Introduction

            A lot of variables should be taken into account if  one should decide to do a business in a certain location. One variable to consider is to what degree a social environment of the business is conducive  to the business success. Business will accumulate wealth only if the business ecosystem supports the growth of business. One aspects of business ecosystem is the social environment. Decision to invest in a certain location (either community, region or state) should consider to what degree the social environment at a particular location is conducive for business development.

This article discusses how social environment may provide threats and opportunities for business investment. It also discusses the impact of business activities on social environment.

Three aspects of social environments are discussed in this article.

1.      Values held by a community

2.      Potential impact of interactions among subgroup in a community (accommodation, cooperation, assimilation, and conflict).

3.      Social change as influenced by globalization.

 Values of community

            To be successful in doing business a businessman should have sound understanding about the communities’ values.

           

1.      Relation to nature

The issue of people’s relationship to nature reflects how people in a society treat the nature and how they orient themselves to the natural world around them and to the supernatural power. This issue is of prime important for the people who live with the  nature. Businessmen who invest in the forestry industry should consider to what degree people would accept the logging of trees as something acceptable  to their value.

      There are three main perspectives about human relation to nature. First, subjugation to nature where people view the nature as the source of life. People would treat the nature as part of their sacred place which should be protected from any harm. In the society who hold this view, any activity which harm the sustainability of the nature is a sinful act. Nature should be protected. Life in this context is viewed as predetermined, or preordained by the supernatural power.

      The second orientation is “harmony with nature’. People should live side by side with nature. People may take benefits from the nature but without harming  sustainability and the important role of nature to support people’s life. How this orientation may influence the way people do business may be seen in the following examples. In building the railway, should not destroy the forest and hill, but should adjust the building of railway to minimum alteration of nature.

      The third orientation is mastery over nature where people try to change the nature as required by their own need. Referring to the previous example of building railway, people who hold this value will  alter the terrain by leveling the trees and the hills. Therefore in the society where this value is the predominant value, the resistance from society in cultivating culture for  business  activities is acceptable.

           

2.      Time orientation

There area two ways to think about time. The first has to do with one’s general orientation toward time, rather than how one thinks about the use of specific unit of time. This can be illustrated in how people respond to new events. For people who are predominantly past-oriented, view the new events from the perspective of the past. “How have others dealt with this kind of problem before?” For the people who consider the immediate effect of an action, then the dominant orientation is more likely present-oriented. Similarly, if the chief concern were to be “ What are the long-term consequences of this choice?” then the dominant orientation could be described as future-oriented.

      The planning horizon is the most obvious point of impact on managers of this value orientation. Past oriented values are more likely to recreate past behavior for planning. Present-oriented managers will have short-term concerns in planning. Future oriented-managers are more likely to consider long-term impacts of planning.

 

3.      Belief about basic human nature

People assumption about human being is crafted by the way they were educated by their parents. Most religions assume that human beings basically are good. However, in real life there are some people who perceive human beings as creatures with bad intention. One motivation theory, theory X and Y formulated by Douglas McGregor (See Robbins, 2000) argues that there are two types of worldview about human being. Managers who assumes that the employees basically bad (lazy, avoid responsibility) which he called X-type of  managers, and managers who perceive the employees basically are good ( responsible, self-motivated).

Using this line of argument, we could also classify people’s responses to the outsiders (investors) into two categories, positive response and negative response.  In the  positive response category ,  people perceive the capital invested in a certain area will bring blessing for the people in the surrounding area. Meanwhile people of the opposite world-view would see the intentions of investors only looking for their own benefits.

      The assumption about human being influences managerial practices. People whose assumption is negative apply a tight control on the employees, while people of positive assumption tend to offer more empowerment to the employees.  Similarly, if people in a certain area assumes that the investor has good intention in investing their money, than people would support the investment. On the contrary, if people’s perception about the investor is negative, than they will not support the investment.

 

4.      Activity orientation

The activity orientation refers to desirable focus of activity, not something about  the state of activity or passivity. The activity dimension affects how people approach work and leisure, how preoccupied they are with work, and to what degree work-related concern pervade their lives.

There are two types of activity orientation, doing orientation and being orientation.  In a strongly doing orientated community, people are more likely to view work and work-related activities as central focus to their existence. They work hard to achieve excellence, and there is a compulsive concern for good performance. In a being oriented community, the decision to get involved in work is more likely motivated by emotional consideration. The role of money is not so powerful in motivating people. They focus more on maintaining good social relationship.

