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Stakeholders

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Importance of Stakeholders

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Introduction

Corporation has certain responsibilities toward its stakeholder and society at large that are required to be fulfil by them for achieving success in market. Corporate responsibilities includes business practices that are performed with ethical principle, honesty and integrity. This report is about importance of a stakeholders and role played by them within an organisation. This assignment elaborates about the theory of stakeholders as well as their identification and engagement. Further it describes about Debenhams plc's and WH Smith plc's stakeholder engagement along with their comparison. In addition to this it explains about the corporate responsibilities that a company have toward its stakeholders.

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Main Body

Stakeholder theory

Stakeholders are person who are interested in organisational affairs and being affected by its objectives, action and policies. Some example of stakeholders are employees, partners, investors, government, customers, creditor, suppliers and community from which a business take its resources (Anikina and Chekalkina, 2014). Therefore, stakeholder are the key person on which the functionality of a business depends as they affects the decision or actions taken by a company.

Dr. Edward Freeman was a professor at University of Virginia, detailed the Stakeholder Theory of business ethics and organisational management. This theory suggest that the aim of business is to create value for its stakeholders in order to achieve sustainability in market for long period of time. For achieving higher success it is very essential for executives to align the interest of stakeholders in the direction of organisational operations. For conveying this concept, Edward Freeman has improved the Stakeholder theory in year 1984 which is generally known as Strategic Management: A Stakeholder Approach (Bal and et. al., 2013). In this theory Freeman state that a manager is required to consider the need of individuals as a company would be cease to exit without the support of its stakeholders.

This image depict about the various types of stakeholders that are connected with organisation and are being affected by the decision taken by them. Under this theory, Edward identifies and model the group which consider as stakeholder of a company for recommending the methods through which company can give due regard to interest of stakeholder (Cennamo and et. al., 2012).

In theory Freeman has presented that organisations generally give more preference to the interest of shareholders. For satisfying them to get more investment for continual growth. But Edward suggested that a company must consider the interest of other stakeholder such as employees, community, supplier, environmental group etc. instead of shareholders. As without the support of these groups company will not be able to perform its operation in market (Blowfield and Murray, 2014). These stakeholders form up a corporate environment whose needs are required to be consider and satisfied for keeping company healthy and successful for a long run.

Stakeholder identification and engagement

For achieving success it is very essential for a company to identify its stakeholders and consider them while making policies, plans or decision. As they are the person who either influence or get affect by these decision that may affect the growth of business at marketplace. Identification of stakeholders and their regular engagement ensures that each information get accessed that can support in achieving success in market place (Cundy and et. al., 2013). Following are the importance of identifying right stakeholders:

  • Help in improving the quality of operations by providing vital information and ensuring that nothing would be miss which is important.
  • This will minimize the obstacles by taking support from shareholders.
  • Supporters may provide extra resources that can be used to improve the productivity of company.

Getting fail in identifying right stakeholders that benefited the company may result in over budgeting, wasting of time, failure of product in market, missing of important deadlines etc. Hence stakeholders plays an essential role in functioning and development of an organisation. As identification of stakeholders will help in determining the person that are required to be engage in business operations and decisions which support toward the growth as well as success of company. Stakeholders are determined under two categories which are as given below:

External stakeholders:- It refers to the group of people outside the business but are being affected by the operations performed by a company. These stakeholders doesn't have direct financial interest in company's profit or loss but they are interested in how an action of company affect the community. It includes government, customers, associations, trade union etc. which affect the actions taken by a company. The role of external shareholder is to voicing their opining over the operations performed by a company when they feel particular action positive or negative in relation to welfare of a person or community. When there is clash between the view of company and external stakeholder then it will create lot of issues for the functioning of a company in community (de Klerk and de Villiers, 2012). Therefore it is very essential for a company to consider external stakeholders as a partner in their operations to achieve growth in market. They must engage external stakeholders in their organisational actions in order to eliminate future uncertainty. This will help company in achieving support from external stakeholders that further contribute toward the growth of organisation.

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For instance, Debenhams is a British multinational retailers which deals in clothing, household and furnitures around 178 locations in UK, Denmark and Ireland. As company operates on a global level its function has been influenced by law or regulations formulated by government of each country (Doaei, 2012). So it is very essential for Debenhams to compel with all these rules as breaching of law may affect the existence of company. Hence, external stakeholders such as government plays an essential role in operations of company so regulations formulated by them must be consider while formulating plans and policies. Apart from this engagement of government in business operations also plays an essential role. As by taking legal approval from them company will be able to achieve security from future uncertainty that may be caused due to political situation of country.

