External Environment and Social Responsibilities - Essay Example

Type Here: Here: Topic: External Environment and Social Responsibilities A big influence on internal business environment is the external environment. No business can choose to ignore the outside factors, if it aims to succeed in the today's corporate world. Corporate culture should embody what it takes to succeed in the environment. If the external environment requires the strict following of rules in a particular country, then the businesses are bound to follow these rules, otherwise they will be forced to shut down, according to the laws of the company. We can further subdivide this external environment into various categories. These include social, political, economical and technological. These factors can make or break a business. In simple words the outside environments consists of stakeholders. A stakeholder is any group within or outside the organization that has a stake in the organization's performance. External environment mainly consists of people who have stakes in the activities of the business such as the government, local population, pressure groups and investors. To illustrate how these people are affected by the organization's activities, let's look at some examples: Government will look at whether the business is indulging in legal activities or not Local Population will look at the price of the good and to see that the business is not producing any good that is detrimental to their religion and social norms. Pressure groups will look at the technology and will seek more employment of labor than machines. The factor that I consider to be the most important in the external environment is social and cultural values that have to be followed and respected by the businesses. If this business does not follow the social values of the country, it will face a legal action against it and will have to shut down. This is how social and political factors are related. So, no business can prosper if ignores the social environment of the country it is operating in. This obligation of organization management to make decision and take actions in conformity with the normal social values and practices of the country, which enhances the welfare and interest of the society, is known as the social responsibility of the business and it cannot survive if it chooses to ignore this factor. Although at first, it might become very complex to grasp the concept of social environment because different people have different thoughts about as to which actions will improve the society's welfare. Social factor is wide a category which also includes the ethical practices of the businesses, its conformity with the tradition of the country and its responsibility to follow legal laws of the country. As already discussed above, social environment is linked with the business's legal, ethical and discretionary policies. Similarly, social environment may also affect the political, technological and economic environment, either directly or through a series of patterns. All modern societies lay down ground rules, laws and regulation that businesses are expected to follow. The respect that the business has for these rules and regulations defines the legal responsibility in the social environment for the business. Businesses are expected to fulfill their economic goals within the legal framework. For example, oil companies may be asked that they are allowed emit only a certain amount of gases in the environment. Their failure to follow this legal instruction will mean that they have violated the necessary requirement and for that they may be sued or forced to shut down. Similarly, companies producing waste may be asked, not to dump this waste in the places of scenic beauties such as beaches, island etc. If they still do this then they are ignoring their legal responsibility in the social environment. If they are found guilty they may be fined or kicked out of the country. So, all businesses are expected to follow these laws. Since, most of the laws are made by political setup of the country, therefore, the political and social environment that a business faces are linked. For example, a strict government would mean that the business is governed by more law and hence it will have more legal responsibility in the social environment. Similarly, if the government is flexible, then the business will be governed by fewer laws and will have less legal responsibility in the social environment. This is how social environment and political environment are linked. Organizations that knowingly break the law and do not follow their legal responsibility are poor performer. There are certain internet businesses or companies that charge the user's credit card account for nothing and as a result in the recent years bans have been imposed on such side. So, one can easily conclude that legal responsibility and profitability are correlated. Another component part of social environment is the ethical responsibilities. These include behaviors that are not necessarily codified in to law and may not serve the business's direct economic interests. Any business that is aware of its ethical responsibility acts with equity, impartiality respects the rights of individuals and provides different treatment individuals only when relevant to the organization's goals and tasks. Unethical behavior occurs when decisions enable an individual or company to at the expenses of the society. This responsibility is further highlighted with the development of modern theories of behaviors and with the advancement of medial. This kind of behavior is not tolerated in the modern world any more. Any business involved in unethical responsibility loses market share and people prefer not to purchase the goods of such business. For example, When a Danish based newspaper published blasphemous cartoons; people protested against it and stopped using the Danish products. As a result, Denmark's economy suffered huge losses and in the end, they had to apologize to the world. This is how social responsibility is link with economic prosperity in the external environment. To understand the concept of ethical responsibility better, let's look at an example: When Fianst took a chance in 1990 and opened a supermarket in Cleveland's inner-city neighborhood of Glenville, it performed an ethical act. Residents of the neighborhood, which