Unit 2

Definition of a sociocultural environment

The sociocultural environment refers to trends and developments in changes in
attitudes, behavior, and values in society. It is closely related to population, lifestyle,
culture, tastes, customs, and traditions. These factors are created by the community
and often are passed down from one generation to another. Examples of critical
sociocultural variables are:

- Culture. Individual values and habits can change individuals through contact
with specific cultures.
- Habits that represent how to behave in response to a given situation.
- Beliefs and values. Belief refers to how we feel about something or someone.
Meanwhile, values are relatively long-standing beliefs and serve as guidelines
for culturally appropriate behavior.
- Number and growth of population. Increasing the population indeed
provides more labor and demand for goods and services. On the other hand, it
can lead to social problems such as crime and poverty, especially
when employment is inadequate.
- Age composition. In some countries, productive age populations dominate
and provide opportunities for economic growth and demand for goods and
services. However, countries like Japan, the elderly population dominates. It
presents opportunities as well as challenges for the economy and companies
there.
- Geography. Populations may be concentrated in some geographical regions,
for example, on arable agricultural land or in industrial areas.
- Ethnicity. A country, like Indonesia, consists of a variety of different ethnic
and ethnic groups. It has implications for various aspects such as language,
culture, habits, and tastes.
- Household and family structure. The population of a community can be
broken down based on the number of children.
- Employment, for example, the composition of white-collar workers vs. blue-
collar workers.
- Wealth and social class. People from different social classes can have
different values that reflect their position in society.

How does the sociocultural environment affect business

Changes in several sociocultural factors may take years. However, some of them are
changing faster and more dynamically, for example, thanks to technological
developments. Sociocultural factors continue to change. That has implications for the
opportunities and threats that companies face. And finally, these changes also
determine the company’s strategy that the company must choose. Social and cultural
change challenges companies to find more effective ways to adapt to stay ahead of
their competitors.
For example, changes in age composition affect changes in patterns of demand for
goods and services. As the elderly population begins to dominate, the need for health
services and pensions increases.

Furthermore, changes in age composition also affect recruitment policies. Companies

must face more elderly with reduced productivity. Different sociocultural factors also
influence business practices, policies, and activities. Culture influences taste and
lifestyle. Therefore, culture also influences the types of products and services that
businesses must offer. Also, human resource management may need to overcome
cultural differences in recruitment. For example, some ethnic minorities have
different body language, which may be difficult for interviewers to interpret.

The interface between business and various types of

environment :

1. Business and Demographic Environment:

Demography is the study of human population with reference to their age,
gender, status, occupation, income, education etc. The demographic
environment differs from country to country and has significant
implications on business. Business undertakes various social welfare
programmes like health camps, awareness, and literacy programmes etc. In
the same way rise in the income level of consumers helps in rise in demand
for products.

2. Business and Economic Environment:

The economic environment of a country comprises of the structure of the
economy, economic resources, level of income, economic policies etc. Any
change in the economic policy can have a positive or negative impact on the
working of the business. Business organisation has to consider the various
economies prevailing in the country like import policy, industrial policy,
taxation policy etc. which can have a great impact on the business.

3. Business and Technological Environment:

Technology refers to the set of process in an organisation to transform raw
material of resources into finished goods and services. Technology includes
tools- both machine (hard technology) and way of thinking (soft
technology). business is responsible for technological up gradation as a
huge amount is spent on Research and Development to introduce new
products and concepts in the business. This technological revolution
became a compelling reason for inter-nationalization and Globalisation.

4. Business and Natural Environment:

Both natural environment and business are closely related and have
influence over each other. Natural environment is also termed as physical
environment Business depends on the nature for supply of resources like
raw material, water etc. The business has to adjust with the environment to
ensure its survival. Ecological factors have recently assumed great
importance. The excessive use of these resources, environmental pollution
and the disturbance of ecological balance has caused great concern. One
cannot take the environment granted.

5. Business and Cultural Environment:

Culture refers to values, attitude, belief, morals, customs and traditions.
Culture is a critical component of business environment. Proper
understanding of cultural dimension is very important for product
development, promotion, human resource management etc.

Business and culture are closely associated with each other. Culture is the
powerful element to shape the business. The business should come up with
various cultural events, thereby promoting and preserving the rich culture
of a country.

Responsibilities of Business

Your business company entails crucial responsibilities towards:

 Shareholders or Owners
 Customers
  Employees
 Government
 Society and Environment

Let’s discuss them one-by-one.

1. Shareholders or Owners

The first and most important responsibility of a business should be towards the
shareholders or the owners who have invested money. They are eligible for a fair return
on the money they have invested. The shareholders expect dividends and appreciation
in the value of shares, which depends upon the company’s performance.

2. Customers

Customers are the most important and valuable assets tor any business organization. A
business must supply top-quality goods and services to the customers at reasonable
prices. No fake, dishonest and misleading advertisement should be presented before a
potential customer. Also, there should be proper arrangements to handle customer
complaints and requests.

 Commitment to provide best-quality goods or services

 The goods / products are fit for the required purposes
 Customer support post-sales
 Genuine cost without compromising with quality
 No fake promises

3. Employees

A business directly or indirectly depends upon the productivity and work efforts of its
employees. Following which, a business organization must provide a fair salary based
upon the work and industry standards. An employee also deserves a healthy and safe
work environment with insurance, compensation, and medical benefits in the event of
any loss or injury at the workplace.

 Equal opportunities for all

 Healthy and safe work environment
 Comply with Minimum Wage Act
 Compensation for injury at workplace
 Insurance and Medical Benefits

4. Government

A business setup must comply and follow the guidelines laid by the government. It
shouldn’t indulge or follow any unlawful activities and corrupt practices. One should
conduct the business in a lawful manner with paying all taxes and duties honestly on
time.
  No illegal trade or manufacturing
 No violation of state or federal law
 Fair business practices
 Fair business audits and taxation

5. Society and Environment

A business is a part of the society and hence it should contribute its part towards the
welfare of the society. It should generate employment opportunities equally for all,
irrespective of their cast, gender or color and promote social and cultural values. A
business must also protect the ecological environment of the society without
contributing any type of damage like air or water pollution.

Political and Legal Environment :

Each and every business is closely related to the government in the operating
country. The political influence of the government affects business to a large
scale in a positive or negative way. It is very important to take the political and
legal nature into consideration for operating any business. Businesses come in
constant clashes with these two and get affected from time to time.

Technological Environment :
Technology is evolving by leaps and bounds and is it is essential for the
businesses to keep in touch with the ever growing technology to update them
and be in the race. New technology is now being used for the production of
goods and services.

Use of machines to standardize processes is now the regular way of doing

things because it reduces the cost as well as enhances productivity. The use of
latest technology also gives the organization a competitive advantage over the
competition due to which it gets a better market share

Constitutional Environment :

(i) Economic Justice:

The Indian Constitution laid down social, economic and political
justice to every citizen in the country. It is, therefore, the duly of the
business organisations to provide social, economic and political justice
to every citizen.
(ii) Liberty of Thought, Expression, Belief, Faith and
Worship:
This has been accepted in our constitution that every citizen has
liberty of thought, expression, belief, faith and worship. According to
this concept every business, organisation should have liberty of
thought, expression etc., with everyone.

(iii) Equality of Status and of Opportunity:

According to this concept every businessman should believe and give
equal opportunity to others. This can be achieved through eradication
of poverty. This does not mean winning gap between the poor and
rich.

Economic Role of Government :

- Consumer Protection and Safety
The government’s role in business includes protecting the consumer or
customer. When a vendor fails to honor the guarantee, the purchaser has
recourse in the law. Likewise, when a product causes harm to an
individual, the courts may hold the vendor or manufacturer responsible.
Labeling is another requirement the government imposes on marketers.
Many foods, for example, must display nutritional content on the
packaging. The U.S. has been making advances in consumer rights for
decades. However, the consumer movement still needs considerable
development to protect the public.

- Employee Rights and Protections

Many state and federal agencies work to protect the rights of employees.
The Occupational Health and Safety Administration, for example, is an
agency under the Department of Labor. Its mission is to ensure a safe and
healthful work environment. The Equal Opportunity Commission protects
employees from discrimination.

- Environmental Regulations and

Protection
When a marketing transaction impacts a third party – others besides the
marketer and purchaser – the effect is called an “externality.” The third
party is often the environment. Thus, it is the government's role to
regulate industry and thereby protect the public from environmental
externalities.

- Revenue and Taxation

Governments at all levels tax businesses, and the resulting revenue is an
important part of government budgets. Some revenue is taxed at the
corporate level, then taxed as personal income when distributed as
dividends. This is in no way inappropriate, since it balances the tax
burden between the company and individual and allows the government
to tax more equitably.

- Investor Rights and Protection

Government mandates that companies make financial information public,
thereby protecting the rights of investors and facilitating further
investment. This is generally done through filings with the Securities and
Exchange Commission. Whether federal regulation has been adequate is a
matter of much debate.