Business Environment of Nepal

Unit 7: Socio-Cultural
Environment
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Why to study Socio-cultural environment?

 Socio-Cultural Environment and its significance for business;

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Socio-Cultural Environment: Introduction
A business firm should, thus, keep in mind that its policy and strategy
should not ignore the socio-cultural forces. The cost of ignoring or
neglecting socio-cultural forces could be very high for the firm. Even
more threatening for a business firm would be the impact resulting from
its strategy going counter-culture.
Managers need to use analytical approach in understanding socio-
cultural dynamics of a society in which a business firm operates.
It is also defined as a “collective programming of the mind”.
Social environment of business means all factors which affects business
socially. Every business works in a society, so societies different factors
like family, educational institutions and religion affects business.
Cultural environment consists of a set of beliefs, customs, practices and
behavior that exists within a population.
The term "socio-cultural environment" is typically used in business or
marketing to describe an environment composed of forces and
institutions impacting societal preferences, values and behaviors. 1–3
Socio-Cultural Environment: Significance
Socio-Cultural environment is made up of the social institutions, class
structure, beliefs, values, accepted patterns of behavior, customs of
the people and their expectations.
Culture is all-pervasive. Business firms are no isolated entities. They
are an integral part of the broader socio-cultural environment of the
society.
A business firm is owned by people, sells to them, buy from them,
employs them and is regulated by them. Peoples are thus the vital and
integral part of a business firm. Hence, any change in this socio-
cultural make up of the society finds easy extensions to the business
firm influencing its internal corporate culture. At the same time, the
business firm by the very nature of its business has to interact with
the society at large. Hence it need to understand and adjust with
external social cultural forces.
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Socio-Cultural Environment: Significance
The social environment imposes severe pressures on the management of a
business firm. Every business function-managing a workforce, marketing
output, purchasing supplies, dealing with officials, etc. is subject to potential
socio-cultural problems. Similarly a society’ culture reflects and shapes its
values and attitudes, including those toward time, authority, age, status and
education.
The relevance of managers role is thus interwoven as much with his or her
sensitiveness to the socio-cultural environment as with his or her managerial
functions. Without proper understanding of these socio-cultural forces,
management functions cannot be effectively undertaken.
The existing socio-cultural problems facing a society have also serious
impacts on the running of a business firm. The larger problems of poverty,
illiteracy, skill shortage, family system, caste or religious structures, culture
and traditions, increasing awareness of citizens rights and consumerism, and
the like complicate managerial functions especially in respect to
supervision, discipline management, marketing, control system etc.
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Socio-Cultural Environment: Significance
The influence of socio cultural forces on business is just one side of coin.
The other side is, of course the influence of business in bringing about
socio-cultural changes in societies. The business firms have been acting as
agents of cultural change. For instance, soap and detergent manufacturers
have changed the washing habits of people.
There are many different ways through which business firms exert
influences on the socio-cultural values of society. A business firm must keep
a close watch on the changing patterns of the socio-cultural make-up of a
society in which it operates. Any organization, which runs counter to these
socio-cultural realities is bound to be adversely affected by these forces.
Socio cultural factors influence the demand and supply of the business firm.
The buying and consumption habit of the people, their languages, beliefs,
values, customs and tradition, taste and preferences etc. fall under the socio-
cultural environment. The managers, therefore require a high level of
cultural awareness and a significant degree of cultural empathy to cope with
these social expectations.
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Socio-Cultural Environment: Significance
Socio-cultural environment is significant for a business due to following
reason:
A business may be regarded as the composition of people. Change in
culture directly affects the internal socio-cultural environment of a business.
At the other side the socio-cultural environment at large i.e. external socio
cultural environment affects the business operations since the business
constantly interacts with the society.
The socio-cultural environment affects the ways that a business is
managed in terms of authority, responsibility, devolution, status, education
etc. This eventually affects the organizational outcomes in terms of
recruitment practices, motivation, compensation, satisfaction, turnover,
absenteeism etc.
Business firms also work as the drivers of social changes. They act as
change agents and influences social preferences, demand, values and beliefs
significantly.

