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Social Entrepreneurship and the Global Environment for

Entrepreneurship
It Application Tools In Business (Technological Institute of the Philippines)

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Social Entrepreneurship and the Global Environment for Entrepreneurship

Social Entrepreneurship

A new form of entrepreneurship that exhibits characteristics of nonprofits,

government, and businesses—including applying to social problem solving traditional,
private-sector entrepreneurship’s focus on innovation, risk-taking, and large scale
transformation.
Defining the Social Entrepreneur
Social entrepreneurs are sometimes referred to as “public entrepreneurs,” “civic
entrepreneurs,” or “social innovators.”
Social entrepreneurs are change agents; they create large-scale change using
pattern-breaking ideas, they address the root causes of social problems, and they
possess the ambition to create systemic change by introducing a new idea and
persuading others to adopt. These types of transformative changes can be national or
global. They also can be highly localized—but no less powerful—in their impact.
Defining the Social Enterprise
There are challenges to the boundaries of what is and what isn’t a social
enterprise. It is generally agreed that social entrepreneurs and their ventures are driven
by social goals; that is, the desire to benefit society in some way. But because the social
mission of social entrepreneurs is the most important criterion, not wealth creation,
arguments are made any social enterprise should be in the world of not-for-profit
organizations.

Social Enterprise and Sustainability

The basic challenge of social enterprise—addressing the obligations of a business

to society—is the same for all types of businesses—but questions concerning the extent
to which corporations should be involved in social obligations to society is open to
debate.
Sustainable Entrepreneurship
Sustainable entrepreneurship includes:

o Eco Entrepreneurship, which refers to environmental entrepreneurship with

entrepreneurial actions contributing to preserving the natural environment including
the Earth, biodiversity, and ecosystem.

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o Social entrepreneurship, which encompasses the activities and processes

undertaken to discover, define, and exploit opportunities in order to enhance social
wealth.
o Corporate social responsibility, which refers to actions that appear to further
some social good, beyond the interests of the firm.

Eco Entrepreneurship
The environment stands out as one of the major challenges of social enterprise.
Entrepreneurs have an enormous challenge to build socially responsible organizations for the
future. Eco vision—attention to employees, the organization, and the environment—is a
possible leadership style for accomplishing this.
A plan to create a sustainable future through a practical, clearly stated strategy, as defined by
Hawken and McDonough:

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.

Shared Value and the Triple Bottom Line

The triple bottom line (sometimes referred to as TBL) is an accounting framework that goes
beyond the traditional measures of profit, return on investment, and shareholder value to
include environmental and social dimensions.
"Shared value” is an approach to creating economic value that also creates value for society by
addressing its needs and challenges.
Bottom-Line Measures of Economic Performance

o Personal income
o Cost of underemployment
o Establishment sizes
o Job growth
o Employment distribution by sector
o Percentage of firms in each sector
o Revenue by sector contributing to gross state product

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Bottom-Line Measures of Environmental Performance


o Hazardous chemical concentrations
o Selected priority pollutants
o Electricity consumption
o Fossil fuel consumption
o Solid waste management
o Hazardous waste management
o Change in land use/land cover

Bottom-Line Measures of Social Performance


o Unemployment rate
o Median household income
o Relative poverty
o Percentage of population with a post-secondary degree or certificate
o Average commute time
o Violent crimes per capita
o Health-adjusted life expectancy

Global Market Place

Global Entrepreneurs
Global entrepreneurs rely on global networks for resources, design, and distribution. They rise
above nationalistic differences to see the big picture of global competition without abdicating
their own nationalities. They confront the learning difficulties of language barriers head-on,
recognizing the barriers such ignorance can generate.
Diaspora Networks
Diaspora networks are relationships among ethnic groups that share cultural and social norms.
They represent powerful advantages to global entrepreneurs because they speed the flow of
information across borders; they create bonds of trust; and they create connections that help
entrepreneurs collaborate within a country and across ethnicities.
Global Organizations and Agreements
They contribute to significant international vehicles that have developed.
THE WORLD TRADE ORGANIZATION
The WTO is the umbrella organization governing the international trading system. Its job is to
oversee international trade arrangements
THE NORTH AMERICAN FREE TRADE AGREEMENT

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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.
It created the world’s largest free trade area, with strong protection for patents, copyrights,
industrial design rights, trade secret rights, and other forms of intellectual property
THE EUROPEAN UNION
The EU is an economic and political union of 27 member states which are located primarily in
Europe.
Methods of Going International
Methods of going international are importing, exporting, international alliances and joint
ventures, direct foreign investment, and licensing
IMPORTING
Importing is buying and shipping foreign-produced goods for domestic consumption.
EXPORTING
Exporting is the shipping of a domestically produced good to a foreign destination for
consumption.
INTERNATIONAL ALLIANCES AND JOINT VENTURES
Three main types of international alliances: informal international cooperative alliances; formal
international cooperative alliances (ICAs); and international joint ventures.

