Bm 1.4 Stakeholders


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IB Business and Management (Standard Level)
All material taken from the IB Business and Management Textbook:
"Business and Management", Paul Hoang, IBID Press, Victoria, 2007

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Bm 1.4 Stakeholders

  1. 1. Business and Management : 1.4 Stakeholders Lesson 1 Pages 60-62
  2. 2. 1. Focus Questions <ul><li>1. Who are the internal and external stakeholders within or outside the company? </li></ul><ul><li>2. How do these stakeholders have conflict between each other? </li></ul>
  3. 3. 2. Overview <ul><li>What is a stakeholder? </li></ul><ul><li>Who makes up the bulk of the stakeholders? </li></ul>Employees Customers Suppliers Investors Rivals Government Managers Owners Business
  4. 4. 3a. Categories of Stakeholders <ul><li>What are the two categories of stakeholders? </li></ul>Directors Managers Shareholders Employees 1. Internal Stakeholders (are members of the organization)
  5. 5. 3b. Categories of Stakeholders <ul><li>What are the two categories of stakeholders? </li></ul>Pressure Groups Government Suppliers Customers 2. External Stakeholders (do not form part of the business)
  6. 6. 4a. Internal Stakeholders <ul><li>1. Employees: </li></ul><ul><ul><li>Staff will have a stake (an interest) in the organization they work for. </li></ul></ul><ul><ul><li>They will try to improve the following: </li></ul></ul><ul><ul><li> </li></ul></ul>Training and career opportunities Job Security Working Conditions Pay Employees improve:
  7. 7. 4b. Internal Stakeholders <ul><li>These things can only be offered to the employees if the company is performing well. </li></ul><ul><li>Are the employees the company’s best assets? </li></ul><ul><ul><li>Many would argue that it is the employees/staff who produce goods and services for sale. </li></ul></ul><ul><ul><li>It is the staff who communicate with the customers. </li></ul></ul><ul><ul><li>… </li></ul></ul>
  8. 8. “ Treat employees like partners, and they act as partners .” ~ Fred Allen (1894-1956), An American comedian What do you think of this quote ? Do you think this is true? Why ? …
  9. 9. 4c. Internal Stakeholders <ul><li>Put employees first, </li></ul><ul><li>Customers second, and </li></ul><ul><li>Shareholders third… </li></ul><ul><ul><li>By doing this, customers and shareholders both benefit ? </li></ul></ul><ul><ul><ul><li>Do you agree with this? If so, how so? </li></ul></ul></ul><ul><li>What if you have a demoralized staff ? </li></ul><ul><ul><li>Will they be willing to produce good quality products or deliver good customer service for you? </li></ul></ul><ul><li>They might even take industrial action… </li></ul><ul><ul><li>Such as go on strike. </li></ul></ul><ul><li>It is important for managers to meet, the needs of their employees as much as possible. </li></ul><ul><li>This will ensure that they are motivated. </li></ul><ul><ul><li>… </li></ul></ul>
  10. 10. 4d. Shareholders / Stockholders <ul><li>Who are they ? </li></ul><ul><ul><li>Are owners of private and public limited companies. </li></ul></ul><ul><li>What do they do ? </li></ul><ul><ul><li>They invest their money in a company. </li></ul></ul><ul><li>How do they do this ? </li></ul><ul><ul><li>They purchase shares, because they expect or hope they get a nice return on their investment. </li></ul></ul><ul><ul><li>… </li></ul></ul>
  11. 11. 4e. Shareholders / Stockholders <ul><li>A very powerful stakeholder group because they have what ? </li></ul><ul><ul><li>A vote…a say…a voice in how the business is managed . </li></ul></ul><ul><li>Since they are the owners of the company, they are entitled to a share of the profits . </li></ul><ul><ul><li>They have two main objectives…what are they ? </li></ul></ul><ul><ul><ul><li>To maximize share dividend payments </li></ul></ul></ul><ul><ul><ul><li>Capital gains ; a rise in share price. </li></ul></ul></ul><ul><ul><li>… </li></ul></ul>
