Analysis
Discuss about the Strategic Management for Stakeholder Competition.
Wheelen et al. (2017) defines strategic management is the formation of strategies and plans to achieve the mission and vision of business organisations. Business organisations form strategies to earn profits and business growth to benefit the stakeholders. It appears from their work that the aim of strategic management is to bring about benefits of all the stakeholders and that it is neutral. However, Bridoux, F., Stofberg, N. and Den Hartog, D., 2016 points out that in reality strategic management is not ethically neutral and that fact has become more prominent with emergence of neoliberal context. Labonté and Stuckler (2016) neoliberalism as the situation where governments reduce investments in various sectors to give ways to private investments. One can point out that in contrast to the public welfare aim of the governments, the aims of the commercial organisations is to earn profits. Clements, Baum and Cumming (2016) mention that these commercial organisations in order to fuel their own profit earning motives, often indulge in unethical practices, thus benefiting one of the stakeholders less compared to other group of stakeholders like investors. The paper would reinstate that in the age of present neoliberalism, strategic management is not ethically neutral and companies benefit some stakeholders more at the expense of the others. It would take into account theories like stakeholders’ theory and shareholder theory to bring into light the topic being studied.
Hopkins (2017) mentions that business organisations should faction in order to bring welfare and value addition to their stakeholders. The stakeholders of business organisations can be divided into external stakeholders and internal stakeholders. The internal stakeholders consist of the management of the business organisations which form the strategies and the employees who execute these strategies. The external stakeholders consists of governments, investors, customers, suppliers and the society as a whole. Arora et al. (2017) mention that business organisations, especially the multinational public limited companies are dependent on shareholders for the capital bases. They are as a result ethically and legally obliged to give high returns to these shareholders in order to attract higher investments. This puts them under continuous pressure to earn higher profits to give more returns to these shareholders. This intense pressure from the shareholders often forces them to apply unethical methods like compromising on the quality of goods, thus harming the consumers. Thus, in neoliberal era of today, the strategic management is not neutral and business organisations have to benefit one set of stakeholders less to benefit one group of stakeholders more.
Examples
Chari and Acikgoz (2016) points out that in the present neo-liberal age, government allow private organisations function in most of the sector except the critical sectors like defence whose control they reserve to themselves. The governments makes laws and regulations to regulate the functions of these business organisations. These business organisations have to incorporate these laws and policies while forming their business strategies. The governments impose taxes on these business organisations which in turn increases their expenditure. As pointed out by Arora et al. (2017), business organisations are obliged to bring about capital maximisation for their shareholders. This means they are compelled to earn high profits and reduce their expenses to give higher returns on their investments. The high rates of taxes which governments impose thus are a bearing on these business organisations. The present corporate tax rate in the United States of America is 21 percent which has been reduced from 35 percent (hbr.org 2018). The tax rate which multinational companies pay in the United Kingdom is also similar (gov.uk 2018). One can point out that these two countries are home to several multinational companies. These multinational companies in order to reduce their tax spending establish their businesses in tax havens where the tax rates are comparatively lower, usually in other countries. These companies thus able to function from these tax havens by paying lower tax rates to their host countries and earning high profits (theguardian.com 2018). An analysis of this discussion clearly points out that in this case, business organisations in order to profit the investors and the management, benefit the host country governments by paying them less taxes. Thus once again, it can be proved that strategic management is not ethically neutral and business organisations often benefit one stakeholder group at the expense of the other (globalnews.ca 2018).
The next example where one group stakeholders benefits at the expense of the other in the present neoliberal era is environmental pollution. According to the United Nations the top business organisations involved in manufacturing goods cause immense amount of environmental pollution. The companies operating in the manufacturing sectors like automobile and energy earn immense revenue by serving their customers. They in the process of the manufacturing finished goods exploit natural resources and harm the environment and the local community as a whole (independent.co.uk 2018). The governments of the host countries often allow the multinational companies to exploit their natural resources including the water resources like rivers (financialexpress.com 2018). The government bodies bodies earn immense revenue from these companies in return. The customers get diverse ranges of products from them and in turn contribute to their immense revenue generation. The investors get immense return on their investments and attribute the companies with investments in return. The four stakeholder groups here, the government, the company, the customers and the investors benefit from the strategies of the company and do not put any limitations on its exploitation of natural resources. These reckless exploitation of natural resources affect the local community which often suffer from drought due to excess usage of water by the multinational companies. Thus, this analysis shows that business strategies of business organisations often benefit one group of stakeholders at the expense of the other groups.
