A Study Of Surat Diamond Organizations Business Essay

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Profit motivation is the main spark of any economic activity, but at a macro level any economic activity is a part of social responsibility. The social responsibility demands that business should take some of the responsibilities and help to solve the allied social problems and issues and help to reach socio-political goals of business. Business should be an active guardian of society's conscience and problems.

This study may help the business world to understand the need for social responsibility and people's expectations from business.

Objectives of the Study

The main objective of this study is to see how far the business affects the society and to judge the attitude of diamond entrepreneurs to carry out their social responsibilities. The study is an attempt to evaluate the size wise (Large & Small) difference in their view points related to the different concepts of social responsibility of business.

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The other objectives are:

To see the impact of industry on society.

To observe why people expect businessmen to be socially responsible.

To study the room for the implementation of social responsibility in prevailing situation.

To do conceptual argument against the execution of social responsibility.

To find out high priority areas of social responsibility.

To find out main hurdles in the implementation of the concept of social responsibility.

Scope of the Study

The study is restricted to the diamond industry of Surat city only. The study was conducted between January 1, 2012 and August 25, 2012.

Methodology

The study is based on both primary as well as secondary data. For primary data a questionnaire was prepared containing different types of questions like Yes or No, Five Point Rating Scale, Ranking Order and Multiple Response, etc. Respondents were either unit holders or managers/key persons of the unit of diamond units. Secondary data was collected from booklets, printed materials provided by diamond units, Journals, Periodicals and websites. Data analyses had been done with the help of statistical tools like mean scores, percentage, chi-square test, critical ratio, rank correlation and 't' test.

Concept of Social Responsibility

Many others tried to define social responsibility of business in their own way. Votaw says, "The term (social responsibility) is a brilliant one; it means something but not always the same thing to everybody. To some it conveys the idea of legal responsibilities or liabilities; to others it means socially responsible behaviors in an ethical sense: many simply equate it with 'charitable contribution', some take it to mean socially conscious behavior".

Keith Davis attempts to define the concept by a two-fold classification of tasks: Where the Social responsibility begins, the law ends. Social responsibility refers to businessmen's decisions and actions taken for reasons at least particularly beyond the firm's direct economic or technical interest. Thus, social responsibility has two rather different faces. On one hand, businessmen recognize that since they are managing an economic unit in society, then they have a broad obligation towards the community with regard to economic development affecting public welfare (such as full employment, inflation and maintenance of competition). A quite different type of social responsibility is' on the other hand, a businessman's obligation to nature and developing human values (such as morals, co-operation, motivation and self reliance in work). Accordingly, the term 'social responsibility' refers to both socio-economic and socio-human obligation to others.

In short social responsibility means social consciousness, socio-human obligation, solution of society's problems, positive contribution to human betterment and involvement in social welfare.

Profile of Diamond Industry

Indian diamond industry is primarily an import-dependent industry. Indian diamond industry is the largest processor and exporter of Cut and Polished Diamond in the world. Out of every batch of 10 Diamond made in the world, 7.5 are made in India. In our country, the diamond processing units are mainly located in Gujarat, particularly in Surat, Navsari and some other parts of Saurashtra and North Gujarat region. About 80% of country's diamond processing work is being done in Gujarat, out of which more than 50% is conducted at Surat only. Hence Surat city is known as 'Diamond City'.

The diamond industry came up in the Surat city during 1934-1940 when it was set up in small-scale units. There was a spurt in the growth of the industry from 1960 to 1970 since export demand for diamonds in various markets grew very fast. During the 1980s better technology was brought in, which further resulted in massive expansion of the industry at Surat. As a result a large scale migration of laborers took place from Saurashtra and other parts of Gujarat to Surat.

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Today, the industry provides employment for a million people directly or indirectly. There are around 8 lakh people working directly on manufacturing, trading and other operations in Surat. It is estimated that there are as many as 12,000 units having onc lakh diamond finishing machines (called Ghanties) of which 30% are semiautomatic and 30% conventional (desi) type.

Employment in the diamond industry is exclusively on the basis of the type and quality of work done by a worker. Workers generally specialize in one of the overall manufacturing/finishing processes. Payment is made on piece basis. The diamond industry provides employment just with a minimum training of two months. Practical training in a diamond unit enables a worker to earn a minimum of Rs. 1,000 to Rs. 1,500 per month.

As the job involves the handling of valuable high cost product, to get a job in a diamond unit without any reference is not possible. For a few years' workers acquire the skill of processing, followed by direct and indirect method in learning practices for trading in and valuation of diamonds. Senior workers normally either start their own units or enter the field of brokerage or direct trading.

