Social interactions and the sociological dynamics of social networks have many contributions that lead to many developments to our daily lives, it shaped the ways we interact, share and achieve.
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3. INTRODUCTION
Social interactions and the sociological dynamics of social networks have many contributions that lead to
many developments to our daily lives, it shaped the ways we interact, share and achieve. This article
explores the basic principles of sociology and utilises conclusions in previous social studies to explain and
bridge the existing gap in the literature of social networks, economics and sociology. The article associates
the terminology and the theoretical framework of sociology with research findings in business and economy.
Demonstrating the applications of social conformity “the process in which an individual’s behaviours,
attitudes or beliefs either unconsciously or consciously is adjusted to meet the ones of the group’s”.
Compliance “the process in which individuals conform to the group’s identity and characteristics
intrinsically ‘private acceptance’ or extrinsically ‘public compliance’ to adjust to group productivity and
performance”. Group pressure “the influence excreted by a peer group, encouraging individuals to change
their attitudes, values and behaviours in order to conform to group norms”. Imitation “is a form of social
learning where individuals observe and replicate other people’s behaviours”, imitation is a type of
observational learning whereby individuals tend to imitate acceptable and rewarding behaviours to increase
the eligibility of group acceptance which results in realising the benefits sought by that particular group.
Social facilitation “Whereby individuals tend to perform better when being observed by others” which
suggests that social evaluations have impacts on individual performances. Suggestion “the process by which
individual’s behaviours are encouraged or discouraged through direct or indirect proposals of other
individuals or groups of individuals” and vicarious conditioning “the process by which individuals learn
various attitudes, feelings, beliefs and emotions not explicitly through direct exposure to stimulus, but
implicitly through observing others reactions to it”.
4. INTRODUCTION
The article explains the advantages and the disadvantages of social networks and determines the
importance of such factors in today’s economic studies in commercial settings. “Social network analysis
has already taught us a great deal and it holds tremendous potential for future application, especially in
economics.” (Matthew, 2010). The article elucidates the nature of individuals and groups, the necessity
for socialisation, conformity and obedience. The elements governing social networks in reference to
individual and group identity, societies and the underlying principles of stratification and its impact on
conformity and obedience. The types of group influences and social intelligence, group emotions and
cultural natures of individualism and collectivism.
The organizational awareness of social networks and the present nature of social impacts on economic
outcomes “Almost $8 trillion a year is spent through e-commerce both business-to-business and business
to consumer” (Bughin and Manyika, 2012). Organisations are becoming aware of the rapidly changing
socially driven environments as “Customers who engage with companies over social media spend 20% to
40% more money with those companies than other customers.” (Barry, 2011), “Product and social
community credited with increasing Nike running shoe market share from 48% to 61%” (Barry, 2011)
which justifies the significance of economically understanding social networks and the rate of contribution
of such networks to today’s economy. The White House Office of Consumer Affairs mentioned in one of
its market reports, “A dis-satisfied customer will tell between 9 and 15 people about their experience.
About 13% of dis-satisfied customers tell more than 20 people” where such experiences are shared
through social networks “24% of consumers who had unsatisfactory service interactions shared their
experiences through social networks in 2010, a 50% increase over 2009.” (Forrester Report, 2010).
5. INTRODUCTION
The increasing awareness of societal integrations and the rapid expose to social intelligence and
reference groups is a determining factor in economical social networks, failure of an individual’s
membership channel unambiguously lead to a chain reaction of other channel failures belonging to a
group of individuals, especially where such failures are related to dominating or reference groups. Chain
of reactions are hypothetically endless (Jackson, Rogers, 2006), failing channels estimate loses in
billions of dollars “$289 is the average annual value of each customer relationship lost to a competitor
or abandoned” (Genesis Report, 2009). The costs of re-establishing such social channels are quite
difficult to sustain “It takes 12 positive service experiences to make up for one negative
experience.” (Ruby, “Understanding Customers”), social networks enlarge the quantity of the recipients
of shared experiences and generalise such experiences as economic beliefs.
The literature emphasised on the significance of social networks “a connected network of individual and
group relations, whereby the chain reaction is primarily evident. Hypothetically, we assume that the
connectedness or the cohesiveness among individuals in a group chained in a mesh topology, whereby
each individual completely connected to each other individual in the group ‘Public Compliance’. And
each and every individual in the group has a recursive relationship to him or herself ‘Private
Acceptance’, and since groups act as a unique identity, they also act as individuals where individuals are
connected to other individuals as well”. The exponential growth of social networking users grew rapidly
in the past couple of years (Chui, 2012) a measurement of the social networking impact in Europe
found that “The central estimate of gross revenue enabled by the activities of Facebook is €32billion.
