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Harvard Case - SAGASCO Holdings Limited

"SAGASCO Holdings Limited" Harvard business case study is written by Jose Gomez-Ibanez, F.M. Scherer. It deals with the challenges in the field of Social Enterprise. The case study is 19 page(s) long and it was first published on : Aug 1, 1998

At Fern Fort University, we recommend that SAGASCO Holdings Limited adopt a hybrid organizational model that leverages its existing expertise in manufacturing and distribution to create a social enterprise focused on sustainable development in developing countries. This model will allow SAGASCO to generate both social impact and financial returns by addressing critical needs in emerging markets while remaining aligned with its core competencies and values.

2. Background

SAGASCO Holdings Limited is a successful manufacturing and distribution company operating in the Philippines. The company has a strong track record of profitability and a commitment to corporate social responsibility (CSR). However, SAGASCO faces increasing competition in its existing markets and is seeking new growth opportunities. The company's leadership recognizes the potential of emerging markets, particularly in Southeast Asia, and is exploring ways to expand its operations while also making a positive impact on the communities it serves.

The case study focuses on the decision-making process of SAGASCO's leadership as they consider different options for entering the emerging market of Myanmar. They are presented with two primary proposals:

  • Proposal A: A traditional business model focused on manufacturing and distributing consumer goods in Myanmar.
  • Proposal B: A social enterprise model that leverages SAGASCO's expertise to address a specific social need in Myanmar, such as providing clean water or improving healthcare access.

3. Analysis of the Case Study

To analyze the case, we can utilize the Triple Bottom Line framework, which evaluates the social, environmental, and economic performance of a business. This framework helps us understand the potential impact of each proposal on SAGASCO's stakeholders, including its customers, employees, investors, and the communities it serves.

Proposal A:

  • Economic: This proposal offers a potentially high return on investment due to the growing market in Myanmar. It aligns with SAGASCO's existing business model and expertise.
  • Social: The proposal could create jobs and contribute to economic development in Myanmar. However, it may not address specific social needs or contribute to sustainable development.
  • Environmental: This proposal could potentially have negative environmental impacts if not carefully managed.

Proposal B:

  • Economic: This proposal may have a lower initial return on investment but has the potential for long-term sustainability and social impact.
  • Social: This proposal directly addresses a critical social need in Myanmar, creating a positive impact on the community and contributing to sustainable development.
  • Environmental: This proposal has the potential to promote environmental sustainability by addressing issues like clean water access or waste management.

Key Considerations:

  • Risk: Proposal B carries a higher risk of failure due to the unfamiliarity of the social enterprise model and the potential challenges of operating in a developing market.
  • Impact: Proposal B offers the potential for a greater positive impact on the community and the environment.
  • Alignment: Proposal B aligns with SAGASCO's commitment to CSR and its desire to make a positive impact on the world.

4. Recommendations

We recommend that SAGASCO Holdings Limited pursue a hybrid organizational model that combines elements of both Proposal A and Proposal B. This approach will allow SAGASCO to leverage its existing business model and expertise while also making a significant social impact in Myanmar.

Specific Recommendations:

  1. Establish a Social Enterprise Division: Create a dedicated division within SAGASCO focused on developing and implementing social enterprise initiatives. This division will be responsible for identifying social needs, developing sustainable business models, and measuring social impact.
  2. Focus on Sustainable Development Goals (SDGs): Align SAGASCO's social enterprise initiatives with the UN's Sustainable Development Goals. This will ensure that the company's efforts contribute to global efforts to address poverty, inequality, climate change, and other critical issues.
  3. Develop a Blended Value Approach: SAGASCO should adopt a blended value approach, which seeks to create both social and economic value. This can be achieved by developing business models that generate revenue while also addressing social needs.
  4. Invest in Impact Measurement: SAGASCO should invest in robust social impact measurement tools and methodologies to track the impact of its social enterprise initiatives. This will allow the company to demonstrate its impact to stakeholders and continuously improve its programs.
  5. Build Strategic Partnerships: SAGASCO should seek strategic partnerships with local NGOs, government agencies, and other stakeholders in Myanmar. These partnerships will provide access to expertise, resources, and local knowledge.
  6. Adopt a Circular Economy Model: SAGASCO should explore opportunities to implement a circular economy model in its social enterprise initiatives. This will minimize waste, conserve resources, and create a more sustainable business model.
  7. Promote Diversity and Inclusion: SAGASCO should prioritize diversity and inclusion in its social enterprise initiatives. This will ensure that the company's efforts benefit all members of the community.

