impact assessment of social business model

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Social Business a change agent in spurring social solution within Capitalism.

Foreword

Noble Laureate professor Mohammmad Yunus, a pioneer in microcredit operation

in the world has tossed the very idea of Social venture through Capital injection

from big corporate hence mitigating a social cause within. He called it Social

Business-type II. He believes that the model has a subtle but distinct difference with

Social entrepreneurship ( Grameen creative lab & HEC paper 2009). Thus, it forms

an Idea of Not- for profit & non dividend1 business venture which fixes the social

problems through its operations.

In the light of seven principles, ProfessorYunus (2010:4) clearly distinguishes a social

business from social entrepreneurship:

Social entrepreneurship relates to a person. It describes an initiative of social consequences created by an entrepreneur with a social vision. This initiative may be a non-economic initiative, a charity initiative, or a business initiative with or without personal profit. . . .In contrast with social entrepreneurship, social business is a very specific type of businessa non-loss, non-dividend company with a social objective. A social business may pursue goals similar to those sought by social entrepreneurs, but the specific business structure of social business makes it distinctive and unique.

Now if we look at the world we would see that almost 25%3 people are living their

life below the poverty line i.e. $1.25/ day(nominal rate). LDCs and Sub saharan

African4 countries are the main participants of this league with hugely unsolved and

unaddressed social issues; which impede these countries economic prosperity. For

years big donor agency dominated NGOs and government institutions applied their

apparatus to overcome such a distress. But reality in these countries speaks out

differently and loudly here apart from some exceptions. However, some real life

case of social Business application may be exemplary for LDCs. For example in

Bangladesh where Social Business model has been applied and it has made a

significant impact so far.

I would like to thank my supervisor for critical questions and motivations when I

needed most. I would also like to thank my friends for discussions and input. Finally

I would like to express gratitude for the open environment my workplace has

provided me with, including input for innovative business thinking.

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Executive Summary

Ever since the global melt down 2008-09, thinkers of different social aspects and

economic gurus redundantly trying to fix the current Capitalistic model where most

of the time top of the food chain still remains stable and bottom of the pyramid has

to face social calamities, a kind of an obvious route to socio economic path. A need

has been surged as a matter of fact to address social issue along the path of

economic profit.

Social Business, as a model has been orated probably cant be a better timing than

this, has a proposition to serve financial/ economic and social ends. Social business

not at all a social entrepreneurship only, it has far wider scope to address the

pressing issues of society. This thesis is just an attempt to look at the propositions of

social Business clinically and thus assess whether social businesss impact match

with its declarations.

Chapter 1,2 and 3 are more of scene setting and how we would approach to the end

has been depicted here. From the core of social business model to design the

research and from the research strategy to the narrower aspects of research

methodology has been described here. The thumb rule that we have has always in

our mind was to direct the questions on impact level and how it would answer us at

the end. As looking at the social phenomena we could have easily drifted towards

qualitative bits, however we have narrowed the area and tried to be as relevant and

quantitative as it can get.

To encounter the issue and find out the real impacts in localities where social

business is in action, we had to develop relevant hypothesis for making our thesis

journey even more cynical and objective oriented. Chapter 4 will give a glimpse of

developing hypothesis and how they are constructed has been narrated as well.

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Now its time to look at a company which has been built on the principle of social

business. In chapter 5, Grameen Dannone foods limited and the way the this

company acts in the market, their current structure, their portfolio and their supply

chains- each of the issues has been narrated in details.

Making an overall assessment wont be possible without designing into the right

structure. All it was needed to design an assessment model and align with the

questionnaire to detect any links whether possibly achievable or not. Chapter 6 will

give us a concrete idea about the collection of data and how they had been coded to

give a real meaning in analysis. After that the research continues to embark on

analyzing data that has been taken over a course of time. Nearly 200+ samples with

2500 data has been collected and then analyzed via SPSS software. To come to a

proper conclusion we did factor analysis and hypothesis testing had also been done.

The addressing issue was whether social business have any positive impact over 5

issues namely decreasing malnutrition, creation of jobs, alleviating poverty and

entry to BOP market.

Finally, once the analysis was done we could eventually see the big picture around

us. Social business not only reaps benefit as a model for the company but also

mitigate problems exist in social arena. GDFL was created to address the

malnutrition of children and over the course of 7 years, it seemed it has attained the

principal goal and some other issues are also showing promise to be met.

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Table of Contents

Foreword I Executive Summary II List of Figures III List of Tables IV Abbreviation V

Chapter 1 - Introduction 9-15 1.0 Introduction 9 1.1 Contextualization and research Interest 10 1.1.1 Examples at Hand 10 1.1.2 Bangladesh as an Emerging markets and their Issues 11 1.1.3 MNCs in Emerging states 12 1.1.4 Capitalism and solution to the current crisis time 12 1.1.5 Integrating CSR and Entrepreneurship 13 1.1.6 Attractive Business model for serving BOP (base of the pyramid) 13 1.2 Main research Question 14 1.3 Research Objectives 15 1.4 Serving both ends 15

Chapter 2 Methodology 17-25 2.0 Methodology 17 2.1 Research Philosophy 17 2.2 Research Approach 18 2.3 Research Design 19 2.4 Research Strategies 21 2.5 Time Horizon 22 2.6 Data Collection methods and Techniques 22 2.7. Validity and Reliability 23 2.4 Delimitations 24

Chapter 3 Social Business- A model to watch for the next decade 27-38 3.0 Social Business- A model to watch for the next decade 27 3.1.1 Types of Social Businesses 28 3.1.2 Seven Principles 28 3.2 Is it another form of Social Entrepreneurship or Social Enterprise 29 3.2.1 Social Entrepreneurship literature 30 3.3 Social Business and A new form of Capitalism 31 3.4 CSR and Social Business 33 3.5 Bottom of the pyramid and Social Business an entry mode for MNCs 34

Chapter 4 Hypothesis development 40-46 4.1 Introduction 41 4.2 Relationships 42 4.3 Contribution 42 4.4 Hypothesis development 43

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4.5 Hypothesis Related to decreasing Malnutrition level 43 4.6 Hypothesis Related to Economic emancipation 44 4.7 Hypothesis Related to poverty alleviation and increasing productivity 45

