Case Analysis: Fairphone - Traits and Challenges of Social Entrepreneurship

This case analysis explores the traits and challenges of social entrepreneurship through the example of Fairphone. It discusses the innovative, ethical, and risk-taking traits of entrepreneurs and the challenges faced by social enterprises, such as legal and tax implications and measuring social impact. The analysis highlights the importance of entrepreneurship in creating social change.

Case Analysis
Fairphone
Lenovo
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a. Executive Summary
Entrepreneurs are of great importance to society as they change the way of living through their
innovations. The main purpose of this report was to analyse the case of ‘Fairphone’ in relation to
entrepreneurship traits and challenges involved in running a social enterprise. The findings of the
report show that Fairphone possess the traits of being innovative, value-driven or ethical and
have the ability to take risks. Fairphone has so far been able to provide great value to its
consumers, employees, community and the environment. The three challenges that are faced by
social enterprises include legal and tax implications, meeting the double bottom line and
measurement of the social impact created by the business.
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Table of Contents
b. Introduction..................................................................................................................................4
c. Analysis of Entrepreneur traits/characteristics............................................................................4
d. Major Boundaries or Challenges in Social Entrepreneurship......................................................7
e. Conclusion...................................................................................................................................8
f. References....................................................................................................................................9
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b. Introduction
An entrepreneur is a person that builds, operates and analyse the risk in a business in return of
attaining profits. Entrepreneurs have the ability to modify the way of living through their
innovations. Through their ventures, they help in creating jobs, wealth and builds foundations for
a prosperous society. A social entrepreneur around the globe has been the catalysts to bring
social change. They make use of market-driven strategies to overcome critical social issues in
new ways. However, the complexities have also increased due to a number of factors. The main
purpose of this report is to analyse the case of ‘Fairphone' in relation to entrepreneurship traits
and challenges involved in running a social enterprise. The subsequent sections of this report
analyse the characteristics and traits of entrepreneurs as seen from the case of Fairphone. This is
followed by discussing the challenges of running social enterprises. Overall, the light is shed on
the importance of entrepreneurship and the challenges faced by a social entrepreneur.
c. Analysis of Entrepreneur traits/characteristics
Entrepreneurship is the ancient form of business venture. It is the entrepreneurs that carry
innovation in the economy through new services and products (Khosla and Gupta 2017). In this
way, they help in driving the economy for the nation for development and growth. Fairphone is a
cell phone-business that is highly dedicated to the community and consumers and lays focus on
transparency, open communication and start-up approach for sustainable business (Akemu,
Whiteman and Kennedy 2016).
With the use of the Big-5 factor personality model, researchers have identified traits of
entrepreneurs which include innovativeness, locus of control, self-efficacy and risk attitudes
(Kerr, Kerr and Xu 2018). Researches also show that entrepreneurs hold a need for achievement
which allows them to start a business from scratch (Kerr, Kerr and Xu 2018). Another series of
research showed that entrepreneurs are ethical, resilient, and competitive and have the vision and
passion to succeed (Khosla and Gupta 2017). Fairphone was started by its owners for the purpose
of raising awareness about the supply chain of electronic goods and how it created conflict
minerals (Brix-Asala et al. 2018). This purpose gained momentum and gifted its owners with
‘Fairphone.’
Research shows that ethics and integrity are important traits of entrepreneur and pillar stones of a
successful company in the long term (Haucke 2018). The company is so far ethical as it focuses
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on creating human values. Fairphone is one such company that sticks by its morals and provide
with fair wages and good working conditions to its employees. The production of phones is done
in an ethical manner which also supports the people involved in the supply chain. Ethical
manufacturing is a trait evident in Fairphone’s business (Brix-Asala et al. 2018). This is as it
supports small-scale mines which are transparent and provide with safe working conditions. The
company remains ethically responsible to the environment by sourcing eco-friendly products for
production. Also, the company reduces e-wastes by adopting a modular format in its designing.
This format saves the costs of repairs for the consumers. Unlike this, Apple products are difficult
to fix without the help of a technician (Bohas and Monnet 2019). This type of strategy helps
Apple to generate profits. However, Fairphone believes in providing with long-lasting phones
which can be repaired easily by customers. In this way, Fairphone provides more value to its
customers, environment and its employees.
Innovativeness is another important trait of entrepreneurs. Fairphone is a live example of
innovation. Nobody thought manufacturing mobiles will be possible using sustainable materials.
Fairphone has a modular construction, which is different from the rest of the smart phone
companies (Markman et al. 2016). The main components of the phone come out in sections
which make it easier to replace them. Spare parts of the phone are also available in the market
making the phone long-lasting and user-friendly. This also allows the users to upgrade their
phones with new technologies without buying new models or paying extra costs (Hankammer et
al. 2018). Presently phone companies are focusing highly on increasing profits by exploiting
minerals and making the use of models limited (Bohas and Monnet 2019). However, Fairphone
is breaking this streak by bringing products that are innovative and life-changing.
Another important characteristic of an entrepreneur is a risk-taking attitude. It is well-known that
risk is an integral part of every business. However, in entrepreneurship, it is the entrepreneur that
bears the entire risk of the business. This trait is evident from the case of Fairphone as it recently
took a decision to cancel the release of its new model and proposed improvements in the present
model (Bohas and Monnet 2019). This can be risky for the company as it is not making enough
progress in sales and releasing new models is the only way to improve sales.
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d. Major Boundaries or Challenges in Social Entrepreneurship
The idea of social entrepreneurship is becoming highly popular due to increased social problems
and complexities in modern society. Social entrepreneurship is all about doing business for
helping society and solving the problems of people who do not have enough opportunities.
