Business Studies- Unit 1- Stakeholders

by danhardman24 (student)

Daniel Hardman.

A04- Stakeholders

The fundamental definition of a stakeholder is a person, group or organisation that is affected or can affect a business or organisation’s actions, beliefs or objectives. There are two main types of stakeholder- internal and external. The title of ‘Stakeholder’ is usually a title given by the stakeholder them self, although all stakeholders are affected by and affect an organisation in different strengths and in completely different ways.

As the name suggests, internal stakeholders are those that work within the business and are benefited by such factors as profitability and stability. Examples of this type of stakeholder include employees, managers and directors.

The first internal stakeholder that I will explore is the employee. Employees are individuals that are employed to work for either a single person or whole organisation under a contract of employment. A contract of employment can be written, oral, implied or expressed but is always the terms and conditions in which an employee must work under to receive an agreed salary or wage. In every contract of employment, it is always agreed that the employee is obliged to carry out allocated tasks and assignments to his/her best ability. On the side of the employer, there is always the obligation to protect his/her employee from harm and to compensate their employee with an equal compensation for any work-related harm which may occur to the employee. It is most definitely within the interests of the employee to make sure that his/her employer follows the terms and conditions of the contract of employment and also within the interests of the employer for the employee to follow the terms and conditions of their contract of employment.

Although the main interest of an employee is to earn the highest salary possible, the factors that cause his/her employer to pay their employees highly are much more complex than mere choice. If the employee’s business is not profitable, there is very little chance of pay rises, long holidays, a large number of authorised sick leave and promotion occurring. It is for this reason as to why employees take interest in the profitability and success of their business. Also, if an employee’s business is unsuccessful, some may have to be made redundant. Job sustainability is of very high importance to most employees and will do everything their power to make sure that they are not made redundant and they therefore must try harder to keep their job. In addition, employees expect respect and truthful, effective communication to come from their managers- if an employee does not receive this, an employee may feel unnecessary, unwanted or an outsider from what should be a very strong team within Coca Cola Wakefield.

However, conflict may occur between an employee and manager as their interests tend to differ. Due to the fact that a manager’s main role in a business is to be responsible for a specific sector of employees in a business, a manager’s fundamental interest is for the employees in which they are responsible for to work as hard as possible will as little leave as is allowed, thus accumulating maximum capital for the business. This position is often referred to as a profit and loss responsibility and most of the company’s sales, marketing and daily operations of the business are overseen by the manager. The manager is responsible for a large number of duties, such as planning, delegating, choosing staff, organising jobs and operations, and decision making. A manager’s role has a large amount of authority to ensure that the company attains its desired profit results. Not only this, but because the manager is higher up the organisational chart and therefore has a large span of control.

Due to the fact that Coca Cola Wakefield employs over 500 staff, it is of the upmost importance that the managers of Coca Cola Wakefield do not merely pay the employees as little as possible for the business to be its most profitable as this, as the July 2007 employee strike proves, can have devastating effects on the business. A prime example of the conflict which occurs between the interests of employees and managers, and the stakeholders within a business is the 48 hour walkout which occurred due to pay- which was seen by a vast number of employees and their supporting unions as far too little. Regional Officer Davy Hall went as far as to say that…

"Their hard work has delivered the profits for Coca-Cola Enterprises. Their mortgages, gas bills and council tax have all increased but their pay has fallen flat,” which, in my personal opinion is very much a reasonable purpose for strike and should certainly not justify Stephen Moorhouse (the Vice President of Coca Cola Enterprises at the time) to merely say that “We cannot justify a settlement of almost double the 2007 norm and feel this would be unfair to the rest of our associates across the rest of the British business.”