4.8 Hypothesis Related to self sustaining business model creation 45

4.8 Hypothesis Related to entry strategy for big corporate into untapped BOP markets

46

Chapter 5 Knowing a Social Business Company-Grameen Danone

48-58

5.0 Groupe Danone 49

5.1 Grameen Foundation 49

5.2 Story of Social Business Project (Grameen Danone Foods Limited) 50

5.2.1 A Unique Business Model 51 5.2.3 Where the dream catches the reality 51

5.4 GDF Supply Chain 52

5.4.1 Company-Owned Milk Collection Center 53 5.4.2 Grameen Livestock Foundation 54

5.4.3 Nandigram Farm 54 5.4.4 Spot Market 55

5.4.5 Date Molasses 55

5.4.6 Nutrients 55

5.4.7 Packaging 56 5.5 GDFL Organizational Chart 57

5.6 GDFL- Capital Structure 57

Chapter 6 Designing an assessment model 60-65 6.1 Overview 61

6.2 Sample selection 61 6.3 Scaling and measure 62

6.4 Data Collection procedure 62

6.5 Analytic Techniques and Hypothesis testing 63

6.6 Designing an assessment model 65

Chapter 7 Research results 67-71 7.1 Research result Extraction process 68

7.2 Sample Description 68 7.2.1 Size 68

7.2.2 Sample Characteristics 68 7.3.1 Frequency Distributions 69

7.3.2 Factor Analysis 69

7.4 Hypothesis Testing 70

7.4.1 Testing Hypothesis 1 - Hypothesis 5 70

Chapter 8 Discussions and Conclusions 73-78 8.1 Thesis Results 74

8.2. Derivation of an impact model and scale 75 8.3 Limitations 76

8.4 Implications for future research 77

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8.5 Conclusions 78

Reference 80-108

Appendices 110-115 Appendix A 111

Appendix B 112 Appendix C 113

Appendix D: Descriptive Statistics 114 Appendix E: Correlations 115

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List of Tables

Table 01 Survey Participants No and area

Table 02 Scale and measurement linked with Literature

Table 03 Scale of Impacts

Table 04 Factor analysis in Social Business Impact

Table 05 Significance level test result of Hypothesis

Table 06 Impact zone and Assessment based on Hypothesis test

Table 07 Impact zone Weightage

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List of Figures

Figure 01 Research Philosophy

Figure 02 Distinguishing facts of Social Business to Social entrepreneurship

Figure 03 analyzed Grameen Social Business addressing issues

Figure 04 Development of Hypothesis

Figure 05 Grameen Dannone in map of Bangladesh

Figure 06 Grameen Dannone organ o gram

Figure 07 Grameen Dannone performance at a glance

Figure 08 Beta values for independent Variables

Figure 09 Making an effective Scale and its impact

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List of Abbreviations

GDFL: Grameen Dannone Foods Limited

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We can put poverty into the museums Professor Yunus

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You do not need to think of Social Business only in terms of selling a

product. (p. 23)

Poverty is artificialwe can create poverty-free world if we redesign our

system to take out its gross flaws which create poverty (p. 15)

Building Social Business, Dr Mohammad Yunus with Karl weber

1.0 Introduction

Words above are self-explanatory and are course a food for thought for where and

how we live in this world. Feeling like changing the world to a different order is not

a distant matter at least in theory and in some mini practices, serving the social

needs through streaming a profit oriented business tells us to dream on. Social

Business by its name has got real attractions in the current business arena as of late

for letting us nurture a concept of a poverty-free world. As a matter of fact, a human

with an experience of a state where his most basic needs are still unmet, where he

sees capitalism has propelled to a momentum but social change for him is still a far

cry; as a result accepting massive inequality and status of poverty is his ultimate

destiny- when someone questions to this livelihood problem and narrates a solution

to these can surely wave a hope of positivism reflecting the true spirit of Capitalism.

Well, it is a matter of academic debate whether we can achieve these unthinkable

solutions through fostering a Social Business Model. 1The most pragmatic question

may come here in the course of time is whether it is a comparable fit to a profit

generating machine. From poor to the developed across the global economic map,

this model has grasped attention in the midst of economic turmoil both in Europe

and America. Even in recent past, here in Copenhagen on 28th March a seminar had

taken in place in front of the industry experts and MNCs of the local industry to curb

1 Social Business is a new kind of Business, its quite distinct form either a traditional profit maximizing business or a not-for-profit organization. Its goal is to solve a social problem by using Business methods, including the creation and sale of products and services. (Building social Business, p1)

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the social problems arising in recent years. Dr. Yunus unambiguously tried to touch

down the premise on what basis he believed his model could ensure a solution to a

social needs yet can generate profit out of a business concerned with the solutions

in it.2

What inspires me here to do this thesis is finding the linking point of departure

between the MNC and the solution to a social problem. In a world where -we see one

third of the people in each day cant manage three times meal day, we see jobless

people in different countries are just growing and where we can see that gap the

inequalities has been rapidly growing for the last 5 years consecutively. MNCs on

the other hand have evolved to a new paradigm to enter into the markets where

barriers to entry are relatively high due to both external and internal factors. Most

of the international players have developed their CSR programs in giving the

recognition to a responsible business model. Now it becomes trickier when this CSR

has been revamped into a package of self-sustaining model under the context of

Social Business Model.

1.1 Contextualization and research Interest

1.1.1 Examples at Hand

The first joint-venture social business was created in 2005 with the multi-national

French dairy company DANONE, aimed at reducing malnutrition among the children

of Bangladesh. The Grameen-DANONE Company produces a delicious yogurt for

children and sells it at a price affordable to the poor. This yogurt is fortified with all

the micronutrients, which are missing in the childrens ordinary diet vitamins,

iron, zinc, iodine, etc. If a child eats two cups of yogurt a week over a period of eight

to nine months, the child gets all the micro-nutrients he or she needs and becomes a

healthy, playful child.

2 The daily star, 29th March. www.thedailystar.net

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The most intriguing part is the performance measured in the joint venture are not

based on the profit maximization rather it is based on the effectiveness on meeting

the social cause; to be specific enough- the number of children got out of malnutrition

in each year.

1.1.2 Bangladesh as an Emerging markets and their Issues

Well it can be easily perceived that emerging market economies are now in the

transition mode and most of the emerging state used the International Trade as

their way of changing their fate. Low cost labour and human capitals have been the

ultimate source of their boost in the recent years. Having said all these we cant deny

the fact that emerging states are still behind on meeting the social problems lie in

the backbone of their society compared to any developed state.3 Inequality in wealth

of distribution and poverty are some of the pulling down effects to name a few.

Bangladesh unlikely to many other emerging economies could not reap out the

benefit to its full swing. After 1991, when the country starts its journey towards a

democratic pro free trade state, it has since then continuously registered a

staggering growth rate of over 5.5% (average).4 But the rate of poverty reduction is

still minimal and quite depressive. Along side to this Bangladesh has moved to

worlds second largest RMG exporters in the world capitalizing its low cost labor

endowments but on the side of the coin income distribution gap is widening for the

last decade at a rate of 7.43%. As a result, people are still struggling to get rid of

vicious circle of poverty and thus most of the social problems still persist vivid in

Bangladesh.

1.1.3 MNCs in Emerging states

It needs to keep in mind that over the years Business has seen many dimensions and

contribution from the MNCs with buffeting creativity and Internationalization in

3 MDG report 2012.

4 Bangladesh Bureau of Statistics 1990-2011, GDP forecasting reports.

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trade & commerce. If we look into the contribution size to the world GDP ( )from

MNCs we would hardly say against of it. The important thing to remember here is

the growth rates and non-specifications of Locations. It tells the beauty of

Globalization and the impact to this is a huge growth captured by MNCs using the

Local market adaptations and serving local consumers. Yet, the question remains

quite bold against the MNCs and their operational objectives in the country-

especially in emerging economies. However, things can be thought off if there is a

format of business for MNCs and solving social cause side by side. Since the

economies are transitional in phase-can social business model erect a success stone

to solve issues that emerging states have in common i.e access to pure drinking

water, access to shoes, access to primary health & education, access to entrepreneurial

markets, decreasing the malnutrition rate of rural based children etc.

1.1.4 Capitalism and solution to the current crisis time

Adam Smith provided the conceptual framework of capitalism: the freer the market,

the better is the result in solving the questions of what, how, and for whom. the world

has changed enormously. The need for reviewing the basic structure of capitalism

has been felt on many occasions. But it has never been felt as strongly as it is being

felt today. Capitalism is in serious crisis: free-market capitalism cannot allocate all

resources efficiently and individual profit maximization does not lead to collective

happiness, eventually 3 billion people are badly suffering though poverty, hunger

and disease.

Its a change that will allow individuals to express themselves in more

human way and address the problems left unsolved or even exacerbated

by the existing socio-economic framework. Although my proposal may

be viewed as a significant change in the structure of capitalism, it is

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indeed consistent with what Adam Smith explained so brilliantly 250

years back in his Theory of Moral Sentiments. 5

1.1.5 Integrating CSR and Entrepreneurship

Even the companies are so concerned to profit orientation in business cycle, they

have never kept themselves away from doing something for the market where earn

their bread and butter. In business, we call it CSR (Corporate Social Responsibility).

