Unit 1: Business and Society Relationship

Concept of Business and Society

Business refers to any organization that is engaged in making a product or services for a profit. It is the
organization that is involves in the trade of goods, services or both to consumers for a profits.
Society on the other hand is a network of individuals, group s and organization. Society
refers to human being and to social structures they collectively create. It is a set of organ created by
human.
Business therefore, is an ongoing activity that operates in the society. For e.g.
businesses employ workers, buy supplies and borrow money, they also sell products, pay taxes. So,
business and society are highly interdependent
To manage interdependencies, managers needs an understanding of their company’s
relationships and how the social and economic system is affected by their decisions.

Relationship between Business and Society

Business and society are highly interdependent. Businesses activities impact upon other
activities in society and various social actors continuously affect business. To manage
interdependencies, managers need an understanding of their companies’ relationship and how the
social and economic system is affected by their decisions.
In a world of fast paced globalization, shifting public expectations
and govt. policies, growing ecological concerns and new technologies, managers face the difficult
challenge of achieving economic results while simultaneously creating value for all of their diverse
stakeholders. So there is direct relationship between business and society. To understand relationship of
business and society, we have to understand two heading:
1. A system Perspective
2. Forces shaping business and society relationship

1. A system Perspective
General System theory, first introduced in the 1940’s argues that all organisms are open to and interact
with their external environments. Although most organisms have clear boundaries, they cannot be
understood in isolation, but only in relationship to their surroundings. According to the system theory of
management, business firms are surrounded by a social structure (external environment) with which
they constantly interact. Firm have ongoing exchanges with customers, government, competitors,
media, communities and many other individuals and group.
 System perspective helps us to understand how business and society, are taken together from
an interactive social system
 Each needs the other and each influences the other, any action taken by one will surely affect
the other.
 They are both separated and connected. Business is the part of society and society affect the
business decisions.
The Stakeholder theory of the firm
Stakeholder refers to the persons and the groups that affect, or are affected by an organization’s
decision’s policies, and operations. They are the person who have the genuine interest on the
 organization. They include diverse group of customers, employees, stockholders, the media,
government, etc.
Manager make the decisions when they pay attention to the effect of their decision on stakeholders, as
well as stakeholders’ effect on the company.
Strong relationship between the company and its stakeholders are the assets that adds the value.
Stakeholder theory focus on following,
 Value creation to the stakeholders
 Thinking about ethics and responsibility
 Solving the problem of managerial mindset.

2. Forces shaping business and society relationship

Business and their stakeholders do not interact in a vacuum. On the contrary, most companies operate
in a combination of social, ethical, global, political, ecological and technological change that produces
both opportunity and threats. There are many forces that powerfully shape the business and society
relationship. Each of this forces is explained below:

1. Changing societal expectation

Everywhere around the world, society’s expectations to the business are changing. People
increasingly expect the business to be more responsible, believing that company should pay
close attention to the society. Increasingly business is faced with the challenge of balancing its
social, legal, and economic obligations, seeking to meet its commitment with multiple
stakeholders.
 Affluence and education
 Awareness through television

2. Government Intervention
Government plays an important role for shaping the society and business relationship, as it
cannot be assumed that all business will behave ethically without enforcement of regulations.
Some degree of legislation is necessary to ensure that business comply with their ethical
obligation to the public.
Government can encourage ethical behavior by,
 Incentivizing it with tax breaks
 Imposing such charges on companies with high levels of emissions.

3. Growing emphasis on ethical reasoning and actions

The public also expects business to be ethical and wants corporate manager to apply ethical
principle-guideline about what is right and what is wrong, fair and unfair-when they make
business decisions.
Business should focus on,
 Fair employment practice
 Concern for consumer safety,
 Contribution to the welfare of the community
4. Globalization
We live in an increasingly integrated world economy, characterized by the continuous
movement of the goods, service, and capital across the national borders. Product and service we
buy in Nepal may have come from India, United States or China. Thus any changes in the
economy of one country quickly impact economies around the world. This has challenged the
business to integrate their financial, social, and environmental performance.

5. Evolving(Changing) government regulations and business responses

The role of government has changed dramatically in many nations in recent decades.
Government regulation to the business periodically becomes tighter, then looser, much as
pendulum swings back and forth. Because of the dynamic nature of this force, business has
developed various strategies to influence the elected government officials.

6. Dynamic natural environment

All interaction between business and society occur within the finite natural ecosystem. Business
as well as society should use the resource like oil, coal, gas sustainably. But due to the
excessive use of natural resources, climate change now threatens all the nations.

7. Explosion of new technology and innovations

Technology is one of the most powerful forces affecting the business and society. In recent
years, the pace of technology change has increased enormously from social media via internet,
to online business, form nanotechnology to wireless communication. The extent of change
brings the massive challenge for business as they seek to manage their various privacy, security
and intellectual property.

8. Workforce diversity
This refers employing different categories of employees who are heterogeneous in terms of
gender, race, ethnicity, community, physically disadvantaged, elderly people etc.
i. Workforce of women and men
ii. Many racial ethnic group
iii. Individual with variety of physical and psychological abilities
iv. People with different age and sexual orientation
Challenges:
The challenges is to how to make employee accommodating to diverse group of people by
addressing their different lifestyle, cultures, family need and work styles.
It may result in,
i. Higher turnover
ii. Higher interpersonal conflict
iii. Ineffective communication

9. Women at work
Today women are not generally seen as inferior to men. There are many women who want to
put work first and family second. Even in a male dominated society, like Nepal, the things are
changing for better. Women in the workforce are dramatically increasing.