How stakeholders influence business activities - Essay Example

?Using specific examples, discuss how stakeholders influence business activities Introduction In the 21st century, the influence of stakeholders on the activities of all kinds of business has increased manifolds particularly with the integration of social responsibility and community citizenship into the business management. “The narrow definition considers those groups vital to the firm’s survival and continued success” (Booth and Segon 2008, p. 323). In the broader perspective, an individual or a group can be considered as a stakeholder in a business if there is something of interest to it in the activities of the organization and is powerful or authorized enough to affect the performance of the organization or has stake of any kind in the organization (Stonehouse and Houston, 2002, p. 26). The key groups of stakeholders include but are not limited to employees, business partners, customers, and communities. “[T]he type of interest and degree of influence of each group varies between different types of stakeholders and different types of businesses” (Carysforth and Neild, 2000, p. 189). Stakeholders carry weight in the business activities as well as the decisions made by the company. Owners Owners are best able to judge the performance of a business. If a business makes more profit, it increases the likelihood of re-election of the directors of business in the subsequent elections. Owners assume the prime responsibility of establishment of the goals and objectives of a business, though the decisions are made in due consultation with other groups. For example, the directors that assume the responsibility of management of the company’s affairs on the daily basis can decide to prioritize the increase of sales instead of prioritizing the profits. Owners influence the business activities by controlling the finances of the business. The decision of whether to run the business as a sole proprietor or make a joint venture with another company or group of companies is made by the owner of the business. The owner also decides what kind of products or services the company would sell. The owner decides whether to continue selling the same product or service or to diversify the products or services to be sold over the passage of time in order to increase the profitability of business. Government Government is one of the most important stakeholders in any kind of business. Responsibility comes with authority of the government. It is primarily the government’s responsibility to ensure that the product or service a company sells is not against the norms and values of the culture of the society in which the business operates. “The government can impose rules and regulations on businesses to ensure that customers are not exploited and employees are working in safe conditions” (Seliet, 2000, p. 90). Apart from that, the government obliges the business owners to pay tax on the earnings they make so that the money made from business can also be used for social services and the benefit of the society as a whole. Government regulates the business and ensures that the practices of the business do not subjugate or offend the rights of any community in the society. Governance and social responsibility Governance of a business means development of its vision, mission, and objectives which are overseen by the owners of a company in small businesses. Traditionally, maximization of the profitability of a business has remained the main focus of governance as well as all operations related to a business. In the present age corporate social responsibility happens to be the second most important depicter of the reputation and image of a company among the consumers whereas the quality of product or services of the company is the first. “According to some scientific research, customers do not evaluate companies based only on the features of their products and services, but also on what business practices they are engaged in, how their products are produced, and what effect on society the company has” (Kaufmann and Olaru, 2012, p. 12). Many companies have been moved by social responsibility to balance their responsibilities toward environment and society with the profits. Although the notion of social responsibility in business has been around for quite some time, yet the companies have increasingly started to become more active in this area as a result of the pressure posed by the government and the society at large. Customers and community Customers are the main source of influence for a vast majority of companies. Customers happy to be the main source of influence for companies not only because of the companies’ urge to maximize the profitability of businesses, but also because satisfaction of the customers is fundamental to the development of sustainable long-tern relationship between the companies and the customers which is fundamental to the sustainable business and maximization of its profitability over the passage of time. These days, companies around the world are increasingly making use of the data-driven process of business marketing, known as customer relationship management in order to obtain information related to the customers and customize their products and services according to the needs of the customers. Customer relationship management leads to higher brand value. Many companies have benefited from better customer relationship management. For instance, “today Procter and Gamble is considered a textbook market driven global powerhouse with billion-dollar brands such as Bounty, Olay, Tide, Crest, and Folgers” (Ferrell, 2004, p. 126). Understanding the needs of the customers and making high-quality products and services available to them are some of the most fundamental steps that any company needs to take to be successful. These days, satisfying the customers has become more difficult for the business entrepreneurs than it was in the past. This has primarily happened because of the immense competition among companies in the market and the availability of more options to the consumers. Companies face the increased need of extensive research and development to constantly study and comprehend the expectations of the end users and modify the business to accommodate their changing needs so that business can be made sustainable and the profits can be made in the future as well. Employees Businesses which comply with the requirements of the corporate social responsibility and consider the community citizenship a matter of prime importance generally consider the interests of their employees their businesses’ focus. Some of the ways in which the employees’ influence upon a company can be observed include the treatment of employees as the most importance asset of the company, projection of a work culture that is free of any kind of racism and discrimination, and involving the employees in the process of decision making. Satisfaction of the employees is extremely important because it has a direct impact on the awareness of the employees and their tendency to come up with unique and innovative ideas that the company can adopt to gain an edge over its competitors in the market. For example, when the employees are not satisfied with the policies of the managers in a company, they feel demotivation as a result of which, their performance declines. This has a direct negative effect on the business activities and the profitability of the business is minimized in such cases since employees work at the grass-root level. Managers make the policies whereas the employees implement them in the work. This imparts the need for the managers to take measures to keep the workforce motivated. There are numerous ways in which employees can be motivated that include providing them with different kinds of tangible or intangible awards. Business Partners One of the systems that have flourished since the start of the 21st century was the supply chain management system. This system comprises coordination and collaboration among the suppliers and buyers of business that jointly work to provide the end customers with the best value. This collaboration is of immense importance both in the logistics as well as in distribution since the organizations tend to adopt strategies of cost reduction along with placing more emphasis on the customer value and protection and preservation of the environment. Business partners finance a business. It is extremely important for the business partners to work in mutual harmony and collaboration with one another so that the business can be run smoothly. Conclusion In any kind of business, the importance of stakeholders cannot be overemphasized. Stakeholders play a key role in all stages of businesses that include but are not limited to the establishment of business, its expansion and growth, its merger with another company, and even its extinction. The importance of stakeholders varies depending upon the size of business. The most important stakeholders in small businesses are the owners, the customers, and the staff whereas in large companies, the most important stakeholders are the shareholders since they are able to vote the directors out if they are not satisfied with the way the directors are running the business. To ensure that the profitability of a business is maximized, it is imperative that the concerns of the stakeholders that matter to the business the most at a particular stage are identified and addressed. References: Booth, C, and Segon, M 2008, A Stakeholder Perspective of Strategy Formation, International Review of Business Research Papers, Vol. 4, No. 5, pp. 320-334, [Online] Available at http://www.bizresearchpapers.com/25[1].%20Chrisbooth.pdf [accessed: 12 December 2012]. Carysforth, C, and Neild, M 2000, Gnvq Intermediate Business, Heinemann Educational Publishers. Ferrell, OC 2004, Business ethics and customer stakeholders, Academy of Management Executive, Vol. 18, No. 2, pp. 126-129, [Online] Available at http://danielsethics.mgt.unm.edu/pdf/Customer%20Stakeholders.pdf [accessed: 12 December 2012]. Kaufmann, M, and Olaru, M 2012, The impact of corporate social responsibility on business performance – can it be measured, and if so, how? The Berlin International Economics Congress 2012, [Online] Available at http://www.culturaldiplomacy.org/academy/content/pdf/participant-papers/2012-03-biec/The_Impact_of_Corporate_Social_Responsibility_on__Business_Performance_-_Malte_Kaufmann.pdf [accessed: 12 December 2012]. Seliet, H 2000, Business Without Options, Heinemann Education Publishers. Stonehouse, G, and Houston, B 2002, Business Strategy, Butterworth-Heinemann. Read More