CAIE A-Level Business 1.5.2 Stakeholder influence

Analyse one way in which conflict between stakeholders may affect a business.

Indicative content

Responses may include:

NOTE: Stakeholder conflict may be between different stakeholder groups e.g. managers and shareholders, or between members of the same stakeholder group e.g. employee vs employee.

AO1 Knowledge and understanding

Conflict may affect a business in the following ways:

- Demotivated workers

- Reduced profit

- Slow decisions

- Industrial action

- Damage to reputation

- Conflicting objectives

- Conflict between different stakeholders may lead to industrial action. (1 mark □ × 1)

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AO2 Application

- Different stakeholders in a business may have different expectations - resulting in conflict - management want to invest in more capital equipment - workers fear for their jobs.

- Different stakeholders may require a business to operate in different ways - employees will focus on wages/salaries and working conditions while directors may favour higher dividends to attract more investment.

- Potential for conflict is real - so many stakeholders internal and external with different agendas.

- Developed application - managers may wish to automate production in search of a more efficient process of production - employees/workers may fear for their jobs and be less motivated. (2 marks ± 2 )

- Limited application - workers may strike in order to preserve their jobs. (1 mark ± 1)

AO3 Analysis

- Shareholders - will focus on bottom line - short-term profits - conflict with long term planning concerns of senior management.

- Core business purpose - some stakeholders such as government, community, overseas workers may seek to have CSR as a business objective - other stakeholders will be concerned at the cost - shareholders concerned at a drift from commercial considerations - the business of business should be business not social support.

- Conflict between employees and owners/managers - aim of management is to contain cost increases arising from increase wages/salaries - workers and unions threaten strike.

- Local community may object to business decisions - new factory - impact on the local environment.

- Customers want lower prices - impact on quality of product as viewed by the business.

- Government increases taxes on businesses/employees - business does not absorb the tax, puts up prices and customers become critical and threaten to switch to other providers.

- Developed analysis - shareholders will likely focus on the bottom line in pursuit of profits and dividends which may have consequences for long term business planning for a business that requires to build up internal financial resources for growth investment. Shareholders will likely oppose proposals for more retained earnings. (2 marks L2)

- Limited analysis - shareholders will likely only focus on the bottom line and seek profit maximisation regardless of the effect on other stakeholders. (1 mark □ L1)

Accept all valid responses.