The dynamic business environment means that The Board of Directors and senior managers might be forced to change corporate objectives. When this situation happens, the impact on stakeholders of the business will be significant. Key stakeholders include owners (shareholders), managers, employees and customers.
Different stakeholder groups will be affected in different ways by these changes in business objectives – owners may earn less dividends in the short-term, managers may need to learn new skills, employees’ jobs might be lost and customers may have less choices of goods and services.
On the positive side, in the long term, owners’ returns might be safeguarded by the decisions taken today and banks will be reassured that loans given to the business earlier will be repaid from higher profits.
Example 1: Expanding the business by building a new head office.
Case Study: In 2019, lululemon, the athletic clothing company, proposed new global headquarters building in the False Creek Flats in the City of Vancouver, Canada. By 2032, the number of headquarters jobs is expected to increase to approximately 4,000 positions, as the new purpose-built headquarters is key to lululemon’s strategy of retaining and attracting global talent.
The expansion of the business will create more jobs for the employees, and more career opportunities for the workers to develop both professionally and personally. However, as the company grows bigger, the hierarchy structure will expand causing unnecessary disruptions, longer chains of command that can make business communication less efficient and more time-consuming.
Business expansion brings tangible benefits to local community not only resulting from job creation, but also from higher spending made by local residents who now have higher incomes. But, with a bigger business now operating in a local area and more employees living near the new head office more disruptions will be caused, heavy traffic jams during work hours and damage to green areas.
Usually, bigger businesses with more staff are able to provide better-quality products for customers, however buying from larger companies is becoming less personal due to inferior customer service.
Example 2: Taking over of a competing firm.
Case Study: Microsoft took over a large part of Nokia share ownership after the phone company from Finland experienced a collapse in sales of its mobile phones in 2013. Nokia strived for survival instead of growth being forced to cut several thousand jobs.
Larger businesses tend to be more secure and offer career promotion opportunities for their employees. However, rationalization may occur to avoid waste and cut costs – the same or similar jobs might be lost to avoid duplication of positions.
Local community will most likely benefit from the business expanding on the existing site as local job vacancies and incomes might increase. On another hand, if the company turns out to be too large, rationalization of offices or factories might lead to some closures and job losses.
Customers of the larger business may benefit from economies of scale, which could lead to lower prices. But after the takeover, competition is reduced which could have the opposite effect – less choices for customers resulting in higher prices in the longer-term.
Example 3: Applying IT into production methods.
Case study: A dairy products manufacturer from Iran has decided to use Six Sigma-based framework of define-measure-analyze-improve-control (DMAIC) methodology for quality improvements in yogurt production process. The company was able to continuously improve the manufacturing processes and develop the new products by using effective analytical and statistical IT tools and methods.
In order to use this new technology, untrained employees in the production department will be offered training and development opportunities, and those who are not able to learn new skills may be laid off. Also, the company may make redundant some workers who are no longer needed as machines can produce products faster than men.
The suppliers that provide IT services related to the production processes will see increased orders resulting in higher sales revenue. Due to more orders, these specialist companies will also increase hiring specialist IT workers therefore increasing employment and wealth creation in the local area.
With more efficient and flexible production methods, quality of the products will improve and companies will be able to offer more product variety to customers. However, technical problems and breakdowns may cause supply delays that will result in customer dissatisfaction.
