Social and cultural environment

Social change may affect businesses through many aspects of their activity. These may include:

• Human resources - expectations within society about patterns of employment and

working conditions will affect the firm's organization. Increasingly, trends towards home
working, more flexible employment patterns and a portfolio approach to a career are
influencing firms and the way they operate. Social change impacts on firms in different
ways, but all businesses would be wise to plan for change.
• Marketing - firms need to ensure that their product portfolios reflect the pattern of
demand in society. Changes in society lead to changes in the pattern of demand and firms
need to be aware of changes taking place in their market. Market research will be an
important element of judging the significance of trends and changing consumer
purchasing behavior.
• Production - with the growth in multinational enterprises, production has become
increasingly globalised and ready to shift anywhere. However, firms are also under
increasing pressure to ensure that their production does not impact negatively on the
countries and societies where they operate.

What is culture

Collective programming of the mind which distinguishes the members of one human
group from another... Includes system of values; and values are among the building
blocksof culture. (Hofstede, 1980)

Culture is learned

Common to members of a certain group

Determines the behavior of group members

Culture (customs, values, habits) makes life

Culture ‘ingredients’ / elements

• Norms
• Value
• Believe
• Institutions
• Religion
 • Language
• Education system
• Art and aesthetics ,Material culture and life-style

Impact of foreign culture on business

• Impact of language on business

• Impact of music and arts on business
• Impact of religion on business
• Impact of social habits on business
• Impact of cuisines on business

Social audit

Social audit is “a systematic study and evaluation of the social, rather than the economic,
performance of an organisation.” It is a formal and thorough analysis of effectiveness of the
social performance. Social audit assesses the impact of organisational activities on society,
identifies areas where social values are promoted and areas where organisations need to promote
the social culture.

Objectives of Social Audit:

i. It assesses the gaps between needs and resources available for local development.
ii. It creates awareness amongst stakeholders about the company’s productive
services.
iii. It increases efficiency and effectiveness of the corporate development
programmes.
iv. It assesses corporate policy decisions, in the interest of its stakeholders

Steps involved in social audit:

• Framing the social programmes.

• Monitoring activities in carrying out these programmes.
• Measuring social performance.
• Evaluating the performance of socially responsive activities.
• Framing strategies to set future goals.

Social Responsibility
 Social responsibility means that individuals and companies have a duty to act in the best
interests of their environment and society as a whole. Social responsibility, as it applies to
business, is known as corporate social responsibility(CSR). Many companies, such as
those with "green" policies, have made social responsibility an integral part of their
business models

Types of social responsibility

• Legal Responsibility
• Ethical Responsibility
• Discretionary Responsibility
• Economic Responsibility

Competitive Environment: Definition

A competitive environment is the dynamic external system in which a business
competes and functions. The more sellers of a similar product or service, the more
competitive the environment in which you compete. Look at fast food restaurants - there
are so many to choose from; the competition is high. However, if you look at airlines
servicing Hawaii, very few actually fly to the islands.
Direct competitors are businesses that are selling the same type of product or service as
you. For example, McDonalds is a direct competitor with Burger King. Indirect
competitors are businesses that still compete even though they sell a different service or
product. The products or services offered by indirect competitors tend to be those that can
be substituted for one another. Again, considering travel, you have the option to travel by
plane, train, or car. Therefore, airlines are also competing with train lines and buses
(assuming the travel does not go overseas).
Examples
There are several examples of competitive business environments. The first that comes to
mind is smart phones. How many choices do you have when it comes to buying a smart
phone? They seemed to have multiplied overnight! That is an extremely competitive
business environment.
Companies are constantly trying to one-up the latest best-selling model - a good
indication of a competitive environment. Additionally, prices of comparable smart phone
models are relatively close.
Michael Porter 5 forces model

Understanding Porter's Five Forces

The tool was created by Harvard Business School professor Michael Porter, to analyze an
industry's attractiveness and likely profitability. Since its publication in 1979, it has become one
of the most popular and highly regarded business strategy tools.
Porter recognized that organizations likely keep a close watch on their rivals, but he encouraged
them to look beyond the actions of their competitors and examine what other factors could
impact the business environment. He identified five forces that make up the competitive
environment, and which can erode your profitability. These are:

1. Competitive Rivalry. This looks at the number and strength of your competitors. How many
rivals do you have? Who are they, and how does the quality of their products and services
compare with yours?
Where rivalry is intense, companies can attract customers with aggressive price cuts and
high-impact marketing campaigns. Also, in markets with lots of rivals, your suppliers and
buyers can go elsewhere if they feel that they're not getting a good deal from you.

On the other hand, where competitive rivalry is minimal, and no one else is doing what you
do, then you'll likely have tremendous strength and healthy profits.

2. Supplier Power. This is determined by how easy it is for your suppliers to increase their
prices. How many potential suppliers do you have? How unique is the product or service that
they provide, and how expensive would it be to switch from one supplier to another?
The more you have to choose from, the easier it will be to switch to a cheaper alternative. But
the fewer suppliers there are, and the more you need their help, the stronger their position and
their ability to charge you more. That can impact your profit.

