Executive Summary on Business and Government in Society Essay
Business, government and the society are interrelated. Research conducted indicates that none can exist without the other. Business requires the government to set regulations and rules and to provide a conducive business environment. Business needs the society to consume the goods. This interrelationship is an endless one. This research paper was done to explain further the relationship that exists between the government, business and the society. The main study focuses on the importance of business and government in the global society. The research done was based on the review of many literature materials for example the textbooks. According to Kolbi (2008, p.51), he outlines three theories that describe the relationship that exists between government, business and the society. These three theories are: theory of mixed economy, socialism and free market economy. The main objectives of business are maximization of profits having low costs. The government is to set rules and framework for the business and to provide adequate resources and many others. The likely problems associated with business are outlined towards the end of the report. Some of these are uncertainty, the global economy, the credit markets, innovation, government policy and regulations and the technological advancements among others. Business and government are of key significance in our global society.
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The involvement of business, civil societies and the government in providing solutions facing the global society has been in the existence for ages (Kolb, 2008, p.8). However, this idea has acquired more support in the recent past. Due to the urgent need of globalization, there is the necessity to re-evaluate the business and government-society relationship. The expression of business ideas is ever changing and is extraordinarily diverse. Business activities take place every day, every time and everywhere. People earn most of their income from business activities. Business and Government have a close relationship and play very significant in the global society.
Government refers to the body that governs a particular state of country. Society is a collection of individuals. They reside in communities of same values and laws. The society is composed of different interests, culture, attitudes, lifestyle and religions (Kolb, 2008, p.10). Business involves firms or organizations that have a role industrial, consumer or economic activities.
Business forms the cornerstone of prosperity in society (Crane, 2015, p.3). Business companies do create the necessary resources needed for social development in the global society. Business involves the exchange of goods and services between the buyers and the sellers. This report generally describes the role of business and government in the society. It outlines why business is of great necessity to our society. The business sector has provided many benefits to the economical sector of our society. This is also described. It explains the theories and models of business and government relationship. The description of the business and government sector is briefly described. This work also focuses on the effects of government on business and the likely problems associated with business.
The main goal of business is to develop, produces and supply goods and services to customers within the society (Crane, 2015, p.340). This is aimed at achieving profit maximization. The business sector plays an important role in the enhancement of much development in all the sectors of the economy of any country.
Literature Review
Theories of Business, Government and Society relationships
There exists a complex relationship between business and government. This relationship entails both the negative and positive aspects. This is termed as “the public good.” It varies depending on several ideologies put forward by many people. This makes it even more complex to understand. There are three theories that elaborate further on the understanding of the relationships between business, government and the society. These include: theory of mixed economy, socialism and the free market economy (Kolb, 2008, p.51).
Mixed economy refers to a system of economy whereby both the private sector and the state directs the economy. It also directs the planned economies and the market economies. This system argues that private sector should direct the means of ownership. The dominant form of coordination should be the markets (Crane, 2015, p.370). The fundamental force that drives economic activity should be the profit-seeking enterprises and the capital accumulation. The role of the government is the provision of social and economic benefits to its citizens. The government has a considerable indirect influence over the economy. This is realized through the fiscal and monetary policies. These policies are set to counteract the economic setbacks like cases of unemployment. Mixed economy is so complex and there may not be a definite definition. It simply encompasses certain private degree of economic freedom combined with degree of the regulation of markets by the government.
The economic concept of socialism emphasizes on the collective ownership of the means of production and the way of distribution (Beales, 2012, p.80). It eradicates competition within business. This is because regardless of the demand of goods or the cost of production, the items or goods are still solved at predetermined prices (Aras & Crowther, 2012, p.178). It ignores the people’s ability to pay for the goods. Its main objective is the provision of goods for the general welfare of people and the proper distribution in accordance to the needs of people. It stresses on social ownership. It disputes the idea that items preferred by individual or private businesses firms are also important for the entire society. The government should direct and control business on behalf of people. It should also determine the nature of goods to be produced and at what prices (Beales, 2012, p. 85). This solves the problem of tendencies of capitalism that are selfish and dehumanizing.
