Sustainability of Social Enterprises in Hong Kong - From customer s’ and social enterprises’ perspective Yu Nga Hin (1155015546), Tsang Wai Chun(1155023912),

Sustainability of Social Enterprises in Hong Kong

- From customer s’ and social enterprises’ perspective

Yu Nga Hin (1155015546),

Tsang Wai Chun(1155023912),

Adam Ng (1155003504)

Group no 154.

Definition of social enterprise

Values of Social Enterprises

Job Creation for minoritiesJob Creation for minorities Spread of social missionsSpread of social missionsDifferences between

other forms of businessDifferences between

other forms of business

• more sustainable and creative than the nonprofit sector

• more generous than traditional business

• serves the common good of people

Definition:• An Enterprise that adopts a mission to create and

sustain social value, not just private value (Dart, 2004)

• Double bottom line--cares about social mission and profits at the same time (Emerson and Twersky, 1996)

Source: Emerson, J., and Twersky, F. (eds.). New Social Entrepreneurs: The Success, Challenge, and Lessons of Non-profit Enterprise Creation. San Francisco: Roberts Foundation, 1996. Dart, R. (2004). The Legitimacy of Social Enterprise. Nonprofit Management and Leadership, 14(4), 411-424.

Definition of social enterprise –3 pillars

Social Enterprise

Social Mission

Sustainable business

model

Distribution of profit

1 2 3

Source: Kee, C. H. & Kwan, T. (2011). Hong Kong Social Enterprises - Profitable or Valuable?. Retrieved November 4, from https://www.fses.hk/ourdb/files/[email protected]/article_201107_hkse.pdf

(Kee & Kwan, 2011)

Development of Social Enterprises in Hong Kong is fast

2007 2008 2009 2010 2011 2012200

250

300

350

400

450

222

269

320 329

368

406

Number of social enterprises in Hong Kong

CAGR: 12.83%

26%

25%15

%

13%

10%

8% 3% Lifestyle

Catering and food manufacturing

Medical care

Business Support

Recycling and Eco Product

Education and train-ing

others

Business Nature of Social Enterprises

1

2

The number of SEs in Hong Kong is growing rapidly, reaching 406 in 2012.

Over 40% of Social Enterprises are either providing lifestyle or catrering products/services.

Source: The Hong Kong Council of Social Service. & Social Enterprise Business Centre. (2013). Power of Good: Hong Kong Social Enterprise Landscape Study 2012-13. Retrieved November 5, from http://www.socialenterprise.org.hk/sites/default/files//general/powerofgood_72%28dpi%29_0.pdf

Analysis –3 insights of social enterprises in Hong Kong from

literature reviews

60%

39%

Types of social enterprises in Hong Kong

Operated by Non-profit organizations

Private Companies

Co-operative ( 合作社）

Non-profit organization

Hierarchy structure of Social Enterprises

Social Enterprise 1

Social Enterprise 2

Social Enterprise 3

Insight (1): Social Enterprises in Hong Kong are under undue influence of Non-profit organizations.

• share of resources within the whole organization• Wide external support

AdvantagesAdvantages

DisadvantagesDisadvantages

• share of profits within the overall organization• mindset problem

Insight (1) –Network and relationship between NGO and SE


Insight (2): Social Enterprises in Hong Kong is very much reliant on government fund and external support.

Capital Sources of Social Enterprises in Hong Kong

A Sum of 3 years government fund to starting SE

Examples Own / company’s capital

Funding provided by NGOs

Survival Rate 70% 50%

Insight (2) –Funding of Social Enterprises


Percentage

Job Creation for the disadvantaged

Vocational Training for disadvantaged

Promote Social Inclusion

Promote environmental sustainability

69% 29% 20%71% 69% 29% 20%

Social Missions of Social Enterprises*

Objective: To hire the greatest number of disadvantaged employees instead of maximize profits

(can choose more than 1 item)

Insight (3) –Social Enterprises’ social missions


3 Observations of social enterprises in Hong Kong

1

2

3

Structure and Network: Most of SEs are operated by Non-profit organizations

Financing: Most of SEs are reliant on government or NGO funding, which led them higher survival rate

Social Missions: Most of SEs set their missions as providing job opportunities to disadvantaged

Financial sustainability of HK social enterprises

Profit 50%

Loss 50%

Ratio of Social Enterprises Closure

• 1 out of 2 Social Enterprises suffered losses • About 30% of social enterprises closed down within 3 years of operation

What are the factors to support the sustainability of Social Enterprises in Hong Kong?

