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AssignmentBusiness Environment Interaction Matrix Interaction between Economic and Environmental Factors

INTRODUCTION The objective here is to explore the interactions between economic growth and change, on the one hand, and changes in social, environmental, political and population variables, on the other. These interactions are likely to affect social and economic well-being, for better or worse, and very possibly quite strongly. Economic Growth could be supported and enhanced or it could be undermined, even reversed. The economy is embedded in society, after all; the objective will be to show this in a measurable way, and to show as precisely as possible why and how this matters. Keeping the analysis simple, economies here will be assumed to be made up of sectors industry, agriculture, services and social classes workers, landlords, business owners, bankers. There are economic interactions between sectors and social classes; analyzing these is part of the theory of growth and fluctuations. But we want to focus on a different kind of interaction, also involving both sectors and classes, but this time between economic advances and the resulting pressure or development of social variables. When sectors and classes interact along the social dimensions, we shall argue, it is likely to change the patterns of development and it may lead to stagnation and failure to develop.

Economic Economic Growth: GNP levels and growth, level and growth of employment, standard measures of sectoral growth; human development index, for comparison with purely economic. Environmental issues Environment: Pollution of soil, waste disposal air pollution gases and particulate matter; acid rain; waste heat and energy discharge and the effects on climate; water quality and availability. Social issues Socialization of Adolescents: preparing adolescents for adult working life, contact between adolescents and non-parental adults, apprenticeship and other training programs, school drop-out rates, measures of substance abuse. Education : literacy rates, school enrollments, education spending as a percentage of government budget, of GNP, primary, secondary, and college graduation rates, research programs, specialized training Interaction between economic and social variables 291 programs, newspapers and books published, library book loans, net school enrollment male and female (primary, secondary, tertiary), literacy, ratio of female to male literacy. Health: infant mortality, mothers condition in childbirth, life expectancy, morbidity and prevalence of disease, access to hospitals, availability of medicines, hospitals, doctors per thousand population, indicators of public health.

Household Standard of Living : not only the level of the average standard of living, but also its distribution the degree of inequality. Under 5 infant mortality, shared household income ratio between highest 20% and lowest 40%, population using improved drinking water and sewage facilities. Public goods, crime rates by income distribution, radios and televisions per capita. Gini coefficients will give an overall picture; poverty rates for different poverty levels, and measures of concentration of wealth and ownership of land will portray the extremes. Political Social Infrastructure: transportation, communications, police and the criminal justice system, public infrastructure - roads, bridges, sewers and water supply, harbours, airports, garbage and waste management; public administration, land management and zoning, military and defense spending. Effective and Democratic Government : Representative and responsive government, civil order, size of middle class, percentage voting, effectiveness of the legal system and the courts, training of the police, the working of a free press, human rights and religious freedom. Demographics Population : Size, growth, age distribution, median age, birth and death rates, natural reproduction rates, fertility, % under 15, % over 65, life expectancy at birth. Sex ratios, if available.


PopP, AdlSoc and Educ together give us people along with their skills, what they know and what they can do. EconG and EnvH tell us what is being done, what is being produced, who is working, in what ways, and with what effects on the world in which the society is set. SocInf measures what the state and the society as a whole provides as a framework to undergird and regulate social life and economic activity. Health and HStndL show how what is being produced benefits the people, in both public and private dimensions. It gives us a measure of the benefits being delivered and their distribution. And finally EffGov tells us how order is maintained and disputes resolved. THE TRANSFORMATIONAL GROWTH MATRIX To examine these questions we must set up quite a general framework, in which we can study how different kinds of economic change can interact in various ways with many aspects of the social order. But in what follows we will keep the discussion of the purely economic side as simple as possible, allowing us to define and examine a wide range of social, political and demographic variables. We will stick to Straightforward cases of economic growth resulting from capital accumulation and technological advances. At this point we will present a full spectrum of non-economic variables, though later we will simplify

this, too. Even so, we will see that the interaction between the economic side of a country and the other aspects of its social order turns out to be complicated and important. To display the variables and their interactions in the most general way, we will set them out as a matrix, in which the coefficient will indicate the relationships. (Since we are examining growth, we call this the Transformational Growth Matrix.) First we will list and describe the variables to be considered. These will appear in the row and column vectors. Usually a variable will be a composite, made up of a number of different but related elements that tend to move together, so that it can be represented by ppropriate proxies.4 Measurement scales will have to be chosen or developed, and they will necessarily be approximations. However, we will not deal with the empirical issues here. Our aim is to present the approach, and outline the kinds of relationships that we can see between economic advances and social, political and demographic variables.


The economic environment of business exercise a strong influence on the noneconomic environment of business just as the non-economic environment influences the economic environment. The economic environment is, thus, both exogenous and indigenous, it determines as well as it is determined by the noneconomic environment. Let us consider a few specific interactions.

