Part I

The Entrepreneurial Mind-Set

in the 21st Century

Chapter 4
Social Entrepreneurship
and the Global
Environment for
Entrepreneurship

PowerPoint Presentation by Charlie Cook

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 Chapter Objectives
1. To introduce the social entrepreneurship movement
2. To examine who would be a social entrepreneur
3. To delve into the concept of shared value
4. To discuss the challenges of social enterprise
5. To introduce the global opportunities and challenges for
social entrepreneurs
6. To present the newest developments that have
expanded the global marketplace
7. To examine methods of entering the international arena
8. To set forth the key steps for entrepreneurs seeking
global markets
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 The Social Entrepreneurship Movement
• Social Entrepreneurship
➢ Entrepreneurship applied to social problem solving
whereas traditional, private-sector entrepreneurship
focuses on innovation, risk-taking, and large scale
transformation.
• The Social Entrepreneurship Process
➢ Recognition of a perceived social opportunity
➢ Translation of social opportunity into an enterprise
concept
➢ Identification and acquisition of resources required to
execute the enterprise’s goals.

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 Defining the Social Entrepreneur
• Social Entrepreneurs
➢ Are a person or small group of individuals who founds
and/or leads an organization or initiative engaged in
social entrepreneurship.
➢ Also referred to as “public entrepreneurs,” “civic
entrepreneurs,” or “social innovators.
➢ Are creative thinkers continuously striving for
innovation in technologies, supply sources,
distribution outlets, or methods of production.
➢ Are change agents who create large-scale change
using pattern-breaking ideas to address the root
causes of social problems.
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 Defining Social Entrepreneurs (cont’d)
• Characteristics of Social Entrepreneurs
as Change Agents
➢ Adoption of a mission to create and sustain social
value (beyond personal value)
➢ Recognition and relentless pursuit of opportunities for
social value
➢ Engagement in continuous innovation and learning
➢ Action beyond the limited resources at hand
➢ Heightened sense of accountability

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Table
4.1 Examples of Social Enterprise Obligations

Environment Pollution control

Restoration or protection of environment
Conservation of natural resources
Recycling efforts

Energy Conservation of energy in production and marketing operations

Efforts to increase the energy efficiency of products
Other energy-saving programs (for example, company-sponsored car pools)

Fair Business Practices Employment and advancement of women and minorities

Employment and advancement of disadvantaged individuals (disabled, Vietnam veterans,
ex-offenders, former drug addicts, mentally retarded, and hardcore unemployed)
Support for minority-owned businesses

Human Resources Promotion of employee health and safety

Employee training and development
Remedial education programs for disadvantaged employees
Alcohol and drug counseling programs
Career counseling
Child day-care facilities for working parents
Employee physical fitness and stress management programs

Community Involvement Donations of cash, products, services, or employee time

Sponsorship of public health projects
Support of education and the arts
Support of community recreation programs
Cooperation in community projects (recycling centers, disaster assistance, and urban renewal)

Products Enhancement of product safety

Sponsorship of product safety education programs
Reduction of polluting potential of products
Improvement in nutritional value of products
Improvement in packaging and labeling

Source: Richard M. Hodgetts and Donald F. Kuratko, Management, 3rd ed. (San Diego, CA: Harcourt Brace Jovanovich, 1991), 670
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 Social Enterprise and Sustainability
• Sustainable Entrepreneurship
➢ The preservation of nature, life support, and
community in the pursuit of perceived opportunities to
bring into existence future products, processes, and
services for gain, where gain is broadly construed to
include economic and noneconomic gains to
individuals, the economy, and society

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 Forms of Sustainable Entrepreneurship

Social Corporate Social

Ecopreneurship
Entrepreneurship Responsibility

Environmental Activities and processes Actions that appear to

entrepreneurship with undertaken to discover, further some social good,
entrepreneurial actions define, and exploit beyond the interests of
contributing to preserving opportunities in order to the firm and that which is
the natural environment. enhance social wealth by required by law and often
creating new ventures or denotes societal
managing existing engagement of
organizations in an organizations
innovative manner

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 Environmental Awareness
• Ecovision
➢ A leadership style that encourages open and flexible
structures that encompass the employees, the
organization, and the environment, with attention to
evolving social demands.

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 Environmental Awareness
• Key Steps in an Environmental Strategy
1. Eliminate the concept of waste.
2. Restore accountability.
3. Make prices reflect costs.
4. Promote diversity.
5. Make conservation profitable.
6. Insist on accountability of nations.

