Social Impact as Competitive Advantage in China

This post was written by Dan Baum, a rising second year at Fuqua and a CASE Fellow.

Immediately after wrapping up my first year at Fuqua, I went with about 30 of my classmates on a Global Academic Travel Experience (GATE) trip to China, where we traveled across the country and visited both for-profit and nonprofit organizations to learn more about doing business in China.  We were lucky enough to have CASE set up a few of those visits for us, one of the most memorable being with Shokay, a social enterprise that supports herders in Tibet and knitters near Shanghai by selling high-end clothing items made from yak fiber.

Co-founder and Echoing Green Fellow Carol Chyau met with us in their Shanghai store and told us how Shokay was founded to make a difference in Western China.  As we talked with her, it became clear that Shokay’s social focus had given them a few advantages in the marketplace:

1. Their focus on supporting an underdeveloped area of China gave them access to resources that hadn’t reached their full potential.  80% of the world’s yak population is located in Western China, making it a highly accessible resource for Tibetan herding families.  At the same time, it’s highly underutilized and even though yak fiber can be used as a substitute for cashmere, it is rarely seen on shelves.  As a result of their desire to empower people in Western China, Chyau and her team found a valuable, underutilized resource that they could mobilize in a way that no other organization had to that point.

2. Centering their business around the herders and knitters they support allows them to attach remarkable traceability to each product, which builds a greater connection with their customers.  For example, with a few clicks on their website, I was able to find that the mini-yak I bought was made by Yuan Mei Xian, who, in addition to knitting really cute stuffed animals, conducts traditional Chinese medicinal therapies for free, when neighbors and friends need it.  As a result, Shokay’s mission can build customer loyalty in a way that more traditional organizations cannot.

3. Lastly, the social focus of the organization has made a positive impact on the Shokay team.  Carol told us that, while Shanghai is typically a very transient place where high turnover is common, Shokay staff stay with the company because of the social mission.  Their ability to retain talent strengthens the organization and their ability to make a difference in the long run.

Now, to be fair, their model brings about numerous challenges as well.  As an example, the yak fiber is seasonal and can only be sourced once per year, adding in a lot of uncertainty.  With that said, I think it’s important to realize that social impact doesn’t only come with sacrifice or an increased level of difficulty.  There are benefits to operating with a social mission at your core, which is why the social sector continues to grow and develop every day.  My classmates and I felt lucky to see that in action during our visit with Shokay.

I’ll leave you with a final thought from Carol.  One member of our group asked her what drives her and why she does what she does.  Her response was powerful and something I know I’ll remember.  She said:

“I was given much and therefore it’s my responsibility to give even more.”

She backs it up too, since Shokay has increased the household income of the 260 herding families they source from by 20-30% so far.