Reluctance to Enter the War Essay

The American population in the late 1930’s was very self focused for several reasons. Many had come through World War One and it’s aftermath. The economy was still in a depressed state. There was a sincere lack of faith in the Government being able to handle anything outside of our borders. There was a perception that there was little about the situation in Europe that impacted the people in the United States. Each of these reasons in varying degrees impacted the feelings of reluctance about entering another conflict on far off shores. World War One was fresh on many people’s minds in the late 1930’s and early 1940’s. That war impacted many individual lives and families in the United States. Most people remembered fathers or brothers that did not return home or were injured in that war. Much of what the United States government tried to do after the war in international relations failed. There was a perception that we were out of our league when it came to international relations. Our own economy was in the throws of a national depression. People were focused on personal and immediate survival needs. Several farm families had been uprooted in the mid west and were living in near homeless conditions on the west coast. Unemployment was at an all time high. Soup lines were still long. Neighbors and families were introverted in meeting immediate needs and not overly concerned with another foreign dispute. Faith in government was not very high in this period of our history. Franklin D. Roosevelt was still popular and people still had hope. Delivery of political promises was something the people had not seen much of. What they wanted the government to do was focus on American needs – not other nations wants. Although what was going on in Europe was perceived as negative for those in Europe. Many did not feel it impacted our own lives in the United States to any great degree. As a nation were not only had an isolationist policy – we had an isolationist attitude. Our perceptions of the hostile actions around the world would only be changed if they impacted our own shores. That perception remained strong until early December 1941.

Reviews on Financial Risk Management Essay

The definition and types of financial risk III. Risk management and the theoretical foundation IV. The process of financial risk management V. The challenges faced by the modern financial risk management theories ?Abstract? Financial risks are exposures of uncertainties for those participants in financial market. Financial risks can be divided into four categories: market risk, credit risk, liquidity risk and operational risk. Risk management has become more and more crucial for a market participant to survive in the highly competitive market. As the development of the global financial market, there are many phenomena that cannot be explained by traditional financial risk management theories. These phenomena have accelerated the development of behavioral finance and economic physics. The financial management theories have already improved a lot over the past decades, but still facing some challenges. Therefore, this report will review some important issues in the financial risk management; introduce some theoretical foundation of financial risk management, and discuss the challenges faced by the modern financial risk management. I. Introduction Financial risk is one of the basic characteristics of financial system and financial activities. And financial risk management has become an important component of the economic and financial system since the occurrence of financial in human society. Over the past few decades, economic globalization spread across the world with the falling down of the Bretton Woods system. Under above background, the financial markets have become even more unstable due to some significant changes. Many events happened during the decades, including the â€Å"Black Monday† of the year 1987, the stock crisis in Japan in 1990, the European monetary crisis in 1992, the financial storm of Asia in 1997, the bankruptcy of Long-Term Capital Management in 1998, and the most recent global financial crisis triggered in the year 2008. All these changes brought enormous destruction of the smooth development of the world economy and the financial market. At the same time, they also helped people realized the necessity and urgency of the financial risk management. Why did the crisis happened and how to avoid the risk as much as possible? These questions have been endowed more significant meaning for the further development of the economy. Therefore, this report will review some important issues in the financial risk management; introduce some theoretical foundation of financial risk management, and discuss the challenges faced by the modern financial risk management. II. The Definition and Types of Financial Risk The word â€Å"risk† itself is neutral, which means we cannot define risk a good thing or bad. Risk is one of the internal features of human behavior, and it comes from the uncertainty of the future results. Therefore, briefly speaking, risk can be defined as the exposure to uncertainty. In the definition of risk, there are two extremely important factors: first is uncertainty. Uncertainty can be considered as the distribution of the possibility of one or more results. To study risk, we need to have a precise description about the possibility of the risk. However, from the point view of a risk manager, the possible result in the future and the characteristic of the possibility distribution are usually unknown, so subjective factors are frequently needed when making decisions. The second factor is the exposure to uncertainty. Different human activities were influenced at different level to the same uncertainty. For example, the future weather is uncertain to everyone, but the influence it has over agriculture can be far deeper than that over finance industry or other industry. Based on the above description about risk, we could have a clearer definition of financial risk. Financial risk is the exposure to uncertainty of the participants in the financial market activities. The participants mainly refer to financial institutions and non-financial institutions, usually not including ndividual investors. Financial risk arises through countless transactions of a financial nature, including sales and purchases, investments and loans, and various other business activities. It can arise as a result of legal transactions, new projects, mergers and acquisitions, debt financing, the energy component of costs, or through the activities of management, stockholders, competitors, foreign governments, or weather. (Karen A. Horcher). Financial risk can be divided into the following types according to the different sources of risk. A. Market risk. Market risk  is the  risk  that the value of a portfolio, either an investment portfolio or a trading portfolio. It will decrease due to the change in value of the market risk factors. The four standard market risk factors are stock prices, interest rates, foreign exchange rates, and commodity prices. The influence of these market factors have over the financial participants can be both direct and indirect, like through competitors, suppliers or customers. B. Credit risk. Credit risk  is an investor’s risk of loss arising from a borrower who does not make payments as promised. Such an event is called a  default. Almost all the financial transactions have credit risk. Recent years, with the development of the internet financial market, the problem of internet finance credit risk also became prominent. C. Liquidity risk. Liquidity risk  is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss. Liquidity risk arises from situations in which a party interested in trading an  asset  cannot do it because nobody in the  market  wants to trade that asset. Liquidity risk becomes particularly important to parties who are about to hold or currently hold an asset, since it affects their ability to trade. D. Operational risk. Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. Nowadays, the study and management of operational risk is getting more attention. The organizations are trying to perfect their internal control to minimize the possibility of risk. At the same time, the mature theory of other subjects, such as operational research methods, are also introduced to the management of operational risk. Overall, financial risk management is a process to deal with the uncertainty resulting from financial markets. It involves assessing the financial risks facing an organization and developing management strategies consistent with internal priorities and policies. Addressing financial risks proactively may provide an organization with a competitive advantage. It also ensures that management, operational staff, stockholders, and the board of directors are in agreement on key issues. III. Risk Management and the Theoretical Foundation Financial market participant’s attitude towards risk can be basically divided into the following categories. A. Avoid risk. It is irrational for some companies to think that they can avoid the financial risks though their careful management because of the following reasons. First of all, risk is the internal feature of human activities. Even though it doesn’t have direct influence, it could generate indirect influence though the competitors, suppliers or customers. Moreover, sometimes it might be a better choice for the manager of the company to accept risk. For example, when the profit margin of the company is higher than the market profit margin, the manager can increase the value of the company by using financial leverage principle. Obviously, it will be harder to increase the value of a company if the manager is always using the risk avoidance strategy. B. Ignore risk. Some participants tend to ignore the existence of risks in their financial activities, thus they will not take any measures to manage the risk. According to a research of Loderer and Pichler, almost all the Swedish multinational companies ignored the exchange rate risk that they are facing. C. Diversify risk. Many companies and institutions choose to diversify risk by putting eggs into different baskets, which means reaching the purpose of lower risk by holding assets of different type and low correlation. And the cost is relatively low. However, as to small corporations or individuals, diversifying risk is somehow unrealistic. Meanwhile, modern asset portfolio theory also tells us that diversifying risk could only lower the unsystematic risk, but not systematic risk. D. Manage risk. Presently, most people have realized that financial risk cannot be eliminated, but it could get managed though the financial theory and tools. For instance, participants can break down the risk they are exposed to by using financial engineering methods. After keeping some necessary risk, diversify the rest risk to others by using derivatives. But why do we need financial risk management? In other words, what is the theoretical foundation of the existence of financial risk management? The early financial theory argues that financial risk management is not necessary. The Nobel Prize winner Miller ;amp; Modigliani pointed out that in a perfect market, financial measures like hedging cannot influence the firm’s value. Here the perfect market refers to a market without tax or bankruptcy cost, and the market participants own the complete information. Therefore, the managers do not need to worry about financial risk management. The similar theory also says that even though there will be slight moves in the short run, in the long run, the economy will move relatively stable. So the risk management that is used to prevent