The Stakeholders and Identifying Challenges - Assignment Example

Business Environment Certificate of Authentication I _________________________________________________________ affirm thatthe attached work is entirely my / our own except where the words or ideas of other writers are specifically acknowledged through the use of inverted commas and in-text references. This assignment has not been submitted for any other Unit at LCB or any other institution. I have revised, edited and proof read this paper submission. Task two Business Responsibilities Stakeholders are the important people or parties in a business. For each business entity, there are various stakeholders. Stakeholders are either internal stakeholders or external stakeholders. Theses stakeholders include the business owners, the government, the customers, the society, the suppliers as well as the employees. Before the early 1980’s, businesses hardly endorsed the stakeholder theory. The theory asserts that the primary purpose of a business is not only to create profit for the business owners but also to assume responsibility to the groups in the wider society. It is crucial that a business organization balances its responsibilities to its stakeholders. Majority of the entities employ the stakeholder power analysis. It is a very effective tool in tackling imbalances among the stakeholders and identifying challenges in an organization. It also helps to comprehend the effect people have on institutions and policies. The stakeholders have a degree of influence on the success or failure of the organization. Thus, it is important for organizations to fulfill their obligations to their stakeholders (Parker 2004, pp 56). The business is socially obliged to the government in various ways. A business is required to comply with the government rules and regulations. It should pay the tax as stated by the law. The government also has regulations which dictate the legal business activities. The business should not engage in illegal activities (Parker 2005, pp 35). The business entities are also socially responsible to the owner. Large companies such as the Shell Oil Company are owned by shareholders. The shareholders of Shell are the major internal stakeholders. The shareholders provide a significant portion of the Company’s capital and in turn, they reap profits from their contributions in form of dividends. The shareholders are represented by a Board of Directors. The Board of Directors provides an annual report on the Company’s progress during the Annual General Meeting attended by the shareholders. All businesses are socially responsible to their suppliers. They should ensure that tenders are fairly allocated to the contending parties. They should also ensure that the make their payments on time as per the terms of their contract. The businesses should also ensure that their terms of the tender are fair to the suppliers (Heald 1970, pp 93). Shell suppliers are part of its internal stakeholders. They also partner with the company since they are part of the production chain of oil and gas. Shell operates on set values and ensures that its contactors share the same values, so must the suppliers. These values ensure satisfaction of both the suppliers and the company. The business is obligated to its customers in that, the services and products offered should be affordable. Businesses are prohibited from exploiting customers so as to increase their profit margin. Shell recognizes the value of its customers. One of its major object objective states: “To win and maintain customers by developing and providing products and services which offer value in terms of price, quality, safety and environmental impact, which are supported by technological, environmental and commercial expertise”. The company provides its customers with quality fuels and at the market competitive prices. The research department takes care of the market prices as well as quality of the fuels. Considering the environmental pollution concern of most customers, shell seeks to provide more efficient cleaner fuels for example biofuels. In addition, shell has developed and established a platform through which customers can air their views. This enhances the public relations of the company as well as creating a positive image for its customers. A business has social responsibilities to the society within which it is set up. Such obligations include participating in programs aimed at promoting the growth and development of a society. In addition, the business should offer equal employment opportunities to the society members. With regard to these responsibilities, Shell aims at creating economic as well as social development for the community. Shell aims at investing in communities. Therefore, communities will be in a position to reap long term benefits. These local communities often raise an issue of their safety. To overcome this challenge, the company has put in place essential measure which will guarantee the people’s safety and in turn win over their trust. This encompasses creating awareness among the communities on emergency procedures. To safeguard the communities’ welfare, Shell has partnered with members of the communities. It supports development of academic institutions such as universities and schools. It also provides the communities with health facilities. The company has launched various initiatives. For instance, there is the Shell Live Wire. It is an online community which provides a platform for the young entrepreneurs in who wish to start their own businesses. It provides young people with the necessary information as well as the resources they need to establish their business ideas into flourishing enterprises. Shell Oil Company is not exempted from theses social responsibilities. It is very crucial for large and multinational companies such as shell to balance all the stakeholders’ needs. Shell is based in Hague, Netherlands. Its parent company is known as the Royal Dutch Shell plc. Shell is an energy company and is