Manufacturing Centre

The geographical conditions in Saurashtra and other parts of Gujarat impel the local workers to opt for diamond labour or manufacturing. Due to the shortage of drinking water and, to some extent, electricity workers migrate to Surat to look for labour in this trade. In view of low investment and less government support, diamond units have mushroomed in the Varachha Road area in Surat.

Areas like Varachha Road, Mahidharpura, Katargam and Ved Road are flooded with diamond processing units. The large concentration of workers and diamond units is the main cause of problems like insanitation and pollution. It is suspected that a number of workers suffer from psychological problems, skin diseases, tuberculosis and a few even from AIDS.

Marketing

There are two large markets known conventionally as mini and big diamond markets. Mini markets are situated on the Varachha Road and the big market at Mahidharpura. Originally the diamond market was at Mahidharpura but because of the growth of the trade, the area of this market proved insufficient. Further, owing to the operating of a large number of diamond processing units on the Varachha road, alternative markets grew up there which are now many times larger than the old market at Mahidharpura.

In these markets, buyers and sellers of rough and finished diamond assemble for trading. While actual buyers or suppliers may or may not be at the site, a great part of trade from both sides is conducted through middlemen called dalals. The number of such buyers (including brokers) in both these markets may be around 10,000. The market operates from 11.00 a.m. to 2.00 p.m. and from 5.00 p.m. to 8.00 p.m. with brisk activities. Buyers and sellers also come from Mumbal, Navsari and parts of Saurashtra.

A Diamond Industrial Park is coming up at Sachin in Surat and a few units with better technology have been set up there. At Sachin, the units are generally engaged in the polishing and grading of diamonds. The town has a unique institute of repute called the Indian Diamond Institute, which undertakes scores of training programmes on diamond technology management.

Primary Data Analysis

Table: 1 Expectation of Socially Responsible Behavior

Question

Effect of Industry on the Socio-economic and Political Conditions of Society

Expectation of Socially Responsible Behavior

Concerning S.R. in respect of Multination Companies

Analysis

Yes

No

Chi-Square Test

Yes

No

Chi-Square Test

Yes

No

Chi-Square Test

Large Size

(n=24)

20

(83.33)

4

(16.67)

23

(95.83)

1

(4.17)

24

(100)

0

(0)

Small

(n=28)

26

(92.86)

2

(7.14)

28

(100)

0

(0)

26

(92.86)

2

(7.14)

All

(52)

46

(88.46)

6

(11.54)

1.479

N.S

51

(98.08)

1

(1.92)

0.011

N.S

50

(96.15)

2

(3.85)

3.28

N.S

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Note: N.S. = Not Significant. Figures given in brackets indicate percentage

About 91.82% respondents have given a favorable reply to the question whether industry substantially affects the socioeconomic and political conditions of society. The size wise analysis reveals that small units have given more favorable replies than larger units. From the viewpoint of chi-square value, it can be said that size for the industrial pattern hasn't any significant influence on the responses as both computed and chi-square values are less than the table values.

In conclusion, it can be observed that the majority of respondents accept that industry substantially affects the socioeconomic and political conditions of society.

A great majority of the respondents think that industry should behave in a socially responsible manner. The size wise analysis indicates that small units accept the view more extensively than large units. It shows that a good majority of people are of the view that industry should behave as a socially responsible person. The perceptions are not influenced by size as their responses are the same.

Due to liberal economic policies, many multinational companies are entering the Indian economy. In response to the question "Should multinational companies encroaching upon Indian markets be concerned more about the social responsibility of business? Majority of the respondents have opined favorably. The size wise analysis indicates that small unit respondents have more favorable replies than large unit respondents. The chi-square value calculation reveals that there is no significant difference between the responses of large and small units, as the computed chi-square values are less than the accepted level.

A good majority of respondents have opined that industry should be concerned more about social responsibility when multinational companies are encroaching upon Indian markets.

Table: 2 Responses about Accusation against Industry

Sr. No.

Accusation

Mean

Rank

Chi-Square Test

(A)

Instigates gang war and terrorism

2.17

7

N.S.

(B)

Spreads corruption among government servants

3.77

5

N.S.

(C)

Donation to political parties for favor

4.08

1

N.S.

(D)

Evasion of taxes and duties

4.06

2

N.S.

(E)

The only goal is profit maximization

3.83

3

N.S.

(F)

Always tries to hike the prices

3.79

4

N.S.

(G)

Debarring workers from enjoying their rights

2.90

6

N.S.

(H)

Fanning communalism in the country

1.56

8

N.S.

