Determinants of Success

One of the major determinants of Toyola's success has been its local value chain. By creating a network of multiple local component suppliers, Toyola cuts down on import costs, no longer has to be concerned with production issues and has a diverse set of suppliers to mitigate supply shortages. Ultimately, Toyola does not produce stoves, but distributes and markets them. Because most of their effort is placed on marketing and quality assurance, they have a large portion of the stove market and continue to grow.

Their understanding of their clientele is further exemplified by the fact that they identified a demand for solar lighting products. Though not discussed in this case study, Toyola now also sells 200-500 solar lanterns and 5W solar systems for lighting. About 90% of their products come from Barefoot Lighting in Australia. The rest come from local providers including Deng Limited, Wise Energy and Solar Light. These products provide savings on lighting bills, eyes sight protection, improved livelihoods, and improvement in education as children are able to learn after sunset.

Another enabler is the type of technology Toyola is working with. Almost all Ghanaians already use charcoal/wood stoves and thus Toyola does not need to exert effort explaining what their stoves are and how to use them. It only needs to convey the savings from purchasing a stove. Since stove saves the end user a noticeable amount of money, this marketing happens in a large part by word of mouth. Thus, Toyola is addressing a universal need with a technology that the population already feels comfortable while simultaneously saving them money.

Toyola could increase their growth even more through the identification of other products that their clients demand. They have proven through their solar initiative that they can truly assess the needs. They must remain in touch with the end-user so that they can further expand and adjust to the customer's needs. This could translate not only into new products offered but also improvements made to the stove. Toyola currently sets the specifications and quality requirements of the components. It could request alterations to the components to improve the overall performance of the stoves.

Currently the Ghanaian government takes little interest in the promotion of fuel efficient stoves. In Mali, the government plays an active role in the promotion of LPG through marketing and a subsidy due to its displacement of wood use. Deforestation is also an issue in Ghana, especially in the north. The Ghanaian government should play a more influential role in creating an enabling environment for a business model that addresses national environmental concerns while creating jobs along the value chain.

The up-front cost is one of the constraints faced by the end-users, which ultimately limits the number of sales. Working with AREED II to link in with MFIs to create a loan that covers the cost and has monthly payments equal to the average savings from the stove use would be one feasible option. The government could also consider providing a small subsidy for the purchase of fuel efficient stoves.

Production is also limited by an irregular supply of inputs, namely scrap metal. This is in part caused by the Chinese demand for scrap metal, which has turned to African countries as a major source. This huge demand has drastically impacted the local scrap metal market. It not only limits the production of stoves but may ultimately raise the price of metal and consequently the stoves. The impact is not limited to the production of stoves, but also all other local metal work. The government may want to look into placing an export tax on scrap metal to limit this supply issue. Toyola has made an effort to limit the impact this has by dealing with multiple scrap dealers and metal component suppliers.

Consistent quality production is another major issue. As various component producers are working throughout the country, it is difficult to assure consistent quality. Toyola does a quality check prior to purchase, but there were still some mention of rough edges of metal causing injury to the end users. This could be an opportunity for Toyola to set the lead in upgrading the value-chain. It is possible that the metal workers could make better, smoother stoves if they had access to a certain machine. Toyola, being the largest player in the production chain, could provide a loan or act as a guaranteer for a loan to one of the metal component enterprises. It will already know the approximate amount of revenue the metal enterprise makes per month based on what Toyola purchases. The metal enterprise would be able to pay off the loan and Toyola would have a higher quality end product, which would also increase sales.

Cracks in the clay core has already been mentioned as a concern. Cracks occurring during transportation represent lost sales for Toyola. Minimizing cracks would be to their advantage. This could be done by investing in road improvement. Currently Toyola is not a member of any professional association, but if there were enough local goods transporters requesting the government for improved roads and explaining the increased profits and thus taxes that would be generated as a result. Also, rewarding innovation by the clay workers on how to decrease cracks would be another way to address the issue.

In the future, Toyola risks being pushed out of the market by other technologies, such as LPG. LPG, for example, offers time savings that the Toyola stoves do not. As more of the population finds employment, the time savings may become more and more appealing. Also, as deforestation continues, the price of charcoal may become so expensive that LPG or solar cookers actually seize the market. The scrap metal demand from China could greatly hinder the production of the stoves and make them too expensive.

Eventually, as sales grow and the concentration of potential clients is not as large in one area, Toyola may need to move away from the door-to-door service and focus on distributors. It may become too costly in terms of time and gasoline to travel to rural villages for a handful of sales. Toyola will have to monitor its success from such trips, keeping in mind that the direct interaction with its clients has lead it to a new branch of solar products.