ILOCOS SUR

POLYTECHNIC STATE
Tagudin Campus
COLLEGE

Lecture Notes
CHAPTER 2 – SOCIAL ENTREPRENEURSHIP

TITLE: OPPORTUNITY IDENTIFICATION FOR SOCIAL ENTREPRENEURSHIP

WHAT IS THE MODULE ALL ABOUT?

Module 2 focuses on opportunity identification particularly for social ventures.

It looks into the external environment in the context of social entrepreneurship. The
PEST matrix and the different tools in analyzing the environment are discussed. This
chapter also explains ways on discovering opportunities and the models that can be
applied to make sure the social venture is sustainable.

LIST OF TOPICS TO BE STUDIED IN THE MODULE

 Lesson 1. The External Environment of Social Entrepreneurship

 Lesson 2. Discovering Opportunities for Social Ventures
 Lesson 3. Developing a Social Venture Sustainability Model

INTENDED LEARNING OUTCOMES (ILO) for Lesson 1

At the end of this module, the students would be able to:

1) Analyze the external environment for social ventures
2) Identify the ways on discovering social entrepreneurial opportunities
3) Conduct assessment of identified social venture opportunities
4) Explain the social venture sustainability model

Course Code: Entrep 112

Descriptive Title: SOCIAL ENTREPRENEURSHIP
Instructor: JERIC L. PADSING
 ILOCOS SUR
POLYTECHNIC STATE
Tagudin Campus
COLLEGE

Lecture Notes

LEARNING CONTENT

OPPORTUNITY IDENTIFICATION
FOR SOCIAL ENTREPRENEURSHIP

Lesson 1 – THE EXTERNAL ENVIRONMENT OF SOCIAL ENTREPRENEURSHIP

Understanding the External Environment of Social Entrepreneurship

Social enterprises or ventures do not operate in a vacuum; rather they exist

in an external environment that can impact on their formation as well as survival.
The external environment shapes organizations, business or non-profit, in different
ways, and therefore it is an important variable in gaining a greater understanding of
social ventures and social entrepreneurship.

The Macro-environment of Entrepreneurship

An understanding of the context, i.e, the environment in which

entrepreneurship operates, is important as no entrepreneur can operate outside of it
- as the old saying goes - no man is an island, the same applies to
entrepreneurship, social or commercial. They all operate within their external
environment in which they exist and are influenced by that environment, either
positively or negatively.

As always, social entrepreneurship can gain knowledge and insights into

research in the field of commercial entrepreneurship.

Generally, four broad types of environment affect entrepreneurship:

 Political; - (government policies, democracy, the Rule of Law, etc.) can

facilitate or impede entrepreneurial activity.
 Economic; -the state of the economy, inflation, taxes, unemployment,
economic growth or recession, etc.
 Sociocultural - demographics, culture and tradition, lifestyle, etc,
 Technological - (the level of R&D, innovation, etc.) was recently added
to the three above to create the acronym PEST - (Political, Economic,
Sociocultural, and Technological).

The PEST Model and Social Entrepreneurship

Course Code: Entrep 112

Descriptive Title: SOCIAL ENTREPRENEURSHIP
Instructor: JERIC L. PADSING
 ILOCOS SUR
POLYTECHNIC STATE
Tagudin Campus
COLLEGE

Lecture Notes
The PEST model is widely used as a strategy tool to analyze the external
environment of an organization in order to gain a greater understanding of how the
various factors - political, economic, social, and technological - may impact or
influence new or existing organizations, including social ventures.

The table below shows the PEST factors in the external environment:

Political factors Economic Social factors Technological

factors factors
Tax policy Economic growth Culture Research and
Labor law Interest rates Traditions development
Environmental Exchange rates Religions activity
law Inflation rates Religious Automation
Trade restrictions State of economy tolerance Rate of
Tariffs Standard of living Lifestyle technological
Democracy Economic risk Value system change
Political stability Structure of Norms Use of technology
Political risk industry Population Types of
Rule of law Market size demographics technology
Availability of
investment capital

1. Political Environment and Social Entrepreneurship

The political environment of any country is an important determinant of

the growth and development of entrepreneurship, whether commercial or
social. The political environment includes factors such as tax policy, labor
laws, environmental laws, trade restrictions, democracy, political stability,
rule of law, and political risk. A study conducted in 47 countries using GEM
data found that social/political variables accounted for 76 percent of the
variance in explaining social entrepreneurial activity. Governments around
the world, including Saudi Arabia are promoting policies that support the
formation of entrepreneurship across all regions (urban and rural), genders
(encouraging women to start their own businesses, etc.).

