Countervailing Forces Model and Stakeholder Model – Global perspective of BGS to Managers – Models of BGS relationships – Market Capitalism Model. .. o Render advice and counsel top management o All other functions required by. FOUR MODELS OF THE BGS RELATIONSHIP . The countervailing forces model, shown in Figure , depicts the BGS relationship as a flow .. Thus, a consulting firm that helps American managers avoid social blunders in. The market acts as a buffer between business and nonmarket forces. Four Models of the BGS Relationship The Countervailing Forces Model.
Those who subscribe to the model believe that corporations and a powerful elite control a system that enriches a few at the expense of the many.
Such a system is undemocratic. In democratic theory, governments and leaders represent interests expressed by the people, who are sovereign. Proponents of the dominance model focus on the defects and inefficiencies of capitalism. They believe that corporations are insulated from pressures holding them responsible, that regulation by a government in thrall to big business is feeble, and that market forces are inadequate to ensure ethical management.
Unlike other models, the dominance model does not represent an ideal in addition to a description of how things are. For its advocates, the ideal is to turn it upside down so that the BGS relationship conforms to democratic principles. In the United States, the dominance model gained a following during the late nineteenth century when large trusts such as Standard Oil emerged, buying politicians, exploiting workers, monopolizing markets, and sharpening income inequality.
Beginning in the s, farmers and other critics of big business rejected the ideal of the market capitalism model and based a populist reform movement called populism on the critical view of the BGS relationship implied in the dominance model. Populism is a recurrent spectacle in which common people who feel oppressed or disadvantaged in some way seek to take power from ruling elite that thwarts fulfillment of the collective welfare.
In America, the populist impulse bred a sociopolitical movement of economically hard-pressed farmers, miners, and workers lasting from the s to the s that blamed the Eastern business establishment for a range of social ills and sought to limit its power. This was an era when, for the first time, on a national scale the actions of powerful business magnates shaped the destinies of common people. Some displayed contempt for commoners.
Vanderbilt told a reporter during an interview in his luxurious private railway car. The next day, newspapers around the country printed his remark, enraging the public. The populist movement in America ultimately fell short of reforming the BGS relationship to a democratic ideal. Other industrializing nations, notably Japan, had similar populist movements.
Marxism, an ideology opposed to industrial capitalism, emerged in Europe at about the same time as these movements, and it also contained ideas resonant with the dominance model.
In capitalist societies, according to Karl Marx, an owner class dominates the economy and ruling institutions. Many business critics worldwide advocated socialist reforms that, based on Marx's theory, could achieve more equitable distribution of power and wealth.
In the United States the dominance model may have been most accurate in the late s when it first arose to conceptualize a world of brazen corporate power and politicians who openly represented industries.
However, it remains popular. Ralph Nader, for example, speaks its language. Over the past 20 years, big business has increasingly dominated our political economy. In recent years fear of transnational corporations has given the dominance model new life in a global context. It suggests complex exchanges of influence among them, attributing dominance to none. This is a model of multiple or pluralistic forces. Their strength waxes and wanes depending on factors such as the subject at issue, the power of competing interests, the intensity of feeling, and the influence of leaders.
The counter- with democratic traditions.
The 4 Basic Models of the BGS Relationship Essay
Many important interactions implied in it would be evaluated as negligible in the dominance model. What overarching conclusions can be drawn from this model? Business is a major initiator of change in society through its interaction with government, its production and marketing activities, and its use of new technologies. Broad public support of business depends on its adjustment to multiple social, political, and economic forces. Incorrect adjustment leads to failure.
This is the social contract at work. BGS relationships continuously evolve as changes take place in the main ideas, institutions, and processes of society.
The Stakeholder Model The stakeholder model in Figure 1. Stakeholders are those whom the corporation benefits or burdens by its actions and those who benefit or burden the firm with their actions. A large corporation has many stakeholders. These can be divided into two categories based on the nature of the relationship.
But the assignments are relative, approximate, and inexact. Depending on the corporation or the episode, a few stakeholders may shift from one category to the other. Primary stakeholders are a small number of constituents for which the impact of the relationship is immediate, continuous, and powerful on both the firm and the constituent.
They are stockholders ownerscustomers, employees, communities, and governments and may, depending on the firm, include others such as suppliers or creditors.
