Balancing stakeholder needs

by Business Case Studies on Monday 12th October, 2009

All businesses have stakeholders – those groups or individuals with an interest in the decisions they make. Shell, the multinational energy company, is no exception. In its challenge to meet the energy needs of both current and future generations, Shell aims to satisfy the needs of all of its stakeholders while balancing the impacts of its work on society, the economy and the environment. Shell's internal stakeholders are its shareholders, employees and suppliers. It also has external stakeholders such as customers, local communities and pressure groups. The decisions made by the organisation may have an impact on all or some of these groups.

On Friday 9th October, JJB Sports confirmed it was aiming to raise £100 million through a rights issue. This means it will offer new shares to existing shareholders. JJB is hoping to gain more than the current market value of the business which currently stands at just less than £80 million. This decision is likely to impact on a number of its stakeholders. As JJB made losses of £42.9 million in the first half of the year, this rights issue should make the employees feel more at ease of keeping their jobs and customers more confident that they will be able to continue to make purchases. Current shareholders have the opportunity to keep their percentage holding in the firm but may decide to waive this right to purchase more shares and therefore be forced to take a smaller share of profits as dividends. (The Times Online 9th October 2009)

Stakeholders are affected by, or can affect, a business. They all have different expectations of the business and these contrasting objectives may cause conflict. Organisations, like Shell and JJB, must balance the requirements of their different stakeholders as they constantly make decisions which could impact on them.

Questions

  1. List the different stakeholders of organisations like JJB Sports
  2. Explain, using examples, how there might be conflict between different stakeholder groups
  3. Using the case study, analyse the benefits to Shell of working closely with pressure groups
  4. To what extent are shareholders the most important stakeholders of a business?

Answers to questions

  1. List the different stakeholders of organisations like JJB Sports
  • Customers
  • Employees
  • Shareholders
  • Managers
  • Local community
  • Suppliers
  • Pressure & interest groups
  • Government

  2. Explain, using examples, how there might be conflict between different stakeholder groups

Conflicts can occur between stakeholders because their objectives may differ. For example:

  •  Employees may demand higher pay but this would impact on the dividends being paid to shareholders.
  • Suppliers may want to be paid more for their goods but this in turn may lead to price increases for customers.

3. Using the case study, analyse the benefits to Shell of working closely with pressure groups

Benefits could include:

  • tapping into the knowledge and experience of the pressure groups e.g. how to dispose of old oil rigs in a way that minimises damage to the environment
  • ensuring that investments are made into positive projects such as the coastal erosion research laboratory in the USA
  • reducing negative media attention
  • improving reputation.

4. To what extent are shareholders the most important stakeholders of a business?

On the one hand, shareholders are important because:

  • They are providing capital required to set up and run the business
  • They will want rewarding for the risk they take when investing in the business
  •  If shareholders in public limited companies are unhappy, share prices could fall

However:

  • Without customers, businesses would not exist
  • Motivated, well-trained and skilled workers impact on a business' sales and reputation
  • Suppliers are an essential stage in the chain of production, especially for organisations like Shell and JJB

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