Business: Understanding the role and importance of stakeholders
Give an example of who could be found in Quadrant B and explain how they should be treated
(Keep informed: low power, high interest) - a group of residents living close to a manufacturing business (concerned about the impact of the business' operations on their lives) Managers should keep this group informed on its interest area and may choose to consult on specific low-risk matters with this group (to generate goodwill and enhance the business' reputation)
Give an example of who could be found in Quadrant C and explain how they should be treated
(Keep satisfied: high power, low interest) - investors who are only interested in financial returns Managers should engage and consult with this group and possibly aim to increase their level of interest (so that they can benefit from different perspectives and expertise and generate good publicity for encouraging involvement)
Give an example of who could be found in Quadrant D and explain how they should be treated
(Key players: high power, high interest) - a customer who purchases a high proportion of the business' products and only wants to deal with reliable and ethical suppliers Managers need to keep this group happy, possibly involving them in the decision-making process
Give examples of who could be found in Quadrant A (2) and explain how they should be treated
(Minimal effort: low power, low interest) - businesses who supply small quantities of low-value materials - or a customer group that purchases small and declining amounts of the business' products Managers do not need to worry too much about this group and may only update them using general communications such as a newsletters and the business' websites
Give an example of when a participation approach to stakeholder management might be appropriate
(Suited to stakeholder groups that have high power but a relatively low level of interest AND to powerful stakeholders with higher interest.) Major customers may be invited to take part in the design stage of the development of a new product.
What impacts would using more technology in production have on creditors?
+ increased need for borrowing to finance purchase of technology + if successful, the business will have enhanced ability to repay borrowing
What impacts would expanding production have on employees and customers?
+ more jobs available + the possibility of promotion and higher pay + new products available + increased production may reduce prices
What impacts would expanding production have on creditors?
- borrowing money increases, making repayment more difficult (creditors will have to wait longer before their money is repaid to them) + increased profitability
What impacts would using more technology in production have on shareholders and suppliers?
- initial investments may reduce profits and dividends + may lead to higher long-term profits and rising share prices - business' image may suffer due to job losses damaging share price + orders received for new supplies or for the technology + increased sales may result in larger orders + lower production costs may reduce pressure to find cheaper suppliers
What impacts would expanding production have on shareholders and suppliers?
- investment needed may cut short-term profits + share price and long-term profits could increase + possibility of larger or more regular orders - expectation of reduced prices
What impacts would using more technology in production have on employees and customers?
- jobs lost as technology plays larger role + new higher-paid jobs created to manage technology + lower prices as technology is more efficient + services available for longer hours - standardised products may less likely to meet individual needs
How do government policies influence a business' relationship with its stakeholders?
- laws and less formal codes of conduct to guide businesses in their relationships with suppliers, customers, employees and local communities. - for businesses operating in industries that were previously owned by the Government, e.g. rail services and energy supply, these controls can be extensive (including restricting their ability to raise prices).
What are the 5 possible approaches to stakeholder management? Give key features of each
1. Partnership - closest involvement of the stakeholder group in the decision or process. Two-way communication. Shared responsibility. HIGH POWER, HIGH INTEREST GROUPS. 2. Participation - stakeholders will be a part of the team and involved in decision making. They may have responsibility for part of the activity. They are likely to be engaged in two-way communication for that part of the activity. HIGH POWER, LOW INTEREST GROUPS. (sometimes HIGH POWER, HIGH INTEREST) 3. Consultation - finding out the views of the relevant stakeholders. Some two-way communication but limited power to influence decisions. HIGH INTEREST, LOW POWER. 4. 'Push' communications - one-way communication from the business. Emails, podcasts, mailshots or letters. LOW POWER, LOW INTEREST in the project/decision in question. 5. 'Pull' communications - the business communicates with the stakeholder groups but only if they choose to engage with the business and access the communication. LOW POWER, LOW INTEREST in a decision.
Give 8 examples of stakeholders
1. Shareholders 2. Employees 3. Customers 4. Suppliers 5. Creditors (a person or company to whom money is owed) 6. The government 7. Competitors 7. The local community
Give an example of when a 'push' communications approach to stakeholder management might be appropriate
A business (e.g. a licensed restaurant) may opt to choose this approach to inform local residents of its intention to open for longer hours each evening
Give an example of when a partnership approach to stakeholder management might be appropriate
A business that is undertaking a major construction project might involve its main suppliers in a joint planning and construction process to utilise their expertise and to share responsibility for the project.
Give an example of when a consultation approach to stakeholder management might be appropriate
A house construction company might consult with local residents on certain aspects of a plan to build new homes in a locality, but will only allow this for certain (maybe less controversial) elements of the proposal
What are quadrants A, B, C and D on a stakeholder map?
