Factors Influencing Business Ethics: Determinants & Importance

Factors Influencing Business Ethics

Business organizations and their owners are aware of ethical issues, so they want to raise the bar for ethical behaviour in the workplace. Self-regulation is undoubtedly more effective and produces satisfying outcomes. In addition, a variety of factors affect business ethics.

In this article, we’ve discussed factors influencing business ethics, determinants of ethics and ethical factors affecting business.

What is Business Ethics?

Business ethics is known as the study of appropriate business perspectives. It works on potentially contentious issues, such as corporate governance, market manipulation, financial benefit, detachment, social responsibility, and parental responsibilities.

The law frequently serves as a guide for business ethics. Still, on occasion, business ethics provide basic standards organizations can choose to abide by to win the public’s support.

The same business ethics apply to dealings with a single customer as with the rest of the world.

What are the Determinants of Ethics and ethical factors in business:

Determinants of Ethics are the origins from which an ethical norm arises. These factors determine human behaviour, whether an act is good or bad. There are numerous determinants of ethics viz—religion, Laws, Societal rules, Individual values and preferences, Knowledge and Time etc.

Importance factors influencing business ethics:

  • Good business ethics will develop the business and positively impact the company.
  • Ethics of the business provide a good reputation
  • Ethics of the business improve the customer confidence
  • Moreover, it creates the confidence of the investors.
  • Enhance teamwork and employee satisfaction. 
  • It helps the organization to do competitive analysis.
  • Improve the revenue of the organization.
  • The business’s ethics helps the organization be aware of social responsibility.
  • Good business ethics helps to provide a unique product to the customer. 
  • Encourages employees to remain involved with the company.
  • It brings in investors and maintains a high share price for the company.
  • Reduces the costs of hiring new employees and draws more people to the company.

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Factors Influencing Business Ethics

  1. Personal Code of Ethics
  2. Legislation
  3. Leadership
  4. Government Rules and Regulations
  5. Ethical Code of the Company
  6. Social Pressures
  7. Ethical Climate of the Industry

Personal Code of Ethics:

One of the primary factors causing ethical behaviour in business is individual Ethics. The primary factor affecting someone’s behaviour is their code of ethics, or what they hold to be moral.

For instance, Ratan Tata, chairman of the Tata Group, is renowned for his code of ethics, which contributes to both employee satisfaction and the high brand value of the tata group.


When the organization does not hold the business rules and regulations, the Government steps in and enacts laws. Only when businessmen completely disregard their social obligations and behave unethically and selfishly. 

No society can put up with such lousy behaviour constantly. It will undoubtedly put pressure on the Government, and as a result, there is nothing else the Government can do to stop the businessmen’s ineffective behaviour. It is one of the pressures influencing business and factors affecting business. 


If the leader leads the team ethically and motivates them to do action lawfully, employees will perform legally. It would be advantageous for the company and the employees. In such cases, leaders are essential to lead the company and the team in the way that should be. All the time, the organization could not interfere directly or spend time on the whole department. So, the leader in that particular position should take the responsibility of leading the team ethically. 

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Government Rules and Regulations

Whatever the business is, whether small or big, it can be a small or a large turnover company; the company should follow the norms of the Government, such as security, working conditions, food, safety, Insurance, etc. These offer techniques for business managers to choose accepted or acknowledged standards and practices.

Ethical Code & Policy of the Company

A company’s ethical standards increase as it becomes more established. The professional image, positive reputation, and general perception are all at risk from any unethical behaviour or conduct on its part.

As a result, most businesses exercise extreme caution in this area. They communicate to their subordinates detailed strategies regarding business dealings.

Social Pressures

Social pressures and forces significantly influence business ethics. Consumers will lose interest in a business if it delivers cheap products and engages in unethical behaviour.

These rejections will put the company under pressure to conduct itself genuinely and adhere strictly to business ethics. Society can sometimes turn against a company—for example, friends, family, coworkers, neighbours, and the media.

Ethical Climate of the industry

Today’s modern industries operate in an environment that is becoming more and more competitive. Therefore, only businesses that strictly adhere to the ethical code can maintain their position in their industry.

The company should operate at the same level as others in the industry when other businesses adhere strictly to ethical standards. The business can only endure over the long term if its performance exceeds that of direct competitor businesses in the same sector.

