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Masisa Argentina and the Evolution of

its Strategy at the Base of the Pyramid


An Alternative to the BoP Protocol Process?*

Miguel Ángel Gardetti


Centre for Study of Corporate Sustainability, Argentina

Guillermo D’Andrea
Universidad Austral, Argentina

Masisa Argentina is a wood/timber company that has been in operation since 1992.
It belongs to Masisa, headquartered in Chile, whose main investor is GrupoNueva.
In 2005, and after a pilot development project in different Latin American countries,
Julio Moura, then CEO of GrupoNueva, took the strategic decision to commit the
company to earning 10% of its income from base of the pyramid (BoP) business by
the end of 2008. Then, Roberto Salas, current CEO of GrupoNueva and President of
Masisa, consolidated and enhanced the BoP corporate strategy. This process was
reflected in Masisa Argentina, which went from the creation of a system of ready-to-
assemble furniture, to carpenter-craftsman training and development to a pilot
project in a prison in the Province of Buenos Aires. This case study analyses the OO Masisa
Argentina SA
evolving strategies at the base of the pyramid of Masisa Argentina based on the core
OO Base of the
concepts of this type of strategy. This is also compared with the fundamentals of the pyramid (BoP)
BoP Protocol by showing that the company—relying on the domestic environment— OO Wood/timber
managed to make use of the BoP integration strategies thanks to the lessons learned company
at a time when the company had almost no experience or capability to develop this OO Argentina
type of strategy. OO BoP Protocol

Miguel Ángel Gardetti is Director of the Centre for Study of Corporate


Sustainability (CSCS) in Buenos Aires (Argentina), and both the founder and
u Centre for Study of Corporate
Sustainability, Avda. Córdoba 6502,
coordinator of the Argentina Base of the Pyramid Learning Laboratory. He 1er piso ‘B’, C1427BZS Buenos
teaches business strategy and sustainable development and base of the
Aires, Argentina
pyramid. He recently published Texts on the Base of the Pyramid: Toward the
Co-creation of Value and Development (2009). He holds a PhD in ! mag@sustentabilidad.org.ar
Environmental Management (Pacific Western University, California).

Guillermo D’Andrea (PhD) teaches marketing at IAE Business School in


Buenos Aires, Argentina, retail management at Babson College and Mexico’s
u Mariano Acosta s/n y Ruta Nacional
8, B1629WWA Pilar, Pcia. de
Monterrey Tec and is a visiting professor at MIP International MBA in Buenos Aires, Argentina
Milano, Italy. His research interests cover retail management and business
strategies for the bottom of the pyramid. In the past he has researched on ! gdandrea@iae.edu.ar
International Marketing and Agribusiness. Author of six books, he is Research
Director of The Coca-Cola Retailing Research Council – Latin America.

  * The authors would like to thank Masisa Argentina for its important contribution to the development
of this case study.

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T
he widening inequality gap in Argentina is alarming. According to Mario
Teijeiro (2009), a few decades earlier, Argentina was a middle-class island amid
a Latin American region characterised by ‘dual’ societies, with very few affluent
people and very many poor people. During the 1970s, it had a Gini coefficient
of 0.36, quite similar to that of industrialised countries (0.35).1 At present, that value is
near the Latin American average (0.50, approximately), while the Gini coefficient of
industrialised countries has remained unchanged. A research study conducted by
Narayan et al. (2000) can explain the reasons: governments have proved ineffective in
eradicating poverty, and NGOs have played a very limited role. In this connection, in
the preface of the research study Tomorrow’s Markets (2002), Michael Porter stated, ‘we
are learning that the most effective way to address many of the world’s most pressing
problems is to mobilise the corporate sector in a context of rules, incentives, and part-
nerships where both companies and society can benefit’. In his paper ‘An Economic
Strategy for America’s Inner Cities: Addressing the Controversy’, Porter (2001) said,
‘the lack of businesses, investment, and most importantly, jobs in these disadvantaged
urban areas not only perpetuates a crushing cycle of poverty but fuels other social prob-
lems’. Finally, Warner and Sullivan (2004) stated that the World Summit on Sustainable
Development (Rio +10) had clearly underscored the central role of the corporate sector
in the crusade to reduce poverty.
That is, the sustainable business has the potential to bring together the private sector
and development including issues related to poverty, respect for cultural diversity and
environmental conservation (Hart 2005a, 2007).
This paper shows the evolution of the strategies at the base of the pyramid in the
case of Masisa Argentina, a wood/timber company in operation since 1992. This process
goes from the DIY furniture concept, to carpenter-craftsman training and development,
to a pilot project in a prison located in the Province of Buenos Aires. This is also com-
pared with the Base of the Pyramid Protocol (BoP Protocol) process, showing that the
company, relying on the domestic environment, managed to use strategies of integration
with low income people through a learning process created when the company failed
to have the capabilities (and experience) to develop BoP strategies.2 Thus, the purpose
of this case study is to contribute to the debate on the current, rather dogmatic, approach
to the BoP Protocol.

