The Difference Between Social Enterprise And Business Enterprise

On completion of this module you will be able to:
1. Explain the differences between social and commercial enterprises
2. Demonstrate the knowledge of social enterprise operations
3. Analyse the stakeholder relationship affecting social enterprises
4. Describe the challenges and issues social enterprises face
5. Demonstrate the understanding of corporate social responsibility theories and practices

What is Social Enterprise?

This paper will discuss about the social enterprise, how it is different from the business enterprise. Social enterprise is a firm, which applies different commercial technique to improve, financial, environmental and social well-being. This paper explains how the thought process of a business enterprise is different from the social enterprise. This assignment researches how this two enterprises differ based on their goals, mindset, value creation, marketing communication, approach. This paper will also include the ways that the social enterprises can undertake to increase their profit margin without harming the main motto of the business organisation. The paper will have a brief discussion about each of the ways of how the social enterprise can improve the revenue and thus increasing their profit margin. This paper also contains a reflexive write up about what I have learned from this assignment and about my personal experience.

Social enterprise is an organisation or firm, which formulates some business strategies that helps in maximising the improvements in the financial, environmental and social wellbeing (Smith, Gonin and Besharov 2013). This may contain increasing the social impact besides expanding the profit for the external shareholders of the company. Social enterprise can be of four different types and they are listed below (Doherty, Haugh and Lyon 2014):

• Trading enterprise: The employee of the organisation mainly owns trading enterprise. Trading enterprise has two different segments, member owned enterprise and the employee owned enterprise (Raveh 2013).
• Financial enterprise or institution:These are the company or firms who deal with the monetary transactions like deposit, investments, currency exchange and loans (Gennaioli, Martin and Rossi 2014). Financial enterprise supports other institution or individuals in monetary terms. Examples of financial enterprise are credit unions, co-operative banks and micro-credit organisation.
• Community organisation: Community organisation is an informal or formal group in a community, which helps in the betterment of the community. Most of the community organisation is an informal group who does not have proper rules. Their main aim is to provide social support to the local community (Abbott 2016).
• Charities and NGOs: Charities are the organisation who provides financial support to the people by raising money (Bebbington, Hickey and Mitlin 2013). Charities help the people in need by providing them food, clothes, medical support. NGO means non-government organisation. NGOs are the non-profit organisation who works in betterment of the society. Some of the charities in UK are The National Trust, The Salvation Army, OXFAM and Cancer research UK.

Business enterprise is an organisation whose main motive is to earn profit and expand the business in the market. They do not work for any particular social cause. They work for the betterment of the organisation. Business organisation can be of different types based on the jurisdiction:

• Sole proprietorship: Sole proprietorship means a sole trader. A person who manages and runs his own business himself is known as sole proprietorship (Permwanichagun et al. 2014). They mainly work for their own purpose and their core objective is to earn profit and the betterment of their firm. They may hire skilled employees to carry out the business operations. They are responsible for all the liabilities, they have to handle the liabilities on their own, and they provide all the assets of the firm for example, inventory, manufacturing equipment, land and infrastructure.
• Partnership: Partnership businesses are those, which are owned by two people or more than two people. In partnership business, the revenue and loss are divided between the partners of the organisation. The different types of partnership business are limited partnership, limited liability partnership and general partnerships (Cohen 2017).
• Corporation:Corporation owner have finite liability. Corporation can be private and government owned (Moore 2016). A small group of people can run a privately owned corporation. The shareholders mainly own a non-profit private corporation, the shareholders elect the board members themselves to direct and hire the employee of the organisation.
• Franchises: The franchise is a process where the entrepreneurs can own the rights and operate the business from a well-established organisation (Economics 2015).

The main differences between the Social enterprises and the Business enterprises are listed below:

Goals: The main goals of the business enterprises are to achieve the business and the financial goals of the company. Their main aim is to find a way by which the organisation can achieve growth and how it can increase the profit margin of the organisation (Iacob et al. 2014). Whereas, the main goal of the social enterprises is to make some difficult decisions regarding the business procedure which will help in balancing the dual objective of earning sustainable profit as well as will also help impact the society in a positive way (Ridley-Duff and Bull 2015). For example, Allen Carr’s Easy way is an organisation who provides therapy services to the people to help them from quitting smoking, while there are many organisation for example Pepsi, they do not bring something, which will help people in improving their health rather they bring different flavours, which will increase their sales.

