Commercialization Of Local Crafts Project Rationale Business Essay

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Inspite of having high demand of both utilitarian and traditional crafts in domestic and international markets traditional craftsmen are still exploited by middlemen and most of them live below the poverty line. There is participation and support from both the private and public organizations but the level of economic and social awareness still remains below par amongst the craftsmen.

It is interesting to find out what role the for-profit organizations which try to establish the link between rural craftsmen and urban markets can play in this domain. Also it would be interesting to know why commercial enterprises are not rushing into this space.

The project work also tries to find out the nature of inclusivity of a business in the handicrafts industry. A framework to measure the degree of inclusivity of such businesses is essential to understand the real social impact caused by these companies.

Objectives

The objectives of the study were to:

1) Study the Indian Handicrafts market landscape

2) Understand Inclusivity of a Business

3) Develop a framework to measure degree of inclusiveness

4) Evaluate key players on the framework to understand the unique working models of key players

Methodology and Research approach

The primary research essentially consisted of interviews conducted with company executives and industry experts. The visits to retail outlets helped to understand the supply chain of Mother Earth and FabIndia more comprehensively. The interviews conducted with IIM B professors gave some good insights in the project work. The secondary research is largely based on the available case studies published by Harvard and IIM, business and news articles related to the pertaining business area.

The study follows a 4 step approach:

1) The research work helps to understand the Indian handicrafts Industry and also the key players in this industry

2) Understanding Inclusive business by gaining a hold on various criteria and definitions. To measure the degree of inclusivity a framework depending on key social and economic value indicators was developed

3) Evaluation of key players with the framework to find out what these businesses are doing differently to create a social impact

4) Understanding the challenges and barriers which hinder a commercial enterprise to successfully enter this business area

Industry research & key players study

Evaluation of Mother

Earth &FabIndia on the parameters

Development of parameters

for inclusivity

Identification of

challenges

& recommendations

Indian Handicrafts Industry

Handicraft industry is a major source of income for rural communities employing over six million artisans including a large number of women and people belonging to the weaker sections of the society. This industry has a lot of cultural and economic importance. The Indian Handicraft Industry is showing continuous growth rate of 20% every year for the past few years. According to the national census of handicrafts, undertaken by the National Council for Applied Economic Research the value of handicrafts produced last year were of Rs.26,213 Crore. The total exports of crafts items: - Rs. 13412.92 Crore. India's contribution in world market is 1.2% which can be further increased given the vast opportunity in this sector.

The Indian handicrafts industry is highly labour intensive, cottage based and decentralized industry. Handicrafts products can be distinguished into following: Metal ware, Wood ware, Hand printed textiles, Embroidered and crocheted goods, Shawls, Carpets, Bamboo products, Zari goods, Imitation jewellery, Paintings, Earthenware, Jute products, Marble Sculpture, Bronze Sculpture, Leather Products and other miscellaneous handicrafts.

Key players

There are hundreds of small players in the industry who deal with limited range of products. Product coverage and Scale were considered as important factors to arrive at the set of key players in the Industry.

The key players thus arrived at were FabIndia, Mother Earth, Hansiba, Good Earth and Anokhi.

Based on the preliminary research, when the players in the handicrafts industry were mapped on a plot with dimensions of scale and degree of inclusion of low income groups in the value chain, it was found that FabIndia was the most successful social enterprise followed by Mother Earth. Although the scales of these two companies had a lot of difference but both the companies had a considerable number of poor beneficiaries in their value chain. Other players like BIBA, W were largely commercial enterprises with a good amount of scale. The rest of the players were smaller as compared to the previously mentioned players both in scale and social inclusion.

Thus it was found that very few organizations have business models focusing on both profitability and social impact.

Inclusive Businesses

An inclusive business is sustainable in nature and essentially benefits low-income groups. Inclusive business maintains its for-profit nature and contributes to poverty reduction through the inclusion of low income communities in its value chain. Inclusive business is all about including the poor in the business process as consumers or producers.

Popular definitions

Inclusive Business entails creating a net positive development impact through a financially profitable business model

'Inclusive business integrates people living in poverty into the value chain as consumers or producers

Inclusive business is 'profitable core business activity that also tangibly expands opportunities for the poor and disadvantaged in developing countries

Inclusive Business is 'An economically profitable, environmentally and socially responsible entrepreneurial initiative

Inclusive businesses may engage low-income communities by providing employment and means of livelihood; targeting development of service providers and suppliers from underprivileged sections of the society; or providing affordable goods and services targeted at well being of the economically challenged class.

