CASE #3: hABITAT FOR HUMANITY - · PDF fileTRAVIS BEITLER, KATE DOROFEEVA 2 CASE #3: HABITAT FOR HUMANITY 1. What are the strengths of H4H? Affiliate Network Run in 3 different levels

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[email protected]

Professor Duncan Reith

CASE #3: HABITAT FOR

HUMANITY MRK519-MMT

Travis Beitler, Kate Dorofeeva SN# 054 579 131 + 021 479 134

mailto:[email protected]

mailto:[email protected]

TRAVIS BEITLER, KATE DOROFEEVA 1

CASE #3: HABITAT FOR HUMANITY

Table of Contents 1. What are the strengths of H4H? ............................................................................................................... 2

Affiliate Network ....................................................................................................................................... 2

Partnerships (Collaborators) ..................................................................................................................... 2

Respected Initiatives ................................................................................................................................. 2

Working Capital (Knowledge Workers) ..................................................................................................... 3

Brand Perception ...................................................................................................................................... 3

2. What business is H4H in? .......................................................................................................................... 4

Overview ................................................................................................................................................... 4

Functions of Their Business ...................................................................................................................... 4

Humanitarian Philanthropy................................................................................................................... 4

Donations and Funding ......................................................................................................................... 4

Affiliates ................................................................................................................................................ 5

3. Professor Bagozzi defines Complex Exchange. Describe the exchanges in H4H’s business model. ....... 6

4. What (if anything) is H4H doing to protect its brand? Your team should identify all stakeholders, as

per Bagozzi’s exchange model, before you attempt to answer this question. ............................................ 8

5. We identified SIX brand valuation methodologies this term. Create and fill in a table like the one

shown below. ................................................................................................................................................ 9

6. Do you believe the $1.8 billion valuation? Is it too high or too low? Why? ......................................... 12

Analysis ................................................................................................................................................... 12

Volunteer Work Force ............................................................................................................................. 12

Time .................................................................................................................................................... 12

Labor ................................................................................................................................................... 12

Quantity .............................................................................................................................................. 12

Conclusion ............................................................................................................................................... 12

Works Cited ................................................................................................................................................. 13

Marking Rubric ............................................................................................................................................ 14



1. What are the strengths of H4H?

Affiliate Network Run in 3 different levels

o Local and National Affiliates

o Area and Regional Offices (US and International)

o HFHI Headquarters

Gain funding, resources, and knowledge workers in order to keep H4H functional

Operational Activities

o Fundraising, construction, mortgage services, partner family selection, support, and

building site-selection (Quelch, Laidler 7)

Regional Offices

o Regional conferences, training sessions, and state meetings. (Quelch, Laidler 7)

HFHI Headquarters

o Information, training, support services to fellow habitat affiliates (Quelch, Laidler 8)

Partnerships (Collaborators) Habitat for Humanity (H4H), has partnerships with well re-known individuals and respected

corporations which include:

o Individuals

Jimmy Carter, Rosalynn Carter

Former US President and First Lady

Personal funds invested into “Jimmy Carter Work Project”

o Government

Asia, Europe, United States, Latin America

Local law enforcement

o Corporations

Home building, bank, foundation industries

o Christian NGO’s (Non-Government Organizations)

o Churches

Respected Initiatives “Save and Build”

o Groups of 12 families; $.15 saved per day – 6 months (Quelch, Laidler 4)

o H4H matched group savings; provided funds to build an additional 3 houses

“Bridge for Reconciliation”

o Northern Ireland

o Catholic/Protestant volunteers

8 houses in each respected neighborhood (Quelch, Laidler 5)

“More Than Houses”

o Launched in 2000

o Goal

Raise $500 million

Build 100,000 homes by end of 2005 (Quelch, Laidler 6)



50% of donations from corporations

“Woman Build Program”

o 350 homes built by women in the United States (Quelch, Laidler 6)

“Prison Partnership Program”

o Build homes, and assist convicted prisoners with social skills and rehabilitation.

o 75 prison partnerships, built 250 homes in United States per year (Quelch, Laidler 6)

“Campus Chapter”

o Market, participate, educate, and gather funds for H4H

“Habitat for Humanity University”

o Mentoring, lecturing, online education, and research in collaboration with corporations,

nonprofits, and institutions (Quelch, Laidler 6)

