General Business Models

Contents

The following section is an application of the knowledge our project has acquired about doing business the developing countries we studied. These business models are based on what we believe would best adhere to the lifestyles of the potential user in the countries that we have researched. The general mechanisms of distribution and marketing are spelled out, while specific agents are left to interested parties who want to further develop these ideas. In this way, these initial business models will serve as a springboard to future innovations.

The principles of affordability, credibility, sustainability and wealth generation have guided the design of each of these models such that the product is geared towards the poor in the developing world. The hope is that the end-product will go beyond its original function to become a renewable source of income for the user as well.

1. Caravan Model

Salesmen who have extensive knowledge of particular target regions (variable depending on what country model is operating in) are selected by the local partner. These salesmen will travel in the area that they have experience in, selling to designated locations. These salesmen will have the dual obligation of both selling the product as well as training a local representative in each destination who will become responsible for charging the light and/or distributing batteries for the use of the light. This creates a microenterpising opportunity for the stationary agent in the value chain.

Strengths

• To target remote areas and isolated populations, more of potential users can be reached through this model than through a stationary retailer.
• Salesman is able to navigate the region better than foreign businesses.
• A personal connection can be made between the company and users through the local battery/charger entrepreneurship.
• If only one charger is sold to a village, initial capital spent by users is lowered, increasing the likelihood of a purchase.

Weaknesses

• Transportation for the salesman will be difficult.
• The activities of all the salesmen have to be coordinated to avoid the overlapping of sales regions.
• Selection of salesman and caliber of individuals is crucial to the success of the overall business scheme.

2. Lights for Goods Model

LUTW travels to villages, and seeks out existing groups of women or men who are known as artisans and produce a high-quality artistic goods (blankets, rugs, baskets, paintings, etc) which can be sold internationally. Many of these people will not have direct access to capital, but do have a highly valued skill. By providing our lights and a small investment as the microloan, LUTW serves as the distributor to these regional artists to exhibit their cultural artwork on an international level. In this way, the lights themselves are the microloan and their artwork -- produced using our lights -- repays this loan. We can gather the goods from these artists, sell to partners/resellers internationally and offer them directly for purchase from our website as well. As a manner of implementation, we can increase the incentive to produce more artwork after the initial loan is paid in full. For example, the artist could initially be given 35% the price we get for their work, but be given 65% once they have repaid their loan. Individuals will be able to service the lights and to sell more lights to members of the community as wealth in the community accumulates. These individuals will be trained by LUTW to service our lights and other electronic items on a minimal level to provide supplemental income. If substantial profit is made from the sale of artwork, LUTW can subsidize sales to customers thereby further increasing the availability of our light.

Assumptions

• There are skilled craftspeople in every village
• Their products will sell, and enough people will buy them to make a profit.
• LUTW will be able to staff someone who can manage these retail aspects of the business.

Strengths

• Wealth generation becomes an option for locals.
• Local cultural goods are promoted.
• LUTW may be able to generate significant income for retail goods that contributes to its sustainability.
• Potential users do not need to expend initial capital to buy the light, we offer it to them up front.

Weaknesses

• Shipping of goods may be expensive and difficult.
• Only craftspeople will benefit immediately from the model, not everyone is accounted for.
• The market demand for goods may not be enough to run a sustainable business.

3. Remittance Model

In some areas, much of the work force in employed in a distant area and sends portions of their salaries to relatives at home. Some organizations have been created to serve as facilitators for and bankers of this transfer. At their branch locations, recipients can cash in their remittances. Additionally, they help the domestic relatives access government home-financing and health aid. The relatives at home pay nothing for this service; expenses are covered by a small fee (e.g., $1-3) charged to the sender with every transfer. Money sent home from expatriate workers is almost always used for everyday purchases. LUTW would partner with such an organization to make points of remittance distribution also serve as points of light distribution. When customers go to the distribution points to receive their remittances, the bank clerk will offer them an opportunity to use their remittances to purchase a light. The bank will not be the center of light maintenance and battery recharging. Instead, a small store owner in the vicinity will be trained by LUTW to maintain the lights and charging unit. This small store owner will purchase a charging unit, through microcredit, and charge a fee for recharging batteries. The bank clerk refers the light customer to the local store for future light maintenance. The bank clerk will be given a commission/stock option for each light sold. Recharging and maintenance are handled by a separate but cooperating entity, most likely a small store owner.