  12. 12. 4f. Shareholders / Stockholders <ul><li>As for sole traders and partnerships… </li></ul><ul><ul><li>Profit is a key aim. </li></ul></ul><ul><li>How are profits distributed between a sole trader and a limited company ? </li></ul><ul><ul><li>… </li></ul></ul>
  13. 13. 4g. Managers and Directors The daily running of the Business. Control… organize plan Managers are the people who…
  14. 14. 4h. Managers and Directors growth The long-term health of a Company. Please shareholders profit Their benefits (bonuses & Perks) Directors aim to maximize…
  15. 15. Business and Management : 1.4 External Stakeholders Lesson 2 Pages 62-66
  16. 16. 1. Focus Questions <ul><li>Who are the external stakeholders in a company? </li></ul><ul><li>What do they do? </li></ul><ul><li>… </li></ul>
  17. 17. 2a. The External Stakeholders Government Competitors Special Interests Groups Customers Suppliers External Stakeholders
  18. 18. 2b. Suppliers <ul><li>What do the suppliers do for a company ? </li></ul><ul><ul><li>Provide raw materials. </li></ul></ul><ul><ul><li>Parts. </li></ul></ul><ul><ul><li>Finished goods need for production. </li></ul></ul><ul><ul><li>Maintenance and technical support. </li></ul></ul><ul><li>It is extremely important to have an excellent relationship with your suppliers…why is that ? </li></ul><ul><li>… </li></ul>
  19. 19. 2c. Customers <ul><li>What is CRM? You will hear this often in retail. </li></ul><ul><ul><li>C ustomer R elations M anagement. </li></ul></ul><ul><ul><ul><li>Two rules to CRM: </li></ul></ul></ul><ul><ul><ul><ul><li>1. The customer is always right . </li></ul></ul></ul></ul><ul><ul><ul><ul><li>2. If the customer is ever wrong, read rule 1 . </li></ul></ul></ul></ul><ul><li>“ Right or wrong, the customer is always right.” </li></ul><ul><ul><li>Marshall Field (1834-1906), founder of the Marshall Field Department Stores. </li></ul></ul><ul><li>So, why is the customer ALWAYS right? </li></ul><ul><ul><li>In the end, it is the customer who determines the financial performance of a business. </li></ul></ul><ul><li>It is vital for businesses to pay attention to their customers’ needs. </li></ul><ul><ul><li>How are businesses able to do this? </li></ul></ul><ul><ul><ul><li>By using market research to find out what the customer wants and then tries to meet these demands . </li></ul></ul></ul><ul><ul><ul><ul><li>Can use customer satisfaction surveys </li></ul></ul></ul></ul><ul><li>Businesses aim to keep the customer loyal & become repeat-purchasers. … </li></ul>
  20. 20. 2d. Special Interest Groups <ul><li>A.K.A. SIG…they advocate certain issues, such as protecting the environment, animals rights, etc. </li></ul><ul><li>They serve to protect the needs and concerns of their members. </li></ul><ul><ul><li>Several types of SIGs : </li></ul></ul><ul><ul><ul><li>Trade Unions </li></ul></ul></ul><ul><ul><ul><li>Pressure Groups </li></ul></ul></ul><ul><ul><ul><li>Industry Trade Groups </li></ul></ul></ul><ul><ul><ul><li>Local Community. </li></ul></ul></ul><ul><li>Let’s take a look in more detail at these groups. </li></ul><ul><li>… </li></ul>
  21. 21. 2e. SIGs <ul><li>Trade Unions : </li></ul><ul><ul><ul><li>Main aim is to uphold and enhance the conditions of work for their members. Such as : </li></ul></ul></ul><ul><ul><ul><ul><li>Wages and salaries. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Minimum wage. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Better working conditions. </li></ul></ul></ul></ul><ul><li>Pressure Groups : </li></ul><ul><ul><ul><li>Have a common interest and seek to place demands on organizations to act in a certain way or influence change. </li></ul></ul></ul><ul><ul><ul><li>They do this by : </li></ul></ul></ul><ul><ul><ul><ul><li>Influencing government policy. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Getting support on an international level. </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>See box. 1.4a pg. 64 </li></ul></ul></ul></ul></ul><ul><li>… </li></ul>
