AQA GCSE · Question 01.8 · Business in the real world
Shareholders have a key objective of profit.
Explain one reason why this might cause conflict with a different stakeholder group.
How to approach this question
This is a 2-mark "explain" question.
1. Identify a different stakeholder group (e.g., employees, customers, suppliers).
2. State their objective.
3. Explain how the shareholders' objective of profit maximisation clashes with the other group's objective. For example, how does cutting costs to increase profit affect employees?
Full Answer
A focus on maximising profit for shareholders could conflict with the objectives of employees. For example, to increase profits, a business might decide to keep wages low or cut staff benefits. This would directly oppose the employees' objective of receiving fair pay and good working conditions, leading to a conflict between the two stakeholder groups.
Stakeholder conflict arises when the objectives of different stakeholder groups are incompatible. Shareholders, as owners, are primarily interested in maximising profit to get a good return on their investment (dividends and share price growth). This can conflict with other groups. For example:
- **Employees:** Want higher wages and better working conditions, which increase business costs and reduce profits.
- **Customers:** Want high-quality products at low prices. Increasing quality or lowering prices can reduce profit margins.
- **Suppliers:** Want to be paid high prices and promptly. A business might delay payments or push for lower prices from suppliers to improve its own cash flow and profit.
Common mistakes
✗ Not clearly linking the conflict back to the objective of profit.
✗ Simply stating two stakeholder objectives without explaining the conflict.
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