MASTER OF BUSINESS ADMINSTRATION

THE COURSE OF MANAGEMENT INFORMATION

SYSTEM

Group Project Work/Assignment on Developing an Effective Information

Management Strategy Coca-Cola Company in Ethiopia

Course Instructor: Reta Mulugeta (Assist. Prof.)

Basic Required Information

Group Members Personal Information Name ID

1 Teshome Tadele 042/15

2. Bekele Gedefa. 008/15

3. Taye Gedefa. 038/15

MARCH, 2024
Addis Ababa Ethiopia
1. Introduction-------------------------------------------------------------------------------------------------
1

2. The Contribution of the Private Sector to Development --------------------------------------------3

3. Study Objectives and Methodology-------------------------------------------------------------------- 5

4. The Coca-Cola System ----------------------------------------------------------------------------------7

5. The Manual Distribution Center (MDC) Model -----------------------------------------------------8

6. Assessing the MDC Model’s Contribution to the Business and to Development ---------------10

6.1 Business benefit s --------------------------------------------------------------------------------------10

6.2 Development contributions ---------------------------------------------------------------------------11

6.2.1 Creating Opportunities for Entrepreneurship and Employment -------------------------------11

6.2.2 Promoting Women’s Economic Empowerment -------------------------------------------------12

6.2.3 Catalyzing Human Capital Development --------------------------------------------------------13

7. Recommendations ---------------------------------------------------------------------------------------13

7.1 Invest in continuous improvement of the core business model ----------------------------------14

7.2 Broaden socio-economic opportunity for MDC owners and employees---------------------- 16

7.3 Promote small business development and entrepreneurship more widely-------------------- 18

7.4 Explore how the business model could distribute social products or messages ---------------18

7.5 Undertake participatory evaluation and action-based learning--------------------------------- 19

8. Conclusion ------------------------------------------------------------------------------------------------20

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Reference---------------------------------------------------------------------------------------------------22

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1. Introduction

Expanding economic opportunity, raising productivity and increasing growth are crucial for
alleviating poverty. In the face of the global economic crisis they are more important and more
challenging than ever. Their achievement will require concerted leadership on the part of both
the public and private sectors. As the OECD’s Development Assistance Committee has
commented, “Increasing economic growth rates is essential – but it is not enough. The quality of
growth – its sustainability, composition and equity – is equally important.”1 A key element of
this is creating jobs and livelihood opportunities for low-income people and households.
Research by the World Bank and United Nations has shown that the expansion of employment
and entrepreneurial opportunities is the single most important pathway out of poverty.2 To
achieve this there is a need to improve the access of small and micro-enterprises to fi nance,
information, skills, technology, sound business practices and markets. Some of these enterprises
can further raise their productivity and employment levels by upgrading and integrating into
broader production networks and value chains.3 In many developing countries, achieving these
goals requires the creation of more inclusive business models that directly integrate low-income
people as entrepreneurs, suppliers, distributors, retailers, employees and consumers.4 It also
requires more collaborative approaches between large companies, small enterprises, public sector
entities, civil society organizations and the poor themselves. These are necessary to address the
market failures and the governance gaps that currently exclude or disadvantage many small
enterprises and low-income households from prospering. A growing number of large
corporations are proactively engaging in such approaches with the aim of achieving core
business benefi ts - such as greater competitiveness, increased market share and improved risk
management - while also contributing to the achievement of international development goals.
The following report provides a review of one such approach: Coca-Cola’s Manual Distribution
Center model, with a focus on implementation in Ethiopia where it accounts for over 80% of the
company’s sales.This research forms part of an ongoing series of studies and dialogues being
undertaken by the Corporate Social Responsibility Initiative at the Harvard Kennedy School and
the International Finance Corporation (IFC), in partnership with other development agencies,

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companies, civil society organizations and alliances such as the International Business Leaders
Forum, the World Business Council for Sustainable Development, the Growing Inclusive
Markets initiative, and the Business Call to Action. It aims to provide a more empirical basis for
understanding and enhancing the development contribution of large companies through their
core business operations and their partnerships with other development actors. In addition to this
report, the participating organizations are working together in Africa and elsewhere to engage
with key stakeholders, test recommendations on the ground, and implement practical new
approaches that combine both business benefit and development gains.

Our Mission

 Our Roadmap starts with our mission, which is enduring. It declares our purpose as a
company and serves as the standard against which we weigh our actions and decisions.
 To refresh the world.
 To inspire moments of optimism and happiness.
 To create value and make a difference.

Our Vision

Our vision serves as the framework for our Roadmap and guides every aspect of our business by
describing what we need to accomplish in order to continue achieving sustainable, quality
growth.

People: Be a great place to work where people are inspired to be the best they can be.

Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy
people's desires and needs.

Partners: Nurture a winning network of customers and suppliers, together we create mutual,
enduring value.

Planet: Be a responsible citizen that makes a difference by helping build and support sustainable
communities.