Above table shows the respondent's accusations against industry. It is obvious from the table that five accusations are accepted by them, while three are rejected. The accusations that have found acceptance in descending order of the degree of acceptance are:

1. Donations to the political parties for favors.

2. Evasion of taxes and duties.

3. Profit maximization is the only goal.

4. Spreads corruption among the government servants.

5. Always tries to hike the prices.

Those accusations against industry which are found to be unacceptable are, in descending order:

1. Fanning communalism in the country.

2. Instigates gang war and terrorism.

3. Debarring workers from enjoying their rights.

It is obvious that political parties interfere with industrial organizations. Evasion of taxes and duties, profit maximization and spreading corruption among government servants may be the aftermath of meddling by political parties with industrial organization. Those charges which are rejected by respondents are all of a non-monetary character. The item wise analysis indicates that there are significant differences in their perceptions of one item out of eight. It is obvious that size of the unit has any significant influence on the responses. Their responses are the same to the accusations against industry.

Factors behind Expectation of Socially Responsible Behavior

In order to identify the factors behind expectation of socially responsible behavior from industry, respondents were presented with a set of seven factors and requested to indicate the importance of each factor. The results are tabulated in the form of mean in Table: 3. Main factors are listed below in order of their descending importance.

1. Industry is an organ of society.

2. Acceptance of social responsibility by some leading firms.

3. Irresponsible behavior disturbs human values.

The other factors are:

4. Exploitation of society's resources.

5. Industry has dominant power, next to the government.

6. Failure of the government in serving the people.

7. Largeness and backwardness of the country.

It is observed that the activities of big industrial houses in the direction of social responsibility are an inspiration for other industrial units (Rank 2).

Table 3 shows the purview of the factors behind expectation of socially responsible behavior from industry. The itemize analysis indicates that there is no significant difference between the perceptions of large units and small units, as the computed chi-square value is less than the table value. But the over all rank correlation co-efficient is not significant. It is a fact that the size of the unit has significantly influenced the responses.

Table: 3 Responses about Factors behind Expectation of Socially Responsible Behavior from Industry

Sr. No.

Accusation

Mean

Rank

Chi-Square Test

(A)

Exploitation of society's resources

4.20

3

0.5 Significant

(B)

Acceptance of social responsibility by some leading firms

4.27

2

N.S.

(C)

Industry is also an organ of society

4.59

1

N.S.

(D)

Industry has dominant power next to the government

4.08

5

N.S.

(E)

Failure of the government in serving the people

3.90

6

N.S.

(F)

Largeness & backwardness of the country

3.86

7

0.01 Significant

(G)

Irresponsible behavior disturbs human values

4.16

4

N.S.

The factors behind expectation of socially responsible behavior from industry indicate that there is no significant difference in deciding the following two factors:

(1) exploitation of society's resources and

(ii) largeness and backwardness of society.

Reasons for the implementation of Social Responsibilities

Table 4 records the reasons for the implementation of social responsibilities. The main reasons are:

I. Satisfaction of consumers, investors and the Local community.

1 Fulfilling social responsibility generates sympathy among the people.

3. In the long run, the social action programme rewards more.

The other reasons in order of descending importance are

4. The social action programme has publicity value.

5. Strikes and labour union activities can be avoided.

6. The concept of social responsibility has a similarity of the trusteeship doctrine of Mahatma Gandhi.

7. Denial of social responsibility results in public hostility.

8. The programme helps in avoiding more governmental regulation.

The examination of results reveals that there is a great similarity between the views of large and small units. The item wise analysis reveals that there are differences in the opinions about three out of eight items. From these three items, the item No. 6, "The concept of social responsibility is similar to the trusteeship doctrine of Mahatma Gandhi," is salient because the mean difference indicates this item as the greatest factor for opinion differences. Finally, it has been observed that size of the unit significantly influences the views of respondents.

Table: 4 also highlight the reasons for implementation of social responsibility. From the ranking pattern, it is obvious that respondents are greatly aware of the problems related to ecological balance. Ranks 2, 3 and 4 indicate respondents' attitudes towards workers and the rest of the people. It can also be perceived that "Advertising Ethics" is the least important area as it has less concern for the well being of workers and other people.

Table: 4 Responses to the Questions about Reasons for the Implementation of Social Responsibility

Sr. No.

Accusation

Mean

Rank

Chi-Square Test

(A)

Social action programme has publicity value

3.83

6

0.05 Significant

(B)

For the satisfaction of consumers, investors, local community

4.42

1

N.S.

(C)

Fulfilling social responsibility generates sympathy among the people

4.04

3

N.S.