SOURCE:

A manager’s main stake in a business is to receive a high salary, but unlike employees, managers have a far stronger interest in the productivity of the employees that work below him/her as the productivity of their delegated employees is, in most cases the sign of whether a manager is effective or not. In addition, most managers, unlike employees, are more interested in the long term growth of the business as appose to the employees which tend to covet the highest salary possible and will not be satisfied with less pay if the business has recently a large sum of capital elsewhere, regardless of possible raises which may occur in the future due to this investment. Obviously the manager will try to make sure that the employees below him/her are working to the best of their abilities to carry out delegated tasks and will also try to make sure that their employees have as few sick and holidays as possible as the longer an employee is not contributing to a business, the more capital is lost.

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The next internal stakeholder that I will explore is the shareholder. Due to the fact that these are individuals or organisations owning a share or percentage of the business, these are commonly known as the owners. Although it is true that the more shares owned by a shareholder, the more of a say they have in the running of a business, all stakeholders are permitted to attend the annual general meeting in which all plans for the future of that business are decided. Although it is not necessarily accurate that one share accounts to one vote in the business- the more shares owned, the more of a say one has in the running of the business. Due to the fact that shareholders, especially shareholders owning a very large proportion of the shares, rely quite dependently on dividends (a share of the corporate profits) these are probably the stakeholders that are most affected by the profitability and success of their business. It may be the case that some shareholders of the business also have other stakes in the business because they are also such workers as employees or managers.

The main interest of a shareholder is for maximum profit to be made, as this will mean that their dividend will be higher, and will return the risk capital in which they have invested in the business, hopefully to result in profit. This could be done in the case of Coca Cola by lowering such expenditures as the wages of the employees and managers which would conflict with the interests of them, or selling their drinks products for a higher price, which would certainly conflict with the interests of the customers. It is also in the interests of the shareholders to spend as little as possible on such factors of the business as ethicalness and eco-friendliness although there is a large amount of customers that see such factors as these as high priority when choosing beverages.

Another instance in which the interests of shareholders are not in accordance with those of another stakeholder is the conflict which occurs between shareholders and employees. Shareholders, due to the fact that they want the profits of their business to be as high as possible and therefore their dividend will be more capital, try to pay the employees of their business as little as possible and also want such productivity hindrances as sick-days, holidays and annual leave to be minimal. Contrastingly, employees obviously wish for the highest salary possible with the minimal work hours to earn it.

External Stakeholders

An external stakeholder is an individual, business or organisation that has interest in the business yet is not directly involved in the running of that business. Examples of these include customer, supplier and financier. Within Coca Cola, there are such external stakeholders as Yorkshire Water (supplier of water to the Coca Cola Wakefield), and the customer- which is seen most commonly as the most important of all external stakeholders. It is the conflict which occurs between internal and external stakeholders that will be the main focus of this assignment- starting with the conflict occurring between customers and employees.

The customer of a business is commonly seen as the most important of all stakeholders in a business as a business such as Coca Cola would be completely non-existent without the capital from purchases of the products sourced from customers. In the case of Coca Cola, the four main interests of the customers are value for money, quality of the product, customer care and the ethicalness of the product. Ways in which Coca Cola please its customers are, with regards to price, that Coca Cola strive to make sure that the price of their soft drinks are as competitive as possible, and also have a promise of good quality made to all customers:

“We measure key product and package quality attributes by focusing on ingredients and materials, and regulating manufacturing, bottling and distribution, of The Coca-Cola Company products to ensure those products meet Company requirements and consumer expectations in the marketplace.”

SOURCE:

With regards to the ethicalness of their soft drinks, Coca Cola Wakefield state that they have reduced their consumption of energy by 15.6% by investing in a sophisticated ‘Monitoring and Targeting’ system which they state ‘enables us to pinpoint where energy is being consumed, and focus our energy reduction programmes in the right areas.’ Such efficient energy consumption should be attractive to all customers as it results in Coca Cola spending less money and thus perhaps charging less for their soft drinks. However, this more eco-friendly way of thinking should be especially attractive too those passionate for the environment.