The strategic management is not ethically neutral and often leads to benefits of one group of stakeholders at the expense of the others. The above discussion clearly shows that business organisations often form strategies to primarily benefit four stakeholder groups namely, the management, the investors, customers and the governments. The by-product of business operations like wastes cause pollution and harm the society as whole which is an important stakeholder as well. The harm to the society due to society cannot be measured financially but has significant business implications (financialexpress.com 2018). This is perfectly exemplified through the downfall of Enron which was a leading American company operating in the energy sector. The management of the company which was also one of its stakeholders used unethical methods of misrepresenting financial figures before the shareholders. The company had a transparent accounting method which accounted for its transparent image before the stakeholders. However when Skilling joined the company in 1997 as its new CEO, the accounting methods adopted by the company become increasing complex which vexed the analysts. The company presented false statements about its stock position and indulged in extravagant spending for the high level executives which in turn resulted in its high expenditure (theguardian.com 2018). This benefitting of one stakeholder group at the expense of the other resulted in loss of stakeholder support and ultimately bankruptcy of Enron.
Somsuk and Laosirihongthong (2014) stress on the fact that strategic management is not neutral and business organisations often benefit one group stakeholders at the expense of the others. However, at downfall of Enron clearly points out that the failure of companies to benefit one group of stakeholders ultimately leads to loss of support of all the other group of stakeholders, ultimately culminating into their downfall. As the management of Enron started misrepresenting the financial results to the shareholders and started spending exorbitant amounts towards benefiting the top level executives at their expense, the company lost the support of the former. The accounting process became complex to cover these unethical practices which ultimately led to the loss of control of the company over its finances which catapulted it towards bankruptcy (theguardian.com 2018). One can also point from the example of Enron bankruptcy that endangering the benefit of one stakeholder group ultimately affects the other groups as well. For example, when the investors withdrew their support, the company met with its bankruptcy, the top executives who had benefitted earlier lost their jobs. The customers also withdrew their support due to loss of shareholder support. This inter-relatedness of stakeholder support and benefits has led to the necessity of corporate governance as an important component of the strategic management of the business organisations.
Mason and Simmons (2014) defines corporate governance as the strategic management of the operations of business organisations under the guidance of management, creditors, regulators and the stakeholders. The business organisations in the present neoliberal age incorporate the expectations of all the stakeholders which forming their business strategies. They today function as corporate citizens rather than mere agents of the investors. As per ArAs (2016) corporate social responsibility of the business organisations form an important part of their strategies and is directly taken care of by the apex management. The business organisations in the neoliberal age today involve the stakeholder groups like customers in forming their strategies. They obtain information about the views and expectations of the customers using the social media. The in turn give the customers information about their future strategies, products and offers. They take into consideration the suggestions of the customers in their product strategies. As a result, their products find ready acceptance in the market which earn the firms more revenue. They as a result are able to give more returns to the investors and in turn obtain more investments from them. Ali and Ahmad (2016) further points out that today customers are concerned about their environment and emphasis on purchasing environment friendly product. The business companies as a result are compelled to restructure their manufacturing strategies and opt for more environment friendly modes of manufacturing. These companies as a result are able to attract more customers and generate higher revenue. They as a result can give more return to their investors. The governments are able to gain more taxes from them and provide them with more facilities in return. This discussion shows that corporate governance can pave way for more ethical strategic management and higher degree of stakeholder benefit. However, it must also be pointed out that it is not feasible to nullify environmental population or exploitation of natural resources. Corporate governance can direct companies to form policies to benefit more number of stakeholders than they would have benefit by only operating towards profit generation (theguardian.com 2018). The business organisations today participate in the social development initiatives of the governments like providing basic medical facilities to the local communities. Multinational companies help in development of the local communities and in the way help in minimising the loss they do them by exploiting the natural resources. This once again points out to the non-neutral nature of the strategic management. It is not feasible for business organisations to benefit all the stakeholders to the same extent. However, they can take actions to make up the loss they do to the stakeholder group they benefit less like the local communities.
Conclusion:
It can be concluded that strategic management is not ethically neutral and business organisations benefit certain stakeholder groups at the expense of others. The business organisations are ethically and legally bound to benefit the investors and customers. This is because they get capital and revenue respectively from them. They are legally bound to pay taxes to the government because it the latter form laws and offer them licenses to operate in the market. One can conclude the companies can measure capital, revenue and taxes financially and thus operate to benefit them. However, they must also operate to benefit the society as a whole by reducing environmental pollution. The stakeholder groups must use corporate governance to regulate the strategy formation among the companies. The companies must form strategies to benefits their stakeholders to the extent possible to bring about their development and value addition.