Profit: Maximize long-term return to shareowners while being mindful of our overall
responsibilities.

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Productivity: Be a highly effective, lean and fast-moving organization.

Our Winning Culture

Our Winning Culture defines the attitudes and behaviors that will be required of us to make our
2020 Vision a reality.

2. The Contribution of the Private Sector to Development

There is growing consensus among policymakers, development experts and business leaders that
the alleviation of poverty and the achievement of other key development goals cannot occur in
the absence of a diversify and productive private sector. As the World Bank argued in its seminal
World Development Report 2005: A Better Investment Climate for Everyone: “Private firms are
at the heart of the development process. Driven by the quest for profits, firms of all types – from
farmers and micro-entrepreneurs to local manufacturing companies and multinational enterprises
– invest in new ideas and new facilities that strengthen the foundation of economic growth and
prosperity. They provide more than 90% of jobs – creating opportunities for people to apply their
talents and improve their situations. They provide the goods and services needed to sustain life
and improve living standards. They are also the main source of tax revenues, contributing to
public funding for health, education and other services. Firms are thus central actors in the quest
for growth and poverty reduction.”5 Despite the importance of the private sector, it is clearly not
a substitute for good government. Good governance is more necessary than ever, especially in
light of the current economic crisis, climate change and other threats to human security and
prosperity, and particularly when it comes to protecting the poorest and most vulnerable
households and communities. At the same time, there is a need to better understand and enhance
the development role of the private sector.

Large companies have the potential to make a contribution to poverty alleviation through the
following four areas of business action:

• Core business operations and value chains

. • Corporate social investment and strategic philanthropy.

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• Hybrid models that combine social and commercial capital and/or public and private resources.

• Public advocacy, policy dialogue and institution building

A number of major corporations are taking more strategic and proactive approaches in all of the
above areas, driven by a combination of market development imperatives and business
opportunity, risk management, and reputation drivers. In particular, there is growing recognition
in both the corporate and international development communities that the most sustainable
contribution that any company can make to poverty alleviation is to carry out its core business
activities and investments in a profitable, responsible and inclusive manner. Strategic
philanthropy and compliance with laws and international standards remain important
components of responsible business practice. They can be especially challenging, and at the
same time have a high impact in developing countries. However, it is through core business
operations and value chains that companies are likely to make the greatest contributions to
development. Until relatively recently, core business operations and value chains have not been a
key part of the corporate social responsibility (CSR) debate, and their development impacts have
not been rigorously analyzed, evaluated or reported on. The United Nations Development
Programme, (UNDP) the British Department for International Development, the World Business
Council for Sustainable Development and others are increasingly using the term ‘inclusive
business models’ to describe core business approaches that explicitly integrate low-income
people into corporate value chains, as in the following ways:

 Consumers: The development and delivery of products and services that improve low-
income households’ access to health, education, water and sanitation, food and nutrition,
energy, housing, information, financial services, etc.
 Employees: Efforts by large companies to support the recruitment, training and
development of people from low-income households.
 Producers, suppliers, distributors, retailers and entrepreneurs: Business linkage
initiatives that source from, distribute through, or sell to small and micro-enterprises and
small-scale farmers. Business linkage initiatives are obviously not new, but they have
been the focus of increased attention in recent years. There is growing evidence that
commercially viable business linkages between large corporations and micro, small, and
medium enterprises in developing countries can play a vital role not only in creating local

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 jobs, improving livelihoods, supporting gender diversity and enhancing economic
options, but also in transferring skills, technologies, quality management and sound
business standards along value chains. This is the case for both supply chain linkages and
distribution and franchising linkages. The Coca-Cola system’s Manual Distribution
Center (MDC) model, which is currently being implemented in various forms in some 25
countries around the world, offers an interesting distribution example. It is fi rst and
foremost an approach created to solve a core business need for the company. At the same
time, it has the potential to make a positive contribution to some of the Millennium
Development Goals. The Coca-Cola Company has made the MDC model a key
component of its public commitment to the Business Call to Action, an initiative
launched by the British Prime Minister Gordon Brown in 2007. The initiative aims to
mobilize large companies to support the achievement of the Millennium Development
Goals through new investments that harness their core competencies and value chains. It
is managed by a secretariat in the United Nations Development Programme (UNDP),
with a steering committee currently composed of the UK’s Department for International
Development (DFID), Australia’s Aid Agency (AusAID), the United Nations Global
Compact, the International Business Leaders Forum, and the Clinton Global Initiative.
The Business Call to Action is supported by some 60 companies to date, and is
establishing an independent monitoring mechanism to track progress of the commitments
and their contributions to development. It aims to mobilize the core competencies of large
companies in ways that:
 Generate new employment and enterprise in developing countries;
 Improve the quality of supply chains, helping local businesses to diversify and/or
become competitive; and
 Include innovations or technologies that make it easier for individuals and businesses to
earn a living.

