White Paper Stakeholders - Essay Example

White Paper Stakeholders: of the of the No: Contents Contents 2 Introduction 3 Definition and Concept of Stakeholders before 21st Century 3 Business interaction with Stakeholders before 21st Century 3 Importance of Stakeholders before 21st Century 4 Importance of Stakeholders Today 5 Conclusion 6 References 7 Introduction In the present era, it is found that thousands of business managers try to estimate the true worth and effort required to satisfy the stakeholders of their respective organizations. Concept and utility of stakeholders are seen to substantially increase over years, especially since the 21st century. The researcher, in context of this paper, desires to make a White Paper stakeholder analysis, where he intends to inform and persuade the manager of the company regarding its true significance and worth. Definition and Concept of Stakeholders before 21st Century The concept of stakeholders is a new phenomenon in the contemporary world. The worth and value of stakeholders was not too high, before 21st century. However, it should be noted that stakeholders was a known terminology in legal concept, since long. The origin of the concept of stakeholders, in business or management field, had initially come into existence in 1963. At that time, the terminology of stakeholders appeared in the international memorandum of Stanford Research Institute. Stakeholders, then, were defined as “those guys without whose support the organization would cease to exist” (Friedman & Miles, 2006). In the 19th century, the concept of stakeholders referred to the respective owners of business organizations, who had invested money in it as well as possessed full power to enjoy all upcoming benefits of the organization. The author named Freeman had first emphasized on the importance of the term, “stakeholders”, in 1984, in his book, Strategic Management Stakeholders Approach. Long before 21st century, the business corporations were assumed to be artificial legal entities and the value of the so-called stakeholders, like, customers, suppliers, shareholders, government and employees, were assumed to be neutral. Thus, in that particular period, stakeholders of an organization were referred to as only those individuals in the market who could provide economic support to the corporation’s activities. Business interaction with Stakeholders before 21st Century Prior to 21st century, it was found that business corporations used to give importance and value to only those individuals who could support the concerned firm with some financial support. At that point of time, the owners of organizations were considered to be extensively powerful. According to the views of Lord Edward Coke, “corporations cannot commit treason, nor be outlawed nor excommunicated, for they have no souls” (Friedman & Miles, 2006). The interactions of stakeholders with the soulless organizations were extensively poor in the period before 21st century. The firms almost did not react or interact with its stakeholders. The employees working in an organization had no power to influence the decisions of the firm. Though their service contributed substantial benefits for the organization, but still they were given the least importance by the system. This was because employees were not the fund contributors in these organizations (Webster, 1995). Even the consumers were not allowed to comment on any event of wrong initiatives undertaken by corporations. The powers of suppliers were also weak, like that of the employees. Most of the manufacturing business firms, then, were able to enjoy scale economies and profit in business from benefits that were reaped from the Industrial Revolution. The western nations used to abide by the principles of Capitalistic Economy and thus, the power of the government for intervening in affairs of the organizations was also very low. Hence, before 21st century, interaction between the business and its stakeholders was very low (Westwood, 2005). Importance of Stakeholders before 21st Century The value of stakeholders in the market was quite inferior before 21st century. As stated in the above context, at that point of time, the bargaining powers of suppliers, customers, employees and the government were extremely low in the scope of business operations. This is because the degree of competition among business firms in the market then was relatively low too. The existing corporations in the industry were, thus, very powerful and did not pay any attention in satisfying the stakeholders in their businesses. Capitalistic principles were strongly followed in most of the nations (CQI, 2014). As per the norm in respective economies, the power of private enterprises was high and the government’s role was also less in determining the different activities of corporations. So, it is evident that the importance of stakeholders in business was extensively low at that period. However, it should be noted that after 1990s, with the emergence of globalization, the degree of commercialization had significantly improved in terms of scale and scope. Thus, if we consider the period immediately before 21st century, we should know that with the rising degree of competition, the relative importance given to stakeholders were significantly improving too (Assael, 2005). Importance of Stakeholders Today In 21st century, the importance of stakeholders to business firms has significantly improved. In most of the business market segments, the bargaining powers of suppliers, employees and customers have increased. The rise in bargaining powers is responsible for the rise in the level of competition among firms in industries. Currently, in most of the developing and developed nations across the world, market systems abide by the rules of Free Markets or Mixed Economic Principles. Under this regime, powers of all enterprises are checked under the regulations established by the governments. Moreover, this era is the age of “consumerism”, where the ultimate goal of each and every business organization is to maximize the satisfaction levels of their customers. In order to win over a wide base of customers and augment brand value in the market (hence, leading their respective industries), the value of stakeholders has been increased since the 21st century. The satisfaction of stakeholders helps the firms to draw productive capital from the market. According to views of the Stakeholder Theory, modern firms consider customers as their primary stakeholders in business, as the revenue of the organizations depends on them (The Body Shop, 2008). Human resource management is one of the primary business divisions in modern business firms. Firms, today, aim to motivate its employees by providing them with several incentives as these help them to operate more productively in business. The growing practices of campaign funding and lobbying signifies the fact that the scale and scope of operations of modern business firms are strongly affected by the decisions of public ruling authorities. It should, thus, be considered that the value of stakeholders is high now. Before taking any new decision in business, firms refer to the stakeholder’s map (that signifies the decisions and relative powers of each stakeholder) in business. Figure 1: Stakeholder Map (Source: Freeman, n.d.) The above diagram portrays the different groups of stakeholders that affect the actions of organizations in the modern days. Conclusion From the above analysis, it can be summarized that the worth of the concept of stakeholders has emerged over time. This is the primary reason which has heightened the importance of stakeholders in the markets along with rising degree of competition. Cut-throat competition, faced by firms, forces them to research and opt for effective strategies through which they can lead in the competitive markets. Over time, it has been realized that by satisfying the desired intentions of stakeholders, firms can easily enhance their performance and augment their brand value in the market. In the early days, low level of competition and capitalistic forces of economic system bestowed high powers to the then existing firms. Nonetheless, with rise in the degree of internationalization in business and scope of commercial activities, the terminology of stakeholders has turned out to be a modern jargon (Kapferer, 2012). References Assael, H. (2005). Consumer behavior a strategic approach. Indian. Delhi: Dreamtech. CQI. (2014). Stakeholders. Retrieved from http://www.thecqi.org/Knowledge-Hub/Knowledge-portal/Customers-and-stake-holders/Stakeholders/. Freeman, R. E. (n.d.). Stakeholders Theory in the Modern Corporation Retrieved from http://academic.udayton.edu/lawrenceulrich/Stakeholder%20Theory.pdf. Friedman, A. L., & Miles, S. (2006). Stakeholders: Theory and practice: theory and practice. Oxford: Oxford University Press. Kapferer, J. N. (2012). The new strategic brand management: Advanced insights and strategic thinking. Delhi: Kogan Page Publishers. The Body Shop. (2008). The Body Shop stakeholder panel review. The Body Shop. Retrieved from http://www.thebodyshop.com.vn/pdfs/Values/Stakeholder_Panel_Review_2008.pdf. Webster, F. E. (1995). Industrial marketing strategy. New Jersey: John Wiley & Sons. Westwood, J. (2005). The marketing plan workbook. Delhi: Kogan Page Publishers. Read More