ORGANISATIONAL CULTURE AND ENVIRONMENT

Introduction of business environment:

Business environment means all the internal external forces that affect the business directly and
indirectly. These types of forces affect the performance, decisions and operation of a business.
According to Robbins and Coulter: “Environment refers to institutions or forces that affect the
organization’s performances”. Business environment is the set of all the conditions and events
that are directly or indirectly related to the operation and development of a business. Generally,
organizations are influenced by two environmental factors one internal environment and
external environment.

Types of Business Environments:

Internal environments: The internal environment refers to the forces existing within a business
organization that could influence the actions, performance and decision of the business. The
internal environment generally consists of elements within or inside the organization, such as
physical resources, financial resources, human resources, information resources, technological
resources, the organization’s goodwill etc. Following are the internal environmental factors;
I. Organizational resources: Organizational Resources represent all resources available to
the organization and necessary for the performance of its activities. The successful
 functioning of a business enterprises requires the optimum utilization of various human
and non- human resources. The success and failure of an organization depend on how
resources are mobilized in organization.
II. Organizational structure: An organizational structure is the arrangement of an
organization’s workforce according to job responsibility and authority. An organizational
structure is a set of rules, roles, relationships and responsibilities that determine how a
company’s activities should be directed to achieve its goals
III. Organizational culture: Organization culture is described as “the means through which
people in the organization learn and communicate what is acceptable and unacceptable
in the organization.” Organizational culture is the collection of beliefs, values and
methods of interaction that create the environment of an organization. Organizational
culture encompasses the foundational values of a company or business. It also reflects an
organization’s expectations and philosophy and the experiences of the employees and
leaders within it, often determining the group’s future direct.
IV. Organizational goals and principles: An organizational goal is what an organization
wants to achieve shortly. Organizational goals are the desired outcome of organizations.
The goals of the organization help every member of an organization to understand where
the organization is going. Goals give meaning and purpose to an organization. They
determine the scope of future activities and serve as a reference point to concentrate on
resources and efforts. They determine the action to be taken at the present to obtain
results in the future.
V. Other factors: Shareholder, owners, trade unions, leadership style, size of organization
etc. Are some of the factors that affect the internal environment of an organization.

External environment: The external environment is the factors outside a business that
can affect its operation by influencing its activities, choices and determine its opportunities,
risks and threats. External environment can be classified in two parts
I. Task Environment
II. General Environment
I. Task Environment: Task Environment of an organization is the environment
which directly affects the organization from attaining business goals. Task
Environment is the set of conditions originating from suppliers, distributors,
customers, stock markets and competitors which directly affects the organization
from achieving its goals. The main component of task environment are as follows
1. Customers: The basic reason for the very existence of any business organization
is making profits and the profits are created by customers. An organization must
continuously monitor the consumer environment in terms of any changes in
customer’s needs or preferences. Knowledge about the customer’s needs and
fulfilling these needs is an organization’s primary concern.
2. Suppliers and distributors: Supplier are the important force of the task
environment of an organization or companies. The suppliers are those who supply
 the inputs like raw materials and components to the organization. Whereas
distributors intermediary between retailers and wholesalers or between
manufacturer and wholesaler who play a vital role in a task environment.
3. Financial institution: Financial institutions are very important for business
funding they provide funds for short as well as long-term. Besides funds, they
also provide other services like banks, insurance, and other institutions related to
the capital market. A sound relationship with the financial institutions creates
opportunities for the business.
4. Pressure Group: A group of people who share an interest, concern, or set of
opinions and who try to influence the policies, rules, customer welfare
environmental protection, quality, human rights etc. issues related to business.
Such group create pressure to the organization in order to make decision in flavor
of them.
5. Government: Without any doubt, any change in governmental regulations will
impact the business operation. A sudden change in law would mean that the
company must adapt accordingly.
6. Competitors: A competitor is a person, business, team, or organization that
competes against you or your company. Competitors encourages in progress and
product-developments. It forces organizations to be more innovative and
productive for organizations survival.

2.General environment: General environment forces are external factors that

influence the success of a company's operations. It is also known as macro environment. It is
uncontrollable and requires proper monitoring so that appropriate policy may be designed to face
emerging challenges. The major factors are also known as Political, economic, socio-Cultural
and technological (PEST). The given factors as explain below
1. Political –legal Environment: This factor refers to the influence of government
institutions, strategies of political parties, policies of state and local government and
the relationship between government and business. It is important because political
and legal system partially define what an org. can and cannot do. Some of the major
component of political-legal environment are given below:
1. Constitution: legal document of nation which determine the framework within which all
people have to perform their activities including business,
2. Political system: stable and efficient political system can influence the growth of an
organization.
3. Political institution: consist of three institution legislature, Judiciary, executive which
direct, develop and control business.
2. Economic environment: The economic environment of the business is one of the
external factors that can influence strategy and decision-making. The major economic
are dimension of country , monetary, fiscal and economic policies ,condition of
capital market and effect of globalization etc.
 Economic system: represent the foundation of economic environment of country.
There a three model of economic system open market, state owned and mixed economy.
Economic polices: guideline adopted by govt. for economic prosperity. It includes
Fiscal policy, monetary policy, commercial policy etc.
Economic condition: Business organization. are affected by economic condition of
country, economic growth rate, purchase power of customer, per capital income
developing stage of national economy etc.

