The strengths and weaknesses of stakeholders
Stakeholders Theory has played a critical role in business, especially for international business. Because international business involves more stakeholders, if these stakeholders are not treated seriously, the business will encounter more challenges. However, every coin has its two sides. On the one hand, the strengths of stakeholders are obvious. On the other hand, the weaknesses of stakeholders can not be neglected. The following will explore the strengths and weakness of stakeholders in detail.
The strengths of Stakeholders Theory
Firstly, the strength of organization will be stronger when the members of stakeholders are more. In the past, only shareholders were considered as the owner of enterprises, while other people just served for them. Even the relationships of shareholders and employees, customers, creditors were hostile, which was bad to the development of organizations (Ezekiel, C & Paul, O., 2010). After employees, customers, and creditors became stakeholders, they could collaborate with each other in order to the whole interests. Absolutely the development and operation will be better when there are more people make contributions to organizations. Stakeholders undertake risks and losses in common just like they enjoy interests. Therefore, the enterprise obtains more motivations to development, and the risks are distributions to more stakeholders. As a matter of fact, the principle of stakeholders is as same as shareholders. The joint of more people is to share risks and losses, which is one purpose of modern company’s system.
Secondly, Stakeholders Theory could solve contradictions and conflicts easily. Obviously it can not be avoided that contradictions and conflicts exist between different bodies. To some extent, conflict of interest also is a motivation of social development. However, if people excessively focus on how to win conflicts or only care about different interests, the development will be blocked. Stakeholders Theory makes more people together, which establishes a kind of relationship of win-win between stakeholders. Organization does not belong to some people, it serves for every stakeholders. Every stakeholder is cared, and the organization is affected by every stakeholders. Any conflicts and contradiction can be solved under Stakeholders Theory.
Thirdly, there are so many relationships need to be handled in international business. The development of modern enterprise make bodies’ identifies more various, for example, the shareholders of listed company are public, some of them also are customers of the company, or creditors. In addition, an investor can purchase more than one company’s stocks. What’s more, the expansion of multinationals involves in different countries’ economies and local interests. In addition, the innovation of technology is harder and harder. Many innovations and inventions can not be completed by one company. Therefore, the collaborations of organizations are necessary. It is not strange that competitors also are stakeholders.
The weaknesses of Stakeholders Theory
Firstly, the biggest shortage of Stakeholders Theory is that its definition is too excessive. According to the definition of Freeman, R. Edward and Reed, David L: “a corporate stakeholder is a party that can affect or be affected by the actions of the business as a whole,” the affected individuals and organizations are so many that companies will lose direction to deal with the relationships with its stakeholders. In addition, different organizations have themselves definitions according to their needs. The situation is every enterprise has a definition, for example, many companies do not think that competitors are stakeholders.
Secondly, the objectives of enterprises are changed under Stakeholders Theory; the maximum of commercial profit is not the only goal of company. Corporate social responsibility must be undertaken by enterprise with Stakeholders Theory. On the one hand, people would misunderstand that the nature of enterprise is social rather than commercial. Once one company purely pursues commercial profit, the condemnations from public will be unimaginable. On the other hand, some companies do not how to balance the relationship of corporate social responsibility and commercial profit. The consequence of Stakeholders Theory is that enterprise will undertake excessive responsibilities and public will have more and bigger expectations.
Thirdly, one problem is that enterprise should how to practice Stakeholders Theory. The feasibility of Stakeholders Theory has gone through more and more challenges in recent years. On the one hand, the development of Stakeholders Theory makes the range of stakeholders is broadened. On the one hand, fiercer and fiercer competition makes enterprise do not have money and time to care stakeholders. Even though the value of Stakeholders Theory is enormous in theoretical explanation, it is so hard to apply it in practice. For example, customers are stakeholders, but what companies should do in order to participate into the actions of companies. In addition, many so-called stakeholders are not willing to involve on the activities of company just in order to a little interest. Therefore, the definition of stakeholders is not enough in theory. Scholars should take account into the needs of people who are included in stakeholders.
The effects of Stakeholders Theory on international business
This part focuses on the effects of stakeholders on international business. The theory of stakeholders has changed some management and operation of business, especially for international business. The expansion of multinationals will be continual, and the development of international trade will be faster and faster. Therefore, it is necessary and valuable to explore the effects of Stakeholders Theory on international business.
The international business is affected by stakeholders
International business refers to any business activity that crosses national boundaries. Therefore, international business does not only involve on the relationship of enterprises, but also it affects or affected the relationship between countries. After business crosses national boundaries, the responsibility also crosses national boundaries. In addition, stakeholders will more in international business. In order to deal with more and more complicated relationships in international business, Stakeholders Theory will play its affects. The following will explain in detail.
Firstly, Stakeholders Theory makes business easier in other countries. International business is not only relative to commercial, but also is affected by political, legal, and cultural factors. Stakeholders Theory takes account into local governments, residents, and communities, environmental protection, and corporate social responsibility. Other countries’ governments and people will be easier to accept international business. In the past, people thought international business meant a kind of plunder to natural resources and opportunities (Reinhard, S., 2006). It is not hard to understand that why local people would resist foreign products and companies. However, enterprises are the parts of local. The existence of international business is not to damage the interest of local people with Stakeholders Theory. Local government can be beneficial to the development of foreign companies. Therefore, they will welcome the arrival of international business and create advantages to absorb external capitals.
