Economic and Social Forces in Today's Business - Literature review Example

Economic and Social Forces

Introduction

If one takes a close look at the contemporary business world, one will be able to see that it is dramatically different from its counterpart from the past. Indeed, organizations are much more likely to engage various scientific concepts in order to improve their performance instead of simply focusing on the maximisation of return on investment. In addition to that, one should also point out that the business world has become quite responsible to various factors. As a result, organisations try to adapt to the external pressure and often introduce changes that can be explained by a set of certain factors. This paper will focus on two categories of such factors, namely economic and social, arguing that they should be held responsible for the changes that contemporary organisations endure. The economic forces to be examined include global economic interdependence, intensification of competition, the flexibility of the business world, engagement of innovation; the social forces that are analysed as environmental awareness, growing activism, criticism of consumerism, and demand for responsibility.

Economic forces

Global economic interdependence

It is quite obvious that globalisation has become the buzz words of the contemporary business literature; however, for the purposes of this report, the analysis will include only one dimension of it – the economic one. Thus, Mauro, Dees, and McKibbin (2008) insist that the ability of companies to interact with their counterpart from all over the world paved a way for a new pattern of interaction. For example, Cheung and Westermann (2013) point out that the growing popularity of outsourcing can be perceived as a pressure that urges a company to change. Consider the example of Apple Inc.: once it proudly claimed that all its products are made in the USA; however, it was among the first to enjoy the benefits of outsourcing. That is why the latter might encourage an organisation to introduce changes to its products and structure.

One should also take a look at this aspect from a different point of view. Thus, Gaspar (2016) argues that today people are able to buy products from abroad as easily as if the company that they buy from was situated in their own country. All this leads to the understanding that the range of products and services that customers can enjoy has expanded. As a result, it is expected that a company does not limit itself to national boundaries and should prepare itself to enter the global market. It is obvious that the major driving force of this it technology since in many decades ago this could not have happened; however, it is important to keep in mind that buying from foreign companies is no longer perceived as something extraordinary and should be regarded as a given fact of the reality.

Intensification of competition

Many scholars acknowledge the fact that competition is an essential element of the development and an organisation; however, some point out that it is important to stress the role that company's image plays in the contemporary world (Kozlowski 2012). Indeed, competition should not be perceived as a mechanistic comparison of offers: it is a dynamic framework that evolves according to its own logic (Lee 2011). Recently, reputational management has become extremely popular and many scholars pay their attention to the image of a company. That is why organisations spend a considerable amount of money to take care of the scandals that can damage their public perception and work to promote a positive image. Consider the example of BP: it is an oil producing company, but it spends a lot of money to take care of the environment, hoping that this will make its image more appealing. Therefore, the interest towards the reputation of a company should be recognised as an important force the encourages change.

Tapamoy (2008) insist that the contemporary competition has been so intense that it establishes almost impossible requirements for the companies to compete. Indeed, there has been a parity achieve with regard to price and quality which leads to the fact that organisations are expected to find another way to differentiate themselves. However, this also creates the following threat: should an organisation make the price higher or lower the quality of the products or services, a consumer can always switch to a competitor. That is why while companies are expected to compete, they are also expected to maintain the desired level of price and quality for its products and services. Think about the competition between Apple Inc. and Samsung: it has been several years that the latter was able to produce products that are not inferior to those of the first; as a result, the two companies actively compete in other areas, maintaining the highest level of quality.

Flexibility of the business world

If one considers economic forces that pressure contemporary organisations to change, one can hardly omit the fact that it is a requirement for companies to be flexible. For example, Kline (2005) that today government is much more involved in various economic affairs than it used to be several decades ago. Moreover, if one takes a close look at the contemporary political world, one will be able to see that economic sanctions have become the major tool of pressure on certain countries which leaves a trace on the business world. In other words, the contemporary companies should be ready to face the situation when the rules of the game are changed instantaneously. Think about business with the Russian enterprises: after economic sanctions were in place, business as usually was no longer possible. That is why those companies that could adapt to the new conditions quickly can succeed.

