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As a country, India covers a land area greater than that of Europe.

Its inhabitants speak a bewildering array of languages (16 official languages as well as innumerable local dialects and patois).The people live in twenty-eight states and seven union territories. It is hardly surprising, therefore, that India is a country about which it is very difficult to make sweeping generalisations.

Yet India presents a massive market opportunity for companies who wish to expand their markets internationally. With a population approaching 1.2billion - many millions of whom are reasonably affluent and possess large disposable incomes - the sub-continent is widely tipped to be the second or third largest economy in the world within the next 20 years. (it is already the 3rd largest economy by GDP Purchasing Power Parity).

People often forget that business in India (growing at about 9% per annum GDP in 2011) is powered by a very strong domestic market which has seen strong performances in all three sectors or agriculture, industry and services and that these sectors, couple with high savings rates and a very favourable demographic trend, make India much more than merely a 'low-cost' option. Any business organisation that wishes to profit from India's rise, would do well to spend a little time studying the cultural norms which drive the thinking of the Indian people. Although it is difficult to generalise about approach to business in India, there are certain factors which would seem to be almost universal in their applicability and which need to be borne in mind when working with Indian contacts. These issues include the fact that India is a country in which relationships are placed before business and thus the relationship phase of the business cycle could be considered to be the most important.


The social life of man lies mainly in his interaction with the environment. The people, the material resources, the climatic conditions or any other things around him constitute his environment. These are important and un avoidable factors to him. Similarly for a business unit, it is very much necessary to respond, understand and react with its environment for the survival in the market and business growth.

Particularly the modern business world has become so dynamic and complex in nature. This is because its environment is changing day by day. Any lacuna in understanding these changes will result in failure and total withdrawal from the market due to the stiff competition. So, let us discuss the concept of business environment and highlight the significance of environment and its inter-relation with business.


The term business is usually described as the organized efforts of an individual or a group in producing and / or exchanging goods and services to satisfy needs and wants of the people. But now this term encircles (other than production and exchange of products) study on consumer behaviors, brand positioning among competitive goods, sales promotion techniques market share and goodwill, innovations through product research and so, on. Therefore, the environment study becomes an integral part of business.

Every business organization exists admits of its challenging competitors, changing consumer attitudes, technological changes, varying economic trends, political policies and controls and many other influencing factors. These surroundings are called as environment of business.

In the words of Arthur K. Weimer, Business environment encompasses the climate or set of conditions-economic, social, political or institutional in which the business operations are on ducted

According to Willliam F. Gluceck, the environment means the economic, governmental or legal, market or competitive, supplier, technological, geographic and social settings monitored by the business executives to determine opportunities and threats to their firms.

The renowned marketing scholar, Philip Kotler explains the organizations environment as the set of interacting institutions and forces, that affect the organizations ability to serve its markets. From the above conceptual descriptions we can summarize the following points. 1. 2. 3. 4. 5. The surrounding conditions or forces of business are known as its environment. The social, political and economic settings of the society mainly constitute the business environment. The environment is dynamic and its changes influence the business decisions. Study on environment will reveal the opportunities available to a business. The threats or challenges could be predicted from environment, so that the firm can be prepared to meet them.

SIGNIFICANCE OF BUSINESS ENVIRONMENT The business environment can be divided into internal and external environment or as the micro and macro environment. These classifications are not final and airtight. It is divided into many types as convenient to the analysts. The internal environment is the organizations internal climate such climate such as machineries, technical know-how, skills of workers, supplies of raw material etc. So, they are controllable factors. Whereas the external environment is uncontrollable, this includes political decisions, economic trend, socio-cultural factors, technological changes, competitive strategies and so on. These uncontrollable factors make the business so turbulent and multi-dimensional. Therefore failure to understand them may result in un-repairable losses. So, the external environment plays a significant role business decisions.










The significance of the environmental factors can be clearly understood from the following advantages, which are the results of environmental analysis.



A businessman can estimate the future demand for a product by analyzing demographic features, competitors market share, consumer behaviour and their purchasing power and the general economic and political conditions. This is the basic function before producing a product.



The attitude and preferences of consumers differ based on their socio-cultural back ground. By studying this, the desired features in a product can be finalized. Without such product research the consumers may not be satisfied by that product.



Every competing brand is placed in a particular position in the market. This is done through pricing policy and distinct product features or quality. This position for a product is strategically planned to gain a particular market share after considering the competitors strategies. For example, NIRMA was priced one-fourth price or SURF at the time of introduction and gained a major share.



For the sales promotion techniques the knowledge of cultural environment is essential. The advertisement themes, personal selling strategies and special campaigns require good response from the audience. Only if the attitudes and values of the people are understood the promotion efforts will e successful. Many marketers have corrected their strategies after knowing the

response from consumers, and made effective. We can quote the examples of ad themes based on family relations, that is why they are popular among people of Indian social set-up.



The manufacturer of a product of any nature has to keenly watch the major changes in science and technology. There are many avenues to improve the performance of his product and to reduce cost through new methods of production. He must at-least follow the competitors in this respect, failing which they will over take his product. Even a popular brand is often modified or improved to meet out the tastes of consumers. Usually innovations, that are the new concepts, new products or new methods of offering goods, gain greater preferences of consumers. Technology helps to create innovative products.



There are many legislations passed in our country related to business units, and they should be observed. For example the Acts regarding Factory workers, consumer protection, social security, public welfare etc. are to be followed by businessmen. Todays business is encircled by a massive web of laws. That is why large firms employ legal experts as advisers. The failure to adhere legal provisions will be met with penalty.



The planning and policies of Government affect business in general. Some measures or programs of Government are directly related to specified sectors of industries. The industrial policy, tax policy, foreign trade policy and many controls on private business units are the important interventions of Government to business decisions. The public spending of the government also provides facilities for industrial and business development. By understanding all these aspects a businessman has to carefully decide the investment of the future production.



The Standard of living of the people determines their purchasing power and consumption pattern. On the other side the cost of factors of production will determine prices of goods. Therefore, by understanding the price trend and economic climate, a businessman can estimate his cost and fix prices. Now the international trade and global markets are also widening the business opportunities, and also opening up for global competition. So cost-wise and quality wise efficiency is the need of the hour.

