Nodoka's Blog

“If the United Nations was fully funded why would we need the Arc or social enterprise?”

To answer this question, one could think of the United Nations (UN) and social enterprises as firms with the same goal of creating social change in the world, but with different structures. UN could be thought of as a huge corporation with countless sub-branches and divisions under its umbrella. It sets goals and provides funds for the various firms and organizations under its control. In contrast, social enterprises are small to medium-scale firms that create direct change. Considering this difference and two other factors, I believe that we would still need the Arc or social enterprises even if the UN was fully funded.

Firstly, the UN simply has too many aims. There are 17 goals under sustainable development according to the official website, and the aims vary from reducing hunger and poverty to promoting sustainable industrialization to fighting against climate change. Even if the UN has enough funds, covering every single aim in one enormous organization would be very demanding. It is by far more efficient if the UN “outsourced” some of its purposes. Indeed, the UN has recently increased the number of partnerships  with private businesses in order to become more effective.

The slogan for the council is “Business Solutions for a Better World”.

Secondly, it is idealistic to claim that the UN is independent of the interests of its member nations, particularly the United States. Jacques Fomerand states that the UN is limited because it must find its balance between “the high ground of moral principles and values” and “the numbing realities of political power”. In addition to this issue, coming to a consensus is difficult in an organization consisting of nations with vast differences in economic power. This is exemplified by the fact that developing countries argue it is unfair for developed nations to enforce sustainable industrialization on them.

Social enterprises, and projects that promote it such as the Arc, are needed to cover what the UN cannot. Independent social enterprises listen to the small voices that may be overlooked by such a large organization. Since they are not bound by political interests, they are able to create fast and direct social changes. We need such systems in the world.

Click on the logo to access the official website.

Lately, I have been following blogs written in the Stanford Social Innovation Review. I find this website quite unique and interesting; In contrast to the famed Harvard Business Review, much of its contents are specifically dedicated to news and opinions regarding social entrepreneurship, corporate social responsibility, and “social change leaders”.

One blog post that recently caught my attention is “Translating Sustainability Strategy into Practice,” in which Kenneth Amaeshi, Chris Ogbechie, and Nicholas Allo give advice to businesses experiencing difficulties in implementing the idea of sustainability to their organizational structure. I found this post as an effective confirmation of what I learned about business models in classes earlier in the course.

The authors suggest that companies should “treat commitment to sustainability as a business philosophy” and implement it in the value chain. In other words, in order for a company to successfully implement sustainability in its business, it must shift the focus of the right hand side of its business model canvas – specifically the value propositions, customer relationships, and channels – to a sustainable business model. Since changing the value propositions will have significant effects on all other parts of the business, I believe that implementing sustainability in the value chain is a practical idea.

On the other hand, I cannot overemphasize that for any of the changes in the business model to be truly meaningful, the leaders themselves must first believe in the social responsibility of their businesses. “Embedding sustainability practice in an organization’s culture” comes from the top-down, not bottom-up. Leaders should carefully assess whether pursuing sustainability truly aligns with their beliefs and visions.

This Tuesday, three Sauder alumni visited our class: Paul Davidescu (Tangoo), Paul Gill (Naked Coconuts), and Jennifer Martin (SIP Soda). I was amazed by the ability of these people to see the world differently, to see opportunities where I never thought of seeing, and to build something that made the world a better place to live in. (How many would actually think of selling something like soy-free soy sauce? At least, I have never seen anything like it while I lived in Japan.) I enjoyed the whole time they were in our class.

Ms. Martin referred to her company as her “baby”. An idea for a business requires much effort and care before it becomes a running company.

One memorable advice for fresh entrepreneurs that all three of them agreed was to have passion. They explained convincingly that “money will only get you so far” and that “you need passion to get over bumps along the way, to break through walls that you face with a start-up company.” While listening to these three people talk with much enthusiasm, I realized that the values of the entrepreneurs were what inspired them to create their companies. Paul Davidescu created Tangoo because he valued getting together and developing real relationships. Paul Gill created Naked Coconuts because one of his core values was honesty, and saw opportunities in the food industry where his value could be highly regarded. Jennifer Martin created Sip Soda because she believed in healthier lifestyles that did not sacrifice the joy of consuming sweet carbonated drinks.

Of course, this should not have come as a surprise; the value proposition is the heart of any business, and the entrepreneur’s passion would directly influence it. Passion is the key to creating a company’s point of difference. Meeting the three entrepreneurs provided me a great opportunity to see a part of the business model canvas in action.

A blog post by a fellow classmate, “Building a Business for Making a Better World,” introduced TOMS shoes and defined it as a social enterprise. The author’s criteria was that it is “a for-profit company driven primarily by a social objective.” Going against the opinion of many, I didn’t quite feel that TOMS shoes was nailing the criteria for being a “true” social enterprise. Why?

