se typology

8/9/2019 SE Typology

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- Session 2 -

2010. 4. 2.

W I S HWHAT IS STRATEGY FOR HUMANITY?


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Contents

1. Social Enterprise in Context

2. Social Enterprise Classification

3. Operational Model of Social Enterprise

4. Social Enterprise Structures


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Traditional

Nonprofit

Nonprofit

with

Income-

Generating

Activities

Social

Enterprise

Socially

Responsible

Business

Corporation

Practicing

Social

Responsibility

Mission Motive

Stakeholder Accountability

Income reinvested insocial programs oroperational costs

Sustainability Strategy :

Commercial methodssupport social programs

Profit-making Motive

Shareholder Accountability

Profit redistributed to

shareholders

Sustainability Strategy :

Doing well by doing good

Traditional

For-Profit


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Traditional

Nonprofit

1. Nonprofit

with

Income-

Generating

Activities

2.SocialEnterprise

3. Socially

Responsible

Business

4.Corporation

Practicing

Social

Responsibility

Traditional

For-Profit

Types of income-generating activities

Cost Recovery (discrete)

-A means to recuperate all or percentage of the costs to deliver anonprofit service-Or fund a discrete activity related to the organizations mission

Earned Income (ongoing)

-Provides a stream of unrestricted revenue to the organization-Generated through activities both related and unrelated to theMission

When is an Earned Income Activity a Social Enterprise?When it is operated as a business

-Established strategically to create social or economic value-A long-term vision-Managed as a going concern-Qualified staff with business or industry experience


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Traditional

Nonprofit

1. Nonprofit

with Income-

Generating

Activities

2. Social

Enterprise

3. Socially

Responsible

Business

4.Corporation

Practicing

Social

Responsibility

Traditional

For-Profit

Any business venture created for a social purpose and to generate

social value while operating with the financial discipline, innovation

and determination of a private sector business.

-can be classified based on their mission orientation

as well as the level of integration between social programs and

business activities.

Mission Motive Profit Motive


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Traditional

Nonprofit

1. Nonprofit

with Income-

Generating

Activities

2. SocialEnterprise

3. Socially

Responsible

Business

4.Corporation

Practicing

Social

Responsibility

Traditional

For-Profit

For-profit companies that operate with dual objectives

-Making profit for their shareholders

-Contributing to a broader social good

In some cases,

a Socially Responsible Business may be considered a Social

Enterprise when;

it is a registered for-profit subsidiary owned by a nonprofit

organization created for the purpose of earning income

for the parent organization as well as supporting a social

cause.


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Traditional

Nonprofit

1. Nonprofit

with Income-

Generating

Activities

2. SocialEnterprise

3. Socially

Responsible

Business

4.Corporation

Practicing

Social

Responsibility

Traditional

For-Profit

For-profit business whose motives are financially driven,

but who engage in philanthropy

Which helps companies,

-Achieve profit maximization and market share objectives

-While contributing to public good

Corporate social responsibility is not classified as social

enterprise.


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Mission

Centric

Mission

Related

Unrelated toMission

Mission Orientation in Hybrid Organizations


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Mission vs. Profit Motives in Hybrid Organizations

High

HighProfit Motive

MissionMotive

Mission-Centric SE

Mission-RelatedSE

Mission-UnrelatedSE

CostRecovery

EarnedIncomeActivity Socially

ResponsibleBusiness

CorporateSocial

Responsibility


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Mission

Centric

Mission

Related

Unrelated

To Mission


Classified based on their Mission Orientation


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MissionCentric

MissionRelated

UnrelatedTo Mission


Central to the Organizations Social Mission

Purpose of advancing the mission using a self-financing Model

Form ofembeddedsocial enterprises

Examples:

-Organizations to employ disadvantaged populations

-Micro finance institutions


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MissionCentric

MissionRelated

UnrelatedTo Mission


Related to the Organizations mission or core social services

Have synergistic properties

Two types of Mission related social Enterprise

1) Commercialization of Social services2) Mission expansion

Form ofintegratedsocial enterprises


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MissionCentric

MissionRelated

UnrelatedTo Mission


Not related to the organizations mission or intend to advance

the mission

Only generate income for its social programs and operatingcosts

Form ofexternalsocial enterprises


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SocialPrograms Enterprise

Activites

Classified based on the level of Integrationbetween Social programs and Business activities


