The Concept of Entrepreneurship - Essay Example

Critically consider the challenges and opportunities that social and community enterprises face in their chase to affect social change Introduction Nowadays, the concept of “entrepreneurship” involves much broader spectrum of approaches and theories (Darabi et al., 2012). If initially entrepreneurial area comprehended only economic/financial interest, today it also embraces social and environmental footprint. As a result of increased public awareness about environmental changes, social problems, the concept of social entrepreneurship has become more popular across the globe. Social entrepreneurship is defined as an activity that employs various business concepts and entrepreneurship skills in order to raise income for achieving social objectives (Nkala, 2009). In contrast to other socially/community-oriented organizations, social enterprise combines two important aspects: entrepreneurship and social-orientation. Even though the concept of social entrepreneurship is a relatively new, the number of social enterprises has increased substantially during the past decades (Nkala, 2009). Today there exist both threats and opportunities that social enterprises face with. The aim of this paper is to analyze what challenges and opportunities social and community enterprises face in their chase to affect social change. Social entrepreneurship defined There exist many different interpretations of the concept of “social entrepreneurship”. Despite the variety of definitions of the term of social entrepreneurship, some researchers believe that more unified definition is still to be developed (Short, Moss, and Lumpkin, 2009). Bornstein and Davis (2010) define it is a process by which individuals transform or create institutions in order to solve or help to solve various social problems, including poverty, illiteracy, illness, environmental destruction, corruption, and human rights abuses. Thus, these organizations aim to improve life for many people and broader society. In order to achieve their mission, social enterprises undertake various commercial activities. Thus, the value of social enterprise is measured not only in terms of its contribution to social, environmental, or cultural life but also in terms of its financial sustainability (Social traders, 2011). There are identified three major categories of motivations for establishment of social enterprise. These categories include: employment; service innovation, and income generation. In terms of employment motivation, social enterprises provide employment opportunities, support and training for marginalized groups. These enterprises are also motivated by an opportunity to maintain or create services, which enable to satisfy economic or social needs in the community. And finally, social enterprises are motivated to generate profits in order to support local communities, or to fund charitable non-profitable activities (Social traders, 2011). Social enterprises can take different forms, be it privately-owned business, intermediate labor market companies, social firms, member-owned, community-owned business, community development finance institutions, or commercial trading function of a charity organization (Social traders, 2011). Despite the form of business entity, social enterprises, as organizations operating in highly competitive business environment, face all the challenges which small and medium sized enterprises normally face (Social traders, 2011; Carter, 2007). More detailed overview of these challenges is given in the next section. The challenges that social and community enterprises face with Management challenges As it has been already mentioned, social enterprises are organizations which perform entrepreneurial activities in order to achieve their social, cultural, or environmental goals. As quite often delivery of social outcomes compromises the profitability of a business, social enterprises might find it very challenging to balance these two aspects (Social traders, 2011). Moreover, social enterprises often operate in resource-scare environments, and this aspect creates many other difficulties (Denny & Seddon, 2013). Thus, a common challenge for many social enterprises is a necessity to manage the complexity and tension arising from a need to find a balance between two (often conflicting) objectives (Denny & Seddon, 2013). Balancing act becomes even more complicated by the activities of competing firms, who are less likely to be concerned about social outcomes. Another potential governance challenge, which social enterprises can face with is referred to the start up stage and implies a conflict of interests arising between the Board of directors and the objectives of the organization (Nkala, 2009; Roger, 2009). One more challenge is referred to a limited supply of people (management and board members) with entrepreneurial, financial, business and strategic skills (Spear, Cornforth, & Aiken, 2009). These specific skills are particularly important in social enterprises, but often social enterprises find it difficult to involve such skilled team-members. Financing Funding is recognized to be one of the major challenges for social and community enterprises (Doherty, 2009). In contrast to purely commercial ventures, social enterprises are less likely to be able to provide financial incentives for employees and investors, and thus often have financial constraints (Denny & Seddon, 2013). Governments also impose significant reporting requirements, which make it quite difficult for many small and medium-sized enterprises to comply with (Bornstein & Davis, 2010). Another potential source of funding is philanthropic organizations. However, unique application procedures and reporting formats also make fund-raising process for social enterprises overcomplicated and time-consuming (Bornstein & Davis, 2010). As a result, some great initiatives and promising organizations can be either undermanaged or under-capitalized (Bornstein & Davis, 2010). Prevalence of safe projects leads to increased competition Business activity of many social enterprises involves very basic operations, ranging from education to recycling. This trend imposes a risk of overcrowding of market by social enterprises involved in easy projects (Nkala, 2009). Most of the projects are easy to replicate and this fact increases a risk of creation of intense competition environment. This also makes it more challenging to find funding for the projects as many firms have to compete with other firms. International expansion If social entrepreneurs expand their business to foreign locations they are more likely to face with certain challenges, such as lack of societal support and socio-cultural resistance. Socio-cultural resistance to changes from employees, public, locals or other stakeholders is one of the major potential challenges, which social enterprises might face with (Nkala, 2009). The range of these challenges depends on the country, society, and other aspects of external environment where the firm operates. Socio-cultural resistance is more likely to occur when social enterprises expand their activities internationally and interact with culturally diverse people. Also, while expanding its activities internationally, social enterprises might face a challenge of conflicting agenda and resource allocation (Munoz, n.d.). Government restrictions, lack or inconsisitency of government support, legal challenges, institutional restrictions (Gawell, 2013), language barriers, insufficient technical expertise and technical disparities, lack of credit access, quality standards, finance and resource challenges are some other challenges which a social enterprise might face while developing business