Chapter 2 Literature Review
2.1 Social Enterprise
2.1.4 Business Model of Social Enterprise
For survival, every organization develops a set of activities for particular environment, which is called business model. Hamel (2000) thinks business model is the way which enterprise creates value, comprising core strategy, strategy resource, customer and value chain.
Besides, business model is also can be considered as the value position of industry, value creating and the way to obtain surviving resource. So it will be helpful if people understand social enterprise through their business model. However, the difficult part is every enterprise has its own goal and different enterprise tend to adopt the most suitable way they think to operate. Not mention for social enterprise, it has both social and economic goal. These characteristics make the business model of social enterprise different from common enterprise or nonprofit organization.
Business Model Canvas is a familiar analytical framework for business model. This idea was proposed by Osterwalder (2005) and his team, explains how an enterprise to profit by
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organizing below factors systematically:
1. Infrastructure
(a) Key Activities: The most important activities in executing a company's value proposition.
(b) Key Resources: The resources necessary to create value for the customer.
They are considered an asset to a company, which are needed in order to sustain and support the business. These resources could be human, financial, physical and intellectual.
(c) Partner Network: In order to optimize operations and reduce risks of a business model, organization usually cultivate buyer-supplier relationships so they can focus on their core activity.
2. Offering
(a) Value Propositions: The collection of products and services which a business offers to meet the needs of its customers. According to Osterwalder (2005), a company's value proposition is what distinguishes itself from its competitors.
3. Customers
(a) Customer Segments: To build an effective business model, a company must identify which customers it tries to serve. Various sets of customers can be segmented based on the different needs and attributes to ensure appropriate implementation of corporate strategy meets the characteristics of selected group of clients. The different types of customer segments include:
(b) Channels: A company can deliver its value proposition to its targeted customers through different channels. Effective channels will distribute a company’s value proposition in ways that are fast, efficient and cost effective.
(c) Customer Relationships: To ensure the survival and success of any businesses,
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companies must identify the type of relationship they want to create with their customer segments.
4. Finances
(a) Cost Structure: This describes the most important monetary consequences while operating under different business models.
(b) Revenue Streams: The way a company makes income from each customer segment.
As mentioned above, the business model of social enterprise is usually different from other common organizations accordance with its mission. So there are some scholars have proposed different framework for analysis. Domestic researcher Yang (2009) proposed a theory model of social enterprise different from the classification of western scholar’s theory after studying and analysis domestic corporation enterprise, which includes 6 sectors.
1) Value claim: The value claim of social enterprise shall comprise social mission, value
transmit.2) Business strategy: Business strategy means the direction and position of social enterprise
in the future.3) Revenue organism: Social enterprise shall combine the value of social and economic and
turn them to competence. It is necessary to conduct market segment, define target market and predict consumer demand.4) Deploy resource: Social enterprise cannot distribute surplus wantonly, so it needs to
combine different resource more to implement its strategy.5) Value chain: Value chain means the organism that to create value for customer and the
partners in this organism. Organization plays an important role for value creation.Therefore, organization needs to coordinate with suppliers and customers.
6) Sustainability: Weerawardena and Mort (2006) proposed the sustainability is a core value
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of an organization and efforts on the ability for innovation and risk management.
2.1.5 Legal d Development of Social Enterprise
After economic crisis and with the emerging of social enterprise, many governments start to realize that there may be a different way to solve social issues no matter they are conventional or emerging one, especially when governments are in financial difficulty. At the same time, when governments try to place hopes on social enterprise to solve the problems such like education, poverty, unemployment and so on. They found it would be better to regulate it based on its hybrid organization type, functions or relative weakness.
In accordance with Teng (2014), the current legislation condition or the process to regulate social enterprise can be classified 3 ways.
1) Regulated in a specialized law: In this case, countries passed the specialized law for
social enterprise. For examples, based on employment promotion Korea government passed social enterprise promotion act in 2006. And in this act, social enterprise is clearly defined and government has obligation to promote social enterprise.2) Regulated in different laws: For United Kingdom, in 2004 government passed the
Companies (Audit, Investigations and Community Enterprise) Act 2004. In this act, a new company was formed which named Community Interest Company. This type was designed for social enterprises to use their profits and assets for the public good. Besides, on 19 March 2014, the U.K. government announced the introduction of the Social Investment Tax Relief to encourage financial investment in social enterprises. Effective 6 April 2014, this provides 30 percent tax relief to those who qualify. The tax relief is specifically targeted at regulated social enterprises namely:18
(a) Community interest company
(b) Community benefits society that is not a charity (c) Charity
(d) Any other body prescribed, or of a description prescribed, by an order made by the U.K. Treasury.