Types of Social Enterprise

Mind-set of the entrepreneurs: The main difference between the mindset of social entrepreneurs and business entrepreneurs is the way they think about the entrepreneurship itself. Chasing money and chasing passion sums up the entire topic. The social entrepreneurs thinks about chasing their passion and creating some changes which will benefit the society, whereas the business entrepreneurs thinks about earning money that will help the organisation to grow (Douglas and Fitzsimmons 2013).

Marketing communication: In business enterprises, the marketing communication is done in a huge scale. The availability of huge budget helps the business enterprises to spend for the communication. Traditional communication media like TV and newspaper advertisement is highly used for the promotion of business enterprise. Whereas, in social enterprises the enterprises mainly rely on the organic social media tactics and the word of mouth marketing techniques for reaching out to the public. Business enterprises like McDonalds spend a lot of money in promotion but social enterprises like Allen Carr’s Easyway, Andela does not pay a single penny on promotion. They rather believe word of mouth marketing strategy

Value creation: Business enterprises provide value to the customer by providing better product and competitive pricing. Whereas, social enterprises create value by creating positive impact to the communities while at the same time gaining the sustainable profit margin (Wilson and Post 2013).

Profitability measuring: The business entrepreneur venture is designed in such a way that it benefits the key stakeholders of the company such as private investors and shareholders. Social enterprises can also engage in for-profit ventures but they frame their organization as the non-profit organisation. They mainly donate the extra profits to the community to make their life better. One such example is NIKA Water Company, the organisation is a for-profit company that sells purified bottled water, but according to report they donated their entire profit to support a project on clean-water in Kenya, Uganda, Nicaragua and Sri Lanka (Chung et al. 2016).

Approach undertaken for creation of wealth: The motivation of the business and social enterprises is same and that is to change the status and benefit the community but the mission is different from one another. Business enterprises aim at innovation within the commercial market so that it can benefit the consumers. If the innovation is successful then it will help the enterprise to create wealth. A social enterprise also focuses on the wealth creation but that is not for their own benefits. They use the wealth creation as a tool to bring change in the social environment.

What is Business Enterprise?

Purpose: Business enterprises may bring changes to the society but that is not their sole purpose whereas social enterprise’s main purpose is to bring change. They work mainly to bring something new or change something that will make the life easier for the society.

Social enterprises generally work to make life better for the community and to help the people in need. Social enterprises include NGOs, charities, financial institution, trading enterprise. Their sole purpose is not to earn a huge amount of revenue or profit. They work to create change in the environment that the government cannot do. Social enterprises also need money to sustain the organization (Bingham and Walters 2013). Unlike the business enterprises, Social enterprises do not require a high amount of profit or revenue to run their organization. Social entrepreneurs can also engage in the for-profit ventures but they donate most of their revenue or profit to the community to make a difference and to support the people who are in urgent needs but the social enterprise also need monetary support to run their organization. The source of money for social enterprises is the common people and they need to increase those donations so that they can help others. To increase the can expand the profit margin without diluting the ideology of Social enterprises. Social media can increase their profit margin by following the ways mentioned below:

• Volunteerism: Public donations bring money to the social enterprises like charities and NGO’s. Charities can look for more volunteers who will be able to and willing to donate to the charity. This will increase the revenue and will help the social enterprises to gain more profit. Many non-profit organizations are helping charities to increase the number of volunteers. Most of the charity is relying on the volunteers for running their enterprises and these volunteers are helping them in many ways (Frew, 2014).
• Gala Events: The Social enterprises hold a big gala event every year for raising funds. These events can be very costly to arrange and organize but this gala event can bring a huge amount of revenue in the day of the event. Some social enterprises can bring a millions of rupees from single gale events. This money can come from different sources like wealthy donors, the corporation that sponsored the event or from some celebrity. Auction of precious antiques or products that are donated by businessman or celebrity can earn a huge money for the social enterprises.
• Interest rates: The financial institution that provides loans for helping the people can increase their interest rates to a certain amount, which will be beneficial for the enterprises. The interest rates should not be so high that people will not be able to pay the interest; it should be moderate so that people can pay the interest and at the same time the financial enterprise can earn profit.
• Product sales: A product sell can be another tangible way for the charities and NGO’s to raise money from the public. For example, the Boy Scout popcorn and Girl Scout cookies earned a million of dollars every year, which is higher than the annual membership fees.
• Promotion or publicity: Social enterprises can use the tactics of promoting their enterprise. Spending money can eventually make or bring more revenue. Advertisement of social enterprises like charity and NGO’s can create awareness about that particular enterprise which will attract more potential donors. A celebrity endorsement can help the social enterprise to create a hug impact to the community that will help in raising the funds (Dung and Diep 2014).
• Performance and events:Besides gala events, social enterprises can present dance performance, concerts and music recitals, which will help the organization in gaining more profit. Social enterprise also can organize telethons in television and public radio channels.