Thus by the above analysis we can conclude that the business units survive and grow by studying its environment. It interacts with its surroundings by utilizing various sections of people ad favorable conditions in the society. Also they contribute in turn, to the society by means of increasing the economic activities, and offering public welfare measures to show their social responsibility. So both are inter-dependent and we can say that business without society has no roots and society without business units has no fruits. FACTORS OF ENVIRONMENT AND THEIR INFLUENCE ON BUSINESS

The environment of business is classified in different ways. Philip Kotler divides it into Micro environment and macro environment as diagrammatically represented in the previous chapter. Here is another classification given in the following figure.


These environmental factors can simply be grouped into sicio-cultural environment, economic environment, political and legal environments, demographic, technological geographical or

natural, competitive and international environments. This will help to discuss these factors one by one.



A business can not exist without the contributions of society. To interact efficiently with the society, we have to know its cultural background and social practices. Because the behaviour and expectations of the surrounding people are determined by this environment.

Our country follows traditional culture. It is transmitted through numerous generations to us. So we have different set of social systems and practices. The customs, habits, ceremonies, attitudes, values, beliefs, tastes and preferences etc., of or people are to be understood to take the right business decisions.

The reactions of people while playing the roles of workers, consumers, suppliers and others are to be studied. Then only the positive relations with them could be developed by businessmen. 2. ECONOMIC ENVIRONMENT.

It means the total climate that affect the human activities related to production of wealth. We know that the basic economic activity is producing and exchanging commodities to satisfy the people. The business process involves some inputs namely the factors of production. The cost and their availability are the important economic factors, which will finally determine price of commodities. On the other side the output of business is the goods or services that reach consumers. Here also the economic phenomenon namely the purchasing power of people will determine the demand level.

There are also some general economic conditions that affect volume of trade domestically and in foreign markets. Hence a businessman should analyze carefully the trend and changes in the economy, to know his opportunities and challenges.



This means and includes the various controls, programs and activities of the government. In the mixed economy like India the role of government is considerable in promoting industries and controlling private business enterprises.

In the economic planning the sources of funds and its allocation to various sectors are decided by the govt. In the fiscal policy, government d3ecides the tax revenue, public expenditure and public debt. That is, it reallocates the funds of the society. Moreover, the industrial development, assistance for agriculture, employment generation, public welfare measures etc. are made by the government. All these activities affect business units directly or indirectly.

The government as the regulatory organ of the society, takes a number of control measures on the business units. Such regulations include registration under the Acts, licensing, control on investment and location, control on prices and trade practices and so, on. Much legislation for the welfare of workers, consumers and the public.

The governments policies on foreign exchanges, international trade, public sector industries, banking regulations public utility services etc. indicate that the political climate has numerous influences on business sector.



This factor may be considered as a part of economic environment. But its impact on business and industries is quite large. The technological changes helps business to grow by means of new and improved goods, reduction in cost and variety in goods.

The term technology indicates macro level improvements in the method of production. A technological change in a country results in a total change of atmosphere in industry. For example, electronic industry, computer industry, space research and satellites, resulted in mushroom growth of industries and wide application of these facilities for the development of business.

Therefore, every unit tries to cope up with the technological changes, other wise it can not produce improved goods to compete in the market. The consumers tastes and preferences are also changing fast. So, the scientific inventions, and the results of industrial research and development ( R & D ) are converted into innovative products and services. We have to remember here, that some countries that could imp[rove the technologies more effectively, have become economic giants in the world.



The natural resources are the gifts to a country by which economic activities could be developed. The minerals, materials and also the climate, coil conditions, rainfall etc., help in this progress. On the other side, the people, especially the businessmen, should take care I preserving natural and ecological balance of the earth.

There are many challenges to the natural environment, which will affect the society in the long run. For example, air, water and atmospheric pollution, soil erosion, holes in ozone layer, green house effect on sea levels, climatic disorders, acid-rains and so on. Finding solutions is not only the moral duty of the businessmen but also for their future business growth.



To meet out the competition is the routine task for business. This is because the producers of goods and services become unlimited. Hence close watch on the competitive strategies on prices, improved products and promotion appeals will help a businessman to take right decisions. This is so important, as it is a question of survival and growth in the market.

The globalization concept has opened up the market for international competition as well as opportunities. Now, our businessmen have to face the challenges from the multinational corporations (MNCs) and trans national corporations, other than the local competitors. The technology and resources of MNCs are very much improved and our businessmen should increase their ability up-to the international standard.

The merit claimed for globalization is that our share in the world trade would increase due to multilateral agreements. For this, we have to increase our productivity. Also there is a danger of excess reliance of developing nations on the developed countries.

Thus leading the competitors or following them is unavoidable for business, challenging with international standards will also become a part of this game in the near future.


The social environment means the forces arising out of the structure and characteristics of the society. These forces vary from society to society. They are the results of interactions of the people. Ancient people started living as groups and they transmitted their experiences, beliefs and habits to their generations. This process resulted as culture. Particularly traditional countries has rich cultural heritage. It is reflected in the attitudes and behaviour of people. Hence the social forces arise out of the particular cultural background of the society and that is why they are called as socio cultural environment.

The term culture is defined as the art of living applicable to a group of people. It is also described as the intellectual development made or the physical and mental training received in the course of ages. That is, culture is composed of teachings of our forefathers, passed through so many generations.

E.B. Taylor defines culture as The complex whole of civilasation that includes knowledge, beliefs, art, morals, law, custom and other capabilities and habits acquired by man as a member of society. According to Francis Merill, it is the characteristically human product of social interaction and the total repertoire of human action, which is socially transmitted.

Thus culture is not developed by an individual but by social inheritance. It is not static. It progresses or declines with or without contact with other cultures. By trial and error method the society earns experiences and better practices of other cultures are also adopted in the process of civilization, so culture becomes a composite package of experiences. Some countries like Egypt have been converted into a society of entirely new culture foregetting their ancient civilizations. In case of countries like India and China the cultural link continues without break.

As we have discussed, socio-cultural forces of India are traditional and distinct. Let us see some of their characteristic features.








