Contribution of Social Enterprise and Social Entrepreneurship to Current Economic Climate - Coursework Example

Social Enterprise and Social Entrepreneurship Institution Affiliation Date Social enterprises Social enterprises are organizations or businesses that are set up for the purpose of trading or doping business to improve the lives of the people, community and the environment. They aim at solving the social problems that the people are faced with. They make money from selling goods and services in the market just like all other businesses but they invest back majority of their profits to the community through creating employment, training programs, environmental conservation initiatives among others. (Defourny and Nyssens, 2006). They exist to benefit the community rather than shareholders and owners hence when the business profits, the society profits too. For a business or organization to be a social enterprise it must have a clear social mission and vision set out that will clearly benefit the community and society, must re-invest majority of their profits towards the wellbeing of the community and society, Must be accountable and transparent with all its business transactions and engage in lawful activities and should be driven by a public or community cause in whichever form, it may be social, environmental, cultural or economic cause. There is no specific business line for social enterprises they can operate under any form of business and in a range of industries as long as they give back majority of their profits to the community. Examples of social enterprises include: cafe direct which is a united kingdom based hot drinks company, Elvis and kresse organization which recycles industrial waste materials and transforms them to handbags and luggage which are then sold to the public and 50% of their profits are donated to the fire fighters charity. Lastly there is Hill Holt Wood which educates the youth Social entrepreneurship Social entrepreneurship is the way companies and entrepreneurs develop fund and put in place solutions to social, cultural environmental and economic problems that affect people. It is the practice of combining innovation, resources and opportunity to tackle the critical social environmental challenges that affect the daily lives of the community. Social entrepreneurs focus on identifying and transforming systems and practices that are the root cause of problems to the people through causing poverty, environmental deterioration, and loss of human dignity. (Peredo, and McLean, 2006) They educate the people on the modern way of life to change them from the past perspectives such as female circumcision, monogamous marriages, marrying off of young girls, and non-education of girls where boys are seen as more important and are educated while girls are not, family planning, violence against women among others. Through these activities, they may from foundations that may be profitable or non-profitable such aid aids awareness foundation, people with disability foundation and breast cancer foundation which educate and create awareness to the people. (Borzaga and Defourny, 2004)A social entrepreneur is therefore someone who pioneers or drives innovation and changes that benefit the people. Together with other institutions, networks and charitable organizations, they create solutions that are efficient sustainable and have impact on the lives of the people to a measurable level. Example of social entrepreneurs and their solutions include: Muhammad Yunnus who established a bank that spearheaded microfinance globally. Carlo Petrini started a movement called slow food movement which has over 100,000 members globally in over 130 countries that contribute to and are committed to preserving cultural traditions that are sacred are beneficial and preserving biodiversity. Lastly there is Wendy kopp’s teach for America which transforms educational opportunities for low income people and recruits top university students to work in America’s worst performing public schools. Contribution of social enterprise and social entrepreneurship to current economic climate Over a long period of time, social enterprises have played an important role in the development of social economy which has continued to grow globally. They have directly impacted the current social climate which has greatly improved the livelihood of people through improving their standards of living directly and indirectly. They have contributed in the following ways. They have created employment opportunities for vulnerable groups of individuals in the society such as people with disability, widows and the young generations who have not gotten formal employment besides being educated (Harding, 2004). Through creation of these job opportunities, they are able to depend on themselves, and therefore they don’t not rely on assistance from the government or relatives. They become productive members of the society and assist others who are in need. They also provide taxes to the government since they are employed and can access loans which are offered to them by the government to initiate and develop ventures than can generate income and benefit the community. This leads to improved standards of living, a longer life span and growth of the country’s GDP. They are initiators of lasting projects that benefit the community greatly. These services should normally be provided by the government to them since they are basic needs for survival but they are effectively established and well managed by social enterprises and change the lives of the people greatly. They may include projects such as schools, dams, boreholes, hospitals churches roads among others. Today the world is experiencing