Impact of Stakeholder Conflict on Business
TITLE
Analyse one way in which conflict between stakeholders may affect a business.
ESSAY
Title: The Impact of Stakeholder Conflict on a Business
Introduction
Stakeholder conflict in a business can have significant repercussions on its operations and overall success. Understanding the various forms of conflict and their effects is crucial for effective management and strategic decision💥making.
Demotivated Workers
Stakeholder conflict, such as disputes between employees and management, can lead to demotivated workers. When employees feel undervalued or unsupported, their morale and productivity may decline, resulting in negative impacts on the business's performance.
Reduced Profit
Conflicts between stakeholders with different financial objectives, such as shareholders and management, can ultimately lead to reduced profits. Divergent interests may hinder strategic decision💥making and resource allocation, affecting the business's financial performance.
Slow Decisions
Conflicts among stakeholders can hamper the decision💥making process within a business. Disagreements and disputes may lead to delays in implementing critical strategies or projects, thus hindering the organization's ability to respond quickly to market changes or opportunities.
Industrial Action
Serious stakeholder conflicts, such as those between employees and management over wages or working conditions, can escalate into industrial action. Strikes or other forms of protest can disrupt operations, harm relationships with customers, and damage the company's reputation.
Damage to Reputation
Stakeholder conflict that becomes public or affects external perceptions of the business can lead to reputational damage. Negative publicity resulting from disputes between stakeholders can erode trust and confidence in the company, impacting its brand image and customer loyalty.
Conflicting Objectives
Different stakeholders may have conflicting objectives, creating tensions within the business. For example, while employees may prioritize job security and fair wages, shareholders may prioritize maximizing profits or dividends. Balancing these competing interests can be challenging and may lead to conflict.
Analysis
Stakeholder conflict manifests in various forms within a business, impacting its operations, financial performance, decision💥making processes, and relationships with internal and external parties. Shareholders' focus on short💥term profits may clash with management's long💥term strategic planning efforts, highlighting the tension between immediate returns and sustainable growth.
The core business purpose may clash with the social responsibility expectations of stakeholders such as the government, community, or overseas workers. Balancing commercial objectives with social and ethical considerations can create conflict regarding priorities and resource allocation.
Conflicts between employees and management over cost containment measures or wage increases can lead to strikes or labor disputes, disrupting operations and harming productivity. Similarly, objections from the local community regarding business decisions, such as environmental impact or expansion plans, can strain relationships and pose reputational risks.
Conclusion
In conclusion, stakeholder conflict can have far💥reaching implications for a business, affecting its internal dynamics, external relationships, financial performance, and overall reputation. Effective stakeholder management, communication, and conflict resolution strategies are essential for mitigating these risks and maintaining a harmonious and productive business environment.
SUBJECT
BUSINESS STUDIES
LEVEL
A level and AS level
NOTES
Analyse one way in which conflict between stakeholders may affect a business. NOTE: Stakeholder conflict may be between different stakeholder groups e.g. managers and shareholders, or between members of the same stakeholder group e.g. employee vs employee. AO1 Knowledge and understanding Conflict may affect a business in the following ways: · Demotivated workers · Reduced profit · Slow decisions · Industrial action · Damage to reputation · Conflicting objectives · Conflict between different stakeholders may lead to industrial action. (1 mark ´ 1) 5 9609/12 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2023 © UCLES 2023 Page 18 of 32 Question Answer Marks 4 AO2 Application · Different stakeholders in a business may have different expectations – resulting in conflict – management want to invest in more capital equipment – workers fear for their jobs. · Different stakeholders may require a business to operate in different ways – employees will focus on wages/salaries and working conditions while directors may favour higher dividends to attract more investment. · Potential for conflict is real – so many stakeholders internal and external with different agendas. · Developed application – managers may wish to automate production in search of a more efficient process of production – employees/workers may fear for their jobs and be less motivated. (2 marks x 2) · Limited application – workers may strike in order to preserve their jobs. (1 mark x 1) AO3 Analysis · Shareholders – will focus on bottom line – short💥term profits – conflict with long term planning concerns of senior management. · Core business purpose – some stakeholders such as government, community, overseas workers may seek to have CSR as a business objective – other stakeholders will be concerned at the cost – shareholders concerned at a drift from commercial considerations – the business of business should be business not social support. · Conflict between employees and owners/managers – aim of management is to contain cost increases arising from increase wages/salaries – workers and unions threaten strike. · Local community may object to business decisions – new factory – impact on the local environment. · Customers want lower prices – impact on quality of product as viewed by the business. · Government increases taxes on businesses/employees – business does not absorb the tax, puts up prices and customers become critical and threaten to switch to other providers. · Developed analysis – shareholders will likely focus on the bottom line in pursuit of profits and dividends which may have consequences for long term business planning for a business that requires to build up internal financial resources for growth investment. Shareholders will likely oppose proposals for more retained earnings