International Entrepreneurship Issues

by Jason Shaw
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Profile of Firm

Ref Description Response
1.1 Company Age Root Capital is an organisation based in impoverished and remote parts in Latin America and Africa that is social and non-profit. The firm was founded by William Fulbright Foote in 1999. (Root Capital, 2013a). The business was set up with the goal of offering funding to small and rising enterprises in rural areas. The corporation, which was a subsidiary of the Ecological Development Fund, was incubated as Ecological Finance.
1.2 Size The organisation now has over 100 workers employed in different areas of Africa and Latin America. The investment fund is in a continuous recruitment process, especially in Africa.
1.3 Industry Sector the industry served by the company is financial services. The investment fund is involved in financing and advising of the smaller and less privileged business in the rural parts of Latin America and Africa (Root Capital, 2013c). The objective of the investment fund in to increase rural prosperity and decrease environmental vulnerability within small and medium businesses (Root Capital, 2013b).
  Offerings The company is involved in increasing its environmental and social impact with the help of three step strategy. These include financing, advising and catalyzing

Financing- this involves providing leans to the small and medium business in rural and poor sections of various countries. Presently Root Capital operated in Africa and Latin America. The company is involved in both long term and short term financing of loans. Through lending, a support system is provided to the rural ecosystem.

Advising- the investment fund is involved in providing financial training to prospective clients as well as current clients. The objective of providing management training in finance is to make these clients capable of establishing and maintaining business. The service products in financial advisory include information seminars, diagnostic workshops, and financial training and preparation services for loan application

Catalyze- root capital aims to create a financial market in which the underprivileged and vulnerable classes of business are provided with full potential and expertise so they are able to thrive in this competitive market and make a mark for themselves. The catalyze strategy for Root Capital is to innovate and accelerate.

1.4 Main Market (Domestic/ International) Root capital is majorly involved in international market. Majority of its operational revenue come from Latin America and Africa. The target clients of Root Capital are small and medium businesses in rural areas. During the early days, majority of the clients were from agricultural background. Later on, the company started providing loans to coffee products and small trading companies.
1.5 B2B/B2C Root Capital falls in business to business category where small and medium businesses from rural parts of Latin America and Africa are its customers.

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 Demographic Profile of the Entrepreneur

Ref Description Response
2.1 Age, Gender, Education, Marital Status etc. William Fulbright Foote popularly known as Willy Foote is the founder and current Chief Executive Officer of Root Capital. Willy is 43 years old and married to Virginia Foote. His present home address is Greater Boston. Willy completed his bachelors from Yale University in the year 1990. He then went on to pursue his masters in development economics from the London School of Economics
2.2 Prior Work Experience He stated his carrier working with Latin American Corporate Finance (LACF) as a financial analyst. After leaving Wall Street, Willy started working as a business journalist in Mexico. This was the time when he was confronted with the challenges of the small and medium businesses of the rural areas and the disadvantages they were facing.
2.3 Personal Interest, Special Training Willy Foote completed his specialist training at the Aspen Institute in the year 2012. He attended the Henry Crown Fellowship Class. Apart from work, he likes to spend his time with family. He is good with kids.

 Motivation to Start Business

Ref Description Response
3.1 What Factor/s Motivated Entrepreneur to start up While working as business journalist, Willy has to move to different places, including rural areas in and around America. As a business journalist, his work was to find out the business source and practices followed in these areas. During this time, Willy came across many small and midsized businesses, particularly in rural areas. He read that most of these businesses were from agricultural sector. These business owners were hugely underpaid and unmanaged. This was the time when Willy decided to give up his business and take up social entrepreneurship.
3.2 What Levels of Support did he/she get from;

Government Agencies, Financial Institutions such as bank, Family and Friends, Partners

