Part I The Entrepreneurial Mind-Set in the 21st Century

C h a p t e r

4

Social Entrepreneurship and the Global Environment for Entrepreneurship

PowerPoint Presentation by Charlie Cook © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

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)

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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 Energy Fair Business Practices Human Resources Community Involvement Products

Pollution control Restoration or protection of environment Conservation of natural resources Recycling efforts 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) 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 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 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) 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

Ecopreneurship

Environmental entrepreneurship with entrepreneurial actions contributing to preserving the natural environment.

Social Entrepreneurship

Activities and processes undertaken to discover, define, and exploit opportunities in order to enhance social wealth by creating new ventures or managing existing organizations in an innovative manner

Corporate Social Responsibility

Actions that appear to further some social good, beyond the interests of the firm and that which is required by law and often denotes societal engagement of organizations

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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

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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 Performance

• Personal income • Cost of underemployment • Establishment sizes • Job growth • Employment distribution by sector • Percentage of firms in each sector • Revenue by sector contributing to gross state product.

Environmental Performance

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

Social Performance

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

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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.

© 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

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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)

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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

1. Canada 2. China 3. Mexico 4. Japan 5. German 6. United Kingdom 7. South Korea 8. France 9. Taiwan 10. Brazil

Exports

248.8

91.9

163.3

60.5

48.2

48.5

38.8

27.0

26.0

35.4

Imports

276.5

364.9

229.7

120.3

82.7

49.8

48.9

38.6

35.9

29.3

Total Trade

525.3

456.8

393.0

180.9

130.9

98.3

87.7

65.6

61.9

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

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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

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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

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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 Type Degree of Involvement

Informal international cooperative alliance Limited in scope and time Formal international cooperative alliance Internal joint venture Deeper involvement; exchange of proprietary knowledge

Ease of Dissolution

Easy and convenient for either side More difficult to dissolve due to legal obligations and commitment Deep involvement; requires exchange of financial information, proprietary knowledge, and resources Most difficult to dissolve due to the significant investment of both companies and the existence of a legal entity

Legal Entity

None None Separate company

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

 Immediate intimate knowledge of the local conditions and government  Use of the resources of the other firms involved in the venture  Initial capital outlay and overall risk are lower •

Disadvantages

 Fragmented management control of the venture’s operations  Differences of opinion that reflect different nationalities  Unanticipated withdrawal of a 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

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

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Researching Foreign Markets

Local customs and culture Government regulations Market size Market Research Parameters Political climate Infrastructure Competition Distribution channels © 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

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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

Unstable governments, disruptions caused by territorial conflicts, wars, regionalism, illegal occupation, and political ideological differences

Economic Risks

Changes in tax laws, rapid rises in costs, strikes, sudden increases in raw materials, and cyclical/ dramatic shifts in GNP.

Social Risks

Antagonism among classes, religious conflict, unequal income distribution, union militancy, civil war, and riots.

Financial Risks

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

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Key Questions and Resources

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

Why is the company interested in going international?

What specific market strategy is needed to tap the potential of this market?

Internationalization Strategic Decisions

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4 –32

Key Terms and Concepts

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

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