tisa - recommendations for a sustainable micro-franchise

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Siddharth Durgavanshi, Janos H. Katter, José María San Juan, Nora Szeile, & Zoraida Velasco

The Fletcher School of Law and Diplomacy - Tufts University B243: Market Approaches to Human Development:

Reaching the base of the economic pyramid through social enterprise Prof. Kimberly Wilson

Medford, MA

May 2, 2014

TIENDAS DE LA SALUD Recommendations for a sustainable micro-franchise

Prepared especially for: Nancy Swanson and Anna de la Cruz, Linked Foundation

B243: Market Approaches to Human Development 2 May 2014 TIENDAS DE LA SALUD: Recommendations for a sustainable micro-franchise

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Table of Content

Page

Background & Introduction 1

Introduction 1

Brief SWOT 2

Optimizing Customer Experience 4

Optimizing Franchisee Experience 5

Financial and Operational Challenges 9

Social Metrics Challenges 14

Expansion Strategy 15

Conclusion 21

Annex 23


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Background

Tiendas de la Salud (TISA) is a micro-franchising project located in Guatemala and made

possible through a partnership between Farmacias de la Comunidad (Farmacias), the country’s

largest pharmacy chain, Mercy Corps, and Linked Foundation (the Foundation). Its purpose is to

provide rural communities with access to modern pharmaceutical products through health shops

that sell inexpensive medicines. This allows Farmacias to serve not only the social purpose of

providing access to health products, but to support economic development in rural areas while

expanding their supply chain and gaining profit. Currently, the project has opened over 70 stores

and has been able to reach over 120,000 people.

Farmacias provides store owners with generic medicines at 20% discount. The store

owners sell the product and other health and basic food items while receiving business and

health support from not only Farmacias but Mercy Corps staff as well. Additionally, after investing

in building the store, they have access to loans from Banrural that are designed to cover start-up

costs.

Introduction

Linked Foundation, as an investor in the TISA project, requires the business model to have

a diminishing subsidy level with a goal of achieving financial sustainability and allowing them to

exit from the project. With this in mind they have requested the assistance of students from

Professor Kim Wilson’s Market Approaches to Human Development: Reaching the base of the

economic pyramid through social enterprise class at the Fletcher School of Law and Diplomacy in

assessing the viability of a sustainable expansion strategy for the project. The goal of this case

study is to evaluate how well the TISA stores meet the program's mission of improving access to

essential medicines with three objectives: 1) understand when and how community members

use the TISA stores 2) assess the community-level effectives of the program 3) assess the

operations and management of the TISA stores. Ultimately the objective is to increase revenues

to make the project sustainable and less reliant on funding from the Foundation. The following

report is a SWOT (strengths, weaknesses, opportunities, and threats) analysis derived from the


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work of five teams from the class which focused on the following different aspect of the business

respectively: 1) inventory/supply chain; 2) financials; 3) social metrics; 4) customer experience;

and 5) franchisee experience.

Brief SWOT

TISA, as a social enterprise, has to excel in accomplishing its social mission while also

creating a business model that is profitable and scalable. With this double-bottom line in mind,

TISA has to measure both social and financial results while staying on track for expansion. In order

to reach its social mission, TISA has to build a well-articulated theory of change (Toc) that is

supported and measured by useful and informative social metrics. Further crucial steps before

scaling are optimizing franchisee and consumer experience including the development of

financial metrics.

Looking at five aspects of the business such as - 1) inventory/supply chain; 2) financials;

3) social metrics; 4) customer experience; and 5) franchisee experience - we conducted a SWOT

analysis to reveal the areas to improve or to capitalize on for future sustainable growth. This

method also helped to show the links between certain problems and how the five aspects are

interconnected and affect strategic expansion.

Franchisees are currently facing profitability and cash-flow issues; moreover, they have

to deal with inventory and supply chain difficulties. The franchise-model is not fully standardized

across stores; owners have very different trainings and backgrounds. These do not only affect the

franchisee’s motivation but it also reduces consumer satisfaction. These gaps in the model allow

other potential competitors to enter the market or further develop the TISA-model. Branding is

also a key part to strengthen both internally for franchisees and the external perception to build

loyalty and be distinguished from competitors.

There’s a current paradigm shift in development and business to address complex

challenges by building partnerships to leverage collective impact. Based on the available

information, we identified the lack of diversity in partnerships as one area to move forward and

invest in. For future potential partnerships, - that include also important stakeholders – TISA


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should turn its focus across sectors and pursue greater involvement with government bodies and

private companies.

