Company Dynamics: System, Environment, and Social Responsibility

The Company as a System

A system is a set of interdependent elements that can each be identified and treated as a whole. The elements that comprise a system can be grouped according to several criteria and can form different subsystems within the overall or general system. Every subsystem is capable of being regarded as a system at a reduced level.

The company consists of a set of elements (people, facilities, etc.) which act in a coordinated manner with a clear direction and have a set of purposes and objectives to achieve. Therefore, a company is a system.

Characteristics of the Company as a System

• It is an open system. This means it relates to its environment; everything that happens outside the company affects and influences its decisions.
• It is made by combining different elements or subsystems, resulting in a combination with unique characteristics not specific to its individual subsystems.
• It is a holistic system, because any influence it receives impacts other subsystems and the entire company.
• It is self-controlling and adapts to any cyclical change.

The Business Environment

The environment refers to external factors that affect a company. We can classify them as follows:

General Environment

This affects all companies in a country (e.g., cultural, technological, political, legal, demographic factors). Within the general environment, the following are typically involved:

• Economic factors: such as the purchasing power of the population, labor costs, etc.
• Demographic elements: such as population structure, age data, etc.
• Political-legal elements: including political stability, social unrest, demonstrations, etc.

Specific Environment

This specifically affects each individual company (e.g., customers, suppliers).

Social Responsibility of the Company

Companies are responsible for social problems such as air and water pollution, land speculation, etc. They must take into account important issues such as business ethics when dealing with customers, etc.

Until recently, companies were primarily expected to efficiently obtain goods and services (i.e., to achieve the lowest cost). Currently, the focus is not only on increasing profit but also on the socioeconomic context in which the product or service operates. The company must consider the economic and social effects that its decisions will have on society, generally referred to as social costs.

Through social costs, society pays for the damages caused by companies. As this represents a problem for society, companies should strive not to provoke these negative social costs. Alternatively, they should 'privatize' them, meaning they should assume these costs themselves to minimize their repercussions on society.