Understanding Business Outcome 2 2012-13 Stakeholders What is a Stakeholder? Stakeholders are groups of individuals with an interest in or an influence on an organisation. The Oban Chocolate Company Discuss: Background Info Here A family run business… an Award Winning business… making luxury chocolates: Selection boxes Wedding favours Special Events eg Easter Hampers Wedding Cakes Video Here (and downloaded) Who are the Stakeholders? Who are the Stakeholders? Local Community Customers Local Council Suppliers Bank (RBS) PSYBT Scottish Government Argyll & Islands Enterprise Employees Any Others? Who are Stakeholders? Watch the Video…and discuss as a class. What are Stakeholders Interests? Using the template worksheet… note down the interests and influences that different stakeholders have. See how many you can come up with before the slide is displayed… Owners/Shareholders INTERESTS To receive a share of the profits made To see the business succeed and survive To see an increase in the value of shares For the company to operate in an ethical and socially responsible manner INFLUENCES Decide to buy/sell shares Opportunity to vote at AGM (Ltd/plc) Direct influence on decision-making (ST/PT) Employees INTERESTS Job Security Improved Salaries Career Opportunities Working Conditions INFLUENCES Level of Productivity Industrial Action Management INTERESTS Job Security Profit Maximisation Improved Salaries and Bonuses Career Opportunities Working Conditions Growth of the Business INFLUENCES Key Decisions Made Banks INTERESTS Ability to Pay Back Loans Profits/Growth – Additional Business for Bank INFLUENCES Grant/Refuse Loan Application Setting Interest Rates Terms & Conditions of Loan Customers INTERESTS Best Prices (Value for Money) High Quality Range of Products Customer Service Guarantees INFLUENCES Whether to Buy the product/service Repeat Purchasing Suppliers INTERESTS Continuing Custom Ability to Pay Invoices INFLUENCES Quality of Raw Materials Set Raw Material Price Set Credit Terms Local Community INTERESTS INFLUENCES Environment Ability to Persuade Businesses to carry out Jobs their wishes Effect on other Businesses Positive/Negative Infrastructure Publicity Pressure Groups INTERESTS Environment Jobs INFLUENCES Lobby Businesses – Positive/Negative Publicity Local/National Government INTERESTS Attracting Jobs Collection of Taxes Improvement of Economy INFLUENCES New Legislation Levels of Taxation Competing Aims of Stakeholders Different stakeholders can have competing aims eg: Senior Management may wish to maximise profit whereas customers want low prices. The Managing Director may wish to have an innovative atmosphere whereas employees are looking for job security (innovation might include the introduction of automation leading to job losses) ‘Insert Your Team’ Football Club Thinking about your favourite football club (if you have one – otherwise you can support your teacher’s favourite!)…. Create a display which clearly shows the different stakeholders and their interests and influences on the club. Possible Solution Did you think of any others? Optics plc Questions Using your knowledge gained so far answer the following questions… Extension Tasks GCSE Business: Asda Dividend GCSE Business: ReTyre GCSE Business: Powergen Times 100: Shell – Balancing Shareholder Needs Shell: Balancing Shareholder Needs identify the various stakeholders in the business. what interest and impact do they have on the business? how does Shell balance the needs of various stakeholders in order to avoid conflict? Factors Affecting Businesses Business Challenges A business challenge is anything that prevents a business from fully achieving its aim(s). Examples of business challenges: Morrison’s aim to maximise profits is challenged by Asda opening for 24-hours each day. Enrico’s fish and chip shop’s aim to maximise profit is challenged by an increase in the cost of fish and potatoes. The Roodland’s Hospital aim to provide the best possible patient care is challenged by there being a shortage of trained staff. Cancer Research UK’s aim to raise more money for charity is challenged by the difficulty of obtaining finance to open new premises. Business Challenges In pairs list as many factors which you think would affect decisions that businesses, such as the Oban Chocolate Company, might make today or prevent them from successfully achieving their aims. eg the recession. Feedback to the class and categorise your findings into 2 columns Internal and External Factors. Internal or External? A fire broke out in the stockroom. The price of visitor parking in a neighbouring council-run car park has increased by 20% The rate of