thus obligated to prevent environmental pollution. Gas and oil are very essential but still are non-renewable resources. The demand for the two products has constantly increased over the years with the increased world population growth. This means increased demand for other sources of energy aside from oil and gas. It is a challenge for Shell to increase its capacity and meet the current energy demand as well as future demand. The company should also minimize the effect of its activity on the environment to as little effects as possible. The aim of Shell Oil Company is to safely and responsibly provide energy. It also aims at satisfying its shareholders, customers and stakeholders. It has two key objectives. Firstly, the company aims at participating in chemicals, gas, oil as well as other businesses in a responsible, efficient and profitable manner. Secondly, it aims at engaging in the ongoing research to create other energy sources with the goal of meeting the constantly increasing demand and the customer needs. It is thus a challenge for Shell to observe its social responsibility to the society and help reduce global warming and environmental pollution. Shell has over 100,000 employees. It has many employees across the world. The staff of Shell encompasses senior international managers who are oversee the finance, sales and marketing, exploration of oil and gas among other aspects. The company engages qualified practitioners such as site engineers, geologists, oil platform workers, business analysts, market researchers, office administrators with the required dexterity to oversee smooth running of the operations. The company is held with the responsibility of ensuring the health and safety of all its employees. Shell observes the health and safety of its employees; in turn the staffs are able to provide excellent and competent services. Shell has made respect of other individuals, its employers not excluded, a priority. It prioritizes its employees and offers them working conditions which are both good and safe. Similarly, the company offers the staff competitive and fair terms of employment. The staffs have equal employment opportunities as well as promotional opportunities. These working conditions make the staff feel motivated to work and they also feel safe. The company employees the Corporate Social Responsibility policy so as to balance the needs of the stakeholders involved, both internal and external stakeholders. There are also various strategies employed to ensure that these responsibilities are met and also a balance in the needs of the stakeholders. These strategies can be subdivided in to two; internal and external assessment. These assessments not only help to balance the stakeholders’ but also assess the company’s weaknesses and strong points. An internal assessment encompasses all the departments of the company laying effective strategies. The finance department lays a comprehensive competitive price. The research and development department maintains creativity and innovation of the firm. This ensures that the company is not left behind by its competitors. The marketing department ensures there is a strategic plan for effective marketing of the commodity. The sales department ensures that the laid sales goals are achieved by the end of the day. Task 3 Competition policy and other Regulatory Policies Competition is an important feature in an active market. It brings about numerous benefits to the consumers such as availability of a wide range of goods and services as well as affordability of these products. The competition policy was set in place to encourage and support competition and at the same time ensure that consumers can reap maximum benefits from the increased competition. The competition law in the United Kingdom has flexibility. It is based on a principle which states that business activities should be judged according to their effect on competition as well as public interest. There are four principals in the United Kingdom’s parliamentary Acts which form the basis of the Competition Policy. Firstly, there is the Fair Trading Act. This Act was passed in 1973. It focuses on preventing abuse of monopoly influence in the market. This Act seeks to prevent firms which do not have competitors from exploiting the consumers with the aim of maximizing their profits margin (Lifland, Mario, Dimitris & Gerwin 2004, pp 457). Secondly, there is the Competition Act which was implemented in 1980. It regulates anti-competitive practices which might be exercised by some companies. There is also the Restrictive Trade Practices Act which was implemented in 1976. It seeks to cease sealing of agreements which may be restrictive to competition. Lastly, there is the Resale Prices Act which was implemented in 1976. It puts a minimum price on goods that are sold in the market. The competitive policy is implemented in different stages. Firstly comprehensive investigations are conducted profoundly into the case in question. Once the results of the investigation are released, advantages on the case are judged. This is followed by recommendation of appropriate remedies for the situation at hand. Consequently a decision is made by the responsible parties on whether to take up the recommended remedies. The remedies are then monitored since the time they are implemented. There are four main bodies whose responsibilities are to oversee the implementation of the competition policy. These bodies include the Director General of Fair Trading, the Restrictive Practices Court (the Court), the Monopolies and Mergers Commission (MMC) and the Secretary of State for Trade and Industry (Rodrigues, Maria & Eleni 2014, pp 57). There are other restrictive policies in the United Kingdom. For instance, the Restrictive Trade Policies. It covers business agreement regarding goods and services. Some commercial agreements may put restriction to competition through the pricing of commodities or sharing of the market. All agreements either formal written agreements or just