MS-03

ECONOMIC AND SOCIAL ENVIRONMENT

UNIT 2

PART-I : SOCIO-CULTURAL ENVIRONMENT

 OBJECTIVES

• Define the socio-cultural environment of

business
• Identify the critical elements of social
environment
• Explain the interaction between social and
economic environment
• Describe the social responsibilities of
business.
 INTRODUCTION

• You will recall that we talked about the

interaction between the economic and
non-economic environment of business.

• In this unit, we will discuss the non-

economic environment of business.
 SOCIAL ENVIRONMENT
• You may question: what factors constitute this
environment ?
• There are a host of factors like social values,
culture, beliefs, tradition and convention,
social attitudes, social institutions, class
structure, social group pressure and dynamics
etc.
• The nature of social objectives and priorities,
along with the set of social constraints, give
form and content to several social movements,
social systems and social preferences.
 SOCIAL ENVIRONMENT
• In a very broad sense, therefore, the social
environment happens to be the culmination
of forces operating from different platforms
such as history, culture, politics, ethics and
morality, values and institutions, geography
and ecology, and the like.
• Society itself has to balance the
achievements and aspirations of various
individuals, groups, communities and
institutions.
 CRITICAL ELEMENTS

The critical elements of the sociological

environment of business are :
• Social institutions and systems
• Social values and attitudes
• Education and culture
• Role and responsibility of the Government
• Social groups and movements
• Socio-economic order
• Social problems and prospects.
 UNDERSTANDING THE SOCIAL
ENVIRONMENT OF BUSINESS
Just go through the following statements :
• “Social justice and economic growth must go
together”.
• “Socio-economic problems have to be tackled in one
go”.
• “All social movements are basically economic in
content and intent”.
• “Social welfare is the ultimate goal of economic
planning”.
• “All business and economic activity must be tinged
with a sense of social responsibility”.
• These are not mere statements but facts concerning
the interaction between sociology and economy.
 SOCIAL DEVELOPMENTS,
INDUSTRIALISATION PROCESS AND
MANAGEMENT CULTURE
The industrialisation process in every society today
can be traced to the work of small elite group.The
group which assumes leadership in the initial period
of Industrialisation has certain general
characteristics:
• Some knowledge of business, trade and
commerce
• Access to capital or saving, or ability to
mobilize such resources
• Thrifty habits.
 SOCIAL DEVELOPMENTS,
INDUSTRIALISATION PROCESS AND
MANAGEMENT CULTURE

• Approaches to Management styles:

• Ethnocentric or racial

• Polycentric

• Geocentric
 SOCIAL DEVELOPMENTS,
INDUSTRIALISATION PROCESS AND
MANAGEMENT CULTURE
• With the passage of time, as industrialization
proceeded either in the form of a revolution or
evolution, sooner or later organised movements
were engineered by various social groups to
protect their own class interests.
• The class-conflict grew in intensity resulting in a
variety of social movements.
• As a result today, in every country without an
exception, on the industrial front we are face to
face with the trade union movement, the
consumer movement, the professional
management movement, the shareholders’
movement and so on.
 TRADE UNION MOVEMENT
• SOURCE: http://www.fesnam.org/pdf/pre2006/reports_publication/TradeUnions_inAfrica05.pdf

• Trade or labour unions can by described as

organised
groupings of wage and salary earners with the
purpose of bringing to bear the economic, social and
political interests of their members in labour relations
and the political system.
• As a new type of organisation trade unions
emerged during industrialisation in Europe in the
second half of the 19th century.
• From trade organisations of highly qualified skilled
workers(e.g. printers) they later developed into more
comprehensive organisations of the rapidly growing
industrial proletariat, mainly in the big industry.
 TRADE UNION MOVEMENT

• With the emerging resistance against

colonial rule, African trade unions rather
quickly emancipated from their European
centres.

• As the most important African mass

organisations of that time, unions very
often had a decisive share in the national
liberation struggle.
 CONSUMER MOVEMENT
• The consumer movement exercises a considerable
influence on the socio-economic environment of
business.
• In developed urban areas the consumers
themselves have become more conscious of their
rights and legitimate demands.
• Present day consumers are aware about the market
environment.
• They are quality conscious and are conscious of
customer’s rights.
• They have some notion about the legitimate
distribution margin of profit for each product. To
protect the interests of consumers every nation has
organisations like consumer cooperatives/ vigilance
committees etc.
 CONSUMER MOVEMENT
• The consumer movement has gathered considerable
momentum in recent years, but it is still in its
infancy. It suffers from several defects:
– Lack of leadership and management
– Lack of financial resources
– Lack of permanent organisations, i.e., ad hoc
character
– Confined to a few urban pockets rather than
spreading to the vast rural areas where
consumers’ resistance is conspicuous by its
absence
– Politicisation of the consumer movement
– Lack of consumer education
 Management Movement and
Philosophy: Emerging Trends
• Participative management – There are five
stages of participation:

– Informative Participation
– Consultative participation
– Associative participation
– Administrative participation, and
– Decisive participation
 Management Movement and
Philosophy: Emerging Trends
• The idea of professionalisation of management
is of recent origin. Professionalisation of
management has a number of implications like:
– Management is separated from ownership
though, as an individual
– Taking up Management as a career or
profession involves intensive pre-entry
education and post-entry training.
– A professional manager is formally educated
in a specialised discipline like finance,
production, marketing personnel system, etc.
Such education gives him ‘knowledge’.
 Management Movement and
Philosophy: Emerging Trends
• Implications of Professionalisation in
management:

– As a professional manager, s/he has a

mental make-up and a value system which
together are quite different from the
“tunnel vision” of the typical owner-
manager for profit.