The following sections follow up on each aspect abovementioned and provide an

assessment of the current situation along with recommendations for further strategic actions.

Optimizing Customer Experience

Community members in Guatemala go to different health facilities to meet different

health needs. They use basic government health clinics staffed by community health workers for

preventative services and sometimes for basic medicines. Each TISA community has one of these

facilities and they are open either weekly or monthly for preventative services. There are also

provision stores, which sell over the counter medicines and pharmacies, where community

members can pick up medicines prescribed to them at the hospital.

Where does TISA fit in?

In the general progression of health-seeking behavior of first trying home remedies, then

looking at over-the-counter (OTC) options, then attending a health facility and finally purchasing

prescriptions, TISA’s entry would be in providing OTC medications and filling prescriptions when

free medicines aren’t available.

There are challenges that TISA faces with regard to consumer patronization of TISA stores,

which are fulfilling customer needs, trust of TISA and TISA employees, and cost of health care.

Three primary customer needs were identified:

● Filling prescriptions (when free medicine is unavailable)

● Over the counter medicine (ibuprofen, cough syrup, etc.)

● Non-medicine food, hygiene and other items (sugar, candles, soap)

Surveys show that the most popular items sold were sugar, candle, soap, cough and cold

medicine, OTC pain medication (acetaminophen), OTC anti-inflammatory (ibuprofen). These

account for 52 percent share in overall sales. Most customers complain over the low availability


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of products at TISA stores. This is due to the fact that stores are constantly running out of items

that people need and in addition to people’s inconsistent purchasing power. This demonstrates

the interrelation between the franchisee and customer experience. The effects of this

relationship will be analyzed further under the following Optimizing the Franchisee Experience

section.

Optimizing Franchisee Experience

Each TISA franchise is owned and managed by a community resident. This study has

identified two major objective of each franchisee/TISA store owner. The first one is to set up and

manage a sustainable and profitable micro-business and the second one being able to provide

valuable medicines and service to the community.

A successful franchisee is pleased to have the opportunity to start a business. The

experience provides them with a higher level of trust from other community members and the

ability to develop leadership skills as a result of their participation in the program. They feel proud

to provide an essential service to their community and in many cases describe their role as more

than just a store owner—wanting to integrate all health knowledge into their practice (i.e.,

prescribing medication, explaining dosage). Most reported that one benefit was the opportunity

to reinforce their existing health knowledge and learn new things.

Analysis

Despite their willingness and some of the positive experiences, TISA franchisees face a

number of challenges that have resulted in unpredictable but generally low sales volumes, small

profit margins, and inconsistent provision of quality service to their community. These franchisee

challenges have simultaneously a direct influence on the customer experience as well. This study

has identified the following challenges as the most essential:

● Medicine stocks in the TISA shop do not meet the health needs of community members.

● Farmacias are out of stock of essential medicines when store owners need to restock.

● Store owners and/or employees have low levels of financial literacy and management

skills and insufficient medical knowledge


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● Community members have low, unstable incomes

Recommendations

The following are practical recommendations pertaining to training of franchisees and

human resource management - to know how to sell; operation and supply chain management -

what to sell; and financial support. Improved financial cash flow management is addressed briefly

in this section. Nevertheless, an in-depth analysis of this is provided under the Financial Analysis

section of this report.

“How to sell”

The role of the Field Technician was identified as a key function to assist the franchisee,

especially in relation to training and human resource management and operation and supply

chain management. Field technicians represent a critical resource for store owners that enable

them to manage their store more efficiently. Additionally, field technicians play two key roles:

they identify entrepreneurs within community clusters of 900 or more to take part in the health

franchise and they provide technical supports to store owners ensuring that they comply with

TISA standard requirements.

Under the newly envisioned TISA model, Farmacias Regional Managers supervise field

technicians. The technicians receive an average of two months of trainings prior to identifying

entrepreneurs to run the shops and are required to open up to 20 stores during a 9-month period.

However as of 2014, TISA has managed to setup only 70 stores. There is also evidence suggesting

that the quality of the support received by store owners through their field technicians varies

among regions. In order to address this issue, we offer the following recommendations:

● TISA should hire field technicians who possess strong business skills and experience to

support store owners. While store owners are generally educated and possess health

training, they lack the business skills like book keeping ensuring adequate tracking of

profits. Field technicians have the potential to fill this gap and identify other areas through

which they can provide support to the store owners like with marketing and advertising

to improve sales. Field technicians should be screened and tested to ensure they possess

the adequate business skills and acumen to advise store owners.