Interests in the Coca Cola business conflict between customers and employees. The reasoning behind this is because, as aforementioned, employees are interested in the growth of the Coca Cola business as this means that their job stability, prospects and wages may increase. However, customers wand their Coca Cola soft drink for as little money as possible, resulting in a cut having to be made somewhere in Coca Cola’s expenditures, most probably the salary of employees. Another interest of the customer which does not concur with that of the employee is the quality of the product. Although Coca Cola’s employees will strive to the best of their abilities to make the soft drinks in which they are manufacturing as high in quality as possible, it is commonly the case that the higher quality of product, the more work goes into producing it. It is here where it is in the interests of the employees to make their job as easy as possible and yet in the interests of the customer to have the best quality drink at the best value. The ethicalness of the product also commonly comes at a high cost to a business, and employees will not like profitability being at a hindrance due to pleasing these customers.

The next external stakeholder that I will explore is the local community. The community of the surrounding area of Coca Cola Wakefield are interested in job offers, involvement in new ideas which could affect them such as expansion of the factory, career opportunities within the factory and also shares. The local community of Coca Cola Wakefield will also be interested in the environmental protection methods in which Coca Cola Wakefield are using to make sure that the surrounding area of Coca Cola Wakefield is not polluted or smoggy. Coca Cola Wakefield have certainly pleased such interests as these by introducing their ‘Monitoring and Targeting’ system which, as aforementioned, has significantly lowered energy consumption by 16.5%, also the use of a wind turbine to produce energy for the factory means that less pollution is being caused by the business. The local community of Coca Cola Wakefield are also interested in such irritations as noise pollution and the hours in which the factory manufactures in. For example, if the factory was to work all the way through the night, this could cause uproar in the local community as this could cause lack of sleep or just disturbances. Truthful communication is another vital agreement in which the local community are interested in keeping- as if Coca Cola Wakefield were to lie about new business ventures, suspicion and distrust will surely arise between the two parties.

SOURCE: cokecce.co.uk/about-us/sites-and-offices/wakefield.aspx

Conflict most certainly arises between the shareholders and local community of Coca Cola Wakefield. It is certainly in the interests of Coca Cola Wakefield to please its local community to avoid protest or revolt, though the ways in which this is done come as quite a hindrance to the business. Shares of the business, which are desired by a lot of the local community, will mean that the before shareholders will receive a lower dividend of the profits of Coca Cola Wakefield. Involvement of the local community (which is one of the local community’s interests) in new ideas and business ventures could also have a hindering effect on the profitability of Coca Cola Wakefield as such ventures as expansion of the factory, which could benefit the business greatly, could perhaps not go forward if the local community do not agree with it. The prevention of noise pollution during the late hours of the evening also obstructs Coca Cola Wakefield’s growth as during these hours, more soft drinks could be manufactured. In many cases, the means in which a business goes about reducing energy consumption can be very costly, such as the wind turbine which will have cost thousands of pounds to purchase and install.

Another conflict of interests that occurs involving shareholders of a business is the one between the shareholders and customers. Because shareholders are mainly interested in pushing Coca Cola Wakefield into earning the maximum possible profit capital, their aim is to manufacture the soft drink as cheaply as possible and sell it for the most expensive as possible. However, the interests of customers are much more complex than this as they are interested in product quality, value, ethicalness and customer care. The shareholders of Coca Cola have

The government takes a lot of interest in the running of the country’s most profitable businesses, and due to the fact that Coca Cola Wakefield is one of the UK’s most profitable businesses of the secondary sector, its profits and ideas are observed very closely by parliament. The reasons as to why the UK’s government are so interested in Coca Cola Wakefield are that, particularly in this country, businesses are heavily taxed. And, because taxation is a percentage of the profit capital that Coca Cola Wakefield earn, the more tax that they must give to the government. When many hear this, they question why Coca Cola Wakefield do not lie about the amount of profit that they make, resulting in less tax having to be given to the government- which brings me on to the next interest in which the government have in Coca Cola Wakefield, truthful reporting. The UK’s government rely so greatly on the taxes from such large businesses as Coca Cola Wakefield that tax inspectors are employed by the government to make sure that their tax reports are accurate and truthful. It is for this reason why Coca Cola Wakefield is forced to by truthful on their tax reports; otherwise they could be heavily prosecuted for fraud. This leads me to another of the government’s interests in Coca Cola Wakefield which is the legislation of the business. If such illegal actions as paying employees below the minimum wage of £6.08 per hour for over 21s are committed, the government will surely step in and enforce prosecution.

