Social Entrepreneurism - Grameen Danone Foods Limited - Coursework Example

Social Entrepreneurism Final Paper Introduction Today, an increasing amount of initiatives worldwide appear to be confrontingthe various obstacles, that have in the past, hindered businesses from offering services to the underprivileged in the society. En masse, these initiatives create a phenomenon that has been labeled “social entrepreneurship.” Subsequently, “social entrepreneurship” (SE) refers to the fast growing number of firms that have established models for resourcefully catering to fundamental social needs that prevailing markets and organizations have failed to fulfill. Social entrepreneurship incorporates the inventiveness of basic entrepreneurship into the objective of societal change and provides visions that motivate new concepts for more socially appropriate and sustainable corporate policies and organizational models. Indeed, by engaging innovative forms of resources and merging them into new approaches, SE has become a fertile ground for the discovery and establishment of motivated models of value creation. The Institute for OneWorld Health in the US, Sekem in Egypt and Grameen Bank in Bangladesh are case examples that have adopted the concept of Social entrepreneurship. Alongside this evolving phenomenon of Social entrepreneurship, another concept has emerged, that is ‘Social Business”. This paper, drawing from Muhammad Yunus’ Creating a World without Poverty investigates the idea of social business and using the Grameen/Danone joint venture as a case example, attempt to link social business and social entrepreneurship. In addition, this discussion also offers some critique of the ideas postulated by Muhammad Yunus as well as opinions regarding the "best practices" for an effective social entrepreneur and/or social businessperson. The Concept of Social Business According to Muhammad Yunus Most of the world’s social problems continue to persist as a result of a shared misconception of the notion of capitalism. Consequently, individuals are regarded as one-dimensional entities whose main objective is profit maximization. Further, this one-dimensional conception of the free marketplace is entrenched in the notion of the ‘double bottom line’, whereby a company is expected to generate profit while at the same time, creating social change. In essence, the conventional business or economic theory ignores the existence of the multi-faceted, multi-dimensional nature of humans which negates the idea that all businesses must be oriented towards the single objective of profit maximization. However, Yunus believes capitalism in its current form, can be used as the device that determines change without advancing this “double bottom line’. Therefore, Yunus suggests that in order to complete the structure of capitalism, it is essential to establish a new form of business that acknowledges the multi­dimensional character of individuals: the social business (Yunus, Moingeon, & Lehmann-Ortega, Building Social Business Models: Lessons from the Grameen Experience, 2010). According to Yunus, two extreme forms of corporate organizations are distinguishable within the capitalist system. The first type of corporate organization is those companies viewed as profit-maximizing firms and whose main objective is to generate shareholder value. The other type is the non-profit organizations that exist to accomplish social objectives. A social business derives and combines characteristics from these two types of entities to emerge as an entity that bears both the potential to act as a proxy for global change and the necessary business-like features to guarantee it subsists as a business. The social business has to fund its full costs from its own operations, while its proprietors are enabled to recover their invested funds; however, it is more cause oriented rather than profit-driven (Yunus, 2008). The organizational structure of the social business is fundamentally identical to that of the profit-maximizing enterprises whereby it is not a charity organization rather, a business in its entirety. Markedly, the managerial outlook must be similar to that of a business even though the overall objective is dissimilar from the PMB. Further, while attempting to achieve its social objective, the social business should, at the same time, to regenerate their full costs in order be self-sustainable. In this form of business, the owners do not expect to generate profits for themselves; however, they are allowed to recoup their investment money if they wish. Ideally, the entrepreneur and/or investor in the social business are inspired by the need to do good in the society rather than to amass Wealth. In fact, there are no dividends in this form of business and surpluses are reinvested and thus, eventually, distributed to the specified beneficiary target group in such forms as reduced prices, improved services or increased accessibility. The social enterprise’s executives, management, and personnel are dedicated to addressing the issue that the business was created to solve, and it benchmarks its achievements and impacts appropriately. Notably, profitability satisfies the firm’s need to fund its overheads and its desire for growth (Yunus, 2008). According to Yunus, a social business is created and operated similar to a ‘normal’ business entity, with goods, services, consumers, markets, expenditures and revenues. A social business is a basically, a no-loss, self-sustaining, no-dividend entity that trades in goods or services and reimburses investments to its proprietors, but whose main objective is to serve the society and improve the conditions of the underprivileged . Defined this way, the social business differs from NGOs, which are, in most cases, not intended to