5 Business and Society

Monica Bansal

1.   Learning Outcome:

After completing this module the students will be able to: Understand the concepts of Business and Society.

Understand the Business and Its Environment.

Describe the Social Responsibility of a Business. Understand the Social Factors Affecting Business.

Understand the Business Factors Affecting the Society.

2. Introduction

One of the most revolutionary changes in capitalism over the past 50 years has been the development of conscience. Private business, which is the hard core of this economic system, has realized and has been made to realize by several social, economic and political forces, that has social obligations to fulfill, besides ensuring its own existence through profitable activity. There is no denying that fact that part of this realization is not genuine and takes the form of mere lip service which is thought necessary to ensure the survival of private enterprise. But it cannot be denied also that private business does partly realize and recognize the hard reality that a privately-owned form cannot meet the challenge of socialism and allied doctrines unless it sets its house in order, changes its outlook and is prepared to play its legitimate role as an organ of society. It will be useful here to go into some of the forces and factors which have persuaded businessmen to consider their responsibilities and the conditions which were favourable to the development of businessmen’s concern with social responsibilities. Some of the more important among them are:

Ø  The threat of public regulation of private ownership.

Ø   The pressure of the labour movement.

Ø   The development of moral values and social standards applicable to businessmen.

Ø  The development of business education and contacts with the government and its problems.

Ø   Recognition of human factors contributing to the long-term interests of business.

Ø  The development of a professional managerial class with a different motivation and point of view due to the separation of ownership from management in the corporate enterprise.

Ø  The increased complexity of the decision-making processes in which many persons participate and in which various points of view and diverse interests are expressed.

Ø   The change in public opinion about the role of business in modern society.

These and a number of other social, ethical and economic forces have combined together to make business a socio-economic activity. Business is no longer a mere occupation, it is an economic institution operating, in social environment, an institution that has to reconcile its short-term and long-term economic interests with the demands of the society in which it functions. Essentially, it is this which gives rise to the general and specific social responsibilities of business.

3.  Business and its Environment

The environment in which an individual or an organization operates has more or less a direct bearing on his or its objectives and functions; this applies to business organization as well as it does to any other type of organization. A proper estimate of the objectives of business can, therefore, be made only after an understanding of the environment in which a business form functions. The environment of a business enterprise, as discussed earlier, comparises several segments which may be classified as under:

Ø  Social: Comprising consumers and employees as well as social institutions which benefit from business or provide benefits to it.

Ø  Economic: Encompassing the whole economy, the various economic institutions including other firms with which an enterprise has to deal.

Ø  Political: Covering the political institutions of the country, including the government and the legislature, which regulate business activity and draw upon the resources of business firms in the form of taxes of different kinds.

Ø  Technological: Comprising the know-how and production and management technology available to business firms at any point or period of time.

The relationship between a firm and its environment is one of the mutual benefits. This is referred to as a symbiotic relationship. The word symbiosis is taken from Botany and refers to the mutually beneficial relationship that exists between the trees and the small plants. Just as tree draws food and nutrition from small plants growing underneath and the plants get their food from the tree and its leaves, the business form has also to function in such a way that it takes from and gives nutrition to, the various segments of its environment. Only through such a relationship can a business firm survive and prosper. Otherwise, it will starve and wither away.

Another way of describing the environment of a firm will be to take stock of the various interest groups which are contributors to the firm’s continuity and prosperity and also claimants of return in different forms from the business firms. These groups include consumers, employees, stock holders, creditors, suppliers, distributors, competitors and the government. The survival and growth of a business form will depend upon its relations with all these interest groups. The above segment shows the firm in relation to the different interest groups that constitute its environment.

4.  Social Responsibility of a Business

While there is no denying the fact that business is an economic performance, it is also true that business is an organ to society and as such it must justify its continuance by fulfilling its role and responsibilities to society. One may even go to the extent of asserting that a business enterprise is a trust of the community which must fulfill its responsibilities towards the various sections of the community. Some of the specific responsibilities of business may be outlined as follows:

Ø  The enterprise and the shareholders: In the first place, corporate business must provide a fair return on capital to shareholders and must provide them with regular, accurate and full information about the working of the enterprise. The shareholders should also meet their obligations by evincing keen interest in company affairs.

Ø  The enterprise and the workers: It is the responsibility of the management to provide opportunities to the workers for meaningful work. Also, the management of a business should try to win the cooperation of the workers by creating the right conditions in the enterprise. The business enterprise owes it to the workers to provide recognition to the workers’ unions, accept the workers’ right to associate and to help them to develop their own leadership in the unions through education. Social security, profit sharing, fair promotions, proper grievance settlement and employee welfare are some of the other well recognized responsibilities of business firms to their employees.

Ø  The enterprise and the consumers: A business enterprise has the responsibility of providing the goods and other services needed by the community at the most reasonable possible prices. It must guard against adulteration, poor quality, lack of service and courtesy to customers, misleading and dishonest advertising, etc. The consumers also need protection against monopoly and restrictive trade practices. Such protection can be provided best if business learns to play its part with fairness and liberalism.

