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Scope and Size of Opportunity Economic class C, D and E were considered to make the Bottom of Pyramid (BOP) in Brazil. In 2002, out of a total population of 176 million 84% of population was considered to be part of BOP, which represented significant purchasing power making 41% of total spending capacity of the country, which further accounted for US$ 124 billion in formal, reported economy. It was also believed that the informal sector reaches another 50% of the BOP. The strength of the purchasing power of BOP can easily be estimated by the fact that of the total appliance and furniture market of Brazil had 45% of the pie represented the BOP. Television, radios and refrigerators were very common in households in BOP, which even lacked basic infrastructure like toilets and telephones. The furniture and appliances market at the bottom of the pyramid was estimated to be 6% of the total spending capacity or US$7.6 billion. Most of the banking sector in Brazil was formal and had less than 50% of penetration in the BOP. Informal financiers were available in the market that were willing to provide finance at micro level, but the average interest rates in such cases were about 14% per month. Most of the BOP has a wage level of R$400, with which it was hard to support good brands luxury items. Formal banking sector not interested to work and the informal financing sector with very difficult terms to do business with, literally made access to financing impossible, thus, BOP a strong purchasing muscle of society left untapped by most of the big retailers. Casas Bahia realized the opportunity and aligned the strategy to milk it. Some of the other players were working on the similar lines, but with retail margins of as low as 2.5% where volumes was the name of the game, either they were not very successful or were already planning to pull out of the venture. Theory of Change To improve the everyday life of those at the bottom of the pyramid by providing them access to those merchandize that they dream to buy through giving them access to easy financing which will trigger a consumption explosion. Demographics of the Targeted Market Seventy percent of Casas Bahia customers have no formal or consistent income. Majority of them were working as maids, cooks, independent street vendors and construction workers, with average monthly income of R$400. They typically lived in concentrated
which would as a result define an upper limit for the client. Thus the program helped Casas Bahia not only to judge the financial strength of the client but also to create a relation that would be beneficial to both players. Salesmen only deal with the straightforward 2 . As SPC was a very reliable source of credit check that would only provide positive or negative information about the client thus saving Casas Bahia from working with bad creditors. Working in credit terms with the bottom of the pyramid is always hard because of higher risk of default due to informal and non-consistent income.5% as compared to competitors where default rates can be as high as 16%. who by way of interviewing the clients would evaluate the creditworthiness of the client. This results in customer education. If the client has positive score on SPC only than he could move ahead with the process where if the product was less than R$600 only requirement was a valid permanent address otherwise for more than R$600 merchandize other information like proof of income were required to be entered in a system to assess the clients financial health. If the price of merchandize that the client wants to buy is more than that upper limit the sales man would kindly forward the client to the credit analyst. If in future the client shows creditworthiness. Casas Bahia’s Role Casas Bahia developed an innovative financing program to help this segment of BOP where the people can make payments in form of small monthly installments against the merchandize they bought. Human Capital Credit Analysts are the most important players in the sales chain. The relations helped Casas Bahia to grow while helping their clients spending in accordance with their income. Any client willing to purchase product on financing – which made about 90% of the total sales – would be required to submit an SPC credit check. Customers regard that credit is easy at Casas Bahia.Casas Bahia: Fulfilling a Dream Social Entrepreneurship 2011-01-0073 areas called favelas in small size houses of 215 square feet along with up to seven family members. This relation was required to be based on a program where the clients from the BOP never felt humiliated due to their small pocket sizes and where saying “No” to them was regarded as even below the last option. his upper limit will be raised thus enabling him to buy more. which at Casas Bahia is believed to major cause of lowest average default levels of 8.
