Business, government, and society interact and influence each others' specific objectives and goals. In this lesson, you will learn the three different models that can impact how they influence each other.
Business, Government, and Society
Business, government, and society have similar goals and objectives. How can all three affect each other?
Let's make sure that you have an understanding of each term. Society is a group of individuals who reside in communities that have shared values and laws. In addition, society is made up of different religions, cultures, interests, attitudes, and lifestyles. Business consists of organizations that participate in consumer, industrial, or economic activities for a purpose, such as profit or non-profit means. Government refers to the governing body of a nation, state, or local community.
In this lesson, you will learn how government and society affects business. First, we need to examine the objectives of business, government, and society to see how they intersect in order to understand their symbiotic relationship. We will use N&N Chocolates, a manufacturer of candy bars, as our example company. Our society will be the surrounding area of N&N Chocolates' customer base. Lastly, government will be represented by the U.S. government.
N&N Chocolates' main business objectives are to keep their costs low, increase sales, and maximize their profits. Society's objectives focus around survival, clean environment, access to food, health care, education, shelter, and opportunity to succeed. Lastly, government's objectives are to provide regulation to instill a fair, safe use of resources and to protect citizens against things like unethical business.
Each of the objectives is interrelated. For example, society wants food, and N&N wants society to choose their products as their food objective. The government has to ensure that N&N operates ethically to not harm the environment or the consumers. There are three different models that can explain how business, society, and government's objectives interact.
The first model is called market capitalism and is found in democratic societies. The definition is based on an economy that is focused on supply and demand, where the prices of goods and services are set through an open free market system. For example, N&N would love to sell their chocolate bars for $20.00 each. Unfortunately, society's demand for chocolates is high, and consumers are not willing to pay such a high price, especially since society can eat many other options to fulfill their food objective. They could order two pizzas for $20.00 instead or purchase a competitor's chocolate bar for only $1.00. In market capitalism, the objectives for businesses are determined by society's demand, as well as government's added costs, such as taxes.
Dominance is the second model that can be used to explain business, government, and society. This model is based on the idea that a few people are rich at the expense of many. It is also known as populism, where the common man views business and government as something to be protected from. Government's part in the dominance model is the idea of heavy regulation and owning big business. Business and government are ranked at the top of the pyramid, while the rest of society is beneath them.
N&N faces countless new regulations from the government that is used to keep big business under ethical control. Consumers tend to view N&N as big business and the 'bad guys' out just to make a profit under this model. Recent public sentiment, or public opinions, have been negative towards big business due to unethical nightmares caused by companies, such as Enron.
Countervailing forces is also based on a democratic ideal. The premise is an open society where society and government both take a hand in building relationships with business. For example, N&N uses lobbying and influence to affect regulations in government. The government uses regulations and leadership to maintain control over N&N and protect society.
Lastly, society demands N&N offer products and services that fit with their values. Countervailing forces are areas that can impact the symbiotic relationships of society, government, and business, such as war, weather, technology, or cultural change. These forces can alter the relationship, such as when N&N faced a drop in profits due to the emergence of 3-D printer technology, which caused consumers to print their own personal chocolate bars at home for half the price.
Business, government, and society interact and influence each other through three different models:
Market capitalism is based on an economy that is focused on supply and demand, where the prices of goods and services are set through an open free market system.
Dominance is based on the idea that a few people are rich at the expense of many. It is also known as populism, where the common man views business and government as something to be protected from.
Countervailing forces are areas that can impact the symbiotic relationships of society, government, and business such as war, weather, technology, or cultural change.
You'll have the ability to do the following after this lesson:
- Define society, business and government
- Explain how these three interact through the models of market capitalism, dominance and countervailing forces