Case Study: Local Utilization As a Tool For Organizational Growth

by Megan Edelman…

Leaving commerce to the supervision of the local community can have its drawbacks.   It is clearly beneficial to have the local community successfully sustaining the trades and businesses of the region, however at times assistance is needed due to a lack of resources, knowledge and capital.  When large corporations may decide to expand to more rural areas the citizens of the community can be put in jeopardy.  Utilizing the existing community resources and empowering individuals to work for themselves is the socially smart approach.  With the example of Wal-Mart there has been many examples where Wal-Mart stores have moved into suburban or rural communities putting hundreds of specialty local-run stores out of business (Anderson, 2012). When considering local investment in regards to the concept of social entrepreneurship, businesses must consider the triple bottom line.  It is good business to be inclusive and it is smart business to utilize the resources already in place.  The challenge for management in these positions is evaluating whether or not the local capital is capable or working cohesively with the mission of a company.  This is a major issue or risk; can the local community succeed? And if so how can they complete with this global market?

Depending where on the globe we are observing, many parts of the developing world will lack the human capital, knowledge, education, availability and resources to mange their own economy.  In turn, such efforts exist to empower these local communities and help them learn to sustain themselves. Also organizations may work as a partnership with the local businesses to help them reach optimal results. A travel company called Intrepid Travel offers adventure trips all around the globe.  All of their ground staff on each trip is local, all accommodations used are locally owned and all food and applicable excursions are offered by local operators.  This avoids the issue of revenue leakage and keeps all funds within the community or country (Intrepidtravel.com).  The local proprietors themselves probably could not sustain without the influx of the Intrepid clientele.

With an organization called EGBOK (Everything’s Going to be OK) they take regional teenage orphans from Cambodia and Southeast Asia and train them in different areas of the hospitality field.  Then large hotel chains like Starwood or Hyatt hire these graduates and place them in hotels around the Southeast Asia region (EGBOK Mission).  Organizations like this are the intermediaries that are needed at times to help the local communities and the local people create and keep jobs.

Sometimes these relationships are absolutely necessary, even for legal purposes. With the example of the NY Times article, “Partnership Preserves Livelihoods and Fish Stocks”, the local fishermen and the Nature Conservancy teamed up and worked together to reach mutual goals.  The Nature Conservancy needed to protect certain endangered fish and the fisherman needed to keep their lively hood and support their families.  By coming to a mutual agreement both can benefit from this relationship and enhance the local economy.  From the local business perspective it may be difficult to function successfully without the assistance of intermediaries and still stay within code/guidelines/laws, etc. For the Nature Conservancy they saw an avenue to use the fishermen’s information to their advantage from eCatch (Kaufman, 2011).  This relationship helped both parties in the end. The Nature Conservancy is not sacrificing their mission to work with these local fishermen, even though they aren’t eradicating commercial fishing on these coasts entirely (which may had been their main mission). In cases like this it must come down to one thing; what is more socially responsible?  Allowing fishermen to keep their livelihood and support their families OR fully protect the endangered fish of the California coasts?  When considering social entrepreneurship, organizations are not sacrificing their missions when working with local businesses.  They are enhancing their objectives and widening their efforts.  Being socially conscious is about looking at the big picture.  Investing in local commerce certainly falls under this category.  As in this case most relationships become mutually beneficial and help the greater good.

Local sustainability should be on everyone’s radar screen.  Bringing the control back to the people is essential to building a solid and cohesive economy.  It can often be more prolific and lucrative as well.  In certain circumstances a region may have the necessary resources to function without large corporate assistance and in fact be more efficient.  With the example of the forests in the small area of IXTLN de JUREZ, Mexico in the article “Growing a Forest ad Harvesting Jobs” the locals were able to create a successful self-governing body maintaining the lumber trade and protecting the forest in this area of Mexico (Malkin, 2010).  More and more communities are beginning to understand the power that their strong communities can hold when in comes to creating and effecting local business.

The positive effects that a local sustaining community can have on its environment are innumerous.  It provides work and capital flow into the communities allowing for better quality of life, lower poverty levels, less unemployment and stronger community coercion.  Ultimately, what many communities are lacking is the simple education of how they can build a self-sustaining community.

Efforts to increase local business sustainability are most certainly dictated by what presently exists in each given situation, community or local trade.  To assist with any programming of this nature it is vital for any intermediary organization to be purely resource based.  All must work from the ground up each time in order to build the best relationship and ensure the highest chances of economic prosperity. Each setting will be different so this must be kept in mind.

When dealing with local or rural support efforts the role of a supervisor in this sense is much different than that of a traditional business manager.  It is important to observe, understand and relate to the working local economy.  In many instances these communities are in rural, international, small communities that have very different languages and customs. Understanding them, their resources and having the ability to think on their local scale will help ensure a managers success.

Ultimately it is vital for the success of global prosperity that communities have control of their own land, income and trade.  As the world’s number one profession is still in agriculture, land ownership and support and education are vital to ensure the sustainability and financial growth of rural areas around the globe.