problems such as poverty due to poor leadership from leaders who mislead the people and drive countries to poor economic state due to their corruption, misuses of power alongside resources and dictatorship methods of leading people instead of democracy where people can freely criticize the government when they are not satisfied with service delivery. Social entrepreneurship leads to creation of young leaders who are well trained and natured to help uplift the people from poverty and create a better environment for them to live in (Alvord, Brown, Letts, 2004). For example the global good fund program invests capital in human resources to create potential leaders who are committed to tackling and solving today’s greatest challenges such as misuse of resources and corruption. The result is empowered leaders who are highly motivated and with high values who grow their social enterprises and deliver sustainable development. Leadership is the main strategy for solving the most complex and widespread problems that affect the community such as poverty. If leaders are well mentored, natured and trained from an early age, they will understand the problems of the people and will effectively serve the people without greed for power and financial gain and there would be equitable distribution of employment opportunities and infrastructure. Therefore social entrepreneurship develops effective leaders who help the people in this current economic climate of inflation and unemployment. In the current economy, the rate of unemployment is very high. People are educated and more continue to acquire education and knowledge, but the employment opportunities created are not enough to meet the demand for jobs by well trained and knowledgeable graduates. The result is unequal equitable of resources whereby part of the society that is the employed overstay in their positions and earn income and become rich as the unemployed do not earn income despite being skilled and get poorer. Social enterprises ensure that half of their profit goes back to benefit the community instead of putting back in business. This creates equal distribution of resources since they offer employment opportunities to such unemployed graduates and provide other benefits such as improved infrastructure in terms of roads hospitals and self-help groups. Due to inflation in the current economy, prices for commodities such as raw materials are increasing dramatically over time and organizations are continuously looking for ways to cut down on the expenses of the materials. Social enterprises reinvest profits for community ventures and use the local resources available in the local community (Granovetter, 2005). For example in an arid area where there are Aloe Vera plants growing, there may be establishment of a processing plant for making Aloe Vera products from the natural Aloe Vera plant which can be used to create a variety of products such as soaps and detergents both in the liquid and solid form, body lotions and medicines for people and animals since it contains some medicinal values. This reduces the cost of acquiring the raw materials which would have had to be imported at a high cost due to the current inflation and the venture would have to operate at a loss. The products would also need to be priced highly in order for profit to be realized but due to use of local resources the prices are cheap. Social enterprise therefore achieves two solutions to the problem of inflation because it reduces the price of raw materials and makes use of locally available resources. One of the ways social enterprises benefit the community is through ventures that promote the environment and make it healthy for people to live in. Social enterprises deliver environmental solutions to the people at a local level and improve their standards of living through providing alternative ways in which people can get natural resources they need where they cannot get them from the government due to various reasons. For example in this modern economy electricity is a major resource required by all people for both domestic and commercial purposes. Sectors like the manufacturing and processing industries require high levels of electricity for their operations. Although most cities are well connected to with electricity in developing countries, some communities mostly farming and pastoralists communities leave in undeveloped rural areas where electricity is not yet connected. Social enterprises develop projects such windmills that harness energy from the wind and provide the local people with electricity from the windmills. This not only offers cheap source of electricity but also consistent since they are not affected by electricity outages that affect the normal electricity supplied by the government. Social enterprise hence creates alternative solutions to economic problems that affect the people. Social entrepreneurship aims at developing ways through which solutions to social cultural and environmental problems faced by the people. This in turn leads to the promotions invention and innovation towards the technological ways of doing activities. It therefore creates opportunities through which individuals can come up with innovative ways of tackling issues that are faced in the community. For example individuals that are skilled in information technology field can come up with ways of sending and receiving money through mobile networks such as through m-pesa. This enables people to send money to each other and make payments to business through the mobile network when they purchase. This creates security where large transactions are involved since a lot of cash is bulky and can cause security issues. It also offers a convenient