SUST 5003 Module 4 Social Enterprise Business Model Comparison Example

Who Pays and Who Benefits: Comparing Four Business Models for Getting Glasses and Shoes to People in Need

Student Name

American College of Education

SUST5003: Building Better Businesses: Social Entrepreneurship in Action

Module 4 Assignment

Instructor Name

September 25, 2028

Introduction

Earlier papers profiled Warby Parker, examined its innovations and compared it, as a benefit corporation, with a conventional competitor. This paper widens the view to business models. It compares four ways of getting a basic product to people who need it: Warby Parker's model of giving through partners for each sale, the market-based model used by its main partner, VisionSpring, one-for-one in-kind donation, using the evidence from randomized trials of TOMS shoe donations, and direct service through public partnerships, as in Warby Parker's school program. Each is described in the same terms: who pays, who benefits, what drives cost and what evidence shows.

Two Kinds of Hybrid

Ebrahim et al. (2014) offered a useful distinction among social enterprises. In integrated hybrids, the people the organization serves are also its paying customers, so commercial activity directly produces social value. In differentiated hybrids, commercial activity generates money that funds a separate social program for different beneficiaries. The authors argued that differentiated hybrids face a greater risk of mission drift, since commercial success does not automatically produce social results, and that governance should hold both kinds accountable for social as well as financial performance. The four models fall at different points on this spectrum.

Model One: Giving Tied to Each Sale

In Warby Parker's model, customers in wealthier markets pay for glasses, and the company funds the distribution of a pair to someone in need for each pair sold, recording these donations as an operating expense (Warby Parker Inc., 2021). Customers and beneficiaries are different people, so this is a differentiated hybrid. Revenue comes entirely from the commercial business, and giving scales with units sold. The main cost driver is the per-pair donation, which is small relative to price. The model's strength is predictable funding that grows with the business; its weakness is that giving follows sales rather than need.

Model Two: Local Entrepreneurs Selling Affordable Glasses

Warby Parker's prospectus describes VisionSpring as a nonprofit that equips people from poor communities to run small eyewear businesses serving customers who live on very little, with over half of those customers buying their first pair (Warby Parker Inc., 2021). Here beneficiaries are also customers, paying a low price, which makes this closer to an integrated hybrid; local sellers earn income as well. Revenue combines sales with funding from partners. Cost drivers include training, supply and supporting sellers in remote areas. The model builds local markets rather than bypassing them.

Model Three: One-for-One In-Kind Donation

The best-known one-for-one model is TOMS, which for years gave a pair of shoes for each pair sold. Researchers tested it with a cluster-randomized trial among 979 households in rural El Salvador. Donated shoes reduced local shoe purchases only slightly, about one fewer pair bought for every 20 donated, a difference that was not statistically significant (Wydick et al., 2014). However, the donations had generally insignificant effects on overall health, foot health and self-esteem, small positive effects on boys' school attendance and made children more likely to say outsiders should provide for their families (Wydick et al., 2018).

What the TOMS Evidence Means

The authors concluded that, where most children already owned at least one pair of shoes, the program's overall impact was negligible, and they stressed the importance of more careful targeting of in-kind donations (Wydick et al., 2018). The lesson is not that giving products never helps. Glasses differ from shoes in an important way: many people who need them own none, and a randomized trial of near glasses among tea workers found large productivity gains. The lesson is that impact depends on whether the product fills a real gap for the people who receive it, which is a question of targeting rather than volume.

Model Four: Direct Service Through Public Partnerships

Warby Parker's Pupils Project works with organizations and local government agencies so that students can be screened, examined and fitted with glasses at no charge, often receiving their first pair (Warby Parker Inc., 2021). Beneficiaries pay nothing. Funding comes from the company and its partners, while schools provide access to children and teachers who often notice vision problems first. Cost drivers include exams by eye care professionals and follow-up. This model targets a group with documented unmet need and delivers care, not only a product, but it depends on the commitment of public partners. Its reach is therefore set by the number of schools and agencies willing to take part.

Comparing Revenue Logic

Set side by side, the models differ in who pays. In the first, distant customers pay; in the second, beneficiaries pay a low price, supported by partner funding; in the third, distant customers pay for an in-kind gift; in the fourth, the company and public partners pay. Only the second earns revenue from the people it serves, which gives it a built-in signal of whether the product is valued. The others rely on proxy measures, such as items distributed, and therefore need deliberate evaluation to know whether they help. Battilana and Lee (2014) noted that how organizations combine commercial and social activity shapes both their resilience and their accountability.

Comparing Targeting and Evidence

Targeting separates the models further. Market-based sales reach people willing to pay a little, who may not be the very poorest. One-for-one donations can reach anyone a partner chooses, but, as the TOMS trials showed, may go to people who already have the product. School programs target children through a setting where needs can be checked. On evidence, the in-kind model has the strongest independent evaluation, and it was mostly unfavorable; the glasses models rely more on partner estimates, though independent research supports the value of glasses in general.

Mission Drift Risks

Each model carries its own risk of drift. Giving tied to sales may drift toward counting pairs rather than improving lives. Market-based models may drift toward customers who can pay more, leaving the poorest behind. In-kind donation may drift toward easy distribution rather than real need, the problem the TOMS evidence exposed. Public partnership models may shrink if a partner's budget or leadership changes. Ebrahim et al. (2014) suggested that governance can guard against drift by building social performance into board oversight and measurement, which applies to all four.

Which Model Fits Which Problem

No model is best in every setting. Market-based sales fit problems where a low-cost product can be sold profitably and local sellers can reach customers. Giving tied to sales fits companies that want predictable funding for partners already doing that work. In-kind donation fits only where careful targeting shows a real gap. Public partnerships fit services that require professional care and access to a defined group. Warby Parker's combination, funding a market-based partner for most distribution and running a school program directly, uses the strengths of two models while limiting the weaknesses of pure in-kind giving.

Conclusion

Comparing four social enterprise business models shows that who pays and who benefits shape everything else: funding stability, targeting, evidence and the risk of mission drift. Randomized trials of TOMS shoe donations found negligible impact where most children already had shoes, which underlines the importance of targeting. Warby Parker's choice to fund a partner that builds local markets and to run school-based care directly reflects lessons from that evidence. The final module applies these lessons to a plan for transforming an established organization through social entrepreneurship.

References

Battilana, J., & Lee, M. (2014). Advancing research on hybrid organizing: Insights from the study of social enterprises. Academy of Management Annals, 8(1), 397-441. https://doi.org/10.5465/19416520.2014.893615

Ebrahim, A., Battilana, J., & Mair, J. (2014). The governance of social enterprises: Mission drift and accountability challenges in hybrid organizations. Research in Organizational Behavior, 34, 81-100. https://doi.org/10.1016/j.riob.2014.09.001

Warby Parker Inc. (2021). Prospectus (Form 424B4). U.S. Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/1504776/000162828021019236/warbyparkerinc424b4.htm

Wydick, B., Katz, E., & Janet, B. (2014). Do in-kind transfers damage local markets? The case of TOMS shoe donations in El Salvador. Journal of Development Effectiveness, 6(3), 249-267. https://doi.org/10.1080/19439342.2014.919012

Wydick, B., Katz, E., Calvo, F., Gutierrez, F., & Janet, B. (2018). Shoeing the children: The impact of the TOMS shoe donation program in rural El Salvador. The World Bank Economic Review, 32(3), 727-751. https://doi.org/10.1093/wber/lhw042