the loss in short term is just a waste of time and resource. Namely, there is no financial risk in the long run, so the financial risk management in the short run will just offset the firm’s profits, and therefore reduce the firm’s value. However, in reality, financial risk management has already roused more and more attention. The need for risk management theory and measures soar to unprecedented heights for both the regulator and participants of the financial market. Those who think risk management is necessary argue that the need for risk management is mainly based on the imperfection of the market and the risk aversion manager. Since the real economy and the financial market are not perfect, the manager can increase a firm’s value by managing risk. The imperfection of the financial market is shown in the following aspects. First, there are various types of tax existing in the real market. And these taxes will influence the earning flow of the firm, and also the firm’s value. So the Modigliani ;amp; Miller theory does not work for the real economy. Secondly, there is transaction cost in the real market. And the smaller the transaction is, the higher the cost. Last but not least, the financial market participants cannot obtain the complete information. Therefore, firms can benefit from risk management. First, the firm can get stable cash flow, and thus avoid the external financing cost caused by the cash flow shortage, decrease the fluctuation range of the stock and keep a good credit record of the company. Secondly, a stable cash flow can guarantee that a company can invest successfully when the opportunity occurs. And it gets some competitive advantage compared to those who don’t have stable cash flow. Thirdly, since a firm possesses more resource and knowledge than an individual, which means it could have more complete information and manage financial risks more efficiently. If the manager of a firm is risk aversion, he can improve the manager’s utility through financial risk management. Many researches show that the financial risk management activities have close relation to the manager’s aversion to risk. For example, Tufano studied the risk management strategy of American gold industry, and found that the risk management of firms in that industry has close relation to the contract that the managers signed about reward and punishment contracts. The managers and employees are full of enthusiasm about risk management is because that they put great amount of invisible capital in the firm. The invisible capital includes human capital and specific skills. So the financial risk management of the firms became some natural reaction to protect their devoted assets. In conclusion, although controversy is still going on about the financial risk management, there is no doubt that the theory and tools of financial risk management is adopted and used by market participants, and continue to be enriched and innovated. IV. The Process of Financial Risk Management The process of financial risk management comprises strategies that enable an organization to manage the risks associated with financial markets. Risk management is a dynamic process that should evolve with an organization and its business. It involves and impacts many parts of an organization including treasury, sales, marketing, tax, commodity, and corporate finance. Company’s financial risk management can be divided into three major steps, namely identification or confirmation risk, measure risk and manage risk. Let’s illustrate it using the market risk as an example. First, confirm the market risk factors that have a significant influence to the company, and then measure the risk factors. At present, the frequently used measure of market risk approach can be divided into the relative measure and absolute measure. A. The relative measure method It mainly measures the sensitivity relationship between the market factors fluctuations and financial asset price changes, such as the duration and convexity. B. The absolute measure methods It includes variance or standard deviation and the absolute deviation indicator, mini max and value at risk (VaR). VaR originated in the 1980s’, which is defined the maximum loss that may occur within a certain confidence level. In mathematics, VaR is expressed as an investment vehicle or a combination of profit and loss distribution of ? -quantile, which stated as follows: Pr ( ? p ;lt;= – VaR ) = ? , where, ? p said that the investment loss in the holding period within the confidence level (1 –? ). For example, if the VaR of a company is 100 million U. S. ollars in 95% confidence level of 10 days, which means in the next 10 days, the risk of loss that occurred more than 1 million U. S. dollars may of only 5%. Through this quantitative measure, company can clear its risks and thus have the ability to carry out the next step targeted quantitative risk management activities. (Guanghui Tian) The last step is management risk. Once the company identified the major risks and have a quantitative grasp of these risks through risk-measurement methods, those companies can use various tools to manage the risk quantitatively. There are different types of risk for different companies, even the same company at different stages of development. So it requires specific conditions for the optimization of different risk management strategies. In general, when the company considers its risk exposure more than it could bear, the following two methods can be used to manage the risk. The first way is changing the company’s operating mode, to make the risk back to a sustainable level. This method is also known as â€Å"Operation Hedge†. Companies can adjust the supply channels of raw materials, set up production plants in the sales directly or adjust the volume of inflow and outflow of foreign exchange and other methods to achieve above purpose. The second way is adjust the company’s risk exposure through financial markets. Companies can take advantage of the financial markets. Companies can take advantage of the financial markets wide range of products and tools to hedge its risk, which means to offset the risk that the company may face through holding a contrary position. Now various financial derivative instruments provide a sufficient and diverse selection of products. Derivative products are financial instruments whose value is attached to some other underlying assets. These basic subject matters may be interest rates, exchange rates, bonds, stocks, stock index and commodity prices, but also can be a credit, the weather and even a snowfall in some ski showplace. Common derivatives include forward contracts, swaps, futures and options and so on. V. The Challenges Faced by the Modern Financial Risk Management Theory Over the recent years, as the focus of risk management hifts from a control function to one of global financial optimization, the concern shifts from modeling the behavior of engineered contracts in selected markets to modeling the evolution of the entire economy. This change of focus calls for a vastly improved ability to model the time evolution of economic quantities. (Sergio Focardi). While those who do risk management are interested in predicting if assets will go up or down, the over-riding interest is in the relationship in movement to different assets. Though linear methods such as variance-covariance help to understand the co-movements of markets, a different set of tools is necessary to better manage risk. (Jose Scheinkman). Paradigms such as learning, nonlinear dynamics and statistical mechanics will affect how risk – from market and credit risk to operational risk – is managed. While the first attempts to use some of these tools were focused on predicting market movements, it is now clear that these methodologies might positively influence many other aspects of economics. For instance, they could be useful in understanding phenomena such as price formation, the emergence of bankruptcy chains, or patterns of boom-and-bust cycles. Lars Hansen, Homer J. Livingston professor of economics at the University of Chicago, remarks that these new paradigms will bring to asset pricing and risk management at enhanced understanding once the implicit underlying fundamentals are better understood. He says â€Å"What needed is a formal specification of the market structure, the microeconomic uncertainty, and the investor preferences that is consistent with the posited nonlinear models. Commenting on the need to bring together the pricing of financial assets and the real economy, he notes that an understanding of what’s behind pricing leads to a better understanding of how assets behave. â€Å"For risk management decisions that entail long-run commitments,† he observes, â€Å"it is particularly important to understand, beyond a purely statistical model, what is governing the underlying movements in security prices. † Blake LeBaron, professor of economics at the University of Wisconsin-Medison, observes that there is now more interest in macro moves than in individual markets. But traditional macroeconomics typically provides only point forecasts of macro aggregates. In the risk management context, a simple point forecast is not sufficient; a complete validated probabilistic framework is needed to perform operations such as hedging or optimization. One is after an entire statistical decision-making process. The big issue is the distinction between forecasts and decisions. (Blake LeBaron) Arriving at an entire statistical decision-making process implies reaching a better scientific explanation of economic reality. New theories are attempting to do so through models that reflect empirical data more accurate than traditional models. These models will improve our ability to forecast economic and financial phenomena. The endeavor is not without its challenges. Our ability to model the evolution of the economy is limited. Prof. Scheinkman notes that unlike in a physical system where better data and more computing power can lead to better predictions, in social systems when a new level of understanding is gained, agents start to use new methods. Prof. Scheinkman says â€Å"Less ambitious goals have to be set. Gaining an understanding of the broad features of how the structure of an economic system evolves or of relationships between parts of the system might be all that can be achieved. Prof. Scheinkman remarks that we might have to concentrate on finding those patterns of economic behavior that are not destroyed, at least not in the short-run, by the agent learning process. VI. Conclusion The theory foundation of modern financial risk management is the Efficient Markets Hypothesis, which notes that financial market is a linear balanced system. In this system, investors are rational, and they make their investment decision with rational expectations. This hypothesis shows that the changing of the future price of financial assets has no relation with the history information, and the return on assets should obey normal distribution. However, the study of economic physics shows that financial market is a very complicated nonlinear system. At the same time, behavioral finance tells us that investors are not all rational when making decisions. They usually cannot completely understand the situation they are facing unlike hypothesized. And most times they will have cognitive bias, when they use experience or intuition as the basis of making decisions. It will lead to irrational phenomena like overreaction and under reaction when reflected on investment behaviors. Therefore, it will be meaningful to study how to improve the existing financial risk management tools, especially how to introduce the nonlinear science and behavior study into the measurement of financial risk.

