Table of Contents
Social and business enterprises satisfy a need in the market and strive to make sustainable profits (Austin, Stevenson, & Wei-Skillen, 2006). However, the main differences stem from beyond-profit factors such as measurement of performance. Social entrepreneurs evaluate their achievement based on the positive impact the enterprise brings on the society whether social, economic, cultural, political, or environmental. On the other hand, business enterprises measure their performance on the level of benefits conferred to shareholders and investors. Social entrepreneurs can behave like profit-maximising enterprise without diluting the ideology of social entrepreneurship by confronting and embracing the dual nature of their objectives. This section highlights the differences between social and business enterprises and explains how the former can make profits without deviating from social entrepreneurship.
Differences between Social Enterprise and Business Enterprise
Social and business enterprises defer on the basis of main objectives, wealth creation, and a measure of profitability, perception of value, and emphasis on team and individual, and performance measurement.
The main objective of a social enterprise is communal and/or ecological health and wellbeing of the society (Chahine, 2016). When a social enterprise discovers a problem in the local community, the environment, or the way people approach issues, is acts to resolve the puzzle (Dacin, Dacin, & Matear, 2010). The main goal of a social enterprise is not to earn profit but solve the societal problems. Also, the social entrepreneurs prioritise satisfying the needs of the local community by taking a flexible approach (Sampson, Morenoff, & Earls, 1999). In most cases, these social entrepreneurs will undertake their jobs with little financial resources and the same time make a substantial difference in the community. For instance, a social entrepreneur notes that cities have sewerage disposal problems and start a program to resolve the problem by sourcing funds from the community or the government.
On the other hand, business entrepreneurs are more interested in making profits and creating wealth (Estrin, Mickiewicz, & Stephan, 2013). Their main objective is to satisfy client needs, confer financial benefits to shareholders, expand the business’s market share, and to promote the business to a large number of people. In other cases, some business enterprises have emphasised on the financial benefits of their venture to the extent of ignoring the environmental effects of their actions. Business entrepreneurs prioritise earning profits because they need a continuous flow of income for them to keep satisfying the needs of the target markets, fund their lifestyles, and expand their businesses. For example, BP needs to make good profits for it to sustain its business activities in the UK and other parts of the world. Also, the firm’s shareholders would like to see healthy returns on their large investment.
Though social and business enterprises strive to change the status quo, their mission is different. A business enterprise operates within a commercial sector to satisfy the needs and wants of the consumers. If it succeeds in its mission, it creates wealth in the process. In other words, the success of a business enterprise is determined by the amount of wealth that it creates over a certain period (Miller, Grimes, McMullen, & Vogus, 2012). However, a social entrepreneur is expected to create wealth but will not benefit it (Dees, Emerson, & Economy, 2004). Instead, the wealth created is used a means of the social entrepreneur to undertake the social change. In addition, the extents in which suffering is ameliorated or minds are changed or injustice reversed or justice served to signify the company’s success.
Measure of Profitability
Business enterprises are meant to convert profits that benefit shareholders such as private investors. Social enterprises may at times involve themselves in for-profit activities. Nevertheless, social entrepreneurs structure the companies as non-profit making or donate the funds to the causes they support. For instance, Nika Water is a for-profit firm that deals in bottled water. However, the company donates 100 percent of its profit to support clean water projects in developing countries such as Sri Lanka, Nicaragua, Kenya, and Uganda.
Perception of Value
Social entrepreneurs and business entrepreneurship perceive value in different ways. For business enterprises, value stems from the profit that the investors expect to enjoy as the product or service grows in the market. The business entrepreneur is answerable to shareholders and investors for making profits from business operations. On the other hand, a social entrepreneur sees value in profits because it is essential for supporting the cause of the company. That is, value for the social entrepreneur is evident in the social benefit that a society or change to a community that lacks resources to satisfy its needs.