“World Leaders Build”

o 28 world leaders, from 26 different countries

o Collaborated to build 1,175 houses (Quelch, Laidler 4)

Working Capital (Knowledge Workers) Expert knowledge from profitable organizations including:

o Automotive Industry

o Advertising Industry

o Banking Industry

Brand Perception Positive behavior – 69% (Quelch, Laidler 9)

Honest, effective, efficient

Community based charity



2. What business is H4H in? Overview H4H is a nonprofit organization aimed at eliminating homelessness and poverty globally through

religious motivation in Christianity. In 2002, H4H built more than 133,000 houses worldwide providing

650,000 shelters for 3,000 different communities (Quelch, Laidler 1). H4H is comprised of 2,285

affiliates that operate in 87 countries worldwide (Quelch, Laidler 1).

Functions of Their Business

Humanitarian Philanthropy H4H priority mission is to provide homes for, malnourished, poverty, and families in need worldwide. In

doing so, H4H receives a piece of mind by spreading their faith (Christianity) to their stakeholders. H4H

long-term plan includes the following:

200,000 homes for homes for 1 million people by 2005 (Quelch, Laidler 2)

Increase presence globally to 100 countries

Provide 21 million housing units by 2010 (Quelch, Laidler 3)

o 14 million additional units each year to eliminate worldwide housing deficit by 2020

(Quelch, Laidler 3)

They provide interested parties with a Partnership Housing approach. This allows for stakeholders

participating to build their own homes (known as partner families) at the value of no interest provided

on the house. H4H in turn receives mortgage payments used to build additional homes. Partner

families partake in Sweat Equity, where they become laborers building their own homes, and assisting

other home builders

Donations and Funding H4H receives donations and funding from the following:

Money Gifts Resources

Jimmy Carter Work Project

Cash Contributions

Church Donations

Europe/United States

From various stakeholders/interested parties

Building Material – United States

Sweat Equity – Labor and Time

Partnerships

Bain and Co.

Tufts University

Whirlpool

Corporation

Lions Club

International

The Case Foundation

Bank of America

Dow Chemical

Company

Wells Fargo Housing

Foundation

Square D/Schneider

Electric

Citigroup

Maxwell House



Affiliates H4H runs the majority of its business through affiliates. They work in agreement with local communities

and national entities. Each affiliate works towards gaining funding, resources, and knowledge workers

necessary to keep H4H operational. H4H is operated in three different areas:

Local and National Affiliates

Area and Regional Offices (US and International)

HFHI Headquarters

Operational Activities

Each affiliate operates through fundraising, mortgage services, partner family selection, support, and

building site-selection (Quelch, Laidler 7). The affiliates in each region donate money to help construct

and build further housing units. H4H regional offices work to educate affiliates through conferences,

training sessions, and state meetings. Regional offices can be found in major operational territories

which include: United States, Africa, Middle East, Asia Pacific, Central Asia, Caribbean, and Costa Rica.

HFHI headquarters provides local affiliates with information, training, and support services. The key

services that HFHI provide are the following:

Resources and Volunteers

o US 20% the cost of an average habitat house (Quelch, Laidler 8)

Training, Coordination, and Practices

Brand Custodians (Guardians)/ Brand Management

Overall Christian Mission

o Spread faith and Christian key values



3. Professor Bagozzi defines Complex Exchange. Describe the

exchanges in H4H’s business model.

1. HFHI and Families in need of housing

Through fundraising, HFHI raises capital and then rehabilitates simple houses with homeowner

(partner) families. As a result of this exchange families receive renovated houses; in return they

have to pay interest-free monthly mortgage payments and sweat equity.

2. Corporate Partners and HFHI

This exchange involves three things given on the side of Corporations – money (charitable

donations), products (for example, Whirlpool donated refrigerators) and volunteer work (employees

would be required to donate 1 day to volunteering at HFHI). In exchange, corporations receive

favourable PR, positive brand associations, and a visible/measurable result of their corporate social

responsibility.

3. Corporations and Families in need of housing

The volunteer work is flowing directly from organizations involved in partnering with HFHI to

partner families. The work is being held on those families’ sites, meaning that the exchange is not

happening just between HFHI and corporate partners. In return the corporations receive visible and

measureable results of CSR.