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● Strong incentives should be given to field technicians to provide technical support after

the entrepreneurs have set-up their shops. While it is important for field technicians to

be rewarded for signing up entrepreneurs to setup shops and expand the franchise, more

incentives should be given to the technicians to continue training and supporting after

the initial set-up of the store. Field technicians could for example, receive a bonus when

store owners under their supervisions are able to pass a business exam administered by

TISA to test their accounting and other business skills.

“What to sell”

A significant challenge for TISA franchisees is ensuring they have the right mix of products

in stock. Since TISA store owners buy their inventory from Farmacias locations, it is important

that the stores they visit have the needed products in stock when resupply trips are made.

Research conducted of TISA store owners showed stock-outs at Farmacias as one of the top three

reasons store owners have problems with declining sales.

It is understandably challenging for Farmacias stores to have sufficient product on-hand for

when TISA store owners make unscheduled resupply trips. To address this problem, a revised

supply chain management approach should be considered. Several possibilities exist, including:

● Developing an ordering system that would enable individual TISA store owners to

transmit orders before making the expensive trip to pick up products. This would enable

Farmacias to prepare orders in advance and confirm that all ordered goods are available

prior to travel. From a technical standpoint, this could be developed using a simple mobile

text or voice messaging system or similar low-cost mechanism that leverages technology

already in use. Similar mobile phone-based systems are successfully used around the

world to notify rural farmers when market prices are favorable, to help them maximize

revenue and make expensive trips to market only when profitable to do so.

● Helping individual store owners pool their orders to enable more frequent stock

replenishments. Again, texting or a similar simple technical system implemented by

Farmacias could help owners relatively close to one another, but far from the nearest

Farmacias location, to share the costs of more frequent travel for order pick-up. If


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retrieving orders for a larger number of owners, travel by more than one owner could still

be cost-effective

● Farmacias could contract with a local bus or other transit company to ship orders to rural

bus depots for pick-up by store owners. Order payment could be made via cellphone or

store accounts if available.

● Product deliveries could be made by area managers or field technicians when visiting the

stores in their areas.

Financial support

Independent research conducted by University of California San Francisco (UCSF) notes

that certain franchise owners have struggled with turning a profit and in turn, repaying loans.

Reasons cited include, a small customer base, hard economic times, and the inadequate

restocking of pharmaceutical supplies by Farmacias. Without the proper stock of goods, TISA

franchisees are forced into a downward cycle where their sales and revenues drop and are thus

unable to afford further purchases of other goods to sell.

In order to better serve Franchisees and prevent such cycles from occurring, Farmacias could

commit to provide greater financial support through the following options:

● Restructure terms of franchise contracts so that they are more favorable for franchisees.

If contractual requirements such as restocking of goods are not met by Farmacias, then

they could offer to provide financial support by negotiating loan extensions for borrowers

with local banks. Fair contractual agreements would make the franchisors responsible to

supply on time, relieving the franchisee from the stress of a stock-out of products.

● Provide smaller credit options on a more consistent basis to ensure that franchisees can

pre-order in the case that certain challenges arise. Furthermore, this extension of credit

will help streamline the purchase of products, by giving franchisees the ability to meet

customer’s needs on demand.

● Work with Banrural, TISA’s financial lender, to restructure financial agreements.

Currently, Banrural requires that all franchisees have a co-guarantor, which represents a

major impediment and disincentive for potential franchisees from joining the operation.


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Furthermore, while Mercy Corps’s pilot project offered loans at 1% interest, Banrural’s

current rate is 12%. Farmacias can also make the operation more attractive to potential

franchisees by agreeing with Banrural to lower their current interest rates. Additionally,

considering that Farmacias is providing a social service need that is not met by the

Guatemala government, they can also pursue a partnership with the government

requesting them to serve as a guarantor for the Banrural loans.

● Give franchisees the opportunity to sell back goods. The UCSF study notes that upon

inauguration, franchisees are unaware of customer demand, and end up with large

supplies of goods they will never sell. For such small operations, the financial loss is far

greater for the TISA shop-owner than for Farmacias, who can simply sell these goods in

stores where the demand is high.

Financial and Operational Challenges

A TISA store’s average monthly income is around USD $25, while their cash flow is

negative USD $7. Franchisees absorb the loss and re-invests in the project to keep it running.