Indian cultural history is very ancient. A great civilization flourished in India when Rome and Greece did not exist, and when people in Europe were still in the hunting stage. The history of India dates back to many centuries before the birth of Christ. So our society has a traditional culture consuming the essence of good value from foreign cultures, when they migrated to India or invaded our lands. As descried by Jawaharlal Nehru this absorption and synthesis made India a unique mosaic of cultures. Our culture is remarkable for its spirit of tolerance. The geographical features, which helped the evolution of the composite culture of our country, also helped the development of sprit of tolerance. The existence of various types of people in the country created a spirit of tolerance of differences among them. So we uphold the noble principle of Unity in diversity we all are integrated in-spite of the varied physical features, different climates, and diversified racial, religious and linguistic differences. Role of Hindu religion in he development of our culture in noteworthy. Max Muller pointed out the feature of Indian Society as that there is an unbroken continuity between the most modern and the most ancient phases of Hindu thought extending over more than thousand years. In strict sense, the Hindu religion is the collection of cultural values of the society. It is not evolved by anyone as that of all other religions. Hence the Hindu religious principles and our cultural set-up were developed side by side. In Indian culture, there are plenty of moral and spiritual values. They speak the values of simple and self-contented life. They were preached through Vedas and epics, by the kings and saints and in the centers of learning like Nalanda, Banaras, Taxila, Madhura, Kanchi etc. There is an cultural uniformity found in the lives of different sects of people in our country. The philosophies, literatures, conventions, ceremonies, festivals of various parts of India reflect the same basic principles. Idols worship is common but in different forms. The moral and cultural values taught thro the stories and epics prevalent in our society are almost the same. The structure and characteristics of or social groups and family system are unique. The Aryan society was divided originally on the basis of division of labor such as Brahamnas, Kshatriyas, Vishyas and Sudras. Later it was made as by birth by selfish people and called as castes. Vast differences including untouchability were created among the caste groups subsequently. In the course of time many superstitious beliefs erupt into our culture. The joint family system, restrictions to

women and male-domination, importance to marriages and ritual ceremonies, etc., become the distinct features of our socio-cultural system. INFLUENCE OF SOCIO-CULTURAL FACTORS ON BUSINESS

Through the social and cultural aspects do not influence the business directly; many business policies and decisions are taken by thoroughly understanding the socio-cultural background of the people. This is because; based on the culture a particular group of people behave and react in a particular way. Here are some instances.








In estimating the demand for a product the consumer behaviour and their consumption pattern are to be understood apart from their purchasing power. Some latent needs of people, if understood properly, can be converted into demand. For example some products sold in sachets get good response due to the convenience and low cost. The product features are designed by understanding the cultural background of consumers. The tastes and preference differ due to this aspect. For instances, products containing vegetable fats than animal fats are preferred by some groups, natural ingredients than chemical or artifical goods, are preferred by somebody, the food-stuffs also vary consumed by different groups. The sales promotion techniques based on the understanding of cultural values of people usually become successful. The appeals are selected best suited to the attitude of people. We could see a number or advertisements based on the affection and importance of family relationships. In developing human relations with workers, suppliers, middlemen and the public, it is necessary to understand the culture and mental make-ups of those people. For example workers in different regions behave differently. If this is understood conflicts with workers may be reduced. The trade practices and services are designed based on the customs and habits of the people. This includes holidays, (Fridays, instead of Sundays in Muslim areas) working hours, consumer service, sales retail-outlets, demonstrations etc. In introducing varieties, improvements and innovations in products, care should be taken to understand the social characteristics of people. Many products in cosmetics failed in Indian markets. We can also quote the hesitated acceptance of electric appliances and gas stoves in rural markets. The general attitude of people towards consumption, savings and investment patterns also affect the overall business growth. Indian people usually dont prefer use and throw goods. They prefer investing in gold than in shares and bonds.

Thus, as a unit of the society, the business cannot alienate itself from the society to gain and grow. Also the businessmen need to satisfy the expectations of the society.


Language is central to the expression of culture. Within each cultural group, the use of words reflects the lifestyle, attitudes and many of the customs of that group. Language is not only a key to understanding the group, it is the principal way of communicating within it. A language usually defines the parameters of a particular culture. Thus if several languages are spoken within the borders of a country, that country is seen to have as many cultures. In Canada, for instance, both English and French are spoken; in Belgium, French and Flemish; while in South Africa there are 11 official languages with a number of other African languages also spoken by the population. In addition, there are often variations within a language - different dialects, accents, pronunciations and terminology may distinguish one cultural group from another, e.g. English-speaking South Africans, the British, Americans and Australians. Learning some of the subtleties of a language can assist greatly in avoiding confusion:

The importance of being able to understand other languages cannot be over-emphasised this is particularly relevant when executives travel abroad and are negotiating with people of different language groups. Because English is the predominant language of business in the western world, people with English as a home language are usually reluctant to learn foreign languages and tend to expect others to converse with them in English. In contrast, European and Far Eastern businesspersons have been willing to learn and converse in the language of their trading partners, leading inevitably to a better understanding and better rapport between the parties concerned. If exporters do not speak the language of the country they plan to visit, they should at least establish the extent to which their own language is spoken there and, if necessary, engages the services of an interpreter during discussions or negotiations. If promotional material needs to be prepared in a foreign language, it is important to ensure that none of the meaning is lost or distorted when the information is translated. Thus, translations should be undertaken within the country concerned or at least by a native of the country in question.

