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Thread: Doninican Business Model

  1. #1
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    Default Doninican Business Model

    I have been reading there is a different business model in the DR.

    I would like to learn more about this model and how it differs from the US/Canada model.

    How did this model help/hurt during the past economic mess.

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    The Dominican business model is based on having more capital percentage wise (compared to credit driven economies like the US) as the interest rates here can sink any business plan in short manner especially since there is no such thing as fixed rates here, no matter what the bank manger tells you. The rates are dependent on the pesos value to the dollar from my understanding.

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    Shhhhh...

    It's secret...


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    Ok! Let's get the ball rolling!

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    The Dominican Business Model 101!



    The formal and informal markets.

    The Dominican Republic's internal economy (non-exports sector) can be divided into two parts.
    One is the formal sector which by economic investment power, represents the majority of commercial tax revenues to state's GDII (IRS).

    The other is the informal sector, which by population and practice, comprises the largest economic sector of the country.

    To understand the internal economy of the Dominican Republic, one must be first fully aware that this is a developing economy. By all measures, this is an economy that's not matured or even operating to more than half of its own true latent potential.

    One social sub-sector of the economy shows possible all the same traits of developed economies elsewhere in democratic countries: The middle Class.

    The Middle Class of the Dominican Republic is not any different than what you'll find in traits common to middle class of the U.S.A. or the U.K. They are modern, have purchase power and overall represent the largest single marketable sub-sector of the internal economy. They are both represented equally in both the formal and informal sectors of the economy.

    For now, let's pick this single sub-sector to better understand the actual Dominican Business Model in our debate...







  8. #6
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    If you have a basic business background, then you'll know that there are two basic principles to run a successful business anywhere in the world: Expenses VS Profits! You want to stick to maximize profits and minimize expenses in order to have a successful business...


    The DR business model is the same as the above basic principle, but then, how do you actually achieve that and what model of business allows for that in the Dominican economy?


    For that we take to exploring the innards of the most popular and prevalent business of the Dominican Republic and possibly the most revealing of what model is best to work with here: The Colmado (bodega, convenience store, etc...).

    Rent don't buy!

    It's something that we are accustomed to hear and follow up on when we venture into any small to large business in the developed world. But, is this true for the Dominican Colmado and local business model it represents?

    Facts are that Dominican RE is cheap firstly, location is a non-issue as any place is as good as the business it carries secondly and rent is a thorny issue which can see you in the streets, due to rent control modifiers not applying to commercial property in the country.

    So, rent and don't buy is not really true or applicable for the Dominican business model, which is strongly suggestive elsewhere in the region and world.

    So our Colmado is fully owned for in terms of RE and leasing terms.

    Now we set upon the operational part of the business!

    A mechanical scale hangs from the ceiling. A counter big enough to partition the client access area to that of the staff and goods. We have several refrigerators, utensils, lavatory, etc...

    Then we have the shelves stocked with the goods for sale, inventory. We have the register and the common things you expect in the line of business like these in the country.

    But wait! Didn't we just mention inventory?

    How does this relates any different to operating a business model back home, just the same, no?

    You estimated the costs, shelf life, demand and value of that inventory just as you do in the US bodega model, so what's there to say they are different models of business at all?

    Sure the actual property is different by virtue of looks and development. The inventory also reflects the exotic location. The equipment and furnishings also, but all this is expected from different locations and cultures, right?

    NOT!

    You see in the US model, you can carry on the business basics as usual when it comes to inventory control and allocations, but in the Dominican Republic prices are not stable for long periods in most of the consumables you carry, nor is the price jumps within a margin you can work around with ease to process your next inventory refill.

    You see, the soap bars you got for your inventory last week, and sold with a 100% markup for profit, just went up 125% for the next order to stock your now empty shelve. So even when you made a comfortable and nice profit of 125% for the complete inventory sold, your costs for the next order surpasses the costs of the inventory sold atop the profits you made and still need you to come up with an extra % to cover the new stock!

    That's not only a frequent cost of doing business in the DR, but the standard operating procedure each week!

    So how can a business model you so understand in USA, be so impossible to carry out here in the DR?

    Your model starts to crumble just weeks after having invested into your new Colmado and things don't seem to let up on their rise of costs!

    But that's not only inventory! Then we have that the energy costs also have risen along the gasoline spent to get your goods at supply points. The water bill went up!

    So how can you survive the Dominican Republic economy using a fit model for all this?

    Well, we call it the Dominican business model for a reason: It's made for the DR alone!

    Above was just one example of the lowest and simplest type of business in the DR...

  9. #7
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    The Colmado is a type of business that's present in the formal and informal sectors of the DR economy.

    They pay taxes, but only a fixed amount each term, regardless of true and actual profits/sales made.
    They don't pay taxes when they feel they can't stretch in order to cover said examples of the costs of running a business.

    They serve to all sub-sectors of the economy and their largest client block is the middle class by all accounts and ease to find one close to you.

    So how does the Colmado carries out their business in the DR? What's the business model they follow to keep open and profitable?

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    I took the Colmado for one reason to break open the Dominican business model for all of you here:

    It's the simplest and most basic of all types of business that can be said to mimic the business model used in the Dominican economy, up to the largest corporations!

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    Default Enhances Product Line

    Quote Originally Posted by PICHARDO View Post
    So how does the Colmado carries out their business in the DR? What's the business model they follow to keep open and profitable?
    Well, some simply add drugs to their line of merchandise.

    donP

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  13. #10
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    Since you describe how any small mom 'n pop convenience store in the states, I suppose lesson #1 in the "Dominican business model" is cheating on taxes.

    Oh, please, continue.


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