How to control stakeholders Essay Example
How to control stakeholders Essay Example

How to control stakeholders Essay Example

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  • Pages: 7 (1891 words)
  • Published: January 16, 2018
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These groups are the capital market stakeholders (shareholders and the major suppliers of a firm's capital), the product market stakeholders (the firm's primary customers, suppliers, host communities, and unions representing the workforce), and the organizational stakeholders (all of a firm's employees, including both managerial and managerial personnel)(R. Duane Ireland, Robert E.

Hosking's, and Michael A. Halt, pip-21 In most cases. Shareholders - individuals and groups who have invested capital in a firm in the expectation of earning a positive return on their investments are the most obvious stakeholders.

Rights of these stakeholders' are grounded in laws. In contrast to shareholders, the firm's customers prefers that Investors achieve the lowest return on their Investments. In that high returns to shareholders of capital market might lead to lower returns negotiated with customers.

How capi


tal market stakeholders could affect a firm and its activities As we all known, shareholders and lenders will invest a firm, which can increase their wealth, and they're always willing to take risks when doing investments. Shareholders can use stock market price signals to continually monitor management performance SATURDAY'S, S. ND BROADEST, T. , 2012). If the firm creates more risks, shareholders and lenders will be dissatisfied.

Therefore, shareholders and lenders will take actions to contribute less capital to the firm or directly sell the firm's stock (R. Duane Ireland, Robert E. Hosking's, and Michael A. Hit). Obviously, shareholders have their own power against the firm and its activities.

For example, the case in article called corporate governance convergence In Germany through shareholder catcalls: Impact of the Deutsche Boers bled for London Stock Exchange fully shows it (2012).

This case study examines th

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shareholder revolt initiated by a small activist shareholder, which eventually thwarted a takeover bid by Deutsche Boers for the London Stock Exchange and forced the resignation of two of Its highest profile board However, why can shareholders make such things happen? What are the sources of their power? In that shareholders have rights to vote for the firm's resolutions, such as the right to replace the director and CEO and to withdraw the capital or other resources for the company. Sometimes, their personal or public statements or activities can even affect the firm's reputation (GIFFORD, E.

J. , 2010). Therefore, in the opening case of Airbus, we can reasonably assume that Airbus's CEO and managers who have main power in the firm are considering carefully and seriously about what to do to enhance the firm's image and outcome in order to satisfy its capital market stakeholders (D.

Michaels, 2007). How product market stakeholders could affect a firm and its activities Comparing to capital market stakeholders, some might think that product market stakeholders (customers, suppliers, host communities, and unions) get fewer interests.

In fact, if the firm is engaged in a competitive battle, the four groups could all be benefited Just like the firm. For example, based on product and industry characteristics, market battle may probably result in lower price of products for customers and higher price to be paid to its suppliers (B. A.

Manville & B. Menage, 2006). Let's talk about customers first. For instance, a massive car recall crash in Southern California in August 2009 occurred caused by the world's largest automaker.

Since then, Toyota has recalled more than 5 million vehicles in

the North American market, including many of its popular brands (ANDREWS, A.

P. , SIMON, J. , TITAN, F. And ZOO, J. , 2011 .

). Due to the considerable bad feedbacks of customers, Toyota had to deal with mounting public pressure and legal challenges (it may face more than 130 potential class-action lawsuits over falling vehicle values and nearly 100 personal injury and wrongful death cases in federal courts nationwide)(Planning Perspective Inc. (2010). ). This recall crisis directly affected competitive dynamics in the global auto industry.

So that customers have power to get back what they deserve if the merchandises hey purchase have problems in a certain extent, which is bothering a big cluster of customers. Plus, the product should be deserved a certain value and might be threatening fitness that capable to make customers concern about. Thus, customers' power, most of the time comes from their feedbacks, which could possibly increase or decrease the reputation of a firm and indirectly affect the firm's margin. In addition, the Toyota case also left a question about the pursuit of quality and cost control.

Who lowed the quality of the main components and caused the recall? Before Toast's executive UP Swastika Waterman started the Construction of Cost Competitiveness in the 21st century, Toyota has on average five guest engineers per supplier, while GM has 0. 2 (Dyer and Hatch, 2004).

Toast's strategy on building trust and sharing intellectual property with its suppliers has achieved great success (Dyer been launched and resulted in cost reduction of nearly IIS$II billion over the next five years (ANDREWS, A. P. , SIMON, J. , TITAN, F. And ZOO, J. ,


Toyota started to expand rapidly and that led to the increase number of suppliers outside of its original supplier association. Moreover, Toyota no longer had enough senior engineers to monitor and supervise these new suppliers according to Toast's standards, resulted in a deterioration of product quality in key component areas (ANDREWS, A. P. , SIMON, J.

, TITAN, F. And ZOO, J. , 2011). The number of abrupt acceleration report surged after that.

In year 2009, according to the J. D. Power Customer Retention Survey, Toyota lost the no. 1 status to Honda for the first time (ANDREWS, A. P. , SIMON,J.

TITAN, F. And ZOO,J. , 2011). Therefore, suppliers mainly cause the low quality.

