Stakeholder Theory free essay sample

Before it was thought that business and ethics were an oxymoron, two terms that could never coexist together in our society, however this video on Stakeholder Theory has proven otherwise. The video talked about various ideas/topics concerning Stakeholder Theory from what is a stakeholder to the effects of technology in our fast paced society today. R. Edward Freeman started the video by explaining how stakeholder theory started off. He gave an example early in the video of himself and few colleagues who wanted to put out an article around 30 years ago presenting the idea of Stakeholder Theory through a local newspaper. The newspaper editor called back and advised Freeman he had a typo in the title from â€Å"Stakeholder† to â€Å"Shareholder. † At that time the newspaper editor had no idea there was a difference between the two. Well what is the difference? A shareholder owns part of the company through stocks, or other various forms. We will write a custom essay sample on Stakeholder Theory or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Stakeholders are not products, or accounts, or assets, but rather they are actual living, breathing humans with faces. Since they are actual humans they are also customers who are directly affected by the behavior of an organization and they hold a stake in its performance. The job of a stakeholder is to find an approach to value creation. In order to do so, they must find an intersection of interests; almost like a graph you would draw in economics where the supply and demand curve intersects creating equilibrium. To find intersects of interest it involves finding and searching for opportunity, or essentially the art of not having to make tradeoffs. Freeman gave us an example of tradeoffs and searching for opportunity. It involved a chemical company who was notorious for an extreme amount of pollution. The CEO had a change of heart and wanted to completely eliminate pollution and advised his engineers that they needed to figure out a way to end it. The engineers immediately responded and advised there was no possible way, so the CEO stated that they would have to shut down the company. Eventually, the engineers found a plan to help eliminate the pollution. In this example the company did not accept the trade-off. Long story short, if you look to see how interests go in the same direction, you might find a solution, but you might not find one either, but it’s better than not trying at all. Another example would be to think about this idea in terms of music. It’s as if everyone was playing different notes and their own instruments, but when they all work together and go in the same direction they may create a harmony. Stakeholder Theory was developed as a business strategy; however there was a sense of integration missing between the term business and ethics. This video helped explain that when thinking about stakeholders it’s thinking about business, but also when you’re thinking about stakeholders you must also think about ethics. So the idea of business and ethics being an oxymoron is senseless. This relates back to a topic titled â€Å"Saints and Sinners† that was featured in the film with R. Edward Freeman. He discussed that saints ran business ethically and the sinners paid no attention to ethics. However, why does it have to be one or the other? A business involves human beings and ethics is the study of human behavior. This is what Freeman was saying; these two terms correspond with each other. However, the Stakeholder Theory was also missing the integration among other areas. Managing for stakeholders is about what businesses and capitalism is. It’s also about ethics, strategy, corporate responsibility, civil society, but it’s mostly about all of that and how you put those things together and tell a new story about capitalism. In the end capitalism is about how we create value for each other, or our stakeholders, not about competition. How well we all cooperate with each other helps determine the amount of value we can create for each other, which in turn creates more trust, because when the public doesn’t trust a business, who does? Stakeholder Theory is complex when you have to take the time to write it out and explain it, but if you take a step back and look at businesses today, you will see Stakeholder Theory is a very common, everyday theme, it is just a matter of what you are looking for. If individuals are looking for tradeoffs, they will find a multitude of tradeoffs available for them, but the real success lies with those who achieve and find the integration and intersection point of everything that really matters in capitalism, creating Stakeholder Theory. Stakeholder Theory free essay sample Part A: Introduction – Organisation background Part B: Market Stakeholders for BIFF Sdn Bhd 1. Supplier 2. Customer 3. Employer Part C: Non Market Stakeholders for BIFF Sdn Bhd 1. Local Community 2. Media 3. Government Part D: Suggestion on how to develop and maintain the relationship with identified stakeholders 1. Have a direct dialog 2. Provide variety of monitoring method 3. Organise activity to develop interest of stakeholder Part E: Conclusion References 2 OUMM 3203 INTRODUCTION