Like United Kingdom, the promotion for social enterprise in United States is basically adopt tax-relief way and is included in General Internal Revenue Code, which is a federal statutory tax law. And it defines social enterprise and grant tax relief if organization qualified.
In addition, some states in U.S even started to create a new legal form named low-profit limited liability Company, for solving the problem positioning social enterprise.
3) Setting up an official mission but legislation: According to Teng (2014), unlike the
countries mentioned above, Singapore government adopted a different approach to develop social enterprise. They set up Ministry of Social and Family Development (MSF) for handling all issues related with social enterprise. And built up Social Enterprise association for assist new-established social enterprise with knowledge, fund, or advisory.Unlike Korea government, presently there is no specific law for social enterprise in Taiwan, and the related terms were based on other laws, such like civil law, tax law or laws which regulate NPO. Besides, a lot of relevant administrations also have not been integrated in different government departments in Taiwan. But the amount of registered corporation with the name of social enterprise now is about 47. According to the statistics from Fu Jen University, there are 200~1000 enterprises take social problem-solving as their main purpose or one of purposes. Therefore, it would be better to consider to regulate it for promotion or balancing the elements among share holder or character of public benefit.
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2.2. Brief Summary
If social enterprise was adopted as a key word for searching relevant study in National Digital Library of Theses and Dissertations in Taiwan, there were nearly 200 papers can be found. Those relevant researches on social enterprise emphasize some certain points and could be summed up to several types as arranged Table 2-2 below.
1) In previous studies, many researchers focus on single social enterprise. And the analysis framework used is usually business model canvas or business model theory proposed by Yang (2009). Chang’s (2013) “The Innovation Business Model of Social Enterprise- The Leezn Company Ltd. Case Study” could be the model of these kind of research. However, whatever analysis framework was adopted this kind of research is not easy to exam different social enterprises under the same research background at the same time. In addition to the single social enterprise, famous and more successful cases are tend to be selected due to social enterprise is an emerging idea in Taiwan. Most of them are in the phase of exploration, even their leader cannot be sure if their business model would be successful or not.
2) The study about how a nonprofit organization evaluates to transform or operate a social enterprise. Like Chen’s (2013) “The Evolution of Business Model for Social Enterprise:
A Case Study of Non-Profit Organizations in Taiwan”. These researches tend to put the points on the obstacles when transformation or which business models they should use.
3) Thirdly, the associativity between each factor influence in single social enterprise.
4) And the last castigatory is the common enterprise who intended to access the area of social enterprise and the discussion for CSR. In these studies, there is only one research discuss the development of social enterprise overseas. For the type of socially responsible businesses which the types proposed by Alter (2006), it also needs more innovative way
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to achieve their mission. But, this kind of research tend to focus on what kind of benefit bring to common enterprise.
For the characteristics mentioned above, the current social enterprise research have the following obstacles, which includes the cases selected are limited in a single geography area which is Taiwan. It means it is not easy for the people to refer to the development oversea, it is difficult to detachment social enterprises from bigger structure like economic or culture at all and exam it isolate. For innovation it would be also helpful to refer to the case overseas. Yeh’s (2009) “A Study of America, India, Hong Kong Social Enterprises: Its Business Strategy to Success” is the only research discussed foreign social enterprise so far. The second obstacles here is most researches are focus on single case, so it is hard to conclude or classify them by business model theory despite the related research is getting more. So people could not know if there is any pattern or model exist even using the same business model theory in different researches. The last issue is the current study in Taiwan is focus on the establishment and the problem they are trying to solve in single case. However, there are several successful cases have been mentioned repeatedly. It would be helpful to refer to the case overseas for innovation.
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Table 2-2 Relevant Research on Social Enterprise
Item Author Title Focus
1 Wu, Chih-Chieh / 2014
An Explorative Study on the Business Models of Social Enterprises
The purpose of this research is trying to search the potential business model in healthcare and microfinance as a reference for future social entrepreneurs.