References:
Abedi, M. 2018. Paradise Papers: Tax havens aren’t illegal, so what’s the problem?. [online] Global News. Available at: https://globalnews.ca/news/3845754/paradise-papers-tax-havens-problems/ [Accessed 16 May 2018].
Ali, A. and Ahmad, I., 2016. Environment friendly products: factors that influence the green purchase intentions of Pakistani consumers. Pakistan Journal of Engineering, Technology & Science, 2(1).
ArAs, G., 2016. A handbook of corporate governance and social responsibility. CRC Press.
Arora, P., Hora, M., Singhal, V.R. and Subramanian, R., 2017. When do Appointments of Corporate Sustainability Executives affect Shareholder Value?.
Boje, D. and Rosile, G. (2018). Enron Whodunit. 2(4)(14732866).
Bridoux, F., Stofberg, N. and Den Hartog, D., 2016. Stakeholders’ responses to csr tradeoffs: when other-orientation and trust trump material self-interest. Frontiers in psychology, 6, p.1992.
Chari, M. and Acikgoz, S., 2016. What drives emerging economy firm acquisitions in tax havens?. Journal of business research, 69(2), pp.664-671.
Clements, H.S., Baum, J. and Cumming, G.S., 2016. Money and motives: an organizational ecology perspective on private land conservation. Biological conservation, 197, pp.108-115.
Deakin, S. and Konzelmann, S.J., 2004. Learning from enron. Corporate Governance: An International Review, 12(2), pp.134-142.
GOV.UK. 2018. Rates and allowances: Corporation Tax. [online] Available at: https://www.gov.uk/government/publications/rates-and-allowances-corporation-tax/rates-and-allowances-corporation-tax [Accessed 16 May 2018].
Harvard Business Review. 2018. Breaking Down the New U.S. Corporate Tax Law. [online] Available at: https://hbr.org/ideacast/2017/12/breaking-down-the-new-u-s-corporate-tax-law [Accessed 16 May 2018].
Healy, P.M. and Palepu, K.G., 2003. The fall of Enron. Journal of economic perspectives, 17(2), pp.3-26.
Hopkins, M., 2017. Introduction. In CSR and Sustainability(pp. 30-58). Routledge.
Hopkins, N. 2018. Why we are shining a light on the world of tax havens again. [online] the Guardian. Available at: https://www.theguardian.com/news/2017/nov/05/why-shining-light-world-tax-havens-again-paradise-papers [Accessed 16 May 2018].
Huczynski, A.A., 1993. Explaining the succession of management fads. International Journal of Human Resource Management, 4(2), pp.443-463.
Labonté, R. and Stuckler, D., 2016. The rise of neoliberalism: how bad economics imperils health and what to do about it. J Epidemiol Community Health, 70(3), pp.312-318.
Mason, C. and Simmons, J., 2014. Embedding corporate social responsibility in corporate governance: A stakeholder systems approach. Journal of Business Ethics, 119(1), pp.77-86.
McLarney, C. and Dastrala, R., 2001. Socio-political structures as determinants of global success: The case of Enron Corporation. International Journal of Social Economics, 28(4), pp.349-367.
McLean, B. and Elkind, P., 2013. The smartest guys in the room: The amazing rise and scandalous fall of Enron. Penguin.
Oxfam.org. 2018. Policy & Research | Oxfam International. [online] Available at: https://www.oxfam.org/en/research [Accessed 18 May 2018].
Roberts, R. 2018. Businesses should foot the bill for the pollution they cause, says United Nations. [online] The Independent. Available at: https://www.independent.co.uk/news/uk/home-news/businesses-pollution-environmental-damage-united-nations-eric-solheim-a7965181.html [Accessed 16 May 2018].
Somsuk, N. and Laosirihongthong, T., 2014. A fuzzy AHP to prioritize enabling factors for strategic management of university business incubators: Resource-based view. Technological forecasting and social change, 85, pp.198-210.
The Financial Express. 2018. Multinationals exploiting country’s natural resources: CPI(M) leader Brinda Karat. [online] Available at: https://www.financialexpress.com/india-news/multinationals-exploiting-countrys-natural-resources-cpim/640314/ [Accessed 16 May 2018].
The Smoking Gun. 2018. Enron’s “Code Of Ethics”. [online] Available at: https://www.thesmokinggun.com/documents/crime/enrons-code-ethics [Accessed 18 May 2018].
Tran, M. 2018. Enron. [online] the Guardian. Available at: https://www.theguardian.com/business/2006/jul/06/corporatefraud.enron [Accessed 16 May 2018].
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic management and business policy. pearson.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