REFERENCES

Anderson, L. May, 2004. Does Wal-Mart Destroy Communities?

http://mises.org/daily/1521

EGBOK Mission. 2012. http://egbokmission.org/

Intrepid Travel. 2012. www.intrepidtravel.com

Kaufman, L. November, 2011. Partnership Preserves Livelihoods and Fish Stocks.

Malkin, E. November, 2010. Growing a Forest and Harvesting Jobs. The New York

         Times. http://query.nytimes.com/gst/fullpage.html?res=980CE1D7113FF930A15

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4 thoughts on “Case Study: Local Utilization As a Tool For Organizational Growth

  1. tlhill2012 October 30, 2012 at 9:16 PM Reply

    Thanks for the comment.

    I am most intrigued by your discussion of possible collaborations between TINA and LOIS organizations. Is it truly possible for global networks to use and support local providers? Would this work in manufacturing as well as in service contexts? if so, it would be an intriguing way to organize a supply chain. In the 1980s and 1990s, there was a fair amount of work done on flexible manufacturing networks in which networks of local small firms strove to compete on the global stage by combining expertise and resources on an as-needed basis. Some worked well, and the example of the Italian knitwear manufacturers (high end) is often cited. Critical to successful networks was often a central design and communication hub that tracked global trends, translated demand into designs, and coordinated efforts. The technologies to support all fo these steps has improved since then, as have the governance mechanisms – such as open source systems. Within company boundaries, the WW Gore company provides an interesting model; between companies, perhaps deClerq (a retail chain in France); and outside of companies, various open source systems (see O’Mahoney’s work on these).

  2. Hunter Maloumian November 1, 2012 at 10:35 AM Reply

    I found the collection of articles to be very interesting and thought provoking. Although I agreed with many of the points “The Small-Mart Revolution” put forward I can’t help but to feel they are casting TINA businesses in an unfavorable light. Living in Philadelphia, we don’t need to look too far to identify a TINA business that has had significant positive economic effect on the city. According to the article “COMCAST CENTER – ESTIMATED ECONOMIC, FISCAL, AND REAL ESTATE MARKET IMPACTS” the Comcast Center has contributed a NPV of net new tax revenues for the city of Philadelphia is 160 Million. (The article was written in 2008 and this number is potentially much higher today) Not all of this capital is necessarily going into the local multiplier but it is reasonable to assume that a large percentage of it will leak back into the Philadelphia economy. From this perspective, the large public investment that was necessary to keep the Comcast Corporation in Philadelphia was well justified. It is possible that one day Comcast might leave Philadelphia, but to solely focus on that would result in ignoring the numerous positive impacts it has already had on our local economy. That being said, I do agree with many of the points laid out in the article that favour LOIS over TINA. The example of the IXTLN de JUREZ area of Mexico is a perfect in analysing the positive effects that LOIS businesses can have on an area. The communal efforts by the members of the IXTLN de JUREZ community demonstrate the limitless possibilities the LOIS model presents. It is the direct interest of this community to preserve the forest and to create sustainable practices to benefit future generations.

    http://www.econsult.com/articles/060308_Comcast_Report.pdf

    • robmccaw November 1, 2012 at 10:05 PM Reply

      This series of articles provoked a lot of thought regarding the best way to establish and sustain a business. I like the idea of a local economy that multiplies upon itself as money is continually reinvested within it. I do not think that this is a recipe for growth. I will draw on the real world case study of my current employer. We are small risk and insurance services firm that was founded in 1997. The idea was simple, provide insurance brokerage services on a fee-base to avoid conflict of interest inherent with a commission based model. Our founder, who is from the area, essentially used his personal network to establish and grow the business. This worked great and he has been very successful. The problem is we have exhausted his network and are out of new business opportunities, at least on a large scale. We now must achieve large growth objectives, but in a way we are not use to – cold calling and networking to establish new relationships.

      This limitation is inherent in the local commons, similarly to my company’s founder’s personal network. There are a limited number of opportunities, and once they have all been captured, you must look outside for future growth. As Shuman states (2005), LOIS shareholders can be just as demanding as TINA shareholders when it comes to the short term bottom line. Changing a business model in this fashion can be risky and perhaps avoidable if the organization had not be trapped by the blinders of a local economy to begin with.

      Shuman, M. 2005. The Small-Mart Revolution. (San Francisco: Berret-Koehler Press.) pp. 61-62.

  3. tlhill2012 November 23, 2012 at 9:59 PM Reply

    Rob – this is a conundrum. A LOIS question might be, how big is big enough? Maybe there is a natural limit in any locality, and that is OK. And if one wants to grow, why not replicate the business model (honest broking via fee) in other areas, rather than expanding this particular version.

    I’m not sure what I think about this kind of response, because stagnation is often bad for a firm. But it does seem worth questioning the grow or die mantra we hear in business school. Take the grow or die mantra to far, and one gets cancer…

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