Socio-Cultural Environment

Uddhab Shiwakoti
Kathmandu University School of Management
(KUSOM)
usnepal2000@gmail.com

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 Concepts and Definitions

• Socio-Cultural environment is the sum total of factors, forces,

and surroundings from social and cultural environments that
have immediate as well as far reaching impact on the
performance and outcomes of business

• These factors may include social surroundings like socio-

demographic, basic social structure, and cultural forces

• Changes in these factors provide opportunities for and threat

to business

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 Components of Socio-Cultural Environment

• Social environment

• Cultural environment

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 Social Environment

• Social environment is the sum total of forces and factors from

social environment which have immediate as well as far
reaching impact on business doing

• Factors in social environment include social population size,

age and sex mix, urbanization, migration, social changes,
social structure, etc.

• For example, increase in population size provides bigger

market for corporate houses

• Migration statists provide insights about business positionings

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 Components of Social Environment

• Socio-Demographics

• Social Institutions

• Social structure

• Social changes

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 Social Demographics

• Social demographics is concerned with population and its

attributes in a social surroundings

• It is the study of impact of those attributes on business doings

• It combines the following factors

– Population size
– Age mix of population
– Urbanization of population
– Migration of population

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 Population Size

• Population size of a particular geographical area indicates the

total number of people residing in that particular place or
region
• For example when we talk about population or its size in
Kathmandu valley, then it indicates number of people living in
Kathmandu Valley
• Recent statistics indicates that some five million of people live
in this valley
• Hence, population size of the valley is the total number of
people residing here (i.e. Kathmandu valley)

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 Population Size…

• Holding other things constant, increasing population size

indicates good market potentials

• Huge production and distribution is possible

• Mass production curve and experience curve economy is

likely

• However, increase in population alone does not make sense to

business communities

• It must be backed by sound purchasing power of the people

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 Population Size…

• Increased population and declined purchasing power due to

either income saturation or due to uncontrolled inflation may
be fatal

• Break of social disorder is likely due to

– Widening gaps between haves and havesnot

– Pressure of limited income for mounting needs

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 Age Mix of Population

• Age mix is the study of population attributes by the age of people

residing in that particular place or region
• Age is one of the indicator for product and manpower need
assessment
• Based on age, marketers segregate the market and design their
strategies
• Similarly, when working population (16 to 60 years) in the total
population composite more, than it indicates that there will be
availability of sound manpower
• More than 50 % population in our country falls under this category

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 Urbanization of Population

• Urbanization is the act of converting particular place into big

towns and cities with modern and sophisticated facilities
• Population size of the urbanized cities like Kathmandu,
Polkahra, Biragnagar is big
• People have good purchasing capacity due to good
employment, business, and professions
• There is good investment in education and health care so that
future market potential is likely
• However, political instability may result rise in criminalism
and unethical as well as illegal practices
• Urbanization provides insights for market positioning too

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 Migration of Population

• Migration is the act of shift of people from one place to

another in permanent basis
• It can be internal or international
• Migration provides important information regarding market
potential
• Business shift is likely to the migrated place from migrating
places
• Due to natural resources and socio-political classes, people
from village and mountain migrating to Terai and developed
cities

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 Social Structure

• Social structure is a term used in the social sciences to refer

to patterned social arrangements in society that are both
emergent from and determinant of the actions of the
individuals

• It represents family, reference group, and social classes

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 Family

• Family is a social institution which unites its member

• Family has great influence in purchase decision, volume, and

life-style of the people in society

• It has three categories

– Extended family

– Joint family

– Nuclear family

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 Extended Family

• Size of the family is big

• There is big demand for products
• Product choices are traditional and religious in nature
• Less demand for sophisticated products
• Decision making is slow

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 Joint Family

• Size of family is big

• Purchasing decision is moderate
• Moderated purchase volume and need of modern and
sophisticated products
• Family income is good

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 Nuclear Family

• Small family size

• Prompt decision making
• Small volume of purchase
• Need of sophisticated products
• Both the partners are employed
• Less time for family and other needs
• Fast-food, restaurant, and school business gets florished

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 Social Classes

• Social class (or simply "class"), as in a class society, is a set

of concepts in the social sciences and political theory centered
on models of social stratification in which people are grouped
into a set of hierarchical social categories the most common
being the upper, middle, and lower classes.

• The social stratification based on economic prospects is

crucial

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 Upper Classes

• They are people having good purchasing capacity

• They fall under business houses and industrialized family

• They are quality centric

• They do not consider about product prices

• But, they do not make any compromise in product quality

• They are affluent in nature

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 Middle Class

• High-classes employees and professionals fall under this

category

• They have good purchasing capacity

• They are quality centric

• However, they do have some bargaining for price subsidies too

• But they are not affluent in nature

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 Lower Class

• Purchasing power is low

• Price-sensitive buyers

• Hence, price centric

• Quality does not make much sense

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 Reference Group

• An individual or group of people with which an individual

identifies and whose values are accepts as guiding principles.
• Big leaders, film stars or celebrities, friends, religious leaders,
and even stories and theories comprise reference group
• Reference group has great influence in people attitude and
behaviors
• Change culture, changing lifestyle, and new uses habits are result
of reference group influence
• For example, individuals who are great fan of Mr. Salman Khan,
they not only uses good-luck charm, but starts believing on these
fait too
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 Social Changes

• Social change refers to an alteration in the social order of a

society.
• Social change may include changes in nature, social
institutions, social behaviors, or social relations.
• The base of social change is change in the thought process in
humans.
• Social change may refer to the notion of social progress or
socio-cultural evolution, the philosophical idea that society
moves forward by dialectical or evolutionary means.

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 Social Changes …..

