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WJEC BUSINESS STUDIES A LEVEL Issue 2 Sept 2012 Page 1

RESOURCES.

Business Stakeholders their objectives and aims.


A stakeholder in a business, is any group or invested in, high dividends and strategies to
individual who can benefit or lose from the achieve short term growth. But these strate-
activities of a business. The most commonly gies may be at odds with achieving long term
accepted stakeholders are business owners growth through reinvestment of profits and
(shareholders), staff, and managers. To investing in brand value, which are what the in-
these traditional stakeholders can be added dividual, long term investor is looking for.
a wider group who will include customers, sup-
pliers, the government, those who live locally Unfortunately for the little guy, the institu-
to business operations and even those af- tional view is the one that more often than not
fected in the wider community by a business wins the day.
operations.
Managers.
Theses stakeholders are not all driven by the The focus of managers should be on achieving
same objectives, in fact it is likely that dif- long term business objectives, using the re-
ferent stakeholder groups will want very dif- sources under their control to achieve maxi-
ferent things from the business concerned. mum benefit for the business, getting the
Therefore it is not unusual to find different most from the assets that
stakeholders and stakeholder groups coming they manage. Unfortunately
into conflict over a businesses activities and for business, the main long
objectives. The idea of self-
term objective of many
managers is the protection preservation is often
Shareholders. of their position. the main motivator
for any middle
Shareholders are of Th i s idea of se lf - manager. This drive
it is not unusual to preservation is often the
course the owners of a for self-preservation
find different limited company. On the main motivator for any mid-
may result in heroic
stakeholders and face of it, all sharehold- dle manager. This drive for
self-preservation may re- efforts..
stakeholder groups ers share the common
sult in heroic efforts, such
coming into conflict objective of sustained
long term growth, giving as working 60 hour weeks, or alternatively it
over a businesses
both capital gain and in- can result in the establishment of whole layers
activities and of hierarchy who role is to preserve the status
creasing income. But the
objectives. reality is that even quo.
shareholders can come
into conflict. Institu- For more senior managers this idea of self-
tional shareholders (investment and pension preservation can be extended to the idea of
funds) are often driven by the need to empire building. Empire building means devel-
achieve in the short term. So this means that oping the power of influence of a department
they require from the firms that they have for the sake of the department and

Copyright A Level of Achievement


Title Business stakeholders Page 2

its bosses, not for the good of the business this view contrasts with the demands of em-
as a whole. Empire building managers will con- ployees. Whether conflicts arise depends upon
tinually seek to increase their budgets, their two factors. Firstly, whether managers are
spend, their staff, and their influence. And willing to see workers as real assets (theory y)
of course at the top of the tree we have the and reward accordingly. And secondly, the
fat cat managers, whose only objectives compliance of workers, are they militant willing
seem to be to maximise their salaries and to fight for better pay and conditions, or are
benefits, whilst cutting costs through redun- workers forced by labour market pressures
dancies and rationalisations. into taking what they can get?

Customers

Other staff Customers are perhaps the key stakeholder,


after all satisfying customers needs profita-
Staff as stakeholders are protected by a bly, should lead to the financial strength to
range of employment and health and safety satisfy the other stakeholders Customers want
laws. This legislation has a major influence on efficient service and a quality product, at a
employment practices, even more so with the competitive price. These requirements should
UK adoption of the Social Chapter of the not be at odds with good business practice, but
Maastrict treaty, the minimum wage, Work- unfortunately sometimes they are. Short-
ing Time Directive and so on. termism of businesses, can mean that achieve-
ment of immediate profit comes ahead of long
The primary concern of staff is job security. term customer satisfaction. Also customers
With many firms seek- like to feel needed and respected, it is all too
ing to incorporate tech- easy to alienate your customer base, as Gerald
nology, and reduce Ratner and to a lesser extent Marks and
it is all too easy to
workforce size, there Spencer have found to their cost.
alienate your
will be obvious conflicts
customer base, as in stakeholder views. In
Gerald Ratner and the past this conflict Suppliers
to a lesser extent would have more often
Marks and Spencer than not, led to indus- Suppliers want a fair price for their products,
have found to their trial action. But over businesses wish to minimise costs. Following
the last decade it seems supply and demand theory, each market should
cost.
that the labour force achieve an equilibrium price, which in a com-
has become more aware petitive market should allocate rewards be-
of the realities of mod- tween supplier and buyer efficiently. But un-
ern employment, and are willing to move jobs, fortunately for suppliers, the power in the
relocate and retrain. market often rests with the buyer, and we are
The second most important aspect of employ- seeing this market imperfection more and
ment is a decent income. Of course firms, as more. The big four supermarkets dominate the
a general rule, wish to minimise costs, and
Title Business stakeholders Page 3

UKs farming industry, continually forcing creased regional wealth, improved facilities
down the prices they pay to producers, re- and infrastructure. Costs can involve potential
ducing farm incomes. pollution, environmental damage, and loss of
The situation is often worse when suppliers open space. The local stakeholders who make
are based in developing countries, with the their views known, are often the educated mid-
original producer receiving a tiny proportion dle classes, who will perhaps, benefit little
of the products final sale value. Fair trade from new commercial developments. They can
goods, such as Dubble chocolate, try to make therefore protest with no heed to the loss of
the supplier buyer relationship more bal- potential jobs, or filtering down of wealth.
anced. But in the end, if the interests of the They view developments not as a necessary
producer are to be fully taken into account, it evil, but as simply unnecessary. The term
is up to the final consumer, the supermarket NIMBY, not in my backyard was coined to de-
customer, to make ethical buying decisions. scribe the views of this voluble minority.

Government. Notes

For government, business success, means, in-


creased tax revenues, higher employment,
and lower benefit payments. But the same
economic success also means increased pollu-
tion, increased traffic, and loss of green
field sites through development. In the past
the priority was invariable given to growth,
but increased environmental awareness has
forced the government into limiting develop-
ments, encouraging development of brown
field sites, and into imposing taxes such as
the Climate Change Levy, and the Landfill
Tax. These taxes on business, increase busi-
ness costs, reduce competitiveness, and po-
tentially increase unemployment.

As a stakeholder the government has to bal-


ance business and economic growth, against
external costs of business activity..

Local population.

There are both costs and benefits to a local


population that come from local business ac-
tivity. Benefits include employment, in-