Secondary stakeholders include a possibly broad range of constituents in which the relationship involves less mutual immediacy, benefit, burden, or power to influence. Examples are activist groups, trade associations, and schools. Exponents of the stakeholder model debate how to identify who or what is a stakeholder.
Some use a broad definition and include, for example, natural entities such as the earth's atmosphere, oceans, terrain, and living creatures because corporations have an impact on them. Others reject this broadening, since natural entities are represented by conventional stakeholders such as environmental groups. Some include competitors because, although they do not work to benefit the firm, they have the power to affect it. At the furthest reaches of the stakeholder idea lie groups such as the poor and future generations.
But in the words of one stakeholder advocate, stakeholder theory should not be used to weave a basket big enough to hold the world's misery. The stakeholder model reorders the priorities of management away from those in the market capitalism model. There, the corporation is the private property of those who contribute its capital. Its immediate priority is to benefit one group— the investors. The stakeholder model, by contrast, is an ethical theory of management in which the welfare of each stakeholder must be considered as an end.
Business Government and Society
Stakeholder interests have intrinsic worth; they are not valued only to the extent that they enrich investors. Critics of the stakeholder model argue that it is not a realistic assessment of power relationships between the corporation and other entities. It seeks to give power to the powerless by replacing force with ethical duty, a timeless and often futile quest of moralists. In addition, it sets up too vague a guideline to substitute for the yardstick of profits for investors.
With respect to corporate actions, laws and regulations protect stakeholder interests. Creating surplus ethical sensitivity that soars above legal duty is impractical and unnecessary. Some puzzles exist in stakeholder thinking. It is not clear who or what is a legitimate stakeholder, to what each stakeholder is entitled, or how managers should balance competing demands among a range of stakeholders. Yet its advocates are compelled by two arguments. First, a corporation that embraces stakeholders performs better.
A corporation better sustains its wealth-creating function with the support of a network of parties beyond shareholders. Put bluntly by one advocate of the stakeholder perspective, executives ignore stakeholders at the peril of the survival of their companies. Irrespective of academic debates, in practice many large corporations have adopted methods and processes to analyze their stakeholders and engage them.
Henry Adams defined a historical force as "anything that does, or helps to do, work. Change in the business environment is the work of nine deep historical forces or streams of related events discussed below. The first historical force is the industrial revolution, a powerful force that grips the imagination of humanity. The term industrial revolution refers to transforming changes that turn simple economies of farmers and artisans into complex industrial economies.
In thousands of years before the industrial takeoff of Great Britain in the late eighteenth century, there had been no widespread, sustained economic growth to raise living standards. The vast majority of the world's population was mired in poverty.
Industrial transformation requires specific conditions, including a sufficiency of capital, labor, natural resources, and fuels; ready transportation; strong markets; and ideas and institutions that support the productive blend of these ingredients. Britain came first because it was first to have the right mix of social, political, and economic supports. It was an open society that allowed social mobility and encouraged individual initiative.
Its parliament embodied values of political liberty, free speech, and public debate. Perhaps consequently, Britain was the source of scientific advances and inventions such as the steam engine that liberated energy s in the nation's massive coal deposits.
Its climate supported agriculture and its island geography put it at the hub of sea routes for world trade. From time immemorial, status distinctions, class structures, and gaps between rich and poor have characterized societies. Inequality is ubiquitous, as are its consequences-envy, demands for fair distribution of wealth, and doctrines to justify why some people have more than others. The basic political conflict in every nation, and often between nations, is the antagonism between rich and poor.
As the industrial revolution accelerated the accumulation of wealth, it worsened the persistent problem of uneven distribution.
Explosive economic growth widened the gap between rich and poor around the globe. In the international arena, the nation-state is an actor formed of three elements, a ruling authority, citizens, and a territory with fixed borders.
The modern nation-state system arose in an unplanned way out of the wreckage of the Roman Empire. The institution of the nation-state was well-suited for Western Europe, where boundaries were contiguous with the extent of languages.
However, the idea was subsequently transplanted to territories in Eastern Europe, Southwest Asia, and the Middle East, partly by force of colonial empires and partly by mimicry among non-Western political elites for whom the idea had attained high prestige.
