1.5 Stakeholders in a business Flashcards Preview

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Flashcards in 1.5 Stakeholders in a business Deck (11)
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People or groups of people who can be affected by, and therefore have an interest in any action by an organisation


Stakeholder concept

The view that businesses and their managers have responsibilities to a wide range of groups, not just the shareholders


Groups of stakeholder

Customers, suppliers, employees, local community, government, pressure groups


Responsibilities to customers

- Quality, design, durability and customer service should be in line with customer's objectives at a reasonable price
- Not to break the law concerning consumer protection and accurate advertising
- Avoid taking + of vulnerable customers
+ Customer loyalty, great purchases, good publicity (word of mouth), good feedback


Responsibilities to suppliers

- Pay promptly
- Regular orders
- Long term contracts
+ Suppliers loyalty (meet deadlines, except request for special orders)
+ Credit terms more likely to be offered


Responsibilities to employees

- Not breaking the workers' rights and contracts
- Provide training opportunities, job security, good working conditions and wages, involving staff in decision making
+ Easy to recruit good staff
+ Improved motivation
+ effective communication
+ Low labour turnover


Responsibilities to local community

- Offer secure employment -> less local fear of job losses
- Local supplies to build good relationships
+ Gain permission to expand business
+ Likely to accept some of the negative effects the business has on the surroundings
+ Reduce transportation costs
+ Reduce adverse working environment


Responsibilities to government

- meet legal responsibilities as defined by gov legislation
- pay taxes on time
- complete gov statistical and other forms accurately
+ Receive valuable gov contracts
+ Request for subsidies may be approved
+ Licences to set up new operations are more likely to be awarded


CSR evaluation

- Small scale business -> should focus on growth/ survival = core objectives
- Costly because sustainable tencho -> more costs -> less profit
- Distracts from the key role of business activity -> econ resources not used efficiently
- "Window-dressing" to mask unscrupulous activities by the business
+ Cost saving as in no preservative, no fancy packaging
+ Innovation ( Unilever invents hair conditioner that consumes less water)
+ Long term = build up image of the company OR if they invest in infrastructure -> improve the country -> possible foreign investments -> Discerning views


How conflict might arise from stakeholders having different aims

- Customers want good-quality products at low prices. Higher profits will be desired by shareholders -> higher dividends.
- Shareholders want to have large profits, employees want to be paid higher wages. (increase cost, reduce profit)
- Government aims to have lower unemployment, business wants to increase its use of machinery. However, business more profitable, more tax.
- Suppliers charge higher prices, business increased costs, reduce profits and dividends paid to shareholders.


Changing business objectives affect its stakeholders

1. Profit maximisation -> increase market share
- Satisfy the needs of shareholders to receive dividends paid out of profit.
- Change:
+ Reduction in profit due to more money being spent on building image/ uniqu selling point (USP)
+ Gain stronger position
2. Survival to growth
- Give some security to employees
- Produce larger profit that can be paid to shareholders in form of dividends.