Secondly, Stakeholders Theory could help international business cross cultural handicaps. International business does not only cross national boundaries, what’s more, it needs to cross cultural boundaries. The cultural differences are vast between countries, especially for the cultures of east and west. It is harder to understand different cultures sometimes, but it is easier to understand and accept Stakeholders Theory for different countries’ people. Cultural differences may lead different behaviors. However, Stakeholders Theory cares about local customers, employees, residents, communities, environment, suppliers, and governments. This kind of caring could help companies overcome obstacles of cultures. In addition, Stakeholders Theory could remove misunderstanding in international business negotiations and collaborations.
Thirdly, Stakeholders Theory is helpful to the development of multinationals. Multinationals are the typical represents of international business. Generally speaking, the business of multinationals involves many countries. They arrange business all over the world, their collaborators, suppliers, customers, creditors, and shareholders could be from all over the world. Stakeholders Theory could help multinationals establish good images; stakeholders could trust companies because they are an integral whole (Laurie, K. L., 2007). In addition, multinationals are stronger to undertake responsibility than other enterprises. Multinationals have sophisticated operational and managerial system. Stakeholder Theory does not bring too much pressure to multinationals. Even though Stakeholders Theory has its own shortages, the practices of multinationals will make up them and create new ideas for Stakeholders Theory.
How to apply Stakeholders theory in international business
Stakeholders Theory is valuable to international business, but people are confused about how to apply it in operation and management. The internal impulse to commercial profit makes company want to escape from the application of Stakeholders Theory. Even though it is too early to say that Stakeholders Theory must be the future of international business, it is valuable to explore how to use Stakeholders Theory.
Firstly, enterprises who engage in international business could neglect the definition of scholars about stakeholders. And then they could ascertain who should be included in stakeholders according to themselves conditions (Ektewan, M & Stephen, O., 2010). After all, so-called affecting or affected by activities of organizations is really hard to define. The easiest way is to define who is stakeholder of organizations. The stakeholders of multinationals are very many, it is better to define stakeholders of each subsidiary. Obviously this way is easy to practice.
Secondly, companies should take different strategies to different stakeholders. After all, different stakeholders have different affects to the activities of company, or they are affected differently by company. To some extent, even though stakeholders have interests to entity, the size of interest is different. For example, if competitors are viewed as stakeholders of company, competitors will be different in different terms. In addition, the importance of stakeholders is different for different companies.
Thirdly, company should pay more attention to corporate social responsibility. No matter who are defined as stakeholders of company, corporate social responsibility should be fulfilled. Even though commercial profit is the internal impulse of commercial organization, as a part of the society, social responsibility can not be neglected (Jeff, F., 2010). Company can not survive without the support of society, let alone profit. However, company also should realize corporate social responsibility is not the burden of company. Society does not ask company to undertake excessive responsibilities, or the interests of the whole society will be damaged finally.
Fourthly, customers should be played in a very important place. As the saying goes that customer is king, the management and operation. One purpose of Stakeholders Theory is to stakeholders could affects the decision of company or the company should take account into the interests of stakeholders. In addition, a company only can pursue profit after the services or products are purchased by customers. Therefore, company should explore the needs and wants of customers. If there is new service or product to be public, the suggestions of customers should be pay attention.
Fifthly, Stakeholder Theory is not contradictive with other theories or strategies. Enterprises could use Stakeholders Theory along with other theories. For example, supply chain management and customer service management are relative to Stakeholders Theory. As a matter of fact, some companies do not realize they are applying Stakeholder Theory. Stakeholders Theory does not ask to be written into the articles of incorporation. Enterprises could apply Stakeholders Theory in practice unconsciously. Therefore, it should not be rigid to view Stakeholders Theory.
Conclusion
The theory of stakeholder has been an important part of international business. As the development of globalization, Stakeholders Theory will play a more important role in international business. Stakeholders Theory is still in the developing phase. The correctness of theory needs to be checked in practice. As a matter of fact, the development and application of Stakeholders theory depends on the choice of enterprises. After all, theory is from practice, and it only can be developed in practice. Even though there are many companies realize the importance and value of Stakeholders Theory, it is another thing to apply it. Moreover, companies have to consider the cost of Stakeholders Theory when they use it. For example, it is well known that corporate social responsibility is important, but if a company can not survive, how it can fulfill corporate social responsibility. The application of Stakeholders Theory should be placed into a right and suitable place, or the consequence will be not good. In addition, the range of stakeholders could be large and small. It can not be denied that some companies are confused about how to apply it. Maybe the shortages of Stakeholders theory will limit the application of it, or the shortages could be overcome in the practices. Many problems need to be explored in practice not just in theory. No matter how the future of Stakeholders theory is, its value has been seen. Therefore, people also should not be negative to the development of it. Stakeholders Theory should be together with other theories in order to overcome its shortages.
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