1. Emergence of Stakeholder Theory.
2. How does Globalization influence different stakeholders?
3. Why and how sustainability influence stakeholders?
This essay takes stakeholders as a whole, however, in the main textbook each stakeholder chapter has separate section focusing on Globalization and Sustainability issues. book (Crane, A. & D. Matten (2016), Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization)
4.The coursework should be typed using 12 pt. Times New Roman Text with line spacing of 1.5. The word limit is 1000 words (excluding references) and should not be exceeded. Please note that assignments below or above the limit by more than 10% would result in decrease in the overall achieved mark by 10%. You should include at least 10 references
The Emergence of Stakeholder Theory
Globalization is a reality in the modern world where nations have become greatly interconnected. The concept is defined as the process of political, economic, social, cultural, and technological interconnection among countries around the world. Nonetheless, the process is normally confused with internationalization, which is the increase of the significance of international relations, trade, alliances, and treaties between nation-states (Eriksson et al. 338). Globalization takes into account such processes and others that result in great integration around the world. The interconnection has an impact on various business aspects, including stakeholders. Although the stakeholder theory has always affected business management and ethics, it has become more important in the age of globalization when companies and concerned parties have become more integrated.
The Stakeholder Theory
The stakeholder theory will be applied in assessing the impact of globalization. The model has gained prominence in the modern world since Edward Freeman (1984) introduced it in a publication under the same title (Jensen and Sandström 473). The concept diverted the attention in business studies and business practices from stockholders. The principle is used on organizational ethics and management to account for numerous individuals and groups affected by various related operations, such as consumers, employees, suppliers, shareholders, local communities, and creditors, among others. The theory helps scholars to understand organizations from the perspective of stakeholders.
Influence of Globalization on Stakeholders
Globalization has affected the way organizations relate with their different stakeholders as they operate in an interconnected environment. The concept has put new demands on stakeholder theory due to two major issues. The first challenge exists regarding the process effects on power relations between companies and their stakeholders (Den Hond and Bakker 322). For example, there is need for clear definition for both state and stakeholder. Scholars argue that although traditionally strong actors, such as leading international companies, can still mobilize resources and influence other actors, globalization has given rise to new actors, including non-traditional stakeholders, such as global consumers.
Figuratively, globalization created new sources of power and other more powerful parties who impact the way businesses operate in the interconnected world (Jensen and Sandström 474). Secondly, the concept has introduced new aspects of responsibility. Scholars base the argument on the famous expression, ‘…with power comes responsibility’ (Jensen and Sandström 474). The interconnection of companies, leading to multiple actors, reflects their duty to members and the impact on the value-creation process. Globalization has created a need to move beyond the conventional stakeholder relations on trust and legitimacy since it fails to show whether or not a corporations is responsible for its stakeholders. Regardless of the two issues, the global connections affect various parties differently, as evident in the following discussion of each stakeholder group.
Shareholders are critical players in the global market due to their important role in providing capital to firms. The individuals are the primary reason many companies are able to operate in the global market due to their financing capabilities. As a result, globalization has increased the power of this stakeholder group (Park and Doucette 534). The process has further fueled a shift of economic power from employees to the providers of capital. Financialization propagates and sustains itself through power relationships founded on the process of interconnection. Notably, it increases the power of shareholders as companies compete for investors, and also influences the business to enhance the quality of products and services to generate adequate returns on investment.
Suppliers play an important role in the success of businesses. In the globalized world, companies can source supplies from around the world, which has led to restructuring of the supply chain to include the growing number of suppliers (Crane et al. 405). Besides, firms have reduced the cost of supplies by investing close to the source through internationalization strategies. Consequently, globalization has reduced the power of suppliers due to their large numbers. The process has also led to a decrease in the cost of supplies as companies seek more affordable and sources that can offer them value for their money. Supplies for many companies, especially those that depend on readily available raw materials, have become increasingly accessible due to globalization.
