Chapter 1.

4
Stakeholders

IB Business Management
 Key Terms
Worksheet 1
Answer the following questions:
• What are stakeholders?
• What are internal stakeholders?
• What are external stakeholders?
• Explain what is the power-interest model and its
strategies.

 Solve them in groups of two max.

1.4 Stakeholders
By the end of this chapter, you should be able to:
• Define the term stakeholders and identify internal and
external stakeholders for a given organization.
• Outline the main interests of internal and external
stakeholders.
• Explain possible areas of benefit and conflict between
stakeholders.
• Apply the power-interest model for stakeholder analysis.
 ¿What are Stakeholders?
• People, groups of people, and organizations who
affect or can be affected, directly or indirectly, by an
action done by an organization.
– They have an interest or concern (a stake) in a company’s
performance.
– The stake can be financial (profit) or non-financial (safety).
 Internal stakeholders
Individuals or groups that work within the business
– Shareholders
– Employees
– Unions
 Remember…
• Do not confuse the terms ‘stakeholder’ and ‘shareholder’.

• Stakeholder is a much broader term that covers many groups,

including shareholders.
 External stakeholders
Individuals, groups, and organizations that are outside
the business.
– Government
– Financiers
– Suppliers
– Customers
– Community
– Pressure groups
– The media
 Interests of internal stakeholders
¿What do they (stakeholders) expect from the business?
Shareholders
• Returns over their investments
• Make strategic decisions
• Information about decisions made

CEO
• Achieve strategic objectives efficiently

Senior managers
• Achieve tactical objectives efficiently

Middle managers
• Achieve day-to-day objectives efficiently
Employees and unions
• Better working environment
• Better salary
• Promotions
• Training
 Interests of external stakeholders
¿What do they (stakeholders) expect from the business?
Government
• Pay taxes
• Licences and certifications

Suppliers
• Stable commercial relationship
• Buy more supplies
• Better selling conditions

Customers and consumers

• Quality products
• Cheaper products
• Promotions
• Better purchasing conditions
¿What do they (stakeholders) expect from the business?

Community
• Business does not impact negatively
local area
• Create jobs
• Social responsibility

Financiers / Investors
• Returns over their investments
• Pay loan on time

Pressure groups
• Influence business in a specific issue

The media
• Information about the business
 Internal and external stakeholders
Individuals might have multiple stakeholder interests.
Examples:

• Employees of a business might live in the community where the business

is located.
– As employees they are internal stakeholders,
– As residents of the community, they are external stakeholders.

• Small shareholders in large publicly traded companies.

– Like all shareholders, are internal stakeholders.
– However, they are usually considered external to the business as they have virtually no
ability to influence on the organization.
 Possible areas of benefit and conflict
All stakeholders have a ‘stake’ in a business, but not always they have the
same objectives. Their focuses are different.

Example: A pay rise for employees

– Shareholders may object to the idea, as it could decrease profits and,
therefore, their return on investment.
– Employees, on the other hand, would favour pay rises, which would give
them a higher standard of living.
• Any decision of importance will have different reactions from different
stakeholders.
• In successful businesses, the interests of stakeholders are sufficiently
satisfied most the time.
 Remember
• Many examination questions involve the conflict of stakeholders’
objectives.
• Remember that it is difficult for a business to meet all its
responsibilities to all stakeholders at the same time.
• Compromise might be necessary – meeting as many stakeholders’
objectives as possible or meeting the needs of the most important
groups in each situation.
 Stakeholder analysis
• Large businesses with many stakeholders often perform a
stakeholder analysis.
• Purpose: prioritize or rank the interests of the stakeholders
• Determine how “close” each stakeholder is to decision-making in
the business.
– Under this approach, owners and managers are central to decision-making
– Suppliers, employees, financiers, and consumers are further removed.
– Most distant are government, pressure groups, the media and the local
community.
• Decision makers try to satisfy those stakeholders closest to the
centre.
 Stakeholder analysis
Government

Employees

Owners
Suppliers Financiers
Pressure Media
groups Managers

Consumers

Local community
 Power-interest model
• Another conceptual approach for mapping stakeholders
• Stakeholders are placed in groups in a matrix based on the level of
interest and the degree of power towards the organization
• The company can decide on likely strategies to manage potential
conflicts.
Level of interest
Low High

Group A Group B
Low
Minimal effort Keep informed
Degree
of
power
Group C Group D
High
Keep satisfied Key players
Group A: Minimal effort
• Stakeholders with minimal interest and limited power over the
business.
• Rarely a problem for the business.
• Owners and managers fairly ignore them, or at least devote limited
energy and attention to satisfy their interests.
Level of interest
Low High

Group A Group B
Low
Minimal effort Keep informed
Degree
of
power
Group C Group D
High
Keep satisfied Key players
Group B: Keep informed
• Stakeholders with a high interest and low degree of power over the
business.
• Making this group feel included is important.
• Newsletters, events, and other ways of conveying a sense of belonging
are important.

Level of interest
Low High

Group A Group B
Low
Minimal effort Keep informed
Degree
of
power
Group C Group D
High
Keep satisfied Key players
Group C: Keep satisfied
• Stakeholders with low interest and high degree of power over the
business.
• They have the power to influence other groups.
• The business must find ways to flatter the self-esteem of members of
this group to make them feel important.

Level of interest
Low High

Group A Group B
Low
Minimal effort Keep informed
Degree
of
power
Group C Group D
High
Keep satisfied Key players
Group D: Key Players
• Stakeholders with high interest and high degree of power over the business.
• Most important group. The business must communicate and consult them
before any major decisions are made.
• The business should focus on their needs in preference to the others.
• Failure to involve and satisfy these stakeholders can have very negative
consequences for the business.
Level of interest
Low High

Group A Group B
Low
Minimal effort Keep informed
Degree
of
power
Group C Group D
High
Keep satisfied Key players
 Key concept link
• A positive culture in business today is unfortunately the exception rather
than the norm, but a strong organizational culture can clearly differentiate
a business from its competitors in the mind of its stakeholders.
• Business ethics are the guidelines a company uses when interacting with
entities inside and outside the company. It is a conscious effort to treat
people and companies with respect and establish a positive working
environment.
• The effects of ethical practices in business can benefit a company financially
and they can also help a company gain the elements it needs to grow.
• However, some organizations apply unethical practices towards their
suppliers or employees to satisfy the needs of their key stakeholders.
 Exercises
Answer the questions in PART A of your worksheet 1

→ The worksheet 1 file is in Managebac.

→ Deadline: May 27th (sent it through Managebac)

 Solve them in groups of 2 max

Sources
• Stimpson, P., Smith, A. (2015). Business Management for the IB Diploma.
Cambridge, United Kingdom: Cambridge University Press
• Lominé, L., Muchena, M., and Pierce, R. (2014). Business Management.
Oxford, United Kingdom: Oxford University Press
• Clark, P. and Golden, P. (2009). Business and management Course
Companion. Oxford, United Kingdom: Oxford University Press
• Gutteridge, L. (2009). Business and Management for the IB Diploma.
Oxford, United Kingdom: Oxford University Press
• Thompson, R. and Machin, D. (2003). AS Business Studies. London, United
Kingdom: Harper Collins Publishers