4. Donors and HFHI

Sizeable portions of HFHI revenues comes from individual contributions - from people or

organizations that donate money to HFHI. Additionally, financial contributions from donors are not

directly involved in exchange with the partner families. HFHI in return, serves as an intermediary

between them and partner families providing fulfillment.

5. Government and HFHI

Government provides bonds and grants for H4H. In return HFHI relieves poverty by providing

affordable housing for the population.

6. Churches and HFHI

Churches remain central to HFHI’s operations and are referred to as one of HFHI’s strongest support

bases. Churches provide financial contributions to the organization and overall ideology and unity of

purpose. In return, Habitat for Humanity spreads the word of Christianity and its faith.

7. Volunteers and Supporters and HFHI

Volunteer and supporters provide volunteer work and non-financial support to HFHI. In return, HFHI

gains fulfillment for their contribution and solution to a global epidemic; poverty.

8. Volunteers and Supporters and Partner families

Volunteers work directly on partner families’ properties; in return they receive gratitude.



4. What (if anything) is H4H doing to protect its brand? Your team

should identify all stakeholders, as per Bagozzi’s exchange model, before

you attempt to answer this question. The research study conducted in 2002 by third-party research agency identified that current and

potential partners had some misconceptions about Habitat for Humanity as an organization. The were 3

primary concerns that were established during the research: religious nature of HFHI (partners were

concerned with Christianity being central to the initiative’s message); the exchange (a lot of respondents

thought that HFHI gives away houses for free, without the concept of “sweat equity” or any financial

variables involved); and the international scale of HFHI’s operations (a number of HFHI’s partners felt

that the problems within the US should be addressed first before sending any money abroad. As a

result, people were by far more willing to donate to a local cause than to an international charity).

One of the methods that HFHI employed to address these issues were the fund-raising and brand-

building events. As a part of them, HFHI clarified what the brand stands for and explained its purpose to

lessen the misconceptions. At the same time, HFHI had the leverage of talking to partners directly

through local affiliates (after that however, all brand-building was in the arms of word-of-mouth, not to

mention that a large number of potential partners were left out from the conversation). These two

methods were not sufficient to allow full control over the brand; hence at that point of time protecting

the brand was one of the top challenges for HFHI.

One of the ways to protect the brand would be enforcing greater level of standardization and

establishing more thorough controls over local affiliates. Back in 2003 (the year case dates back to)

social media was not as ingrained in people’s lives, but if the situation was to be regulated now it would

be one of the best tools that is available for NFPs. Not only would HFHI be able to tell and show what

they stand for to mass crowd at a very low cost, they would also be able to reply to users’ messages on

an individual basis. The whole notion of two-way communication would make the brand more relatable

to general public and it would at the same time make the brand a lot easier to protect from a perception

viewpoint.



5. We identified SIX brand valuation methodologies this term. Create

and fill in a table like the one shown below. Brand Valuation

Methodology Description of Methodology Is this Particular Methodology

Appropriate for H4H?

Comparable (Market)

Market Brand Valuation technique involves identifying comparable brands in the market to the one that is being evaluated and assigning proportionate value to it based on their size, revenue and other applicable variables. Then based on the comparison with similar brands, the dollar amount is estimated for which the brand could be sold in the market at that moment of time. This amount is the value of the brand as according to this methodology.

The problem with this method is that it is nearly impossible to find identical brand in the market to measure its value against. Brands are unique and have points-of-difference, which makes this method very inaccurate. It is used more as a “sense-check” than as the primary brand valuation technique.

This method is not appropriate for estimating the value of the Habit for Humanity brand. First of all, it is nearly impossible to find a comparable brand with a similar business structure, cost structure, revenue streams and scale. At the same time, unlike businesses, NFPs do not have direct revenues from products sold, which makes the comparison more complex, as it includes a lot more stakeholders and intangible exchanges, which are hard to measure and compare between non-for-profit brands.

Historical/Creation This brand valuation technique equates brand value to the total of costs involved in building the brand ever since it was first established. The main idea behind cost valuation techniques is an assumption that investors would not pay more for the brand than it would cost to recreate it or replace it with a brand/asset that possesses same utility.