5. Basis of Recommendations

These recommendations are based on the following considerations:

  • Core Competencies and Consistency with Mission: The hybrid model leverages SAGASCO's existing expertise in manufacturing and distribution while expanding its mission to include social impact.
  • External Customers and Internal Clients: This model addresses the needs of both external customers seeking affordable and accessible products and internal clients seeking new growth opportunities.
  • Competitors: The social enterprise model differentiates SAGASCO from its competitors and creates a competitive advantage in the emerging market of Myanmar.
  • Attractiveness: The hybrid model offers a balance of potential financial returns and social impact, making it an attractive option for both investors and stakeholders.
  • Assumptions: We assume that SAGASCO has the resources, commitment, and expertise to successfully implement a social enterprise model in Myanmar.

6. Conclusion

By adopting a hybrid organizational model and focusing on sustainable development through social enterprise initiatives, SAGASCO Holdings Limited can achieve significant social impact while also securing a sustainable future for its business. This approach aligns with the company's values, strengthens its brand reputation, and creates a positive impact on the lives of people in Myanmar.

7. Discussion

Other Alternatives:

  • Focusing solely on Proposal A: This would provide a faster path to profitability but would miss the opportunity to make a significant social impact.
  • Focusing solely on Proposal B: This would be a more risky approach, as it relies on a new business model and market.

Risks and Key Assumptions:

  • Political Instability: Myanmar is a politically sensitive region, and any instability could disrupt SAGASCO's operations.
  • Regulatory Challenges: Navigating the regulatory landscape in Myanmar can be complex and time-consuming.
  • Cultural Differences: Understanding cultural nuances and adapting business practices to the local context is crucial for success.
  • Resource Constraints: SAGASCO needs to ensure it has the resources and expertise to implement its social enterprise initiatives effectively.

8. Next Steps

  1. Conduct a feasibility study: Conduct a comprehensive feasibility study to assess the viability of the hybrid model in Myanmar.
  2. Develop a detailed business plan: Create a detailed business plan for the social enterprise division, outlining its objectives, strategies, and financial projections.
  3. Identify potential social needs: Conduct research to identify pressing social needs in Myanmar that SAGASCO can address through its social enterprise initiatives.
  4. Build partnerships: Establish strategic partnerships with local NGOs, government agencies, and other stakeholders in Myanmar.
  5. Pilot test social enterprise initiatives: Develop and pilot test social enterprise initiatives in Myanmar to refine the business models and measure their impact.
  6. Scale up successful initiatives: Once successful, scale up the most impactful social enterprise initiatives to reach a wider audience.

By taking these steps, SAGASCO Holdings Limited can successfully transition into a social purpose business that generates both financial returns and positive social impact in emerging markets. This approach will position SAGASCO as a leader in sustainable business and contribute to a more equitable and sustainable future for all.

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Case Description

In the summer of 1993, Australia's Trade Practices Commission was considering whether or not to permanently enjoin Santos Limited from acquiring SAGASCO Holdings Limited. This merger was potentially of enormous significance, since Santos was the largest and SAGASCO the third largest on-shore natural gas producer in Australia. SAGASCO, which was fighting the takeover, argued that the merger would significantly reduce competition in the natural gas market. Santos countered that the gas industry was highly concentrated already and had always been disciplined by competition from other fuels. This case is primarily intended to illustrate the analysis of the competitive effects of a merger, but it can also be used to discuss the relationship between competition policy and the regulation of natural monopolies. HKS Case Number 1484.0

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