way doing monetary transactions. Social entrepreneurship therefore promotes creativity and innovation to help come up with alternative easier and more convenient way of doing activities in this economic times when computer technology is adopted in all aspects of doing activities. Another contribution of social enterprise and social entrepreneurship in the current economic climate is the promotion of trade agreements that create more opportunities for sellers and buyers to trade across borders thus increasing the potential market for goods and services and enabling the people access varieties of products and services. When ventures are started through social enterprise and social entrepreneurship, they are aimed at benefiting the community and therefore the government or other authorities may come up with strategies such as trade agreements and reduced tariffs of the products from those ventures such as to promote the community. Trade agreements and reduces taxes and tariffs make trading and business easier when in the current economy there are many regulations and taxes that inhibit the growth and development of such ventures. Through social enterprise and social entrepreneurship leaders from all over the world are connected through forums such as forum for economic development where they discuss ways of tackling problems. Through these forums communities and countries learn how others solve the issues that affect them and employ the same strategies to deal with the problems. For example African countries learn how to tackle environmental pollution and other ways of doing activities that do not lead to environmental pollution. Pollution is one of the most global problems that people are still trying to control. Through social enterprises and social entrepreneurship, people are trained and acquire skills of doing various activities which can generate income or earn the employment. This is sometimes followed by financing of ventures where the people get direct financing or are allowed to access financial assistance for funding and developing ventures. This is a major contribution since financing is one of the major challenges of starting any businesses nowadays due to the huge initial capital required. Differences in social enterprise, social entrepreneurship and profit based enterprises with no social impact Social enterprises establishment of businesses that are set up for trading where the businesses aims to solve the people’s problems by investing part of their profits to the local community instead of re investing them back to the business. They can be used in creating development projects that will benefit the people such as building water conservations, schools and hospitals. Social entrepreneurship refers to the way organizations and entrepreneurs find solutions to environmental and economic problems faced by the people through coming up with creative and innovative ways which the people can adopt and solve their problems. Once a problem has been identified alternative solutions to the problem are researched and are then implemented to tackle the problems. Profit based enterprise are businesses that are owned by individuals or organizations for the sole objective of making profit and maximizing the shares of the owners. The owners identify a market gap which they can fill due to the demand and then inject the necessary human, financial and technological resources to be able to provide products and services where that gap exist. The market gap is therefore the opportunity that the owners utilize so as to make profits. In social enterprise businesses or ventures are setup to benefit the people so that they are able to deal with problems that affect them, the main objective is solving the problems of the community, the business trade and the profits realized are donated to the local community to help in solving problems. In social entrepreneurship, ventures are not developed but companies and entrepreneurs come up with innovative ways that offer solutions to social, cultural environmental and economic problems that affect people, the main aim is to offer solutions to problems faced by the people, the people are trained on how to solve their problems using the new ways. Business enterprises that have no social impact unlike social enterprise and social entrepreneurship, are started by owners or shareholders from their own capital, their main aim is not to solve the people problems but to provide goods and services that they may need for the day to day activities, they do not offer any help to the community and all the profits are put back in the business to grow it. Business models, financial models and business planning models used in social enterprise and social entrepreneurship organizations For social enterprise and social entrepreneurship to succeed, organizations need to understand how the business creates delivers and captures values. The following is the various models that social enterprise and social entrepreneurship organizations use to achieve their objectives. First is identifying customer segments. This involves specifying who the customer is and what their characteristics are. What are their needs, tastes and preferences, behaviors and attitudes. However, it may be important to distinguish customers from beneficiaries because the once who pay or purchase products may not necessarily be the ones using them. Second is value proposition which is the key to success. What is the value that you are offering to the community is it improving infrastructure? Providing health services or providing education? Value proposition explains the problems that you are solving for the beneficiaries and how you are solving them. (Seelos and