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Social Responsibility of Business

Business firms, at all times, have expected to operate within the law and within prevailing norms of society. However, during the past few decades, social responsibility of business became an extremely broad and deep subject. Particularly, the western industrialized society has become increasingly concerned that greater affluence has not been accompanied by equal progress in solving important social problems. Thus the notion of the responsibilities of business took a distinctive ruin in the late sixties. The demand on business accelerated sharply and has continued at a high level. Over the years, the nature of these demands and the nature of business response to the make changed in important qualitative way. Society includes those people and factors, which have a stake in the business functioning and are affected by it. The vital area of corporate social responsibility focuses on an organization’s debt to society. There are three important area of responsibility of business which are directly related to the interest of the wider society are (a) community- they need employment, community services and infrastructure development. (b) environment- cleaning up the existing environment, designing and using the processes to prevent or reduce pollution and protecting the environment. (c) Weaker section of the society- education and training to disadvantage groups, female employment and equal opportunities.

Political environment

The political climate in a country in which a business firms operate is a very important factor. A hospitable and stable government can encourage business investment and growth n spite of scarcity of natural and other resources. The business firms also have to cope with a large number of other tensions like ideological conflicts, terrorism, traditional hostilities, government interventions, labour activism, and so on. The management of a business firm, therefore, should undertake political risk analysis prior to investing in a new project or in expansion of its existing business. For a systematic study of the political system, a business firm should, first of all, analyze the constitution, major political parties, form or structure of government, the mechanisms designed to guide a transition of power from one leader to the next, key power blocks, and the extent of popular support. In addition, a firm should also analyze how politicians finance their campaigns- what standards of honesty and /or conflict of interest apply. Political situation in Nepal is being very poor day by day. Due to unstable political systems and their policies, business organization are facing many problem and those who can manage such changes exists in the market and those who cannot are already root out from the market. These all external environment plays vital role in smooth running of the business. So every business firm should analyzed them properly and such factor are uncontrollable and business organization them self should formulate such strategy which easily cope with such uncontrollable factors.

Technical environment

Technology envisages all aspects of applied sciences for achieving a practical purpose- a totality of the means employed to provide objects for human sustenance and comfort. It may be denoted that the word “science” refers to a systematic body of knowledge. When this knowledge is put into practice, it becomes technology. Advantage in science helps develop new technologies. The changing social and commercial need provide the drive for new scientific discoveries and innovations. The technological environment consists of the inventions, techniques and the vast store of organized knowledge of ways of doing things. The modern business is characterized by newer and ever- changing technological developments. This not only calls for the technological changes. Technological changes, which are undoubtedly the most familiar ones, include the significant modification in products and services; in the way they are product and marketed. Technological changes such as advances in radio, television, and printing processes have influenced the style of advertising goods and services.  Through the use of computers and other electronic data processing equipment, the whole system of decision making has undergone a great change. Information in material handling, storage, and transportation have enabled the managers to make product available to consumers at the right time, in the right place, and in relatively good condition. The managers must therefore, grasp a proper understanding of these aspects of technological environment.

Legal environment

The legal environment refers to the frame work of laws, regulations and court decisions intended to encourage, guide and control business activities. Some are designed to protect workers, consumers, and communities. Other are designed to regulate the behavior of managers and their subordinates in business and other enterprise. Still others are designed to make contracts enforceable and to protect property rights. Business legislation thus has three main purposes (a) to protect business firms from unfair competition, (b) to protect consumers from unfair business practices and (C) to protect the interests of society from unbridled business behavior. Law and regulations are enforced to govern the conduct of individual and institutions in a society. Such laws govern the relationships between or among individuals and also the relationships between individuals or institutions and the society as a whole. Though the legal system provides the legal rights and freedoms to each individual or institution, it also sets limits or boundaries that may not be trespassed in such relationships. Violation of these boundaries results in penalties to the individuals or institutions. The managers should use their awareness of the growing complexity of the legal environment in the country to avoid situation that might results in conflict, misunderstanding, or outright violation of national laws.

Socio- cultural environment

Another important external environment of the business is socio-cultural environment. The socio- cultural fabric is a very strong environmental force, the buying and consumption habits of the people, their language, beliefs and values, customs and traditions, taste and preferences, education are all factors that affect business. The socio-cultural forces should therefore, be properly analyzed and understood while formulation business strategies. Socio-cultural environment is made up of the social institutions, class structure, beliefs values, accepted patterns of behaviors, customs of the people, and their expectations. Culture is all pervasive. Business firms are no isolated entities. They are an integral part of the broader socio-cultural environment of the society. The influences of the cultural forces on business is just one side of the coin the other side is of course, the influence of business in bringing about cultural changes in the societies. The business firm has been acting as agents of cultural change. For instance, soap and detergent manufactures have changed the washing habits of people. Similarly, the cloth manufactures have changed the fashion and style. These are only some examples. There are many different ways through which firms exert influences on cultural values of a society. The social performance indicators of a country are important to business firms.

