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P2; describe the different stakeholders who influence the purpose of two contrasting businesses.
M1; explain the points of view of different stakeholders seeking to influence the aims and
objectives of two contrasting organisations
Stakeholders
A stakeholder is anyone who is affected by the activities of a business. Stakeholders are able to
influence key objectives, for e.g. businesses that ignore the concerns of customers may find
themselves losing sales to rivals.
Internal stakeholders are groups within a business i.e. owners and workers, on the other hand
external stakeholders are groups outside a business i.e. the community.
The following are Faisal’s stakeholders, and also how they influence his decisions:
Internal Stakeholders
Owners have a big say in how the aims of the business are decided. Faisal is able to make all
decisions, therefore he is likely to base them on which are more profitable as he aims to
increase income. The owner is considered as the most important stakeholder as the business
affects the owner’s earnings and wealth.
Impact on Aims and objectives; the main aim may be altered in order to reduce costs and
increase revenue which in results increases profit for the owner. The owner would avoid the
morale of the business, and may exploit in order to reduce costs and increase profits.
Employees are important stakeholders as they are vital in producing a profit or achieving
high revenue. Without employees the business would not make any sales and would
therefore fail, however the owner can work as an employee but this would result in low
revenue and he would also be restricted for holidays unless he closes the shop. Overall
employees are key to this particular business. Therefore employees can take advantage of
their importance and influence the business by legally claiming for better working
conditions, this in return could increase the costs for the owner. Employees may ask for a
wage increase and this would also result in higher costs, therefore the owner will be forced
to make cuts in other departments if he is under the influence of employees.
Impact on Aims and objectives; An Employee’s view can have an effect on the business’s
aims and objectives as in order to meet an employee’s needs and wants it could be costly,
therefore it would be even more difficult to break even. In result the new aim would be to
increase revenue by ‘x’% in order to break even and also reduce costs in other areas of the
business.
External Stakeholders
Customers can influence a business by deciding to continue to purchase goods and services
from the organisation. They can choose to take their custom elsewhere. Customers would
want the products to be high quality but also at low prices, if their demand is not met, Faisal
, is likely to lose customers and must therefore make changes to his aims and objectives in
order to suit their needs and wants.
Impact on Aims and objectives; new aims and objectives are likely to be cost-effective
objectives in order to decrease prices of products which would appeal to customers. If the
owner decreases the prices of his products, overall revenue would decrease (TR = Price of
products * Quantity sold) therefore he would have to make financial cuts in other
departments as it would be easier to break even with lower costs.
Suppliers would want to raise prices and refuse to give discounts on bulk orders in order to
increase their own profits, however it would have an effect on Faisal’s cash flow. Suppliers
would influence the business to purchase more of their stock, as well as pay at a high price
with no discount.
Impact on Aims and objectives; if the owner of F.R Furniture does not result in changing
suppliers, then the aims and objectives would be based upon saving as much money as
possible and wasting less, this could be done by setting objectives such as reduce running
costs each month by using less electricity. An aim would be to increase sales by a fixed
percent before the next trading year. However if the owner is currently not happy with the
current supplier, the new objective would be to find new suppliers (who supply stocks at a
cheaper price) and this would help meet the current aim; “…break even.”
The Local Community is considered a stakeholder as business activity affects the local
environment. Faisal’s aims and objectives must be moral or the local community may
petition against the building or plan permissions for new developments. They may act as a
‘pressure group’ and could eventually have a negative effect on the businesses reputation.
The local community would want Faisal to provide furniture that has been manufactured
from sustainable materials. Overall the aims and objectives may have to be changed in order
to favour the environment.
Impact on Aims and objectives; the aims and objectives may have to be changed in order to
favour the environment. For e.g. a new aim would be to reduce carbon footprint of products
by half by 2020, and an objective would be to purchase stock from suppliers which
manufacture furniture in the UK rather than other countries such as China, as importing
them to the UK gives the products a high carbon footprint.
Government can influence a firm by raising Corporation Tax which would affect a firm's
profits. The government would want to increase the corporation tax as it would increase
their income. In result, this may influence Faisal to increase the prices of his products in
order to make a vast amount of profit or at least break even.
Impact on Aims and objectives; if a new tax is imposed or a current ad-valorem tax
(economic term for % tax) such as VAT is increased, then the aims and objectives may
change as these indirect taxes would reduce consumer spending and therefore revenue
would decrease due to government intervention, in result the owner must have cost
effective aims and objectives in order to survive during the ‘recession’ (which would be
likely).
Banks may have an effect on this business as they may refuse to give a loan or permitting an
overdraft. Banks are important to businesses such as F.R Furniture, especially during rough
trading periods. Some banks may offer loans when a business is failing in hope that it will go
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