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Posts Tagged ‘MENA’
Q&A with Shuan SadreGhazi, author of Saraman case study (Iran)

Shuan SadreGhazi serves as a PhD researcher at United Nations University (UNU-MERIT) and is located in Maastricht, the Netherlands. He is also a tutor in International Business Strategy and Entrepreneurship at Maastricht University. In addition he has work experience with the private sector in Northern Europe and the Middle East. His academic interests lay primarily in innovation management and business strategy with a special focus on their application for development in the South. Shuan’s current research aims at studying pro-poor innovations. He holds a M.Sc. in Management and Economics of Innovation from Chalmers University of Technology (Sweden) and received his B.Sc. in Industrial Engineering from Isfahan University of Technology (Iran).

Saraman is an Iranian company co-founded by an Iranian and a German professor that designs, fabricates and erects affordable, earthquake-proof pre-fabricated steel structures for houses, schools and hospitals.

To download the Saraman case study from the GIM database, please click here.

What is Saraman’s basic value proposition and what makes it financially sustainable?

A number of issues surround the conventional construction industry in Iran and many other countries in the South: low safety, long completion time and high cost.  Related to these are the challenges of a growing population who needs  appropriate housing and employment. Saraman addresses both of these issues in its value proposition.

Saraman designs, builds  and erects affordable, earthquake-proof pre-fabricated steel structures for houses, schools and hospitals. Through collaboration among German and Iranian universities and their corporate partners, Saraman adapts advanced technology to reduce cost and time of earthquake-proof construction, using locally available material in an environmentally friendly way. In addition, special training is provided to facilitate exchange of know-how and develop employment opportunities for young graduates who later implement the practice in Iran. New construction projects also create jobs for less-skilled workers.

Saraman sought financial sustainability through a number of ways. In the technical aspects, they optimized the process of construction and used state-of-the art technology to lower the costs associated with inefficient conventional methods, which enabled them to build affordable construction, but still going to scale was needed in order to make it a viable business.

In the formation phase of the company, Saraman paid special attention to invest in know-how to reduce the cost of technology adaptation and implementation in the long run. To fund training costs it sought support from the German Academic Exchange Service (DAAD).

Saraman started the commercialization phase by entering in construction projects that were likely to be continued and would allow it to build a foot-hold in the market. It would be rather difficult for a young company like Saraman to enter right away the turbulent market of housing. Winning the bids of school construction projects allowed them to enter a niche market to show their capability, prove the advantages of their method and get funding and more construction offers that would fuel its growth.

What were some of the challenges hindering Saraman’s development and growth and how did the company overcome them?

One challenge was low awareness and knowledge about construction safety among the actors on both the supply and the demand side. On the supply side, although regulations about safe construction exist, using conventional methods and designs makes earth-quake proof construction rather costly. The cost issue coupled with the lack of knowledge leads some constructors to turn to less-safe and/or fraudulent ways of construction.  On the demand side, due to low awareness about importance of earthquake safety and already high-costs of construction, earthquake-safety issues are often ignored in favor of having a cheaper building. In addition, since in conventional constructions the structures that ensure earth-quake safety are hidden, it is difficult for ordinary users to check the robustness of the construction.

Saraman tackled this challenge through a number of ways. First, the founders invested a lot of their time and academic credit to provide presentations and site-visits to convince contractors and sub-contractors about the benefits of their method. Second, by making the construction-safe components visible and verifiable by the users, they made constructions not only earth-quake proof and low-cost but also less prone to fraud. Of course to ensure future demand for verifiable safe construction they had to raise awareness. That is Saraman’s third plan, i.e. to start with building schools with visible structures and putting awareness slogans on it.

To what extent was the collaboration between German and Iranian universities a critical factor in Saraman’s success?

The inter-university collaboration was crucial for the success of Saraman, especially because for affordable construction they were using state-of-the-art technology.

