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Case Study Mercy Charitable Foundation. Agenda Introduction of Mercy Charitable Foundation Conflict between Benefit and Ethic The Counterpart Alliance.

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Presentation on theme: "Case Study Mercy Charitable Foundation. Agenda Introduction of Mercy Charitable Foundation Conflict between Benefit and Ethic The Counterpart Alliance."— Presentation transcript:

1 Case Study Mercy Charitable Foundation

2 Agenda Introduction of Mercy Charitable Foundation Conflict between Benefit and Ethic The Counterpart Alliance for Partnership (CAP) Challenges Social Impact and Business Results Q&A

3 Introduction of Mercy Charitable Foundation Christian faith-based NGO, founded in 1997 Zhytomyr in Ukraine the problems result from the high unemployment rate(60%) the incident of Chernobyl nuclear power plant

4 Activities For homeless children Provide meals Offer educational, social activities, legal aid and counseling programs For elderly and substance abuse Provide meals Offer educational, social activities, legal aid and counseling programs

5 Finance Mercy Charitable Foundation Local NGOsbusiness partners international donors Local agricultural producers and business local government Prior Financial Support Worsened country economic situation Decide to initiate income-generating activities to sustain the organization and its operation.

6 New Activity To start a caf é Hunan resource Mercy youth club members served as volunteer labor to build physical facilities. Venture team, experienced in the restaurant industry.

7 Conflict between Benefit and Ethic Sell alcohol and cigarettes or not Benefit twice Prior activity is to help young people to quit smoking and avoid drugs and alcohol. It is estimated over 50% of the population in Ukraine smokes Some business advisors predict that the Caf é would go bankrupt in case of not selling alcohol and cigarettes.

8 Decision to Start Kovcheg Caf é Smoke- and alcohol-free restaurant Low price strategy and emphasis on quality Kovcheg Caf é provides different service from other caf é in Zhytomyr.

9 The Investment in Farm Provide vocational training and rehabilitation for drug addicts and alcoholics Reduce the incidents of relapse Give drug addicts and alcoholics in recovery new possibilities to earn an income Provide agricultural products to the caf é and Mercy s free meals program.

10 The Counterpart Alliance for Partnership (CAP) CAP was one of Mercy s most important partners. CAP is a founded program of Counterpart International, Inc., a US NPO with more than 35-year record in improving environmental, economic and social conditions for human development in over 60 countries. Their mission is to promote civil society through NGO capacity building and enhanced civil participation, especially in the following specific vulnerable populations: children &youth, disabled, the elderly, and drug& alcohol addicts. CAP provides support and services, including: consulting and technical assistance, Funds for small-scale projects, NGO exchanges with partners in neighboring countries.

11 What did CAP do for Mercy?(1/3) Helping Mercy select a business idea. Supporting the market research and analysis. Helping Mercy develop its human resource plan for the caf é.

12 What did CAP do for Mercy?(2/3) The most important assistance was Marketing. At first, Mercy s marketing approaches were random: advertisements in the newspaper; flyers sent to businesses, community centers, churches and the university,etc … Can t target specific customers, or build a steady client for the caf é. Mercy should prepare a marketing plan focused on developing the caf é s brand and image.

13 What did CAP do for Mercy?(3/3) Develop a niche market The caf é serves a small, well-targeted market with a clearly defined concept: healthy place. Faith-based/Christian ethic Mercy leveraged NGO relationships, networks and reputation as marketing channels. Low price penetration strategy High quality product is the first priority Responsive to customer demand Developing products and services according to customer preferences.

14 Challenges- Financial Mercy lacked funds to invest in full-scale renovation and upgrades for the caf é. The kitchen needs a better ventilation system, a major expense. The caf é could serve more customers by building additional dining space. Mercy received a $1,000 loan from the CAP Program, but could not secure a bank loan. Utility prices have skyrocketed in 2000 & 2001.

15 Challenges- Legal There were many legal barriers to nonprofits opening businesses. Under Ukrainian law, in order for Mercy to operate a for-profit without losing nonprofit status, managers must incorporate the caf é under a private entrepreneur who will act as the fiduciary agent and business manager. Mercy managers chose one of their members with whom they signed a memorandum of understanding (MOU) stating that this individual is responsible for running all of the NGO s commercial activities.

16 Challenges- Human resources At fist, the Mercy team struggled with human resource and management issues: Professional manager or someone who understands Mercy s mission? The number one criteria is character assessment people who understand and are committed to the mission, so they picked a former Mercy client to be the caf é manager. Employing student interns doing practicum work to reduce the cost of labor.

17 Challenges- Bureaucracy Meeting licensing requirements and dealing with legal authorities very trying. Several of the neighboring caf é s bribe the health department, but Kovcheg s management has refused. The consequence for Kovcheg s refusal has been harsh scrutiny and the necessity to comply strictly with numerous requirements.

18 Challenges- Political Zhytomyr had a corrupt mayor who was vehemently trying to block the initiative, and the mayor colluded with local authorities that tried to impede them by withholding building permits & continually changing licensing requirements. Through this experience Prokhorenko learned the value of political involvement and decided to play a role.

19 Social Impact and Business Results(1/4) The organization s entire annual operating budget is covered by income earned from its entire activities 94%($9,350) from the three thrift shops in 2001 6%($597) from the caf é the caf é played an invaluable role in raising political and public awareness regarding healthful lifestyle

20 Social Impact and Business Results (2/4) Two of mercy s youth soccer team comprised of low-income and street children made it to the European finals in Sweden The 11- to 13-year-olds took third place The 14- to 17-year-olds took fifth place

21 Social Impact and Business Results (3/4) Increased job creation in Zhytomyr City Achieved sustainability of Mercy Charitable Foundation by creating a permanent funding source through its social enterprises and independence from donor support Generate income Launched three new social enterprise thrift shops that contributed $9,350 or approximately 94 percent of Mercy s budget

22 Social Impact and Business Results (4/4) Provided 60 free meals a day in 2001; over 100 projected for 2002; 150 projected for 2003 Changed public opinion and social consciousness about healthy lifestyle choices Influenced public policy and legislation for future social enterprises Increased cross-sector cooperation between NGOs, business and government

23 Key Success Factors of Kovcheg Caf é Common mission Team is very important Niche creation Counterpart alliance for partnership CAP program Self-confidence and determination Marketing Develop a niche market High quality product is the first priority Low prices Faith-based/Christian ethic Responsive to customer demand

24 Advice Don t be afraid Get a good lawyer and learn the law Put together a good team Use personal contacts and work with those people that you already know Operate transparently and abide by the law Get involved in the community and local politics

25 Q&A How to improve the financial state of Mercy? Short term Increase the price of meal Lower the cost of operation Higher class meal for business men Long term Extend operation time Provide additional services

26 Q&A(2) Bribe the health department? Bribe: get higher profit and serve more clients No bribe: no money and no clients No money

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