CHAPTER 3

MANAGEMENT –
BUSINESS
ENVIRONMENT
AND SOCIETY

Management: Principles, Processes & Practices

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 Learning Objectives
 To learn and appreciate the significance of
business environment and society in
management.
 To understand difference between old and
emerging economies.
 To learn application of Michael Porter
model in diagnosing the competitive
business environment.
 To learn the significance of corporate
social responsibility in today’s business
environment
 To understand importance of social audit
Management: Principles, Processes & Practices
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  To learn the difference between business
ethics and ethics in business.
 To learn about steps involved in ethical
decision making.
 To learn about what is meant by
corporate governance and its relevance
ethical standards

Management: Principles, Processes & Practices

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 Introduction
 Managerial actions as reflected in the
organizational performance is the outcome of
synchronization of internal systems to respond
effectively to the external environment.
 Organizations for their success in today’s fast
changing environment have to keep adjusting,
adopting, and adapting by developing inbuilt
response mechanisms
 Need to understand importance and relevance of
organizational environment for strategic
management as also for social concern and
value-based management.

Management: Principles, Processes & Practices

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 Macro Environment Affecting
Organization
SOCIAL CULTURAL

LEGAL

ORGANIZATIO
TECHNOLOGICAL N

COMPETITIVE

POLITICAL DEMOGRAPHIC ECONOMIC

Management: Principles, Processes & Practices

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 Trends Affecting Emerging
Economies
Old Economies Emerging Economies

Dominance of agriculture and Dominance of service

Manufacturing sector

Local and national markets Global markets

Customer behaviour – loyalty Customer behaviour –

highly
fluid

Competitive forces – tolerable Competitive forces –

intense

Regulated economic regime Deregulated regime

Emphasis on physical assets Emphasis on human assets

Management: Principles, Processes & Practices
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Michael Porter’s Model—
Competitive Diagnosis
Threat of
new entrants

Power of
suppliers
Rival firms and
rivalry amongst
them
Power of
customers

Above factors need to be appropriately diagnosed by the managers to

identify their competitive advantages and disadvantages, so as to chalk out
strategies that can enable them to achieve their corporate goals and objectives
by responding effectively to various environmental forces.

Management: Principles, Processes & Practices

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 Corporate Social Responsibility
(CSR)
 CSR focuses on need for seriously considering the impact of
the company’s actions on society
 CSR basically refers to the obligation toward the society
voluntarily assumed by business.
 The philosophy of business as highlighted by Keith Davis
and Robert Blomstrom (1975) states ‘Social responsibility
is the obligation of decision makers to take actions which
protect and improve the welfare of society as a whole along
with their own interests’ This implies that business has to
be viewed more than a money-making proposition and it
provides a great opportunity to serve society. Business
entity has also to focus their efforts on protecting welfare of
the society by creating positive benefits for society.
 Corporate Social Responsiveness means the extent to which
company’s policies and programmes are geared to the
social environment. The responsiveness focuses on actions
that results in ways and means of firm’s responses to social
concerns as against responsibility that focuses more on
‘need’ and ‘should’ for corporate sustained growth.

Management: Principles, Processes & Practices

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 Corporate Social Responsibility (CSR) at
Different Levels

CSR Voluantry Responsibilities

Obligation
toward Ethical Responsibilities
Society
Voluntarily
Assumed Legal Responsibilities
by
Business
Economic Responsibilities

Management: Principles, Processes & Practices

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 Advantages of CSR
 The organizations that integrate CSR as part and
parcel of their philosophy of growth, derive various
advantages such as –
improved financial performance,
cost reduction,
enhanced brand image and reputation,
increased customer satisfaction,
enhanced productivity, quality,
increased market share,
more engaged investors,
environmental sustainability,
and above all competitive edge in the market.

