Business
Organisation &
Environment
Stakeholders
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Stakeholders
• Person or organization that has a
interest
in
and
is
affected
direct
by
the
performance of a business
• They include owners, managers, employees,
customers, suppliers, investors, competitors,
the local community and the government
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Stakeholders
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Internal Stakeholders
They are members of the organization i.e.
employees, shareholders (owners), managers
and directors.
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Employees
 They have a stake (an interest) in the
organization they work for.
 They strive to improve on their pay and
other
financial
benefits,
working
conditions, job security, training, etc.
 These can only be offered to employees if
the business is performing well.
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Managers and Directors
 People who plan, organize and control the
daily running of the business.
 Directors are senior executives who are
elected by the company’s shareholders to
oversee business operations.
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 Senior managers and directors will aim to
maximize their own benefits such as their
annual
bonuses
and
other
perks,
and
therefore they are likely to aim for profit
maximization for the company.
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Shareholders (Stockholders)
 Owners of the private and public limited
companies by purchasing shares in these
companies.
 Shareholders have two main objectives and
that is maximize on the share dividend
payments and achieve a rise in the value of
the share price (known as capital gains).
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External Stakeholders
They do not form part of the business i.e.
customers, suppliers and the government but
have a direct interest or involvement in the
action of the organization.
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Customers
 The key stakeholder group who determines the
financial performance of a business.
 No business can survive without customers, they
are the ones who provide a business with
revenues.
 Customers can simply choose to spend their
money elsewhere, threatening the survival of a
business. So
10attention
it is vital that
business pay
to the needs of their customers.
Suppliers
 Provide stocks of raw materials, component
parts, finished goods and other resources for
production.
 Also
provide
business
services
such
as
maintenance and technical support.
 Aim for regular contracts with clients at good
prices and request that customers pay their
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outstanding
bills on time.
Competitors
 Rival businesses of an organization, interested
in the activities of a business for several
reasons:
Incentive to be innovative and produce new
products
Remain competitive, respond to rival businesses
Benchmark performance, compare performance
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Government
 Have
a
significant
influence
on
business
unfair
business
behaviour.
 Ensure
that
there
is
no
practices, health and safety standards at
work are met, correct payment of corporation
tax,
employment
protection
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legislation
and
laws are being upheld, etc
consumer
Pressure Groups
 Consist of individuals with a common interest
who seek to place demands on organization to
act in a particular way or to influence a change
in their behaviour.
 Try to achieve their objectives by aiming to
influence government policy, such as lobbying for
a change in legislation, e.g. include organizations
set up to protect the environment, campaigning
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against
smoking, deforestation, etc
Local Community
 Places
demands
on
the
businesses
that
operate in their community e.g. job creation
and opportunities, need to be considerate of
the local environment, sponsorship of local
and fund-raising events, etc.
 These considerations are paramount to the
local community’s acceptance of businesses
setting up in the area.
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Stakeholders’ Conflicts
 Different stakeholder groups have varying
interests in an organization and therefore
conflict will arise.
 Business cannot necessarily meet the needs
of all its stakeholders simultaneously
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Sources of Conflicts
 If owners want more profit, may need to
cut
staff
benefits,
this
will
upset
employees;
 If suppliers want payment on time and full
price in one transaction, this may harm
cashflow of the business, conflict may
arise
between
17suppliers.
the
business
and
its
 Other source of potential conflict is that
some
stakeholders
have
more
than
one
interest in an organization e.g. managers
who are employees of a company, may also
be
shareholder
of
the
company;
a
customer is also likely to be a member of
the local community
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Stakeholders and CUEGIS
 Most
strategies
compromise
stakeholder
so
aim
that
groups
for
the
a
needs
are
addressed.
 The outcome of any negotiation
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‘best
of
fit’
all
reasonable
Stakeholders and CUEGIS
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Stakeholder Mapping Model
Using a stakeholder mapping model (developed
by
Gerry
Johnson
and
Kevan
Scholes),
managers of a business can assess how to deal
with
conflicting
stakeholder
prioritize their actions.
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objectives
and
Assesses the relative interest of stakeholders
in a business and their relative power (or
influence) on business behaviour.
Stakeholder
groups would be placed into the grid as follows:
Level of interest
Low
Level of
Power
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High
Low
A (min effort)
B (keep informed)
High
C (keep satisfied)
D (max effort)
Analyzing from the stakeholder mapping model,
it is likely that stakeholders in:
 A will receive least attention from decisionmakers.
 D will receive the most attention.
 B just need to be kept informed.
 C
must
be
kept
satisfied,
perhaps
by
consulting these stakeholders groups on key
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decisions.
Limitation of the stakeholder mapping model
is that it is static as relative power and level
of interest of stakeholders is likely to change
with time e.g. environmental pressure groups
have
gain
much
support
in
recent
times
whereas the power and image of many trade
unions have deteriorated.
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Use of Public Relations Firms
 Another way to deal with stakeholder conflict
is to use public relations (PR), using a good PR
firm to handle negative publicity.
 They will publicize the good work that the
business is doing to repair or promote good
public relations.
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