BUCHAREST UNIVERSITY OF ECONOMIC STUDIES

FACULTY OF BUSINESS ADMINISTRATION IN FOREIGN LANGUAGES

___________________________________________________________________________________________
_

Case study analysis

Mercy Corps and KeBal Healthy Food Carts:
Sustaining and Scaling Up

Prof. univ. dr. Carmen Paunescu

FABIZ Business Research Master
Course: Entrepreneurship Research
Master of Business Research
Authors (masterands):
Burciu Andrei
aburciu25@yahoo.com
Dobre Stefan
stefan.dobre91@gmail.com
Dominte Oana
oana_dominte@yahoo.com
Ghighilan Alexandru
ghighilan@yahoo.com
Lupescu Loredana
loredana.lupescu@gmail.com
Petrescu Marius
marius.petrescu@ost.com.ro
Preda Iulia
julythinksallot@gmail.com
Group 1
Bucharest

December 10th, 2014

ABSTRACT
In early 2010, Mercy Corps, a global nongovernmental organization (NGO), wanted to find a
way to turn its KeBal pilot project, which sold nutritious food from food carts to kids in
Jakarta, Indonesia, into a self-sustaining, scalable business that would benefit the local
communities both from the perspective of customers and the one of maintaining and creating
new entrepreneurs and jobs. Although the Mercy Corps office had concluded that growth
would be best served by franchising, that conclusion left them with further questions.
1. Defining the issue
This case study analyses the current situation of a pilot program, KeBal, run by the NGO
Mercy Corps, for selling nutritious food to poor children from street carts, in Jakarta as well
as the choices that should be done in order to make the transition from a non-profit project to
an self-sustaining, independent business. KeBal.
Even though it has proved to be a successful project until January 2010, our point of
reference, the Mercy Corps will only fund Kebal until November 2010, period in which two
project managers from Mercy Corps, Usye Umayah and Dini Marhendra have to find a
solution to transform the project into a self-sustaining business. With the purpose to support
them with highly specialized professional advice, four MIT Sloan MBA students from a
Global Entrepreneurship Lab (G-Lab) were brought in Jakarta for three weeks by Mercy
Corps.
In order to have a clear understanding of the issues that the project is facing and to decide
upon which we should concentrate our full attention, we decided to categorize them into four
types: immediate, basic, tactical and strategic. (Table.1)

Immediate Issues
Monitor profitability
Insufficient employees
Lack of an equipped cooking center

Marhendra had little business experience and

Tactical Issues

Basic Issues
Management issues: Usye Umayah and Dini
the only received advices are from students
Lack of funds
Untrained team
Focus on increasing sales
Competition
Strategic issues

Build the brand (raise awareness of

KeBal as a business and not as an NGO

Strategic direction of the business

Relationship with Ibu Ana

project, bolster the brand recognition, the

position, the tagline and its cause)

Lack of menu variety

Table 1. Types of issues in KeBal project

2. Analyzing the case data

2.1. Constraints
o Usye and Dini are faced not only to a budget constraint due to the dependency on Mercy
Corp but also time constrains generated by the fast arrival of November 2010.
o The team along with G-Lab needs to choose and establish a solid business model. As
Exhibit 5 illustrates, in a two-layer format the HQ undertakes responsibilities regarding the
kitchen set ups, hiring cooks and vendors, purchasing carts and ingredients and preparing the
food. The three-layer model dissipates these responsibilities among kitchen independent
managers and vendors.
As Table 2 shows bellow, both the two layer and the three layer approaches have a
multitude of advantages and disadvantages.
Model
Two-layers