2 Hua, Jia-Yu / 2014
The analysis of Business Model for Social Enterprise : A Case Study of Vulnerable employment-based social enterprise in Taiwan
This study used business model Canvas to study the business model the vulnerable employment-based social enterprise selected. Through the application of this concept instrument to learn their operating status and make a comparative analysis, thus providing other social business planning and development of reference.
3 Huang, Cheng-Yu / 2013
Business model of Homemaker's Union Consumer Cooperative - in the view of social enterprise
To study the business model, organization and their association of Homemaker's Union Consumer Cooperative
4 Chen, Shwu-Chuan / 2013
The Evolution of Business Model for Social Enterprise : A Case Study of Non-Profit Organizations in Taiwan
This study is to establish dynamic business model for social enterprise.
Continued for previous research in business model and social enterprise business model, we expect to find out the evolution for business model in social enterprise, and offer what contributes to business model.
5 Chang, Tzu-Chun / 2013
The Innovation Business Model of Social Enterprise| The Leezn Company Ltd. Case Study
Trying to find a common intersection between the general business or social enterprise, either theoretical models or concepts. Allows
enterprise operations are owned reference to the successful model of the ultimate purpose of this paper.
6 Liao, Pei-Chun / 2013
The study on business model of social enterprise in Taiwan
To explore the current development of social enterprise in Taiwan by 9 cases in Taiwan.
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7 Shih, Chun-Chi / 2013
The Entrepreneurial Process and Business Model of Autonomous Social Enterprise in Taiwan
To understand the entrepreneurial motivation from selected case, and inquire how they found social gap and made their own resources to build a combination of social and commercial purposes of the social enterprise.
8 Wu, Yi-Jung / 2013
The business model of social enterprises- Case study of Lee-Zen company
This study aims to summarize and analyze the business model and key success factors
To study the business model of social enterprise whose value proposition is locavore movement from the aspects of sustainable environment protection and fair trade, And advice the people who would like to build a sustainable agriculture production-marketing system.
10 Ou, Guan-Liang / 2011
A Case Study on Business Model of Social Enterprise
This study of social enterprises and business models to explore in greater depth at the same time, and continue Yang Ming Yin et al (2009) constructed the business model, the use of case studies on social
business case companies explore in more depth and analysis, and propositions to put forward social enterprise business model.
11 Yeh, Chu-Li / 2009
A Study of America, India, Hong Kong Social Enterprises: Its Business Strategy to Success
Through analyzing the official websites and related secondary data, inducting the strategy of these three social enterprises.
Arranged by Author
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CHAPTER THREE
RESEARCH METHODOLOGY
The purposes of this research is try to understand the practical operation from social enterprise in Southeast Asia by analyzing their business model, and bring different aspect to Taiwan’s initiatives. For deeper understanding, qualitative research method will be adopted in this research. There are 9 cases will be selected as study objects, and related literature, cases and information from interview will be analyzed under the theory of business model proposed by Yang (2009). These selected cases will be examined with its six dimensions of business model, include value claim, business strategy, revenue organism, deploy resource, value chain, sustainability streams for current status.
3.1. Research Framework
Because there will 9 cases will be selected as research object for trying to know the current development of social enterprise in Southeast Asia area, the research framework will be set up with literature and cases interviewed. In the beginning, to understand the selected cases belong to which classification proposed by Alter, and analyzing them by the theory of business model proposed by Yang (2009). The reason for choosing Alter’s theory for social enterprise as framework is as mentioned in the prior sector, there are lots of characteristics of social enterprise are overlapped with many concepts which already existed. The spectrum
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theory proposed by Alter is a concept which accepted widely in academic circles and it also allows researcher to have widest flexibility to select cases. As for Yang’s business model theory, despite there are also different business model such like Business Model Canvas. However, as motivation mentioned in the beginning, the related studies for social enterprise is relatively rare in Taiwan no matter compared to the subject common enterprise or non-profit organization. In the other word, one of the major practical problem now is there is not enough cases, but use the different business model or dimension to exam. Yang’s business model theory has been adopted in several studies for social enterprise. One of the benefits for adopting his theory is it is easier to compare difference cases even they are not in the same study, because they are analyzed under the same framework. Besides, for the object with greater scope like social enterprise, Yang’s theory seems easier or lean to exam. Based on Yang’s theory, the cases interviewed will be measured by 6 dimensions - Value claim, Business strategy, Revenue organism, Deploy resource, Value chain, Sustainability. These dimensions can help to exam the research current development of the research. The below is research framework. (Figure 3-1)
Figure 3-1 Research Framework
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3.2 Research Approach
The main purpose of this research is try to understand the development in other countries for reference. Compared to the countries in Southeast Asia, East Asia countries hold resemble culture and face similar problem, and social enterprise issue may be associated with sensitive political problem in certain country. Besides, due to historic origins this area have been receiving lots of foreign aid and use these funds for making social change. For sustainable operation many of them are arranged as a type of social enterprise. Therefore, after evaluating diversity and convenience for interview Southeast Asia has been selected as considerable target area. But there are huge divergences on the progress of economic development in these countries. For letting this research can be analyzed under a similar background, Vietnam, Laos, and Cambodia were be selected as the countries where to seek to social enterprise. They and Myanmar are classified as late-developing countries in ASEAN1, and they have resembled experience in modern history.
