Pontificia Universidad Católica de Chile
The alliance between Farmacias Ahumada (FASA), Chile’s largest drugstore chain, and Las Rosas Foundation (FLR), a nonprofit organization that provided care to needy old people, began in 1997 and was promoted by Alex Fernández, a FASA director. FASA had sought to develop an alliance with a charity institution in order to enhance its image within the community and position itself as a socially responsible organization. FLR had been chosen because of its target –senior citizens, an important demographic for FASA- and its renowned management transparency. Also significant for FASA was the fact that FLR, unlike other nonprofits, had no other visible alliances.
It is important for students to understand the setting where this collaboration was forged. The drugstore market had become highly competitive, and FASA needed to differentiate itself from its competitors and to strengthen its image within the community as a socially responsible company involved in social aid. Thus, it set out to find a partner and chose FLR.
The collaboration involved training FASA stores’ sales personnel to ask customers for a small monetary contribution when they paid for their purchases at cash registers. FASA developed a special software that “reminded” cashiers to ask customers to donate their change and kept an updated donation store log on a national basis. FLR was in charge of the training process and publicized the alliance from an institutional perspective.
FASA, in turn, organized weekly visits to FLR homes for needy old people in order to increase sale personnel awareness on the social activity undertaken by the Foundation. Moreover, FASA allowed FLR to use its point of sales to sell Christmas cards in November and December every year. By 2002, fund-raising at FASA stores covered 5% of FLR’s operating expenses, totaling nearly US$ 400,000. Taking into account that, despite personnel training and awareness efforts, donations were only solicited to 50% of all customers, this amount could be easily increased.
In recent years, FLR had undergone a remarkable growth both in the number of homes served and individual care. This growth called for an ongoing resource supply if the institution were to fulfill its mission appropriately. Thus, FLR had concentrated its efforts in consolidating the alliance with FASA and developing new collaborations with other private companies. FLR’s ability to raise funds to afford the necessary operating and maintenance expenses to provide high cost assistance to old people would prove instrumental to its growth and survival.
Facing this challenge, FLR had been offered the chance to into a new collaboration partnership with an international supermarket chain. This alliance posed a potential risk to the relationship with FASA, and Father Andrés Ariztía faced a critical decision. The public exposure derived from a partnership between FLR and a supermarket chain could jeopardize its collaboration with the drugstore chain.
This case is suitable for strategy courses focusing on alliance development, strategy valuation and selection in cross-sector collaborations.