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EmbeddedSE

IntegratedSE

ExternalSE

Social

Programs

+

Enterprise

Activities

Social programs = Business activities

Relationship : Comprehensive

Usually Mission-centric

Evident in below models where :

-Social and economic activities are Unified

-Social mission is the central purpose to the Business

-Client = Beneficiaries /Customers / Employees/ Owner


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EmbeddedSE

IntegratedSE

ExternalSE

Social programs Overlap

with Business activities

Relationship : Synergistic

Usually Mission-related

Evident in below models where :-Social and economic activities Overlap

-Synergies exist (cost-sharing, asset leveraging)

-Client = direct beneficiary of income earned from the social enterprise

Client may or may notbe involved in Enterprises operations

Social

Programs

Enterprise

Activities


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Social programs aredistinct from Business activities

Relationship : Supportive $

Usually Unrelated to Mission

Evident in below models where :

-Motivation for economic activities Funding mechanism for Social Activity

-Social and economic activities are linked via nonprofit ownership &

Funding relationship

-Client = direct beneficiary of income earned from the social enterprise, infrequently

involved in Enterprises operations

EmbeddedSE

IntegratedSE

ExternalSE

Social

ProgramsEnterprise

Activities


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EmbeddedSocial Enterprises

IntegratedSocial Enterprises

ExternalSocial Enterprises

Mission

Centric

Mission

Related

Unrelated

To Mission


Social

Programs

+

Enterprise

Activities

Social

Programs

Enterprise

Activities

SocialProgramsEnterprise

Activities

$


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Sells business support and financial services to its target population of Clients.

Social enterprise clients then sell their products and services in the open market. (The

entrepreneur support model is usually embedded, the social program is the business)

Case of Pro MujerThey established microfinance institutions that provide small workingcapital loans ($50-$300) to low income women who invest the capital inproductive activities such as retail trade or small-scale production then selltheir products in the open marketplace.


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Case of Prumice Marketing CooperativeAeta (Ingenious people of Luzon, Philippines) people formed a marketingsocial enterprise together, market and sell the stones to the thousands ofgarment makers in the Philippines (to produced stone washed denim)

The market intermediary either purchases the client-made products outright or takes

them on consignment, and then sells the products in high margin markets at a mark-up.


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Provides employment opportunities and job traning to its target populations orClients (Disabled, Homeless, at-risk youth, ex-offenders)

Case of Mazuunte Natural Cosmetics FactoryWhen the Mexican government first banned the slaughter of sea turtles,this closed the town's sole employerMexico's largest sea turtleslaughterhouseMazunte's population was devastated. Today, thecosmetics factory replaced jobs lost by the slaughterhouse.


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Commercializes its social services, and then sells them directly to the targetpopulations or Clients

Case of Bookshare.orgA subscription service providing an extensive online library of digitalbooks for blind and low vision adults. Within a year of its 2002 launch,Bookshare.org already had 12,100 books available to its customers.


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Variation on the Fee-for-Service model. The emphasis of this model is providing poorand low income clients access to products and services whereby price, distribution,

product features, etc.

Case of Scojo Founding India, Relieving Consumer BarriersTo successfully reach the Indian market for reading glass, ScojoFoundation has overcome the challenges of awareness, accessibility,and affordability.


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Fee-for-service model

VS Low income clients as market model

The main difference Focusing Ranges

Offering Targets (Buying power)

Fee-for-serviceMore service

narrow

Everyone regradless of their buying power

broad

Low income clientsas market

Service and Product

broad

Low income people

narrow


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Provides direct benefit to its target population or clients, cooperative members, through

member services (Market information, technical assistance/extension services, collectivebargaining power, etc)

Case of Equal Exchange*Purchases coffee beans and cocoa directly from small farmer cooperativesin developing countries at fair trade pricesa guaranteed minimum priceregardless of how low commodities markets fall.*(1) Marketing Strategy, (2) Distribution Channels, (3) Quality Products


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The social enterprise functions as a broker connecting buyers to producers and viceversa, and charging fees for this service.

