Chapter One Flashcards
What is a business?
any organization that is engaged in making a product or providing a service for a profit
What is society?
human beings and the social structures they collectively create
Are business and society interdependent?
Yes, highly
How does the General Systems Theory relate to business?
It means that business firms are embedded in a broader social environment with which they constantly interact
Traditional View: Ownership Theory of the Firm
firm is the property of its owners; purpose is to maximize returns to stakeholders; shareholders interest are above all else
Contrasting View: Stakeholder Theory of the Firm
argues the cooperation serves a broader purpose, to create value for society; must make a profit to survive, but also creates other value as well; ALL stakeholder groups are taken into account
Descriptive
more realistic description of how companies really work
Instrumental
more effective corporate strategy
Normative
stakeholder management is the right thing to do
What is a stakeholder?
persons or group that affect or affected by an organizations decisions, policies, and operations
What is a stake?
an interest in, or claim to, a business enterprise
Are stockholders and stakeholders the same?
NO! stockholders are one of the several kinds of stakeholders
What are market stakeholders?
those that engage in economic transactions with the company as it carries out its primary purpose of providing society with goods and services
AKA primary stakeholders
What are nonmarket stakeholders?
people or groups who although they do not engage in direct economic exchange with the firm, are affected by of can affect its actions
AKA secondary stakeholders
Should government be a nonmarket of market stakeholder?
normally they do not have direct exchange with businesses, but sometimes they do
