This document discusses management principles related to business environment and society. It covers several topics: 1. The importance of understanding the external business environment and how organizations must adapt their internal systems in response. 2. Key factors of the macro environment like social, economic, political, and technological forces that influence organizations. 3. Differences between old and emerging economies and trends affecting emerging markets. 4. Michael Porter's model of competitive strategy and how managers can diagnose competitive advantages. 5. The concept of corporate social responsibility and how businesses have obligations to society beyond profit-making.

1. Management: Principles, Processes & Practices
© Oxford University Press 2008 Allrights reserved
CHAPTER 3
MANAGEMENT –
BUSINESS
ENVIRONMENT
AND SOCIETY

2. Management: Principles, Processes & Practices
© Oxford University Press 2008 Allrights reserved
Learning Objectives
 To learn and appreciate the significance of
business environment and society in
management.
 To understand difference between old and
emerging economies.
 To learn application of Michael Porter
model in diagnosing the competitive
business environment.
 To learn the significance of corporate
social responsibility in today’s business
environment
 To understand importance of social audit

3. Management: Principles, Processes & Practices
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 To learn the difference between business
ethics and ethics in business.
 To learn about steps involved in ethical
decision making.
 To learn about what is meant by
corporate governance and its relevance
ethical standards

4. Management: Principles, Processes & Practices
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Introduction
 Managerial actions as reflected in the
organizational performance is the outcome of
synchronization of internal systems to respond
effectively to the external environment.
 Organizations for their success in today’s fast
changing environment have to keep adjusting,
adopting, and adapting by developing inbuilt
response mechanisms
 Need to understand importance and relevance of
organizational environment for strategic
management as also for social concern and
value-based management.

5. Management: Principles, Processes & Practices
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Macro Environment Affecting
Organization
ORGANIZATIO
N
SOCIAL CULTURAL
LEGAL
TECHNOLOGICAL
COMPETITIVE
POLITICAL DEMOGRAPHIC ECONOMIC

6. Management: Principles, Processes & Practices
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Trends Affecting Emerging
Economies
Old Economies Emerging Economies
Dominance of agriculture and Dominance of service
Manufacturing sector
Local and national markets Global markets
Customer behaviour – loyalty Customer behaviour –
highly
fluid
Competitive forces – tolerable Competitive forces –
intense
Regulated economic regime Deregulated regime
Emphasis on physical assets Emphasis on human assets

7. Management: Principles, Processes & Practices
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Michael Porter’s Model—
Competitive Diagnosis
Rival firms and
rivalry amongst
them
Threat of
new entrants
Power of
customers
Power of
suppliers
Above factors need to be appropriately diagnosed by the managers to
identify their competitive advantages and disadvantages, so as to chalk out
strategies that can enable them to achieve their corporate goals and objectives
by responding effectively to various environmental forces.

8. Management: Principles, Processes & Practices
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Corporate Social Responsibility
(CSR)
 CSR focuses on need for seriously considering the impact of
the company’s actions on society
 CSR basically refers to the obligation toward the society
voluntarily assumed by business.
 The philosophy of business as highlighted by Keith Davis
and Robert Blomstrom (1975) states ‘Social responsibility
is the obligation of decision makers to take actions which
protect and improve the welfare of society as a whole along
with their own interests’ This implies that business has to
be viewed more than a money-making proposition and it
provides a great opportunity to serve society. Business
entity has also to focus their efforts on protecting welfare of
the society by creating positive benefits for society.
 Corporate Social Responsiveness means the extent to which
company’s policies and programmes are geared to the
social environment. The responsiveness focuses on actions
that results in ways and means of firm’s responses to social
concerns as against responsibility that focuses more on
‘need’ and ‘should’ for corporate sustained growth.

9. Management: Principles, Processes & Practices
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Voluantry Responsibilities
Ethical Responsibilities
Legal Responsibilities
Economic Responsibilities
CSR
Obligation
toward
Society
Voluntarily
Assumed
by
Business
Corporate Social Responsibility (CSR) at
Different Levels

10. Management: Principles, Processes & Practices
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Advantages of CSR
 The organizations that integrate CSR as part and
parcel of their philosophy of growth, derive various
advantages such as –
improved financial performance,
cost reduction,
enhanced brand image and reputation,
increased customer satisfaction,
enhanced productivity, quality,
increased market share,
more engaged investors,
environmental sustainability,
and above all competitive edge in the market.

11. Management: Principles, Processes & Practices
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Social Audit
Social
Audit
Mandatory as
Required by
Government
Voluntary
Social
Programs
undertaken
by companies
Pollution Check
Employment
Standards
Labour Amenities
to be provided as
per factory Act,
Minimum Wages to
be Provided
Rural
Development
Education
Health

12. Management: Principles, Processes & Practices
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Ethics – Different View Points
Various Views on Ethics
Ethics
Utilitarain View Rights View Justice View
Utilitarian View: The utilitarian view focuses on welfare of the greatest
number of people, implying thereby the greatest good for the greatest
number as a criterion for weighing and evaluating decisions.
Rights View: The protection of individual's rights is the main concern as per
rights view.
Justice View: The justice view is grounded in the idea that rules of
organizational or societal existence must be imposed equitably to all. The
focus is making a decision that is objective – without prejudice to emotions -
and fair to everyone involved.

13. Management: Principles, Processes & Practices
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Ethical Decision Making
 Define the problem and issue clearly
and explicitly
 Jot down the values relevant to the
situation for the issue under
consideration from the short and long
term perspective
 Analyze the issue vis-à-vis conflicting
values and choose an alternative that
takes care of most crucial values
 Implement the decision