Stakeholder Management and Interests
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Questions and Answers

What is the primary focus of strategies aimed at increasing the usage rate of existing customers?

  • Launching new products in different markets
  • Investing heavily in market research and prototyping
  • Gaining market dominance and reducing competition (correct)
  • Expanding the company's workforce for better service

Which of the following represents a characteristic of market development?

  • Carries medium risk due to potential new market challenges (correct)
  • Focus on increasing usage among current customers
  • Involves introducing new products to existing markets
  • Requires little investment in distribution networks

What might be a consequence of product development in existing markets?

  • It can significantly increase operational costs
  • It usually involves developing products that replace existing ones (correct)
  • It eliminates the need for customer feedback
  • It requires minimal market research efforts

Why could establishing a business in new markets be expensive?

<p>It requires a greater distribution network and investment (C)</p> Signup and view all the answers

Which approach is least likely to help in gaining market dominance in growing markets?

<p>Reducing customer engagement initiatives (D)</p> Signup and view all the answers

Which factor allows larger firms to reduce the marketing cost per unit?

<p>Higher production volume (D)</p> Signup and view all the answers

What is a possible disadvantage for larger firms as they expand?

<p>Increased bureaucracy (B)</p> Signup and view all the answers

What type of diseconomy of scale is related to challenges in managing large organizations?

<p>Control and coordination (A)</p> Signup and view all the answers

Why might larger firms have an advantage in borrowing money from banks?

<p>They possess more assets and collateral. (C)</p> Signup and view all the answers

What is an example of an external economy of scale?

<p>Access to skilled labor (D)</p> Signup and view all the answers

What impact does bulk buying have on larger firms?

<p>Decreases unit costs (C)</p> Signup and view all the answers

Which of the following statements is true regarding diversification in larger firms?

<p>It limits exposure to market fluctuations. (D)</p> Signup and view all the answers

What is a reason why larger firms may experience internal diseconomies of scale?

<p>Increased bureaucracy and policies (D)</p> Signup and view all the answers

What is the primary purpose of a SWOT analysis?

<p>To map a company’s internal strengths and weaknesses and external opportunities and threats (B)</p> Signup and view all the answers

Which of the following best describes the 'Cash Cow' category in the Boston Matrix?

<p>High market share and low market growth (D)</p> Signup and view all the answers

What does a balanced product portfolio help a business achieve?

<p>Reduced risks associated with having only one product (D)</p> Signup and view all the answers

What is typically considered a weakness in a SWOT analysis?

<p>Lack of resources compared to competitors (B)</p> Signup and view all the answers

Which type of growth does a 'Star' represent in the Boston Matrix?

<p>High market share and high growth (D)</p> Signup and view all the answers

In the context of SWOT analysis, what is a threat?

<p>A competitor's new product that affects market share (D)</p> Signup and view all the answers

What does it mean to diversify in business strategy?

<p>To introduce new products into new markets (A)</p> Signup and view all the answers

What aspect of a firm's internal environment does the 'Strengths' section of a SWOT analysis focus on?

<p>Internal resources and capabilities (C)</p> Signup and view all the answers

What is a primary concern for financiers regarding a business?

<p>The financial health of the organization (A)</p> Signup and view all the answers

Which of the following interests concerns trade unions the most?

<p>Employee pay and conditions (C)</p> Signup and view all the answers

What do customers generally seek from a business?

<p>Good quality and safety (D)</p> Signup and view all the answers

What is a common interest for suppliers when dealing with a business?

<p>Securing long-term contracts at a fair price (B)</p> Signup and view all the answers

Which interest is most relevant to pressure groups?

<p>Socially responsible and ethical operations (A)</p> Signup and view all the answers

What is a primary concern of competitors regarding a business?

<p>Product pricing strategies and market share (B)</p> Signup and view all the answers

Which interest is crucial for the local community concerning businesses?

<p>Provision of good quality, well-paid local jobs (C)</p> Signup and view all the answers

What is a significant regulatory interest for the government concerning businesses?

<p>Compliance with laws related to consumer protection and safety (A)</p> Signup and view all the answers

What is the financial strategy used for cash cows in a business portfolio?

<p>Harvesting profits from best-selling products (D)</p> Signup and view all the answers

Which of the following describes a home country for a multinational company?

<p>The country where the business originally started (B)</p> Signup and view all the answers

What is a potential negative impact of a multinational corporation (MNC) on a host country?

<p>Depletion of natural resources (B)</p> Signup and view all the answers

What impact do MNCs typically have on local job markets in host countries?

<p>Possibly leading to a reduction in local firms (D)</p> Signup and view all the answers

What benefit do MNCs provide that can contribute to economic growth in a host country?