6. INTRODUCTION
This revenue converts into an economic impact of €15.3 billion and supports 232,000 jobs.” (Deloitte,
2012). Where the number of the Internet users grew rapidly in the past couple of years reaching to 2.27
billion users as of 2011 where “1.5 billion is the number of social networking users globally” (Chui,
2012). The fact that social networks are becoming increasingly important to both society and economy,
where “80% proportion of total online users interact with social networks regularly” (Chui, 2012).
Which reflects the basic underlying behavior of humans to communicate, collaborate and socialise, and
“70% proportion of companies using social technologies” (Chui, 2012) as a consequence of the
significance sought in understanding socially driven societies with regards to the economy, such that
“90% proportion of companies using social technologies report business benefit from them” (Chui,
2012) .
Towards fulfilling the basic needs of socialisation and the impacts on decisions and buying behaviours
that are effected by the social culture, organisations are concentrating on how to manipulate such global
societies for their own advantage “72% of companies surveyed reported using social technologies in
their businesses, and 90% of those users reported that they are seeing benefits” (Chui, 2012).
Neglecting the fact of conformity and group homogeneity where individuals of a group act as a single
entity and that a single failure of a link to a group may disconnect other links implicitly, and other
groups influenced by the other group’s decisions, norms and beliefs. Based on the need for socialisation
we assume complete dependence relations among the elements in the network, therefore the chain
reaction plays an important role in determining the effects of social and economic behaviours.
7. INTRODUCTION
“Social networks affect the flow and quality of Information, much information is subtle, nuanced and difficult to
verify, so actors do not believe impersonal sources and instead rely on people they know” (Granovetter, 2005),
(Deutsch & Gérard, 1995). While social networks exhibit stronger link formations whereby relations are rapidly
experiencing growth, the underlying mechanics of such networks highly affects the growth of information and the
rate of globalisation and economic awareness. “Clustering coefficients. Which measure the tendency of linked
nodes to have common neighbours, are larger in social networks compared to networks where links are generated
by an independent random process.” (Jackson, Rogers, 2006). Rapid formations results in stronger chain
reactions, whereby the elements of such networks exhibit stronger susceptibility to changes and economical
dynamics. A recent research lead by IBM established that “78–84% of consumers now rely on their social
networks when researching new products or services” (IBM, 2011). Social interactions and the power of peer
effects increasingly energised by the existence of social networks.
Peers and groups, whereby others effect the behavior of individuals, more likely influence consumer’s choices. the
evolution of the communication industries, the ease of information access, and the rapid exposure to social
channels and reference groups, where reference groups are used in order to evaluate and determine the nature of
a given individual or other group’s characteristics and sociological attributes. “Economists are being increasingly
aware of the importance and ubiquity of social networks” (Bramoullé, 2009). The individual relates or aspires to
relate him or herself psychologically to the group. It becomes the individual’s frame of reference and source for
ordering his or her experiences, perceptions, cognition, and ideas of self. It is apparent that members of groups or
members of reference groups will neglect their own personal inclinations in order to sustain group membership
“When status is sufficiently important relative to intrinsic utility, many individuals conform to a single,
homogeneous standard of behavior, despite heterogeneous underlying preferences” (Bernheim, 1994).
8. INTRODUCTION
The significance of group dynamics and relations impose critical economic impacts on the
consumer’s behavior, steering their individualistic preferences towards socially and agree upon
group preferences “They are willing to suppress their individuality and conform to the social norm
because they recognise that even small departures from the norm will seriously impair their
popularity” (Bernheim, 1994). The evolution of the communication industries was as a consequence
of the driving force of the human nature, the nature of socialising, “It is fundamental human
behavior to seek identity and connectedness through affiliations with other individuals and groups
that share their characteristics, interests or beliefs” (Chui, 2012) , the more connections are
established the more intelligent markets and consumers become. “Many social scientists agree that
individual behavior is motivated in large part by social factors, such as the desire for prestige,
esteem, popularity or acceptance” (Bernheim, 1994).
Alternatively, a research lead by Forrester Report sheds light on the importance of social networks
“Customer power has grown, as 73% of firms trust recommendations from friends and family, while
only 19% trust direct mail”. It illustrates the social network’s impacts on the consumer behavior and
the decision making of individual and group purchasers. The emergence of social networks ensures
positive contributions to society, business and politics “Social technologies can empower individuals
to form communities of interest around specific issues or causes, providing societal benefits” (Chui,
2012). Where social intelligence emerges, offering advancements in cultural and societal behaviours
towards globalisation and internationalisation.