internationally, (more likely to face with these challenges in developing countries) (Munoz, n.d.; Shockley, and Frank, 2011). Some other challenges include the following: ensuring quality of products and services, securing management expertise, establishing networks and cooperatives; and upgrading skills and jobs (Doherty, 2009; Lundström et al., 2014). Opportunities that social and community enterprises face with Some authors believe that despite numerous constraints, social and community enterprises also have a potential to find some opportunities. Some of these opportunities are discussed below in more details. Domestic Market Opportunity to fill a gap in the commercial market and thus to capture a specific market niche is one of the most common opportunities for social enterprises (The Benevolent Society, 2013). By introducing innovative solutions with positive social impact the firms can find a great source of revenue. International expansion With the globalization, development of logistics and IT, and liberalization of markets, many social enterprises have gained opportunities for establishing international ventures (Munoz, n.d.). Even though social entrepreneurship is a global phenomenon, it is not equally developed in all locations (Mair, Robinson & Hockerts, 2006). With the decline of the welfare state, changes in the institutional environment and vital gaps in the social safety social entrepreneurs have gained more opportunities for their activities (Mair, Robinson & Hockerts, 2006). In global scales social ventures have many opportunities to address such social issues as: air pollution, water table decline, drug use and abuse, low paying jobs, etc. (Munoz, n.d.). During the last years, increasing number of social enterprises has actually expanded their cross-border activities. This growth is explained by a fact that international markets are potential platforms for further replication of successful products, services, and concepts of social enterprises. Social entrepreneurs that have successfully achieved their mission and goals in one country can find countless opportunities where they can make a positive impact in other locations across the globe (Munoz, n.d.). In addition to the opportunities of international business expansion, there exist opportunities to participate in internationalizing social programs (Munoz, n.d.; Kelly, 2014). One of the examples of successfully implemented international social initiative is Gramen Banking by Muhammad Yunus, which started to provide micro-credits to the poorest sector of society in Bangladesg and have expanded this activity across several countries (Munoz, n.d.). Funding As it has been already discussed in the previous section, one of the major challenges of social enterprises is referred to funding aspects. Desire to contribute to positive social impact exists not only among social enterprises but also among individual and institutional buyers. Social enterprises have a large pool of funding options, which depend on the type of business, structure, size, etc. Some of the most common funding opportunities social enterprises should seek for include: grants, social investment, debt finance, equity finance, and community finance (Socialenterprise.org.uk, 2015). Emergence of venture philanthropy – an activity where wealthy entrepreneurs spur and support social change through venture institutions also can be viewed as a great opportunity for many social entrepreneurs seeking for funding and other support (Davis, 2002; Nicholls, 2006). It is worth to mention that all of the above mentioned financing opportunities have different advantages, disadvantages, and limitations, which should be reviewed on individual basis. Government programs Governments also often take active part in social initiatives, and contribute to easing of funding challenges faced by social enterprises (Nkala, 2009). Thus, for example, government departments can deliver some goods and services and purchase more. As the role of the government is to serve for public benefit, government procurement department might seek for buying from social enterprises. Thus, social enterprises should view this as a great opportunity as such contracts are often long-term, solid, and with timely payments (Social traders, 2011). The UK Government has took active part in promoting public-sector partnership by introducing a strategy called “Partnership in public services; an action plan for third sector involvement” (Doherty, 2009). This plan includes the information on public-sector procurement and commissioning processes. There are also such government sponsored initiatives which help to address some of the challenges faced by social and community enterprises. For example, European Social Fund, New Deal, Blakenhall Community Development, All-Saints are some of such government initiatives (Nkala, 2009). Social Investment The government of UK has organized the Social Investment Forum, which involves a network of Social Investment Finance Intermediaries. These organizations provide social investment for social enterprises and serve as an alternative funding opportunity (Socialenterprise.org.uk, 2015). Conclusion The concept of social entrepreneurship has undergone substantial evolution and development during the past few decades. Facilitated information flow and increased public awareness about social and environmental problems together with government support have encouraged many firms to focus on social impact of their activities. Also, this tendency has stimulated many entrepreneurs to establish social enterprises and other social/community platforms which would bring benefit to wider society. All these enterprises are more likely to face with all the challenges and opportunities, which small and medium sized enterprises normally face. As it has been shown there are numerous challenges which social enterprises face while performing their activities, among which were listed the following: numerous management challenges, financing challenges, fierce competition of both socially-oriented and not socially-oriented businesses, and challenges associated with international expansion. Challenges associated with international expansion have many other challenges including: lack of societal support and socio-cultural resistance, government restrictions, lack or inconsistency of government support, legal challenges, language barriers, insufficient technical expertise and technical disparities, lack of credit access, quality standards, financial and resource challenges. However, in addition to challenges, there exist attractive opportunities for social entrepreneurship activity development in both domestic and international markets. Some of these opportunities include the following: capturing of niche in domestic market; international expansion and development of international/global projects; participation in internationalizing social programs; various sources of funding; participation in government programs, and creation of public-private ventures. Social enterprises should be aware of both potential challenges and existing opportunities in order to implement strategically effective decisions and continue their positive social contribution. References: Benevolent Society (2013). The benefits and challenges of running a social enterprise. Available at: http://www.google.com.ua/url?url=http://www.ribm.mmu.ac.uk/symposium2009/Papers%252009/Nkala,%2520Makhosi.pdf&rct=j&q=&esrc=s&sa=U&ei=vdzPVKTsDuH7ygPVgIKoBg&ved=0CBMQFjAA&sig2=WYM4ohikvj__UtaO-OPNjQ&usg=AFQjCNH9ymmFCOwBsDn6n7rsVHooQIf1ug Bornstein, D. and Davis, S. (2010). Social entrepreneurship: What everyone needs to know. New York: Oxford University Press. 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