In a being oriented community people put so much consideration for maintaining their position in community. This condition sometime becomes counter-productive. For example, in rural area of Java if there is a member of community dies or seriously ill, usually employees who work in a factory will ask for permission to leave the job, just to pay condolence.  If an investor should build a factory in the area where the community has this kind of tradition, then the investor should be ready to have a high time-loss due to such habits

 

5.      Relationships among people

What I mean with relationship among people refers to what degree people concern about the other people. One approach is ‘individualism’, where people care about their own business, and less care about the other people. This attitude is dominant in the western culture. The other approach is ‘collectivism’ where people care more about the welfare of the other people. In the community of individualism it is much easier to invest and build factory since people do not care about the other’s activities. As long the other’s activities do not interfere with the need of their own, people do not care.  On the contrary, in the community of collectivism any investments should be discussed with the local community because people assumes any activity in their community is part of their community.

 

6.      Orientation of space.

In  several communities of Indonesia, especially if the areas are inhibited by a certain ethnic group, frequently the land and rivers belongs to the whole community members. In Indonesia this type of ownership is called hak wulayat. Recently there  was a controversial issues regarding privatization of Stated Own Company (BUMN) Semen Padang. The local people of surrounding areas of factory argue that the land that are used as the source of raw material for producing cement is owned by community. Therefore, the company  does not have the right to sell the stocks to public. If the stocks should be sold to public, substantial part of the stocks should be given to the local people. This issue should be well understood by  investors in making  decision to build a factory in a community. 

 
Group Interaction in Business Location

            Stability in a community or state is a prerequisite for a good investment. The instability as created by friction amongst the component of society which lead to violence (such as burning and looting of the assets) is something to consider in making decision about investment. Therefore it is a must for businessman to scrutinize the quality of relationship among groups within a society.

            There are four types of interaction quality, namely cooperation, competition, accommodation and conflict. The cooperation occurs when groups of people from different background interact in positive way. One group supports  the needs and interest of the other groups. The existence of one group becomes complementary to the other groups. For example if one ethnic group focus their economic activity on trading, while the other group focus on agriculture. Farmers work on agricultural sectors, traders work in trading. The farmers’ agriculture products would be disseminated by the traders to customers. This relationship would be harmonious in nature. The case of group cooperation and accommodation is not a problem for investment, because this situation always be a good ground for harmony in a society.

            Competition is a beginning of a conflict. A group of people in a community competes to outperform the other group. If  people in a community compete in a positive way by respecting the rules and the norms of society, the  negative impacts of competition can be reduced substantially. If the competition grows to a more serious stage, the interaction may not develop into a conflict if there is a willingness to accommodate the needs and interest of the other party. On the contrary if the competition escalates into a stage of uncontrollable, where no option are available to accommodate the other party’s need and interest, then the interaction develops into a conflict stage. If the conflict escalates into violence and spreading out so quickly leading to assets destruction than the possibility of lost in investment is high.

            It would be wise to invest in the area where potential conflict among groups, ethics, and religion at the lowest possibility. Therefore, one should develop an awareness about this possibility.

            In addition to that, the conflicts could also arise between the company and the local people. For example, there have been a substantial number of tensions between company management and local people because of misinterpretation of Regional Autonomy Law, Law no. 22, 1999. The local people assume that they have the right to put a native born people (the son of soil/putera daerah) as manager of company that operates in their land. They also demand the company to recruit more local people as employees of the company.  This becomes a serious problem if the operation of company requires employees of high education and skill, while the local people do not have this requirement.

 

Assessing the potential conflict.

            The potential conflict usually develops in the area where the community consists of several grouping, such as grouping of different ethnic groups, religion, political affiliation and economic activities.  Basically if there are two or more strong groups which struggle for dominance in economic, social and political arena, then there will be a higher chance for group conflict to exist. If one group has domination over the other groups in three arenas of prime importance, then the potential conflict will escalate into open conflict. The tree areas of domination are political, social and economic. The political arena relates to all matters of governance, administrative control, and command over the mean of coercion. The social arena relates to all matters connected with the effective claim of social esteem, including the distribution of status and social privileges. The economic arena relates to all matters connected with the production of wealth and distribution. Each of these three arenas will determine the quality of social order.

            The assessment of conflict pertaining to those three areas may be viewed from two important variables: (1) the existing distribution of power, wealth, and status, and (2) the relative ease with which individuals can secure access to power, wealth, and status through peaceful means. The first variable provides a static picture about of existing patterns of dominance and deprivation. The second variable refers to possibility for peaceful change.