Advantages
+ Control of the cooking centers

Disadvantages
- Initial investments needed to cover

+ No royalties fees/structure

the cost of the headquarters and

+ Tested business model by lead cooking centers

- Slower growth rate
competitors
- Hiring multitasking employees with
+ Easier to monitor finances
both managerial and cooking skills
+Possibility
to
change
and - Ending the collaboration with Ibu Ana
Threelayers

implement new menus quicker

+
Quicker
deployment

of - High royalty rates and fees

- Cooking center franchisers are not

independent cooking centers

+ Higher levels of motivation for well stimulated and might turn into
owner/managers of the centers
competition
+ Previous collaboration with Ibu
Ana
+ Improved talent attraction &

retention
Table 2: Advantages and disadvantages for two and three layers business models
o Qualified personnel is hard to find and the employees involved require training

o Products are always fresh and needs to be supplied on a daily basis

o No proper production plan has been developed: the vendors estimate the amount they will
sell in a unstandardized manner and end up throwing away the leftovers.
o Actual production time takes up to 6 hours: using single cook-vendor decreases the time
spent actually obtaining revenues.
o Lack of menu variety: their impossibility to sell more than 2 assortments of dishes is
reflected by the majority of 70% of consumers whom complained that children get bored
quickly of the same menu.
2.2. Opportunities
o Competitive advantage of offering safely prepared and healthy food at low costs [] free
o
o
o
o

of preservatives and non-food-grade additives

Educating their target market: mothers with children under 5 years old
Relying on the support of the local community and authorities
Gathering similar business partners such as Ibu Ana
Increasing brand awareness by using the success of the pilot project and the trust

consumers have in the vendors.

o Customers have a high degree of loyalty. The market research comprised by the team
revealed that 97% of their sample admitted they purchase KeBal food at least 3 times a week.
o Teaming up with schools, hospitals and private clinics to offer free nutrition courses and
how their products can be incorporated in a healthy diet and have an impact on a social level
o Changing to a cook vendor team: Exhibit 2 illustrates that the average daily revenues are
lower for the one man operations driven by RW02 and RW05 while the combination of
vendor and cook, RW10 + Gunanto, has a steady increase and takes the lead by 0.06 from
August to September.
o Prices are perceived being fair and maybe a little low thus there is room for the company
to increase unit profit margins because the increase in price is counterbalanced by the high
degree of loyalty to the brand and what it offers.
2.3. Assessment
o KeBal food carts have an easily recognizable image (Exhibit 1): the company can build a
brand on their existing carts decorations (kids having super power, intensely and diversely
colors, as a metaphor of the four nutritional elements promoted).
o The vendors have well set schedules, tailored to mother and children behaviors : 7 days a
week from 6am to 8am and from 3pm to 5pm.

o Target profit margin between 20% and 30%: typical sales range from 40 to 70 portions of
porridge at 20 cents and 30 to 50 portions of jelly at 10 cents, with an average of 1,5 serving
of both. Thus the daily revenues would reach an average of 22,5 dollars.
o Ibu Saripa and Gunanto propose a different business process: Gunanto purchases chicken
porridge from Ibu Saripah at 16 cents/portion and sells it for 21 cents; he buys the fruit jelly
portion for 8 cents and sell them for 10,5 cents. By this way, RW10 (Ibu Saripah) + Gunanto
so called joint venture is increasing the region daily total revenue from 3,30 USD/day in
June and 5,0 USD /day in July to 9,0 USD/day in August and September (see Exhibit 3). In
the same period, the other two regions are less efficient, producing revenues with almost 40%
lower: between 5,9-6,5 USD/day in July and September. Most importantly, by using this
approach, Gunanto has overcome the lower limit of monthly (near 100 USD/month) in their
region, by double in four months.
The following Fishbone diagram underlines the major cause and effect relationships:
Equipment
Hard to push
food carts
Limited kitchen
equipment

Cook & Vendor

are the same
Laborious & Time
consuming
Health & Quality
control

Increasing malnutrition
problems
Lack of diversity
Fresh & Non
reusable

People

Process

Low level of nutritional &

health education

Materials

Recruitment
time: 2 months
Vendors should
be popular
Usye & Dini do not
have business
experience

Becoming a selfsustaining business

Demographics
Dependency on
Mercy Corp

Competition

Environment

Management

3. Generating alternatives
3.1. First option for KeBal organization is to apply the classic two-layer structure that most
small franchises in the food industry follow. This model is a simpler one and implies a more
clear division of tasks: on one side there are the headquarters, which also own the cooking
centers (where the products will be prepared) and on the other side lay the vendors.

