individuals or groups with an interest in the activities of a business

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1.5 Stakeholders – Business Stakeholders

Learning Objective

  • Identify the individuals or groups that have an interest in the activities of a business.
  • Explain their rights, responsibilities and the influence they can exert.
  • Analyse how business decisions affect each stakeholder and how conflicts arise.
  • Understand how businesses are held accountable and why communicating objectives to stakeholders is essential.

What is a Stakeholder?

A stakeholder is any individual or group that can affect, or be affected by, a business’s objectives, actions or policies.

Classification of Stakeholders

1. Internal vs. External

  • Internal stakeholders are directly involved in the day‑to‑day operations of the business (e.g., owners, employees).
  • External stakeholders are outside the organisation but have an interest in its performance (e.g., customers, suppliers, government).

2. Primary vs. Secondary

  • Primary stakeholders are essential for the survival of the business; the relationship is usually contractual (e.g., shareholders, employees, customers, suppliers, government).
  • Secondary stakeholders have an indirect interest and may influence the business through public opinion, regulation or activism (e.g., local community, NGOs, interest groups).

Key Stakeholder Groups – Rights, Responsibilities, Typical Interests & Influence on Decision‑Making

Stakeholder Group Internal / External Primary / Secondary Key Rights Key Responsibilities Typical Interests Key Influence on Decision‑Making
Shareholders / Owners Internal Primary Dividends, voting at AGM, access to financial information Provide capital, monitor performance, act in the long‑term interest of the company Profitability, share price, return on investment Set strategic direction, approve major investments, appoint directors
Employees Internal Primary Safe working conditions, fair wages, non‑discrimination Perform duties efficiently, uphold policies, suggest improvements Job security, wages, career development, work‑life balance Productivity, industrial action, innovation, morale
Customers / Clients External Primary Receive goods/services as described, protection of personal data Pay promptly, provide feedback, comply with terms of purchase Quality, price, service, after‑sales support Sales revenue, brand reputation, market share
Suppliers / Creditors External Primary Timely payment, fair contract terms Deliver goods/services on time, maintain quality standards Credit terms, long‑term contracts, business stability Supply continuity, pricing power, credit conditions
Government & Regulatory Bodies External Primary Collect taxes, enforce legislation, protect public interest Comply with laws, file accurate reports, pay taxes, obtain licences Tax revenue, compliance, economic stability Legislation, licences, fines, incentives, policy direction
Local Community & Society External Secondary Healthy environment, employment opportunities, community development Engage in dialogue, support local initiatives, respect customs Employment, environmental impact, social welfare Public opinion, community pressure, local lobbying
NGOs & Interest Groups External Secondary Campaign, access information, freedom of expression Act responsibly, avoid defamation, provide evidence for claims Ethical practices, sustainability, human rights Campaigns, boycotts, advocacy, influencing legislation

Influence of Stakeholder Aims on Business Decisions

  • Shareholders – aim for profit and growth → push for cost‑reduction, expansion, dividend policies.
  • Employees – aim for job security and fair pay → influence decisions on automation, wage policies, training.
  • Customers – aim for value for money and quality → shape product design, pricing, after‑sales service.
  • Suppliers – aim for stable orders and timely payment → affect procurement strategies and contract terms.
  • Government – aim for tax revenue and public welfare → drive compliance, health & safety standards, environmental regulations.
  • Local Community – aim for employment and environmental protection → can affect site location, corporate‑social‑responsibility (CSR) projects.
  • NGOs – aim for ethical behaviour and sustainability → may trigger changes in sourcing, advertising, and reporting.

Common Conflict Scenarios & Quick Conflict‑Resolution Checklist

Typical conflicts

  • Cost‑cutting (shareholders) vs. employee welfare (employees)
  • Price increases (profit focus) vs. customer affordability (customers)
  • Expansion into new markets (shareholders) vs. environmental concerns (NGOs, community)
  • Strict regulatory compliance (government) vs. operational flexibility (management)

Resolution checklist

  1. Identify the conflicting aims.
  2. Analyse the impact on each stakeholder (positive, negative, neutral).
  3. Seek win‑win or compromise solutions (e.g., retraining programmes, phased price changes).
  4. Agree on mitigation actions and responsibilities.
  5. Communicate the decision and rationale to all affected parties.
  6. Monitor outcomes and adjust if required.