Inclusive business is not corporate philanthropy, which has inherent limitations of scope and budget. Rather, it is the search for innovative and sustainable business models that perform well financially by doing good to the society and have the potential to become part of the mainstream business model within the companies concerned - the key to business having development impact at scale.

Key Takeaway: An inclusive business model operates on the concepts of triple bottom line (Economically profitable, socially and environmentally responsible)

What is means to be inclusive

For Business:

1) Income generation opportunity by addressing the needs of the poor or providing unique services

2)Driving innovations by creating sustainable model for development

3) Building markets at the Base of the Pyramid

4) Strengthening supply chains by providing access to rural areas which are low potential and inaccessible in nature

5) Expanding the labor pool

For the Poor:

1) Creation of jobs and opportunity to increase income levels and thereby increase the standard of living

2) Access to essential goods and services

3) Meeting basic needs

4) Higher productivity sustainable earnings

5) Greater empowerment to the underprivileged

Based on the research the following areas of inclusivity were arrived at:

Selling products and services that are needed by the poor and have a high development impact (such as low-cost nutrient-fortified foods). Even though earlier it was considered that producing for the poor is ultimately a mere wastage of resources now the poor are target customers for many businesses.

Large companies that take deliberate action to expand development impacts through supply and distribution chains or R&D. Big Corporates have realized that associating themselves with small suppliers have enabled their supply chains to be more flexible and stable and at the same time be of reduced costs

Domestic small and medium enterprises (SMEs) that have local economic development as an explicit driver because they are embedded in the local economy

Social enterprises whose core product is of high social value

Measuring Inclusivity

'Inclusive Business' has enormous potential to contribute positively to development outcomes. Working through core business models, the 'Inclusive Business'approach requires minimal outside support and can often reach a scale unattainable by most direct development interventions.

Social inclusion requires addressing the problem of social exclusion faced by the poor apart from generating income for the disadvantaged class. Apart from economic development of the poor one also needs to take account of health, education, affordable access to other public services such as justice, housing, civil rights, security, information and communications.

Businesses should be measured in dimensions of economic value added and social value added. There are multiple indicators of social value enhancement. The weights assigned to each of the social indicators must be different depending on the type of domain the business operates. For instance, a handicrafts business's primary social goal is be to provide employment opportunities to the poor and increase income levels whereas an organization like Arvind Eye care will have the primary social goal of providing health services. There are certain secondary social goals of a business which evolve eventually as the business grows. These may be called as peripheral development areas such as sanitation, infrastructure, association with local SMEs etc. While evaluating the degree of inclusivity of businesses both monitoring and impact assessment frameworks must be used. The unintended negative impact of business operations must also be taken into account. But the positive impacts of business operations must overweigh the negative outcomes.

Acceptable as socially inclusive business

Ideal, socio-economic sweet spot

Unacceptable as socially inclusive business (commercial biz.)

High

Low

High

Economic value

Social value

Organizations high on social value & moderate to high on economic value considered as inclusive. Organizations which are high on social value add and lower on economic performance are also considered as inclusive.

Social indicators are quantitative statistics that can be monitored over time to identify changes in standard of living. They attempt to summarize the most important aspects of the social phenomena in a way that is accessible to policy makers and the general public.

Indicators should: Identify the essence of the problem, be interpretable, robust and can be validated, reflect direction of change

Thus, indicators not only provide a tool to assess progress and identify problem areas, but also to encourage citizen engagement in the process of achieving results. These indicators have been developed for a variety of purposes, ranging from measuring the progress of a community to evaluating the impact of specific policies.

Few parameters on which the performance of a business should be measured are:

As previously mentioned, hygiene (must have) factors and add ons (good to have) will vary depending upon the type of the business. Thus, inclusivity of a firm cannot be compared to any other firm directly.

Key economic indicators

Commercial viability of a business is measured by the adequacy of demand and adequacy of supply to cater to that demand. Based on this, following indicators can be used to measure the economic sustainability of a business:

Financial indicators:

These indicate the financial health of the company. Following metrics can be deployed:

Profitability of business: Gross margin and net margin can be used to assess the profitability. A business running negative on both over a large period of time is at risk of closing down.

Sustainability of business: Firm's assets and liabilities determine the overall sustainability of the business in long run. Ex- firm can have acquired assets that can give it a sustainable competitive advantage, on the other hand a firm may have long term debts accumulated which may lead to huge pressure and bankruptcy. Also, liabilities may vary based on source of funds acquired.