regenerate their total overheads from their operations, and are as a result, obligated to dedicate most of their time and effort to generating capital. Conversely, Yunus posits that since social businesses seek self-sustainability, they are only reliant on its financiers at the establishment of a development project (Yunus, Moingeon, & Lehmann-Ortega, 2010). Indeed, this Yunus’ idea of social business is almost similar to the Mair and Marti (2006) definition ‘social entrepreneurship’, as ‘a process involving the innovative use and combination of resources to pursue opportunities to catalyze social change and/or address social needs’ (Mair & Marti, 2006, p. 37). However, Yunus counters that the concept of social entrepreneurship is broader and translates to any initiative intended towards societal change. Consequently, a social business can be viewed as a subgroup of social entrepreneurship, which consists of both profit and not-for-profit enterprises, and which is distinctive from conventional entrepreneurship due to the comparative precedence accorded to social wealth creation against the creation of economic wealth (Mair & Marti, 2006, p. 39). Yunus further posits that individuals who create and manage social businesses are social entrepreneurs however, not all social entrepreneurs are involved in social businesses. Essentially, the key premise of the social business is the collaboration that is probable amongst corporations and those concerned with eliminating poverty (Yunus, 2008). In addition to defining what a social business is, Yunus provide a justification as to why investors may invest their money into this form of business. According to him, the large sums of money donated by individual around the world annually to charitable causes signify that individuals desire to contribute money in a manner that aids other unprivileged individuals. Yet, as noted before, financing a social business varies from philanthropy since the social business is self-sustaining and financiers are entitled to recoup their investments, whereas, individuals who give to charity causes do not. Moreover, the investor in a social business also continues as the proprietor of the company and can, therefore, decide its future progress and initiatives. Besides, the social business provides an inspiring opportunity for businesspeople to augment and apply their own corporate skills and creativity to generate solutions to social problems (Yunus, 2008). Yunus’ Vision Yunus theorizes that, the social business, as a new business paradigm represents the universally sought after panacea to poverty. As such, he believes that that a social business should be able to sell inexpensive and nutritious food to the underprivileged and malnourished; offer health services to the underprivileged; make cheap and renewable energies; and recycle waste that is detrimental to the community and environment as a whole. According to Yunus, social business is in reality, the point where capitalism encounters socialism. Predominantly, Yunus envisages a world or situation where businesspeople would invest without craving for a return such as dividends or profit maximization. Instead, Yunus envisions the motivation for the investor in this business as the desire to instigate a societal or collective transformation in society. Yunus’ rationale of social business is to make available both a means of sustenance alongside a means of employment for the countless millions of the underprivileged in the world (Yunus, 2008). In his vision regarding using the current state of capitalism to create solutions for the world’s enduring problems, Yunus advances the principles of social entrepreneurship set forth by Elkington, & Hartigan, (2008) who believe that revolutionary business models of the future are inherent within the unpredictable fringes of the conventional market (Elkington & Hartigan, 2008). Moreover, Yunus’ social business as illustrated by the Grameen Bank and its partnerships speaks to the potentials of social entrepreneurship as highlighted by Dees, Emerson, & Economy (2002). Dees, Emerson, & Economy (2002) believe that social entrepreneurship represents a progressive condition by contrasting the bad or obsolete set of activities with the good or the management techniques that will result in social improvement for a better future (Dees, Emerson, & Economy, 2002). The social business model offers a beneficial approach that will empower individuals to participate in societal development and construct homes for themselves and their kin. However, to be successful, social businesses should be able to contest and participate actively in the commercial market and undergo the same market challenges, risks and threats as all businesses (PMBs). Moreover, they also require pragmatism in regard to the limitations of market economics and persistence in the discovery of ways of using prevailing markets to empower the poor. Yunus (2008) essentially believes that by re-defining the entrepreneur in a wide-ranging way, individuals have the opportunity to transform the nature of capitalism drastically, and in the process, solve most of the unsolved societal and economic problems within the free market scope (Yunus, 2008). Critique to Yunus’ Vision Most critics to Yunus’ ideas state that major problem lies in Yunus’ bipartite segregation of organizations. These critics argue that Yunus’ division is over-simplified, because today, most businesses tend to operate beyond such distinctive boundaries and beyond the scope of the goals for which they were originally founded. As such, Yunus’ two part theory of organizations tends to ostracize those organizations which operate further that the confines of this distinctive classification. A perfect illustration of the paradox in Yunus’ definition