Stakeholders In A Business: The Relative Importance And Influence Of Stakeholders On Business Activities (Copy)
1.5.2 The Relative Importance And Influence Of Stakeholders On Business Activities
The Impact Of Business Decisions On Stakeholders, And Their Reactions
- Shareholders/Owners
- A decision to expand overseas may increase profits and dividends but involves risk.
- Shareholders may react positively if growth potential is high, or negatively if risk threatens returns.
- Employees
- A decision to automate production may increase efficiency but lead to job losses.
- Employees may resist such changes through strikes or low morale.
- Customers
- A decision to increase prices might generate higher revenue but reduce loyalty.
- Customers may shift to competitors if value is not justified.
- Suppliers
- A decision to switch suppliers for lower costs may damage relationships.
- Loyal suppliers may respond by tightening credit terms.
- Government
- A decision to reduce tax compliance or ignore regulations will provoke penalties or investigations.
- Conversely, ethical decisions can attract government support (e.g., subsidies).
- Local Community
- A decision to build a new factory creates jobs but may cause pollution.
- Communities may welcome job creation but protest environmental damage.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change AS Level Business Full Scale Course
The Impact Of Stakeholder Aims On Business Decisions
- Shareholders’ Aims
- Want profit maximisation, high share prices, dividends.
- Businesses may prioritise cost-cutting or expansion to meet these aims.
- Employees’ Aims
- Seek fair pay, job security, training, and safe conditions.
- Businesses may increase wages or offer better working conditions to maintain productivity.
- Customers’ Aims
- Demand affordable, high-quality, ethical products.
- Businesses may adapt strategies to improve customer satisfaction (e.g., eco-friendly packaging).
- Suppliers’ Aims
- Want long-term contracts, fair payments, and reliable orders.
- Businesses may decide to maintain loyalty by avoiding late payments.
- Government’s Aims
- Seeks tax revenue, compliance, reduced unemployment.
- Businesses often adjust to new laws, such as minimum wage or environmental standards.
- Community Aims
- Expect businesses to operate responsibly without harming the environment.
- Businesses may invest in CSR programmes to align with these expectations.
How And Why A Business Needs To Be Accountable To Its Stakeholders
- Accountability Means: Transparency in operations, honest reporting, and ethical behaviour.
- Reasons For Accountability:
- Builds trust and reputation.
- Ensures compliance with legal requirements.
- Attracts and retains investors.
- Enhances employee loyalty and customer trust.
- Methods Of Accountability:
- Publishing financial reports.
- CSR reporting (social and environmental impact).
- Regular communication with employees and customers.
- Open stakeholder meetings or forums.
- Example:
- Unilever produces annual sustainability reports to show accountability beyond financial success.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change AS Level Business Full Scale Course
How Conflict Might Arise From Stakeholders Having Different Aims And Objectives
- Shareholders vs Employees:
- Shareholders want cost-cutting to increase profits, but employees demand higher wages.
- Customers vs Shareholders:
- Customers want low prices, but shareholders want high profits.
- Government vs Business Owners:
- Governments demand higher taxes or stricter regulations, which owners resist.
- Community vs Management:
- Community may want environmental protection, while management wants low-cost production.
- Consequences Of Conflict:
- Strikes, boycotts, legal disputes, reputational damage, loss of customers.
- Resolution Methods:
- Negotiation, stakeholder engagement, compromise, and CSR initiatives.
How Changing Business Objectives Might Affect Its Stakeholders
- Objective Shift To Profit Maximisation
- Shareholders: Benefit through higher dividends.
- Employees: Risk job cuts or wage freezes.
- Customers: May face price increases.
- Objective Shift To Growth/Expansion
- Shareholders: Short-term profits may fall due to reinvestment.
- Employees: More opportunities for career development.
- Communities: Benefit from job creation but may face environmental concerns.
- Objective Shift To CSR/Sustainability
- Customers: Gain ethical products and improved trust.
- Shareholders: Might face reduced short-term profits but long-term brand value increases.
- Government/Communities: Positive impact as firms align with social and environmental priorities.
- Example:
- Tesla shifted objectives towards sustainability, attracting ethical customers and investors but initially operating at lower profits.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change AS Level Business Full Scale Course