MEETING THE NEEDS OF OTHER STAKEHOLDERS
23
Although a business may pursue other such objectives, it is normally set up primarily with a
view to increasing the wealth of its owners. In practice, the behaviour of businesses over time
appears to be consistent with this objective.
Within
a market economy, there are strong competitive forces
at work that ensure that
failure to enhance owners’ wealth will not be tolerated for long. Competition for the funds
provided by the owners and competition for managers’ jobs will normally mean that the own-
ers’ interests will prevail. If the managers do not provide the required increase in ownership
wealth, the owners have the power to replace the existing management team with a new team
that is more responsive to their needs.
MEETING THE NEEDS OF OTHER STAKEHOLDERS
The points made above do not mean that the needs of other groups with a stake in the busi-
ness, such as employees, customers, suppliers, the community, are unimportant. In fact, the
opposite is true, if the business wishes to survive and prosper over the longer term. For
example, a business with disaffected customers may well find that they turn to another sup-
plier, resulting in a loss of shareholder wealth.
Real World 1.3
provides examples of busi-
nesses that acknowledge the vital link between satisfying customers’
needs and creating
wealth (value) for their owners (shareholders).
What other objectives might a business pursue? Try to think of at least two.
A business may seek:
■
to provide well-paid jobs and good working conditions for its employees;
■
to conserve the environment for the local community;
■
to produce products or services that will benefit its customers; and/or
■
to support local suppliers.
You may have thought of others.
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