Business Is a Social Institution because Trade Is a Social Act, Affecting People and Society - Assignment Example

BUSINESSES ARE SOCIAL INSTITUTIONS: TRADE IS A SOCIAL ACT, AFFECTING PEOPLE AND SOCIETY TABLE OF CONTENT Introduction……………………………………………………………………1 The philosophy of Business……………………………………………………2 Sociology in Business………………………………………………………….3 Contribution of Psychology in Business……………………………………….3 Business are social Institutions…………………………………………………4 Responsibilities of Business Organizations being a Social Institution…………6 Contribution of Businesses as Social Institutions in Society…………………...7 Trade is asocial act……………………………………………………………..8 Business is a social institution because Trade is a Social act, affecting People and society……………………………………………………………...9 Conclusion……………………………………………………………………10 Introduction A business is also known as an enterprise or firm is an organization which is involved in the function of trade of goods, services or both to t he consumers (Sullivan, Arthur and Steven, M. Sheffrin 2003). In capitalist economy, businesses are dominant part of society. Businesses are privately owned and privately own to earn revenue and increase wealth of the owner of business. State owned businesses are not for profit making. A business which is owned by many people is referred to as a company. The etymology of business means being engaged in a kind of work by Etymologically the word Business is in fact ‘busy-ness. It is the form of an old word of English Bisignis, which is formed from the equivalent of busy (bisig) plus the equivalent of-ness. The word of business in old times means anxiety or uneasiness. Later it was used to describe a state of being busy. Till the period of 14th century, the word busy was continued to use as the condition of being busy. It was also used as a proper word for official task. At the start of 15th century, the word busy began to use for work. The word began to apply for a occupation of a person in the end of 15th century. During the period of 16th century, business is used to consider as a piece of work and it was for the first time that business was considered as Trade. But it was not till 19th century that business entities achieved their full sense of meaning. The philosophy of business The philosophy of business means the principles of the formation of business enterprise. Philosophy of business includes the purpose and nature of business, its role in society and the moral obligations it pertain to. Business touches every aspect of our lives. The philosophy of business was built in the 17th and 18th century. During this time many philosophers like Hobbes, Locke, Rousseau, Shaftesbury and Smith created intellectual foundation of business principles. According to Thomas Hobbes, John Locke and Jean Jacques Rousseau, we are all free to make decisions, control our own destiny and engage in a social contract. This idea leads to the entrepreneurship. The modern philosophers of business are involved in other philosophical or scholarly work rather than business. The most famous modern philosopher of business is Peter Drucker who gave many renowned theories on business and management sciences. Drucker also dealt with the conflicting issues between market place and society. Geoffrey Klempner is also a philosopher who examines how business enterprise works as a whole in a society. Business philosophy and business ethics are closely related to each other since business persons must know how to behave in society and marketplace as well. From Hoppe to Geoffrey, philosophers played an important role in the field of business. Whether it is an issue of ethics in business or theories about business principles, philosophy is always there. The philosophers make realize the people that business is a social entity and it cannot be excluded from society. It is part of society rather than society comes in it. The philosophers told the world that business is not just about making money but it also has some responsibilities towards society. According to Henry Ford, A business that makes nothing but money is a poor business. Sociology in Business Sociology is the scientific study of society (Comte, Auguste, 2005). It is a social science which uses many methods of empirical investigation and critical analysis to know about human social activity (Ashley D, Orenstein DM, 2005). Every Business enterprise has to grow and develop in society and society has a great influence on the business practices, norms and values. Nothing can be excluded from the context of sociology. The company or business consists of people including employees and consumers. You have to deal with them and get to know their desires and demands. Sociology helps us in dealing with great diversity of people and confronting situations especially working in groups. Now business has understood the human factor and the involvement of sociology in business. Contribution of Psychology in Business Psychology plays an important role in business because business depends on customers and employees. To understand the needs and wants of customer and dealing with employees, understanding of psychology is very important. That’s why psychology has become a subject of great interest to businessman. This is because of the growing awareness about “human nature factor” in business situation and increasing demand by the business person to know about this factor. The performance of any business depends on the performance of its employees and the expectation of it customers and hence human factor is very important for the success of any business. In the 20th century our concepts about understanding human being has changed and this is related to