ROSE OLWAL

BBA 206 BUSINESS NETWORKING

CAT 1 2014

a. Definition of social capital ant its relation to business networking

Social capital, like human capital, is related to human well being, but on a societal rather than an individual level. It consists of the social networks that support an efficient, cohesive society, and facilitate social and intellectual interactions among it members. Social capital refers to those stocks of social trust, norms and networks that people can draw upon to solve common problems and to create social cohesion. Examples of social capital include neighbourhood associations, civic organisations and co-operatives. The political and legal structures, which promote political stability, democracy, governmental efficiency, and social justice, are also a part of stock of social capital.Social capital is the aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance and recognition to membership in a group – which provides each of its members with the backing of the collectively-owned capital, a ‘credential’ which entitles them to credit.The forms of social capital are:

Obligations and expectations Informal potential norms and effective sanctioning Authority relations Appropriate social organizations Intentional organizations

The relation of social capital to business networking can be explained as follows:

Social capital is established in policy discourse among companies and public sector organizations but its dynamics are still poorly understood, especially in regard of whether social capital is a resource, is a means of developing resources, and is a means of acquiring resources.

Social capital is organized in networks, implying radically different concentrations of activities across space and time in the accumulation and uses of social capital, from herds, crowds and crowding out, to

sparseness, holes and discontinuities. Social capital is that we have come to understand it as essentially in network form.

Social capital owes its dynamics to it having a performative capacity in relationships and through exchanges, and being well instituted in an organization and by that organization

Business network is a particular case of social network, which represents a union of actors (varying from individuals to organizations) joined by the common purpose. Social network accomplishes certain activities to achieve certain goals and purposes planned. The specificity of business network consists in: 1) its orientation to economic advantages; 2) its initial structural and relational formality; though, relations could be informal, this informality is always developed on the basis of well-defined functions and sanctions; 3) business processes are mostly regulated by official law, while social network could refer to common sense notions.

The evidences of the social capital benefits are: 1. Attracting and retaining talent. Despite the proliferation of

Internet recruiting services, most employers still find the right people for jobs, and most jobseekers find the best jobs by tapping their informal networks of friends, family, neighbors, colleagues, associates, and acquaintances. Social capital embedded in those networks means that the information given about potential candidates is trusted.

2. Creating value and rewarding value creators. People with rich social capital are paid better, promoted faster, and receive better appraisals. The reason is simple: these are rewards for superior value creation. People with rich social capital are better-informed, more efficient, more creative, and better problem solvers; in short, they create value.

b. Identifying the three (3) pillars of social capital (with a diagram) and what they mean.

Social capital is defined as an instantiated informal norm that promotes cooperation between two or more individuals as a tool with which to gain an advantage through social relationships made. Social capital is an asset that can help either a person or a collective: it allows X to achieve ends that he would otherwise not be able to.

Social capital is regarded as a three-pillared concept (the three pillars), consisting of social networks, trust, and norms and values. It is difficult to separate these three pillars, because the components are strongly interconnected: if people do not share the same norms and values, it is unlikely that they will trust each other and a social network without trusting relationships is very seldom and. The mafia is often quoted as an example of social capital as a network without trust.

Here, X can refer to an individual as well as a collective. I consider the network structure to be the most important pillar of social capital, because it is the element ‘sine qua non’.As formulated by Lin, social capital is all about the ‘resources embedded in the social structure’. The social structure that X has at his/its disposal has only surplus value, i.e. X can only gain an advantage from others when the other ‘end’ of the social relationship possesses goods or resources, particularly those that X does not have him/itself. In other words, there has to be a network with embedded resources before any actor can benefit at all from what the others possess. I do acknowledge that for X to actually exploit social relationships and their resources, it is necessary that these relationships have a basis of trust and that the same norms and values are being supported. If two actors do not trust each other, they will never allow the other to have access to their resources. Moreover, disagreement about social norms and values can cause problems, for example I would not lend my computer to someone I know does not care about other people’s belongings. I will, therefore, focus primarily on the network component of social capital, but always with an eye on the other two elements.

Three pillars thereof: trust, norms, and networks, the cultural aspects of social capital (trust and norms and values) and the structural elements (the network).

These three pillars of social capital have in common is that they are comprised of aspects of social structures and they facilitate the actions of actors therein. Trusting relationships facilitate access to the resources in the network.

These resources refer to the (im) material support that the actors in the network have to offer. Relationships of trust with acquaintances who can

provide these resources increase the opportunity of access thereto and the use thereof.

The diagram below shows the inter-relationship of various element of the social capital pillar:

Figure: Social Capital Pillars, requirements and service attributes.

c. Five reasons why firms or entrepreneurs should build or join networks

Networking is an essential skill for most business people, but especially for entrepreneurs. The strong association between the entrepreneur as a person and his or her business demands that entrepreneurs get out into the world and create and maintain business relationships.Networking takes many forms, from Friday afternoon happy hours to formalized groups that help finance new businesses to traditional Chambers of Commerce. Moreover, these networks serve many purposes, from access to capital, to providing venues for political action, or supporting mentoring and educational opportunities. Entrepreneurs’ needs also evolve over time. When first considering a new start-up, entrepreneurs often need basic coaching and hands on tips about leasing space, finding staff, and the like. They also need companionship, and the opportunity to learn and share with others facing similar challenges in starting a new business. As a firm matures, these needs become more focused, with special emphasis on growing the business through access to new finance or strategic partnerships with related companies.Regardless of their stated purposes, networks provide entrepreneurs with critical opportunities for peer learning. These learning opportunities

matter as communities with more extensive peer networks in place tend to enjoy higher levels of both entrepreneurial activity and economic growth.

