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How The Social Environment Affects Business: Examples & Impact

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  • 0:06 Social Environment Defined
  • 1:42 External Social Environment
  • 4:45 Internal Social Environment
  • 5:30 Diversity & Groupthink
  • 7:15 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
Businesses operate in a society. In fact, large organizations are mini-societies unto themselves. In this lesson, you'll learn some of the factors that make up the external and internal social environment of a business.

Social Environment Defined

The social environment consists of the sum total of a society's beliefs, customs, practices and behaviors. It is, to a large extent, an artificial construct that can be contrasted with the natural environment in which we live.

Every society constructs its own social environment. Some of the customs, beliefs, practices and behaviors are similar across cultures, and some are not. For example, an American traveling to Britain will find many familiar practices but not so much if traveling to China.

This social environment created by a society-at-large in which a business functions can be referred to as its external social environment. If a business operates in a multicultural society, then the social external social environment is even more complicated because the environment will consist of diverse sub-populations with their own unique values, beliefs, and customs.

A business also has its own social environment. We can refer to this as its internal social environment, which is simply the customs, beliefs, practices, and behaviors within the confines of the business. A business has much more control over its internal social environment than it does with its external social environment.

Effects of External Social Environment

A business must utilize and adapt to its external social environment, or it will not survive. A business must be keenly aware of the society's social preferences regarding its needs and wants. These preferences and needs and wants will be influenced by a population's values, beliefs, and practices.

Let's look at some examples. A change in beliefs and values towards energy conservation and global climate change may create a change in consumer preference away from gas guzzling SUVs to hybrid sedans. Some cultures treat the meal as a long social event, and fast food just won't cut it. Social preferences relating to fashion are constantly changing. Skirt lengths go up and down depending upon the years, as do the preference for single-breasted and double-breasted suits.

If a business refuses to adapt to changing social preferences, its sales will drop, and it will fail. Of course, sometimes the change in social preferences may be so large that a business simply can't adapt. For example, a social movement led to the outlawing of alcohol in the early 20th century, which was known as Prohibition. During Prohibition, it was illegal to sell alcohol. Distilleries were put out of business until Prohibition was repealed.

While there are risks with social change, there are also opportunities. Businesses often try to influence social values through the use of marketing, advertising and targeted public relations strategies. Marketing campaigns are used in an attempt to create trends. The fashion industry is a prime example. Public relation campaigns are often used to build up or repair a business' image.

For example, BP launched a massive public relations campaign to improve its image after a massive oil leak in the Gulf of Mexico caused by offshore drilling. Fast food restaurants may include healthier choices on their menus and sponsor health-related activities.

Broader social values will also affect the success of a business. A society that values higher education will provide a better workforce that will lead to more productivity and innovation. Likewise, a society that supports investment in public infrastructure will have access to good transportation and communication systems. And if the social values of a community include a hard work ethic, a business will have access to productive workers and a population that has money to spend on goods and services.

Internal Social Environment

A business also creates a social environment consisting of its own organizational values, norms, customs and practices. Many of these values, norms, and beliefs will mirror the external social environment, but some will be unique to the organization.

Businesses need to operate as a cohesive unit, so it's important that they build a strong and productive organizational culture. It's also important to ensure that the culture is stable and positive. Thus, a business should carefully monitor the relations between its members to detect any hostility or other dysfunction that needs to be corrected.

Diversity and Groupthink

The internal social environment of a business is also affected by current changes in the contemporary workforce. The contemporary workforce has a higher percentage of women, minority racial groups and elderly in it than it did just ten years ago. Each of these subgroups bring in their own sets of values and beliefs with them to the workplace. A business will be able to integrate some of this diversity to make it strong.

Additionally, a business must also be cautious to follow the law and not engage in adverse employment actions relating to hiring, firing, promotion and benefits based on race, sex, age, religion and disability. In other words, a smart organization will embrace and take advantage of diversity and not run away from it.

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