Methodology
In order to develop this case study, the authors gathered background on the company
from two sources. One source was the company’s active participation in the BoP Learn-
ing Laboratory since 20053 and, the other, the sustainability reports of Masisa (at cor-
porate level) and Masisa Argentina. These sources were supplemented by eight

  1 The Gini coefficient is generally used to measure income inequality (web.worldbank.org/WBSITE/


EXTERNAL/TOPICS/EXTPOVERTY/0,,menuPK:336998~pagePK:149018~piPK:149093~theSiteP
K:336992,00.html, accessed 13 April 2010). It is a number between 0 and 1, where 0 equals absolute
equality (everybody has the same income) and 1 equals absolute inequality (one person holds all the
income and the others no income).
  2 www.bop-protocol.org (accessed 13 April 2010).
  3 In January 2000, one of the major milestones in the development of this BoP conceptualisation
occurred: Professor Stuart Hart developed the first ‘learning laboratory’ at the University of North
Carolina, USA (relocated in 2004 to Cornell University, New York). Later, this learning lab would
give rise to an international network of laboratories, including those developed at Instituto Tec-
nológico de Monterrey (Mexico, 2004), Instituto de Estudios para la Sustentabilidad Corporativa
(Argentina, 2005), Fundación Getúlio Vargas (Brazil, 2005), Tilburg University and Triple Value

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interviews. Two of them were conducted in GrupoNueva, at a corporate level. One inter-
view was with the current CEO and the other with the former CEO. An additional five
interviews were conducted in Masisa Argentina: one with the CEO, three with the mar-
keting manager and one with the head of channels and inclusive business. Finally, the
head of the Placacentro store in the City of Santa Fe was also interviewed.

Main elements in the development of BoP strategies


There are several reasons why the base of the pyramid (BoP) is a very complex concept.
First, the vision of managers and business executives is generally conditioned by their
familiarity with consumers on the upper half of the pyramid (Doering et al. 2002). This
is related to what Simanis and Hart (2008) referred to as ‘disembedded innovation’,
characterised by three attributes: a product-centric value proposition, a clinical orienta-
tion to stakeholders, and a discovery-based approach to the community. The primary
goal of ‘disembedded innovation’ is to bring less expensive and better-performing
products into the hands of the consumers, which results in business solutions that
are structural in nature. These structural business solutions focus on the physical or
architectural dimensions of the business system and include changes to product/
service design, improvements in the production process and reconfiguration of the
value chain.
Second, becoming involved in the BoP markets casts doubts on many of the assump-
tions held by managers for a long time (Prahalad and Hart 1999, 2002). And, third, a
company that wants to get to the base of the pyramid should broadly understand the
context, local needs and human development situation (Hart 2005a, 2007; Simanis and
Hart 2008; Simanis et al. 2008).
The co-creation process includes listening carefully to people living in poverty, dis-
covering their needs, and co-inventing solutions and business models. This is what
London (2007) defines as external diversity.
‘Becoming native’ based on an ‘embedded innovation’ strategy requires its own
distinctive capability, the so-called native capability that, according to Simanis and Hart
(2008), is based on a community-centric value proposition, a long-term partner orienta-
tion to stakeholders, and a creation-based approach to opportunity. At a field level, this
calls for skills in facilitation and the practice of humility, building trust and close ties
across different classes and settings, and co-evolving value propositions and business
models through action/learning approaches. At a corporate level, the native capability
requires maintaining an R&D ‘white space’ to promote linkages to corporate-level
resources and capabilities while maintaining, at the same time, sufficient independence
from the routines, metrics and structures that govern the core business. It also demands
patient capital and performance metrics that can support experimentation and learning
in the field. Radical transactivity refers to the identification, exploration and systematic
incorporation of feedback from fringe stakeholders. This concept was developed by Hart
and Sharma (2004) and it is the means by which companies become more ‘native’ and
develop ‘local’ capabilities to provide fully contextualised solutions based on local knowl-
edge and culture, and natural diversity (Hart 2005a, 2007; Hart and London 2005). It
is about joining the capabilities and knowledge of companies and communities. This
calls for a shift in the paradigm that people living in poverty are victims, to accepting
their knowledge and wisdom (Gardetti 2009a).

(Holland, 2005), Stellenbosch University (South Africa, 2006) and the Indian School of Business
(India, 2006). See bopnetwork.ning.com (accessed 13 April 2010).

