Honey Care Africa (A) A Different Business Model Case Solution

1. What are the key elements of the Honey Care Africa business model? What are the core sources of competitive advantage? How do they link together?

The business aim of Honey Care, as envisioned by Farouk Jiwa, was to buy honey from small scale rural farmers and package it for sale in the urban markets; establishing value on three fronts, environmental, economic, and social. Mr. Farouk had experienced firsthand how attempts to alleviate the state of the rural farmer had failed due to mismanagement, corruption, and a lack of incentive. The Honey Care model was setup to provide farmers with means of economic prosperity.

In turning his attention towards honey production, Jiwa was trying to tap an industry that had historical roots in Kenya but had never been viewed as a profitable venture. Honey Care was bound to face skepticism due to prior experience of farmers with government representatives and businesses; so the value proposition of Honey Care has to offer a significant incentive to rural farmers to divert their time and resources towards honey production, many of whom are dependent on subsistence farming. In communicating with farmers, Honey Care was explicit about creating a self-sustaining environment; aiming to alleviate farmers from subsistence level and reliance on donor funding. The most important elements of Honey Care’s business model are undoubtedly its partners and resources. In its liaison with local NGO’s, Honey Care conveyed its joint eventual goal of social upheaval allowing it to foster partnerships with local NGO’s for setting up the venture. These partnerships not only helped gain Honey Care the trust of local farmers, who were disenfranchised by businesses and the government, but provided them with initial resources that would help farmers produce honey. Honey Care set out to produce a higher quality of honey catered to urban tastes, which it markets at a higher price to capture the company’s vision of financial sustainability.

Encouraged by its success honey care’s competitors soon sprung up but could not emulate the company’s success, as they could not embody the vision. Honey Care is driven by its employees and its partners who share the vision of Farouk Jiwa. The company’s sources of competitive advantage are due to operational efficiency and differentiation. Honey Care’s management, employees, and partners all believe in its vision, enabling it to integrate its supply chain seamlessly. While offering naturally made high quality Honey Care was also able to offer urban customers a differentiated product. Combined they allowed the company to fulfill its promise of timely payments, provide customers with a delicious honey and make profits for itself.

2. What partnership could be reconfigured to increase Honey care’s financial viability?

Transition from small-scale to a medium scale business transforms business dynamics and financing becomes a very complicated issue. The complexity of this issue can become clearer through a further research in the funding system of the company. Initially, Honey Care was able to facilitate the provision of Langstroth hives with NGO’s and donor assistance, possible because the smaller number of hives to be provided could be adequately met with the existing arrangements. Success of the project spread the word through rural communities who also wished to engage in honey farming. These farmers created an excess demand for hives which could not be met with existing financial conditions. The situation somewhat alleviated with the deal with K-rep Bank but as long as demand continues to increase for honey production this arrangement is tenuous at best. In order to keep pace with the demand, Honey Care needs to revisit two relationships, with NGO’s and Banks.

Originally donor funding to NGO’s provided Hives to Honey Care, which sold them to farmers for a commission of the produce till cost recovery. In a period of rising demand, Honey Care should look to structure deals with NGO’s to obtain funds specifically for the purchase of Hives. It would ensure a stream of funds; not dependent on the NGO management’s decision to allocate a portion of the funds. A further advantage of such an arrangement would mean that Honey Care would not be restricted to use the funds in geographical presence of the NGO but could allocate them where the need is most urgent. A collaboration of the above nature would aid Honey Care’s growth while simultaneously achieving NGO’s aim for social and economic development. Additional Stream of donor funding cannot be relied completely upon to fulfill the excess demand; for greater reliability, Honey Care should look to develop a comprehensive deal with K-rep. The existing arrangement caters to micro financing the acquisition for langstroth hives. Honey Care should centralize the deal; obtain financing from one branch to buy in bulk. This would help it achieve economies of scale and greater autonomy over distribution of hives.

3. What changes could enhance the scalability and replicability of the business model?

As Honey Care grows, its ability to finance its operations will pose more challenges; thus, it has to revisit relationships to gain greater independence of finances and access to greater capital. In many countries where honey production and rural uplift concerns are present, the honey care business model provides the yard stick to measure by. It is important to recognize the aspects that make the business model successful but recognize constraints as well, so they can be dealt with to produce similar or better results.