PLEASE RESPOND AND ANSWER EACH OF THE FOLLOWING QUESTIONS OR POST STATEMENTS. MUST BE 150 WORDS (PLEASE), WRITE IN 3RD PERSON.ONLY ONE REFERENCE CAN BE USED FOR EACH ANSWER.
DQ 1
A sole proprietorship functions as a unique entity within a community. Does the sole proprietorship have a greater responsibility to the community than to internal stakeholders? Why or why not?
DQ 2
This course has described stakeholder relationships in a variety of organizational settings. What are the most significant ideas you will take from this course? How will those ideas influence your research?
Stakeholders in Sole Proprietorships
Introduction
A sole proprietorship is usually a small, locally owned business with the owner/operator being the primary stakeholder. However, there are a myriad of other people, groups, entities, and organizations both private and political that may also have a stake in the success of these small businesses. These are the individuals and groups who have a direct or indirect interest in the business, and may be in contact with the business on a daily basis. Based on the close ties to community, it is critical for the sole proprietor to identify and satisfy these stakeholders. Schlange (2006) states that from a stakeholder perspective, the key activity of an entrepreneur or sole proprietor is to intentionally develop a network of social contacts from which resources can be obtained and with whom the business person will work to convert resources into value. This means that a sole proprietor is a relationship builder who creates a unique configuration of resources through these relationships.
Key Stakeholders
Critical to the success of a sole proprietorship is the relationship that is formed with local stakeholders. These small business entrepreneurs depend on the patronage of local customers for their survival. Thus, it is essential for them to become involved both in community activities and in local functions and promotions; their visibility generates far-reaching networks of support. Memberships in local organizations, committees, chambers of commerce, and other groups provide additional support, key networking opportunities, and visibility. It is truly all about who the sole proprietor knows. Mitchell and Cohen (2006) state that virtually anyone can affect or be affected by the actions of an organization. Some attempt to specify the pragmatic reality that firms simply cannot attend to all actual or potential claims and must, therefore, employ some prioritizing system to limit the extent of inclusion in the firm. However, simply by this limitation, the sole proprietor stands the risk of alienating or missing potential business relationships, which, in the long run, will be critical to the firm's survival.
The local community government is another key stakeholder and primary resource for sole proprietors. These small businesses provide a vital link between resources and the community, and, as such, are of primary interest to local governments. Their local involvement includes promotion of shopping locally and in generating a consistent and ever growing tax base for the local governments. This level of involvement enhances the community at large and is a function of the utilization of opportunities and resources (Schlange, 2006). These resources increase the taxpayer base of a community and generate a higher rate of return. Local governments and their agencies have the ability to attract and influence the actions of small businesses through incentives and other support. To the extent that these organizations depend upon the government for tax exemptions, they can be pressured into getting involved in the community to promote their businesses (Marcoux, 2004).
A variety of community institutions, such as religious and civic organizations, schools, voluntary groups, welfare agencies, and human service organizations round out the list of stakeholders primarily because they can affect the retention of community residents and play an ever growing part in the success and/or failure of these small businesses. The community at large acts as a stakeholder through these entities. Proenca (2003) emphasizes this during his discussion of health care stakeholders in which he states the health of a community is closely associated with the human and social capital of its residents and is reflected in its economic conditions. As such, a variety of human services institutions and other local entities are likely to have a stake in the development of community resources, which subsequently impact the success of local and small businesses.
Primary stakeholders to sole proprietorships could include the following:
• Management and employees - They will be interested in their job security, prospects, and pay. They will also be most interested in the best interest of the company and have a direct interest in profitability.
• Customers and suppliers - Small businesses depend on attracting and retaining local customers. This support of small business as opposed to support of larger stores requires skillful marketing and the ability to provide goods and services tailored to the specific needs of the community. The same is true of suppliers.
• Banks and other financial organizations - These institutions are connected because they lend money to the sole proprietorship.