3. Objectives and Methodology of the project

During 2008, IFC worked with the Corporate Social Responsibility (CSR) Initiative at
the Harvard Kennedy School to review the operations of the MDC model implemented

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by Coca-Cola Sabco, one of the Coca-Cola Company’s bottling partners, in Addis Ababa,
Ethiopia.
The project aimed to explore two sets of questions:
 How is the MDC business model in these two countries structured and
implemented, including the relationship between the owners and employees
of the MDCs and the managers in Coca-Cola Sabco?
 How is the MDC business model contributing to expanding economic
opportunity and human capital development?
The project focused exclusively on a sub-set of Manual Distribution Centers and their
owners and employees in Ethiopia. It did not look at other small and micro-enterprises in
the company’s value chain, such as retail outlets or suppliers. Nor did it attempt to assess
the company’s overall social, environmental and economic development impacts or the
poverty alleviation footprint in these two countries. Ethiopia was selected for the field
work because they are countries in which the Coca-Cola Sabco MDC model has been in
operation for over five years and has been implemented in different ways. The project
involved field-based data collection and interviews undertaken during July and August
2008 with Coca-Cola managers and a sample of owners and employees at 48 MDCs
(representing 7% of the total number of MDCs in Addis Ababa and 12% of the total in
Dares Salaam at the time). These 48 MDCs were selected to ensure the representation of
a range of performance levels (i.e. high, average and low sales) and geographic locations,
because of the impact location can have on business performance (i.e. road conditions,
accessibility of retailers, outlet density, access to power or water, and consistency of
supply). Interviews were conducted either in the local language, through a translator, or
in English.
 In November 2008, once the study’s initial findings were available, Coca-Cola
convened a multi-stakeholder dialogue in Ethiopia to seek input on the findings.
The session was attended by development practitioners from the NGO,
government and international agency community to debate and explore some of
the research recommendations in more detail. Co-facilitated by Business Action
for Africa and the International Business Leaders Forum, the dialogue included a
wide range of participants including local, regional and international

6
 representatives from organizations such as Save the Children, Population Services
International, Enables, CARE International, Cola life, the U.K.’s Department for
International Development, the United States Agency for International
Development, SNV Netherlands Development Corporation and UNICEF. This
report summarizes some of the key findings and recommendations from the
research to date. It will form the basis of ongoing dialogue and local engagement
by the partners involved.

4. The Coca-Cola System

The Coca-Cola Company (TCCC) is the largest non-alcoholic beverage company
in the world, manufacturing nearly 500 brands and 3,000 beverage products, and
serving 1.6 billion consumers a day.8 In the 200 countries and territories in which
it operates, TCCC provides beverage syrup to its bottling partners, who then
manufacture, package, distribute and sell products for local consumption. TCCC
has more than 300 bottling partners worldwide, which are local companies that
are either independently owned or partially or fully owned by TCCC. It has had a
presence in Africa since 1928 and today is one of the continent’s largest private
sector employers, operating about 160 bottling and canning plants through its
local bottling partners and working with more than 900,000 retail outlets. TCCC
and its bottling partners (collectively known as “the Coca-Cola system”) are
renowned for their ability to make their products available to consumers in even
the most remote locations. They have utilized a wide range of innovative
distribution methods to accomplish this. In many countries, particularly developed
countries, the system primarily uses traditional distribution models in which large
amounts of product are delivered via trucks or other motorized vehicles to large
retail outlets. Yet in much of the developing world, road infrastructure, terrain,
retail markets, cost implications and customer needs differ. Thus, other
distribution methods have been developed to distribute much smaller amounts of
product to a diversity of retail outlets utilizing methods such as bicycles, boats,
and pushcarts. The Coca-Cola system uses the full range of distribution methods
in Africa. In the most developed, urban parts of the continent, the system uses the

7
 more traditional model of supplying large retailers such as grocery stores, hotels,
universities, and other institutions using delivery trucks. However, for a large
proportion of its retail customers, particularly in East Africa, where they are
mostly small neighborhood restaurants or bars, corner stores, and one-person
kiosks, the Coca-Cola system has adopted a manual delivery approach working
with small-scale distributors to deliver products to small-scale retailers in densely
populated urban areas. One of TCCC’s key bottling partners in Africa, Coca-Cola
Sabco (CCS), has been at the forefront of innovation in this approach, known as
the Manual Distribution Centers model. This report focuses exclusively on this
one component of the Coca-Cola value chain (see diagram). CCS is one of the
Coca-Cola system’s largest bottlers in Africa, operating 18 bottling plants and
directly employing more than 7,900 people in East and Southern Africa.
Headquartered in South Africa, it is 80% owned by a private investment group
and 20% owned by TCCC.

5. The Manual Distribution Center (MDC) Model

MDCs are independently owned, low-cost manual operations created to service emerging urban
retail markets where classic distribution models are not effective or efficient. Common
characteristics include:

 A central point for warehousing of product, with a manageable coverage area and
defined customer base (typically about 150 retail outlets).
 Distribution of product is mostly manual (e.g. by pushcarts) to keep costs at a
minimum.
 Outlets served are typically low-volume with high service frequency requirements
and limited cash flow, requiring fast turnaround of stock.