Material culture

Material culture relates to the way in which a society organises and views its economic

activities. It includes the techniques and know-how used in the creation of goods and services, the manner in which the people of the society use their capabilities, and the resulting benefits. When one refers to an 'industrialised' or a 'developing' nation, one is really referring to a material culture. The material culture of a particular market will affect the nature and extent of demand for a product. Whereas a luxury item, such as a sophisticated piece of computer hardware, may have a ready market in a country such as France, demand for it may be non-existent in a developing country which is hampered by inadequate facilities and/or foreign exchange shortages. The material culture of a country may also necessitate modifications to the product. Electrical appliances, for example, may have to be adapted to cater for differences in voltage levels. To illustrate this: the United States operates under a system of 110V in contrast to South Africa's 220V. Alternatively, weights and measurements may have to be converted to those applicable in the importing country (again the US uses measures such as miles, gallons and pounds, whereas most other parts of the world use the metric system - kilometres, litres and kilograms). Material culture can also have a significant effect on the proposed marketing and distribution strategies. While highways and rail transport are the principal means of moving goods within the United States, rivers and canals are used extensively in certain European countries. If the company is planning to develop a manufacturing operation in a foreign market, aspects such as the supply of raw materials, power, transportation and financing need to be investigated. Aesthetics

A culture's aesthetics refer to its ideas concerning good taste and beauty as expressed in the fine arts - music, art, drama and dance - and in the appreciation of colour and form. Insensitivity to aesthetic values can not only lead to ineffective advertising and package design for products, it can also offend prospective customers. Aesthetics also embrace people's dress and appearance, i.e. their outward garments and adornments or accessories. Distinctive national attire, for instance, includes the Japanese kimono, Dutch clogs, and the Englishman's bowler hat and 'brollie'. The significance of different colours may vary considerably from one culture to another. For example, in many societies, colours are often associated with emotions: "to see red", "to be green with envy" or "to be feeling blue". Green, a popular colour in many Moslem countries, is often associated with disease in countries with dense, green jungles. It is associated with cosmetics by the French, Dutch and Swedes and increasingly with an environmentally world.

Various colours represent death. Black signifies death to Americans and many Europeans, but in Japan and many other Asian countries, white represents death. (Obviously, white wedding gowns are not popular in parts of Asia.) Latin Americans generally associate purple with death, but dark red is the appropriate mourning colour along the Ivory Coast. And even though white is the colour representing death to some, it expresses joy to those living in Ghana. In many countries, bright colours such as yellow and orange express joy. To most of the world, blue is thought to be a masculine colour but it is not as manly as red in the United Kingdom or France. In Iran, blue represents a bad colour. Although pink is believed to be the foremost feminine colour by Americans, most of the rest of the world considers yellow to be the most feminine colour. Red is felt to be blasphemous in some African countries but is generally considered to be a colour reflecting wealth or luxury elsewhere. A red circle has been successfully used on many packages sold in Latin America. but it is unpopular in some parts of Asia. To them, it conjures up images of the Japanese flag.

Social organisation

Social organisation refers to the ways in which people relate to one another, form groups and organise their activities, teach acceptable behaviour and govern themselves. It thus comprises the social, educational and political systems of a society. The exporter's ability to communicate depends to some extent, on the educational level of the foreign market. If the consumers are largely illiterate, advertising materials or package labels may have to be adapted to the needs of the market. In this regard, however, a company marketing baby food in a certain African country put the picture of a smiling child on the outside of the jar. The local resident assuming there were preserved babies inside, avoided the product! In addition, there are unspoken signals which identify cultural differences, from certain taboos to less obvious practices like the time taken to answer a letter. In some societies, for instance, an important issue is dealt with immediately; in others, promptness is taken as a sign that the matter is regarded as unimportant, the time taken corresponding with the gravity of the issue. In a culture where great importance is attached to the family unit, promotional efforts should be directed at the family rather than the individual. The size of the family unit differs from one culture to another. It can range from the nuclear family, i.e. mother, father, and children, to the extended family which includes many relatives and whose role is to provide protection, support and economic security to its members. In the extended family, characteristic of developing countries, consumption decision-making takes place in a larger unit and purchasing power patterns may be different from those evident in western cultures. In any society, certain occupations carry more prestige, social status and monetary reward than others. In India, for example, there is a strong reluctance amongst people

with university education to perform 'menial' tasks using their hands, even answering the telephone. In many countries, including France, Italy and Singapore, financial independence is considered essential for occupation-related prestige. In Japan, however, the majority of university-educated professionals tend to prefer working for large multinational firms than for themselves. Social organisation is also evidenced in the operation of the class system, e.g. the Hindu caste system and the grouping of society members according to age, sex, political orientation, etc.

Religious beliefs A religious system refers to the spiritual side of a culture or its approach to the supernatural. Western culture is accepted as having been largely influenced by the Judeo-Christian traditions, while Eastern or Oriental cultures have been strongly influenced by Buddhism, Confucianism, Taoism and Hinduism. Although very few religions influence business activities directly, the impact of religion on human value systems and decision-making is significant. Thus, religion exerts a considerable influence on people's actions and outlook on life, as well as on the products they buy. In certain part of the world, such as Latin America, the influence of religion extends even beyond the individual or family and is manifested in a whole community's deep involvement in, and devotion to, the church. A society's religious belief system is often dependent on its stage of human or economic development. Primitive tribesmen tend to be superstitious about life in general while people in technologically advanced cultures seem to have dismissed the notion of traditional religious worship and practice in favour of a more scientific approach to life and death. To disregard the significance of religious beliefs or superstitions evident in a potential export market could result in expensive mistakes.

Attitudes Attitudes are psychological states that predispose people to behave in certain ways. Attitudes may relate, for example, to work, wealth, achievement, change, the role of women in the economy, etc. Western cultures, for example, value individualism and promote the importance of autonomy and personal achievement needs. In contrast, in many eastern and developing countries, there is a strong sense of collectivism and the importance of social and security needs. For instance, the