This topic helped me to understand what social enterprises are. Social enterprises are those, which works for the betterment of the society. Social organization does not aim at making profit in abundance. The key motive of social enterprise is to raise funds from the public and then help the people who are from the poor section of the society. I have learned that social enterprises have a lot of difference between them and the business enterprises. Business enterprises main motive is to earn money by satisfying the public. Business entrepreneurs are mainly focused on achieving the goal of the business organization and to increasing profit margin. Social enterprises also want to earn profit but for not their own purpose. One of such examples are NIKA purified bottled water. The organisation is a for-profit company that sells purified bottled water, but according to report, they donated their entire profit to support a project on clean-water in Kenya, Uganda, Nicaragua and Sri Lanka. This paper also helped me to understand about the different types of social enterprises for example financial enterprise, community organisation, charities and NGOs. Financial enterprises are the organisation that helps provides monetary benefits to the common people. They provide loans, deposits, investments and currency exchange.  The Charities and NGOs works for the poor and handicapped people. They raise funds from the common people who are willing to donate and then donate it to the poor and needy people. They raise the funds by selling any famous antiques or by raising funds with the help of any event and then they distribute clothes, foods, medical support or sometimes money. Business organisation like Adidas spend a lot of money in advertisement and hoardings, but the social enterprise does not spend money on marketing

The Differences Between Social Enterprise and Business Enterprise

 Their main aim is to bring change in the environment. Some of the charities in UK are The National Trust, The Salvation Army, OXFAM and Cancer research UK.  These charitable trusts are working hard to bring change in the society. Cancer research UK is the third largest charitable trust in UK and are helping the cancer patients for their treatment. The community organization is a group of people who works for a particular community in the society. These communities are mostly informal which means that they have no particular rules or particular way of working. They also do not get any support from the government. Apart from these social enterprises, I also came to know about the different types of business enterprises. Business enterprises are of many types and some of the examples are Sole proprietary, partnership, corporation and franchises. Sole proprietorship means a business enterprise, which is maintained and directed by a single person only. Only one person handles the assets and liabilities of the organisation and he only incurs the loss of the organisation in the time of recession. Partnerships are the business, which is owned by two or more number of people. The assets and liabilities of the company are divided into number of partners the organisation have. Corporation is the business enterprise model, which can be owned by both private and by the government. I have learned that shareholders mainly own a non-profit private corporation; the shareholders elect the board members themselves to direct and hire the employee of the organisation. Apart from this, I have also learned the difference between the Social enterprise and Business enterprise, how the mindset of the entrepreneurs is different, the purpose and the ways they make their wealth.Business enterprises like Pepsi develop their product to increase their sale or profit margin but social enterprises like Andela or Allen Carr’s Easyway works on improving the life of others, which will help them in living a better life. This paper also helped me to understand that the social enterprises can increase the profit margin and act as a business enterprise without destroying the core objective of the enterprise. This paper explained me the ways they can increase their profitability. Some of the examples that are given in this paper are volunteerism, product sales, Gala events, Performance and events. Volunteerism means finding more people who are willing to donate to the charities and NGOs. Gala events in some special days of the year can bring a huge amount of revenue and profit into the organisation.  One such example is Pink day in South Africa, which is organised to raise funds for helping the breast cancer patients (Mayosi and Benatar 2014). This event was organised by the South African cricket team and the money is given to the cancer patients for their treatment. I have learned that to be a social entrepreneur, an individual should have a researching and innovation skill. Innovating and bringing change should be the primary objective of the social entrepreneur. Social entrepreneur should always take risks should be confident about every decision that he takes.

Approaches to Wealth Creation

Conclusion:

This paper concludes that there are many differences between the social enterprises and the business enterprises. The main difference lies on the objective of the different enterprise. The business enterprises works mainly to better the organizations chances of making profit, the social enterprises works for the betterment of the society. Business enterprises may or may not innovate but social enterprises have to innovate something that will help the social enterprise. This paper also helped to understand that the social enterprises could aim for maximizing their profit without damaging the main motto of the enterprise.

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