The downside of this brand valuation methodology is that the basis for identifying which costs are to be included is very subjective – the line between investments in the business and investments in brand development is very thin and in a lot of cases even non-existent. As the same time, this method can only be applied to the brands that are relatively new and have their costs readily available. The costs are increasing incrementally with time, but cannot be directly linked to the increases in the value of the brand;

This brand valuation method is not appropriate for estimating the value of the Habitat for Humanity brand. First of all, the time frame is too big to evaluate all the costs incurred over the 25 years in building the brand. At the same time, even if the costs were to be calculated, they cannot be representative of the current value of the brand. Also, Habitat for Humanity did not invest a lot directly into promotional activities, thus the costs involved exclusively in brand development are hard to define.



according to this method, the longer brand was around, the more it is worth.

Replacement This methodology is another technique under cost brand valuation umbrella. As the other cost-based methods, it assumes that investors would not pay more for the brand than it would cost to recreate it or replace with a brand/asset of the same utility. This method involves estimating the costs that would be involved if the brand was to be built from scratch to gain the same influence and scale.

This method is not applicable to evaluating the value of Habitat for Humanity brand. First of all, the Habitat for Humanity is a non-for-profit, thus it is challenging to evaluate all the costs that would be required to gain the same impact and scale. The problem is presented by the non-commercial nature of the organization – there is no direct comparison that would show how much more consumer would pay for a unit of a product branded with Habitat for Humanity brand compared to the same product without a brand. The only mode of evaluating in

Royalty Relief A method used to determine cash flows based on the brand not being fully owned, but instead licensed out to third parties. This method uses available data in comparable industries to determine specific brand earnings between the licensor and the licensee. The specific value of the brand is obtained through the net present value (NPV) of all forecasted royalties related to the brands business (Brand Finance).

This method evaluation is widely used in industry transactions which include: entertainment, oil/gas, and pharmaceuticals.

Considering that H4H is operated through affiliates that donate money to habitats cause, it does make sense to use this method. H4H operates with 2,285 affiliates across 87 countries (Quelch, Laidler 1). Each affiliate operates independently of habitat acquiring labor, funds, and assets in order to maintain operations in H4H. This operational aspect is comparable to a licensor and licensee.

The problems with this method occur when considering the sheer size of H4H. Maintaining track of 2,285 affiliates in 87 countries would have to work in tangent with discount rates, tax rates, and currency conversion. Each affiliate would have to pay a royalty fee based on their operations. In developing countries across the world, American H4H donate up to $9 million to keep them functional. While the method does appear functional in approach on paper, in practice it could be impractical.



Incremental Cash Flow

A method used to identify current cash flows in the brand and compare it to businesses that are unbranded. Cash flows are obtained through both generated revenue and cost reduction. This approach is complex and it is used for planned and brand commercial use (Brand Finance). Popular brands such as Virgin use this approach when negotiating a new brand license with a new licensees. This adds value to their business through the licensees business.

An example of Incremental Cash Flow: o Virgin Branded Cash Flow = $50 Million o Unbranded Cash Flow = $25 Million o Difference = $25 Million

The problem with this method is that it’s rare in application considering finding unbranded companies related to the specific industry prove to be difficult.

In approach and functionality this approach is laudable for H4H. Habitat operates in parallel to licensor/licensees with the direction it operates through its affiliates. Each affiliate operates in its own discretion, generating funds, donations, sweat equity, and resources. The affiliates add value/revenue to H4H by providing their resources, and capital towards H4H.

However the method becomes problematic when trying to determine unbranded nonprofit organizations similar to H4H. Habitat declares it best when they state their only competition comes from “World Vision or the Enterprise Foundation would be the closest” (Quelch, Laidler 9).

Interbrand A unique method that uses specific tools which include: financial analysis, role of brand, brand strength, and data sources to obtain a specific set brand value. The financial analysis measures a company’s return to investors known as “economic profit”. Where Economic Profit = Companies After-Tax Operating Profit – Charge used to generate the brands revenue and margins (Intrebrand).

Role of brand is determined through an RBI (Role of Brand Index). The role of brand index takes factors into consideration which include: primary research, historical value/role of brand for companies related to that industry, and an expert panel assessment (Interbrand).

Brand strength determines the capability of a brand to generate loyalty which leads to substainable profit in the future (Interbrand).

All of Interbrands data is obtained through data sources gathered from Thomas Reuters and Datamonitor (Interbrand).

