Social enterprise

Definition:

- A form of business that has a social purpose when it comes to sales of goods

and service for the social objective. Social enterprises aim at social and

environmental well-being which may include maximizing social impact alongside

profits for external shareholders. Paper 1 - providing solar panels due to the

shortage of electricity.
How is it different from a normal business?

- The social aim of a social enterprise nevertheless takes priority over any other

aim such as growth, maximizing sales, or making profits, which are typical

objectives of for profit organizations. For-profit social enterprises aim to make a

profit. However, they do not want to maximize profits as, doing so compromises

their social purpose.

- For the business entrepreneur, value lies in the profit the entrepreneur and

investors expect to reap as the product establishes itself in a market that can

afford to purchase it.

- The business entrepreneur is accountable to shareholders and other investors

for generating these profits. To the social entrepreneur, there's also value in

profits, as profits are necessary to support the cause. That said, value for the

social entrepreneur lies in the social benefit to a community or transformation of

a community that lacks the resources to fulfill its own needs.

- Although the business entrepreneur and the social entrepreneur are similarly

motivated to change the status quo, their missions differ significantly. The

business entrepreneur is driven to innovate within a commercial market, to the

ultimate benefit of consumers. If successful, the innovation creates wealth.

- The venture's success is gauged by how much wealth it creates. To the social

entrepreneur, wealth creation is necessary, but not for its own sake. Rather,

wealth is simply a tool the entrepreneur uses to effect social change. The degree

to which minds are changed, suffering is alleviated or injustice is reversed

represents the organization's success.

What are the problems of setting up a social enterprise?

- Finance can be a huge problem when it comes to social enterprise especially if

it’s a start up.

- Government can be a problem as corruption is spread all into the system.

- Sources of income include: grants, personal finance, debt, member contributions,

cash flow management, and resource sharing with other businesses.

- Finding the right staff was the second biggest problem. Connected to this

problem is burnout. When volunteers and staff are overworked and

undercompensated, especially where their own money is invested in a venture,

stress levels can result in collapse.

- Your social enterprise may want the board to ‘represent’ stakeholder interests –

which are much broader than simply making money.

- Social enterprises usually have a wide range of stakeholders, so making

business decisions on a representative basis can prove problematic when

interests conflict.
- Sometimes, you may need to make a value judgement that sacrifices profitability

in the interests of mission objectives. This is the nature of the business, but if this

is needed or done too frequently, the social enterprise will not work. If too much

conflict arises between the social and business goals of the enterprise, you may

need to switch to a different organisational model.

Examine the decision of setting up AS in Afghanistan.

Driving forces

● First mover advantage

● War prone zone - lack of electricity could be replaced by solar panels → market

available

● Weather of afghanistan favours solar panels

● Scope of funding from other government institutions (eg. World bank)

Restraining forces

- Afghanistan is not technologically is advanced - as per data it is 562 per capita

and further, the tertiary sector is not developed.

- Population density is 53 km per 100 km which shows the market size to be less

- Political instability - where there is no peace and this seen through its global

peace ranking which is 162

- The cost for market research is high → low literacy rate (people don’t know about

solar panels, so you have to teach them about solar power first, then you can

market to them by telling them that it is cheaper and better for the environment)

- Lot of time is required to set up the business - ranked 183 (meaning that it takes

183 days for someone to set up a business)

AS as a Private Limited Company

● AS is a social enterprise with a profit motive hence has to be incorporated

as a Pvt. Ltd.

● She wants to keep control and work with like-minded people and does not

want interference - No government involvement → looking at political

stability.

● Decision making is easier/Flexibility.

● Element of secrecy.

Other side

● Stakeholder conflict with government

● Limited opportunity for further growth opportunities which means AS will have

limited capital

● Stakeholder conflict with local pressure groups

Microfinance

People who do not have money, source of income, or security, go to a microfinance

company to get a loan, which is used to start a business, or to improve their livelihood.

Advantages

● Aims to reduce the gap between the rich and the poor

● CSR → linked to AS → Social change

Disadvantages

● Misuse of money could happen (people use the money for personal

expenses)

● Lack of collateral

● Low interest rates

● Stakeholder conflict

○ Government might question the intentions of AS and the

Microfinancers

Growth Strategy

AS and AK can function through a strategic alliance

→ AS does production and marketing for solar panels

→ AK provides loans to allow people to buy solar panels

 → AK might want commision from AS for providing the finances

Commercial marketing

Marketing activities that determine consumer needs and wants before using appropriate

marketing strategies to market the product.

Social Marketing

A marketing approach aimed at influencing a positive behaviour and improvements in

societal well being.

Difference

- Social marketing is looking at the marketing strategies from the aspect of societal

impact.

- Commercial marketing focuses on the financial aspect of the organization.

Product oriented vs market oriented

David focuses on product oriented approach - product would have to be of high quality.