The survival rate of social enterprises in Hong Kong is still low


Financing

1. Financial subsidies from

government, NGOs

Network

1. Non-financial support because

of human relationship (e.g.

partnering, recruitment)

Social Mission

1. Clear social mission to

accomplish

Fulfillment of customer needs

1. Products and services to fulfill the

needs of targeted customers

2. Ways to promote themselves to

the target audience

4 Key Dimensions of Sustainability of Social Enterprise(Alter, 2007 )

Hypothesis: The above factors are some of key factors to enable the sustainability of social enterprises in Hong Kong

Analytical Framework

Sustainability: the ability to generate profits or breakeven in the long run

Source: Chan, K. M. & Yuen, T. (2013). An Overview of Social Enterprise Development in China and Hong Kong. Journal of Ritsumeikan Social Sciences and Humanities. 5(2013), 165-178. Alter, K. (2007). Social Enterprise Typology. Retrieved at August 26th, 2013 from, http://www.virtueventures.com/setypology/ [Accessed November 10th 2013].

General Approach of the study

Network Financing Social Mission Customer needs

QuestionnaireSemi-structured interviews and site visitsMethods

Details 1. Questions slightly varied depending on industries and businesses

2. Understand their challenges and concerns

Learn from customers’ perspective

Tasks • To study if the following 4 factors are essential in contributing the sustainability of social enterprises in Hong Kong

Choices of companies for interview

Café 330 iFlorist Dialogue in the Dark

女工同心合作社

Industries • Food & Catering • Food & Catering• Education & training• Lifestyle

Types • Operated by NGO • Cooperative• Private Companies• Private Companies

Accomplishments • Top 10 popular tourist attraction in Hong Kong

• established for more than 12 years

• Recently become social enterprises

• 2 branches so far

Financial sustainability of HK social enterprises

Coverage of major types of social enterprises

Methodology- Questionnaire

Aims of Questionnaire

To investigate consumers’ perceptions

Figure out whether fulfilling

consumers’ needs is one of

factors


Part A

• To ask respondents’ understanding

• To investigate respondents’ perceptions

Part B

• To figure out the factors lead to consume in SE

Part C

• To collect the background information of respondents

Methodology-QuestionnaireCollection of Data Opened online from 27/9- 8/11 through the

online questionnaire system of Google.

Methodology-Questionnaire Invited respondents through Facebook


•Snowball sampling

•Stratified sampling

Sampling methods

•Closed end questions

•Multiple choice questions

•Ranking & score

Questions

Methodology - Interviews

Purpose of Interviews

In-depth understanding

of their operations

Methodology - Interviews

Aspect of Questions

Labour recruitmen

tWays to recruit

specific minorities

Ways to overcom

e the weaknesses of

the labours

Capital resources

Ways to maintai

n financial balance &

achieve social

mission

Degree of

reliance to

external financial assistances

Non-financial support

From the governm

ent or other third

parties

Attractive-ness to the costumers

The way they

promote themselv

es

Data Analysis- Questionnaire (204 Obs.)

Results & Analysis:

204 responses were collected

Background

Female46%Male

54%

Gender2% 8%

10%

6%

1%

5%62%

5%

Age group>6255-6148-5541-4734-4027-3320-2613-19<12

Data Analysis- QuestionnaireResults & Analysis

a. Perceptions on social enterprises Included a group of characteristics and common

misunderstanding towards SE

Data Analysis- Questionnaire (204 Obs.)a. Perceptions on social enterprises (Result) (1: highly disagree; 2: disagree; 3: neutral; 4: agree; 5: highly

agree)

1

2

3

4

5

0 10 20 30 40 50 60 70 80

17

28

50

74

35

Employees are mainly the disables

109 out of 204, 53.4%!


agree)

1

2

3

4

5

0 10 20 30 40 50 60 70 80 90

16

27

43

85

33

ii. Higher price than normal firms

118 out of 204, 57.8%!