is seen in co-operative enterprises that are established by employees, manufacturers or consumers and overstep the distinctive border separating the private and charitable sectors. Actually, cooperatives are usually established for a social or community objective, though they are usually structured to negotiate and distribute societal and economic benefits equitably instead of prioritizing the social and fiscal objectives of the creators (Yunus, Moingeon, & Lehmann-Ortega, 2010). Indeed, from Yunus’ definition, social businesses operate in a similar way to co-operatives, which are normally designed so that the revenues are either reinvested into the organization or distributed among its members. In addition, cooperatives are self-governing initiatives that are conjointly owned and democratically operated by its members to accomplish their mutual, shared goals. Further, they are distinctive since they are user-owned, user-controlled and user-benefited, and are focused on providing benefits to their users (Yunus, 2008). In essence, the fact that organizations like cooperatives exist in today’s corporate world casts doubts on the two-part foundation to the theory by Yunus. Specifically, the notion that social business is a new innovative way of dealing with social problems is questionable since cooperatives have been in existence for many years. Moreover, analyses of Yunus book in the Financial Times and the Economist reinforce this view by indicating that the idea is naive, not new and that the social businesses are not sufficiently large to create the effect envisioned by Yunus, particularly considering the level of the problems they are supposed to solve (Ghalib, Hossain, & Arun, 2009). Grameen Danone Foods Limited Grameen Danone Foods is a successful example of a social business. The company was created in 2006 as a 50-50 joint venture between Yunus’ Grameen Bank and French group Danone, a prominent healthy foods producer. Groupe Danone is the largest yoghurt maker in the world and one of the leading companies in France, earning approximately $21 billion in sales every year. Further, Danone is ranked number one in the fresh dairy products global market and number two in the bottled water market. Over the past 30 years, Danone has engaged in a twofold commitment to both business success and social responsibility. To this effect, its corporate mission statement has transformed to ‘bringing health through food to a maximum number of people’ currently, from ‘bringing health through food’ in the early 2000 (Yunus, Moingeon, & Lehmann-Ortega, 2010). The joint venture concept was coined by Muhammad Yunus and Franck Riboud, the founder of Groupe Danone, upon discussions initiated by the latter. Founded on the mission statements of its two partners’, Grameen Danone’s main objective is to ‘help the children of Bangladesh to be healthy’ by providing them with ‘a nutritious and healthy product which they may consume on a daily basis’. The strategic vision for Grameen Danone Foods was to construct approximately fifty factories that deliver fresh and nutritious dairy products to the underprivileged Bangladeshis by the year 2020 (Rodrigues & Baker, 2012). The four primary objectives for Grameen Danone Foods include augmenting health through nutrition at inexpensive costs to every Bangladeshi child; improving the lifestyles of the underprivileged community members by including them in all the phases of the organizational model; conserving non-renewable resources; and becoming profitable to guarantee economic sustainability (Rodrigues & Baker, 2012). According to its value proposition, Grameen Danone’s product is designed to be inexpensive and accessible on a day-to-day basis for the less privileged families who epitomize a completely varied target market from Danone’s high-end customers. To this effect,’Shoktidoi’ was created, prepared from cow’s milk and date molasses fortified with micronutrients, such as calcium and proteins necessary for children’s development and bone strength. Further, ’Shoktidoi’ is appropriately priced at 6 BDT (about V6 cents) per container and is therefore, affordable for the poorest Bangladeshi families (Yunus, Moingeon, & Lehmann-Ortega, 2010). At its inception, this joint venture had to undergo numerous steps in order to develop the most appropriate working model. For instance, regarding the value constellation, the entire value chain had to be re-examined especially the three core processes including supply, production and distribution. Consequently, Grameen Danone opted to use locally available raw ingredients for a number of reasons. Notably, using local ingredients would decrease raw materials overheads, diminish fossil energy consumption through reduced transportation, as well as support local community enhancement and abate rural exodus. Additionally, to circumvent competition with other milk buyers, and simultaneously limit any further escalations in the prevailing high milk prices, Grameen Danone had to restructure the upstream market, by developing micro-farms to supplement its supply network. Subsequently, the Grameen Bank provided micro-credits to potential dairy cattle owners, who were also offered a guaranteed yearly fixed price alongside veterinary assistance to increase quality and output (Ghalib, Hossain, & Arun, 2009). In terms of production, the Grameen Danone established a small factory (500 square meters in surface area in the northern Bangladesh area whose capacity is approximately one thirtieth of a typical Danone European factory. This way Grameen Danone was able to apply the proximity-based model and effectively simplify its production process at the same time minimizing automation. Further, in terms of distribution and sales, Grameen Danone chose to use door-to-door distribution