  22. 22. 2f. SIGs <ul><li>Industry Trade Groups: </li></ul><ul><ul><ul><li>These groups specialize in public relations. </li></ul></ul></ul><ul><ul><ul><li>They promote the aims of their group through education and advertising. </li></ul></ul></ul><ul><ul><ul><li>For example: anti-piracy. </li></ul></ul></ul><ul><ul><ul><ul><li>Movie, music industry. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Farmer’s association promoting eating fruits and vegetables. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Dairy farmer’s promoting drinking milk. </li></ul></ul></ul></ul><ul><li>Finally, Local Communities : </li></ul><ul><ul><ul><li>They will place demands on a business what operate in their community. </li></ul></ul></ul><ul><ul><ul><ul><li>Job creation. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Environmental responsibility. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Competitive priced products. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Sponsorship of local and fund-raising events. </li></ul></ul></ul></ul><ul><li>So how are these SIGs able to succeed? See pg. 65. </li></ul><ul><li>How should a business determine to devote time and resources to the demands of SIGs? See pg. 65 … </li></ul>
  23. 23. 2g. Competitors & Gov’t <ul><li>Competitors: </li></ul><ul><ul><ul><li>Who are they and how are they a stakeholder in your company? </li></ul></ul></ul><ul><ul><ul><ul><ul><li>They are your rivals. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>So why are they interested in the activities of a business? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>To avoid anti-competitive practices. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>A stimulus to innovation and product development. </li></ul></ul></ul></ul><ul><li>Government : </li></ul><ul><ul><ul><li>Will have a larger influence on business behavior. </li></ul></ul></ul><ul><ul><ul><li>They are interested in business activity for several reasons: </li></ul></ul></ul><ul><ul><ul><ul><ul><li>Unfair business practices. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Health and safety issues. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Corporate taxes being paid. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Payment of business rates. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Protection of consumers. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Employment laws being followed. </li></ul></ul></ul></ul></ul><ul><li>Overall, the government aims to ensure that businesses act in the public’s interest and to stimulate business activity. </li></ul><ul><ul><ul><li>How might this be done ? See pg. 66. </li></ul></ul></ul>
  24. 24. Business and Management : 1.4 Stakeholder Conflict Lesson 3 Pages 67-71
  25. 25. 1. Focus Questions <ul><li>1. What are the differences between internal and external stakeholders? </li></ul><ul><li>2. What are the aims of stakeholder groups and how do they conflict with each other? </li></ul>
  26. 26. Think about it… <ul><li>Margaret Thatcher, Prime Minister of the United Kingdom from 1979 to 1990 , once said that… </li></ul><ul><ul><li>“ standing in the middle of a road would get you get hit by traffic coming from both sides .” </li></ul></ul><ul><li>What was she suggesting in this quote? </li></ul><ul><ul><ul><li>You can not please all the people all the time. </li></ul></ul></ul>
  27. 27. 2a. Stakeholder Conflict <ul><li>Are all organizations able to meet the needs of all the stakeholder groups? </li></ul><ul><ul><li>Why not ? </li></ul></ul><ul><ul><li>Can you list some examples ? </li></ul></ul><ul><ul><ul><li>Owners wanting more profits ? </li></ul></ul></ul><ul><ul><ul><ul><li>How can we accommodate them? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cut staff benefits? How will the staff feel about this? </li></ul></ul></ul></ul><ul><ul><ul><li>What about the suppliers? What are their needs ? </li></ul></ul></ul><ul><ul><ul><ul><li>Customers pay on time and full price? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>How could doing this affect their customers / businesses? </li></ul></ul></ul></ul><ul><li>Do you see the conflicts here? </li></ul>
