Case Study ： Mercy Charitable Foundation

第四組：鍾佳蓉、蔡青潣、宋政桓、陳昭錡、王琮仁

指導教授：王俊程

Agenda

Introduction of Mercy Charitable Foundation

Conflict between Benefit and Ethic The Counterpart Alliance for

Partnership (CAP) Challenges Social Impact and Business Results Q&A

Introduction of Mercy Charitable Foundation

Christian faith-based NGO, founded in 1997

Zhytomyr in Ukraine the problems result from the high unemp

loyment rate(60%) the incident of Chernobyl nuclear power

plant

Activities

For homeless children

Provide meals

Offer educational, social activities, legal aid and

counseling programs

For elderly and substance abuse

Provide meals

Offer educational, social activities, legal aid and

counseling programs

Finance

Mercy Charitable Foundation

Local NGOs business partners

international donors

Local agricultural producers

and business

local government

Prior Financial Support

Worsened country economic situation

Decide to initiate income-generating activities

to sustain the organization and its operation.

New Activity

To start a café Hunan resource

Mercy youth club members served as volunteer labor to build physical facilities.

Venture team, experienced in the restaurant industry.

Conflict between Benefit and Ethic

Sell alcohol and cigarettes or not ？ Benefit twice Prior activity is to help young people to qu

it smoking and avoid drugs and alcohol. It is estimated over 50% of the population

in Ukraine smokes Some business advisors predict that the C

afé would go bankrupt in case of not selling alcohol and cigarettes.

Decision to Start Kovcheg Café

Smoke- and alcohol-free restaurant Low price strategy and emphasis on qua

lity Kovcheg Café provides different service f

rom other café in Zhytomyr.

The Investment in Farm

Provide vocational training and rehabilitation for drug addicts and alcoholics Reduce the incidents of relapse Give drug addicts and alcoholics in

recovery new possibilities to earn an income

Provide agricultural products to the café and Mercy’s free meals program.

The Counterpart Alliance for Partnership (CAP)

CAP was one of Mercy’s most important partners. CAP is a founded program of Counterpart International,

Inc., a US NPO with more than 35-year record in improving environmental, economic and social conditions for human development in over 60 countries.

Their mission is to promote civil society through NGO capacity building and enhanced civil participation, especially in the following specific vulnerable populations: children &youth, disabled, the elderly, and drug& alcohol addicts.

CAP provides support and services, including: consulting and technical assistance, Funds for small-scale projects, NGO exchanges with partners in neighboring countries.

What did CAP do for Mercy?(1/3)

Helping Mercy select a business idea.

Supporting the market research and analysis.

Helping Mercy develop its human resource plan for the café.

What did CAP do for Mercy?(2/3)

The most important assistance was Marketing. At first, Mercy’s marketing approaches were rand

om: advertisements in the newspaper; flyers sent to businesses, community centers, churches and the university,etc…

Can’t target specific customers, or build a steady client for the café.

Mercy should prepare a marketing plan focused on developing the café’s brand and image.

What did CAP do for Mercy?(3/3)

Develop a niche market — The café serves a small, well-targeted market with a clearly defin

ed concept: “healthy place.” Faith-based/Christian ethic — Mercy leveraged NGO relationships, networks and reputation as

marketing channels. Low price penetration strategy High quality product is the first priority Responsive to customer demand — Developing products and services according to customer prefere

nces.

Challenges- Financial Mercy lacked funds to invest in full-scale renovati

on and upgrades for the café. The kitchen needs a better ventilation system, a

major expense. The café could serve more customers by buildi

ng additional dining space. Mercy received a $1,000 loan from the CAP Pro

gram, but could not secure a bank loan. Utility prices have skyrocketed in 2000 & 2001.

Challenges- Legal

There were many legal barriers to nonprofits opening businesses.

Under Ukrainian law, in order for Mercy to operate a for-profit without losing nonprofit status, managers must incorporate the café under a“private entrepreneur” who will act as the fiduciary agent and business manager.

Mercy managers chose one of their members with whom they signed a memorandum of understanding (MOU) stating that this individual is responsible for running all of the NGO’s commercial activities.

Challenges- Human resources At fist, the Mercy team struggled with human re

source and management issues: Professional manager or someone who

understands Mercy’s mission? The number one criteria is character assessme

nt—people who understand and are committed to the mission, so they picked a former Mercy client to be the café manager.

Employing student interns doing practicum work to reduce the cost of labor.

Challenges- Bureaucracy Meeting licensing requirements and dealing

with legal authorities very trying. Several of the neighboring cafés bribe the

health department, but Kovcheg’s management has refused.

The consequence for Kovcheg’s refusal has been harsh scrutiny and the necessity to comply strictly with numerous requirements.

Challenges- Political Zhytomyr had a corrupt mayor who was veheme

ntly trying to block the initiative, and the mayor colluded with local authorities that tried to impede them by withholding building permits & continually changing licensing requirements.

Through this experience Prokhorenko learned the value of political involvement and decided to play a role.

Social Impact and Business Results(1/4) The organization’s entire annual

operating budget is covered by income earned from its entire activities 94%($9,350) from the three thrift shops in

2001 6%($597) from the café

the café played an invaluable role in raising political and public awareness regarding healthful lifestyle

Social Impact and Business Results (2/4)

Two of mercy’s youth soccer team comprised of low-income and street children made it to the European finals in Sweden The 11- to 13-year-olds took third

place The 14- to 17-year-olds took fifth

place

Social Impact and Business Results (3/4)

Increased job creation in Zhytomyr City Achieved sustainability of Mercy Charitable

Foundation by creating a permanent funding source through its social enterprises and independence from donor support

Generate income Launched three new social enterprise thrift

shops that contributed $9,350 or approximately 94 percent of Mercy’s budget

Social Impact and Business Results (4/4)

Provided 60 free meals a day in 2001; over 100 projected for 2002; 150 projected for 2003

Changed public opinion and social consciousness about healthy lifestyle choices

Influenced public policy and legislation for future social enterprises

Increased cross-sector cooperation between NGOs, business and government

Key Success Factors of Kovcheg Café Common mission Team is very important Niche creation Counterpart alliance for partnership CAP program Self-confidence and determination Marketing

Develop a niche market High quality product is the first priority Low prices Faith-based/Christian ethic Responsive to customer demand

Advice Don’t be afraid Get a good lawyer and learn the law Put together a good team Use personal contacts and work with

those people that you already know Operate transparently and abide by

the law Get involved in the community and

local politics

Q&A

How to improve the financial state of Mercy? Short term

Increase the price of meal Lower the cost of operation Higher class meal for business men

Long term Extend operation time Provide additional services

Q&A(2)

Bribe the health department? Bribe: get higher profit and serve

more clients No bribe: no money and no clients

No money