2. Economic Environment and Social Entrepreneurship

A growing economy with lots of resources, both human and physical,

resources tend to support a greater degree of entrepreneurial activity than an
economy that is stagnating or not growing. The attractiveness of social
entrepreneurship in a country frequently exists as a result of information
about existing material and human resources. In other words, countries
where material resources are available may have more social entrepreneurial
activity than those that lack such resources.

Course Code: Entrep 112

Descriptive Title: SOCIAL ENTREPRENEURSHIP
Instructor: JERIC L. PADSING
 ILOCOS SUR
POLYTECHNIC STATE
Tagudin Campus
COLLEGE

Lecture Notes
The economic policies in a country, such as the rate of taxation,
monetary and fiscal policies, may have a direct positive or negative impact
on the formation and management of new business or social ventures.

3. Social Environment and Social Entrepreneurship

A country’s social and cultural environment, including its demographic

groups and lifestyle does have an impact on entrepreneurial activity. The
social environment includes factors such as culture, the value system,
traditions, religious belief/s, and demographics as well as attitudes toward
entrepreneurship.

Countries with a high degree of individualism (self-reliance/

independence) are said to have higher levels of entrepreneurial activity than
countries that have a lower degree of individualism (collectivism/ controlled).

4. Technological Environment and Social Environment

Like the other external environmental factors (political economic, and

social), the technological environment can influence entrepreneurial activity,
including social entrepreneurship in the following ways:

1) Technology, especially information technology, facilitates increased

awareness of the existence of social problems not only locally but in other
parts of the world.
2) Technology can facilitate the creation of social ventures because social
entrepreneurs can easily use the internet to advertise their social
ventures.
3) Technology facilitates partnerships among social entrepreneurs located in
various parts of the world.

Tools for Analyzing Social Venture’s External Environment

Analyzing the external environment for a social venture can be done through
environmental scanning, competitive intelligence, benchmarking, and applying the
Porter’s 5 forces model.

Environmental Scanning

Environmental scanning is a strategic management tool that is used to

analyze the external environment of a firm.

It involves a five-step process:

1. Identifying the environmental scanning needs of the firm;

2. Gathering the information needed by the focal firm; (internal/external
sources of information)

Course Code: Entrep 112

Descriptive Title: SOCIAL ENTREPRENEURSHIP
Instructor: JERIC L. PADSING
 ILOCOS SUR
POLYTECHNIC STATE
Tagudin Campus
COLLEGE

Lecture Notes
3. Analyzing the information;
4. Communicating the results to concerned parties; and
5. Making informed decisions

Environmental scanning helps a firm to identify key driving forces in the

environment. Examples of driving forces include:

 increasing globalization,
 internet opportunities,
 regulatory policies/government legislation,
 changing societal concerns, attitudes, and lifestyles, and
 changes in the degree of uncertainty and risk.

These strategic tools can also be applied in assessing or scanning the

external environment in which a social venture operates, with some modification.

Competitive Intelligence

Competitive intelligence is a strategic management tool that is used to

reserve useful information about the competition, the market, and the technology
that can be utilized by managers to make strategic decisions.

Competitive intelligence involves:

 Collecting information.
 Analyzing and interpreting information.
 Distributing and storing information.
 Responding to the information.
 The External Environment of Social Ventures

Social entrepreneurs can also use competitive intelligence to collect

information about social needs to address and the potential competitive landscape
of social ventures that address similar needs. This is particularly important when the
social venture has a hybrid or a for-profit form of organization.
Social Entrepreneurs can help acquire useful information about their key
stakeholders by using competitive intelligence.

Benchmarking

Benchmarking refers to the process of comparing one’s own business

processes against leaders in an industry and comparing performance metrics with
the industry’s best or with best practices from other industries.