Product oriented approach:

● Customers unaware about the solar panels

● Marketing needs to highlight the advantages of using solar panel

● They can decide the price and promotion of the product

Market oriented

● Products would have to be high quality

○ There could be competition

● Price/Promotion needs to be very different

Social Marketing

● Influencing positive consumer behaviour and bringing about change

● No intention to earn profits

● Used by Government and NGOs

Commercial Marketing

● Influence customers to buy a good or service to earn revenue

● Used by companies

● Lack of awareness of sustainability and focus cannot be a social cause

● Stakeholder conflict

● Intention of the company can be questioned → Influencing positive consumer

behaviour and bringing about change

Examine the usefulness of producing solar panels by using cell production

Using cell production for solar panels will enable AS to

● To give high quality solar panels quicker since it will be produced quickly

● Also Su’s philosophy/ motivation is supported as she believes in teamwork

Advantages Disadvantages

Cost , efficiency Huge set up cost

Fits in with the culture, acts as a Huge training cost, probable stakeholder

motivational tool conflict

Market

http://smallbusiness.chron.com/main-difference-between-social-marketing-business-mar

keting-23967.html
Recommend a suitable marketing mix for selling the solar panels in afghanistan

● Product → Convenience good

○ Product oriented

■ No market for the product

● Market is unaware for the need of solar panels

○ No demand

■ Product itself is unique

● USP

○ Don’t have to pay for electricity

○ Afghanistan is close to the equator which means it is

geographically favourable

■ Not enough skilled labour for manufacturing

○ Introduction stage of the Product Life-Cycle

○ Question Mark in the BCG Matrix

● Price

○ Penetration pricing

■ First mover advantage

■ They will not be able to recover fixed cost quickly as the set up cost

itself is high enough.

○ Developing Economy

■ Spending power is low

 ■ GDP is low

■ Product has to be affordable

○ High capital expenditure

■ Longer breakeven period

■ Working capital could be an issue

● Promotion

○ Above-the-line promotion:

■ Mass media Advertisements

■ Wider outreach - reaches out to the entire nation.

■ High cost for AS

■ Will help make the customers more aware

○ Below-the-Line promotion:

■ Personal Selling

■ Good way to promote since the target audience is unaware of the

use of solar panels and microfinance

■ Can be time consuming to hire the locals to promote - hiring local

increases cost

■ The locals would also inform the consumers in Afghanistan about

microfinance.

○ Marketing approach conclusion.

■ To start off: AS could start off with ATL to raise awareness but

eventually shift to BTL so it is persuasive.

 ■ ATL: makes people talk about the advert even though they lack

knowledge but it helps in solving the purpose.

● Place

○ Could be a problem due to poor infrastructure

○ Single channel distribution

■ Manufacturer: AS

■ Agent

● Microfinance provider

● May not be skilled - requires training

● Knows the customer

● Cost or commission involved

● They can spread the word about microfinance which will be

a driving force.

■ Customer

● Unaware of solar power technology

Using Handy Shamrock’s framework, recommend a suitable organizational structure to

AS.

● Core Staff

○ Main staff:

■ Arif Kumar

● Microfinance guy
 ■ Su

● CEO

■ HH staff

● Handling Daily operations of the business

■ David

● Responsible for marketing and promotion

■ Salima

○ High cost of labour

○ Make better decisions due to familiarity with the business

○ More loyalty

● Peripheral Staff

○ Part-time and portfolio workers

■ Labourers in the cell production

● Lower cost

● Lesser rights

● Minimizes conflict

● Lack of job security

● Disconnected with the organizational culture

○ Less motivated

● Outsourced Staff

○ Hiring outside people to do the business work

○ Staff
 ■ Marketing and promotion

■ Food supplies

■ Local agents

■ Some production items

○ Lower cost

Recommend which country should be chosen for outsourcing some of the production

items of the solar panels?

Similarities and differences between both nations

- Country A has a developed economy. The unemployment is low, which means

that the company would have to pay high wages/salaries to workers to lure them

into working with them. The only advantage here is that the unemployment is

rising.

- Country B has an economy that is developing with high levels of unemployment

and this could mean that the company could get away with paying less wages.

