BUSINESS ENVIRONMENTS & CORPORATE SOCIAL RESPONSIBILITY

Business enterprises do not exist in a vacuum but exist and operate within a context.
Without society therefore, business would be non - existent because it is society that creates
and sustains business.
Since the existence of business depends on society, business has the burden of managing its
relationship with that society to ensure that it is as good and favorable as possible.
This requires the business to perpetually analyze its micro (internal) and macro (external)
environment and adjust accordingly.
Micro/internal environment
The internal environment is composed of a firm’s resources and comprises factors which a
firm can effectively use in adapting to the ever changing external environment.
Unlike the external environment, the internal environmental factors are largely within
control of the management of the business. They comprise of:-
 resources such as plant, machinery equipment, Human Resource, etc
 Marketing factors, channels of distribution, labor relations, funds availability
 Public image ,research and development
These factors are often inter-related e.g marketing maybe affected by the number of
staff available within an organization.
How effective a firm is in the control of its internal environment determines its ability
to cope with the changes in the external environment.
The strength in a firm’s resources will enable it to exploit environmental
opportunities or to overcome problems that it encounters in the course of conducting
its business.
Macro (external) environment
Business will normally be in constant interaction with the environment as it strives to achieve
its set objectives.
These external environmental factors may offer opportunities or threats to a business in
attaining its objectives
A business will therefore take advantage of the environmental opportunities and overcome
or minimize the impact of environmental hazards.
This ability to take advantage of the opportunities available will be determined by the
strength and weaknesses of its micro/internal resources.
The external environment of a business is dynamic rather than static and is always changing.
The forces are also interrelated and a change in one kind of force affects the other and vice
versa which makes it difficult to predict change in a particular force.
Change in the external environment may require business to re-adjust its business strategy in
order to cope with the new environment of business
It will therefore be necessary for Businesses to do an environmental scan of its operating
environment by conducting a SWOT analysis.
S-Strengths
W-Weaknesses
O-Opportunities
T- Threats
The Strengths & Weaknesses relate/emanate from the internal Business environment while
Opportunities and Threats relate/emanate from the External Business Environment.
The external environment will normally consist of:-
1. Political-legal environment
This environment comprises the following factors
A. Laws and regulations from the central and local government on prices, products,
taxation, labor and industrial laws business formation etc
B. Political climate and stability e.g. policies and systems of government. They might
also be favorable or hostile.
C. The judicial system which includes procedures adopted by courts in the
administration of justice and the extent laws and regulations are enforced
D. groups
2. Economic environment
This environment is determined by the following states of the economy
A. The current state of the economy such as inflationary, recessive, depressive, recovery
or prosperity.
B. The state of competition in the economy which may be enterprise(similar) or generic
(different but for same purpose) competition
C. The trend of prices of goods and services
Monetary policies such as interest rates and the state of the country’s currency vis-à-
vis other major currencies
D. balance of payments whether surpluses or deficits in regard to foreign trade
E. fiscal policies such as taxation for firms and individuals
3. Social-cultural environment
The major factors in this environment are
A. Social factors such as family institutions, religion, education, health and aspects of
recreation. The way they are structured and the role they play in a society
B. Cultural factors such as social values, customs and beliefs, life styles and society
aspirations. Culture will normally be reflected in a peoples way of life and will affect
the way business is conducted
C. Demographic characteristics of a population such as size of the population, age and
sex distribution, income levels and distributions. Changes in demographic structure
may favor or not favor a business
4. Technological environment
The major factors that comprise this environment are:
A. The raw materials used in the production of goods and services
 B. The tools and equipment used in their production
C. The skills and techniques used
D. The finished goods that are ready for consumption
Technology affects major business functions such as production, sales and
marketing, human resource and finance. Performance of these activities will be
determined by the available technology.

CORPORATE SOCIAL RESPONSIBILITY (CSR) OF BUSINESS

Business has been experiencing increased pressure from the society to be socially responsible.
The concept of social responsibility of business is concerned with the obligation that business
has in helping to promote the welfare of the society.
This pressure has been occasioned by two major factors namely;-
 Society has become more enlightened.
A more enlightened society is more aware of its problems, rights and the role that
business can play in addressing these issues to enhance their social welfare
 There are a lot of emerging issues in the society which business is expected to
participate in addressing e.g. health, insecurity, family crisis, unemployment,

Arguments for social responsibility

There are major arguments that have been advanced in favor of business social
responsibility and they include
1. Changing society needs and expectations
The changing needs of society have led to changing expectations of business.
Therefore, increased business social response is necessary in order to narrow the
gap between expectations and actual response while keeping business in tune with
the society
2. Moral obligations
Social responsibility is ethical and therefore it is ethical for a business to be
socially responsible
3. Limited resources
A business must act responsibly not only to conserve the limited resources
available but also to use such scarce resources wisely
4. Better social environment
A business can help in creating a better quality of life by helping to solve difficult
social problems
5. Long-run profit
A more socially responsible business has a tendency to have more secure long-run
profits
6. Discouragement of further government regulations
 If business is socially responsible, it will discourage government from imposing
more regulations
7. Balance of responsibility with power
A business should be more socially responsible as a balance to the large amount of
social power it enjoys
8. System interdependence requires social involvement
The modern social system has become very complex and interdependent that
almost every internal activity has some influence on the external world and thus
business should act responsibly
9. Business contributes to social problems
Many of the society’s problems have been caused by business and therefore
business has an obligation to help correct such problems
10. Public image
Business’ social response improves the public image of business
11. Business contributes to social problems
Business has valuable resources that could be applied to social problems and
therefore it should share its resources
12. Prevention is better than cure.
It would be easier and cheaper for business to act in order to prevent social
problems than to solve the problem once they have occurred
Arguments against social responsibility
The following are the major arguments that have been advanced against social responsibility
of business
1. Need for profit maximization
The singular pursuit of profit enables business to reduce costs and prices which
benefits society
2. Costs of social responsibility
Social responsibility is expensive and such costs are eventually passed on to society
3. Weakened international balance of payments
The costs of social programs eventually make products of a country expensive due to
attempts by the firms to recover costs in prices. This weakens a country’s competitive
position in international trade. Such a country is likely to end up in a poor balance of
payments relationships with other countries.
4. Business has enough power
This would make business too powerful if it has also to assume social responsibility
5. Lack of social skills
Business executives are economically oriented and unlike social workers lack the
social skills that are required in the administration of social responsibility
6. Lack of accountability
Business has no direct lines of social accountability to the people and therefore it is
not wise to allow business activities in areas where business is not accountable
7. Inability to make moral choices
Only individuals can make moral choices and not organizations or businesses.
Therefore, it is a waste of time talking about business social responsibility
8. Divided purposes and confused expectations
If business executives have to also pursue social goals alongside the economic ones,
their interests may be greatly divided that they will become confused and ineffective.
Areas of social responsibility
Business has an obligation to be socially responsible to various parties in the society.
These parties will in most cases determine areas that the business is expected to be
socially responsible and these include:-
1. The consumers
2. The employees
3. The government
4. The creditors/financiers
5. The debtors
6. The general public
7. International community