1.2 - stakeholders, economies and diseconomies off scale,

stakeholders

individuals or groups that have a vested interest in the decision-making, outcomes and operations of a company

internal stakeholders

individuals or groups within an organization, who have directly interest in its operations and decision-making processes.

• employees

• managers and directors

• shareholders

employees stakes

• pay and financial benefits and security

• work conditions

• opportunities for career progression

managers and directors stakes

• profit maximization

• job security

• financial benefits

• long-term financial health of the company

shareholder stakes

• dividends

• achieve capital gain in the value of shares

external stakeholders

individuals or groups outside the organization that can affect or be affected by its operations

• customers

• competitors

• trade unions

• suppliers

• government

• local communities

• financiers

• pressure groups

customers stakes

• lower prices

• good quality

• safety of products

competitors stakes

• performance

• competitive threats

• innovation from rivarly

trade unions stakes

• terms and conditions of employment

suppliers stakes

• regular contracts

• regular payments

• good relationship

government stakes

• employment and consumer protection laws

• environmental protection

• health and safety standards

• taxes

local communities stakes

• social responsibility

• creation of jobs

• financial support

financiers stakes

• ability to repay debts

• ability to achieve subsequent earnings

pressure groups

individuals with common interest who seek to place demands on organisation

conflict between stakeholders

inability of an organisation to meet all stakeholder objectives simultaneously

grounds for stakeholder conflict

• higher wage demands (employees)

  • increased costs

• higher bonus demands (managers)

  • increased costs

• higher efficiency and productivity demand (employers)

  • lower employee satisfaction

  • job loss to technology

• higher and regular dividend demand (shareholders)

  • lower retained profit

• lower price demand (customers)

  • lower profits

economies of scale

reduction in per-unit costs as production and operations increase

dis-economies of scale

increase in per-unit costs as production exceeds optimal size or efficiency

internal economies of scale

occurs inside the firm and is within firm’s control

types of internal EOS

• technical

• managerial

• financial

• specialisation

• marketing

• purchasing economies

technical internal EOS

• better machinery

• reduced average costs of production

financial internal EOS

• lower rates of interest

• increased access to capital.

managerial internal EOS

• workload divided among more people

• high productivity

specialization internal EOS

• specialized labor

• higher productivity

marketing internal EOS

• increased efficiency and effectiveness in reaching customers

• better targeting of marketing efforts.

purchasing internal EOS

• bulk buying

internal dis-economies of scale

• lack of control and coordination

• lower efficiency

• increased costs per unit as production scales up.

external economies of scale

occur outside the firm and are out of firm’s control

• technological progress

• improved transportation networks

• abundance and availability of skilled labor

• regional specialization

external dis-economies of scale

• higher rents

• increased transportation costs

• lack of skilled labor

• rising material costs