Cerámicas de Costaragua:

This case describes how Cerámicas of Costaragua, a leading manufacturer of home improvement products and construction materials, started serving a population group it had traditionally ignored –the low-income segment (LIS). The company developed a pilot project to gain a better understanding of LIS consumers and stumbled against a number of challenges associated with the design of a new distribution channel, built on a complex ecosystem that involved grassroots organizations and potential customers.

Students are presented with a critical operating dilemma as the company prepares to scale up its scheme: how should Cerámicas of Costaragua organize its distribution chain to bring the product close to consumers and to overcome the hurdles facing its new channel?

Case discussion will enable students to learn more about:

• Value chain management –particularly, distribution chain management;
• The challenges a large company needs to rise to when it chooses to “conquer” low-income segments, as well as the implications for its business model and the players in its value chain;
• The construction of ecosystems as a critical feature in value chains.

This case may be used in courses on logistics, value chain management, inclusive businesses, and social responsibility. For courses on logistics and value chain management, this note underscores the analysis of options’ value added and only assigns twenty minutes for the second part of the discussion. To use the case in courses on inclusive businesses and social responsibility, more time should be allotted to the second part of the discussion (dealing with the changes required to engage low-income segments in business ventures).