<p>Contribution to GDP through produced goods and services (A)</p> Signup and view all the answers

How might MNCs influence local wages in host countries?

<p>By providing only low wage employment opportunities (C)</p> Signup and view all the answers

What is a significant drawback of MNCs in terms of labor conditions?

<p>Exploitation of labor with poor working conditions (D)</p> Signup and view all the answers

What does the term 'dogs' refer to in a business portfolio context?

<p>Underperforming products that should be divested (B)</p> Signup and view all the answers

What is a potential environmental consequence of MNCs operating overseas?

<p>Higher levels of air, water, and soil pollution (C)</p> Signup and view all the answers

How can MNCs affect the tax revenue of host countries?

<p>Generate limited tax revenue if tax breaks are provided (B)</p> Signup and view all the answers

What cultural impact can MNCs have on local populations?

<p>Loss of cultural diversity due to globalization (B)</p> Signup and view all the answers

What is a typical economic benefit for local suppliers when MNCs are present?

<p>Increased profits for local suppliers (A)</p> Signup and view all the answers

Which of the following is NOT a benefit of MNCs leading to improved current accounts?

<p>Decreased exports (D)</p> Signup and view all the answers

Flashcards

Customer interest

Customers want good quality, safety, and low prices/good value, and good customer service.

Competitor interest

Competitors are interested in their own operations like product range and pricing, finances, and benchmarking to measure their performance.

Financier interest

Financiers are interested in a company's financial health (debt repayment and profit-making abilities) and prompt debt repayment.

Trade union interest

Trade unions are interested in employee pay, conditions, and safety.

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Pressure group interest

Pressure groups want social responsibility and ethical business operations.

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Supplier interest

Suppliers want long-term contracts, fair prices, and prompt payments.

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Government interest

Governments want compliance with laws (consumer protection, employment, environmental, etc.) and regulations.

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Local community interest

Local communities want no/limited pollution, good quality, and locally provided, well-paying jobs.

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Market Development

Using existing products in new markets; often involves expanding into new geographical areas or customer segments.

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Product Development

Creating new products for an existing market; may involve modifications, extensions, or entirely new items.

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Market Penetration

Increasing the usage rate of existing products with existing customers.

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Risk of Market Development

Potential for failure due to unfamiliarity with new markets or differing consumer preferences.

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Risk of Product Development

High investment costs associated with creating new products, including research, prototyping, and testing.

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Diversification

A strategy where a larger firm has many products in varied markets. If one product fails in a specific market, the firm isn't severely impacted due to its spread across different markets.

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Managerial Economies of Scale

Larger firms can hire specialized managers, which leads to more efficient work and lower per-unit costs.

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Marketing Economies of Scale

Higher production leads to spreading advertising costs over more units, thus lowering the advertising cost per unit.

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Technical Economies of Scale

Larger firms utilize their capital equipment more efficiently due to higher output, which lowers machinery costs per unit of output.

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Financial Economies of Scale

Larger firms have more collateral, making banks perceive them as less risky, leading to lower interest rates and reduced borrowing costs.

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Diseconomies of Scale (Bureaucracy)

Increased paperwork and policies in large firms can hinder efficiency and increase average costs.

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Diseconomies of Scale (Control & Coordination)

Larger firms find it hard to effectively coordinate employees, leading to inefficiencies and increased costs.

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External Economies of Scale

When an industry grows, all firms in the industry see their average costs drop. Occurs when the industry or region gains positive factors to the business.

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SWOT analysis

A framework for analyzing a company's internal strengths and weaknesses, and external opportunities and threats, to guide strategic planning.

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Boston Matrix

A marketing tool to analyze a company's product portfolio based on market growth and market share.

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Strengths (SWOT)

Positive internal factors of a business, such as unique resources or capabilities.

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Weaknesses (SWOT)

Negative internal factors that need improvement, such as resource limitations.

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Opportunities (SWOT)

External positive factors that the company can leverage.

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Threats (SWOT)

External negative factors that could hinder the company's success.

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Balanced Product Portfolio

A collection of products that minimize risks by diversifying offerings.

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Diversification (Strategy)

Expanding into new markets or products.

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MNC Reputation Impact

A positive reputation of a multinational company (MNC) in a host country can lead to increased exports and economic benefits for that country.

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MNC Tax Revenue

MNCs can provide tax revenue to the host country through corporation tax on their profits and income tax on their employees.

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Cultural Shift

The growing presence of MNCs can lead to a convergence of habits and tastes, potentially impacting local cultural diversity.

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Internal Diseconomies of Scale

When a business grows too large, it can experience inefficiencies like increased bureaucracy, communication problems, and coordination difficulties, leading to higher costs.