3. Buyer Power. Here, you ask yourself how easy it is for buyers to drive your prices down.
How many buyers are there, and how big are their orders? How much would it cost them to
switch from your products and services to those of a rival? Are your buyers strong enough to
dictate terms to you?
When you deal with only a few savvy customers, they have more power, but your power
increases if you have many customers.

4. Threat of Substitution. This refers to the likelihood of your customers finding a different
way of doing what you do. For example, if you supply a unique software product that
automates an important process, people may substitute it by doing the process manually or by
outsourcing it. A substitution that is easy and cheap to make can weaken your position and
threaten your profitability.
5. Threat of New Entry. Your position can be affected by people's ability to enter your market.
So, think about how easily this could be done. How easy is it to get a foothold in your
industry or market? How much would it cost, and how tightly is your sector regulated?
If it takes little money and effort to enter your market and compete effectively, or if you have
little protection for your key technologies, then rivals can quickly enter your market and
weaken your position. If you have strong and durable barriers to entry, then you can preserve
a favorable position and take fair advantage of it.

Competitive strategies

Businesses of all sizes use strategies to address problems and overcome obstacles on the way to
reaching performance goals. Competitors are often a major factor influencing success in the
marketplace. To meet the challenges of such competition, companies develop specific strategies
detailing how they position themselves in their business environment and react to market events.
Competition strategies leverage competitive advantages to create strong market positions that
competitors can't match.

Price
Low price is a suitable competition strategy if you have a natural cost advantage. If you have a
unique, low-cost source of supply, a special, low-cost design or an unusually productive
workforce, you can monitor market prices and undercut the competition, knowing you still make
a profit when they lose money. Competing on price means you have to implement a cost
reduction and control process to reduce costs to their minimum and keep them down.
Location
If your business has a prominent or more accessible location than your competitors, your strategy
has to highlight your advantage in your promotional material. Prominently display your address,
add a map and make sure you support the convenience of your location with measures on
parking, quick service and attractive customer areas.
Differentiation
Unique product or service features will make customers buy from you rather than competitors.
Ideally, such features are difficult for competitors to replicate. Your strategy is to promote your
special features to become known as the business that has this particular product or service.
Developing special features raises costs, but usually you can achieve higher prices. The strategy
has to ensure that value to customers justifies the higher price.
Quality
Offering high quality is an effective competition strategy for marketing to high-income
consumers, but it is challenging to implement. It involves assembling well-trained staff, reliable
suppliers, a competent development team and an interested market segment over the long term.
Such a strategy can be very profitable.
Focus Strategy
A focus strategy segments the accessible market to identify and group customers who have
specific needs that your company can satisfy more completely and at lower cost than your
competitors. If your company has a strong competitive advantage in one product with particular
qualities, it makes sense to focus your resources on customers who are interested in those
qualities.
Niche Marketing
Niche marketing is a customer-oriented strategy that segments an accessible market by surveying
customers and determining their needs and preferences. Your company can then develop the
features of a product that match the needs of a particular segment or niche. The effectiveness of
the strategy depends on how well you identify the needs of your customers and how well the
features of your product satisfy those needs.
Classification of business

Basics of starting a business

Industrial Policy

Industrial policy is a document that sets the tone in implementing, promoting the regulatory roles of
the government. It was an effort to expand the industrialization and uplift the economy to its
deserved heights. It signified the involvement of Indian government in the development of industrial
sector.

With the introduction of new economic policies, the main aim of the government was to free the
Indian industry from the chains of licensing. The regulatory roles of the Indian government refer to
the policies towards industries, their establishments, their functioning, their expansion, their growth
as well as their management.

I. Industrial Policy of 1948

The first industrial policy after independence was announced on 6th April 1948. It was presented by
Dr Shyama Prasad Mukherjee then Industry Minister. The main goal of this policy was to accelerate
the industrial development by introducing a mixed economy where the private and public sector was
accepted as important in the development of the economy. It saw Indian economy in socialistic
patterns. The large industries were classified into four categories:

• Industries with exclusive State Monopoly/Strategic industries: It included industries

engaged in the activity of atomic energy, railways and arms and ammunition.

• Industries with Government control: This category included industries of national

importance. 18 such categories were mentioned in this category such as fertilizers, heavy
machinery, defence equipment, heavy chemicals, etc.

• Industries with Mixed sector: This category included industries that were allowed to
operate independently in private or public sector. The government was allowed to review the
situation to acquire any existing private undertaking.

• Industry in the Private sector: Industries which were not mentioned in the above categories
fall into this category. High importance was granted to small businesses and small industries,
leading to the utilization of local resources and creating employment.
Industrial Policy Resolution, 1956
This second industrial policy was announced on April 20, 1956, which replaced the policy of 1948.
The features of this policy were:
• A new classification of Industries.

• Non-discriminatory and fair treatment for the private sector.

Promotion of village and small-scale industries.

• To achieve development by removing regional disparity.

• Labour welfare.

New Industrial Policy, 1991

• Public sector de-reservation and privatization of public sector through disinvestment.

• Industrial licensing.

• Amendments to Monopolies and Restrictive Trade Practices (MRTP) Act, 1969.

• Liberalised Foreign Investment Policy.

• Foreign Technology Agreements (FTA).

• Dilution of protection to SSI and emphasis on competitiveness enhancement.