What is the primary driver of the social entrepreneur?

The primary driver for a social entrepreneur is change. He or she is concerned with issues such as global warming, pollution, and natural resource conservation. Rather than leaving societal needs to the government or business sectors, social entrepreneurs find what is not working and solve the problem by changing the system, spreading the solution, and persuading entire societies to take new leaps.

Should green or cleantech ventures be classified as social enterprises? If so, why?

Yes, they should! Social enterprises are social mission driven organizations, which apply market-based strategies to achieve a social purpose. The movement includes both non-profits that use business models to pursue their mission and for-profits whose primary purposes are social. Their aim is to accomplish targets that are social and/or environmental. Many commercial businesses would consider themselves to have social objectives, but social enterprises are distinctive because their social or environmental purpose remains central to their operation. This brings home my point of why green or cleantech ventures should be classified as social enterprises. Green initiatives often require large changes to existing infrastructure, shifts in human behaviors, etc.; and the fact that they are mostly concerned with the overall well-being of society, classifies it as a social enterprise.

 What are some of the negatives of forming the social venture as a non-profit?

• Creating a nonprofit organization takes time, effort, and money. Because a nonprofit organization is a legal entity under federal, state, and local laws, the use of an attorney, accountant, or other professional may well prove necessary.

• A nonprofit must keep detailed records and submit annual filings to the state and IRS by stated deadlines in order to keep its active and exempt status.

• Although the people who create nonprofits like to shape and control their creations, personal control is limited. A nonprofit organization is subject to laws and regulations, including its own articles of incorporation and bylaws

• A nonprofit is dedicated to the public interest; therefore, its finances are open to public inspection. The public may obtain copies of a nonprofit organization’s state and Federal filings to learn about salaries and other expenditures.

Why do stakeholders view the social venture differently from a traditional venture?

Since the social need being redressed is the primary driver, everything else feels more intense. Stakeholders both external and internal to the venture tend to view the social venture as more than just a company. They view the social venture as a change agent that can impact the world for the better. The primary goal is not to make money, but rather change.

What are some of the growth challenges of a social venture?

1. With growth come the stresses on the ability of the venture to communicate internally
2. It runs the danger of starting to appear to its employees as just another company
3. Keeping the employees motivated and informed about how to keeping the mission alive
4. The conflict of hiring followers or employees who will see themselves as just employees

The differences between Social Entrepreneurship, Corporate Social Responsibility, and Philanthropy: 

Philanthropy and corporate social responsibility are closely related concepts in that philanthropy is a slice of the bigger corporate social responsibility pie. When integrated into a company’s mission and used to guide a company’s actions, corporate social responsibility can benefit the communities it serves, the company itself and its employees.

Corporate social responsibility not only deals with corporate philanthropy, but also other issues that affect the environment, consumers, human rights, supply-chain sustainability and transparency for the greater good of the world at large. Businesses that integrate social responsibility into their missions acknowledge that their business processes have an impact beyond the company. Therefore, they address issues like philanthropy, environmental-impact assessments and providing good working conditions.

Social entrepreneurship is different in the sense that the entrepreneur makes “the change” his or hers primary goal for the business, whereas CSR is just a part of the overall business – usually an expense for the company. Philanthropy is something the company can stress within the company to its employees.

The differences between Social Entrepreneurship and Business Entrepreneurs

Perceptions of Value

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.

Approach to Wealth Creation

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. 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.

Real Case

Volkswagen has been cheating in emission tests by making its cars appear far less polluting than they are. The US Environmental Protection Agency discovered that 482,000 VW diesel cars on American roads were emitting up to 40 times more toxic fumes than permitted – and VW has since admitted the cheat affects 11 million cars worldwide. It means far more harmful Nix emissions, including nitrogen dioxide, have been pumped into the air than was thought – on one analysis, between 250,000 to 1 million extra tonnes every year.

If VW had some sense of CSR, this would never had happened!

For my venture idea, I’ll pick up where I left off. I’m ready to pitch my idea about my juice and sandwich shop that I once operated in Alanya, Turkey. Although I know there are a lot of other companies that offer juice, smoothies, coffee, and sandwiches, in Alanya now, I do strongly believe that “DJ’s Favorite Juices” (DJ’s) could once again rise and be a profitable business.

The focus on health and eating right is greater than ever. It is a trend that has developed over the past ten (10) years and is still growing. Eating right and not turning to an unhealthy snack during the day, is rapidly being replaced by healthier choices. In today’s fast-paced society, it seems that many of us measure our meals by minutes rather than what is good for us. If it isn’t fast, it doesn’t fit into our schedule, and we don’t want it. We turn to food we know is bad for us in an effort to save time, and in some cases we will skip eating altogether. Eating healthy, and eating fast, do not have to be mutually exclusive.

People are getting more concerned about what they eat and drink, every calorie counts. People in our target group are relatively more aware of what they eat and drink and tend to spend more on health compared to people who are out of, under, or above the age group. The customers are locals and tourists; and our product line appeals to everyone within the target group regardless nationality. DJ’s’ focuses on the young independent individuals who are able and willing to spend the same amount as one would on fast food.