Coca-Cola Sabco first developed the MDC model as a pilot, which created ten MDCs in Addis
Ababa, Ethiopia, in 1999. By 2002, it had implemented the model on a broad scale throughout its
markets in East Africa. Although the exact number of MDCs changes on a regular basis, as of
November 2008 there were 165 MDCs in Addis Ababa and 651 in Ethiopia as a whole,
accounting for 83% of CCS sales nationwide. Also as of November 2008, there were 152 MDCs

8
in as a whole, accounting for 93% of CCS sales nationwide.9 CCS now relies on the MDC
model as its core distribution model in Ethiopia, Kenya, Uganda, Mozambique, Tanzania, and to
a smaller extent in Namibia.

The research study looked at the following key characteristics of the MDC model: Establishing
new MDCs – Including the processes used by the company to assess the need and appropriate
location for an MDC and to recruit new owners and operators, and the start-up costs and sources
of finance used by the MDC owners. Three primary sources of funding were identified - personal
savings, credit from CCS, and bank loans. MDC employees – Including a review of the
recruitment processes, staffing structures, roles, and salaries of MDC employees.

 Reporting and supervision of MDCs – Looking at the reporting structure between the
MDC owners and Coca-Cola Sabco the roles and responsibilities of the Coca-Cola Sabco
sales team in working with the MDC owners, and the nature and regularity of their
interaction. The use of monitoring and management tools was also reviewed, and their
role in supporting, setting targets, evaluating and providing incentives for MDC owners
was assessed.
 Training of MDC owners and employees -focusing on the number and nature of
training and coaching opportunities provided by Coca-Cola Sabco to MDC owners and
employees.
 The sales and distribution process – Reviewing the relationships and value chain
linkages between the Coca-Cola Sabco sales teams, the MDC salespersons, and the
numerous retail outlets served.
 The economics of the MDC model – Assessing different aspects of wholesaler margins,
profits, and operating expenses of the MDCs and some of their profitability concerns.

It is worth clarifying that most of the MDC owners are not from the poorest segment of the
population - the so-called ‘Base of the Pyramid’.10 The majority of those interviewed have a
minimum of primary school education and most had previously been employed or were in school
before becoming an MDC owner. For 75 percent of the Ethiopians interviewed however, this
was their fi rst time as a business owner. These people therefore represent part of a growing
entrepreneurial, middle-class - what have been termed ‘opportunity’ entrepreneurs as opposed to
‘survival’ entrepreneurs. These are the types of people who have the potential to grow a

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business, employ others, raise productivity, and increase incomes on a sustained basis, all of
which are essential for alleviating poverty.

6. Assessing the MDC Model’s Contribution to the Business and to

Development

6.1 Business benefits

The MDC model was born out of business need and has been driven by the mainstream
operations of the business. Since the beginning, the model has helped Coca-Cola increase sales
by reaching small-scale retail outlets located in densely populated urban areas where truck
delivery is not effective or efficient, and where outlets demand smaller, more frequent deliveries
of product. Since the model was first piloted in 1999, it has scaled to the point where more than
80% of the company’s products are currently distributed through the MDC model in Ethiopia.

Some of the specific business benefits of the model have been as follows:

 Facilitates delivery in “road-poor” settings: The MDC model allows for access to
areas that are hard to reach by large trucks, such as crowded urban settings where roads
are not built, are too narrow to be accessible, or are in disrepair.
 Allows for small drop sizes at retail outlets: The close proximity of the MDCs to their
retail outlets allows them to make frequent, small deliveries, enabling outlets to carry less
inventory and to purchase more on a demand-driven basis, addressing some of the
financial and space limitations that the retail outlets face.
 Provides improved customer service: Whereas under the traditional model, retail
outlets had to wait for infrequent truck deliveries and risk running out of supply, outlets
have constant access to products under the MDC system (12 hours a day/six or seven
days a week). Also, through regular interaction with retailers, the MDCs and CCS can
ensure that merchandising standards are also better adhered to and that problems are
rectified faster than in traditional models.

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 Overall, the model has led to positive business results in Ethiopia and Tanzania and has
been a contributing factor to Coca-Cola’s sales and volume growth in these two
countries, as well as elsewhere in East Africa.

6.2 Development contributions

Development is a complex concept that at its most fundamental level implies a positive
change in the lives of people. A credible methodology for measuring the development
impact of a specified intervention, such as the MDC model, would:
 Identify relevant metrics and collect baseline data before the intervention
was implemented, so that changes over time could be detected;
 Include a control group that received no intervention, so that changes
attributable to the intervention could be distinguished from changes that
would have occurred naturally.

