1.4 Stakeholders

Stakeholder

Individuals / organizations with a direct interest (stake) in the activities + performance of a business

Internal stakeholders

• Members of the organization

• Have direct interest in + affected

  by the activities + performance

  of a business

Types of internal stakeholders

1. Employees

2. Managers + directors

3. Shareholders (owners)

External stakeholders

• Individuals + organizations not

  part of the business

• But have a direct interest in its activities + performance

Types of external stakeholders

1. Customers

2. Suppliers

3. Financiers

4. Pressure groups

5. Competitors

6. Government

Employees

Staff of the organization

What do employees want?

Improvement in:

1. Pay + other financial benefits

2. Working conditions

3. Job security

4. Opportunities for career

   progression

Argument for employees being the most valuable stakeholder

If demotivated → produce bad quality products / deliver bad customer service → damage brand rep / take industrial action

Managers

Oversee the daily operations of the business

Directors

• Senior executives

• Elected by the company's shareholders to address business activities on behalf of their owners

What do managers + directors want?

1. Profit maximization

2. Job security + financial

   benefits

3. LT financial health of the company

Shareholders

Owners of a limited liability company

• Shares in a company can be held by individuals + other organizations

2 main aims of stakeholders

1. Maximize dividends

2. Achieve capital gain in the value of the company shares

   • Ie rise in share value

Customer

Clients of a business

Main interests of customers

1. Value for money

2. Good quality products

3. Greater choice

4. Competitive pricing

   • Depends on industry

Suppliers

Provide a business with stocks of RM, component parts + finished goods needed for production

• + provide commercial services- eg maintenance + technical support

Main aims of suppliers

1. Clients who pay their bills on time

2. Regular contracts with clients

3. Good working relationships with clients

Why would a business aim to have good working relationship with its suppliers?

Supplier will offer preferential credit terms (trade credit) → improves CF position

Financiers

Financial institutions + individual investors who provide SoF for an organization=

Main interests of financiers

1. Ability of firrms to repay debts

2. Ability of firms to generate profits

3. Establish LT relationship w firms to achieve subsequent earnings

How to financiers earn money?

Charge interest on amt borrowed

Pressure groups

Individuals w a common concern who seek to place demands on organizations to act in a specific way / to influence a change in their behaviour

• Eg environmental protection

Interests of pressure groups

Depend on purpose of business

Main interests of the local community in businesses

1. Create job opportunities

2. Low environmental impact

3. Sponsor local fund-raising events

4. Conduct business activities in a socially responsible way

Competitors

Rival businesses to an organization

Main interests of competitors

To

1. Remain competitive

2. Benchmark performance

   • Compare perfoance indicators (eg profit) w rivals

3. Be creative + innovative

   • Rivalry → innovation

Local community

General public + local businesses w a direct interest in the activities of an organization

Government

The ruling authority within a state or country

• Want to ensure businesses complying w the law

• Want the b to act in the interest of the general public

Main interests of the government

Ensure:

1. Avoid unfair business practices

2. Firm pay correct corporate tax amt from profits

3. Health + safety standards met

4. Comply w employee legislation

5. Consumer protection laws are upheld

Ways governments can support businesses

1. Lower IR / taxes

2. Create employment opportunities

3. Offer incentives to MNCs to locate in their countries

4. Subsidies

5. Greater investment- eg in road + communication networks

Stakeholder conflict

Differences in needs + priorities of various stakeholder groups

• Business can't meet all stakeholder objectives simultaneously

• → tension

Remuneration

Pay + benefits

Factors affecting how to deal w stakeholder conflict

1. Type of organization

2. Business goal + objectives

   • Eg goal = growth → less profits as dividends (more retained)

3. Source + degree of power (influence) of each stakeholder group

   • Eg customers = high power in mass markets bc lots of subs

Tool to manage stakeholder conflict

Stakeholder mapping

Stakeholder mapping

Model that assesses the relative interest + relative power of stakeholders on an organisation

• Helps managers prioritise groups