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Innovation is an essential condition to access the base of the pyramid (Christensen


et al. 2001; Hart and Christensen 2002; Prahalad 2005, 2006). Technological innova-
tion should be regarded as a contextual process (Srinivasa and Sutz 2008) since depri-
vation involves problems at different levels: namely, infrastructure, access to materials
and products, institutions, people and economic resources (Kandachar and Halme
2008). The base of the pyramid needs innovations that will rapidly exceed current rou-
tines and knowledge (Hart and Milstein 1999). That is the difference between continu-
ity and discontinuity as pointed out by Hart (2005b). The former is illustrated by
concepts such as efficiency, operations, control, resource allocation and convergent
thinking; the latter, by imagination, innovation, creative destruction, resource attraction
and divergent thinking.4 Discontinuity is also what Milstein et al. (2007) called the
‘revolutionary routines’: that is, the activities that purposely disrupt the status quo, help-
ing companies to innovate. This is what London (2007), in turn, defines as internal
diversity.
The creation of inclusive, co-created business will demand not only dramatic tech-
nological innovations and business models, but also the re-evaluation of price/perform-
ance ratios of products and services and a more effective use of capital.
As the communities at the base of the pyramid are usually physically and economi-
cally isolated, their development calls for more efficient delivery systems and networks
(Prahalad and Hart 1999, 2002). This means redesigning the supply chain to reduce
costs and reach the prevailing market cost. Large companies which are familiar with
developed markets think in terms of intensive use of capital and work productivity. The
opposite logic applies to the BoP: given the large number of people at the base of the
pyramid, the production and delivery approach should provide work to many people
(Prahalad and Hart 1999, 2002).

‘To be native’ and the BoP Protocol


The early business strategies at the base of the pyramid showed a limited understanding
of the needs and aspirations of the poor based on their consumption patterns. Therefore,
it is necessary to develop strategies in which the key element is ‘to become native’ based
on an ‘embedded innovation’ strategy. The BoP Protocol is an innovative process bring-
ing together a business and a BoP community. The purpose of this alliance is to imagine,
launch and develop a new business that would serve that particular community. The
process is based on the capabilities and resources of both partners and creates a strong
sense of shared commitment and profound interdependence. According to Simanis et
al. (2008) and Simanis and Hart (2008), this process consists of an initial phase before
the field work, and three interdependent field work phases, as follows:
tt Initial phase (before fieldwork). This phase includes choosing the right location
to develop the BoP project, teaching and training a multidisciplinary corporate
team, choosing partners from the local community, and creating an R&D environ-
ment in line with the BoP within the corporation
tt Phase I: opening up. This phase begins with a company ‘immersion’ in the com-
munity, paying home visits to build rapport and trust. The company’s immersion
team then recruits a community cohort, and together they learn about each other’s

  4 Exploration, experimentation, flexibility and disruption are crucial to economic vitality and corporate
success, especially when firms are exploring or responding to nonlinear change (Schumpeter 1934,
1942; March 1991; Hamel 2000).

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capabilities/needs and explore mutually beneficial business opportunities. The


result is an actionable, co-created business concept
tt Phase II: building the ecosystem. In phase II, the partners formalise a project team
and develop an initial product/service offering and brand position based on the
co-created business concept. Action learning is used to empower and build the
community team’s business skills, while creating ‘buzz’ in the larger community.
The result is a community-tested business prototype
tt Phase III: enterprise creation. In phase III the full business model evolves through
small-scale tests and action learning. The local market demand is catalysed through
the community engagement in this process. The community team deepens its
management skills, and the company creates a scale-out platform. The result is a
locally embedded business
According to Simanis et al. (2008), the principles of ‘mutual value’ and ‘co-creation’ are
crucial for the BoP Protocol. Mutual value refers to the fact that each process phase—not
just the new business—creates significant value for all the partners. The ‘co-’ particle in
‘co-creation’ refers to the need for companies to work in an equal partnership with the
BoP communities. Co-development ensures that the business model is culturally suit-
able and environmentally sustainable and built on local resources and capabilities.
The ‘-creation’ component in the term ‘co-creation’ reflects the vision that a co-gen-
erated business concept should be executed through an evolutionary and highly interac-
tive approach which eventually realises the new value proposition.