Ø  The enterprise and the community: An enterprise must respect the law and pay taxes regularly and honestly. It must behave as a good citizen and take care to avoid bad effluents, smoky chimneys, and ugly buildings and devote attention to housing and workers living conditions. It has the responsibility of maintaining proper relations with the community through the press and it meetings.

5. Social Factors Effecting Business

In today’s world the society is changing continuously. The habits, tastes, preferences and fashions are a great example of this change with the passage of time. One of the most important differences is the growing popularity of social media usage. Various social networking sites viz., Facebook, Whatsapp, we chat etc. have become very popular among the younger people. The young consumers and customers have grown used to mobile phones, computers and digital gadgets. New generation prefers to make use of digital technology for online shopping. While older people will perhaps prefers the traditional methods of shopping. The effects of changing society are an often discussed. Companies often focus on these changes in depth. For this purpose, the companies employ environmental analysis such as PEST analysis. Moreover, STEP is a variation of PEST. The “S” in all these analyses indicates social or socio-cultural factors. Other factors we should assess are political, economic, technological, environmental, ethical and legal. Businesses opt for an environmental analysis depending on the nature of operations. However, all of them study the social factors.

In the social step for these analyses, we have to look carefully at the social changes. We will also have to look into the cultural changes which take place in our business environment along with the social change. Market research is a critical part of this step. It is important to notice the trends and patterns of the society. To understand the impacts of social factors on business better, we might need to study the factors in details. Most of the companies analyze the population growth and age structure with demographic profile. The companies also show interest in consumer attitudes and lifestyle changes.

Social factors which impact customer needs and size of markets are listed below:

Ø  Lifestyles: The life style of the people changes with the passage of time. There is change in the psychology of the Indian consumer because of the impact of westernization in the society. Therefore, the businesses have to make the products prepared according to their demand.

Ø  Buying habits: The purchasing habits, tastes and the preferences of the people also change because of the changing environment. The purchasing power has also increased because of the revised pay scales by the Government and the decrease in the value of money. Consumer is the kind in the market place and the changing habits of the customers built a pressure on the business enterprises to satisfy their needs.

Ø  Education level: The people are becoming more educated now a day. They are more aware about the products and the services offered by the business enterprises. The education level of the Indian consumer has also a significant impact on the services offered by the companies. People are becoming more demanding also.

Ø  Emphasis on safety: Customers and the companies are more cautious about the safety of the well being rather than the looks of the products. The commodities offered for sale should be safer. They are ready to pay more for the customized products which are demanded by them. Companies also take care of the safety measures regarding the products so that there should not be any damage of the products. The government also plays an important role and set standards for the companies for safety measures.

Ø  Religion and beliefs: Indian consumer is more involved and follows the customs and traditions. The religion and beliefs are more valuable for them and they follow it fully. The business enterprises try to make the products according to the needs and desire of the customers which will not hurt the sentiments of any segment of the society.

Ø  Health consciousness: Day by day the people are becoming more health conscious. Increase in the rate of heart attacks, diseases the people demand more healthy products. There has been an increase in the demand for organic products, eco-friendly commodities which do not contain any pesticides and have more nutrition values. They are ready to pay more for the natural health diet plans. Companies also manufacture healthy products by taking due care of the health aspect of the Indian consumer.

Ø  Sex distribution: There is a lot of variation in the sex ratio of different states. The ratio between the birth rate of male and female is differentiated. Gender is an important demographic variable on the basis of which there is market segmentation. For example, especially for the garments market that is totally based on gender segmentation, the companies’ produces as per the needs, tastes, desires and fashion of the customers.

Ø  Average disposable income level: The purchasing power of the people has increased in the last few years. Disposable income is the income which the customer spent on the day to day routine activities of their lives. A part of the total income earned is spent on the food, clothing, shelter etc. and another part is saved for future. Today the people believe in spending rather than saving as were in olden days.

Ø  Social classes: The Indian society’ class size is lower income group level, middle income group level and high income group level. The high income people are more cautious about the status, social esteem, self actualization etc. rather than the physiological needs. They carry higher social status and spent more to maintain it. On the other hand, the lower income group people are more concerned with the physiological needs.

Ø  Family size and structure: When the family size is large there will be more demand for the products. Family structure also plays a significant role and has a direct impact on the business. In the nuclear family system there is demand for durable item like electronic items, separate electrical items to be placed in the houses. Whereas in the joint family system there is only one television, one refrigerator in the house but the demand for the food items is on higher side.

Ø  Minorities: The minority section of the society is more concerned with the physiological needs and the day to day routine expenditure. They earned daily and spend daily. 60 per cent of the Indian population lives below the poverty line. Food is more important for them in comparison to the other needs. The Indian government has made certain rules and regulations for the protection of the minority sector of the society.