agree)

1

2

3

4

5

0 10 20 30 40 50 60 70 80 90 100

23

87

51

28

15

iii. Better Services than normal firms

110 out of 204, 53.9%!


agree)

1

2

3

4

5

0 10 20 30 40 50 60 70 80 90

9

24

51

80

40

A non profitable organization- always suffer-ing lost

120 out of 204, 59.7%!


agree)

1

2

3

4

5

0 10 20 30 40 50 60 70 80

18

29

47

76

34

Target customers are the minorities in the society

110 out of 204, 53.9%!


agree)

1

2

3

4

5

0 20 40 60 80 100 120

35

104

46

16

3

Same as normal firms

139 out of 204, 68.1%!

a. Perceptions on social enterprises (Analysis)


Characteristics of particular SE Common characteristics

1.Hiring the disables as employees

e.g. ark

2.Charging higher price

3.Target customers are the minorities

Data Analysis- QuestionnaireResults & AnalysisBackground

Yes38%

No62%

Have you ever consumed in SEs?

Data Analysis- QuestionnaireResults & Analysis

b. Factors affect consumers’ preference

include a group of factors that affect the consumption preference

figure out which factors are more important in term of attracting consumers

Data Analysis- QuestionnaireResults & Analysisb. Factors affect consumers’ preference

Price

Service Quality

Product

Location

Fulfilling

consumers’ needs

Data Analysis- QuestionnaireResults & Analysisb. Factors affect consumers’ preference

Clear social mission

Well- known

Data Analysis- Questionnaire (78 Obs.)b. Factors affect consumers’ preference (Result) (Ranking score for every factors, 1: not important at all; 5: very

important)

1

2

3

4

5

0 5 10 15 20 25 30 35 40 45 50

i.(Good) Service Quality

85.9% chose at least 4!


important)

1

2

3

4

5

0 5 10 15 20 25 30 35

ii. Support the social missions and show the social responsibil-

ity 87.2% chose 3 or below!


important)

1

2

3

4

5

0 5 10 15 20 25 30 35

iii. (Cheap) Price



important)

1

2

3

4

5

0 5 10 15 20 25 30 35 40

iv. (Attractive) Products



important)

1

2

3

4

5

0 5 10 15 20 25 30 35 40

iv. (Convenient) Locations


important)

1

2

3

4

5

0 5 10 15 20 25 30 35

vi. Well-known


important)

Mean Score (/5)

(Good) Service Quality 4.102 1

Support Social Missions of SEs

2.525 6

(Cheap) Price 3.436 3

(Attractive) Products 3.987 2

(Convenient) Locations 3.268 4

Well- known 2.962 5

b. Factors affect consumers’ preference (Analysis) Interpretation I

Being a social enterprise X advantage in gaining consumers’ support

“Having social mission” shows negligible effect on consumers’ side


b. Factors affect consumers’ preference (Analysis) Interpretation II

Respondents rank high importance for the factors of fulfilling consumers’ needs

SEs compete directly with their rivals as normal firm for customers

Fulfilling consumers’ needs is very important


b. Factors affect consumers’ preference (Analysis) Interpretation II: Related Question


Highly will-ing3%

Will-ing

19%

Not sure37%

Not will-ing

41%

Willingness to pay higher for same product in SEs

Respondents will not relax their standard (Price, Quality, Location) when consuming in SEs.

Requirements are not fulfilled

Not consume in that SE.

b. Factors affect consumers’ preference (Analysis) Interpretation III Perceptions in offering higher price and poor service

quality - Reduce consumers’ preference to consume


10%11%

23%27%

13%

16%

Reasons for not consuming in SEs

Never heard about SE

SE is hardly to approach

Worse service provided

More expensive

Inconvenient Location

Already consume in Ses' Rivals

Data Analysis- QuestionnaireResults & Analysisc. Short Summary

i. Fulfilling consumers’ needs is the factor to sustain SEs’ operation

ii. Committing social missions shows no effect in attracting customers

Limitations of questionnaireLimitations

i. SamplingRespondents: mainly

undergraduates

Non- probability sampling

ii. Lack of understanding of SEBiased towards well-known

SEs

Data Analysis- Interviews

4 interviews arranged

Face-to-face interviews

Café 330女工同心

合作社

Phone interviews

iFlorist Dialogue in the Dark

Data Analysis- Interviews (Café 330) Café 330 Locations

Since 2013 in YIA, CUHK Since 2011 in POW

Hospital

Background “New Life Psychiatric

Rehabilitation Association” Mental health organization Café 330 as the workplace

Data Analysis- Interviews (Café 330) Interview details First concern: labour Recruitment

