So, that's one model, but there's another model, and
that is called stakeholder model.
What is the theory of stakeholder theory?
That business can be understood as a set of very complex relationships
between customers, shareholders, shareholders or stakeholders,
suppliers, employers, employers and employees, and the community.
So, stakeholder three wants to know how do these all interact to create value?
Because without those interactions the stakeholder model argues,
you can't create value, you can't create value just to hear about profits because
you have to have good employees.
You have to have good, think about Merc, you have to have good researchers,
you have to have customers who buy things.
You don't have customers who forget it, right?
Yes you have to have shareholders and owners, yes you have to have managers to
manage this, but you also have suppliers and you have to have good suppliers.
Because if you don't you get bad supplies and things aren't so good,
that's why Bayer Crop Science wants those seeds, that's a great supply for them.
So you see, there are all these complications so
business can't just be about profit,
it has to be about how all these stakeholders work together to create value.
And the value has to be for all of them otherwise it won't work.
If I treat my employees badly they're going to quit or
they're not going to work well they're going to say,
you know take all the sick days and you've seen that, you know that.
If I don't treat my customers well,
they're not going to buy my product, right, they're going to go someplace else.
If I don't treat my suppliers well, they're going to go so
they don't have to work with me, they go someplace else.
And I have to treat my shareholders well or
they will of course not help me support my company, so all of these are important.
So here is the basic shareholders we always talk about, owners of course,
customers, so a small company is just the owner, not the shareholder.
Customers or clients, employees, managers, suppliers, and of course
the community in which the company operates and those are all important.
So business then, we often talk about the natural environment as a shareholder.
Now natural environment isn't a person or a group of people or organization, right,
but nevertheless business depends on the ecosystem and
it affects the ecosystem as you know, it often hurts the ecosystem.
Sometimes it's very green and helps the ecosystem, so
that's a very important stakeholder, even though it's not a human stakeholder.
So perhaps, there's often been this debate between shareholder theory and
stakeholder theory, but maybe they all overlap in the end.
Maybe it is that in order to make profits I depend on all these other stakeholders.
And these other stakeholders, of course, depend on the company making money in
order for them to keep doing what they're doing.
So there's this sort of complete interaction and
interrelationships between all of these components,
this message is we can't forget any of them.
And in a company you have to run it so all of these matter,
because if you don't run it that way, you will suffer.
And that's what we'll see later in module four when we look at
Volkswagen who forgot about their customers.
So this is a very complex stakeholder map, I mean, you don't have to memorize it,
but it just shows how companies are so involved with so many people.
I mean, it's just astonishing, and so many organizations,
I mean it's just difficult business is difficult.
And even a little company with one owner, just a small company,
think about your little grocer, if you have a grocery near you.
Think about all the interactions that owner has to involve to buy the food
that the owner sells. Even if I have a little kiosk, where do I get my supply?
Very complex, even in little, tiny, tiny organizations, so big organizations,
they have work to do, this is complex, but now look again at this slide.
The firm is in the middle, and your eyes go to the middle, and
that affects your thinking and your decision making.
Because we tend to put what's in the middle as primary.
And that's all right, but we must be careful that the firm is not
the center of the universe, it's just one of thousands of firms.
Small firms, medium sized firms,
large firms, mom and pop firms, single owner firms.
So we have to be very careful about our thinking to remind ourselves
that firms are part of many political economic economies.
So, this is a standard stakeholder map, and I've put the Bayer in the center here.
And you can see that, but what happens if I put the farmers in the middle?