Case of Phytotrade (Example of Embedded market linkage model)Develops business partnerships between african rural producers and buyers,major European natural products companies (source suppliers, buyers, qualitycontrol evaluators, product development specialists. etc.)


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Market intermediary model

VS Market linkage model


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Case of Editora Expressao Popular (Popular Expression Press)Providing literacy training and educational services to people, ANCA createda social enterprise,Popular Expression Press, a publisher and

clearinghouse for educational materials for nonprofit leaders and community

activists.

Sells products or services to an external market and uses the income it generates tofund its social programs.


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Case of Para la Salud, a national health organizationStarted a chain of village pharmacies to address rural health problems. Thepharmacies have an average profit margin of 20% to 25%, and profits areused to cover the costs of rural community health clinics.

Net revenues from the social enterprise provide a funding stream to cover socialprogram costs and operating expenses of the nonprofit parent organization. Thismodel is commonplace among western nonprofit organizations.


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Social Enterprise models are combined to

Increase revenues by entering new markets or businesses

Facilitate enterprise or social program growth

Augment breath or depth of social impact by reaching more people in

need or new target populations

Ex) Scale : Breath = geographical coverage

Depth = volume of clients


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A complex model of social enterprise combines two or more operational models.Complex models are flexible; virtually any number or type of operational models can

be combined into one social enterprise.


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Many nonprofit organizations run multi-unit (mixed) operations, each with different social programs,financial objectives, market opportunities and funding structures. Each unit within the mixed model

may be related vis--vis target population, social sector, mission, markets, or core competencies.


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Franchising enhances social enterprises by helping them achieve economies

of scale and with it viability or profit, as well as enabling mass replication,and thus, increased breath of scale-geographical coverage-or depth of scalevolume of clients-and social impact


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Mutually beneficial relationship between a for-profit company and a nonprofit

social enterprise. This partnership is based on active operational involvement ina social enterprise.

Helados BonA partnership was forged between Helados & environmental non profit, PlanSierra(helps local farmers grow macadamia trees through the sale of icecream).The partnership is a win-win proposition for all those involved.


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A. Organizational Structure

Many organizations use a mix of different structures simultaneously.

The following diagrams illustrate the social enterprise structure vis--visits relationship to the parent organization.

ParentOrganization

SocialEnterprise

ParentOrganization

SocialEnterprise

SocialEnterprise

1. Structured Internally 2. Structured

as a Separate Entity

3. Structured

as the Same Entity


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B. Legal Structure

A social enterprises structure or model is not a definitive determinate of

its legal status. Legal status may be arbitrary.

The decision to incorporate the social enterprise separately from theparent, and then to do so as a for-profit or nonprofit is driven by one ormore of the following factors;

Legal environment

Regulatory Environment in Emerging Market Countries

Access to Capital

Capitalization

Leadership Decision


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C. Ownership Structures

Three different types of social enterprise ownership structures exist:

private, public and collective.


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Eventually

Only

C. 1. Cooperative Ownership Structures

Nonprofit cooperatives

NonprofitCooperative

(A Board of

Director)

Mission

For-profit cooperatives

For-profitCooperative

(Target

Population)Mission

Market


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C. 2. Private Ownership Structures

Sole proprietorship

Soleproprietorship

Mission

RegulatoryEnvironment

Private Shareholders

SocialEnterprise

Mission

Target Populationas shareholders

Government


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Benevolent Owners

C. 2. Private Ownership Structures

SocialEnterprise Mission

SociallyResponsible

Business

BenevolentOwners


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C. 3. Public Ownership Structures

ParentOrganization

Nonprofit organizations

SocialEnterprise

Mission

Public shareholders

SocialEnterprise

Mission

Public shareholders


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Any Question?


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[Case Study] 2 ,

(Operational Model)

(Organizational, Legal, Ownership Sturcture)

.

1 : 2 : 3 : 4 :

. !

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