These steps require considerable time and advance planning, and in most business situations the
interventions have already been completed before the company starts thinking about measuring
its development impacts. The MDC model is no exception. As a result, because it is difficult to
reconstruct baselines and impossible to control after the fact, the study did not aspire to measure
the development impact of the MDC model over time, but rather to focus on some key areas
where it is possible to collect statistics today, and to lay out a framework for measuring impact
more broadly and consistently in the future.

The study captured a snapshot of the MDC model’s impact in three broad areas:

6.2.1 Creating opportunities for entrepreneurship and employment:

The MDC model directly contributes to creating new entrepreneurship and employment
opportunities especially in the formal sector. Furthermore, the economic opportunities
and income created for MDC owners and employees indirectly impact their household
members who according to interviews often depend on the income from the MDC to pay
for food, housing, and education. It should be noted that these figures relate only to the
MDCs themselves, and do not include the thousands of small retail outlets they are
supporting further along the value chain, which were not analyzed for this research.

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  To date, the Coca-Cola system has created over 2,500 MDCs in Africa,
generating over 12,000 jobs and more than $500 million in annual
revenues. MDC owners and employees support an estimated 48,000
dependents.
 The 651 MDCs in Ethiopia has helped to create ownership opportunities
for both existing and new small business owners and entrepreneurs, and
provided nearly 6,000 jobs since 2000. Based on the sample of 48 MDCs
surveyed in this study, each MDC employs an average of 3.9 people in
Ethiopia. Some Coca-Cola Sabco jobs and benefits were lost during the
shift towards the MDC model, but these losses were limited relative to net
new job creation.
 The MDC owners earn a set profit margin for each case sold, equivalent
to the difference between the cost to the MDC for purchasing a case of
beverages and the retail price to customers. With affordability being such
a key driver of volume, CCS sets a consistent retail price across all
MDCs. The nature of the industry means that the MDCs target high
quantity sales to derive satisfactory incomes, with profit margins in the
range of 3% to 5%. In addition, MDC owners are eligible for a monthly
bonus based partly on adherence to a CCS management tool and ability to
meet sales targets, but this bonus system does not operate everywhere.

6.2.2 Promoting women’s economic empowerment:

The MDC system has created new economic opportunities for women as MDC owners and
employees as well as managers and sales staff in Coca-Cola Sabco.

• Across East Africa, the MDCs have created entrepreneurship opportunities for close to 300
women. Furthermore, couples jointly own a high proportion of MDCs, many of which are
managed by the women.

• Among the MDCs sampled, 19% were owned by women in Ethiopia.

• In addition, an average of 6.5% of employees among the MDCs surveyed in Ethiopia.

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6.2.3 Catalyzing human capital development:
The Company and the MDC owners and employees consider training and technical
assistance to be a highly important element of the MDC model. Evidence suggests that it
not only increases the skills and competencies of individual owners and staff, but also
creates a sense of loyalty between Coca-Cola Sabco and the MDC owners. The intensity
of training varied between Ethiopia, with the former being more regular and intense,
although plans are underway to increase the offering of training in Ethiopia. Training
provided to owners ranged from management training in areas such as basic business
skills, warehouse and distribution management, account development, merchandising and
customer service, to regular one-on-one coaching. In the case of MDC employees,
training focused on customer service and sales and on traffic safety issues. MDC owners
and employees also report that the near daily contact and supervision that they receive
from CCS staff is also a very valuable resource for business skills development.

7. Recommendations
 The MDC model is not a panacea – either as a business solution or as a development
driver. Its success in both respects depends on factors both within and beyond the
company’s control. Yet, the model offers a core business-led approach that in Ethiopia
accounts for over 80% of the company’s product distribution and supports more than
1,000 small-scale enterprises and nearly 6,000 jobs.
 As a relatively new approach to doing business, the model is being reviewed and revised
by the company on an ongoing basis and adjustments are being made accordingly. There
is growing recognition of the importance of listening to and learning from the MDC
owners, both in terms of improving the business model itself and in terms of enhancing
its development impacts.
 In these two countries and others where the MDC model is being implemented, there is
potential to leverage this network of thousands of small enterprises that are located in
low-income communities to achieve broader development goals, such as the distribution
of social products or support for social marketing. This broader effort cannot and should
not be the responsibility of the company alone. Nor must it undermine the core
commercial viability of these small enterprises. Failure to maintain profitability would

13
 clearly undermine the business model and thereby jeopardize the long-term contribution
it can make to development. Yet, by working in partnership with other companies,
donors, government bodies or development experts there is potential for the network of
MDCs to be leveraged in a targeted way to address other development needs.
 Field research and interviews with MDC owners and employees and Coca-Cola Sabco
managers revealed that there are specific areas where the development contribution of the
MDC approach could be enhanced at the same time as the business model is improved,
scaled up, and rolled out to additional markets. This conclusion was borne out also by the
November 2008 dialogue that included a wide range of participants including Save the
Children, Population Services International, Enables, CARE International, Cola life, the
U.K.’s Department for International Development, the United States Agency for
International Development, SNV Netherlands Development Corporation and UNICEF.
 Drawing on the research and stakeholder dialogue, there are five broad areas of
recommendation. These are of relevance not only to the Coca-Cola system in Ethiopia
elsewhere in Africa and other developing countries, but also to other major corporations
that are developing inclusive business models, or as some call them, “base of the
pyramid” business models. The recommendations are also of relevance to governments,
donor agencies, private foundations and civil society organizations interested in
increasing the quantity and quality of private sector resources supporting global
development and in partnering with corporations in this effort. These five
recommendations are as follows:

