Tuesday, 22 March 2011

The influences determining which responsibilities are accepted by a business and which are not.

The suggestion in this is which responsibilities which can be accepted by a business. This includes going from satisfying shareholders to pleasing the government by going against the minimum legislation for the environmental and accept a high degree of responsibility of customers and to be a good employer and who has the power to have responsibilities within a business.
The first responsibilities which a company is seen to have is to comply with minimum standards and legislation and regulation and to comply with the law. This is to make sure businesses are socially responsible to the minimum extent for the business such as working conditions, minimum wage, and other legislation such as environmental pollution and how to store food, sell food and nutrition etc. For example, in the USA, as they are a multinational company, they regulate under the FDA (Food and Drug Administration).They’re regulation is to have good employee hygiene, Food storage and Nutrition Labels under regulations. The impact on this multinational company is that if they fail to comply with these, it will result in closing down the restaurant or Hefty fines. These regulations will be similar across the world in food regulations and this will depend on the amount of money which will have to go to towards fulfilling these regulations as the fines and closing of restaurants will outweigh not abiding by the regulations which means the restaurant must do this. The fines for failing health and safety range between £100,000 and £250,000 not including legal costs. This means the company will comply with the rules as the fines are so high. The success of this will depend on the size of the fine, in relation to the size of the firm, for example, if they have a fine which is not large compared to a multinational company, then the business will be willing to pay this. Also, if the costs will be less than the equipment and lawsuits etc in relation to the fine, then they will be able to keep paying the fine as it will cost less.
Stakeholders have alot of power and interest towards a business or they would not operate in the modern day, this means that these external influences on the business have power they can have over the business. One of these external influences is Shareholders. In the power to interest matrix, they are seen to have a high interest and high power within the business. This is because they are investing their money in the company’s shares which are making them more in demand and valuable and take part in decisions. These are the people with a high interest and high power as they invest into the business. This means the business has to listen to the shareholders and CSR is harder to achieve. For example, McDonalds shareholders in 2010, decided to vote on the proposal of using cage free eggs or not. Cage free is whether they should use cage free eggs or not in restaurants. The outcome was that 77% people will be against the proposal and 18% of people abstained from voting. This means that because they are bound by law to listen to the votes of the shareholders, it makes it harder for the business to incorporate CSR as shareholders aim is to make production cheaper and maximise profit margins in order to get more dividends per share. Free range eggs costs more to produce because of the amount of land and maintaining the chickens, therefore because shareholders want more dividends, they would want to keep costs down as they would get a lower profit margin if they just maintain sales therefore they will have a lower profit margin which lowers the productivity and efficiency of the business as it costs more to be more socially responsible.  Shareholders can exert their power by either demanding as a group in a vote that an action is carried forward as it is a legal requirement, but they can also withdraw investments from the business, therefore making the share price lower as they are not in demand and makes it harder and more expensive to raise finance. The power of this will depend on the amount of influence their business decisions will have for the company, so if they make a decision which worsens brand image and customers do not like the decision, they might have the power to override them as they are consuming the product.
Another stakeholder who has alot of power in the business is the customer. They have alot of power because they can withhold purchases which can be a significant threat to a globalised company which depend on word of mouth and heavy advertising in order to sell the most products. An example of this is that some customer such as environmentalists do realise they have the power to change the company, such as not buying specific products which can help stop certain actions or products within the company. They have tried to combat it by offering promotional such as The Monopoly triple play promotion in order to keep customers satisfied such as offering different foods within the menu but make sure they can keep the speed and quality by changing them every 6 weeks. The customers would be under Category C under the stakeholder mapping power interest matrix. This means that as long as McDonald’s satisfy their customers by holding promotional etc and acknowledge customer interface such as the website “Make up your own mind”. This means that customers will not use their power as they undermine it within themselves. The matrix explains the level of interest and the amount of power they have. They will be a category C because they have a low interest but a high power. This will depend on the quality of the products they have within franchised and none franchised restaurants in order to maintain positive customer branding in order to keep the customers satisfied. Environmentalists can affect the firm by protesting and if they all came together, they would be able to make better conditions if they lower the profit margins of the business by their actions. If customers are disappointed enough, then they will have a high interest and will be able to influence shareholder decisions as they are the people which consume the product and want a product which they are going to buy. This means McDonalds would have to respond to make their customers happy in order to gain a higher profit margin, which may change shareholders opinions on the “free range” eggs issue as the benefits of this would outdo the rewards.
There are many other stakeholders who can be taken into account such as the government, community and employees. These powers can be quite strong and have a high level of interest such as the employees which makes them a strong factor in keeping them happy as they make the business more efficient, to stakeholders which are very weak such as the community or the government because the government only have the power to do something if they are failing to comply with the law and only make minimum requirements and the community neither have power or interest in order to be able to take action against a company, for example the community taking action to prevent large business to make small businesses go out of business.
In conclusion, there are many influences on choosing which responsibilities should be accepted and which should not. There will be a responsibility to for fill the legislation of the business, not necessarily to not be able to pay the fine, but because of reputation and brand image.  The other influences which will be impacted our customers, as they have a low interest and high power, they have the influence whether to buy the product or not, therefore if customers are disappointed, then their interest will increase because they will not buy the product and look for alternatives, if they are deciding they do not like the product, they will also change shareholders decisions as they are investing in a business that customers are not wanting.
The final main factor and most influencing power is the shareholders power. They have a high power and interest in the business, therefore they are trying to maximise the efficiency of the business and make it so they have the most dividends in return, which also shows the level on interest as it is in their best interest to maximise the firms and create a brand image and a product which they will like so therefore they are able to maximise their dividend. They can minimise the threats of the other stakeholder as they have influence of the business such as a business complying with legal, governmental, communities and consumers which have different strains on the business. Increasing the reputation of the brand image therefore means that it would help brand loyalty with consumers and therefore a higher profit margin can be earned.


  1. Hefty fines? Can you find evidence as to what they might be? Are the fines big enough to FORCE/encourage the firm to comply? (Ie are the costs to maintain quality in excess of the fines?)

    SHAREHOLDERS: Explain the link between use of free reange eggs and not achieving shareholder wishes. Excellant evidence though!

    Apart from the legal right to satisfy, what power do shareholders have? How can they exert that power?

    CUSTOMERS: How would 'environmentalists' affect the firm? what could that lead to?

    Explain theory in more depth! The matrix for example. what does it do?

    OTHER STAKEHOLDERS: You could identify why certain stakeholders are weaker than others? Ie the community is very weak.

    What does the respective power depend on? Impact on costs? impact on future sales?

    Overall. You have good snippets of evidence. Try and explain that in the customer section more. (Not all of us have a knowledge of mcdonalds)

  2. Fines- Why might they not be enough to force a firm to comply? (ie what does their success depend on?) Size of the fine in relation to the size of the firm? Size of the fine in relation to the fee to comply in the future?

    Shareholders - Introduce the power-interest matrix first, before outlining how this group apply? (You have actually kinda explained it in the customer section) + What does their power depend on?

    Customers - I think the they have high power but the MAJORITY have low interest. Some are more interested than others and this may increase if disappointed enough.

    Conclusion - You may want to see Heidi's as an alternative.