Welcome to the World of Stakeholders!
Hello! Welcome to your study notes for the Business and Technology (BT) exam. Today, we are looking at a very important topic: Stakeholders. Think of a business like a giant party. A stakeholder is anyone who is invited, anyone who is helping out, and even the neighbors who might complain about the noise! In this chapter, we will learn who these people are, why they care about a business, and how a business manages their different needs.
Don't worry if this seems a bit broad at first. By the end of these notes, you’ll be able to spot a stakeholder from a mile away and know exactly how a manager should deal with them.
1. What is a Stakeholder?
A stakeholder is any individual or group that can affect or is affected by the actions, objectives, and policies of a business organisation.
A Simple Analogy: Imagine you are building a new house. Your stakeholders would include:
• You (you want a nice home).
• The builders (they want to get paid).
• The neighbors (they don't want their view blocked).
• The local council (they want you to follow building rules).
Quick Review: If someone has an "interest" or a "stake" in what the company does, they are a stakeholder. It’s not just about owning the company!
2. The Three Categories of Stakeholders (ICE)
To make things easier to remember, we group stakeholders into three main categories. You can use the mnemonic ICE to remember them: Internal, Connected, and External.
A. Internal Stakeholders
These are people who are inside the organisation on a daily basis. They are part of the "inner circle."
• Employees: They want fair pay, job security, and good working conditions.
• Managers/Directors: They want the company to succeed so they can get bonuses and career progression.
B. Connected Stakeholders
These people are not part of the organisation, but they have a direct contractual or financial link to it. They are "connected" by business deals.
• Shareholders (Owners): They want high profits and dividends (a share of the profit).
• Customers: They want high-quality products at a fair price.
• Suppliers: They want to be paid on time and have regular orders.
• Lenders (Banks): They want their loans repaid with interest.
C. External Stakeholders
These people have no direct tie to the business, but they are still affected by it or can influence it.
• The Government: They want the business to pay taxes and follow laws.
• The Local Community: They want the business to provide jobs and not cause pollution.
• Pressure Groups (like Greenpeace): They want the business to act ethically and protect the environment.
Key Takeaway: Internal = Inside. Connected = Linked by money/contracts. External = The wider world.
3. Stakeholder Conflict
Here is the tricky part: Stakeholders don't always want the same thing! This is called stakeholder conflict.
Example:
The Shareholders want the company to make more profit. To do this, the company decides to cut Employees' wages. Now the shareholders are happy, but the employees are angry. This is a classic conflict!
Did you know? A manager's job is often a balancing act, trying to keep as many stakeholders happy as possible without hurting the business.
4. Managing Stakeholders: Mendelow’s Matrix
Since a manager cannot please everyone all the time, they use a tool called Mendelow’s Matrix to decide who to listen to first. This matrix looks at two things:
1. Power: How much can the stakeholder influence the business?
2. Interest: How much does the stakeholder care about what the business is doing?
The Four Strategies:
1. High Power, High Interest (Key Players): These are the most important people (e.g., a major shareholder). The business must invest most effort here and involve them in decisions.
2. High Power, Low Interest (Keep Satisfied): These people are powerful but don't care about the day-to-day details (e.g., the Government). The business should keep them happy so they don't use their power against the company.
3. Low Power, High Interest (Keep Informed): These people care a lot but can't do much (e.g., local community or junior employees). The business should talk to them and keep them updated to stop them from becoming unhappy.
4. Low Power, Low Interest (Minimal Effort): These people don't care much and have no power. The business just ignores them or provides basic information.
Common Mistake: Don't assume "Low Power" means "No Power." If many "Low Power" stakeholders (like customers) join together on social media, they can become very powerful very quickly!
5. Corporate Social Responsibility (CSR)
CSR is the idea that a business should go above and beyond what the law requires to act in an ethical way toward its stakeholders.
For example, a law might say you can't dump chemicals in a river. A company practicing CSR might go further by using 100% recycled packaging or donating a portion of profits to local schools. This helps build a good reputation with External Stakeholders.
Quick Summary of Chapter:
• Stakeholders are anyone affected by a business.
• They are Internal, Connected, or External.
• They often have conflicting goals.
• Mendelow’s Matrix helps managers prioritize stakeholders based on Power and Interest.
• CSR is about being a "good citizen" in the business world.
Keep Going!
You've just covered a major part of the "Business Environment" section. Stakeholders are a foundation for almost everything else in business. If you can remember that Shareholders want profit and Employees want pay, you already understand the biggest conflict in business!