was burned out during the 1968 riots, previously had to ride the bus 8 miles to suburban supermarket or shop at high priced corner markets. The opening of a supermarket led to further development in the area, including Rite-Aid store, a condominium development and 75 new homes. Today, Finast's store account for more $800 million in sales, quarterly. This ethical practice has made it possible for Finast to meet both ethical goals and economics goals. This shows us that both economic and ethical responsibility is closely link in the external environment and no business can ignore one factor to achieve success in the other. Similarly, Technological and Social factors in the external environment are also linked. It is a trite that technology often replaces labor and as a result people lose job. This creates a situation where technological advances violate with social responsibility of the businesses. However, Web Industries, which is located in Massachusetts, hired 50 former prisoners highlighting its commitment to giving people a second chance. Taking a leaf out of Web Industries book, no business should try to adopt the technological advance at the expense of its social responsibility. This also shows the fact that both technological advance and ethical responsibility of the businesses are strongly link in the external environment. (Ian Hobday, 2001) It has also been noted that there is a strong links between all the factors in the external environment. Failure to follow one of these factors can lead the business into shambles. Therefore, all successful managers keep close eyes on all the factors of external environment and create strategies based on their findings. Now let's look at the following example to determine how the failure to conform to any one of these factor could lead the business to shambles. Shell's container once spilled the oil in the Nigerian sea. This occurred because the Shell Management was not cautious about their social responsibility and ignored the social environment. After this pressure groups held various campaigns asking the government of all African countries to ban Shell from operating in their respective countries. Many of these campaigns went unheard but people all over the world started shifting away from using Shell products. This was a very dangerous situation for the company whose profits decline massively throughout the world. Shell continued to lose business until they develop a very good system and ensured people that incidences will never happen again. They also tried to elevate their brand name by changing their standing plan. The new standing plan consisted of various celebrities coming on TV and saying that they trust shell. They spent billions of dollars on this and thus have to compromise with low-profits as a result of this advertising campaign. Shell, ultimately, learnt that in their surge of profit they cannot ignore the social factors in the external environment if they want to stay a big business and want to earn a huge profit. (Geraldline books, 1994) Another very good example of a company who never ignores its social responsibility is Boeing. The Boeing Company has integrated ethics into the corporate culture, encouraging all employees to make personal integrity in a way of life. Boeing's ethical structures that promote ethical behaviors include Ethics and Business conduct committee. The purpose of this committee is that it looks at the business activities and makes sure that the business is not involved in any activity that is against legal practices, social norms or any other activity that might anger the people. This shows that Boeing is fully away that they cannot succeed until and unless they give full importance to the social environment and if they don't follow the social responsibility. The company has always given full importance to what is happening outside the country and always complied to the social, legal reforms. They have also made it very clear that they will not fire workers to replace them with machines. Although, mechanization in the USA is becoming very common but Boeing does not want to fire worker and hence they are ignoring the technological change to keep themselves socially responsible. (Shea, 1988) In order to bridge the gap between external environment and internal environment, good businesses usually indulge in discretionary policies. Although, these policies are not enforced upon the businesses by law or because they are ethically responsible for them, but instead such activities are carried to improve the social perception and goodwill for the business. For example, Pittsburgh Brewing helped laid-off steelworkers by establishing and contributing to the food banks in the Pittsburgh area. Discretionary responsibly is the highest criterion of in judging whether or not the business is complying to the social environment It goes beyond the social expectations and is done to contribute to the community's welfare. In the light of above discussion, we can easily conclude that businesses are not only governed by the internal operations and internal environment which includes management and employees, but in order to be successful it is binding upon them to be cautious of the external environment as well. Although businesses may experience various dilemmas in order to decide what decisions are best for themselves, but wise managers usually decide on the best decision by looking at the social factor in the external environment. Better businesses are differentiated from rest by their ability to cope with the external environment and to keep their operation profitable at the same time. Only this can we arrive at whether the business is a success or a failure. (Daft, 1997). Reference Geraldine Brooks. "Shell's Nigerian Field Produce Few benefits for Region's Villagers". The Wall Street Journal (1994) Richard L. Daft, Management 4th Edition. The Dryden Publishing (1997): Ian Hobday. A First Course to Economics. Pearson Educational (2001) Gordon F. Shea, Practical Ethics. New York American Management Association (1988) Peter Stimpson and Paul Borrington. "GCSE Business Studies:, Cambridge University Press (2001) Tad Tulega. Beyond the Bottom Line. Penguin Books (1987) John A. Byrne. Business Are Signing Up for Ethics 101. BusinessWeek. February 1988. Milton R. Moskowitz. Company Performance Round Up. Business and Society Review 53. . Read More