Transcript Case Study ：Mercy Charitable Foundation

Case Study ：Mercy Charitable
Foundation
指導教授：王俊程
第四組：鍾佳蓉、蔡青潣、宋政桓、陳昭錡、王琮仁
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
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
Activities
For
homeless children
For elderly
and substance abuse
Provide meals
Provide meals
Offer educational,
social activities,
legal aid and
counseling programs
Offer educational,
social activities,
legal aid and
counseling programs
Finance
Worsened
country economicLocal
situation
NGOs
business partners
Mercy
Charitable
Foundation
international donors
local government
Decide to initiate income-generating activities
Local agricultural
to sustain the organization
and its operation.
producers
Prior Financial Support
and business
New Activity


To start a café
Hunan resource


Mercy youth club members served as
volunteer labor to build physical facilities.
Venture team, experienced in the restaurant
industry.
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
Café would go bankrupt in case of not
selling alcohol and cigarettes.
Decision to Start Kovcheg Café



Smoke- and alcohol-free restaurant
Low price strategy and emphasis on
quality
Kovcheg Café provides different service
from other café in Zhytomyr.
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 café
and Mercy’s free meals program.
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.
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 café.
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 café.
Mercy should prepare a marketing plan focused on
developing the café’s brand and image.
What did CAP do for
Mercy?(3/3)

Develop a niche market —
The café 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.
Challenges- Financial





Mercy lacked funds to invest in full-scale
renovation and upgrades for the café.
The kitchen needs a better ventilation
system, a major expense.
The café 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.
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 café 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.
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 café manager.
Employing student interns doing practicum
work to reduce the cost of labor.
Challenges- Bureaucracy



Meeting licensing requirements and dealing
with legal authorities very trying.
Several of the neighboring cafés 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.
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.
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 café
the café played an invaluable role in raising
political and public awareness regarding
healthful lifestyle
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
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
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
Key Success Factors of Kovcheg
Café






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
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
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
Q&A(2)

Bribe the health department?


Bribe: get higher profit and serve more
clients
No bribe: no money and no clients
No money