Analyse one way in which conflict between stakeholders may affect a business.
CAMBRIDGE
A level and AS level
Year Examined
May/June 2023
Topic
Stakeholders
👑Complete Model Essay
Conflict Between Stakeholders: Impact on Business
Stakeholders, with their diverse interests and expectations, play a crucial role in the success of any business. However, the inherent differences in their objectives often lead to conflicts that can significantly impact the company's operation and profitability. This essay will analyze how conflict between stakeholders, particularly between management and employees, can negatively affect a business.
Demotivation and Reduced Productivity
A primary consequence of conflict between management and employees is the creation of a hostile and demotivating work environment. When employees feel undervalued or ignored, their morale and productivity plummet. For instance, if management consistently prioritizes profit maximization over employee well-being, perhaps by implementing stringent performance targets or cutting benefits, employees may feel exploited and lose their motivation to work effectively. This leads to decreased productivity, lower quality output, and potentially even higher employee turnover.
Increased Costs and Industrial Action
Conflict often escalates, leading to costly industrial action. Strikes, go-slows, and other forms of industrial action severely disrupt business operations, leading to production halts, delayed deliveries, and a loss of revenue. Additionally, resolving such disputes often involves lengthy negotiations, legal battles, and settlements, further escalating costs for the business. A prime example is the 2018 Ryanair cabin crew strike, which forced the airline to cancel hundreds of flights, costing the company millions in lost revenue and compensation payouts.
Damage to Reputation and Brand Image
Public disputes between stakeholders, especially between management and employees, can significantly damage a company's reputation. Negative media coverage, social media backlash, and boycotts by ethical consumers can erode public trust and damage the brand image. For example, the fast-fashion retailer Boohoo faced severe criticism and a decline in sales after reports emerged of exploitative labor practices in their supply chain.
Long-Term Impact on Growth and Sustainability
The impact of stakeholder conflict extends beyond immediate financial losses. A company embroiled in continuous internal disputes struggles to attract and retain talent. Talented individuals are less likely to join a company known for its poor employee relations or unethical practices. Moreover, investors and financial institutions may hesitate to invest in businesses perceived as unstable or unethical, further hindering growth and sustainability.
Conclusion
In conclusion, conflict between stakeholders, particularly between management and employees, can have a devastating impact on a business. It leads to demotivation, reduced productivity, increased costs, and damage to the company's reputation. Ultimately, such conflicts jeopardize the long-term growth and sustainability of the business. Therefore, it is crucial for businesses to prioritize open communication, transparency, and fair treatment of all stakeholders to foster a harmonious and productive working environment.
Analyse one way in which conflict between stakeholders may affect a business.
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A-Level Business Studies Essay Guide: Analysing Stakeholder Conflict
This guide will help you write a successful A-Level Business Studies essay analyzing how conflict between stakeholders can affect a business. Remember to use the provided structure to help you organize your work and achieve a high mark.
Understanding Stakeholder Conflict
Firstly, define stakeholder conflict and explain how it can arise in various ways. Here are some key points to consider:
- What are stakeholders? Define stakeholder groups (e.g., employees, shareholders, customers, suppliers, government, local community) and their interests.
- Different expectations and objectives: Explain how stakeholders often have differing priorities. For example, shareholders may prioritize profit maximization, while employees may focus on job security and fair wages.
- Internal vs. external conflict: Highlight conflict within stakeholder groups (e.g., employees vs. management) and conflict between different groups (e.g., shareholders vs. customers).
Analyzing the Impact of Stakeholder Conflict
Next, explore the specific ways in which stakeholder conflict can affect a business. Use the following points as a framework:
1. Demotivation and Reduced Productivity
Explain how conflict between employees and management can lead to:
- Low morale: Conflict erodes trust, leading to decreased motivation and effort from employees.
- Absenteeism and turnover: Employees may be absent more frequently or seek employment elsewhere due to dissatisfaction.
- Reduced productivity: A demoralized workforce is less productive, impacting output and profitability.
2. Profit Reduction
Analyze how stakeholder conflict can negatively impact a business's financial performance:
- Higher costs: Conflict can result in increased labor costs (e.g., through strikes or wage demands) or higher costs associated with resolving disputes.
- Lost sales: Negative publicity or disruptions caused by conflict can lead to reduced customer confidence and sales.
- Reduced investment: Potential investors may be hesitant to invest in a business experiencing ongoing stakeholder conflict.
3. Slow Decision-Making
Explain how conflict can hinder the decision-making process:
- Stalemates and delays: Conflict often results in disagreements and indecision, delaying important business decisions.
- Compromised solutions: To appease conflicting stakeholders, a business may opt for less-than-optimal solutions, impacting long-term growth.
- Missed opportunities: Delays in decision-making can result in the business missing out on crucial market opportunities.