Emphasis on Team and Individual
Social enterprises and business enterprises receive different kinds of emphasis from teams and individual that supports it. As for business entrepreneurs, venture capitalists invest based on the firm’s leadership and the organisation in support of it. For example, a venture capitalist will commit his funds to Wal-Mart stores if the company’s leadership is promising enough to guarantee profits or returns on investment. Conversely, as for social entrepreneurs, people raise and donate funds for charitable reasons based on the feasibility and practicality of the projects as determined by the person in charge. For instance, a non-governmental organisation (NGO) for orphans and vulnerable children based in Iraq will need to convince UK donors that its efforts will benefit thousands of children in the country. In addition, the NGO must provide viable evidence and practical cost-benefit analysis of its operations in Iraq. Therefore, while venture capitalists are concerned about the possibility of returns for their investments, donors are more focused on the practicability and feasibility of the social project to be undertaken by the social enterprise.
Business enterprises rely on some tangible and quantifiable measures of performance such as market share, financial indicators, level of customer satisfaction, and quality of products or services. For instance, Microsoft, a business enterprise, can measure its performance by gauging the extent of profits growth over a certain period. In February 2017, the company reported a 27.8 percent in its quarterly profit largely contributed by its cloud computing services. From the information, it is apparent that Microsoft is performing well financially and its level of customer satisfaction in regard to cloud computing services is high. The positive performance in terms of customer satisfaction is indicated by the rise in the demand of the cloud computing services.
Contrastingly, social enterprises measure their performance based on the positive impact the enterprise brings on the society regardless of whether they are social, cultural, political, or environmental (Epstein & Buhovac, 2014). For instance, a microfinance institution will measure its performance by quoting the number of people its low-interest loans has reached and changed their lives. However, it is difficult to measure social or political change because of its non-quantifiable and multi-causal feature, and the insightful distinction of the social effect created.
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Social Enterprises as Profit-Maximising Enterprises
There are few social enterprises that have acted as profits-maximising enterprises and have not deviated from their social causes. For instance, MyBnk is among one-fifth of social enterprises that have brought economic development. MyBnK assists potential entrepreneurs to access funds for starting new businesses. In 2015/2016, the social enterprise assisted about 15000 people through financial education and business idea generation. The company was started in 2007 and has helped over 100 000 youth to access funds for starting new ventures. Although the company rarely publishes its financial reports, a few websites have indicated that company makes profits of not less 30 percent in a fiscal year. Another example of a successful social enterprise is NetSuite, which donates software and other services to non-profit companies to help improve the quality of their service and realise more social changes. Like other firms, non-profit organisations depend on technology to conduct their day-to-day operations. However, most of them operate on low budgets and find it difficult to acquire the latest technological application. Therefore, NetSuite’s operation helps these companies to stay competitive by using latest technological devices and applications. The financial and philanthropic accomplishment of the above social enterprises indicates that social entrepreneurs can enjoy good profits by adopting the right business plans, unique value proposition, and marketing efforts.
Social entrepreneurs can behave like profit-maximising enterprise without diluting the ideology of social entrepreneurship by confronting and embracing the dual nature of their objectives. Social entrepreneurs design innovative solutions to social, cultural, and environmental challenges facing the community (Elkington & Hartigan, 2008). They achieve this by approaching banks, securing crowdfunding, tapping into equity debt, or pursuing tradition methods of securing start-up capital. However, the above methods may not work at times as it not always guaranteed that banks or other sources will heed to funding requests. Rather, social entrepreneurs request donations, grants, and corporate investors. However, it is difficult to convince investors and donors why they should commit financial resources to support a social enterprise (Lounsbury & Glynn, 2001). However, by attempting to create and maintain a continuous flow of funds into the organisation, social enterprise is at risk of deviating from their original visions and mission to focus on maintaining a profit margin (Zahra, Gedajlovic, Neubaun, & Shulman, 2009). One method diluting the ideology of social entrepreneurship while seeking funds is to keep a solid business plan and regularly review it with employees, the management, and investors to make sure that the organisation does not sidetrack from the initial mission and overarching action plan (Seelos, 2007).