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S-C Environment: Components/Determinants
Culture is the human-made part of environment. It is the sum total of
mankind’s knowledge, beliefs, art, morals, laws, customs and any
other capabilities and habits acquired by human beings as members of
society.
Culture consists of several components-attitudes and beliefs,
religion, education and social institutions.
Culture thus gives an individual an identity as well as codes of
conduct. A natural evolution, which occurs in any culture may lead to
sub-culture. People who share a set of secondary values are referred
to as sub-culture. The most important components of the sub culture
are: language, education, social structures and institutions, aesthetics
and like.

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Socio-Cultural Environment: Components

Attitudes and beliefs

Religion

Language

Education

Family structure and social organization

Class structure and classification

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Components of S-C Env.: Attitudes & Beliefs
The basic building blocks of culture are values, beliefs and attitudes.
An attitude can be defined as any effective reaction to a person,
object, idea or activity.
Attitudes are evaluative statements—either favorable or unfavorable
—about objects, people, or events. They reflect how we feel about
something.
It can be either positive or negative.
A person’s belief reflects his/her viewpoints.
Attitudes are complex. The more the attitude object is liked, the
more positive one’s attitude towards it. The more it is disliked, the
more negative one’s attitude.
Employees attitudes and beliefs about various work-related issues
like working hours, work shift, supervision, technology employed.
Organizational reforms etc. have significant effect on their work
attainment. This ultimate effect on organizational performance.
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Components of S-C Env.: Attitudes & Beliefs
Work Related attitudes and viewpoints
Time: Time is not important in Nepal. Everything gets passed on to
tomorrow. Meeting start late.
Pace of change: The pace of change is slow in Nepal. Traditionalism
is deep-rooted. Environmental adoption by organization is slow.
Work: Achievement orientation is low in Nepal. The tendency to
live for today’ among workers is pronounced.
Working hour/shift: People normally want job at day time in Nepal.
Organizational reforms: Efficiency and effectiveness are low in
government sector.
Changes seen in workplace
Material culture: People are accumulating more wealth.
Demonstration effect: High demonstration effect.