7.1 Invest in continuous improvement of the core business model.

7.2 Broaden socio-economic opportunity for MDC owners and employees.

7.3 Promote small business development and entrepreneurship more widely.

7.4 Explore how the business model could distribute social products or messages.

7.5 Undertake participatory evaluation and action-based learning.

7.1 Invest in continuous improvement of the core business model

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It is essential that the MDC model continues to be commercially viable for both the company and
the MDC owners in order to perpetuate any economic and human development benefits that it
fosters. There are a number of practical, ongoing actions that can be taken to improve business
efficiency, performance and quality to enable MDC owners to improve their profits. These
include the following:

Formalize owner recruitment processes: Selecting the right type of individuals with sufficient
business acumen and local contacts is one of the most critical success factors for the model. The
selection criteria used in recruitment, which currently incorporate a set of relatively informal
characteristics and competencies, could be formalized and better documented to make them more
effective from both business and development perspectives.

Improve access to finance: Linked to owner recruitment is the essential issue of access to start-
up funding and working capital. This goes far beyond micro finance for this category of
business. Owners are responsible for financing the start-up costs of their MDCs, which average
from about US$6,000 to US$8,000 in Ethiopia and US$10,000 to US$15,000 in Tanzania.
Personal capital is currently the predominant source of financing, especially in Ethiopia. Loans
or credit arrangements from Coca-Cola Sabco or commercial banks are increasingly important in
Tanzania and other more established markets, with some 40% of the MDCs interviewed in Dar
es Salaam financing the start-up of their MDC through such loans – most of whom had houses or
other property to use as collateral. There are also opportunities to assist with insurance services
and with improved finance for working capital including improved credit lines, short term
overdraft facilities, and leasing facilities, for example for vehicles. There is great potential here
for building partnerships with commercial and other financial institutions to improve access to
different financial products and services and to financial training.

 Expand and enhance training: Another action Coca-Cola Sabco can take to enhance
both business and development results is to expand and professionalize the training
opportunities it provides to MDC owners and their employees, most of whom reported in
interviews that the training they currently receive is extremely valuable. At a minimum,
there would be value to expanding and enhancing the provision of business and financial
skills training, which could enable owners and staff to improve business performance,
help to ensure that they represent the Coca-Cola brands appropriately, and foster loyalty

15
 to CCS, while at the same time helping to build their own skills, competencies and long-
term employability. Opportunities identified by both the field research and the
stakeholder dialogue also included the development of a high-quality ‘best practice’
curriculum that goes beyond basic business and financial training to focus on how to run
a successful MDC and achieve performance excellence. Stakeholders at the November
dialogue in Tanzania, for example, proposed a Coca-Cola School of Entrepreneurial
Development with a multi-year program, which would offer different levels of formal
qualification and also an opportunity to create incentives for people to learn from others.
There is also potential to partner with other companies that already have well-established
training programs.
 Improve management tools and relationship management: The MDC model is most
successful when MDC owners and employees have regular interaction with CCS staff
and have access to and a good understanding of the company’s management tools. This
helps to lower costs, improve record-keeping, enhance loyalty to Coca-Cola and produce
positive business results for the MDCs. Standardizing some of the existing management
tools and integrating them into a single MDC management system - which could include
selected development indicators as well as core business metrics - would be a valuable
addition to managing and monitoring the MDC model.
 Align evaluation, compensation and incentive processes: More consistent and well-
defined performance metrics that are evaluated on a regular basis could improve the
setting of targets, incentives and bonuses for MDC owners and their employees.
Evaluation and incentive programs could also deliver non-monetary incentives. For
example, owners and employees could be awarded points that could be redeemed for
non-monetary benefits such as school tuition or life skills courses. In terms of
compensating MDC employees, some of the owners in Ethiopia have started to
implement salary-plus-commission compensation schemes, rather than commission-only
systems. While this increases their monthly fixed costs, it decreases the fluctuation in
employees’ incomes, which usually results in greater employee loyalty and a reduction in
staff turnover and theft.

7.2 Broaden socio-economic opportunity for MDC owners and employees

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 In addition to improving the commercial viability of the model for the company and the
MDC owners, efforts can be made to explicitly broaden the economic opportunity and
human capital benefits gained by the MDC owners, their employees, and indirectly their
families.