With using new technologies, particularly in the South, there are often the challenges of scarce “know-how” and adaptation. The machinery gets imported but the knowledge to use it properly remains with the expensive consultants and/or a handful of people inside the company. In addition, the imported technology often needs adaptation to local conditions in order to be effective and the technology providers in the North are limited in addressing local conditions.  These factors lead to a less-effective and more costly use of the technology (I would compare it with the “poverty penalty” issue, but at the technical level, i.e. a “tech transfer penalty”).

Saraman started its activity by investing in human capital and know-how development, primarily by offering training to young graduates. Providing summer-schools, onsite training and establishing joint educational programs with the German institutions was a fruitful way to maintain a continuous supply of local skilled work force who have both the know-how and understanding of local conditions. The funding from the German Academic Exchange Service (DAAD) eased the financial burden of the training process.

Based on Saraman’s experience and in light of Haiti’s devastating earthquake, what are the prospects of mainstreaming earthquake-proof technology into the low-income construction industry in Iran and beyond?

One can see the prospects from two perspectives. One is through “democratizing the technology”. In many countries in the South, even if the construction codes exist, they are often either not enforced and/or the constructors find ways to get away with it. Mainstreaming certain construction technologies that give the power of verifying construction safety to people and raising awareness about it is one way to address the issue in the absence or weak presence of monitoring bodies. In line with that, training and using local skilled workforce – as we see in the Saraman case- enhances the potential of adapting the technology to what local users want rather than what a foreign company thinks the people need. Democratizing the technology is closely linked to the inclusive business approach of the GIM Initiative.

Secondly, new technologies can be employed to “leap frog” to more efficient solutions, especially in the poverty context where neglecting safety is linked to low purchasing power. As seen in the case of the Haiti earthquake, the poor are the ones who are hit the hardest during disasters. Poverty and severe effects of earthquake go hand in hand. Of course technology alone is not a panacea and it needs to be buttressed by paying special attention to know-how development, adaptation and devising appropriate business models.

Mainstreaming technologies and business models make construction agile, more robust, less costly and increases job prospects for low-skilled labor as well as job-less young graduates. Considering the significant population growth in the South, which sharply increases the need for house, there is a bright prospect for those who manage to figure out new solutions in the low-income construction industry.

What has been your personal experience going through the GIM training and case research process?

As a researcher at United Nations University I was always looking forward to cooperate with a relevant UN project and get an opportunity to learn and incorporate other ideas. The UNDP-led GIM initiative was a valuable chance for me to do so.  I found the involvement with the GIM training and case research process a rewarding and pleasant experience. It gave me the opportunity to a get a deeper insight about inclusive business, which is closely linked to my PhD research on pro-poor innovations. The wide set of GIM cases have been a valuable resource for my research and even more important, the interaction with the GIM team has been a source of inspiration. In addition, the project management of the GIM case research process was done in a very professional way, which was a great experience for me to learn about handling large scale research projects.

Q&A with Brahim Allali, author of Promasol and Temasol case studies (Morocco)

Brahim Allali is a Professor at HEC Montreal where he teaches Entrepreneurship and Small Business Management as well as International Strategic Management. Dr. Allali holds an Msc in International Business, another one in Banking from ITB-CNAM (France), and a PhD degree in Business Administration from HEC Montreal affiliated with the University of Montreal. Before dedicating himself to teaching, research, and consulting, Doctor Allali had spent many years working in industry and banking. He is also a Consultant with many international organizations such as the WTO, the World Bank, International Trade Centre, and Islamic Centre for Development of Trade. Doctor Allali has published two books: “Audit-export” and “Vision des dirigeants et internationalisation des PME”, as well as many scientific and professional papers. He has also given many presentations on Entrepreneurship, Small Business Management, Corporate entrepreneurship, and International Development.

TEMASOL is a joint-venture between the oil and electricity French companies TOTAL and EDF created in 2002 within the framework of a national program championed by Morocco’s National Electricity Office aiming at electrifying rural regions of the country through renewable sources of energy.

To download the TEMASOL case study from the GIM database, please click here.