            In assessing the potential conflict, the attention should be focused on the following aspects. (1) the general profile of which sets of individual benefits most or are deprived most by the existing social structures when classified by certain subcategories like race, language, religion, or culture. (2) the level of disproportion in the dominance or deprivation of the given group relative to its size or standing in the community as a whole. (3) the opportunities for peaceful transformation by scrutinizing  the existing institutional structures, the ruling norms of behavior, and the general expectation about appropriate political actions.

 

Source of conflict

1.      Economic factors

Competition for resources (land, waters, capital. etc.) among groups of people from different background may lead to group violence. Gap in economic prosperity among the poor and the rich, the groups who dominates the economy and  the groups who deprive from the economic opportunity. A lot of examples demonstrate that the economic disparity among people of different ethnic group may lead to violence. For example, in Indonesia the economic sector is predominantly controlled by the Chinese-origin businessmen. The racial disparity in economic development frequently a fertile ground for racial violence. The violence could be stimulated purely by economic gap between the have and the have not, but it could also be motivated by political purpose. 

A lot of examples can be cited to show how the economic disparity has led to violence. The religious conflicts in  Ambon is assumed to be stimulated by economic disparity where the economic sector was predominantly controlled by muslims, while the public sectors was controlled by Christians. Racial violence toward Chinese has occurred in several places, and several times. The most horrible one was the case of  May , 1998 at the end of President Suharto’s rule. Of course, the ethnic violence like this frequently stimulated by provocateurs with political purpose to be discussed in the next section.

The high unemployment rate is another  predictor for  the occurrence of   group violence. If the unemployed population is dominated by the young age, the chance for instability in a particular area is high, because the chance for the occurrence of banditry, drug trafficking, robbery, and stealing will be high.

 

2.      Political factors and social disorder.

 

Struggle for power and domination is another source of group conflict. Power and wealth is something goes hand in hand, the power leads to wealth, and the wealth leads to power.   If the groups in conflict coming from different ethnic, religion, and political party the impacts could be disastrous.  The group violence in Ambon which has taken thousands of deaths toll is one example how disastrous is the conflict.

At the company level there is a growing labor movement in Indonesia. This is caused by the perception that most companies do not give a good treatment and welfare to the employees. The union leaders stimulate the labors to join the union and offer them a promise that their future would be better if they become the member. If the union is not affiliated to a certain political party, and the union is established as employees’s representative to negotiate with management, the existence of union is good for employees and company. But if the union is used for political movement then the employees, the companies and the nation may suffer. This is caused by solidarity among union members. If the employees of one company go on strike, then the whole employees of other companies that are affiliated with the union should also go on strike to show their solidarity. If this kind of movement exists, and the union’s demands for salary and welfare is beyond the capability of the company, then Indonesia may be is not  a good place for investment.  If this happens then more and more investors will move their business to the other country that offers better condition, especially in the era of lawlessness and high social unrest.

      Sometime in a community there is a habit which is not in line to the business productivity. One example is a habit of drinking liquor that leads to getting drunk. If the unemployment rate is high, and a lot of jobless people, then the habit of drinking may create a problem. It has  been reported in some cases that the company and the company’s employees have been the target for blackmail and robbery.

 

3.      Religious factors

Issues pertain to religion has a high sensitivity. Because of this nature, the issues of religion frequently have been the source of a group conflict. The racial violence that occurred in Borneo, Celebes, and  Moluccas Islands were partly motivated by the religious issues.

The existence of different religious factions in a particular area  may be used to assess to what degree the group conflict  may arise. The conducive environment for conflict even stronger if the religious factions are affiliated to a certain political party. The case in point can be seen during the political rivalry between Amin Rais ( as proponent of Muhammadiyah and the leader of  PAN ) and Gus Dur ( as leader of  PKB and a highly respected Nahdhatul Ulama leader), where the followers at the grass root level broke into violent conflict damaging a number of schools buildings belong to  a certain faction.

 

4.      Norms and values

The social norms vary from one community to other community. Anything that is all right for one particular society may be is not acceptable for the other society. The following example illustrates how difficult it is to do business in a society whose norms are not in line with business norms.  In a communal society the sharing of  properties is a norm. If employees from the communal  society are hired to work in a store then the employee assumes all things in the store belongs to him or her.   

Another example is a norm regarding the treatment of people whose family member dies, even though the family member who die is a baby. In one case  a factory has to close its operation  due to most of its employees leave their job for attending the burial ceremony.  It seems that in this community the responsibility to do the job is less important than the responsibility to uphold the community’s norm. People identify with their primordial groups and tend to maintain relationships even at the expense of work performance.

 

Social Class and Lifestyle of  Community.

