Entrepreneurship: Evolutionary Development—Revolutionary ...portal.unimap.edu.my/portal/page/portal30/Lecture...1. To introduce the social entrepreneurship movement 2. To examine

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CHAPTER 4

Social Entrepreneurship

and the Global Environment for

Entrepreneurship


Learning Objectives

1. To introduce the social entrepreneurship movement2. To examine who would be a social entrepreneur3. To delve into the concept of shared value4. To discuss the challenges of social enterprise5. To introduce the global opportunities and challenges for

social entrepreneurs6. To present the newest developments that have expanded

the global marketplace7. To examine the methods of entering the international arena8. To set forth the key steps for entrepreneurs seeking global

markets


Social Entrepreneurship

• Social Entrepreneurship• Entrepreneurship that is a form that exhibits

characteristics of nonprofits, governments, and businesses.

• Combination of private-sector focus on innovation, risk taking, and large-scale transformation with social problem solving.

• Social Entrepreneurship Process• Recognition of a perceived social opportunity

translated into an enterprise concept.• Resources are acquired to execute the enterprise’s

goals.


Defining the Social Entrepreneur

• Social Entrepreneurs• A person or small group who founds or leads an

organization or initiative engaged in social entrepreneurship.

• Also referred to as “public entrepreneurs,” “civic entrepreneurs,” or “social innovators.”

• Creative thinkers continuously striving for innovation in technologies, supply sources, distribution outlets, or methods of production.

• Change agents who create large-scale change using pattern-breaking ideas to address the root causes of social problems.


Defining the Social Enterprise

• Driven by Social Goals• Challenges are presented regarding the boundaries

of what is and what is not a social enterprise.• Social causes can be based on personal goals.• General agreement that there is the desire to benefit

society in some way.• Arguments can begin over the location and purposes

of the social goals.


The Concept of Social Entrepreneurship

Process

Business

Social Services Social Engagement/ Values

• Poverty alleviation• Green technology• Health solution• Create sources of water• Waste management• and others refer to Table 4.1

https://www.youtube.com/watch?v=1ecKK3S8DOE&list=PLpThEpiiVDWTmYHTHu_sW5_B-P4KnVH1u


Social Enterprise and Sustainability

• Sustainable Entrepreneurship• Focus on the preservation of nature, life support, and

community.• Pursuing opportunities to bring into existence future

products, processes, and services for gain, including economic and noneconomic gains to individuals, the economy, and society.

https://www.youtube.com/watch?v=XwcfTXqmYkU


TABLE 4.1 Examples of Social Enterprise Obligations

Obligation Examples

Environment Pollution controlRestoration or protection of environmentConservation of natural resourcesRecycling efforts

Energy Conservation of energy in production and marketing operations Efforts to increase the energy efficiency of products Other energy-saving programs (e.g., company-sponsored carpools)

Fair Business Practices Employment and advancement of women and minoritiesEmployment and advancement of disadvantaged individuals (persons with disabilities, Vietnam veterans, ex-offenders, former drug addicts, persons with handicaps, and hard-core unemployed)Support for minority-owned businesses

Human Resources Promotion of employee health and safetyEmployee training and developmentRemedial education programs for disadvantaged employees; alcohol and drug counseling programsCareer counselingChild day-care facilities for working parentsEmployee physical fitness and stress management programs

Community Involvement Donations of cash, products, services, or employee timeSponsorship of public health projectsSupport of education and the artsSupport of community recreation programsCooperation in community projects (recycling centers, disaster assistance, and urban renewal)

Products Enhancement of product safetySponsorship of product safety education programs;

reduction of polluting potential of products;improvement in nutritional value of products;improvement in packaging and labeling

Source: Adapted from Richard M. Hodgetts and Donald F. Kuratko, Management, 3rd ed. (San Diego, CA: Harcourt Brace Jovanovich, 1991), 670.


Forms of Sustainable Entrepreneurship

1. Ecopreneurship• Environmental entrepreneurship with entrepreneurial actions

contributing to preserving the natural environment, including the Earth, biodiversity, and ecosystems.

2. 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.

3. 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.


Ecopreneurship (slide 1 of 2)

• 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.

• Environmental Movement• Initiated primarily by values rather than by design.• Developed by a plan to create sustainable future.


Ecopreneurship (slide 2 of 2)

• Key Steps in an Environmental Strategy1. 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

• Shared Value• An approach to creating economic value that also

creates value for society by addressing its needs and challenges.

• Transforms business thinking by addressing issues through innovation and methods.

• Triple Bottom Line (TBL)• An accounting framework that goes beyond the

traditional measures of profit, return on investment, and shareholder value to include environmental and social dimensions.


Triple Bottom-Line Measures (slide 1 of 2)

1. 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

2. EnvironmentalPerformance

• Hazardous chemical concentrations

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


Triple Bottom-Line Measures (slide 2 of 2)

3. 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


Benefit Corporations: Promoting Sustainable Enterprises

• Benefit Corporation – new form of corporation in USA (also known as low-profit limited liability company (L3C))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.


