Business to have a competitive advantage
Stakeholders are all those individuals and groups which have a ‘stake’ in the company. Included in this category are groups such as; employees, creditors, customers, shareholders and local communities. These are all affected by the actions of the business in some way. Competitive advantage is a distinctive feature that makes a business successful. It may result from innovation, reputation or the relationship with customers and suppliers.
There has been a growing trend for businesses to be more closely involved with their stakeholders. The growing awareness that reputation is an important contributor to competitiveness has enhanced this trend. By developing innovative products, and maintaining their high standards, companies will gain a reputation. Having a good reputation means that the stakeholders have confidence in the company, with more capital being invested.
Some companies gain competitive advantage by listening to demands from the public and meeting them quickly with little fuss. Customers and the community are affected by the actions of the business in similar ways. A decision to work with local people means that there is less risk of alienating them. It is important for a firm to look after the community where it operates, after all, the community includes the customers, suppliers and possibly some shareholders. Employees know that if they show commitment and the right attitude, they can alter the image they have created in a good way. Customer care and consideration is important; if it is overlooked, the company can be given a non-caring image causing the reputation and interest in the company to decrease. Creditors are people who are owed money by the company. They have to be taken into consideration because it is important to maintain their goodwill. If this falls, the company’s reputation does as well.
Suppliers are stakeholders too. They can add to the reputation by being reliable and flexible, showing that they can manage a sudden demand that needs satisfying. There are fewer complaints towards the company because they are producing more efficient, cheaper, better quality products. Businesses will gain lots of loyal customers that will keep returning because they know the service is good and they are widely known because of the reputation is has built up.
The community will be the best source of competitive advantage. If the business looks after the community, good PR is established. If it wanted to expand, it would need to get backing from the community and planning permission from the council. If everything runs smoothly, the interest in the company will increase because word has spread that this company cares for its local people. Simple activities such as sponsoring a local event will also boost the business’s morale and reputation.
This is a good way to become more widely known throughout the area. Local education in the town can also benefit from the company. By supporting them and providing supplies, they are increasing their popularity while getting some free publicity. The parents of the children will return the favour by using the business and giving the company confirmation that the relationship between company and stakeholders is good.
There is a drawback however – Pressure groups can be formed. If, for instance, a dispute arose over environmental issues, these pressure groups can be made up from customers and members of the local community. If they do not agree with what the company may be doing, they will set out to ruin its reputation. Reputation can take a long time to build but is invaluable once it has been achieved. However it is very easy to dent, so the company would have to be extremely careful when making decisions about relocating or expanding to avoid confliction. Once a reputation has been damaged, it is hard to rebuild.