  28. 28. 2b. Stakeholder Conflict <ul><li>What is another major cause of stakeholder conflict ? </li></ul><ul><ul><li>It has been in the news recently. </li></ul></ul><ul><ul><ul><li>The pay and remuneration of the directors of a company. </li></ul></ul></ul><ul><ul><li>Are these people overpaid ? </li></ul></ul><ul><ul><li>Are the top managers “overpaid”? </li></ul></ul><ul><ul><ul><li>Who would argue this and why? </li></ul></ul></ul><ul><ul><ul><ul><li>These shareholders and employees….why? </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Fairer distribution of profits to shareholders . In the form of what? </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>DIVIDENDS . </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Staff wants better wages . </li></ul></ul></ul></ul></ul>
  29. 29. 2c. Stakeholder Conflict <ul><li>Is there a conflict if you are an employee of a company and also a shareholder? </li></ul><ul><ul><li>What is the conflict here ? </li></ul></ul><ul><ul><li>What about your customers and local community? </li></ul></ul><ul><li>Stakeholder conflict is usually short-term. </li></ul><ul><li>With all this conflict, is it possible to meet the needs of both employees and managers? </li></ul><ul><ul><li>Can meeting their needs lead to a highly motivated and productive workforce ? </li></ul></ul><ul><ul><li>Explain : Do you think this could lead to improved… </li></ul></ul><ul><ul><ul><li>customer relations? </li></ul></ul></ul><ul><ul><ul><li>Corporate image? </li></ul></ul></ul><ul><ul><ul><li>Market share? </li></ul></ul></ul><ul><ul><ul><li>Profits? </li></ul></ul></ul>
  30. 30. 2d. Is Stakeholder Conflict Beneficial? Can their needs be met? 1. Greater output may lead to… 2. Higher levels of Employment in the local community 3. Local community will benefit and support the company.
  31. 31. 3a. Stakeholders & Business Strategy <ul><li>As a manager or leader in business you will need to decide on how to best deal with conflicting stakeholder needs . </li></ul><ul><li>You will need to look at three major issues : </li></ul><ul><ul><li>1 . The type of business organization. </li></ul></ul><ul><ul><ul><li>A partnership will have different aims as opposed to a charity. </li></ul></ul></ul><ul><ul><ul><li>Ltd. will be accountable to the shareholders. </li></ul></ul></ul><ul><ul><li>2 . The aims & objectives of the business. </li></ul></ul><ul><ul><ul><li>If you are expanding your business profits will be used for that instead of filling the pockets of the owners. </li></ul></ul></ul><ul><ul><li>3 . The source & degree of power of each stakeholder group. </li></ul></ul><ul><ul><ul><li>Customers will have more power if you are selling a substitute product on mass. Coke vs Pepsi </li></ul></ul></ul>
  32. 32. 3b. Stakeholder vs. Shareholder Concept <ul><li>When running or managing a business, should we give priority to the stakeholder over the shareholder? </li></ul><ul><ul><ul><li>Some would argue that employees are the key stakeholder. </li></ul></ul></ul><ul><ul><ul><ul><ul><li>Would you agree with this statement? </li></ul></ul></ul></ul></ul><ul><ul><ul><li>External stakeholders such as Pressure groups are effective in influencing business activity. </li></ul></ul></ul><ul><ul><ul><ul><ul><li>How are you going to deal with these groups ? </li></ul></ul></ul></ul></ul><ul><li>How will you deal with SIGs spreading rumors or misleading information about your company ? </li></ul><ul><ul><ul><li>Issue statements, counter publicity campaigns, or legal action. </li></ul></ul></ul>