Internal stakeholders:- It refers to the group of people who contribute toward the execution of company's activities or make decisions on behalf of it. Internal stakeholders are employees, shareholders and suppliers. Internal stakeholders have interest in the success of organisation due to financial investment. These are the group of person who work for contributing toward the success of organisation as their personal growth as well as success depends over the prosperity of company. Therefore, it is very essential for a company to consider the interest of its internal stakeholders while taking any decision within the organisation. As dissatisfaction of internal stakeholders such as employees may affect the performance of business if they don't have favourable environment to work. On the other hand disagreement among shareholders or investor of company have an huge impact over its financial strength (Dobele and et. al., 2014). Hence, company must engage their internal stakeholders in decision making policies for achieve success at marketplace. Here stakeholder engagement refers to the engaging and concerning employees while bringing any changes to current function or procedure followed by company and involving shareholders in process while taking investment decisions.

For instance WH Smith PLC is a British retailer deals in selling books, magazine, stationery, newspapers, magazine, entertainment product and confectionery. It maintain a chain of retail stores over several location where store personnel plays a crucial role in growth and success of company. As they are individuals who directly interact with customers and have the ability to influence the performance and functionality of company. So it is very essential for WH Smith to keep them satisfy with the company in order to get maximum contribution from their side. As dissatisfaction among employees may take down their moral which may negatively affect their performance (Leipziger, 2017). So in order to achieve success and maximum profit at marketplace it is very essential for company to formulate favourable policies that may foster employees to perform well. This can be done by engaging employees in decision making process by inviting suggestions from them related to what changes are required to be made for improving the working environment as well as performance of company.

Debenhams plc's Stakeholders engagement

Debenhams plc is a leading international retailer headquartered in London, UK and operates around 241 stores across 22 countries. Company deals in selling a range of household items, furniture and clothing throughout the globe (About Debenhams, 2018.). In UK, Debenhams manage around top five market share in menswear as well as womenswear and top 10 share under children wears. It is a well known brand throughout the world and its success is wholly depend over the contribution of stakeholders in its operations . As Debenhams engage its stakeholders in several managerial operations for continuously improving its performance. Following points describe about the key stakeholders of company and their engagement in organisational operations:

Customers:- It refers to an individual or group of persons that purchase good and services that are produced by a company. Debenhams consider the need and preference of its customers while making decision related to their local stores, adding new product line or brands, making the shopping easier by improving the channel etc. Customer engagement also plays a crucial role in the growth and success of company by providing their valuable feedback over their website related to product and services offered by Debenhams (Mainardes, Raposo and Alves, 2012). These feedbacks provide an information about the areas where company require improvement in order to fulfil need of its target market.

Suppliers:- These are the individuals which supplies product or other material that are required by a company in order to perform their operations. Debenhams consider their suppliers as a pillar of success as because of them company will not be able to provide its customer unique, exclusive and differentiated range of product. Therefore company offer them various benefits that may be monetary or non-monetary for encouraging them to engage in business practices ethically.

Employees:- It refers to a person who contribute toward the success of company by performing some work. Debenhams' employees engagement is very crucial as they provide quality services that support toward the growth of company. Debenhams employed around 30,000 people that works at head office, logistics and distribution centres (Missonier and Loufrani-Fedida, 2014). Company always keep its employees engage with the organisational goals and objectives that support in achieving higher success. For keeping them engage Debenhams reward and appreciate their employees for the success that have been achieve from their support. Apart from this company also provide several opportunities to its employees to enhance their skills and tools to inspire customers for their work.

Shareholders:- These are the person who invest their money in company and are interest in the success as well as financial affairs of an organisation. Shareholders plays a crucial role within the business activities of Debenhams by providing capital required to perform operations effectively. Therefore their engagement is very essential within the organisation for fulfilling the financial requirement. Commitment to product or service excellence, robust control environment, longevity and strength of company's strategy all are the factors that attract investors to get engage in business operations.

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Community:- It refers to the location or society in which company operates its business and which being affected by the actions taken by them. Support of community is very essential for Debenhams in order achieve market sustainability. Company always try to be an active and responsible member within a society in which it operates by supporting national and local charities through fundraising and volunteering. This help Debenhams in achieving support from community for the existence and promotion of company within the society by getting engage in CSR activities.