Annual sales and ROI (compared to industry average) for investors are also

indicators of current scale and growth of firm over years.

Important point to note here is that these indicators are the final outcome of the constant stream of demand. However, while doing the assessment important external factors like customer requirements and changing trends in market and information about competitors need to be kept in mind as the pose potential threat to sustainability.

Operational indicators:

In order to adequately cater to the demand, a firm needs to be backed up with resources and operational model. Following metrics can be used to assess the same:

Infrastructure: In context of crafts industry, infrastructure implies tools and machinery to create the end product.

Processes: Here processes imply work allocation processes across the supply chain as well as workflow processes in creating the final processes. Apart from this, processes for people management, channel governance and maintaining relationships with vendors are also important. Work allocation and production processes should be standardized and well documented.

Tools and automation: While infrastructure includes basic tools to achieve production, automation (power mills etc.) can help achieve consistency in quality and higher efficiency at a lower operational cost.

Resources: As crafts industry is a labor intensive industry, human resources are most important assets. Thus, HR systems including organizational structure, career growth, incentives, compensation and skill development through training become extremely important.

Key social indicators

Social impact, contrary to popular notion can be measured quantitatively provided adequate data is available and captured timely. Any business creates both direct and indirect social impact depending on type of sector in which operates. Following metrics can be used to measure direct social impact in craft industry:

Livelihood generation: The primary objective of organizations operating in crafts sector is to provide sustainable livelihood. Following measures can be employed for the same:

Change in average per-capita income post entrance of firm in this sector

Number of jobs created by the firm

Training and skills development: For a business to be inclusive, it should make people self-sufficient to pursue the sector they are employed in as a sustainable livelihood. For this, they need to develop the skills requisite to do the tasks on their own. Thus, for a business to be inclusive it needs to ensure proper training not just in terms of skillset but also in terms of business skills. Some of the measures that can be used are:

No. of people trained

No. of households benefitted by skills imparted to 1 member (through knowledge transfer)

Women empowerment: One of the key issues that need to be addressed in several parts of India is women upliftment. Thus, inclusive businesses are expected to work towards facilitating women empowerment. Following measures can be used:

No. of women employed

Increase in average marriage age

Women attrition rates

Reverse migration: Providing sources of employment in rural areas ensures reverse migration. This can be measured by estimating the number of people migrating from urban jobs to rural jobs and relative preferences for both.

Benefits like PF leading to better financial planning: Many inclusive businesses have the employees on their payroll entitling them to fringe benefits like PF, health insurance etc. This is helpful in increase awareness about sources available for better financial planning. Following measures can be used:

Increase in number of people having annual savings

People availing MF, bank loans for productive investments

Indirect/spillover effect is essentially the impact created indirectly through efforts put in by firms for achieving direct impact. It can be bucketed into following heads:

Focus on education:Some of the jobs created require some minimum level of literacy encouraging people to pursue education. Following measures can be used to assess impact:

Literacy rate

Reduction in dropout rate

Increase in 12th pass students

Increased indirect employment through ancillary industries: Opening up of facilities for production /services in any sectors also ensures mushrooming of different ancillary industries like transport, catering, security. Number of such companies opened can be used as a measure to assess this impact.

Spillover effects: While creation of jobs promotes education, it can have indirect unintended consequence as well. In case of craft industries as skill development doesn't require much literacy level, people may be de-motivated to pursue higher education given they are getting livelihood through this work. Also, similar unintended consequence can be traced to people leaving agriculture; their mainstay of income, pursuing these jobs makes agriculture a non-sustainable activity.

Social value indicators can be bucketed into following 4 categories covering different aspects of development:

Enterprise Development: Companies support local business development through backward and forward business linkages along their value chains especially with medium, small and micro-enterprises

Human Capital Development: Companies support human capital development through training and skills development for employees

Income Generation: Companies impact upon incomes and family well-being through various activities but in particular by paying wages to employees; enabling economic activity of other stakeholders; and supporting access to basic needs

Standard of Living Development: Companies help in overall development of society by helping improve aspects like health, sanitation etc.

Gender equality

Health and well-being

Culture preservation

Empowerment

Evaluation framework

A comprehensive framework using these parameters is envisaged. This model can be applied provided all the requisite data is available. But this model can be tweaked to evaluate firms based on available data. Following figure illustrates the same:

Figure : Inclusivity Evaluation Framework

The parameters need to be divided into 'must have' and 'good to have'. For economic indicators, 'must have' parameters include steady stream of revenues and profits. Having adequate asset base or less liabilities is good to have but not a necessary requirement for a business to be commercially viable.