Project 2 Essay Example | Topics and Well Written Essays - 1750 words - 1

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Islam Economic System Essay Example | Topics and Well Written Essays - 2250 words

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Health Care Database Systems Essay Example | Topics and Well Written Essays - 750 words

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Competitive Advantage Case Study Example | Topics and Well Written Essays - 2000 words

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Science Standards Essay Example | Topics and Well Written Essays - 500 words

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Police Supervision and Management Complete Unit 3 Essay

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Drug and Alcohol Abuse in Teenagers Research Paper

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Public Administration Essay Example for Free

Public Administration Essay â€Å"The Blast in Centralia No. 5: A Mine Disaster No One Stopped† by John Bartlow Martin. Reprinted by permission of Harold Ober Associates Incorporated. Copyright 1948 by John Bartlow Martin. Copyright renewed 1975 by John Bartlow Martin. Overview The title of this case study alone insinuates that perhaps this mine disaster could have been prevented. Martin opens his case study with very descriptive and gruesome details about the events that lead up to the explosion. Martin states: â€Å"One hundred and eleven men were killed in that explosion. Killed needlessly, for almost everybody concerned had known for months, even years, that the mine was dangerous. Yet nobody had done anything effective about it† (Stillman 31). Initially, the thought and idea that a community would allow such a horrific event to occur that could have been prevented is terrifying and somewhat startling. Martin uses his case study to explore various questions regarding this mine disaster as well as the background and other potential issues surrounding the explosion. Purpose The overall goal of this case study is to place an emphasis on how dependent modern day society is on public administration to handle chaotic or unexpected situations. In exploring various aspects of this catastrophe, Martin explores the following: (1). A coal company sensitive only to profit incentives. (2). State regulatory agencies inadequately enforcing mine safety legislation. (3). Federal officials and mine unions complacent about a growing problem. (4). The miners incapable of protecting themselves against the impending disaster. Ultimately, â€Å"Modern society depends on the proper functioning of unseen administrative arrangements for safeguarding our environment; for protecting the purity of our food; for transporting us safely by road, rail, or air; for sending us our mail; or negotiating an arms limitations agreement at some distant diplomatic conference. All of us like miners in Centralia No. 5, rely throughout our lives on the immovable juggernaut of impersonal administrative systems† (Stillman 30). It seems  that most people as a whole have absent mindedly become too dependent on something as abstract and complicated as public administration. It seems to be public administration and its official’s responsibility to handle any concern in the community as well as make everything flow smoothly. To the Letter of the Law Driscoll O. Scanlan, a dedicated mine inspector, strove to enforce mining laws â€Å"to the letter of the law† because he deeply desired to protect miners and took his responsibility and job deeply. In a sense, Scanlan’s motivation toward the Constitution (the law), bureaucracy (as a public administrator responsible to the public), and obligation all played a key factor in his attitude and efforts that he made towards inspecting mines. The Stillman text states the following in regards to Scanlan: â€Å"Other inspectors, arriving to inspect a mine would go into the office and chat with the company officials. Not Scanlan; he waited outside, and down in the mine he talked with the miners, not the bosses† (Stillman 32). The text goes on to state many other comparisons between Scanlan and the other mine inspectors. Scanlan’s actions and efforts showed that he truly had a passion for his job and a genuine concern for the miners. For all of these reasons and many more, Scanlan gained a different perspective as well as insight than the other inspectors which ultimately led him to deem the Centralia No. 5 mine the worst in the district. This realization pushed him to take action. Scanlan’s Actions Scanlan was very persistent in his attempts to bring attention to the troublesome areas in the Centralia No. 5. Mine. Letter after letter he provided a detailed description of issues, potential recommendations, and concerns that he had about the condition of the mine. Those concerns included the following: (1). The amount of dust (2). The overall cleanliness of the mine. I am for the efforts and attempts that Scanlan made. Over a period of thirteen years, Scanlan took the appropriate steps towards potentially preventing the disaster that occurred in the Centralia No. 5. Mine. Scanlan reached out to the Department of Mines, Minerals at Springfield company, directors of various departments, Governor Green, presidents in numerous agencies, superintendents, attended meetings, and  made many other actions that could have benefited the miners and the overall condition of the mine. Alternative Actions Scanlan could have done the following after he saw that effort was not being made to aid the miners or the mine: (1) Dust the mine himself (2) Sprinkle the roads himself (3) Threaten to shut down the mine (4) Actually close down the mine. All of these potential options were possible; however, these actions would have been very time consuming and tedious. Overall, Scanlan did all that he could do to prevent the disaster in the mine. By law, a mine inspector could shut down a mine. Scanlan informed the miners of their potential dangers as well as gave certain recommendations and reported his findings to the appropriate actors. As a last resort, Scanlan could have closed down the mine or went to and relied on an inspector or supervisor above him to take further action. Responsibility According to an article entitled: Can Government Regulate Safety? The Coal Mine Example, â€Å"the Federal government has been directly involved in coal mining safety for over 35 years, operating under three major pieces of legislation enacted in 1941, 1952, and 1969. In fact, the 1941 and 1969 regulations significantly reduced the fatality rate in coal mining† (Lewis-Beck and Alford 1). Mark Aldrich, professor of economics at Smith College, stated the following in his article entitled: The Needless Peril of the Coal Mine: The Bureau of Mines and the Campaign against Coal Mine Explosions, 1910-1940, â€Å"The bureau continued the safety investigations begun by the USGS which focused largely on the prevention of explosions and their con-sequences. In addition to certifying and championing the use of permissible mine equipment, it also launched a first-aid and mine rescue campaign. But its most important work was its investigation of the causes of coal dust explosions and its campaign to spread rock-dusting technology. This choice of safety priorities resulted in part from the bureaus bureaucratic structure and scientific and technological orientation. No group within the bureau was charged with setting priorities, and research problems were usually chosen by scientists with little direction from above† (Aldrich 542). Conclusion If the appropriate actions were taken when Scanlan first made recommendations about the mine, the mine disaster could have been prevented. Ultimately, it is not one person or agency’s full responsibility to prevent disasters such as this one; it is a joint effort among workers, the community, legislation, inspectors, and many more to ensure that working conditions are safe and not a potential hazard to society as a whole. References Aldrich, Mark. Preventing The Needless Peril of the Coal Mine: The Bureau of Mines and the Campaign against Coal Mine Explosions, 1910-1940 Technology and Culture , Vol. 36, No. 3 (Jul., 1995), pp. 483-518. Published by: The Johns Hopkins University Press on behalf of the Society for the History of Technology Article Stable URL: http://www.jstor.org/stable/3107239. Lewis-Beck ,Michael S. and John R. Alford. â€Å"Can Government Regulate Safety? The Coal Mine Example.† The American Political Science Review , Vol. 74, No. 3 (Sep., 1980), pp. 745-756 Published by: American Political Science Association Article Stable URL: http://www.jstor.org/stable/1958155. Stillman, Richard Joseph. Public Administration: Concepts and Cases. Boston, MA: Wadsworth Cengage Learning, 2010. Print. â€Å"The Blast in Centralia No. 5: A Mine Disaster No One Stopped† by John Bartlow Martin. Reprinted by permission of Harold Ober Associates Incorporated. Copyright 1948 by John Bartlow Martin. Copyright renewed 1975 by John Bartlow Martin.

