3. U3O1 notes. Characteristics of stakeholders PDF

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Study design dot point: Characteristics of stakeholders of businesses including their interests, potential conflicts between stakeholders, and corporate social responsibility considerations

Stakeholders are those who have a vested interest in a business, and are impacted by its success. At each level of the business environment (macro, operating and internal), there are stakeholders or pressures that impact directly on the business. A stakeholder can either affect or be affected by the operations of a business. Stakeholders have different interests in the business and a manager needs to consider these interests when making decisions.

Broad operating conditions in which a business operates and over which it has no control

E

g Internal environment

The environment immediately external to a business with which it has little control but close interaction. Factors within a business that the business has full control over.

What to know with this dot point: -

Who are key stakeholders- make sure you explain what they are. Eg what is an employee? Stakeholder interests in the business- ie what is it that the stakeholder wants? CSR considerations when dealing with stakeholders Conflicts between the interests of differing stakeholders

Stakeholder

What do they want? (what is their interest in the business?)

Level of business environment

Owners or Shareholders - those who have invested money into the business to own a portion.

Profitability of the business. To receive dividends and increased share prices (only for a company)- gain a return on their investment Often put pressure on the business to make decisions that will benefit the return for the shareholder

Internal environment

Directors of a company are key senior personnel in a company who are responsible for managing the business activities.

To develop and direct strategy and major business decisions.

Internal environment

To ensure strict adherence to corporate governance, social responsibility, and ethical and honest behaviour.

Many directors will be major shareholders, but they want to be considering the impact their decisions have on all stakeholders.

Employees- those who complete work within the business in exchange for a wage or salary.

To receive a fair wage or salary and work in a nondiscriminatory and ethical workplace.

Managers are those responsible for overseeing different areas of the business and make decisions to help achieve objectives.

To be involved in setting goals and objectives and achieving them.

Internal environment

To have the opportunity of career advancement. To gain job satisfaction and security.

To receive a fair remuneration package (pay and benefits). To work for a business that is ethical and socially responsible.

Internal environment

Stakeholder

What do they want? (what is their interest in the business?)

Level of business environment

Trade unions- a group that represents and protects the rights of workers in Aus.

To negotiate for their members fair wages, working conditions, working hours and other related work issues. To ensure the welfare of their members, both health and safety. To be able to act as bargaining agents for employees when negotiating new collective agreements.

Operating environment

Customers-those who purchase goods and services from a business.

To obtain quality goods and service and to receive high levels of customer service (pre- and post-sale). To potentially establish a long-term relationship with the business. To ensure that the business is acting in an ethical and socially responsible manner (including support for Australian owned businesses).

Operating environment

SuppliersTo ensure their customers’ business is profitable (so organisations who they get paid). provide resources To be paid promptly. to a business. To be able to establish and guarantee a long-term preferred supplier relationship.

Operating environment

Creditors/banksthose parties who have loaned money to a business with an expectation that this money will be repaid with interest.

To be paid repayments, both principal and interest, due on loans. To ensure all banking interests of the business are secured by that bank. To be certain that customers are being open and honest in their financial dealings.

Operating environment

Competitorsrival businesses that sell similar products in the same market.

To ensure they gain a competitive edge over the business. To differentiate their product or services from their competitors. To compare and evaluate their performance against other businesses.

Operating environment

Community/ Society- a group of people who live in the same area in which the business operates.

To benefit from the employment opportunities created by the business and for the business to participate in their community. To ensure the business is ethical in its operations. To ensure the business operations are environmentally responsible and sustainable.

Macro environment

Government- a group of people given authority to run a country or state.

To receive taxation revenue from profitable businesses. To provide a legislative framework to control business operations, such as the Trade Practices Act 1974, the Environment Protection Act 1978. To provide assistance to businesses to establish and run their operations.

Macro environment

Potential conflicts between stakeholders. Society increasingly expects businesses to consider corporate social responsibility doing the ‘right’ thing in the interests of all stakeholders – to not just comply with the law, but to also be socially just and ecologically sustainable in their operations. All stakeholders who interact with a business have an interest in its activities. However, some expectations are incompatible; that is, they oppose each other. Some examples: Stakeholders Employees and shareholders Management and customers

Management and members of the community Suppliers and members of the community Management and suppliers

Conflicting interest Employees require safe working conditions and reasonable wages, but this will reduce the business’s profit and dividends to shareholders. Management could attempt to maintain profit and a high dividend to satisfy shareholders by raising the prices of products, but this will upset customers, who expect reasonably priced products. Management might decide to cut costs by neglecting maintenance, which could possibly put members of the community in danger. Suppliers expect to be paid fairly and promptly, but they might reduce costs by using unethical or socially irresponsible practices, which can upset members of the community. Management wishes to keep costs down to improve profit but suppliers providing ethical materials require higher prices to cover their costs.

Know at least two of these conflicting stakeholders

Corporate social responsibility considerations. Corporate social responsibility can be referred to as a situation where businesses go beyond their legal obligations to display a commitment to the economy, community/society and environment. (HINT-MUST show that it is beyond legal obligations and that this is morally correct or where this will occur eg economy/community/environment) It is the moral application to business decisions and the consideration of the triple bottom line. This means that the business will consider three areas when making a decision if they are following CSR protocol. 1. Is this decision going to make a profit? 2. How is this decision going to impact the community? 3. How is this decision going to impact the environment? NOTE- do not confuse this with legal obligations. Don’t say not discriminating against potential candidates in order to have a more diverse workforce. It is ILLEGAL to discriminate therefore the business MUST not do this. CSR relates to going beyond this. EG actively seeking a more diverse workforce by hiring more older workers could be seen as CSR. It is important for a business to consider CSR when dealing with different stakeholders....