Stakeholders are individuals or groups who have an interest in what a business does and either is affected by what the business does or affects the business by what they do. There are two main types of stakeholders: Internal stakeholders and External stakeholders. Internal stakeholders are normally part of business; apart away from shareholders, mainly they are employees which including managers and staffs. External stakeholders normally are not part of the business but have an interest in or are affected by business, they include: customers, suppliers, government and local communities. A number of stakeholders have the right to determine what happens within an organization, and more particularly in a firm, rather than just the owners.
Managers are the brain of business, they are responsible for keeping the business together and functioning properly, they have the power to hire and fire people and put forward new ideas. The managers’ objectives are to make decisions and ensure that the staffs are doing their jobs properly and to their capacity. They could expect good fringes benefit and holidays, they may also expect a chance to invest into the business so they could receive good returns on the shares. If the managers were to ever change their expectation, this could damage the business quite seriously. For example, the less strict of managers, the less positive workers will be, so the business could go downhill.
Like a machine can not run without energy, business can not operate without their staffs. ‘The business must be able to recruit and retain staffs with the relevant skills and ensure its workforce is efficient and well-motivated.’ (Ryan. J & Richards. J 1991 P217) Staffs have an obvious financial interest in the company, since their pay levels and their job security will depend on the performance and the profitability of the business. They do need the business for their livelihood, such as living expenses and bills. Staffs want good salary or nice level of wages, so that they could receive more money to spend; they are concerned with having a good working environment in order to work more comfortable; they desire challenging job, so that they could obtain a chance for promotion or prove their personal values; they also want to work for a business which they could put their trust on, thus they will lose their jobs. Firms should make effort to provide job satisfaction, otherwise staffs would not happy. Therefore, there is low productivity and workers might decide to leave and find work somewhere else or can even go on strike. TOYOTA plc. conducted employee benefit plans to provide certain health care and life insurance benefits to eligible retired employees. In addition, Toyota provides benefits to certain former or inactive employees after employment.
Making profit is the most important objective of a business. Customers are who the business’ products and services are selling for. Customer is ‘sovereign’. Business only could make money from its customers. ‘No business can survive for long if its customers are not satisfied with its products and services.’ (Ryan. J & Richards. J 1991 P217) BBC stated that their audiences are at the heart of everything they do in its Annual Report and Accounts 2002/2003. Customers want to get maximum satisfaction with lowest possible cost; they also want to be sure that the products that are being sold to them are of good quality and do not become useless after a certain period of time. It is therefore vital for a business to find out exactly what the needs of the consumers are, and to produce their products and services to directly satisfy these needs in order to retain their customers and attract new customers. At the same time, it can prevent people buying competitors’ products, so that firms could remove competition. Companies gain competitive advantage by listening to demands from the customers.
Suppliers are stakeholders too. For a business, suppliers are as important as the petrol of cars. Without flexible and reliable suppliers, the business could not guarantee that it will always have sufficient, high quality and unique raw materials which they required to produce their products. If a business gives a delayed payment to their suppliers regularly, then the suppliers may well refuse credit to the businesses or may even stop all dealings with them. So, it is important for a business to maintain good relationships with their suppliers, so that materials can be ordered and delivered on time; and also the business can negotiate flexible payment, so that it improves cash flow of the company; additionally, business could get special offer such as discount and special items from its suppliers. Therefore, there are fewer complaints towards the company because they are producing more efficient, cheaper, better quality and special products. Businesses will gain lots of loyal customers that will keep returning because they know the service is good and they are widely known because of the reputation has built up.
The government is always interested in business because the problem of unemployment. In the modern economies, the government affects the operating of businesses in numerous ways: Firstly, businesses have to pay a variety of taxes to government; government will always want full and on time taxation. Secondly, the government can influence the business by creating laws. The government has to make sure that the employees and the public are not in danger of anything and that they are being treated well by the business. It also ensures that the environment is not being polluted by the activities of business. Thirdly, Businesses will be affected by different economic policies, for example, if interest rates are increased, then this will discourage businesses from borrowing money since the repayments will now be higher. However, businesses can also benefit from government’s policies, such as new infrastructure, job creation schemes and business relocation, offering cheap rent, low-interest loans.
The local community will be the best source of competitive advantage. The local communities are interested in business firstly because of the increasing of employment; the business also raises the value of the lands in the local area; and also local communities are also concerned with environmental issues such as pollution, traffic congestion and noise. Business could benefit significantly from local community by building up good public relationship. If business took care of the community, better reputation will be established. For instance, simple activities such as sponsoring a local event or supporting a charity will also boost the business's morale and reputation. In every McDonald’s restaurant, there are many boxes are placed on the cashier desk, these boxes are used for collect the changes of customers. Then McDonald’s uses this money to help the poor people. The BOC Group plc. has set up The BOC Foundation for the Environment since 1990; and, with its partners, has funded nearly 120 environment projects since then to the tune of more than £12 million. These are good ways to become more widely known throughout the area because the words have spread that this company cares for the people and environment.
In the old times, companies were created to produce and to sell, in other words to create money. As a result of this, their ideals are the simple purpose of do business that can generate money which means to satisfy the needs of its shareholders and provide money for them. In recent times, the companies have changed. The new style of companies have to have a different perspective, if they want to succeed in the new business market, they have to take into account two important factors when their managers are making decision. One is their economical wealth –shareholders- and another one is their implication towards the society –stakeholders-. ‘The corporation cannot –and should not- survive if it does not take responsibility for the welfare of all of its constituents, and for the well-being of the larger society within which it operates.’ ( Post. J, Preston. L & Sachs. S 2002 P16-17) However, a firm may not possible to satisfy all interest groups; sometimes it will result in conflicts. By given information, resources, obligations, managers must decide what is more important for the business when they are making decisions.
References:
Marcouse I., Business Studies, Spain: Hodder & Stoughton, 2nd edition, 2003, P489
Ryan J. & Richards J., Business Studies Today, Musselburgh: Cambridge University Press, 1991, P217
Post James. E., Preston Lee. E. & Sachs Sybille, Redefining the Corporation, California: Stanford University Press, 2002, P16-17
Bibliography:
Core Chris, Murray Kate & Richardson Bill, Strategic Decision-Making, Dotesios: Cassell, 1992.
Wheeler David & Sillanpaa Maria, the Stakeholder Corporation, Great Britain: Pitman Publishing, 1997
Rappaport Alfred, Creating Shareholder Value – The New Standard for Business Performance, United States of America: The Free Press, 1986
Doyle Peter, Marketing management and strategy, Great Britain: Prentice Hall Europe, 2nd edition, 1998
THE BOC GROUP Annual review and summary financial statements 2003
TOYOTA Annual Report 2001
BBC Annual Report and Accounts 2002/2003
