1. Definition – stakeholder

A stakeholder is any individual or group that has a vested interest in a business and how it operates. According to your study design, this includes:

• Business owners (including shareholders & partners)

• Managers

• Employees

• Customers

• Suppliers

• The general community

2. Characteristics and interests of different stakeholders

Activity

1. In your exercise books/A3 sheet you are to construct a table like the one below

2. Attempt to go through each stakeholder and identify what their characteristics and their interests are in a particular business

For assistance with this task see pages 27-31 from the textbook

3. Possible conflicts between stakeholders

A conflict often arises when the needs of one stakeholder group are satisfied at the expense of another’s.

Some stakeholders have very similar interests, while there are other stakeholders whose interests could be in conflict with one another.

How can these stakeholder have conflicting interests:

• Business owners and Customers

• Shareholders and Employees

• Managers and suppliers

Structuring of answer… Sentence 1: State who the stakeholder is. Sentence 2: Provide one of their interests. Sentence 3: State who the second stakeholder is. Sentence 4: Provide one of their interests. Sentence 5 (and possibly sixth): illustrate how satisfying the interest of one stakeholder will lead to the other stakeholder being left unhappy/dissatisfied – hence the conflict.

Business owners and customers A business owner has the interests of wanting to see their business grow in profitability. Customers, those people who purchase the goods and services sold by a business are interested in receiving a high quality good/service at an affordable price. If, in searching for greater levels of profitability, the owners of a business decide to increase their prices or find a cheaper supplier to reduce their expenses, this could lead to a conflict occurring with customers who could be unhappy at having to either pay more for the business’s goods or services or pay the same amount for a poorer quality good/service.

Shareholders and employees Shareholders are the part owners of a business. Their interests lie in seeing the business increase their profitability as this will translate into a higher rate of return on their investment. Employees are members of the business who carry out the day-to-day tasks of the business. Their interests lie in receiving what they deem to be an appropriate salary for the work that they do. If, in wanting the business to become more profitable, shareholders pressure the managers of the business to cut staff numbers or freeze salary increases this could cause a conflict with employees who would feel unhappy about lost job security or not receiving a wage increase.

Managers and suppliers Managers are the employees who have the responsibility of successfully overseeing how the business operates. Their interest lies in the business achieving its objectives which in most instances would incorporate profitability. Suppliers are the business that supplier the necessary resources a business needs to produce products. Their interest lies in being paid the maximum price for their suppliers so that they can increase their profitability. These two interests can come into conflict as should a business prioritise their profit objective and seek to reduce their expenses by trying to bargain a cheaper price for their supplies, the supplier will be upset as they will consequently see their profit objective decline.