– A professional manager enjoys a lot of

discretionary powers.
 SHAREHOLDERS’ MOVEMENT

• In socio-cultural environment of business, the

shareholders’ movement is a recent offshoot of
the professional management movement

• Shareholders’ association have been in

existence since the day of company formation.
For a long time, the shareholders have
remained blissfully unaware of their rights.

• The shareholders are increasingly becoming

aware of their legitimate rights. With the
spectacular boom in the stock markets in the
early eighties the companies started paying
attention to AGMs.
 ENVIRONMENTAL MOVEMENT
• Issues related to protection of the
environment and ecology have received world
wide attention not only in developed
countries but also in the developing countries.
• Increasing concern has been expressed about
environmental degradation which can risk
human life and existence.
• Though environmental problems are not new,
the scale, in spite of technological advances,
on which environmental degradation has
been taking place has assumed alarming
proportions.
 ENVIRONMENTAL MOVEMENT
• The terms ecology and environment are
interlinked. Ecology is the study of plants,
animals, people, and institutions in relation to the
environment.
• The eco-system embraces the sea, forests,
reservoirs of water, plants, trees, flora and fauna
which, in fact, comprise an eco-chain underlining
their interdependence.
• The ecosystem is the totality of living and non-
living elements in the Ecological community
communicating with one another and their
environment.
 ENVIRONMENTAL MOVEMENT
• The term environment is defined as the complex
or sdaphic (soil related), climatic and biotic
(biological) factors that act upon an organism or
a community.
• It is important for us to understand the
interrelationship between ecology and
development.
• Imprudent use of natural resources resulting
from the developments in science and technology
has led to negative consequences which have
promoted many a thinker to advocate a slow
down of economic growth for the sake of
environmental protection.
 ENVIRONMENTAL MOVEMENT
• Modern developments in agriculture and industry have
brought about fundamental changes in the
consumption habits of people which have given rise to
several problems.
• Today, society faces a strange dilemma.
• While uncontrolled and unplanned industrial
development may destroy the health of society and
may have a negative impact on the quality of life,
excessive concern with environmental issues may halt
the process of technological and industrial growth.
• It is, therefore, necessary to follow a balanced
approach wherein the conservation of natural
resources and quality of environment complement the
objectives of economic growth.
 ENVIRONMENTAL MOVEMENT
• Environmental deterioration is a multi-dimensional
problem of which resource depletion is only a part.
• Business leaders in general have a significant and
practical role to play in managing the environment.
• Environmental Management encompasses
environmental planning, protection, monitoring,
assessment, research, education, conservation and
sustainable use of resources.
• It can be accepted as major guiding factor for the
sustainable development of the nation.
• It is realised that while environmental problems
attributable to poverty (and underdevelopment) could
be tackled by more rapid development, the unintended
side effects of the process of development itself have
given rise to many of the environmental problems
confronting the nation today.
 ENVIRONMENTAL MOVEMENT
• Thus, to achieve the long-term goal of making
development sustainable, environmental and
ecological imperatives need to be built into the
total planning process right from the beginning.
• The degree to which a nation can prosper depends
on its productivity. i.e.., the efficiency with which
it is able to utilize the resources of the
environment to satisfying human needs and rising
aspirations.
• This requires that, while providing for current
needs, the resource base should be managed in
such a manner that it achieves sustainable
development in harmony with the environment.
• Refer to :
http://www.eoearth.org/article/Energy_and_sustainable_development_at_global_environmental_summits
• For environmental movenmts
 SOCIAL RESPONSIBILITIES OF
BUSINESS
• Business exists in the context of a society. In a
(traditional) pre-industrial society, business
transactions are negligible or nil; in that society
production is mainly done for self-consumption and
the need for exchange is minimum.
• In a modern industrial society, business grows by
leaps and bounds; production is meant for the
market; the subsistence system is replaced by the
commercialized system and, therefore, exchange
transactions multiply.
• In a postindustrial (Recent) society business gets
specialized and professionalised. With growing
Monetisation, both primary and secondary, the
complexity of business grows manifold.
SOCIAL RESPONSIBILITIES OF BUSINESS
• Business grows in variety.
• Business has become more and more service-
oriented from being production-oriented.
• Thus as transition is taking place in a society
through various stages, business changes in
terms of size, structure, strategy and system.
• On the other hand, business changes in terms of
its form and organisation, society is also
undergoing changes.
• Social values social institutions, social order social
contract, social conflict, social problems –
everything changes along with a change in the
business culture.
• In other words, business determines society as
much as society determines business. Therefore,
business must be socially responsible.
SOCIAL RESPONSIBILITIES OF
BUSINESS
 SOCIAL RESPONSIBILITIES OF
BUSINESS
• Each and every social group has a very definite
expectation from business.
• The shareholders, promoters, and owners expect
a fair return on their investment; unless lucrative
dividends are paid, they do not want to supply
venture capital for business.
• The workers expect fair wages and bonus,
otherwise they feel exploited when they produce
output more in value than the input.
• The salaried managers likewise expect a
remunerative packet of pay and perks, otherwise
they do not find any incentive to work hard and
long for their business concern.
 SOCIAL RESPONSIBILITIES OF
BUSINESS
• The consumers expect a quality product and
service at fair prices, otherwise they feel cheated.
• The suppliers expect a prompt settlement of their
bills.
• The distributors expect after sales service as well
as fair commission on sales, otherwise they do
not find incentives to promote sales.
• The government expects business to pay taxes
and to be accountable for subsidies.
• And, importantly, there are others who are not
directly concerned with business, yet they have a
lot of expectations from it.