Similarly, social indicators can also be classified into 'good to have' and 'must have' indicators. However, indicators will be classified into 'must have' category only if they correspond to fulfilling primary objective. In case of crafts industry, income generation and human capital development are primary objectives and hence come under the category of must haves. Standard of living development through indirect impact and assisting in development of micro enterprises forms secondary objective and hence is classified under good to have category.

In the figure above, social indicators have been bucketed into 4 heads. However, these can be assessed at a level deeper (migration, women empowerment etc.) depending on data availability.

The evaluation for any firm will involve rating on a 5 point scale (indicated through Harvey balls). Although the rating is subjective, it has to be backed by adequate proof. Also, one firm's rating can't be compared to other firm's rating. The rating will only indicate how far is the firm currently from attaining its objective/being best in class. Weighted average of ratings for each criterion will give overall rating. Weights will be determined based on the relative importance of each parameter.

Assessment of inclusivity: FabIndia

Inclusivity was assessed for FabIndia as both a viable commercial as well as social venture.

FabIndia: Overview

FabIndia was conceived with the mission of reviving craft skills by creating a market for hand-crafted products and thereby generating sustainable employment for village based craftsmen. FabIndia worked as a facilitator between the weavers and niche buyers who wanted a merchandiser to sell the particular products. Change in customer consumption pattern and increased income per capita has given boost to domestic sales of FabIndia. Target Customers appreciate the fact that they have an extraordinary culture and that a handmade product has an intrinsic value.

Working Model

Pre liberalization

Initially, teams from cottage emporium were sent to different villages to collect samples from craftsmen. Then these works were put on exhibitions and other promotions for sale. The response was measured then orders were taken.

Later, weavers brought a 12" fabric (their own work) to FabIndia. Amongst the lot, few samples were approved and sent to different buyers with price list (price depended upon the quality of work). The buyers responded with the order size. FabIndia then approached the weaver for the order.

Today

The working model of Today's FabIndia is simple. FabIndia created an investment company Artisans Microfinance (AMFL), which helped funding 17 community-owned companies that FabIndia calls "supplier-region companies," or SRCs.

The enterprises are self-managed and serve as a platform for disbursing financial and technical assistance to weavers, enabling them to scale up production. These 'Supplier Region Companies' (SRCs) are envisioned as regional supply centers that would consolidate supply capacity, create and provide access to common facilities, implement standard systems for production and delivery, and train artisans. Each SRC is supposed to cover a geographical spread of approximately 6-7 surrounding districts. Supplies for all product categories - textiles, organics or furniture are sourced through the SRC. When they were restructured, the artisans got shares of these companies thus gaining a share of FabIndia's pie. The income generation through employment and shares is considerably good.

Hiving off management responsibilities to shareholder-owned companies promises to make FabIndia more efficient, too. Instead of dealing with more than 700 individual suppliers, the corporation only deals with 17 SRCs. Thus it enables the company to handle larger volumes and theoretically gives smaller artisans and suppliers a better chance to showcase their products locally and break into the retailer's supply chain.

Figure: Working Model

Figure: Operating Structure

Figure: Marketing Structure

Challenges

Pre liberalization

Low finance to procure RM and inadequate distribution structure

Maintaining high inventory while finding a prospective buyer leading to a cash crunch

War conditions causing the artisans to flee from villages and causing delay in shipments

It was tough to maintain quality or deadlines over long distances ( artisans were placed at different places all over north India)

Tension within various castes in villages for various types of jobs

Today

Additional capital requirement

Shortage of qualified personnel

Threat from new retail chains

Increasing rental rates

Key Success factors

Pre liberalization

The company tried hard to maintain quality and delivery schedule

Today

Create an exquisite and exclusive product

A price point that defines that exclusiveness yet not out of reach of common man

Operate at a niche market with limited accessibility that builds an aura

Never advertise but make people talk about the product and shopping experience

Structure and Pricing

FabIndia consisted of 3 major departments: production, export and finance

Followed an open book strategy with both suppliers and buyers

Constant Mark up

Essentially followed the principle: Keep working on the fabric until it looks good and then calculate the cost.

