1.4 stakeholders

• Stake


  To have an interest or to be involved in something
• Stakeholder


  Any individuals, group, or organisation with a direct interest or involvement in the operations and performance of a business
• Stakeholder categories

  • Internal
  • External
• Internal stakeholders


  Members of the business
• Internal stakeholders

  • Employees
  • Managers and Directors
  • Shareholders (owners)
• Employees


  • Direct stake in the organisation they work with
  • Likely to strive to improve their pay, working conditions, job security, opportunities for career progression, training and professional development
• Employees are an organisation's most valuable asset as they produce goods and services for sale and are in direct communication with customers
• A motivated workforce (employees) is more dynamic and loyal</b>
• Managers and directors


  • Aim to maximise their own benefits such as annual bonuses and other financial rewards
  • Seek long-term financial health of their organisation
• Shareholders


  • Powerful stakeholder group as they have voting rights and 'say' in operations of the company
  • Entitled to a share of annual profits
  • Aim to maximise dividends and achieve capital gain in the value of the company's shares
• Internal stakeholder


  Directors or employees who hold shares in the company
• External stakeholder


  Individuals who own shares in the company but are not directly involved in the daily operations of the business
• Market share

  The percent of total sales in an industry generated by a particular company, calculated by the company's sales over the period divided by the total sales of the industry over the same period
• Nokia shareholder


  Individual(s) who are the owner(s) of a limited liability company, meaning they have voting rights and a say in the operations of a business, and are entitled to the dividends of the business
• Nokia stakeholder


  Individual(s) who owns a stake in the business (interest or are directly involved in the business) and are impacted by the company or/and its decisions
• Microsoft takeover of Nokia

  • Positive implications for Nokia employees as they had job security and were transferred to Microsoft
  • Negative implications for Nokia employees outside the phones division who lost their jobs
  • Positive implications for Nokia shareholders as they were able to focus on maximising dividends and achieving capital gain after the drop in market share value
• External stakeholders


  Not a part of the business but have a direct interest or involvement in the organisation
• External stakeholders

  • Customers
  • Suppliers
  • Financiers
  • Pressure groups
  • Competitors
  • Government
• Customers


  • Very important in all aspects of business activity
  • Businesses have to listen to the opinions of their customers
  • Customers' interests or objectives include greater choice, better quality products, and more competitive prices
• How businesses listen to customers' needs and wants

  1. Market research

  2. Customer suggestions schemes and satisfaction surveys

  3. Addressing complaints and suggestions
• Suppliers

  • Strive for regular contracts with clients at competitive prices
  • Request customers pay any outstanding bills on time
  • Businesses try to establish good working relationships with suppliers to receive quality stock on time and at reasonable prices
• Financiers


  • Primarily interested in borrowing organisations' ability to generate sufficient profits, repay debts, and make regular interest payments
  • Earn money by charging interest on the amount of money borrowed
• Pressure groups


  • Individuals with a common interest who seek to place demands on organisations to act in a particular way or to influence a desired change in their behaviour
  • Actions taken include boycotting, lobbying, public relations, and direct action
• Local communities can put demands (pressure) on businesses to provide jobs, sponsor local fund-raising events, and be accountable for the impact of their actions on the local environment
• Competitors


  • Interested in the activities of a business to remain competitive, benchmark performance, and be creative and innovative
• Government


  • Can have a significant influence on business activity
  • Strives to ensure that all businesses act in the interest of the general public
  • Supports businesses through policies like lowering interest rates and taxes, offering incentives, and investing in infrastructure
• Stakeholder conflict


  The difference in the varying needs and priorities of the various stakeholder groups of a business, resulting in conflicting interests
• It is not possible for a business to meet all of its stakeholder objectives simultaneously
• Stakeholder conflict arises because a business cannot simultaneously meet the needs of all its stakeholders
• Examples of stakeholder conflict

  • Shareholders wanting a greater share of the profits causing cutting of employee benefits
  • Suppliers wanting full price in one transaction vs businesses wanting discounted prices for large quantities
• Factors in deciding how to deal with conflicting stakeholder needs

  • Priority - who to prioritise
  • Type of business entity
  • Goals and objectives of the business
  • Source and degree of power (influence) for each stakeholder group
• If a good is highly elastic, customers can determine the price in a perfect competition market