oral agreements made between business parties should be notified to the Office of Fair Trading (OFT). The terms of the agreement may be restrictive to the freedom of competition for the parties. Details of these agreements are filled in a public register. The involved parties should notify the OFT on their agreement terms in the following areas: terms of the commerce, prices, area or locality in which the business activities will take place, the kind of commodity, quantity of the produce, third parties with whom to transact business activities and the processes through which to manufacture the commodity (Lifland, Mario, Dimitris & Gerwin 2004, pp 459). Microsoft was accused of blocking its competitors by Novell in 1993. Novel claimed that Microsoft of using anti-competition policies which made it hard for its competitors in the market. The complaint was based on a license practice. The license practices required royalties to the Microsoft Company on every computer sold by suppliers of its operating system. This was regardless of whether or not the sold computer had the Microsoft’s Windows operating system. Later on in 1994, Microsoft Company terminated several license practices which were restrictive to competition. This case is commonly known as the European Union Microsoft competition case. Microsoft was accused of abusing its influential dominant position in the market. As earlier stated, the complaint was initially filled by Novel. It resulted in to the European Union dictating that Microsoft give some information concerning its server products. Microsoft was also directed to create a Microsoft Windows version which was exclusive of the Windows Media Player. The European Commission consistently insisted on the issue of interoperability (Scopelliti 2010, pp 924). Consequently, another complaint was filed against Microsoft Company by the Sun Microsystems. The Company complained that Microsoft was not fully disclosing information on the Windows NT and its interfaces. This case further got wide when the European Union intervened and demanded to know how Microsoft Company had integrated streaming media technologies with the Microsoft Windows (Mülle 2005, pp 311). The European Union reached a conclusion in 2003. The Union ordered Microsoft Company to create a Microsoft Windows version which is exclusive of the Windows Media Player. It was also instructed to provide the necessary information which its competing networking software companies would use to be able to fully interact with servers and Windows desktops. In the following year, that is 2004, the Union charged Microsoft a hefty fine. Microsoft was charged a fine of €497 million. In today’s economy, this sum is equivalent to $794 million in the United States’ economy or £381 million in the United Kingdom’s economy. This happened to be the most enormous fine on a company fined by the European Union during that era. The hefty fine was accompanied by the instructions for Microsoft to provide the servers information with 120 days and an allowance of 40 days to create a Windows version which is exclusive of the Windows Media Player. Microsoft Company, later on in the following month, expressed their view of the ruling made by the European Union. The company released commentaries which were scathing. However, the fine was paid in full in the seventh month of that year. Microsoft accused the European commission of wanting to implement a law which would adversely restrict the dominant companies’ ability to be innovative as well as interfering with the intellectual property rights (Mülle 2005, pp 312). Neelie Kroes was appointed in the Commission as the competition commissioner in 2004.her first obligation was to ensure the Microsoft Company cleared its fine. Microsoft complied with the instructions and created the Windows XP N which does lacks the Windows Media Player. The company also provided the source code but withheld specifications of the Windows Server 2003. The Company also sought an appeal. The appeal hearing by the European Union lasted for a week. Neelie Kroes was part of the hearing as the Competition Commissioner. She stated that Microsoft had launched claims that it had not clearly comprehended the obligations as had been stated in the 2004 decision by the Union. The Company also claimed that the obligations had been altered. Neelie Kroes disagreed with these claims and proclaimed that no changes had been made and the obligations were clearly stated. Microsoft had been allowed to appoint a monitoring trustee in 2005. The monitoring trustee stated that the obligations were clearly outlined in the decision. Microsoft began provision of the required information to the European Union in June, 2006 (Mülle 2005, pp 313). However, according to the European Union it was past the given deadline. Due to the delay, Microsoft was fined an additional fine of €280.5 million. This fine was on a daily basis for every day between 16 December 2005 and 20 June 2006. This new fine was imposed on 12 July 2006. The Union further threatened Microsoft claiming that if the Company failed to comply by 31 July 2006, it would increase the fine to €3 million for every day it delayed. Microsoft lost the appeal on 17 September 2007. The obligations were upheld; both regarding the fine imposed as well as the server interoperability information. The Company was still bound to producing a Windows operating system which lacks the Windows Media Player. In addition to this, the commission was obliged to cater for 20% of the legal fees encountered by Microsoft. On the other hand, Microsoft had to pay 80% of the Commission’s legal fees. The commission request to allow the independent monitoring trustee access to organizations internal structures was declined. Microsoft Company declared that it would meet the obligations and did not seek to appeal again. Microsoft reduced the rate it was demanding from interoperable software commercial vendors on patent-licensing royalties from 5.95% to 0.4%. it also ceased from requesting