Many stores are not sustainable and are at the risk of being insolvent. This difficult situation can

be attributed to the intertwined operational and financial difficulties of TISA stores. The

low/unsustainable cash flow is an outcome of different problems, from low purchasing power,

lack of advertisement and/or differentiation of TISA from competitors, and inventory problems

among others. Franchisees have adapted to this situation to keep the business running, but they

will not be able to afford it for extended periods of time.

On some occasions, franchisees reduce the low purchasing power barrier by providing the

medicines on credit; this depends on the ability of the TISA store owners to set aside extra cash

for the goods they are willing to sell on credit. Some of the factors causing the low/negative cash

flow levels are low gross margin, low ticket sales (low purchasing power in the towns) and low

store traffic. The TISA stores have to buy the goods with cash from Farmacias and this reduces

their working capital. This cash crunch also decreases the ability of the store owners to restock

properly.


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Consumer preferences will have to be factored in while planning the inventory to increase

the profitability. Additionally, while a typical customer finds it difficult to afford the medicines

they also prefer to go to the store when someone with basic health care training is available to

provide advice. The lack of available trained health attendants at the stores coupled with an

unreliable supply of stock deters customers from shopping. Consequently, these defeats the

social purpose TISA stores were created for. Going forward, TISA will have to work on their brand

as a pharmacy store. Currently they are perceived as another convenience store in the town and

not as a store with a social mission.

Farmacias, through their stake and exclusive partnership, has a considerable leverage

over the TISA project; this limits the ability of store owners to negotiate better terms. TISA

should explore re-negotiating buying goods on consignment and the possibility of a partnership

with another pharmaceutical firm for medicines.

TISA as a business proposition, though attractive, has not envisaged the opportunity cost

of store owners. The risk store owners are taking as entrepreneurs needs to yield revenues in

addition to the amount of minimum wages. Nowadays, the average net income in the region is

around USD $22. This figure must be considered to calculate the break-even point.

Recommendations:

These problems lead to unsustainability for the stores and the project in general. The main

problem can be encompassed in cash flow unsustainability. TISA stores’ current situation will not

change with one single strategy, a holistic business strategy has to be adopted to cover all the

weaknesses present. The proposed strategy covers marketing, price sensitivity analysis, strategic

alliances among others. Its main goal is to create synergies among the listed areas to improve the

individual performance of each store, as well as the overall performance, and to reach cash flow

sustainability. The strategy is divided into the five following sections:

a) Consignment scheme:


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Farmacias will help Tisa’s store owners by giving them part of the medicines they need in

consignment, allowing them to reduce their initial investment and working capital future needs.

Store owners will pay to Farmacias the next time they go to restock their store. The benefits of

this scheme are as follows:

● Shared risk between Farmacias and store owners.

● Increase the level of engagement with the project in both parties.

● Appropriate inventory levels to satisfy customers demand.

● Less financial burden to store owners, and a higher cash flow per month.

● Monitoring the sales of each store by Farmacias.

● Identify the fast moving and essential medicines per community.

b) Negotiate a better margin from Farmacias

Tisa stores’ gross margin is 20%, while Farmacias is around 56%. In addition, Farmacias

expected net profit -profit after taxes- is around 20%. The difference among margins is high, and

if we consider that the risk is mostly taken by the store owners, it seems an unfair situation.

Farmacias can lower their prices without harming their financial sustainability. There are two

potential outcomes from this price renegotiation:

1. Reduce price to increase store owners profit margin: by reducing the price store owners

can have a better margin from each product they sell.

2. Reduce wholesale price to reduce the retail price: As mentioned before, the low

purchasing power of the customers is a barrier to some stores. Medicines at a reduced

price will become more affordable for customers, increasing their willingness to buy.

The second option is better because it is in line with the project goals - providing medicines

at affordable prices to low income communities - and it will increase the flow of the people in

the stores. The question Farmacias needs to address is: Do they want the 56% of 10 or the 30%

of 100? Increasing the volume of sales will benefit the performance of the whole project.