Internal & External Factors influencing Business Ethics

Business ethics can be influenced by mainly two factors, i.e. Internal And External.

Internal factors influencing business ethics

Internal factors influencing business ethics are as follows;

  • Employees and manager
  • Money and resources
  • Company culture

Employees and Managers

Your employees play a significant role in the internal environment of your business up until the point where you’re a one-person show. Whether selling products to strangers or writing code, your staff members should be competent in whatever they do.

The ability to supervise other areas of the internal environment and manage lower-level employees are both skills that managers should possess. Internal politics and conflicts can destroy a good company even when everyone is competent and talented.

 Money and Resources

More funds and resources may also determine the fate of your business. The number of employees you can hire, the calibre of your equipment, and how much advertising you can spend all depend on how much cash the company has available.

You will have many more opportunities to develop and grow your company if you have enough cash.

Company Culture

A company’s internal culture consists of the principles its personnel uphold. A company that emphasizes collaboration and teamwork will have a different environment than one with a competitive culture where every employee competes with one another. 

Usually, a company’s culture develops from the top down.

External factors influencing business ethics

External factors influencing business ethics are as follows;

  • Economy
  • Customers and suppliers
  • Politics and government policies.


In a poor economy, even a successful business might be unable to survive. If customers lose their jobs or accept jobs that barely support them, they will spend less on sports, entertainment, gifts, expensive items, and new cars.

Too-high credit card interest rates may deter consumers from making purchases. Even though you have no control over the economy, understanding how it functions can help you spot its opportunities and threats.

Customers and Suppliers

Your customers and suppliers are the most crucial persons you work with after your employees. Suppliers have a big impact on your expenses.

Any supplier’s leverage depends on scarcity: If there are no alternatives to your purchase, your options for negotiation will be limited.

Your ability to leverage your customer base depends on various factors, including how fierce the competition is for their business, the quality of your goods, and whether or not your advertising encourages customers to use you.

 Politics and Government policies

Government policy changes may have a significant impact on your company.

One of the most compelling examples is the tobacco industry. 

Cigarette manufacturers have been warned labels on their products since the 1950s, and they are no longer allowed to advertise on television or in other media. But, few places are now legal for smokers to smoke.

Determinants of Business Ethics

The constant interaction between numerous factors is how business ethics came to be. The main elements affecting how businesses behave ethically are as follows:

 (1) Social Factors

Fundamentally, ethics are social morals. In other words, moral behaviour in business is ethical behaviour in society. Therefore, social mores, standards, customs, and norms dictate business ethics and how companies should behave.

Additionally, business ethics are adjusted to the shifting social environment as societal norms and values change.

 (2) Economic Factors

Business ethics’ facets and diffusion are the impacts of economic development. With the economy’s growth, particularly in the business sector, business ethics tend to take on a more liberal character.

For example, the advertisement on mint.

 (3) Cultural Factors

Cultural values continuously impact how individuals and organizations should conduct themselves. And the cultural legacy, family structure, religion, system of education, and Government are some of the sources of these cultural values.

These factors continuously influence the nature and style of social ethics-based behaviour.

(4)  Political Factors

The ideology and philosophies of the ruling political party also influence business ethics. The Government tries to enforce companies in respect of such crucial facets as the business location, maintaining quality, fair prices, treating employees fairly, safety precautions, pollution prevention, etc.

 (5) Organizational Factors

Business managers’ ethical perceptions, judgement, and successful behaviour are significantly influenced by organizational factors like the company’s ideology and regulatory regime, the managers’ attitudes, and the relationships between subordinates and superiors.

 (6) Institutional Codes

Several sectoral institutions have established codes of conduct for business that must be followed.

Professional organizations like the All India Management Association, the Institute of Chartered Accountants of India, the Institute of Costs and Works Accountants of India, the Institute of Company Secretaries of India, and the Institute of Chartered Accountants of India have each established codes of ethics for their respective members.

Business enterprises also have codes of conduct developed by organizations such as Chambers of Commerce, Industry and Trade Associations. Such codes of conduct serve as trend-setters and foster an environment that encourages businesses to act ethically.

Now that you have understood factors influencing business ethics, Factors Influencing Business Ethics: Determinants & Importance, and factors causing ethical behaviour in business. So, to learn more about business development or ethical factors in business, you can keep visiting our website for more business-related blogs.