Unique Value Proposition
Another way in which social entrepreneurship can make profits is to adopt business value proposition strategy. Only a few donors and investors can commit time and funds to a cause except if they have a clear picture of how their commitment will pan out. As a result, a social enterprise should develop a strong, credible, and unique value proposition (Emerson, 2003). A unique value proposition is an exclusive and continuous value that donors or investors will enjoy for supporting a cause. A good UVP gives a social enterprise the competitive edge in the industry. It not only convinces a potential donor to invest in a profitable cause but also explains how their financial support will benefit or create a unique opportunity. As a result, a UVP should communicate to the target audience, focus on the return of investment, and emphasise on sustainable and continued value. For example, American Red Cross created a UVP partnership with Pacific Gas and Electric Company which raised over $ 1 million, got over $ 3 million in earned media, and over 1 million people were trained on first aid skills.
Although it is uncommon for social enterprises to market themselves, it is critical for them to understand that marketing is now diversified. In the end, marketing is one of the ways of satisfying the needs of the clients and the donors. First, a social enterprise should define its target market by researching similar organisations and associations on the same course (Guclu, Dees, & Anderson, 2002). It should then strategise and design a plan to establish the desired objectives of the marketing strategy. Once the social enterprises have defined its target market and determined the desired outcomes, it should design marketing materials such as brochures, flyers, posters, table tents, or door hangers that describe the benefits, services, and donation opportunities and values that stand out in the company. Also, the NGO should design a social media strategy (Facebook or Twitter) that creates a channel through which the company can reach a large number of people interested its activities. The social media penetrates beyond regional boundaries and reach people within the country and those in other parts of the world.
A social enterprise could also create and maintain an active and professional internet marketing presence by building a website. The website is used to share company’s information such as history, news and events, and a donate button. In addition, a social entrepreneur should create a customer database and use it to send mail, make phone calls, invite customers to events, form alliances, and profile and segment the market. Lastly, the company should always look for partners that would benefit the organisation in one way or another. The best people and organisations that social enterprises should partner with include the media and other businesses.
I have learnt a lot of things about social enterprises in this module. First, a social entrepreneur is a person while a social enterprise is an organisation. Therefore, a social entrepreneur is the person who designs and implements an intervention, a product or service that ameliorates the suffering of marginalised people or populations. On the other hand, a social enterprise is an organisation founded to intervene in a social or environmental challenge and rationalises its operations to bring social benefits to a population. A social enterprise minimises resources and applies a sustainable business model in its operations. In other words, the primary reason for streamlining operations and minimising resources use is to save more and direct it at bringing a social change.
Secondly, I learnt that a social enterprise depends on the feasibility or practicality of its mission, accountability, and transparency for it to secure funding from investors and donors. Investors and donors can only be willing to donate funds if they are convinced that social mission to be undertaken is feasible, achievable, and practical. Otherwise, no one will donate funds for a cause that may not be achieved with the timeframe given or is not achievable at all. In addition, social enterprises are required to maintain high standards of accountability and transparency to attract and maintain a continuous supply of funds. That is, investors, donors, and other interested people cannot donate funds if a social enterprise is accused of misappropriation and embezzlement of funds.
Third, key findings of state of UK social enterprise prove that social entrepreneurs can behave like profit-maximising enterprise without diluting the ideology of social entrepreneurship by confronting and embracing the dual nature of their objectives. For example, half of UK’s social enterprises reported a profit with 26 percent of them breaking even. In addition, about all social enterprises in the country use most of their profits to fund further social or environmental change. Profits maximising enterprise earn most of their funds from trade and so do UK social enterprises. About 73 % of UK social enterprises earn 75 % of their income from trading activities. In terms of job creation, UK social enterprise creates more jobs than Small Scale enterprise.
Lastly, I learnt that due to the complex nature of managing social enterprises, leadership is an important aspect. Social enterprises leaders are required to create a vision, mission, strategy, and mechanism of execution for their organisations. They should have the ability to anticipate and see the future, maintain flexibility, and think strategically and bring changes to the organisation. For instance, social enterprises require transformational leaders that idealise influence, inspire motivation, individualise consideration, and cause intellectual stimulations. Social enterprises operate on tight financial budgets and it is up to the transformational leader to devise ways and methods of getting extra funds. In addition, leadership and management are different things as far social enterprises are concerned. For instance, while leadership will create a vision and strategy for a social enterprise, management will plan and budget for the same.
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