The paper 'Contemporary Business Issues' is a great example of a Business Assignment. ASDA is a supermarket chain which supplies product at low cost to ensure that they are able to tap customers. The company has followed a policy where they try to fetch the maximum return for its shareholders. This has made ASDA concentrate more on the bottom lines and the shareholders whereas the other stakeholders are ignored. This supports Milton Friedman's findings that the prime responsibility of the director is to ensure a return for the shareholder but it goes against the stakeholder theory which lays importance on all the stakeholders associated with the company.
The paper thus looks into the stakeholder theory for ADSA and the manner it will affect ASDA if it looks towards it. Business units are looking for ways to maximize profits. Different ways and techniques are used to ensure that profits maximize. Profit maximization is “ a process through which the firm ascertains the number of goods they are going to produce for a particular price which will reap maximum profit for the business unit” . (Producers & Profit Maximization, 2010) Profit maximization thus looks into the improvement of the present situation into a better one.
This also acts as a mechanism to ensure that “ competitors stay out of business” . (Profit Maximization, 2010) ASDA here looks towards purchasing the goods at the lowest cost from the suppliers. ASDA concentrates more on the bottom line which is highlighted by the fact that they put pressure on the supplier to get goods at low prices. ASDA also looks towards canceling contracts with the suppliers if the product is not delivered on time.
ASDA to ensure that their reputation is not hampered looks towards the supplier to ensure that they negotiate with the employees and ASDA has no role to play. This ensures a good reputation and helps ASDA to ensure that goods are available at low prices which helps to earn high profits for the shareholders. ASDA which is looking towards stakeholder theory will be able to ensure proper service for all. Stakeholder theory states that “ business organization needs to see that the organization works for the well being of people associated with the organization and ensure that they're well being is looked after” .
(Hill & Jones, 1992) The stakeholders who are influenced by the decision taken by the business units is demonstrated below It shows that the corporation should make a decision that will improve the performance of the customer, community, employee, trade association, and everyone associated with the corporation. This will help ASDA to ensure that only profit doesn’ t become the sole criterion for their growth. In fact, it will look towards other aspects like improving the condition of the employees by improving the work environment, having a proper compensation package, and proper working hours.
This will also help ASDA to improve their ethical policy and ensure that they are able to deliver equality in services towards all countries irrespective of its operational country. A study demonstrates that since stakeholder theory “ doesn’ t specify the trade-off between the decisions taken by the manager is correct or wrong and doesn’ t hold him accountable for it so the manager might take decision which benefits him instead of all the stakeholders” . (Jensen, 2004) This makes it difficult to monitor the working of ASDA and the decision can have a forbearing on all the stakeholders.
This will thereby affect the proposition of value maximization. ASDA won’ t be able to maximize profit because the concern for the stakeholders will increase.
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