In an interesting article on Stanford Social Innovation Review, Roger L. Martin and Sally Osberg voices concern for the fact that the definition of “social entrepreneurship” is vague. A social enterprise, in their words, must take direct action to create a “new equilibrium” in transforming a society, in which it pushes a society to a stable higher level. Anything that does not satisfy this criteria is either a social service provision or social activism, or a mix of the three forms. Arguably, I feel that the concept of “One for One” makes TOMS more similar to a charity being funded by a business rather than a pure form of a social enterprise. While I see the aims of the company to be noble, donating shoes does not address the root of the problem of poverty or dramatically transform an entire society. In my opinion, TOMS is a hybrid of a social enterprise and social service.

Perhaps I am too agnostic and picky on connotations of terminology. On the other hand, failure to establish a firm definition of social entrepreneurship would leave the term almost worthless. I am not claiming that TOMS is a charity, but social entrepreneurship should not be confused with charitable organizations, since the boundaries are difficult to point out in the current state.

Leadership Cafe with United Way-CEO and president Michael Knight gives his speech

On Tuesday night this week, I was invited to an event called Leadership Café held by the Company of Young Professionals. The guest speaker for the event was the CEO and president of United Way of Lower Mainland, Michael Knight. After some great food and speeches, we were divided into teams of ten to brainstorm on one of three questions. My team was assigned the question, “What is the role of business sector in supporting the not-for-profit sector and social services?” I was glad that I had prepared for class 15 beforehand.

In the short time that we were given, our team agreed that businesses should “encourage, educate and facilitate” support for non-profit sector and social services. Personally, I thought this cliché answer was too general and weak. The discussion my team had was quite interesting, but I did not think we had nailed the answer.

Developing on the article by Michael E. Porter and Mark R. Kramer, I have a strong feeling that businesses should regard supporting not-for-profit sector and social services as a new form of long-term investment. Investing in the support for these sectors strengthens community capacity, and in turn strengthens the purchasing power of the community. This will lead to an increase in consumer expenditures, and businesses will benefit from the increased number of customers and fame in brand name.

Of course, it is idealistic to think that all businesses will perform better by investing in the community. However, given the research by Havas Media that “most people worldwide would not care if more than 73% of brands disappeared tomorrow”, it seems crucial strengthen ties with the community and make a memorable, long-lasting impact.

When I first read this blog post, “Company Secrets Hindering Human Technology Progression”, I was convinced that businesses are holding back advancements in technology. It stated that businesses are unwilling to share their newest technology to the public for the fear of being imitated and their profits taken, and that many companies waste effort attempting to “achieve technology that already exists.” However, as I questioned my first impression of the post, I became somewhat skeptical of the cliché that commercialization is the source of all problems.

While I see much truth in the writer’s claim that competition could be a detrimental factor to advancements in technology, I will argue that businesses are created with a different goal in mind. The main goal of most businesses is not to contribute to technological advancements, but to satisfy consumer desires. For many companies, technological advancements are either byproducts or methods of satisfying the wants. It could be said that consumers are leading the progress in a certain direction that they see is suitable to fulfilling their desires.

Is there a way to find balance between technological progress and business interests? I do not have a clear answer. One possible solution is for companies to attempt to research and experiment in technological areas that seem neglected, as the product of the experiment could turn into an opportunity. This also ties in to the idea of creating transient advantage and should be with business interests.

The Supreme Court found in June this year that the First Nations people had title to 1,750 square kilometers of land in western British Columbia. This is a significant turning point in the long struggle between the First Nations and the government. On the other hand, despite the advancements in recognizing the territorial rights of the First Nations, the grim dispute with businesses that seek to capitalize on the rich resources of the territory continues.

Companies who wish to expand in to the rich territories should recognize the First Nations in British Columbia as one of its stakeholders. Just as investors and government are stakeholders of a company, so are First Nations in the sense that they can be classified as part of the local community. In our class preparation for Business Ethics, Freeman stated that, for any company to be successful, managers must pursue the interests of all the stakeholders involved. Companies that neglect the community and does not consider corporate responsibility are “soon regulated in to decline”.

Arguably, the issue so far had been that First Nations had a relatively limited voice as a community stakeholder and companies did not have significant consequences in ignoring their voices and interests. However, now that the Supreme Court has acknowledged their right to a large area of land in BC, the First Nations will have a stronger voice than before.

First Nations people regard themselves as protectors of the land they live in. Their interests are less driven by economic factors and more by environment protection. This is exemplified by the fact that most First Nations willingly accept small scale energy projects like solar, wind, and geothermal power. However, they are concerned when it comes down to projects with environmentally significant effects, such as a dam on the Peace River for hydroelectricity.

