This article describes a business environment and the considerations to be made when starting a new business venture or expanding an already existing business to a new location. Any business venture does not operate in a vacuum but reacts to factors within and outside the business environment in order to remain relevant in the highly competitive business environment while maintaining or increasing its profit margins (Barron 2009).
In as much as business competition may play the biggest role in describing a business environment it, however, only does touch on the financial side of the business while other conditions and factors touch on the social and legal responsibilities of the business.
The business environment is viewed as the set of conditions that include social, legal, economic, political and institutional factors that are uncontrollable in nature but affect the functioning of a business entity (Palmer &Hartley 2001). Any business venture that seeks to remain relevant within the business environment, increase profit margins and grow in terms of the capital base must ensure that it maintains a favorable business environment (Paul 2010).
Given that the business environment is dynamic and changes with change in the geographical location it is imperative that the Board of Directors for ABC Complete Kitchen shave a clear understanding of the business environment in order to establish and maintain an ethical and socially responsible business climate for the proposed new plant.
The operation of any business venture does not take place in a vacuum but has to associate with and react to factors within and outside the business (Barron 2009). A successful business unit ensures that the factors are well balanced. As seen in figure 1 below, the business environment describes a set of conditions that include social, legal, economic, political and institutional conditions that are uncontainable in nature but affect the functioning of a business (Paul 2010).
In opening a new plant, the Board must assess the business environment with the aim of ensuring that its new plant establishes and maintains a socially and ethically acceptable business climate (Mahdavi 2005). Not all business activities are aimed at earning profits with some aimed at performing the performance of their social responsibility (Barron 2009).
According to Palmer & Hartley (2001), the main factor influencing a business is the degree of competition with other factors being social, legal, economic, political, technological and ethical factors. A business venture reacts and acts to whatever happens outside the business (Paul 2010).
Most business administrators understand that ethical and social dimensions of company behavior have a clear impact on the profitability of the company (Palmer &Hartley 2001). To ensure that they meet their social and ethical responsibility most companies communicate their expectations to their employees, organize training sessions, codes of ethics, reward systems, and coach their staff (Berenbeim 1989).
Mahdavi (2001) points out that the main challenge businesses face today in terms of ethical and social responsibility are: How best to communicate values most effectively to employees? Which communication channel to use?
An analysis of the codes of conduct of various businesses in different areas found that the objective of these codes was to maximize the contribution of transnational corporations to economic development while minimizing negative effects.
In addition, multinational companies should also address human rights and whistleblowing (Werther& Otter 2008). A business venture has both social and ethical responsibilities apart from activities aimed at making profits. This paper discusses these responsibilities in international management.
This refers to any to obligation and responsibilities a company has towards the welfare of the members of the society with whom it interacts or towards the society in general. Every business entity operates within a society, using the society resources and depending on the society for its function. This creates an obligation on the part of the business entity to contribute towards the interest of the community (Mahdavi 2005).
Any business venture operates to earn profits, but this is not the sole function of the business. It also performs a number of social functions that include taking care of those who are instrumental in its existence and survival like owners, investors, employees, consumers, government, society and community (Berenbeim 1989).
It should be noted that any activity viewed as social responsibility is not a charity and should not negatively affect anyone. Take a company that smuggles drugs that negatively affects people or cheats its customers and operates a free clinic, the clinic cannot qualify as discharging social responsibility because the company’s smuggling activities negatively affect people (Worthington & Britton 2006).
The concept of social responsibility is aimed at discouraging business entities from adopting unfair business practices like black-market trade, hoarding, adulteration, tax evasion and cheating customers to earn profits. It instead encourages them to earn a profit through judicious management, provision of better products, provision of better working and living conditions for workers and after-sale services to its customers. They are also encouraged to control pollution and conserve natural resources (Werther& Chandler 2011).
In order to discharge social responsibility, the Board must ensure its activities in the course of business must not negatively affect anyone in the community. This is the most important condition for discharging social responsibility.
Every society views certain activities, conduct and behavior as undesirable or harmful. In relation to business, ethical responsibility ensures that social values are not ignored as they indicate characteristics of a good business, desirable objectives to follow, and the manner in which business activities should be carried out in the interest of the society (Mahdavi 2005).
Ethical responsibility answers the question of whether a business should earn a profit by any means necessary. The answer is no as business ethics suggests certain principles in conducting business to be morally justified (Mahdavi 2005). Ethical responsibility is not the same as a culture but is a broader sense of culture. These are in regard to morality and categorize an activity as either right or wrong.
The Board should ensure that the plant location is not controversial in any way. Locating a plant that produces toxic chemical wastes near a residential area or a noise pollutant near a school is ethically wrong thus the Board must analyze the location before establishing the new plant (Wetherly& Otter 2008).
Berenbeim (1989) identified seven ethical issues faced by multinationals that included: employee conflict of interest, inappropriate gifts to corporate personnel, sexual harassment, unauthorized payments, affirmative action, employee privacy and environmental issues. These issues must be addressed by the board.
As research has shown companies with a strong ethical climate and culture experience minimal ethical problems and deal with them better (Mahdavi 1989). The board must, therefore, develop a strong and realistic code of ethics to be used by the company in order to ensure that they operate ethically. In addition, they must also analyze the code of the country for the proposed new site so as to avoid any friction with the host country.
The above-discussed responsibilities, social and ethical, are not aimed at making profits but to ensure that the company is appreciated by those associated with the company. As the company uses the scarce society resources to continue and grow, they should ensure that none of their activities is injurious to the long-run interests of the society.
In practice, it has been observed that there are some socially undesirable business aspects such as environmental pollution, nonpayment of taxes, manufacture and sale of adulterated goods and provision of false advertisement information.
The concept of social responsibility in businesses demands that owners and managers of business be made conscious about the responsibility of their businesses towards interest groups that include shareholders, society, consumers, Government and employees as seen in figure 2 below (Paul 2010).