Strategy making in social enterprise: The role of resource allocation and its effects on organizational sustainability

Social enterprises are non‐profit organizations that seek to achieve social goals through commercial activity. Because they have both social and commercial objectives, social enterprises are confronted with high levels of complexity in their strategizing and operations; not only do they have to generate sufficient revenue to re‐invest in their business operations, they also have to maintain investment in social projects in their community. Under conditions of resource scarcity, this poses severe challenges which can threaten the long‐term sustainability of the enterprise. In this paper the tension between allocating resources to commercial activity and social action is explored. A simple causal‐loop diagram is constructed which maps out the relationships between resource allocation and a number of other variables thought to influence the sustainability of social enterprises. By tracing through the diagram, a range of generic strategic alternatives available to social enterprises is evaluated and discussed.