Another point that should be mentioned is that the contemporary business world is much more vulnerable when it comes to various fluctuations. Thus, Carbaugh (2008) insist that because of the global economic interdependence and the peculiarities of the global financial system, worldwide economic recessions have devastating consequences. Another point that should be mentioned is that national economies are very dependent on the exchange rate. For example, several years ago in Ukraine the government was overthrown by certain political forces; in the aftermath of it, the exchange rate of the national currency dropped dramatically. It is obvious that this created new conditions for businesses to operate it. One would make no mistake suggesting that no one could have predicted this change, but the latter is a part of the reality and organisations have no other way, but to deal with it.

Engagement of innovation

In spite of the fact that some scholars might view the role that is played by innovation as a technological factor, there is an economic dimension to it that should be explored. For example, Cawsey, Deszca, and Ingols (2012) insist that the primary driver for engagement of innovation is the desire to increase the profitability of the business operations. Indeed, new technology does not only places the business on a higher level, it also allows it to enjoy higher profits. That is why it is common sense to engage innovation in order to improve the performance. It is obvious that some organisations, for example, Google, have been champions of innovation per se; however, one should keep in mind that other organisations can benefit from it as well. For example, using cloud technology instead of spreading documents in print can save a considerable amount of money that would have been spent on paper. Moreover, the important of engagement of various Information Systems can hardly be exaggerated.

Another point that should be mentioned is that innovation allows companies to expand their business horizons. Dunphy, Griffiths and Benn (2007) believe that e-commerce may seem to be a marginal area of business, but the share of it will grow gradually and soon enough it will occupy the major place in the contemporary business world. Consider the example of Amazon: it is the most successful platform for selling products in the virtual environment; moreover, it is able to ship the products it sells into virtually every country. It is obvious that companies should be ready to enter this kind of framework and change the products or services that they offer accordingly in order to make them more suitable for the biggest number of people possible. Therefore, engagement of innovation pressures companies to re-evaluate the manner in which they operate.

Social forces

Environmental awareness

Some might suggest that the concern for the environment may be regarded as one of the most popular ideas in the contemporary world. Indeed, Smith and Graetz (2011) insist that the majority of people think about this issue in one way or another and would like to minimise the negative impact of the human activities. Moreover, Zimmermann (2011) holds that while several decades the concern for the environment was largely seen as some kind of a marginal movement, nowadays it is some strong and influential that the impact of it expanded to the business world. Indeed, at the present moment, many organisations try to "greenwash" their products, hoping that the consumers will not turn away from them. As a result, being "green", "organic" or "environmentally" friendly has become of the major trends and many companies follow it. In other words, one might point out that one of the best ways for an organisation to acquire the support of the public today is to initiate various environmental policies.

Another point that should be mentioned is that environmental awareness of the public should be taken into account not only but the companies the activity of which has a significant impact on nature. Thus, Boonstra (2013) shows that the consumers believe that all their products should be manufactured in an environmentally friendly way or at least a company should increase the number of recycled materials in its operations. That is why today when a person buys a Samsung smartphone, one sees that the package has a "Manufactured from recycled materials" label. The same goes for McDonald's that serves its food in paper pages, made of recycled materials. All this shows that the importance of environmental awareness of the consumers expands across industries and every organisation should pay a considerable amount of attention to it.

Growing activism

Friedman (2002) insists that business in the previous time was a one-way street: the companies sold the products that they manufactured and the consumers bought them. The latter were not able to have any serious influence on the former which allowed them to feel free. However, Faber insists that everything changed in the present century. Thus, consumers were able to recognise their power and organise themselves to boycott certain companies if the latter are found to be involved in a certain malpractice. Consider the case of Forever 21: this company was reported to use sweatshops in order to produce its clothes and when the consumers found out that information, they boycotted it while urged the company in question to introduce changes to its operations. All this leads to the understanding that the nature of business in the twenty first century has changed significantly because the consumers found ways to influence the organisations.