Research states that social entrepreneurs have the capability to change the dynamics of the
society (Vallet et al. 2017). The main focus of business entrepreneurs is on the economy while
social entrepreneurs focus on society. Fairphone focuses on saving natural minerals in
production. It may seem that the company is focusing on profits but the main emphasis is on
social change. Fairphone is one such self-driven social enterprise that has creative individuals
who exploit better opportunities, question the conventional norms and refuse to give up until
they make something better for the world (Vallet et al. 2017).
There are wide-ranging opportunities available for a social entrepreneur starting from a social
purpose commercial business to development of a non-profit model to creating partnerships with
wide networks and so on. However, there are a number of challenges that are involved in running
a social enterprise. This is the development of a social enterprise involves a combination and
adaptation of social as well as commercial methods (André and Pache 2016). Along with these,
the development of advanced conceptual frameworks and strategies is required which is linked
with social entrepreneurship. Social entrepreneurs face challenges in conveying their business
ideas, gaining family support, competition from different forces, maintaining quality,
government policies, technology needs and so on.
Along with these, one of the unique challenges for social enterprises is to measure the social
impact created by their business in an effective manner (André and Pache 2016). Social
entrepreneurs might not answer to the shareholders of investors but they do have to answer the
stakeholders. They need to stay accountable to the public and make sure the funds are invested in
the right places to create an impact.
Another challenge for social entrepreneurs is to meet the double bottom line of maintaining the
balance between the creation of social values and profits. This adds a layer of complexity which
is not experienced by the profit-driven enterprises. A social enterprise’s work is directly linked
with their cause that is how much value they provide (Davies, Haugh and Chambers 2018). The
growth of their business is measured through the external benefits provided rather than the
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internal financial gains. There are times when social priorities can lead to decisions which put the
business at a commercial risk (Wry and York 2017). Also, decisions about keeping business
afloat can challenge social concerns.
In a recent study by Davies, Haugh and Chambers (2018) it was found that social enterprises
face challenges due to lack of business acumen. They often misunderstand the difference
between profit and revenues failing to consider operating costs when reporting profits. Another
study found over-optimism across social enterprises with challenges of future financial returns
overestimated and regular discounting. Moreover, legal and tax implications is another challenge
for social enterprises. This includes compliance with the constitution of organisation,
reinvestment of profit, GST inferences and many laws related to different industries (Wry and
York 2017). There is also debate regarding tax concessions in relation to profits earned by social
enterprises.
e. Conclusion
From the above review of the Fairphone, it can be concluded that the main purpose of social
entrepreneurs is to work for a social cause and benefit larger communities. Entrepreneurs help in
shaping the dynamics of society by giving them a reason to grow and live better. Some important
traits of an entrepreneur that goes along with the case of Fairphone are, innovative, risk-taking
attitude and ethical. These traits helped Fairphone to create value for its employees, community,
environment and its suppliers. Fairphone has been able to dominate the market by producing
products through the use of eco-friendly products while helping small business and suppliers. It
is also working to provide value to customers by innovating in the construction of phones. These
traits definitely prove long-term success for Fairphone. One of the key challenges for social
enterprises is to meet the double bottom line which involves meeting both social and financial
goals.
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f. References
Akemu, O., Whiteman, G. and Kennedy, S., 2016. Social enterprise emergence from social
movement activism: The Fairphone case. Journal of Management Studies, 53(5), pp.846-877.
André, K. and Pache, A.C., 2016. From caring entrepreneur to caring enterprise: Addressing the
ethical challenges of scaling up social enterprises. Journal of Business Ethics, 133(4), pp.659-
675.
Bohas, A. and Monnet, M., 2019. The strategies of consumer electronics manufacturers to
establish fair and transparent mineral supply chains: the Fairphone case (No. hal-02045703).
Brix-Asala, C., Geisbüsch, A.K., Sauer, P., Schöpflin, P. and Zehendner, A., 2018. Sustainability
tensions in supply chains: A case study of paradoxes and their
management. Sustainability, 10(2), p.424.
Davies, I.A., Haugh, H. and Chambers, L., 2018. Barriers to social enterprise growth. Journal of
Small Business Management.
Hankammer, S., Jiang, R., Kleer, R. and Schymanietz, M., 2018. Are modular and customizable
smartphones the future, or doomed to fail? A case study on the introduction of sustainable
consumer electronics. CIRP Journal of Manufacturing Science and Technology, 23, pp.146-155.
Haucke, F.V., 2018. Smartphone-enabled social change: Evidence from the Fairphone
case?. Journal of Cleaner Production, 197, pp.1719-1730.
Kerr, S.P., Kerr, W.R. and Xu, T., 2018. Personality traits of entrepreneurs: A review of recent
literature. Foundations and Trends® in Entrepreneurship, 14(3), pp.279-356.
Khosla, A. and Gupta, P., 2017. Traits of successful entrepreneurs. The Journal of Private
Equity, pp.12-15.
Markman, G.D., Russo, M., Lumpkin, G.T., Jennings, P.D. and Mair, J., 2016. Entrepreneurship
as a platform for pursuing multiple goals: A special issue on sustainability, ethics, and
entrepreneurship. Journal of Management Studies, 53(5), pp.673-694.
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Vallet, F., Tyl, B., Pialot, O. and Millet, D., 2017, August. Is this system eco-innovative? A case-
based workshop. In 21th International Conference on Engineering Design ICED17.
Wry, T. and York, J.G., 2017. An identity-based approach to social enterprise. Academy of
Management Review, 42(3), pp.437-460.
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