The Global Marketplace (slide 1 of 6)

• Global Entrepreneurs• 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.



• Global Thinking• Entrepreneurs who expand into foreign markets think

about how to design and adopt strategies for different countries.

• Diaspora Networks• Global networks of relationships among ethnic groups

that share cultural and social norms.• Advantages of Diaspora Networks

• Speed the flow of information across borders• Create a bond of trust• Create connections that help entrepreneurs collaborate

within a country and across ethnicities



• Global Organizations and Agreements• Organizations, unifications, and trade agreements are

some of the vehicles that have developed.• World Trade Organization (WTO)

• 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.



• North American Free Trade Agreement (NAFTA)• International agreement between 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.


TABLE 4.2 Top Ten Countries with Which the U.S. Trades

The largest U.S. partners with their total trade (sum of imports and exports) in billions of U.S. dollars in 2017:

Rank Country Exports Imports Total Trade1 China 115.8 462.8 578.62 Canada 266.8 278.0 544.93 Mexico 230.9 294.1 525.14 Japan 63.3 132.2 195.5

5 Germany 49.4 114.2 163.6

6 South Korea 42.3 69.9 122.2

7 United Kingdom 55.4 54.3 109.7

8 France 30.9 46.7 77.7

9 India 21.7 45.9 67.7

10 Taiwan 26.0 39.3 65.4

Source: U.S. Census Bureau, Washington, DC, 2017.



• European Union (EU)• European Economic Community including 28 member

states, which are located primarily in Europe.• Objectives of the EU

1. Elimination of custom duties among all 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.



• Venturing Abroad• Opportunities to expand internationally.

• Gradual Internationalization• 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.


The ASEAN Free Trade Area (AFTA)

• 10 members - Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Kampuchea, Laos, Myanmar, and Vietnam.

• To eliminate tariffs on 60 percent of their products by the year 2003.

• To work on the elimination of non-tariff barriers.• Direction of Trade ASEAN’s exports had regained its

upward trend - US$ 408 billion per year in 2000.• ASEAN trade with major markets as a whole

increased by 11.71 percent for exports and 6.91 percent for imports (2003)


The Competitive Advantage of Nations

• Resource-Rich Countries• Have extractive assets• 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


International at Inception

• Characteristics of “Born Global” Firms1. Global vision from inception2. Internationally experienced management3. Strong international business network4. Preemptive technology or marketing5. Unique intangible asset6. Linked product or service7. Tight organizational coordination worldwide


Methods of Going International

• Importing• Buying and shipping foreign-produced goods for

domestic consumption.• Exporting

• Shipping of domestically produced goods to a foreign destination for consumption.

• International Alliances• Agreements between companies from two or more

countries; not legally binding.


TABLE 4.3 Types of International Alliances

AllianceType

Degree of Involvement

Ease of Dissolution

Legal Entity

Informal international cooperative alliance

Limited in scope and time

Easy and convenient for either side

None

Formal internationalcooperative alliance

Deeper involvement; exchange of proprietary knowledge

More difficult to dissolve due to legal obligations and commitment

None

Internal joint venture Deep involvement; requires exchange of financial information, proprietary knowledge, and resources

Most difficult to dissolve due to the significant investment of bothcompanies and the existence of a legal entity

Separate company

Source: Adapted from John B. Cullen and K. Praveen Parboteeah, Multinational Management: A Strategic Approach, 6th ed. (Mason, OH: Cengage Learning, 2014), p. 352.


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


Direct Foreign Investment (slide 1 of 2)

• Direct Foreign Investment • 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.


Direct Foreign Investment (slide 2 of 2)

• 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


Researching Foreign Markets

• Market Research Parameters• Government regulations• Political climate• Infrastructure• Distribution channels• Competition• Market size• Local customs and culture


Entering the International Marketplace

• Steps for Entering the International Marketplace• Conduct research• Prepare a feasibility study• Secure adequate financing• File the proper documents• Draw up and implement the plan


International Threats and Risks (slide 1 of 2)

• Foreign Market Dangers• Ignorance and uncertainty• Lack of experience• Lack of information• Imposed restrictions (demands and red tape)


International Threats and Risks (slide 2 of 2)

• 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


Key Questions and Resources

• Internationalization Strategic Decisions• Why is the company interested in going international?• What does the foreign-market assessment reveal

about the nature and functioning of the markets under investigation?

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


Key Terms

• B corporation• benefit 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 impact investing• social value• sustainable entrepreneurship• triple bottom line (TBL)• World Trade Organization (WTO)

Entrepreneurship: Evolutionary Development—Revolutionary ...portal.unimap.edu.my/portal/page/portal30/Lecture...1. To introduce the social entrepreneurship movement 2. To examine

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