A: Minimal effort. Low power, low interest. B: Keep informed: Low power, high interest. C: Keep satisfied: High power, low interest. D: Key players: High power, high interest.
What type of factor is the market conditions and how do they influence a business' relationship with its stakeholders?
An external factor - businesses facing strong competition from rivals may opt to engage more closely with customers, employees and suppliers to establish a reputation for meeting the needs of stakeholders as fully as possible (which could be an advantage over their competitors) - in some markets, one or two businesses are dominant (UK supermarket market) which can have implications for stakeholder groups such as suppliers on whom the dominant businesses sometimes impose tough conditions. A business that dominate a market may also be able to exploit consumers by failing to deliver value for money if competition does not exist. - this can also occur if a few large firms dominate a market and appear to collude on pricing
What type of factor is the power of stakeholder groups and how does it influence a business' relationship with its stakeholders?
An external factor - some stakeholder groups have considerable power to impact on the activities and success of a business (e.g. large pension funds and insurance companies invest people's savings in a range of ways, including buying shares in PLC companies). Because of the size of their shareholding, they can become very influential and managers need to consider them when making decisions.
What type of factor are business objectives and how might they influence a business' relationship with its stakeholders?
An internal factor - businesses pursuing ethical or social objectives would normally give high priority to meeting the objectives of as many stakeholders as possible. - a business that is focused on maximising profits/achieving rapid rates of growth may have to make decisions that do not meet the needs of many stakeholders (e.g. by paying minimal wages, ignoring the needs of local communities and charging high prices).
What type of factor is the management and leadership style and how does it influence a business' relationship with its stakeholders?
An internal factor - managers who take an autocratic approach are likely to focus less on the needs of employees (especially in terms of delegation and involvement in the decision-making process). Other stakeholders, including shareholders and local residents, may also feel that their interests are not being considered and this could lead to resentment. - a more democratic approach may be more concerned with the wellbeing and involvement of employees, and the openness and belief in two-way communication could foster better relationships with most other stakeholder groups too.
What type of factors are the size and ownership of the business and how do they influence a business' relationship with its stakeholders?
An internal factor - small businesses may find it easier to communicate with and involve stakeholder in decision making simply because there are fewer of them. (e.g. a soletrader may have a very good relationship with its stakeholders because the owner knows many of them personally and communicates with them regularly) - a large PLC may have different relationships with its stakeholders because of its legal structure. Some boards of directors may be under pressure from powerful shareholder groups to maximise short-term profits. This can result in a series of decisions that alienate and damage relationships with other stakeholder groups such as employees, customers and suppliers.
Stakeholders
Are individuals or groups within society who have an interest in an organisation's operation and performance
What do suppliers need? (3)
Frequent and regular orders A sole-supplier agreement (they are the only supplier to that business) Fair prices
Give an example of when a 'pull' communications approach to stakeholder management might be appropriate
Managers might choose this approach to advise a minor supplier of its intention to adopt a new brand image for some of its products. (this is likely to have little impact on this particular stakeholder, provoking less interest on their part)
Why is stakeholder mapping a beneficial process for a business?
Managing stakeholder needs is an important part of taking successful decisions. Stakeholder mapping can help managers to consider decisions in relation to stakeholders' needs and their ability to influence them.
What is the difference between primary and secondary stakeholders?
Primary stakeholders are individuals or groups that are affected by a particular business activity, such as a decision to increase productivity. This category includes anyone with a functional or financial interest in the business. Secondary stakeholders are individuals or groups who do not have a direct functional or financial relationship with the business even though they are affected by, or can influence, its actions.
Give examples of primary and secondary stakeholders
Primary: customers, employees, creditors Secondary: general public, local communities, the media
What do customers need? (3)
Reliable supply of goods Clear pricing policies Safe products
What do creditors need? (3)
Repayment of money owed at a degree date Profitable returns on investment Minimal risk of failure to repay money owed
What do employees need? (3)
Steady and regular income Safe working conditions Job security
What do shareholders need? (3)
Steady dividends Investment that does not lose value Preferential (special) treatment as customers - e.g. lower prices
What does the local community need? (3)
Steady employment Avoidance of pollution and noise Provision of facilities (e.g. parks) for the local community
Why may stakeholders' level of power and interest change? (3 scenarios)
Their power may be reduced by laws (e.g. in the case of a strong workforce whose trade unions may become limited in terms of the activities that they can engage in) A relatively uninterested local residents' group may become very interested if a business opts to do something that will drastically change the area Rapid increase in demand for products may increase the power of suppliers if their materials are judged to be increasingly scarce and difficult to acquire
Consultation
is a process by which one group discovers the views of another one
Social responsibility
is a term describing the duties a business has towards stakeholder groups such as employees, customers and the government
Market conditions
refers to a number of features of a market, such as the level of sales, the rate at which they are changing and the number and strength of competitors