Often when talking to students about social business in emerging markets, the question is raised, why this is relevant. At the University of St.Gallen, this question often ends in a discussion about ethics and moral. The Social Business Club takes another perspective and looks at social business as a strategic asset that fosters social progress at the same time as economic opportunities. The club identified four main reasons, why social business will affect the careers of a vast majority of HSG-students in a very direct .
In a globalized world, economic and social issues can not to be regarded separately. Single supply-chains have become highly international, affecting thousands of people in the most diverse living situations. Resources and raw materials are often mined in developing countries and shipped to the more developed world. With technological progress, these complex supply-chains are becoming more and more visible. This has two major effects on companies based on developed countries.
The first effect is a very strategic one. Through fostering social progress in emerging markets, companies can often improve their services or increase efficiencies in processes. Further they can decrease the risk of “black swans” that would get them out of business. For instance, the Earth Security Group states in his risk report that success of Switzerland’s economy is directly correlated on water scarcity in Cote d’Ivoire. This comes from the fact, that Cote d’Ivoire exports around 80% of the worlds cocoa supply, which is highly relevant for the Swiss chocolate industry. Therefore, assessing the risks of water scarcity in Cote d’Ivoire and taking measures to avoid it becomes a key-interest of companies in developed countries. Therewith, sustainability and social business become the the strategic tools to gain competitive advantages.
The second effect has to do with transparency. If clients have the possibility to track down supply-chains from the very first mining of raw materials until the very last distribution, companies that don’t care about sustainable supply-chains can get in trouble very fast. This means that companies will have the responsibility to invest in the ecosystems of their mines, plantations, and plants in emerging markets in order to ensure that the conditions for workers are fair and that the organization is acting as a good citizen.
Most of the companies, graduates of the University of St.Gallen usually end up with, will have connections to emerging markets at any point of their value-chains. This fact isn’t only true for large multinational companies but also for many SMEs in Switzerland. This is why knowing about the characteristics of these markets, being able to assess risks, and taking measures to avoid these risks is very relevant for students.
Emerging markets present large growth opportunities to the business world. The markets in the BRICS as well as in the “Next 11” countries continue to grow rapidly and allow companies to engage in new business opportunities. In these countries, large portions of the population leave poverty and are becoming richer, thereby entering the middle class.
However, usually there is still a large share of the population that is excluded from the economic boom in emerging markets often due to exclusion from a formal legal system. It is estimated that 60 to 80 percent of worlds markets are semi-formal or informal. This means that business takes place outside the formal legal system. Including this part of the societies into the economy presents a potential that is as big or even bigger than the rising middle class.
In these informal markets, social business is often the only way to be successful. According to research, companies that want to be competitive often have to invest in infrastructure and legitimize their success in society before they actually can focus on competition. Therefore, fostering social progress is often a very strategic decision to make use of the full potential in emerging markets.
The distinction to usual enterprises is that a social business primarily tackles a real need within society with a profitable business model.
There are different ways, of how a business can contribute to social welfare. In the following, two examples are given. First, consulting firms like FUNDES are helping smallholder farmers to improve the quality of their harvest and educate them to negotiate with clients such as Nestlé or SAB-Miller. For FUNDES it is a sustainable business model as the consulting firm gets a share of the increase in revenues or the quality improvement. On the other hand, there are companies, like the Aravind Eye Clinics, that provide the people from the bottom-of-the-pyramid with services for their most basic needs, doing this on a low-cost but high-quality level. Reengineering processes can be a very profitable business that has the potential to disrupt any industry.
As mentioned above, there are still big parts of the emerging economies that are not taking place in a formal legal system. The consequence for people living outside this system are often very grave. In many cases, people living in extreme poverty not even have a formal identity and are therefore not able to access a bank account, credits or public services. So developing ecosystems in which businesses can thrive within a formal legal system is a first necessity to enable local businesses in emerging markets to be able to scale – first regionally then nationally.
Student’s don’t have to look too far to find people that are excluded from the system. There are many challenges to society also in Europe. For example people living in poverty, challenges like the more recent migration streams, or providing effective services and support to minorities like drug-addicts. All these issues have to be solved in an integrated manner. New approaches to business can provide solutions how social progress in Europe for all people – not only citizens – can .
In this way, students who want to have an impact on society that goes beyond making profit, have to learn about social business. This way, they can learn how business serves community rather then community serves business.
Being a student is not only about preparing a prosperous career. It’s probably even more important to develop a strong personality. It is expected that during the coming years many industries will be disrupted and the way we live will change significantly. Especially in times where uncertainty is that high, it is crucial for students to be able to get along with situations totally unknown to them. According to the WEF, the most needed skills for managers in the years to come are complex problem solving, critical thinking, creativity, and social intelligence together with cognitive flexibility.
Enganing in social business tends to make students more resilient. The flexibility needed to move in different environments, responding to different needs is strengthening many of the skills mentioned by the WEF above. Further, Peter F. Drucker, a famous professor in management once said: “All the satisfied people, I met, were part of two worlds.” So, preparing for the upcoming disruptive changes gives students a competitive advantage compared to their peers – and in our view, also more satisfaction.
Become involved in the Emerging Market Fellowhsip
The Emerging Market Fellowship is the perfect opportunity to become involved in social business in emerging markets. It makes you familiar with the basics of emerging markets, teaches you how to build a company in emerging markets, and provides you with the opportunity of living through a unique personal experience. Apply now until September 30 to take become a fellow.