patent-licensing royalties from individual developers. To acquire the interoperability information, one is required to pay a one-time fee worth €10,000 which is equivalent to US$15,992 (Scopelliti 2010, pp 924). Microsoft failed to abide to the antitrust decision made on March 2004. This failure attracted an additional fine by the European Union of €899 million which is equivalent to US$1.44 billion. This had been the largest fine ever imposed by the European Union following the competition policy. This was until 2009 when Intel Company faced charges on anti-competitive behavior and in turn was charged a fine of €1.06 billion which is equivalent to $1.45 billion (Scopelliti 2010, pp 924). Task 4 Effects of Business and Cultural Environments on Behavior of Organizations Business environment and cultural environment encompasses the aspects which influence the operations of a company. Such factors include industry trends, competitors, government activities, customers, cultural factors, educational factors, political factors, social factors, stakeholders, economic factors, suppliers as well as technological factors. These factors not only form the base of every organization but also influence the organization’s behavior. Culture may be defined as features which mould or define a specific group of people. Cultural ways of people differ in terms of social habits, language, music, religion, arts, and cuisine among other characteristics. In the business field, culture is defined as the style in which an organization is run, its self-image, the values and beliefs which it upholds, its norms as well as the symbols it uses to represent itself (Savaneviciene & Stark 2008, pp 51). A business has two environments; the internal and external environment. An internal environment in every organization encompasses the resources such as human, financial, technological and physical resources. The marketing environment has three branches; internal environment, macro environment and the micro environment. The main aim of every marketer is to ensure the customers get full satisfaction. It is this aim that affects the behavior of an organization. The organization thus needs to asses and evaluate means through which it will achieve this aim. It is the duty of the market research department to assess and evaluate consumption levels, consumer access to the commodity effectiveness of the distribution process employed, buying behavior of the target market and well as competitors’ products and services. Similarly, Shell oil Company has both internal and external environment. These factors significantly affect how the business operates. Shell undertakes worldwide operations and it has established retail stores all over the world. It thus operates under different politics and varying rules and regulations. Firstly, shell is subjected to effects of political factors. In every environment, political stability provides a conducive environment for businesses to flourish. A company which engages in oil and gas production, there should be educational programs provided to the local communities. These programs are to create awareness on safety measures to be taken in the event that something goes wrong. Social cultures also affect the behavior of a business. A business is supposed to respect the socio-culture of the local communities in the area in which it is located. The Impact of Global Factors on the United Kingdom Businesses There are various global factors which affect the business organizations in the United Kingdom. These include the increased levels of multiculturalism, increased internal trade scales and the increased inter-dependency levels of national economies among others. To effectively the effects of these factors, businesses may use political, economic, social, technological, ecological and legal factors (PESTEL). Few United Kingdom businesses enjoy the benefits that come with international trade. The scale of exports from the United Kingdom has constantly reduced over the years whereas the scale of imports records a constant gradual increase. This has in turn disadvantaged most of the UK businesses. The main explanation for this occurrence is that importers to the United Kingdom such as India and China possess a competitive advantage which is mainly related with availability of cheap labor. The level of multiculturalism has also increased. It can have two effects on the United Kingdom businesses. The effects can either be positive or negative. Firstly, multiculturalism may contribute to the growth of a business by offering different views which may solve traditional problems in the businesses. Multiculturalism might also result into misunderstandings which will adversely affect business performance (Wetherl & Dorron 2014, pp 67). Shell is also subject to the influence of these global factors. Since Shell operates across the world, it is subject to the influence of global legal factors. As earlier stated, the Company has over 100,000 employees worldwide. These are across the world. The countries have different measure of legal, political and financial stability (Pinkse & Ans 2010, pp 269). It results in to the Company adapting varying political developments hence adjustments to its rules and regulations. Moreover, the Company’s investments, both equity-accounted and subsidiaries may be at the peril of litigations or disputation across the world. Shell also experiences changes in employment laws as well as health and safety laws. Thus, Shell is forced to oblige with the legal requirements pertaining employment and health and safety as per the country in which it operates. This changes the behavior of the organization from one country to another. With respect to employment, the working hours vary from one country to another. In addition, the minimum wage also varies across the world. Thus, the Company requires adequate information regarding the rules and regulations so as to avoid problems in the near future which could result into hefty fines (Buhmann, Lynn & Mette 