Case Study

Can social enterprises scale while remaining sustainable? The Mondragon cooperatives

31 pages
October 2014
Reference: IMD-7-1605

Can social enterprises scale and remain sustainable? Many social enterprises, or enterprises in general, face difficulties when scaling due to two competing agendas: social mission and profitability. The Mondragon Corporation is one of the most significant challengers to this status quo. Founded in 1956, the Mondragon Corporation is currently the tenth largest company in Spain, employing 83,000 workers and having nearly 36-billion euros in consolidated assets. Its strategy for growth has been in the development of cooperative groups to attain economies of scale and the creation of support cooperatives to finance growth and provide technical assistance. Its diverse set of cooperatives spans a significant array of product and services, from supermarkets to appliance manufacturers to a polytechnic university to a cooperative bank. However, the Mondragon Corporation is not immune to gravity and the difficult tradeoffs that occur in the social enterprise space. The financial insolvency of Fagor Electrodomésticos (Fagor), its oldest cooperative member, presents the most challenging dilemma in Mondragon’s long history. Since 2008, the Mondragon Corporation (through its cooperative members) has injected 300-million euros of debt financing to assist Fagor. However, Fagor has made another financial request for 180-million euros. Txema Gisasola, the President of the Mondragon Corporation needs to decide whether he should recommend financing Fagor’s debt or deny the cooperative’s request for assistance. While most Mondragon cooperatives in the past have decided on their own to file bankruptcy and reallocate workers, it is a tougher scenario for Fagor, which currently employs 5,600 workers. Should the Mondragon Corporation finance Fagor’s debt? Going forward, what should the Mondragon Corporation’s strategy be? Will continuing to scale the Mondragon Corporation jeopardize its long-term sustainable impact? Alternatively stated, what are viable strategies for growth that enable social enterprises to remain social enterprises?

Learning Objective

Explore whether a social enterprise can scale and still remain sustainable

Keywords
Social Enterprise, Cooperative Company
Settings
Europe, Spain
Mondragon Corporation, Consumer Goods, Home Appliances
2008-2013
Type
Published Sources
Copyright
© 2014
Available Languages
English
Related material
Teaching note
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