Some related social enterprises have been contacted and asked for interview before departure to Southeast Asia. However, there were some people not available then, so some case sources were recommended by case interviewed there. It took around 1~2 hours for each interview and if there is anything interviewee would like to replenish. They would send relevant data or information by mail to me. Below (Table 3-1) is the information for interviewees.
1ASEAN : Association of Southeast Asian Nations
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Table 3-1 Interviewees Information
Country Name of Social
Enterprise Legal Form Location Founder Interviewee Interviewee’
Title
Creating practical opportunities for people with disabilities through vocational training and life skills training
and advocating for the rights, recognition and equal opportunity of disabled women by promoting awareness and raising the profile of disabled women.
Fair Trade Laos Enterprise
and NPO Vientiane Uncovered Anousone
Phimmachanh Project manager 2008
To promote the ideas and concept of Fair Trade in Laos and empower small scale producers on their efforts to combat poverty, strengthening their economic position with Fair Trade product distribution both inside and outside Laos.
FruitFriends Enterprise Vang Vieng Ket Vannatham Ward Reekmans
General Coordinator &
Advisor
2011 Profits from agriculture are used to establish local community projects based on education.
Ma Té Sai Enterprise Luang
Prabang Emi Weir Emi Weir Manager 2011
Creating a larger market for gift and household items made by people all over Laos and offering a higher and more sustainable income back to poor and vulnerable Lao artisans.
Cambodia
Concert Enterprise Siem Reap Michael Horton Lanh Sokha Programme
Support Officer 2008
To turn people's good intentions into the best possible help for the most vulnerable people in Cambodia.
Angkor Butterfly
Centre Enterprise Siem Reap Benjamin Hayes Unknown Operation
manager 2009 Increase income of rural farmer by butterfly breeding.
AngkorWall-Coffee
Hostel Gallery Enterprise Siem Reap Hank Hsu Hank Hsu Funder 2008 Increase education opportunity by running guesthouse.
Vietnam
ZÓ PROJECT Enterprise Hanoi Trần Hồng
Nhung Nguyen Le Financial
manager 2013
To preserve traditional Vietnam Do paper by selling craft and art product produced by ethnic minorities and rural women.
Tea Talk Café Enterprise Hanoi Michael Ong Pham Thi Phuong Luong
Consulting
Supervosor 2012 Tea Talk Café creates employment opportunities for young social workers in Hanoi.
Arranged by Author
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3.3 Research Method
The research method refer to a way comprising collect, analysis, summarize, and technique for study, such like case study method, in-depth interview, and so on. It could adopt different method in a research. Compare with U.S. and Europe, social enterprise is still an emerging idea in Asia, plenty of them are just in the beginning phase. The major characteristics of this kind of enterprise are small size, non-public-traded company, and with special mission different form common enterprise. In addition to, each organization has its unique way for
The research method refer to a way comprising collect, analysis, summarize, and technique for study, such like case study method, in-depth interview, and so on. It could adopt different method in a research. Compare with U.S. and Europe, social enterprise is still an emerging idea in Asia, plenty of them are just in the beginning phase. The major characteristics of this kind of enterprise are small size, non-public-traded company, and with special mission different form common enterprise. In addition to, each organization has its unique way for