stakeholders

Question 1

Who are stakeholders in a company?

Answer 1

• owners
• managers
• suppliers
• local community
• customers
• pressure groups
• government
• workers

Question 2

What do Owners (possibly shareholders) want in a business?

Answer 2

• want to make money from the business
• interested in the company making a profit
• want a good dividend
• want their shares to increase

Question 3

What do managers want in a company?

Answer 3

• better chance of promotion
• successful company may reward them by paying them higher salaries
• giving them a bonus
• better fringe benefits
• if company fails they could lose their job

Question 4

What do workers want in a company?

Answer 4

• want the company to succeed so they are more likely to get better paid
• chance of promotion
• better facilities
  A failing company will threaten their jobs, freeze their pay, possibly cut their wages.
  A FAILING COMPANY WILL:
• threaten their jobs
• freeze their pay
• possibly cut their wages

Question 5

What do suppliers want in a company?

Answer 5

• want the company to succeed because it means more orders for them
• more success for their business
• a failing company would mean
• falling orders for them
• less profit
• job losses
  A FAILING COMPANY WILL:
• failing orders for them
• less profit
• job losses

Question 6

What do customers look for in a company?

Answer 6

• they want low prices
• best quality available
• good service
• innovative products

Question 7

What does the local area look for in a business?

Answer 7

• creating jobs for local people
• the local area will suffer if a business fails and is a large employer
• business might buy from local suppliers
• provides a service to local people or businesses
• it could pollute the local environment

Question 8

What does the government look for in a business?

Answer 8

• business pays taxes - the more profit it makes, the more taxes it pays
• if a business fails workers are made unemployed, government will have to pay them unemployment benefit
  A FAILING BUSINESS WILL:
• workers are made unemployed
• Govt will have to pay them unemployment benefit

Question 9

What are some common interests within a group of stakeholders in a company?

Answer 9

• shareholders and employees have a common interest in the success of the organisation
• high profits which not only lead to high dividends but also job security
• suppliers have an interest in the growth and prosperity

Question 10

What are some examples of conflicting interests within an organisation?

Answer 10

• wage rises might be an expense of dividend
• managers have an interest in organisational growth but this might be at the expense of short term profits
• growth of the organisation might be at the expense of the local community and the environment.

Question 11

What aspects can influence stakeholder influences?

Answer 11

• external pressure from the market place, including competitors, customers, suppliers shareholders, pressure groups
• internal pressures from existing commitments, managers, employees and their trade unions
• the personal and ethical and moral perspectives from senior managers.

Question 12

What is stakeholder theory?

Answer 12

• the profit maximising theory of the firm that characterised neo classical economics has to be modified to take into account the power and influence of stakeholders.
• various writers have put forward theories based in an alternative to the profit maximising aim:
• Baumol (1959) put forward a theory based on a sales maximising objective.
• williamson (1964) offered a theory based on managers setting the objectives to maximise their personal satisfaction
• Marris (1964) offered theory based on growth as the key concern.
  In all three cases;
• the objective the result of managerial power over decision making .
• reflected the interests of managers rather than shareholders
• ther was a limiting factor- these objectives are pursued subject to producing a satisfactory level of profits.

Question 13

What is behavioural theory?

Answer 13

• In ‘a behavioural theory of the firm’ (1963) Cyert and March argued the goals of an organisation are a compromise between members of a coalition made up of stakeholders.
• the outcome of decision making is compromise or trade off between the interests of the various stakeholder groups.
• in the process leading to compromise much will depend on the relative power of the different stakeholder groups

Question 14

What is satisficing?

Answer 14

• The Cyert and March theory of decision being a compromise between the different stakeholders has certain features in common with the idea of satisficing behaviour which is associated with Herbert Simon.
• Simon argued that decisions are taken in conditions of uncertainty and ignorance, rather than an exhaustive search for the best or ideal solution, decision makers seek an acceptable or satisfactory outcome
• this is chosen because of the internal and external constraints such as time, pressure, lack of information and the influence of powerful stakeholder.