The organization is funded by private and public foundations as well as individual donors. Few of the foundations which have supported the investment group are Peery foundations, Jasmine Social Investments and Mulago Foundations etc. finding support from banks was not tough as the company easily got loan for starting its new business. Willy got ample of support from his family and friends. According to news reports, Willy’s wife is an active supporter of the businesses and is also involved in various financial activities, helping Willy from time to time. Root Capital also got funding from supply chain companies like Starbucks. 
3.3 What Start-up Barriers did they Face? During the early days, the investment fund suffered with lack of capital investment. Though they got loans from banks to support their operations, the expenses surpass overall revenue. Distance between the organization and clients were another initial barrier. Initially the organization had few members and to reach the clients in rural and far-away areas, required excessive field work. Lack of management expertise was another major hurdle for the start-up business. The organisation was facing difficulties in recruiting skilled professionals. Another major hurdle was convincing the small business groups in rural areas. Most of these businesses were farmers and have been operating according to the traditional business rules and patterns. During the initial days, the organisation faced difficulties in persuading businesses and making them understand about the advantages of their financial solutions. Loan has always been a dreaded concept for villagers and people from rural areas. Initial reluctance to run their business on loans was high and the achieved revenue was lesser than expected.
3.4 How did they Overcome these Barriers? To overcome the initial issues, the company came up with many strategies. It took one year for the start-up to establish its first loan with a rural business client. Once the loan was sanctioned, it gave the organisation a balance and start-up portfolio. After some time, the organisation started hiring loan officers in different places around America and Africa. The company got support from supply chain partners such as Starbucks, which boosted the overall capital growth as well as confidence. The organisation soon hired expert financial trainers for training of rural business groups. This helped in changing the mindset of the rural business and increased the number of clients for investment.
3.5 What Challenges do they Currently Face? The major challenge for Root Capital is penetration. Even though there has been enormous growth in this industry, less than two percent of the total rural and small businesses have access to these financial services. Physical distance and sparsely populated spots are other factors which hamper the overall penetration process.

Future Plans

Ref Description Response
4.1 How has Business Changed or Grown? Root capital uses a metric program to analyse the environmental and social status of businesses. Accordingly, undesirable practices are reduced or cut down and all those practices are implemented in the businesses, which are profitable for the long term growth. During the last few years, the company has started entering into new businesses such as trading, coffee etc. The company also ventured into specialist training programs providing personalised business related solutions to the clients. Apart from providing a positive financial and sustainable environment to the business, the social organisations has started participating and campaigning for various social causes such  as women empowerment, promotion of food security and food and recovery campaigns (Root Capital, 2013e). During the first quarter of 2012, Root Capital reached more than 100 businesses across all regions, which exceeded the quarterly result by 30 percent (Root Capital, 2013d; Root Capital, 2013f).
4.2 What future Plans do they have for the Business?

Expand/Maintain/

Divest

In the current five year plan starting from 2012 to 2015, the organisation has made different growth strategies for its three key business areas.

Finance

·       The company aims to triple its lending activities in order to achieve 600 businesses, more than 2 million households in the agricultural and farming sector and a total of 10 million people by the end of 2017.

·       The company is planning to reach break even or self-sufficiency in its operations by the end of 2015. The company also plans to extend its portfolio balance to a minimum of 140 million dollars by the end of 2015. The overall objective is to make the sustainable trade fund (STF) self-sufficient and comprehensive.

·       The investment fund plans to diversify its business from agricultural finance to other sector such as value chain industries in order to provide financial services to undeserved markets. Apart from that, Root Capital plans to expand its business portfolio by commercialising its loan products for other industries.

Advise

  • In terms of financial advising, Root Capital plans to train 300 small business groups (SBG) through its financial advisory program. The objective of this program is to prepare small businesses for qualifying credit.
  • The strength of the businesses processes will be enhanced by advanced financial advisory programs including financial management, accounting, planning, risk management, administrative and business management, loan application and internal credit management.
  • Developing and pilot new training products and curriculum such as mobile applications and e-learning platforms.

Catalyze

  • The organisation is planning to use impact studies and advance matrix in order to increase the efficiency of financial management and internal credit management. These matrixes will help in better understanding of the services and business functions to the SBUs (small business units).
  • The company plans to establish a market place by making a high-impact agricultural lending system.
  • Root Capital plans to collaborate with different lending institutions in order to establish best practices and strict norms for this industry. Since the industry is in a nascent stage it is very important to safeguard the interest of the clients and their business.