• Government - As a sole proprietor, a business owner needs to adhere to the laws of the city, county, and state regarding operating a business such as obtaining a business license. However, the sole proprietor is free from other bureaucratic regulations that business structures such as partnerships and corporations require for standard operation.
• Pressure Groups - These groups are interested in whether the business is acting appropriately towards their specific area of interest.
Stakeholder Relationships
Schlange (2006) emphasized the need to better understand how individual perception drives the general behavior of entrepreneurs as well as both their opportunity seeking in the early stages of business formation and in the development of relationships with stakeholders. The process of creating unique stakeholder relationships calls for the sole proprietor to first take a serious look at the community at large. In an instrumental approach, the first step in a distinctive entrepreneurial situation is to uncover the relevant stakeholder groups (Schlange, 2006). Resource dependence theory has been helpful in pointing out the significance of control over resources as a means of promoting business relations, and it provides a generalized high level view of the necessity for value creation. As a sole proprietor, these steps can be critical in developing and sustaining a usable plan to create stakeholder value. In particular, issues of stakeholders who control resources that are critical for the survival of a venture are likely to be addressed actively (Schlange, 2006).
In an organizational lifecycle approach to stakeholder analysis, the stages of start-up, growth, maturity, and transition have been distinguished (Jawahar& McLaughlin, 2001). Throughout a start-up venture, stakeholder relationships typically are in the process of materializing. As a consequence, sole proprietors have more potential stakeholder relationships than managers of larger businesses with multiple owners. The sole proprietor may choose to establish these relationships or not and tends to relate on a more personal level. In addition, it may be assumed the sole proprietor will sample the available options in order to select the ones that promise to offer the best opportunities to turn their entrepreneurial intentions into action (Schlange, 2006). By catering to and addressing the needs of primary stakeholders, sole proprietors are better equipped to attract and retain loyal customers. The sole proprietor knows the customers, works with them, and lives next door to them. Clearly understanding these needs and taking the responsibility for addressing them is a critical part of developing and maturing the stakeholder relationship.
As a venture matures, stakeholder relationships are likely to change. While during its formative stages, suppliers of knowledge, investment capital, and human labor are most important, the sole proprietor will later become more customer-focused and begin to develop business relationships along with furthering relationships with the community at large.
Conclusion
The unique situation of sole proprietors includes their ability to not only become intertwined in the community but also to create a relationship with specific organizations and entities that are a vibrant part of the success or failure of the community at large. Entities such as individual customers, local governments, civic organizations, health care entities, and others form potential networks. In an effort to succeed and to bring the business to maturity, sole proprietors need to understand how individual perception drives the general behavior of stakeholders as well as stakeholder opportunity seeking in the early stages of business formation. This is achieved through developing a keen awareness of their environment through local involvement, civic activities, and attending local functions such as chamber of commerce and city governmental meetings. A sole proprietor is best equipped to react to and mitigate any objections that a stakeholder group may have because the sole proprietor takes stakeholder concerns and needs into consideration and interacts to develop personal relationships.
References
Jawahar, I. M., & McLaughlin, G. L. (2001) Toward a descriptive stakeholder theory: An organizational life cycle approach.Academy of Management Review, 26(3), 397-414.
Marcoux, J. E. (2004). Community stakeholder influence on corporate environmental strategy at Whistler, British Columbia. Simon Fraser University (Canada). ProQuest Dissertations and Theses. Retrieved from https://search.proquest.com/docview/305072360?accountid=7374. (305072360).
Mitchell, R. K., & Cohen, B. (2006). Stakeholder theory and the entrepreneurial firm. Journal of Small Business Strategy,17(1), 1-15.
Proenca, E. J. (2003). A stakeholder approach to community health management. Journal of Health and Human Services Administration, 26(1), 10-34.
Schlange, L. E. (2006). Stakeholder identification in sustainability entrepreneurship. Greener Management International, (55), 13-32.