Hindu religion imparts a type of work ethic that considers work central to one's life but maintains that it must be performed as a service to others, not for one's own personal achievement. Stereotypes are sets of attitudes in which one attributes qualities or characteristics to a person on the basis of the group to which that person belongs. An international businessperson's tendency to judge others by his or her personal and cultural standards instead of attempting to understand others in the context of their unique historical, political, economic and social backgrounds could, for example, be termed an undesirable attitude. Values Values are judgements regarding what is valuable or important in life, and they vary greatly from one culture to another. People who are operating at a survival level will value food, shelter and clothing. Those with high security needs, on the other hand, may value job security, status, money, etc. From its value system, a culture sets norms, i.e. acceptable standards of behaviour. Space The concept of space is different wherever one goes. In western corporate culture, the size and location of an executive's office is usually determined by his level of seniority in the company. The locality and size of an Arab business executive's office, on the other hand, are a poor indication of the person's importance. Conversation distance between two people is learned early in life - almost completely unconsciously. A western business executive, conditioned to operating within a certain amount of personal space, may feel uncomfortable or alarmed at the closeness and physical contact displayed in the Middle East or Latin America, for example. Time Time also has a different meaning in each country. Western cultures tend to perceive time in terms of past, present and future. They are orientated towards the future and in the process of preparing for it, they save, waste, make up or spend time. In South Africa, giving a person a deadline is a way of indicating the degree of urgency or relative importance of the work. In the Middle East, however, time does not usually include schedules and timetables. The time required to get something accomplished depends on the relationship. With South Africans, the more important an event is, the earlier it is planned, which is why last minute invitations are often regarded as an insult. In planning future events with Arab businesspersons, it is often advisable to keep the lead time to a week or less, because other factors may intervene and take precedence. Some time ago, an American lost a major contract in Greece because he did not appreciate the Greek concept of time. The Greek executive could not understand the American's insistence on setting time limits on the length of their business meetings - he and his colleagues were prepared to spend as much time in discussion as they felt was necessary. The American also insisted that

the senior managers involved in the transaction be responsible only for working out the general principles of the deal, with the actual details being left to subordinates. Suspicious that this represented a lack of commitment on the part of the American, the Greek called off the deal. Many factors continuously produce cultural changes in a society - new technology, population shifts, availability of scarce resources and changing values regarding the role of education or women. Culture is thus dynamic, and exporters, particularly those involved in international travel and marketing, need to regularly assess what new products and service needs have been created, who the potential buyers and users are, and how best to reach them

Hofstede's Dimensions of Culture Geert H. Hofstede was born on October 2, 1928 in Haarlem, the Netherlands. He received his M.Sc. from the Delft Institute of Technology in 1953, his Ph.D. (cum laude) from Groningen University in 1967. Hofstede served in the Netherlands Army from 1953 to 1955. In 1955, he married Maaike A. Van den Hoek. They've also "lived happily ever after", but I'm not sure where (probably Brussels, Belgium). Hofstede is most well known for his work on four dimensions of cultural variability, commonly referred to as "Hofstede's Dimensions." These include: Uncertainty Avoidance, Power Distance, Masculinity-Femininity, Individualism-Collectivism, Confucian Dynamism. These dimensions were arrived in his 1980 publication, "Culture's consequences: International differences in workrelated values." The study took existing survey data (sample size of 116,000) collected from a multinational corporation (IBM). The result was a score in each of the dimensions for 40 different countries. During 1978-83, the Dutch cultural anthropologist Geert Hofstede conducted detailed interviews with hundreds of IBM employees in 53 countries. Through standard statistical analysis of fairly large data sets, he was able to determine patterns of similarities and differences among the replies. From this data analysis, he formulated his theory that world cultures vary along consistent, fundamental dimensions. Since his subjects were constrained to one multinational corporation's world-wide employees, and thus to one company culture, he ascribed their differences to the effects of their national cultures. (One weakness is that he maintained that each country has just one dominant culture.) In the 1990s, Hofstede published a more accessible version of his research publication in Cultures and Organizations: Software of the Mind [Hofstede]. His focus was not on defining culture as refinement of the mind (or "highly civilized" attitudes and behavior) but rather on highlighting essential patterns of thinking, feeling, and acting that are well-established by late childhood. These cultural differences manifest themselves in a culture's choices of symbols, heroes/heroines, rituals, and values. Hofstede identified five dimensions and rated 53 countries on indices for each dimension, normalized to values (usually) of 0 to 100. His five dimensions of culture are the following:

Hofstede's Dimensions of Culture Geert H. Hofstede was born on October 2, 1928 in Haarlem, the Netherlands. He received his M.Sc. from the Delft Institute of Technology in 1953, his Ph.D. (cum laude) from Groningen University in 1967. Hofstede served in the Netherlands Army from 1953 to 1955. In 1955, he married Maaike A. Van den Hoek. They've also "lived happily ever after", but I'm not sure where (probably Brussels, Belgium). Hofstede is most well known for his work on four dimensions of cultural variability, commonly referred to as "Hofstede's Dimensions." These include: Uncertainty Avoidance, Power Distance, Masculinity-Femininity, Individualism-Collectivism, Confucian Dynamism. These dimensions were arrived in his 1980 publication, "Culture's consequences: International differences in workrelated values." The study took existing survey data (sample size of 116,000) collected from a multinational corporation (IBM). The result was a score in each of the dimensions for 40 different countries. During 1978-83, the Dutch cultural anthropologist Geert Hofstede conducted detailed interviews with hundreds of IBM employees in 53 countries. Through standard statistical analysis of fairly large data sets, he was able to determine patterns of similarities and differences among the replies. From this data analysis, he formulated his theory that world cultures vary along consistent, fundamental dimensions. Since his subjects were constrained to one multinational corporation's world-wide employees, and thus to one company culture, he ascribed their differences to the effects of their national cultures. (One weakness is that he maintained that each country has just one dominant culture.) In the 1990s, Hofstede published a more accessible version of his research publication in Cultures and Organizations: Software of the Mind [Hofstede]. His focus was not on defining culture as refinement of the mind (or "highly civilized" attitudes and behavior) but rather on highlighting essential patterns of thinking, feeling, and acting that are well-established by late childhood. These cultural differences manifest themselves in a culture's choices of symbols, heroes/heroines, rituals, and values. Hofstede identified five dimensions and rated 53 countries on indices for each dimension, normalized to values (usually) of 0 to 100. His five dimensions of culture are the following: Power-distance Power Distance reflects the degree to which a culture believes how institutional and organizational power should be distributed (equally or unequally) and how the decisions of the power holders should be viewed (challenged or accepted). In other words, people in high power distance cultures are much more comfortable with a larger status differential than low power distance cultures.

Predictors of Power Distance: Climate, measured by geographical latitude. Cultures in high-latitude climate (moderate or cold climates) tend to have low PDI scores. Cultures that have tropical climate tend to have high PDI scores. Population. Generally, the more people within the culture, the greater the power distance is likely to be. Distribution of Wealth. The more unequally the wealth is distributed within a culture, the greater the culture's power distance. Consequences of Power Distance: most evident are family customs, the relationships between students and teachers, the young and the elderly, language systems and organizational practices.