Specific department in “New Life” to manage human resource Provides training to the patients Assesses the conditions of recovered patients Refers them to different workplaces included Café

330 Role of Café 330

Adopts the clients after interviews

Data Analysis- Interviews (Café 330) Interview detailsFirst concern: labour Recruitment

Able staffs in Café 330 Recruited through normal process Trainings are provided for effective leadership

Difficult to attract & retain employees Lower salaries

Data Analysis- Interviews (Café 330) Interview detailsSecond concern: financial issues

Financial assistance from the government Lump-Sum Grant from the Social Welfare

Department For 4-year operation

Lots of paper works Detail business plan & budget required Scrutinizes on every spending

Specific department in “New life” to manage

Data Analysis- Interviews (Café 330) Interview detailsSecond concern: financial issues

Financial arrangement of Café 330 Not an independent financial balance Centralized capital distribution

Subsidizes the deficit firms with the gain from surplus firms

Maximize the number of social enterprises Maximize job vacancies

Data Analysis- Interviews (Café 330) Interview detailsThird Concern: Non-financial assistances

Policies favourable to social enterprises Premises reserved for social enterprises Preferential rent prices offered by the premise

owners

Sourcing system in “New Life” Internal transfers within the association Centralized purchasing unit

Data Analysis- Interviews (Café 330) Interview detailsThird Concern: Non-financial assistances

Network establishing Seldom assistances from “New Life” Their own effort to build up networks with other

firms New enterprises can easily collapse when they fail

to build up the network

Data Analysis- Interviews (Café 330) Interview detailsFourth concern: Attractiveness &

competitiveness of Café 330

The name of enterprise Insignificant in attracting customers But designing firms are willing to help in a lower

price Improves decorations

Data Analysis- Interviews (iFlorist) iFlorist

Private-owned florist shop

Established by a few lame women 20 years ago As ordinary shop

Became social enterprise recently

Data Analysis- Interviews (iFlorist) Interview detailsFirst concern: labour recruitment

NO such thing Only 3 members in iFlorists No hierarchy between the 3 members

Even not a constant location to work in the beginning

Data Analysis- Interviews (iFlorist) Interview details

The way of operation of iFlorist Cooperate with other NGOs

Deaf centres Helps training the deaf people to be florists In exchange of their labour forces

Turning the deaf centres into their workplace when there are orders to iFlorists

Creates jobs opportunity to the weak

Data Analysis- Interviews (iFlorist) Interview details

Expansion of the model Build up connections with the civil organizations

nearby the clients Flower shops co-operate with rehabilitating

organizations in HKU campus Training Centre of HKCTU in Tai Wo Groups of unemployed women in Cheung Kwan O

Reduces the operational costs Only pay for wages

Data Analysis- Interviews (iFlorist) Interview detailsSecond Concern: attractiveness &

competitiveness

The name of social enterprise May attract people at the first time Key to retain customers & business partners Quality of work

Gain reputation & expand the business

Data Analysis- Interviews (iFlorist) Interview detailsThird concern: government’s financial support

The interviewee: useless Too bureaucratic Failed to pass the scrutiny process

100% private capital

Pay more time & effort in the beginning

Data Analysis- Interviews ( 女工同心合作社 )

女工同心合作社 Food retail shop Established 2001 in

CUHK Under the Hong Kong

Women Workers’ Association (HKWWA)

Cooperatives Similar aims and

missions with social enterprises

Data Analysis- Interviews ( 女工同心合作社 ) Interview details

Structure of the cooperative Organized by the HKWWA But not management

Workers operate the cooperative themselves Independent in operation & finance


Cooperative Unusual structure of business Report to Agriculture, Fisheries & Conservation

