how changing business objectives might affect stakeholders

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Stakeholders – Relative Importance and Influence

Learning Objective

Understand how a change in a business’s objectives can affect the interests, rights, responsibilities, relative importance and influence of its stakeholders, and how this analysis links to wider strategic tools (PEST, SWOT, Porter’s Five Forces).

1. What Is a Stakeholder?

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

1.1 Internal vs External Stakeholders

  • Internal stakeholders – exist inside the organisation: owners/shareholders, board of directors, managers, employees.
  • External stakeholders – exist outside the organisation: customers, suppliers, creditors, government/regulators, local community, NGOs, trade unions, media.

1.2 Primary vs Secondary Stakeholders

  • Primary stakeholders – essential for the business’s survival (owners, employees, customers, suppliers, creditors, government).
  • Secondary stakeholders – have a legitimate interest but are not essential for survival (local community, NGOs, media, trade unions, interest groups).

2. Roles, Rights & Responsibilities of Key Stakeholder Groups

Stakeholder Group Typical Roles Key Rights Typical Responsibilities
Owners / Shareholders Provide capital, appoint directors, set overall strategic direction. Voting rights; right to dividends; right to timely information. Exercise due diligence; act in the best interest of the company; comply with corporate‑governance codes.
Board of Directors Strategic oversight, fiduciary duty, risk management. Right to full information; right to make strategic decisions. Act with care, skill and diligence; avoid conflicts of interest; ensure legal compliance.
Managers Implement board decisions, allocate resources, motivate staff. Right to delegate authority; right to performance data. Achieve targets, maintain ethical standards, report accurately.
Employees Produce goods/services, interact with customers. Health & safety; fair wages; right to be consulted on major changes. Perform duties competently; follow policies; uphold confidentiality.
Customers Purchase and use products/services. Right to safe, fit‑for‑purpose goods; right to accurate information. Pay for products, give feedback, respect terms of sale.
Suppliers Provide inputs, services or finished goods. Right to timely payment; right to fair contract terms. Deliver quality goods on time; comply with ethical standards.
Creditors (banks, bond‑holders) Provide finance for operations or investment. Right to repayment with agreed interest; right to relevant financial information. Maintain covenants; use funds for intended purposes.
Government / Regulators Set the legal framework, collect taxes, enforce standards. Right to enforce laws; right to levy taxes; right to inspect. Comply with legislation; file returns; cooperate with inspections.
Local Community & NGOs Live/operate near the business; may advocate on social or environmental issues. Right to a healthy environment; right to be consulted on projects affecting them. Engage constructively; provide accurate information; respect local customs.
Trade Unions Represent employees, negotiate terms and conditions. Right to collective bargaining; right to strike (subject to law). Negotiate in good faith; avoid industrial action that endangers safety.
Media Inform the public, shape reputation. Freedom of expression; right to access public information. Report accurately; avoid defamation.

3. Measuring Relative Importance

Relative importance reflects how critical a stakeholder is to achieving the business’s current objectives. It is assessed by analysing the stakeholder’s contribution to:

  • Revenue (e.g., major customers, key shareholders)
  • Cost (e.g., primary suppliers, creditors)
  • Risk (e.g., regulators, trade unions)
  • Reputation (e.g., media, NGOs)

Typical rating scale: High, Medium, Low.

Stakeholder Contribution to Objective Relative Importance
Major shareholders Provide 60 % of capital; influence strategic direction High
Key customers Generate 45 % of sales volume High
Local community Potential source of protest if expansion harms environment Medium
Minor suppliers Provide low‑value components Low

4. Influence–Interest Matrix

The matrix plots influence (power) against interest (concern)** to help decide how to manage each group.

Interest / Influence High Influence Low Influence
High Interest Key Players – e.g., major shareholders, senior management, board of directors Subjects – e.g., employees, local community, NGOs
Low Interest Context Setters – e.g., government regulators, major creditors Crowd – e.g., occasional customers, general public, media (when not actively engaged)

5. Impact of Business Decisions on Stakeholders

The Cambridge syllabus requires analysis of specific decision types. For each decision, ask “What does this mean for each stakeholder?” and then reassess importance and influence.

5.1 Decision Types (A‑Level examples)

  • Price changes – increase, decrease or introduce price discrimination.
  • Product development / innovation – launch of a new product line or digital service.
  • Location change – relocation, expansion, off‑shoring or opening a new plant.
  • Mergers & take‑overs – acquisition, joint venture or strategic alliance.
  • Corporate Social Responsibility (CSR) initiatives – sustainability programmes, community investment.

5.2 Example Impact Boxes

Price increase
• Customers: lower demand, possible switch to rivals (interest rises, influence may stay low).
• Shareholders: higher profit margins (interest & influence increase).
• Regulators: may monitor for anti‑competitive pricing (influence rises).
New product launch
• Employees: need new skills, training (interest rises).
• Suppliers: may need to provide new components (importance rises).
• Media: increased coverage opportunities (interest rises).
Off‑shoring production
• Employees (home country): risk of redundancies (interest high, influence may become “Context Setter”).
• Trade unions: may organise industrial action (influence rises).
• Local community: possible loss of jobs, reduced economic contribution (interest rises).

6. How Changing Business Objectives Affects Stakeholders

6.1 Typical Objective Changes

  • From profit‑maximisation to market‑share growth.
  • Adoption of sustainability or CSR goals.
  • Geographic expansion (new regional or international markets).
  • Cost‑reduction programmes (automation, outsourcing, off‑shoring).
  • Product‑innovation focus (new product line, digital transformation).

