Tuesday, March 21, 2017

Chapter 5: Stakeholders in a Business (AS LEVEL BUSINESS STUDIES)

Definitions to Remember:

  • Stakeholders: 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 shareholders
  • Corporate Social Responsibility: the concept that accepts that businesses should consider the interest of society in their activities and decisions, beyond the legal obligations that they have

Notes:

Responsibilities to Stakeholders - and Impact on Business Decisions

Customers:
  • It is essential to satisfy customers' demands in order to stay in business in the long term
    • Decisions about quality, design, durability and customer service should consider the customers' objectives for attractive goods that perform as intended, all at a reasonable price.
  • Businesses also have responsibilities to customers not to break the law concerning consumer protection and accurate advertising
    • Avoiding taking advantage of vulnerable customers and not using high-pressure selling tactics are other policies of responsible businesses
Benefits of accepting these responsibilities:
  • Consumer Loyalty; Repeat Purchases
  • Good publicity when customers give word of mouth recommendations to others
  • Good customer feedback, which helps to improve further goods and services

Suppliers:

  • Good reliable suppliers must be found and given clear guidance on what is required
  • In return, the purchasing business should pay promptly, place regular orders and offer long-term contracts
Benefits of accepting these responsibilities
  • Supplier loyalty - prepared to meet deadlines and requests for special orders
  • Reasonable credit terms more likely to be offered

Employees:

  • Providing training opportunities, job security, paying more than minimum wages when these are very low, offering good working conditions, involving staff in some decision-making
Benefits of accepting these responsibilities
  • Employee loyalty and low labour turnover
  • Easier to recruit good staff
  • Employee suggestions for improving efficiency and customer service
  • Improved motivation and more effective communication

Local Community

  • Offer secure employment so that there is less local fear of job losses
  • Spend as much as possible on local supplies to generate more income
  • Reduce the transport impact of business activity as much as possible
  • Keep the adverse environmental effects to a minimum
Benefits of accepting these responsibilities
  • Local councils will be more likely to give planning permission to expand the business
  • Local communities are more likely to accept some of the negative effects caused by business operations if they provide financial support for community groups and projects such as children's playgrounds
  • Local councils often only give contracts to businesses with a record of community involvement

Government

  • All businesses should meet their legal responsibilities as defined by government legislation
  • Business should pay taxes on time
  • Complete government statistical and other forms accurately
  • Seek export markets
    • the foreign currency earned by exports allows a country to pay for important imports of food, materials, new technology and so on
Benefits of accepting these responsibilities
  • Good relations with government might lead to success with expansion projects receiving planning permission
  • Businesses are more likely to receive valuable government contracts
  • Requests for subsidies to expand businesses are more likely to be approved by the government
  • Licences to set up new operations are more likely to be awarded to businesses that meet their responsibilities to the government and the wider society

An Evaluation of Corporate Social Responsibility

  • There could be opportunities for businesses adopting such policies to become more profitable because they are socially responsible
  • By spending money on CSR projects, it is suggested that businesses have less to invest for expansion and less to pay out to owners, who took the risk to originally invest in them
  • CSR is just a form of 'window dressing' to make businesses appear society friendly when they are really damaging the interests of society by some of their activities
  • It is stated that CSR is an attempt to get governments to get governments to impose fewer controls and restrictions on powerful multinational firms
  • Meeting social responsibilities can be expensive and might reduce profits in the short run (for example: giving employees better working conditions than other firms)
  • However, over a longer period of time, the marketing, public relations and employee motivation benefits of CSR policies might pay for themselves and even generate higher profits.

Impacts on Stakeholders of Changing Business Objectives

Different stakeholder groups will be affected in different ways by these changes in objectives - employees' jobs will be lost and customers will have less choice, for example. However, owners' returns might be safeguarded in the future by the decisions taken above - and lenders might be reassured that action is being taken to stem losses that should mean they are repaid the loans the have given.

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