The Battle for Stirling Bridge - Assignment Example

17 Feb. 2008 The Battle for Stirling Bridge Who are five of Stirling Bridge’s key stakeholders in this case? Why are they key and what is their sphere of influence? Stakeholder is an individual or organisation affected by the activity of the business. In any organisation the stakeholders will be present within the company as well as beyond the company. The five key stakeholders in Stirling Bridge Tool and Dye Company comprises of: Shareholders Employees Customers Suppliers Government All the above mentioned stakeholders play a major role in the activities performed in Stirling Bridge Company and each stakeholder have their own spheres of influence in working towards the goal of the company. Shareholder: Shareholder is the first stakeholder who legally owns one or more shares of the company. Shareholders are said to be key as they contribute to the investment of the company and influence the economic growth of the company. Every shareholder of the Stirling Bridge company gets a dividend of the profit gained by the concern. The Braveheart tools are the main profit earning tool of the Stirling Bridge company as they contribute 80% of the profit. Employees: Employees are the superior stakeholders of the company. Employees work towards the objective of the company. The skilled metal workers of the Stirling Bridge Company manufacture power tools including the Braveheart tools and other light and heavy industrial machinery and thus they exert their sphere of influence in maximizing the profit. Customers: Customers play a major role in the development of the organization as they are the consumers of the product produced by the company. The customers influence the company by giving feedbacks about the quality of the product. Suppliers: Raw materials are main resources of an organization. Suppliers provide the necessary raw materials and influence the continuous production of the tools. Government: The organization should get the approval of the government before commencing its productions. The concern should abide by the rules and the standard acts imposed by the Government. The Government has full authority to take legal action against the company if any of its activities harms the society. Thus each of the stakeholders exercises their own influence in different areas of interest in the company thereby promulgating the production to a profitable extent. 2. How might the actions of Stirling Bridge, with respect to its Braveheart line of tools, be regarded more as a stakeholder approach as opposed to a strict shareholder approach and which of Lantos’ types of Corporate Social Responsibility might be demonstrated by each of the actions taken? The objective of corporate governance centers is based upon two traditional views Stakeholder Concept Shareholder Concept Stakeholder Concept: A stakeholder is any individual or organization that affects or is affected by the activities of a business. They have a direct or indirect interest in the business, and may be in contact with the business on a daily basis, or may just occasionally. A major reason for increasing espousal of a Stakeholder Concept is the recognition that businesses are affected by the "environment" in which they operate. This concept suggests that while taking major decisions, the managers of a business should take into consideration, the responsibilities of all the groups and not only the shareholders group. The Stakeholder Values Perspective emphasizes responsibility over profitability. The principal stakeholders in any organization are: Shareholders Employees and Customers Government Banks and Financial organizations Shareholder Concept: A shareholder or stockholder is any individual or organization that legally owns one or more shares in a company. Shareholders are the first stakeholders and their Value perspective emphasizes profitability over responsibility All the shareholders collectively own the company and they will be interested in their dividends and capital growth of their shares. This concept suggests that the managers running a business should have an objective in maximizing the company’s profit both in the short and long-term. It is important to distinguish clearly between a STAKEHOLDER and a SHAREHOLDER .Shareholders are one who hold shares in the company i.e., they own part of it on the other hand Stakeholders have an interest in the company but do not own it. Stake holder’s approach invariably presents contrasting views of whether a corporations responsibility is primarily to deliver profits to the stockholders/owners. This approach shows how company’s standard operating procedures affect stakeholders within the company (employees, managers, stockholders) and immediately beyond the company (customers, suppliers, financiers). Stirling Bridge Company: The Braveheart tool marketed by the Stirling Bridge company caused much harm to its consumers. This led to legal lawsuit against the company. As a legal measure, they called back their tools to prevent further consequences. The failure to adopt such an action at the appropriate time would have led to ruination of the company resulting in loss of job to its employees and services to their customers. These actions taken by the Stirling Bridge strongly reflects stakeholder’s approach as they recalled their tools taking into consideration the concern for employees, customers and shareholders rather than the profit of their firm. This action strictly opposes the shareholder’s approach. Lantos proposed three types of