WH Smith plc's Stakeholders engagement

WH Smith plc is a British retailer which is headquartered in Swindon, UK and operates a chain of high street, airport, railway station, hospital and service station shops for selling newspapers, magazines, stationery, entertainment products and many more (Pearson, Seyfang and Jenkins, 2013). Company is expanding rapidly over global scale in around 20 countries and covers over 60 airports worldwide (WHSmith, 2018). The reason behind this growth and success is contribution as well as engagement of company's stakeholder. WH Smith also engage its stakeholders in various managerial operations in order to keep updated with their demand and get full support from them to achieve sustainability in marketplace (stakeholders, 2018). Following point describe about the stakeholders of WH Smith and their engagement with company:

Customers:- These are the most essential stakeholder for WH Smith as customers are the main sources of revenue for company as they purchase company's product or services. Therefore, engagement of customers is very essential for the growth of company. WH Smith engage its customers with business by continuously managing space in store to reflect the features of each location (Purnell and Freeman, 2012). This continually arrangement and renovation in store help in attracting customers toward the store and influencing them for keep on engage with company. These strategies further support company in achieving market recognition that support in expanding business effectively.

Suppliers:- WH Smith always try to maintain its stock as per the requirement of customers by keeping its suppliers engage various managerial activities. Company always concern with its suppliers while moving to new location this help them in maintaining their networks that support them by providing other material whenever they require. Apart from this company use product assortment method in order to determine technology or innovation to bring in business.

Employees:- These are consider as an asset of company because employees are the key person who perform their operations to achieve the organisational objective. Therefore employees engagement is equally vital for the growth of WH Smith. Company has employ more than 14000 employees throughout the world which work toward attracting and serving the customer to achieve the targets of company (Rosso, and et. al., 2014) . WH Smith always focuses on improvising their polices, practices and procedures to provide a healthy working environment to their employees for getting maximum engagement from them by keeping them satisfied.

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Shareholders:- They also plays an essential role in growth of WH Smith by providing it capital for operating its business effectively. Company always focuses on engaging with its stakeholders for operating its business effectively and for expansion purpose as well. WH Smith try to make acquisition with various other organisations for increasing the value of business and providing dividends to its shareholders for keeping them engage within company. For instance WH Smith sign a partnership agreement with Mark & Spencer to deliver joint Food to Go offering. This provide both the firm to combine their resources for operating their business operation that support in achieving success at marketplace.

Community:- WH Smith also engage in various activities that promote welfare and betterment of society as company has committed to contribute within society to bring positive impact (Toppinen and et. al., 2012). It decided a target to invest £10 in local community and charity project by 2020 (Corporate Responsibility, 2018). WH Smith also maintain a charitable trust that support employees who are engage in performing charitable activities in community. Community grant to public who are searching for funding charity or school in local community.

Conclusion

From the above report it has been concluded that stakeholders plays an essential role in the growth and success of company. As they influence and get influenced by the action taken by a company. So it is very essential for an organisation to keep their stakeholder engage and satisfy from its business practices by fulfilling their corporate responsibilities. This further support company to get support from all the stakeholder which help company in achieving sustainability at marketplace.

References

  • Anikina, I. D. and Chekalkina, A. A., 2014. Using the stakeholders theory in the development of regional financial innovation strategy: harmonization or conflict of interests?. In The first international conference on economic sciences (pp. 176-180).
  • Bal, M., and et. al., 2013. Stakeholder engagement: Achieving sustainability in the construction sector. Sustainability. 5(2). pp.695-710.
  • Blowfield, M. and Murray, A., 2014. Corporate responsibility. Oxford University Press.
  • Cennamo, C., and et. al., 2012. Socioemotional wealth and proactive stakeholder engagement: Why family–controlled firms care more about their stakeholders. Entrepreneurship Theory and Practice. 36(6). pp.1153-1173.
  • Cundy, A.B., and et. al., 2013. Developing principles of sustainability and stakeholder engagement for “gentle” remediation approaches: The European context. Journal of environmental management. 129. pp.283-291.
  • de Klerk, M. and de Villiers, C., 2012. The value relevance of corporate responsibility reporting: South African evidence. Meditari Accountancy Research. 20(1). pp.21-38.
  • Doaei, M., 2012. A dialectic model of development of stakeholders’ theory and corporate governance: From hume utilitarianism to aristotelian virtue ethics. International Journal of Financial Research. 3(2). p.96.
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