The free market theory stresses on the investment, production and the distribution of goods and services (Crane, 2015, p.88). The forces of demand and supply determine the decisions of investment, production and the distribution of goods and services. It is in the free market system where the prices of goods and services are determined. It is based on laissez faire which is a theory of Adam Smith. It asserts that there should be minimal or no relationship that is formal between the government and business (Beales, 2012, p.100). It further argues that in the standard living of individuals, there exists a similarity between the economic gains and efficiency with the public goods. Better goods are produced at cheaper prices for people based on the system of demand and supply. This theory postulates that it is only in the market place where business interacts with others in the society.
Business Sector
Every business posses some nature of involvements with groups, people organizations or stakeholders in the society. These people may affect the policies, decisions and the operations of a particular business operation. This is attributed to the diversity in the cultural, political and economical influences created by the people, ideas or the institution (Crane, 2015, p.232). Some are desirable while others are undesirable and unintentional. The profitability and economic success of the business may affect suppliers, customers, owners, employees, the creditors and the local communities. Decision made about business matters may have both the negative and positive impact to the society. The prosperity of a business firm may also be influenced by the actions within the society.
Managers in the business firms must take the key responsibility to achieve or fulfill the tasks of the government. The government may be primarily influenced by business through the political action committees, the public relations and the lobbying groups (Aras & Crowther, 2012, p.155). Lobbying groups for example, trade and business associations are actively involved in the presentation of their ideas at the state and the local levels of government. The existing groups may be supported by business or new groups can be formed for a specific purpose. Businesses, through the political action committees may be greatly get involved in the electoral and government process. For example, in countries like United States of America, the political action committees have the mandate to solicit for funds from stockholders and employees. They then make the contributions to their political candidates.
Government sector
The government is joining hands with other stakeholders to take the strategic role of corporate social responsibility (CSR). The CSR as a concept in government action has a connection with the other challenges that are attributed economic changes and globalization for example, the changing role of business in society. The CSR policies of the government can be evaluated through four types of relationship. These are: CSR in government-business relationships, CSR in public administration, CSR in government-civil society relationships and CSR in government-business-civil society relationships (Giavazzi & Mcmahon, 2012, p. 55). These programmes incorporate the inputs of participation between business, government and the society. The governments in many nations have started to see the CSR programs as a means to enhance development that is sustainable. They also view the programs as a means of creating strategies of national competitiveness. This allows for competition of foreign direct investment. They are also able to have global exports. They also enhance delivery of policy goals that are public.
Relationship of Business, Government and Society
The objectives of business, government and society are interrelated. The main objectives of business are to maximize profits, keep the costs low and to increase the sales. The society’s objectives include good survival, access to clean environment, food, healthcare, shelter and education. The government’s objectives include provision of regulations for a fair and good use of resources and also to offer protection to the citizens (Giavazzi & Mcmahon, 2012, p.81). There are models that describe how these objectives interact. The market capitalism is got within societies that are democratic (Machan, 2011, p. 78). It focuses on an economy that is rooted on demand and supply. The prices of items and services are given in an open and free market system. In market capitalism, the demands of the society and governments added costs determine the objectives of business (Machan, 2011, p.78). The second model is dominance. It argues that just a few people in the society are rich but majority are poor. Business and government is viewed by a common man as something he should be protected from. The government’s role here is the heavy regulation and owning the big business. Business and government forms the top ranking while the society follows from the bottom.
Effects of Government on business
The government may play a positive role in changing the business sector through many ways. First, by creating an enabling and conducive environment. The business sector especially the business firms requires an environment where business activities can thrive well. The firms should not go at a loss. The business policies are to be created by the government. This enhances the business sector. The government may also raise awareness and stimulating public debates (Giavazzi & Mcmahon, 2012, p.102). These are aimed at addressing the issues and challenges within the business sector for example fluctuating prices. Awareness creation is an important tool for the government (Hughes & O’Neill, 2008, p. 113). It helps in the dissemination of information. Its goal is show how business companies can contribute to sustainable development. The government can promote the CSR initiatives through inviting or endorsing wider community support. It may also recognize the CSR in a formal way. The government may also offer proper training of the civil societies and the public authority. This provides more business knowledge thus attracting enhancements within the business sector. Another strategy of developing the business sector is by convening the stakeholders and businesses. This promotes capacity building that is greatly required in the business sector. The government may also provide funds for research. In addition, they can facilitate the networking of researchers. The business sector is also improved through the establishment of the public-private partnerships. Through this, a strong relationship is created between the public business firms and the private firms. Partnership involves a combination of the expertise, resources and competencies of the public sector and the other sectors. It aims at addressing the key issues in CSR. The government can be the initiator, the facilitator and moderator. For example, the government may get into stakeholder dialogue. The government may also take up the duty of mandating. This helps to set and enforce the standards for the performance in business.
