Sociocultural Environment: Social Test for All Businesses in the Real World
The term Sociocultural in a Sociocultural environment is made up of two words, ‘socio’ which means a social system, and ‘cultural’ which means culture. The sociocultural environment refers to the force that develops changes in attitudes, actions, and values in society. It is closely related to community, way of living, culture, customs, tastes, and heritage which affects the growth and functioning of a business directly and indirectly.
The world has developed a lot but despite that, we are constantly surrounded by these two factors: our social system and culture. No matter what work at any moment, the first thing that strikes our mind is our society and culture. Although society and culture are external factors, they indirectly affect the business and play an essential role in operating the business.
We can take examples of different countries like India, Nepal, and numerous others where different kinds of cultures and religions exist, hence an organization needs to analyze every aspect before initiating and operating its business. There are many examples of a business needing to change its pattern of working due to the influence of the sociocultural environment.
There are several key factors in the sociocultural environment that affect business some of which are Culture, Religion, Demographics, Level of education, and Customer preferences.
The sociocultural environment is an essential aspect of every business. There are various sociocultural factors that significantly affect the performance of a business. Every business should have knowledge about the societies and cultures of the place where they are operating.
They should keep themselves updated about any changes which have happened or are going to happen so that they can continue their business operations smoothly as well as give tough competition to their competitors. The sociocultural key factors that can have a big impact on the operation of the business are as follows:
Culture is an important factor in the sociocultural environment. Culture is a factor that easily influences people. Culture is complex because sometimes two people of the same culture can even have different beliefs.
All the people will not have the same kind of culture, so it creates a different kind of attitude in people regarding the environment of an organization. People will have a different attitude towards their time of work, beliefs, change, and jobs.
If any organization tries to change people’s beliefs, go against the people and operate its business there is a high chance it will fail. Moreover, culture also affects the types of goods and services that businesses must provide.
Religion is another important factor that affects business operations. Whenever any organization plans to establish or expand a business it needs to carry out a great deal of research about the religion which has its influence over the target market. They should be aware of the religious beliefs of people before launching any new project. There is a need to analyze the religious demographics and integrate its findings in the planning for new business operations to ensure that the risks associated with it are mitigated.
If an organization makes its plans keeping in kind the respect for all religions and runs the business accordingly then they have a high chance of being successful. We can take an example of various e-commerce companies which have become successful and earned profits by attracting customers by providing discounts and gifts during festive seasons.
Demographic is the analysis of populations. The demographic analysis mainly includes the analysis of age, gender, income, occupation, and so on. The demographic analysis mainly guides us to know about the people who are living in the area where the organization is planning to operate its business.
After analyzing the demographics, an organization can devise and implement the business strategy accordingly. The demographic factor is a vital factor both before and after the establishment of the business. To make a business successful it is essential to know the following elements from the demographics perspective:
- Age: Either in the target population young people are residing who are still earning or senior citizens who are already retired or are in a retiring phase.
- Gender: Either the male population is more or the female population is among the target population.
- Purchasing power: The value in money for which the target population may purchase goods or services.
- Family status: Either the people in the target population are married or single or are they staying alone or with a family.
An organization needs to be well aware of the factors that can affect the business and plan its strategy for the business operations. Therefore, demographics have different factors which an organization needs to analyze.
Level of education
The level of education is also one of the sociocultural factors that affect businesses. Many times business is good but it is not successful due to people’s level of education. The level of education refers mainly to how much awareness people possess. If we see it from the customer’s perspective the level of education refers to how much people are knowledgeable or know about a product or service and if we see it from the organization’s perspective it means the employee’s method of thinking and level of creativity.
If we watch it from the organization’s internal perspective, an employee’s level of thinking and prioritizing work makes a business successful because they can form a strategy for a business accordingly. If their level of thinking is high then the business will be successful and will rise to their expected level but if their thinking is limited business can’t give the results as per the expectation as they will not be able to come up with some best and unique idea about the business.
Now if we view it from the customer’s perspective, which is very important for any business, if a customer is not well aware or educated about a product or service that the organization is offering, then there is a high probability that the business will not be successful. For example, if we try to start or sell the Ayurveda products in an area where people are not much aware of them then surely it will fail. Hence, the level of education of customers, as well as employees, is extremely important for any business.
Customer preferences are another important sociocultural factor that affects business and business decisions. Customer preferences are the factors that are not constant. There are different other factors that make a change in the customer preferences like income, family status, technology, etc. What was people’s choice 4 years ago may not be the same now. The most common example of this is the clothing market because the clothing market keeps constantly changing with the people’s change in preferences for clothes.
We can take an example of the e-commerce market of our country Nepal. In Nepal, the e-commerce market is suddenly rising now because of customer preferences now to buy the products of their choice online rather than going to the physical location of the shop and buying it. The rise in technology has grabbed the market rapidly in the present scenario. Consequently, the preferences of customers have also changed.
The sociocultural environment has been playing a major factor for all businesses not only now but for a considerable amount of time. It is crucial for all organizations before and after the establishment of a business. The different factors of the sociocultural environment have sometimes been a huge challenge for an organization to be successful but it has sometimes also been a massive opportunity to be successful.
No organization can stay away from the effects of sociocultural factors but what it can do is be quickly adaptable to make any changes to its business strategy whenever the need arises. Therefore, the sociocultural environment is of paramount importance for all businesses to sustain themselves in the real business world.