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c) Strategic Alliances

The TISA store project created a new distribution channel aimed to reach unattended

communities in Guatemala. Forty eight percent of Tisa stores are non-medical products. This

creates opportunities for large companies like Nestle, P&G and Unilever, whom are looking to

expand their businesses in emerging countries. A strategic alliance with large multinational

companies can be made to diversify the products offered by the stores, to ensure the quality of

them and to increase the sales margin of the store owners. In addition, they can provide support

with the initial investment of the stores.

d) Credit Payment Scheme

The low purchasing power of the consumers is a barrier to increase the average sales per

customer and the number of sales per day. This could be solved by implementing a community

credit scheme that would enable purchase of medicines on credit. In the case they are in need of

a medicine, the cost may be already covered, and if it not, and they don’t have enough money to

cover it, the store owner can give them a small credit to afford it. The key is to create engagement

between the stores and their clients.

e) Training in Basic Health Services

Customers’ willingness to buy in TISA stores increases when the shopkeeper has some knowledge

of health services. Unfortunately, the store owner with this knowledge is commonly there only

for few hours at night. Investing in basic health services training for the store shopkeepers,

particularly for those who staff the shop most of the time, will increase the flow of customers.

f) Financial & operational dashboards.


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“If you can measure it, you can’t manage it.” To understand the performance of the stores it is

important to measure their operations and financial situation. The next metrics will help keep

track to the performance of the stores and from the project in general:

● Operational / Sales

● Average sales per client

● Clients per day

● Composition of the average ticket:

○ Medicines participation in each average ticket

○ Hygiene products participation in each average ticket

○ Other products participation in each average ticket

● Monthly Average Sale per Store

● Restocking travels per month

● Financial Metrics

● Profit Margin (medical products and non-medical)

● Compound Annual Growth Rate (CAGR) of Sales and Revenues

● Operational margin: EBITDA/Revenues

● Inventory turnover ratio

● Working Capital

This strategy needs to be complemented with a marketing campaign focus on highlighting

the benefits and goals of the stores. Community members need to be aware of the value added

provided by TISA, and how can they be benefit from it. For the average net income and cash flow

and expected net income numbers see Annex 1.

Social Metrics Challenges


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For TISA, we recommend using utility focused monitoring and evaluation methods that fit

the existing operations so when it comes to integrating monitoring and evaluation (M&E) to the

whole TISA system, it won't be an extra burden to resources and people. In order to collect social

metrics, TISA has to have a plan to verify the direction they are moving towards and have a

baseline to compare the change to.

To ensure a return for Linked’s philanthropic investments, M&E is crucial component to

the due diligence process. Yet this is only an investment worth making if there is some system

for analysis and learning. The best way to capitalize on M&E systems is to create an evaluative

culture in the organization that supports learning and provides feedback loops for iteration of

programs when needed. Adequate M&E systems contribute to knowledge management, higher

and better transparency, and accountability.

Hiring an M&E-specialized consultant to design a social metrics system to meet the

criteria above and to engage with TISA and Linked staff in the design and learning process should

be the first step. For that engagement, we recommend making the ToC explicit; creating metrics

that align to the changes the program seeks to make; and investing in an M&E system.

Make the Theory of Change explicit

Well-articulated ToC is crucial to promote social change. ToC depicts the change pathway

and reflects the organization’s mission. The more explicit it gets, including the list of assumptions

one has to make; the better social metrics can be built to measure change. This process does not

only serve the purpose of monitoring and evaluation but fosters discussions regarding the

mission, vision and the related strategic decisions. The latter discussion and decisions derived

from it will help to contribute to develop a standardized brand for TISA too.

Create metrics that align to the changes your program seeks to make

Social metric systems should primarily be informative and useful to the end-user so that

it informs the decision-making process and tracks changes. Each objective should have a basket

of indicators to triangulate the changes by both qualitative and quantitative data. Besides

considering what data should be collected, TISA also needs to thinking thoroughly about who will


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be the data collectors and their supervisors, who will evaluate the data, and finally, who will make

the final decisions based on the evaluations.

Invest in a Monitoring & Evaluation system through the following

● Develop a process for data collection, analysis and learning

● Anticipate spending financial and organizational capital on this

● Align system with existing operational structure and expansion plans preferably “light

touch” using tablets and/or field officers (see technology recommendations under

Expansion Strategy).

● Deliver monitoring data to the right person to inform decision-making

● Engage at all levels throughout the organization to create an evaluative organizational

culture for learning with the ultimate purpose of betterment

● Align social and financial metrics

Expansion Strategy

While the initial expansion strategy sought to open 2440 stores (look at business plan) in 18

months of time, since its inception, Farmacias has opened over 70 TISA stores at a rate of 3 stores

per month. This has allowed them to serve over 120,000 people with access to pharmaceutical

products they would otherwise have to travel great lengths to purchase. While TISA’s rapid

growth has allowed this social enterprise to reach a larger audience, there are specific aspects of

the value chain that need to be carefully evaluated and improved before considering any further

expansion. This section will particularly address: Recruitment, Training & Funding; Product

Procurement; Marketing & Sales; and Monitoring & Evaluation.