The improvement of level of education and the availability of good job for people have given the opportunity to people to move to a higher level of social class. Since there is a positive correlation between the social class and the level of spending, the higher the social class, the higher the demand for consumer goods, then there will be more opportunity available for business.

People’s lifestyle may be the source of  good business, especially if the purchasing power is high. The success of  products  in the  market depend upon which  target groups the products aims to. Therefore, understanding of the social class and its lifestyle would definitely help the success of business.

There are marked differences in the characteristics of social class among countries. However we could make a certain categorization as a guideline to understand the lifestyles, even though the characteristics are not perfectly matched with characteristics of a particular community.    There are a number of studies that have been conducted on this topic. Values and Life Style Study (VALS) have been conducted in several counties, including Indonesia.

The information in Table-1.informs us about the classification of social class profiles and the characteristics for each category. This is taken from the western society, particularly American society.

Table-1.  The classification of social class profiles.

 

1.	The Upper class-Country Club Establishment ·         Small number of well-establish families ·         Belong to best country clubs and sponsor major charity events ·         Serve as trustees for local learning institution or social institution. ·         Prominent professionals (for examples: businessman, physician, engineers, and lawyers). ·         May be head of major financial institution, owners of major long-established firms. ·         Accustomed to wealth, so do not spend money conspicuously.
2.	The Lower-Upper Class-New Wealth ·         Newly rich people ·         Successful business executive ·         Conspicuous users of their new wealth
3.	The Upper-Middle Class Achieving Professionals ·         Have neither family status nor unusual wealth ·         Career-oriented ·         Young successful professionals, corporate managers, and business owners ·         Most are college graduates, many with advanced degrees ·         Active in professional, community, and social activities ·         Have a keen interest in obtaining the ‘better thing in life’. ·         Their homes serve as symbols of their achievements ·         Consumption is often conspicuous.
4.	The Lower-Middle Class-Faithful Followers ·         Primary non-managerial white-collar workers and highly paid blue collar workers. ·         Want to achieve ‘respectability’ and be accepted as good citizens. ·         Prefer a neat and clean appearance though not styled clothing.
5.	The Upper Lower- Class-Security Minded Majority ·         The largest social-class segment ·         Mostly blue collar ·         Strive for security ·         View work as a means to ‘buy’ enjoyment.
6.	The Lower-Lower Class ·         Poorly educated, unskilled laborers ·         Often out of work ·         Children are often poorly treated ·         Tend to live a day-to-day existence.

 

Not knowing the lifestyle of people in a certain society may lead to business failure. The failure of  global product to enter local market, frequently causes by the inappropriate of products to the needs of local people. For example, the electric razor produced by Philips was not successful in Japan’s market because the size is too big for the hand of Japanese. Similarly the coffee brewer produced by Philips is too big for Japanese kitchen, since most people in Japan live in a small house.

Another example is American orange juice that was introduced in France was not successful, since it was not a habit of French people to have  breakfast with orange juice. The greeting card produced by Hallmark was not successful in French market, because French people create their own greeting card. Pancake produced by Kellog faced a similar problem in England. Before eating the pancake, it should be warmed using toaster. The failure was caused by the fact that the people in England mostly do not have toaster.

           

Globalization

            Globalization has influenced people all over the world. The world becomes borderless with the availability of a high-speed transportation and the information technology. Since the modern technology such as television and internet have been used extensively for marketing products and services, the spread of lifestyle from one country to another becomes so intensive. One could see a lot of similarities in the product people use and the foods they eat. The western culture lifestyle is exported to the developing country and the countries in the east past of hemisphere. McDonald, Pizza Hut, Seizler, Arbys are among the fast-food restaurants that can be found in many countries. The hegemony of western culture influences wide dimensions of people life. The presenters of TV program, and the actors and actress of TV series frequently are of western face, for examples Dewi Sandra, Wulan Retno, Indra Brugman, Tamara Blezinsky, and Sophia Latjuba. The hair color of western people (blonde) has been a major trend in hair styling. Similarly, the big eyes and pointed nose which characterize western people seems to be a high demand in the eastern countries.

            Globalization also motivates people to send their children to international school. Now there are many international schools open their representative in Indonesia. Through twinning program with the local learning institution, the international schools  are allowed to  open their program in Indonesia. Since the cost of sending students to the international school is very high, that means more money will flow to the western country. Of course there is the other side of argument. The availability of international program in Indonesia, may reduce the cost of sending students abroad.

            Globalization offers a positive and  negative sides. The positive impacts of globalization is there are more franchising companies and universities open their outlet in Indonesia. This will provides job opportunity and income for the country. The negative sides is the people spend more  money to adapt to the western lifestyle, and put less money in their saving account.