An ideology is a set of reinforcing beliefs and values that constructs a worldview- The industrial revolution in the West was facilitated by a set of interlocking ideologies, including capitalism, but also constitutional democracy, which protected the rights that allowed individualism to flourish; progress, or the idea that humanity was in upward motion toward material betterment; Darwinism, or Charles Darwin's finding that constant improvement characterized the biological world, which reinforced the idea of progress; social Darwinism, or Herbert Spencer's idea that evolutionary competition in human society, as well as the natural world, weeded out the unfit and advanced humanity; and the Protestant ethic, or the belief that sacred authority called for hard work, saving, thrift, and honesty as necessary for salvation.
Ideologies are more than the sum of sensory perception and rational thought. They fulfill the human need for concepts and categories of meaning that explain daily life.
Ideologies in accord with experience and current conditions often spread widely. Their belief systems lead adherents to feel a collective identity and to follow common norms that direct social behavior, thereby promoting cooperation and stability. And they give institutions that represent them, such as churches, and corporations, the power to interpret events and resolve human problems.
Leaders have brought both beneficial and disastrous changes to societies and businesses. Alexander imposed his rule over the ancient Mediterranean world, creating new trade routes on which Greek merchants flourished. Adolf Hitler of Germany and Joseph Stalin in the Soviet Union were strong leaders, but they unleashed evil that retarded industrial growth in their countries.
There are two views about the power of leaders as a historical force. One is that leaders simply ride the wave of history. When oil was discovered in western Pennsylvania inJohn D.
Rockefeller was a young man living in nearby Cleveland, where he has accumulated a little money selling produce. He saw an opportunity in the new industry. His remarkable traits enabled his to domineer over a rising industry that reshaped the nation and the world. Yet is there any doubt that the reshaping would have occurred nonetheless had Rockefeller decided to stick with selling lettuce and carrots. Scholars are reluctant to use the notion of chance, accident, or random occurrence as a category of analysis.
Yet some changes in the business environment may be best explained as the product of unknown and unpredictable causes. No less perceptive a student of history than Niccolo Machiavelli observed that fortune determines about half the course of human events and human beings the other half.
We cannot improve on this estimate, but we note it. Using this measure, inequality becomes greater as the percentage figure rises toward The basic population trend throughout human history is growth. As shown in Figure 2. After eight more centuries, population growth began a rapid new acceleration in the late s that turned into a skyrocketing rise through the twentieth century.
This astonishing growth had two causes, both related to the industrial revolution. First, advances in water sanitation, hygiene, and scientific medicine reduced deaths from infectious disease, leading to rapid mortality decline.
Second, mechanized farming expanded the food supply to feed record numbers. Throughout recorded history new technologies and devices have fueled commerce and reshaped societies. In the s the printing press was an immediate commercial success, but its impact went far beyond the publishing business. Over the next years the affordable, printed word reshaped European culture by creating a free market for ideas that undermined the doctrinal monopoly of the Catholic Church.
Printed pamphlets spread Martin Luther's challenge to its scriptural dogma and brought on the Protestant Reformation. Galileo was placed under house arrest in Florence for holding heretical views about astronomy, but his theories prevailed because they were published in Protestant Holland.
A Europe opened to the exchange of new ideas based on experience and observation was primed for the scientific revolution. The invention of the steam engine in the late s and its widespread use be-ginning in the early s, along with increased use of the waterwheel and new iron-making methods, triggered the industrial revolution. Globalization occurs when networks of economic, political, social, military, scientific, or environmental.
In the economic realm, globalization occurs when nations open themselves to foreign trade and investment, creating world markets for goods, services, and capital. The current rise of such a system began after World War II, when the victor nations lowered trade barriers and loosened capital controls. Where it was transplanted, nations were often irrationally define and boundary lines split historic areas of culture, ethnicity, religion, and language.
Key Environments of Business 1. Continuing long-term growth in output, consumption, and investment characterizes the global economic environment. Growth briefly slowed in and because of economic repercussions from the September 11,terrorist attacks and the sudden acute respiratory syndrome epidemic in Asia.
However, after a rough patch of several years the world economy picked up again, led by recovery in the United States and rapid expansion in china and India. Underlying this strong and continuing overall economic growth are two basic sub trends. The first is raising trade. This spectacular rise has been enabled by a trading system created at the end of World War II. Nations within the system have been encouraged to lower tariffs and other trade barriers because other member nations promised to reciprocate this openness.
The system has evolved into an institution called the World Trade Organization WTO that embodies an ongoing process of negotiation and trade liberalization in which nations now participate.
In addition, several hundred regional trade agreements promote freer exchange among countries that are parties to them. The second sub trend underlying continued economic growth is a major expansion of foreign direct investment FDI by transnational corporations. Foreign direct investment is capital investment by private firms outside their home countries.