The examination of the issue of growing activism can hardly be carried out without analysis of the role that social media plays. Li (2013) insist that while originally it was perceived as a new service that the Internet community could enjoy, nowadays, social media should be regarded as an important social force that has a significant impact on virtually every aspect of the society. Leaving aside the notion of e-commerce, one should point out that social media have become the major platform that is used for promotion as well as dissemination of ideas regarding a certain product. That is why there is no wonder in the fact that many organisations believe that they need to have an active account in the major social networks. As a result, one is able to see that organisations are engaged in an on-going conversation with their customers. This calls for a significant change in the operations.

Criticism of consumerism

It would not be an exaggeration to suggest that the business world evolves as well as the attitude of the people towards their role in it. Payne and Askeland (2008) insist that today the new aspect of the contemporary culture, namely consumerism, has become the major object of criticism of many movements. One would make no mistake that there was a time when people were encouraged to buy more than they could afford, but today this way of life is largely condemned. That is why companies are expected to produce produces that are needed; moreover, if a new version is presented, it should be significantly different from its counterparts, not just yet another analogue. One would make no mistake suggesting that this places a significant pressure on the organisations since it potentially deprives them of the profits and has a negative impact on the performance. That is why the contemporary companies should prove that they are not trying to trick the consumers into buying their products.

Stole and Micheletti (2013) insist that all this results in significant changes in the manner in which business is carried out. Thus, it used to be that maximisation of profits and return on investment was the major priority of a company and the latter tried to achieve it at all costs. Nevertheless, today this approach is unacceptable and those organisations that use it are doomed to failure. Contrary to that, companies should root their success on loyalty. Indeed, Apple Inc. enjoys extraordinarily strong loyalty which can be explained by the fact that the products that it sells become a part of their life. In other words, the company insists that the consumers do not buy yet another gadget, they buy something that will improve their life significantly. That is why this justification for a purchase is considered to be valid.

Demand for responsibility

Finally, there is one last force that should be considered which is the demand for responsibility. Boje (2015) insists that corporate social responsibility is no longer considered to be an abstract notion that does not have any significant implication for business. Nowadays it is regarded as one of the major driving forces that bring the success to a company. Indeed, this can be explained by the fact that the public wants to hold the companies accountable for the steps that they take. That is why an organisation has two major options: on the one hand, it can embrace the responsibility and introduce the required changes to the operations; on the other hand, it may refuse to do so. Needless to say that the second option leads to the failure. As a result, all companies are not turning their attention to the concept of corporate social responsibility, making sure that it occupies an important place in their business operations.

With all this in mind, Lewis (2011) insist that the demand for responsibility calls for a re-evaluation of the relationship between a consumer and a company. As it has already been mentioned, there was a time when it was largely seen as one-sided, but everything changed today. The consumers have a lot of ways to influence companies and the latter have to deal with it. As a result, embracing the responsibility and treating the consumers as important players in the market is the only logical way to structure business today. It is obvious that this is significantly different from the pattern that the companies were following for decades. However, this change is crucial if an organisation wants to be successful. Another point that should be mentioned is that this change should not be perceived as a temporary one: the engagement of corporate social responsibility marks the new era of business.

Conclusion

Having examined all the points which were mentioned in the paragraphs above, one is able to come to the following conclusion: there are numerous economic as well as social forces that pressure contemporary companies to change. Speaking of the former, one should point out that the role that is played by the global economic interdependence can hardly be ignored. In addition to that, intensification of competition results in the situation when a parity in the major characteristics has been established and companies compete in other ways. Moreover, the contemporary companies should be flexible as never and engage innovation. As for the second category, environmental awareness of the consumers should be regarded as an important trend. The growing activism of the consumers allowed them to acquire the power to influence companies. In addition to that, the criticism of consumerism and demand for responsibility urge organisations to change the pattern of their behaviour.