Right questions being asked and evaluating the answers to judge the creditworthiness of the client in a span of ten minutes is the part of learning of the program. Delivery Drivers ensure successful. while credit analysts are the guys who take on the complex cases and with their fine tuned skills make it look simpler. free transportation and policy of no firing without director’s approval. After the classroom training the analyst spends two weeks in store with an experienced employee. It is in the classroom where these future analysts are taught these soft skills so that can enable them to foster relations with their clients. This will not only result in a bad word of mouth but also if the situation changes to positive for the client he might not return. With the help of these questions when the credit analyst has reached the conclusion to allow the client make the purchase above than the approved limit helps the client to be grateful towards the analyst for taking a chance on him and spreading a very positive word of mouth because his dream was fulfilled. on time and reliable deliveries to customers. Their training process is a combination of classroom and informal techniques. These retention programs include salaries above than the market average. The fact that 3 . subsidized cafeteria services.Casas Bahia: Fulfilling a Dream Social Entrepreneurship 2011-01-0073 customers who have a case. Thus this training helps to develop credit analyst who are known to have played a major role in the present success of Casas Bahia. Another major training effort is to teach new comers the art of saying “no” to customers. Casas Bahia employs and trains approximately 2500 drivers and crew. The training program is based on the ideology that even if the client has to leave without being served he should leave with a positive impression about Casas Bahia that would result him coming back when the situation improves or referring several others to the store whom the system approves for purchase. This is where Casas Bahia has spent a lot to train their human capital for capacity utilization resulting in not only to maintain default rates below industry average but also fraud detection. In order to lower the training costs the company has increasingly focused on retention programs. At the BOP clients not only expect to meet people who show respect when they go for asking credit but also someone who could be friendly and have a sound understanding of their situation. This policy has helped Casas Bahia to keep a very low turnover rate of 3%-4%. At Casas Bahia it is believed that when the customer enters the store he has a dream to be fulfilled and when denied their dream is destroyed.
Toshiba. where they are trained to be respectful. Human Resources Management has become an important task since 1996 when Casas Bahia started expanding rapidly. The average salespersons make about R$1500 per month. Casas Bahia mostly hires locals as this results in not only in better employee efficiency but also for the customers a feel of pride and ownership prevails. Casas Bahia employees approximately 20. Most employees spent their entire career at Casas Bahia and the average turnover rate is 1%. They are trained to load and off-load trucks. thus Casas Bahia also ensures that these drivers undergo a formal training program. be courteous to dispose off the old merchandize from customer’s place and not to bump or drag the merchandize.Casas Bahia: Fulfilling a Dream Social Entrepreneurship 2011-01-0073 most of the time these employees will be dealing with the females. Salesperson is paid minimum salary of R$500 per month while usually a major chunk of salary comes from commissions from sales which are in addition to the guaranteed salary. clean and well groomed. In addition to this in good times the company ensures a bonus equivalent to two paychecks and employee recognition and reward programs such as travel incentives to as lucrative places as Disneyworld.000 employees and additional 2. Top brands include Sony. An evaluation program is also maintained to ensure these services by way of providing phone numbers to clients to lodge complaints and randomly sampling of 3% of customers for report on their delivery experience. all starting at the bottom and working their way up the ladder. The lowest rank in the corporate ladder at Casas Bahia is salesperson.500 contract installer. Trainings are an important part of employee grooming. denying the misconception that the people at the BOP do not desire quality products by providing a system of installments for payment of such high priced quality goods. Most of the middle managers have been with the company for the last 20 years. which ensures that required level of services are performed and core values are entrusted with the employees while helping them to learn and adjust quickly. All trainings are designed to teach the employees one core value in addition to others that the better the Casas Bahia do the better the employees will be personally and professionally. Casas Bahia’s merchandize was strongly 4 . which continues in times of economic turn downs. These salary packages are believed to be better than the direct competitors. JVC and Whirlpool. Operating Model Products of best labels and quality are carried and sold at Casas Bahia.
In 2003 advertising budget for Casas Bahia reached R$200 million equaling to the combined advertising budgets McDonalds and Pao de Acucar for the same period. as it is believed that in retail business. This fleet includes 90 long haul trucks. which leaves broadcasting heavily the brand name and low prices to attract customers. This helped the company to reduce costs hence increased margins while ensuring quality and availability of products. In addition to this Casas Bahia maintains a fleet of approximately 1000 truck. all from Mercedes. Casas Bahia invests 3% of its revenues in advertising and consistently maintains the largest advertising budget in Brazil. Marketing has always been very important to Casas Bahia and is one of the key components of success. the company was the major reason for failure or success of brands in the Brazilian market. Furniture was the top-selling product with 31% of total sales. there is much less to differentiate between the available products. Offering promotions like interest free financing further augmented the demand for furniture. Mostly Casas Bahia advertises on television. Advertising is given extra importance at Casas Bahia. The company has achieved operational excellence with the help of three distribution centers and six cross docking facilities. Casas Bahia has one of the world’s largest warehouses that help them store products in large quantities. which is believed to reach about 90% of the households in Brazil. In order to increase its margins Casas Bahia was continuously trying to move towards increased furniture sales as compared to appliances. Due to its huge size.Casas Bahia: Fulfilling a Dream Social Entrepreneurship 2011-01-0073 concentrated on furniture and appliances. The company negotiates hard with its suppliers to get the best deal at the lowest possible prices and volumes are non-issue at Casas Bahia. 700 standard trucks. This range helps in maneuvering any type of terrain in the supply chain system. The company also 5 . The company followed a backward integration by opening up furniture production facilities. 200 medium trucks and 10 small trucks. Another key success factor for Casas Bahia was that while designing products it reversed engineered by first deciding the terms the product will be sold to customers and based on that knowledge the product is designed. Supply Chain Management is a core success factor in Casas Bahia’s operational excellence. In addition to lower prices this storage capacity also helps to ensure timely delivery of products thus saving the company of stock out costs.
