Worksheet 1

Key Terms

Chapter 1.4 - Stakeholders

 What are stakeholders?

 What are internal stakeholders?
 What are external stakeholders?
 Explain what are the Power-interest model and its strategies.

Chapter 1.5 – External environment

 What is STEEPLE analysis?

 When we should use STEEPLE analysis?
 Explain each factor of the analysis?
 For each factor explained give two examples

Exercises

PART A

Chapter 1.4 – Stakeholders

1. Stake & Chips

The day of the relocation was hectic. Staff were carrying boxes to the various vans hired to move the company
to its new offices 50 miles away.

The move had been agreed six months ago. Paragon, a pottery manufacturer, under pressure from
shareholders to cut costs and improve profit margins, had been faced with some tough decisions. Competition
in the market was fierce; most businesses in the industry had already moved production facilities to South East
Asia and now had significant cost advantages over Paragon. Paragon’s Managing Director had avoided the
inevitable for as long as possible, ‘we have a duty to our staff, the local community and to the UK to remain
here’, she argued 12 months ago. But, under increasing pressure from shareholders, the company moved
production to Vietnam and the factory and offices were sold to a housing developer.

The majority of staff were made redundant; a small number would manage the company from offices 50 miles
from the original factory. The local newsagent and shop owner, who had supplied the staff with refreshments
for over 20 years, although obviously upset by the move came out to wish everybody well.

a. Identify as many external stakeholders from this case study as possible.

b. Identify two internal stakeholders.
c. Using the information in this case study, highlight why managers’ responsibilities to different stakeholders are
often in conflict.
2. Your school

a. Identify four internal and four external stakeholders for your school and outline two possible areas of mutual
benefit and two possible areas of mutual conflict.
b. Applying the power-interest model, carry out a stakeholder analysis to determine the importance of these
stakeholders
c. Examine how poor performance your school might impact on its stakeholders

3. Skoda

Founded in 1895, Skoda Auto is one of the oldest automobile manufacturers in the world. Inearly2007,the
Czech company, which became part of Volkswagen Group in2000,entered China as part of its growth strategy.
However, in the same year, its workforce in Europe went on strike over concerns regarding pay and benefits. It
was reported that industrial action cost Skoda, the country's largest exporter, 60 million crowns ($2.9 million)
per day in lost output. Nevertheless, China became Skoda's main market, and by2013 the company had
produced its one millionth car in China.

a. Identify two external stakeholder groups of Skoda Auto.

b. With reference to the case study, explain one source of conflict between Skoda Auto's various stakeholders.
c. Discuss how the conflict outlined in your answer above could have been minimized.

Chapter 1.5 – External environment

4. Comment on how the following demographic changes present both opportunities and threats to businesses:
a. A growing number of self-employed people.
b. An increasing number of single-parent families
c. Adults choosing to have fewer children and at a later stage in their lives
d. An increasing number of people graduate with university degrees.

5. AIR POLLUTION IN INDIA

In 2014 India ranked 174th out of 178 countries on air pollution in the Yale Environmental Performance Index.
India’s Central Pollution Control Board said that in 180 cities in 2010, particulate matter in the air was six times
higher than World Health Organization standards. Car sales in India have boomed, and diesel is the most
common fuel. Monitoring pollution in India is not well coordinated, and many industries continue to defy the
existing environmental laws as they know that even if they are caught the prosecution process will take a very
long time.

India’s Environmental Pollution Control authority has reported that the level of air pollution is the cause of
more than 3000 child deaths each year in Delhi alone. The report recommends a number of measures
including:

 30% tax on the sale of diesel vehicles

 higher automobile registration and parking fees
  Supreme Court should use its authority to order compliance with pollution laws
 India’s national air quality standards must be made legally binding

a. Explain two reasons for India’s growing air pollution problems.

b. Discuss how the measures proposed by the Environmental Pollution Control Authority could influence the
objectives and strategies of multinational businesses operating in India.

6. Nokia

Nokia was once the pride of Europe having been the market leader in the mobile phones industry from 1998
to 2008, enjoying up to 49.4% market share. In 2005, the Finnish company sold its one billionth mobile phone.
By 2007, its market capitalization was a staggering $150 billion, making it the fifth most valuable brand in the
world. However, the huge popularity for Apple and Samsung smartphones eventually forced Nokia to be sold
to Microsoft for 'Just' 5.4 billion euros ($7.3billion) in November 2013. A staggering 99.5% of Nokia's 3900
shareholders voted in favor of the deal after seeing its share price drop by 93% and its market share
continually decline to 3%.The company's 32 000 employees were transferred to Microsoft in early 2014.

a. Use the case study to distinguish between shareholders and stakeholders.

b. Examine how different stakeholder groups are likely to be affected by Microsoft's takeover of Nokia.