Collectivism vs. individualism Individualism-Collectivism describes the degree to which a culture relies on and has allegiance to the self or the group. Predictors: Economic development. Wealthy cultures tend to be individualistic, whereas poor cultures tend to be collectivistic. Climate. Cultures in colder climate tend to be individualistic, whereas cultures in warmer climates tend to be collectivistic. Note: Hofstede found a strong negative correlation between a culture's scores on the power distance index and its scores on the individualism-collectivism index. High PDI cultures tend to be collectivistic, whereas low PDI cultures tend to be individualistic. Consequences: Collectivistic cultures tend to be group-oriented, impose a large psychological distance between ingroup and outgroup members and ingroup members are expected to have unquestioning loyalty to their group. In a conflict situation, members of the collectivistic cultures are likely to use avoidance, intermediaries, or other face-saving techniques. Conversely, people in the individualistic cultures do not perceive a large psychological distance between ingroup and outgroup members. They value self-expression, see speaking out as a means of resolving problems, and are likely to use confrontational strategies when dealing with interpersonal problems.

Femininity vs. masculinity Masculinity-Femininity (alternative label is achievement-nurturance) indicates the degree to which a culture values such behaviors as assertiveness, achievement, acquisition of wealth or caring for others, social supports and the quality of life. This dimension tends to draw unwarranted criticism for its name alone. It basically refers expected gender roles in a culture. According to Hofstede, people in high masculinity index (MAS) believe in achievement and ambition, in ostentatious manliness, with very specific behaviors and products associated with male behavior. The cultures that scored towards what Hofstede referred to as "masculine" tend to have very distinct expectations of male and female roles in society. Low MAS cultures believe less in external achievements and/or manliness, and more in quality of life such as helping others and sympathy for the unfortunate. Feminine cultures also prefer equality between male and female and less prescriptive role behaviors associated with each gender. The more "feminine" cultures have a greater ambiguity in what is expected of each gender. Predictors: Climate. Masculine cultures tend to live in warmer climate near the equator and feminine cultures are likely to locate in colder climates away from the equator. Consequences: Members of high MAS cultures believe that men should be assertive and women should be nurturant. Sex roles are clearly differentiated, and sexual inequality is seen as beneficial. The reverse is true for members in the feminine cultures.

Uncertainty avoidance Uncertainty Avoidance refers to the extent to which a culture feels threatened by ambiguous, uncertain situations and tries to avoid them by establishing more structure. The high positive scores on the uncertainty avoidance index (UAI) indicate low tolerance for ambiguity. These cultures prefer to avoid uncertainty and dissent as a cultural value and desire consensus. As a result, HIGH uncertainty avoidance cultures prefer formal rules and any uncertainty can express itself in higher anxiety than those from low uncertainty avoidance cultures.Cultures with low UAI scores have a high tolerance for uncertainty and ambiguity, believe in accepting and encouraging dissenting views among cultural members and in taking risks and trying new things. Thus, cultures which ranked low (compared to other cultures), feel much more comfortable with the unknown.

Predictors of Uncertainty Avoidance: No clear-cut predictors. But in general, high UAI cultures tend to be those that are beginning to modernize and are characterized by a high rate of change. Conversely, low UAI cultures tend to have reached the level of modernization and have more stable or predictable in their rate of change. Consequences: High UAI cultures tend to develop many rules to control social behaviors. Low UAI cultures need few rules to control social behaviors.

Long- vs. short-term orientation Also know as Confucian Dynamism - It ranges from long term to orientation to short term orientation. Later work with Bond (see Hofstede & Bond, 1987), produced another dimension meant to explain the rapid economic developement of many Asian countries. This dimension refers to the selective promotion of particular set of ethics found in Confucian teachings. Particular teachings that lead to economic development include thrift, perserverance, a sense of shame, and following a hierarchy. Other Confucian teachings are less emphasized such as tradition, and protecting face.

Hofstedes' Cultural Dimension Summary Country Arabic (ARA) Argentina (ARG) Power Distance World 80 Uncertainty Avoidance 68 Individualism Masculinity Confucian Dynamism 38 52





Australia (AUL) 36 Austria (AUT) 11

51 70 94

90 55 75

61 79 54


Belgium (BEL) 65

Brazil (BRA)


76 48 86 80

38 80 23 13

49 52 28 64

65 23

Canada (CAN) 39 Chile (CHL) Columbia (COL) Costa (COS) 63 67

Rica 35




Denmark (DEN) 18 Eastern (EAF) Africa 64

23 52

74 27

16 41 25

Ecuador (ECA) 78 Elsalvador (SAL) Finland (FIN) France (FRA) 66

67 94

8 19

63 40

33 68

59 86 65 35

63 71 67 89

26 43 66 66 31 25

Germany (FRG) 35 Great (GBR) Britain 35

Greece (GRE) Guatemala (GUA) Hong (HOK)

60 95

112 101

35 6

57 37

Kong 68





India (IND)


40 48 59

48 14 41

56 46 43


Indonesia (IDO) 78 Iran (IRA) 58

Ireland (IRE) Israel (ISR) Italy (ITA)

28 13 50

35 81 75 13 92 85

70 54 76 39 46 18

68 47 70 68 95 39 80 75

Jamaica (JAM) 45 Japan (JPN) South (KOR) Malaysia (MAL) 54

Korea 60





Mexico (MEX) 81 Netherlands (NET) New (NZI) 38

82 53

30 80

69 14 44

Zealand 22





Norway (NOR) 31 Pakistan (PAK) 55 Panama (PAN) 95 Peru (PER) Philippines (PHI) 64 94

50 70 86 87 44

69 14 11 16 32

8 50 44 42 64 19 0

Portugal (POR) 63 Russia (RUS) 90

104 70 8 49

27 42 20 65

31 37 48 63 48

Singapore (SIN) 74 South (SAF) Africa 49

Spain (SPA)





Sweden (SWE) 31 Switzerland (SWI) Taiwan (TAI) 34

29 58

71 68

5 70



69 64 85 46

17 20 37 91

45 34 45 62

87 56

Thailand (THA) 64 Turkey (TUR) United (USA) 66

States 40


Uruguay (URU) 61 Venezuela (VEN) West (WAF) 81

100 76

36 12

38 73

Africa 77






The population of a country serves as the human resources in the economic development. Also people are the ends in economic activities. Therefore study of demography becomes necessary for the rulers, economists and businessmen.