Social Enterprise Potential for Sustainability in the UK

Social Enterprise Potential for Sustainability in the UK Social enterprise is an active and sustainable business form of choice which is able to bring economic, communal and environmental benefits to the UK. It operates across all sectors of the economy, serving individuals in the private, public and third sectors. Through out this research will identify the increase levels of understanding of the role and value of Social Enterprise, given that a lack of understanding of the role and value of social enterprises was cited as a major barrier to the acceleration of the use of the business model. The purpose of this research will identify the key barriers faced by Social Enterprise and explore how these barriers could potentially be overcome to achieve sustainability. Chapter 1: Introduction A brief overview of social enterprise is introduced in the first chapter. Then, the purpose of the study will be next discussed which will end with a specific research question. In the end of this chapter the contribution of this research is also presented. A Brief Overview of Social Enterprise Social enterprise is a business structure that aims to distribute across a range of economic, social and environmental outputs which refer as‘ Triple bottom line. Within this business structure, anyone can develop a business and considers social and environmental impact as central part objectives. It can bring wealth as well as empowerment to disadvantaged communities which may be otherwise suffering exclusion. Social enterprises are organisations that supply goods and services to communal economy sector. These comprise a collection of organisations that subsist between the traditionally private and public sectors and have a stronger association with the community and non-profit sector. This sector has a key function to take part in achieving many of its goals, including overcoming social injustice and exclusion. Fundamental ethos are most often used by social enterprise organisations themselves, emphasises following three general features: †¢ Enterprise oriented like any other business, social enterprise is capable of generating income from production of goods and services to a market. As far as viable trading concerns, they are also able to make surplus from their trading. †¢ Social aims they are driven forward by unambiguous social aims. They are capable of creating new employment opportunity, training skills development and provision of local public services. They are responsible to their members and the larger society to increase its effectiveness and financial sustainability with the ultimate goal of creating social, environmental and economic impact or change. †¢ Social ownership they are self-governing organisations with an authority and the ownership structures are based on participation by stakeholder groups for example users or clients and local community groups and by trustees. Profits or surplus are disseminated as profit sharing to stakeholders or are used for the benefit of the community. In the United Kingdom, social enterprises are gradually becoming a well-known sector of the local and national economy. The organisation which is operating in this sector is conscious about the most important factor that becoming sustainable businesses is the path to independence both financially and in mission. However, this emerging sector is struggling for further growth and eventually it leads to have impact negatively on their sustainability. Social Enterprise should be supported and encouraged to grow both as a sector and as individual organisations so that these will become more sustainable organisations. Purpose of the Study My paper has been developed to explore how the term social enterprise has acquired meaning in the United Kingdom and to demonstrate how practitioners, policymakers and academics influence each other in the development of new sustainable ideas, given that a lack of understanding of the role and significance of social enterprises was cited as a major barrier to the acceleration of the use of this business model. These challenges come in many forms. Some are the same as those affecting any other business including access to business support and finance, a lack of affordable premises and finding skilled staff. However, social enterprises also face one huge barrier that seriously affects their ability to assume a position within the market. That barrier is a lack of understanding of how social enterprises work and of their potential value. This lack of understanding exists across the public, private and voluntary and community sectors. Often its been very difficult to secure contract and mainstream funding support as there are plenty of confusion surrounding the social enterprise business model. So my dissertation will identify the key barriers faced by Social Enterprise and explore how these barriers could potentially be overcome in order to achieve sustainability. It examines critical incidents that have shaped the meaning of social enterprise in England and reflects on these incidents to draw conclusions about the future sustainable development of social enterprise practice. Through out this paper, I will also study the possible circumstances for the sustainable development of social enterprise. The purpose is to notify both policy-making and the wider argument about social enterprise: what its potential might be and how that potential can be realised in different settings. Structure of the Report: This research is divided into six chapters; the first chapter is an introduction with purpose of the study. In the second chapter, literature based review of definitions of social enterprise, roots of social enterprise, discussion relevant to the sustainability of social enterprise, the nature of their contribution and their sponsors and sources of funding. The third summarises the background information of social enterprise in the UK and the fourth and fifth chapter contain the methodology and the summary of the main findings of the study with implications for policy. Finally, the sixth chapter is giving the idea about possible areas that further research could be conducted with the limitations of the study of this research paper. Chapter 2: Literature Review This chapter will give an overview of literature and models that are related to the research problem presented in the previous chapter. This chapter will introduce the roots and concepts of social enterprise in order to give a clear idea about the research area. 2.1 Roots of social enterprise Scott specified (2006, p.50) mentioned â€Å"The roots of social enterprises and community enterprise overall can be found in the mutual, self help and co-operative sector which goes back, in the UK, at least to the Fenwick Weavers in Ayrshire 1769 and Dr William King of Brighton in the 1820s with earlier antecedents.† Local community based organisation played vital role within the development of this movement and empowering disadvantaged poor community to move forward labour market. Grass root social worker Harry Cowley campaigned between first and second world war for housing needs and employment opportunity for returning service people and capacity building support for small business. He also advocated â€Å"job creation† programme from the local public service authority for unemployed people and eventually had some success. 2.2 General Discussion on Social Enterprise Social Enterprises combine the requirement of successful businesses with communal aims. They seek to qualify as businesses by setting up a market share and making a profit and draw attention to the long-term benefits for employees, consumers and the community. Todays competitive business world stated that defining the social enterprise is a challenging task. According to OECD (1999, p.9) â€Å"there is no universal, commonly accepted definition of social enterprise.† On the other hand, the OECD (1999, p.10) has described social enterprise as: â€Å"any private activity conducted in the public interest, organised with an entrepreneurial strategy but whose main purpose is not the maximisation of profit but the accomplishment of certain economic and social goals, and which has a capacity of bringing innovative solutions to the problems of social exclusion and unemployment†. Doherty and Thompson (2006, p.362) mentioned in their article that social enterprises are organizations which are seeking business solutions to social crisis. These are needed to be distinguished from other socially-oriented organizations. These also need to take initiatives that can promote to communities but which are not seeking to be â€Å"businesses†. In this esteem, these latter organizations remain dependent on endowments and donations rather than build up true paying customers. According to DTI report A Progress Report on Social Enterprise: A Strategy for Success (2003, p.6), social enterprise is such kind of business which reinvests its surpluses in the business or in the community rather than increases profit for shareholders or owners. Drucker (Gendron, 1996, p.37) argued that social entrepreneurs are those who altered the performance capacity of society but Henton et al. (1997, p.1) mentioned that ‘civic entrepreneurs are a new generation of leaders who built new, powerfully productive connections at the intersection of education, business, community and government. Somers (2005, p.46) stated â€Å"Social enterprise emphasise creating social and environmental value at all stages of their production process, as an intrinsic part of their identity†. Following Figure: 1 describes the production process of social enterprise. Laville and Nyssens (2001, p.325) argue that when the roots of social enterprises are based in reciprocity and in this way these are part of the third system, their force is based in their ability to valve into all three economic principles and systems. They are different from private and public enterprise. In terms of private enterprise they do not only maximize profit to benefit owners, they also develop market activities and generate profits. With the comparison to public enterprise, they are independent from direct control by public authorities but they benefit to a greater or lesser extent from public subsidy. In this way, they mobilize market relations to sell services or goods and use redistributive relations by utilizing government funding to finance their services. Their long-term sustainability depends on their ability to ‘continuously hybridise the three poles of the economy so as to serve the project. 2.3 Discussion Relevant to the Sustainability of Social Enterprise According to Asefa (2005, p.1), â€Å"Sustainable development is the concept of a relationship between economic growth and the environment. The term was first used in 1987 by the world Commission on Environment and Development .Although the term has been around for almost two decades, different interpretation have kept it from being a useful guide for development policy†. Bornstein (2004, p.3) mentioned that over the last decade there has been unprecedented growth of social enterprise world wide. This business model has been getting attention from both government and corporate sector though sustainability remains the major concern. According to 2004 Global Entrepreneurship Monitor (GEM) report, a survey was conducted of social entrepreneurship activity in the UK. These data suggested that latest ‘social activates are emerging at a faster rate than more conventional, commercial endeavours. Within local and global level there are three areas to focus on sustainability in business activity and they are environment, economy and community. (Harding and Cowling, 2004, p.5) Environment It ensures that business is engaged in the appropriate and careful use of limited supplies and the management of waste so that it will be able to minimize the negative and maximize the positive impact of human activity. Economy It ensures that business is financially viable and it engages in good employment practice. Finally it is beneficial to the whole economy. Social It ensures that business is overall of advantage to communities, their customs and does not cause danger to them. Schulyer (1998, p.3) described that social entrepreneurs are those who have a powerful visualization for social change and who have the strong financial resources to support their ideas. That means they should reveal all the abilities of conquering business people and a compelling aspiration for social change. On the other hand, Catford (1998, p.96) argued that â€Å"social entrepreneurswill only flourish if they are supported by the right environment, which will be created largely by governments together with the private sector†. 2.3.1Financial Sustainability Social Enterprise looks for surplus generation in order to achieve financial sustainability. This is a fundamental need to social enterprises. Emphasizing financial sustainability in addition to profit distribution becomes a way to account for all activities the organization engages in, including advocacy and in support of bono work. Sacrificing one cause and effect chain for another can have significant implications for both the quality of work and social enterprises financial sustainability. Whilst many may rely on combination of grant and trading income, ultimately, if an organisation is not financially sustainable, it cannot deliver its social and environmental impact. Fig3. Shows how the profit of social organisation is distributed to the organization itself and community. 2.4 Policy Reform and Good Governance DTI report A Progress Report on Social Enterprise: A Strategy for Success (2003, p.6) describes the three key goals for government: creating an enabling environment, making social enterprises better businesses and establishing the value of social enterprise. Thompson et al. (2000, p.328) describe â€Å"people who realize where there is an opportunity to satisfy some unmet need that the state welfare system will not or cannot meet, and who gather together the necessary resources (generally people, often volunteers, money and premises) and use these to ‘make a difference†. Brown and Murphy (2003, p.57) mentioned on Bank of England report that â€Å"Social enterprises, like all businesses, need access to a range of financial products appropriate to their activity and stage of development†. A HM Treasury report on Enterpriseand Social Exclusion (1999, p.108) came to the conclusion, arguing that social enterprise was â€Å"less understood and rarely promoted in a consistent way by the existing infrastructure for business support†. It is more constructive to judge and expand social enterprise capabilities rather than expertises and capacity building. The fact that social enterprises need to combine commercial objectives with social mission as well as internal governance means that a â€Å"capabilities approach† is more comprehensive. This is a useful way of recognising factors additional to individual skills that inter-play to determine the effectiveness and impact of a specific enterprise. It also moves away from limited considerations of a key person or group within the organisation, and their specific skills, towards a more holistic view of what the organisation is capable of doing, irrespective of the location of particular skills. Catford (1998, p.97) articulated the problems and gave one probable way out: â€Å"Traditional welfare-state approaches are in decline globally, and in response new ways of creating healthy and sustainable communities are required. This challenges our social, economic and political systems to respond with new, creative and effective environments that support and reward change. From the evidence available, current examples of social entrepreneurship offer exciting new ways of realizing the potential of individuals and communitiesinto the 21st century†. Academic writing about modern social entrepreneurship skills is relatively limited, compared to mainstream business or charities. The concept of ‘social enterprise has been quickly appearing in the public, private and non-profit sectors over the last few years. Todays increased competitive not for profit sector there is extensive needs for the improvement of organisation effectiveness and sustainability even though securing funding is harder to meet the criteria of funding body. There is a good opportunity to tap in to corporate social responsibility programme by utilising better communication and marketing strategy in order to tackle complex social problems. Chapter 3: Background Information of Social Enterprise This chapter will give the idea about the social enterprise in the UK along with the impact, barriers and access to finance. Social Enterprise in the UK The UK government has been at the front position of enabling and encouraging the increase of social enterprises as part of both welfare services delivery and community regeneration at the policy level. The impacts and influence of public, private, and citizen are empirically proven and exhibit that these conventional sectors of society are playing a part in re-evaluating the value creation opportunities offered by market (or quasi-market) mechanisms. DTI research suggested that there are at least 55,000 social enterprises in the UK, and combined turnover of  £27billion per year. These social enterprises account for 5% of all businesses with employees and the contribution to GDP is approximately  £8.4 billion, around 0.7% of the total economy. Cabinet Office mentioned on their website that in the year 2004-2005, the charity sector in the UK had a overall income of about  £27.6 billion which was raised over  £800 million from the previous year. It stand for about 2% of the UKs GDP. The data obtained from the Cabinet Office website in social sector showed that, 67% of them expected activity to grow in the next three years compare to 56% in the year 2003-2004 of third sector organisations reported an increase in activity in the previous year. Positive aspects of Social Enterprise: Social enterprise is a diverse activity and can contain a range of organisations working on different extents and at different stages of trading. They can work in commercial markets or in public services. Some work nationally, while others work at community level. They often work in the most deprived areas and work with the most underprivileged groups. Some organisations work only as a social enterprise while in other organisations social enterprise is often a part of their activity. It works in a number of key priority areas for the UK economy- these include: employment and training adult care services childcare and health transport financial enclosure recycling rural enhancement renewable energy and community regeneration According to Doherty and Thompson (2006, p.362) the common characteristics for a Social Enterprise are: They have a social rationale and yields and surpluses are not shared out to shareholders. Reinvested income can be utilized to provide training and improvement opportunities for workers. They use assets and capital to generate community benefit. It gives assurance that resources provide value for money where a public-sector agreement is essential for the activity. Members or employees can also take part in decision making. The SE model could make new structures of entrepreneurship and employment within a society. The enterprise is responsible to both its members and a wider community. Social enterprise can propose goods and services to its consumers in an elastic and inventive way. Often the market has failed or the private sector does not want to go in this area. The potential of earnings and returns stream could unleash organisations from the oppression of fundraising and grant applications. There is either a double or triple-bottom line concept. The assumption is that the most effective social enterprises show signs of healthy financial and social returns rather than high profits in one and lower profits in the other. Social Enterprise adopted enterprising solutions to deal with social and environmental issues following evidence of the beneficiaries of social enterprise activity is shown in Figure.3 (IFF, 2005). According to IFF (2005, p.28), a survey of social enterprises was conducted in 2004 for the Small Business Service (SBS), the UK Government, is showed on the following figure.4. It shows 19% beneficiaries were people with disabilities; 17% were children and young people; 15% were elderly; 12 % were people on low incomes and the unemployed. Social enterprise has been playing vital role to tackle these targeted disadvantaged group and moving forward them in the labour market, predominantly in poor areas with soaring levels of poverty and joblessness. Barriers of social enterprise According to UK Government, there are mainly four significant barriers to accessing appropriate business support and finance for social enterprises throughout the region. 1. Cultural barriers between those setting up social enterprises and mainstream business advisors. 2. Lack of transparency about where to access business support at the local level, largely due to the huge diversity of routes into starting up social enterprises. 3. Limited numbers of qualified technical specialists in key business advice areas where social enterprises require specialist support, for example on legal structure, potential investors or taxation. 4. Limited sources of affordable equity and loan finance of all sizes. Bank of England (2003, p.25), took the survey of Social enterprise and it stated that 32% of social enterprises mentioned the problems in obtaining external finance and 25% problems in getting grants as major barriers to expanding their trading activities. However, other problems are lack of qualified staff (14%); lack of appropriate premises (16%); and lack of cash flow (10%) Low (2006, p.381) cited in his journal according to the source of DTI â€Å"†¦often have boards of directors or trustees who come from a voluntary sector rather than a business background. This can lead to a lack of business focus and prevent social enterprise from truly reaching their potential† The Progress Report on Social Enterprise: A Strategy for Success(2003, p.68) concluded that there is little hard substantiation to show the impact and added value of social enterprise. According to the report, the main reason is that social enterprises generate a variety of social and environmental impacts, beyond their financial return that are difficult to measure. Policy makers, business support providers and finance providers find it difficult to assess the value of targeting social enterprises or of including them in their activities due to lack of information on their social and environmental, as well as financial impact. Access to Finance The key factor in an enterprises development is access to appropriate sources of finance. Social enterprises have been rejected more for finance compared to the SMEs. In addition, a large minority of social enterprises perceive access to external finance as a major barrier to expansion, including some of those that have successfully accessed finance in the past. There is no clear reason to account for the higher rejection rates among social enterprises but possible contributory factors are: lack of obtainable security and private financial stake; use of organisational structures and grant funding streams with which lenders may be unfamiliar, and which may result in lengthy arrangement times; low levels of investment readiness among some social enterprises depends on some elements of credit and behavioural scoring and reputational risk to the lender. For example creating â€Å"venture philanthropy† organisation will ensure long term financing of charities infrastructure, proact ive management support and capacity building support. Dees (2004, p.18) mentioned that â€Å"Businesses fail all the time and many donor-dependent nonprofits have been around for many decades, even centuries. Social entrepreneurs look for the strategy, structure, and funding mechanisms that are most likely to ensure effective and efficient social performance given specific mission objectives and a particular operating environment†. Chapter 4: Methodology This chapter will present detailed idea about the research were conducted. This includes the research design, sample selection methods and data collection methods. At the end of this methodology part validity and reliability issues will be discussed to follow the quality standards of the research. 4.1 Research Design The present study endeavoured to explore the sustainability of social enterprise for the development of the UK. Exploratory research is selected as research design as little information exists about the social enterprise of the UK. The aim of exploratory research is mainly to gain enough information before doing more thorough research. Cooper Schindler (2003, p.21) mentioned that we basically start by gathering as much information about the object as possible and with a vague impression of what we should study. Exploratory studies are a valuable means of finding out what is happening, to seek new insight, to ask questions and to assess phenomena in a new light. It is particularly useful if researcher wish to clarify the understanding of a problem. According to Saunders et.al. (2003, p.360), there are three principle ways of conducting exploratory research and these are: a search of the literature, talking to experts in the subject, conducting focus group interviews. Qualitative interviews would be best in achieving and addressing the questions that I am looking forward to address in this dissertation paper. The research requires data that is both rich and varied as I am keen to extract the opinions and insight about practices, insights and expectations of leaders and beneficiaries in the social sector. Adopting this methodology, I will extract this data without limiting the responses of the respondents; I am mostly interested in their innate insights, opinions and organisational beliefs. Anastas (1988, p.19) mentioned that when there are the cases of sensitive subject issue and difficult decision-making procedures, individual in-depth interviews give a far more valuable tool and create a situation where participants would be likely to speak more explicitly and freely. According to Sokolow (1985, p.28) , there are several other advantages of one-to-one in-depth interviewing which include the support of individual thought, respondent thoughtfulness to questions and the offering the capability of the interviewer to sense non-verbal opinion. 4.2 Sampling Cooper and Schindler, (2003, p.44) stated in their book that selecting some of the elements in a population is the fundamental idea of sampling and researcher may draw conclusions about the entire population. There are a number of convincing reasons for sampling, including: lower cost, greater correctness of result, greater speed of data collection and accessibility of population selection. The sample would be randomly selected nationally from Social Enterprise and are actively fund raising. It is easier to make some comparison and a fairer analysis of the data because the similar size of organizations most likely to follow related trends and they are also affected by the same factors. Due to the complexity of the sector, the samples would be drawn from the wider UK region; this is to widen the organisation from which to select the qualifying sample. 4.3 Data Collection The major form of data collection was based on the semi-structured interview process with senior managers, policy officer and research development officer of the 7 selected Social enterprises operating in the UK. The interviews were designed to gain an understanding of Social Enterprises potential sustainability issues and further research needed to achieve sustainability. Therefore, interview procedures needed semi-structured interview process which is relatively informal; relaxed discussion based around a predetermined topic. Whilst conducting a semi-structured interview first of all I provided the background information regards to the research programme and its objectives to the interviewee. My interviews questions are based on open question where the interviewees had the opportunity to express opinions through its discussion. To keep momentum of discussion with the interview it is important to prepare easy to understand approach when building question with a logical sequence. In terview questions were tested among prior to interviews. Semi-structured interview was highlighted by Leech (2002, p.665) as â€Å"†¦Ã¢â‚¬ ¦one that can provide detail, depth and insiders perspective, while at the same time allowing hypothesis testing and the quantitative analysis of interview responses†. For collecting secondary data participant social Enterprises annual report, various books, websites, newspapers, annual reports, monthly reviews and significant articles were chosen. Also for collection of primary data in-depth interviews with a range of designated professional, related to this field, were taken. I contacted with Business Links and DTI to obtain the list of social enterprise operating in the UK. 4.3.1. Validity Saunders et. al. (2003, p. 109) emphasised validity is concerned with whether the findings are really about what they appear to be about. Validity defined as the extent to which data collection method or methods accurately measure what they were intended to measure. Cooper Schindler (2003, p.71) believe that validity refers to the extent to which a test measures what we actually wish to measure. There are two major forms: external and internal validity. The external validity of research findings refers to the datas ability to be generalized across persons, settings, and times. Internal validity is the ability of a research instrument to measure what is purposed to measure. To ensure the validity of the study numbers of different steps were taken: †¢Data was collected from the reliable sources, from respondents who are more experienced senior management position within Social Enterprise; †¢Survey question were made based on literature review and frame of reference to ensure the validity of the result; †¢Questionnaire has been pre-tested by the responded before starting the survey. Questionnaire was tested by at least ten persons; †¢Data has been collected through four weeks, within this short period of time no major event has been changed with the related topic. 4.3.2 Reliability: To ensure the reliability of the study numbers of different steps were taken: In order that responders could concentrate more on each question questionnaire was divided into three parts; The Ground Theory that has been selected for the study was clearly described and research question has been formulated based on the previous theory. Data has been collected based on the frame of reference that was drawn from the discussed theories. The objective is to make sure t Social Enterprise Potential for Sustainability in the UK Social Enterprise Potential for Sustainability in the UK Social enterprise is an active and sustainable business form of choice which is able to bring economic, communal and environmental benefits to the UK. It operates across all sectors of the economy, serving individuals in the private, public and third sectors. Through out this research will identify the increase levels of understanding of the role and value of Social Enterprise, given that a lack of understanding of the role and value of social enterprises was cited as a major barrier to the acceleration of the use of the business model. The purpose of this research will identify the key barriers faced by Social Enterprise and explore how these barriers could potentially be overcome to achieve sustainability. Chapter 1: Introduction A brief overview of social enterprise is introduced in the first chapter. Then, the purpose of the study will be next discussed which will end with a specific research question. In the end of this chapter the contribution of this research is also presented. A Brief Overview of Social Enterprise Social enterprise is a business structure that aims to distribute across a range of economic, social and environmental outputs which refer as‘ Triple bottom line. Within this business structure, anyone can develop a business and considers social and environmental impact as central part objectives. It can bring wealth as well as empowerment to disadvantaged communities which may be otherwise suffering exclusion. Social enterprises are organisations that supply goods and services to communal economy sector. These comprise a collection of organisations that subsist between the traditionally private and public sectors and have a stronger association with the community and non-profit sector. This sector has a key function to take part in achieving many of its goals, including overcoming social injustice and exclusion. Fundamental ethos are most often used by social enterprise organisations themselves, emphasises following three general features: †¢ Enterprise oriented like any other business, social enterprise is capable of generating income from production of goods and services to a market. As far as viable trading concerns, they are also able to make surplus from their trading. †¢ Social aims they are driven forward by unambiguous social aims. They are capable of creating new employment opportunity, training skills development and provision of local public services. They are responsible to their members and the larger society to increase its effectiveness and financial sustainability with the ultimate goal of creating social, environmental and economic impact or change. †¢ Social ownership they are self-governing organisations with an authority and the ownership structures are based on participation by stakeholder groups for example users or clients and local community groups and by trustees. Profits or surplus are disseminated as profit sharing to stakeholders or are used for the benefit of the community. In the United Kingdom, social enterprises are gradually becoming a well-known sector of the local and national economy. The organisation which is operating in this sector is conscious about the most important factor that becoming sustainable businesses is the path to independence both financially and in mission. However, this emerging sector is struggling for further growth and eventually it leads to have impact negatively on their sustainability. Social Enterprise should be supported and encouraged to grow both as a sector and as individual organisations so that these will become more sustainable organisations. Purpose of the Study My paper has been developed to explore how the term social enterprise has acquired meaning in the United Kingdom and to demonstrate how practitioners, policymakers and academics influence each other in the development of new sustainable ideas, given that a lack of understanding of the role and significance of social enterprises was cited as a major barrier to the acceleration of the use of this business model. These challenges come in many forms. Some are the same as those affecting any other business including access to business support and finance, a lack of affordable premises and finding skilled staff. However, social enterprises also face one huge barrier that seriously affects their ability to assume a position within the market. That barrier is a lack of understanding of how social enterprises work and of their potential value. This lack of understanding exists across the public, private and voluntary and community sectors. Often its been very difficult to secure contract and mainstream funding support as there are plenty of confusion surrounding the social enterprise business model. So my dissertation will identify the key barriers faced by Social Enterprise and explore how these barriers could potentially be overcome in order to achieve sustainability. It examines critical incidents that have shaped the meaning of social enterprise in England and reflects on these incidents to draw conclusions about the future sustainable development of social enterprise practice. Through out this paper, I will also study the possible circumstances for the sustainable development of social enterprise. The purpose is to notify both policy-making and the wider argument about social enterprise: what its potential might be and how that potential can be realised in different settings. Structure of the Report: This research is divided into six chapters; the first chapter is an introduction with purpose of the study. In the second chapter, literature based review of definitions of social enterprise, roots of social enterprise, discussion relevant to the sustainability of social enterprise, the nature of their contribution and their sponsors and sources of funding. The third summarises the background information of social enterprise in the UK and the fourth and fifth chapter contain the methodology and the summary of the main findings of the study with implications for policy. Finally, the sixth chapter is giving the idea about possible areas that further research could be conducted with the limitations of the study of this research paper. Chapter 2: Literature Review This chapter will give an overview of literature and models that are related to the research problem presented in the previous chapter. This chapter will introduce the roots and concepts of social enterprise in order to give a clear idea about the research area. 2.1 Roots of social enterprise Scott specified (2006, p.50) mentioned â€Å"The roots of social enterprises and community enterprise overall can be found in the mutual, self help and co-operative sector which goes back, in the UK, at least to the Fenwick Weavers in Ayrshire 1769 and Dr William King of Brighton in the 1820s with earlier antecedents.