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 Shared Value and the Triple Bottom Line
• Shared Value
➢ An approach to creating economic value that also
creates value for society by addressing its needs and
challenges—company success begets social progress
when overcoming societal problems reduces costs for
firms, increases productivity, and opens new markets.
• Triple Bottom Line (TBL)
➢ An accounting framework that combines consideration
of traditional economic measures with environmental
and social dimensions to measure the firm’s
performance in achieving its sustainability goals.

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 Triple Bottom Line Measures

Economic Environmental Social

Performance Performance Performance

• Personal income • Hazardous chemical • Unemployment rate

• Cost of underemployment concentrations • Median household income
• Establishment sizes • Selected priority pollutants • Relative poverty
• Job growth • Electricity consumption • Percentage of population
• Employment distribution by • Fossil fuel consumption with a post-secondary
sector • Solid waste management degree or certificate

• Percentage of firms in • Hazardous waste • Average commute time

each sector management • Violent crimes per capita
• Revenue by sector • Change in land use/land • Health-adjusted life
contributing to gross state cover expectancy
product.

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 Promoting Sustainable Enterprises

• Benefit Corporation
1. Purpose: to create a material positive impact on
society and the environment.
2. Accountability: to have a fiduciary duty to consider
the interests of workers, the community, and the
environment.
3. Transparency: to report annually to the public on
overall social and environmental performance with a
credible and transparent third-party standard.

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 The Global Marketplace
• Global Entrepreneurs
➢ Are opportunity-minded and open-minded global
thinkers able to see different points of view and weld
them into a unified focus.
➢ Rise above nationalistic differences to see the big
picture of global competition without abdicating their
own nationalities.
➢ Have a core language plus working knowledge of
others.
➢ Confront the learning difficulties of language barriers
head-on, recognizing the barriers such ignorance can
generate.
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 The Global Marketplace (cont’d)
• Diaspora Networks
➢ are global networks of relationships among ethnic
groups that share cultural and social norms.
• Advantages of Diaspora Networks
➢ They speed the flow of information across borders
➢ They create a bond of trust
➢ Third, they create connections that help entrepreneurs
collaborate within a country and across ethnicities.

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 Global Organizations and Agreements
• World Trade Organization (WTO)
➢ Is the umbrella organization that overseas and
administers WTO trade agreements
➢ Handles trade negotiations or trade disputes
➢ Monitors national trade policies
➢ Provides technical assistance and training for
developing countries

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 Global Organizations and Agreements (cont’d)
• The North American Free Trade Agreement
(NAFTA)
➢ Is an international agreement among Canada, Mexico,
and the United States that eliminates trade barriers
among the three nations.
➢ Created the world’s largest free trade area, linking 444
million people and producing $17 trillion in goods and
services annually.

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Table
4.2 Top Ten Countries with which the U.S. Trades

Country Exports Imports Total Trade

1. Canada 248.8 276.5 525.3
2. China 91.9 364.9 456.8
3. Mexico 163.3 229.7 393.0
4. Japan 60.5 120.3 180.9
5. German 48.2 82.7 130.9
6. United Kingdom 48.5 49.8 98.3
7. South Korea 38.8 48.9 87.7
8. France 27.0 38.6 65.6
9. Taiwan 26.0 35.9 61.9
10. Brazil 35.4 29.3 59.3

Source: U.S. Census Bureau, Washington DC, 2011.

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 Global Organizations and Agreements (cont’d)
• The European Union (EU)
➢ Is an economic and political union of 27 member
states which are located primarily in Europe.
• Objectives of the EU
1. Elimination of custom duties among member states
2. Free flow of goods and services among all members
3. Creation of common trade policies toward all countries
outside the EU
4. Free movement of capital and personnel within the EU
5. Encouragement of economic development in the EU
6. Monetary and fiscal coordination among all members
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 Venturing Abroad
• Gradual Internationalization
➢ Is a step-by-step progress toward internationalization
as risk and commitment increase and entrepreneurs
acquire more knowledge through experience.
• Learning Curve Concept
➢ Increased sales from exports will lead to greater
efficiencies along the firm’s cost curve, which in turn
will lead to increased overall profits as the firm
expands into overseas markets.

