1

Masisa BOP Benchmarking & Performance AssessmentHaas Project TeamMargot KaneLorin May

April 25, 2007

GrupoNueva/Masisa Project TeamAlejandro EspinosaKatherine RahalRodrigo TorresCristián ValenzuelaRenato Daziano

2

Agenda

Introduction & Methodology Bottom of the Pyramid

Benchmarking Performance Assessment Strategic Recommendations

3

GrupoNueva/Masisa

4

GrupoNueva/Masisa Set an Ambitious Goal to Engage the BOP Market“GrupoNueva has established an ambitious goal: by 2008, 10% of its sales will come from ‘socially inclusive business,’ by which we seek to offer our customers opportunities through the market to break the vicious cycle of poverty.”

– GrupoNueva website

“If we stop thinking of the poor as victims or as a burden and start recognizing [the poor] as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up… What is needed is a better approach to help the poor, an approach that involves partnering with them to innovate and achieve sustainable win-win scenarios where the poor are actively engaged and, at the same time, the companies providing products and services to them are profitable”

– C.K. Prahalad

5

Masisa Chile Commissioned Haas to Assess its Performance Against That Goal

1) Conduct benchmarking to identify key success factors for BOP projects.

2) Assess the feasibility of Masisa’s BOP initiative in Chile.

3) Review pilot project, including social and operational impacts

4) Provide strategic recommendations.

6

Agenda

Introduction & Methodology Bottom of the Pyramid

Benchmarking Performance Assessment Strategic Recommendations

7

Haas Team Conducted In-Depth Review of 6 Companies’ BOP Strategies

8

Case Studies Selected by Relevance to Masisa

Company

Geography

Industry

Product

Innovation

Description

Casas Bahia Brazil Manufacturing/Retail

Furniture/ Electronics/ Appliances

Credit/ Counseling

‘Carne’ is a credit and counseling service to help low-income consumers buy products. Among products is high quality, low-cost furniture.

CEMEX Mexico Cement Home Improvement Kits

Credit/Training

‘Patrimonio Hoy’ offers “complete solution” to home improvement via credit schemes, bundled savings, training and technical support.

Hindustan Lever Limited

India Consumer Products

Various Distribution/ Training/ Education

‘Shakti’ is an integrated program that organizes self-help groups and micro-financing schemes to provide rural women with income-generating opportunities, health and hygiene education and market access.

Natura Brasil

Brazil Consumer Products

Health & Beauty

Sustainable Development/ Integrated CSR

Natura Brasil employs extensive network of direct salespersons, along with an integrated approach to CSR and focus on natural products.

9

Key Success Factors Identified from Case Studies

Shape AspirationsShape Aspirations

Tailor Local Tailor Local SolutionsSolutions

Create Buying Create Buying PowerPower

Improve AccessImprove Access

Build Build InfrastructureInfrastructure

10

Agenda

Introduction & Methodology Bottom of the Pyramid

Benchmarking Performance Assessment Strategic Recommendations

11

Masisa Well-Positioned to Make a Considerable Impact GrupoNueva respected as a CSR leader First-mover advantage Ability and resources to enable

functioning pilots to get to scale Supportive management, leadership

and strong commitment to objectives within Masisa Chile

Partners expressed motivation and excitement around BOP initiative

Inclusive business model/priority can have real impact on poverty reduction

12

13

The Pilot Model is Very Complex

Masisa Role: conduct market research, design RTA furniture, provide commercial support; ensure competitive cost of wood boards

PlacacentrosRole: manufacture RTA furniture; ensure competitive cost; provide credit to agrupación social

Agrupación Social (EME/SIRREMA)Role: provide legal structure for group of entrepreneurial womenBOP Consumer

FUNDESRole: provide training; assess agrupación social performance

AVINARole: identify participants, local group to oversee projects and source of seed capital

Domos/ EduceresRole: Oversee day-to-day functioning of agrupación social

IAFRole: provide seed capital

Banco de DesarolloRole: identify entrepreneurs to participate in program; provide microcredit

Boards/design

RTA boards and credit

Training

Credit

Vendedoras

Support

Funding

Support

NGO partners, vendedoras

RTA furniture and credit

Credit

Note: model is intended to represent Haas consultants’ understanding of how the program functions based on interviews with various stakeholders. It may or may not reflect the structure as initially defined by Masisa.