Most of the big MNCs in the world are contributing to this CSR fund citing an

essence to project a commitment towards the society and the country. In 2012, the

rate to funding in CSR issues by Fortune 500 companies rose to almost $2.3 billion, a

staggering growth of 12% compared to SPLY. But the essence of giving this

mammoth amount has been now in question since a meager level of improvement

has been seen in the areas where companies allocated funds for CSR acts. CSR to

entrepreneurship transformation has so far uncovered rather CSR has been taken as

a corporate charity at the end of the day. Dr Yunus has defined his ways as:

CSR programs are mostly used to build a companys imageto promote the idea

that the company is a Good Neighbor or a Good Citizen. Under the Present

economic framework profit making company have to decide on profit

Maximization first and then to social issues. By contrast, social business

exclusively designed to deliver social benefits and its attention to the social

cause is totally undivided. (Building Social Business, p10-12)

1.1.6 Attractive Business model for serving BOP (base of the pyramid)

Reaching out the poor and giving solution to their cause of poverty is just aligned

with the core of Social Business. Well, we must here know the numbers and the

number is mind striking for any business model to sustain and crane profits in the

long run. Approximately, 4Billion consumers lie in this base dormant with lots of

5 Vision 2050 Poverty free world, page 11, Journal of Social Business.

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social cause and wiping out from their social problems, Social Business can lead a

model for the BOP market. MNCs who are spending huge on CSR can now think

twice since it may turn out that their philanthropy can be means of solution of their

vicious circle of problems.

1.2 Main research Question

The Fundamental question that we will answer through our research is:

How Social business model can be a change agent to address a social

cause and doing business at the same time? How impactful it would

turn out to be as a model to achieve a solution? (For example-

alleviating poverty rates & creating jobs for that locality)

Some other socio economic answers it may give us as follows:

a. Whether this model has any impact on overall corporate branding of a

company? (share prices, sustainability indexes etc)

b. How can this model be applied for quick and unparallel entry to emerging

markets by MNCs or TNCs?

c. Would this model be a supplementary to the current CSR activities driven by

big MNCs?

d. What is the overall assessment on the impact of Social Business Model in

comparison to CSR activities of MNCs? (CSR budget/investments vs.

benefits sought/ social problem elimination level)

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1.3 Research Objectives

The main objectives are:

To assess whether Social Business can be a change agent for society since it

advocates a business model which gives a solution to a problem of society.

To identify whether the supposed model can be a solution for the

consumers, corporate investors and society.

To measure the degree of models impact on the overall profit & capital

formation of Multinationals and on the overall index of an economy.

To address whether this model can be used as a mode of entry for big brands

in emerging markets where numbers of consumers & opportunity to make

Low cost products are second to none.

1.4 Serving both ends

Social Business talks on serving both ends of the system. It has just shown ways to

solve problems by emulating Social Business model with a view to solve social

issues. Neither it attracts a different system altogether nor it says to run Capitalism

like the way it is running out of the runways. It is indeed a tricky part here,

considering a business with profit cycle and yet curbing the social problems. Unlike

the other businesses the motive is distinctive to look for which are in accordance

with the spirit of Human capability and creating a base to end of poverty era.

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A methodology is the theory of how research should be undertaken, including

the theoretical and philosophical assumptions upon which research is based

and the implications of these for the method or methods adopted (Saunders,

M., Lewis , P. & Thornhill, A. 2003)

2.0 Methodology

In this chapter, considerations regarding the methodology are presented. The

methodology departs from the problem statement and aims to secure an

appropriate standard and quality of the analysis. The chapter will begin with

reflections on the research philosophy. Such reflections are necessary for ensuring

consistency in the overall approaches and will provide a foundation from which the

thesis research approach and research strategy can be presented.

2.1 Research Philosophy

Since answering the research question, the central and pivotal point is to explain the

position of why we are choosing an option and reasons behind the choice dedicating

our knowledge base (Crotty 1998). Presenting answers through a research needs to

follow a linear path, which needs to be aligned with focal points of the discussion.

At every singular stage we will get in we would have assumptions and reality we

will excavate may either complement the facts or supplement the idea. However,

our philosophy must not change with the pace of the time or occurrences.

Therefore, we know that there are several branches of research philosophies

around us and we need to categorically choose a path that relates and answers our

base line research question. Philosophy for the whole research here is to set up a

platform to which one can assume the ends (Johnson and Clarke 2006). Adding to

that I believe Research Onion (Mark Saunders et al) can be way to clearly describe

the philosophy of doing my research.

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Taking a singular position is quite hard here especially when we are looking at the

facts of social theories implemented in recent times. Both Positivism and realism

shades light on my research idea. Working on phenomena and observing them on

real social actors involved in are areas where our research dives in. Before

excavating anything we must not forget that social actors and some observable facts

constitute a framework where we can possibly accept an epistemology. Well, we

dont either delist the pragmatism at all but we may find our questions answering in

the right frame using a mix of both positivism and realism in. (Crotty 1998 & Gill

2010)

2.2 Research Approach

Related to the level of structure and the procedural requirements, one can

distinguish and choose between deductive or inductive perspective. In a deduction

one seeks to use existing theory to shape the approach and adopt it to the

qualitative research process and to aspects of data analyses. On the other hand, in

the case of an induction one will seek to build a theory that is grounded in a number

of relevant cases. Another form we call it adductive approach, exist which steps in to

explain things from phenomena to generate a new or modify an existing theory and

Figure 1: Research philosophy

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subsequently test through additional data collection and interpretation. (Saunders

et al 2008)

This thesis report has applied a deductive approach since we are investigating an

existing theory and thus assembling data to assess and interpret the underpinned

promises based on phenomena. Social business has been in the surface as a thought

and as well as a new theory for the last 5 years, we have investigated its proposition

as a theory and would like to test its effectiveness in terms of its promise as a

catalyst of changing things and creating solutions in business arena.

As Blaikie6 has suggested 6 sequential steps, we have followed not in exact format

but have kept his approach, more or less indicative here. Since this approach has a

focus on casual relationship between concepts and variables, we have also tried to

incorporate a relationship between Social business concept and assessment of the

factors in chosen companies who have adopted this theory in practice. This thesis

since the beginning tried to solicit quantitative facts. As a result this approach would

enhance us to pinpoint the quantitative and econometric relations between the

social business as theory and the observed variables as facts from the company

moves towards accepting or negating our research hypothesis. (i.e. a change agent

or not). Another reason to support this approach is to constitute an overall

generalization matching theory in practice. Carefully selected samples and their

interpretations may suggest us to form a generalized view about our main research

question.

2.3 Research Design

Research design is generally negotiating with the researcher himself or herself of

how the research questions to be answered in a complete set of strategies. It is a

step forward to answer whether the research would be conducted generally either

in quantitative or qualitative in manner. Well, once a researcher is convinced with

6 Mark Saunders et al, Business Methods for research, p 145, Sixteenth edition.

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the process of the design making, he or she can go through the road map selected

way before hand in the research philosophy. Aligning with both philosophical and

approach base, this thesis tries out to reach the answers using both qualitative and

quantitative manners. While dealing with the Social Business principles, we would

rather try to focus on the qualitative facts complements the theory whereas

assessing the impact of the theory we have to be in the ground and assess the reality

against the promises made by the theory itself implemented in the business society

through engaging corporate entities. But in a general sense we can affirm that this

thesis will surely give more focus on the Quantitative sides.

