STAKEHOLDERS Links between Stakeholders and their dependence upon

STAKEHOLDERS Links between Stakeholders and their dependence upon each other

Interdependence of Stakeholders n In large firms the owners are dependent upon the skill and ability of the management team to perform well. n Employees rely on the leadership of management in order to do their jobs, and management depend on workers to produce output according to their instructions. Management are accountable to the owners if the workers are inefficient.

Interdependence of stakeholders n Businesses need consumers to buy their goods and services. Consumers can only buy if their have income, and they earn this income from working for businesses. n The financial health of consumers, employees and business owners is interdependent and sensitive to the economic environment.

Objectives and conflict of stakeholders Conflict can occur when objectives are different. Each stakeholder is likely to have their own goals which they want to achieve. n Shareholders want regular, secure and high returns and a say in the goals of the business n Managers want responsibility, high rewards and a lack of interference in their actions n Employees want high earnings, an interesting job and secure employment

Objectives and conflict of stakeholders (contd) n Customers want quality products at low prices and a good service n Suppliers want secure, regular and profitable orders n Government wants to achieve a large number of goals including growth in the economy and low inflation n The local community wants thriving local businesses which do not cause problems

Employees and Owners - Conflicts n Levels of pay n Working conditions n Changing practices n Redundancy

Owners and Managers - Conflict n Managers becoming too powerful, giving themselves high salaries. This could result in owners selling their shares and is referred to as a ‘divorce of ownership and control’ Conflict here can lead to low motivation throughout a company through lack of job security and loss of wages.

Customers and business conflict n Price n Quality n Delivery time n After sales service n Hours of business

Suppliers and Managers conflict n New production methods have led to a closer relationship between suppliers and managers. However, conflict can arise when businesses require goods immediately. n Small suppliers can suffer financially when large business take too long to pay for goods.

Owners and the community conflict n When the quality of life of local residents is threatened by business activity, eg environmental pollution, noise pollution n Since the 1990’s many businesses have chosen to develop away from major residential areas, choosing instead to operate from business parks on the edge of town centres. (BANANA) - Build absolutely nothing anywhere near anyone! (NIMBY) - Not in my backyard!

CASE STUDY – The Stakeholders of Chelsea Football Club On 20 th September 2007 Jose Mourinho left Chelsea. It was by ‘mutual consent’ with Roman Abramovich, the owner. It was reported that the Russian owner was unhappy with the Blues’ lack of flair as Man United reclaimed the throne of ‘top club’. He had purchased two new Russian Players against the advice of Mourinho and the two had fallen out over the constant ‘hands on’ approach of Abramovich. Describe how the different points of view of the stakeholders of Chelsea have sought to influence the strategic aims and objectives of this club. (Merit)

Management buy-outs n A management buy-out is where the ownership of a business is transferred to the current management team. The team is likely to buy shares from the existing owners. Funds for the buy-out might be provided by members of the management team itself or financial institutions such as banks or venture capitalists (specialists who are prepared to take the risk of investing directly into a business).

Management buy-ins n This is where an outside management team takes over a business. For example in 1997 Whibread sold Pizza Piazza for £ 11. 25 million to a management buy -in team led by Ivan Taylor, the former Pizzaland MD. The deal was funded by venture capitalists 3 i. n Deals of this type are becoming more complex. n Investor buy-outs (IBO’s) are where the seller negotiates more closely with the fund provider rather than the management team.

Management buy-ins (Contd) n Buy-in management buy-outs (BIMBOS) are when an external management team, combined with the existing management team buy the business from its owner. In 1997 Phildrew, one of Britain’s largest venture capital firms, put together a bimbo.