(D)

A social action programme helps in avoiding more governmental regulations

3.35

8

N.S.

(E)

Denial of social responsibility results in public hostility

3.69

7

0.05 Significant

(F)

The concept of social responsibility has a semblance of the trusteeship doctrine of Mahatma Gandhi

3.98

4

0.05 Significant

(G)

In the long run, social action programmes reward more

4.23

2

N.S.

(H)

Strike and labor union activities can be avoided

3.92

5

N.S.

Finally, it is concluded that size has influence on the responses about difficult areas in implementation. There are no differences in the responses of large and small units.

Arguments against the Concept of Social Responsibility

Arguments against the concept of social responsibility as perceived by respondents are given in Table 5. Among the seven arguments listed, only two are found more acceptable to the respondents and the other five are rejected. Two important and valid arguments against the concept of social responsibilities are

1. Social action programmes are not affordable to small units.

2. Clear guidelines on the areas of social responsibility have not been drawn.

Table: 5 Responses to the Questions about Argument against the Concept of Social Responsibility

Sr. No.

Accusation

Mean

Rank

Chi-Square Test

(A)

Public service is the business of the government

1.86

7

0.05

Significant

(B)

Society expects only production and profit from business

2.79

3

N.S.

(C)

Involvement in social activity weakness is the strength of industry

2.73

4

N.S.

(D)

Clear guidelines on the areas of social responsibility have not been drawn

3.10

2

N.S.

(E)

Governmental rules and regulations indicate social action for industry and therefore extra social activities are not necessary

2.19

6

N.S.

(F)

Social action programmes are not affordable to smaller units

3.61

1

N.S.

(G)

Mistakes in the implementation of social action programmes also tarnish the professional image of industry

2.69

5

N.S.

Among the arguments, the following have been rejected:

I. Public service is the business of the government.

2. Government rules/regulations indicate social action for industry and therefore extra social activities are not necessary.

3. Involvement in social activities weakens the strength of industry.

4. Society expects only production and profit from businesses.

5. Mistakes in the implementation of a social action programme also tarnish the professional image of the industry.

The most important argument against the concept of social responsibility is that

"Social action programmes are not affordable to smaller units", may be the reflection of a large number of small units of the diamond industry in Surat. It is noteworthy that larger units have consistently opined that social action programmes are not affordable to smaller units. The rank two arguments indicate respondents' belief that industry should assume social responsibility on its own.

The item wise analysis indicates that there are significant differences in one item out of seven and the rank correlation coefficient. It implies that the perceptions of respondents are not influenced by size. It reveals that there are significant differences in one argument out of seven.

It is obvious that the size of the unit significantly influenced responses to the question about arguments against the concept of social responsibility.

Priority Areas of Social Responsibility

With a view to ascertaining the priority areas of social responsibility, a list comprising ten areas was presented and respondents were asked to rank them in order of importance. The mean rank is presented in Table 6. From the table, it can be seen that four areas have been perceived as important factors. They are listed below:

1. Ecological Conservation.

2. Labour Welfare Activity.

3. Encouragement of National Policy.

4. Rural Area Development.

The other areas in descending order of importance are

5. Society Building Programme.

6. Resource Conservation.

7. Fair Business Practices.

8. Society Relief Activity.

9. Fair Monetary Transaction.

10. Advertising Ethics.

A comparative analysis of the size wise perceptions of respondents about important and difficult areas for the implementation of social activities (responsibilities) is shown in the table. From the table it can be found that there is no significant difference between the perceptions of large and small units. The analysis is also related with the social areas of efforts in terms of difficulty in implementation. It shows areas of difficulty in implementation as perceived by all respondents. Here rank I is most difficult while ascending ranks are less difficult areas of implementation. The primary areas having the mean value less than 5 are:

1. Ecological Conservation

2. Rural Area Development

3. Encouragement of National Policy

4. Society-building Programme

5. Resource Conservation

The secondary areas in order of difficulty in implementation are:

6. Labour Welfare Activity

7. Fair Business Practices

8. Fair Monetary Transactions

9. Society Relief (Activities)

10. Advertising Ethics

Table: 6 Important and Difficult Areas of Implementation- as Perceived by all Respondents (n=52)

Sr. No.