Nonetheless, it may raise ethical issues if the company exploits them to a great

extent

-
Country A Country B

Labour cost high → More skilled workers Unemployment High → Labour is cheaper

→ higher training cost

Better infrastructure for solar panels Govt. gives grants → more source of

finance for AS

Private sector dominates → (AS) Will be Falling currency → cheaper factors of

run as a Pvt. Ltd. production

Better facilities, but higher rent Better transport links to Afghanistan →

cheaper transport cost

Uncertain govt. One party state

SWOT of AS in Afghanistan

● Strengths

○ USP

■ Solar Panels

■ Environmentally sustainable

○ Support of HH in the form of

■ Finance
 ■ Human resources

○ Su is a successful entrepreneur

○ Partnership with Arif Kumar

○ Cell Production

● Weaknesses

○ High initial setup cost

■ Lack of Funding

● Shown in Cash flow forecast

○ Organizational culture conflicts

○ Solar panels are dependent on the weather

■ Lot of space/real estate required

■ High maintenance cost

○ High training cost

■ Because of cell production

○ High marketing cost

■ Lot of market research required

● Opportunities

○ First mover advantage

■ Scope for solar panels in Afghanistan

○ Cheap labour cost and other factors of production

○ Financial assistance from other organizations

■ NGOs
 ■ World Bank

■ Other world bodies

○ Close to the equator

■ Lot of sunshine

● Solar panels would work well

○ Households need solar power

○ Build up a good brand image

■ CSR for HH

● Threats

○ Poor quality of infrastructure

■ More spending in infrastructure development required

○ Politically unstable country

○ Low spending power

○ AS could be seen as a profit-making company that is exploiting the locals

○ Not easy to do business in Afghanistan

○ Low literacy rates

○ Dependent on the weather

Examine the cash flow forecast of AS

● High setup cost

○ 200 is capital expenditure in the second half of 2018

○ Solar panels as a product are expensive

○ Poor infrastructure

● Positive sales inflow shows evidence of demand in the market

○ On the other hand, the sales cost is also increasing

■ They also have to spend on promotion which increases overheads

● Increase in other overhead expenses which puts pressure on revenues

○ Maintenance

○ Labour

● How do we increase inflows?

○ More investment from business angels

■ They exercise a lot of control

○ Investors of HH could own a stake in AS

■ Would want to exercise control

○ Selling of dormant assets of HH

■ Might create stakeholder conflict

○ Arif Kumar becomes an investor/partner in the business

■ Arif Kumar would want control too

● Stakeholder conflict
 ○ Growth strategies

■ Joint venture with local firms

● Would result in Dilution of control

○ This would cause stakeholder conflict since Su wants

to maintain full control

○ Grants could be taken from international banks

■ Lot of transparency required with loans

Discuss any two sources of finance, which could help her improve her inflows

Explain the importance of a business plan in setting up AS

● Elements of a business plan

○ Mission Statement

○ Vision Statement

○ Prospective sources of finance

○ Probable SWOT analysis

○ Projected/forecasted:

■ Cash flow forecasts

■ P/L statement

■ Balance Sheet
 ○ Challenges and Difficulties that might be faced in the future

● Usefulness of a business plan

○ Promotes the business to potential investors

○ Provides a plan for the business to function

○ Will be seen by the government and other stakeholders

○ Can be used to invite other stakeholders to the business.

Looking at the additional information given, and the existing information given in the

case. Evaluate whether AS should be setup in Afghanistan?

Afghanistan in Economy (​http://investinafghanistan.af/why-invest-in-afghanistan/​ )

- Availability of labour

- Free market economy - privatised

- Rising economic growth

- Favourable location

- Flexible tax structure

- Less duty on imports.

- Favourable investment climate & mechanisms to settle dispute on 100% foreign

ownership

- Leasing for 99 years.

 - Government commitment to climate reforms

- Poor infrastructure

- Will soon get a membership of the WTO.

Social enterprise in Afghanistan

https://www.pioneerspost.com/news-views/20141105/weaving-women-out-of-poverty-af

ghanistan
 - Name of the organization is Aarzoo - employs women and trains them to make

rugs so they can make a living out of it. - she is a women from the developed

world.

- Employment to 700 women weavers

- Good brand recognition

- Part time recognition

- Employees get paid at a fair rate.

- Make sure children go to school

Solar Power in Afganistan -

https://www.cnbc.com/2017/11/27/solar-power-in-afghanistan-to-get-44-point-76-million-

boost.html
 - Investment in solar power approved by ADB

- Boost renewable energy - sustainable approach

- Increasing demand

- Favourable geographical location -closer to the sun would help the PV concept

stated in the article

- Scope of PPP model (public private partnership)

Microfinance in Afghanistan

http://www.artf.af/results/artf-at-work/building-a-vibrant-microfinance-sector-in-afghanist

an

- In 2002 - the banking sector collapsed due to rising demands of microfinance

- 94% are repaid loans

- Women empowerment

- Grants from the world bank

- NGOS helping micro finance.

Section wise for section c

Section A

SWOT

Steeple

Force Field

Ansoff

Cash flow forecast

Sustainability

Section B:

Application - using tools to explain the case specific situations

Section C:

Reasoned argument where you use information from outside

Examine the usefulness of crisis management plan to an organisation like AS.

- Crisis management refers to the systematic steps and efforts by the

organization to limit the damage from a sudden crisis.

 - Formulating a plan on the onset of a crisis

Why AS needs crisis management

1.) Afghanistan a country recovering from war -

- stakeholder conflict between govt and its citizens which is likely to reduce

spending power. As a result, Su’s operations are affected since people would not

really want to buy solar panels.

- Plan to have financing schemes like microfinance.

2.) Unstable economy

- Low spending power

- More awareness created for solar panels

- More discounts makes it costly

3.) High corruption

Setting up of AS will take time - AS will require assistance from various financial

agencies
4.) Poor infrastructure

High setup cost - outsourcing concerns

5.) Presence of extremist groups

PPP model

Examine the method of recruitment being followed or considered by Su in hiring

employees for AS.

Internal recruitment

Benefits and Limitations