In terms of talking about the method of this thesis we see multiple method7 serves

better answering the research questions than anything. While considering the fact

of multiple methods we do believe that thesis is designed in the mixed method8 as it

accounts both qualitative and quantitative methods. Regarding the question of this

method of being partially integrated or fully integrated, we believe our thesis acts in

a fully integrated format. When we will do qualitative stuffs like in-depth

interviewing, we would work on qualitative facts and observations whereas

interpreting questionnaire, we will be as much quantitative as possible.

This thesis tries to look at the facts stated in Social Business theory and its impact in

the change of social problems especially in the BOP zone. Thesis will be an

exploratory purpose where we will find the interaction of catalyzing elements

between social business and social solutions. Again we have kept in mind that

finding a causal relationship with the agreed variables, we will ultimately move

towards explanatory studies. Our econometric modeling chapter will be based on

that. Apart from that we would do 7 in depth interviews with the concerned people

to talk about the social business operation in Bangladesh though GDFL project. To

7 Mark Saunders et al, Research method for Business Student, 6th edition, p 165

8 Mark Saunders et al, Research method for Business Student, 6th edition, p 166

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get proper idea on solution channel we would conduct sample survey of 200 people

through structured and open-ended questionnaire.

2.4 Research Strategies

The research strategy is a general plan of how we have intended to reach the

answers to the research questions. Yin (1994) presents two strategies for general

use, i.e. one is to rely on theoretical propositions of the study, and then to analyze

the evidence based on those propositions, and the other technique is to develop a

case description, which would be a framework for organizing the case study. In

choosing the research strategy, the authors considered the fit of the strategy across

two main dimensions the fit with the aim of the research and fit with the research

philosophy.

In this case, the explanatory study relates to the relationship between the affirmed

promises in the theory vs. the reality on the ground; and it asserts qualitative

insights on the fact of Social business through in-depth interviews. The research

strategy of the thesis is dependent on experiment, survey and interviews which

tends to be used in answer how and why questions for explanatory portions and

for exploratory research on crucial insights as well. The purpose of an experiment

is to test whether a change in an independent variable produces a change in the

dependent variable (Saunders, et al., 2003).

In order to analyze this quantitatively, regression analysis is utilized in the analytical

part of this thesis, as this general statistical technique enables researchers to study

and analyze the relationship between a single dependent variable and one or

several independent variables (Hair, et al., 2010), which is relevant in regards to the

test the hypothesis on Social solution driven by Social Business projects. How

regression analysis is used in this thesis in particular, is explained thoroughly later

in chapter 8. Secondly, if social business has the driving force to start to eliminate or

eliminate the social problems are determined through correlation coefficient, which

measures the strength of the relationship between two sets of variables (Newbold,

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et al., 2007). By using these techniques in combination, the identified theoretical

hypotheses are investigated in combination with the empirical data gathered

through sample questionnaire data sets. (N=200)

2.5 Time Horizon

It actually determines whether the thesis is either cross sectional or longitudinal.

Conducting a longitudinal research is relevant to answer questions relating to any

theory since it covers the capacity to study the change and development over the

specified time. (Saunders et al 2003) This thesis though tries to figure out the real

outputs of an economic theory in practice could not go for longitudinal at last.

Therefore, this thesis is cross sectional and covers a period of only 4-5 months.

However it needs to be mentioned here that data representation from different

government and NGOs are longitudinal so in a sense this thesis covers a story of a

Social Business thought from 2005-2013.

2.6 Data Collection methods and Techniques

Once we are quite convinced with the strategies on how to complete the thesis on

the proposed topic, we then need to decide the techniques of collecting the data

through which we can derive, analyze and recommend whether these (data) can

produce us enough facts to conclude our position.

Primary Data

A questionnaire is a formalized framework consisting of a set of questions and

scales designed to generate primary data (Hair, et al., 2009). We have used survey

methods where we have questionnaire to collect data primarily form the source

where Social business has been in operation. One key benefit of questionnaires is

their capability to quickly accommodate large sample sizes at relatively low costs

(Hair, et al., 2009) as well as collecting data that can be used together with advanced

statistical analysis to identify trends in the gathered data.

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Although quantitative data are easy to administer and process, they may lack the

flexibility that qualitative data can result in, since quantitative date are represented

by number, while qualitative data are represented by detailed and comprehensive

statements (Andersen, 2008). Keeping this in mind we have done in depth

interviews with five (5) persons who are quite influential and able to provide us

enough information regarding Social business as a concept and as well as an

implemented project with GDFL.

Secondary Data

The use of academic journals plays a core role in this thesis. These are essential, as

they allow us to have insights in a broad and in-depth research with a large number

of respondents not obtainable by ourselves due to time and cost considerations

(Hair, et al., 2009). Data published in different academic and professional journals,

reports are our main resource to analyze and to compare different quantitative

facts. In most cases we have tried to take data that are treated reliable. Different

public institutions and NGOs have given us pivotal information regarding nutrition,

poverty rate, GDP etc. The main secondary data sources applied are therefore

research articles from well-known journals explicitly explaining their methodology

and were mainly gathered from Business Source Complete, WB fact book, MDG

Guidelines 2015, UNCTAD report 2012-13, UNDP country report, BIDS report 2010-

13, BBS (bureau of Bangladesh Statistics) year book 2005-2013, Social Business

Journal 2011 and some representative websites.

2.7. Validity and Reliability

As researchers we should report any errors in the research design and estimate the

effect on the research findings, since some flaws may have little consequence on the

validity and reliability of the data, while others might ruin the usefulness of the data

completely (Blumberg, et al., 2008). Validity is concerned with whether the findings

are really what they appear to be about, that is, the capability of a research

measurement system to measure what it is claimed to measure. In contrast,

27


Reliability refers to the extent to which a scale produces consistent results if

repeated measurements are made. Both concepts must be taken into consideration

when conducting the research as well as when analyzing the findings since validity

and reliability are a critical review of the quality of the methods applied. 9

Considering the fact of Reliability this thesis tries to be cynical regarding the

possible biases. When we have been conducting interviews we tired to be as much

focused and professional as it can be. We have always kept in our mind that

Qualitative data are difficult but once they are taken with less bias it can be treated

an asset to the project. (Anderson 2008) Again we had to be strict in accumulating

quantitative data since they can be biased and misleading at times.

On the other hand when we think of validity in this thesis, it refers the overall

validity is determined by the link between theoretical variables and empirical

variables and gains access to the specific records or data (Andersen, 2008), In this

thesis we have gained access to GDFL records for quantitative facts and for

qualitative facts we have gained access to different layers of management of GDFL

through in depth interviews.

2.4 Delimitations

Restrictions to the paper were necessary due to time constraints and the scope of

the project. The thesis examines the impacts of Social Business in the society and

with implications of this concept whether or not social problems are met or not.

Talking about social problems we very often would see that LDCs are the priorities

in table for this. As a result we have chosen Bangladesh for conducting research on

social business and its implications. Throughout the thesis we have categorically

assessed or tried to assess the seven principles laid down by Social Business

concepts in practice with the GDFL project or not. And we have found some critical

insights on social issues neither can be addressed by Social Business venture nor by

9 Mark Saunders et al, Research Method for Business Students, p 192-194

28


any entrepreneurship ventures. Since government intervention may produce results

of different kind. Again we have limited our arms of length to only one project of

Social Business since we believe if we can assess GDFL and can come up

recommendations we would solicit our research questions with definite answers.

The role of MNC has also played crucial role here. We have seen things in a unit-

based process where Gruppe Danone is our concerned MNC tagged in Social

solution driven business called GDFL.