Concerning the flow of the activities, vendors will be able to buy baked products from the
cooking centers and then sell them directly to the customers.
This way the cooking centers gross profit would be organizations gross profit and this will be
the only source of profit as long as other franchise royalties/fees does not exist. No
underreported revenues or avoided taxes could occur, as the headquarters will fully monitor
the firms activity.
The total costs for implementing such business model are higher, as the founders need to
raise, on their own, enough capital to cover the development costs (i.e. rent a space, buy
kitchen equipment, hire bakers etc.) and further sustain the firms daily activity (production
costs). In order to raise the necessary amount of money (~5000 dollars), Usye and Dini should
try at first to find some investors/business angels willing to put their money into this type of
business or may also consider applying for a long term loan (3 to 5 years, small interest rate,
in local currency). The implementation time of this plan may be prolonged up to late
November 2010 (last month of subventions granted from the Mercy Corps NGO).
Because raising capital to further extend the business is hard, especially in the beginning, a
slower growth rate of the business in expected in the following 2 years.
In terms of productivity, the twolayer organization will be more productive as all the food
will be cooked at first in one place. Newly hired employees will be in charge with cooking
and with the administrative work (monitor profits, build brand awareness, do marketing etc.);
in plus, they will have a constant support from Usye and Dini.
Employee turnover is low and their implication in the firms activity is high in this case.
Moreover a two-layer firm is more flexible and dynamic as changes in menus, techniques or
processes can be more easily implemented and do not require any other approval.
Their competitive advantage lies in the unique recipe of rice porridge and jelly, which is
healthier for kids less than five years old than any other existing products on the market. Most
customers also consider the price fair; this is what makes them return to KeBal and spread the
word around.
In a twolayer organization, product quality can be easily monitored and kept at high
standards. Due to the increased productivity and centralized cooking centers, product variety
can also increase significantly. Consequently, this will lead to an increased level of customer
satisfaction.
This model is easy to implement, as no complex royalty system must be created, not other
contracts with other parts. Competition is not yet fierce because the targeted segment of

clients is not yet fully addressed and mothers see in KeBal a trustworthy producer with whom
have already created strong connections.
3.2. Second alternative is to build a business model structured on three-layers. In order to
analyze the three-layer option and compare it with the two-layer, we must pass it through the
same qualitative and quantitative testing to form an opinion.
The example of Ibu Saripa and Gunantos case could be used in order to prove that following
this model can bring extra value for both customers and entrepreneurs, who proved the
possibility to exploit customers availability to pay more for better products and services.
Very important things to begin is with what we believe are the way in which the HQ will do
the contracts with the cooking centers. This is of a highly importance due to the fact that if
not negotiated properly, cooking centers can stop at some point offering royalties to the HQ
and start doing their own business based on the KeBal idea. So it is very important to
establish some solid terms in which the cooking centers are allowed to use the ideas and the
products with KeBal brand only while under the umbrella of the company.
Now for the quantitative assessment and concerning the profit, through a three-layer
organization, the profits are proportionally split and based on how well each does its work so.
If vendors will sell well the products, they will generate revenues and profit for the cooking
centers, which will be able to cook more and by so to bring bigger royalties to the HQ. IN this
way, management in HQ will have the necessary revenues to cover operating costs and to
focus on better marketing plans and improving the menus. By so, will be created a positive
cycle which can ensure greatly increases for the growth rate of the entire business created
with KeBal products: franchising, production, selling.
With this model, development costs are greatly split between the three layers so the money
needed to actually fund the beginning of the start-up will be smaller.
Regarding the production costs and productivity, by having a three layer business model, a
very important thing that can be implemented is quality control, which can check not only the
quality of the products but also their cost and production efficiency.
Last but not least concerning the quantitative factors, the employee turnover rate is not very
important in the three layer business model because every person has only one specialization
and you dont have to search for people with multiple skills in case an employee decides to
leave. Also, will be created interdependency between second and third-layer, the most value
creation part of the cycle.