6.2 Impact‑Analysis Framework

  1. Identify the new objective. Write it in SMART form (Specific, Measurable, Achievable, Relevant, Time‑bound).
  2. Map the objective to stakeholder interests. For each stakeholder group ask: “What does this objective mean for them?”
  3. Re‑assess relative importance and influence. Use the contribution criteria (revenue, cost, risk, reputation) and the Influence–Interest matrix to see who moves to a different quadrant.
  4. Spot potential conflicts and accountability issues. Note where interests clash (e.g., shareholders vs. employees) and decide which accountability mechanisms will be used.
  5. Adjust communication and engagement strategies. Choose the appropriate level of involvement (inform, consult, involve, collaborate) and the most effective channels.

6.3 Example Scenarios – Before & After Objective Change

Original Objective New Objective (SMART) Stakeholder(s) Affected Nature of Impact Resulting Change in Importance / Influence
Maximise short‑term profit Increase market share by 10 % within 12 months Customers, major shareholders More competitive pricing, broader product range; shareholders expect longer‑term returns. Customers move from “Low‑Medium” to “High” interest; shareholders’ influence rises as they monitor market‑share metrics.
Cost reduction (lean production) Reduce carbon emissions 20 % by 2027 (sustainability programme) Suppliers, NGOs, local community Preference for green suppliers; NGOs gain higher interest; community expects environmental benefits. Eco‑friendly suppliers become “Key Players”; NGOs shift from “Crowd” to “Subjects”.
Domestic focus Enter three Southeast Asian markets within 2 years (geographic expansion) Employees, trade unions, local community (home country) Potential relocation, new skill requirements, possible job losses domestically. Employees and unions move to “High‑Interest/High‑Influence” (Key Players/Context Setters) because of job‑security concerns.
Maintain current product line Install robotics to cut labour cost 15 % in 18 months (automation) Trade unions, employees, major shareholders Risk of redundancies; shareholders anticipate higher margins. Trade unions become “Context Setters” (high influence, moderate interest); employees become “Subjects”.

6.4 Stakeholder Conflict & Accountability (Cambridge wording)

  • Typical sources of conflict – profit‑maximisation vs. employee job security; expansion vs. community environmental concerns; cost‑cutting vs. supplier sustainability standards; price rises vs. customer loyalty.
  • Accountability mechanisms
    • Annual reports and dedicated sustainability/CSR statements (transparency).
    • Formal stakeholder consultation processes (surveys, focus groups, public hearings).
    • Grievance procedures (internal complaints, ombudsman, regulator‑led appeals).
    • Corporate‑governance codes (e.g., UK Corporate Governance Code, ISO 26000, OECD Guidelines).
    • Legal compliance and industry standards (e.g., health & safety legislation, environmental permits).

7. Linking Stakeholder Analysis to Wider Strategic Tools (A‑Level Extension)

  • PEST Analysis – External macro‑environmental factors (Political, Economic, Social, Technological) often explain why a stakeholder’s influence changes (e.g., new environmental legislation raises regulator influence).
  • SWOT Analysis – Stakeholder strengths (skilled workforce) and threats (activist NGOs) are incorporated into the internal and external assessments.
  • Porter’s Five Forces – Suppliers and buyers are key stakeholder groups; a shift to a differentiation strategy alters their bargaining power.
  • Stakeholder Map → Strategic Choice – The outcome of the Influence–Interest matrix helps decide whether a cost‑leadership, differentiation or focus strategy is most appropriate.

8. Managing Stakeholder Relationships After Objective Changes

  1. Communication – Issue clear updates (press releases, internal memos, stakeholder newsletters) that explain the rationale, expected benefits and timelines.
  2. Consultation – Involve high‑influence/high‑interest groups early (workshops with senior management, focus groups with employees, meetings with regulators).
  3. Negotiation & Incentives – Offer retraining, severance packages, long‑term contracts or profit‑sharing schemes to groups that may lose out (e.g., employees facing automation).
  4. Monitoring & Review – Set KPIs such as stakeholder‑satisfaction scores, grievance‑resolution time, ESG performance metrics; review quarterly and adjust engagement plans.

9. Suggested Diagram

Influence–Interest matrix with stakeholder examples placed in each quadrant (Key Players, Subjects, Context Setters, Crowd)
Influence–Interest matrix – examples of stakeholders in each quadrant.

10. Summary

When a business alters its objectives, the balance of stakeholder importance and influence can shift dramatically. By systematically:

  • Identifying all internal and external stakeholders,
  • Understanding their rights, responsibilities and typical interests,
  • Measuring their relative importance, and
  • Plotting them on an Influence–Interest matrix,

managers can anticipate reactions, manage conflicts, demonstrate accountability, and align stakeholder engagement with the new strategic direction. Integrating this analysis with PEST, SWOT and Porter’s Five Forces prepares students for the full A‑Level syllabus.

11. Review Questions

  1. Explain how a shift from profit‑maximisation to a sustainability focus might change the relative importance of suppliers. Include at least two specific criteria you would use to re‑rate them.
  2. Using the Influence–Interest matrix, classify the following groups when a company decides to outsource production: senior management, local community, major shareholders, and trade unions. Justify each placement.
  3. Describe two communication strategies a business could use to manage stakeholder expectations after deciding to enter a new international market. Mention the intended audience and the medium.
  4. Identify a potential conflict that could arise between two stakeholder groups when a firm adopts a cost‑reduction (automation) objective, and suggest one accountability mechanism to mitigate the conflict.
  5. Briefly outline how the outcomes of a stakeholder analysis can be fed into a SWOT analysis for strategic planning.

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