This thesis tries to connect a causal relationship with social business and social

solutions; however achieving credible and sustainable solutions may be possible

due to lots of other important and tangible factors within society along with Social

Business. Therefore, limiting it to only social business is to get an idea of a real

portion of probable solution phenomena. This thesis limits itself to only 4 different

branches of philosophies namely as Capitalism ad the mental sentiment, CSR and

corporate philanthropy, Social Business linked with MNC FDI in LDCs and serving

the BOP market through win-win situation. We still believe that there may be other

important areas we didnt cover and which may have been important.

The paper does not analyze neither the MNCs origin nor their engagements in detail,

or speculate about their underlying reasons for engaging in such projects. In

addition, the time perspectives of the investments are not reflected on in the paper,

which may influence the results and lead to stories of success or failures. Limiting

the research was needed but it also dismissed different related and appealing topics

that could have added value.

29


30


The significance of your research and what you find out will inevitably be

judged in relation to other peoples research and their findings. You, therefore,

need both to map and assess the existing intellectual territory. (Tranfield et al.

2003:208)

This chapter discusses the facts of Social business as a model and takes a

comparative route based on different models available in the Business discipline.

Initially we would try to focus on the principles laid down in Social Business model

and later on we would assess the compatibility of a model itself in the discipline.

Then we would try to narrate the comparison & contrast in details with some

models of Social Entrepreneurship, The mental sentiment of Capitalism and Base of

the pyramid of market entry mode.

3.0 Social Business- A model to watch for the next decade

Social business is a non-loss, non-dividend enterprise dedicated entirely to

achieving a social goal where an investor aims to help others without taking any

financial gain him or herself. At the same time, the social business generates enough

income to cover its own costs, any surplus is invested in expansion of the business

or for increased benefits to society.

In other words, it is a cause-driven business. In a social business, the

investors/owners can gradually recoup the money invested, but cannot take any

dividend beyond that point. Purpose of the investment is purely to achieve one or

more social objectives through the operation of the company, no personal gain is

desired by the investors. The company must cover all costs and make profit, at the

same time achieve the social objective, such as, healthcare for the poor, housing for

the poor, financial services for the poor, nutrition for malnourished children,

providing safe drinking water, introducing renewable energy, etc. in a business way.

31


The impact of the business on people or environment, rather the amount of profit

made in a given period measures the success of social business. Sustainability of the

company indicates that it is running as a business. The objective of the company is

to achieve social goal/s

3.1.1 Types of Social Businesses

Type I: focuses on businesses dealing with social objectives only.

Eg. The product produced is for the benefit of the poor.

Type II: can take up any profitable business so long as it is owned by the poor

and the disadvantaged, who can gain through receiving direct dividends or by

some indirect benefits.

Eg. The product could be produced by the poor but exported to an international

market while net profits would go towards workers benefits.

3.1.2 Seven Principles

According to the inventor of the model , to run Social Business effectively in the it

must follow the seven commandments and they are as follows:

Business objective will be to overcome poverty, or one or more problems (such

as education, health, technology access, and environment) which threaten people and

society; not profit maximization

Financial and economic sustainability

Investors get back their investment amount only. No dividend is given beyond

investment money

When investment amount is paid back, company profit stays with the company

for expansion and improvement

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Environmentally conscious

Workforce gets market wage with better working conditions

Do it with joy

3.2 Is it another form of Social Entrepreneurship or Social Enterprise

Early works on Social Enterprise

Early use of the terms 'social enterprise' and 'social entrepreneurship' can be traced

to Beechwood College near Leeds, England (from 1978) where educators helped

worker co-operatives develop social auditing, and at ASHOKA - a US Foundation -

during the 1980s where Bill Drayton established a programme to support the

development of social entrepreneurship. Social enterprises are often regarded -

erroneously - as non-profit organisations. Social enterprise is characterized by open

membership and goals widely considered to be in the community or public interest.

By comparison, Non-profit status may include organizations with private

membership. A useful perspective, created by social enterprise consultants across

four continents after a review by Social Enterprise Europe, highlights three factors

which frame the business philosophy of a social enterprise.10

The extent to which it engages in ethical review of the goods and services it

produces, and its production processes;

The extent to which it defines its social purpose(s), and evidences its social

impact;

The extent to which it democratizes ownership, management and

governance by passing control of its human, social and financial capital to its

primary stakeholders (producers, employees, customers, service users).

10 http://en.wikipedia.org/wiki/Social_enterprise

http://en.wikipedia.org/wiki/Social_entrepreneurship

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3.2.1 Social Entrepreneurship literature

With its origins in the field of non-profit activity, the Social Entrepreneurship (SE)

literature focuses on questions of how entrepreneurial opportunities for social

change are discovered and exploited in the form of social entrepreneurial ventures

(Shane and Venkataraman2000; Austin et al. 2006). Early literature examined the

creation and scaling of new non-profit organizations, and an important sub-

literature examined the field of social enterprise, that is, non-profits supplementing

their donated income with earned revenue strategies. More recently, the extended

view of SE (Perrini 2006) sees an independent, extremely inter sectoral field of

study and sector of activity (spanning nonprofit, for profit, and the public sector)

which leverages creativity and innovation (hallmarks of the mainstream

entrepreneurial field) but is specifically targeted towards social change (Perrini

2006). The goal

of SE in this expanded perspective is large-scale systematic social change (Drayton

2002), a new social equilibrium(Martin andOsberg 2007), pattern-breaking social

change (Light 2008), catalytic change, and revolutionary breakthroughs in the way

social value is created (Waddock and Post 1991).

The existence of social purpose business ventures is puzzling from a purely

economic point of view. SPBVs purport to exist primarily to create a public

good. However, while the benefits they create are public they are nonetheless

incurring private costs. How can they manage to do so? Putting social welfare

first and still being a profitable business is counterintuitive. Management

research has no theoretical explanation for these phenomena (Hockerts 2006a,

b, p. 143)

However, confining things under the head of hybrid model of Social enterprise does

not allow us to get a conclusive points to draw line between Social business and

Social Enterprise. Both forms of the business models are close and subtle (Campbell

1998; Schaltegger 2002; Volery 2002; Mair and Noboa 2003; Clifford and Dixon

2006; Hockerts 2006a, b) hence we would find a gap between the described two

34


models here. Social Enterprise or entrepreneurship relates to a person and his

willingness to serve the society as in well being in manner where as Social Business

may take this entrepreneurial aspects in a cooperative manner to solve a burning

issue in the society.11

3.3 Social Business and A new form of Capitalism

To make the structure of capitalism complete, we need to

introduce another kind of businessIf we businesses, this new

kind of business might be called social business. Entrepreneurs

will set up social businesses not to achieve limited personal gain

but to pursue specific goals (Yunus 2007, p. 21).

11 Building Social Business, Muhammad Yunus, page 4

Figure 02: distinguishing facts of Social Business to Social entrepreneurship

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History takes a tour here in 18th century where Adam Smith propelled the idea of

liberalism in Business through his mastery writing of philosophy called The wealth

of Nations- a primer for economic study and looking at the economic being, choice

and alternatives put forth in the from of production and labour with the discourse of

free trade regime. it is sufficient to be reminded that in The Wealth of Nations the

theory of price and allocation was developed in terms of a model which made due

allowance for distinct factors of production (land, labour, capital) and for the

appropriate forms of return (rent, wages, profit). Looked at from one point of view,

the analysis taken as a whole provides one of the most dramatic examples of the

doctrine of unintended social outcomes, or the working of the invisible hand.

