LO5

LO5- Understand the relationships between businesses and stakeholders

Stakeholder

Any person, group or organisation that has an interest in a business because they are, or may be, affected by the activities of that business.

Internal stakeholder

An individual or group who are involved in a business directly by being or representing members of the workforce; this includes owners (sole trader, partners), employees (e.g. chief executive, directors, managers, supervisors, assistants)

External stakeholder

A person or group of people with links to the business, e.g. because of their personal location or that of the business they are connected with the organisation directly. They can be shareholders, customers, suppliers, potential investors, lenders, local community, pressure groups, and central and local government (e.g. HMRC, environmental health, planning department).

Employee - Type of Stakeholder

Internal

Owner/founder - Type of Stakeholder

Internal

Customer - Type of Stakeholder

External

Supplier - Type of Stakeholder

External

Financial businesses - Type of Stakeholder

External

Local residents - Type of Stakeholder

External

Local and central government - Type of Stakeholder

External

Trade unions - Type of Stakeholder

External

Shareholder - Type of Stakeholder

External

Pressure groups - Type of Stakeholder

External

Employee - Stakeholder objectives

• For business to succeed and remain profitable to retain salary and job security

• Be fairly paid and receive benefits

• Have a long and fulfilling career

• Get rewards and recognition for work, e.g. bonus, promotion

• Enjoy good working condition

Owner/founder - Stakeholder objectives

• For business to succeed and remain profitable

• Have skilled, loyal and hard-working staff to contribute to business’ success

• Ensure business remains competitive

Customer - Stakeholder objectives

• Be treated fairly

• Get good value for money

• Get quality products/services

Suppliers - Stakeholder objectives

• Commitment to a fair contract

• Be paid within the agreed timescales

Financial businesses - Stakeholder objectives

• Advise the business financially

• Fund of retain the financial aspects of the business

Local resident/communities - Stakeholder objectives

• Purchase the products/services

• Respect the local community

• Inform the local community of any major changes that may impact local resident

Local/central government - Stakeholder objectives

• Ensure business abides by the law and regulation, e.g. HMRC, Environmental Health

• Encourage and support economic development and growth

Trade Union - Stakeholder objectives

• Support employees to ensure working condition, pay

• Aid conflict resolution

Shareholders - Stakeholder objectives

• Support the business

• Investing funds in exchange for shares with the business paying out dividends to shareholders

Pressure group - Stakeholder objectives

• Monitor business activities and processes influence alternative business decisions

Employee - Why is this stakeholder important

• Business depends on employees to function

Owner - Why is this stakeholder important

• They decide on the direction of the business

Customer - Why is this stakeholder important

• Without customers purchasing products or service, the business will not survive

Suppliers - Why is this stakeholder important

• Supply products and services to the business on a regular basis

Financial businesses - Why is this stakeholder important

• Provide financial and investment advice

• Provide finance when and if required

Local residents - Why is this stakeholder important

• Purchase the products/service

• Promote the business locally by supporting the business

• They can determine the success of the business

Local/central government - Why is this stakeholder important

• Support local businesses

Trade Unions - Why is this stakeholder important

• A group to ensure that the business acts and treats employees fairly

• If conflicts arise, support workers

Shareholders - Why is this stakeholder important

• Invest regular financial funds to the business

• Aid the business in moving forward according to its aims and objectives

Pressure groups - Why is this stakeholder important

• Can improve and influence business operations and methods

Conflict resolution

the methods a business may implement to resolve any major issues that affect the way in which business is performed.

A mediator will also need to listen to both parties, understand the issues and, above all, facilitate the negotiation process towards some sort of resolution that both parties can agree.

Benefits of meeting stakeholder needs

• Gaining a better understanding of each stakeholder’s individual objectives

• Communicating with stakeholders, listening to their thoughts and concerns, and involving them in decisions will build up trust, better understanding and appreciation of the decisions that will be made from both sides

• Understanding and appreciating which stakeholders could have the most influence on the business

• Stakeholders may have access to different resources, which could enable a business to benefit from these contacts

Drawbacks of meeting stakeholder needs

• Listening to all stakeholder groups can take time. Businesses may therefore have to select which groups they discuss issues with.

• If the advice is not implemented, stakeholders may become annoyed, which could distract from business activities