 

4.3 What Future Ambitions do they have for Themselves? The company wants to become a pioneer in the business of agricultural and financial lending, providing financial services to small and rural businesses and people have no access to capital. The company wants to grow its client base from 100 to 500 in the next 3-5 years. The investment fund also has ambitions to expand into new geographical areas such as western Europe and Central Asia. With its core strength of financial advisory and loan products, Root Capital aims to minimise the gap between rural and national business.
4.4 What do they Consider to be their Secret/s of Success? Proper management, planning with clear objectives are few of the things which are always kept in mind while implementing any strategy. The success of their business comes from deep research and analysis. Root Capital is involved in intensive research to find out those businesses which are in need for financial planning services. The company then categorically divided those businesses into its three core product/service category which are financing, advising and catalysing. Then according to the requirements of the business, proper strategies, training and programs and advisory services are provided. Root Capital’s unique ability to target into exact businesses category differentiates it from other investment companies. 
4.5 What Advise do they Give Other Potential Entrepreneurs? To become successful in the rural financing business, few things should always be kept in mind;

  • The objective for establishing business should be clear and concrete. Most businesses have one major aim, profit maximization. If an entrepreneur has profit making objectives from his/her future business, then social entrepreneurship will not be a good option.
  • The first few years of the business will be tough. This is the time when real leadership skills and patience are important. Good entrepreneurs make a strategic timeline for reaching the threshold and stick to it.
  • The market chosen by the entrepreneurs should be ripe and the product should differentiate itself from other participants in the business.
  • Trust in the business as well as the employees are essential. During the initial days, team members will face many difficulties in terms of establishment and getting things done. It is very important for the leader to maintain his/her will and capacity to resolve any issue and carry on with the business.
  • Positive and a comprehensive public relations department or team is essential for a start-up businesses. The trust factor in new businesses is less and government as well as other bodies need to build trust in these start-ups. Thus, association with some reliable names in the industry will help in increasing value to the business.

 

Assignment B

Social entrepreneurship is a rapidly emerging concept, especially in the public, non-profit and private sectors. Markets have seen a growing interest for social entrepreneurship and this is increasing at a fast pace (Horsnell and Pepin, 2002). At present, the social and non-profit sector has been marred by increasing demands for improving sustainability and effectiveness of the overall trading process. As a result of the decreasing sources of traditional funding and increased competition within the sector, the markets for these sectors are seeing a tough transition. The market is observing an increasing in wealth concentration especially in private sector. This has compelled government bodies to call for regulations and implications such as corporate social responsibility in order to respond to the emerging and complex social problems. The government sector is already mulling with the large number of demands for public funds from various organisations.

In a situation like this, the emergence of social entrepreneurship is regarded as creative and innovative approach to deal with the increasing social issues (Bull and Crompton, 2006). Social entrepreneurship gives emphasis to social innovation and problem solving activities. Recent research in this field has revealed the increasing popularity as well as potential of this field. However, since it is a new field, depth of research is low compared to other aspects of businesses.

The objective of this essay will be to analyse the emerging themes in social entrepreneurship. In the last case study, Root Capital was taken as an example for social entrepreneurship. The emerging issues in the case study were the initial difficulties in establishing a business, lack of capital and required skills and lack of proper references in the industry (Phillips, 2006). In the current essay the current status of social entrepreneurship will be discussed. The essay will also throw some light on its emergence over the years. Apart from that, current issues and future trends will be discussed.

Background

The major difference between business and social entrepreneurs is that while business entrepreneurs’ measure performance in terms of returns and profit, social entrepreneurs are involved in much larger cause. Social entrepreneurs make sure that they return sufficient profit to the society as well (Sheerman, 2000). In today’s business environment, the role of the social entrepreneurs is to fund, promote and advise the less privileged and vulnerable sections of the society. Social entrepreneurship has spread its arms in various fields. It is present in various fields such as financial, technical, business etc. The aim of all these organisations is to use their expertise and knowledge to help the society (Prahalad, 2005)

Other than business entrepreneurs social entrepreneurs differ from economic entrepreneurs too, in a variety of ways. There is a difference in ideology and this drives the vision, mission and objective for choosing a business (Austin, Stevenson and Wei-Skillern, 2006)  Individuals who chose to enter into the business of social entrepreneurship are solely motivated by the objective of bringing social and developmental change in their client’s business environment (Thompson, Alvy and Lees, 2000).

Current Issues in Social Entrepreneurship

Even though the importance of social entrepreneurship has gained pace, the sector is still under privileged and faced by many roadblocks (Hynes, 2009).

Support for Non-Profit and Social Entrepreneurs

Since social entrepreneurship is not a solely profit-making business, not much of individuals are interested in this area. Thus, the government and other organisations need to support the social entrepreneurs who chose this path of social entrepreneurship (Mair and Marti, 2006). Given the rise in social issues and widening gap between the available options for large industries and smaller businesses, it is becoming increasingly important that these smaller businesses are provided with support (Conway, 2008). However, being a new concept, social entrepreneurship has still not got the required support from organisations.

