There is always a clear shift of attitudes in all production units and firms. As the standards of living rise above subsistence level and people get a better education, their needs change. They become less interested in material possession and instead aspire to improve the quality of their life, job satisfaction, security, and cleaner environments.
It is against this backdrop that there are so many concerned interest groups monitoring the activities of every issue geared towards achieving quality. Consequently, business firms cannot confine their traditional economic role of aiming for profit within existing legal frameworks. There is now a broadening of the original economic motive to include a wider range of responsibilities. These can be solely illustrated by stakeholders.
The stakeholders view the company as owing a responsibility to; employees, customers, the community the local, and the central government. Consequently, the firm does not work in a vacuum. If they are to ensure their long-term survival business organizations need to respond to growing public criticism of their activities and be seen to meet the changing needs of society.
Therefore this paper is going to focus on the social responsibilities of a sugar company its management and its stakeholders. The paper will then conclude by giving an insight on how to carry out proper management of a firm to arrive at long-term enrichment.
Epua sugar millers
Epua sugar millers of Diamond Sugar Company have been facing difficulties meeting the ever-increasing demand for sugar. The capacity of production was not sufficient to cope with the amount of raw material supplied to the branch by the local farmers. This situation has caused untold suffering to both the employees and the management. The same has affected the local farmers who have to do with delays in the harvesting of their cane. Consequently, the competitors have taken advantage of the situation at the mill. They thus have a competitive edge over Epua.
The mill has also not been given time for maintenance thus resulting in inefficiency and loss of revenue. Again the employees have been reduced to cope with the situation. To break even, the management of Epua sugar mill plans to borrow 1.5m dollars from a local bank to purchase a diffuser machine and a further 400, 000 from the parent company for installation work. It is expected that the plan will increase production up to 50%. This plan will however increase emissions to river Yale by about 10% which will affect local farmers who depend on it for watering their farms.
Stakeholders are divided into two, namely external and internal. Internal stakeholders are workers of the firm or they derive benefits directly from the firm. They are also liable to losses due to bad performance. An example of this is like the employees who obtain jobs and salaries, creditors concerned with the survival of the company, shareholders/owners/stockholders that get profits/losses.
External stakeholders on the other hand are involved or deal with the company but not employed or affected by the result of the business. They include; customers interested in prices, quality and safety of goods, the local authority concerned in taxes and rates, and so on.
Stakeholders and stakes.
|1.||Parent company||Profits||11.||Local community||Their welfare roads, health facilities, et cetera. job losses|
|2.||Employees||Job security |
|3.||Shareholders||Receive profits from the company||13.||Potential employees||Creation of jobs|
|5.||Trade unions||Minimum wage||15.||Local authorities||Levies (taxes & rates)|
|6.||Federation of employers||Interest of employers||16.||Media||Negative publicity|
|7.||Government||Employment, health, and safety||17.||Town planners||Health/safety|
|8.||Customers||Quality products, fair and affordable prices||18.||Local farmers||Markets and revenues|
|9.||Suppliers||Survival of the firm||19.||National Environment Management Authority||Pollution penalties|
|10.||Creditors||Profitability of the firm i.e. liquidity and financial health of the organization||20.||Suppliers||Revenues|
Stakeholders with opposing interests/stakes and how they conflict
The management of this firm and the competitors have conflicting interests. The management is looking forward to increasing its production considerably. The management plans to increase production by 50% and to improve advertisement appeal to capture a wider market share. The competitors are also targeting this market and therefore are seeing Epua’s plan as a ploy to eat into their market share.
Consequently, the management is at loggerheads with their customers who feel that the quality of the products may be compromised. They also feel the price of the products might be increased to cover the extra production cost together with the advertisement. On the other hand, the competitors want to protect their market share as much as possible and that is why they are wary of these new developments.