Masisa Argentina
Masisa Argentina is a wood/timber company that has been in operation since 1992. It
is controlled by Masisa with its main offices in Chile.
In Argentina the company has a plant in the city of Concordia, Province of Entre
Ríos, with a covered area of 56,000 m2, and a throughput of 450,000 m3 of wood boards
per year. The plant employs 1,200 people, either directly or indirectly.
In Argentina, Masisa has a forest division called Forestal Argentina SA which lever-
ages the ROI (return on investment) and develops highly profitable forest areas for the
company, looking for synergies with the board business. Forestal Argentina SA manages
72,383 ha of land in Entre Ríos and Corrientes, with over 44,500 ha planted with euca-
lyptus and pines. These plantations are certified by the Forest Stewardship Council
(FSC) for sustainable forest management, and 3,378 ha are devoted to natural reserves,
which are managed together with Fundación Hábitat y Desarrollo.
The company’s product family includes particle boards, MDF (medium density
fibreboard), melamine, sheets and pre-painted MDF mouldings. In 2008, the sales of
the Argentine branch accounted for 10.2% of the company’s consolidated sales (i.e.
US$107.4 million).
As of December 2009, Masisa Argentina’s distribution network included 54 Placa-
centro stores scattered throughout 15 provinces: Buenos Aires, City of Buenos Aires and
Greater Buenos Aires (22), Chaco (1), Córdoba (5), Entre Ríos (6), Jujuy (1), Mendoza
(1), Río Negro (1), Salta (3), San Juan (2), San Luis (1), Santa Fe (5), Santiago del Estero
(1), Santa Cruz (1), Tierra del Fuego (2), and Tucumán (2). These stores, based on a sort
of ‘franchise’, common brand and format, are innovative as they are focused on small
and medium-sized carpenters/furniture store owners. A peculiarity of Placacentros is
the addition of services related to furniture manufacture, such as design centres,

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enhanced board-cutting services, placement of edge-covers and hinges, door-to-door


delivery services, and technical discussions, among others. Likewise, the owners and
managers of these stores receive training and technical assistance from the company in
terms of products, applications, point-of-sale management and marketing techniques.
This results in increased business results and improved carpenter and small contractors’
productivity.

Process kick-off and corporate decisions


GrupoNueva promotes transparency towards more sustainable development of society
and business profitability. This means creating value for business while contributing to
a more sustainable world (Hart 1997, 2005a, 2007; Hart and Milstein 2003).5 According
to Hart (1997), and Hart and Milstein (2003), future business performance relies on
creating and sustaining the shareholder’s value. At this point inclusiveness, through the
base of the pyramid concept, may become a good option to create human value and
development.
According to Hammond et al. (2007), in Latin America (and the Caribbean), the base
of the pyramid accounts for US$509 million, including 360 million people, which can
be translated into a significant business opportunity.6 Therefore, in 2003, GrupoNueva
began to promote pilot projects in this field through its divisions, Masisa included. It
launched a contest called ‘Todos Ganamos: imagine negocios inimaginables’ [‘Every-
body wins! Imagine unimaginable businesses’], in which employees were asked to
prepare a business plan for low-income people. The contest terms were very specific:
projects had to be about business, not philanthropy, and they had to be innovative,
doable and consistent with the company’s strategy. Besides they had to offer goods and
services that would improve the quality of life of this population segment (Gardetti
2009b). Employees welcomed the contest with enthusiasm, submitting 246 proposals,
and at year-end the corporate jury selected three winners, one of which was a project
created in Masisa Argentina.
Encouraged by the contest results and the many pilot projects run in different coun-
tries, in February 2005, the former CEO of GrupoNueva, Julio Moura, set this strategic
goal: ‘10% of income should come from BoP business by the end of 2008’ (Schmidheiny
2006). The executives in charge of operations in the different countries in which
GrupoNueva carries out business were free to choose the best way to achieve such a
goal. Moreover, in 2007, the company held a region-wide contest to design social furni-
ture. The purpose of the contest, in which the target group was students from the design
and architecture programmes, was to enhance the professional future and development
of the furniture industry by creating innovative proposals and contributing to the well-
being of low income families living in social housing.
This entire process was fully endorsed and developed by the current CEO of
GrupoNueva and President of Masisa, Roberto Salas, who, early in 2008, reviewed the
strategies of inclusive business and the base of the pyramid.7 The range of strategies

  5 GrupoNueva has integrated the Sustainability Scorecard© into both strategic planning and risk
analysis. This strategic management tool helps identify the most significant business aspects and
describes the contribution of environmental and social aspects to a successful business strategy.
  6 The study conducted by Hammond et al. (2007) defined the BoP segment as having an annual income
of up to US$3,000.
  7 Parallel to this consolidation in GrupoNueva, Roberto Salas—through his work in the development
area at the World Business Council for Sustainable Development (WBCSD)—fostered, and currently
leads, the creation of a network of inclusive business executive leaders (www.wbcsd.org, accessed 13
April 2010).