 It is a systematic, continuous process of measuring and comparing an

organization’s business processes against the leaders in an industry to gain

Course Code: Entrep 112

Descriptive Title: SOCIAL ENTREPRENEURSHIP
Instructor: JERIC L. PADSING
 ILOCOS SUR
POLYTECHNIC STATE
Tagudin Campus
COLLEGE

Lecture Notes
insights that will help the organization take action to improve its
performances;
 It is about learning from others, including your competition, in order to
improve performance.
 Companies often benchmark others on three dimensions—quality, time, and
cost

There are seven (7) steps in the benchmarking process:

1. Identify problem areas.

2. Identify industries that have similar processes.
3. Identify organizations that are leaders in those areas.
4. Survey leading organizations for measures and practices.
5. Visit the leading organizations to identify best practices.
6. Implement best practices.
7. Evaluate and adjust when necessary.

Social ventures can learn not only from other high-quality social ventures but
also from high-performing commercial businesses by using benchmarking. Social
ventures can use benchmarking to compare themselves to the best in a area or to
learn from the best practices in both social and commercial entrepreneurship.

Applying Porter’s Five Forces Model to Social Ventures

The five forces identified by Porter comprise:

1) Intensity of rivalry among existing firms

2) Threats of new entrants.
3) Pressure from substitute products.
4) Bargaining power of buyers.
5) Bargaining power of suppliers.

The joint influence of these five forces determine the intensity of the
competition in each industry. The greater the strength of the five forces, the lower
the expected profitability in a given industry will be.

.
It makes perfect sense to apply Porter’s five forces model to social
entrepreneurship as there is competition among social entrepreneurs for resources
(such as grants, donors, volunteers, and government contracts) in the social sector.

Course Code: Entrep 112

Descriptive Title: SOCIAL ENTREPRENEURSHIP
Instructor: JERIC L. PADSING
 ILOCOS SUR
POLYTECHNIC STATE
Tagudin Campus
COLLEGE

Lecture Notes

Lesson 2 – DISCOVERING OPPORTUNITIES FOR SOCIAL VENTURES

The recognition of opportunities to create or innovate is the initiation point of

the entrepreneurial process. Either the venture is for economic or social gain, it
always starts with opportunity recognition.

Opportunity and Opportunity Recognition

Generally, an opportunity is the possibility of doing something. It is a set of

circumstances, and ideas that make it possible to do something that is favorable to
for attainment of a goal.

In business and entrepreneurship context, opportunity is a set of

circumstances that make it possible to create a need for a new product, service or
business. It is a set of situations that makes it possible to create and develop
profitable and sustainable business. The process in seeking and assessing
opportunities for a social venture is called opportunity recognition. Opportunity
recognition is discovering and evaluating changes in the environment that can be
exploited, such as new technology, socio-cultural trends, or shifts in consumer
demand. The connection between an awareness of emerging trends and the
personal characteristics of the entrepreneur is called opportunity recognition.

In opportunity recognition there is a need to look into the environmental trends

and personal characteristics of the entrepreneur (see the diagram below). By
assessing the factors, the social entrepreneur can be able to spot the difference
between what is available and what is possible that is the business, product or
service opportunity gap. In the presence of a gap, the social entrepreneur can come

Course Code: Entrep 112

Descriptive Title: SOCIAL ENTREPRENEURSHIP
Instructor: JERIC L. PADSING
 ILOCOS SUR
POLYTECHNIC STATE
Tagudin Campus
COLLEGE

Lecture Notes
up with new venture ideas. When a product or service is needed by a specific group
of people that might have been ignored by the existing businesses, then there is a
gap that needs to be addressed.

Environmental Trends
 Economic factors
 Social factors
 Technological
advances
 Political and regulatory New Business,
changes Business, Product, or Service Product, Service,
Opportunity Gap Social Venture Ideas
Personal Characteristics of
an Entrepreneur
 Prior experience
 Cognitive factors
 Social networks
 Creativity

Every commercial or social venture starts with an idea. Ideas are not
opportunities in themselves. They are inert and have no real value in and of
themselves. Ideas are the seeds of the entrepreneurial process but they must be
acted upon to be useful. Because ideas are important to the entrepreneurial process,
it is worth knowing where they originate. Entrepreneurship scholars have identified at
least five sources of ideas:

1. personal experiences;
2. hobbies;
3. accidental discovery;
4. systematic search; and
5. awareness created by media, personal, and professional networks

What is an Entrepreneurial Opportunity?

