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Case Study on Grameenphone Essay Sample

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Case Study on Grameenphone Essay Sample

Bangladeshi-native Muhammad Yunus developed the concepts of micro-financing and micro-credit when he was Professor of Economics at Chittagong University. After visiting some poor neighborhoods and villages near Chittagong, he realized that very small loans to the poor people could make a very big difference to their work and to their lives. In 1976 he set up his own research project to lend small amounts of his own money to the poor people, particularly the women. The project was successful, and in the same year he secured small loans from the government bank to proceed with the project, which continued to succeed and grow. In 1983 the project had expanded into a large business, and was renamed Grameen Bank. From 1983 to 1989 Grameen continued to grow and expand, until Dr. Yunus realized the need to diversify; several subsidiary enterprises, including GrameenPhone, were created within the Grameen organization. All of these enterprises were structured on the same social business model and operated on the same principle of micro-financing. The majority of these enterprises focused on women, because Dr. Yunus believes that women suffer more disproportionately from poverty than men, and women are more likely to use their earnings to help their families and communities.

The Grameen model of micro-financing has proved successful in many countries, particularly developing nations. Dr. Yunus has won many awards and honors for his work, including the 2006 Nobel Peace Prize, which he was awarded jointly with Grameen Bank. In 2006-2007, Dr. Yunus considered entering politics on a platform to help the poor, as well as to campaign for honest and clean government. This caused problems for him and created rivalry and hostility from other politicians who had previously supported his efforts. Accusations began against him for mismanagement of Grameen’s finances. Despite all the previous good work through Grameen, Dr. Yunus now has many opponents, mostly political, in Bangladesh, but at the same time the support of many international leaders from around the world. In 2011, Dr. Yunus was dismissed as Managing Director of Grameen Bank by the government, as it investigated allegations of “misused and misappropriated” funds of the bank. This affair is still ongoing and unresolved. Introduction

Iqbal Quadir, a Bangladeshi-born naturalized US citizen, is the founder of Legatum Center for Development and Entrepreneurship at MIT (the Massachusetts Institute of Technology). In 1993, he began to develop an idea to provide universal mobile phone service throughout Bangladesh, and in particular for the rural poor. He had been impressed by Dr. Yunus’s success with Grameen Bank and the micro-financing and social business models on which it was structured. So he traveled to Bangladesh to meet with Dr. Yunus to explore how they might together develop this idea as a working venture. Together they negotiated a partner-union with Telenor, the telephone company of Norway, and in 1996 the new company GrameenPhone Ltd. was granted its operating license and the following year launched its service. Service was expanded over the next four years, and by 2000 the network covered the entire country. The business model for GrameenPhone was based on combining the fact that most people in Bangladesh could not afford their own cell phone, and the idea that a cell phone could serve as a source of income. It also depended on the Grameen Phone Ladies.

The Grameen Phone Ladies were an essential factor in developing the business model structure that was the foundation of GrameenPhone. Using the same principle used in Grameen Bank’s innovative idea that women are the most dependable basis for micro-lending ventures, Dr. Yunus started a program in which village women would receive loans from Grameen Bank (through its subsidiary GrameenPhone). This money was then used to buy a cell phone and airtime (in the form of SIM cards) from GrameenPhone. The women would in turn rent the phone and airtime to the other villagers for short periods. The villagers were now able to afford to communicate with family and friends anywhere in Bangladesh and even worldwide. The Phone Ladies made a profit which they could reinvest by buying more airtime, or they could use to start other business ventures, or to improve the lives of their families. And GrameenPhone also made a profit. From this history summary, GrameenPhone will be used for the basis of the case-study. Case Summary

Table 1 presents a basic outline of the nature of the study. The creation of GrameenPhone as a new business venture has been chosen as the focus of the study. This case summary sets out the methodology to be used, and also states the aim of the study. The study is intended to analyze the problems and other factors to be resolved in the creation of GrameenPhone. It will be analyzed from the viewpoint of Dr. Yunus and Grameen Bank, the parent company of the proposed new subsidiary. Table 1: Case summary

Activity| Description|
Inquirer mission:| To create and establish GrameenPhone as a new business venture. | Methodology: SIS| Mission to balance the forces of pressure from the social, economic and business environments encountered in creating such a company. | Goals and aims of inquiry:| To develop the situation in terms of its technical,Organizational and personal attributes. | Nature of examination:| SIS is being used to analyze the technical and organizational attributes of micro-financing and the social business model.| Explanatory model:| The creation and operational development of GrameenPhone based on the social business model.| Options selections:| Options chosen define technical, organizational and personal features of strategy in establishing GrameenPhone.

