objectives of different stakeholder groups

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1.5.2 The Role of Stakeholder Groups

Learning Objective (AO1)

Identify the main objectives of the different stakeholder groups that influence a business, recognise why these objectives differ, and explain how conflicts can arise.

What is a stakeholder?

A stakeholder is any individual or group that can affect, or be affected by, the activities and decisions of a business.

Internal vs. External Stakeholders

  • Internal stakeholders operate within the organisation (e.g., owners/shareholders, managers, employees).
  • External stakeholders are outside the organisation but have an interest in its performance (e.g., customers, suppliers, creditors, government, local community/society).

Key Stakeholder Groups (Numbered)

  1. Owners / Shareholders
  2. Managers
  3. Employees
  4. Customers
  5. Suppliers
  6. Creditors (banks, lenders)
  7. Government
  8. Local community / Society

Primary Objectives of Each Stakeholder Group (AO1)

# Stakeholder Group Primary Objectives (as stated in the syllabus)
1 Owners / Shareholders
  • Profit objective – maximise profit and return on investment.
  • Growth objective – increase share price and dividends.
  • Long‑term sustainability objective – ensure the business can survive and grow.

Data‑response task (AO3): A business makes a profit of £200 000 and pays dividends of £50 000.
Calculate the dividend yield and comment on what this indicates for shareholders.
2 Managers
  • Goal‑achievement objective – meet the organisational goals set by owners.
  • Efficiency objective – maintain productive operations and control costs.
  • People‑development objective – motivate, train and retain staff.
3 Employees
  • Job‑security objective – secure stable employment and income.
  • Remuneration objective – obtain fair wages, bonuses and benefits.
  • Career‑development objective – access training, promotion and job satisfaction.
  • Health & safety objective – work in safe and healthy conditions.
4 Customers
  • Value‑for‑money objective – receive quality products/services at a reasonable price.
  • Service objective – enjoy good customer service and after‑sales support.
  • Choice & innovation objective – have access to a range of products and new developments.
5 Suppliers
  • Order‑flow objective – obtain regular orders from the business.
  • Payment objective – receive timely payments.
  • Profit‑margin objective – achieve a reasonable profit on supplied goods/services.
6 Creditors (banks, lenders)
  • Interest‑income objective – receive agreed interest on loans.
  • Repayment objective – have capital repaid on schedule.
  • Risk‑minimisation objective – maintain a good credit rating for the borrower.
7 Government
  • Revenue objective – collect taxes and duties.
  • Regulatory objective – ensure compliance with laws (health & safety, environmental, consumer protection).
  • Economic‑development objective – promote employment, growth and stability.
  • Public‑interest objective – protect consumers, the environment and public health.
8 Local community / Society
  • Employment objective – benefit from local jobs.
  • CSR objective – enjoy community projects, charitable activities and ethical business practices.
  • Environmental & social objective – minimise negative impacts on the local area and society.

Why Do Objectives Differ?

Each stakeholder group looks at the business from a different perspective. Owners seek profit and growth because they have invested capital and expect a financial return. Managers are judged on how well they achieve the owners’ goals while keeping costs low. Employees value job security and fair pay because their livelihood depends on the firm. Customers want value for money and good service, whereas suppliers need regular orders and timely payment to keep their own operations viable. Creditors focus on interest and repayment to protect their lending risk. Government bodies aim to raise revenue and enforce regulations that protect the public, while the local community cares about jobs, social responsibility and environmental impact. These differing priorities naturally create tension when the same decision benefits one group but disadvantages another.

How Conflicts Arise (AO2 & AO4)

Conflict Stakeholder(s) Involved Underlying Objective Clash
Higher profits vs. higher wages Owners/Shareholders ↔ Employees Profit objective (owners) vs. remuneration & job‑security objective (employees)
Lower selling price vs. supplier margin Customers ↔ Suppliers Value‑for‑money objective (customers) vs. profit‑margin objective (suppliers)
New health‑safety regulation increases production cost Government ↔ Owners/Shareholders & Customers Regulatory objective (government) vs. profit objective (shareholders) and value‑for‑money objective (customers)
Interest‑income vs. profit distribution Creditors ↔ Owners/Shareholders Interest‑income objective (creditors) vs. profit‑distribution objective (shareholders)
Factory expansion vs. local environmental impact Local community ↔ Owners/Shareholders Environmental & social objective (community) vs. growth objective (shareholders)

Exam‑style case snippet (Paper 2 stimulus)

“Fast‑Food Ltd has introduced a new health‑safety regulation that requires all restaurants to install additional ventilation systems at a cost of £15 000 per outlet. Management must decide whether to pass the cost onto customers by raising menu prices or to absorb it, reducing the annual profit forecast from £2 million to £1.7 million.”

This stimulus can be used to assess students’ ability to analyse the conflict between the government’s regulatory objective and the shareholders’ profit objective, and to evaluate possible managerial responses.

Dual‑Role Stakeholders (Additional Concept)

In many organisations a single party can belong to two stakeholder groups at once – for example, an owner‑manager who is both a shareholder and a manager, or an employee‑shareholder who holds shares while working for the firm. Dual‑role stakeholders often act as a “bridge” that can moderate conflicts because they understand the objectives of both groups.

Strategies for Managing Stakeholder Relationships (AO2)

  • Stakeholder analysis – map each group’s power and interest (see the power/interest grid below).
  • Open communication – regular reports, meetings, newsletters and feedback channels.
  • Negotiation and compromise – seek mutually beneficial solutions (e.g., profit‑sharing schemes, flexible pricing).
  • Corporate Social Responsibility (CSR) – address community, environmental and ethical concerns to align business goals with societal expectations.

Evaluation Prompt (AO4)

“Assess whether prioritising the objectives of the local community (e.g., environmental protection) could enhance the long‑term profitability of a business.”

Students can discuss short‑term cost implications versus long‑term reputation benefits, the role of dual‑role stakeholders, and real‑world examples such as green‑branding strategies.

Stakeholder Map – Power/Interest Grid (Analysis Tool)

Four‑quadrant power‑interest grid showing: High power / high interest – Owners/Shareholders and Managers; Medium power / high interest – Employees; Low power / high interest – Customers; Medium power / medium interest – Suppliers; High power / low interest – Creditors; High power / medium interest – Government; Low power / medium interest – Local community.
Power‑interest grid: each stakeholder is positioned according to its relative power over the business and its level of interest.

Summary (AO1‑AO4 Alignment)

  • AO1 – definition of stakeholder, internal vs external distinction, numbered list of groups, and syllabus‑exact objectives.
  • AO2 – quantitative data‑response task, expanded conflict table, case snippet, and management strategies.
  • AO3 – dividend‑yield calculation provides data for analysis.
  • AO4 – evaluation prompt and discussion of dual‑role stakeholders encourage critical judgement.

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