Free Social Enterprise Is Not Suitable For Instantly China Essay Sample
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The idea of running Social Enterprises was birthed by the economic crisis that was experienced in 2008. The idea involved the combination of enterprise with a social purpose to try and address the persistent poverty and environmental problems that the world faces. As a result, the organizations that become SE’s pursue the common business mission of financial stability and that of accomplishing the social purpose.
The organizations’ management, acquisition of resources and mission of the organization are affected by their transformation into SE’s. The research paper discusses the advantages of the different explanations of SE’s in relation to the public. The discussion extends to the private and third sectors. There is the discussion on a difference between SE’s and charitable organizations, and the reason why SE’s are preferred over charitable organizations. It also focuses on the different understandings of social enterprises in relation to the public sector.
The Characteristics and Complications of Social Enterprises
Social Enterprises, SE’s seek to achieve the financial purpose of the business, and include social goals. As a result, it is not possible to classify them as private, public or non-profit organizations. They exhibit hybrid organizational characteristics. They exhibit conflicting logics. The attempt to achieve both financial and social obligations results in conflicting logics.
The terminology, Social Enterprises confuses the general public in many ways whereby most of them view them as non-profit organizations that take up economic activities for their own good without any benefit or change of the mission. The confusion is caused by the humanitarian and environmental activities that the SE’s carry out, the rules that govern them and their nature of the operation. In fact, most members of the public find the activities of SE’s and opportunistic because of the popular belief that non-profit organizations should not be involved in business activities. What they do not know is the double faceted nature of the SE’s and the difference in the overall management for the good of the beneficiaries, the environment and the enterprise. They are self-sufficient, thus, sustainable.
The Advantages of SE’s in relation to the Public
The SE’s are different from traditional enterprises in that the enterprise is owned by the people that work in it. Traditionally, capital would hire labor with the primary aim of making profits above everything else. According to the European definition, SE’s serve the purposes of benefiting the community. The power of making decisions is not determined by their shares and they have limited profit distribution practices. In the economic realm, they exercise continuous activity of selling their goods and services. In addition to that, they have high levels of autonomy and high risk.
The private sector is governed by the market forces in the maximization of financial returns. As opposed to SE’s, the private sector organizations are owned by the shareholders, and the power of governance depends on the level of capital ownership. The revenue of private organizations is obtained from fees and sales. The public sector organizations, on the other hand, are governed by the principles of public benefit. They are owned by the state and the citizens, and revenue is obtained from tax.
The non-profit organizations are formed and run in the pursuit of achieving social and environmental goals. Such are owned by the members of the organizations and the governance is led by an elected board of governors. The staff members include volunteers and employees. Non-profit organizations get their revenue from donations, legacies and membership fees. The residual earnings of non-profit organizations cannot be shared by the managers or any other senior employees or donors. It is a legal requirement.
As opposed to purely profit-making organizations, SE’s re-invest the profits made in the income-generating activities. Unlike the common rule of sharing the profits among the investors, the profits made are used to advance the mission of the SE.
Now SE’s do not fit into any of the three categories. For instance, SE’s get some if their funds from trading goods and services. That fits into the description of businesses in the public and private sectors. However, they differ in their mission whereby the SE’s seek to improve the community and environmental situations whereas the businesses in the private sector operate for the sole purpose of making profit. SE’s are similar to non-profit organizations in that they work towards the achievement of the social welfare of the employees and the environment within which they operate. However, they do not rely on donor funds, bequests or grants for financing.
The Sustainability of SE’s in China
China is one of the countries that experiences sustainable economic growth at the moment. China is expected to be the world’s economic superpower come 2030. The efficiency in the activities and the competent workers make economic growth rapid. In addition to that, China has a great spirit of entrepreneurship that drives the country’s economy and innovations to the ceiling. However, the side-effects of the rapid industrial and economic growth is felt on the environment and social stability . Social Enterprises are still very new in China and they could be unsuitable for instantly China .
The advocacy for SE’s rose after the 2008 earthquake that left many Chinese citizens stranded . China has experienced remarkable economic growth in the recent past that has got many out of poverty. However, there are those that still struggle. In addition to that, the rapid economic development results in extensive environmental pollution that requires attention. According to Lane (2012), the potential for the growth and success of Social Enterprises in China is similar to that of other countries such as Japan and India. However, the entrepreneurial environment of the SE’s faces numerous challenges because of the influence of the government. The challenges that face SE’s in China revolve around three factors. That is the access to funds, retention of human resources and the lack of a government policy providing for SE’s.
SE’s are not suitable for China because of the difficulty in the raising of capital for the social enterprises. China experiences the most rapid economic growth in the world and most businesses that call for external funds and investors are those that have high investment capital and growth opportunities. Experienced investors in China say that it was difficult to attract capital for deals that are as small as social enterprises . That is because the idea of SE’s is still new in China and most of the SE’s that come up are small in terms of size and capital. The few options left for attracting foreign investors in the SE’s require marketing through offshore subsidiaries, a strategy that is considered inefficient and costly (84). That discourages entrepreneurs from pushing through with social enterprises. It also becomes difficult to attract any foreign investors because of the small size of the registered and investment capitals of such enterprises.