Three areas of action offer potential and would be relatively easy and cost-effective to
implement within the current system:

 Target the recruitment process: In addition to formalizing and professionalizing

overall owner recruitment, there are opportunities to implement targeted
recruitment initiatives focused on identifying, recruiting and mentoring
designated groups that may create high development benefits, such as women and
first-time business owners. It is currently difficult for these two groups to enter
the system due to the relatively high start-up financing costs.
 Expand access to financial products and services: Financing is one of the
major barriers to entry into the formal business sector for many small enterprises.
Since CCS requires owners to finance their own start-up costs for an MDC
business, the opportunity tends to be limited to those who have either saved
enough capital or who are able to take commercial loans. As a result, those who
are selected to be MDC owners tend to be previously employed, operating other
businesses, or relatively better off than their neighbors. If adjustments are made to
the selection criteria to target more first-time business owners and women in the
program, enhancing access to capital will become an even higher priority. This
effort could include partnering with commercial banks or public and civil society
institutions that specialize in financing small enterprises. The MDC owners and
employees could also benefit through a program that assists with personal
savings, health and other forms of insurance.
 Complement business skills training with life skills and further education
opportunities: The existing MDC network could also be leveraged for delivering
life skills training and further education opportunities, in addition to business and
financial skills training. This could include subjects such as HIV/AIDS
awareness, occupational health and safety, nutrition, personal finance, language

17
 and writing, and driver training. Some courses could be built into a package of
non-financial performance incentives. In certain cases, local managers from Coca-
Cola Sabco could help to deliver training as part of an employee volunteer
program.

7.3 Promote small business development and entrepreneurship more widely

In addition to supporting MDC owners and employees who are directly participating in the
extended Coca-Cola system, there are opportunities to promote small business development and
entrepreneurship more broadly in the countries and communities where the company is doing
business.

Establish a system of referral for aspiring entrepreneurs: The interest in owning an MDC is
significantly higher than the availability of opportunities. The field research in Ethiopia, for
example, showed that for every MDC that opens, some 10-15 entrepreneurs apply for the
opportunity. The company could partner with a small business development agency to develop a
referral system for the interested entrepreneurs and school-based entrepreneurship training and
small and micro-enterprise development in a more strategic way.

Support entrepreneurship education and programs through community investment: The

Company could also harness its philanthropic and community engagement programs in Africa to
support university and school-based entrepreneurship training in a more strategic way.

Advocate for better regulations for small enterprise development: Along with other large
corporations operating in Africa the company has a strong political voice and access to
government. The broader business community could become stronger advocates for small
enterprise development and for the necessary regulatory changes needed to support small-scale
entrepreneurs.

7.4 Explore how the business model could distribute social products or messages

Given the effectiveness of the model in distributing Coca-Cola products and marketing messages
in low-income urban areas, could the same model be utilized to distribute other products and
messages, such as health and nutrition products and public health information? In theory, such
initiatives could provide new opportunities for MDC owners to enhance their profitability.
18
Alternatively, if the products and messages were distributed free of charge, they could enhance
owners’ standing in the community. The MDC distribution network is deeply rooted in many of
the communities where it operates and MDC owners are often high-profile and respected. A
number of the MDC owners interviewed recognize that basic needs such as safe drinking water
and sanitation, health and education are often seriously lacking within their local communities.
They indicated that they would be willing to help their communities by distributing social
products or information through their facilities and operations.

However, introducing such social products to the distribution model could pose several risks to
commercial viability. These might include increased costs, challenges with inventory
management, problems with quality control and even exposure to legal liability in the case of the
distribution of certain health products. Such changes would therefore have to be introduced
carefully to avoid negative impact on profitable business operations, which keep the model
sustainable.

Equally, neither the company nor the MDC owners are development experts. As such, it would
be essential to collaborate with government, donor or civil society health or development experts
to ensure that the products or information distributed were appropriate for and genuinely
demanded by the target community. Efforts would need to be driven locally, with the MDC
owners, community leaders and development partners identifying key needs, opportunities and
approaches. There would have to be clear agreement on which partner was responsible for which
part of the social product value chain. The Coca-Cola system, for example, would be able to help
with logistical advice and possibly marketing ideas, but would need to defer to its stakeholders
and social partners on the most appropriate social products or messages to promote. There are
many opportunities and enthusiastic partners, but each one would have to be carefully considered
through community consultation and with the local context and constraints of the MDC owners
in mind.

7.5 Undertake participatory evaluation and action-based learning

The field research and stakeholder dialogue agreed on the potential for the company to identify a
set of key development performance indicators, which could be tracked on an ongoing basis
alongside traditional business performance metrics.

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These could include the following:

Creating opportunities for entrepreneurship and employment: number of new enterprises

and jobs created, number of fi rst-time owners, MDC profits, and total income generated by
employees.

Promoting women’s economic empowerment: Number of women entrepreneurs, MDC staff

and CCS employees

Catalyzing human development: Number of people who receive training on business skills or
safety procedures, total number of hours of training delivered per year, surveys on participants’
satisfaction with the training delivered.

