Compendium 2.4.5 Supply chains

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EQUAL COMPENDIUM ON INCLUSIVE ENTREPRENEURSHIP

2.4.5 Building competitive supply chains

Contents

The challenge

Whilst supply chains and clusters are often seen as applying only to high-end technological sectors, EQUAL partnerships have shown that taking a collective and trade-sector-based approach to developing all levels of the local supply chain can have considerable advantages over ad hoc support for individual entrepreneurs.

EQUAL has described the process of starting up a business as being just the first step on a ladder. If start-ups do not have access to markets and competitive technology the ladder will just lead entrepreneurs over the cliff into debt and bankruptcy. Currently, despite regional differences, an average of around ten percent of businesses disappears each year across the EU.[1] A lack of business knowledge, technical capacity, market awareness or business networks can all prevent many entrepreneurs – particularly from disadvantaged groups – from being able to expand a business idea to its full potential.

In this sense, start-up support is clearly not enough. For example, start-up support can help women to create their own enterprises. However, once they are up and running, many women entrepreneurs can find it hard to break into the male-dominated business networks which can be crucial for developing contacts and clients. Similarly, ethnic minorities tend to use their traditional knowledge and networks to set up businesses which trade within their own community. This can be a good way to start but, in the end, the market can become saturated with very similar ethnic businesses.

In the same vein, entrepreneurs within deprived urban and rural areas often begin by trying to serve the local people they are most familiar with. But incomes within these areas are often low, and only a small proportion of firms can survive exclusively on local markets. Many social enterprises are also conceived to provide services that private firms find too risky or costly to provide. If they rely exclusively on these markets it can become very difficult to become independent from public funding.

How EQUAL has approached the issue – examples

Although supply chains and clusters are all too often seen as applying uniquely to the “champions’ league” of the knowledge economy, in fact, there are many emerging and niche markets which provide important opportunities for entrepreneurship and job creation among disadvantaged groups.

EQUAL projects have shown that taking a collective or sector-based approach to developing local supply chains can have considerable advantages over approaches which target the individual irrespective of the local conditions. The best way of ensuring that start-ups survive and become sustainable is to intervene in an integrated way at different levels of the supply chain, from training and product development to improved technology and accessing the market. Approaches have focused on fulfilling the potential of particular groups or areas, or harnessing new or growing levels of demand, particularly in the environmental, social and cultural sectors.

[1] Eurostat: http://epp.eurostat.ec.europa.eu/portal/page_pageid=2293,59872848,2293_61474735&_dad=portal&_schema=PORTAL

Turning growing social and environmental needs into opportunities

Growing awareness of the threats facing the global environment and increasing social needs – particularly in the fields of child and eldercare – create new potential for developing local supply chains. EQUAL projects have worked at different levels of the supply chain, including identifying needs and supporting entrepreneurship amongst disadvantaged groups or social enterprises to meet these needs.

The Factoria de Empresas project in Spain helped launch social enterprises contributing to meet local social or environmental needs in areas around Madrid, which were suffering from high unemployment and limited job opportunities. The project saw the potential to turn the growing social and environmental needs of the major city into new job opportunities for the disadvantaged groups living just outside. It set up ‘Ecotextil’, which is focused on recycling publicity materials for reuse and ‘Ecoaceite’ that recycles used vegetable oil. It also supported the development of a garden centre and a farm school aimed at people with disabilities. The project worked with the Universidad Autónoma in Madrid to explore new business opportunities in the environmental sector.

The INSPIRE project developed an innovative model for replicating successful social enterprises in northeast England. Its most notable progress was in the context of the growing niche market of home care services where a successful employee-owned company, Sunderland Home Care Associates (SHCA), was used as the model to launch several similar companies in the region. A social franchising body, Care & Share Associates (CASA), has facilitated the creation of new social enterprises through planning, administration, management, quality control and recruitment support in following the SHCA model. To ensure the independent enterprises are held together in a mutually supportive way, each has shares in CASA whilst CASA retains a holding in each company. The project led to the creation of over 400 new jobs.

The ADERE project sought to take advantage of increased social needs in rural areas in Portugal to develop employment opportunities. The project worked at all levels of the process, from identifying the local needs and assessing the barriers to service delivery to providing the training and support necessary for disadvantaged groups to provide these services. A growing market was identified for services in elderly care, dwellings for the elderly, home care, household chores, childcare, support for youngsters with difficulties, security and improvements to housing. Disadvantaged groups, particularly youngsters seeking their first job, were provided with the knowledge, methodologies and tools necessary to create micro and small businesses in areas with success potential.

Promoting new opportunities in growing sectors

The modern economy is undergoing many changes as a consequence of factors such as technological advances, globalisation and changing tastes and preferences. Many of these changes cause the loss of jobs, for example as factories close owing to competition from abroad. However, the changing economic context also provides new opportunities, which can be exploited to provide new or expanded local markets. Particular opportunities exist in the growing sectors of leisure, culture, entertainment and tourism.

Community celebrations offer potential for the development of business ideas amongst disadvantaged groups in areas such as creative industries, catering, clothing, media and tourism. Festivals can tap into the growing leisure and tourism markets and, because of the very nature of many of these festivals, they can provide opportunities for creative activities empowering individuals and socially excluded groups. The Celebrating Enterprise project in the UK focused on two London-based festivals rooted in ethnic minority communities. The project sought to harness the potential of the events to raise the profile of ethnic community businesses and to develop the confidence-building effects of participation in these events.