14

Pilot 1: EME in Conchalí

15

Pilot 2: SIRREMA in Puente Alto

16

Key Challenges

Strategic partnerships not effectively managed

Lack of strategic competitive positioning 10% goal ambitious and not clearly defined No metrics for success other than 10%

sales goal Distribution, logistics and channel conflict Product not designed specifically for BOP

market

17

Key Challenge: Masisa’s 10% BOP Sales Goal is Ambitious

A, B, C

D, E

7,905.767 people (49% of population)

25,700m3 (7.3% of market) USD23,500,000 (3.8% of market)

Size of the BOP

Demand at the BOP

Note: numbers represent Masisa’s estimates

10% of domestic sales in Chile = USD10,000,000, or nearly half the entire BOP market!

18

Agenda

Introduction & Methodology Bottom of the Pyramid

Benchmarking Performance Assessment Strategic Recommendations

19

Summary of Strategic Recommendations

Set clear and understandable goals Engage stakeholders and strategic

partners Build upon core competencies Map current operations Innovate within product mix Understand the “audience,” including

target market, competitors, future market forces

20

Internal Identify Priorities of BOP Initiative w/ Respect to

Sales vs. Inclusive BusinessDevelop Clear ‘Success’

MetricsMap Current BOP Activities

PartnershipsConduct Stakeholder Engagement/Analysis

Assess Core Competencies & Value-AddBuild TrustExternal

Evaluate Strategic Positioning/Competitive Landscape

Understand Consumer Needs & Preferences

Immediate Next Steps: Assess Operating Environment

21

Immediate Next Steps: Explore Alternative Models & Conduct Feasibility Analysis Solicit partner feedback and ideas on alternative

models through inclusive dialogue. Assess pros and cons of various strategies,

including: Core competencies Tradeoff between inclusive vs. non-inclusive

business Costs and risks (e.g. building infrastructure,

holding inventory, credit) Channel conflict Scalability

Conduct feasibility analyses on alternative models proposed, and select one to three based on strategic alignment, feasibility, and impact for the BOP – some experimentation will be needed

22

A Few Examples From Our Discussions… Re-Engage SERVIU, public housing

developers, libraries and schools to meet sales goal

Create ‘Placa-Barrios’ or board warehouses in BOP neighborhoods; reduce number of layers in value chain

Include furniture-makers and current BOP customers in value chain

Identify alternative existing distributors (i.e. semaneros) and housing savings committees through Banco de Desarrollo

Imitate Venezuela’s school-based training model

23

Our Recommendation on a Feasible Model Focus on reaching out to existing BOP

customers and distributors through current retail channels

Shift idea of Masisa’s value add from furniture to core competency – boards and access to services

Enable BOP customers to gain design and technical skills to design and build high-quality furniture to sell to higher income segments

Work closely with retail channel to improve BOP customers’ access and buying power

Recruit partners to extend credit, encourage savings, manage training, and form cooperatives and sales forces

24

Project Value

To Haas Team: Working with an

established CSR leader Exploring an exciting

emerging issue Experiencing the

challenge of global business

Learning from a welcoming, engaged, open-minded, international client

C’mon… Chile?

To Masisa: Forum to ask tough

questions… and get honest answers

Initiating important new dialog with and increased feedback from stakeholders

Receiving a thorough performance assessment and actionable recommendations

25

Conclusion: A Promising Start… Understand that it will take time to

build civil sector partnerships Take some risks and innovate Stay committed!

Masisa’s 10% goal is ambitious… … But a strong commitment from

management and partners presents a real opportunity to make a lasting contribution to poverty reduction in Chile.

26

THANK YOU!