Name: Nikhil Kumar J RegistrationNo:18BCI0091

MGT1022 - Lean Start-up Management (Theory) TE1

Digital Assignment – 4
Stakeholders in Business and Sources of Finance
What is a Stakeholder?
In business industry, a stakeholder is any individual person, group, or party that has an interest in a firm and
the consequences of its actions. General examples of stakeholders are employees,
customers, shareholders, suppliers, communities, and governments. Different stakeholders have diverse
interests, and companies frequently face trade-offs in trying to satisfy all of them.
Stakeholder vs Shareholder
This is a significant division to understand. A stakeholder is someone who has any type of stake in a
corporate, while a shareholder is somebody who possesses shares (stock) in a corporate and thus has an
equity interest.
Types of stakeholders:
1. Internal Stakeholders - Internal stakeholders are people who are directly and/or monetarily involved
in the working process. This comprises employees, owners, and managers. Each of these groups is
potentially satisfied directly for the success of the firm.
• Employees are main internal stakeholders. Employees have noteworthy financial and
time investments in the association, and play a important role in the plan, tactics, and
operations the firm carries out. Well run administrations take into account employee
opinions, concerns, and values in determining the strategy, vision, and mission of the
firm.
• Managers play an extensive role in defining the plan of the party, and a significant voice
in effective decisions. Managers are also responsible for the choices made, and act as a
point of interaction between shareholders, the board of directors, and the firm itself.
• Owners are the persons who hold weighty shares of the firm. Owners are responsible for
the influences the firm has, and have a substantial role in strategy. Owners frequently
make significant decisions concerning both internal and external stakeholders

2. External Stakeholders - There are moderately a few external stakeholders for firms to keep in mind
when making choices and carrying out actions. These comprise of the following but are not limited
to customers, suppliers, creditors, communities, governments, and society at large:
• Customers - The key drive of providing goods and services is to fill desires. Understanding
the requirements of an administration’s principal customer base, and enhancing actions to
best fill those desires, is thus an important part of handling a business. Interacting with
clients through social media, emails, storefronts, user testing groups, and the transfer of
services and goods is a significant part of preserving a strong community. These days, big
data plays an important role in defining what users need. By understanding trends, habits,
and courses in user statistics, administrations can forestall the desires of users and improve
their value proposition.
• Suppliers and other strategic associations are co-dependent, where the victory of one will
impact the victory of another. As an outcome, suppliers are meticulously related to
establishments as important external stakeholders. Timely payments, shipments,
communication, and working processes are important in continuing a robust relationship
with this stakeholder group.
• Local community - A corporate can be a great benefit to public, providing tax money, local
access to exclusive goods and services, jobs, and community development plans.
Nevertheless, a corporate can also be a trench on public by increasing traffic, causing
pollution, hurting small businesses of their sales, and changing real estate prices. As an
outcome, businesses must look at the desires of the community, and confirm that negative
consequences are diminished while community engagement is maximized.
• Government tax businesses, and hence have a steady stake in their triumph. Governments
can in fact be measured as primary stakeholders, seeing the profit motive involved.
Governments also deliver regulatory misunderstanding, guaranteeing that accounting
procedures, ethical practices, and legal concerns are being handled sensibly by commercial
representatives.
• Broader Society - As a consequence of the digital and global economy, a corporate can have
an important influence on society at large. Corporations such as Airbnb and Uber have
altered entire industries, making dynamically dissimilar economies with an extensive variety
of members than ever. Walmart has significantly impacted the feasibility of small businesses
in many areas. The food that is traded at fast food chains has enormous impacts on global
health. Industrial facilities in emerging nations are changing entire ecosystems. Social
networks are gathering massive amounts of data. All of these ideas aren’t essentially good or
bad, but handling them to guarantee consequences are optimistic for society as a whole is a
serious responsibility.

Figure 1 Types of Stakeholders

Ranking/Prioritizing Stakeholders
Companies frequently struggle to order stakeholders and their competing interests. Nevertheless, in many
situations, they do not have similar interests. For instance, if the company is stressed by shareholders to
reduce costs, it may lay off staffs or decrease their wages, which presents a tough trade-off.
Jack Ma, the CEO of Alibaba, has said that, in his business, they rank stakeholders in the subsequent priority
order:
▪ Customers
▪ Employees
▪ Investors
Numerous other CEOs tout shareholder primacy as their TOP interest. Much of the ordering will be built on
the stage a company is in. For instance, if it’s a start-up or an early-stage corporate, then clients and
employees are more probable to be the stakeholders considered primary. If it’s a established, publicly-
traded company, then shareholders are expected to be front and centre.
At the end of the day, it’s up to a company, the CEO, and the board of directors to fix the suitable ranking of
stakeholders when contending interests ascend.
Sources of Finance
For a businessperson or entrepreneurs, to find the sources of business finance is the utmost significant piece
when opening a business or a new project. It wants the extreme effort and dedication. The foundations of
business finance are characterized based on ownership, time, period, and control, etc., evaluate, and used
in diverse conditions.
Business finance is the capitals essential to establish, function business actions, and increase in the future.
Funds are explicitly essential for numerous purchase types such as theyconcrete assets such as furniture,
machinery, buildings, offices, factories, or insubstantial assets like patents, technical expertise, and
trademarks, etc.
Apart from the assets stated above, other things that need funding are the day-to-day working activities of
a corporate. This activity comprises buying raw materials, paying salaries, bills, gathering money from
clients, etc. It is vital to have adequate sum of money to endure and grow the business.
What are the types of finance in business?
Finance in firms can be roughly categorised under two types –