Many foreign affiliates are acquired by merger and acquisition and between and there was an unprecedented burst of cross-border merger activity both in the number of deals and in their dollar value. It also reveals that most investment flows to and from developed nations. The Technological Environment Today new scientific discoveries create a business environment filled with mind-ling technology. For example, nanotechnology allows manipulation of objects the size of atoms.
New materials and tiny machines invisible to the naked eye can be engineered at the molecular level. Semiconductor makers can now make microchips with components the size of one ten-millionth of a meter. When this ability is harnessed to practical manufacturing, it will create chips that operate on an atomic scale comparable to the photosynthesis process in plants.
Users with such circuits could store all information in the Library of Congress in the space of a sugar cube. Fuel cells and methods of harnessing renewable energy may dramatically reduce use of fossil fuels. Digital telecommunications technology now creates a global network of computers, software, and electronic devices. This network has led to radical innovations such as open sourcing, which allows numbers of individuals to participate in the creation of complex knowledge products.
Wikis, or Web sites open to collaborative editing by multiple or innumerable parties, have been used to create browsers, encyclopedias, dictionaries, and news sites. The Cultural Environment A culture is system of shared knowledge, values, norms, customs, and rituals acquired by social learning. No universal culture exists, so the environment of a transnational corporation includes a variety of cultures, each with differing peoples, languages, religions, and values.
On one level, this variation causes conflicts of business custom, and managers in foreign countries must absorb both subtle and striking differences in employee loyalty, group versus individual initiative, the place of women in organizations, ethical values, norms of giving and gratuities, attitudes toward authority, the meaning of time, and clothing worn in business settings.
The consequences of cultural differences are often trivial, even humorous. Thus, a consulting firm that helps American managers avoid social blunders in foreign countries counsels them not to force the custom of name tags at business meetings on Europeans, who feel they are being treated as schoolchildren when wearing them. However, consequences can be serious too. In France, the notion is widespread that American fast food causes obesity and, worst of all, is bad tasting and insults the refined French palate.
President Jacques Chirac said that national ways of eating should be preserved in the face of an assault by cross-Atlantic invaders; and a minister of agriculture once said that the United States was "home to the world's worst food.
A mob wrecked one of its restaurants and another was bombed, killing an employee. On a deeper level, although no uniform world culture exists, there is a fundamental divide between the culture of Western economic development and the rest of the world's cultural groupings.
The culture of the advanced West promotes a core ideology of markets, individualism, and democratic government. Islamic nations and China see spreading Western values as a form of cultural aggression. They have resisted adopting them, particularly participatory forms of government.
The 4 Basic Models of the BGS Relationship Essay Example for Free
Over the last half of the twentieth century, some cultural values in developed nations began to shift, creating changes in the global business environment.
In these societies, beginning in the s, traditional values based on historical realities of economic scarcity were transformed. In their place came what are called postmodern values, or values based on assumptions of affluence. For example, in older industrializing societies materialism was a dominant value. People sacrificed other values such as leisure time and environmental purity to make money and buy necessities, then luxuries.
While consumption is still a powerful value in developed nations, their affluent citizens grow more concerned with quality of life and self-expression. The Government Environment Governments have simultaneously stimulated and constrained business. In this regard, two long-term global trends in government are central. First, government activity has greatly expanded. One way of measuring this is by comparing a government's spending with the size of its economy.
The importance of the business-government-society field is to understand the relationship between the three elements. Understanding those help managers make better business decision to run a business or to stop make a business fail a business. Businesses should be responsive to forces for its economic and noneconomic environment pg 7. Businesses have a social contract.
All three elements work together to make better business decisions. There are four basic models of the BGS relationship: In the Market Capitalism Model it is easier for any individual to enter the market. Any new business that enters the market is in to make profit and to create competition. Competition creates and offers better value to customers and opponent firms. Businesses in this model focus on creative work and profitability. The creative work is well done therefore people are happy with the products, services etc.
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Government regulations are limited. The dominance model represents the perspective of business critics. Society is in a pyramid but only a small group of privileged corporations, government and business leaders control society. Power and wealth are mostly concentrated in a selected group. In this model society does not have any control and it would probability experience difficulties. The corporations and the government take advantage of society. Business have too much power, changes in the systems is crucial.
The countervailing Forces Model consists of four forces: