Subject: Business | Level: GCSE | Exam Board: AQA
Master the dynamic world of business stakeholders, understanding exactly who influences a business and how a business impacts them. This essential topic is a massive mark-winner in GCSE Business exams when you learn to analyse the inevitable conflicts between different groups.
Revision Notes & Key Concepts
Key Terms & Definitions
- Stakeholder
- Any individual or group that has an interest in a business, is affected by it, or can affect its operations.
- Internal Stakeholder
- Groups that are part of the business itself, such as owners and employees.
- External Stakeholder
- Groups outside the business that have an interest in its activities, such as customers, suppliers, and the local community.
- Shareholder
- An individual or institution that owns a percentage of a limited company.
- Dividends
- A share of the business's profits paid to shareholders as a reward for their investment.
- Stakeholder Conflict
- A situation where the objectives of one stakeholder group are incompatible with the objectives of another.
Worked Examples
Worked Example
Question: Explain one way in which the objectives of employees might conflict with the objectives of owners. (3 marks)
Solution: One way employees' objectives conflict with owners' is over financial rewards (1 mark). Employees want higher wages to improve their standard of living, whereas owners want to keep costs low to maximise profit (1 mark). If the business increases wages, its overall costs will rise, which directly reduces the profit available to distribute as dividends to the owners (1 mark).
Worked Example
Question: Analyse the impact on two different stakeholder groups if a manufacturing business decides to relocate its factory to a cheaper area. (6 marks)
Solution: **Paragraph 1 - Employees**: The decision to relocate will have a significant negative impact on employees. Their main objective is job security, but relocation will likely lead to redundancies if they cannot move to the new area. This means they will lose their income and face financial uncertainty, leading to low morale and potential industrial action before the move. **Paragraph 2 - Owners**: Conversely, the relocation will have a positive impact on the owners. Their primary objective is to maximise profit. Moving to a cheaper area will lower fixed costs such as rent or business rates. This reduction in costs means the business can increase its profit margins, leading to higher dividends and a better return on investment for the owners.
Worked Example
Question: Evaluate whether customers are the most important stakeholder group for a newly established retail business. (9 marks)
Solution: **Introduction/Agreement**: Customers are arguably the most important stakeholder for a new retail business because they provide the revenue needed to survive. A new business lacks brand loyalty, so it must meet customer objectives—such as value for money and good service—to build a customer base. Without customers, the business will generate no sales, leading to immediate cash flow problems and potential failure. **Counter-argument**: However, owners could be considered more important in the short term. The owners provide the initial capital required to set up the shop, buy inventory, and pay for marketing. If the owners do not have the objective of long-term growth and are unwilling to risk their capital, the business cannot even open its doors to serve customers. **Conclusion/Judgement**: In conclusion, while owners are essential for providing the initial setup capital, customers are ultimately the most important stakeholder group for a newly established retail business. This is because, in the highly competitive retail market, a new business relies entirely on attracting and retaining customers to generate the revenue needed to cover costs and eventually deliver the profit the owners desire. Therefore, customer objectives must be prioritised to ensure survival.
Practice Questions
Question: State two external stakeholders of a business. (2 marks)
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Question: Explain how the local community might influence the decisions of a business planning to expand its factory. (3 marks)
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Question: Analyse how a decision to switch to cheaper, lower-quality suppliers might cause a conflict between owners and customers. (6 marks)
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Question: Evaluate whether suppliers are the most important stakeholder for a fast-food restaurant chain. (9 marks)
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Question: Explain one way the government can influence the objectives of a business. (3 marks)
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