BA 310 Mod 5 Ch 11 Ethical Issues in the Developing World Objectives List and discuss the types of social entrepreneurs 1 Describe the ethical issues that multinationals must focus on when dealing with Bottom of the Pyramid markets 2 Describe the seven key principles for being profitable for BOP markets 3 Define social entrepreneurship 4 5 Describe the Grameen Bank s purpose 6 Discuss the concept of fair trade and explain its significance for third world countries 7 Explain why human rights are important 8 Explain why hunger and poverty must be addressed by businesses 9 10 Explain the food versus fuel debate 11 List the Millenium Development Goals List the causes of hunger 1 The Bottom of the Pyramid developing country a nation with a lower standard of living an underdeveloped industrial base and has a low Human Development index Human Development Index Life Expectancy Education Level Income Level BOP the base or the Bottom of the Pyramid refers to the 4 billion people who are virtually ignores by most corporations because they are perceived as high risk and low resource customers Ignoring 65 of the world s population is not a good strategic move since they represent 5 trillion in purchasing power Firms that focus on BOP customers may need to review their traditional strategic focus and must accept a large volume low profit margin competitive focus There are certain ethical issues that can be raised by multinational corporations focusing on BOP markets The appropriateness of the product The price points established by the firm Potential misuse of advertising and promotion Multinationals not required to maintain the profits from their BOP in the local communities 2 New Generation Business Strategies Seven key principles in order to be profitable addressing the needs of BOP customers i Create market opportunities exploring partnerships with other businesses and determining the potential demand for the new products Craft solutions with BOP following the advice of London and Hart who state that firms need to be patient stay longer and come back meaning the firm must listen to the local customers or their needs Orchestrate effective experiments ability of the firm to do one or more pilot studies before the strategy is fully implemented Experiment learn and be innovative based on the feedback fail by their very nature Manage failures understanding that considered pilot because the firm does not have enough information to effectively implement the strategies info the pilot studies obtain builds on the skills and knowledge of base of the managers who will do business with the partners Establish or commingle competitive advantage based on identifying leveraging and enhancing the currently available platforms current infrastructure existing distribution channels and the role of the existing informal leaders in the marketplace Leverage and transfer social embeddedness understand the social impact of the firm s project Social embeddedness refers to the ability to understand the social context of the firm s project along with the ability to understand the intrinsic economic rationale of the local economy related to the firm s project The firm can use these social contacts to scale deep and wide the pilot studies can and will Scaling deep refers to providing new products to established customers of the firm Scaling wide is the offering of similar products that have been accepted by the existing customers to potential new customers Enhance mutual volume relates to the ability of the firm to understand its impact in the local community The firm first must view its contribution based on a holistic approach and consider both the short term and long term impacts of the project ii iii iv v vi vii 1 BA 310 Mod 5 Ch 11 Ethical Issues in the Developing World 3 Social Entrepreneurship social entrepreneurship organizations that have created business models that cater to basic human needs that are not currently being served social entrepreneurs individuals who use their drive and motivation as traditional entrepreneurs and focus on a mission that can positively impact society Three critical attributes a social entrepreneur must have in order to be successful i ii iii A specific vision of the purpose and goals and objectives for the organization The ability to use his or her leadership skills to champion the implementation of his or her vision The will and motivation to be committed to developing the business so that it will be sustainable in the long term i ii Social entrepreneurs need to focus on four types of capital in order to succeed in their vision Financial capital the creation and growth of wealth for the firm which is also the mission of any entrepreneurial firm Social capital the wealth that is generated to the community and society through the operations of the social entrepreneur s organization Environmental capital the wealth created by having the organization focus on environmental sustainability issues Aesthetic capital the intangible wealth that is created by developing a feel good factor by making the world a better place to live in iv iii Ten Characteristics of Successful Social Entrepreneurs i ii iii iv v vi vii viii ix x Disregarding the constraints of ideology or discipline Using innovation resourcefulness and opportunity to determine what practical solutions are viable to solve the social problem Using innovation to focus on the development of new products or services Focusing on how the organization s mission will be used to create social value Not waiting until all resources are available in order to capitalize on the opportunity Recognize that everyone has the ability to contribute to the economic and social development of the organization Every entrepreneur is willing to take risks in order to succeed Making sure to balance the passion for the project with the ability to measure and monitor the social impact of the project Successful social entrepreneurs are also good teachers for other to learn how to achieve their social goals Patience is needed when type of progress that is needed for a successful completion of the project is not realized social bricoleur usually focuses on addressing the social needs of resources local communities using existing bricoleur the ability to use existing resources to address the strategic issue An example of a social bricoleur is an individual who sets up a relief organization to help individuals who have been affected by a natural disaster