Interbrand is a complex model that is difficult to apply to a nonprofit organization such as H4H. Interbrand suggests through its brand strengths, that customer loyalty generates profit, leading to increased value of the brand. In its valuation of H4H, it accounted for tangible assets which included “total funds and raw materials” (Quelch, Laidler 12). However the valuation method overlooked the “nonfinancial value added by nonprofit brand, such as volunteer time” (Quelch, Laidler 12). Volunteer time relates to brand strength as it pertains to customer loyalty and belief in the brand (according to Interbrands model).

While it’s important to assess all the variables to financial analysis (Interbrands tool), Interbrand hasn’t acknowledged the customer loyalty part of their brand strength analysis.



6. Do you believe the $1.8 billion valuation? Is it too high or too low?

Why?

Analysis Based on the figures provided by Interbrand’s evaluation, they have left out several key metrics which

has lead us to believe that Interbrand’s assessment is incorrect. These key metrics include:

Volunteer work force

o Time o Labor (Sweat

Equity)

o Quantity

Volunteer Work Force Nonprofit organizations rely on the efforts and strengths of their volunteers to achieve success.

Interbrand considers loyalty as one of their key assessments when calculating BSS (Brand Strength

Score). Volunteers are the highest form of brand loyalty, where resources such as time, sweat equity,

and sheer size of volunteers across the world are overlooked (Quelch, Laidler 12).

Time Each individual that volunteers through H4H, spends time in building, fundraising, educating, and

spreading H4H’s mission. Volunteer’s time however is not taken into consideration under Interbrands

brand valuation methodology. Time is a precious resource and the individuals spending numerous hours

enriching H4H’s brand have gone undocumented/calculated.

Labor Volunteers provide workforce labor in the form of sweat equity. Interbrand does not calculate the

amount of labor, or the exact forms of labor that H4H’s volunteers provide. The monetary value of labor

depends on region. With H4H’s reach over several different countries (87 in total), affiliates in regional

offices would have to assist in providing where volunteers work, when they’re working, what they’re

working on (what they do), and how frequently.

Quantity The sheer amount of volunteers globally would have to be calculated. H4H has a global reach of 87

different countries, with 2 285 unique affiliates. Each region would have to account for how many

volunteers are within the area.

Conclusion Based on Interbrand’s methodology, their evaluation of $1.8 billion appears to be too low. Quantity,

labour, and time provided by the volunteer force needs to be addressed in Interbrand’s valuation.

Several key factors that have been overlooked has demonstrated that Interbrand’s model requires

further refinement. Ultimately, to attain a valuation that’s congruent with interested stakeholders,

several valuations methodologies should occur that provide parallelity in: data obtained, financials, and

a definitive conclusion. “It is relatively easy to manipulate the results of measuring brand equity in

order to deliver any value that management wishes… No single approach will give all the answers to a

correct valuation” (Abratt, Bick 15). Otherwise the brands credibility and valuation could become

questionable.



Works Cited

Abratt Russel, Geoffrey Bick. "Valuing Brands and Brand Equity: Methods and Processes" Nova

Southeastern University n.d: 1-18. Web. 21 Nov. 2015.

Brand Finance. "IS 10668." Brandfinance.com. 2010. Web. 21 Nov. 2015.

Interbrand. "Methodology" Interbrand.com, 2015. Web. 21 Nov. 2015.

Quelch, John and Laidler, Nathalie. "Habitat for Humanity International: Brand Valuation." Briefcases

Harvard Business School (2003): 1-27. Web. 21 Nov. 2015.



Marking Rubric

Criteria Possible Marks

What are the strengths of H4H? /4

What business is H4H in? /4

Describe the exchanges in the H4H business model with a picture.

/10

What, if anything, is H4H doing to protect its brand? /5 Completed table of brand valuation methodologies, description and appropriateness for H4H.

/30

Discussion and critique of $1.8 billion valuation. /12

Total Marks for Case Submission /65 In-Class Quiz /15

Total Marks for Habitat for Humanity /80

Documents

CASE #3: hABITAT FOR HUMANITY - · PDF fileTRAVIS BEITLER, KATE DOROFEEVA 2 CASE #3: HABITAT FOR HUMANITY 1. What are the strengths of H4H? Affiliate Network Run in 3 different levels