(Andrew Skinner). The TMS (Theory of Moral sentiments) reminds us that the

pursuit of economic ends takes place with a social context, and that men maximise

their chances of success by respecting the rights of others. In Smiths sense of the

term, prudence is essentially rational self-love. In a famous passage from the TMS

Smith noted, with regard to the competitive individual that:

In the race for wealth, and honours, and preferments, he may run as

hard as he can, and strain every nerve and muscle, in order to outstrip

all his competitors. But if he should justle, or throw down any of them,

the indulgence of the spectators is entirely at an end. It is a violation of

fair play, which they cannot admit of. (TMS II.ii.2.1)

Well, social Business has been emphasizing the differences between social Business

and Traditional Profit maximizing business. It has to be mentioned here that both

forms have similarity as well. Social business does not contradict with the

philosophy of profits but of course it does not allow profiteering. As reasoning

changes and prudence tops up the curve of rationality, Social Business surfaces the

idea of a new form of business within the Capitalism segment. Above all, Social

Business represents a new way for human beings to express their entrepreneurial

spirit. ( Yunus 2011) The concept of Capitalism stretches further with the practices

36


of Social Business. (Andrew Skinner , 2007) In an argument which bears upon the

analysis of the TMS, Smith noted in effect that the rational individual may be

constrained in respect of economic activity or choices by the reaction of the

spectator of his conduct a much more complex case than that which more modern

approaches may suggest. Smith made much of the point in his discussion and

suggested two ways as morality and pleasure on the other hand. (Oakley 2002)

Therefore, Social business excavates the facts understated over the years in the

capitalism which in fact does not rest while people suffer from a vicious strike of

poverty and yet it opens a door for moral obligation in doing business (Young 2007).

A new form of Capitalism here obviously suggest to go to its base and get the idea of

doing business with head and hearts to solve a puzzle in the state or society.

3.4 CSR and Social Business

The CSR field considers the effects of for-profit business on society, beyond the

traditional role of seeking to maximize profits (Crane et al. 2008a, b). CSR occurs

Figure 03: analyzed Grameen Social Business addressing issues

37


when a business firmconsciously and deliberately acts to enhance the social well-

being of those whose lives are affected by the firms economic operations

(Frederick 2008, p. 522).

Almost a century ago early thought leaders stressed the interconnectedness of

owners with other constituents in society (Follett 1918). Modern CSR can be

classified into four stages of development (Frederick 2008).

The first, corporate social stewardship (1950s1960s), focused on voluntary

philanthropy, in the form of allocating a portion of company funds to support worthy

causes (Bowen 1953).

The second stage, corporate social responsiveness (1960s 1970s), focused on the

idea that corporations should respond to legitimate social demands (Frederick 2008).

In this era, a stakeholder approach to management was proposed (Andrews 1971)

The third and fourth stages were business ethics (1980s1990s) focusing on creating

and maintaining an ethical corporate culture, driven in part by human rights

concerns, and corporate global citizenship (2000s) where the guiding principle is

focused on companies taking responsibility for their global impact (Frederick 2008).

On the other hand Social Business intersects on the point of Philanthropy and

Corporate charity and state its dominion on the aspects of completely changing a

status of a society and its economic well-being. Where CSR is brought to build an

image of a brand or an associated company Social Business builds a business on top

of that image and makes profit for people involved in eliminating social problems.

A profit maximizing company that practices CSR may devote 95% of

its respurces to producing profits and 5% or less to making world to a

better place. By contrast, Social buiness directly devoted to changing

38


the economic and social situation to poor or to creating some other

social improvements in the world.12

3.5 Bottom of the pyramid and Social Business an entry mode for MNCs

It is not from the benevolence of the butcher, the brewer, or the baker

that we expect our dinner, but from their regard to their own interest.

(Smith 1776)

What improves the circumstances of the greater part can never be

regarded as an inconveniency to the whole. No society can surely be

flourishing and happy, of which by far the greater part of the numbers

are poor and miserable. Adam Smith (The Wealth of Nations 1776)

In 1932, the phrase bottom of the pyramid was used by former United States

President Franklin D. Roosevelt in a radio address to his country that was in the

midst of the Great Depression. He said, These unhappy times call for the building of

plans that rest upon the forgotten, the unorganized but the indispensable units of

economic power (plans) that put their faith once more in the forgotten man at the

bottom of the economic pyramid(Irma 2012). The BoP theory was made popular by

CK Prahalad. His idea was a simple one: multinational firms could benefit

immensely from the opportunities offered by the Base of the Pyramid i.e. the

market made up of the 4 billion people living in emerging countries on a few dollars

a day while at the same time contributing to helping these populations develop.

(Prahalad 2004) On the one hand, it is in the interest of multinationals to include

these poor consumers into their business models: although margins are very small,

their sheer numbers are such that the market offers considerable opportunities.

Prahalad initially estimated the size of this market to be about US$12.5 trillion PPP,

but he later admitted that he was only looking for dimensionality and

12 Building Social Business, Muhammd Yunus, p9

39


directionality13. The World resources Institute proposed a more conservative

estimate at around $5 trillion. (Hammond et al 2007) On the other hand, these

strategies might contribute to reducing poverty: companies can offer products and

services at a lesser cost, and thereby reduce the poverty penalty that poor

consumers incur. (Caplovitz 1963) The surplus offered to consumers who pay less

than before for their products is therefore tantamount to an increase in their

disposable income. Over the years, the BoP corpus has evolved, in particular in the

direction of better taking into account the specificities of the population that the

firms intend to serve, from selling to the poor to business co-venturing with local

organisations. (Simanis and Hart 2008) The theory therefore offers a shift away

from a moral or philanthropic vision of development: pursuing the interests of

multinationals could be the most efficient development tool. A large number of

firms, especially those operating in the field of consumer goods, have invested in

such models: Unilever, Procter & Gamble and SC Johnson are the most notable

examples, with in particular a distribution of their products in individual packaging

in emerging countries.

The central thrust of the ideas of Prahalad can be captured in the subtitle of the

book Eradicating Poverty through Profits. The core propositions of Prahalad and

his collaborators can be summarised as follows (Prahalad and Hammond 2002;

Prahalad 2005):

1. There is an untapped market for the large MNCs at the BOP;

2. In contrast to conventional wisdom, the MNCs can make profit by focusing

on the

BOP market; and,

3. While gaining profit by selling to the poor, the MNCs can bring prosperity

for them.

The central theme for BOP approach is not its poverty, but rather the fact that BOP

13 3 Prahalad, C K (2006): A Response to Mirage at the BoP; http://www.nextbillion.net; Accessed on 11/28/2010 /blog/2006/08/31/prahalad-responds-to-mirage-at-thebottom-of-the-pyramid.119

http://www.nextbillion.net/

40


population segments are not integrated with the global market economy. Most

people at the BOP do not have proper access to basic services such as banking,

communication, water and sanitation and therefore there is a significant unmet

need. It has been argued as well that the poor are willing to pay for these services

(London and Hart 2004).

Words reminds us that the debate between self-interest and selflessness

illustrated by the opposition between BoP and Social Business refers to the issue

of togetherness, i.e. the notion that we live life within a group. BoP, as well as the

free-market liberalism which it stems from, evokes a community of free individuals

similarly to elementary particles in which an invisible hand reconciles and

optimises selfish, contradictory strategies through a skilful balance between the

forces present. It is based on the independence of actors in the field. (David et al,

HEC 2011)

BOP spurs profit with the hand of Yunus ( Grameen and Telenor)

Telenor and Grameen led to the formation of two separate organizations (Malaviya,

Singhal, & Svenkerud, 2004): GrameenPhone was operated by experienced Telenor

managers with a strategic objective to maximize financial returns; Grameen-

Telecom was set up as the administrative interface to the existing Grameen Bank

BOP model of providing microfinance and running microenterprises to create jobs

for millions of poor people in the more than 60,000 rural villages throughout

Bangladesh. GrameenTelecom had a very different strategic objective than

GrameenPhoneto maximize the numbers of jobs created for the rural poorand a

very different organizational culture and management structure. When it started

out in 1997, GrameenPhone was one of four companies to receive a license to

operate a mobile network in Bangladesh. It became profitable in 2000, passed two

million subscribers in late 2004 and passed 6 million in February of 2006.