Pressure from Environment on Grameen Bank
The first step for Grameen Bank (and Dr. Yunus) toward creating the new business venture is to determine the forces of pressure which will shape their choices and decisions. Because the companies of the Grameen organization are structured on a social business model, the forces of pressure will be connected more to social needs rather than conventional business needs. Figure 1 shows these pressures, which are: (a) The need of the rural poor villagers to get affordable phone service. Until this time, most could not afford to own their own cell phone. (b) The need to offer the rural poor economic opportunities for self-sustaining small business ventures, with the assistance of micro-financing loans from Grameen Bank. (c) The need to find a business partner with technical experience in communication services. At this time there was no or very limited network availability of phone service in rural areas. Need to find a business partner

Figure 1: Pressure from environment on Grameen Bank
Affordable phone service for rural poor villagers
Grameen Bank

Economic opportunities for micro-financing

Characteristics of Difficulty or Mess
Table 2 shows whether the characteristics of the different parts of the situation can be seen as a difficulty or a mess. Table 2: Characteristics of difficulty or mess Characteristics of Difficulty or Mess| Characteristics of Situation| Certain/Uncertain about:The problemKnowledge/informationSolution| There is a need to help poor individuals obtain small loans. Uncertainty about ability to repay loans. Information is based on Dr. Yunus’s economic studies and personal knowledge of social conditions.Solution should take into consideration the investors financing the loans.| Determinable/indeterminable:ImplicationTimescalesNumber of people involved| Impact on social conditions is unclear. Grameen can set timetable for loan repayments, but not determine whether timetable will be met.Number of people receiving loans will depend on money available.| Clear/unclear priorities| Target individuals most in need, who would also pose least risk of non-repayment.| Independence/interdependence of context| Examine how this business model fits in with conventional business models.| System Focus Position of GrameenPhone

Figure 2 shows the system focus of the objectives in creating GrameenPhone. On the first level, the primary objectives are: (a) To provide an affordable phone service for all people, especially the rural poor villagers. (b) To provide the rural poor with opportunities to operate self-sustaining business ventures. On the second level, the objectives are to sell the cell phones and airtime (in the form of SIM cards), which would then be rented to the villagers by those who operate the small businesses. Figure 2: System Focus Position of GrameenPhone

Cell phones
Business opportunities
Phone service
Airtime (SIM cards)
Grameen Phone

Social Roles
Table 3 identifies the roles assigned to the involved parties in this case-study. The problem belongs to Grameen Bank, and Dr. Yunus, as its head, is the client. The stakeholders are all parties who will benefit from finding a solution to the problem. The change agent provides the solution; in this case the creation of GrameenPhone provides the solution. Table 3: Social roles

Roles| Role Takers|
Client| Dr. Muhammad Yunus|
Problem Owner| Grameen Bank|
Stakeholders| Grameen Bank and its employees and owners; Grameen Phone Ladies and their families; entire population of Bangladesh in need of cell phone service.| Change Agent| Grameenphone|

Influences on GrameenPhone
The diagram in Figure 3 shows the strength of the various influences affecting the creation of GrameenPhone. The main influences come from the societal needs of the rural poor; the micro-lending interests of Grameen Bank; the technical constraints of building a phone service network that will cover all Bangladesh. The influences of media and public awareness are of lesser importance at the beginning stages, but will increase when GrameenPhone will be launched. Figure 3: Influence Diagram on GrameenPhone

Grameen Bank Micro-lending
Technical constraints
GrameenPhone
Media
Societal needs
Public Awareness

Loan Repayments

Rural Poor

Driving Forces and Restraining Forces
The diagram in Table 4 shows the driving forces (top row) and restraining forces (bottom row) which influence the creation of GrameenPhone, while the thickness of the arrows shows the strength of each force. It can be seen that the combined strength of driving forces outweigh the restraints. Table 4: Force Field Diagram

Driving Forces|
Societal Needs| Help for Rural Poor| Need for Phone Service| Need for Business Opportunities| Expansion| |
GrameenPhone|

Availability of Loan Capital| Loan Repayments and Misuse of Loans| Costs of Implementation| Sustainability| Technical Constraints| Restraining Forces|
Mind Map
In order to plan for the creation of GrameenPhone, it is necessary to organize the factors that need to be considered. The diagram in Figure 4 is a road-map of these various considerations that lead to the mind of Dr. Yunus, the individual in this case who would be making the plan.

