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Business-Government-Society

Chapter One
Introduction to the Field

Business-Government-Society
Why do we need to study this field?
Examine the interplay of business, government and society and its effect on management decision making.

Business
Satisfy human needs Create necessary goods and services For a PROFIT Sole Proprietorship, Partnerships, Corporations, and LLC/LLP

Government
The structures and processes in society that authoritatively make and carry out policies and rules Local, State, National, International Focus on the economic and regulatory powers

Society
A network of human relations Three interacting elements:
Ideas, values, norms Institutions Material Things

Why Study the BGS Field?


To be successful a company/manager must be responsive to both the economic and non-economic environments Society will punish and constrain those who dont

The Social Contract


Defines broad relationships between business and society Partly expressed in statutes and laws
Also resides in social value Sound vague to you?

4 Models of BGS Relationships


Simply provide different perspectives, different views Attempt to see the problem from anothers perspective

Market Capitalism Model

The Market Capitalism Model


Focuses on the economic market, ignores the social environment Goal of management is to maximize shareholder wealth Based on Adam Smiths Free Market System see handout

The Market Capitalism Model Adam Smiths Influence


Markets are extremely efficient
Government interference in markets lessens that efficiency

Greed is good! Everyone should act in their own self-interest

The Market Capitalism Model Assumptions


Informed consumers who make rational decisions People exercise moral constraint Basic institutions such as law and banking exist Many producers in a common market

The Dominance Model

The Dominance Model


Wealth and power are concentrated in the hands of a few Undemocratic Shows defects and inefficiencies of market system Market forces are inadequate to ensure ethical management

The Countervailing Forces Model

Countervailing Forces Model


Complex forces at work, none of which is dominant Varies from the Market Capitalism Model because it shows business as exposed directly to the influences of non-market forces

The Countervailing Forces Model


Four Characteristics
Business is deeply integrated in society Business is a major initiator of change in government and society Public support of business is dependent on businesses adapting to macro-environment The environment is constantly changing

The Stakeholder Model

The Stakeholder Model


Stakeholder those for whom the firms operations have benefited or burdened Primary and Secondary Stakeholders Public anyone who thinks they have an interest in your business

The Stakeholder Model


Viewpoint each stakeholder must be considered, not just profit maximization Says management has a moral duty to raise its gaze above profits

The Stakeholder Model


Criticism of the Stakeholder Model
Not realistic Idealistic Who is a legitimate stakeholder and what are they entitled to? What objective measure do you use to measure performance?

Review of Chapter One


What are social values and norms? What is the social contract? What is the major focus of the Market Capitalism Model? What does the Dominance Model show the defects and inefficiencies of? Primary vs. Secondary Stakeholder?

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