Corporate Social Responsibility which are: Ethical CSR Altruistic CSR Strategic CSR From these types, the actions taken by Stirling Bridge can be demonstrated using Ethical CSR. Ethical CSR deals with mandatory fulfillment of Economic Responsibilities, Legal Responsibilities and Ethical Responsibilities. The Stirling Bridge company fulfilled the Legal Responsibility by calling back their defective tools in response to the lawsuit filed against them. The task of Ethical responsibility is accomplished by their action of issuing booklets to carry out proper installations of the tools thus providing a clear idea about the usage, in turn preventing any harm to the society. The company also maintained economic activity by negotiating a deal with Caledonia to market their tools, thereby bringing a profit to the company’s shareholders which would also help to get rid of the shortage of tools in Caledonia. This move by the company not only gratifies Economic Responsibility but also fulfills the Ethical Responsibility by helping the people of Caledonia to sustain their growth. 3. Analyze the actions of Stirling Bridge with respect to its Braveheart line of tools using Archie Carroll’s four part definition of Corporate Social Responsibility. The notion that business has duties to society is firmly impinched, although in the past several decades corporate executives have struggled with the issue of the firm’s responsibility to its society. What is Social Responsibility? Social responsibility refers to businesses "decisions and actions taken for reasons which benefit both the corporate and the society. Archie Carroll (1979) proposed a popular four-part definition of Corporate Social Responsibility, suggesting that we should judge corporations not just on their economic success but also on non-economic criteria. The nature of Corporate Social Responsibility (CSR) deals with exploring its component parts. According to Carroll the four responsibilities or “four faces” that are essential to fulfill the basic requirements to be good corporate citizens are: Economic Responsibility Legal Responsibility Ethical Responsibility Philanthropic (or otherwise “Altrustic”) Responsibility For CSR to be accepted by a conscientious business person, it should be framed in such a way that the entire range of business responsibilities is embraced. It is suggested here that four kinds of social responsibilities constitute total CSR: Economic, Legal, Ethical, And Philanthropic. Furthermore these four categories or components of CSR might be depicted as a pyramid. To be sure, all these kinds of responsibilities have always existed in some way or the other to some extent but it has only been in recent years that ethical and philanthropic functions have taken a significant place. Each of these four categories deserves closer consideration. Archie Carroll’s four part definition of Corporate Social Responsibility proves worthy in evaluating the actions taken in Stirling Bridge company with respect to its Braveheart line of tools. Economic Responsibility: Ever since the industrial revolution, business organizations were created as economic entities designed to provide goods and services to societal members. Stirling Bridge, a tool and a dye company which was founded in 1887. It began as a company that manufactured ordinary carpentry tools. To maintain Corporate’s economic responsibility and to be competitive in the market, SB now manufactures not only its original line of tools, but Braveheart power tools for use by consumers and light and heavy industrial machinery for use by other manufacturing concerns. Over the past decade the SB has steadily grown in product line and also expanded its market area to US and Western Europe apart from North Carolina. Ethical Responsibility: Ethical duties imply being moral, doing what is right, just, and fair; respecting peoples moral rights; and avoiding harm or social injury as well as preventing harm caused by others. Ethical responsibilities embrace those activities and practices that are expected or prohibited by societal members even though they are not codified into law. Citizen Alert (CA), a consumer interest research group, cited a recent study that the main profit making tool of the Stirling bridge company, Braveheart line of power tools laid serious risks of injuries to the consumers of the product. To provide ethical care to the society, the company issued a booklet which explains the operation of the locking mechanism in a prominent manner. Legal Responsibility: Legal duties entail complying with the law and playing by the rules of the game. Legal responsibilities reflect a view of "codified ethics" and are appropriately seen as coexisting with economic responsibilities. As the Braveheart tool of stirling bridge proved to be harmful, a case was filed by the injured consumers. As a legal response, Robert Bruce, the CEO of Stirling bridge directed his subordinate to callback the Braveheart tool and stopped its production. Philanthropic Responsibility: Carroll’s Philanthropic Responsibility encompasses corporate actions in making voluntary contribution to the society, giving time and money to the good works for the welfare of the society. As per the studies made by the chief sales representative of the Stirling Bridge, Caledonia, a developing democracy was in shortage of tools and machinery to sustain their growth. Hence the company contributed its tools to alleviate the speculative situation in Caledonia for the betterment of the country. 