1.5 Stakeholders in a business

Question 1

Stakeholder

Answer 1

People or groups of people who can be affected by, and therefore have an interest in any action by an organisation

Question 2

Stakeholder concept

Answer 2

The view that businesses and their managers have responsibilities to a wide range of groups, not just the shareholders

Question 3

Groups of stakeholder

Answer 3

Customers, suppliers, employees, local community, government, pressure groups

Question 4

Responsibilities to customers

Answer 4

• Quality, design, durability and customer service should be in line with customer’s objectives at a reasonable price
• Not to break the law concerning consumer protection and accurate advertising
• Avoid taking + of vulnerable customers
  + Customer loyalty, great purchases, good publicity (word of mouth), good feedback

Question 5

Responsibilities to suppliers

Answer 5

• Pay promptly
• Regular orders
• Long term contracts
  + Suppliers loyalty (meet deadlines, except request for special orders)
  + Credit terms more likely to be offered

Question 6

Responsibilities to employees

Answer 6

• Not breaking the workers’ rights and contracts
• Provide training opportunities, job security, good working conditions and wages, involving staff in decision making
  + Easy to recruit good staff
  + Improved motivation
  + effective communication
  + Low labour turnover

Question 7

Responsibilities to local community

Answer 7

• Offer secure employment -> less local fear of job losses
• Local supplies to build good relationships
  + Gain permission to expand business
  + Likely to accept some of the negative effects the business has on the surroundings
  + Reduce transportation costs
  + Reduce adverse working environment

Question 8

Responsibilities to government

Answer 8

• meet legal responsibilities as defined by gov legislation
• pay taxes on time
• complete gov statistical and other forms accurately
  + Receive valuable gov contracts
  + Request for subsidies may be approved
  + Licences to set up new operations are more likely to be awarded

Question 9

CSR evaluation

Answer 9

• Small scale business -> should focus on growth/ survival = core objectives
• Costly because sustainable tencho -> more costs -> less profit
• Distracts from the key role of business activity -> econ resources not used efficiently
• “Window-dressing” to mask unscrupulous activities by the business
  + Cost saving as in no preservative, no fancy packaging
  + Innovation ( Unilever invents hair conditioner that consumes less water)
  + Long term = build up image of the company OR if they invest in infrastructure -> improve the country -> possible foreign investments -> Discerning views

Question 10

How conflict might arise from stakeholders having different aims

Answer 10

• Customers want good-quality products at low prices. Higher profits will be desired by shareholders -> higher dividends.
• Shareholders want to have large profits, employees want to be paid higher wages. (increase cost, reduce profit)
• Government aims to have lower unemployment, business wants to increase its use of machinery. However, business more profitable, more tax.
• Suppliers charge higher prices, business increased costs, reduce profits and dividends paid to shareholders.

Question 11

Changing business objectives affect its stakeholders

Answer 11

1. Profit maximisation -> increase market share
   - Satisfy the needs of shareholders to receive dividends paid out of profit.
   - Change:
   + Reduction in profit due to more money being spent on building image/ uniqu selling point (USP)
   + Gain stronger position
2. Survival to growth
   - Give some security to employees
   - Produce larger profit that can be paid to shareholders in form of dividends.