Entrepreneurial opportunities are situations in which new goods, services,

raw materials, and organizing methods can be introduced and sold at greater than
the cost of their production (or provided to society at a benefit greater than the cost
of production).

Course Code: Entrep 112

Descriptive Title: SOCIAL ENTREPRENEURSHIP
Instructor: JERIC L. PADSING
 ILOCOS SUR
POLYTECHNIC STATE
Tagudin Campus
COLLEGE

Lecture Notes
Timmons & Spinelli (2007) identified five characteristics of an entrepreneurial
opportunity, as follows:

 ability to add value to the customer;

 adding value by solving a customer’s problem or fulfilling a customer need;
 ability to capture a market and generate profits; and
 compatibility with the skill set of the entrepreneur who pursues them.

Gartner & Bellamy (2010) emphasized the four Cs to be considered in

discovering entrepreneurial opportunities. The four Cs of opportunity includes
customer, consideration, connection, and commitment.

1. Customer – individual willing to buy the products or services of a firm

2. Consideration – value provided to the customer
3. Connection – getting the product to the customer
4. Commitment – willingness to devote time and energy to pursue the
opportunity

Entrepreneurial opportunities for social ventures are formed through four

distinct ways: systematic search, alertness, idea generation, and design thinking.

1. Systematic Search

 Entrepreneurs actively search for opportunities. They do so by

relying on their competencies, personal and professional
experiences.
 Systematic search is a narrow process that is limited to the
entrepreneur’s experience.
 Subject to the corridor principle. According to the corridor principle,
once an entrepreneur starts a firm, he or she begins a journey down
a path where corridors leading to new venture opportunities
become apparent (Barringer & Ireland, 2012).

2. Alertness

 It is the ability to identify opportunities that are overlooked by

others.
 It includes three dimensions:
a) scanning and searching for new information
b) connecting previously disparate information
c) evaluating whether the new information represents an
opportunity

3. Idea Generation

Course Code: Entrep 112

Descriptive Title: SOCIAL ENTREPRENEURSHIP
Instructor: JERIC L. PADSING
 ILOCOS SUR
POLYTECHNIC STATE
Tagudin Campus
COLLEGE

Lecture Notes
 This can be done through brainstorming and focus group
discussions.

4. Design Thinking

 It consists of using ethnographic methods, such as observation to

come up with new ways of solving problems.
 Iterative, exploratory process involving visualization, experimenting,
creating, and prototyping of models, and gathering feedback.
 It deals with complex, ill-defined problems.
 Design thinking is construed as a cognitive style, a process or a
resource.
 According to Herbert Simon, a design thinking process could have
seven stages: define, research, ideate, prototype, choose,
implement, and learn.

A social entrepreneurial opportunity has five features (Zahra, et al., 2008):

1. Prevalence: How rampant is the social problem or need in society?

2. Relevance: Do you have the necessary resources to effectively solve the
problem and launch the social venture?
3. Radicalness: How creative and innovative is your solution to solve the
social problem?
4. Urgency: Does the social problem need a quick, immediate response by
your social venture team?
5. Accessibility: What is the level of difficulty in addressing a social need
through traditional mechanisms, including government interventions, non-
profit capabilities, or foundation support?

Lesson 3 – DEVELOPING A SOCIAL VENTURE SUSTAINABILITY MODEL

Social business models or sustainability models are essentially different

from commercial business models. In developing a sustainability model for social
venture, the following questions should be answered:

1. How will the social venture sustain itself over time?

2. Why does the social entrepreneur need to build his/her social venture
sustainability model?

A simple answer to the question is that entrepreneurs need to build

sustainability models to ensure that they understand what needs to be done to make
the venture sustainable over time.

What is Social Venture Sustainability Model?

Course Code: Entrep 112

Descriptive Title: SOCIAL ENTREPRENEURSHIP
Instructor: JERIC L. PADSING
 ILOCOS SUR
POLYTECHNIC STATE
Tagudin Campus
COLLEGE

Lecture Notes
A social venture sustainability model (SVSM) can be defined as the
process of creating, delivering, and capturing value for all stakeholders involved in
the social venture. The social venture proposition is a bundle of services that the
social enterprise proposes to its customers both beneficiaries and sponsors.