Department Extra costs for hiring auditors to write reports

No support from the Social Welfare Department


Aims of the cooperative Provides affordable foods to students

Seldom raise the price of commodities Support social movements

Donations Provide food in those events


Reason to be able to sustain for 12 years Workers sacrifice their wages

No increase in wage despite inflation Support from the Student Union

Maintain their premise in campus

Social Mission

DiD products

DiD experimental exhibition

DiD Management Workshop

$ 120 - $150 per person 3 hours workshop HKD 28,000

• To provide jobs for blind people and change people’s mind on the disabled.• To educate and help people new perspectives

Dialogue in the Dark Hong Kong

Become the most popular social enterprise in Hong Kong

Dialogue in the Dark Interview

Forms of SE • private companies

Dialogue in the Dark Findings

Network

PurposesPurposes

Financing

FindingsFindings

FindingsFindings PurposesPurposes

1

2

• Partner with training consultants

• Offer innovative products with seasoned professionals

• 5 millions in total, 3 millions in equity investment and 2 million in interest-bearing loan

• resembles to business organization, more flexibility • no need to agree on anything

Analysis- Interview: Summary Café 330

Typical subordinate of a giant association Centralized administration processes

From training labours to applying financial assistances Operational costs are reduced by or shifted to the

association

iFlorist Micro-scale enterprises “Outsourced” the production process Minimized the operational costs

Analysis- Interview: Summary Dialogue in the Dark

Medium scale business Independent business NO support from the government Mature network of business operation in all aspect

女工同心合作社 Cooperative upheld by workers Limited backup from their association No support from the government Student Union plays a big role to its existence

Analysis Observation As social enterprises

Unable to minimize the cost as ordinary firms do Limitation from the social missions To help more rather than gain more

Many different ways to compensate suchinherit weaknesses

Common measures to relieve operational costs alternatively

Analysis Short Summary

Network establishment as the common measure Usefulness

Shifts operational cost to the other parties Obtains resources and materials in lower costs Uncountable preferences provided due to the respect to

the social mission Essential for social enterprises to sustain

Analysis Short Summary

Financial supports make SEs’ operation easier Can enhance sustainability

But NOT necessary to maintain normal operations Usefulness: Hard to get financial support from

government Long procedure & many paper work)

Just give up such financial support

Conclusions

Social Enterprises Strong Network

1. Utilize the network in

their parent NGO

2. Find other business

partners /unions

Minimize the operational cost of the company

Approach

FactorsFactors

Networks1

Financing

Social Missions

Customer needs

2

3

4

Essential? (/)Essential? (/)FindingsFindings

• clear social mission doesn’t give SE a competitive advantage• can’t escape from the competition from traditional firms• Respondents in the questionnaire rank high importance of fulfilling customer needs in their purchasing decisions

•女工同心合作社 said only an enhancement factor, but not necessary condition

Conclusions

• interviewees said networks are crucial in minimizing costs

Suggestions to Government

Financial support: Existing policies*: Provide seed grants to newly established SEs- as initial capital and

operating expenses

The Enhancing Self-Reliance Through District Partnership

Programme (NGOs only)

Period: 3 yrsMaximum $: $3 million

The “Enhancing Employment of People with Disabilities through Small Enterprise"

Project

Period: 2 yrsMaximum$: $2 million

ProblemsProblems

1 Applicants are confined to NGOs only

2 Same period and maximum amount across different industries

SolutionsSolutions

What can the Government do to help social enterprises?

Extend the application pool to Non-NGOs

Adjust maximum period and subsidy subject to performance

Customer needsNetwork

• Encourage other established firms to set up more SE business centers

• Leverage the role of business center from providing mentoring to professional advisory services across different types of SEs, particularly private companies

Suggestions to Government

Limitations of the research study

• Interviews are only conducted to a particular party (i.e. company). Other parties’ opinions such as regulators, NGOs should also be valued.

• research method is confined to interviews and only a limited number of interviews were conducted.

•All interviewees related to Waseda University, significant bias towards the study.

Questions & Answers Session

Documents

Sustainability of Social Enterprises in Hong Kong - From customer s’ and social enterprises’ perspective Yu Nga Hin (1155015546), Tsang Wai Chun(1155023912),