Models of Business Environment

Question 1

explain why we need the models.

Answer 1

even though they are highly theoretical (since they developed through time with observation), they are needed to understand the environment a company works in and how to best gain strategic advantage.

Question 2

define the market capitalism model (4 points)

Answer 2

1. society directly influences the market and indirectly the business
2. ethical duty solely toward the shareholders, but still some social responsibility
3. government = laissez faire
4. assumption of perfect competition (many buyers and suppliers, lots of private equity, gov is limited and main motive is self-interest)

Question 3

define the dominance model (3 points)

Answer 3

1. the highest dominance is held by environmental forces.
   government has a direct impact on businesses and society.
2. no ethical duty - exploiting workers, only caring about profit (no social responsibility)
3. government regulation is definitely in favour of businesses (at least implicitly)

Question 4

define the countervailing forces model (3 points)

Answer 4

1. forces are environmental catalysts, the public, corporations and government. they all influence each other.
2. social responsibility of businesses: enacting change within the society through interaction with the government (lobbying the gov and public)
3. need for regulation: high

Question 5

define the stakeholders model (4 points)

Answer 5

1. primary and secondary stakeholders affect the business. primary are affected directly and secondary indirectly.
2. ethical duty: welfare of each and every stakeholder should be the goal.
3. long-term view is needed for social responsibility
4. government is one of the stakeholders, so there is need for regulation (??)