Strengths

• Leverages remittance organization's existing network.
• For the rural user, an immediate investment of the received remittance into household value, rather than two transfers (remittance into cash, cash into household goods).
• Bank clerks have incentive to sell light in commission/stock option.
• New income generation will not be concentrated in the hands of the bank, since a small store owner will be the center of charging and maintenance.

Weaknesses

• LUTW needs to find a small store owner nearby the remittance distribution point that will be willing to take on the proposed responsibility.
• The small store owner needs to obtain a microloan. LUTW may need to assist in this area.
• Because bank clerks sell the lights while local store owners maintain the lights and charge batteries, there may be problems because responsibilities are not centralized

4. Salesperson Model

A local entrepreneur, likely a woman, acts as a salesperson of the LED light and battery, selling units door-to-door. She obtains light from LUTW for display, with brochures and pamphlets for advertising, along with a LUTW business card certifying her as a salesperson. Takes orders for lights, sends orders to LUTW national headquarters, and facilitates delivery of product. Entrepreneur has solar panel recharging station at her home and charges fee for recharging batteries. Entrepreneur also handles microfinance, assessing risk and determining whether a potential customer is trustworthy. She then decides on a suitable payment plan for the customer. Job starts as a full time job, soliciting purchasers of product until village market is saturated. After market saturation, it becomes a part time job (see below) with revenue solely from charging batteries.

Strengths

• This model may provide opportunities for new income generation to people that would benefit significantly.
• The local entrepreneur only needs microcredit to purchase a charging unit, not the lights.

Weaknesses

• It may be cost inefficient to order and transport a small volume of lighting units, rather than in bulk.
• Sales person may have to wait until she receives several orders before having the lights delivered from the national headquarters. This would may cause her customers to be unsatisfied with her service due to the wait time. This would also mean that there may be a significant time before the salesperson actually earns any income from taking orders.
• It is necessary to account for costs of training the entrepreneur to maintain the recharging unit.
• An additional maintenance person needs to be trained in order to service the lights.
• A reliable salesperson is crucial to the viability of model.

5. Small Store Model

Local stores stock LED lights and batteries received from LUTW national headquarters alongside their usual merchandise. Stores also maintain charging units so customers return to the store for recharging. Consistency is maintained by a maximum charging price cap set by LUTW national headquarters and a certification program that each small store reseller must undergo.

Strengths

• Since the locals already shop at the small stores, they are likely to be comfortable buying a light from the small store owners.
• Selling the lights would be a part of the normal operation of the store, so the store owner would not have to change jobs for our purpose.

Weaknesses

• Transportation cost of lighting units from the LUTW headquarters may not be cost efficient if the store owner purchases a small volume.
• The store owner will have monopoly power over the lighting units in his local area. He may choose to sell the lights based on his own preferences.
• Consumers' default on payment for the lights may, in turn, cause the store owner to default on his microloan payment.
• Costs of training the store owner to maintain the lights and recharging unit need to be accounted for.

6. Other Options

6.1 The Added Value Light Option

From talking to organizations and people involved with bringing electricity to developing countries, it is apparent that lighting may not be the key issue that needs to be addressed. The need for electricity is greater than the need for lighting. For example, most NGOs provide families with large PV systems that can store enough energy to power not only lights, but radios and even televisions. Providing additional services and/or products in conjunction with LED lights has two main advantages:

(1) the wealth generating potential of our micro-enterprises increases and

(2) more demand is created for our products and services. One possible idea is to combine the battery charger job with a secondary job like operating a cell phone for the village. The objective is to maximize the wealth and value for the end user. They key is to understand the needs of the user to determine what other value-added options can be combined with the light.

Strengths

• LUTW can leverage partnerships with other organizations that have experience with providing services and products to the poor. Grameen Phone is one example.
• There are more incentives for micro-enterprises.

Weaknesses

• LUTW may need to expand its mission to beyond providing just lights. Increased complexity. Initial startup costs will increase.

6.2 Leasing Option

• Users enjoy a free trial of light for one week. If pleased with the experience, they have the option of leasing the light whenever they want or buying it. The idea is that they will come to realize the necessity of a light and will be willing buy the light eventually.
• The leaser can buy the light initially with a loan and is able to repay the loan with the leasing fee he charges.
• The leaser will also be responsible for service and maintenance.

6.3 Medical Clinic Option

• A partnership with international health organizations allows us to provide a primary or backup lighting to medical clinics and hospitals. These organizations would know which clinics most need our lights, and serve as a distribution channel to these end users.
• Our lights may be used for surgical procedures, as well as for general lighting purposes. Portability would be an important characteristic in the product.
• Examples of organizations would include the Red Cross and Doctors Without Borders.