4. If Stirling Bridge ships its Braveheart line of tools to Caledonia, how might its competition react? The Stirling Bridge company in order to extend its product line to third world Countries, it began to manufacture braveheart power tools. This production yielded maximum profit to the company. Years later, the efforts made by the company to expand its market in Eastern Europe proved to be in vain and it led to severe cash flow problem in the company. To make matters worse, Consumer Interest group like Citizen Alert opposed the use of braveheart tools as they proved to be harmful to the consumers with a high rate of hand and facial injuries. With regard to the concern for the society, the company has to withdraw the tools and stop its production. The chief sales representative of the company made a detail study as to how to improve the current state of the company and came out with a positive solution. From these studies, Caledonia, an emerging democracy was found to be the best place to sell out their tools as the country was in shortage of tools and machinery to sustain its growth in per capita income. A negotiation was made between the company and the president of Caledonia’s hardware retailers’ trade association and a fruitful deal was made between them to allow the sales of the Braveheart tools in Caledonia. This agreement paved the way to sell 90% of the recalled tools in Caledonia the negotiated price was close enough to wipe out most of the expected losses. The entry made by the Stirling Bridge company into Caledonia earned them a reasonable compensation to their incurred losses, which made its competitors to react strongly. The major issues that were considered by the companies to compete with Stirling Bridge are: Marketing Consumer Protection Cultural Imperialism Ethical Decision making Marketing: Marketing is a very basic concept in the growth of any business. It is a societal process which creates awareness of the products or their services to the consumers. The companies adopted different techniques like direct marketing, advertising and strategic management to be more competent with Stirling Bridge. Consumer Protection: The companies give more importance to consumer protection as consumers are the assets of companies. To meet the competitions, the companies produced goods with high standards of quality. Cultural Imperialism: Each country has its own cultural diversity and for the companies to be competent over the other, they need to manufacture a product which suits the culture of the locality where the product is being marketed. Ethical Decision making: For the company to be victorious in the global market, the decision making involved in the company should be towards the ethical care of the society. 5. How does the civil society sector enter into this case study and how could the civil society sector assist and/or create problems for Stirling Bridge? What role would social capital play? Civil sector society is a non profit sector, also called a third sector or a voluntary sector distinct from the private sector and public sectors. This sector is made up of a number of voluntary civic and social organizations and institutions. These are totally non profit organizations and they work for the welfare of the society. Civil society sector plays a major role in democracy for industrial nations and it adapts favorable approaches to protect the rights of individuals and the common good beyond politics. The three sets of activities that are involved in civil society sector are: Project Replication Building grassroots movements Influencing Policy Reforms In this case, the civil society sector creates problems to the Stirling Bridge company. The Braveheart tool manufactured by the Stirling Bridge company proved to be injurious to the consumers. As a civil sector, the social organizations and institutions involved in the society looks for welfare of the society alone and do not adopt any profit making policies. Hence the social organizations in the society prohibits the use of Braveheart tools by filing a lawsuit to impose a ban on the its further production. Thus the civil sector society will pave way for the decline of the company. The civil sector is a major form of social capital. Social capital is important for efficient functioning of modern economies and it constitutes the cultural components of the modern societies. Social capital seems to promote cooperation between two or more individuals. It may be of two forms as follows, Economic Capital Human Capital Economic capital refers to non-human asset used in the production of tools and Human capital refers to technical knowledge incamated to employees and users of tool. Social Capital plays a major role in Civil Society Sector. Social organizations in this sector can conduct awareness programs to the consumers of Braveheart tools about the safety installation procedures and its usage and thereby assists the Stirling Bridge Company. Works Cited Archie B. Carroll. Aug 1991. The pyramid of corporate social responsibility: toward the moral management of organizational stakeholders - balancing economic, legal, and social responsibilities. Business Horizons. 16 Feb. 2008. Civil Society Sector. 12 Feb. 2008. Wikipedia- the free encyclopedia. 16 Feb. 2008 Lantos and Carroll Corporate Social Responsibility. Stonehill education. 16 Feb. 2008. Shareholders and Stakeholders. 6 Jan. 2008. Value based management. 16 Feb. 2008 Social Capital. 16 Feb. 2008. Wikipedia- the free encyclopedia. Stakeholders. 16 Feb. 2008. Wikipedia- the free encyclopedia. 16 Feb. 2008. Read More