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Business Environment

Chapter 2: Responsibilities of Organisations

Social responsibility
This is the way a Co acts in a responsible way to those inside and outside it. It also looks at the way it does business. Is it good for the environment? Is it good for the society?

Examples of Social Responsibility.

Govt is supposed to offer services to people e.g. housing, health, education Schools & universities prepare students for work C.S.R. Corporate(Company) Social Responsibility

Some believe that the only job of managers is to make the owners wealthy (very rich) There are two reasons for this thinking: 1. The shareholders own the business. So managers should not do anything which reduces the value of the business E.g. giving away things for free to school children.

2. If managers increase the wealth of the owners the following will happen: A) the Govt will have more taxes, which can help more people B) Having rich people also helps the society, they create jobs, they spend money on many things. So everyone gains from having rich people! C) Most shares are owned by Pension Funds e.g. Pingan. So they may be owned by people who are not rich.

The thinking is based on

1. The only people who are important are the Owners, everyone else is not! 2. The business will only have one sort of relationship with the society, A business relationship and nothing else.

Problems with this way of thinking

1. Shareholders do not really control the businesses. It is the managers. 2. Big Cos have too much power and so can control a town or even a country. E.g. Apple makes Billions of dollars each year. It could pay the national debts of many poor countries!

3. Businesses get a lot of help from the Govt: - Govt pays for education, health, roads etc - Cos pollute the environment - the tax they pay may not be much anyway. 4. Cos produce two types of things: - Good - goods and services - Bad pollution, noise,

B. Employees
Workers are part of the internal and external environment. 1 Internal as workers 2 external as part of the public and society.
Internal wages, job security, promotion, pensions Cos are now trying to make workers happier by: - daycare paid by the Cos or at the worksite. - flexible working working from home - Paternity leave for fathers.

C. Customers
These are very important to the Cos. If they are unhappy the Co may lose money or close!
Their main worries are: 1. quality of goods and services 2. Safe products 3. Availability of products 4. Support concerning products.

These like Customers are connected to the Co. They are very important to the Co: E.g. they can cause a Co to lose money or fail. Suppliers worry about: 1. Getting paid for the goods and services given. 2. Future businesses: Power of suppliers: A. they may stop supplying to the Co. B. They may say from now on pay in cash. C. They may tell other people the Co is not a good Co.

Financiers are people who give money to the Co like banks. Their main concerns are: 1. Being paid the interest. 2. Being paid the capital. Powers of Financiers: 1. Can make the Co close 2. They can refuse to give the Co anymore money. 3. They may take the Co to court. 4. They may take some of the Assets of a Co.

D. Financiers, Lenders

Professional bodies
For accountants think of CICPA in China. Its job is to control what the members can do. In reality there is very little they can do except: 1. to ask him to pay money 2. Or to stop him being a member

Cos must not disturb their neighbours e.g. Must not pollute, make noise or cause traffic jams
This will depend on the country, society or its laws.

This is very powerful. Govts interests may be as follows: Tax Cos are paying tax. Employment How many people are working, Environment it may wish to discourage pollution. Development the government may wish to see the country becoming better.

Powers are many e.g.
Can change, remove or add laws. Controls taxes. Controls public spending e.g. taxes Can help cos e.g. laws or give Cos money Can build infrastructure e.g. roads, hospitals. Can be a competitor sometimes!

The stakeholder theory

It says: The public is a stakeholder, so the Co must think of the Public before doing anything.
Giving money away is good for the Co in the Publics eyes, it may make buy your products! It can stop the Govt putting laws which force you to do something, if you do it yourself.

Environmental Responsibilities
Laws The Govt may encourage you to do something. E.g. if you buy an electric car you may pay no sales tax. Or the Govt may discourage you by tax E.g. people used to be given plastic bags for free. To reduce pollution, the govt makes people pay for them.

Environmental issues on business

1. Can make business more expensive. E.g. changing from plastic bags to paper bags in a shop may be more expensive. 2. It may make the Co more liked by customers. E.g. the Body Shop. 3. Customers may stop buying if they are not happy with your way of doing business.

Business and the environment

1. Most resources will be finished. The best thing is to slow down this usage. - another thing to do is to re-cycle, use again. Pollution: - Air , Noise, Light, Water, Environmental

Big issues in the environment

1. Acid rain. Due to pollution the rain which falls main not be clean. This is called acid rain. This has damaged: Forests Fish Water bodies like lakes, rivers

Big issues in the environment

2. Ozone The ozone protects people from the sun. There is now a hole in this. The main cause is a gas called CFC, which is found in such things as refrigerators.

Big issues in the environment

3. Waste
When making a product, what is left afterwards which is not wanted is called waste. E.g. when cooking the oil. Some Cos have managed to use this as fuel in cars! Some have managed to use it as animal feed.

Big issues in the environment

4. Climate Change
This is when the weather of a place, country changes. Nowadays there are more floods, droughts and unusual weather patterns, Most is caused by pollution, Cutting too many trees

Big issues in the environment

5. Energy Resources These will run out sooner or later We are talking of oil, gas, coal etc. There has to be a way to manage them better. E.g. build machines which use less. Make sure there are less losses from where we make them to when they get to the customer. Use by products: to make other things Use renewable energy e.g. the Sun, water, wind

E.g. Hwange Colliery

This is a mining co in coal Africa. It supplies to industry, farmers and the power Co. It sends the best quality coal to industry. The low quality coal, which is really waste, is sent to the power station. It has said that it wishes to move into gas selling. Normally where there is coal there is also methane . Methane is a gas It can be used to cook, heat or make electricity!

Business sectors and the environment

1. Primary sector
These have a big effect on the environment, e.g. mining, agriculture, fishing or timber. Effects - deforestation no more forests - animals lose their homes - fewer plants and animals - poor working conditions and safety, - food or products not safe

2. The secondary sector

Here we mainly look at building & construction. Effects: 1. damaging the environment pollution etc 2. unsafe products e,g, the milk 3. using dirty machines this gives us waste. 4. using hard to get things e.g. wood.

Steps taken by business: 1. recycle more 2. Have processes and products which use less resources.

These do not have a big effect as the other two sectors: They affect the environment in the following Electricity. E.g. office machinery, lights. Energy. Business trips, using private cars Paper. E.g. printing business documents Water e.g. in the toilets at work.
Possible solutions: Recycle papers Print less or use electronic printers Switch off lights after hours or use better lights.

3. Tertiary sector

Ethical issues
Ethics is the study of right and wrong. It is a very problematic area because people do not always agree on what that is. Cos try to make sure that employees act in a certain way. They may follow a code of conduct.

These are usually documents which tell an employee what he can or not do. They are supposed to help him do the right thing. Conduct means the way you behave E.g. a code of conduct may talk about: Being fair on e.g. women, Obey the law. Respect others Do not lie or cheat

Codes of Conduct

The code of conduct can not include everything!

It is not enough to have a code of conduct. If someone does something wrong they must be punished, whoever they are.

Codes of Conduct

E.g. if a manager steals He should be dimissed and the police told

This will tell people: 1. the Co is serious about bad behaviour. 2. it tells other people not to do the same things. 3. it shows that the Co will deal with anyone who breaks the rules, manager or not!

Business Ethics
Question Is there a place for ethics in business? Should a Co not only worry about how to make money and nothing else.

Advantages/Disadvantages of Business Ethics

Advantages 1. Protect the Co from punishment 2. Give the Co a good name 3. May attract customers 4. May stop the Govt from making rules which may be tough for the Co. 5. May attract good employees 6. Gives confidence to others who do business with you. disadvantages They may cost money

It is not a Cos job but the Courts You may lose business

Ethics models
There are two main models for having ethics in a Co. 1. Compliance based model 2. Integrity based model

Compliance Based Model

The word comply means to follow or to do what you are told e.g. follow the law The Co will only do what the law says. The Co will not do more than the law says. The idea is to: 1. stop people breaking the law, 2. Make sure those breaking the law are caught 3. That they are punished for breaking the law.

Integrity Based Model

This one goes more than the Compliance Based model. The main idea is that the Co 1. Will try to be good 2. Because it is good 3. To be good!

Differences between Compliance and Integrity Systems

Idea Aim Source Methods

Follow the law, rules Keep to the law Lawyers Employee does not have much choice

Choose your own standards Have legal and responsible behaviour Management, lawers, owners etc Leadership, training, Co systems

Behaviour ideas Main people Actions

The Law
People are selfish Lawyers Make standards, train people, discipline, investigate, report The Law, code of conduct

Co Values, Vision & the Law

People are social beings Managers & Lawyers Build values into Co systems, Lead people, solve problems Values, the Law, Compliance systems


Management Responsibilities
Managers are responsible for two key issues: 1. Recruitment bringing people into the Co 2. Retirement people leaving the Co at the end of their working lives. 3. Redundancy asking people to leave because the business is not doing well or they are not good enough.

This means hiring new people. The Co must make sure it gets the right person. It can be expensive or even difficult to fire a person. This can be avoided by choosing the right person in the beginning, Firing people can make others unhappy

This when an employee has reached the legal age limit or has chosen to retire early. The employee must get: A good pension to support him during retirement. A big problem for some people is what to do next. Cos may help prepare them through talks etc.

This is when some people are asked to go. This could be because the Co is not doing well Or there is a change in the Co Or they do not have the skills now needed. The Co may help by doing the following: Putting them in sister Cos if possible Helping them to find new jobs. Training them for new jobs Providing advice. Arranging for job fairs Giving them good pensions when they leave the Co.


Management & Customers

Main ideas: Good products Good quality Safe products Not cheating customers

Management and Suppliers

Main things are: 1. The Co must not use its buying power to force suppliers to give them very low prices. 2. Cos should pay within the agreed times. 3. All information about suppliers should be kept secret. 4. Treat all suppliers, future, current fairly.

Management & the Community

Keeping the social values of that society E.g. advertising which is decent

Making the community better E.g. giving jobs, helping schools and hospitals.
Helping the community when problems happen E.g. noise, pollution

Public Relations & Corporate Governance

Corporate image is the way people see the Co It could be good, boring, bad, cool E.g. Apple is Cool

1. 2. 3. 4.

Reasons for P.R. To tell people about the Co and its products. to make the workers want to work harder and longer for the Co To make customers only want their products. To show that they are socially responsible.

Environmental Pressure Groups

These are people who are concerned about the environment and Cos actions. They work by: 1. information getting it and telling the public. 2. Action protests to damaging Co property. 3. Partnership try to help businesses improve.

Other pressure groups

Employees for their safety and to help the Co. Law more and more countries putting laws on child workers, environment, animals etc. Media the internet, newspapers, tv, radio, can be used to put pressure on the Cos. Nowadays due to the internet information travels so quickly and is hard to stop or control!