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Components of S-C Env.: Attitudes & Beliefs
Additional changes have been occurring in Nepal as more and more
information and consumer goods are becoming available to the
people. The material culture came through our direct contacts with
people abroad, foreigners and tourists in Nepal and the increasing
access to television and communication network.
The demonstration effect (seeing others with the fashions and
goods) and improvements in infrastructure (roads, electronic media
to bring the product to them and electronic power to operate them)
cause people to realize that they can have greater prestige and
pleasure by owning more physical assets. Their attitude toward work
changes not because of any alteration of their moral or religious
value but because they now want what only money can buy.
Material culture of the people is thus an extremely crucial factor to
be kept in view by a business firm formulating product-market
strategy because it affects the level of demand, the quality and types
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of demand.
Components of S-C Env.: Religion
Religion is an important aspects of most societies. It provides the
philosophical foundation for beliefs and values.
Beliefs are an opinion or conviction: It’s a confidence in the truth or
existence of something not immediately susceptible to rigorous
proof.
Religion is a major influence for shaping the attitudes, beliefs,
motivations and values of a culture. Religion also affects the ways in
which members of a society relate to each other and to outsiders.
The knowledge of the basic tenets of religion will therefore help
understand why people’s attitude vary from society to society.
CBS, 2008 depicts Hinduism: 80.61%, Buddhism: 10.74%, Islam
4.19%, Kirat: 3.60%, Christianity 0.45%, others 0.41%.
Nepal has a multi-cultural population i.e. population made up of
many different ethnic and racial groups. Religion occupies an integral
position in Nepalese life and society.
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Components of S-C Env.: Religion
The majority of people are following Hindu religion, it has pre-
dominated the cultural ideologies and structures. Buddhism also
retains a significant values.
Nepal is home of well over 100 castes and ethnic groups having
separate yet related traditions collectively known as Nepali culture.
The ethnic composition of Nepali culture can be broadly categorized
into five major distinct groups of people. These are i) the Hindu
groups with caste origin ii) the Buddhist iii) the ethnic/tribal groups
iv) the Muslims and v) Others including Sikh, Bengali, Marwadi and
Christens.
Religion affects the business environment. Often religions impose
constraints on the role of individuals in society. Religions also shape
the attitudes its adherents have towards work, consumption,
individual responsibility and planning for the future.
Gita also state “Karma gara fal ko aash nagara” where Christianity
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state do hard work for wealth accumulation.
Components of S-C Env.: Religion
A Hindu society is stratified into four Varnas-Brahmins, Kshatriyas, Vaishyas
and Sudras. As a religious tradition, each Varna was assigned a certain class
of work. Brahmins were priests, Kshatriyas were rulers, Vaishyas traders
and farmers and Sudras, the lowest among four castes, took to manual
labour.
Hierarchy is the principal theme of the caste framework. Conventionally, an
individual inherits his or her position and job from his or her caste. Most of
these caste groups represents complex social structures. Although Nepal
has officially outlawed discrimination based on caste system, it still exists in
practice. Caste system of Hinduism traditionally has restricted the jobs
individuals may perform, thereby affecting the labour market. The upper
caste worker may not appreciate, if the management puts someone from
lower caste to supervise him/her.
Some Islamic societies limit job opportunities for women. Income in the
form of interest is also prohibited in Islam.
Buddhism believes in spiritual achievements not in material achievement.
This has a effect and entrepreneurship and profit making. 1–15
Components of S-C Env.: Language
Language is another prominent part of a nation’s culture. It has been
described as the mirror of culture. Language, must therefore be learned if a
person is to understand its people. Generally there will be as many cultures
in a country as there are languages. However, it odes not follow from this
generalization that cultures are the same wherever the same language is
spoken. In the process of development, some language get a greater
opportunity to prosper. Some of them are spoken only in specific ethnic
communities.
In Nepal, there is great diversity in languages. Although the languages
spoken in Nepal are diverse and different in nature, most cultural groups in
Nepal are the product of hundreds and thousands of years fusions of
different cultures and languages. The increasing use of Nepali as the
national language has symbolized Nepal as a distinct national unit.
The sign, symbols, non-verbal cues, communication styles, and so on in
each language system may differ. The same word may have different
meanings in different languages. This significantly affect what is said and
how it is said. 1–16
Components of S-C Env.: Language
Language capability thus serves four distinct roles in the management of
business firm:
Language is important in information gathering and evaluation. A
manager can see and hear personally what is going on
Language provides access to local society. A manager can easily become
part of the market and personally feel the situation
Language is an important medium of communication. Therefore,
language capability is most for a manager in business communication,
whether with corporate member or with channel members.
Language provides more than the ability to communicate. It extends
beyond mechanics to the interpretation of contexts.
In low-context culture, message are explicit; words carry most of the
information in communication.
In a high context culture, less information is contained in the verbal part of
a message, since, much more information is in the context of
communication. In general, high-context cultures, such as Japan Saudi
Arabia get along with much less legal paper work than is deemed essential
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Components of S-C Env.: Education
Education in its widest sense can be though of as any part of the