The social environment affects and gets affected by the economic environment of business. Social attitudes towards business and management determine how many people get attracted to private business as an activity and to management as a career. If business gets social sanction as a respectable profession, the occupational structure of a country will reflect a sizable category of professional mangers. On the other hand, if more and mroe of the active labour force joins professional management, the social attitude towards business and its management also changes. Let us take another example : Social movements largely determine the economic system. If the workers cultivate an attitude of confrontation, rather than cooperation, with management, a repressive economic system may be needed to cope with industrial disorder. On the other hand, if the attainment of rapid economic growth is the target, the management must bring about a labour productivity revolution and the wages may be base don productivity of labour rather than profitability of business. To operate on productivity-based wages is cooperate on the system of incentives and positive attitudes of labour. The

attainment of a specific economic objectives is, thus, conditioned by a specific social attitude and discipline. The educational cultural environment and the economic environment of business are also interdependent. The state of economic development acts as a decisive factor in the choice of a system of education. For example, only a relatively high-income country can afford to impart costly higher education in science and technology. The system of education, on the other hand, may be responsible for a given economic environment. For example, the emphasis on education in the arts and a lack of vocational course may be held responsible for the economic problem of unemployment in many countries. At the corporate level, the interdependence between educational and economic environmental factor may at times take the form of a vicious circle. For example, a business concern whitlow profits may not find resources of finance management training or executive development programme. As a result, there may be a shortage of highly qualified and trained management personnel. Thus, lack of trained competent managers may lead to business inefficiency. The politico-legal environment and economic environment of business are also interlocked to such an extent that we sometimes think of political economy of business. In a situation of political stability, business enterprises happen to be forthcoming and businessmen are willing to take more economic risk. But if there is political instability, business uncertainties multiply and, therefore, entrepreneurs may not like to take up new business ventures. The state of business in Punjab during the period of terrorism is a recent example. The ideology of the ruling party influxes the economic system. The ruling party which believes in using socialism as a strategy and nationalization of enterprises as a tactic to strengthen the economy may not be favorably viewed by the private business sector. On the other hand, sometimes a series of political legislations may be necessary to cope with the economic environment. To fight economic and industrial recession, the strategy of streamlining the administration and simplifying the procedure maybe adopted. In fact, different legislations of the Government (like MRTP Act, FERA, and Urban Land Ceiling Act) are often politicoeconomic in character. This is borne out by Ana analysis of the content and intent

of different legislations and political announcements. Also the state of economic environment decides the continuity or discontinuity of a particular political administrating. The state of the political environment, in its turn, decides the pattern of economic legislations. The historical environment and the economic environment of business are also interdependent. The print (economic) environment of business can be treated as a legacy of its past (historical) environment. Every business has a history, and history always has a lesson to teach. As such, the repent is a reflection of the past, and the repent can also be handled in terms of the experiences of the past. A number of examples may be quoted. The present economic environment of a country is partly determined by the available structure of industry in that country. These industries can be traced back to the colonial pattern of investment in the past. The British Empire was interested in the colonies so that it could easily (a) get the raw materials for its industries, and (b) dump the finished manufactured products in the colonial markets. The colonies, thus, supplied the market as well as the raw materials. In other words, the economic environment of business in the newly independent nation-states is the outcome of the colonial infrastructure which those countries had in the past. Similarly, history is a record of events and a storehouse of lessons which can provide guidelines for present economy policy deisms. The achievements of the Five-Year Plans in the past may provide a direction to the formulation and implementation of the current Five-Year Plan of an economy and the present performance of a plan will decide the future course of planning. It suggests that the environments factors are interrelated on the time scale too. Finally, we come to the interaction between the physical environment of a country and the economic environmental business in that country. A number of legislations have been enacted in many countries to conserver natural resources and to preserve natural the physical environment. These environment allegations may impose a constraint on the expansion of a given business concern like a factory. Thus environmental considerations limit the expansion activities of a business firm. On the other hand, the size of a plant, the scale of output, the organization of firms, the structure and action of industries may lie at the root of

either environmental improvement or environmental delay. Thus, the social responsibility of business today means taking care of the environmental impact of various economic and technological activities. To the extent this social responsibility is not discharged, laws rating to business and industry will increasingly turn out to be laws relating to the physical environment of business. From the standpoint, one may feel that in that in addition to the existing functional Ares of management (prod finance, personnel and marketing), we are soon going to have a few area of environment. The point remains that the physical environment as a factor is becoming so significant day by day that it may be treated as a critical element within the economic environment of business. In Interaction Matrix below we have listed the critical elements of the noneconomic environment along the rows and the critical elements of the economic environment along the columns thus yielding a seven by five matrix. When a given element of the economic environment influences a given element of the non-economic environment, you draw a short line vertically, and when an element of the non-economic environment influences a given element of the economic environment, you draw a short line horizontally. Thus in case of interdependence among the environmental elements, you end up with a plus sign which suggests a two-way interaction. The Interaction Matrix serves as ready eference for understanding environmental relations and relations.