Berkat Ilham Frozen Food Sdn Bhd is a frozen food supplier. This company was founded on 26th December 2000 and began commercial operation in 2002. It was located at Bandar Baru Senawang, Negeri Sembilan. It now has 100 staff including General Manager, Human Resource Manager, Quality Safety Manager, Sales Manager, Finance Manager, Production Manager and Logistic Coordinator. The products offered are of various type of local food and western food that has been upgrade as a frozen food to fulfil the customers need. This business was inspired by former curry puffs maker that doing business in small scale, after getting guidance from FAMA on frozen food processing and technical advice in this process, it has been commercialise to support food market business. We will write a custom essay sample on Stakeholder Theory or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page This product has been supply to all 711, Hypermarket, Mini Market and also to the cafeteria around Negeri Sembilan. Now this company are planning to expand their business worldwide through Small Medium Enterprise under guidance of government. Our Mission ? To become the pioneer in the food and beverage industry through our high quality food and beverage variety as well as superior customer service. ? To select, retain and educate a highly skilled, motivated and responsive staff for the growth of the organization and the nation. ? To meet all challenges with dedication and commitment and to set standards that other will strive to emulate. ? To become 1st Halal food supplier that will be recognise worldwide. Source from: http://foodking. com. my/about-us/ 3 OUMM 3203 An organization chart for Berkat Ilham Frozen Food Sdn Bhd. General Manager Secretary Human Resource Manager Quality Safety Manager Sales Manager Finance Manager Production Manager Asst. HR Manager QC Supervisor Asst. Sales Manager Asst. Finance Manager Production Supervisor Clerk 1 Incoming QC Clerk 2 Process QC Accountant Logistic Coordinator Logistic Supervisor Technician General worker Finish Product QC Document Controller 4 OUMM 3203 PART B : MARKET STAKEHOLDERS FOR BIFF SDN BHD Stakeholder has been defining as a person, group or organization that has interest or concern in an organization. They can affect or be affected by the organizations actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees, government (and its agencies), owners (shareholders), suppliers, unions, and the community from which the business draws its resources. Source from : http://www. businessdictionary. com/definition/stakeholder. html 1. Supplier A party that supplies goods or services. A supplier may be distinguished from a contractor or subcontractor, who commonly adds specialized input to deliverables. Also called as vendor. To ensure that there is enough ingredient for production to run. It is important to ensure that the supply will be available on time. For that the reliability of the contract and guaranteed of payment within stipulated period should be given priority. Source from: http://www. businessdictionary. com/definition/supplier. html 1. 1 Reliability of contract With the reliability of contract give. It will ensure that the ingredient will be supply as per quality requirement and reduce the market price from fluctuation. By signing a contract, they are bound to fulfil to the company quality and standard requirement to ensure that this problem will not affect our productivity and it also it will help to ensure there is no contract fraud occurs. With good supplier we can maintain our quality and productivity. 5 OUMM 3203 1. 2 Method of payment It is importance in order to be reassure the business growth , the payment are expected to be paid promptly to ensure both party interest being maintain so as to assure business growth, payment is expected to be paid promptly to ensure the interests of both parties can be maintained for a longer period. In the meantime the confidence should be planted so that the quality of materials is maintained. 2. Customer A party that receives or consumes products (goods or services) and has the ability to choose between different products and suppliers. Source from: http://www. businessdictionary. com/definition/customer. html When we look from the point of view of the customer, they are the consumer of our product. It show that the important role as a major stakeholder and give big influence in our market. Their exclusive power will influence local community. Therefore it is important to get their attention and to gain their trust. 1. 1 Quality and variety of food. It is important to ensure the quality and variety of food accordance with international food standards set by the Ministry of Health Malaysia and Good Manufacturing Product (GMP). It will help to gain customer confidence in our product quality. It will also help to promote our product variety. When we can met this requirement. There is no reason the we can’t fulfil customer needs. 2. Employer A legal entity that controls and directs a servant or worker under an express or implied contract of employment and pays (or is obligated to pay) him or her salary or wages in compensation. 