3.4.3 Shareholders versus stakeholders

Question 1

What is a shareholder friendly firm?

Answer 1

A business that is purely focused on maximising its profits and hence, its dividends for its shareholders

Question 2

What are characteristic of a shareholder friendly firm?

Answer 2

1. Reduces costs- A business may use cheaper raw materials, pay minimum wage, use zero hour contracts(Cheaper raw materials could result in a poorer quality product)
2. It may focus on its production methods to reduce
3. Production may take place in sweatshops in countries such as China or Bangladesh
4. Maximise sales - Promotions
5. Reduce costs even if at the expense of the environment if it reduces cost
6. Reducing costs, will allow them to have larger profit margins

Question 3

When could this be used?