Stakeholders in Business
Stakeholders in Business
A stakeholder is any individual or group that has an interest in or is affected by the activities and decisions of a business. Understanding stakeholders is crucial because their needs often conflict.
Key Stakeholders
| Stakeholder | What They Want | How They Are Affected |
|---|---|---|
| Owners/shareholders | Profit, growth, return on investment | Receive dividends; risk losing investment if the business fails |
| Employees | Fair pay, job security, good working conditions | Depend on the business for their livelihood |
| Customers | Quality products, fair prices, good service | Buy goods/services; affected by changes in price or quality |
| Suppliers | Regular orders, prompt payment | Rely on the business for their own revenue |
| Local community | Jobs, minimal pollution, community support | Affected by noise, traffic, employment and environmental impact |
| Government | Tax revenue, legal compliance, employment | Collects taxes; regulates business behaviour |
| Managers | Business success, salary, career progression | Make decisions that affect all other stakeholders |
| Lenders/banks | Loan repayment with interest | Risk losing money if the business defaults |
Stakeholder Conflict
Different stakeholders often want different things, creating conflict:
- Owners vs employees: owners want to cut costs (including wages) to increase profit; employees want higher pay
- Customers vs owners: customers want lower prices; owners want higher prices for more profit
- Local community vs owners: the community wants less pollution and noise; the business may want to expand operations
- Shareholders vs managers: shareholders want short-term dividends; managers may want to reinvest profits for long-term growth
- Suppliers vs business: suppliers want prompt payment; the business may want to delay payment to improve cash flow
How Businesses Manage Stakeholder Conflict
- Compromise — finding a middle ground that partially satisfies both groups
- Prioritisation — deciding which stakeholder is most important in a given situation (often customers or shareholders)
- Communication — keeping stakeholders informed about decisions and the reasons behind them
- Corporate Social Responsibility (CSR) — voluntarily acting ethically to satisfy multiple stakeholders (e.g. paying fair wages, reducing environmental impact)
Internal vs External Stakeholders
| Internal (within the business) | External (outside the business) |
|---|---|
| Owners, managers, employees | Customers, suppliers, government, community, lenders |
| Have direct involvement in daily operations | Affected by but not directly running the business |
Exam Tips
- Always identify specific stakeholders — do not write "everyone"
- Explain the conflict between at least two stakeholders when asked
- Use real-world examples — e.g. Amazon workers demanding higher pay vs shareholders wanting profits
- For evaluation: which stakeholder matters most? It depends on the context — a struggling business may prioritise lenders; a growing one may prioritise customers
- Remember: stakeholder conflict is normal and does not mean the business is failing