Management and Society: The
External Environment, Social
Responsibility, and Ethics
Reference: Chapter 2
Learning Objectives
LO 1 Describe the nature of the pluralistic society and selected environments
LO 2 Understand the impact of the technological and innovative
environments
LO 3 Explain the social responsibility of managers and the arguments for and
against the social involvement of business
LO 4 Understand the nature and importance of ethics in managing and ways
to institutionalize ethics and raise ethical standards
LO 5 Recognize that some ethical standards vary in different societies
LO 6 Realize that trust is the basis for human interaction
A Pluralistic Society and an external
environment
Pluralistic society is a
society where many
organized groups represent
various interests.
Working within a pluralistic
society has several
implications for business as
they have to manage the
divergent goals of multiple
stakeholders while also
pursuing partnerships to
further their cause.
The Technological And Innovative
Environments
Technology the sum total of the knowledge we have of ways to do things.
• Invention
Invention is the development of something new
• Innovation
Innovation is the enhancement, adaptation, or commercialization of new
products, services, or processes.
Product,
Service,
and
Incremental innovation the Disruptive or breakthrough
Process application of technology to innovations apply technology to
develop and commercialize new
adapt, enhance, or
categories of products, services, or
Innovation commercialize existing
products, services, or
processes that serve new market
segments. E.g- iPhone, iPod
processes. [Continuous
improvement]
Kaizen
• E.g.- Ford Motors, Toyota
• Kaizen focuses on bottom-up culture-based changes
• A continuous improvement practice
• It enables a positive work environment and open communication to give each
employee a voice
• Elements- teamwork, personal discipline, improved morale, quality circles,
suggestions for improvement
Quality
Kaizen TQM Six Sigma
Continuous Superior quality
End goal Less defect rate
Improvement product
Organization works
Philosophy Quality improvement Cost reduction
together as a whole
The Ecological Environment
Managers must take into account the ecological factors in their decision-
making.
In order to protect the environment, European countries developed the ISO
14001 standard to assure that company policies address a variety of public
concerns, including pollution prevention and compliance with relevant laws
and regulations.
Here, ecology is the relationship of people and other living things with their
environment, such as soil, water, and air, land, water, and air pollution is of
great concern to all people .
More recently, ecological concerns have focused on climate change and
global warming.
The Social Responsibility Of Managers
Corporate social responsibility is the serious consideration of the impact of the
company’s actions on society
Social responsiveness is the ability of a corporation to relate its operations and policies
to the social environment in ways that are mutually beneficial to the company and to
society.
Social entrepreneurship is the process of developing an organization to address a
societal need with less focus on the associated goal of creating economic benefit for
the entrepreneur.
The question of social responsibility, originally associated with businesses, is now being
posed with increasing frequency with regard to governments, universities, nonprofit
foundations, charitable organizations, and even churches.
Case discussion
Ben & Jerry ice cream company contributes to the conservation of the rainforest. The
company also purchases nuts from tribes in the rainforest so that they do not rely on
cutting trees for survival. [now a B Corp!)
Grameen Bank
Aravind eye hospital
Arguments For Business Involvement in
Social Actions
1. Public needs have changed, leading to changed expectations.
2. The creation of a better social environment benefits both society and
business.
3. Social involvement discourages government regulation and intervention.
4. Business has a great deal of power that, it is reasoned, should be
accompanied by an equal amount of responsibility.
5. Modern society is an interdependent system, and the internal activities of
the enterprise have an impact on the external environment.
6. Social involvement may be in the interests of stockholders.
7. Problems can become profits. Items that may once have been considered
waste (e.g., empty soft drink cans) can be profitably used again.
8. Social involvement creates a favorable public image (legitimacy)
9. Business should try to solve the problems that other institutions have not
been able to solve.
10. Business has the resources.
11. It is better to prevent social problems through business involvement than
to cure them.
Arguments Against Social Involvement Of
Business
1. The primary task of business is to maximize proft by focusing strictly on
economic activities. Social involvement could reduce economic efficiency.
2. In the final analysis, society must pay for the social involvement of business
through higher prices.
3. Social involvement can create a weakened international balance-of-
payment situation.
4. Business has enough power, and additional social involvement would
further increase its power and influence .
5. Business-people lack the social skills to deal with the problems of society.
Their training and experience are with economic matters, and their skills may
not be pertinent to social problems.
6. There is a lack of accountability of business to society. Unless accountability
can be established, business should not get involved.
7. There is no full support for involvement in social actions. Consequently,
disagreements among groups with different viewpoints will cause friction.
Reaction or Proaction?
Reaction in face of stress might not yield best results.
Ways to forecast and anticipate developments and changes should
be developed so that action can be taken in time- Proaction
Contingency planning
Role of government- There are many instances in which social
changes can be implemented only by the enactment of legislation.
Ethics In Managing: An Integrative Approach
Ethics is the discipline dealing with what is good and bad and with moral duty
and obligation.
Business ethics is concerned with truth and justice in the context of
commercial enterprise.
Ethical Theories (normative ethics)
Utilitarian theory
Plans and actions should be evaluated by their consequences. Greatest
good for greatest no. of people.
Theory based on rights
Theory based on rights holds that all people have basic rights.
Theory of justice
The theory of justice demands that decision makers be guided by fairness
and equity, as well as impartiality.
Institutionalizing Ethics
A code is a statement of policies, principles, or rules that guide behavior.
Certainly, codes of ethics do not apply only to business enterprises; they
should guide the behavior of persons in all organizations and in everyday life.
Integrating ethics with daily actions:
• Company policy/ code of ethics
• Ethics committee
• Teaching ethics
Factors that Raise Ethical Standards
(1)Public disclosure and publicity and
(2)The increased concern of a well-informed public
Whistle-Blowing
Whistleblowing means making known to outside agencies unethical company
practices.
Differing Ethical Standards between Societies- Managers must pay attention
to it and decide what standards to follow!
Ethical And Unethical Leader Behavior In
Carrying Out The Managerial Functions
Managers are bombarded with new managerial concepts,
and old ones often are disguised by new terminology—all
designed for coping with managerial change demanded by
global competition, customer expectations, and the need
Trust As The to respond quickly to environmental changes.
Basis For Trust is at the center of communication, collaboration,
and the willingness to change.
Change Traditionally, the concept of trust is equated with
Management integrity, loyalty, caring, and keeping promises in the
relationships between and among individuals. But it
should go beyond individual relationships and extend to
the organization through the creation of a culture of trust
that transcends individual leadership.
The Digital The change from analog to digital technology affects
all people in all environments, domestic and global.
Revolution
Affects The
New digital technologies impact on governments and
Technological, international relations.
Economical,
Ecological, Digital technology is already extensively used in
Social, And developed nations, but the impact on developing
countries can be dramatic as the price of the
Ethical technology is continuously dropping.
Environments
Food for thought!
• Consider an organization that you have worked for in the past. Discuss two or three
aspects of the external environment that impacted that organization for better or worse.
• Search the Internet for “business ethics” and select two articles for class discussion.
• Cars do pollute the air. Search the Internet for “ecology” and “cars” to find out what car
makers are doing to reduce pollution.
• Search the Internet for “knowledge age” and describe three developments that might
affect you or provide opportunities for you.