If the firm can't manage its suppliers properly, suppliers may lower the quality in order to reduce its own cost. Nevertheless, if the firm's suppliers are dispersive all over the world and are not organized or controlled by the firm would probably cause the deterioration of products' quality, which would probably affect the consumer market. Furthermore, if small suppliers converge to seek more profit from the firm, the customers might suffer higher price of the products or lower quality for the same price.

How organizational stakeholders could affect a firm and its activities Organizational researchers have long recognized the important role that top manager play within entrepreneurial firms (Ireland, Hit and Sermon 2003). A significant amount of strategy research has centered on the importance of top management (e.

G. , Humpback and Mason 1984) and entrepreneurial behavior (e. G. , Covina and Sliven 1989; Limpkin and Des 1996) in determining firm performance.

Accomplishing firm's goals in a complex landscape

requires the entrepreneurial leadership abilities from a manager (Ireland, Hit and Sermon 2003).

With the access to information and the power to make these strategic decisions, top managers are empowered with the most influential decision making role in the organization (Child 1972). Finniest and Humpback suggested that managerial secretion impacts organizational outcomes (1996). Furthermore, Research shows that prestigious Coos can enhance the standing of an organization and aid in its legitimacy through the manager's network with other prestigious individuals (Daily and Johnson 1997).

We can divide Coo's power into 4 types: structural power, expert power, ownership power and prestige power (Shining Www, Goofing Quant, Liana Xx, (2011)). Let's choose Bill Gates for example, Bill Gates is able to spread himself around. While the technological strategies are the most important part of the organization, Bill Gates and his managers made them precise and clear into short business goals that can be reached by small, independent working group (Breton Slender, Stephanie Lose, June 18, 1990).

The groups are small enough for Gates to sit around and bothered by operational details, he will be quick to find out both organizational weaknesses and the management talent required to fix them (1990).

This revealed Bill Gates' structural power as a CEO. Although he dropped out of school, he still has the reputation of a consummate nerd (1990). This showed his expert power. When Gates' personal fortune is over $2. Billion and most of it is tied up in his 36% stake in Microsoft stock (Breton Slender, Stephanie Lose, June 18, 1990). This is his ownership power.

So that top managers who display a high tolerance for risk, favor innovative activities,

and possess a high degree of protectiveness will use their 4 types of power directly influence firm performance (DAVIS,J. L. , BELL, R. G. , PAYNE, G. T.

And KISSER, P. M. , 2010). How organization might attempt to understand stakeholders and control them The philosophy of a company called The Southwest Airlines can demonstrate the respective organization have for how to understand and control stakeholders. Understand and controlling employees Here are the main points of their philosophy. -Southwest Airlines is a service organization; - employees are No.

; - it is K to be yourself; (for employees) - have fun at work(LASZLO, G. P. , 1999) Obviously, southwest airline demonstrate their trust in employees and thus succeed to engage their hearts and minds and this is coordinate with their hiring policy too, hire for attitude - not skills (LASZLO, G. P. , 1999).

This is the way how southwest airline ray to understand their employees, they select the sort of people they want so it will be easier for understanding and controlling. Plus, managers at Southwest Airlines are trained to use information and logic to convince employees and has also learned not to talk but to have dialogues with employees.

This kind of employee management is gentle but efficient. Keeping and understanding customers At Southwest Airlines it is recognized that the heart of service is spiritual, not mechanical, it must come from the heart (LASZLO, G. P. , 1999).

That's why they hire people who have real passion and certain characters. They think interpersonal skills are required first and then technical skills. All the operations at Southwest Airlines are for customers. Operational systems, procedures,

processes, employees are all oriented toward serving the needs of customers (LASZLO, G. P. , 1999).

Their advertisement is that it is not Just an airline with great customer service, which is heard to be good enough for customers not to choose other substitutes. Customers but what about the shareholders? How to understand hundreds of shareholders the firm barely knows. Voting fairness In 2006, the mantra of the U. S. Voting establishment is "One man, one L. , 2006).

In 2008 E cornerstones McGreevy declared at the European Parliament that he had decided to abandon his quest for imposing a system of 'one share-one vote' across Corporate Europe (ROSE, C. , 2008). The two examples reveals that the voting fairness is always a controversy.

Maybe what the organization want is not what the minority of shareholders want.

That's why a firm usually misunderstands some of the shareholders and might lose these shareholders in the future. Methods to help organization understands stakeholders and control them First, the firm should have the process of understanding itself. Including identifying its mission and objectives, analyzing the business environment, internal business audit, reviewing of strategic opportunities, comparison of strategic options and implementation of strategy Monsoons, Schools and Whetting, 2012).

After the clear cognition, the firm can consider starting the environmental analysis like SOOT. Before SOOT, these steps should be covered, establish the nature of the general environment, audit of general environmental influences and structural analysis Monsoons, Schools and Whetting, 2012). Additionally, Porter's 5 force model and PEST can help firms with the TOT parts.

Conclusion What we have found is that all kinds of stakeholders in all types of organizations

are almost equally essential. It depends on the situation and status the organization is going through.

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