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 The Competitive Advantage of Nations
• Resource-rich Countries
➢ Have extractive assets
➢ The OPEC nations and many parts of Africa
• Labor-rich Countries
➢ Have vast pools of available labor
➢ Brazil, India, the Philippines, and select countries in
South and Central America
• Market-rich Countries
➢ Have large purchasing power
➢ Europe, Brazil, Mexico, India, China, and the United
States
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 International at Inception
• Characteristics of “Born Global” Firms
1. Global vision from inception
2. Internationally experienced management
3. Strong international business network;
4. Preemptive technology or marketing
5. Unique intangible asset
6. Linked product or service
7. Tight organizational coordination worldwide.

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 Methods of Going International
• Importing
➢ Buying and shipping foreign-produced goods for
domestic consumption.
• Exporting
➢ The shipping of a domestically produced good to a
foreign destination for consumption.
• International Alliances
➢ Agreements between companies from two or more
countries, and they are not legally binding.

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Table
4.3 Types of International Alliances

Alliance Degree of Ease of Legal

Type Involvement Dissolution Entity

Informal international Limited in scope and Easy and convenient for None
cooperative alliance time either side

Formal international Deeper involvement; More difficult to dissolve None

cooperative alliance exchange of proprietary due to legal obligations
knowledge and commitment

Internal joint venture Deep involvement; Most difficult to dissolve Separate

requires exchange of due to the significant company
financial information, investment of both
proprietary knowledge, companies and the
and resources existence of a legal entity

Source: Adapted from John B. Cullen and K. Praveen Parboteeah, Multinational Management:
A Strategic Approach, 5th ed. (Mason, OH: Cengage/South-Western, 2011), p. 352.
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 Joint Ventures
• Advantages • Disadvantages
➢ Immediate intimate ➢ Fragmented
knowledge of the local management control
conditions and of the venture’s
government operations
➢ Use of the resources ➢ Differences of opinion
of the other firms that reflect different
involved in the venture nationalities
➢ Initial capital outlay ➢ Unanticipated
and overall risk are withdrawal of a
lower participating firm

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 Direct Foreign Investment
• Direct Foreign Investment
➢ Is a domestically controlled foreign production facility
that results from a foreign firm:
• Acquiring an interest in an ongoing foreign
operation.
• Obtaining a majority interest in a foreign company.
• Purchasing part of the assets of a foreign concern
in order to establish a direct investment.
• Building a facility in a foreign country.

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 Licensing
• Licensing
➢ A business arrangement in which a manufacturer of a
product (or a firm with proprietary rights over certain
technology or trademarks) grants permission to some
other group or individual to manufacture that product
in return for specified royalties or other payments.
• Types of Licensing
➢ Patents
➢ Trademarks
➢ Technical Know-How

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 Entering the International Marketplace

Draw up
Prepare a Secure File the
Conduct and
feasibility adequate proper
research implement
study financing documents
the plan

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 Researching Foreign Markets

Government
regulations

Local customs Political

and culture climate

Market
Research
Market size Parameters Infrastructure

Distribution
Competition
channels

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 International Threats and Risks
• Foreign Market Dangers:
➢ Ignorance and uncertainty
➢ Lack of experience
➢ Lack of information
➢ Imposed restrictions (demands and red tape)
• Political risks:
➢ Unstable governments
➢ Disruptions caused by territorial conflicts, illegal
occupations, and wars
➢ Regionalism
➢ Political ideological differences.
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 International Threats and Risks

Political Risks Economic Risks Social Risks

Unstable governments, Changes in tax laws, Antagonism among

disruptions caused by rapid rises in costs, classes, religious conflict,
territorial conflicts, wars, strikes, sudden increases unequal income
regionalism, illegal in raw materials, and distribution, union
occupation, and political cyclical/ dramatic shifts in militancy, civil war, and
ideological differences GNP. riots.

Financial Risks

Fluctuating exchange
rates, repatriation of
profits and capital, and
seasonal cash flows

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 Key Questions and Resources

Why is the company

What does the foreign-market interested in going
assessment reveal about the international?
nature and functioning of the
markets under investigation?

What specific market

strategy is needed to
tap the potential of this
market?

Internationalization
Strategic Decisions
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 Key Terms and Concepts
• Benefit corporation • licensing
• B-corporation • market-rich countries
• diaspora networks • North American Free Trade
• ecopreneurship Agreement (NAFTA)
• ecovision • political risks
• European Union (EU) • resource-rich countries
• exporting • shared value
• global entrepreneurs • social entrepreneurship
• importing • social value
• international alliances • sustainable entrepreneurship
• joint venture • triple bottom line
• learning curve concept • World Trade Organization (WTO)

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