Question 15

What are primary stakeholders?

Answer 15

• those most vital to the organisation
• a group without whose continuing participation the company cannot survive as a going concern
• customers, suppliers etc

Question 16

What are secondary stakeholders?

Answer 16

• those without whose continuing participation the company can still exist e.g. the community

Question 17

What are active stakeholders?

Answer 17

• seek to participate in the organisation’s activities e.g. managers, employees, pressure groups

Question 18

What are passive stakeholders?

Answer 18

• Do not normally seek to participate in an organisation’s policy making e.g. most shareholders, government, local communities.

Question 19

What are mission statements?

Answer 19

• a mission describes the organisations basic function in society, in terms of the products and services it produces for its customers.
• taking into account; purpose, values, standards and behaviours and strategy and scope.
• states what the aims, objectives and strategy is for the business.

Question 20

What are business objectives?

Answer 20

• it is important to understand how business objectives ‘fit in’ with business aims and strategies.
• an aim states what you want
• an objectives set out what you need to get what you want.
• a strategy is a course of action which enables you to meet your objectives.

Question 21

What is a primary and what is a secondary objective?

Answer 21

• a primary objective is an ultimate long term goal of the business (e.g. survival, profit maximisation, growth)
• a secondary objective is a day to day objective, and it makes a direct contribution to meeting the primary objectives (e.g. increase sales by 5% each year)

Question 22

What is an objective?

Answer 22

• ‘objectives are statements of specific outcomes that are to be achieved’
• often set in financial terms; desired sales or profit levels, rates of growth, amount of cash generated.

Question 23

Whats a corporate objective?

Answer 23

• corporate objectives are those that relate to the business as a whole.
• tend to focus on desired performance and results of the business.

Question 24

What are functional objectives?

Answer 24

• a well established business will divide its activities into several business functions. these traditionally include areas such as;
• finance and administration.
• marketing and sales
• production and operations
• human resources

Question 25

What are SMART objectives?

Answer 25

- Specific (states exactly) - Measurable(capable of measurement) - Achievable(realistic given circumstances) - Relevant(relevant to ppl responsible for achieving them) - Time Bound(should be set in a time frame)

Question 26

What is a stakeholder

Answer 26

- people/groups with an interest in the success of an organisation

Question 27

What are the different stakeholder objectives (customers, owners, shareholders, managers, employees, suppliers, pressure groups)

Answer 27

- Customers; value for money, good service quality - Owners/shareholders; satisficing/maximising return on investment - Managers; status, performance to bonuses - employees; high wages, conditions of work - Suppliers; to sell a lot at a high price, repeat orders, customer loyalty - pressure groups; to force a reduction of environmental impact

Question 28

What are some determinants of stakeholder power

Answer 28

- the stakeholder can disrupt organisations plans - the stakeholder causes uncertainty in the plans - the organisation needs and relies on the stakeholder

Question 29

What are some levers that can be operated by internal stakeholders?

Answer 29

- internal stakeholders have their own interests which they might pursue - e,g managers might seek organisational growth over profits, employees seek high wages and favourable working conditions. they have: - negative power to impede the implementation of strategy - can threaten industrial action - can threaten to resign - might refuse to relocate

Question 30

What are some levers operated by connected stakeholders?

Answer 30

- shareholders have voting rights and can sell shares thus making the company vulnerable to takeover - creditors can refuse credit, charge high interest rates, take legal action for non payment and, in extreme cases, initiate moves to liquidate the company - suppliers can refuse future credit - customers can seek to buy goods/services elsewhere and enjoy consumer protection.

Question 31

Levers operated by the government and pressure groups

Answer 31

- the government can exert influence through taxation, government spending, legal action, regulation and threatened changes in the law. Community and pressure groups can exert influence by; - publicising business activities they regard as unacceptable - political pressure for changes in the law - refusing to buy goods/services from named firms - illegal actions such as sabotage.