1.4 STAKEHOLDERS / IB BUSINESS MANAGEMENT / internal and external stakeholders, stakeholder conflict

Stakeholders in Business

  • Definition of Stakeholders

    • Individuals, groups, or organizations that influence or are influenced by business decision-making.

    • Distinction of interests: Stakeholders hold a stake beyond just financial shares; their stake refers to their interests in business operations (interest holders).

Types of Stakeholders

Internal Stakeholders

  • Individuals within the company.

    • Shareholders

      • Objective: Maximize shareholder value.

    • Managers

      • Objective: Achieve business goals efficiently (time and cost-effective).

    • Employees

      • Objective: Seek fair wages and good working conditions.

    • CEOs

      • Objective: Maintain shareholder satisfaction to ensure stability of shareholding.

External Stakeholders

  • Individuals or groups outside the company.

    • Government

      • Objective: Stable tax revenues, legal compliance, voter support.

    • Media

      • Objective: Gain publicity and interesting stories, regardless of positive or negative nature.

    • Local Community

      • Objective: Employment opportunities and environmental safety.

    • Suppliers

      • Objective: Establish good relationships and ensure timely payments (short credit periods).

Complicated Nature of Stakeholders

  • Competitors

    • Not universally considered stakeholders as they lack direct interest in a particular business’s operations.

  • Dual Roles of Stakeholders

    • Certain individuals/organizations can be both internal and external (e.g., employees who live in the local community)

    • Minority Shareholders

    • Lack decision-making power despite holding shares; thus, functionally external.

    • Temporary Stakeholders

    • External parties (e.g., marketing agencies) become internal upon initiation of a contract.

Stakeholder Conflicts

  • Different stakeholders have varying objectives that can clash, leading to conflicts (e.g., between employees and managers).

  • Importance of resolving conflicts for smooth business operations and decision-making.

Tools for Managing Conflicts

Power-Interest Matrix

  • Quadrants based on the level of stakeholder power and interest:

    • Group A: Low Power/Low Interest

      • Minimum effort required (e.g., local community).

    • Group B: Low Power/High Interest

      • Keep informed (e.g., customers).

    • Group C: High Power/Low Interest

      • Keep satisfied (e.g., government).

    • Group D: High Power/High Interest

      • Maximum effort needed (e.g., shareholders, CEO, managers).

  • Conflict Resolution Strategy

    • Address stakeholders according to their group in the matrix: group D first, followed by C, B, and A.

Stakeholder Analysis

  • Visual tool to assess decision-maker proximity.

    • Circles Technique

      • Central circle for main decision-makers; surrounding circles for those with lesser power.

    • Helps prioritize stakeholder attention based on influence on business decisions.