Ø  Attitudes toward saving and investing: The behaviour of the Indian consumer towards the saving and investment also has a significant impact on the business. If the people believe in saving rather than spending there will be less demand for the products. On the other hand if the people will invest more then there will be more demand. The investment is also productive and non productive. The productive investment will generate income for the nation.

Ø  Attitudes toward green or ecological products: As discussed earlier, the people are more health conscious and prefer the organic, green and ecological products. There are kisan hubs or the retail vegetable and fruit stores on which special organic vegetables are available with more nutritional values. These products are free from any kind of pesticides and have more costly in comparison to the other products.

Ø  Attitudes toward for renewable energy: Now a day more stress is given on the recycling and the renewable energy programmes. Government has also issued subsidies and grants for bio-gas plants. The attitude of the society towards renewable energy has increased the sale of energy saving devices viz., Syska LED lights etc. Modi government emphasis on the conservation and preservation of energy.

Ø  Population growth rate: The Indian population is increasing at the fast rate and the highest young population in the world. The demand for the products and services also increases with the increase in population. The sex ratio also determines the rate at which the demand for the clothes will increase. After China India has the highest population growth rate in the world.

Ø  Immigration and emigration rates: The growth rate at which the Indian population moves in the foreign countries and the rate at which the foreigners and the NRI’s comes in India also matters a lot for deciding the market size. If the immigration rate is more the market size will be greater and if the emigration rate is more than the market size will be small.

Ø  Age distribution and life expectancy rates: The life expectancy rate has increased in the last few years. The age distribution of the Indian consumer is an important base for the segmentation of the markets. Some of the products are meant for young people and the other are for the old age people. So segmenting the market on this basis is an important aspect.

• Ø Attitudes toward imported products and services: The government controls the import and export of products by imposing quota and the services. If the import rate is more and these will be available at the cheaper rates then it will adversely affect the Indian business environment and vice-versa.
• Ø Attitudes toward work, career, leisure and retirement: The people attitude towards the quality of life they want to lead, towards their work, career, the leisure life and the retirement also play an important role in determining the size of the market.
• Ø Attitudes toward customer service and product quality: People are more curious about the quality of services provided to them by the companies. They are more conscious about the quality of goods offered and delivered to them.

The social aspect of the business focuses on the forces within the society. Family, friends, colleagues, neighbors and the media are social factors. These factors can affect our attitudes, opinions and interests. So, it can impact sales of goods and profits generated. The social factors shape who we are as people in the form of customers. Social factors affect how the customer behaves and what the customers buy. A great illustration is how people’s attitude towards diet and health is changing in various countries. Because of this reason, the businesses of different countries are seeing some changes. Some people are joining fitness clubs who are more health conscious. The demand for organic food is also increasing by the passage of time. Changes in the population are also directly affecting different enterprises.

6. Summary

It is not enough for a business firm to be conscious of the need for discharging of its responsibilities towards different segments of the community. Management of a business firm has to make conscious efforts towards the establishment of proper relations with each of these segments. This function of establishing proper relations with all those agencies and persons with whom the business form has to deal goes by the name of public relations. Basically, the public relations function of management is concerned with the establishment of sound and mutually fruitful relations with the different public which contribute towards the growth and prosperity of the business firms. These publics include the owners of proprietary concerns, the shareholders of a company or the members of a co-operative society, the employees, consumers, the government, banking and other financial institutions, the other firms in the business and the community at large. With the help of these a business enterprise fulfills its social objectives too.

Few important sources to learn more about the Business and Society are:

1. Shaikh Saleem (2009). Business Environment. New Delhi-110017: Pearson Education.
2. Bagchi Amaresh (2011). Readings in Public Finance. New Delhi-110020. Oxford University Press.
3. Jha Praveen (2011). Progressive Fiscal Policy in India. New Delhi-110044. SAGE Publications India India Pvt. Ltd.
4. Kapila Uma (2007). India’s Economic Development Since 1947. New Delhi-110002. Academic Foundations.
5. Datt & Sundharam (2011). Indian Economy. New Delhi-110055. S. Chand & Company Ltd.
6. Agrawal A.N. (2007). Indian Economy-Problems of Development and Planning. New Delhi-110002. New Age International (P) Limited.
7. Paul Justin (2009). Business Environment-Text and Cases. New Delhi-110008. Tata McGraw Hill Education Private Limited.
8. Agrawal Raj (2006). Business Environment. New Delhi-110028. Excel Books.

Points to Ponder

1. These and a number of other social, ethical and economic forces have combined together to make business a socio-economic activity.

1. The environment in which an individual or an organization operates has more or less a direct bearing on his or its objectives and functions; this applies to business organization as well as it does to any other type of organization.

• While there is no denying the fact that business is an economic performance, it is also true that business is an organ to society and as such it must justify its continuance by fulfilling its role and responsibilities to society.

1. In today’s world the society is changing continuously. The habits, tastes, preferences and fashions are a great example of this change with the passage of time. One of the most important differences is the growing popularity of social media usage.