Stakeholders interest for sustainability of business
Dr. D. Mukhopadhyay
The question of sustainability of business is central to business strategy. A business can sustain only when it sets its priority to meet the interest of the stakeholders. The key issue of strategic management is that of how an organisation uses its resources and capabilities to develop a sustainable competitive advantage in its favour. The long term success of a firm depends upon the ability to create and sustain a competitive advantage over the rivals that operate parallel in the market. A sustainable business is required to understand the dynamics of economic environment whose essentials constituents are the internal and external stakeholders that include investors, customers, suppliers, employees and regulators. Investors provide capital, customers are the source of profitability, suppliers supply credit, employees are the cause of productivity and regulators i.e. government ensures environment for fair and healthy competition and social justice in the business environment. The business in turn is to prioritise the responsibility for capital appreciation as return and dividend as reward for the investors, timely delivery of high quality products and services at reasonable price for the customers, profit for the suppliers in order to sustain in the business, support, respect, fair treatment, training for upgrading of skill and competence and sustainable with comfort a remuneration for the employees and finally, regulators want a business complies with rules and law of the land, honesty and fairness in the day to day dealings of the firms besides payment of tax in time. The essence of sustainability should be considered as a strategic issue for every business and a business cannot sustain without securing the interest of the stakeholders.
An organsation generally targets at attaining economic prosperity and environmental quality. No business can sustain without profit and according the Michael E. Porter, new entrants to business, power of buyers, and power of suppliers, substitutes and rivalry among the competitors directly or indirectly influence the degree of profitability of a business. New entrants into the market brings extra capacity and intensify competition, existing competition and its intensity and powerful buyers can enforce price cutting, suppliers attributed with bargaining power charge higher prices, substitutes threat across industries and in order to have harmonious balance of these five forces, the business has to gain strength from the stakeholders. No business can rise to the zenith of its success by ignoring the interest of the stakeholders. The theory of stakeholders has become a prominent subject and occupied an important room in the literature of management since publication of the book ‘ Strategic Management; A Stakeholder Approach’ authored by R. Freeman in year of 1984. Freeman says, ”Current approaches to understanding the business environment fail to take account of a wide range of groups who can affect or are affected by the corporation, its stakeholders”. Modern businesses in developed countries are seen to be more serious in protecting the interests of the stakeholders than that of business organisations operating in developing countries like India. Overall commercial success of a business depends on successful management of relationships that a firm does have with the stakeholders. Again, in the version of Freeman, a firm ceases to exist without the support of the stakeholders. The stakeholders do have direct and indirect influence on the long term strategic decision of the firms and without spontaneous support of the stakeholders, it is difficult maintain its continued success in the economic environment. Employees and investors are the internal stakeholders and customers, suppliers and government are the external stakeholders of the firms. It is to take into consideration the fundamental interest of the stakeholders in the process of architecting planning and formulating policy of a company. In India, business management policies are formulated without taking into consideration the views of the stakeholders in many cases. Employees are exploited to the possible extent and in private sectors, organisations barring few private sector multinational companies who adopt the standard practice in treatment of the people with respect , customers is provided with adulterated products, promoters vanish from the market with investors money, suppliers claim are dishonoured, and regulatory bodies i.e. governments is deprived of due tax through the mechanism of tax evasion and tax avoidance process.
(To be Continued)