Learning outcomes:

On completion of this sub-unit you should be

able to:
1. Explain the interests of internal and external
stakeholders [AO2]
2. Evaluate the possible areas of mutual benefit
and conflict between stakeholders’ interest

[AO3]
3. Evaluate the impact of differing stakeholder
objectives have on the behaviour and decisions
of the firm [AO3]
 Various groups of people that have a direct interest
 Affected by the activities and performances of the
business
 stakeholders

 They include:
 Internal stakeholders - members of the organization
 managers and directors
 employees
 Shareholders (stockholders)
 They include:
 External stakeholders - not part of the business,
direct interest/involvement
 customers
 suppliers
 pressure groups
 competitors
 government
 Entrepreneur
Directors

Managers

Employees

Business Owners Individuals

Institutional
Investors

Other Companies
Shareholders

A Summary of Business Owners

Directors – senior executives elected by
shareholders to direct operations
Managers – oversee daily operations
Employees
Individuals
Institutional Investors
Other Companies

Question: Discuss the role of each group of stakeholder identified above.

Customers
Suppliers
Government
Competitors
Community

Question: Discuss the nature of relationship between the various stakeholder groups
listed above and a business.
 A person working and paid for wages or salary.
 An organization engaged in commercial or economic competition with
others.
 A person who buys goods or services.
 The governing body of a nation or state.
 A person or organization that provides something needed such as a good or
service.
 A group of people living in the same place.
 A person responsible for controlling or administering all or part of a
company.
 A person or organization that puts money into financial plans expecting to
earn profit.
Stakeholder Main Objective

Managers and To direct strategies and major

Directors decision-making
To retain control

To increase own power and status

from growth(bonuses / perks)

Aiming for profit maximization –

security
Long-term financial health – retain

profits

Shareholders / To receive maximum dividends from

stockholders (limited after-tax profits

liability companies) To share in the success/profitability

through an appreciating share price

Stakeholder Main Objective

Employees / To receive a fair or improved pay

workforce To have good working conditions

Job security and opportunities for

progression

Organization’s best asset

Motivated – dynamic, productive,

loyal
Fred Allen – ‘Treat employees like

partners and they act as partners’

2013, BMW – 40,000 strike (South
Africa), export sales 75%
Stakeholder Main Objective
Customers – Marshall To obtain good value for money from the
Field (‘Right or products purchased
To receive high levels of customer service
wrong, the customer
is always right’) To receive after sale service and supply of

spares

Complaints and suggestions

Happy and loyal

Suppliers Good relationship - good quality

•materials stocks on time at reasonable price
•commercial services Preferential credit terms

To continue to sell profitably

To be paid promptly and fully for the

goods supplied
Stakeholder Main Objective
Pressure groups Ex. Campaign groups on anti-smoking or
damage to the environment
Influence the government policy

Can influence decisions and actions of

business directly – demand of creating jobs

Acceptance of business to operate on its
location

Possible actions: Boycotting

Lobbying – to influence employers, legal
representatives
Public Relations – positive publicity
Direct action- mass protest / legal action
Stakeholder Main Objective
Competitors To compete by all lawful means
To remain competitive – awareness

and response to rival’s practices

To benchmark performance

To differentiate products – incentive

Government Unfair business practices are avoided

Correct corporate tax is paid

Health and safety standards at work

is met
Compliance with employment

legislations
Consumer protection laws upheld
Stakeholder Main Objective
Government If shareholder, have direct
interest
Ensure businesses acts in the

public interest

Stimulate business activity –

interest rates / taxes
Offer incentives – subsidy

Introduce initiatives –

infrastructures
 situations where people are in
disagreement
 difference in opinion
 creating friction
 business cannot simultaneously meet
the needs of all stakeholders
 Examples:
 more profit = less employee benefit
 payment in full(suppliers) = discounted prices
 remuneration of company directors = overpaid
 more than one role or set of interest
 Leaders look at 3 key issues:
1.Type of organization in question
 Partnership – strive for profit,
customers are key stakeholders
 Charity – not profit oriented, local
community
 Limited company – accountable to
shareholders
 Leaders look at 3 key issues:
2. Aims and objectives of the
business
 expansion as part of strategy
 less profit to owners in the short
term

 leaders given priority during the

change process
 Leaders look at 3 key issues:
3. Source and degree of power
(influence) of each stakeholder
 Customers – more power if business is
selling in mass market with many
substitutes
 More power to pressure groups who can
access to media
 United workforce strengthen influence of
employees via trade union
 Employees
 Example:
• Addressing the needs of both
employees and managers
 highly motivated and productive workforce
 low rates of absenteeism and staff turnover
 improved customer relations
 improved corporate image
 improved market share and profits
 happy shareholders
 greater output, more employment(community)
 only occur in the medium to long term
 Conflict vs. mutual benefits
 How to cater all stakeholders?
 ‘Best fit compromise’

 Relative bargaining power of

stakeholders – big vs. small business
 Stakeholder mapping – model that
assesses the interest of stakeholders
and their influence
 Strategy

 Priority stakeholder

 Leadership styles – paternalistic

 develop and train workers

 Pressure groups – ethical issues

 Is it unethical if a business chooses
to ignore the demands (or needs) of
one particular stakeholder group?
(Semester 1 exam)
 Discuss whether is it possible to
‘know’ which stakeholder group is the
most important to an organization.
What knowledge issues would be made
in such case? (Unit Test)
 Essay

Given the objectives of different classes of stakeholders

discuss the extent to which conflict may arise between
them.

To be submitted next meeting