Paper 1- Theme 3.4- Influences on business decisions

Question 3

define internal stakeholder

Answer 3

someone from inside the business with a vested interest in the activities and decision making of the business

e.g. staff, owners, shareholders

Question 4

define external stakeholder

Answer 4

someone outside of the business with a vested interest in the activities and decision making of the business

(group, organisation or individual)

e.g. customers, society, government, suppliers

Question 5

define shareholder

Answer 5

any person, or company that owns at least one share of the business

Question 6

describe the shareholder approach

Answer 6

business main interest is maximising and growing the value of shareholder returns, through focus on profit

• Friedman

Question 7

pros and cons of shareholder approach

Answer 7

pros

• should be priority as they provide essential investment (may withdraw if unsatisfied)
• shareholders have direct influence as they can voice concerns and appoint directors so important for cohesion
• leads to focus on profit maximisation and drive for efficiency
• less risk in their financial structure, as less reliance on debt finance

cons

• seen as short termist, through inorganic growth –> ignoring sustainability
• —> may miss opportunity by focusing on short term
• lack of investment in innovation may lose firm their competitive advantage
• impact reputation with and isolate other stakeholders

Question 8

describe the stakeholder concept

Answer 8

business main focus is trying to satisfy the needs of stakeholders as much as possible through the business’ decisions and activities

Question 9

pros and cons of stakeholder approach

Answer 9

pros

• motivation among staff
• improved customer perception of brand —-> lead to loyalty
• majority of groups benefit —-> greater holistic benefit
• long term benefits on costs (focus on long term benefits)

cons

• some of these are key (if they aren’t satisfied, the business cant function)
• in short term, costly to meet all the needs
• very difficult to meet all needs as some will be contradicting, possible conflicts
• seen as being CSR —> increase price, added value

Question 10

examples of conflicts

Answer 10

wage rise = lower profits and dividends

organisational growth = less short term profit

expand production = disruption to local community

increasing credit for customers = reduce cashflow and increase credit on supply

Question 11

Pros and cons of Being ethical

Answer 11

Pros

• protect natural world
• competitive advantage (charge premium)
• positive PR

Cons

• costly to implement
• ppl may see through “fake” marketing strategies
• may not receive monetary benefits short term

Question 12

define stakeholder conflict

Answer 12

-needs of different stakeholders may conflict and so an action may benefit one group but impact another group negatively

Question 13

Examples of stakeholders

Answer 13

customers
employees
suppliers
banks
shareholders
community

Question 14

describe the stakeholder concept

Answer 14

Friedman suggested that the only concern should be to use resources available as efficiently as possible to maximise profit, as this will benefit the whole society

Question 15

possible conflicts between shareholders and stakeholders

Answer 15

• sustainability
• wages
• growth
• taxes