inflation rose, leading to a general rise in prices. There was a rise in customer complaints due to poor customer service. There was an upward trend in online shopping. Can we insure against some factors? Apart from crime, discuss as a class some external influences that an organisation could insure against. Looking at Internal Factors first in more detail… Employees inc management Equipment Finance Shareholder Influence Information Internal Factors Employees (including Management): quality of production; skill/ability level; work rate; attitude; motivation; poor industrial relations; staff leaving the company What would be the impact of each of the above? Internal Factors Equipment Expense to install initially Faults/maintenance Finance Is there capital available for changes to be implemented? Shareholder Influences What are their demands eg dividends vs reinvestment? Information High quality and relevance to decision being made? What would be the impact of each of the above? SWOT Analysis Internal and External factors affecting a businesses success or failure can be analysed using a SWOT Diagram. Strengths (Internal) Opportunities (External) Weaknesses (Internal) Threats (External) Analyse the Crazy Music Case Study using these headings. Factors Affecting Success? Internal and External 'Crazy Music' is a local music shop which sells CDs, cassettes, videos, vinyl records and t-shirts. The business started 2 years ago when the owner, Dave, financed the business with money that he had inherited. Although he has a great knowledge of music his business sense leaves lot to be desired. Sales of CDs, cassettes and t-shirts were initially good but have steadily fallen since another record shop started up in business last year. The competitor – 'Trendy Music' – uses aggressive advertising campaigns on television and in the local newspapers. 'Crazy Music’s premises are small. The section of the shop which sells classical music is not particularly successful. 'Trendy Music' has recently invested in EPOS (Electronic Point of Sale) whereas Crazy Music is still using cash registers. It also appears that suppliers are charging 'Crazy Music' more for goods compared to its competitors. Crazy Music Solutions… Strengths - knowledge of music Weaknesses - lack of business sense, no investment in new technology cash registers, small premises, selection of classical stock which is not selling well, keeping track of stock levels. Opportunities - strong advertising using various media, eg newspapers, TV, change suppliers, invest in EPOS, remodernise or move to new premises, business course. Threats - 'Trendy Music', suppliers increasing prices, changing customer tastes. …and now The External Factors Political Economic Social Technological (Environmental) (Competitive) External Factors Political – legislation (eg environmental, employment, taxation) Economic Interest rates, exchange rates, stage of business cycle (eg recession) Social Trends and fashions (including environmental issues) Technological Improving technology (inc eg Facetime , Skype, CAD/CAM) Competition Innovative ideas from other companies What would be the impact of each of the above? External Factors - Videos Legislation Contact Lenses (5 mins 26 seconds) How does the Economy affect business? (4 mins 44 seconds) An ever-changing world (3 mins 34 seconds) CASE STUDY Class Challenge: Vue Cinemas Vue Cinemas are facing an ever increasing pace of change that could affect their profitability. In pairs, discuss the challenges that they may be facing (5 minutes) CASE STUDY EXAMPLE SOLUTIONS Class Challenge: Vue Cinemas Loss in popularity of cinema Cheap cost of DVDs to buy/rent – competition Streaming services eg LoveFilm Sky/Cable TV Changing lifestyles Trying to please everyone Pirate DVDs Government legislation To survive Technological changes Location costs in city centres. GEN 2006Q5e Summary Task: Political, Economic and Social After reading the information provided, answer Task 1 and Task 2… Task 1 – Interest Rates Task 2 – Legislation How could technological factors affect Hislop’s Coach Tours? L&L Business Level 4 – p 44/45 Research Task Using your research skills, find some recent examples of how businesses have been affected by factors outwith their control (ie external factors) Prepare a short report, and be willing to share your findings with the class. Next slides could be made into a match-it activity? Challenges that a business may face due to Government legislation LEGISLATION AND GOVERNMENT ACTION CHALLENGE The Government raises tax on leaded petrol. Garages have to decide whether to raise their prices and so pass the increase in their costs onto