Stakeholders

Overview

Stakeholders are the beating heart of any business. This topic explores the crucial two-way relationship between a business and the individuals or groups that have an interest in its activities. Examiners frequently test your ability to not only identify these groups but to analyse the complex web of conflicting objectives between them. Candidates who can accurately evaluate which stakeholder is most important in a given context, and how businesses manage these conflicts, consistently access the highest mark bands.

Internal Stakeholders

Internal stakeholders are those who are part of the business itself.

Owners (Shareholders)

Role: The individuals who have invested capital into the business.

Objectives: They seek a return on their investment (profit/dividends), business growth, and long-term financial stability.

Influence: Owners make strategic decisions, vote at AGMs (Annual General Meetings), and can inject more capital or sell their shares.

Employees

Role: The workforce who carry out the day-to-day operations of the business.

Objectives: They want job security, fair wages, good working conditions, and opportunities for promotion.

Influence: Employees impact productivity, quality of customer service, and can take industrial action (e.g., strikes) if unhappy.

External Stakeholders

External stakeholders are outside the business but are still affected by or can affect it.

Customers

Role: The people who buy the goods or services provided by the business.

Objectives: They desire value for money, high-quality products, excellent customer service, and increasingly, ethical business practices.

Influence: Customers provide revenue. They can boycott a business, switch to competitors, or leave damaging reviews online.

Suppliers

Role: The businesses that provide the raw materials or components needed for production.

Objectives: They want prompt payment, fair prices for their goods, and regular, reliable orders.

Influence: Suppliers can change their prices, alter credit terms, or withhold supplies, directly impacting the business's ability to operate.

Local Community

Role: The people living in the area where the business operates.

Objectives: They want local employment opportunities, minimal disruption (noise, traffic, pollution), and positive contributions to the area.

Influence: The community can object to planning permissions, organise protests, or generate negative local media coverage.

Government

Role: The local and national authorities that regulate business activity.

Objectives: They want businesses to create jobs, generate tax revenue (e.g., Corporation Tax), and comply with legislation.

Influence: The government can pass new laws, change tax rates, offer subsidies, or issue fines for non-compliance.

Stakeholder Conflicts

Because different stakeholders have different objectives, conflict is inevitable. This is a major focus for examiners.

Owners vs. Employees

Owners want to maximise profit, which often involves keeping costs low. Employees want higher wages, which increases costs and reduces short-term profit.

Customers vs. Owners

Customers want lower prices and higher quality, which can squeeze profit margins. Owners want to maximise profit margins, which might mean raising prices or using cheaper materials.

Local Community vs. Owners

Owners might want to expand operations (e.g., build a new factory) to increase output and profit. The local community might oppose this due to concerns over increased traffic, noise, and environmental damage.

Managing Conflicts

Businesses cannot always please everyone. They must manage these conflicts by prioritising certain stakeholders depending on their power and interest (often analysed using Mendelow's Matrix, though not always explicitly named at GCSE). Strategies include profit-sharing schemes, community engagement, and transparent communication.