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developed in different countries was analysed, among others, during a workshop deliv-
ered in Santiago (Chile) and coordinated by Fundación AVINA.8 Given such diversity
and in order to develop common grounds for the region, three areas were selected to
develop inclusive business:
tt Furniture for social housing
tt Carpenter training
tt Final furniture disposal
Moreover, strategies were also reviewed during that workshop, and the following objec-
tives were set:
tt To contribute to employment opportunities
tt To include the excluded sectors in the value chain
tt To help meet the BoP segment basic needs
tt To increase SME profits
tt To be profitable
tt To promote innovation and encourage collaboration between customers and sup-
pliers
tt To contribute to both a sustainable market and society

The early BoP strategies: Enkastrable and low-income carpenter


training
Enkastrable, which was awarded second place in the contest ‘Todos Ganamos’, is a ready-
to-assemble furniture system which would help low-income communities to access a
new concept of furniture design. The project was conceived by a group of collaborators
from Masisa Argentina. This concept includes ten standard pieces which—through a
simple fit-in or assembly system—can be assembled in endless combinations to get the
piece of furniture required by the customer to match different applications based on the
space available. This project may be regarded as the company’s landmark, as it intro-
duces the firm into the ‘finished product’ business, even though its original core busi-
ness is the manufacture and sale of wood boards.
This furniture system was manufactured at Masisa’s facilities, and the distribution
channels chosen to reach the base of the pyramid were the Placacentro network and Easy,
a home centre specialised in selling products for house construction, gardening, remod-
elling and furnishing.
Between December 2003 and March 2004, 1,000 units were sold at Placacentros. As
of May 2005 this rose to 4,500 pieces of furniture. The basic model cost US$10 per unit,
with a 36% surcharge.
While forecasts were encouraging, there were some obstacles. The major hindrance
was that, while 40% of Placacentros customers were very low-income carpenters, Enkas-
trable was purchased by a different customer profile and, at the same time, the Easy store

  8 AVINA’s mission is to contribute to Latin America’s sustainable development by fostering trust-


building bonds and profitable alliances between social and business leaders, and coordinating con-
certed action agendas.

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had a better penetration into the target market. Therefore, the company began analysing
alternative distribution channels:
tt Pine furniture stores. This channel was characterised by ‘informality’, both in terms
of wood purchase and furniture manufacture. Even if the company had decided to
favour formality along this channel, which was one of the aspects discussed, this
necessarily required working on a furniture-store-by-furniture-store basis which
was really quite complex
tt A second channel was also analysed and it laid the foundations for a pilot project:
mail-order catalogue shopping through an NGO. Alternativa 3 is an organisation
engaged in implementing and developing productive support programmes in the
Province of Buenos Aires. This experience failed because, according to Alternativa
3 salespeople, Enkastrable was not a suitable commodity for the base of the pyra-
mid
Figure 1 shows Masisa Argentina’s business model for Enkastrable and its subsequent
alternatives.

Figure 1  enkastrable: business model with subsequent channel alternatives

EASY

General and BoP


Masisa Placacentro customers
(production) Masisa

BoP customers

Pine furniture
stores

NGO: Alternativa 3
Alternativa 3 door-to-door
salespeople

Original model
Channel: mail-order catalogue
shopping through Alternativa 3
Channel: pine furniture stores

Simultaneously with the development of Enkastrable, Masisa Argentina, which was


training carpenters as part of its corporate strategy through its Placacentro networks,
began to include very low-income carpenters, who were actually its intended customers

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in this strategy.9 More specifically, the profile of those carpenters included piecemeal
but frequent purchases at Placacentros, unemployed but skilled carpenters, who might
make furniture with Masisa’s boards and who also used different services offered by the
distribution network stores.
By mid-2007, the firm had developed eight training programmes in 78 cities and
9,100 people were registered. By late 2008, 12,100 people had completed the training,10
which included a theory module delivered by Masisa to introduce the company and
product line to the participants. The company’s marketing management was in charge
of coordinating the development of these early projects.
Based on this result and the review fostered by Roberto Salas, the company finally
opted for programmes with broader and more specific economic impacts.
With the participation of Masisa Argentina’s CEO, company managers and leaders,
a workshop on ‘technological innovation and radical change’ was conducted in April
2007. The purpose of this workshop was to help members of the management team
and the organisation to think ‘out of the box’ and analyse the reasons why (radical)
innovation was a strategic need for the company based on the relation of that concept
and the base of the pyramid.11

BoP strategy evolution: new carpenters, cooperatives and prison


population
In 2008, Masisa Argentina created the position ‘Head of Channels and Inclusive Busi-
ness’, the holder of which is in charge of developing proposals to improve business
channels in terms of the product and service mix and inclusive business through the
Placacentro network and other stakeholders.
Thanks to this momentum, the training programme for very low-income carpenters
resulted in a broader programme targeted at ‘carpenter-craftsman’ training for low-in-
come people with no access to job opportunities, in order to foster entrepreneurship in
this population segment. The programme is entirely free of charge for participants, and
is focused on teaching different furniture assembly techniques based on the services
rendered by Placacentros, which provide board value-added through cutting, iron-fitting
and hinge application, and edge-gluing, among others. For low-income carpenters, all
these benefits translate into a competitive edge as they gain access to employment while
making a very small investment. Participants are invited either through the ‘Placacentro
Circle of Trust’ or other organisations, such as Cáritas in Jujuy, Fundación Manos Abi-
ertas in Concordia, and Desarrollo Joven in Mar del Plata.12
Training programmes are delivered monthly at different Placacentros around the
country. They take three days, including a theory and hands-on module, with a view to