Stakeholder Analysis in the Decision‑Making Cycle

Four‑stage decision‑making model
  1. Identify – List all relevant stakeholders for the proposed decision.
  2. Evaluate – Assess each stakeholder’s rights, responsibilities, typical interests and likely impact (positive/negative/neutral).
  3. Decide – Choose the option that best balances competing interests while meeting the business’s SMART objectives.
  4. Communicate – Inform stakeholders of the decision, the reasons behind it and any actions required from them.

Power‑Interest Grid – Prioritising Stakeholder Engagement

Map stakeholders on a 2 × 2 matrix to decide the level of attention required.

Low Interest High Interest
Low Power / Low Interest
(Monitor)		 Low Power / High Interest
(Keep Informed)		 High Power / Low Interest
(Keep Satisfied)		 High Power / High Interest
(Manage Closely)

Typical placements:

  • Shareholders – high power, high interest
  • Local community – low power, high interest
  • NGOs – high power (through media), low interest (specific issue)
  • Distant customers – low power, low interest

Impact of Business Decisions on Stakeholders – Case Studies

Case Study 1: Relocating a Manufacturing Plant (Cost‑Cutting)

Decision: Move production from City A to a cheaper overseas location.

Stakeholder impacts (labelled):
  • Employees (City A) – Negative: job losses, loss of income.
  • Shareholders – Positive: lower production costs → higher profit.
  • Customers – Positive (potential price reduction) but risk of perceived quality loss (Neutral/Negative).
  • Suppliers (local) – Negative: loss of contracts.
  • Government (City A) – Negative: reduced tax revenue, possible political pressure.
  • Local community – Negative: increased unemployment, social unrest.
  • NGOs – Negative: concerns about overseas labour standards → reputational risk.
Mitigation actions taken:
  • Redundancy packages and outplacement support for affected employees.
  • Community investment fund to create new local jobs.
  • Public‑relations campaign to explain cost savings and quality‑control measures.
  • Audit of overseas supplier labour standards to address NGO concerns.

Case Study 2: Launching a Sustainable Product Line (Positive Impact)

Decision: Introduce an eco‑friendly product range using recycled materials.

Stakeholder impacts (labelled):
  • Customers – Positive: greener choice, enhanced brand loyalty.
  • Shareholders – Positive: access to a growing market segment, long‑term reputation boost.
  • Employees – Positive: pride in working for an ethical company, training in new processes.
  • Suppliers – Neutral/Positive: may need to adapt to new material specifications; opportunity for long‑term contracts.
  • NGOs & Interest Groups – Positive: alignment with sustainability goals, potential partnership.
  • Government – Positive: supports national environmental targets, may offer tax incentives.
  • Local Community – Positive: reduced waste, possible local sourcing of recycled inputs.
Key actions supporting positive impact:
  • Life‑cycle assessment published in the annual sustainability report.
  • Collaboration with an NGO to certify the product’s eco‑label.
  • Employee training programme on sustainable manufacturing techniques.

Accountability & Communication of Objectives

  • Accountability Framework
    • Annual financial report (shareholder‑focused)
    • Sustainability / CSR report (covers environmental and social performance)
    • Corporate governance code (board responsibilities, audit committees)
    • External audits (financial, environmental)
    • Stakeholder consultation meetings (e.g., community forums, employee forums)
  • Why communicate objectives? Builds trust, aligns expectations, reduces conflict, and demonstrates commitment to legal, ethical and social standards.
  • Typical communication channels
    • Internal newsletters, staff briefings, intranet
    • Press releases, company website, social‑media updates
    • Annual and sustainability reports (publicly available)
    • Community forums, regulator filings, shareholder meetings

Why Stakeholder Analysis Matters

  • Identifies sources of support or opposition before a decision is taken.
  • Helps develop strategies that balance competing demands and minimise conflict.
  • Enhances corporate reputation and contributes to long‑term sustainability.
  • Provides a framework for risk mitigation and for meeting legal/ethical obligations.

Suggested Diagram

Venn diagram showing the overlap between internal, external, primary and secondary stakeholder groups (use as a visual revision aid).

Quick Revision Checklist

  • Can you list the main stakeholder groups and state whether they are internal or external?
  • Do you know which groups are primary and which are secondary?
  • Can you describe the key rights, responsibilities, typical interests and key influence on decision‑making of each group?
  • Are you able to explain how a specific business decision (e.g., plant relocation or sustainable product launch) impacts each stakeholder?
  • Do you understand common conflict scenarios and the conflict‑resolution checklist?
  • Can you outline the four steps of stakeholder analysis within the decision‑making cycle?
  • Do you know how to use a power‑interest grid to prioritise stakeholder engagement?
  • Why is communicating objectives and being accountable to stakeholders essential?

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