6 OUMM 3203 Source from: http://www. businessdictionary. com/definition/employer. html Next we evaluate from the point of view of those employee under the company. They are the assets of our productivity in daily operation. Therefore, any change of policy or management will be affecting the performance of company. Proper planning and benefit to gain interest of the employee will help to gain productivity. It is important to get cooperation from employee in order to achieve our mission. 2. 1 Change working hour Due to productivity, it is important to plan effective working hour without sacrifice our productivity. Proper arrangement man power according to working hour provided will help them to give full commitment in their work. Without proper planning there will be wasting of time. 2. 2 Welfare Offer to the employees To gain interest of the employee the suitable offer is necessary gain their interest. Therefore employee welfare should be taken care. Most of employee are having a family, so one aspect that always been taking care by every company is medical coverage for the family. 2. 3 Skill requirement It is important to train employee to specialize in certain job scope in order to maintain the quality of product but it is also important to create proper work design, therefore they will not get easily bored doing the same thing every day. It also will help productivity and maintain the productivity since everyone can cover other works without affecting the productivity. 7 OUMM 3203 PART C : NON MARKET STAKEHOLDERS Non market stakeholder refers those who although they do not engage in direct economic exchange with the business are affected by or can affect its actions. Source from : http://en. wikipedia. org/wiki/Stakeholder In regard of the food industry, examples of non-market stakeholders classify to the local communities, the media and the government. I. Local community The factory has been built in the industrial area that has good environment and proper access. So that the products are easily being distributed to local community and also to ensure that the products reach the consumer without delay. Local community also play important roles in order to get fast feedback regarding our product. Therefore direct feedback are being practice to ensure that we can fully understand what are their need. II. Media Media is one of important part to ensure that the community are being update by our product. It also playing an active role in conjunction to report on the activities on the local communities by highlighting the product promotion. Indirectly, it’s act as a bridge to communicate in between the local resident. As a consequence, the positive image will be gain through advertisement in the media. Therefore, media plays an active role to connect the people and breaking the barriers among the community. III. Government By setting up a Frozen Food Industry, there are numbers of rules and regulation been set up to ensure the quality and nutrition of food. For example, Good Manufacturing Product, Malaysia Halal Procedure, Malaysia Diet Guide from Ministry of Health. This guideline will help to ensure all the product will be complying with the requirement therefore is will help the consumer safety from food poisoning. In order to ensure that there is no violation of rules. 8 OUMM 3203 Inspection will be done time to time from Health Department and Jabatan Kemajuan Islam Malaysia (JAKIM). The certificate will be renewing yearly to avoid halal certification withdrawn. In this we will gain trust from the community. For the local community it is important to have this kind of certificate. It will help customers to not hesitate doubt about our prducts. PART D : WAYS TO DEVELOP AND MAINTAIN RELATIONSHIP WITH STAKEHOLDERS It is important to build strong and continuous relation with the stake holder in order to achieve company goal and maintain good relationship. There are several ideas had been decide as mention below: 1. Open feedback During feedback period we can solve and minimize the risk about product quality. In order to find out the need and requirement of the utmost important customer to them, the management will conduct an internal review meeting and report to the quality department for improvement. With fast feedback we can gain customer satisfaction. It is important to get customer satisfaction in our product because it will increase our business. 2. Promotion of product through media. Print and electronic media play an important role in promoting the products. By using the right advertising we are able to ensure that the information related to the products reaches the users. For example, nutrients found in each product. The products produced by this company can also be identified to ensure that no counterfeit products in the market. This is to ensure that the customer will get our product without been cheat. 9 OUMM 3203 3. Organise Activities To manage a close relationship with their stakeholder in term of maintaining each other continuous interest in the business. By organizing activities such as Family Day, Sport Day, Concert and etc. could serve as an effective communication for all stakeholders. It also can remove barrier between stakeholder in order to get good cooperation. It can be done without sacrifice code of ethic. 