 Informal alliances are not legally binding and are limited in scope and time.
 Formal alliances usually require a formal contract with specifics about what each
company contributes and involve a greater commitment by each company and a transfer of
proprietary information.
 Joint ventures occur when firms analyze the benefits of creating a relationship, pool
their resources, and create a new venture. Joint ventures imply the sharing of assets,
profits, risks, and venture ownership.

DIRECT FOREIGN INVESTMENT

A direct foreign investment is a domestically controlled foreign production facility. Does not
imply that the firm owns a majority of the operation; can be achieved by acquiring an interest in
an ongoing foreign operation, by obtaining a majority interest in a foreign company, by
purchasing part of the assets of a foreign firm, or by building a facility in a foreign country.
LICENSING
Licensing is a business arrangement in which the manufacturer of a product (or a firm with
proprietary rights over a certain trademark or technology) grants permission to some other
group or individual to manufacture that product in return for specified royalties or other
payments.

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Three basic types of licensing arrangements revolve around patents, trademarks, and technical
know-how.
Researching Foreign Markets
Important parameters to identify and research include:

 Government regulations
 Political climate
 Infrastructure
 Distribution channels
 Competition
 Market size
 Local customs and culture

INTERNATIONAL THREATS AND RISKS

Dangers of foreign markets include political, economic, and financial risks, including:

 Ignorance
 Uncertainty
 Lack of information
 Restrictions imposed by the host country
 Unstable governments
 Changes in tax laws
 Rapid rises in costs and raw materials
 Fluctuating exchange rates
 Repatriation of profits and capital

Case Study: A Foreign Proposal

A FOREIGN PROPOSAL
Edgar Bruning left his job at a major computer manufacturing firm and started his own business
five years ago, naming it Bruning IT. Since then, Edgar has secured five patents for IT-related
equipment. His latest is a computer chip that can increase the speed of most personal
computers by 35 percent. The cost of one of these computer chips is only $8, and the unit
wholesales for $135. As a result, Bruning’s profits have mushroomed.

Realizing that everything he developed can be copied by foreign competitors, Edgar entered
into contractual arrangements with three European firms to market his product. These three
firms have predetermined sales areas that cover all of Europe and the Middle East. Bruning
ships 50 percent of its production output to these three firms, while the rest is sold to
companies in the United States. Edgar recently has been thinking about increasing his

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production facilities. He is certain he could sell 40 percent more chips if he were able to make
them.
Last week Edgar had a visit from the chief executive of a Japanese firm. The company has
proposed a joint venture between itself and Bruning. The venture would work this way: Bruning
would ship the company as many chips as are currently sent to the three firms in Europe. These
chips would be paid for on a 90-day basis. The Japanese firm would act as Bruning’s Far East
sales representative during this part of the agreement. Then within 90 days, the Japanese firm
would purchase manufacturing equipment that would allow it to make the chips in Japan. “This
will save us both labor and shipping costs,” the Japanese executive pointed out. “And all profits
will be divided on a 50/50 basis. Your only expenses will be your share of the manufacturing
equipment, and we will apply your profits against those expenses. So you will have no out-of-
pocket expenses.”

The idea sounds very profitable to Edgar, but he is not sure he wants to give someone else the
right to produce his product. “Technological secrecy is important in this business. It’s the key to
success,” he noted to a colleague. On the other hand, Edgar realizes that without having
someone to sell his product in the Far East, he is giving up a large potential market. Over the
next 10 days, Edgar intends to make a decision about what to do.

QUESTIONS

1. What type of arrangement is Edgar using in his business dealings with the European
firms? Be complete in your answer.
2. Is the Japanese business proposal a joint venture? Why or why not? Would you
recommend that Edgar accept it? Why or why not?
3. If Edgar were looking for an alternative approach to doing business with the Japanese,
what would you suggest? Defend your answer.

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