that is conducted by the ‘Grameen ladies’, who are able to reach 200 households daily, at the same time delivering nutritional information to their customers. In addition, the ‘Grameen Ladies’ act as micro-entrepreneurs since they are not employed by Grameen Danone, but obtain loans from Grameen Bank to purchase product stock and get a commission for every sold yoghourt. In addition to the door-to-door distribution method, Grameen Danone sells Shoktidoi through the already established food stores (Yunus, Moingeon, & Lehmann-Ortega, 2010). With regard to marketing, the normal advertising model was not applicable for GDF, due to the limited penetration of the conventional media in rural Bangladesh. However, Grameen Danone was able to enlist the backing of Zinedine Zidane, who visited the factory at Bogra and helped create an outstanding inauguration for the product. Further, GDF’s marketing plan was leveraged on the national recognition and trust interconnected with the Grameen trademark included in its publicity and promotional campaigns. Notably, GDF’s prevailing marketing approach is adapted from its 2008 marketing and expansion strategy characterized by a series of television infomercials that featured Yunus, who underscored the social goals of the program and the health gains of Shokti for children. Further, outdoor advertising in urban areas, point of sale promotions and other promotional events have helped increase sales for GDF’s product (Rodrigues & Baker, 2012). Lessons Learned In his book, Yunus offers valuable lessons in developing a viable social business and the necessary characteristics of the social business entrepreneurs. The first lesson or characteristic is the ability to challenge the conventional theory regarding business model innovation. To develop a working social business model requires innovation, and the ability to craft new strategies which alter the guidelines of the competitive game within an industry. This entails questioning the existing or previous models that have been successful in the past (Yunus, Moingeon, & Lehmann-Ortega, 2010). The second characteristic is to reinforce expertise and resources by creating strategic partnerships. Indeed, the social business model stresses the need to be receptive to other industry players as well as players in other industries. By opening up their business models to partner firms social entrepreneurs are able to access and gain from new resources that can be implemented in the background of poverty. Notably, the key benefit of such collaborative arrangements is that it enables the merging of resources and knowledge held by the partners, which may effectively result in the establishment of a larger resource portfolio for businesses within the network (Yunus, Moingeon, & Lehmann-Ortega, 2010). The third lesson is to undertake continuous experimentation, that is, strategic experimentation. Strategic experimentation is a specific form of knowledge acquisition that offers the necessary learning, and is vital to unraveling problems where solutions are undefined, or when vital information sources are unavailable or non-existent. Consequently, installing a sequence of minor experiments allows the entrepreneur to reduce risk and capitalize on the company’s learning rate, while increasing the possibility to recognize a strategy’s probability for success most proficiently. Other lessons learned from this case are the need to bring on board social profit-oriented shareholders and identifying the founding social profit objectives plainly and clearly (Yunus, 2008). Conclusion Grameen Danone Foods is considered as the world’s leading consciously-created transnational social business so exceptional lessons can be derived from this case. Indeed, according to Yunus, social businesses are not involved in a competition. Rather, their goals are social, with the aim of learning from each other. In Yunus’ vision, social business as a business model, offers the perfect solution to many social problems such as poverty. Further, Yunus believes even though the capitalist economy has failed to deliver a working solution to these problems, through the social business, we can be able to confront these issues within the capitalistic society. Accordingly, the Grameen Danone example illustrates the specificities of this new form of business model and provides an insight into the characteristics necessary to establishing a social business. These range from the ability to challenge the conventional business theory, creating strategic partnerships, continuous experimentation, engaging social profit-oriented shareholders to stating or identifying social profit goals clearly. References Dees, J., Emerson, J., & Economy, P. (2002). Strategic tools for social entrepreneurs: Enhancing the performance of your enterprising nonprofit. New York: John Wiley & Sons, Inc. Elkington, J., & Hartigan, P. (2008). The power of unreasonable people: How social entrepreneurs create markets that change the world. Boston: Harvard Business School Press. Ghalib, A., Hossain, F., & Arun, T. (2009). Social Responsibility, Business Strategy and Development: The Case of Grameen-Danone Foods Limited. Australasian Accounting Business and Finance Journal 3(4), 1-13. Mair , J., & Marti, I. (2006). Social entrepreneurship research: a source of explanation prediction and delight. Journal of World Business 41(1), 36-44. Rodrigues, J., & Baker, G. (2012). Grameen Danone Foods Limited (GDF). International Food and Agribusiness Management Review Volume 15, Issue 1, 127-158. Yunus, M. (2008). Creating a World Without Poverty. New York: PublicAffairs. Yunus, M., Moingeon, B., & Lehmann-Ortega, L. (2010). Building Social Business Models: Lessons from the Grameen Experience. Long Range Planning 43, 308-325. Read More