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Stakeholder

Any individual or group that has an interest in a company's activities and is affected by its decisions.

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What is a cash cow?

A product or business unit that generates more cash than it consumes, allowing for reinvestment or dividend payouts.

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What is a harvesting strategy?

A strategy used for cash cows to maximize profits by reducing investments and focusing on cost reduction.

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What is a dog?

A product or business unit with low market share and low growth potential.

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What is a divesting strategy?

A strategy used for dogs to sell or phase out underperforming products.

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What is a home country?

The country where a multinational company was first established and has its headquarters.

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What is a host country?

A country where a multinational company operates other than its home country.

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What are the benefits of MNCs to the host country?

MNCs bring economic growth, job creation, lower prices, investment, knowledge transfer, and skill development.

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What are the costs of MNCs to the host country?

MNCs can lead to job displacement, resource depletion, labor exploitation, and pollution.

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Study Notes

Stakeholder Definition

  • People or groups affected by an organization's actions, having a vested interest
  • Include owners, employees, customers, suppliers, local community, government

Stakeholder Concept

  • Businesses have responsibilities to various groups, not just shareholders
  • Closely linked to Corporate Social Responsibility (CSR)

Employee Interests

  • Better pay and working conditions
  • Wider career progression opportunities
  • Improved job security and satisfaction
  • Equal opportunities

Manager Interests

  • Improved customer relations for maintaining/improving competitiveness
  • Higher salaries, bonuses, and benefits (like other employees)
  • Increased operational efficiency, productivity, and profits

Director Interests

  • Organization's return on investment (ROI) for shareholders
  • Improved share ownership and performance-related bonuses
  • Increased organization competitiveness measured by market share and growth

Shareholder Interests

  • Increased share price
  • Higher profits leading to greater dividends

Customer Interests

  • Good quality and safe products
  • Low price and good value
  • Good customer service

Competitor Interests

  • Operations (product range and pricing strategies)
  • Finances (strength, sales, market share, financial ratios)
  • Performance measurement using benchmarks

Financier Interests

  • Organization financial health for loan repayment and profit generation
  • Regular and prompt loan repayment

Trade Union Interests

  • Employee pay and conditions (e.g., safety)

Pressure Group Interests

  • Socially responsible and ethical operations by organizations
  • Ensuring compliance with laws (e.g., consumer protection)
  • Compliance with labor, environmental, equal opportunity and safety rules and taxes.

The Government Interests

  • Ensuring adherence to laws (consumer protection, employment, environmental, equal opportunity, health, and safety)
  • Collection of taxes

Local Community Interests

  • Limited/no pollution
  • Locally available, good quality, and well-paid jobs

Possible Areas of Mutual Benefit between Stakeholders

  • Improved employee pay leads to increased motivation, loyalty, and productivity.
  • Business expansion can result in more profits for shareholders, more jobs for the local community, more taxes for the government, and more orders for suppliers.
  • Customer value for money and quality can positively impact shareholder returns.
  • Efficiency increases due to new technologies can lead to profits and reduced costs.

Economies of Scale (E of S)

  • Factors reducing unit costs as production increases
  • Types: Managerial, Marketing, Technical, Bulk Buying, Financial, Diversification

Internal Diseconomies of Scale

  • Factors increasing unit costs as production increases past a certain point
  • Types: Bureaucracy, Control and Coordination

External Economies of Scale

  • Firm's average cost decreases as the industry grows. The benefits are spread across all firms in the industry
  • Types: Skilled labor, Infrastructure, Ancillary firms

External Diseconomies of Scale

  • Firm's average cost increases as the industry grows.
  • Types: Congestion, Increased competition

Business Growth

  • Ways to grow a business: Internal growth (organic), and External growth (mergers/acquisitions)

External Growth

  • Types: Mergers & Acquisitions (M&As), Takeovers, Joint Ventures, Strategic Alliances

Ansoff's Matrix

  • Decision-making tool for product and market growth strategies (Market penetration, Market development, Product development, Diversification)

Product Portfolio Strategy

  • Strategies for different product stages in the product life cycle (Stars, Cash cows, Question marks, Dogs)

Globalisation

  • Integration of local markets into a single global market
  • Multinational Corporations (MNCs) operate in multiple countries

MNC Benefits to Host Country

  • Reduced unemployment
  • Infrastructure investment from foreign direct investment
  • Increase in economic growth
  • Transfer of skills and knowledge
  • Increased exports

MNC Costs to Host Country

  • Potential loss of local jobs
  • Resource depletion
  • Exploitation of labor
  • Increased pollution
  • Reduced tax revenue
  • Cultural clashes

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