Business Organisations & Their Stakeholders Flashcards
An important difference between Profit and Non-Profit orientation is…
Profit orientated = profit maximisation (Driving factor)
Non-Profit = Provision of a good / service
The difference between ownership of Private and Public sector organisations is: Public organisations are…
…owned / run by central or local government or government agencies
Ownership vs control in individuals: (3)
- Shareholders: Owners; Ltd rights over day to day running
- Directors: Run the company; Accountable to shareholders;
- Operational Management: Accountable to the board
Executive vs Non-Executive Directors
Executive: Daily operations
Non-Executive: Advisory capacity; Particular skills / experience; Some overall guidance
Types of Limited company: (2)
- Private limited companies
2. Public limited companies
Private and Public Limited companies differ by: (4)
- Number of shareholders
- Transferability of shares
- Directors as shareholders
- Source of capital
Sources of capital in Private vs Public Limited companies:
Private:
- Founder / promoter
- Business associates
- Venture capitalists
Public: Additionally:
- Public
- Institutional investors (recognised markets)
Advantages of limited companies: (6)
- More money
- Reduced risk
- Separate legal personality
- Ownership separate from control (investors need not get involved)
- Unrestricted size
- Flexibility (capital + enterprise)
Disadvantages of limited companies: (2)
- Legal compliance costs (audited financials)
2. Shareholders - little practical power
Key characteristics of the public sector: (4)
- Accountability (to parliament)
- Funding (3 ways…)
- Demand for services (limitless!)
- Limited resources
The public sector can obtain funds in 3 main ways: (3)
- Raising taxes
- Making charges (prescriptions)
- Borrowing
Advantages of the public sector include: (6)
- Fairness (access to health)
- Gaps in Private Sector (Street lights)
- Public interest
- Economies of scale
- Cheaper finance
- Efficiency (Lower costs; serve more people)
Disadvantages of the public sector include: (3)
- Accountability (ignore inefficiency)
- Interference (pressures to get elected)
- Cost (Perfect service without the cost!)
The definition of an organisation is… (4)
- Social arrangement
- Collective goals
- Self-control of performance
- Environmental boundary
Common characteristics of organisations are… (5)
- Preoccupied with performance (meeting / improving standards)
- Formal, documented systems & procedures
- People: Different tasks / specialise
- Pursue various objectives
- Process inputs into outputs
Organisations exist because… (5)
be more productive!
- Overcome individual limitations
- Enable specialisation
- Save time
- Accumulate & share knowledge
- Synergy (combined exceeds individual)
The ways organisations differ are… (8)
- Ownership
- Control
- Activity
- Profit / Non-profit
- Legal status (Ltd, Partnership)
- Size
- Source of finance
- Technology (Google vs. Fish & Chips)
Organisational activities include: (7)
- Agriculture
- Manufacturing
- Extractive (Raw materials)
- Energy
- Retailing (Distribution)
- Intellectual production
- Service (Retail, distribution, transport, banking, medicine, education)
The 3 broad types of stakeholders are: (3)
- Internal (employees; management)
- Connected (Shareholders; customers; suppliers; financiers)
- External (Community; government; pressure groups)
Internal stakeholders are interested in… (2)
- Organisation’s continuation and growth
- Individual interests and goals
(Employees & management)
Connected stakeholders: Shareholders are interested in… (7)
- Changes in shareholder value; Long-term share price growth
- Increase in shareholder wealth
- Profitability
- P/E ratios
- Market capitalisation
- Dividends
- Yields
(Shareholders)
Connected stakeholders: Bankers are interested in… (2)
- Security of loan
- Adherence to loan agreements
(Deny credit; Higher interest / Receivership)
Connected stakeholders: Suppliers are interested in… (3)
- Profitable sales
- Payment for goods
- Long-term relationship
(Refusal of credit; Court action; Wind down)
Connected stakeholders: Customers are interested in… (2)
- Goods as promised
- Future benefits
(Buy elsewhere; Sue)
External stakeholders: Government is interested in… (3)
- Jobs
- Training
- Tax
(Legal action; Regulation; Increases)
External stakeholders: Interest / Pressure groups are interested in… (3)
- Pollution
- Rights
- Other
(Publicity; Direct action; Sabotage; Pressure on government)
External stakeholders: Professional bodies are interested in… (1)
- Members’ ethics
Impose standards
Another approach: Primary vs Secondary stakeholders:
Those with a contractual agreement:
- Primary stakeholders (Internal & Connected)
- Secondary stakeholders (External)
Mendelow: Stakeholder Mapping (4)
Matrix of:
- Power held and
- Likelihood of showing interest
Mendelow: Segment D
High interest; High power
Key players / major customers
Mendelow: Segment C
Low interest; High power
Treated with care; kept satisfied
Large institutional shareholders
Mendelow: Segment B
High interest; Low power
Lobbying
Kept informed
Community representatives / Charities
Mendelow: Segment A
Low interest; Low power
Minimal effort
Mendelow: Each segment has 3 choices:
- Loyalty (do as they’re told)
- Exit (Sell shares; new job)
- Voice (stay and change)
Measuring stakeholder satisfaction: Employees (3)
- Staff turnover
- Pay & benefits relative to market rate
- Job vacancies
Measuring stakeholder satisfaction: Government (4)
- Pollution measures
- Promptness of filing annual returns
- Accident rate
- Energy efficiency
Measuring stakeholder satisfaction: Distributors (2)
- Share of joint promotions paid for
2. Rate of running out of inventory
