Theme 3.4

Question 1

Stakeholders

Answer 1

A stakeholder is any individual or organisation who has a vested interest in the activities and decision making of a business.

Different decisions can cause conflict between stakeholders

Question 2

Short - termism

Answer 2

Short - termism is where a business’s prioritises short - term rather than long - term performance

Short - termism emphasises certain performance measures: (shareholder approach)
- Share price
- Revenue growth
- Gross and operating profit
- Unit costs and productivity
- Return on capital employed

Possibly at the expense of long term performance measures: (stakeholder approach)
- Market share
- Quality
- Innovation
- Brand reputation
- Employee skills and experience
- Social responsibility and sustainability

Question 3

Business Ethics

Answer 3

Ethics - Moral guidelines which govern acceptable behaviour

Common areas where ethics are tested
- Advertising
- Personal selling
- Suppliers
- Pay and rewards
- Contracts
- Pricing

Benefits:
- Higher revenues - demand from positive consumer support
- Improved brand and business awareness and recognition
- Better employee motivation and recruitment
- New sources of finance - E.G Ethical Investors

Possible drawbacks:
- Higher costs - E.G sourcing from fair trade suppliers
- Higher overheads - E.G training and communication of ethical policy
- A danger of building up false expectations
- Greenwashing - business says they are doing something however it is very difficult to prove

Tax avoidance by multinationals is legal - but is it ethical
Tax evasion isn’t legal

Question 4

Corporate cultures - Power

Answer 4

Power culture: Autocratic
- Control radiates from the centre
- Concentrates power among a few
- Few rules and little bureaucracy
- Swift decisions are possible
- Clear who holds the power
- However can turn toxic
- Judged on results rather than how you get there

Question 5

Corporate cultures - Role

Answer 5

Role culture: Autocratic/Paternalistic
People have clearly delegated authorities within a highly defined structure
A hierarchical beuracracy
Power derives form a persons position
Little scope exists for expert power
Based on rules
Highly controlled
Can be painfully slow decision making and the organisation is less likely to take risks

Question 6

Corporate cultures - Task

Answer 6

Task culture: Paternalistic/Democratic
Teams formed to solve particular problems
Power derives from expertise as long as a team requires expertise
No single power source
Matrix organisation
Team may develop own objectives (a risk)
Task is the important thing
Effectiveness of this type of culture is largely determined by the team dynamic

Question 7

Corporate culture - Person

Answer 7

Person culture: Democratic
People who believe themselves to be superior to the business
Business full of people with similar training, background and expertise
Common in firms of professionals - lawyer/accountant
Power lies in each group of individuals
Simply exists in order for people to work

Question 8

Why change cultures?

Answer 8

• Declining profits and sales
  
  • Inadequate return on investment
  • Market changes
  • Change in societal views
  • Change of ownership
  • Political and legal environment
  • Economic conditions (downturn)
    Change of management or leadership

Examples = Kodak, digital cameras, too late to embrace the rapid shift from film to digital photography