According to many authors, lack of support to this new and emerging business can be dangerous. Lack of capital or failing to reach the objective might result in turn-offs and discouragement. Thus, it is clear that social entrepreneurs will only grow and flourish if they are provided the right environment and suitable conditions to thrive and prosper. Proper support from government and other larger organisations will also increase motivations among social entrepreneurs

Capacity Building and Training for Social Entrepreneurship

This is related to providing support to social entrepreneurship, but thrusts on more specific activities of support. As discussed earlier, businesses involved in social entrepreneurships are mostly focussed on providing guidance and support to the less privileged and vulnerable sections of the society. In order to provide the required support, these social entrepreneurs themselves will have to be well-trained and knowledgeable (Burnham, 2002a; Burnham, 2002b). Even though many individuals take up these businesses for non-profit sector, the success rate is quiet low. The main reason is lack of appropriate tools, finance, knowledge etc. Most of these social entrepreneurs are young individuals, with lesser industry experience. Thus, even though they have the right skills and motivation for the business, some amount of expertise and consultations is advisable (Thompson, 2002). Major areas where social entrepreneurship business needs training are management and leadership training, information system training, mentoring schemes, international business mechanisms (Hines, 2005). 

Implementation Issues

A vast number of activities in social entrepreneurship are based on collaboration with different sectors. While support is provided to the businesses here, the implementation of the planned activities falters because of a number of issues. The major issue in implementation arises because of cultural barriers. There is a clash between non-profit and profit sector organisations. In many cases, the objectives of profit making organisations is perceived as money making activities by social entrepreneurs and creates conflicts between the partners. The difference in mentality of the two different organisations makes it difficult for them to work together.

Cultural Differences and Motivation Factor

The overall environment of a business involved in social activities is entirely different from those of the profit making organisations. Social entrepreneurs do not get benefits such as attractive pay packages, variables, bonuses etc. Thus, the motivation factor among staff in social organisations is much lower than their counterparts. This makes it even more difficult for the organisation to achieve their business objectives.

Thus, it is clear that though social entrepreneurship has seen many takers in the recent past, it is still a vulnerable and exposed sector. With appropriate support and utilisation of the skills, social entrepreneurship can become an interesting investment for individuals. There are many ways in which the overall functioning and efficiency of social entrepreneurship can be improved. The first is support from government. Organisation capital and finance is the first and basic problem of most of the social entrepreneurs. The government need to perceive social entrepreneurship as a legitimate field for investment (Spear, Cornforth and Aiken, 2009). Many times, businesses are involved in unethical and share profit making activities in the name of social work. These activities when noticed create a negative perception in the government. To resolve this, the government can follow strict regulations by monitoring the authenticity and credibility of the social business. Another major hurdle in social entrepreneurship is policies and laws. Most of the laws which are made for profit making and business organisations do not go well with these smaller social organisations. The government can provide support by reducing some of the policies and practices which hamper the smooth running of the social enterprise (Emerson, 2003).

The field of social entrepreneurship is inadequately explored. The concept of social entrepreneurship has not been properly included in academics and university education. Even though entrepreneurship is an essential course in most of the educational institutions involving business studies, social entrepreneurship is still a naive subject. Lack of sufficient literature and research work also decreases chance for deeper studies into the subject.

Another support which can be provided to social entrepreneurship is partnership with business and profit organisations. It has been discussed earlier that a lack of consensus and shared value drives both businesses apart. These differences can be minimised by providing proper training and development facilities and reducing the cultural barrier. Both the parties need to establish a common platform. These can be social campaigns and corporate social responsibilities. Thus, by working in a common platform, both parties will be able to share common values and reduce internal conflict.