Management: Principles, Processes & Practices

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 Social Audit
Pollution Check
Employment
Standards
Mandatory as Labour Amenities
Required by to be provided as
Government per factory Act,
Social Minimum Wages to
Audit be Provided

Voluntary
Rural
Social
Development
Programs Education
undertaken Health
by companies

Management: Principles, Processes & Practices

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 Ethics – Different View Points
Various Views on Ethics

Ethics

Utilitarain View Rights View Justice View

Utilitarian View: The utilitarian view focuses on welfare of the greatest

number of people, implying thereby the greatest good for the greatest
number as a criterion for weighing and evaluating decisions.

Rights View: The protection of individual's rights is the main concern as per
rights view.

Justice View: The justice view is grounded in the idea that rules of
organizational or societal existence must be imposed equitably to all. The
focus is making a decision that is objective – without prejudice to emotions -
and fair to everyone involved.

Management: Principles, Processes & Practices

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Ethical Decision Making
 Define the problem and issue clearly
and explicitly
 Jot down the values relevant to the
situation for the issue under
consideration from the short and long
term perspective
 Analyze the issue vis-à-vis conflicting
values and choose an alternative that
takes care of most crucial values
 Implement the decision

Management: Principles, Processes & Practices

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 CORPORATE SOCIAL
RESPONSIBILITY

 PRODUCE WEALTH FOR SURVIVAL

 SURVIVAL AT STAKE WHEN PUBLIC
INTERST IS NEGLECTED
 PERSONAL ETHICS
 BUSINESS ETHICS
 TRUTH AND JUSTICE TO SOCIETY
 CORPORATE BEHAVIOUR IN HOME AND
ABROAD
CSR IN INDIA
 2 PRINCIPLES
 PRINCIPLE OF CHARITY
 PRINCIPLE OF STEWARDSHIP
 TRUSTEESHIP MODEL BY GANDHIJI
 PSU’S AS ‘TEMPLE OF MODERN
INDIA’ J.L.NEHRU
 TATA BIRLA GODREJ
 TEMPLES SCHOOLS PARKS COLLEGES
 REACTION OR PROACTION
CSR IN INDIA
 MODERN CONCEPT OF
STAKEHOLDERS
 WORLD BANK, UNDP, CSR – IMAGE
 RESPONSIVENESS TO PUBLIC
OPINION
 KNOWLEDGE AND INNOVATION
DFINITION OF CSR
 BOWEN “The obligation of businessmen
to pursue those policies, to make those
decisions, or follow those lines of action
which are desirable in terms of objective
and value of our society”
 “The continuing commitment by
business to behave ethically and
contribute to economic development
while improving the quality of life of the
workforce and their families as well as
the local community at large.”
LEVELS
 FIRST GENERATION –
PHILANTHROPIC
 SECOND GENERATION – INTEGRAL
PART OF BUSINESS
 THRID GENERATION – ROOT OUT
PROBLEMS LIKE POVERTY,
ENVIRONMENT DEGRADATION.
TTYPES
 CARROL MODEL
 1 ECONOMIC LEVEL
 2 LEGAL
 3 ETHICAL
 4 PHILANTHROPIC
 REIDENBACH AND ROBIN MODEL
(1990)
 AMORAL
 LEGALISTIC
TYPES
 REIDENBACH AND ROBIN MODEL
(1990)
 RESPONSIVE
 EMERGING ETHICAL
 ETHICAL COMPANIES
FOR CSR
 IMPROVED FINANCIAL PERFORMANCE
 REDUCED OPERATING COST
 ENHANCED BRAND IMAGE AND
REPUTATION
 INCREASED SALES AND CUSTOMER
LOYALTY
 INCREASED PRODUCTIVITY AND
QUALITY
FOR CSR
 INCREASED ABILITY TO ATTRACT
AND RETAIN EMPLOYEES
 REDUCED REGULATORY OVERSIGHT
 ACCESS CAPITAL
AGAINST CSR
 OBJECTIVE LOST
 RIGHT OF MANAGERS LIMITED AS
THEY ARE RESPONSIBLE TO
STAKEHOLDERS
 PROGRESSIVE TAXATION – GOVT TO
TAKE CARE OF CHARITY
THANK YOU!