In addition to establishing a more systematic approach to track performance against key

development indicators, a related finding of the research project was the crucial importance of
process. In particular, the research identified the potential for integrating participatory and
action-based learning methodologies into the way the company and its partners learn and share
lessons from each other on what works and what does not. The way the project has evolved, and
the willingness of the Coca-Cola system to ‘learn while doing’, means that a more structured
participatory action learning methodology may be useful for designing, implementing and
evaluating future activities. Such an approach could enhance the learning impact of this work
while also encouraging a manageable degree of risk-taking. In other words, ideas could be tested
in such a way as not to place economic risk on the MDC network, which remains the core
contribution of this approach to development.

8. Conclusion
Inclusive business models such as the Coca-Cola system’s MDC model shed light on the
capacity of companies to stimulate socio-economic development as a part of, not at the expense
of, their core business operations. Such models have the potential to deliver both direct and
indirect development benefits, which are both economic and social in nature.

The field research and stakeholder dialogue that formed the foundation for this report evaluated
how the MDC model currently operates in Ethiopia and provided initial recommendations for
enhancing its business and development impact as it expands and is replicated in Africa and

20
elsewhere. The study has provided some examples of the contribution of the MDC model to
creating opportunities for entrepreneurship and employment, promoting the empowerment of
women, and catalyzing human capital development. It represents a ‘work in progress’, both from
a research and evaluation perspective and in terms of the company’s own journey in creating
inclusive business models that aim to deliver both business benefits and contribute to
development in the countries and communities where the company operates.

The MDC model is not a panacea – from a commercial perspective or from a development
perspective. It is one approach of many that have been developed by fast moving consumer
goods companies to better serve and grow their customer bases, while also creating local jobs
and incomes, and indirectly other business and development benefits. It is only one aspect of The
Coca-Cola Company’s development footprint. Nevertheless, it is clear that the MDC model is
one with potential for replication and scale-up, especially in partnership with others.

A growing number of companies can point to similar inclusive business models of their own,
which integrate low-income people into corporate value chains either as producers, entrepreneurs
and employees, or as consumers. While recognizing competitive realities and pressures, there is
an opportunity for leading companies to develop more of these pioneering business-led
approaches to poverty alleviation, and as they do so, to learn from each other what works, and to
mobilize other companies to get involved. Likewise, governments and development experts can
play vital roles in supporting the business models and value chains that demonstrate measurable
business and development impact, and that have the potential of reaching sustainability and
scale. Most importantly, all of these players will need to become more effective at learning from
and working with the millions of men and women living in low-income urban and rural
communities - the majority of who are not asking for charity, but rather seeking opportunity

21
Reference
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2. Voices of the Poor: Can Anyone Hear Us? Survey undertaken of over 60,000 men and
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business work for the poor. Report of the Commission on the Private Sector and Development to
the Secretary-General of the United Nations, 2004. Narayan, Deepa, Pritchett, Lant, and Kapoor,
Soumya. Moving out of Poverty, Volume 2: Success from the bottom up. World Bank, 2009.

3. Nelson, Jane. Building Linkages for Competitive and Responsible Entrepreneurship:

Innovative partnerships to foster small enterprise promote economic growth and reduce poverty
in developing countries. Harvard Kennedy School and United Nations Industrial Development
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4. United Nations Development Programme. Creating Value for All: Strategies for Doing
Business with the Poor. UNDP, 2008. See also: Jenkins, Beth. Expanding Economic
Opportunity: The role of large fi rms. Harvard Kennedy School, 2007. This forms part of a series
that illustrate inclusive business models in seven industry sectors: food and beverage; financial
services; healthcare; extractives (oil, gas and mining); tourism; utilities; and information and
communications technology.

5. A Better Investment Climate for Everyone.World Development Report. The World Bank
Group, 2005. 6. Nelson, Jane. Leveraging the Development Impact of Business in the Fight
Against Global Poverty. CSR Initiative Working Paper 22. Harvard Kennedy School, 2006.

7. United Nations Development Program. Creating Value for All: Strategies for Doing Business
with the Poor. UNDP, 2008.

8. Statistics provided by The Coca-Cola Company.

9. Ibid.

10. The terms ‘Bottom of the Pyramid’ and ‘Base of the Pyramid’ were coined by Professor Stu
Hart, Professor C.K. Prahalad, and Allen Hammond.

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11. Patricof, Alan. J and Sunderland, Julie. E Venture Capital for Development. Paper prepared
for Brookings-Blum Roundtable: The Private Sector in the Fight Against Global Poverty. Aspen
Institute, August 3-4 2005.

12. There is an emerging community of practitioners and researchers exploring the best
approaches to measuring the development impact of large corporations. Leaders in this area
include the World Business Council for Sustainable Development, Oxfam, faculty at Insead and
Cambridge Universities, and the Aspen Network of Development Entrepreneurs.

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