The term Demography means the study of population characteristics. It is mainly the physical phenomenon, whereas the culture is the psychological phenomenon. This stydy deals with structure and composition, distribution, rate of growth and other feature of population. It becomes so important in a populous country like India. We are the second largest in the world in population and we have to know the trend to plan for the future prospects and problems of the business.




Our country has 2.4% of the total land area of the world but has to support about 15% of the worlds population. At present our population is nearing 100 crores and it may overtake Chinas first place if we fail to control it. Its growth rate was around 1% annually till 1951. Then it increased to 2% in the recent decades.

In 1911 the population was 251 million and we added 100 million in the next 40 years. From 1951 to 1991 this number increased by 500 million and reached 846 million, in 1991 (UN estimates it as 975.8 million in 1998)



The growth rate is the function of birth and death rate. The birth rate increased due to the early marriages and the long reproductive stage of the Indian couples. Whereas the death rate is controlled due to medical and health measures. The infant mortaility rate (death) has considerably been lowered.


Birth rate

Death rate

1901 10 1951 60 1981 90

49.2% 41.7% 32.5%

42.6% 22.8% 11.4%

The annual growth rate at present is slightly lower than 2.11% whereas in 1981 it was 2.46%.



The ratio of male population is to female population is almost adverse to female in the average. But in Kerla and Dadra nagar Haveli the ration is in favour of female population. It is important for a businessman to know this ratio and the number of males and females to calculate demand of products suitable for the particular sex.

CENSUS YEAR 1901 1931 1961 1981 1991

No. FEMALES/1000 MALES 972 950 941 934 927

Steps are taken to check the maternal mortality (death of women during childbirth) and female infanticides to correct this trend adverse to females.



More than half of the countrys population (49%) belongs to juvenile group i.e. below 19 years of age. The people of 20-30 years constitute 15% and middle aged are (30-50 years) about 30%. The aged people above 60 years are about 6%. So the working group constitutes about 45-46%. These data are useful in calculating demand.



The average life span of the people in a country is known as the life expectancy. It was very low in India in 1901, just 21 years and substantially increased to 54.7 years in 1981. In the 1991 census this increased to 60 years. (It is 62.8 years as on 1994).

This was achieved through increased medical facilities. However it is still very low compared to the advanced countries.



Due to industrialization and urbanization the rural mass slowly migrate to towns seeking employment. This could be understood from the data tht shows; in 1971, 80:20 was the rural urban ration; in 1981 it was 76:24 and in 1991 it was 74:26. This information helps planning the marketing efforts for the towns and separately for villages.



This is the number of persons living in on Sq. Km area. Naturally towns have more density than Villages. The average density in India in 1971 was 177 person per Sq. Km. compared to 1951 when it was 117 only. In the year 1981 it went upto 216 and in 1991 it is 267.

In Ladakh (Jammu & Kashmir) the density of population is just 2 persons per sq. km. nd it is 1000 persons in Trivandrum. In 1991 census west Bengal has 767 persons, Kerala has 749, Pondchery has 1642, Chandigarh has 5632 and Delhi has 6352, Andaman has lowest of 34 and J&K has 76 persons per sq. km.

Apart from the above factors the literacy level, standard of living, employment pattern etc., are analysed under study of demographic pattern. In 1991 census he General literacy level was 52.1%. Among males it was 63.8% and among females 39.1% only. In 1901-1931 literate was only 5% to 10%.

As per 1991 census 65% of population is engaged in agriculture and mining (In Advanced countries it is 2 to 5% only), 14% in factories and 21% in service sector.

The large population provides a potential market for goods and the foreign companies are also interested to utilize this. But increasing population is a challenge to our government as it has to plan for the provision of employment, education, sanitation, housing and all other facilities. Therefore Government of India has developed a national population policy, which provides for

Rising the age of marriage to 18 years for woman and 21 years for men. Raising the monitory compensation for permanent family planning measures. Increasing the propaganda to educate people. Leaving the compulsory sterilization to the option of Sttes and increasing group incentives to medical professionals and local bodies.


Indian society possesses and organized civic life right from the days of the Indus valley culture to the present day. The early Indian society has various divisions and the harmonious functioning of these divisions was possible as the life of the people was governed by Dharmshastras, the work of great sages. But these codes of ethics later created wide discriminations among Aryans and non-Aryans. When the number of occupations in the society multiplied, and the castes were determined by birth the dominating and suppressed groups and treated as slaves [panchamas].These people did not have any civil right. The sudras among the Aryans society were also treated much inferior and they had to serve the other superior communities.

The Aryan and non-aryan races mingled with each other and become a mixed group; also there are many foreign invaders and migrators mingled with these groups. Now no single race could be detected from our society. Buddhism, Jainism and Sikhism originated form India and had contributed many reforms in the Varnasrams Dharms. Many superstitious rituals and beliefs were seriously opposed by Buddha and Mahavira. The British rule in India, which lasted for about two countries also, provided its contributions in reforming Indian social systems. Like this our society have absorbed and assimilated the best available in other cultures.


1. LINGUISTIC GROUPS Indian society is divided into many groups based on religions, castes and language. The linguistic study classifies the lingual groups into four based on the origins of presently spoken languages. They are 1. 2. 3. Indo-Aryan Dravidian Austro-Asiatic and



The four Dravidian languates are Tamil, Telugu, Malayalam and Kannadam. Sanskrit was the original Aryan language, which is not in vogue now. This language took the from of Hindi and then developed to many forms as Assamese, Bengali, Gujarathi, Marathi, Oriya, Punjabi, and Sindhi. The Urdu language was used by Muslim relers which is the mixed form of Persian, Arabic and Turkish. There are about 179 languages spoken in India and also 544 dialects [modified forms of a language but without grammar and literature. The following table shows the position of languages as in 1995.