  9 Masisa has defined the carpenters’ increased strength and loyalty as part of its strategy throughout
Latin America. In 2009, 8,000 carpenters were trained in the region with an investment of about
US$400,000. The 2013 goal is to have 30,000 carpenters join the programme.
10 These data have been collected from the initial training of carpenters as part of the corporate strat-
egy.
11 This workshop was designed and delivered by the Centre for Study of Corporate Sustainability.
12 Cáritas Argentina is in charge of the Catholic Church’s charitable action. It encourages, coordinates
and organises such action in an attempt to create and give comprehensive responses to poverty based
on the values of dignity, justice and solidarity. The mission of Manos Abiertas is to promote and
dignify human beings by improving their quality of life, as well as alleviating and easing the needs
triggered by poverty, pain and any kind of want. Programa Desarrollo Joven promotes employment
opportunities for socioeconomically disadvantaged young people, thus contributing to their social
inclusion.

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increasing productivity and quality of products developed by carpenters and to cutting


down costs.
In the theory session, participants are taught about Masisa’s principles, production
processes, the main (wood) boards, and, especially, about melamine. Moreover, they are
given recommendations for use and information about accessories (iron-fittings, hinges,
edge-covers and guides).
The goal of the hands-on module is to help participants apply what they have learned
in the theory session, relying on the advice of professional carpenters selected by the
company to deliver courses in different regions of the country. As a team, they learn
how to glue melamine edges, sharpen, screw and fix boards, assemble drawers, set doors
and use the cutting-enhancer, in addition to other services provided by the Placacentro.
As of December 2009, 1,267 new carpenters had been trained with this programme.
After the initial results, Masisa Argentina decided to add a ‘management module’ to
this training programme. It was delivered by Fundación FUNDES, an organisation that
promotes and fosters the competitive development of micro-businesses and SMEs in
Latin America. The purpose of this module is to help participants learn how to manage
their undertakings once the product is made. Participants learn about costs, sales, quotes
and how to prepare a furniture marketing plan. Moreover, a ‘sales and customer satisfac-
tion’ module was also included. It is delivered by Tack Training, a firm that collaborates
with Masisa in the training and the development of the Placacentro Network.
Within this framework, the firm is reviewing an agreement with Fundación Impulsar,
an organisation that supports low income and unskilled, young, unemployed or under-
employed people aged 18–35. The purpose of this agreement would be to cooperate with
the start-up of productive carpentry projects. Between 2007 and late 2009, 68 training
courses were delivered. They reached 1,267 people and about 47% became customers
of the company. The cost to the company of carrying out the 68 courses amounted to
US$30,000, while carpenters’ sales income amounted to US$400,000.13 Figure 2
shows the business model for this project.
Between August 2007 and June 2008, the purchases of some of the new carpenters-
craftsmen at the Placacentro store in the City of Santa Fe, following the first training
programme carried out in that city, amounted to US$14,800, while the joint investment
made by the company and the Placacentro to organise and develop the first programme
in 2007 amounted to US$1,120. The new carpenters’ increased purchases may be
regarded as an indicator of their business performance.
Supplementary to this training programme, and together with Va de Vuelta, an
organisation that creates opportunities and provides resources to help unemployed poor
people develop new ways of economic support, Masisa Argentina launched a social
inclusion project in the Prison of San Martín, Province of Buenos Aires. This pro-
gramme, which targets inmates whose families live in poverty, offers a chance to learn
the carpenter’s trade in prison and provides support in furniture manufacture so that
these inmates can improve their families’ livelihoods.
The programme is based on the different players’ capabilities: the company offers
training to prison inmates, the Placacentro provides the materials to make products (and
sells the finished products), and the inmates are paid to make furniture. The company’s
future plans include the involvement of retailers, such as Easy and SODIMAC, another
home centre like Easy, to carry their products. Va de Vuelta is in charge of the coordina-
tion and audit processes. Figure 3 shows the business model for the project carried out
in the prison. So far, the training has been delivered to ten inmates and only four of
them work as carpenters.

13 1 Argentine peso = US$0.32 (average exchange rate between 2007 and 2009).