Assessment of inclusivity: Commercial venture

Commercial viability of FabIndia was assessed by evaluating adequacy of demand (through financial indicators) and adequacy of supply (through operational indicators). Following figure illustrates that:

Excellent performance

Average performance

Area of improvement

Figure : Assessment of Inclusivity: Commercial Venture

Excellent performance

Average performance

Area of improvement

Adequacy of demand (Financial indicators)

Revenues: FabIndia has revenues of over Rs. 500 Crore with expected YoY growth of over 30%. Also, the product base has diversified from textiles to include non-textile items and even organic foods helping it achieve scale.

Net margin/Gross margin: Because of its early start, FabIndia was able to get prime mover advantage resulting in cost advantage which translates into a net margin of 8% which is almost 3 times higher than the industry average. However, increasing competition from commercial retailers poses a potential threat in future.

Adequacy of supply (Operational indicators)

Infrastructure: It is well established in terms of retail stores with presently 144 stores and target of 350 stores by 2015. It is also backed by a strong infrastructure in terms of manufacturing and logistics.

Processes: Presence of a robust supply chain that could deliver goods at affordable prices, with very low variance in quality and just-in-time supplies-making its supply chain innovative

Human resources: As the backbone for ensuring adequate supply is human resources in case of crafts industry, multiple aspects of HRM need to be evaluated:

Organizational structure: They have sourcing from 17 different regional CoCs with decentralized sales. This helps in limiting dependence on a particular vendor. It also helps in empowering the people at local level by giving them authority to make decisions on a day to day basis.

Skilled labor: FabIndia invests in training and development of workforce ensuring adherence to optimal quality standards.

Incentive structure: Exclusive suppliers and employees of FabIndia have more than 36% stake in the company which helps them tie their revenues to company's performance increasing motivation to work.

Assessment of inclusivity: Social venture

As indicated in the figure below, FabIndia has more or less achieved its primary objectives of social impact namely employment generation (by linking 80,000+ rural producers to urban markets) and human capital development by conducting extensive training programs imparting both technical and business skills.

Apart from that they have been instrumental in development of enterprises by creation of SRCs and Artisans Microfinance Ltd.

They have also stressed on inclusion of women weavers aiding in women empowerment. The women weavers are now earning approx. Rs. 2000-3000 per month. They also claim to preserve Indian culture by providing ethnic designs but this is debatable as the designs are more contemporary and suited to high end customers rather than focusing on Indian culture.

Figure : Assessment of inclusivity: Social venture

Good to have

Must have

Suggested path ahead

Overall, FabIndia is doing well as a commercial and social venture. However going forward it needs to take certain measures to sustain its performance as an inclusive business:

Commercially:

Unlock demand and the brand in tier 2 and tier 3 cities

Try to scale up profitablywhile retaining its brand equity in handicrafts

Capitalize on cost advantage

Focus on brand building & marketing initiatives

Socially:

Increase awareness and acceptance of women employment in villages

Promote through local influencers (Eg-SathyaSai Academy, religious leaders, panchayat )

Conduct job melas to share positive experiences

Assessment of inclusivity: Mother Earth

Similar to FabIndia, Mother Earth was evaluated for sustainability as a commercial and social venture:

Mother Earth: Overview

Mother Earth is a design led brand that worked with natural fibres for over 15 years in retail, and exports operating out of Bangalore. This company has emerged out of Industree Crafts, a social organization set up in 1994. Industree scaled up and broadened its products to include garments (woven, embellished and stitched by SHG's or rural artisans), food (organic and natural) and a wider range of home linen as well as a large range of handicraft decor, furniture and gift items. They have standalone stores as well as shop-in-shop presence in Pantaloon outlets like Home Town and Ethnicity. They are growing very rapidly and plan to have about 40 stores operational in 5 years.

Company structure

The company is organized into 4 primary functions:

Mother Earth for Retail

Industree Crafts Pvt. Ltd. for manufacturing expertise, design and support

Industree Transform Pvt. Ltd. for Supply Chain (producers stake 26%)

Industree Crafts Foundation, the not-for-profit arm working with government and providing training to the artisans

Figure : Mother Earth Company Structure

Supply chain

Mother Earth sources from 4 different types of suppliers. These include producer groups with 100% artisan ownership (formed by ME), NGO's/cooperatives, established fair trade vendors and partners (established NGOs). Mother Earth is trying to modify its producer mix to ensure higher contribution of Producer groups to the overall supplies.

Mother Earth keeps a strict check on quality by control RM supply to the producer groups and other vendors. It typically sources RM from certified fair trade vendors.