Accusation

Priority Rank

Difficulty in Implementation

(A)

Labour Welfare Activity

1

4

(B)

Society Relief Activity

6

8.5

(C)

Ecological Conservation

2

3

(D)

Rural Area Development

4

1

(E)

Resource Conservation

8

6

(F)

Encouragement of National Policy

3

2

(G)

Society Building Programme

5

5

(H)

Advertising Ethics

10

10

(I)

Fair Business Practices

7

7

(J)

Fair Monetary Transaction

9

8.5

Correlation Coefficient

0.746

T value

3.170

Level of Significance

0.05

Hurdles in the Implementation of Social Responsibility

Some inside hurdles are perceived by all respondents. Table 7 shows size wise and industry wise comparative analyses of hurdles in the implementation of social responsibility by the industries.

The important inside hurdles with the mean less than 4 are:

1. Benefits from social action programmes cannot be known accurately.

2. With the discharging of social responsibility the investor covers more financial advantages.

3. Priorities of social actions vary from manager to manager and person to person.

4. The response from the beneficiary may be poor and discouraging.

The factor which has been rejected is: "Social action programmes disturb routine work."

It is obvious that size as well as the industrial pattern significantly influences the responses. It implies that responses differ between large and small units as well as textile and diamond industries about inside hurdles in social responsibility implementation.

Table: 7 Responses to the Questions about Inside Hurdles in Social Responsibility Implementation

Sr. No.

Inside Hurdles

Mean (Rank)

(A)

Social programmes disturb routine work

2.79

(6)

(B)

The response from the beneficiaries may be poor and discouraging

3.19

(5)

(C)

The burden of social action programmes dilutes the operating

3.44

(2)

(D)

With the discharging of social responsibility an investor covers more financial advantages

(bonus/right share, higher dividend etc)

3.42

(3)

(E)

Priorities of social actions vary from manager to manager and person to person

3.46

(4)

(F)

Benefits from social action programmes cannot be known Accurately

3.58

(1)

Table: 8 Responses to the Questions about Outside Hurdles in Social Responsibility Implementation

Sr. No.

Inside Hurdles

Mean (Rank)

(A)

Corruption in the local government offices

4.44

(2)

(B)

Disruptive activities of political parties

3.63

(6)

(C)

Instable government policies (like quota, licence, import-export, foreign exchange, etc)

4.04

(4)

(D)

Lack of co-operation from the institution concerned in the social activity

3.73

(5)

(E)

Inadequate stimulants from the government

4.10

(3)

(F)

Heavy taxation and unworkable laws

4.50

(1)

(G)

Intra-Industrial jealousy

2.77

(7)

Above table presents some of the outside hurdles as perceived by all respondents and the size wise Comparative analyses. Among the seven outside hurdles listed, six are regarded as formidable.

The more important hurdles with the mean more than 4 are:

I. Corruption in the local government offices.

2. Heavy taxation and unworkable laws.

3. Unstable government policies.

4. Inadequate stimulants from the government.

5. An outside hurdle rejected is intra-industrial jealousy.

The above ranking pattern indicates that Surat is not different from the rest of India as there are widespread corruption and irregularities. It also implies that there is no significant influence of size or industrial pattern on the perception of respondents about outside hurdles in implementation.

It is also clear that there is a significant influence of size on the responses. It implies that responses differ between large and small units about organization for the implementation of social responsibility.

Incentives for Familiarizing the Concept of Social Responsibility

Table: 9 shows the views of all respondents' size wise on incentives for familiarizing the concept of social responsibility. Below are listed more important incentives with the mean more than 4:

1. Full government co-operation in solving electricity, telecommunication and transportation problems

2. Granting of loans for social action programmes by the government

3. Special coverage of social action programmes on television

Table: 9 Responses about Required Incentives for Social Responsibility Implementation

Sr. No.

Inside Hurdles

Mean (Rank)

(A)

Granting of special awards

3.81 (4)

(B)

Special membership of a business institution like the Chamber of Commerce

3.56 (5)

(C)

Special coverage of social action programmes on TV

4.10 (2.5)

(D)

Granting of loans for social action programmes by the Govt.

4.10 (2.5)

(E)

Simpler taxation, FERA as well as import-export regulations

3.48 (6)

(F)

Full Government co-operation in solving electricity, telecommunication and

transportation problems

4.46 (1)

The table also reveals that there is no difference in responses between large and small units about incentives for familiarizing the concept of social responsibility.

Conclusion

Profit motivation is the main spark of any economic activity, but at a micro level any economic activity is a part of social responsibility. The social responsibility demands that business should take some of the responsibilities and help to solve the allied social problems and issues and help to reach socio-political goals of business. Business should be an active guardian of society's conscience and problems. A good majority of people are of the view that industry should behave as a socially responsible person and also believe that Social action programmes disturb routine work. People favor social relief actions, labour welfare activities, ecological conservation, etc. Now it is a high time for the business unit to give more stress on social responsibility rather than profit making objective.