PART B

7. JLP – ARE ALL STAKEHOLDERS SATISFIED?

The success of the John Lewis Partnership (owning John Lewis department stores and Waitrose supermarkets)
shows that giving all employees a substantial stake in the performance of a business and opportunities to
influence management decisions has advantages. The 2013 annual employee profit share bonus was 17% of
their salaries – up from the 14% of the previous year. This annual bonus is one reason why JLP has the lowest
rate of labour turnover of any major UK business.

According to Charlie Mayfield, the chairman of the Partnership, the ‘we’re all in this together’ spirit is central
to the modern growth of John Lewis and Waitrose. Sales at JLP outlets are rising at a faster rate than for other
competing retailers, showing that customers increasingly appreciate the ‘never knowingly undersold’ promise
of the business and its huge range of quality, value for money products. Local communities and central
government benefit from the huge investment programme of JLP – it spent £200 million on new stores and
refitting existing ones even when the UK economy was in recession. Suppliers are competing strongly with
each other to make sure that their products are displayed in the JLP stores as it gives brands additional
prestige. JLP claims that all major strategies consider ethical and CSR issues as well as their potential
profitability.

Perhaps only JLP’s competitors might feel aggrieved at the success of this business. But some business analysts
claim that even rival retailers can benefit from JLP’s growth – for example, by copying some of its practices and
business models. The performance of the Sports Direct stores has been transformed since the business
introduced a generous employee share ownership scheme.

a. Explain how two internal stakeholder groups and two external stakeholder groups can benefit from rising sales
and profits at JLP.
b. Discuss whether stakeholders can gain mutual benefits in all business organizations.

8. MAJOR PALM OIL COMPANIES ACCUSED OF BREAKING ETHICAL PROMISES

Palm oil is one of the world’s most versatile raw materials. It is estimated that it is an ingredient in 50% of all
products sold by a typical supermarket. It is used in a wide range of products from margarine, cereals, crisps,
sweets and baked goods to soaps, washing powders and cosmetics but it is often listed as just ‘vegetable oil’.
So, its production benefits customers of these products. In addition, an estimated 1.5 million small farmers
grow the crop in Indonesia, along with about 500 000 people directly employed in the sector in Malaysia, plus
those connected with related industries. The governments of these countries have encouraged production as
it is a major export for these economies.

However, the industry has a poor image. Palm oil production has led to deforestation with a resulting negative
impact on climate change. There has been substantial loss of wildlife habitat, even endangering the orangutan.
Palm oil companies have been accused by community groups of driving native people off their land which is
then used for palm oil production. Socially responsible businesses, such as KL Kepong in Malaysia, have agreed
to an ethical code which aims to make palm oil production ‘sustainable’ with fair treatment for all local
populations affected by it. However, many companies have been accused of breaking the code as there is no
strong world body to stop them behaving irresponsibly. In any case, food manufacturers want to maximize
profits and final consumers want the cheapest raw materials possible.

Define the following terms highlighted in the article:

a. Socially responsible business

b. Maximize profits.
c. Explain the interests of any two of KL Kepong’s stakeholder groups.
d. Analyze the impact on these two stakeholder groups of a decision by KL Kepong to close one of its palm oil
plantations.
e. Discuss why an expansion of the palm oil industry in either Malaysia or Indonesia is likely to cause conflicting
views between stakeholder groups.

9. Royal Dutch Shell

Royal Dutch Shell (or Shell for short) is Europe's largest energy and oil company. It was formed by the merger
of Holland's Royal Dutch and Britain's ShellIn1907.The BBC reported in early 2007that the Anglo-Dutch
company earns £1.5m ($2.5 m)per hour! This staggering figure obviously draws the attention of Shell's internal
stakeholders. However, being a global energy and oil company also means that Shell's activities are carefully
scrutinized by environmental and human rights groups, such as Greenpeace. In 2013, Shell topped the Fortune
Global 500 list of the world's largest companies, with revenues in excess of $467 billion (or 84% of the
Netherland's GDP).

a. Use an example to describe what is meant by internal stakeholders.

b. To what extent should a global company such as Shell allow environmental and human rights groups to exert
influence on their decision-making?
 Chapter 1.5 – External Environment

