Stakeholders

Question 1

Stakeholder

Answer 1

individual or group who has an interest in what organisation does or who can be affected by organisation’s actions

Question 2

agency relationship

Answer 2

when one party, the principal, employs another party, the agent, to perform task on their behalf

Question 3

agency costs

Answer 3

as directors act in their own best interest, if their actions are not in best interests of shareholders, the loss of shareholders is known as an ‘agency cost’

Question 4

stakeholder agency theory

Answer 4

directors will act on behalf of all stakeholders in business, and should take into account the collective interest when making business decisions even if these interests sometimes conflict

Question 5

internal stakeholders

Answer 5

employees: need pay, good working conditions and job security
managers/directors: need status, pay, bonus and job security

Question 6

connected stakeholders

Answer 6

shareholders: need steady flow of income, capital growth, continuation of business
customers: need value-for-money products
suppliers: need prompt pay, extended supply contract
finance providers: need ability to repay finance such as interest, security of investment

Question 7

external stakeholders

Answer 7

community: they’re stakeholders if their lives are affected by organisation’s decisions
environmental pressure groups: need no harm to environment from organisation
govt.: need providing of jobs, taxes, good legislation from company
trade unions: they take active part in decision-making process

Question 8

Common conflicts of stakeholders

Answer 8

1. employee vs manager (wages vs cost reduction)
2. customer vs shareholder (product qual. vs profit)
3. general public vc shareholders (effect on environment vs profit)
4. managers vs shareholders (investment in company’s growth vs increase in dividend)

Question 9

when does Mendelow’s matrix help?

Answer 9

when organisation is having difficulty deciding who dominant stakeholder is

Question 10

What do Cyert and March suggest?

Answer 10

Rational techniques for resolving stakeholder conflict

Question 11

Cyert and March: satisficing

Answer 11

done by negotiation to keep most but not necessarily all powerful stakeholders happy

Question 12

Cyert and March: sequential equation

Answer 12

by giving stakeholders turns to realise their objectives

Question 13

Cyert and March: side payments

Answer 13

when compensation is given to make up for not addressing particular stakeholders’ objectives

Question 14

Cyert and March: exercise of power

Answer 14

where deadlock is overcome by powerful figures forcing through their preferred strategic option

Question 15

3 characteristics that define negotiation

Answer 15

1. conflict of interest by 2+ parties
2. no established set of rules for resolving it, or parties prefer to work outside of established rules to develop their own solution
3. parties prefer to search for agreement

Question 16

process of negotiation

Answer 16

1. preparation - info. gathering (background or problem, constraints acting on each participant
2. opening - both sides present their starting positions (opp. to influence other party)
3. bargaining - to narrow gap between two initial positions, persuade other party of strength of your case (use logical & clear thought out debate)
4. closing - agreement reached