As for the qualitative factors, the competitive advantage of the company due to the way in
which it prepares its food and the ingredients it uses exists regardless of the business model
that the company will decide to use, but its important to work on the variety of products
because of current complaints concern the lack of variety in the menus. Through a three-layer
model it would be actually easier for the HQ to study the market and implement new products
that might be good to be introduced on the market, rather than being also busy cooking and
doing the production job.
The competition and customer satisfaction are very important factors because many
companies entered the market with different products, the level of customers expectations
constantly increasing. Therefore, permanent improvement and innovation is needed; this issue
brings an advantage to the three-layer business model, because almost all the other businesses
on the market use a two-layer model that make it difficult to focus correctly in the same time
on producing, selling and developing new products and finally to improve customer
satisfaction.
The employee implication in the three-layer model is based on the fact that each employee
works to build its own profit, but in the same time they all depend on each other; those
realities creates a positive synergy between everyone involved in the business.
3. Select decision criteria
The previously mentioned alternatives shall be evaluated according to the following
qualitative and quantitative decision making criteria. Each criterion will be further analyzed
and will help us decide which alternative is most suitable one for KeBal organization, using

Quan

the following Likert scale:

Criteria

Cod

Profit

e
C1

Points
1

Very low

Low

Zero

High

Very high

Costs

C2

Very low

Low

Zero

High

Very high

production)
Productivity

C3

Very low

Low

Zero

High

Very high

Implementation

C4

Very low

Low

Zero

High

Very high

time
Growth rate

C5

Very low

Low

Zero

High

Very high

Employee

C6

Very low

Low

Zero

High

Very high

turnover
Competitive

C7

Very low

Low

Zero

High

Very high

advantage
Customer

C8

Very low

Low

Zero

High

Very high

and C9

Very low

Low

Zero

High

Very high

variety of products
Employee
C10

Very low

Low

Zero

High

Very high

implication
Ease

of C11

Very low

Low

Zero

High

Very high

C12

Very low

Low

Zero

High

Very high

Qualitative criteria

titative criteria

(development

satisfaction
Quality

&

implementation
Competition

4. Analyze and evaluate alternatives

For the first alternative, in which KeBal will apply the mentioned two-layer structure, used
by the majority of small franchises, we identified as competitive advantage a clear division
of tasks: the headquarters with the cooking centers and the vendors. The flow of activities will
allow the vendors to buy baked products freshly from the centers and sell them immediately
to the customers. Another thing which adds to the competitive advantage is the unique recipe
of porridge and jelly which is considered to be the healthiest available.
As far as profit is concerned, the only we have identified is low profitability due to the high
startup costs that are needed to implement the chosen business model. However, if they could
find investors, the costs would be reduced. We identify a high rate of productivity due to the
nature of this two-layer structure, because all the products would be cooked in one place and
the employees who would both cook and do administrative work.
The implementation time should be November 2010 at most. Due to the fact that it is harder
to raise the initial capital the growth rate of this two-layered structure is much slower in the
following years.

10

Regarding employee turnover, we identified it to be at a low level coupled with a high level
of implication in the firms activity. Customer satisfaction is measured to be at a medium
level and a more diversified menu would help make it grow exponentially. This can be done
by the fact that the two-layered organizations product quality can be easily monitored and
kept at high standards which in turn will lead to a product variety.
For the other alternative, namely the three-layer structure, in regards to profit we identify a
high level based on how well each employee does its work: the more they sell the more
royalties they bring in and this will contribute to increasing growth rate of the firm.
The implementation time of this business model is lower than that of the two-layered business
model therefore we identify a low implementation time factor.
The costs associated with this structure are identified as being low due to the fact that because
of this structure the costs are split between layers. Also this business model enables to
implement a quality control, which would increase the productivity and efficiency.
The level of involvement of employees will be critical to the success of this model due to the
fact that they will all depend on each other; therefore we identify a high level of employee
implication.
We identify this model to be easily implementable than two-layer business model. The risks
of implementation related to building and operating of the cooking centers are related only at
the level of the region they are serving, without impact for other regions, in comparisons with
the model with two-layers. Once the teams cooks-vendors will be set, it is less probable that
these will play against team members, even by accepting new vendors in the area, while the
results are those expected; therefore, we identified a low level of competition.
Due to the nature of this three layered model, the HQ can make extensive research on the
market and update the menu in order to increase customer satisfaction and deal with
competitors without overworking the people in charge which also handle cooking as with the
two layered model.
5. Select preferred alternatives
In following table, we have assessed and measured previously chosen criteria in respect with
both alternatives we have discovered.
C1 C2 C3 C4 C5 C6 C7 C8 C9 C10 C11

