Masisa BOP Benchmarking & Performance Assessment

1. Masisa BOP Benchmarking & Performance Assessment GrupoNueva/Masisa Project Team Alejandro Espinosa Katherine Rahal Rodrigo Torres Cristián Valenzuela Renato Daziano Haas Project Team Margot Kane Lorin May April 25, 2007 1

2. Agenda • Introduction & Methodology • Bottom of the Pyramid Benchmarking • Performance Assessment • Strategic Recommendations 2

3. GrupoNueva/Masisa 3

4. GrupoNueva/Masisa Set an Ambitious Goal to Engage the BOP Market “GrupoNueva has established an ambitious goal: by 2008, 10% of its sales will come from ‘socially inclusive business,’ by which we seek to offer our customers opportunities through the market to break the vicious cycle of poverty.” – GrupoNueva website “If we stop thinking of the poor as victims or as a burden and start recognizing [the poor] as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up… What is needed is a better approach to help the poor, an approach that involves partnering with them to innovate and achieve sustainable win-win scenarios where the poor are actively engaged and, at the same time, the companies providing products and services to them are profitable” – C.K. Prahalad 4

5. Masisa Chile Commissioned Haas to Assess its Performance Against That Goal • 1) Conduct benchmarking to identify key success factors for BOP projects. • 2) Assess the feasibility of Masisa’s BOP initiative in Chile. • 3) Review pilot project, including social and operational impacts • 4) Provide strategic recommendations. 5

6. Agenda • Introduction & Methodology • Bottom of the Pyramid Benchmarking • Performance Assessment • Strategic Recommendations 6

7. Haas Team Conducted In-Depth Review of 6 Companies’ BOP Strategies 7

8. Case Studies Selected by Relevance to Masisa 8

9. Key Success Factors Identified from Case Studies Shape Aspirations Tailor Local Solutions Create Buying Power Improve Access Build Infrastructure 9

10. Agenda • Introduction & Methodology • Bottom of the Pyramid Benchmarking • Performance Assessment • Strategic Recommendations 10

11. Masisa Well-Positioned to Make a Considerable Impact • GrupoNueva respected as a CSR leader • First-mover advantage • Ability and resources to enable functioning pilots to get to scale • Supportive management, leadership and strong commitment to objectives within Masisa Chile • Partners expressed motivation and excitement around BOP initiative • Inclusive business model/priority can have real impact on poverty reduction 11

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13. The Pilot Model is Very Complex Masisa Role: conduct market research, design RTA furniture, provide commercial support; ensure competitive cost of wood boards NGO partners, vendedoras FUNDES Role: provide training; assess agrupación social performance AVINA Role: identify participants, local group to oversee projects and source of seed capital Boards/design Placacentros Role: manufacture RTA furniture; ensure competitive cost; provide credit to agrupación social Training Support Vendedoras IAF Role: provide seed capital RTA boards and credit Banco de Desarollo Role: identify entrepreneurs to participate in program; provide microcredit Domos/ Educeres Role: Oversee day-to-day functioning of agrupación social Agrupación Social (EME/SIRREMA) Role: provide legal structure for group of entrepreneurial women Credit Funding Support RTA furniture and credit Credit Note: model is intended to represent Haas consultants’ understanding of how the program functions based on interviews with various stakeholders. It may or may not reflect the structure as initially defined by Masisa. BOP Consumer 13

14. Pilot 1: EME in Conchalí 14

15. Pilot 2: SIRREMA in Puente Alto 15

16. Key Challenges • Strategic partnerships not effectively managed • Lack of strategic competitive positioning • 10% goal ambitious and not clearly defined • No metrics for success other than 10% sales goal • Distribution, logistics and channel conflict • Product not designed specifically for BOP market 16

17. Key Challenge: Masisa’s 10% BOP Sales Goal is Ambitious Size of the BOP Demand at the BOP 10% of domestic sales in Chile = USD10,000,000, or nearly half the entire BOP market! A, B, C 7,905.767 people (49% of population) 25,700m3 (7.3% of market) USD23,500,000 (3.8% of market) D, E Note: numbers represent Masisa’s estimates 17

18. Agenda • Introduction & Methodology • Bottom of the Pyramid Benchmarking • Performance Assessment • Strategic Recommendations 18

19. Summary of Strategic Recommendations • Set clear and understandable goals • Engage stakeholders and strategic partners • Build upon core competencies • Map current operations • Innovate within product mix • Understand the “audience,” including target market, competitors, future market forces 19

20. Immediate Next Steps: Assess Operating Environment Internal Identify Priorities of BOP Initiative w/ Respect to Sales vs. Inclusive Business Develop Clear ‘Success’ Metrics Map Current BOP Activities Partnerships Conduct Stakeholder Engagement/Analysis Assess Core Competencies & Value-Add Build Trust External Evaluate Strategic Positioning/Competitive Landscape Understand Consumer Needs & Preferences 20

21. Immediate Next Steps: Explore Alternative Models & Conduct Feasibility Analysis • Solicit partner feedback and ideas on alternative models through inclusive dialogue. • Assess pros and cons of various strategies, including: • Core competencies • Tradeoff between inclusive vs. non-inclusive business • Costs and risks (e.g. building infrastructure, holding inventory, credit) • Channel conflict • Scalability • Conduct feasibility analyses on alternative models proposed, and select one to three based on strategic alignment, feasibility, and impact for the BOP – some experimentation will be needed 21

22. A Few Examples From Our Discussions… • Re-Engage SERVIU, public housing developers, libraries and schools to meet sales goal • Create ‘Placa-Barrios’ or board warehouses in BOP neighborhoods; reduce number of layers in value chain • Include furniture-makers and current BOP customers in value chain • Identify alternative existing distributors (i.e. semaneros) and housing savings committees through Banco de Desarrollo • Imitate Venezuela’s school-based training model 22

23. Our Recommendation on a Feasible Model • Focus on reaching out to existing BOP customers and distributors through current retail channels • Shift idea of Masisa’s value add from furniture to core competency – boards and access to services • Enable BOP customers to gain design and technical skills to design and build high-quality furniture to sell to higher income segments • Work closely with retail channel to improve BOP customers’ access and buying power • Recruit partners to extend credit, encourage savings, manage training, and form cooperatives and sales forces 23

24. To Haas Team: Working with an established CSR leader Exploring an exciting emerging issue Experiencing the challenge of global business Learning from a welcoming, engaged, open-minded, international client C’mon… Chile? To Masisa: Forum to ask tough questions… and get honest answers Initiating important new dialog with and increased feedback from stakeholders Receiving a thorough performance assessment and actionable recommendations Project Value 24

25. Conclusion: A Promising Start… • Understand that it will take time to build civil sector partnerships • Take some risks and innovate • Stay committed! • Masisa’s 10% goal is ambitious… • … But a strongcommitment from management and partners presents a real opportunity to make a lasting contribution to poverty reduction in Chile. 25

26. THANK YOU! 26