Social- cultural environment: It involves tradition, social values, beliefs, norms,

attitudes and demographic composition of nation. This may create opportunities and
threats to operation of organization. Therefore, manager need to monitor change in
social-cultural environment.
Social institution:
Demography: It involves size and distribution of population, age group, urbanization
rate, gender ratio etc. which affect the business organization.
Life style: The change in level of income, fashion, education, social interrelationship
etc. force people to change their life style which also affect the business organization.
Social Values: Different society have different social values, beliefs and norms that
affects the organization work style.

Technological Environment: The technological environment refers to external factors in

technology that impact business operations. Changes in technology affect how a company will
do business. A business may have to dramatically change their operating strategy as a result of
changes in the technological environment. The following are the component of technological
environment:
• Nature of technology: On the basis of nature and size of business, organization
implement either manual or automatic technology. In automatic technology initial
investment is needed but the operation cost is low but in manual technology initial cost
is low but the labor and other operating cost is more.
• Pace of technological change: Technology is dynamic and ever changing. The change in
technology leads to immediate impact in business of an org. It creates both opportunity
and threats to the business firm. A business can only be successful if it is able to grab the
opportunities created by changing technology.
• Research and development budget: It is essential to invest a certain part of budget of
organization in research n development which helps in innovation and creation of new
products according to new demands of customer.
Environmental scanning
Environmental scanning is the process of gathering information about events and their
relationships within an organization's internal and external environments. The basic purpose of
environmental scanning is to help management determine the future direction of the
organization. It is the base of environment analysis. It is normally done when there is high level
of uncertainty in the environment. It can also be said as environmental scanning is a continuous
process of study and analysis of environment to detect the emerging trend in the environment.
Methods of environment scanning
The following are the common methods of environmental scanning:
1. Extrapolation method- Under this method the future situation is estimated on the basis
of past records and information. Trend analysis, regression analysis and forecasting
techniques can be applied to accumulate information.
2. Historical analogy- This method of environmental scanning is based on partial, similar
or parallel conditions somewhere in the past. Basically, this method is applied in
estimating qualitative changes like social norms, the attitude of workers, living standard
etc.
3. Intuitive reasoning- The managers estimate the future on the basis of logic and ideas
without considering past events. It is intellectual guesswork.
4. Scenario building- This method is used to show the cause and effect relationship among
a series of events. Under this method, different probable events are estimated and their
outcomes are assumed.
5. Cross impact matrix- Under this method, two conflicting trends are studied to find out
their impact on each other.
6. Morphological analysis- This method is applied to forecast technological changes and
their impact on business. Here, all possible alternatives to achieve organizational goals
are studied and evaluated.
7. Delphi technique- The opinions of various experts are secretly collected to forecast
future. The experts having different opinions and with a majority are requested to give
reasons for their distinct opinions. The process will continue until and unless the common
opinion emerges.
8. Survey method- A field survey is conducted to gather information for environmental
forecasting. The opinions of customers, experts, suppliers, leaders, competitors etc are
collected and analyzed on the basis of which the future is forecast.
Brainstorming- This is the process of gathering new ideas through group discussion.
Groups are formed to resolve new problems in future. All the members share their ideas
and come into conclusion through mutual consent.
SWOT analysis
SWOT analysis is a framework that evaluates a business’ strengths, weaknesses,
opportunities, and threats. A SWOT analysis is a valuable framework that can help you
evaluate your business from different angles. A SWOT analysis evaluates a business or
project based on four key factors that can be divided into two categories: internal and
 external. And negative and positive

Social Responsibility of Business:

Social responsibility is an ethical focus for individuals and companies that want to take action
and be accountable for practices that benefit society. It's become increasingly important to
investors and consumers who want to put their money into or purchase products from companies
that take steps to contribute to the welfare of society and the environment.
According to Koontz and Weihric: “Social responsibility is relating corporate operations
and policies to the social environment in ways that company and society”
According to Henry Ford: “Service first and profit next should be the motto of every
business man in social responsibility.
It can be said that the obligation of business to take decisions and perform actions, which are
desirable in terms of the objectives and values of our society is known as Social Responsibility.
Corporate social responsibility (CSR) means that businesses should operate in ways that benefit society
in addition to maximizing shareholder value.
There are two different views on business social responsibility. Some says CRS is needed where as some
has different opinion on it.

