Stakeholder Analysis: Garment Company
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Before starting our analysis, we deem necessary to lie a background of fundamental concepts as to aid the reading of this paper. We shall explain what stakeholder theory is, and how it is employed. The term refers to a management and business ethics theory that addresses the organizational values and managerial morals (Freeman, 2010). The theory also identifies the stakeholders of a company and describes how management can take decisions based on the interest of those stakeholder groups. In a strict way, stakeholder theory intends to make all the parts of the company count in the decision-making process.
Before entering into the ethical implications of our business’s decision, it is important to determine if the decision is of moral, or social interest. It is possible that the competitive factors in our business’s decision refer to a decision that is perceived as a business matter by the company’s management (Carrol & Buchholtz, 2014). In this case, we need to see whom the company is affecting its decisions, as a way to properly take on the decision. That is why, stakeholder theory is keen on understanding the complexities of the decision-making process, turning them into part of the business ethics.
In this analysis, we shall address the ethics of a decision concerning the off-shoring the garment production as a way to cut costs and maximize profits.
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We aim to use the stakeholder management theory as a way to see if the decision the company wants to make is ethical or hinders the stakeholders’ interests. That way, by understanding what the stakeholder theory is, and how to use it, we will provide a better insight on whether or not the decision taken by our company is an ethical one.
Summary of the Situation
Our garment company has been the leader in the jeans market for the past century, this means that the company has managed to have a sizeable portion of the jean market in the country. Our brand proud on being a “Made in U.S.A” brand. This means that all the materials come from the country, and the manufacturing process takes place in five shops in the rural east of the country. Two of those shops are unionized, but the company and the syndicates work closely to ensure the workers happiness. After the last quarter, the company hired an outside consult firm and asked them about how to maximize their profits. The firm considered that to maximize profits, the company could outsource the labor and the manufacturing facilities to an Asian nation. In the same way, the consulting firm believed that there was no need to change the “Made in U.S.A” slogan, as a way to maximize profits. After the consultation. The company has to perform a stakeholder analysis to see if the decision satisfies all the stakeholders.
To do an in-depth stakeholder analysis of the company, it is important to know who the company’s stakeholders are. All the people that might be affected by the corporation’s decision can be regarded as a stakeholder. However, to keep the discussion brief, we shall address those we consider more important.
Shareholders: Although the decision will maximize their profits, they should be taken into account as well
Unions: Only two of the five shops are unionized but it is likely that the unions will not see the change in a positive light and can make waves on the public opinion
Suppliers: By transferring their operations to another country, the company is going to change its traditional suppliers, hindering their operations and profits.
Workers: Outsourcing the company’s manufacturing process would mean fire the 980 workers, or at least a substantial amount. In the same way, if those factories brought jobs and prosperity to the communities, it is likely that after the transfer, those communities lose a sizeable part of their revenue and vitality.
Public Opinion: The Company’s slogan is “Made in U.S.A. Even if the company keeps marketing foreign jeans as made in the country, the public is bound to know sooner or later. This is likely to reduce the consumer’s trust in the brand, and can turn into a substantial profit loss.
The primary stakeholders are those who are closer to the decision, and might feel the repercussions more carefully. In this case, there a handful of stakeholders to consider.
Press: In a company as well-known as course, the decision is going to be known, and although the company is going to minimize the impact of the transferring. Once the press finds out, they are likely to lash against the company
The community: All the company’s five shops are located in rural towns and provide employment to the area, thus, giving wellbeing to the inhabitants of the communities. If our business moves its operations offshore, the means of subsistence of those towns, will also disappear.
These secondary stakeholders hold the least amount of power, but the company is bound to keep them informed, as their opinion is as important as the shareholders’. In this case, the secondary stakeholders’ view is thoroughly related to the public opinion that is why it has to be looked carefully.
Despite its detractors, the stakeholder theory is the most ethical way to conduct business. Without the knowledge of how an organization’s internal and external behavior influences all the people surrounding it, the company could be performing entirely unethical business practices without knowing. In the same way, being able to understand the stakeholder’s needs turns the company from a profit-based business into a socially responsible one. Concerning our garment company, we consider that the risks surrounding the decisions are many, and the decision must be suspended. The company has marketed an image for a substantial amount of time, and changing it will undoubtedly hinder its reputation. Besides, the social costs surrounding the operation are too high to be taken into account. We advise that the decision be disregarded, as it can do more harm than good.
Carroll, A., & Buchholtz, A. (2012). Business & Society: Ethics, sustainability, and stakeholder management (8th ed.). Australia: South-Western, Cengage Learning.
Freeman, R. (2010). Strategic management: A stakeholder approach. Cambridge [u.a.: Cambridge Univ. Press.
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