Globalization has opened national borders to companies from around the world. Besides, corporations can easily invest in the global market due to the reduction or elimination of trade barriers, such as tariffs. The reality has led to an increase in the level of competition from firms operating within the same market or sector around the world (Crane et al. 405). The process has a significant impact on the way companies conduct their business due to increased competition. For example, since customers have a wider choice from among business rivals, they have the opportunity to influence prices. Firms are forced to reduce their prices as well as cost of production and distribution to ensure that their prices are competitive and to attract customers. In most cases, they have to invest in areas close to their customers to reduce the financial burden and maintain low prices.
Employees are the driving force behind globalization since they support various operations. The workers have a responsibility to produce goods or services and delivering them to the global customers. Due to the increase in competition, employees should protect the quality of products and services to avoid losing customers to rivals. Globalization affects employees through the availability of low-wage workers in some countries around the world, which facilitates potential abuse of labor legislation. The loophole influences how companies engage in labor-friendly practices by focusing on the demand for high-skilled workers for their operations (Faleye and Trahan 2). Due to globalization, unskilled employees might also experience a decline in their pay due to their high number. On the other hand, workers with essential skills could enjoy high compensation since they contribute to top quality products and services and add value to firms. As a result, corporations could be afraid of losing them to competitors. Employees can also migrate and work anywhere in the world, which improves their employability across the globe.
Customers remain the most important stakeholders for companies in the globalized world. Corporations concentrate on them since they are the foundation of diverse operations. Additionally, companies produce goods or services with the end-user in mind. Due to globalization, customers as a stakeholder group has become increasingly important (Schmeltz 30). For example, customers place a high demand for firms to implement corporate social responsibility policies and programs. Interconnection also plays an important role among organizations as it drives operations that ensure products and services are available in the right place and time for consumers. The power of customers has grown due to globalization as companies operate globally for consumers who can buy from any of the available competitors. Therefore, it is imperative that companies improve and maintain the quality of their services and products to protect their market share in the global market.
The civil society influences how the global market operates and plays an intermediary role between the government and business. Therefore, they affect the operations of the governments and corporations. The role of civil society and interest groups has expanded in the era of globalization (Crane et al. 436). Notably, these stakeholders have the opportunity to influence operations at a global level. Various groups have emerged, especially to counter the impact of globalization, such as environmental movements. The interest parties have shaped business operations to counter their negative effects on the environment using various concepts, such as sustainable development. They have also put social pressures on governmental institutions to address social and environmental injustices (Mayer and Gereffi 1). They are a leading source of private governance across the world.
Regulation remains important in the globalized world. However, the role of government in regulating business operations over time has declined. The self-regulation idea has increased in many markets around the world. Businesses are increasingly using corporate codes of conduct, process standards, product certifications, and other voluntary types of private regulation that have reduced government intervention in the way the market operates (Mayer and Gereffi, 1). The changes are reactions to social pressures caused by globalization.
Why and How Sustainability Influence Stakeholders
When companies choose to incorporate environmental sustainability in their operations, they influence their stakeholders in numerous ways, depending on the role of the individual or group. The firm’s shareholders should comply with its commitment to sustainability, while having a voice in the future of the company. Customers have to comply with standards, such as eco-friendly consumption, to help companies to reduce their carbon footprint (Vlaeminck et al. 180). Suppliers should adopt ethical business practices and ensure sustainability in the supply chain (Crum et al. 47). Investors demand its incorporation since compliance guarantees returns on their investment (Eccles 9). For example, when looking for investment partners, they look for companies with related policies, such as corporate social responsibility. Employees are expected to implement the sustainability regulations in the way they operate, such as in greening production and marketing for their companies. Generally, organizations are being held accountable by stakeholders, regarding their compliance with various regulations in order to enhance the quality of life. While many companies in the past operated to make profits for their shareholders and investors, stakeholders are today looking at company’s strategies and realizing that sustainability surpasses all other achievements.
Globalization has changed many business processes due to the integration of economies, societies, technologies, and related systems. The changes have numerous effects on various individuals and groups affiliated with business organizations. The stakeholder theory explains some of the impact on different parties who affect or are affected by organizational operations. Customers, employees, suppliers, competitors, shareholders, civil society, and governments have experienced major changes in the way they relate with corporations due to globalization. Notably, the changes are most likely to continue into the future as the global marketplace continues to transform.