MODULE 2
UNIT 1
The advantages of the Business Model Canvas compared to other business models are that it can be prepared quickly, expanded in content, flexibly shaped and, most importantly, that it can be effectively applied to social enterprises.
There are many websites and videos to help you to get to know and use the model, and the canvas can be downloaded for free: free download here.
A good example is the Homoki Varázskert Szociális szövetkezet (Sand Magic Garden Social Cooperative) that relies on the model in its operation. The main activity of the cooperative is the cultivation of spices and herbs, as well as the production of handicraft products. In the workshop of the cooperative, special teas, spice mixtures, gels and cereal bars are made by hand from dried fruits, dried herbs and other natural ingredients.
The launch of a social cooperative, given that it is a fairly special form of organization, is determined by business planning. A good cause or a noble goal alone will not be enough for a successful business. Solely because we are lovable, we will not have regular costumers. Starting a social cooperative is a rather resource- and time-consuming task.
When making canned products (jam, syrups), the creating of conditions for production is less investment intensive, however, a competitive advantage must be provided by some other resource. Whether it is a food engineer working out very creative, surprising flavour combinations, a more efficient, economical production technology or very innovative packaging.
Also, from the point of view of the sustainability of the social cooperative, it is important to assess and identify the needs. The Sand Magic Garden Social Cooperative produce additive-free healthy products often using local ingredients. Therefore, it is important to know, WHO do we want to address with these products; FOR WHOM does it represent value? Are they for families with young children living in an urban environment, with an average or above-average income for whom it is important to buy chemical-free raw materials and have adequate solvency to do so? Or are they for consciously living customers? If we want to address conscious customers, a mall or a supermarket is not the optimal place for them, but if people living in big cities are our primary target group, we have to approach filling out the model with a different logic.
Apart from needs assessment, another element of the model is customer relations, which also depend on the activities of the social enterprise. In the case of Sand Magic Garden Social Cooperative, direct contact with the customers can be built up when selling on different markets. If the cooperative does not have such an area of service, it is necessary to think in different business steps than in the previous case.
It is recommended to continuously evaluate and update the model as the business develops. For example, Sand Magic Garden Social Cooperative contributes to the goals not only through direct job creation, but also indirectly. Disadvantaged, low-educated or even homeless people, after successfully completing vocational training in the canning industry, are provided with a continuous, declared and legal employment by the social enterprise. Another 10 families earn additional income thanks to the social cooperative by becoming suppliers of fruit and vegetable raw materials for the social enterprise. Years later, by integrating new suppliers and developing product that responds to market needs, the social cooperative will already be a key employer contributing to solving local social problems.
The flexibility of the business model is a distinct advantage during the pandemic period. The pandemic made it clear that the Canvas model needs to be kept under continuous review. With regard to the changed economic and competitive environment and other variables, social enterprise is forced to come up with a completely different value proposition, which on the one hand helps them to survive or, in the long run, may even lead to higher profits. For example, additive-free products that promote health came to the fore, and online commerce began to flourish.
UNIT 2
Bergendóc a Social Enterprise[1]: “Rise and fall to be born again”
The following case study was taken place in Hungary, where due to financial advantages a dynamic development of social cooperatives[2] is detectable. Therefore bare in mind that although being instructive for any kind of social enterprise the case study is focused on social cooperatives.
In 2013, the Bergendóc Social Cooperative initiated its operation with 9 founding members and 112 EUR of capital ― which came from the contributions of the members. The aim was to create a stable and financially self-sustainable social enterprise that would create secure, local jobs and enable the economic and social development of the region to be coordinated. Bergendóc is a fairy tale nickname born from the names of three villages Pusztaszer, Ópusztaszer and Dóc. Following its establishment, the organisation received nearly 47 thousand EUR in funding from the Social Renewal Operational Programme providing aid for less-favoured areas (LFAs). The funding created the following opportunities:
- Employment and training of 12 individuals,
- setting up a workspace for the processing of local products,
- establishment of a rest place and exhibition area for enhancing tourism,
- promotion and sale of locally manufactured products.