PROMASOL was launched in 2002 by the Moroccan Ministry of Energy and Mines to promote the market of Solar Water-Heaters (SWHs) in Morocco through quality improvement and certification, awareness raising campaigns, and training and certification of qualified solar water-heaters’ installers.

To download the PROMASOL case study from the GIM database, please click here.

What is the basic value proposition of TEMASOL and PROMASOL?

In Morocco, only 12% of rural homes had access to electricity until 1994 when the government, through the National Electricity Office (ONE), decided to expand access to electricity in rural areas. As ONE could not cost-effectively supply grid-based electricity to all rural homes because of their remoteness, it decided to delegate electricity distribution in these areas to a few subcontractors.

TEMASOL was awarded the largest concession thanks to the expertise of its parent companies and its partners both in solar energy and in rural electrification. The success of TEMASOL in supplying the first 16,000 households with photovoltaic kits encouraged ONE to grant it new contracts to supply electricity to more than 58,000 scattered homes and hamlets in 29 provinces. More than mere access to a brighter lighting, access to electricity provided by TEMASOL has brought to these people the right to enjoy better welfare and productivity.

As for PROMASOL, it strives to democratize access to solar water-heaters (SWH) in Morocco. Indeed, for a country with 3,000 hours of sun per year (5.5 kwh/m2/day), continuing to almost totally depending on imports for its energy needs would seem a real paradox. Moreover and in addition to reducing the burdensome energy bill and reallocating the country’s limited resources towards developmental and social projects, having recourse to solar energy entails many unquestionable benefits at economic, environmental and social levels.

What were some of the challenges hindering TEMASOL’s development and growth and how did the company overcome them?

TEMASOL faced many challenges such as cash-flow difficulties due to late payments, high upfront capital cost, local agents’ training costs, increasing costs induced by rapid growth, lack of local capacity, difficulty of doing R-D, and the absence, in the contract with ONE, of a provision permitting to adjust prices to follow costs fluctuations. TEMASOL managed to overcome most of these challenges thanks to technical assistance provided by its parent companies EDF and TOTAL, the physical presence in rural areas of the company’s agents to collect monthly fees from customers and provide after-sale services to end users, and subsidies received from the Moroccan government through ONE. However, no solution has been found yet to the problem of the price adjustment mechanism.

What was the role played by the UNDP in PROMASOL?

PROMASOL is a key component of a comprehensive program initiated in 1997 involving UNDP and the Moroccan ministries of Agriculture, Environment, and Energy and Mines (MEM) with a view to preserving environment, strengthening sustainable development, and promoting renewable energies. In this context, PROMASOL was assigned the mission of promoting the solar water-heater (SWH) market in Morocco while other programs have been striving for implementing solar-energy-based solutions in other fields such as hammams heating (traditional steam rooms) and rural electrification through photovoltaic systems.

In this context, PROMASOL was created after a funding agreement was signed in 2001 between the Moroccan MEM, and the UNDP. Its management was entrusted to the Center for Development of Renewable Energies (CDER) within the framework of cooperation between the MEM, the FGEF, the UNDP, and other partners. Its cost amounted to USD 43,270,000, of which UNDP directly contributed USD 250,000, in addition to USD 500,000 within the framework of a UNDP-funded project on environment protection and natural resources management.

What role do the Moroccan government and the National Electricity Office play in these two models?

In the TEMASOL project, both the Moroccan government and the National Electricity Office (ONE) played a critical role in creating a conducive environment to starting the business and providing the initial opportunity for its development. The government decided to expand access to electricity to rural areas and allotted the necessary funds to finance such an ambitious program. ONE made it come true by subcontracting its implementation to companies such TEMASOL and tightly supervised the whole process since its inception.

Regarding the PROMASOL program, it was instigated by the government through the Ministry of Energy and Mines and implemented by the Center for Development of Renewable Energies.

Based on these two experiences, what are the prospects of mainstreaming solar energy in Morocco and beyond?