The management and cane farmers have related motives that are a wider market scope and increased revenue. They again view this plan as a blessing because their cane will be harvested on time. On their part employees and the central government have similar motives since increased production leads to the creation of more jobs. They will benefit more if they join hands to oppose any plan that does not yield higher wages by lobbying a labor union for better pay and working conditions.
The company should go ahead with this new plan to acquire machinery that will increase production. The new equipment would increase efficiency and productivity which in turn will increase the company’s profit in the long run. To succeed to this end the company will bring on board a new shareholder (the bank). Owners should be made aware of this fact and its impact like reduced profits in the short term.
The company will face numerous protests from the employees and their representatives. They will press for better pay because of the company’s increased activities. Increased activities in the company mean that employees will carry out extra duties without proper compensation. The trade union will therefore advocate for increased wages for the employees. Another aspect that might be advocated for is proper working conditions for the workers in the company.
On the other hand, the management will have to force employees’ representatives to compromise. The same will apply to the local community and the workers who will be made to understand the importance of this plan. They will be told the plan may appear less cost-effective in its initial stages but it will be beneficial in the long run.
All competitors worry more when the activity of their competitor eats into their market. Consequently, they strive to keep at par not knowing how much the other competitor has invested i.e. in labor, technology, and capital. These competitors find themselves operating at a loss because they cannot cope with the competition.
The best option is to find out the competitor’s opportunity and devise a cheaper way of operation. Another option is to cooperate and merge to operate as one. This plan will reduce production costs in the long run and customers will turn to this company’s products. They will in the long run produce at a lower opportunity cost.
The local communities are interested in the survival of this firm because it offers jobs to the local people. The increase in the firm’s efficiency compromises job creation for the locals. As a result, the company needs to educate them on how increased efficiency brings about higher productivity and survival of the firm. This incentive will cut down on production costs and help the firm reduce prices on its products. Therefore the local community needs to cooperate and allow this plan to take root. Degradation of the environment and pollution might be realized due to increased emissions but the benefits outweigh the costs (Yin, 73).
The central government feels compromised when no jobs are created for its people. This plan of increasing efficiency by putting better technology in use reduces job opportunities. Despite this, the government still benefits in the long run given the fact that there will be increased productivity for the firm which will, in turn, remit more taxes. It is therefore evident that such enrichment cannot go unnoticed.
The main objective of business organizations is to make profits. This is a self-interest deemed beneficial as competition ensures that firms produce goods and services that people want to buy (Bramson, 24). On the other hand, any overcharging would lead to sales going to competitors. When workers get poor wages they may also opt to go to competitors who pay higher wages. It is against this principle that companies produce at competitive prices to capture a large market share.
Today the industrial structure is much different and the value system upon which it was originally based has changed. Business units are increasing in size to secure economies of scale.
The increase in market concentration has brought about the insulation of large concerns from competitive pressure. Therefore as shown in this paper such firms have resources to overcome temporary setbacks and have the power to influence the allocation of resources. They can also diversify and institute internal transfer pricing and more importantly secure more financial security. The firms may then be required to adopt a long-term planning approach rather than day-to-day tactical strategies.
It is therefore recommended that smaller firms that are not able to cope with these pressures cooperate and trade. They will then produce at better opportunity costs and will be able to provide goods and services for the community cost-effectively. They will then have changed attitudes towards labor, local government, local communities, customers, suppliers, employers, and so on. Again this is because they have social responsibilities towards these groups.
Throughout history, the management of firms has been influenced by social concepts. Currently, there is a shift of focus from profit-making to co-operate responsibility and values e.g. marketing policies that avoid the manufacturing of products detrimental to health (Kamau, 128). Other policies in this category are like the policies that entail social costs like the pollution of the environment. This is because consumers have the right to be protected.
Bramson, David. Healthy competition in business organizations. International Journal of Business 21.1 (1998): 14-28. Print.
Kamau, Samuel. Management of firms. Kampala: East African Publishers, 2009. Print.
Yin, Kingsly. Case study research: design and methods. New York: Sage Publications, 2006. Print.