Therefore there are various reasons that make it necessary for the firms or entrepreneurs to join or build networks. These include:

1. Entrepreneurs must generate revenue - No matter how much you love what you do, sales remains at the top of every entrepreneur’s list of things to do. Bringing in business is the task that never ends thus networking to generate leads is absolutely a must. No one starts a business without the intent to generate sales to:

initially sustain the business; reinvest to grow the business and; ultimately turn a profit, increasing sales every year thereafter.

To make it from sustaining your business to being profitable and thriving, networking is going to have to be a part of your overall plan. No need to avoid networking.

2. Entrepreneurs need a supporting cast - More than the average person, entrepreneurs need plenty of assistance. Being good at what you do is simply not enough. As an entrepreneur, aside from networking to gain perspective clients, you’re going to need a team of professionals to help with the various operational aspects of your business you’ll want plenty of options. This is why networking intentionally has to be a part of your marketing strategy. It will give you a neutral playing field to ask the necessary questions to gauge whether the prospective attorney, social media expert, accountant, insurance agent, PR specialist, marketer or whatever key person you are networking to connect with is right for you and your business.

3. Entrepreneurs need word of mouth advertising – Everyone loves positive word of mouth advertising because it’s free and often times unsolicited. Word of mouth is free in the sense that it doesn’t cost you a dime of your advertising budget. It will however require you to invest time to intentional networking so that you reap the benefits of others speaking highly of you as they network. It’s your job to create word of mouth opportunities. Networking with intent allows you to share how you exist to serve through your expertise. You will get to convey to your audience your unique specialties and examples of how you’ve helped solve a problem for clients, associations you belong to and colleagues within your network.

4. Your network will become your partners, customers and brain trust.

There are various questions which provide a basis of why one can be an entrepreneur: Where did that motivation come from? How are you learning about your market? One of my angel investors is one of my first customers. Another is my former boss. One is a friend and colleague from my banking days and another is a former professor. You find that it is from this network that entrepreneurs grow. The inspiration and catalyst to move past a napkin idea will likely come from your network. When we put those segments of vertical knowledge into one room, we see powerful forces align, partnerships formed and deals done. This is why networks are important. Nurture your network; maintain your relationships. It is the innate power of a good founder's network that will turn napkins into products and products into successful businesses.

5. They finance you and collaborations are important

Networks do not only consist of entrepreneurs. If you are starting a business it is likely based on a past job, personal passion or domain expertise. Your network consists of people who believe in you on a personal or professional level. The inspiration and catalyst to move past a napkin idea will likely come from your network. Collaboration can be as simple as sharing resources: the best-value-for-the-dollar accountant or a great graphic designer, all this can be found on the network.

d. Problems experienced when building networks.

Network is defined as a set of social entities connected by a set of social relationships; such as friendship, co-working or information exchange, and characterized by the parameters, which facilitate or hamper social capital, including knowledge sharing. Networks are a central component of an entrepreneurial climate. Entrepreneurs experience many problems when building networks. Some of these problems include:1. Raising Money and Developing Partnerships

Our biggest challenge in today’s economy is to develop partnerships and raise money for promotion, forming a touring band as well

as making connections to the personal empowerment industry. Most entrepreneurs are small scale and therefore have no ability to raise funds to engage with other players in forums like joining the chamber of commerce or attending many business forums.

2. What media to use. Experts and entrepreneurs alike will tell you that social media is all about the “conversation.” That means the key to leveraging Facebook, Twitter and Instagram to your advantage is controlling what people—customers, usually —are saying about you in virtual-but-public forums. It becomes a challenge for the entrepreneurs to decide on the best way to develop their network.

3. Deciding Whether to Embrace Mobile

In the world of mobile technology, quality trumps quantity—every time.

Regardless of whether mobile technology companies specialize in software or hardware, businesses that excel in the field usually experience overwhelmingly positive word-of-mouth chatter, while those that handle mobile poorly usually suffer from negative buzz. It is not always possible for entrepreneurs to be able to use this to their advantage.

4. Constant ChangeThe other challenge relates to the fact that any large scale service infrastructure undergoes constant change. Maintenance and customer provisioning activities in a large global network are ongoing, spanning multiple time zones. On a typical workday, new customers are being provisioned, service for departing customers is being turned down, and change orders to change some service characteristic are being processed for existing customers. Some entrepreneurs can not match this kind of faced paced business environment.

5. Measurement and Data ChallengesThe other challenge associated with building reliable networks is associated with measurement and data. Vendor products deployed by service providers often suffer from an inadequate implementation of basic telemetry functions that are necessary to monitor and manage the equipment. Most of the entrepreneurs do not have well developed

management information systems which they can use to collect data and keep in their database for future use. Their networks fail to grow as their systems do not have the ability to manage the large volumes of data.

6. Lack of SupportSome entrepreneurs have been blessed to have supportive husbands, family, children, and friends. Some of this support group have the ability to help make the entrepreneur's business grow but some could only offer moral support which, hey, it's more than you could ask for. While some are blessed like that, others lack both moral and business support. This affects their ability to improve on their networks and client base.

7. Negative MindsetThe battle always starts in the mind. Our own fears, excuses, and just basically any thing that paralyzes us from moving forward to our destiny is cultivated in our mind. Feelings of inadequacy such as "I don't know if I can do this" or  "I am not qualified enough to start this happen" – these are often thoughts that entrepreneurs deal with. This can often come from our own low self-esteem, lack of support, or our upbringing. This affects the ability to expand the networks since they believe they can not.

8. Dynamism of the business environment In the current business environment, change is fast and not always constant. Most entrepreneurs are not able to keep with the changes. Lack of exposure and training on how to build networks in this kind of environment affects their ability to keep with the changing business environment.

It therefore is important for the entrepreneur to know their abilities and challenges they face and try and mitigate them.

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