Chapter 5 - Stakeholders in Business
Learning Objective: To understand how businesses approach conflicting stakeholders' interests.
As you understand now stakeholders have various and conflicting objectives. How should a business go about solving those?
Think of the following situations:
A factory deemed to close may do so slowly rather than abruptly (business costs keeping this factory will go stretch overtime but this will allow workers to have enough time to find new jobs);
Plan to build a new chemical plant needed to change location due to environmental impacts (the relocation may increase costs of the plant but will at the same time decrease impact on the local community and environment);
24-hour flights introduction at a local airport and the investment in noise insulation of nearby residents (increase costs for the airport but also decreases dissatisfaction from local residents).
How to solve stakeholders conflicting interests? There will be a need for compromise:
Analysis of the highest priorities at the time of decision;
Which are the most important stakeholders in context;
Analysis of the extra costs of the decision;
PR analysis of potential bad publicity and consequent loss of revenue.
Activity 5.4
Whenever a business needs to change its objectives the impact on stakeholders are also inevitable:
Volkswagen’s objective to be world leader in diesel engines for cars and vans had to be changed when the ‘Dieselgate’ scandal broke. This involved Volkswagen deliberately cheating emissions control regulations. The company is now focused on being the world’s leading manufacturer of electric cars, but this has required massive investment and the closure of some diesel engine factories.
‘Social and environmental change’ is one of The Body Shop’s major objectives but, due to difficult trading conditions, it was recently forced to focus on cost-cutting by closing some shops to ensure survival and achieve profitability. Making employees redundant goes against The Body Shop’s original objectives.
To-Do-List
Essay Question 1.a.
Essay Question 2.b.
Chapter 5 - Stakeholders in Business
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