Developing InclusiveBusiness ModelsA Review of Coca-Cola's Manual Distribution Centers in Ethiopia and TanzaniaJane Nelson, Eriko Ishikawa and Alexis GeaneotesExecutive SummaryCorporate Social Responsibility InitiativeHarvard Kennedy School79 John F. Kennedy StreetCambridge, MA 02138USAwww.hks.harvard.edu/m-rcbg/CSRIInternational Finance Corporation2121 Pennsylvania Avenue NWWashington, DC 20433USAwww.ifc.orgTHE CSR INITIATIVE, HARVARD KENNEDY SCHOOLThe CSR Initiative at Harvard’s Kennedy School is a multi-disciplinary and multi-stakeholder program that seeks to study and enhance the public contributions of private enterprise. It explores the intersection of corporate responsibility, corporate governance, and public policy, with a focus on the role of business in addressing global development issues. The Initiative undertakes research, education, and outreach activities that aim to bridge theory and practice, build leadership skills, and support constructive dialogue and collaboration among different sectors. It was founded in 2004 with the support of Walter H. Shorenstein, Chevron Corporation, The Coca-Cola Company, and General Motors and is now also supported by Abbott Laboratories, Cisco Systems Inc., InterContinental Hotels Group, Microsoft Corporation, Pfizer, Shell Exploration and Production, and the United Nations Industrial Development Organization (UNIDO).www.hks.harvard.edu/m-rcbg/CSRIINTERNATIONAL FINANCE CORPORATIONIFC, the private sector development arm of the World Bank Group, adds value to private sectorinvestment by offering its client a range of Advisory Services. To catalyze local economic growth,IFC designs and implements programs to integrate Small and Medium Enterprises (SMEs) into the supply chains of its clients to create income generation opportunities for communities around clients’ project sites. These results are achieved through a mix of interventions, such as local supplier development programs, training in business/technical skills for SMEs and microentrepreneurs, and facilitating SMEs’ access to finance and entry into new markets. IFC also provides client companies with skills, tools and support to implement HIV/AIDS programs within their workplaces and surrounding communities.www.ifc.orgAcknowledgements:The authors would like to thank Adrian Ristow, Marika McCauley Sine and Euan Wilmshurst from The Coca-Cola Company for their inputs in project design and process management, Beth Jenkins from the Harvard Kennedy School for her substantive and editorial review, and Harvard’s Shannon Murphy, Scott Leland and Minoo Ghoreishi, and IFC’s Sujata Lamba for their overall support and input. The project would not have been possible without the full cooperation of the owners and staff of the 48 Manual Distribution Centers and the Coca-Cola Sabco staff in Tanzania and Ethiopia, especially Hebert Nuwamanya, Victor Getenya and Solomon Shiferaw. The project team would also like to acknowledge the valuable insights and feedback received from a group of development practitioners in the NGO community, government representatives and international development agencies who participated in a stakeholder dialogue in Tanzania in November 2008. We would like to especially thank Zahid Torres-Rahman of Business Action for Africa and Graham Baxter from the International Business Leaders Forum for assisting with the facilitation of the convening. Cover Photographs: Supplied by Coca-Cola Sabco and The Coca-Cola CompanyThe findings, interpretations and conclusions of the study are those of the authors and do not necessarily reflect the views of the IFC or the Harvard Kennedy School. The MDC statistics cited are accurate as of November 2008. Written by Jane Nelson, Eriko Ishikawa and Alexis Geaneotes© 2009 Harvard Kennedy School and International Finance Corporation This report is a summary version of a longer research study undertaken by the IFC and the CSR Initiative at the Harvard Kennedy School. The full report will be available on the CSRI website at: www.hks.harvard.edu/m-rcbg/CSRI1DEVELOPING INCLUSIVE BUSINESS MODELS1. Preface 32. The Contribution of the Private Sector to Development 53. Study Objectives and Methodology 84. The Coca-Cola System 105. The Manual Distribution Center (MDC) Model 126. Assessing the MDC Model’s Contribution to the Business and to Development 156.1 Business benefi ts 156.2 Development contributions 16 Creating Opportunities for Entrepreneurship and Employment 16 Promoting Women’s Economic Empowerment 17 Catalyzing Human Capital Development 187. Recommendations 197.1 Invest in continuous improvement of the core business model 207.2 Broaden socio-economic opportunity for MDC owners and employees 227.3 Promote small business development and entrepreneurship more widely 237.4 Explore how the business model could distribute social products or messages 247.5 Undertake participatory evaluation and action-based learning 258. Conclusion 26Table of Contents2 DEVELOPING INCLUSIVE BUSINESS MODELS“More than ever, companies realize that it is good business to share benefi ts with the communities in the developing countries in which they operate. Enabling small, local fi rms to supply or distribute goods and services to larger enterprises creates more effi cient supply chains. At the same time it maximizes development benefi ts by helping local companies to grow and create jobs.” Lars H. Thunell, Executive Vice President and CEO International Finance Corporation (IFC)“Doing business with poor people brings them into the marketplace – a critical step in the path out of poverty – and for entrepreneurs and fi rms it drives innovation, builds markets and creates new spaces for growth. Inclusive business models both produce and reap the benefi ts of human development.” United Nations Development Programme (UNDP) Creating Value for All: Strategies for Doing Business with the Poor, 20083DEVELOPING INCLUSIVE BUSINESS MODELSExpanding economic opportunity, raising productivity and increasing growth are crucial for alleviating poverty. In the face of the global economic crisis they are more important and more challenging than ever. Their achievement will require concerted leadership on the part of both the public and private sectors.As the OECD’s Development Assistance Committee has commented, “Increasing economic growth rates is essential – but it is not enough. The quality
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