Essay: Running a successful social enterprise

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  • Subject area(s): Business essays
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  • Published on: January 16, 2019
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  • Running a successful social enterprise
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Social and business enterprises are not black and white in their differences, they share many characteristics and values that are interchangeable however there are certain traits in how each business is run that can distinguish them. The main difference is their objectives and aims; a social enterprise is created by recognising a social or environmental problem that needs to be tackled and then creating a venture to address this issue (Austin, Stevenson, Wei-Skillern, 2006), for example acknowledging that ex-convicts struggle to find jobs once they are released and creating a business that focuses on hiring these ex-offenders. The social enterprise’s priority is addressing the social problem whereas a business enterprise’s priority is to maximise profits and please shareholders, this could be through responding to market opportunities and gaps (Chahine, 2016). This relates to how each enterprise measures the success of their business; a business enterprise would through increasing profit and providing growth for shareholders whilst a social enterprise would measure success based on the social impact they are trying to achieve.
Each enterprise also differs in what they do with their success, such as what they do with their profits. According to Social Enterprise UK (2012), for a company to be considered a social enterprise, over 50% of profits must go towards solving the social issue or reinvestment into the scheme. On the other hand, a business enterprise has the freedom to use their profits as they wish, whether for individual reward or business expansion. Business enterprises also have more freedom to change; they have the flexibility to adjust with the market and evolve over time whereas a social enterprise is relatively restricted by their social mission which may affect their ability to grow and adapt.

As well as differences in the characteristics of the enterprises there are also differences in the characteristics of the individuals who set them up. Business entrepreneurs are often driven by individual success and gain through making money or becoming a household name. Alternatively, a social entrepreneur is driven by other people’s’ needs rather than their own, this is why they choose to start a business that makes a difference to society or social challenges and personal financial gain is less important to them. However due to social entrepreneurs reasoning to start a business, it could be suggested that they are less business savvy than a traditional entrepreneur and therefore may be less likely to succeed unless they seek professional advice.***

Like any start-up, an enterprise must learn to manage its stakeholders including the customers, shareholders, and employees. It can be difficult to please all of these influencers and a social enterprise has the additional important aspect of creating a social impact. The social entrepreneur must find the right balance between pleasing these stakeholders and their main priority of changing a social or environmental challenge. It could be suggested that the pressure from other stakeholders could create drift in the social enterprise’s aims and the entrepreneur may become unavoidably focused on pleasing these other stakeholders thus diluting the original intent of the social impact of the enterprise. For example, in 2002 Jamie Oliver created his social restaurant Fifteen with an aim to give young, unemployed the opportunity to work within the restaurant business. However, since then only two other venues have opened to expand this programme and in 2016 there was fear that the Cornwall branch was struggling and considering having to let members of staff go (, 2016). This suggests that the enterprise was not doing as well as initially expected. It is clear that the restaurant world is very competitive and cutthroat with many other establishments failing to succeed, including Jamie Oliver’s other business Jamie’s Italian which announced that they would be closing over 30% of their venues this year (Farrell, 2018). Considering this, all three Fifteen’s are still in business at present so it could be suggested that the founders had to stray away from the social aspect of the enterprise in order to keep the restaurants open. This may have been through jobs cuts or reinvesting a proportion of profits into the company rather than to the charity foundations as originally planned.

However, it could also be suggested that some social enterprises have the ability to act like a profit-maximising business without diluting the ideology of social entrepreneurship. These enterprises have managed to find that fine balance between pleasing all shareholders, creating a social impact, and exploiting the opportunity within the marketplace. The Big Issue is a strong example of this with their mission being at the forefront of everything they do as well as having a strong focus on their customer, the vendors. The Big Issue helps people get off the streets by allowing them to buy The Big Issue magazine and sell it on the general public for a profit (The Big Issue, 2018). The Big Issue acts like a profit-maximising enterprise by actively promoting itself and competing against other magazine companies for readers by offering their magazine at a lower price. However, The Big Issue faces the same industry problems as these other magazine companies with the launch of free newspapers and online media (The Economist, 2012). In this situation The Big Issue has acting like a profit-maximising firm and adapted their position in the market by launching The Big Issue Shop, an online store which only sells product created by other social organisations (The Big Issue, 2018). This shows that The Big Issue has managed to maintain their ideology of social entrepreneurship whilst acting like a profit-maximising company by having their social mission at the forefront of all activity.

Considering this, it could be suggested that social enterprises should be encouraged to act like profit-maximising firms. Although we initially stated that the main difference between social and business enterprises was their objectives, with social enterprises’ being a change to a social or environmental issue and business enterprises being to make financial profit. However, generally social enterprises need some form of funding to create their desired social impact and to be defined as a social enterprise the majority of this must be through trade (Social Enterprise UK, 2012). Therefore it could be suggested that if social enterprises don’t act like a profit-maximising company they will not be successful or have the capabilities to create a social impact at all (Zastawny, 2014). For example, Prairie Harvest Mental Health, a social enterprise aiming to give adults with serious mental illnesses an enhanced quality of life, shut down one The Eatery which was one of their streams of revenue (McCambridge, 2013). This decision was made because The Eatery was losing too much money, however it could be suggested that if the establishment had been run more like a traditional enterprise through strong marketing and branding, The Eatery could have survived and contributed to the social issue.

Alternatively it can be argued that social enterprises do dilute their ideology of social entrepreneurship if they act too much like a profit-maximising firm. This may be through not having the social impact at the core of the business or through not giving 50% of profit towards tackling this issue. Once a social enterprise starts to drift away from their social purpose there is risk of them not being a social enterprise at all. This is why it is very important for the social entrepreneur to do their research about the industry they wish to go into to start their business as if it is too challenging or inappropriate the enterprise will fail. For example, Pro-Milk was a social enterprise set up to help goats milk producers in rural areas of Bolivia make and sell cheese in the larger cities. There were many issues due to the location and various suppliers which resulted in the founding entrepreneur abandoning the milk industry and converting to producing soft drinks in the city instead (Talavera, 2015). Although there may be many reasons for the failure of this social venture, it could be suggested that the entrepreneur did not value the social issue to be at the centre of the entreprise and rather personal success and profit. If the entrepreneur had thought more strategically about how he wanted to tackle the social issue he may have been able to create an enterprise that was both socially and personally successful.

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