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masisa argentina and the evolution of its strategy at the base of the pyramid:

Figure 2  training new carpenters: business model

In other places

In other places
Purchase

Carpenter- Furniture Customer


At Masisa craftsmen production

Tack
training

Masisa Trust Training of


Placacentro centre (unemployed) FUNDES

Masisa carpenter-
craftsmen Professional
carpenters

Masisa

Other
organisations

Call for poor unemployed people


Post-development (training) process: purchase process
Post-purchase process (production and selling)

The Ente Cooperativo Penitenciario Federal (ENCOPE) [Federal Cooperative Peni-


tentiary Entity] offers Masisa Argentina a springboard for project scalability, including
prisons all over the country. Thus, the company has begun to develop an undertaking
similar to that at San Martín in the Prison of Marcos Paz (Province of Buenos Aires).
Simultaneously, and along with Va de Vuelta, there is a social inclusion project under
way in the Cooperative ‘La Toma del Sur’ (Avellaneda, Province of Buenos Aires). This
organisation receives obsolete computers from the City of Buenos Aires (waste), disas-
sembles them, and sorts the pieces out for their subsequent re-use. In general, together
with computers, it receives all kinds of furniture which is fixed or reassembled through
a carpenter training programme offered by the company.
Moreover, Masisa Argentina and the Argentine Ministry of Labour are discussing
the possibility of the Ministry granting a certification called ‘carpenter skill certification’
to the new company-trained carpenters for the subsequent development of a website to
recommend these carpenters for different jobs.

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miguel angel gardetti and guillermo d’andrea
Figure 3 project in the prison of san martín, province of buenos aires: business model
(including future retailers)

Prison
ENCOPE platform

Prison
Masisa (training)

Va de vuelta Customer
Retailer

Placacentro
Masisa
Carpenters

Training process
Material flow
Manufactured piece of furniture
Coordination and auditing
Prison platform

Conceptualisation of Masisa BoP strategies: lessons learned,


conclusions and recommendations
Without interacting with low-income people, the company conceived the development
and marketing of Enkastrable and began the carpenter training strategy and relevant
business models. In this internal process, the company developed new capabilities tak-
ing into account the different internal expressions in order to attain so-called internal
diversity (London 2007).
The company started to add external diversity to internal diversity by taking the
knowledge and experience of both organisations and communities (London 2007) as it
became more deeply related to the low-income sector. This way it created the new format
and contents for training programmes based on a dialogue with that segment. To a
certain extent, this is related to some aspects of ‘native capability’, such as creating and
developing interpersonal relations, building trust and evolving into a learning process
by creating ‘mutual value’ for the parties. While this process does not result in a new
co-created business, as set forth in the Protocol, it does co-create the training programme
which will enhance carpenter-craftsmen’s skills.

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masisa argentina and the evolution of its strategy at the base of the pyramid:

The early BoP strategies—referred to as first-generation strategies (Hart 2007; Sima-


nis et al. 2008)—are based on the ‘basic need’ development approach, which defines
poverty and underdevelopment as a form of material deprivation below a given level.
Along this line, to sell to poor people is the right thing to do, as those products or services
may address material deprivation (Simanis et al. 2008). Much of the BoP literature is
based on the ‘basic need’ approach. Given the prevailing position of the economic theory
in management literature, thinking along that line is far from surprising. For example,
the foundations of The Fortune at the Bottom of the Pyramid, by C.K. Prahalad, are not
new (Walsh et al. 2005); they are associated with the economic growth theories of the
1950s (i.e. those based on consumption) (Landrum 2007). The development of sup-
plementary and broader programmes shows that the company is trying to go beyond
‘basic needs’ by promoting, in addition to a source of income, people skills: that is, the
main goal of human development (Sen 1999). Moreover, this approach partially imple-
mented aspects from the ‘New Commons’ philosophy, which considers development
and poverty alleviation as an ongoing and creative dialogue between individuals and
organisations, regardless of power, status, gender or education differences (Esteva
2007).
The inclusion of ‘external diversity’ is also evidence of the company’s trend to include
other organisations from different sectors in order to develop broader business models
with a stronger impact.
In connection with product and service development, in the case of Enkastrable this
occurred through internal diversity: this product clearly disrupted the company’s status
quo as a supplier of wood boards only. The later development of training programmes
was intended to help carpenters to develop the skills to make the furniture outside the
company.
Table 1 sums up the relation between the main elements in the development of BoP
strategies, the Protocol and Masisa Argentina’s BoP strategies.
In the case of Enkastrable, the company was in charge of low-cost production and the
marketing strategy design. However, using carpenter training programmes, the com-
pany expanded both furniture manufacture and distribution by providing carpenters
with the relevant skills. According to Roberto Salas (2009), CEO of GrupoNueva and
Masisa, ‘carpenters are the company’s true sales force’.
The inclusion of new programmes in the Masisa Argentina strategy was consolidated
with two significant events, according to the marketing manager. The first one was a
workshop on ‘technology innovation and radical change’ targeted at the company’s
management and conducted in 2007. After that, the entire organisation began to create
‘room’ to develop these strategies. Along similar lines, the second was the creation of
the ‘Head of Channels and Inclusive Business’ position. Evidently, the marketing
approach has structural implications as regards distribution, logistics and process
mechanisms; however, internal change for the base of the pyramid ‘has to occur’. Masisa
captured the daily attention of collaborators by creating this room; otherwise, it would
have been difficult to find new ideas and opportunities (Milstein 2007). The creation of
the head of channels and inclusive business position is related to the Protocol in terms
of the development of an R&D white space within the company; otherwise the projects
would face difficulties in going beyond the metrics and approaches to solve conventional
problems (London 2007). In Masisa Argentina, this space is gradually supporting
‘experimentation’ outside the conventional business context.
Masisa Argentina’s evolutionary process—expanding BoP programmes—is clearly
different from the process established by the Protocol. However, note that some ele-
ments are common to both processes. The evolution of the BoP strategy of the company
is a ‘learning process’ per se. Against this background, what could be referred to as
‘failure’ from a conventional vision is nothing but a valuable source of information