C12 Total
points /

Rankin
g

averag
e
Alternative
11

s
(1).Two-

40/3.33

44/3.66

Layered
Business
Model
(2).Three
Layered
Business
Model
Table 3. Measurement of chosen criteria over the selected alternatives
Having this assessment, we identified the best alternative for this case to be the threelayered business model, which would bring the most benefits for the organization and also
make it run independently in the future.
That can be achieved by the level of implication of each employee in the model which would
in turn increase capital that the HQ receives which in turn can enable the company to make
better market research or menus.
The two-layered alternative is one which is time costly to set up and due to the fact that for it
to develop into an independent business it would require a lot of pressure on the already
multitasking employees we concluded that the three-layered business model is most suitable
for this situation.
7. Action plan development and implementation
Having the goal of continuing KeBal project with his second stage of life, after the first one as
a pilot project, Mercy Corps will have to consider taking following steps in the
implementation of the Action Plan:
What

Who

When

Where

How is the

actions need to

will take the

is the action due

is the action to

action to

be done?
1. Design the

actions?
Sean Granville

to be done?
Month 1

happen?
Jakartas Mercy

happen?
Management

business model,

Ross, Dini,

(current month)

Corps HQ

meeting;

including the

Usye, G Lab

brainstorming;

franchise fees;

students

discussions;

2. Develop the

G-Lab Students,

Jakartas Mercy

benchmarking;
Management

business plan

Dini, Usye

Corps HQ

meeting;

Month 1

12

brainstorming;
discussions;
3. Define the

Diny, Usye, G-

Months 1+2

Jakartas Mercy

benchmarking;
Meetings;

business

Lab, Ibu Ana

(without G-Lab,

Corps HQ

discussions;

relationships in

which students

Ibu Anas home

benchmarkings

the chosen

have to go
Jakartas Mercy

Discussions;

model
4. Identify the

Sean Granville

home)
Months 2+3

most suitable

Ross , Diny,

Corps HQ

questionnaires;

franchisee

Usye, G-Lab,

On the field

interviews

Ibu-Ana, local
5. Select the

authorities
Sean Granville

Beginning with

Jakartas Mercy

Presentations;

franchisee and

Ross, Dini,

Month 3 and

Corps HQ

negotiations

sign agreements
6. Training of

Usye.
Sean Granville

continuously
Beginning with

Jakartas Mercy

Trainings;

new franchisee

Ross , Diny,

month 4

Corps HQ

in regards with

Usye

Francisees

business , 3rd

location

layer partners
(vendors
selection) and
locations
requirements
6. Renovation /

2nd layer partners Beginning with

2nd layer

Construction

construction of

(franchisee)

partners

works

month 4

new cooking

locations

franchisee

(franchisee)

locations
7. Trainings with Diny, Usye, Ibu-

Beginning with

2nd layer

Presentations;

new franchisee

month 5

partners

Training;

in regards with

locations

cooking

products

(franchisee)

demonstration;

Ana

requirements

13

and cooking
process
8. Identification

2nd layer

Beginning with

2nd layer partners Discussions;

and selection of

partners; local

month 5

neighborhoods

vendors
9. Training of

authorities
2nd layer

Beginning with

interviews
2 layer partners Trainings;

new vendors in

partners; Diny,

month 5

locations;

presentations;

regards with

Usye.

Kebal HQ

role plays

questionnaires;

nd

products
description,
marketing and
sales

Analyzing this case study, we have found how a better resource allocation together with good
level of information and knowledge about target customers can help social entrepreneurs to
develop their enterprise and ensure its sustainability. By doing so, Mercy Corps will be able to
continue KeBal project and expanding it; most important, Mercy Corps will ensure more and
more kids access to healthy food and empower more members of Jakartas poorest JW to
become entrepreneurs in order to leave the poverty.

14