However, the Chair of the Water Drops Foundation in China, Patrick Cheung commented and said that money is not the problem in China. The Chinese government seeks projects to invest. According to Cheung, the problem lies in the lack of social infrastructure to support the SE’s. The Social Ecosystem lacks in China, and that is the reason that China’s SE’s are not as advanced as in other countries. Most people in China are not familiar with the concept and they confuse social enterprises with Corporate Social Responsibility (90).
The Chinese are great at entrepreneurship. As a result, the Chinese business culture is a profit and development-oriented culture more than it is a social culture. An interview with serial social entrepreneur, Michael Norton, revealed that China has a culture that promotes enterprise . Social entrepreneurship is not a common phenomenon. As a result, most people are likely to start businesses, purely for profit making. Advertising the idea of social enterprises should be done to create more awareness and increase the market base for SE’s are and the mission.
The Chinese government has a lot of power over the social and economic activities of the country. That means that no business can prevail without the support of the government. China has a culture that promotes assistance for the poor and the elimination of poverty. That makes SE’s a suitable business strategy in the country. However, the economic situation of China also seems to be against the issue of SE’s because it is assumed that the country is doing well and there is no need to create separate organizations to cater for the welfare of the Chinese people, and the environment. However, it is the reason why the disparity between the rich and the poor keeps growing by the day .
Why SE’s are considered over the Non-Profit Organizations
SE’s have become popular because of their self-sufficient nature. Unlike non-profit organizations that entirely depend on donor funds, SE’s incorporate the economic activities of enterprises that include the exchange of goods and services for cash. That ensures consistent cash flow within the organization because it is not dependent on the mercy and capability of the donors. Such instances were experienced by large non-profit organizations such the World Vision International during the period of economic recess that was experienced in 2008 . The assurance encourages the governing bodies and the employees because such businesses are assured of sustainability. The SE’s enhance the reputation of the organization. As a result, more people agree to volunteer where applicable.
There is also the quality of enhanced management and the business conducts of the organization. Whenever organizations are dealing with money that is generated by the organizations, they are more careful in the way they deal with the handling of assets, expenditure and activities. The sense of responsibility that is brought about by the SE’s is different from that one exhibited in non-profit organizations . The SE’s have an overall business advantage. The popularity of SE’s is also as a result of the large number of the non-profit organizations. Even without the economic recess, the large number of non-profit organizations strain funds. As a result, the success of new non-profit organizations is not guaranteed. In fact, new organizations have to work extra hard to prove that they deserve the funds. As a result, the new trend of forming SE’s instead of non-profit organizations to cater for the social good of the public in consideration of the public is a more viable strategy.
SE’s operate on a number of values such as the mission to create a sustainable social value. They also focus in pursuing new opportunities that benefit the organizations. The opportunities should be able to do so while still serving the mission of the organization. They also engage in innovation, learning and adaptation of new ideas on a daily basis. The reason they operate like businesses to a certain extent is to meet the requirement of the other principle that is to act boldly without any limitations such as funds, ideas or human resources. The governing and management bodies of SE’s work with a heightened sense of accountability that ensures that the outcomes are accounted for, and all the business activities that are carried out support the social work done by the organization.
The business aspect of the SE’s serves to create even more jobs and become more accountable because of the sophistication of the governance and the economic activities. However, it is important to explain the truth about SE’s to the public. Many members of the public believe that social enterprises conduct income-generating activities for the benefit of the organization and that they have nothing to do with the mission of the SE. However, every economic activity, innovation and invention that is conducted by SE’s is done in connection with the mission. They all serve to further the mission of the enterprise that is social work.
Social enterprises also assure the organizations of unrestricted use of funds on projects. That is unlike non-profit organizations that prepare their budgets around the funds and specifications of the donors.
SE’s also increases the business capacity of the organizations. For instance, the financial department is required to exercise extremely competent financial management skills. In addition to that, the management capabilities of the organizations are improved because of the technicalities involved in generating income for the organization, by the organization.
The market discipline of the organization in enhanced whereby the quality and efficiency of the services and programs increase. The new funds that the organization generates from the many activities also give a chance for the expansion of the mission. That is likely to happen with innovations and surplus funds . The reason that surplus funds are not distributed in the form of shares and dividends is because of the core mission of social enterprises. Social enterprises function like non-profit organizations, but with the trading and money-generating aspect for self-sustainability. That means that the core purpose of SE’s is the social development of the community and not the profit-making.
However, SE’s could be faced with challenges such as diversion from the social purpose of the business. That is likely to happen when business is good, innovations are many and the organization is famous. Social Enterprises develop missions that are meant for the development and the overall goof of the community. That means that the profits should not only be pumped back into the business to continue the running of the business. It should be directed where ie benefits the society the most. Many people have a distorted view of Social Enterprises and they view them as corporate companies or businesses that take corporate social responsibility to another level.
SE’s are formed with the public in mind. That means that the public has the right to gain compete understanding of what SE’s are without the many misconceptions of the selfish nature of SE’s. China, one of the world’s super powers has social struggles despite the development. For a long time, China ignored the social purpose and importance of development. However, the economic development has benefited the country and the government while at the same time widening the gap between the rich and the poor. SE’s are sustainable options of enterprises that create more reliable organizations, innovations and stronger missions that are self-reliant.
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