learning process, which equips an individual to take his or her place
in the society. As the culture is learned behavior, education both
formal and non-formal plays important role in transferring cultural
values from one generation to another. However, education is
generally equated with formal schooling. There are several indicators
to measure a country’s formal education level.
The common yardsticks to measure formal education are:
enrolments in primary, secondary and tertiary levels, the number
and kinds of such institutions, types of courses offered and the
amount per capita spent on education. In addition to formal
schooling, there may also be institutions to provide trade and
vocational skills. Similarly the government in a developing country
also runs literacy programs. The literacy rate in a society indicates
the number of people who can read and write.
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Components of S-C Env.: Education
A business firm is interested in all these educational statistics.
Marketers are interested in the literacy rate because this helps them
to decide on the type of media to employ. The literacy rate also
helps them in deciding at what level they should prepare
advertisements, labels, displays and owner manuals. Similarly, the
personnel managers can also use educational profile of the country
as a guide in estimating what kind of people will be available for
staffing the operations.
The educational environment is any country influences virtually
every aspects of managerial and industrial life. it affects not only the
specific skills and abilities of managers, technicians and workers but
also their methods of thinking and the speed at which new thoughts
or values will be assimilated. It has greater bearing on the entire
staffing function, basic organization structure, work specialization,
types of techniques employed and the overall productivity of the
firm. 1–19
Components of S-C Env.: Education
Rising educational levels have an impact on organizations. Higher
educational levels allow people to earn higher income than would
have been possible otherwise. The educational level also leads to
increased expectations of workers and increased job mobility. Better
working condition, stable employment and opportunity for training
and development are few of the demands business confront more
frequently as a result of a more educated workforce.
Literacy status: The literacy rate had increased slowly but
progressively over the last 45 years. Starting from the extremely low
5% in 1951, the ratio has climbed to over 69% in 2010. literacy
among the 6-14 years age group is much higher: 87% of the boys and
58% of the girls.
School Education: There has been a phenomenal expansion in the
facilities for school education. The number of primary school
increased four-fold between 1971 and 2011.
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Components of S-C Env.: Education
Rising educational levels have an impact on organizations. Higher
educational levels allow people to earn higher income than would have
been possible otherwise. The educational level also leads to increased
expectations of workers and increased job mobility. Better working
condition, stable employment and opportunity for training and
development are few of the demands business confront more frequently as
a result of a more educated workforce.
Literacy status: The literacy rate had increased slowly but progressively
over the last 45 years. Starting from the extremely low 5% in 1951, the
ratio has climbed to over 69% in 2010. literacy among the 6-14 years age
group is much higher: 87% of the boys and 58% of the girls.
School Education: There has been a phenomenal expansion in the facilities
for school education. The number of primary school increased four-fold
between 1971 and 2011. the country introduced higher secondary
education system in 1989. today, there are over 3000 higher secondary
schools in the country with a student population of about 406,563. Quality
of education suffers in public schools of rural areas mainly due to lack
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of
Components of S-C Env.: Education
Vocational and Technical Education: Nepalese people are deficient
in technical skills. They have mostly agriculture-based traditional
skills, which are out-moded today. It has been realized over the years
that the pace of economic development suffers in Nepal mainly due
to the shortage of vocational and technical skills. This, therefore,
demand for a system of education, which enables the people to
learn modern technical and vocational skills.
The technical education at the higher secondary level is the
responsibility of Council for Technical Education and Vocational
Training (CTEVT).
Vocational program are also provided by different ministries of the
government focusing on painting, weaving, wiring, brick-making,
fitting, wielding, machine shop and steel metal.
Ministry of communication offer training to telecommunication field.
Department of Civil Aviation provides training on air traffic
management and communication. 1–22
Components of S-C Env.: Education
Hotel Management and Tourism Training Center, Nepal Electricity
Authority, Survey Training Division & Department of Health also
conduct various short-term training programs.
The Industrial Enterprise Development Academy provides training on
micro-business creation programs.
Several NGOs and private organization are also involved in providing
vocational and technical training in different fields.
Higher Education: Higher education is of paramount importance for
economic and social development. Institutions of higher education
have the main responsibility for equipping individuals with the
advanced knowledge and skills required for position of responsibility
in government, business and other profession. The knowledge, skills
and resourcefulness of people are increasingly becoming critical to
an economy. Nepal have five universities: Tribhuvan University,
Nepal Sanskrit University, Kathmandu University, Purbanchal
University and Pokhara University. 1–23
Components of S-C Env.: Education
In addition, BP Koirala Institute of Medical Sciences also offers
academic programs in different areas of medical sciences. Lumbini
Bouddhist University has started its programs. The recently
announced Far Western and Mid-Western Universities have yet to
launch their academic programs.
It is certain that the business firms that successfully accumulate,
create and utilize knowledge will rules the market. In this changing
scenario, the competitiveness of a business firm cannot be