† Local community based organisation played vital role within the development of this movement and empowering disadvantaged poor community to move forward labour market. Grass root social worker Harry Cowley campaigned between first and second world war for housing needs and employment opportunity for returning service people and capacity building support for small business. He also advocated â€Å"job creation† programme from the local public service authority for unemployed people and eventually had some success. 2.2 General Discussion on Social Enterprise Social Enterprises combine the requirement of successful businesses with communal aims. They seek to qualify as businesses by setting up a market share and making a profit and draw attention to the long-term benefits for employees, consumers and the community. Todays competitive business world stated that defining the social enterprise is a challenging task. According to OECD (1999, p.9) â€Å"there is no universal, commonly accepted definition of social enterprise.† On the other hand, the OECD (1999, p.10) has described social enterprise as: â€Å"any private activity conducted in the public interest, organised with an entrepreneurial strategy but whose main purpose is not the maximisation of profit but the accomplishment of certain economic and social goals, and which has a capacity of bringing innovative solutions to the problems of social exclusion and unemployment†. Doherty and Thompson (2006, p.362) mentioned in their article that social enterprises are organizations which are seeking business solutions to social crisis. These are needed to be distinguished from other socially-oriented organizations. These also need to take initiatives that can promote to communities but which are not seeking to be â€Å"businesses†. In this esteem, these latter organizations remain dependent on endowments and donations rather than build up true paying customers. According to DTI report A Progress Report on Social Enterprise: A Strategy for Success (2003, p.6), social enterprise is such kind of business which reinvests its surpluses in the business or in the community rather than increases profit for shareholders or owners. Drucker (Gendron, 1996, p.37) argued that social entrepreneurs are those who altered the performance capacity of society but Henton et al. (1997, p.1) mentioned that ‘civic entrepreneurs are a new generation of leaders who built new, powerfully productive connections at the intersection of education, business, community and government. Somers (2005, p.46) stated â€Å"Social enterprise emphasise creating social and environmental value at all stages of their production process, as an intrinsic part of their identity†. Following Figure: 1 describes the production process of social enterprise. Laville and Nyssens (2001, p.325) argue that when the roots of social enterprises are based in reciprocity and in this way these are part of the third system, their force is based in their ability to valve into all three economic principles and systems. They are different from private and public enterprise. In terms of private enterprise they do not only maximize profit to benefit owners, they also develop market activities and generate profits. With the comparison to public enterprise, they are independent from direct control by public authorities but they benefit to a greater or lesser extent from public subsidy. In this way, they mobilize market relations to sell services or goods and use redistributive relations by utilizing government funding to finance their services. Their long-term sustainability depends on their ability to ‘continuously hybridise the three poles of the economy so as to serve the project. 2.3 Discussion Relevant to the Sustainability of Social Enterprise According to Asefa (2005, p.1), â€Å"Sustainable development is the concept of a relationship between economic growth and the environment. The term was first used in 1987 by the world Commission on Environment and Development .Although the term has been around for almost two decades, different interpretation have kept it from being a useful guide for development policy†. Bornstein (2004, p.3) mentioned that over the last decade there has been unprecedented growth of social enterprise world wide. This business model has been getting attention from both government and corporate sector though sustainability remains the major concern. According to 2004 Global Entrepreneurship Monitor (GEM) report, a survey was conducted of social entrepreneurship activity in the UK. These data suggested that latest ‘social activates are emerging at a faster rate than more conventional, commercial endeavours. Within local and global level there are three areas to focus on sustainability in business activity and they are environment, economy and community. (Harding and Cowling, 2004, p.5) Environment It ensures that business is engaged in the appropriate and careful use of limited supplies and the management of waste so that it will be able to minimize the negative and maximize the positive impact of human activity. Economy It ensures that business is financially viable and it engages in good employment practice. Finally it is beneficial to the whole economy. Social It ensures that business is overall of advantage to communities, their customs and does not cause danger to them. Schulyer (1998, p.3) described that social entrepreneurs are those who have a powerful visualization for social change and who have the strong financial resources to support their ideas. That means they should reveal all the abilities of conquering business people and a compelling aspiration for social change. On the other hand, Catford (1998, p.96) argued that â€Å"social entrepreneurswill only flourish if they are supported by the right environment, which will be created largely by governments together with the private sector†. 2.3.1Financial Sustainability Social Enterprise looks for surplus generation in order to achieve financial sustainability. This is a fundamental need to social enterprises. Emphasizing financial sustainability in addition to profit distribution becomes a way to account for all activities the organization engages in, including advocacy and in support of bono work. Sacrificing one cause and effect chain for another can have significant implications for both the quality of work and social enterprises financial sustainability. Whilst many may rely on combination of grant and trading income, ultimately, if an organisation is not financially sustainable, it cannot deliver its social and environmental impact. Fig3. Shows how the profit of social organisation is distributed to the organization itself and community. 2.4 Policy Reform and Good Governance DTI report A Progress Report on Social Enterprise: A Strategy for Success (2003, p.6) describes the three key goals for government: creating an enabling environment, making social enterprises better businesses and establishing the value of social enterprise. Thompson et al. (2000, p.328) describe â€Å"people who realize where there is an opportunity to satisfy some unmet need that the state welfare system will not or cannot meet, and who gather together the necessary resources (generally people, often volunteers, money and premises) and use these to ‘make a difference†. Brown and Murphy (2003, p.57) mentioned on Bank of England report that â€Å"Social enterprises, like all businesses, need access to a range of financial products appropriate to their activity and stage of development†. A HM Treasury report on Enterpriseand Social Exclusion (1999, p.108) came to the conclusion, arguing that social enterprise was â€Å"less understood and rarely promoted in a consistent way by the existing infrastructure for business support†. It is more constructive to judge and expand social enterprise capabilities rather than expertises and capacity building. The fact that social enterprises need to combine commercial objectives with social mission as well as internal governance means that a â€Å"capabilities approach† is more comprehensive. This is a useful way of recognising factors additional to individual skills that inter-play to determine the effectiveness and impact of a specific enterprise. It also moves away from limited considerations of a key person or group within the organisation, and their specific skills, towards a more holistic view of what the organisation is capable of doing, irrespective of the location of particular skills. Catford (1998, p.97) articulated the problems and gave one probable way out: â€Å"Traditional welfare-state approaches are in decline globally, and in response new ways of creating healthy and sustainable communities are required. This challenges our social, economic and political systems to respond with new, creative and effective environments that support and reward change. From the evidence available, current examples of social entrepreneurship offer exciting new ways of realizing the potential of individuals and communitiesinto the 21st century†. Academic writing about modern social entrepreneurship skills is relatively limited, compared to mainstream business or charities. The concept of ‘social enterprise has been quickly appearing in the public, private and non-profit sectors over the last few years. Todays increased competitive not for profit sector there is extensive needs for the improvement of organisation effectiveness and sustainability even though securing funding is harder to meet the criteria of funding body. There is a good opportunity to tap in to corporate social responsibility programme by utilising better communication and marketing strategy in order to tackle complex social problems. Chapter 3: Background Information of Social Enterprise This chapter will give the idea about the social enterprise in the UK along with the impact, barriers and access to finance. Social Enterprise in the UK The UK government has been at the front position of enabling and encouraging the increase of social enterprises as part of both welfare services delivery and community regeneration at the policy level. The impacts and influence of public, private, and citizen are empirically proven and exhibit that these conventional sectors of society are playing a part in re-evaluating the value creation opportunities offered by market (or quasi-market) mechanisms. DTI research suggested that there are at least 55,000 social enterprises in the UK, and combined turnover of  £27billion per year. These social enterprises account for 5% of all businesses with employees and the contribution to GDP is approximately  £8.4 billion, around 0.7% of the total economy. Cabinet Office mentioned on their website that in the year 2004-2005, the charity sector in the UK had a overall income of about  £27.6 billion which was raised over  £800 million from the previous year. It stand for about 2% of the UKs GDP. The data obtained from the Cabinet Office website in social sector showed that, 67% of them expected activity to grow in the next three years compare to 56% in the year 2003-2004 of third sector organisations reported an increase in activity in the previous year. Positive aspects of Social Enterprise: Social enterprise is a diverse activity and can contain a range of organisations working on different extents and at different stages of trading. They can work in commercial markets or in public services. Some work nationally, while others work at community level. They often work in the most deprived areas and work with the most underprivileged groups. Some organisations work only as a social enterprise while in other organisations social enterprise is often a part of their activity. It works in a number of key priority areas for the UK