For based upon what we were going to write

For
part 1 of this assignment we were asked to produce a 400 to 450 word paragraph
based upon what we were going to write for this essay, the main bulk of my
initial part 1 review was based upon the differing levels of importance given
to different types of stakeholders, using the government, employees and
consumers of the product as my main examples of analysis, viewing their different
levels of importance to the companies level of production and overall profit as
their main indication of importance. Upon review it became apparent that both
my initial group of stakeholders and the way in which I was analysing their importance
was lacking in substance and by using such a small group of stakeholders and
such a narrow definition of importance I feared my coursework would become
rather one dimensional and my work would be a low-quality product. Upon further
research into the topic I started looking further into R. Edward Freeman and
his work on stakeholder theory.

Stakeholder
theory, as described by Freeman is “the creation of value between stakeholders
to create success and sustainable working relationships” (DardenMBA, 2009). Stakeholder
theory suggests that appose to simply just making profit businesses operate to
serve the needs of their stakeholders, allowing them to achieve heightened levels
of success. A research paper made by Donaldson and Preston in 1995 claims that stakeholder
theory is ever-present in business today, falling under 3 main approaches; The
descriptive approach, believing stakeholder theory is used as its essential to
the everyday running of a business, The instrumental approach, believing
stakeholder theory can bring higher efficiency and inevitably higher profits,
and the normative approach, using stakeholder theory in a more ethical sense
and using it due to believing all stakeholders are equal. From 2005 IBM
partnered with Memphis police department developing a statistical package to
help reduce crime. Through analysis with IBM’s SPSS Statistics crime in Memphis
had “dropped nearly 30% since 2006” (K.Schiller, 2011) with multiple
stakeholders like the government and the community of Memphis benefiting from
lower levels of crime while shareholders of the company benefit from an
improved public image. IBM are one of many examples proving that stakeholder
theory is an essential part of modern day business operation, with even the
financial times claiming “companies who pay attention to their stakeholders end
up being more successful financially” (D.Pitt-Watson, 2017) however treating
all stakeholders needs equally is not always done. The case tends to be that
larger a company gets the more power it tends to have over its stakeholders,
using its size to dictate situations for their own gain, however does this mean
large companies abuse their power against stakeholders?

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The
main aim for most private companies is to make profit, however depending on their
size the scale of profit they aim for tends to differ. Smaller companies in the
beginning of their existence mainly attempt to generate enough profit to
survive and to grow allowing them to continue trading and to hopefully over
time grow larger. The larger a company gets the more profit it can generate due
to its size and trading power whilst its aim of survival slowly becomes less of
a priority the larger and more established it becomes as business failure becomes
less likely of an outcome. As companies become larger their value of the
opinion of their stakeholders decrease compared to smaller companies as potential
backlash from stakeholders will affect them much less, these backlashes can
cause mass problems for small to medium sized companies still attempting to
establish themselves, potentially affecting their profits and reputation,
however as larger companies rely less on their stakeholders opinions of them
they can exploit their stakeholders, operating solely to maximise their
profits. The car manufacturer Ford announced last year that it was moving
production of the new model of Ford Focus to China in a move upsetting multiple
stakeholders in the company. Fords 2016 announcement of moving production of
the new ford focus from Detroit to Mexico was met with fierce opposition from
government and labour unions, with the presidential candidate at the time
Donald Trump scalding the company for “investing in Mexican jobs at the expense
of American ones” (B.Vlasic, 2017) however Ford
scrapped the idea of production in Mexico for china earlier last year as “Ford’s
head of global operations, Joe Hinrichs, said the company would save $1 billion”
(B.Vlasic, 2017) the company clearly damaged their stakeholders, raising unemployment
and lowering tax revenue in America, abusing their power as the second largest
car manufacturer in America in order to maximise their profits. Tata and the production
of the Nano wields another example of stakeholders being angered by business
activity. Tata have been accused of increasing pollution in India due to the
production of the Nano. By selling a car at Rs.100,000 ($2500 at time of the
cars release) Tata provided the opportunity of car ownership to a multitude of
new consumers due to its status as the cheapest car on the market. Many
environmentalist groups were angered by Tata’s Nano model with “Leading environmental
research groups in India continuing to denounce the Nano” (A.Rajagopa, 2010) as
increased cars in use will increase pollution rates in India. The production of
the Nano acted like a double-edged sword for the government of India as
increased tax revenue through the increased employment and purchasing of the
Nano was met by increased congestion and pollution in the country, leaving many
of Tata’s stakeholders conflicted on the Nano and the externalities it has
brought to modern day India.