maintained just by developing human resources in the conventional
way. Business firms are in need of knowledge workers who choose to
study hard, develop themselves and lead innovation. Universities
should take the role to cultivate knowledge workers. There is thus a
strong need to develop partnerships between business firms and
universities for continuing education, research and innovative
learning.
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Components of S-C Env.: Family Structure and
Social Organization
Every society has a structure or an organization of relationships.
These relationships define and regulate the manner by which its
members interface with each other. Anthropologists generally study
this important aspect of culture by breaking down its parts into two
classes of institutions-those based on kinship and those formed on
basis of free association of individuals.
The social institutions are however, dynamic entities. Constant
changes do take place in their structure and process due to various
social, political and economic transformations taking place in the
broader society. Knowledge of how a society is organized is useful
because it is organization, which defines and regulate the manner by
which its members interface with each other.
Kinship: Family is one form of social organization. It is an institutions
which is based on kinship. The nature, size and composition of
families differ from society to society.
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Components of S-C Env.: Family Structure and
Social Organization
Kinship (…cont’d): In some societies, a family means the parents and
their children whereas in others a family includes all relatives both
by blood and marriage. In Nepal, family ties are very strong. It is also
a recognized institution in the Nepalese social set up. The basic social
unit in village is the family. Joint Family system is unique features of
the Nepalese society. Joint family system have some implications in
business. There is no incentive for the family members to work hard
and be more productive. Responsibility to the family members is
frequently a cause of high absenteeism in work place. This attitude
highly affect work place.
Nuclear Families have now become quite common in Nepalese
society, particularly in urban areas. With the improved level of
education, people have better employment opportunities. Women
enjoy equal status with men and most of them supplement family
income by their own earning. This all these development in the
family system have their implication in business. 1–26
Components of S-C Env.: Family Structure and
Social Organization
Associations: Social units not based on kinship, known as
associations by the anthropologists, exist in every society. These
social units are in the form of common-interest groups and the
communities. The common interest groups are composed of people
joined together by a common bond, which can be political, social,
occupational, recreational or religious. The management of a
business firm should identify and assess these groups for their
political and economic power. Business firms have been forced to
change their product, promotion and prices by consumer groups and
organizational reform processes have been supported or opposed by
labour unions, which are often a powerful political force. Similarly
there are many other social and professional organizations which can
exert influence on business firms as pressure groups. There are also
consumer groups, which are created to fulfil the basic needs of their
members.
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Components of S-C Env.: Class Structure
Nepal is undergoing very significant demographic and social changes.
There is a sharp mobility of a sizeable segment of the population. At
least two types of mobility have been observed. In Nepal
i)Geographical mobility ii) Economic mobility. Due to high migration
rate in the country, the geographical mobility has intensified. People
move from mountain and hills to Tarai and from rural to urban areas.
Equally intense is the economic mobility. A large segment of the
population is moving upward in income levels. With the economic
mobility, people’s consumption habits, their needs and lifestyles
change. The class system indicates the relative wealth or social
status of a person or family in the community. It basically originates
from the economic mobility of the population. The another
classification of individual based on aspects like religion and caste
have been discussed earlier. From the business prospective, the
Nepalese population can be classified into four broad class
categories: 1–28
Components of S-C Env.: Class Structure
The Affluent Class: This class is very small segment of the Nepalese
population. However it is growing at a fast rate. The people
belonging to this category have luxurious lifestyles. Hence, their
demands for products and consumption patterns also are different.
This group can afford high-priced commodities which are out of
reach of the low and middle-income groups.
The Middle Class: With the growth of development activities and the
expansion of business, education, social service and other non-
government sectors in the country, the middle class population has
grown. The Civil servants, managers, engineers, doctors, professors,
lawyers, traders and soon on belong to this class. These are basically
fixed income group. As the member of this class are better educated
and exposed to different lifestyles, their aspirations have been
constantly growing. Foreign firm making luxury items and other top-
end goods have tended to focus almost exclusively on this segment
of the population. 1–29
Components of S-C Env.: Class Structure
Lower Middle Class: In Nepal, lower middle class has been emerging
very fast. Particularly, after the Restoration of Democracy in 1990,
people took advantage of the free environment existing in the
country to undertake various gainful activities. Foreign employment
of people encouraged by the government has added to the growth
of this class. The remittances of the foreign employed people
elevated the financial status of their families. Similarly, people even
with little education started their own business, retail shops, small
restaurants, transportation business, commercial farming, export-
import business and life. This class now emerged as the
“consumption community” of the country. This has increased the
demand for many of the consumer and durable goods. This is thus
the class, which can be targeted for most consumer goods and
services and relatively cheaper durable product items.