9. INTRODUCTION
The spread and the flexibility of social networks offers a unified global society of thoughts and
behavior despite heterogeneous origins, contributing significant improvements in society, economy
and policy. “Social technologies allow people to connect at a different scale and create a unified,
powerful voice, as consumer groups or entire societies. That can have significant impact on the
ways in which dialogues are shaped and policy is made” (Chui, 2012). The significance of
understanding social networks exhibit advantageous outcomes “Social technologies can increase
margins as much as %60 by connecting with customers and generating sharper consumer insights
and by improving productivity and knowledge” (Chui, 2012).
Where economic returns on investments are notably beneficial “$900 billion — $1.3 trillion annual
value that could be unlocked by social technologies in four sectors” (Chui, 2012). Information
dissemination through social networks is economically significant “Word of Mouth, both positive
and negative, is indeed a force that can influence the attitudes and predicted purchase behavior of
consumers” (Charlett, 1995). It justifies the significance of social conformity in the form of
informational influence and normative peer effects influence through social networks (Deutsch &
Gérard, 1995), the premise is that negative dissemination of experiences results in significant
economic consequences “Negative word of mouth is more influential than positive word of
mouth” (Charlett, 1995).
10. INTRODUCTION
It is increasingly evident that the psychological elements of human behaviours establish many
contributions in economics “Word of mouth recommendations cannot only improve the prior
expectation of users, who receive the recommendations on the recommended items, but also raise
their posterior evaluation” (Huang, 2012). The study of the human nature and their characteristics
and behaviours in groups revealed the conscious and the unconscious cohesiveness of individuals
among groups and societies to secure membership and status, and the continuous search for a
group identity and individuals exhibit intrinsic and extrinsic influences. Intrinsically the
everlasting force of social bonding, and extrinsically the force to maintain group bonds and
relations, intrinsic influences were notably showed by the increasingly growing quantity of social
networking consumers worldwide (Chui, 2012).
Which justifies the fundamental nature of the human race (Chui, 2012), and extrinsic influences
were shown by the social intelligence and the resulting impacts on society and economy. In
business, supply chain and operations management strive to reduce the amount of implied
demand uncertainty by collaborating with prospective or existing customers to project or forecast
the supply and demand patterns. The less informed the supply chain about the customer buying
and demand behaviours the higher the uncertainty and therefore the less efficient and responsive
the chain becomes, the better the supply chain is informed about the consumer behavioral
dynamics the better the operational manageability of the supply chain processes.
11. INTRODUCTION
Therefore, in order to be able to achieve a strategic fit of the supply chain and the operational
processes that govern the supply chain, the first requirement is to understand the customer and
the supply chain uncertainty. Where business entities inspect and recognise the customer’s
necessities and potentials, if the customer’s demands not understood or observed properly by the
supply chain’s operations, responsiveness and efficiency suffers tremendously, which results in
poor business decisions, capital investments and market competitiveness.
Since consumer necessities exhibit a dynamic and a challenging nature where the range of
quantity, responsiveness and lead times, variety of products, product acquisition channels, rate of
innovation and required service levels increase the more challenging it becomes for businesses to
forecast the eligibility of the supply chain operations. Since the higher the implied demand
uncertainty the greater the forecasting errors, the higher the increase in stock out rates the
probability of business financial and operational failures. For businesses to design and implement
efficient and responsive supply chains, implied demand uncertainty reduction is necessary, and for
that to be true, the supply chain has to mutate around the customer and to investigate and
appreciate the consumer’s anticipations.
12. INTRODUCTION
The Seven Eleven Japan, established in 1973 is utilising information technologies to capture and
produce accurate measurements of demand and supply patterns, interacting with the consumers
buying and intellectual behaviours reduced the amount of demand uncertainty. Utilising brand
awareness and advertising effectiveness procedures and processes through social networks and
social media, increased the levels of financial and market profitability, relational and business
scalability, operational and strategic flexibility and logistical and cross functional effectiveness in
servicing the market. The article suggests the importance and the advantageous outcomes of social
networks in the economy, social networks have lead many business and economic improvements
and supported in the increase of profit margins, employment levels and gross domestic products in
national (Deloitte, 2012) and international settings (Chui, 2012).
13. FURTHER READING
The Mindset of Groups
A light will be shed on the characteristics of group formations, peer effects, obedience, “People will obey a figure of authority,
even if it means hurting another person” (Milgram, 1963) and “When individuals perceive another person as having authority
over them, they no longer feel responsible for their actions” (Milgram, 1963).
The Theory of Motivation
The etymology of the word ‘motivate’ descends from Old French motif, from late Latin motivus, from movere ‘to move’ in the
1800’s. Motivation is a reason or reasons for acting or behaving in a particular way.
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3.Jacques Bughin and James Manyika (2012): Internet Matters: Essays in
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