GrameenPhone is now one of the largest private companies in Bangladesh and the

41


second-largest taxpayer, reflecting significant profit levels14. In 2006 it had a market

share of over 60% in a country of 150 million people. The still-low penetration rate

signifies the potential for further growth. By 2006, Grameen-Telecom had created

more than 250,000 jobs for micro entrepreneurs it calls village phone ladies.15 Dr.

Yunnus explained how poor rural women quickly learned how to operate a mobile

phone and generate income from it: To her this is just another cow. And if that

brings money, even the most illiterate person will learn how to grow a business and

catering the marginal would be a source of business and stimulating a social change.

If we stop thinking of the poor as victims or as a burden and start

recognizing them as resilient and creative entrepreneurs and value conscious

consumers, a whole new world of opportunity will open up (C.K. Prahlad)

Social business concept argues on the fact that it would create a change in the

society by addressing their needs. It itself draws an attention to the business

opportunities in the marginal through innovation and convenience at the marginal

consumers door. While BOP actually takes the bottom layer as the future of business

which is still untapped on the contrary Social Business stress that not just serving

consumers but to make them a good buyer and seller would turn the wheel of

business for the MNCs. MNCs on one hand would be able to provide intellectual

capacity to the core of the rurals and thus can create products involving people in

them as a by product of the system. End of the day, the product produced with a low

labor cost must have channel to sell it off to the consumer of affluent. BOP works as

a channel to cater Social Business and interdependence occurs within the economic

models.

14 Financial performance of Rural Phone (Grameen and Telenor)

15 No of subscribers of rural villagers.

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43


4.1 Introduction

In this chapter, the conceptual model is shown depicting the relations between

different explanatory social variables which are linked to possible outcome of a

social business model as a whole. The literature on Social Business suggests that the

most important fact lies in building a social business model is to identify the social

needs and thus try to make a social change through alternative business link ups

and model. The literature further suggests that social business can be treated as a

catalyzing agent to reduce nutrition (social Needs), creations of jobs in the rural

areas (economic development), making enough profits through the venture (self

sustained model behavior) and an entry to untapped market (entry strategy to BOP

markets with the right solutions of products and services). The importance of fit

among the diverse elements in the explanation and prediction of firm performance

has been advocated by many researchers (Maudud & Mushtaq 2012; Korsten, Eric

& James 2013). In seeking to clarify the impacting behavior of such variables, we

further try to create a graphical representation of what we are extracting are:

Figure 04: Development of Hypothesis

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4.2 Relationships

The suggested relationships in the above model are:

1. Social Business acts as a change agent for society provided it brings

positive results in the above said social issues and answering these problems social

business can reshape the very existence of social entrepreneurship into a bigger

scale than ever.

2. The eventual control factor here would be therefore the time and age

of the firm who would invest and likely to change the landscape of social needs and

transform ideas into reality.

If a firm has demonstrated above-average returns, that firm is assumed to both have

a competitive advantage and be more entrepreneurial in its business functions and

strategic processes. The model suggests that a firms performance is influenced by

its philosophic orientation and its internal strategic planning processes as well as an

understanding of its strengths, weaknesses, opportunities, and threats related to the

creation of social business at the first place.

4.3 Contribution

The model suggests that adopting such business models can reflct a better world

with the all the plausible solution both individual level and in firm level. There has

been considerable theoretical and empirical research in the area of strategic

management and the resource based view of the firm. A great deal of theoretical and

empirical research has been conducted in the area of social entrepreneurship, the

majority focusing on the entrepreneur as an individual who starts a business. There

is a noticeable paucity of research in combining social needs and addressing these

issue with entrepreneurial activities together under the separate and distinct topic

45


of strategic enterprise (Wicklund & Shepherd, 2005; Ireland, et al, 2003; Entrialgo,et

al., 2000). Therefore, the first contribution is to advance the understanding of how

the social enterprise cohabits with the principle of social business can be beneficial

mitigating social challenges. The second contribution is to assess the impact of key

social business initiatives in meeting social needs and making above average return

for the firm at the same time regardless of the size of the firm, thus extending the

idea at a national scale.

4.4 Hypothesis development

It appears that todays unbalanced approach to serve humungous demand of

urbanized social being somehow forgets the inner entrepreneurship aspects of

being into capitalism and how it can create enough incentive to the left off poor

social being to become one of the inclusive agents in the holistic ecosystem. Social

business has been built within the core of Capitalism and yet can bring fruit to the

system and nurture the ecosystem with plausible solutions for future mankind.

This discussion of social business as an impactful agent forms the basis of the

following hypothesis:

4.5 Hypothesis Related to decreasing Malnutrition level

It has been a pressing problem in rural areas of Bangladesh where most of the

people live behind $1.5 income level and they have less education than the

metropolitan areas in Bangladesh. ( 23 vs. 78% in metro cities); As a matter of fact,

most rural household are completely unaware of the fact of catching worms for

being lived in bare foot and thus increase the vulnerability of being attached to

different malnutrition related diseases. And equipping them with right set of food

stuff is bare impossible due to their limited income level of households. Meeting

nutrition is the basic needs of every child born in the state and since they the next

46


generation for the state, the central problem to give accost effective nutrition

related solution is imminent here. Social business is fulfilling the need vacuum with

a tangible results at hand. Grameen Danone (Focus Company in this thesis) has

launched product Shakti yoghurt with a joint venture of Groupe Danone from

France and Grameen from Bangladesh. Giving all the natural nutrients intact in the

product GDL has come up with a subsidized product Shakti yogurt. Therefore the

hypothesis for this would be:

H1: Social Business Model has a positive relation as a change agent to

decrease malnutrition level for babies in the region where social

business- Shakti Yogurt is in place.

4.6 Hypothesis Related to Economic emancipation

As it has already been discussed in this thesis that rural areas of Bangladesh are the

most sufferer since the economic activity propels in urban areas and in rural areas

agriculture plays the prime role However, there are places where nearly 5-6 months

time people are off the work due to different natural issue and therefore economic

activity does not bring into effect. Monga is the name of the vicious time which

remembers by its unproductive intent in the region of Bogra. Having been a factory

at this place for the entire country with the factor endowments of pure dairies, lots

of monga affected people now can now be associated with the economic well being.

Therefore, the hypothesis for this social phenomenon goes with the introduction of

Social business in the location-

H2: Social Business helps create jobs in the adjacent areas where it

operates and creates an economic boom therein.

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4.7 Hypothesis Related to poverty alleviation and increasing productivity

Aligning to the previous social aspects, it also reminds us those rural areas

household with 97% women at home are completely unutilized in terms of their

talents and their intention to live a better life for their future generation. And a

result, almost all of their effort turns into zero productivity in the economic sense.