Economic Environment

The most significant of all the external forces with which a business firm must contend is the economic environment of the country. The general economic conditions and trends are crucial to the success of a business firm. How the scarce resources of land, labor, and capital are being allocated to the production and distribution of goods and services and the manner in which they are consumed are of paramount important to managers. To keep abreast of the latest developments and also plan for the future, business firms for many years have been assessing and forecasting the economic conditions at the local, national, and international levels. The structure, composition and trends of the Nepalese economy will be presented and analyzed to draw their relevance to business firms. Gross national product, per capita income, personal consumption expenditure, and personal ownership of goods, private investment, and unit labor costs are the economic dimensions that predict the current position of economic situation of the country which tells about the business environment.

Relationship between Strategy, Organization and Environment

Strategy, organization and environment is very related terms, in the absence of one the goal achievement of the organization becomes impossible. Organizational cannot able to direct its all activities towards goal achievement without the proper strategy and without the proper analysis of environment no organization can able to formulate its strategy for the smooth running of the organization. A business firm’s strategy can be seen as an optimal match between the environmental opportunities and threat and organizational strength and weaknesses. This matching expresses itself in the form of a definition of organizational goals and objectives, and its plans for achieving them. This process or exercise of optimal matching between environmental opportunities and threats, and organizational strengths and weaknesses for developing appropriate courses of action and this process is known as SWOT analysis. An analysis of the internal forces within the control of the firm helps in finding answers to the following questions: where are we now and where are we headed if we maintain the same course? What are our strengths and weaknesses? What are our market opportunities? And so on.

Importance of Business Environment

The study of business environment is very important in this globalize world.  The business entity has to compete not only with the other business with in the boarder, instead they need to compete with whole global world. The importance of the study of business environment may be summed up as – (1) for the strategy formulation business environmental study becomes very important. Business firm have to formulate strategies and long term policies for their continued existence. (2) Environmental analysis provides the firm the market information that they need to formulate effective counter strategies. It is vey important for the management to develop a deep understanding of the firm’s competitive strength and weaknesses. (3) business firm is to adjust with the emerging trend that comes through the environmental forces. So for the adaptation purpose business need the study of its environments.(4) Business firms expects stability in their operations. This is, however, distributed by the environmental changes. Fluctuations in operations affect all the functional activities of the firm. (5) the capacity of a firm to adjust with the changing situations provides it with the dynamism it requires. This is possible only when the firm keeps itself informed of the environmental changes.

Environment Scanning

It is very essential to acquire information and analyze the trend emerging in the environment and for this we have one suitable techniques or method i.e. environmental scanning.  The top management of a firm has to scan the environment to develop corporate strategy. Scanning helps them to understand and define current environmental realities and predict future changes. The top management can observe the changes taking in the external environment through sources like journals, reports, colleagues, employees, personal experience, meeting and conferences. Similarly, change in the internal environment of the organization can be observed through reports, committee meetings, memoranda, subordinate managers, employees and outsiders. Once the top management receives this information about changes taking place in the environment, they then assess, correlate, extrapolate, and interpret the events or signals to develop their corporate strategy. Through the internal scanning exercise, the business firm tries to size up its competitive strength. It takes stock of the competitive advantages available to it. Also it assesses its weakness. Putting all these dimensions together, the business firm develops it competitive profile.

Concept of Business

Business firm is a dynamic entity. It is dynamic because it operates within a context. The wider social, economical and cultural context of a firm is very divorce and complex. The failure of the manager to understand, access, predict and manage environmental forces ultimately affect the business and its operations. A business firm is surrounded by two different environment and they are internal and external environment. Internal environment includes infrastructure, physical assets, human resources, organizational structure, technology, work system and so on. Similarly, external environment contain social, economical, political, legal and competitive forces. In business organization there is a system which contains inputs, processing and output. A system is an entity consisting of functional and interdependent parts operating in a large environment.  A business firm is also a system. In fact it is an open system. There is constant interaction between a business system and its environment. The impact of this environmental factor is very powerful on the functioning of the business system. It is almost impossible for the business system to exist and grow without taking them into account. A firm is thus depending upon the environment for its functioning. This environment as they together influence business operations.