There are three elements of the social venture sustainability model:

1. Specification of targeted stakeholders and the provision that the value

proposition and constellation are not focused solely on the customer, but
are explained to encompass all stakeholders
2. Definition of desired social profits through a comprehensive ecosystem
view, resulting in a social profit equation
3. Economic profit equation targets only full recovery of costs and capital, not
financial profit maximization

Designing a Business Model

Developing a business model consists of creating the content, structure and

governance of transactions designed to create value through the exploitation of
business opportunities.

In the design of a business model, two sets of parameters that business

model designers must consider: design elements and design themes.

Design elements include:

 Content (What activities should be performed?)

 Structure (How should they be linked and sequence?)
 Governance (Who should perform them and where?)

The design elements are the conceptualization and configuration of the

business model.

Design themes include:

 Novelty (Adopt innovative content, structure or governance)

 Lock-in (Building in elements to retain business model stakeholders)
 Complementarities (Bundle activities to generate more value)
 Efficiency (Reorganize activities to reduce transaction costs)

Design themes describe the sources of the models value creation. The
business model of a new venture describes how the new venture plans to make
money and sustain itself over the long term.

It is worth noting that the effectiveness of a business model depends not only
on its design but, more importantly, on its implementation.

Course Code: Entrep 112

Descriptive Title: SOCIAL ENTREPRENEURSHIP
Instructor: JERIC L. PADSING
 ILOCOS SUR
POLYTECHNIC STATE
Tagudin Campus
COLLEGE

Lecture Notes

Designing a Social Venture’s Sustainability Model

The starting point in the design of a social venture’s sustainability model is to

answer the following question: how do social enterprises generate income?

Social enterprises generate income from:

 Those who receive the service;
 Third parties with vested interests; and
 Others who play indirectly.

A framework for successful business models comprises four elements:

 Customer value proposition (CVP) – what value are you providing, or

problem are you solving for the customers?
 Profit formula – how do you intend to earn a profit from the
product/service you offer?
 Key resources – what key resources do you require in order to provide
the product or service?
 Key processes – what internal processes are needed to produce a
product/service that the customer will need?

The customer value proposition is the extent to which the social venture
adds value to the lives of the beneficiaries. Here, the profit formula encompasses
social profits. It deals with the social objective accomplished by the social venture.

There are three elements that are essential in the implementation of a

business model or a social venture sustainability model:

 The creation of value networks, (particularly relevant for social ventures

which depend on many different stakeholders)
 The procurement of strategic resources, and
 The management of customer interface

Another way to create a social venture sustainability model is through the

business model canvas. For a social venture model, here are the nine (9) elements:

1. Key partners;
2. Key activities;
3. Value proposition;
4. Beneficiary or customer relationships;
5. Beneficiary or customer segments;
6. Resources;
7. Channels;
8. Cost structure; and
9. Revenue stream.

Course Code: Entrep 112

Descriptive Title: SOCIAL ENTREPRENEURSHIP
Instructor: JERIC L. PADSING
 ILOCOS SUR
POLYTECHNIC STATE
Tagudin Campus
COLLEGE

Lecture Notes

The Social Venture Sustainability Model

Key Partners Key Activities Value Proposition Customer/ Customer/

Who will help the Identify the key What problem is the Beneficiary Beneficiary Segments
social venture activities to perform social venture Relationships Who are the
implement its to accomplish the solving? How will What types of beneficiaries or
business model? social mission. solving this problem relationships to customers of the
Governments, have an impact? develop with social venture? Who
foundations, other beneficiaries who do are those
companies, etc. not pay for the beneficiaries who
service? would not pay but still
Resources Channels receive the service?
What resources are How to reach the Who are those
needed to perform beneficiaries or beneficiaries who will
the different customers? pay?
activities? How to
acquire these
resources?
Cost Structure Revenue Streams
Identify cost areas. What activities will cost the most? How would revenue be generated to make the social
venture sustainable?

Reference/s:

Beugre, C. (2017). Social entrepreneurship: managing the creation of social value.

Routledge

Building Social Venture Sustainability Models, Retrieved at

https://tinyurl.com/26kjfkn6

Recognizing Social Opportunities, Retrieved at https://tinyurl.com/9wba5fst

Course Code: Entrep 112

Descriptive Title: SOCIAL ENTREPRENEURSHIP
Instructor: JERIC L. PADSING