Arguments for Social Responsibility

 Business uses the resources of society and is a creation of society, so it is expected to satisfy
human needs by providing goods and services.
 If the people related to the business feel that they are not getting their dues from the business,
then they may resort to anti-social activities. This can distort the image of the business and can
be very harmful, so businesses must fulfil their social responsibility.
 Government is the highest authority in the nation. When a government feels that the business is
not socially responsible or is creating problems like pollution, the government limits its freedom.
So to avoided this CRS is needed.
 Business enterprises are responsible for many problems such as pollution, discriminated employment,
corruption, etc. It is the duty of the business to solve the problems created by them.

Arguments Against Social Responsibility

 It is considered that social responsibility is against the objective of profit maximization. But
business is an economic activity and its main goal is to earn and maximize profit.

 Customers suffer because of the solving social problems and taking social care require huge financial
investment. As the money within the business is used in social help, the business increases the cost of
their products and services.

 Due to lack of Social skills. It is often stated that businessmen don’t fully under the social problems
and thus can’t solve them efficiently.

Approaches of Social responsibility

There are four basics approaches adapted by organization

1. Obstruction Approach: An obstruction approach deals unethical issues where managers act
illegally and unethically. The organization might break the law or act in ways that are
considered to be unethical and not socially responsible. The manager clearly knows the
decisions they are making are unethical, and not the social responsibility. Usually the manger
is guided only by ensuring the organization makes the most profit it can, and appeasing the
company shareholders by making as much money as possible.
2. Obligation Approach: In obligation approach, the manager makes decisions that are guided
by laws of the society, but does not make much more of an attempt to act responsibly. The
organization only performs that much social responsibility which is bound by laws. E.g.
writing warning in cigarette packets.
3. Response Approach: Response approach is one where managers do realize the need to be
socially responsible, and to make ethical decisions as required. The organization performs
those activities which are legal and ethical. Such as providing toothpaste and toothbrush in
dental camp, collecting blood for Nepal Red cross Society etc.
4. Contribution Approach: Contribution approach is one where managers are always looking for
ways to be good corporate citizens, and go out of their way to do good for
society.Organization itself participates actively in the development and welfare of the society.
E.g. Building hospitals, schools, conducting skill development program etc.

Areas of Social Responsibility:

(1) Responsibility Towards the Shareholders/ Investors

 Shareholders should be provide the Fair and true financial status.

 The company should make all the efforts to maximize and protect shareholder’s wealth.
 Sharing of useful information with the shareholders, utilization of funds etc.
(2) Responsibility Towards the Employees:

 Employee should get opportunity of career development.

 Management of the enterprise must provide the proper working conditions to the workers.
 Workers should get fair salaries and wages.
 There should be healthy working environment.
(3) Responsibility Towards the Consumers

 Treating customers fairly in all respects of business transaction

 So, it is the responsibility of the company to provide the right quality, right quantity with the right
price to the consumer.
 There should not be the unfair trade practices like adulteration, poor quality, courtesy to the
customers etc.
 Ensuring the regular supply of healthy, safety and hygienic products.
(4) Responsibility Towards the Government

 Enterprises must follow the laws and regulations of the country/ state in which it is operating.
 Should pay taxes in right proportion in time.
 Respecting human rights and democratic institution.
 Help to tackle social problem like unemployment, poverty etc

(5) Responsibility Towards the community:

 Companies are part of society and their business activities affect directly or indirectly to the
society. So, the companies should provide goods and services legally, efficiently and profitably to
the society.
 It is a duty of the corporate body to protect the environment as they use the natural resources.
 Create employment opportunities in community.

Management Ethics: It is the discipline dealing with what is good and bad, or right and wrong, or with
moral duty and obligation. It is a standard of behavior that guides individual managers in their works.

Concepts of management ethics

 Obeying legal practices of the country is conforming to ethical values.

 Disclosing fair accounting results to concerned parties and telling the truth is ethical behavior of
managers.
 The golden business principle is ‘Treat others as you would want to be treated’. This will always
result in ethical behavior.
 Managers’ actions should be fair, impartial and equitable to all individuals and groups.
Emerging Business Environment in Nepal:

 Economic system and policy: Private enterprise and entrepreneurs have the freedom to choose
the line of business on the basis of their interest with nominal administrative formalities and
scope. Also, the government has privatized many public enterprises and also withdrawn the
monopoly power of public enterprises.
 Increasing buying power of consumer:
 Political instability:
 Increasing female involvement in economic activities:
 Excessive use of communication technology:
 Changing attitude of consumers;
 Rapid technology change:
 Natural calamities and pandemic:
 Increasing consumerism: