business organisation & environment stakeholders 1
TRANSCRIPT
Stakeholders
• Person or organization that has a
direct interest in and is affected by the
performance of a business
• They include owners, managers,
employees, customers, suppliers,
investors, competitors, the local
community and the government2
Internal Stakeholders
They are members of the organization
i.e. employees, shareholders (owners),
managers and directors.
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Employees
They have a stake (an interest) in the
organization they work for.
They strive to improve on their pay
and other financial benefits, working
conditions, job security, training, etc.
These can only be offered to
employees if the business is
performing well.5
Managers and Directors
People who plan, organize and
control the daily running of the
business.
Directors are senior executives who
are elected by the company’s
shareholders to oversee business
operations. 6
Senior managers and directors will
aim to maximize their own benefits
such as their annual bonuses and
other perks, and therefore they are
likely to aim for profit maximization
for the company.
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Shareholders (Stockholders)
Owners of the private and public
limited companies by purchasing
shares in these companies.
Shareholders have two main objectives
and that is maximize on the share
dividend payments and achieve a rise
in the value of the share price (known
as capital gains).8
External Stakeholders
They do not form part of the business
i.e. customers, suppliers and the
government but have a direct interest
or involvement in the action of the
organization.
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Customers The key stakeholder group who determines
the financial performance of a business.
No business can survive without customers,
they are the ones who provide a business
with revenues.
Customers can simply choose to spend their
money elsewhere, threatening the survival
of a business. So it is vital that business pay
attention to the needs of their customers.10
Suppliers
Provide stocks of raw materials,
component parts, finished goods and
other resources for production.
Also provide business services such as
maintenance and technical support.
Aim for regular contracts with clients at
good prices and request that customers
pay their outstanding bills on time.11
Competitors
Rival businesses of an organization,
interested in the activities of a business
for several reasons:
Incentive to be innovative and produce
new products
Remain competitive, respond to rival
businesses
Benchmark performance, compare
performance
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Government
Have a significant influence on business
behaviour.
Ensure that there is no unfair business
practices, health and safety standards
at work are met, correct payment of
corporation tax, employment legislation
and consumer protection laws are being
upheld, etc
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Pressure Groups Consist of individuals with a common interest
who seek to place demands on organization to
act in a particular way or to influence a
change in their behaviour.
Try to achieve their objectives by aiming to
influence government policy, such as lobbying
for a change in legislation, e.g. include
organizations set up to protect the
environment, campaigning against smoking,
deforestation, etc 14
Local Community
Places demands on the businesses that
operate in their community e.g. job
creation and opportunities, need to be
considerate of the local environment,
sponsorship of local and fund-raising
events, etc.
These considerations are paramount to the
local community’s acceptance of
businesses setting up in the area.15
Stakeholders’ Conflicts
Different stakeholder groups have
varying interests in an organization
and therefore conflict will arise.
Business cannot necessarily meet the
needs of all its stakeholders
simultaneously
16
Sources of Conflicts
If owners want more profit, may
need to cut staff benefits, this will
upset employees;
If suppliers want payment on time
and full price in one transaction, this
may harm cashflow of the business,
conflict may arise between the
business and its suppliers. 17
Other source of potential conflict is
that some stakeholders have more
than one interest in an organization
e.g. managers who are employees of
a company, may also be shareholder
of the company; a customer is also
likely to be a member of the local
community
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Stakeholders and CUEGIS
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Most strategies aim for a ‘best fit’
compromise so that the needs of all
stakeholder groups are reasonable
addressed.
The outcome of any negotiation
Stakeholder Mapping Model
Using a stakeholder mapping model
(developed by Gerry Johnson and Kevan
Scholes), managers of a business can
assess how to deal with conflicting
stakeholder objectives and prioritize
their actions.
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Assesses the relative interest of
stakeholders in a business and their
relative power (or influence) on business
behaviour. Stakeholder groups would be
placed into the grid as follows:
Level of interest
Level of
Power22
Low High
Low A (min effort)
B (keep informed)
High C (keep satisfied)
D (max effort)
Analyzing from the stakeholder mapping
model, it is likely that stakeholders in:
A will receive least attention from
decision-makers.
D will receive the most attention.
B just need to be kept informed.
C must be kept satisfied, perhaps by
consulting these stakeholders groups
on key decisions.23
Limitation of the stakeholder mapping
model is that it is static as relative
power and level of interest of
stakeholders is likely to change with
time e.g. environmental pressure
groups have gain much support in
recent times whereas the power and
image of many trade unions have
deteriorated.24