Mother tongue Hindi Gujarathi Malayalam Kannada Oriya Punjabi Assam

Speakers [in millions] 437 41 35 44 32 95 22

Mother tongue Telugu Bengali Marathi Tamil Urdu Nepali Sindhi

Speakers [in millions] 74 200 70 71 102 16 18

There are other languages like Kashmiri, Santali etc., spoken by more than four million speakers.

2. RELIGIOUS GROUPS Regarding the religious groups in India, the Hindu religion forms the majority. The religious tolerance is the peculiar feature of out society and that is why India could emerge as a secular state. All the religious groups co-operate with each other and live peacefully despite some religions conflicts. The major religions in India are given below with their share in the total population (as per 1991 census).

Total Population Hindus Muslim Christians Sikhs Buddhists

100.00 82.72 11.21 2.60 1.89 0.70

Jains Others 3. CASTE GROUPS

0.47 0.41

The other important class of the Indian society namely, the caste groups are discussed in detail in the following chapter.

The people forming groups among themselves took part in he social and economic activities. We could see many examples for the business or occupation developed by a particular lingual, religious or caste group. This becomes possible by the mutual help and close co-ordination and control within the group members. This also acts as s means of social security.

To quote some instances the Christian groups run man hospitals and educational institutions, the Muslim in leather processing and hardwares the Sourashtras in handloom and the Marwaris in pawn-broker business. SYSTEMS OF OUR SOCIETY

The joint-family system, caste, system, marriage system, traditional occupation system and the religious oriented ethical system are considered as the most common social systems of India. They reflect our art of living, and our people attach more weightage in maintaining these systems and values.

In the joint-family system our people find it more convenient in running agricultural farms or business and it is considered as prestige symbol in the society. The sons after marriage live with their parents and with their children or even their grand children. Mutual co-operation and patience provide mutual benefit in this system. But this system is weaning out now a days due to changed occupational structure.

Marriage system and its related rituals and ceremonies are considered as important social aspects. High standards are prescribed for women and they have to be get married at the early stage. Their life is mostly dependent on men. Also our people are expected to give respect for elders, to follow spiritual ideas, to show nepotism [favour or preference] to their relatives, and to

adhere fatherly affection and respect to their employers. Traditional occupations took important role till the recent past. As this system was insisted by birth based on castes, people attach low dignity to manual labour. All these features of our social structure and systems interplay with each other to form our social-cultural set up. They are also modified from time to time along with economic and technological developments. This may be understood from improved status of women through education and employment, reservations for suppressed classes, reforms in ceremonies and so on.


The peculiar social system of India has its impact on business as pointed out below.



3. 4. 5. 6.


The trade and employment opportunities re given to family members and own caste group members. This affects balanced economic development of the country. This may affect the productivity also, as the merit is not the main consideration. The seniors claim respect irrespective of their talents. Here the juniors are discouraged to contribute to business development. This is so significant in jointfamilies. The womens role in economic development is underestimated, while they constitute fifty percent of population. Their skills are yet to be utilized in many fields. Due to the impact of feudal setup the employers expect greater respect and intimacy from employees which is not suitable for the scientific management approach. The manual labourers are not respected and they are paid very low. This the result of Varnasrama Dharma. Hence many educated youth desitate to do physical works. People spend a lot of money on unproductive ceremonies. This takes the whole lot of their life-time savings. Hence, they could not spend on necessary & convenient goods and hesitate to invest their saving in business. The people are more sensitive than rational. So they get emotional easily and involve in inter-caste or inter-religious clashes. Out off superstitious beliefs the hesitate to get education and to know their role in economic development.


Caste ad communal systems are ancient and deeply rooted in Indian society. The communalism and casteism become the great hindrances to the democracy and economy of the country. Despite

industrialization and urbanization these communal and caste systems play their role in or society esp., in marriages and diet habits. By this system people are closely knitted but their emotions are wrongly exploited by selfish politicians and communal leaders.

Communal groups are based on religions. This is a dominant factor in minority religions. Some extremists in these groups develop communal clashes and tensions. Also in he majority religious groups, some may stimulate violence on minorities when they give up the traditional sprit of tolerance.

Disparities among caste groups, untouchbility, and other anti-social and anti-human practices are spread by casteism. Caste is defined by Dr. Gokhale as Varna and Jati which mean complexion and birth. Invasions of foreign religions and spread of new religions within our country made the castes more regid. It gives some social security and at the same time was use3d by upper caste groups, to exploit lower groups. There are as many as 3000 castes in India. No other country has such micro classification. This helps to uphold traditional values and at the same time they develop social evils and superstitions, and hence affects development.


1. 2. 3. 4. 5.

Caste prejudices and feuds which lead the society to disunity affect national integration. Caste decided by birth, decreases the human dignity and so it is undesirable. Caste system checks the free association with other groups and with foreigners. As a result people are reluctant to accept changes and modern knowledge. Un-touchability and exploitation are the chief evil effects of caste system. They are strictly anti-democratic. Communalism and casteism are unscientific practice. The clashes among people very much affect our country.

The role of caste system in business development could be observed from the Indian history. Though this role is not much suitable in the modern days the caste system was used in the following ways:

1. 2.

Division of labour: A particular group in the society concentrated in the development of a particular occupation or trade. This helped smooth functioning of the society. Traditional training: The group members are trained from the child-hood in a particular trade. It gives social security and development of skills.

3. 4.

Competition is avoided: The same group members are involved in similar lines of business. By maintaining trade secrets, unhealthy competitions are avoided. Sprit of cooperation: The business organization run by caste groups claim that it develops cooperation among members and a sense of belongingness-we can quote examples of trade or business developed by some caste groups. The Chettiars in banking, Nadars in groceries, Valayars in constructions, Aasaris in jewel making and so on.


It is claimed that the traditional caste system has been considerably altered on account of industrialization, urbanization, scientific education, information network, social awakening, new legislations and political regulation. However our rural social structure makes the caste system survive and it continued to prosper as long as there is lack of education and awareness among the masses. The influence of caste in politics is noticeable during the elections. The role of government and social service originations is to be enlarged to educate the evils of the caste system.