Shakti woman is a byproduct concept of Shakti yogurt social business where

women from different households are engaged into a regular job in selling yogurt in

person and can make money out of this household consumer marketing. Therefore,

hypothesis can built in-

H3: Social business model impacts positively in alleviating poverty and

increasing productivity of firms and individuals

4.8 Hypothesis Related to self sustaining business model creation

Most of the social enterprise model has become a NGO model in the end cementing

deep understanding of social development in building a solution with the aid in

principle. On the contrary, social business talks business here which covers different

aspects of social needs and brings out new products or services to cater the market

or even create a demand in the market by adding new spices to the market. The

combination is as such one brings professionalism with strategic tools and other

shake hands cultivating social changes through people involved in it. Social

business can be very much of a profit driven entity keeping the motion of the

reinvestment of the profit into the business and its derivatives for more growth and

on the other hand the crowd financier can take out the portion of the initial

investment once the model acts by itself. Therefore, the suggested hypothesis might

be-

48


H4: Social business model can be a profit making business model paying

dividends to its internal resources with an above average return in

realization

4.8 Hypothesis Related to entry strategy for big corporate into untapped BOP

markets

Like every other strategies, most MNCs in these try to figure out to be present in the

market with increasing power of their scale of operations and their way to crack the

secret code of developing markets which is worth of almost $13 trillion. And the

bottom of the pyramid is going to be the next big business hubs with the next big

consumers hub as well. Big Companies cant just afford to lose their motion here

sacrificing their opportunities to the local aggressors to become the giant in the next

20 years. The classic example is just in front of us- the Chinese companies in Africa

and south East Asia. Social business can be proper solution to attract both

dignitaries and big corporate to buy a tie and gain mutual benefits. Therefore,

hypothesis would be her as-

H5: Social business model can act as an entry mode for powerhouse

MNCs tapping opportunities of BOP market SOS.

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50


5.0 Groupe Danone

GD was founded in 1919 in Barcelona, and is now the worlds largest producer of

fresh dairy products with more than 80,000 employees. Danone (Dannon) yogurt

has long been GDs flagship product, but it also owns bottled water, baby, and

medical nutrition brands. In 2009, total global sales were more than US$21 billion

and it had a 15 percent profit margin (Groupe Danone 2010). In the past decade, GD

has expanded aggressively into emerging markets with sales in these markets

growing from 6 percent in 1999 to 42 percent in 2009. (Manners 2009). The GD

CEO, Franck Riboud, promoted GDF as a mechanism for GD to expand into a new,

large Asian market and to provide its nutritional fresh dairy products.

5.1 Grameen Foundation

The GFE began in 1976 as a project in collateral-free lending initiated by

Muhammad Yunus, an Economics professor at the University of Chittagong in

Bangladesh. The GFE is a diversified group of enterprises that operates in the

banking, healthcare, energy, education, agribusiness, and textiles industries among

others. In 1983, the Grameen Bank was formed as a government-sanctioned bank.

Over the years, this micro-finance organization has disbursed more than US$10.5

billion in loans, mainly to rural women. The Grameen Bank (GB) now has 8.37

million members and more than 25,000 branches. In 2010, the total average

monthly loan disbursement was about US$120 million. About 27 independent

sister-concerns of the GB have been formed in industries that vary from health and

energy to agribusiness to ready-made-garments. Because most of its borrowers are

based in rural areas, GB has developed specialized loans and extension services to

serve farmers. The Grameen Livestock Foundation (GLF), founded in 1997, is

around 50 km from the Bogra factory and targets financial and extension services

for dairy, poultry, and fish farmers.

5.2 Story of Social Business Project (Grameen Danone Foods Limited)

51


It all began with the meeting in November 2005 between Franck Riboud, CEO of

Groupe Danone, and Muhammad Yunus, founder of Grameen Bank and later winner

of the 2006 Nobel Peace Prize. The two men discussed at length their ideas and their

respective convictions concerning the development of poor countries and

discovered that their areas of expertise were complementary. They then decided to

create a joint venture called Grameen Danone Foods.

This company took on an original project: to create a yogurt factory in

Bangladesh whose mission was to contribute to local development.

Grameen Danone Foods, a company dedicated to the development of its

environment. With the active support of GDs CEO and the GB chairman, GDF was

able to quickly move through the initial planning phase. The vision for GDF was to

create up to 50 factories that provide fresh and healthy dairy products to

Bangladeshis by 2020.

Grameen Danone Foods is guided by four objectives:

1. To develop a product that has high nutritional value and is affordable for the

poorest individuals

- Shokti Doi yogurt (that which builds strength in Bengali) was

developed according to the nutritional needs of Bangladeshi children

with the help of nutritionists from the GAIN NGO.

- It is fortified with nutrients (including vitamin A, zinc and iodine) to

make up for the dietary deficiencies of the local populations.

- Shokti Doi is sold for .06 Euros, a price that studies found to be

affordable for the poorest families.

2. To improve the communitys living conditions by creating jobs that raises the

living standard and enhances the social fabric and the region.

3. To protect the environment and conserve resources

4. To ensure a sustainable activity while seeking profitability

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To achieve these objectives, Grameen Danone Foods has adopted a development

model that runs counter to that of large western companies:

- Grameen Danone Foods primary aim is to have a positive social

impact; its pursuit of profitability is based solely on criteria such as

improving public health, creating jobs, reducing poverty and

protecting the environment.

- Profits earned by the company are re-invested in expanding and

running the business.

5.2.1 A Unique Business Model

Previously, GD produced yogurt using a centralized model in which a few large dairy

farms provided milk to a centralized production facility that processed it into yogurt

and distributed to retailers and wholesalers. In Bangladesh, a number of

environmental factors prompted GDF to adopt a proximity-based business model. A

proximity-based model works to bring supply, production, retail, and consumption

of a product as close to one another as possible.

GDF redesigned the typical yogurt factory supply chain to serve dairy farmers with

around five cows and little or no access to electricity for refrigeration. It also

focused on building high sales penetration and repeat customers in the rural areas

around the factory. It hires door-to-door salespeople to sell yogurt from refrigerated

coolers in these areas. In addition, GDF distributes to convenience stores and

supermarkets in Bangladeshi cities and towns.

5.2.3 Where the dream catches the reality

Guy Gavelle, Groupe Danones Industrial Director for Asia-Pacific Operations,

managed the design and construction of GDFs first factory in Bogra.16The Bogra

16 Exhibit 1

53


facility, which was quite different than the typical GD factory in terms of location,

size, and workforce, presented several unique design challenges for Gavelle:17

1. Product the factory needed to maintain GDs high food safety standards

throughout the production of the Shokti Doi brand of yogurt 18

2. Durability the equipment needed to be durable and dependable enough to

be operated and maintained in remote locations that have limited access to

replacement parts.

3. Lower Capacity the factory would produce a fraction of the output of GDs

other plants but maintain the same quality standards.

4. Different Labor Usage production processes should be both labor intensive

and simple enough to be performed by a low-skilled workforce.

5. Distribution and Sales the plant must include a cold storage distribution

center and office space for regional sales and administration staff.

6. Environmentally Friendly - the Bogra facility needed to include equipment

and processes for wastewater treatment, recycling, rainwater harvesting,

solar water heaters, and a biogas generator.

GD broke ground on July 14, 2006 and equipped the plant with yogurt

processing and refrigeration equipment imported from China and India and

stainless steel tanks and pipes that were locally fabricated. Construction took

about six months to complete; commercial production began in January 2007.

5.4 GDF Supply Chain

GDFs raw milk supply chain does not differ greatly from that of the competition.

Milk is collected from dairy farmers at kiosks that are located near the dairy

farmers. Farmers are paid a fixed price for milk upon delivery to the collection

17 Building a world without poverty, Dr M Yunus.

18 Exhibit 2

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center. Raw milk is brought to a chilling facility in the morning and evening by

bicycle rickshaw and is stored at the facility until a truck picks it up and brings it to

the factory. The collection and chilling centers are either owned by GDF or by milk

collection partners. In addition to milk, GDF needs to source sweeteners and

nutritional supplements in order to make its yogurt. Date palm molasses, which is

prevalent in

impact assessment of social business model

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