(PAPER 3) 3.4.3 stakeholders vs shareholders

Question 1

stakeholders definition

Answer 1

groups that influenced or are influenced by the operations of a business

Question 2

internal stakeholders definition

Answer 2

groups inside a business with an interest in its activities

Question 3

external stakeholders definition

Answer 3

groups outside a business with an interest in its activities

Question 4

internal stakeholders include:

Answer 4

employees: they work for businesses and depend on them for wages in order to live
managers: ensure policies and strategies are implemented within businesses. they are often appointed to work in specific departments or functions.
owners: they stand to gain or loose financially from the performance of their business

Question 5

external stakeholders include:

Answer 5

customers: provide revenue and profit
suppliers: businesses that provide raw materials, components, commercial services and utilities to other businesses
shareholders: part owners of a business.
creditors: lend money to business e.g. banks or individuals
government: want businesses to be successful so they can pay takes
society: businesses to employ people
environment: representative such as individuals or environmental groups

Question 6

stakeholder objectives: employees

Answer 6

growth- rising profits, good income, job security, fair and honest treatment, safe working condition, interactions with colleagues, opportunities for promotion

Question 7

stakeholder objectives: managers

Answer 7

growth (organic or inorganic), rising profits

Question 8

stakeholder objectives: owners/ shareholders

Answer 8

rising profits in the short and long term, return on investment, maximisation of shareholder value, ethical business practices

Question 9

stakeholder objectives: customers

Answer 9

reliable products or services, high quality customer service, value for money, clear and fair pricing, accurate information, choice.

Question 10

stakeholder objectives: suppliers

Answer 10

growth, regular trade, fair prices, paid on time

Question 11

stakeholder objectives: government

Answer 11

compliance with legislation and rules, fair and open trade, employment opportunities, taxation

Question 12

stakeholder objectives: society

Answer 12

Clean, green production with few deliveries or dispatches; Employment;
Investment in local area; Avoidance or minimisation of congestion in local
area

Question 13

stakeholder objectives: environment

Answer 13

Avoidance of any negative impacts such as damage to wildlife and its
habitats and pollution of the atmosphere

Question 14

the stakeholder approach

Answer 14

it is important to cater to the needs of all stakeholders in order to ensure the continued positive relationship with the business. in doing so businesses create long term prosperity and avoid unsustainable business practices.
•Loyalty from directors
•Prefer actions to boost revenue and sales
•Long-term investment

Question 15

to meet the objectives of stakeholders, businesses must:

Answer 15

• take their views into account when making decisions
• maintain open communication before making radical changes.
• recognise the interdependence that exists between different stakeholders.
• minimise or eliminate the adverse effects of business activity

Question 16

+ & - of the stakeholder approach

Answer 16

+ Meeting the needs of stakeholders, especially external stakeholders, encourages ethical practices by reducing the negative impact of a business’s decisions on third parties.
- tends to add to costs and thus
compromise short-term profit objectives- Balancing the needs and objectives
of all stakeholders is not always possible, so the business might need to decide which group to prioritise.

Question 17

the shareholder approach

Answer 17

some believe that the key responsibilities of a business is to its shareholders: the owners of the business. businesses will satisfy their shareholders by maximising profitability and shareholder returns
•Profit-related bonuses
•Cost cutting is favoured
•Focused on profits

Question 18

+&- of the shareholder approach

Answer 18

+ higher profits
- treating suppliers poorly may boost immediate cash flow or profitability but does not create a relationship where suppliers will be willing to go out of their way to make emergency deliveries when stocks are running low

Question 19

possible conflict between profit-based (shareholders) and wider-objectives (stakeholders): employees

Answer 19

if objectives of employees are all met e.g. good working conditions, promotions… there is likely to be a negative impact on profit and dividends. BUT if their needs aren’t met, employees would put pressure on the business by threatening industrial action

Question 20

possible conflict between profit-based (shareholders) and wider-objectives (stakeholders): customers

Answer 20

shareholders want to see increased revenue but by doing this they would have to increase prices which could cause customers to come into conflict with the business

Question 21

possible conflict between profit-based (shareholders) and wider-objectives (stakeholders): directors/ managers

Answer 21

a common conflict between shareholders and directors is the balance between paying dividends and retaining profits for investments e.g. long-term growth vs short-term profitability

Question 22

possible conflict between profit-based (shareholders) and wider-objectives (stakeholders): government

Answer 22

businesses pay taxes to the government in the form of corporate tax. Shareholders and managers often look for sometimes illegal ways of paying minimal tax

Question 23

possible conflict between profit-based (shareholders) and wider-objectives (stakeholders): Environment

Answer 23

businesses often deplete natural resources and damage the environment. profit maximisation will look for the most efficient way of gaining profit. This is not always the most environmentally friendly.