DJ’s will be widely spread over the main bazaar area and Alanya through different promotions. We will have posters at bus stops and a promotion video on the busses. We will create a Facebook page for people to follow with a monthly competition and make brochures to hand out to people walking by the store and around the bazaar. This will promote the sale and let potential customers know that DJ’s is out there and ready to serve healthy beverages and food. In order to build up its client base, DJ’s will use banners and fliers and cross-promotions with other businesses in the Alanya area.

DJ’s marketing strategy will focus on getting new customers, getting customers to spend more, and come back more often. Having a loyal customer base is the most important for DJ’s since such customer core will not only generate most of the sales but they will also recommend DJ’s to others.

DJ’s will position itself as unique healthy fast food place where its customers can not only enjoy a freshly squeezed juice/smoothie and sandwich but also spend their time in a relaxing environment. Comfortable sofas and chairs, dimmed light and quiet relaxing music will help the customers to relax from the daily stresses and will differentiate DJ’s from its competitors.

1. What are the factors in deciding what form of ownership is best suited for the potential business?

When you start a business, you must decide whether it will be a sole proprietorship, partnership, corporation, or limited liability company (LLC). Which of these forms is right for your business depends on the type of business you run, how many owners it has, and its financial situation. No one choice suits every business: Business owners have to pick the structure that best meets their needs. Here are some of the most important factors to consider when starting a business:

• The potential risks and liabilities of your business
• The formalities and expenses involved in establishing and maintaining the various business structures
• Your income tax situation, and
• Your investment needs

2. Briefly describe the advantages and disadvantages of a sole proprietorship and partnership.

 Advantages of sole proprietorship:

1. Profit incentive – after all the debt are paid, the owner receives
2. Total decision-making authority – the owner is in total control, thus he/she can respond quickly to changes, which is an asset in rapidly shifting markets
3. No special legal restrictions – it’s the least regulated form of business ownership
4. Easy to discontinue – if the owner no longer wishes to continue his/her business it can be terminated whenever.

Disadvantages of sole proprietorship:

1. Unlimited personal liability – the owner is personally liable for all business debts
2. Limited skills and capabilities of the sole owner – the owner might not know much of how to run a business and lack skills, education, work experience, and training
3. Limited access to capital – sole proprietorships often find it difficult to raise capital unless they have great personal wealth
4. Lack of continuity for the business – if the proprietor dies or becomes incapacitated, the business automatically terminates unless a family member can take over the business

Advantages of partnership:

1. (General Partnership) Easy to establish – like sole proprietorship, partnerships are easy and inexpensive to establish
2. Complementary skills of partners – in successful partnerships, the parties’ skills usually complement one another
3. Division of profits – profits can be divided among partners with no restrictions
4. Larger pool of capital – each partner’s asset base improves the ability of the business to borrow needed funds
5. Ability to attract limited partners – there can be any number of limited partners as long as there is at least one general partner
6. Flexibility – a partnership can generally react quickly to a changing market
7. Taxation – the partnership itself is not subject to federal taxation, but the involved parties’ salaries are

Disadvantages of partnership:

1. Unlimited liability of at least one partner – the general partner has unlimited personal liability
2. Capital accumulation – partnerships usually have limitations and restrictions to raising capital
3. Restrictions of elimination for the general partnership – when other partners don’t have money to buy the partner’s part, the existing partners are forced to accept a new partner or dissolve the partnership
4. Lack of continuity for the general partnership – if one partner dies, the other partners may not be interested in overtaking that partner’s interests
5. Potential for personality and authority conflicts – friction among partners in inevitable and difficult to control

3. Explain the corporate form of ownership and how a business is incorporated

 A corporation is a business or organization formed by a group of people, and it has rights and liabilities separate from those of the individuals involved. It may be a nonprofit organization engaged in activities for the public good; a municipal corporation, such as a city or town; or a private corporation (the subject of this article), which has been organized to make a profit.

In the eyes of the law, a corporation has many of the same rights and responsibilities as a person. It may buy, sell, and own property; enter into leases and contracts; and bring lawsuits. It pays taxes. It can be prosecuted and punished (often with fines) if it violates the law. The chief advantages are that it can exist indefinitely beyond the lifetime of any one member or founder, and that it offers its owners the protection of limited personal liability.

4. List the differences between the S-Corporation and the limited liability company

 The main differences between an S corp. and LLC are:

• S-corporations are more restrictive on who the shareholders (owners) of the company can be
• S-corporations are required to pay a salary to those owners who work for the company and own more than 2% of the company. In contrast, LLCs are not obligated to pay a salary to its members (owners). This has tax implications for some companies like single-person ventures
• S-corporations are required to maintain and file formal records for the board and shareholder meetings
• S-corporations are allowed to have only one class of stock
• It is a little easier to set up employee stock option plans for S corporations than for LLCs

Practical questions:

How do you think the large corporation, VW, should handle the emission? Could they have done anything to prevent this scandal; and why do you think it happened?