Figure : Mother Earth supply chain

Assessment of inclusivity: Commercial venture

Commercial viability of Mother Earth was assessed by evaluating adequacy of demand (through financial indicators) and adequacy of supply (through operational indicators). Following figure illustrates that:

Figure : Assessment of inclusivity: Commercial venture

Adequacy of demand (Financial indicators)

Revenues: Mother Earth had anexpected turnover of Rs. 120 Mn in 2010-2011. They have also formed ICPL to forward integrate to provide a stable demand

Net margin/Gross margin: With Profits after tax (PAT) in FY 10 as Rs. (24.52) Mn, Mother Earth hasn't been able to make money. However, it is still in growth stage in its lifecycle and is expected to break even in next couple of years.

Adequacy of supply (Operational indicators)

Infrastructure: It has currently 12 stores and is planning to expand to 40 stores by 2015. It also has financial backing and retail sector expertise of Future group helping it develop a robust infrastructure.

Processes: It follows standardized processes in terms of work allocation and sourcing. It controls RM supply for producer groups by purchasing from trade certified suppliers leading to strict adherence to quality standards.

Human resources::

Organizational structure:Producer groups not on payroll in case of Mother Earth which provides option of becoming independent entrepreneurs. The SHG group members report to group leader who manages the group. However, there are issues with scalability as a SHG can have minimum 10 and maximum 20 people.

Figure : Org. Structure

Skilled labor: ICPL trains producer groups for development of core artisan skills. However, it doesn't provide design independence to artisans resulting in potential conflict of interest.

Incentive structure: Producers have 26% equity stake in firm ensuring stakeholder performance being linked to the company performance. However, fringe benefits like PF, health insurance are not provided as producers are not on payroll limiting the scope of incentives that can be provided.

Assessment of inclusivity: Social venture

As indicated in the figure below, Mother Earth is on its way to achieve its twin objective of livelihood generation and human capital development. However it has taken a step ahead to improve standard of living of the entire village by forming a mutual beneficiary trust where 10% of the money earned by organization is pooled back for community development. ICF helps in human capital development by not only training SHGs in core skills but also helping them understand the basics of running a business.

They have tied up with the banks to aid in easy access to financial planning instruments for the villagers. They are also working towards enterprise development by opening producer companies, the first one of which will be opened in Karnataka. This will also improve the incentive structure by providing fringe benefits to artisans.

However, like any other social business, there are unintended negative consequences associated with providing jobs to artisans - opportunity cost of pursuing higher education or agriculture. We don't have any data for Mother Earth in this regard and hence have not evaluated Mother Earth on this.

Figure : Assessment of inclusivity: Social venture

Good to have

Must have

Suggested path ahead

Mother Earth is on track of becoming an inclusive business. However, profitability can become a major concern for overall sustainability in future. It should take following measures going forward:

Commercially:

Focus on brand building & marketing initiatives

Try to scale up profitably in other metros while retaining its brand equity in handicrafts

Form formal organizations with an option for rural artisans to join

Tie-up with NGOs, govt. organizations to outsource training

Ensure fringe benefits through formal organization

Socially:

Actively invest in other community development themes like blood banks, sanitation etc.

Create micro enterprises to ensure better incentives like PF, ESOPs by putting people on payroll

Tie-up with MFIs, banks to provide easy access to loans

Promote higher education through correspondence

Provide education to family members

Actively provide info. about best practices in agriculture

Challenges faced in achieving inclusivity

Lack of Interest: Inadequate dissemination of information on existing models in similar business sectors or contexts, and little guidance on where to go for resources and advice.

Lack of experience, skills, and resources: Identifying and accessing internal innovation and brainpower is difficult. Also, there is lack of market intelligence and knowledge required to identify the best opportunity for a company.

Political and regulatory environment: Political and social perceptions and biases against profit-making models are often a barrier to adopting inclusive business models. Health and safety risks of engaging with small businesses can be a barrier to developing initiatives as it is difficult to ensure that safety standards are upheld

Perceived Risk and competing priorities: Following areas of conflict arise:

Pro-poor business models may be branded as Corporate Social Responsibility (CSR) initiatives and thus dismissed by business units

Merger activity within some companies creates distraction to BOP or inclusive business initiatives.

Economic downturn drives a retraction to core priorities of business survival.

The specific market in which a company operates may not have sufficient scale to warrant pursuing inclusive business initiatives

Barriers of Execution: Execution barriers like financing, building demand and supply, principle agent problem across supply chain and difficulty of monitoring impact exist.

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