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CHAPTER ONE
Business Fundamentals
& Today’s Dynamic
Business Environment
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LEARNING OUTCOMES
In this chapter, you will learn to:
Define and explain the basic concepts of business,
profit, entrepreneurship and risk taking.
Explain how businesses add to the society’s standard of living
and quality of life.
Discuss how businesses should respond to stakeholders.
Explain how business principles may be used in non-profit
organizations.
Identify and explain the business environment.
Define ethics as a social responsibility and rationalize its
importance in the conduct of business.
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BASIC BUSINESS CONCEPTS
• Business organization
• Profit
• Entrepreneur
• Risk taking
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BUSINESS DEVELOPMENT AND
ITS CONTRIBUTION TO
SOCIETY
• How businesses add to standard of
living?
Standard of living refers to the amount of
goods and services people can buy with the
money they have.
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BUSINESS DEVELOPMENT AND
ITS CONTRIBUTION TO SOCIETY
(cont.)
• How does it contribute to quality of
life?
Quality of life refers to the general well-being
of a society in terms of political freedom, a
clean natural environment, education, health
care, safety, free time and everything else that
leads to one’s satisfaction.
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BALANCING THE INTERESTS OF
STAKEHOLDERS
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ARE BUSINESS PRINCIPLES
APPLICABLE TO NON-PROFIT
ORGANIZATIONS?
• Business principles are applicable to non-
profit organizations.
• The same set of skills and knowledge are
required to manage it.
• A non-profit organization is an organization
set up with an objective of not making profit,
e.g. government bodies and NGOs.
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BUSINESS ENVIRONMENT
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ETHICS AND SOCIAL
RESPONSIBILITY
IN THE CONDUCT OF BUSINESS
THE CONCEPT OF ETHICS
• Ethics refers to the standards of moral behaviour
that are accepted by society as right versus wrong
(Nickels et al., 2008).
• It can be described as a set of principles that
contains behavioural codes to determine what is
right or wrong.
• It outlines the moral duty and obligations that any
human being should practise.
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THE DIFFERENCE BETWEEN
MORALITY AND ETHICS
• Morality relates to the norms, values and beliefs
embedded in social processes which define right or
wrong for an individual or a community.
• Ethics is concerned with the study of morality and the
application of reason to explain specific rules and
principles that determine right or wrong for a given
situation.
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ETHICS: ITS ORIGIN AND
INTERNALIZATION
• Ethics begins with each individual; it starts from one’s
inner feeling and subsequently translates into his/her
moral behaviour.
• Factors contributing to ethical behaviour: upbringing,
culture, socialization, experience and critical reflections
on those experiences.
• Ethics is also acquired from religious teachings.
• All religions provide their believers with strong
composition of conduct, part of which involves moral
instructions, values and commitments.
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ISLAMIC MANAGEMENT: VALUES
AND ETHICS COMPONENTS
Values and Ethics Components in Islamic Management
￭ Religious values
Taqwa (God-consciousness), syukur (gratitude, being grateful), tawakkal (relying on Allah
after making own efforts), muhasabah (self-evaluation), justice and amar makruf nahi munkar
(promoting good and forbidding evil).
￭ Professional values
Education, skill, honesty, punctuality, trustworthy and syura (consultation).
￭ Personal values
Accountability, moderation, excellence, patience, tolerance, humble and salam (peace,
greetings to show respect and compassion).
￭ Quality values
Quality, productivity, itqan (the level of quality work), istiqamah (commitment, being straight
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collectivity and ihsan (benevolence, i.e. being kind
UNIVERSALLY ACCEPTED
MORAL VALUES
BAD VALUES
GOOD VALUES
Cheating
Compassion
Cowardice
Courage
Cruelty
Honesty
Deceit
Integrity
Greed
Respect for human life
Lying
Self-control
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Selfishness
BEHAVIOURS OF PEOPLE WITH
HIGH INTEGRITY
1. They are concerned about the greater good. Behaviours of
2. They must possess humility. People with High
Integrity
3. They must be forgiving.
4. They must be truthful.
5. They strive for fairness.
6. They fulfil commitments.
7. They take responsibilities.
8. They extend themselves to others.
9. They celebrate the good fortune of others.
10. They develop others.
11. They respect individuals.
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12. They reproach unjust acts.
ETHICAL DILEMMAS IN THE
CONDUCT OF BUSINESS
• Conflict of interest: This involves morality and
economic trade-offs, whereby there is constant tension
in trying to separate the ‘person’ from the business
decision.
• Personality traits: This relates especially to
relationships and personal issues.
• Responsibility to stakeholders: The pressure of
managerial rationalization and emphasis on the
importance of having a code of conduct or ethics
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ETHICAL DILEMMAS IN THE
CONDUCT OF BUSINESS (cont.)
• Level of openness: To what extent should they
reveal information about their business? Must be
honest and transparent.
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CHECK QUESTIONS IN
HANDLING ETHICAL DILEMMAS
• Is it legal?
Am I violating any laws (inclusive of religious
principles) or company policy?
• Is it balanced?
Am I acting fairly in my decisions? Am I taking
into consideration the needs of others apart from
my own personal needs?
• How will the action make me feel about myself?
Will I be happy after taking such actions?
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WHY IS IT IMPORTANT TO
MANAGE BUSINESSES IN AN
ETHICAL MANNER?
• To keep existing customers
• To attract new customers
• To avoid lawsuits
• To reduce employee turnover
• To please customers, employees and society
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SETTING ETHICAL STANDARDS
AND IMPROVING ETHICS IN
BUSINESS
• Develop a code of ethics: compliance-based or
integrity-based.
• Leaders in an organization must adopt and
unconditionally support an explicit code of ethics
or conduct.
• Employees are expected to act accordingly.
• Managers and employees are to be trained to
consider ethical implications of all business
decisions.
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SETTING ETHICAL STANDARDS
AND IMPROVING ETHICS IN
BUSINESS (cont.)
• An ethics office needs to be established to handle
ethical enquiries or complaints.
• Outsiders of an organization (such as suppliers,
sub-contractors, distributors and customers) must
be updated on ethics programmes.
• Enforcement of code of ethics:
Rewards/Recognition and punishments.
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SOCIAL RESPONSIBILITY
AND SUSTAINABLE
DEVELOPMENT
THE CONCEPTS OF SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
• Social Responsibility (SR)
The obligation of a business to maximize its positive
impact and minimize its negative impact on society,
being a part and parcel of the community at large.
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THE CONCEPTS OF SOCIAL
RESPONSIBILITY AND
SUSTAINABLE DEVELOPMENT
• Sustainable Development (SD)
A pattern of resource use that aims to meet human
needs while preserving the environment, so that
these needs can be met not only in the present, but
also for future generations.
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ARCHIE CARROLL’S CORPORATE
SOCIAL RESPONSIBILITY MODEL
Source: Adapted from Pyramid of Corporate Social Responsibility: Toward the Moral Management of
Organizational Stakeholders, 1991.
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THE FOUR DIMENSIONS OF
CORPORATE SOCIAL
RESPONSIBILITY
• Economic: Profit is the essential foundation of any
organization. An organization’s main existence is to
make money.
• Legal: Being legal; not going against any rules or
regulations imposed on the business.
• Ethical: Ensuring that whatever actions undertaken must
be right, just and fair to all involved.
• Voluntary: Additional activities that may not be required
but promote human welfare and goodwill.
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