Profit isn’t everything
Profit is the difference between the price and the cost of making a product available. There are many types of Stakeholders. A Stakeholder is one who has an interest in the success of a business i.e. Shareholder, Customer, Employee, Local resident, Supplier, Creditor, Government. A Shareholder is a Stakeholder, and he buys shares into a business that will give him high dividends and a high share price. Businesses can benefit a Shareholder because if its profits take an increase so does his dividends. In addition a successful business will increase the share price making the Shareholder wealthier.
A Customer is a Stakeholder and when he goes to purchase a product from a business he will look for high quality goods and the lowest possible prices. A business can affect a Customer with its prices. If a profitable business is successful, it usually means that they are providing the goods and services a Customer wants. An Employee is also a Stakeholder. The businesses’ profit can be helpful to him. If it were successful and it expanded, then an Employee would benefit with more money to take home to his family, due to increase in salary or promotion prospects. The profit would also be helpful in another way, because it would mean more money spent on better working conditions.
Profit may hinder Stakeholders Profit in a business does not always benefit its stakeholders. Competition and expansion in a business are reasons why Profit might hinder Stakeholders for i.e. Shareholder, Supplier, and Government. A Shareholder takes the risk with a business hoping that it will always pay out in dividends. Retained profit and reserves means that all the profit that a business has made over the years can be decided to be retained instead of paying out in dividends. Businesses retain profit to finance future investment or to protect the firm against future problems.
A Supplier can be hindered by the Profit of a business too. If a business has a loss in sales revenue and suffers lack of profit income due to competition, a Supplier will not receive large orders for his bulk products. Without the business making these large orders, the Supplier will suffer too and could even go out of business. The Government is another type of stakeholder. It will receive taxes when the firm makes a profit. The Government will want the business to create wealth and jobs for the economy. But if a business fails to bring in sales revenue then it might have to cut jobs, to reduce its costs. If its losing sales revenue and it is reducing its costs then the business will have a problem in paying taxes towards the Government. Taxes are fixed costs so the business might go bankrupt if not paid on time.
There are also other things apart from Profit, which can help Stakeholders. Job Creation is the extent to which the firm creates employment for people, this helps to raise their standard of living. It is usually measured by counting the number of employees. Job Creation; apart from profit can help Stakeholders, like the Government. Market Share is measured by dividing sales of the businesses products into the total sales of the market. Basically the bigger the market share, the greater the businesses power. Market Share would benefit Shareholders because the more profitable or power a business achieves the wealthier a Shareholder becomes.
Customer Satisfaction measures how happy consumers are with the products made by the business. The business can measure this by doing some market research. This would help certain Stakeholders i.e. consumers, because they look for high quality goods at cheap prices. Ethical Considerations include things like the impact of the businesses activities on the environment. Basically something is ethical if society believes that it is the right way to do things. For example many consumers now think that it is wrong to test cosmetics on animals. Stakeholders i.e. Consumers and Local residents would be happier if this happened.
There is more to being a successful business than just making a big profit. Profit can only tell if businesses are making money out of their sales. It is important to have Profit to keep a business running but, it does not show any indication of whether they are providing Job Creation or Customer Satisfaction. Profit does have advantages but it also has disadvantages. I think that Profit isn’t everything in a business.