their customers. The Government increases direct taxes on business income. Businesses pay more Corporation Tax so profits may fall. Government spending is decreased. Businesses which supply Government departments with goods/services will suffer a decrease in sales. Challenges that a business may face due to economic issues ECONOMIC CHANGES The economy experiences a recession. CHALLENGE Sales may decrease and profits may fall. Businesses may have to consider making some workers redundant. There is a period of rapid inflation – rising Price of goods that UK businesses export prices. may increase and profits may fall. Exports become more expensive for other countries to buy. Customs duties are increased. Businesses that import goods from overseas face rising costs and therefore profits may fall. Challenges that a business may face due to economic issues ECONOMIC CHANGES CHALLENGE There is a rise in the exchange rate against all other currencies - £ is worth more. Exports may become more expensive. There is also a challenge to UK businesses that face competition from cheap imports – imports of cheap clothing affect domestic textile industry. Developments in ICT make it easier to access markets in all parts of the world. Businesses exporting need to make an effort to know the language, import regulations, safety standards, customer profile of the country to which they wish to export and need to obtain finance and insurance cover to protect their exports from damage/loss. Challenges that a business may face due to economic issues ECONOMIC CHANGES CHALLENGE There are changes in age structure of the Challenges to businesses that sell goods population (demographic changes) – fewer and services to both young people and old young people, more older people. people. There is a rise in the rate of interest charged on borrowed money. Businesses that borrow money face increased interest rate costs and thus possible falls in profit. There is likely to be less investment in new technology, buildings, equipment etc. It will be more costly to expand using borrowed money. Challenges that a business may face due to environmental and social issues ENVIRONMENTAL/SOCIAL ISSUES CHALLENGE Legislation is brought in to control the emission of toxic waste. Businesses are faced with the problem of how to dispose of toxic waste. Often this means extra costs and less profit. The Government increases tax on leaded petrol. Businesses have to pay more for petrol or purchase new vehicles which take unleaded petrol. This increases costs. Consumers are demanding sports facilities Local authorities will have to meet the to promote healthy life. demand with limited financial resources. Challenges that a business may face due to environmental and social issues ENVIRONMENTAL/SOCIAL ISSUES CHALLENGE Customers are becoming more concerned about the effect of the actions of businesses on the environment. Being environmentally friendly can add to business costs – Businesses have to persuade customers that their production process does not damage the environment. Oil firms must not damage the environment laying new pipes. Cosmetic firms must not use products which have been tested on animals. Supermarkets must use recycled materials in packaging. Challenges that a business may face due to environmental and social issues ENVIRONMENTAL/SOCIAL ISSUES CHALLENGE Living styles are changing. Working Retail businesses must decide if they women now require longer shopping hours should have a different pattern of opening hours. This could increase costs and reduce profits. Challenges facing businesses due to developments in ICT DEVELOPMENTS IN ICT CHALLENGE A business spends substantial sums of money on ICT equipment. Businesses need to ensure that the use of ICT really does improve the business’s efficiency. ICT equipment needs to be maintained and updated. Businesses require to have the latest technology. There are all costs involved in the training and re-training of staff to use the new equipment and systems. Challenges facing businesses due to developments in ICT DEVELOPMENTS IN ICT ICT offers huge opportunities for businesses and consumers: Businesses – access to global markets. CHALLENGE Developments in electronic communication and faster transportation have ‘shrunk’ the world. Now, communication with markets in all parts of the world is much easier due to ICT. This may be a challenge to UK businesses. Consumers – purchasing goods from the manufacturer rather than a retailer. Businesses overseas use ICT to compete in the UK market. Using the internet to purchase goods directly presents a challenge to the very existence of wholesalers and retailers.