the performance in organization and now focus is on communication, leadership skills and employee satisfaction. These factors are important for improving the performance of any organization. So, it can be easily said that psychology of business is the psychology of consumers and psychology of employees. Businesses are Social Institutions Social Institutions are the institutions which have certain norms, values, code of conducts and these institutions are working for specific social needs. Hospitals, family, religious places, schools all are various examples of social institutions. From this definition, it is very clear that business is a social institution because it satisfies a social need that is money. Business organizations have many responsibilities and duties towards people. Employees, customers, social bodies, government and public cannot be ignored. Government, customers and the people of the society are the external bodies but the relationship with the employees is purely internal. Peter F. Drucker states that business as social institution must verify two conditions. The first condition is that status and function must be given to the employees. Second, the businesses should be equal opportunity provider. The first condition implies that an employee must have some importance beyond his work in the organization. This means from line managers to the upper level staff must consider organizations goals and objectives. The reason is that everyone understands that he or she is the part of organization and have some responsibilities. Companies are now more than instrument for making money, instead they are also achieving societal purposes and they are providing better life for those who are working with them. According to this school of thought, any business institution should not be measured in term of profit but it must be judged in term of institution. Good organizations also give importance to human value and societal value. There must be economic logic but institutional logic should not be subordinate. All organizations require profit to sustain but profit is not just end for the organizations but it is to ensure that returns will continue. If a business has a purpose beyond profit making then the CEOs must do investment in term of employee empowerment, emotional engagement, values-based leadership and other societal contributions. Because of globalization, organizations cross borders have to approve not only from the government but also from the society of that region. Globalization detaches an organization from one society but at the same time requires that the company fulfill the need of many societies. Today social scientists and thinkers regard accompany as a living, vital and dynamic social organism with firm relation with the rest of the community in which it functions. Nowadays business enterprises are solving many problems of the society and taking part in the societal issues. Business organization survives by the use of factors of production and the other facilities of the society. This places an organization in a relation with the community and the environment. This relationship of the business organizations with the society and the interdependence between them give rise a series of responsibilities to society (Mullins, 2005). Mullins further states that social responsibilities of a business are both internal and external to the organizations. There is increasing tendency with the social responsibilities of organizations. This can be seen by the legislation made on such matters as employment protection, equal opportunities, company’s act, consumer laws, product liability and safeguarding the environment (Mullins, 2005). Now social responsibility is legal requirement for the organizations. Responsibilities of Business Organizations being a Social Institution Palmer and Hartley discuss a very important point that organizations must act according to socially accepted manner. Society requires that organizations must consider their role in the society. Palmer and Hartley give two reasons for this: one is philosophical reason and other is factual. Philosophical reason is business is social institution so it must act like other institutions such as schools and churches etc. second reason is factual mean if organization will not give importance to values of society their survival will be in danger (Palmer and Hartley, 2002). According to Mullins, there is diversity of opinion about the responsibilities of an organization towards the society. Milton Friedman devised a theory which argues that social responsibility of an organization is to make as much as profit for its shareholders within the fair competition. But on the other hand there is another theory that is stake holder theory which emphasizes much social responsibilities for business (Mullins, 2005). There is also responsibility of businesses towards environment such as ecology. That’s why, business organizations are legally required to conduct and Environment Impact Assessment (EIA) for their operations. One of the social responsibilities of business is to follow ethics. For this reasons, business organizations have made their code of conduct to follow. A business must follow ethics for their own sake and as a means to future growth and long term survival. In this sense some researcher considers, ethics as duty, irrespective of the consequences. Contribution of Businesses as Social Institutions in Society Industrialist have developed many social institutions proving business understands its responsibility. Houghton family developed town of Corning and Corning Glass in New York. Tata a group of companies in India played an important role in