Stake holders and decision making Flashcards
What is a stakeholder?
Someone that is effected by the business.
What are the two types of stakeholders?
Internal and external.
What are internal stakeholders and what are their needs?
People in the business
Owners/ shareholders - Most important, decide what happens, want high dividends and share price
employees - Job security, promotion prospects, decent wages and pleasant working conditions. Managers, will get blamedd or praised for outcomes.
Who are external stakeholders and what are their needs?
Customers - high-quality goods at low prices
Suppliers - paid a fair price on time, they have cashflow problems if paid late
Local community, employment, sponsorship of local activities, low noise and pollution
Government - business to increase profits so it has a higher tax revenue
Creditors - (people who loan to the business) loans paid back on time
How might a business cutting costs to increase profits to please shareholders cause a conflict of objectives with another shareholder?
It could affect consumers as the business may cut costs in production causing the quality of the goods to decrease, this will upset customers causing them to stop buying and therefore reducing sales which will decrease revenue and therefore profit.
How might a business cutting wages to increase profits in the short run will cause negative effects on the business?
It will undermine the company’s social responsibility
It may cut costs by relocating abroad which would benefit shareholders however would cause job loss in the UK and bad news for internal and external stakeholders such as employees and suppliers, this could create a negative image for the business.
If the business can keep all stakeholders happy what should it do?
Decide which groups it needs to prioritise
How might stakeholders’ interests overlap?
Improving employees working conditions can increase productivity in return it will increase profits which will also please shareholders.
what is a stakeholder map and how is it useful?
It helps identify and compare the power, influence and interests of different shareholders so that businesses can decide which stakeholders to prioritise
it helps businesses manage their shareholders and decide how much communication and attention when making decisions each shareholder needs
How do stakeholder maps prioritise different stakeholders?
Stakeholders with high power, influence and interest are closely managed by the business and their satisfaction is vital. They require the most effort.
What are the factors that influence stakeholder relationships?
- Quality of products made
- Information available
- How easy it is to communicate with them
- Their status
- Customer service
- Influence or power
- Workplace environment for employees
- How much money they have invested into the business
- Views on the environment
- Revenue produced
- Prices of products being sold
- Decisions made by the firm
How might businesses manage relationships with stakeholders?
- through consulting stakeholders before decision which will make them valued if their opinions are considered
- Stakeholders with specialist knowledge will benefit from the decision-making process
How might businesses communicate with shareholders?
- General meetings
- Letters
- Email and social networking
- Posters of advertising
- Public forums
- Media release