At the time when rest of the industry was pulling away from investing in technology. including pardoning of bad debtors in 2002 thus enabling those to purchase again and unemployment insurance for appliance sale committing to forgo first six installments if the purchaser lost his job. actors and television anchors. the focus now is on maximizing customer experience. Casas Bahia continues to invest in technology today to bring further improvements in the systems in which.000 spots in 3 cities in the last 6 months of 2002. 6 . In addition to as the data was required to be entered only once. Research for finding the impact of advertising on Brazilian customer reported that Casas Bahia ranked 5th in overall favorite advertisements by television viewers. It has helped them not only to create differentiation in terms of customer management but also providing excellence in their internal systems and processes.8% of its revenues on technology related expenses as compared to about 3% by its competitors on similar expenses. Casas Bahia took the initiative to invest into upgrading its systems. In addition to these promotions was the Casas Bahia yellow preferred – client card. In addition to that Casas Bahia ranked 4th in the top of mind brands. so the errors and redundancy reduced many folds. Klein and inactive customers were sent letter reminding them as how business with them is valued by the Casas Bahia. with the closest competitor at number 11. which was given to the punctual customers and soon become a status symbol in Brazilian society. which afterwards reduced to 4-5 credit analysts per store and the waiting time reduced to 10 minutes. It is estimated that Casas Bahia spends about 0. Further there were letter-writing plans in which punctual clients were sent letters of thanks from Mr. Technology at Casas Bahia Technology has been the main edge for Casas Bahia. In order to attract customers the company also improvised several promotional plans. Prior to these upgrades. The advertising campaigns usually target emotional appeal and emotional relationship of customers towards the company by way of leveraging famous singer.Casas Bahia: Fulfilling a Dream Social Entrepreneurship 2011-01-0073 invests heavily in radio time with more than 30. the company required 30 credit analysts and the average waiting time for customers was 30 minutes. which gave it an edge during the economic regeneration.
I was doing my internship in agri-sector and had a chance to meet several farmers for the purpose of market research. fertilizers. But the Arthies exploit this situation in order to increase their profits. which could provide products (including seeds. My idea is if a chain of agri product outlets is opened on the similar lines of Casas Bahia in Pakistan rural areas. They minimum interest rates (or profit) charged was 30-40% on 6 month basis. But still I think that can be manageable. But if the crop is destroyed due to natural causes it’s a complete loss. There are a couple of risks. 7 . I do not think other than that bad debit can be a big issue in rural areas. It was very interesting to know that even big farmers (who own 200-300 acres of land) worked with Arthies and more interesting was the fact that they knew that Arthies are selling them goods way above the market prices and buying product from them way below market prices. pesticides etc) to farmers on credit with lower interest rates that can tremendously improve our agricultural output as well as can be an excellent source of revenues. It is a common known fact that most of the farmers do business with middle man (Arthi) due to lack of financing. which are required to be managed while taking this idea into persuasion including the risk of bad credits as a result of destruction of crop due to natural factors or otherwise. But I was told that it was their need to work with them due to non-availability of finances.Casas Bahia: Fulfilling a Dream Social Entrepreneurship 2011-01-0073 Pakistan Store This idea has a lot of potential in Pakistan agri-business.
Casas Bahia: Fulfilling a Dream Social Entrepreneurship 2011-01-0073 Exhibit 1 8 .
Casas Bahia: Fulfilling a Dream Social Entrepreneurship 2011-01-0073 Exhibit 2 Casas Bahia’s Innovative Platform Source: Booz Allen Hamilton 9 .
Casas Bahia: Fulfilling a Dream Social Entrepreneurship 2011-01-0073 Exhibit 3 Website of Casas Bahia – Another proof of their technical strengths 10 .
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