2011, pp84). There are also varying rules and regulations on data protection. For instance, following the financial crisis in the United States, the government has formulated regulations which will require Shell Company to its payments information. Shell fears that this new regulations will interfere with the existing confidential commercial arrangements as well as give rise to legal requirements which are conflicting. Similarly, the European Union regulators recently raised a similar proposal. Such changes usually have a significant effect. It would affect the produced hydrocarbon entitlement, land tenure, rates of production, the royalties, re-writing of leases and also the pricing of oil and gases produced by Shell. The Company has no choice bu7t to comply with the new regulations so as to avoid unprecedented judicial outcomes which may affect the Company adversely (Choi & Sandra 2008, pp 96). There are also ecological or environmental factors which affect the operations of Shell Oil Company. The major factor is global warming. Shell calculates that more energy can be obtained in future by using unconventional sources. However, this would mean increased production of carbon dioxide. Such unconventional projects have already been established, for instance the oil sands in Canada and the project of gas to liquids in Qatar. The company has intensified its research to work out a way through which the flared gas will be captured to avoid increased global warming (Leal & Vlasios 2013, pp. 66) Task 5 Impact of Policies of the European Union on UK Business Organizations The interests of the European Union are wholly represented by the European Commission. The Commission makes proposals to the European Parliament on new legislation. if the new legislation is passed and approved, it is the responsibility of the European Union to follow up on the implementation of these new laws. The ‘commission’ stands for the wider institution and 28 commissioners. The Commission is entitled to right of initiative. Therefore, it has the right to raise proposal of new legislation to the European Union as well as to the European Union Council (national ministers). Most often, the proposals made by the Commission are to allow it to execute its duties in the European Union treaties or in the event that another country, institution or stakeholder under the European Union requests the Commission to act. An initiative was also introduced in April 2012 which allows the European Union citizens to forward law proposals to the Commission. This initiative is commonly known as European Citizens Initiative (Lifland, Mario, Dimitris & Gerwin 2004, pp 452). Recently, an impact assessment was done on the European Commission regulations. Some of its regulations were found to be extreme. The assessment involved six leaders in the business field who were invited by the Prime Minister in 2013. The taskforce also involved other businesses from the European Union. They looked into reforms which would be made to the practices, rules and regulations of the Commission as well as their impact on businesses. The report of the assessment by the task-force is now known as the Cut EU red tape. It gave 30 reforms to the rules of the European Union advising the Union to remove the barriers it has on competition. The task-force also recommended COMPETE principles which would enhance the innovation and growth of the Union. The recommendations were fully embraced by the government which promised to have them implemented. Recent follow up on the Cut EU red tape shows that ten of the thirty reforms recommended have already been implemented. For instance, the proposed Clinical Regulations is expected to save the costs encountered by businesses in the United Kingdom a whooping sum of 60 million pounds on an annual basis. The Stoiber group, the European Union as well as the major business organizations in the European territories have positively embraced the COMPETE principles (Rodrigues, Maria & Eleni 2014, pp 97). The policies of the Commission have laid hefty costs on small businesses. These small businesses have been affected disproportionately by the EU regulations. It is so because when abiding with the EU regulations, small businesses suffer a cost which is equivalent to ten times the cost encountered by large companies on every employee. It was until 2011 when the Commission adapted new laws which seek to reduce the cost on small businesses as well as exempting micro businesses which have less than ten employees. The government also seeks to cease the ‘gold plating’ regulations of the European Union. This means that the Commission will be bound to oblige with the minimum requirements as stated in the European directives. Exemptions will only be made if, and only if it is in the interest of the United Kingdom. Putting an end to the ‘gold plating’ would provide an equal competition platform for the British businesses and their European competitors (Kaeding 2008, pp 597). 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Leal, Filho W, and Vlasios Voudouris. Global Energy Policy and Security. 2013. Internet resource. Kaeding, Michael. "In Search of Better Quality of Eu Regulations for Prompt Transposition: The Brussels Perspective." European Law Journal. 14.5 (2008): 583-603. Print. Rodrigues, Maria J, and Eleni Xiarchogiannopoulou. The Eurozone Crisis and the Transformation of Eu Governance: Internal and External Implications. , 2014. Internet resource. Müller, Markus. "The European Commissions Decision against Microsoft: A Violation of the Antitrust Agreements between the United States and the European Union?" European Competition Law Review. 26.6 (2005): 309-315. Print. Scopelliti, Alessandro D. The Interaction Betwen Antitrust and Intellectual Property: The Interoperability Issue in the Microsoft Europe Case. Warwick: University of Warwick, 2010. Print. (924) Heald, Morrell. The Social Responsibilities of Business, Company, and Community, 1900-1960. 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