Figure 1 - TISA’s Value Chain


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Source: Presentation on March 7, 2014. By Blaen Abraham, Chuck Dokmo, Allison Hutchings Claudia Schwartz, Nora Szeile, Zoraida Velasco

Analysis

A number of the assumptions underlying the enterprise are challenged. These are related to

the value chain and include:

● Accessibility: The lack of awareness of TISA stores in some areas coupled with physical

access from health centers make accessibility difficult due to distance and/or costly

transportation.

● Availability: Most TISA store owners find themselves working multiple jobs to make ends

meet. This decreases the amount of time they have available to tend to the TISA store.

This coupled with the fact that they do not always have professional medical or business

training affects their credibility towards the consumer. Additionally, stock outs at

Farmacias outlets also have an impact on this. The lack of direct connections to the


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network of health centers affects their product offerings and availability for training and

professional development.

● Affordability: There is evidence that customers have difficulty paying for products,

especially during lean periods. Store owners report experiencing low sales volumes and

small profit margins which makes turning a profit/paying back Banrural loans difficult.

● Acceptability: Customers have expressed a preference for seeking medicines and advice

from trained health professionals, however, often store owners and/or staff members do

not have health credentials. There is also concern that customers seek products via other

outlets including free products at government health centers. Furthermore, there is often

a highest demand for non-pharma products which has led store owners to complain about

not being able to stock certain items that they think would be beneficial to customers like

antibiotics and contraceptives.

Recommendations

Premature scaling risks long-term financial sustainability and brand reputation. Before an

expansion strategy can be pursued, the operational model needs to be optimized, as described

in the previous sections of this report, to increase profitability for franchisees, improve the

consumer experience and reduce cash flow issues. A systematic approach needs to be developed

to address the value chain’s weaknesses and to implement a controlled expansion that maintains

brand integrity. Considering the fact that Guatemala had 103.5 percent mobile phone

penetration in 2013, final recommendations for TISA revolve around the incremental use of

technology, and are as follows:

a) Recruitment, Training, & Funding

Store owners, staff and field technicians are all key to the success of a TISA store. Health

resources need to be made available to the store owners and their staff. This could be done by

providing them access to a health database (similar to the one displayed in figure 2) through a

tablet or similar device. Investment in a Tablet or Smartphone based application for TISA owners

could give them access not only to health information but to other training components on topics

like marketing and accounting to better run their business. Additionally, apps on the tablet or

mobile device would help with mobile health delivery and provide the opportunity for customers


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to receive expert advice from remotely located doctors. This technology could also serve as a

platform to connect with other public health centers and share patient information as noted

previously.

Figure 2 - Example of a health database

As outlined in the Optimizing the TISA Experience section, there is a need to better screen

field technicians to guarantee they have the necessary business skills. Incentives need to be

established to encourage them to continue providing quality support to TISA stores. Moreover,

technicians could also serve as financial advisors and encourage the creation of micro-savings

groups for health in the communities they serve.

b) Product Procurement

Product procurement can be improved if a better tracking system is implemented in relation to

sales and inventory. A data-driven inventory management system operated through the same

tablet used by store owners to obtain health information would help consolidate and compare

purchasing trends as well as log information about inquiries related to specific ailments and

product needs from consumers. Furthermore, as mentioned previously, clustering new stores

would allow, store owners to travel together when needing to restock. Plus, if the stores are close


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enough to each other they can buy or trade inventory from one another instead of traveling to

the Farmacias warehouse for just a couple of items. Additionally, Farmacias could provide loans

or other financing options for store owners to purchase products and they should allow store

owners to diversify their non-pharma product offerings. The framework displayed in figure 3 is a

sample of how the inventory can be customized.

Figure 3 - Customizing inventory

Source: Presentation on March 7, 2014. By Blaen Abraham, Chuck Dokmo, Allison Hutchings Claudia Schwartz, Nora Szeile, Zoraida Velasco

c) Marketing & Sales

Aside from providing training to store owners through a mobile application, there are

several other initiatives that could be pursued to improve marketing and sales for TISA stores. A

marketing strategy needs to be designed to strengthen the TISA brand and distinguish from

competitors. This can be accomplished by developing strategic partnerships with institutions and

businesses frequented by the members of the community where a TISA stores are currently


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located or will be opening. These partnerships would allow for an ad campaign highlighting why

TISA stores are different than its competitors and what the benefits and goals of the program

are. These benefits could include things like diversified payment options for customers, the

micro-savings groups, and the use of technology like M-PESA to allow mobile payments. For

details on M-PESA and possible strategic partnerships see Annex 2.