10 OUMM 3203 PART E : CONCLUSION Stakeholder theory has its origins in the field of strategy (Freeman 1984). ‘The stakeholder theory is â€Å"managerial† and recommends the attitudes, structures, and practices that, taken together, constitute a stakeholder management philosophy’ (Donaldson and Preston 1995, p. 87). It has gradually been adopted by scholars in the business and society fields. Stakeholder management has been utilised as the leading red line through several recent handbooks on business ethics (e. g. , Crane and Matten 2004; Carroll and Buchholtz 2006). It has become the grille de lecture in the analysis of corporate responsibility (Attarc? a and Jacquot 2005). The stakeholder approach has, therefore, come to be presented as a theory of ethics for the business world. A pragmatic conclusion that could be deduced from the present analysis of stakeholder reciprocity, seen as reciprocity in stakeholder responsibility, is that while the impact of stake watchers on corporations has to be studied from a strategic point of view when using the stakeholder theory, pressure groups and stake watchers formulate their strategy using a political resources perspective that ignores the ethical dimension of stakeholder theory. Various categories of stakeholders demonstrate different stakeholder attributes. If one considers the broader definition of stakeholders, including stake watchers and other stakeholders that lack a need or obligation for reciprocal loyalty, then the stakeholder concept is applied from a strategic theory perspective that corresponds to the instrumental genre of stakeholder theory. In a more restricted interpretation of the stakeholder, limited to stake owners or genuine stakeholders who reciprocate loyalty, responsibility and fairness, stakeholder theory could constitute an ethical framework. Corporate social responsibility then implies corporate stakeholder responsibility. For stake owners, there is congruence between the company’s legitimate objectives and the process of value creation for all stakeholders. Stake owners own and deserve a stake in the firm. Our analysis of stakeholder reciprocity has practical implications for corporate governance. A stream of studies on stakeholder theory and corporate governance has 11 OUMM 3203 investigated new ways to integrate more stakeholders into the governance of corporations through representation on the governing boards of directors. Stakeholder reciprocity could be an innovative criterion in this corporate governance debate. The analysis presented in this article argues for new criteria that will confer representation on loyal stakeholders who respect stakeholder reciprocity and who contribute to the process of value creation. Within existing corporate law and governance principles, it suggests, at the very least, restricting voting rights to loyal shareholders with a long-term commitment. Our approach is based on ‘normative cores’ (Freeman 1994; Phillips et al. 2003) because reciprocity and stake-holder responsibility towards the firm and towards the other stakeholders falls within the ethical genre of stakeholder theory. It also meets the essence of stakeholder theory. (Fassin, Aug 2012) In this stakeholders studies we can see how important for us to maintain a good relationship with the stakeholder without scarifies our quality. It had been widely gaining recognition to be focus on the key parties that important to the organisation. Stakeholders are the person who be holding the same perception and have vested interest about the service deliver by the organisation. No doubt stakeholders need and satisfactory is the utmost important when running the day to day business, In this case study stakeholders we can see how important it is for us to maintain a good relationship with stakeholders without scarifies our quality. Recognition is important for all parties to ensure that the focus of the parties that are significant for the organization. Stakeholders are the people who hold the same perception and an interest in the services delivered by the organization. No interested party should satisfy skeptical and are important when conducting day to day business. 6 sample sets as relevant stakeholders here are suppliers, customers and employees. Closely related to their business. This is a group of people who have high expectations from the organization. Meanwhile, the non- interested parties such as the media, government and the community is a group of people who have no direct interest as strong as stakeholders but however each party will change either after both indirect basis. By looking at the important role of stakeholders, so many different ways have been proposed to maintain in the long run. The most important way to keep long-term 12 OUMM 3203 relationship is to keep them to join and become part of all activities. When they go into the atmosphere, a better understanding can be sent to either the appropriateness of goals for yourself or a specific organization, especially in online promotion where participation is an important part of success. We can see clearly the important and role of stakeholder that affect our business. With proper arrangement and communication we able to achieve our goals.