Figure 4: Mind Map to identify the possible considerations for Dr. Yunus Cost Staff Social Needs Implementation Hiring Running Training Phone Costs ServiceDr. Yunus Business OpportunitiesFinancing Business Partner Shareholders Role for Grameen Bank? Stakeholders Business Partner Technology Review| Causes that Account for GrameenPhone

There were several causes that contributed to the need to create a company like GrameenPhone. Most of these were societal needs of the rural poor, primarily for affordable phone service and business opportunities. There was also a need to develop a network that would bring phone service to the entire country. The diagram in Figure 5 shows these cause factors. Figure 5: Multiple Cause Diagram showing the factors that account for GrameenPhone Village women

Rural poor
TechnicalNeed for phones Need for airtime Poverty Willing to work No networkPhones expensive to buy Families to feed No credit Simcard expensive for a person
Telenor Grameen bank Affordability Loans Business Opportunities Creation of GrameenPhone

Modeling Options
An important factor in the creation of GrameenPhone is the role that the Grameen Phone Ladies will play. They will become stakeholders in the new company. The foundation of the social business model on which GrameenPhone is being built depends on the success of their involvement and participation. The following characteristics should be examined when targeting prospective Phone Ladies. Characteristics to address in enlisting Grameen Phone Ladies * Role selection of target borrowers; make sure they understand what their role is and how they will benefit. * Stakeholder profiles, including their families. * Market areas of borrowers; the areas where they will do business. * Trainability in operating their own small business.|

Table 5: Options and Evaluations concerning participants in GrameenPhone Membership Option Available for GrameenPhone|
GrameenPhone (GP) | Class| Purposes|
Internal to GP| Managers and employees of Grameen Bank and GrameenPhone| Those with knowledge of GB and GP and their internal workings| External to GP| Business venture partners| To provide financial capital. To provide technical and operational knowledge| Evaluation of Possible GrameenPhone Participants|

GrameenPhone (GP)| Class| Purposes|
Internal to GP| Managers and employees of GB and GP| To arrange loans for Phone Ladies.| External to GP| Grameen Phone Ladies| To rent out cell phones and sell airtime.|

The above considerations should be addressed prior to implementation. A strategy for this based on the options in table 5 is offered in table 6.

Table 6: Most promising options for GrameenPhone implementation Option| What is involved| Who is involved| How will it work| Establish participants| Identifying all stakeholders| GrameenPhone, Grameen Bank and Phone Ladies| Determine the best candidates for receiving loans| Appropriate training for employees| Training in the loan process| Employees of Grameen Bank and GrameenPhone| To ensure that loans are transacted to best advantage of all | Marketing| Explain loan process and describe business opportunities| Phone Ladies and employees of GrameeenPhone| Explain to borrowers how to profit and succeed in business| Consultation & communication with stakeholders| Regular contact| Grameen Phone Ladies| Ensure timely repayments. Support business success.|

Design Implementation Strategy
One of the final steps before implementation of the new company is to make sure that all participants, from managers and employees to stakeholders, are properly trained and prepared. Everybody should not only know what they are doing, but also what their role is in the business venture, and how they all inter-relate. Table 7: Design implementation strategy for GrameenPhone

Option| Implementation plan| Allocation tasks|
Training courses| Train GP staff in loan process| Managers and supervisors| Stakeholder classes| Explain loan process to Phone Ladies; show how they become stakeholders| GP staff| Business classes | Teach Phone Ladies how to operate business venture| GP staff| Marketing| Determine areas for expansion| Managers|

Communication| Get feedback from Phone Ladies| GP staff| Consultation| Hold regular meetings with all staff for feedback and updates| Managers| Monitoring| Review loan repayments | Managers|

Conclusion:
The reason to create GrameenPhone was not from profit-making business ideas, but as a way to meet societal needs. For Dr. Yunus, the problems were not from the risks that he might face as a businessman, but more a challenge for how to structure this new venture as a social entrepreneur. He had the experience from his original work in creating Grameen Bank, which was built on the social business model and which used principles of micro-financing. He used these same concepts to create GrameenPhone. However, with GrameenPhone, he was expanding the ways that Grameen Bank had helped the rural poor, and he would continue this expansion with the various different ventures he created within the Grameen organization. The most important result coming from GrameenPhone was the idea of the Grameen Phone Ladies, a concept that has been used in many of the other self-sustaining business ventures that Dr. Yunus pioneered. GrameenPhone has been a success, and has itself expanded into the area of internet service with the opening of GrameenPhone Community Information Centers.

Reference:

1. Muhammad Y., Bertrand M. and Laurence L.-Ortega (2010), Building Social Business Models: Lessons from the Grameen Experience, Long Range Planning 43, P.308-325 2. Mohammad A. Y. and Quamrul A. (2011), Empowering Role of the Village Phone Program in Bangladesh: In Retrospect, in Prospect; Journal of Information Technology Impact, Vol. 11, No. 1, pp. 35-50, 3. Grameen Phone. 2001. URL: <www.grameenphone.com/village.htm>. 4. Nimalathasan, B., (2008), social responsibility of business: a case study of grameen phone in Bangladesh 5. Anne W. S. and Lars M., Grameenphone and Telenor affecting Bangladeshi Socio-Cultural Development, Studies in Development Management, No 1, MICRO-2007 6. 1 World Bank, World Development Indicators 2007, 2 Wireless Intelligence, Q3 2008

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