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August 10, 2001
Community Investment As a Means of Competitive Advantage
    by Mark Thomsen

Ford Foundation report illustrates how companies are finding investment in rural and urban markets to be good business.


The Ford Foundation recently released a report highlighting a business trend that bodes well for depressed rural and urban communities. "Win-Win: Competitive Advantage Through Community Investment" documents the successful community investment strategies of some of America's top companies. By offering innovative models through examples, the report serves as an excellent resource for companies looking to improve their business involvement with local communities.

"Distressed rural areas and hardscrabble inner cities are transforming themselves into some of America's most competitive places to do business," explained Susan V. Berresford, president of the Ford Foundation. "Many companies are already reaping the benefits of investing in low-income communities and their residents in order to expand their customer base, stabilize their workforce, locate top suppliers, invest corporate assets and build community relations."

The report is divided into five basic sections, each section illustrating how community investment offers a solution to a challenge that many businesses have in common. For example, the first section poses the challenge, "Suburban markets are saturated while demand for goods and services is unmet in inner city and rural markets. How can you secure a competitive edge sell to this expanding, new customer base?"

The report's solution is "Low-income communities and minority populations comprise the fastest growing customer base in the country. Well-established community organizations offer improved access to lucrative, untapped markets." One of the six success stories that follows concerns Pathmark Stores, Inc. (ticker: PTMK), a New Jersey-based supermarket chain that operates 144 supermarkets in the New York, New Jersey and Philadelphia metropolitan areas.

Pathmark built a 44,000 square foot store as the anchor for a new shopping center in Newark, New Jersey's Central Ward, where there had been no supermarket for 10 years. The store offers Hispanic and African-American specialty items and is central to an annual community-based cultural celebration. The Newark store has been an astounding success, ranking second in sales in the Pathmark chain.

Michael Porter, Chairman, CEO and Founder of Initiative for a Competitive Inner City and a professor at Harvard Business School, sees this as no surprise.

"Households in America's inner cities possess more than $85 billion in annual retail spending power. That amounts to nearly 7% of total U.S. retail spending, far more than Mexico's entire formal retail market," said Porter. "Because of the density of demand, many inner-city retailers outperform their suburban counterparts, generating sales per square foot up to 40% higher than the regional average."

Other sections cover hiring and retaining qualified staff, real estate and other corporate assets, corporate citizenship and brand building, and satisfying procurement needs. Each section includes numerous examples.

The Win-Win report was produced through the Ford Foundation's Corporate Involvement Initiative, a $30 million effort launched in 1996 to leverage private sector resources for low-income people in the United States.

In addition to the Win-Win report, The Corporate Involvement Initiative also compiled a companion guide that companies will find valuable. The Expert Resource Media Guide lists more than 30 experts, supporting data and other useful information that can help business executives pursue win-win strategies in local communities.

 

 
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