Due to the fact that fact that the UK’s benefit system cost the government no less than £109.5 billion in the financial year of 2011, it comes as no surprise that the government take a very high interest in employment levels of such businesses as Coca Cola Wakefield. The government, understandably, try to get as many British citizens into employment as this means that they will not have to be aided by the public’s money through the benefit system. Manufacturing businesses such as Coca Cola Wakefield fit the criteria perfectly to get the unemployed to work because many employees without the most prestigious of qualifications are needed at the bottom of the organisational hierarchy. The government are also interested in the sales of Coca Cola Wakefield’s soft drinks as the VAT (Value Added Tax) of 20% is taken by the government when one of Coca Cola’s products is sold.

The interests of the government do not always concur with those of the managers of Coca Cola Wakefield. The reasoning behind this is that managers, like employees, are interested in the growth and profitability of the business and want the business to give the manager the most stable and highest salaried career possible. The government’s wish for a very high taxation of the profits of Coca Cola Wakefield is a hindrance to this and therefore conflict occurs with regards to the relatively very tax in which Coca Cola must pay to the government. It would obviously be in the interests of the managers of Coca Cola Wakefield to pay the government the minimal amount of capital as possible, whereas the government would like the maximum possible. Another conflict of interest that may occur, although I am sure has never arisen in such a developed business as Coca Cola Wakefield, is the conflict with regards to the law. Due to the fact that it is in the interests of the manager for their business to be as profitable as possible, they may wish for such, perhaps in their opinion, time wasting and productivity hindering processes as health and safety courses for their employees to cease or be postponed. This would cause conflict with the government as the government is interested in the safety and wellbeing of their public.

A pressure group is an organization which has a main goal to influence a business’ ideas, activity or values in order to satisfy what they believe to be just or right as members of a cause. The main type of pressure group that Coca Cola Wakefield faces is an environmentalist pressure group- such as Friends of The Earth (a pressure group globally renowned for its campaigns against pollution and the wasting of energy). A pressure group such as Friends of The Earth would be interested in such factors as: the amount of electricity used, if Coca Cola Wakefield uses renewable energy sources, the amount of waste that the business makes, and other factors of Coca Cola Wakefield which may be a damage or influence to the earth. Coca Cola Wakefield have certainly strived to please such pressure groups as Friends of The Earth as the business have reduced their energy consumption by 16.5% since 2006, have built a wind turbine on site to create renewable energy, made sure that the plastic that they use for bottles is recyclable and reduced water consumption by 10% since 2007.

It is in the capital taken for this type of ecofriendly business to run where conflict of interests between shareholders and pressure groups occur. Such very forward pressure groups as Friends of The Earth will always argue that businesses like Coca Cola Wakefield should inject as much capital as possible into making sure that as little pollution as can be is released into the atmosphere and that recycling and minimal waste are high up on the list of priorities of the business. Coca Cola Wakefield’s shareholders, although they have tried very hard to meet the standards in which these types of pressure groups force onto Coca Cola Wakefield, I am sure will not be willing to spend most of the business’ profit capital on something which, in many cases, will not result in a return of capital as the main interest of a shareholder in a business is for the business to receive the highest profit possible- resulting in the highest possible dividend.