Audiovisual industries offer particular opportunities in the modern economy. However the sector relies heavily on small and micro businesses and requires good quality specialised facilities and structures to support the development of skills and products. The Audio Visual Entrepreneurship project in the UK and the similar Maison des Musiques Emergentes project in Belgium aimed to provide individuals from groups under-represented in the audiovisual industries with opportunities to develop the skills, knowledge and experience to create successful businesses. The projects worked on the empowerment of disadvantaged groups, from the development of skills and the provision of rehearsal spaces, through mentoring and help in making links with the mainstream market and industries.

Whilst construction is a declining sector, the more creative field of design is growing. The Maison du Design project in Belgium took a prominent physical space and opened a Design House with specific support services open to all designers. It supported designers from all sections of the community in carrying out market research, developing a business plan, setting prices and working with suppliers. It offered start-up protection through an incubator format and acted to build trust between designers and funding bodies. It also provided an exhibition space so that the designers could profile themselves and gain access to mainstream markets. The Sports Business Partnership project from Greece established a series of one-stop shops specifically aimed at supporting business creation and development in the sports sector. As well as information, these centres provided links to top professionals in the sector, enabling entrepreneurs to access know-how that would only normally be available to people who were already very well connected or who paid a lot of money. This project was particularly innovatory in recognising the economic potential of sports activities, an area which is often seen as a purely public service.

Developing local supply chains for ethnic minority groups

Expanding ethnic minority communities create new opportunities for entrepreneurship and enterprise development at local level. Firstly, existing entrepreneurial activities among ethnic minority groups can be encouraged to expand into mainstream markets and indigenous entrepreneurial activities can be encouraged access ethnic minority markets. Secondly, new job opportunities are directly created in meeting the specific needs of these groups.

The Emerge project in Ireland worked to help ethnic minority entrepreneurs break out of their niches and access mainstream markets. The project sought to provide ethnic minority entrepreneurs with the information to serve a broader market. It worked to build links with mainstream business networks, for example by inviting ethnic minority entrepreneurs to networking events and mainstream business information sessions. It also engaged with mainstream financial institutions to improve their understanding of the potential and needs of ethnic minority entrepreneurs.

The transnational EQUAL project Building Entrepreneurship tested different tools and methods to move ethnic minorities and other socially excluded groups out of the shadow economy through inclusive entrepreneurship. Helping ethnic minority entrepreneurs to avoid the ‘traps’ of the informal economy can be a crucial first step in enabling them to access mainstream funding and support services and mainstream markets.

The Kennis voor een gevulde winkelwagen (‘Knowledge for a well-filled shopping trolley’) EQUAL project targeted ethnic minority entrepreneurs on Boulevard Zuid (Boulevard South) – a two kilometre-long shopping street in South Rotterdam with a dramatically high business failure rate. It aimed to help them turn their shops into successful long-term businesses. The training the project provides was a vital component of the policies promoted by the Kansenzone (‘Opportunity Zone’) led by the City of Rotterdam. This integrated business support initiative combined a grant scheme for investments by SMEs, microcredits provided by banks, starter advice, public-private partnership in area management, public investment to rehabilitate business premises, training programmes for at-risk youth and on-line property information.

Promoting specific local supply chains in rural or urban areas

Many rural areas are experiencing decline owing to international competition and are suffering from depopulation as people move to cities in search of work. However, the specificities of rural areas also offer the potential for developing new markets in the modern economy, from growing agricultural markets – such as organic produce – to new possibilities in the field of leisure and tourism.

For example, the GLOCAL EQUAL project in Northern Portugal created the “Laboratory for Investment Opportunities”, with a strong contribution from the University of Trás-os-Montes and Alto Douro (UTAD). The main part of this “tool” is a computerised scoring system for rating the investment opportunities in the different niches of the main “value chains” in the Alto Douro. It combines a traditional assessment of risk and financial viability with local information about promising market niches, and takes into account personal factors such as the time available after family care commitments. This allows both advisers and entrepreneurs to take a far more detailed, tailor-made and therefore objective overview of the main opportunities for creating “local companies with a global focus”.

On the other hand, urban neighbourhoods can experience some of the most extreme forms of deprivation – even within otherwise prosperous cities. Work can be undertaken to encourage inclusive entrepreneurship and job creation in niche markets in such areas. Opportunities can be created through existing or planned activities in such fields as urban regeneration, culture, the knowledge economy and social service provision. Many of the projects mentioned in previous sections target urban areas (Factoría de Empresas, Celebrating Enterprise, Audiovisual Partnership and Maison des Musiques Emergentes).

Recommendations for mainstreaming policies

Encouraging and supporting business start-ups is a necessary but not sufficient condition for successful sustainable enterprises. Business support policies need to look at all dimensions of the local supply chain – with a clear focus on ensuring eventual self-sufficient market access – to create such sustainable success stories.

Potential for job creation and entrepreneurship can stem from a number of sources, such as growing social and environmental needs, which create new market opportunities. The restructuring of the economy also provides new market opportunities in such growing sectors as leisure, culture, tourism and creative industries. Ethnic minority communities represent new markets and also bring new products which ethnic entrepreneurs can bring to mainstream markets with the right expertise or support.

Business support services which encourage new start-ups in already saturated or non-existent markets are likely to do more harm than good by “setting people up to fail” and driving them into debt. A clear identification of the new or growing local market opportunities can allow targeted business support activities with much greater chance of success.

However emerging opportunities do not translate automatically into new firms and jobs for disadvantaged groups. It is necessary to take an entrepreneurial approach to the entire supply chain and design an integrated sequence of actions which fits each context.

Pro-active approaches need to be taken to identifying potential entrepreneurs. Targeted business support activities can include skill development in particular growth areas, general business training and techniques such as marketing and mentoring to encourage sustainability

Links to EQUAL case studies


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