Another component of the marketing and sales plan would strive to solidify and extend

the distribution network and increase sales. This may be done by launching a pilot program of a

rural travelling sales team. Field technicians already have extended networks in the areas and are

respected by the communities they serve. If given the right incentives, field technicians can be

encouraged to become mobile TISA stores and visit the more rural areas to extend the services

and products offered by the stores. The use of technological analytic tools such as Social Network

Analysis and Geographic Information Systems (GIS) and can help determine the extent of the

field technician’s networks and the most underserved areas in terms of access to health in

Guatemala, respectively. See Annex 4 for a sample of the capabilities a GIS in-depth analysis can

provide.


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Conclusion

TISA, as a social enterprise, has to excel in accomplishing its social mission while also

creating a business model that is profitable and scalable. In order to reach its social mission, TISA

has to build a well-articulated ToC that is supported and measured by useful and informative

social metrics. Further crucial steps to be taken before scaling up are optimization of the

franchisee experience and enhancement of consumer satisfaction.

Both franchisees and the target customers are the key to stabilization of the current

operations. Currently there are teething troubles with both the franchisee owners and

customers. In order to consolidate the gains of recent past and prepare the organization for

future expansion, TISA will have to address the weaknesses within the stores’ network, as well

as its value proposition to the low income consumers to address if the consumers are really being

benefitted. Current operations of the stores can be stabilized and made effective with enhanced

capacity building of the TISA store owners. Creating an integrated and synergistic inventory

system and complementing the current supply chain can improve both the franchisee and the

customer experience.

As the areas under TISA operations are underserved by medical professionals, TISA store

owners invariably double up as para-physicians and managers. If the store owners are trained on

basic communicable and recurrent diseases, the target population would benefit.

Franchisees are currently facing profitability and cash-flow issues; moreover, they have

to deal with inventory and supply chain difficulties. Technological intervention can help in the

inventory management, although it will be expensive and can be considered for investment. A

manual yet robust bookkeeping system would probably be required before implementing an

automated management information system.

TISA’s partnership with Farmacias is another area where some low hanging fruits exist. As

a sole partner, Farmacias has a natural leverage and bargaining power over TISA and that may in

the future result in rent seeking behavior from Farmacias, if it is not already happening. The

foundation of this partnership must be based on a mutually beneficial relationship that is

equitable for the smaller partner (TISA). It will not be just a matter of choice to renegotiate but a


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matter of long term commercial sustainability for TISA to try to diversify its supplier base away

from Farmacias and also to renegotiate on supply payment terms such as purchase on

consignments.

The overall recommendation is to optimize the business model and create functional

social and financial metrics to measure whether the goals in both financial and social dimensions

are being accomplished. Once TISA has the solid foundations and a perfected franchising model,

it will be in a better position to expand and grow sustainably while investing in improved

technologies, continuous training, partnerships for collective impact and iterating the TISA model

in the social and business context.


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ANNEX 1

Financial Analysis

1a. Average Net Income and Cash Flow of TISA Stores

Figures in USD

1b. Farmacias de la Comunidad Expected Net Income


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Annex 2

Inspirations & Potential Partners

INSPIRATIONS

About M-Pesa M-Pesa is a mobile-phone micro-financing service for Safaricom and Vodacom. Currently, as the most developed mobile payment system in the world, M-Pesa allows users with a national ID card or passport to deposit, withdraw, and transfer money in a fast, secure and convenient way by using the SMS (text messaging) feature of a mobile device. Social Benefits The service enables its users to:

Deposit and withdraw money

Transfer money to other users and non-users

Pay bills

Purchase airtime

Transfer money between the service and a bank account (in some markets) Scaling M-PESA M-Pesa was first launched by the Kenyan mobile network operator Safaricom, in March 2007. It quickly captured a significant market share for cash transfers, and grew astoundingly quickly. Today M-Pesa can be found in the following countries:

Kenya

Tanzania

Afghanistan

South Africa

India M-PESA has inspired other mobile money platforms to spring up in other areas of the world. For more information: www.mit.edu/~tavneet/M-PESA.pdf http://en.wikipedia.org/wiki/M-Pesa http://www.safaricom.co.ke/personal/m-pesa/m-pesa-services-tariffs/relax-you-have-got-m-pesa www.mpesa.in

http://www.mit.edu/~tavneet/M-PESA.pdf

http://en.wikipedia.org/wiki/M-Pesa

http://www.safaricom.co.ke/personal/m-pesa/m-pesa-services-tariffs/relax-you-have-got-m-pesa

http://www.safaricom.co.ke/personal/m-pesa/m-pesa-services-tariffs/relax-you-have-got-m-pesa

http://www.mpesa.in/


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About M-KOPA M-KOPA was established in Kenya in 2011 and provides affordable solar power to over 50,000 Kenyan households that are not otherwise connected to the electric grid. The Product M-KOPA sells an LED lamp and radio/phone charging station powered by a solar panel that is fixed to the owner’s roof. Customers can pay for their purchase of the solar panel, lamp and charging station with installments sent via SMS on M-Pesa’s mobile money network. M-KOPA products are currently sold through more than 750 retail shops throughout Kenya. The Social Benefit M-KOPA views solar-powered lighting as a cost-effective substitute to kerosene lamps and anticipates customers saving an entire year’s income within three years of owning the product. Additionally, M-KOPA’s home system eliminates the accidental fires and indoor air pollution caused by kerosene lamps and improves productivity and educational outcomes through reliable and long-lasting electricity. For more information: http://www.m-kopa.com/ http://acumen.org/investment/m-kopa/

About Bridge International Academies Founded in 2007, Bridge International Academies aims to provide high-quality primary education for poor families by scaling a for-profit “academy-in-a-box” franchise. Bridge ensures standardization by issuing all teachers an e-tablet pre-loaded with lesson plans and activities. Social and financial metrics are regularly sent to Bridge’s headquarters and provide a near-real time monitoring and feedback for adjusting the programming and franchise model as it scales. In 6 years, they have grown to 134 academies and more than 53,000 pupils in Kenya. This year, they plan to expand outside of Kenya. For more information: http://www.bridgeinternationalacademies.com/

http://www.m-kopa.com/

http://acumen.org/investment/m-kopa/

http://www.bridgeinternationalacademies.com/


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POTENTIAL PARTNERS

About Quetsol Quetsol is a social enterprise in Guatemala whose mission and business model is similar to the M-KOPA model in Kenya. For more information: http://www.quetsol.com/

About Movilway Founded in 2010 and based in Spain, Movilway is a leading pre-paid mobile top-up company in Latin America. Like M-PESA in Kenya, Movilway provides a mobile electronic payment platform for the unbanked in Latin America. They also recently developed their own customized tablet with inventory management and point of sale (POS) applications—particularly aimed at helping rural entrepreneurs succeed. Movilway recently moved into Guatemala and expects to reach 2,500 outlets within the country. They are now present in 8 Latin American countries and spend $15M annually in the region. For more information: http://www.movilway.com http://m.prnewswire.com/news-releases/movilway-arrives-in-guatemala-to-compete-in-mobile-recharge-market-129532408.html http://techcrunch.com/2012/03/04/movilway-expands-services-in-latin-america/

http://www.quetsol.com/

http://www.movilway.com/

http://m.prnewswire.com/news-releases/movilway-arrives-in-guatemala-to-compete-in-mobile-recharge-market-129532408.html

http://m.prnewswire.com/news-releases/movilway-arrives-in-guatemala-to-compete-in-mobile-recharge-market-129532408.html

http://techcrunch.com/2012/03/04/movilway-expands-services-in-latin-america/


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Annex 3

Social Metrics

Source: Presentation on March 7, 2014. By Katie Dutko, Kate McMahon, Phoebe Sloane, Jennie Vader, Sarah Willis

TISA’s Theory of Change

Source: Presentation on March 7, 2014. By Katie Dutko, Kate McMahon, Phoebe Sloane, Jennie Vader, Sarah Willis

OurUnderstandingofTISA’sGoal

Availability

Access UtilizationImprovedMedicineSecurity

CommunityEmpower-

ment

GOAL:ImprovedMedicineSecurity

Objec ve4:EmpowerCommunity

Objec ve1:Availability

Objec ve3:U liza on

Objec ve2:Access

OpportunityStructure

EconomicSelf-Reliance

SocialRela onships

TheoryofChange

Constant

HighQuality

Timely

CorrectMeds

Knowledge

Affordable

Proximity

StrategicLoca on

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Annex 4 To view the image below in better resolution please visit: www.tufts.box.com/TISAgis

tisa - recommendations for a sustainable micro-franchise

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