SOURCE: cokecce.co.uk/about-us/sites-and-offices/wakefield.aspx

A supplier of a business is an organization that supplies goods to a business in order for that business to develop further or resell. The main interest of suppliers is the success and profitability of the business to which they supply and vice versa, as if the business that a supplier supplies goods to was to lose masses of profit capital, the business may have to look elsewhere for a cheaper supplier or perhaps, if the business was to fall into liquidation, a supplier would merely not be used and that supplier would lose custom of that particular business. Another interest is for the business, in this case Coca Cola Wakefield, is for the business to pay the supplier the correct amount due and also on time. The equitability of the business proposition between Coca Cola Wakefield and their supplier is also a very strong interest in which a supplier has before the decision to supply has been done. An example of a supplier to Coca Cola Wakefield is Yorkshire Water, which as the name suggests, is the supplier of water- which makes up around 95% of the total drink.

Conflict of interest may arise between Coca Cola Wakefield’s employees and Yorkshire Water because, due to the fact that the employees of Coca Cola Wakefield are very interested in the profitability of the business, they want Coca Cola Wakefield to pay as little as possible to its suppliers, whereas Yorkshire Water want to be paid the most possible. In addition, if Coca Cola Wakefield was to decide to make expenditure cuts to its suppliers and thusly propose less payment of capital to Yorkshire Water for its water supply, although obviously not in the interests of Yorkshire Water to pay more, it is highly likely that Yorkshire Water would be willing to be paid slightly less due to the fact that Coca Cola Enterprises are the market leader of soft drinks in the UK.

A supplier in which Coca Cola have had strong conflict with is a supplier of oranges for their popular soft drink- Fanta. Sourced from the town of Rosarno, southern Italy, Coca Cola has recently received very bad press on the topic of the conditions of their orange harvesters. Typically earning around 25 Euros (just £21) per day, (not including the fare to and from home every day) these African migrants mostly inhabited ramshackle makeshift slums or rundown buildings at the other end of the town. Although Coca Cola denies any wrongdoing, it is quite clear that standards were below satisfactory. It is in the interests of Coca Cola to make sure that their suppliers are ethical as unethicalness can most certainly lose custom, whereas most suppliers wish for their supplies to be as cheap as possible- regardless of the reputation of the business to which they supply. Coca Cola has done everything in its power to both rectify the conditions and make sure that the past conditions of these migrant workers are not exposed to the public eye as this, although it will result in more capital being spent on the workers, will cause a more favourable view of Coca Cola from its most important of stakeholders- the customers.

Financiers are organisations or individuals that invest or loan large sums of capital into a business. Examples of financier include: banks such as Halifax; that loan the business capital and expect interest back, the government; who also want interest and tax returned, and venture capitalists such as the investors in Dragon’s Den; who are external investors that invest into high-risk businesses seen as too risky for banks to loan to- also commonly giving managerial expertise into the business for, due to the fact that the businesses that have been invested by venture capitalists are commonly small at the time of investment, for quite a large percentage of the business ownership. The interests that financiers of a business such as Coca Cola Wakefield have are the profitability and growth of the business- this is because if the business was not to be profitable after the investment from the financier, it may not be possible for Coca Cola Wakefield to pay the loan back on time. The reason as to why many financiers are interested in the growth of the business in which they have invested in is because; if the business was to grow further, larger and therefore more profitable loans to the financiers may be asked for in the future. With regards to venture capitalists however- they are particularly interested in the growth of the business that they have invested in because they own a percentage of the business and want a percentage of the business’ profit capital.

Conflict of interests arises between financiers and managers as managers are interested mainly in the profitability of the business and therefore want the financier taking as little of the total profit capital as possible. The financier however, is interested in taking the largest percentage of Coca Cola Wakefield’s total profit capital as possible and would like the return payment paid back as quickly as possible. In addition, if Coca Cola Wakefield was to propose to a bank for a large investment to expand the factory premises and the bank did not see this venture as profitable, they may simply refuse to loan the money- resulting in perhaps a lack of growth for the business which is definitely not in the interests of a manager working within Coca Cola Wakefield.

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