STAKEHOLDERS IN A MATURE PRODUCT MARKET
A business entity needs to fulfill the purpose for which it exists (Cohn, Khurana and Reeves, 2005). Meeting this objective is often difficult because it may be required to fulfill demands that are conflicting. As such, a business should reach a compromise among the various needs. The purpose for which a business exists is satisfying all its stakeholders. These stakeholders include business owners, investors, customers, suppliers, governments, employees, creditors, communities and trade unions (DuBrin, 2008). All these stakeholders have different needs that a business should fulfill for it so succeed. These needs utilize business resources either directly or indirectly, which has a big impact on the performance of the business. On the other hand, a business product has different stages within its life cycle. Each stage has different characteristics that underline its performance. At the maturity stage, the business experiences stagnant growth, faces more competition and is more sensitive to price changes.
At the maturity stage, the business experiences no growth. Therefore, no new customers are attracted. The main objective of the business then becomes retaining the existing customers. In a highly competitive environment, it is difficult to retain customers. Competitors are always lurking in the horizon, waiting to snatch customers from any competing business. To effectively build and sustain customer loyalty, resources must be used (Eric, Brian and Jay, 1993). These resources are used to train employees on quality service delivery to existing customers. The training required is expensive and consumes a considerable amount of money that other stakeholders such as the owners expect from the business. Therefore, it becomes very difficult for a business operating in a mature product market to fully satisfy its stakeholders.
The high competition in mature product markets lead business enterprises to utilize every available strategy to attract the few customers (George and Stephen, 2008). One of the strategies used in mature product markets is price reduction. When prices are reduced, the profit margins are likely to reduce especially if the reduction does not result to more customers and increased sales volume (Hollensen, 2011). Reduced profits bring dissatisfaction to many stakeholders such as owners who rely on the business to get back their return on investment. Employee compensation may also reduce since many organizations compensate their employees depending on the profits gained over a specified time period. Reducing the price of products may be detrimental to the image of a business especially if the quality of products does not match the industries standards. If product quality is compromised, existing customers may perceive price reduction as a sign of low product quality. When such a perception forms, a business may lose its customers to competitors, which may further ruin its performance and ability to satisfy its stakeholders. With the reduced performance, the business entity cannot even cater for its corporate social responsibility, which may leave behind less positive impact in the society within which it operates.
When an organization is operating in a mature product market, it needs to conduct intensive promotional campaigns to curb the high competition. These campaigns consume most of the business’s time and manpower, which may reduce the concentration of the business on the needs of other stakeholders. The divided attention given to some stakeholders makes them dissatisfied and may reduce their effort to improve the performance of the business (Lantos, 2010).
In a business, shareholders are people who have invested in it and expect returns as per the shares they hold within the business. The amount of money due to them at the end of a business year depends on the performance of the business. High profits usually translate to high earnings per share while low profitability means low earning per share held. When a business product has reached a maturity stage, profitability tends to decline. As such, the business faces the challenge of paying off earnings per share to the shareholders despite the, low profitability. The challenge becomes compounded when the business must take care of the shareholders and ensure that the business continues its operations using the limited resources.
Creditors are stakeholders who provide the business with capital and monetary resource to carry out its activities. They avail money to the business to improve its performance at a small interest. The ability of the business to pay back what is owed to the creditors is influenced by its profitability and performance. When the business is operating in a mature product market, performance is low and thus returns are low. Consequently, the ability of the business to repay debt to creditors is minimized. When creditors are claiming their dues from the business, other stakeholders are also demanding for their needs to be met by the business. When the pressure piles of the business, it fails to satisfy its stakeholders appropriately (Pinson, 2004).
Trade unions advocate for the welfare of workers in different industries. They fight for safe working conditions, pension, pay and health care issues (Martinez, 2012). Unions are very aggressive and sometimes ruthless to businesses that fail to meet the demands of their employees. The demands advocated for by trade unions require resource allocation from the business. When the business is at the mature product market, its resources are more strained than when the products are at the growth stage. Therefore, the business may not be able to compensate and take care of all the needs of its employees as required by the unions. As such, satisfying the needs of the unions become difficult especially because the business is at its mature product stage.
When customers purchase a product, they are always anxious and fearful that they might not perform the purpose for which it was bought. Any perception by the customer that another product from a competitor business might perform better can lead to them switching to that business. Businesses operating in the mature product markets are more prone to suffer loss of customers due to competitors. To deal with this challenge, businesses operating in the mature product markets have increased follow-ups with customers through letters and sales people who check regularly the performance of the products purchased (McShane and Glinow, 2010). This process consumes both time and monetary resources. As resources are ever scarce, it becomes difficult for the business to satisfy all the stakeholders in such hard business conditions.
In conclusion, the challenge of satisfying different stakeholders by businesses in the mature product markets emerges due to scarcity of resources. These resources are both monetary and non-monetary. Since the business has to cater for all the stakeholders at the same time with limited resources, it becomes difficult to satisfy them. The conflicting demands by the stakeholders makes balancing even harder since taking care of one stakeholder’s demands may mean foregoing those of the other stakeholders.
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