Question

give an example of a company that succeeded both financially and sustainably. when interest of various stakeholders may differ, how should a manger choose between them? Consider Walmart: the company helped millions of consumers save their hard- earned money, but paid very low salaries to its employees.

Answer 1

An example of a company that has succeeded both financially as well as sustainably is IKEA. The company is a Swedish furniture maker and has stores in various countries across the globe. The company is a profitable company and is considered a financial success. Besides the financial aspect the company is also a success in terms of sustainability of its operations as the operations of the company across its entire supply chain and value chain is highly environmental friendly. IKEA sources around 50% (or half) of its entire wood requirements from sustainable foresters. It sources its entire cotton requirements from farms that adhere to the Better Cotton standards. Better Cotton standards mandates reduced use of resources like water, energy etc. The company makes use of solar energy to light up its stores.

When interest of various stakeholders differ then managers start by prioritizing the stakeholders. An organization has internal stakeholders like employees and external stakeholders like shareholders, vendors etc. The interest and expectation of each stakeholder is different and varies. It is not possible for managers to address the interest of all stakeholders at the same time and to manage the conflicting expectations of all stakeholders at the same time. So what managers do is that they prioritize the stakeholders. This entails ethically deciding which stakeholders to focus on and in what sequence. The manager also looks at the strategic direction of the company when doing stakeholder prioritization. Thus for the case of Wal-Mart its success and its very existence depends on its strategy of being a low cost provider of everyday goods bought by customers. This low cost strategy depends on having a low operational cost structure. One of the means, among several means, that Wal-Mart uses to ensure a low cost structure is to not pay very high salaries to its employees. The company has prioritized its stakeholders and for it the customers take precedence over its employees.