The strengths of Stakeholders Theory
Firstly, the strength of organization will be stronger when the members of stakeholders are more. In the past, only shareholders were considered as the owner of enterprises, while other people just served for them. Even the relationships of shareholders and employees, customers, creditors were hostile, which was bad to the development of organizations (Ezekiel, C & Paul, O., 2010). After employees, customers, and creditors became stakeholders, they could collaborate with each other in order to the whole interests.
Absolutely the development and operation will be better when there are more people make contributions to organizations. Stakeholders undertake risks and losses in common just like they enjoy interests. Therefore, the enterprise obtains more motivations to development, and the risks are distributions to more stakeholders. As a matter of fact, the principle of stakeholders is as same as shareholders. The joint of more people is to share risks and losses, which is one purpose of modern company’s system.
Secondly, Stakeholders Theory could solve contradictions and conflicts easily. Obviously it can not be avoided that contradictions and conflicts exist between different bodies. To some extent, conflict of interest also is a motivation of social development. However, if people excessively focus on how to win conflicts
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Thirdly, there are so many relationships need to be handled in international business. The development of modern enterprise make bodies’ identifies more various, for example, the shareholders of listed company are public, some of them also are customers of the company, or creditors. In addition, an investor can purchase more than one company’s stocks. What’s more, the expansion of multinationals involves in different countries’ economies and local interests. In addition, the innovation of technology is harder and harder. Many innovations and inventions can not be completed by one company. Therefore, the collaborations of organizations are necessary. It is not strange that competitors also are stakeholders.
The weaknesses of Stakeholders Theory Firstly, the biggest shortage of Stakeholders Theory is that its definition is too excessive. According to the definition of Freeman, R. Edward and Reed, David L: “a corporate stakeholder is a party that can affect or be affected by the actions of the business as a whole,” the affected individuals and organizations are so many that companies will lose direction to deal with the relationships with its stakeholders. In addition, different organizations have themselves definitions according to their needs. The situation is every enterprise has a definition, for example, many companies do not think that competitors are stakeholders.
Secondly, the objectives of enterprises are changed under Stakeholders Theory; the maximum of commercial profit is not the only goal of company. Corporate social responsibility must be undertaken by enterprise with Stakeholders Theory. On the one hand, people would misunderstand that the nature of enterprise is social rather than commercial. Once one company purely pursues commercial profit, the condemnations from public will be unimaginable. On the other hand, some companies do not how to balance the relationship of corporate social responsibility and commercial profit. The consequence of Stakeholders Theory is that enterprise will undertake excessive responsibilities and public will have more and bigger expectations.
Thirdly, one problem is that enterprise should how to practice Stakeholders Theory. The feasibility of Stakeholders Theory has gone through more and more challenges in recent years. On the one hand, the development of Stakeholders Theory makes the range of stakeholders is broadened. On the one hand, fiercer and fiercer competition makes enterprise do not have money and time to care stakeholders.
Even though the value of Stakeholders Theory is enormous in theoretical explanation, it is so hard to apply it in practice. For example, customers are stakeholders, but what companies should do in order to participate into the actions of companies. In addition, many so-called stakeholders are not willing to involve on the activities of company just in order to a little interest. Therefore, the definition of stakeholders is not enough in theory. Scholars should take account into the needs of people who are included in stakeholders.
The effects of Stakeholders Theory on international business This part focuses on the effects of stakeholders on international business. The theory of stakeholders has changed some management and operation of business, especially for international business. The expansion of multinationals will be continual, and the development of international trade will be faster and faster. Therefore, it is necessary and valuable to explore the effects of Stakeholders Theory on international business.
The international business is affected by stakeholders International business refers to any business activity that crosses national boundaries. Therefore, international business does not only involve on the relationship of enterprises, but also it affects or affected the relationship between countries. After business crosses national boundaries, the responsibility also crosses national boundaries. In addition, stakeholders will more in international business. In order to deal with more and more complicated relationships in international business, Stakeholders Theory will play its affects. The following will explain in detail.
Firstly, Stakeholders Theory makes business easier in other countries. International business is not only relative to commercial, but also is affected by political, legal, and cultural factors. Stakeholders Theory takes account into local governments, residents, and communities, environmental protection, and corporate social responsibility. Other countries’ governments and people will be easier to accept international business. In the past, people thought international business meant a kind of plunder to natural resources and opportunities (Reinhard, S., 2006).
It is not hard to understand that why local people would resist foreign products and companies. However, enterprises are the parts of local. The existence of international business is not to damage the interest of local people with Stakeholders Theory. Local government can be beneficial to the development of foreign companies. Therefore, they will welcome the arrival of international business and create advantages to absorb external capitals.
Secondly, Stakeholders Theory could help international business cross cultural handicaps. International business does not only cross national boundaries, what’s more, it needs to cross cultural boundaries. The cultural differences are vast between countries, especially for the cultures of east and west. It is harder to understand different cultures sometimes, but it is easier to understand and accept Stakeholders Theory for different countries’ people. Cultural differences may lead different behaviors. However, Stakeholders Theory cares about local customers, employees, residents, communities, environment, suppliers, and governments. This kind of caring could help companies overcome obstacles of cultures. In addition, Stakeholders Theory could remove misunderstanding in international business negotiations and collaborations.
Thirdly, Stakeholders Theory is helpful to the development of multinationals. Multinationals are the typical represents of international business. Generally speaking, the business of multinationals involves many countries. They arrange business all over the world, their collaborators, suppliers, customers, creditors, and shareholders could be from all over the world. Stakeholders Theory could help multinationals establish good images; stakeholders could trust companies because they are an integral whole (Laurie, K. L., 2007).
In addition, multinationals are stronger to undertake responsibility than other enterprises. Multinationals have sophisticated operational and managerial system. Stakeholder Theory does not bring too much pressure to multinationals. Even though Stakeholders Theory has its own shortages, the practices of multinationals will make up them and create new ideas for Stakeholders Theory.