The business sector may be affected negatively by the government. Governments often create rules and regulations. These are frameworks in which the businesses are able to compete for each other. These rules are always changed by the government. This in turn forces businesses to change their mode of operation. Examples of the rules include the economic policy. The policy of taxation has effects on the business costs. An increase in the corporation task has similar effects as an increase in the costs (Hughes & O’Neill, 2008, p.98). The business stakeholders can the pass on the task to some consumers by creating higher prices for goods. Another example of economic policy is the interest rates. The government determines the level of the interest rates. An increase in the rate of interests causes a rise in the cost of business. This further leads to a reduction in expenditure of the consumers. This signifies a fall in the business sales. Business is also affected by government spending. For example, if the government spends more on hospitals, there will be an increase in the income of business that will supply the hospitals with drugs and equipment. At times, the government carries out the provision of subsidies for some business activities. There are legal changes that also have profound effects on business. The government in action may change the laws regularly (Hughes & O’Neill, 2008, p.100). This is based on its political policies and interests. The end result is that businesses have to respond to these alterations in the framework. For example, the government may decide that business to cater for the disabled in the society or the government may create the national minimum wage. Tighter rules may also be created which promotes competition in businesses. The government may take direct control over the industries of imports and exports. They achieve this through the implementation of tariffs and quotas (Hughes & O’Neill, 2008, p. 101). Quotas created on imports limits the amount of the import products that enters a country. Lowering or raising tariffs by the government also puts control measures on specific industries.
Problems associated with Business
Despite the positive impacts that business has on the society and government, it faces certain challenges. Uncertainty is the first problem. The business sector experiences many uncertainties. There exists uncertainty in the credit markets, global economy, uncertainty on the effects of new regulations and new technology on business (Mina, 2009, p.63). It results into having a short-term focus in the businesses. Globalization is the second challenge. This involves understanding of the international cultures and markets. The international operations have become harder to understand due to globalization (Hughes & O’Neill, 2008, p.123). The other challenge is innovation. Many business companies are on the struggle to make better processes. It is hard for companies to have more innovative culture in the business sector. Government policy and regulation affects the business sector. People fail to understand the meaning of regulation and government policy in their respective business companies. They fail to understand the implications associated with government policy and regulation. In addition, there is lack of skills to deal with such a challenge. The level of technology is also moving at an alarming rate (Mina, 2009, p.72). People fail to develop long-term strategies of technology while maintaining flexibility. This will solve the challenge of unforeseen technology. The business sector also faces the problem of diversity. People fail to understand the diverse business ideas. These ideas cannot be contained. Business should foster expansion of new ideas. Business faces complexity of things. Business has become more complex even with the use of new technology. The global economy is also widening and creating much more complex business ideas. Better systems-thinking capabilities should be developed about business processes, products and services. There is also information overload (Mina, 2009, p.80). It has become a great burden for companies to have the ability to consume and make sensible conclusions about the available information. This mountain of information ought to be dealt with by technological means and by man power. There are no proper supply chains. There is need to develop a proper strategy for supply chain to ensure the lowest cost and also risk minimization.
The relationship between business, government and society is a symbiotic one (Hughes & O’Neill, 2008, p.51). They all exist for one another. Business does not only focus on making profits but also focuses on ensuring sustainable development and satisfaction of other stakeholders. The government is not only concerned about business regulation but is also involved within the market sector. Business relies on the society for the provision of inputs such as materials and human beings. Business requires the society to be the consumer of the goods and services. On the other hand, the society benefits from business through the supply of needs. The society is well organized and protected by the government and business. The government helps in the provision of a conducive environment for business activities. All these three are interdependent and interconnected to each other in the global society.
BEALES, H. (2012). Business and government relations: an economic perspective. [Place of publication not identified], Kendall Hunt.
CRANE, A. (2015). Business ethics. [Place of publication not identified], Oxford univ Press.
GIAVAZZI, F., & MCMAHON, M. (2012). The households effects of government consumption. Cambridge, Mass, National Bureau of Economic Research. http://papers.nber.org/papers/w17837.
HUGHES, O. E., & O’NEILL, D. (2008). Business, government and globalization. Basingstoke [England], Palgrave Macmillan.
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