The success of all solar energy projects in Morocco such the ones implemented by TEMASOL and CDER (PROMASOL), has encouraged the Moroccan authorities to launch even more ambitious solar projects. In this respect, a solar energy project worth USD 9 billion which officials said will account for 38% of the country’s installed power generation by 2020. The project will involve five solar power generation sites across Morocco and will produce 2,000 megawatts of electricity by 2020.

What has been your personal experience going through the GIM training and case research process?

Before participating in the GIM training on writing cases that took place in Bratislava, Slovakia, in July 2009, I had written several successful cases dealing with managerial and organizational situations some of which had been published in scholarly journals. This is to say that I was not expecting to learn new things during the Bratislava workshop. However, the case research process presented during the workshop was so effective and so helpful that I started using it since then and until now in writing new cases. For instance, a few months after the Bratislava workshop, I was hired by Industry Canada to write six case studies on small-large firms’ strategic alliances. The new-learned method proved extremely effective in collecting, selecting, organizing, and analyzing data. The output was of such an excellent quality that Industry Canada officially congratulated me.

In addition to the new case method, the GIM training taught me to always consider the social, economic as well as environmental impact of situations that I study in addition to their challenges and constraints.

Q&A with Hamed Ghoddusi, author of Kandelous case study in Iran

Hamed Ghoddusi is a PhD candidate at the Vienna Graduate School of Finance. He also holds two post-graduate degrees in quantitative economics and business administration and a BSc in industrial engineering. He has more than 10 years of freelance consulting experiences including an 18-month cooperation with UNIDO HQ and more than 30 corporate strategy and business planning projects in a wide range of Iranian industries. He also has taught 60 short courses in these areas. Moreover, he has served for more than 12 years in different positions in NGOs, business press, management training institutions and professional websites inside and outside of Iran. Hamed’s areas of interests include real options valuation of investment projects, finance for development, management consulting methods and skills and the economics of natural resources.

Kandelous Group has introduced the concept of mass production of herbal medicine, cosmetics, oils, foods and hygiene products combined with rural tourism in Iran.

To download the Kandelous case study from the GIM database, please click here.

What is Kandelous’ basic value proposition and what makes it financially sustainable?

In my opinion, “connecting urban and in particular middle-class consumers to nature” is the core value proposition of Kandelous. This value is offered to the market via a wide range of products and services, such as a variety of herbal and natural products (cosmetics, food, drinks, and health materials) and rural and cultural tourism. For many years, herbal products have been offered in traditional shops called “Attari”. However, Kandelous adapted modern marketing and product development strategies to attract a new group of consumers. This generated a previously untapped high-end demand for the region’s natural resources and labor.

What drove Kandelous’ founder, Dr. Jahangiri, to deviate from his formal career path in the chemical industry and set up Kandelous?

He had a deep passion for the well-being of people in his birthplace as well as for conserving the cultural heritage of the region. Being an entrepreneur and a manager in addition to having a relatively strong financial base enabled him to focus for many years on building physical and cultural infrastructure of the region in order to realize his dream.

What are the main challenges faced by local communities in a village like Kandelous?

They had to go through a cultural and economic-base change. The silent and isolated environment of their village has to host thousands of tourists from other places. If the process is not managed properly, it might be harmful for the environment and nature.

What are the prospects for the growth of an inclusive tourism industry in Iran, beyond Kandelous’ experience?

There is a huge potential for rural tourism in Iran. The country is endowed with a diverse climate and culture. Therefore, in different regions of the country, rural tourism is able to offer unique local experience to domestic and international visitors. There are already ad-hoc cases of such initiatives; however, a systematic activity and policy support can lead to a boom in these activities and generate thousands of jobs in the sector.

What has been your personal experience going through the GIM training and case research process?

I enjoyed this experience a lot. GIM workshop provided the exposure to key elements of the literature as well as the chance of meeting a big group of people from different countries, who share the same passion.  The process of case-writing was fun and at the same time instructive.  It allowed me to focus on a business environment different from a typical consulting or research project.  I also benefited a lot from the exchange of ideas with GIM team in the case editing and finalizing stage.