The case study helped in explaining the present status of social entrepreneurship and their work patterns. The case had a focal entrepreneur named Willy Foote, who has established a financial advisory known as Root Capital. The objective of the social funding business is to provide loan funds as well as financial and business training to the less privileges and vulnerable businesses of the society. Root Capital caters to the rural small and medium businesses in Latin America and Africa. The objective of the social investment fund is to provide support and training to the small businesses so that they become self-sufficient and capable of running profitable businesses. Comparing the case study and issues in social entrepreneurship, it is clear that there is a huge similarity between the issues and roadblocks of the company and the current issues most of the social entrepreneurs face in current day. Root Capital suffered from issues such as lack of sufficient fund, lack of credible sources for their business, risk-avoiding clients and sparsely places target locations. However, the company came up with various strategies to overcome these initial barriers. It should be noted that during the initial phase, Root Capital suffered many roadblocks. But once it started its businesses and establishing relationship with clients, it got support from various other organisations such as national banks and supply chain giants such as Starbucks. This is similar to the problems faced in social entrepreneurship. The major initial barrier is lack of credibility from government as well as clients. During this time, leadership and motivation to continue can be very useful. Once the social business starts in full swing, social entrepreneurs will get ample of support from different profit and government organisations. Thus it can be said that, the case study on the internal entrepreneur Willy Foote and his firm Root Capital confirms with the emerging trends and challenges on social entrepreneurship 

Conclusion

There has been a rapid growth in economy and business environment. More and more businesses and emerging companies have intensified the competition. Unfortunately, the world is also experiencing a huge increase in environmental and social problems.

This essay helped in understanding the concept of social entrepreneurship and its emerging issues in case of profit and non-profit organisations. Social entrepreneurship has been facing a lot of new challenges off late. Apart from major issues such as lack of capital, expertise, experience and credibility, social entrepreneurs are marred by lack of motivation and confidence (Alvord and Letts, 2004). There is also lack of long term focus, as profitability and revenue are meagre in this sector. Remaining faithful to the mission and stick to the objectives, even in times of slowdown can be building blocks in social entrepreneurship (Dees, 2001). With increased competition and advances in technology, there is a need of more dynamism in social entrepreneurship. There is an urgent need to raise the bar in terms of standard education provided in the field of social entrepreneurship. There are many success stories in social entrepreneurship which can be included in the course curriculum (Mintrom, 2000). These success stories can also be evaluated to find out the path followed by successful social entrepreneurs and their relevance in different social businesses. Many social entrepreneurs have used successful models in their strategies which can be further remodelled and utilised by others. The government can provide opportunities for these social businesses by organising common platform where various national and international social entrepreneurs come together under one roof. This will be a definite help for the young entrepreneurs and will provide an exposure for the established social businesses in terms of new and innovative ideas.

Reference List
  • Alvord, S.H.B. and Letts, C., 2004. Social entrepreneurship and societal transformation: An exploratory study. The Journal of Applied Behavioural Science, 40(3), pp. 260-282.
  • Austin, J., Stevenson, H. and Wei-Skillern, J., 2006. Social and commercial entrepreneurship: Same, different or both?. Entrepreneurship: Theory & Practice, 30 (1), pp. 1-22.
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  • Burnham, K., 2002a.What skills will non-profit leaders need in the future? Nonprofit World, 20(3), pp. 33-35. 
  • Burnham, K., 2002b. What skills will non-profit leaders need in the future? Nonprofit World, 20(3), pp. 33-35. 
  • Conway, C., 2008. Business planning training for social enterprise. Social Enterprise Journal, 4(1), pp 57-73.
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  • Emerson, J., 2003. The blended value proposition: Integrating social and financial returns. California Management Review, 45(4), pp. 35-51.
  • Hines, F., 2005. Viable social enterprise: an evaluation of business support to social enterprises. Social Enterprise Journal, 1(1), pp.13–28.
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  • Hynes, B., 2009. Growing the social enterprise – Issues and challenges. Social Enterprise Journal, 5(2), pp. 114-125.
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  • Root Capital, 2013a. Root capital timeline. [online], Available at < http://www.rootcapital.org/about-us/timeline> [Accessed 9 August 2013].
  • Root Capital, 2013b. Resources. [online], Available at < http://www.rootcapital.org/our-approach/resources> [Accessed 9 August 2013].
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  • Root Capital, 2013d. Understanding our impact. [online] Available at < http://www.rootcapital.org/our-impact> [Accessed 9 August 2013].
  • Root Capital, 2013e. Empowering women. [online] Available at < http://www.rootcapital.org/issues/empowering-women> [Accessed 9 August 2013].
  • Root Capital, 2013f. Performance report. [online] Available at < http://www.rootcapital.org/sites/default/files/performance_reports/QPR/rootcapital_q1_2013_performancereport-v2.pdf> [Accessed 9 August 2013].
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  • Thompson, J., Alvy, G. and Lees, A., 2000. Social entrepreneurship – A new look at the people and the potential. Management Decision, 38(5), pp. 348-338.[/sociallocker]

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