In the first two years of the company’s operation, there was almost no market revenue. There were no attempts to generate income, as if the initial agenda of being financially self-sustainable had been forgotten along the way. Everyday activities were focused on infrastructure developments and events (e.g. free summer camps for children) financed by funds. The operation of the cooperative was therefore made possible entirely by grants, and they did not have a real financial plan without the implementation of the tender.
The following table displays the total income and expenditure of the first two years (2014-2015):
|
“Simplified” Profit and Loss Account of Bergendóc Co-op. |
||
|
Years |
1st. (EUR) |
2nd. (EUR) |
|
Sales |
– |
334 |
|
Grants received |
16 652 |
30 462 |
|
Cost of materials, equipment |
4 991 |
13 121 |
|
Salaries |
9 708 |
21 189 |
|
Depretiation |
76 |
220 |
|
Other costs |
21 |
111 |
In the first two years of operation the company generated a small amount of market revenue in 2015, mainly from the lavender festival. Even after it was obvious that funds dried up, neither a business plan nor a financial plan were drafted. However, the enterprise tried to sale some of its newly developed products such as tea, soap and different kinds of jam made from local herbs ― chamomile, rosehip, elderberry etc. ―, also selling artisanal cheese of different flavours produced from local milk.
Since there were no adequate market research target groups for the products could not assessed by their needs causing a misuse of communication and marketing channels, all of which in the absence of real market access resulted in the halt of otherwise viable initiatives. At the same time a website was established as a non-objective result (http://bergendoc.hu/) where those interested could gather information about the project, and which acts as a knowledge-sharing platform of social cooperatives and rural tourism in general. Also, a Facebook profile (https://hu-hu.facebook.com/bergendoc/) has been set up.
The enterprise overall did not operate as a business, it lacked entrepreneurial attitude and management of finances. Income from market activities did not even come close to the level of fixed costs, so it is no wonder that in 2016 the company could no longer keep its employees, since it could not pay wages. In the absence of self-generated income and funds, employment ended and the production of local products also failed.
As soon as the external financing of the cooperative came to a halt, the issues of market adaptation gravely influenced the future of the enterprise: the organisation was unable to become an independent operator. The costs of operation could no longer be financed at all, so the Bergendóc Social Cooperative was in crisis.
The case study shows that choosing the right agenda ― economic, social and cultural ― alone is not sufficient to be effective in the long run, and that no social enterprise can rely solely on grants. Since the cooperative was unable to develop the activities that could have ensured market operation, the organisation barely survived the next 2 years. As a result it could not live up to its socio-economic and cultural role in the local community.
In 2018, the co-operative was “borne again” thanks to successful partnerships and compliance with market demands. Nowadays, together with the municipalities of the surrounding settlements ― e.g. Dóc, Balástya, Pusztaszer ― and with the governance of their main attractions ― National Park of Kiskunság, Memorial Park of Ópusztaszer, Csillagösvény Labyrinth ― the cooperative carries out various events that vitalises the community and programs focusing on cultural inheritance.
[1] Case study by Krisztián KIS (2017) on Researchgate: The role of social cooperatives in rural development.
[2] Also written as „Co-op.”: a company that is owned and managed by the people who work in it. See more at the end of the chapter under definitions.
UNIT 4
The Treasure of the Valley Social Cooperative (Hungary) was founded on the basis of the Kisvejke apricot growing area. It is a producer cooperative, which takes over the farmers’ products for further processing and provides opportunities for professional training too. With the help of several Hungarian grants, they have become more widely known. The cooperative also submitted an application for support for marketing activities, which included communication through both online and traditional channels. Thanks in part to this, they have been commissioned to participate in the school juice programme, providing a significant amount of fresh produce to the surrounding educational institutions, thus generating a fixed, predictable income and serving social objectives.
In the case of Fructus Start Social Cooperative (Hungary), which produces dairy products from local raw materials, there are two main offline channels in addition to online marketing. On the one hand, in their small snack bar, which is also a local product shop, they regularly attract new customers and tourists with tastings, where they get direct feedback on the products they sell, they get to know their products more widely and, thanks to the good quality, nobody usually leaves without buying. They also aimed to get their products on the shelves of larger stores, which they achieved through direct marketing methods. They directly approached shops that they liked, where they managed to arrange an appointment, and immediately took samples of their products to them. They were successful, and since then one of the larger shops in the county has become a regular reseller.