• It may refer to a paradigmatic change in the socio-economic

structure, for instance a shift away from feudalism and
towards capitalism.
• Accordingly it may also refer to social revolution, such as the
Socialist revolution presented in Marxism, or to other social
movements, such as Women's suffrage or the Civil rights
movement.
• Social change may be driven by cultural, religious, economic,
scientific or technological forces.

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 Social Changes …..

• Social changes result business opportunities due to change in

attitude, belief, and behavior
• However, it also cause cultural disruptions

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 Cultural Environment

• It is the sum total of factors and forces which has immediate

as well as far reaching impact on business performance and
outcomes
• Such factors include language, education, attitude, belief, and
religion
• Change in these factors provide opportunities for and threat to
business performance and outcomes

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 Components of Cultural Environment

• Language
• Education
• Attitude
• Beliefs
• Religions

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 Language

• Language is the means of communication

• It helps human beings to transform data, information, feelings,
and attitudes from one to another individuals and parties
• Since different cultures comprise different languages,
language reflects culture
• 48 % people in Nepal uses Nepali language
• It is official language of this country
• More than some three dozen languages are spoken in Nepal

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 Language……

• Language is means of communication

• It has impact on marketing and business practices
• Knowledge of local language helps businessman to make good
business in local territory
• Using local managers and employees for local branch
operation is admired for better business practices

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 Education

• Education is a form of learning in which the knowledge,

skills, and habits of a group of people are transferred from one
generation to the next through teaching, training, or research
• It is the means of transformation of lives
• Level of education is positively associated with civilization
• Grammar school, +2 schools as well as undergraduate,
undergraduate, and post graduate schools are the means of
education
• Informal source of education like leaders, monks, friends, and
families play crucial role
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 Education….

• Education affects business doing many ways

– Life-style

– Product selection

– HR practices; availability of manpower

– Marketing practices

– Customer awairness

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 Attitude

• An attitude is an expression of favor or disfavor toward a

person, place, thing, or event (the attitude object)
• Attitude influences in product selection and human resource as
well as marketing practices
• Positive attitude towards cultural changes and modernization
favors business prospects
• Tradition pose threat to the business

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 Belief

• Beliefs are the descriptive thoughts held about something

based on knowledge, opinion, or faith
• They are reflective in product selection and choices
• Belief guides individual’s behavior and choices
• Belief on modernization and globalization favors business
prospects and vice versa

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 Impact of Socio-cultural Values on Business

• Management Practices
– Guided by traditional values

– Leadership style (participative vs autocratic decision making)

– Professionalism or family patronage in business

• Work Attitude
– Work is workshop duty is good

– Value of time

– Fatalism

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 Impact of Socio-cultural Values on Business…

• Entrepreneurship
– Risk taking behavior

– Professionalism

– Achievement motivation

• Change Management
– Environmental adaptation

– Resistance to change

– Change management

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 Impact of Socio-cultural Values on Business..

• Business Ethics
– Ethics is concerned with
• What is good and bad

• What is right and wrong

• What is desirable and what is not

– Corruption and bribery

– Gender equality

– Child labor

– Ethical decision making

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 Strategies to Deal with Cultural Differences

• Harmonizing Cross-cultural Behaviors

• Making Little or No Adjustment
• Making Communication Effective
• Making Company and Management Orientations
• Implementing Strategies for Instituting Cultural Changes

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 Harmonizing Cross-cultural Behaviors

• Thoroughly aware of cultural backgrounds

• Assess how deep rooted to the cultural beliefs and values in
people
• Provide cross-cultural orientation and training
• Keep informing about different management orientation
• Create a forum for multicultural team building and providing a
new cultural orientation among the members
• Ensure that the team members are sensitive to several
cultures and sub-cultures to business
• Use tactful facilitator periodically to coach top leaders and
develop a dialog among multi-cultural team members.

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 Making Little or No Adjustment

• Society looks foreigners differently than on its own citizens.

For example Western air-hostegesses when staying in Saudi
Arabia, are permitted to wear jeans and T-shirts, but the local
women cannot.
Hence, countries relatively similar to cultural dimensions
needs no adjustments were as divergent cultures needs more
adjustments.

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 Making Communication Effective

• Spoken or Written language or verbal Communication

• Silent language or non-verbal languages
points to be noted
• Some words can not be translated directly
• Wrong choice of word distort the meanings
• Body language provides different meaning in different
countries

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 Managing Cultural Shocks

• Cultural shock frustrates employee that results when

experiencing new culture.
• Many people get frustrated entering in a different culture.
• Things are hard as they have to learn and cope with a vast
array of new cultural clues and expectations.
• For most of them, cultural shocks begins to decrease after a
month or two.
• Recovering cultural shocks takes time

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 Reverse Shocks

• If a person stays in a new culture long enough understand it

and get used to its way.
• People also encounters cultural shocks when they return to
their home country after a long time gap which is called
reverse shocks.

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 Managing Company and Management
Orientations
• Adaptability of foreign culture not only depends upon cultural
conditions but largely shaped by company and management
attitudes.
• Management orientations may be four types expressed in
EPRG model
– Ethnocentrism
– Polycentrism
– Regio-centrism
– Geo-centrism

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 Ethnocentrism

• is the believe that one’s culture is superior to others.

• What worked at home should work abroad and ignore
environmental differences
• Decision making and control are centralized

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 Polycentrism

• Involves decentralized decision making and control

• Significant degree of autonomy doing business across nations
• Acts like local companies
• Host country personnel are hired as managers

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 Regio-centrism

• The firm adopts regional culture in management practices

covering a group of countries which have comparable cultural
characteristics

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 Geo-centrism

• It believes hybrid uses of home country and host country

business practices
• It is the best management practices

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