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Cases - Microfinance And Fresh Direct Essay

¶ … stakeholders in any microfinance situation. The borrowers are a major stakeholder, and the microfinance institution is another. The investors in the microfinance lender are significant stakeholders, regardless of whether they are investing for charitable purposes or as part of an IPO. Some of the indirect stakeholders are the families and communities of the borrowers, the countries and regions at large (whose economies will ultimately be affected), and the employees of the microfinance institution, and the governments of the countries and regions where the lending takes place, because of their role in tax collection. Microfinance started mainly as a charitable concept, but there are also examples of microfinance institutions tapping capital markets for financing as well. The competitive strategy is that these entities are getting substantial returns from many of their borrowers -- ROI can be very high when lending to small entrepreneurs, commensurate with the risk. But by pooling risk, microfinance institutions are able to offer high returns to their lenders with limited downside. A secondary competitive advantage is the charitable aspect, which some microfinance lenders still use to acquire capital.

3. Leadership at Banco and Grameen need to balance the interests of the different stakeholders. They must be able to offer loans with low transaction costs and effectively pool risk in a way that allows for superior returns, to offer better returns for investors. In terms of operations, both must be wary of the systematic risks that come from operating in the developing world -- the threats that recessions, political risk, corruption, environmental risk and other threats pose to the...

Even if they have diversified the firm-specific risk, the systematic risk can be substantial in these countries.
4. Oversight of lending is critical. In microfinance, many borrowers lack collateral, and in some cases even paperwork might be questionable. So at the ground level, governance is more challenging, and not all microfinance lending offices are good at it -- oversight from head office is mandatory. Specific criteria for lending are essential. Some governance might look a little like cash control functions at small companies -- bookkeeping even minor loans and expenses, and using two or more people to disperse funds. At higher levels, governance ends up being not much different than for any other financial institution, focused on governance models for executives, again relying heavily on peer oversight.

1. Strategic management is a pretty broad term -- and any company that is serious about its businesses uses strategic management. Fresh Direct of course knew who its competitors are, how it was going to find a niche in the market and how it could compete against the established players in the grocery business. The grocery business is mature and highly competitive. Fresh Direct sought to leverage changes in the technological environment to carve out a new niche and created the support systems that would allow it to obtain those competitive advantages.

2. FreshDirect's strategy of buying direct from suppliers was something that it felt helped it to compete on price, by lowering costs at that part of the supply chain. This was the "direct' component of the business model, and one that helped it to be cost-competitive.

3.…

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