economy- these include: employment and training adult care services childcare and health transport financial enclosure recycling rural enhancement renewable energy and community regeneration According to Doherty and Thompson (2006, p.362) the common characteristics for a Social Enterprise are: They have a social rationale and yields and surpluses are not shared out to shareholders. Reinvested income can be utilized to provide training and improvement opportunities for workers. They use assets and capital to generate community benefit. It gives assurance that resources provide value for money where a public-sector agreement is essential for the activity. Members or employees can also take part in decision making. The SE model could make new structures of entrepreneurship and employment within a society. The enterprise is responsible to both its members and a wider community. Social enterprise can propose goods and services to its consumers in an elastic and inventive way. Often the market has failed or the private sector does not want to go in this area. The potential of earnings and returns stream could unleash organisations from the oppression of fundraising and grant applications. There is either a double or triple-bottom line concept. The assumption is that the most effective social enterprises show signs of healthy financial and social returns rather than high profits in one and lower profits in the other. Social Enterprise adopted enterprising solutions to deal with social and environmental issues following evidence of the beneficiaries of social enterprise activity is shown in Figure.3 (IFF, 2005). According to IFF (2005, p.28), a survey of social enterprises was conducted in 2004 for the Small Business Service (SBS), the UK Government, is showed on the following figure.4. It shows 19% beneficiaries were people with disabilities; 17% were children and young people; 15% were elderly; 12 % were people on low incomes and the unemployed. Social enterprise has been playing vital role to tackle these targeted disadvantaged group and moving forward them in the labour market, predominantly in poor areas with soaring levels of poverty and joblessness. Barriers of social enterprise According to UK Government, there are mainly four significant barriers to accessing appropriate business support and finance for social enterprises throughout the region. 1. Cultural barriers between those setting up social enterprises and mainstream business advisors. 2. Lack of transparency about where to access business support at the local level, largely due to the huge diversity of routes into starting up social enterprises. 3. Limited numbers of qualified technical specialists in key business advice areas where social enterprises require specialist support, for example on legal structure, potential investors or taxation. 4. Limited sources of affordable equity and loan finance of all sizes. Bank of England (2003, p.25), took the survey of Social enterprise and it stated that 32% of social enterprises mentioned the problems in obtaining external finance and 25% problems in getting grants as major barriers to expanding their trading activities. However, other problems are lack of qualified staff (14%); lack of appropriate premises (16%); and lack of cash flow (10%) Low (2006, p.381) cited in his journal according to the source of DTI â€Å"†¦often have boards of directors or trustees who come from a voluntary sector rather than a business background. This can lead to a lack of business focus and prevent social enterprise from truly reaching their potential† The Progress Report on Social Enterprise: A Strategy for Success(2003, p.68) concluded that there is little hard substantiation to show the impact and added value of social enterprise. According to the report, the main reason is that social enterprises generate a variety of social and environmental impacts, beyond their financial return that are difficult to measure. Policy makers, business support providers and finance providers find it difficult to assess the value of targeting social enterprises or of including them in their activities due to lack of information on their social and environmental, as well as financial impact. Access to Finance The key factor in an enterprises development is access to appropriate sources of finance. Social enterprises have been rejected more for finance compared to the SMEs. In addition, a large minority of social enterprises perceive access to external finance as a major barrier to expansion, including some of those that have successfully accessed finance in the past. There is no clear reason to account for the higher rejection rates among social enterprises but possible contributory factors are: lack of obtainable security and private financial stake; use of organisational structures and grant funding streams with which lenders may be unfamiliar, and which may result in lengthy arrangement times; low levels of investment readiness among some social enterprises depends on some elements of credit and behavioural scoring and reputational risk to the lender. For example creating â€Å"venture philanthropy† organisation will ensure long term financing of charities infrastructure, proact ive management support and capacity building support. Dees (2004, p.18) mentioned that â€Å"Businesses fail all the time and many donor-dependent nonprofits have been around for many decades, even centuries. Social entrepreneurs look for the strategy, structure, and funding mechanisms that are most likely to ensure effective and efficient social performance given specific mission objectives and a particular operating environment†. Chapter 4: Methodology This chapter will present detailed idea about the research were conducted. This includes the research design, sample selection methods and data collection methods. At the end of this methodology part validity and reliability issues will be discussed to follow the quality standards of the research. 4.1 Research Design The present study endeavoured to explore the sustainability of social enterprise for the development of the UK. Exploratory research is selected as research design as little information exists about the social enterprise of the UK. The aim of exploratory research is mainly to gain enough information before doing more thorough research. Cooper Schindler (2003, p.21) mentioned that we basically start by gathering as much information about the object as possible and with a vague impression of what we should study. Exploratory studies are a valuable means of finding out what is happening, to seek new insight, to ask questions and to assess phenomena in a new light. It is particularly useful if researcher wish to clarify the understanding of a problem. According to Saunders et.al. (2003, p.360), there are three principle ways of conducting exploratory research and these are: a search of the literature, talking to experts in the subject, conducting focus group interviews. Qualitative interviews would be best in achieving and addressing the questions that I am looking forward to address in this dissertation paper. The research requires data that is both rich and varied as I am keen to extract the opinions and insight about practices, insights and expectations of leaders and beneficiaries in the social sector. Adopting this methodology, I will extract this data without limiting the responses of the respondents; I am mostly interested in their innate insights, opinions and organisational beliefs. Anastas (1988, p.19) mentioned that when there are the cases of sensitive subject issue and difficult decision-making procedures, individual in-depth interviews give a far more valuable tool and create a situation where participants would be likely to speak more explicitly and freely. According to Sokolow (1985, p.28) , there are several other advantages of one-to-one in-depth interviewing which include the support of individual thought, respondent thoughtfulness to questions and the offering the capability of the interviewer to sense non-verbal opinion. 4.2 Sampling Cooper and Schindler, (2003, p.44) stated in their book that selecting some of the elements in a population is the fundamental idea of sampling and researcher may draw conclusions about the entire population. There are a number of convincing reasons for sampling, including: lower cost, greater correctness of result, greater speed of data collection and accessibility of population selection. The sample would be randomly selected nationally from Social Enterprise and are actively fund raising. It is easier to make some comparison and a fairer analysis of the data because the similar size of organizations most likely to follow related trends and they are also affected by the same factors. Due to the complexity of the sector, the samples would be drawn from the wider UK region; this is to widen the organisation from which to select the qualifying sample. 4.3 Data Collection The major form of data collection was based on the semi-structured interview process with senior managers, policy officer and research development officer of the 7 selected Social enterprises operating in the UK. The interviews were designed to gain an understanding of Social Enterprises potential sustainability issues and further research needed to achieve sustainability. Therefore, interview procedures needed semi-structured interview process which is relatively informal; relaxed discussion based around a predetermined topic. Whilst conducting a semi-structured interview first of all I provided the background information regards to the research programme and its objectives to the interviewee. My interviews questions are based on open question where the interviewees had the opportunity to express opinions through its discussion. To keep momentum of discussion with the interview it is important to prepare easy to understand approach when building question with a logical sequence. In terview questions were tested among prior to interviews. Semi-structured interview was highlighted by Leech (2002, p.665) as â€Å"†¦Ã¢â‚¬ ¦one that can provide detail, depth and insiders perspective, while at the same time allowing hypothesis testing and the quantitative analysis of interview responses†. For collecting secondary data participant social Enterprises annual report, various books, websites, newspapers, annual reports, monthly reviews and significant articles were chosen. Also for collection of primary data in-depth interviews with a range of designated professional, related to this field, were taken. I contacted with Business Links and DTI to obtain the list of social enterprise operating in the UK. 4.3.1. Validity Saunders et. al. (2003, p. 109) emphasised validity is concerned with whether the findings are really about what they appear to be about. Validity defined as the extent to which data collection method or methods accurately measure what they were intended to measure. Cooper Schindler (2003, p.71) believe that validity refers to the extent to which a test measures what we actually wish to measure. There are two major forms: external and internal validity. The external validity of research findings refers to the datas ability to be generalized across persons, settings, and times. Internal validity is the ability of a research instrument to measure what is purposed to measure. To ensure the validity of the study numbers of different steps were taken: †¢Data was collected from the reliable sources, from respondents who are more experienced senior management position within Social Enterprise; †¢Survey question were made based on literature review and frame of reference to ensure the validity of the result; †¢Questionnaire has been pre-tested by the responded before starting the survey. Questionnaire was tested by at least ten persons; †¢Data has been collected through four weeks, within this short period of time no major event has been changed with the related topic. 4.3.2 Reliability: To ensure the reliability of the study numbers of different steps were taken: In order that responders could concentrate more on each question questionnaire was divided into three parts; The Ground Theory that has been selected for the study was clearly described and research question has been formulated based on the previous theory. Data has been collected based on the frame of reference that was drawn from the discussed theories. The objective is to make sure t