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Components of S-C Env.: Class Structure
The Poor: Nearly half of Nepal’s population belongs to this category.
This population is preoccupied with making basic daily needs. The
number of people in this class is very large and their purchasing
power is very low. Still, this class is the fundamental part of the
Nepalese market for a variety of inexpensive consumer goods.

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 Effect of Socio-Cultural Environment on Nepalese
Business Organization
Management: There is dominance of family business in Nepal. The
family members hold the top level managerial positions. The
authority is centralized. There is lack of corporate culture and
professionalism in Nepalese Business.
Widespread Corruption: Nepal is one of the poorest countries in the
world. The tendency of holding property is widespread in Nepal.
Unethical practices are common for individual and family benefits.
The level of corruption is very high especially in government offices.
Gender Differences: Nepal is still a male dominating country. Gender
differences is widely prevalent in Nepal. The business sector is
mostly dominated by male. The top level is largely occupied by
males.
Social Responsibility: Nepalese business lack social orientation. They
still believe social welfare is the responsibility of the government.
They don’t take proactive approach in social responsibility.
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 Effect of Socio-Cultural Environment on Nepalese
Business Organization
Modernization: With globalization and development of information
technology, significant changes may be noticed in the taste and
preferences in Nepalese customers.
Lack of Planning: Nepalese business organization lack formal
planning. Decisions are made on contingent approach. They focus
short-term benefits.
Workforce Diversity: Nepal is a multi-ethnic and multi-cultural
country. This has impact on workforce diversity. The rate of cultural
mix in Nepalese organization is increasing.
Attitude towards work: Some works are regarded better in Nepal.
Nepalese people are also found to lack motivation and commitment
towards their work.
Resist to Change: Nepalese people are found to resist change. There
exist fear of change due to power loss, job loss or other reasons.
There is lack of risk taking culture.
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Emerging Socio-Cultural Trends in Nepal
Emergence of Female breadwinners: Traditionally, this roles has
been played by male in the Nepalese society. However, the situation
is gradually changing and being common with female as well. The
female are playing an active role in managing their family. They have
significant influence in most purchase decisions of their family.
Change in lifestyles: A significant changes can be seen in lifestyles of
eating habits in the Nepalese Society. Fast foods are getting
popularity over the years. Westerns food items are replacing the
traditional foods. The use of TV, refrigerators, telephone, music
system and washing machine is being common even in rural areas.
The emergence of Urban teenagers: There is a significant growth of
urban teenagers who belong to the middle and upper class families.
They are forming a distinct market segment with growth and profit
potentialities. They spend more on soft drinks, internet, mobile sets,
travelling, chocolate, fast foods, movies and light reading material.
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Emerging Socio-Cultural Trends in Nepal
Growth in Nuclear Family: There is a significant growth of Nuclear
family in Nepal. This has resulted in increased demand for new
apartment, baby care centers, Montessori Schools and changed
lifestyles. They spend significantly in baby related products,
recreational activities like watching movie, eating out in weekends
and visiting new places. In Nepal, youths belonging to 20-30 years of
age group form a distinct market. During this age period, most the
youths get married and also get employment. They settle as nuclear
families.
Change in Attitude: The attitude of people are also changing.
Nepalese people used to have spiritual thinking and dependent upon
luck but the impact of west have transformed them in to
materialistic lifestyle. The awareness among people towards gender
equality has given female the power and rights for working outside
home. This has raised their income and increased their purchasing
power decision. 1–35
Emerging Socio-Cultural Trends in Nepal
Internal Tourism: With the restoration of peace in the country,
internal tourism has also grown significantly. People visit places of
their interest. This increasing mobility of people has created business
opportunities for hotels and travel agencies to grow.

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Socio-Cultural Change
Socio cultural change refer to an alternation in the social order of a
society. Social change may be driven by cultural, religions, economic,
scientific or technological forces. More generally, social change may
include changes in nature, social institutions, social behaviours or
social relations.
The growing number of social issues affecting business firm is also
due to social change. Social issues typically result from a gap
between stakeholders’ perception and expectations and business
practices such as work culture, payment system, office hours,
product quality, deceptive packaging, product differentiation and
warranties. These issues and other social pressures get formalized
and take the shape of law. The effect of social change might
influence:
Change in preference, demographic position, advertising technique,
country environment and other business opportunities and threats.
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Emerging Socio-Cultural Changes and their impact
The following trends indicate the shifting nature of Nepalese Social
values:
Growing urbanization and consumer awareness
Individualized lifestyles and world-oriented outlook
More informed and demanding consumer due to growing
education
Greater acceptance of fashion and lifestyle
Blending of traditionally defined male-female roles
Greater pleasure orientation and material culture
Changing family structure-smaller families, less influence of elders
and more dual-career households
Growing demand for more effective and prompt public service
Equal opportunity for all in all walks of national life.
These factor together represents the socio-cultural profile of
contemporary Nepalese society.
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