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88

GMI56.indb 88
Table 1 development of bop strategies, the bop protocol and masisa argentina’s bop strategies

Training of new carpenter-


Low-income carpenter craftsmen (unemployed Training of carpenters in
Enkastrable training people) prisons

tt Development of new products tt In-house vision only tt Expanded to carpenters tt Expanded to carpenters tt Expanded to carpenters
and services through skill set through skill set through skill set
development development development

tt Low-cost production tt In-house production tt Expanded to carpenters tt Expanded to carpenters tt Expanded to carpenters
tt Capital efficiency through skill set through skill set through skill set
development development development

tt Expanded and low-cost tt Not in the original tt Expanded to carpenters tt Expanded to carpenters tt Integration of retailers
miguel angel gardetti and guillermo d’andrea

distribution business model through skill set through skill set


tt In the modified business development development
model version: integration
of Alternativa 3

tt Deep dialogue – – Yes Yes


tt Discovering needs


Key elements in BoP strategies
tt Co-inventing solutions and
– tt Work (higher income) tt Work (higher income) tt Work (higher income)
business models
tt Skill set development tt Skill set development tt Skill set development

tt In-house business model tt In-house business model tt Co-invention of training tt Co-invention of training
programme programme

tt Developing interpersonal and – – Yes Yes

GMI 56 
trust-building relations
tt Learning process
tt ‘Mutual’ value – – Yes Yes
tt R&D space within the

Protocol
company
– – Yes Yes

Elements of the BoP


– – Yes Yes

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masisa argentina and the evolution of its strategy at the base of the pyramid:

(Simanis and Hart 2006). Therefore, the learning curve developed by Masisa Argentina
in this field translates not only into a source of knowledge and experience, but also ‘into
a new source of competitive edge’ (Salas 2009). Figure 4 illustrates each of the com-
pany’s strategies in terms of the different development philosophies, BoP integration
and capabilities developed at the BoP.

Figure 4 strategies developed by masisa argentina at the bop in terms of the different
development philosophies and bop development
integration philosophies

Basic needs ‘New Commons’

Protocol

+
+

(mutual value and


co-creation)
development of interpersonal
skills and trust building

integration of the bop


Training of new
carpenters (prisons)
certified by the
Training of new Ministry of
carpenters (prisons) Labour

Training of new
carpenters

Training of
carpenters

Enkastrable


2003 2004 2005 2006 2007 2008 2009 Future

In Argentina, poverty, mostly urban poverty, is impacted by different factors. The


social strategies used by this sector are based on assistance delivery (Gardetti 2007),
which combines with political clientelism. Martín Dinatale (2004) states that the real
political clientelism scheme goes beyond the ‘political bully/vulnerable population’ rela-
tion, but is embedded in a complex scheme led or developed by presidents, ministers,
policy-makers, second-line officials of the executive branch of government, governors
and mayors. The real use-and-abuse tools for the co-option of an important segment of
the population living in abject poverty may be tied to vote-catching interest, though they
also act based on economic patterns and financial returns. In turn, we should take into
account that local entrepreneurship, ‘bottom-up’ development, and the fact that the poor
are considered active agents with valuable insights (Chambers 1997; Sen 1999; Ham-
mond 2004) are the fundamentals of the BoP concept. However, these fundamentals
are really difficult to implement.
Therefore, the process carried out might be an alternative to the process set out in
the BoP Protocol. Nevertheless, note that the company should become more inclusive,
in terms of both its decision-taking and its innovation processes, offering increased
empowerment to poor people, and co-creating contextualised solutions with them.
It would be interesting to know to what extent the company is ‘native and part of the
local environment’. For that purpose, it is necessary to observe (and measure) the degree
of co-invention of more sustainable ways of living in the local communities to which the
new carpenters belong, as well as the trust and social capital developed throughout the
process.

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miguel angel gardetti and guillermo d’andrea

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