society by establishing steel city in Jamshedpur, Jharkhand. This is better for business to achieve its objectives by following values of society. Pepsi Co has made a great move towards the health issues. Nutrition, environment responsibility, and talent retention are pillars supporting the slogan. IBM to demonstrate a contributor of society did many tasks like they developed training and access to software tools, projects in schools included training on privacy and anti bullying in 100 schools in Germany. IBM in India established a new website for visually disabled persons and launched in 50 places. IBM played a great role for women business persons in achieving opportunities in USA. Wal-Mart in USA gave many donations to students and awards to teacher to improve its image in public. People in USA did not like business policies of Wal-Mart so Wal-Mart improved their image by becoming active in societal issues. The executive of Procter and Gamble, Robert McDonald believe that the purpose of company, values and principles are part of its culture and evoke strong emotions in employees and gives meaning to the company’s brand. Procter and Gamble in West Africa serves the society for instance Baby Care Group of P&G set up Pampers mobile clinics to reduce high rate of infant mortality and help babies survival. A physician and two nurses in a van travel in the region and teach the people postnatal care, examine babies and refer the mothers to hospitals for follow ups. The employees of P&G are emotionally tied to their organization because they think that their products are serving the society and saving lives. Those organizations who think themselves as social institutions work is emotionally compelling and this purpose and values can be seen in organizations’ goals and performance. There are many instances of contribution of Business in society for the sake of giving business an institutional name and purpose. Procter & Gamble’s Children’s Safe Drinking Water program with UNICEF and several NGOs, Pepsi Co’s agricultural projects in Mexico with the Inter American Development Bank , IBM has worked for Tsunami in Asia, Hurricane Katrina and earthquakes in China and Japan. It made a software to supply foods and find out lost people. Trade is a Social Act Trade means exchange of goods and services fro money. It is a business negotiation between buyer and seller. Trade is a social act because anyone who sells any goods and services to another person affects the interests of another person, the society in general and the government which formulates policies for the trade in fixing prices. A person is a unit of society, society is comprised of people. So, buying and selling cannot be considered as a non social act as it is associated with people. Business is a social institution because Trade is a Social act, affecting and people and Society It has been proved that businesses are social institutions and trade is part of business and a social act. Business and society have been brothers and sisters from the time human being started trading. Business affects the society in which they operate. For example a sole trader running a small store of grocery and start opening his store for Sundays. This will benefit the people and positively affect them. From a grocery store to a large organization, business affects people in many ways. From needle to an aero plane these are all due to the running of business in our society. Business provides us food, cloth, medicines, drinks and even our homes. So business is part of our daily life in form of products and services. These are the organizations which give us work. Besides playing financial role business organizations are playing an important role in our society. This is not the age when business was just considered as the financial institution. Now businesses are well aware of their existence as social institution. Hence, they are contributing towards the prosperity of society. Organizations are greatly influenced by society and their members, they cannot be isolated. Business does not run in space, it operates in society affecting people living there. Conclusion Business is a social act having history since the beginning of mankind. From barter system to the modern day multinational organizations, business has always been an important ingredient of the society. Scholars of different disciplines like philosophy, psychology and sociology, contributed their part of knowledge in explaining the ideas of business. Their common consensus is business is a social entity. Like school, religious institutions and hospitals business is also a social institution because it affects human life greatly in one way or another. This is the fact which cannot be avoided. So, I must say businesses are social institutions because trade which is also a form of business is also a social act and affect human being and society. REFERENCES Sullivan, Arthur. Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Hall. pp. 29 Comte, Auguste, A dictionary of Sociology. (3rd ed), John Scott and Gordon Marshal (eds), Oxford University Press, 2005. Drucker, P. (1954). The Practice of Management, Harper Business, Reissue Edition 1993. Ashley D, Orenstein DM (2005). Sociological theory: Classical Statements (6thed). Boston, Massachusetts, USA: Pearson Education. pp 3-5, 32-36 Mullins, Laurie J. (2005), Management and Organizational Behavior. 7th ed. Pearson Education Limited, Essex, England. Palmer, Adrian and Hartley, Bob, (2002).The Business Environment. McGraw-Hill, New York, USA. Rosabeth. Moss, Kanter. How great Companies think differently. Harvard Business Review. 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