• Debt finance
Well known as borrowed capital, debt finance is maybe a short term or a long-term capital to be
repaid along with interest to the lender.
• Equity finance
It is a kind of finance elevated in exchange for fractional ownership of the business. Equity finance
can be capital presented by the owner or by the investor/s. In instance of the latter, the investors
turn as shareholders of the company.
Types of Entrepreneurship
Businesses can get capital through numerous sources of funds which are classified into three classes.
1. Based on Period – The period basis is further divided into three classes.
• Long Term Source of Finance – This long-term fund is used for more than five years. The fund is
settled through preference and equity shares and debentures etc. and is collected from the
capital market.
• Medium Term Source of Finance – These are short term funds that last more than one year but
not more than five years. The source consist of borrowings from a public deposit, commercial
banks, commercial paper, credits from a financial institute, and lease financing, etc.
• Short Term Source of Finance – These are funds just essential for a year. Working Capital
Mortgages from Commercial bank and trade credit etc. are a few specimens of these sources.
2. Based on Ownership – These sources of finance are divided into two sorts.
• Owner’s Fund – This fund is bankrolled by the company owners, also acknowledged as owner’s
capital. The capital is raised by distributing preference shares, retained earnings, equity shares,
etc. These are for long term capital funds which form a base for owners to gain their right to
control the firm’s management and operations.
• Burrowed Funds – These are the funds gathered with the help of borrowings or loans for a
specific period of time. This source of fund is the most usual and popular amongst the trades.
For instance, loans from commercial banks and other financial institutions.
3. Based on Generation – This source of income is characterized into two divisions.
• Internal Sources – The owners made the funds within the organization. The example for this
situation includes selling off assets and retained earnings, etc.
• External Source – The fund is settled from outside the business. For example, issuance of equity
shares to public, debentures, commercial banks loan, etc.

Sources of finance for start-ups:

• Personal investment - When opening a business, your first investor should be yourself
• Love money - This is money lent by a spouse, parents, family or friends.
• Venture capital
• Angels - Angels are usually wealthy individuals or retired company executives who finance directly
in small firms owned by others.
• Business incubators - Business incubators usually focus on the high-tech sector by providing support
for new businesses in numerous stages of development.
• Government grants and subsidies - Government agencies deliver financing such as grants and
subsidies that may be accessible to your business.
• Bank loans - Bank loans are the most frequently used source of funding for small and medium-sized
businesses
Examples of Stakeholders for some firms:
Tatneft is one of the biggest Russian oil companies.
• Stakeholders with substantial influence: internal (staff, trade union); shareholders and investors;
customers and clients; business partners; public authorities.
• Stakeholders with restricted influence: non-governmental organizations; specialized institutions of
higher and secondary vocational education; mass media; local communities; investment-analytical
and rating companies

Some other examples showing key stakeholders in some of the top Russian oil companies:
Rosneft - Associates and counterparties; international and all-Russian business communities; non-profit and
non-governmental establishments; educational institutions; employees; population and other individuals
RussNeft - Stockholders and investors; business associates; counterparties; customers; officials (directors,
top management and employees)
Lukoil - Regulators; stockholders and investors; staff and trade unions; customers; local communities
Novatek - Shareholders; investors and analysts; staff (including their family members and pensioners);
trade unions; public authorities at federal and regional levels; local communities; allies in common projects;
suppliers and contractors; customers; civil society organizations
Surgutneftegaz - Shareholders and investors; staff; citizens living in the territory of activity; Small
Indigenous Peoples of the North; the public

Based on project:
Topic: Online pharmaceutical sales
Sources of finance
The significant sources of finance for Pharmaceutical industry in India are Share capital, equity and
preference, debentures, public deposits, loans from viable banks and term lending institutions, trade dues
and other current liabilities, depreciation provision and retained earnings. The influence of external funds
to the total funds of the Pharmaceutical industry throughout this period on average was 66.7% and that of
the internal sources accounted for the remaining 33.3%. The external sources surpassed the internal
sources for 20 out of 30 years of the study. As contrary to the contribution of internal sources was 28.9
percent in case of the public sector in India and 71.7 percent in case of many advanced and emerging
countries.

Stakeholders
The primary stakeholders have the greatest accountability in a company. They consist of the company
suppliers, consumers consuming the company’s pharmaceutical product, the medical research institute,
employees employed in the organization and the company shareholders. The primary stakeholders form
the basic important foundation towards a company’s success or failure because of their contribution to the
direct economic situation. The secondary stakeholders do not have an important part in the economic
process but they are as valuable as the primary stakeholders are. These comprise the government, trade
unions, the media, and political parties and action groups
References
Websites:
[1]. https://corporatefinanceinstitute.com/resources/knowledge/finance/stakeholder/
[2]. https://blog.thylmann.net/financial-stakeholders-41e6ccd2b2cb
[3]. https://courses.lumenlearning.com/boundless-management/chapter/business-stakeholders/
[4]. https://efinancemanagement.com/sources-of-finance
[5]. https://byjus.com/commerce/sources-of-business-finance/
[6]. https://www.bajajfinserv.in/what-are-the-different-sources-of-business-finance
[7]. https://www.bdc.ca/en/articles-tools/start-buy-business/start-business/pages/start-up-financing-
sources.aspx
[8] http://shodhganga.inflibnet.ac.in/jspui/bitstream/10603/8359/13/13_chapter%206.pdf

Articles:
[1] (PDF) Bataeva B.S. Stakeholder Engagement: The Case of the Russian Largest Oil and Gas Companies.
https://www.researchgate.net/publication/329037126_Bataeva_BS_Stakeholder_Engagement_The_Case_of
_the_Russian_Largest_Oil_and_Gas_Companies