4. Industrial Action
Discuss how conflict, particularly between employees and management, can lead to:
- Strikes and work stoppages: Employees may engage in industrial action to pressure the business to address their concerns.
- Production disruptions: Strikes can halt production, impacting supply chains and customer satisfaction.
- Financial losses: Lost production and sales during strikes result in significant financial losses for the business.
5. Damage to Reputation
Explain how conflict can negatively affect a business's image and reputation:
- Negative media attention: Public disputes and industrial action can attract negative media coverage, damaging brand perception.
- Loss of customer trust: Customers may lose confidence in a business perceived as being embroiled in conflict.
- Difficulty attracting talent: Potential employees may be hesitant to join a company known for its internal conflicts.
6. Conflicting Objectives
Analyze how different stakeholders' objectives can create conflict:
- Shareholders vs. employees: Shareholders prioritize profit maximization, which may clash with employees' desire for higher wages or job security.
- Customers vs. environmental groups: Customers may demand low prices, while environmental groups may advocate for sustainable practices that increase costs.
- Government vs. local community: Government regulations may impact a business's operations, while the local community may oppose expansion plans due to environmental concerns.
Applying Your Analysis to a Specific Example
Choose a real-world business case study to illustrate your points. Examples include:
- Tesla and Elon Musk: Conflicts between Musk's visions and shareholder expectations, employee unrest, and environmental concerns.
- Amazon and its workforce: Disputes over working conditions, unionization attempts, and pressure on warehouse workers.
- Facebook and privacy concerns: Conflicts between the company's data collection practices and user privacy concerns.
- Apple and its suppliers: Ethical concerns regarding labor practices and environmental impact in supplier factories.
Conclusion
Summarize the key points of your analysis. Emphasize the importance of effective stakeholder management in mitigating conflict and ensuring long-term business success. Consider these points in your conclusion:
- Importance of transparency and communication: Open communication and transparency are crucial to understanding and addressing stakeholder concerns.
- Role of ethical leadership: Businesses need ethical leaders who prioritize the interests of all stakeholders and build trust.
- Need for compromise and collaboration: Stakeholders need to be willing to compromise and collaborate to find mutually beneficial solutions.
- Long-term benefits of effective stakeholder management: By effectively managing stakeholder relations, businesses can foster positive relationships, build trust, and achieve long-term sustainability.
Tips for Success
- Strong structure: Use clear headings and subheadings to organize your essay.
- Relevant examples: Use real-world examples to illustrate your points.
- Critical analysis: Go beyond simply stating facts; analyze the causes and consequences of stakeholder conflict.
- Balanced perspective: Acknowledge the perspectives of all stakeholders involved.
- Clear and concise language: Use precise language and avoid jargon.
- Proofread carefully: Ensure your essay is free of grammatical errors.
By following this guide, you can write a comprehensive and well-structured A-Level Business Studies essay that effectively analyzes the impact of stakeholder conflict on a business.
Extracts from Mark Schemes
Analyse one way in which conflict between stakeholders may affect a business.
NOTE: Stakeholder conflict may be between different stakeholder groups e.g. managers and shareholders, or between members of the same stakeholder group e.g. employee vs employee.
AO1 Knowledge and understanding
Conflict may affect a business in the following ways:
- Demotivated workers
- Reduced profit
- Slow decisions
- Industrial action
- Damage to reputation
- Conflicting objectives
- Conflict between different stakeholders may lead to industrial action.
AO2 Application
Different stakeholders in a business may have different expectations – resulting in conflict – management want to invest in more capital equipment – workers fear for their jobs.
Different stakeholders may require a business to operate in different ways – employees will focus on wages/salaries and working conditions while directors may favour higher dividends to attract more investment.
Potential for conflict is real – so many stakeholders internal and external with different agendas.
Developed application – managers may wish to automate production in search of a more efficient process of production – employees/workers may fear for their jobs and be less motivated.
Limited application – workers may strike in order to preserve their jobs.
AO3 Analysis
Shareholders – will focus on bottom line – short-term profits – conflict with long term planning concerns of senior management.
Core business purpose – some stakeholders such as government, community, overseas workers may seek to have CSR as a business objective – other stakeholders will be concerned at the cost – shareholders concerned at a drift from commercial considerations – the business of business should be business not social support.
Conflict between employees and owners/managers – aim of management is to contain cost increases arising from increase wages/salaries – workers and unions threaten strike.
Local community may object to business decisions – new factory – impact on the local environment.
Customers want lower prices – impact on quality of product as viewed by the business.
Government increases taxes on businesses/employees – business does not absorb the tax, puts up prices and customers become critical and threaten to switch to other providers.
Developed analysis – shareholders will likely focus on the bottom line in pursuit of profits and dividends which may have consequences for long term business planning for a business that requires to build up internal financial resources for growth investment. Shareholders will likely oppose proposals for more retained earnings.