Mair, 2005) It helps to assess whether products or services being offered meet customers’ needs. Another model is channel which describes how you are going to achieve the objectives and deliver the value created to the customers. Will there be a partnership with other already existing organizations or will you sell the products independently or use platforms such as selling them online. Depending on the people who are going to benefit from the value, there may be the need to get creative in order to reach them. Develop channels that are most accessible for them considering whether they are literate use current mobile technology or have reliable access to electricity or public transport. Considering this factor enables the organizations to use channels that would be most effective in delivering the value to the beneficiaries. Another model is the customer relationships which outlines how you will interact with the customers. Will you offer personal assistance or will the customers exercise self-service, will the products and services be offered through community relations or will customers use automated systems. Trust and respect between the organization and the community are key in developing customer relations which should reflect in all aspects of communication between them. Financial and expenditure resources refer to the inputs that will be needed to deliver a products or service and how the financial resources will be made available. In the making of a products, various resources are needed they may include expensive machinery, manufacturing facilities, human resources among others. In delivering a service, key resources will include: human resources, financial resources and technological resources. All this resources are expenditures which are needed by the organization and a proper planning will ensure that the available financial resources are able to meet the expenditure. In this process financial strategies are needed to ensure the expenses are effectively managed. (Chell, Nicolopoulou, and Karataş-Özkan, 2010) An example of financing is crowd funding where the venture is funded by raising money through contributions by many people. It is based on three factors; the initiator of the venture, the venture itself, individuals or groups who support the idea and an organization which acts as the platform that brings all the parties together to launch the product and service. Marketing model outlines how the organization will create awareness about the value they deliver in terms of products and service to the people. The community will not benefit from social enterprise and social entrepreneurship if they are not aware that they exist and can benefit them. Organizations therefore need to put strategies that will create awareness of the existence of their products and services. (Alter, 2006). For example uc social enterprise hub provides business development support to the community social enterprises and social entrepreneurs who seek to create employment for the community. It offers procurement support through advice of tenders and tendering processes, contract management, business development assisting them start up and be sustainable, impact evaluation through tracking of growth performance and asses impact of the enterprise on the community Competition is another business model used by organizations. The difference between success and failure of organizations that are in the same market is the competitive advantage an organization may develop. In social enterprise and social entrepreneurship, competition is encouraged and developed to enhanced effectiveness of the ventures. For example at Enactus which is a community of students, academic and business leaders committed to using power of entrepreneurial action to transform lives and shape better more sustainable world, members compete with other teams and this competing opportunities present projects that members have been working on to students and business leaders from all over the globe. Participating in competitions gives the members a chance to develop skills that are helpful. Lastly is the revenue structure which indicates how money is made. The main objective of selling the products and services is to generate revenue. The revenue may be from various sales such as; direct sales of product and services, subscriptions fee, renting or leasing and lending References Harding, R. (2004). Social enterprise: the new economic engine?. Business Strategy Review, 15(4), 39-43. Alvord, S. H., Brown, L. D., & Letts, C. W. (2004). Social entrepreneurship and societal transformation an exploratory study. The journal of applied behavioral science, 40(3), 260-282. Chicago Alter, S. K. (2006). Social enterprise models and their mission and money relationships. Social entrepreneurship: New models of sustainable social change, 205-232. Peredo, A. M., & McLean, M. (2006). Social entrepreneurship: A critical review of the concept. Journal of world business, 41(1), 56-65. Chicago Defourny, J., & Nyssens, M. (2006). Defining social enterprise. Social enterprise: At the crossroads of market, public policies and civil society, 7, 3-27. Borzaga, C., & Defourny, J. (2004). The emergence of social enterprise (Vol. 4). Psychology Press. Granovetter, M. (2005). The impact of social structure on economic outcomes. The Journal of economic perspectives, 19(1), 33-50. Dees, J. G. (1998). The meaning of social entrepreneurship. Seelos, C., & Mair, J. (2005). Social entrepreneurship: Creating new business models to serve the poor. Business horizons, 48(3), 241-246. Chell, E., Nicolopoulou, K., & Karataş-Özkan, M. (2010). Social entrepreneurship and enterprise: International and innovation perspectives. Chicago Read More