successful social enterprise model that will have a significant impact on the lives of vulnerable populations in Chile.
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Case Description
Describes the alliance between Farmacias Ahumada S.A. (FASA), the largest drugstore chain in Chile, and the Las Rosas Foundation (Fundacion Las Rosas, or FLR), a nonprofit organization that provides shelter and care to needy elders. The collaboration began in 1997. The board at FASA opted to partner with a NGO to enhance its public image as a good community neighbor. FASA trained its salespeople to ask drugstore customers for a small monetary contribution at store cash registers to benefit FLR. By 2002, fundraising among FASA customers amounted to $381,000, covering approximately 5% of FLR's operating expenses. One half of store purchases resulted in a small donation for FLR. In recent years, FLR underwent remarkable growth. However, this growth called for an increase in financial resources if the institution were to fulfill its mission appropriately. The nonprofit was offered the chance to enter into a new partnership with an international supermarket chain. A new alliance posed a potential risk to the relationship with FASA, and the foundation's vice-president faced a critical decision. The visibility of a new partnership between FLR and the supermarket might make FLR a less attractive partner for the drugstore chain. Addresses issues of alliance development, strategy valuation, and selection of cross-sector collaborations.
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