10. MORE CHIPS PLEASE?

The major European supermarkets have been putting IT at the front of their drive for lower costs, improved
customer service and more information about their customers. Applications include barcodes, checkout
scanners, automatic product reordering systems, automated stock control programs, robot-controlled
transport systems in warehouses, chip and pin machines for payment, loyalty cards that record each individual
shopper’s purchases and internet shopping for customers.
Some of these systems have been controversial. For example, centralized ordering and delivery of products
reduced the independence and control of individual store managers. The rapid growth of internet shopping
left some companies with a shortage of stock and delivery vehicles, which led to poor service. Some smaller
suppliers who have been unable to cope with the cost of introducing compatible IT systems to take orders
from the huge retailers have been dropped. The latest development is causing further controversy. RFID or
radio frequency ID tagging involves putting a small chip and coiled antenna, at the initial point of production,
into every item sold through the supermarkets. Unlike barcodes that are manually scanned, the RFID simply
broadcasts its presence and data, such as sell-by date, to electronic receivers or readers. German supermarket
chain Metro already uses RFID and claims that food can be easily traced back to the farm where it is produced,
queues at tills no longer exist as customers’ bills are calculated instantly as they pass by a receiver and all
products are tracked at each stage of the supply chain – ‘We know where everything is!’ Consumer groups are
concerned that shoppers will be tracked and traceable too – not just the goods they have bought. Is this an
invasion of privacy? Unions are opposed to it as it could lead to many redundancies due to its non-manual
operation. Some supermarket managers fear yet another IT initiative that will mean even more central control.
They fear breakdowns in the system and lack of training.

a. Define the term ‘information technology’.

b. Outline how the increased use of IT by supermarkets is likely to benefit their customers.
c. Analyze the likely benefits of supermarkets using RFID to trace and collect data from every product they sell.
d. Discuss the advantages and disadvantages of the wider use of IT in supermarket retailing on individual
supermarket businesses.

11. CHINA TO TAKE ACTION AGAINST INFLATION

The Chinese government is becoming increasingly concerned about higher rates of inflation. Rising oil and
petrol prices have increased costs to industry and firms are being forced to raise their prices to cover these
higher costs. In addition, rising demand for food from a wealthier population, together with supply problems
resulting in excess demand, have led to the price of pork rising by 63% and fresh vegetable prices by 46%.

The People’s Bank of China increased interest rates by a further 0.27%. This was the third increase in less than
a year. A spokesman from Goldman Sachs, the investment bank, reported that the increase shows that the
central bank is now much more prepared to use interest rates to manage the economy and tighten monetary
policy at the first signs of the booming economy overheating. Partly as a result of these increases in interest
rates, China’s GDP increased by 7.7% in 2013, and some analysts believe this should be more sustainable than
the much higher rates experienced in 2007–08. However, Chinese leaders still face conflicting pressures in
balancing the top priority of maintaining high speed economic growth to create millions of new jobs each year,
with managing growing environmental problems and rising cost-push pressures causing higher inflation.

a. Define the term ‘inflation’.

b. Explain two effects rising inflation in China might have on businesses in China.
c. Analyze how an increase in Chinese interest rates might have an impact on demand for a firm’s products and
on a firm’s costs.
d. Evaluate the consequences of ‘high-speed’ economic growth in China on businesses in China.

12. CONSUMER RIGHTS IN YOUR COUNTRY

In Malaysia, the 1999 Consumer Protection Act is an important law protecting the interests of consumers. It
has 14 main sections which include outlawing all misleading and deceptive conduct by firms, outlawing false
advertising claims, providing guarantees in respect of supply of goods and strict liability for defective and
potentially dangerous products.

In India, the 1986 Consumer Protection Act provides for the regulation of all trade and competitive practices,
creates national- and state-level consumer protection councils and lists unfair and uncompetitive trade
practices.

a. Why do you think governments, as in Malaysia and India, pass laws to protect consumer rights?
b. Do you think that such laws help or damage business interests?
c. Research task: Find out the main consumer protection laws in your country. Give examples of how firms try to
break these laws. Are the laws strict enough? If not, why not?

13. Nintendo and Apple

The Nintendo Wii and Apple iPod were huge hits with customers. Nintendo's games console appealed to new
market segments such as women and the elderly. Demand was particularly high in Asia, Europe and the USA,
helping Nintendo to outsell its two nearest rivals, the Xbox 360 and PlayStation 3. Its most popular game, Wii
Sports, sold over 82 million copies worldwide. First sold in November 2006, the Wii was replaced by the Wii U
in November 2012 (the Xbox One and PlayStation 4 were not released until November 2013). In April 2007,
Apple announced the sale of its 100 millionth IPod, making it the most successful music player in history. Over
300 million iPods were bought within the first ten years of its launch.

a. Define the term market segments.

b. Explain how the technological environment can present opportunities for hi-tech firms such as Nintendo and
Apple.