Link between Stakeholder Claims and Product Market - Essay Example

Critically discuss the connections between stakeholder claims and the product market.     Stakeholders are people who are affected by the company’s performance and are impacted financially; moreover it comprises a group of people who have claim on the wealth of the corporation. These stakeholders can be categorized into capital market stakeholders, product market stakeholders, and organizational stakeholders. The capital market stakeholders comprises of banks, private lenders or venture capitalists that may have provided any form of financing for the company’s capital requirements. Whereas, the list of organizational stakeholders include employees who work for the company, managers and non managerial staff of the company and unions. Lastly, when we say product market – it comprises of primary customers, suppliers etc. There is an additional group of stakeholders that indirectly influences the performance of the company, and company cannot operate independent of it – these are the secondary stakeholders such as host communities, government and other environmental groups in the society. The firm has its obligation to maintain its actions that balances the participation of the entire key stakeholder. Each group of stakeholders has their demands that are against the demand of other stakeholders. Companies have to manage this trade-off in supporting one group over another in different decision making objectives. The primary expectations of shareholders and lenders are wealth enhancement and wealth preservation respectively; customers look for product reliability at as much lower price as possible, whereas, suppliers aim to receive the highest prices for the items supplied and that too sustainable in the long run. The group of stakeholder working there look for secure and sustainable work environment, that is rewarding and stimulating and provides opportunities for career growth. Unions struggle for ideal working conditions and achieving job security for the members. The secondary stakeholders focus in on protecting the environment and fulfilling concerns that relate to social environment. As the description earlier indicates that product market stakeholders are basically the non investor stakeholders and their claims from the management are in the form of implicit promises that ensures continuous and timely supply of products, product enhancement, regular customers etc. These claims are implicit because payouts on these claims are not quantified and stated out aloud. But these claims are impacted by the company’s existing financial policy. Cornell and Shapiro (1987) pointed out that these claims affect stock prices similar to the investor stakeholders’ claims; management therefore should alter its financial policy to achieve a balance between implicit claim stakeholders and the investor stakeholders. Taking into considerations these implicit claims it can be implied that contingent claim on an organization’s financial resources might be amplified in case their rights are not properly addressed. These implicit claims can be exemplified by the following: In January 984 when Apple came up with Machintosh computers, it promised (an implicit claim of competitive file servers) its customers that it will soon bring to the market the new file servers that are the hard disk that can manage data of multiple computer machines at a single time. But then the Apple had no clue of the exact characteristics, price etc. The field of corporate finance has long been recognizing how these implicit claims affect the factors earlier mentioned; this concept has been embedded in recognizing organizational capital equivalent to the current market value of all the firm’s implicit claims that the firm expects to sell and organizational liabilities equaling the expected costs of honoring current and the potential implicit claims. Almost all of the stakeholders have criticized that balancing of stakeholders’ rights is not a fair mechanism with capital markets or investor stakeholders always gaining priority over the non investor stakeholders, since capital is the firm’s organizing element hence preferred. But since non investor stakeholders are too important thus marketing concepts are changing – professionals are now targeting at identifying the stakeholders need by conducting surveys, both quantitative and qualitative. For customers association with products is both psychological and emotional. It is imperative to identify the right stakeholders and then stimulate the needs of these stakeholders by making their need a part of company’s equity. This can be done by providing better benefits for a worthy price; the focus should be on the features of the product where it is specifically used, then the hidden rewards that are derived from using the products should be stressed. Here the claims should not be enhancedly stated, misstated or promotes behavior that abuses the natural environment or resources (Kesprakon). Since external stakeholders are too critical for the organizations future and its success is vulnerable to their demands and perspectives, these companies need not isolate their culture but in fact develop and employ systems to gain feedback that is critical to their functioning. These stake holder management systems should go beyond simple tools like public relationship building, the approach should be proactive towards the needs to be satisfied; this provides a chance to discover new opportunities. This benefits the company in multiple ways such as it facilitates in proactively looking for any problems that the customer might face and which will damage the brand value of the product and the company. Moreover, new areas of potential customer interest can be identified that can result in long term sustainability of the business and not bring a tarnished image to the company. Another example of stakeholder claim in the product market is that of Google Inc. What Google did wrong was copyright infringement – it gathered some books that were copyright protected to allow its users to search for those books using the Google’s portal, and this was done without the author’s or publishers’ permission. Though Google might have done this and might have resulted in favor of the authors and publishers with selling more books and have benefitted the customer because more books were available to them. But, wouldn’t it have been better if Google had involved the original owners of the publications in the project. By partnering with stakeholders i.e. publishers and authors Google could have avoided the controversy that was trailing and had impacted its image negatively. To conclude, it can be said in the light of above discussion that businesses have fiduciary duty and obligations towards all the stakeholders and not just the providers of capital as normally understood and no matter whatever the circumstances an optimum level of trade off should be achieved in favor of all the parties. Thus, firms need to properly address what stakeholder groups should be kept in higher regards – employees, customers, creditors, and so on. The actual issue at hand is maximization of social wealth. Since inputs from the economy are taken therefore, something should be returned to economy that has been accumulated from the resources combined together. In short, catering to the needs of these stake holders is embedded in the concept of maintaining and building trust, this help reach beyond simple buying and selling of a product. The company should use many experiences to create such trust…simply product is nothing…uniqueness, empathy, creativity, performance, integrity, clarity and ability to perform are integral part of the product that satisfy product market’s stakeholders’ claims (Gorman 2007). References Gorman, A. Maximize Stakeholder value through the cultivation of your company’s most important asset Brand Spa 2007 Cornell, B. and Shapiro, A.C. Corporate stakeholders and corporate finance, Financial Management, Spring Issue 1987 Fitchett, J.A. Consumers as stakeholders: prospects for democracy in marketing theory, Business Ethics: A European Review Kesprakon, P. Corporate Positioning…Winning the Stakeholders’ Heart and Mind Strategically Preble, J.F. Towards a Comprehensive model of stakeholder management, Business and Societ Review, November 2005 Read More