Given the current trend of the rising interest in cooperating with the First Nations, I suggest that the First Nations should factor in to management decision making as stakeholders voicing concerns for environment protection. This is not contradictory with the world trend, either. Companies around the globe are increasingly interested in adding value to their company name by being “eco-friendly”. Pursuing the interests of the First Nations should not be viewed as a detrimental factor to business.

Jimmy Choo, one of the world’s leading high brands in the shoe industry, is “going public” as the company officially announced this Tuesday. Its IPO is the first in the high brand shoe industry and gathers wide attention. On the other hand, counter-intuitive to what I thought from its strong brand name, some analysts argue that Jimmy Choo may not be as great of an investment choice.

A pair of gold Jimmy Choo high heels

For one, their profit compared to their revenue lags behind other companies in the high brand industry. Why? The Businessweek quotes Howard Davidowitz stating, “‘you have to carry so much more inventory.’” Unlike clothes where many customers will consider buying even if it doesn’t fit perfectly with the body shape, shoes require a close-to-perfect match between the customers’ feet and the product. And as we know, the more the inventory, the more costly it is to keep it. The nature of the business prevents Jimmy Choo from having low inventory, so the rivals who have apparel shops are likely to be better off.

Some also argue that Jimmy Choo’s IPO “will make the shoes less chic.” Paula Rosenblum claimed that a long-term effect of going public would be “overexposure”, which could “‘reduce its prestige’”. As more and more people demand sales and store expansion, the brand becomes less exclusive and many high-end shoppers turn away.

After reading several news articles, I can’t help but agree that while Jimmy Choo may woo some short-term investors, it may not turn out to be a wise choice in the long-term because of the high risks it carries. Jimmy Choo has to be careful of the strategy they plan to take from now on, and be extra careful that they do not damage the high-brand image they’ve tried so hard to establish in the past 20 years. Especially since the high inventory levels are pressing in on their profits.

Matthew Martoma, the former portfolio manager at SAC Capital Advisors LP, was sentenced to 9 years in prison for insider trading on September 8, 2014. This is one of the longest sentences given out to “white-collar crimes”, and the severity of this lengthy sentence has created some heated debates.

Looking at the newspaper headings, I casually guessed that Martoma was severely sentenced for the gigantic profits he made through insider trading. Martoma’s actions is said to have created $275 million in profit and avoided losses for SAC, and a bonus of $9 million for himself. Authorities have called the case to be “the most lucrative insider trading scheme in U.S. history.” However, after further research and readings, I realized that there were others who committed more serious white-collar crimes but were sentenced to a term only slightly longer than Martoma’s. Why is Martoma’s sentence so long?

Arguably the most significant cause of the severe punishment is his unwillingness to cooperate with his prosecutors. The FBI has been attempting to build a case against Martoma’s former boss Steven A. Cohen for years. Martoma’s case was an opportunity for the FBI to further their investigation into Cohen, which would likely have led to the billionaire’s arrest. Martoma’s lack of cooperation with prosecutors added to his sentence under federal guidelines.

In short, the punishment for Martoma included not only the insider trading, but also for lack of willingness to respond to his prosecutors’ calls for cooperation. The possibility of finding evidence to arrest Cohen seems to be a great interest to the government.

Who should keep our food safe?

On 9th of February 2013, Aldi, a supermarket, confirmed that some of its frozen beef products contained 30% to 100% horse meat. The incident raises interest in a repeatedly debated topic: cost versus food safety.

Aldi’s horse meat issue had two distinctive natures. First, the supermarket had been supplied by a complex chain of overseas suppliers that they failed to keep track. Aldi was supplied by a French company Comigel, supplied by Spanghero, which claimed the “beef” had come from Romania. While the globalization process has allowed businesses to seek ways to lower cost of production, it also has made processes complex and difficult to maintain transparency and traceability.

Second, no one understood where responsibility lay. Each of the suppliers blamed each other. Suppliers also blamed the Food Standards Agency (FSA) for inadequate checking. FSA had been suffering from cost cuts, which reduced the amount of food checked by 30%.

Here, we see a mix of “government responsibilities” and “business responsibilities”. Friedman argues “business” should clearly distinguish themselves from “government” to pursue a truly free market. While I agree with his argument, I also believe that limits of government in carrying out food safety can be overcome if businesses also devoted themselves to checking food quality. After all, businesses operates on the interests of the consumer, and food safety is one of the interests.

While there are potential threats of economy becoming collectivized, by assisting the government to ensure food safety and cooperating companies in theory should be able to provide decent quality food at a lower cost.