F1: ACCOUNTANT IN BUSINESS
CH 1: Business Organisations & Their
Stakeholders
1. What is an Organisation?

It is a social arrangement which pursues collective goals, which controls its own performance
and which has a boundary separating it from its environment.
2. Characteristics of Organisations
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They are preoccupied with performance and meeting or improving their standards.
They contain formal, documented systems and procedures which enable them to control what
they do.
Different people do different things or specialize in one activity.
They pursue a variety of objectives & goals.
Most organisations obtain inputs (e.g. materials) and process them into outputs (e.g. for others to
buy).
3. Purpose of Organisations
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They overcome people’s individual limitations, whether physical or intellectual.
They enable people to specialize.
They enable synergy (i.e. the collective output is greater than the sum of the individual’s output
e.g. 1+1=11)
They accumulate and share knowledge.
They save time because people can work together or do two aspects of a different task at the same
time.
4. How Organisations Differ
4.1.

Some are owned by private owners/ shareholders and others by government.
4.2.
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Ownership
Control
Some are controlled by the owners themselves while others are controlled by hired staff e.g.
managers
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4.3. Activity
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They do different things in different industries.
4.4. Profit or non-profit orientation
4.5. Legal Status
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May be limited companies or partnerships
4.6. Size
4.7. Sources of finance
This could range from bank loans to equity financing.
F1: ACCOUNTANT IN BUSINESS
4.8. The use of technology (Compare apple and wal mart)
5. Types of business Organisations
5.1.
Profit Vs Non-profit oriented
Profit Oriented
5.2.
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Non-Profit
Oriented
Owners
Public/beneficiaries
Maximize profits
through dividends
(PRIMARY GOAL)
Provision of
Goods/Services
(PRIMARY GOAL)
PROFIT
OUPTPUT
(GOODS/SERVICES)
Output of
goods/services
(Secondary goal).
Revenue is generated
from this
Minimise cost of
primary goal
Input
(Material,Labour,
finance). Costs are
incurred
Input
(Material,Labour,
finance). Costs are
incurred
Private vs Public Sector
Private- These are organisations not owned or run by government or their agencies
Public- These are organisations owned or run by central or local government, e.g. public schools
and universities, the armed forces.
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5.3.
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This is a legally constituted organisation of people acting together independently from any
form of government.
Their characteristics are:
1. Staff comprises mostly of volunteers as well as full time paid employees.
2. They are financed from grants or contracts.
3. They are non-profit making.
4. They are not constituted as a political party.
5. They aim to improve the lives of people especially the disadvantaged.
6. They require planning and budgeting expertise
7. They have some kind of National headquarters.
5.4.
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Non-governmental organisations
Cooperative Societies and Mutual Associations
They are businesses owned by their workers or customers who share the profit.
6. Stakeholders in Business Organisations
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Managers are not completely free to set objectives. They have different groups of stakeholders to
consider.
The managers act as agents for the stakeholders whose influence varies from organisation to
organisation.
Stakeholders are individuals/groups that potentially have an interest in what the organisation
does.
6.1.
Internal Stakeholders: Employees and Management
Internal Stakeholders
Managers and employees
6.2.
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Interests to Defend
Jobs/career
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Money
Promotion
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Benefits
Job satisfaction
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Response Risk
Pursue system goals
rather than shareholder
interest
Industrial action
Negative power to
impede implementation
Refusal tool relocate
Resignation
Connected Stakeholders
Connected Stakeholders
Shareholders (corporate strategy)
Interests to Defend
 Increase in
shareholder wealth
measured by profit
ability, P/E ratios,
market
capitalization,
dividends & yield

Response Risk
Sell shares or boot out
management
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Bankers (Cash flows)
Suppliers (purchase strategy)
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Customers (Product market strategy)
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6.3.
Risk
Security of loan
Adherence to loan
agreements
Profitable sales
Payment for goods
Long-term
relationship
Goods as promised
Future benefits e.g.
discounts
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Denial of credit
Higher interest charges
Receivership
Refusal of credit
Court action
Wind down relationships
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Buy elsewhere
Sue
External Stakeholders
External Stakeholders
Government
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Interests to Defend
Jobs
Training
Tax
Interest/Pressure groups
(NACADA,NEMA,KNUT)
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Pollution
Rights
Other
Professional Bodies (ACCA)
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Members’ Benefits
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Response Risk
Tax increases
Regulation e.g.
ERC,SRC
Legal action
Publicity
Direct action
Sabotage
Direct action
Imposition of ethical
standards
7. Another Approach
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A stakeholder may also be analyzed by reference to whether they have a contractual
relationship with the organisation.
Stakeholders who have such a relationship are called primary stakeholders e.g. internal
&connected stakeholders.
Those who lack such a relationship are called secondary stakeholders e.g. external
stakeholders.
8. Mendelow Matrix
8.1.
Stakeholder Mapping: Power & Interest
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a) Key players are found in D. Strategy must be acceptable to them, at least e.g. a major
customer. They may even participate in decision making.
b) Stakeholders in segment c must be treated with care and kept satisfied because they are capable
of moving to D e.g. institutional shareholders (Pension & insurance funds).
c) Stakeholders in segment B do not have great ability to influence strategy, but their views can be
important in influencing more powerful stakeholders, perhaps by lobbying. They should therefore
be kept informed. Examples are charities and community representatives.
d) Minimal effort is focused on segment A.
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Stakeholder mapping is used to assess the significance of stakeholder groups. This in turn has
implications for the organisation.
a) The framework of corporate governance should recognize stakeholders’ levels of interest and
power.
b) It may be appropriate to seek to repositions certain stakeholders, &discourage others from
repositioning themselves, depending on their attitudes.
c) Key blockers and facilitators of change must be identified.
Each of these groups has 3 basic choices:
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Loyalty. They can do as they are told.
Exit by getting a new job or selling their shares.
Voice. They can stay and try to change the system.
9. Measuring Stakeholder Satisfaction
Stakeholder Group
Employees
Government
Distributors
Measure
Staff turnover, pay and benefits relative to market
rate, job vacancies
Pollution measures; promptness of filing annual
returns; accident rate; energy efficiency
Share of joint promotions paid for, rate of running
out of inventory