Unit 1: Creating a Business — Stakeholders
Welcome to your study notes on Stakeholders! Every single business decision affects people — from the person who buys a product to the person living next door to a factory. Understanding who these people are and what they want is a core part of CCEA GCSE Business Studies Unit 1.
Don't worry if this topic feels broad at first. We will break it down step-by-step so you can secure top marks in your 1 hour 30 minute exam.
---1. What is a Stakeholder?
According to the CCEA specification, a stakeholder is:
Any person, group, or organisation that has an interest in or is affected by the activities and decisions of a business.
Everyday Analogy: Think of a school. The headteacher, teachers, pupils, parents, the local bus company, and the neighbours living on the street are all stakeholders of the school because its day-to-day running affects them all!
Crucial Exam Warning: Stakeholder vs. Shareholder
This is one of the most common mistakes students make in GCSE exams:
• Shareholder: A person or institution that actually owns a share (part) of a limited company. They have invested money directly into the business.
• Stakeholder: A broad umbrella term for anyone affected by or interested in the business (including customers, workers, and neighbours).
Golden Rule: All shareholders are stakeholders, but NOT all stakeholders are shareholders!
Key Takeaway: A stakeholder is anyone impacted by what a business does, while a shareholder is specifically an owner of company shares.
---2. Internal vs. External Stakeholders
We classify stakeholders into two main categories depending on where they sit in relation to the business organisation:
A. Internal Stakeholders
These are individuals or groups who are directly part of the business organisation from the inside.
• Owners / Shareholders: The people who own the enterprise and take the financial risk.
• Managers: The staff responsible for organising resources, leading teams, and making strategic decisions.
• Employees (Workers): The staff employed to carry out daily tasks and operations.
B. External Stakeholders
These are individuals or groups outside the business who are still impacted by its actions or have a direct interest in its operations.
• Customers: The people who buy the goods or services.
• Suppliers: Other businesses that provide raw materials, stock, or services.
• Local Community: The residents and neighbourhood located near the business premises.
• Government: National and local authorities that collect taxes and enforce laws.
• Lenders (Banks): Financial institutions that provide loans or overdrafts to the firm.
Key Takeaway: Internal stakeholders work inside or own the business; external stakeholders interact with it from the outside.
---3. Specific Stakeholder Objectives (What Do They Want?)
In the CCEA examination, examiners report that students frequently lose marks for giving vague answers like "they want money". You must name the exact objective for each stakeholder group!
1. Owners and Shareholders
• Objectives: Profit maximisation (making as much profit as possible), long-term business growth, and a good return on their investment in the form of dividends.
• Their Influence: They make major strategic decisions or can vote to replace directors.
2. Employees
• Objectives: Fair wages/pay, job security (knowing their job is safe), good working conditions (safe and clean workplace), and opportunities for promotion.
• Their Influence: They can take industrial action, work slower, or leave if treated poorly.
3. Customers
• Objectives: High quality products, fair/competitive prices, and good customer service.
• Their Influence: They choose where to spend their money; bad experiences lead to lost sales and poor reviews.
4. Suppliers
• Objectives: Regular orders to keep their own business running and prompt payment (being paid on time as agreed in credit terms).
• Their Influence: They can refuse to deliver goods or raise prices if they are not paid on time.
5. Local Community
• Objectives: Local jobs for residents, minimal noise, pollution, and traffic congestion, and support for local community events.
• Their Influence: They can protest, complain to local councils, or oppose planning permission for expansions.
6. Government
• Objectives: Payment of taxes on time (such as Corporation Tax and VAT) and full compliance with laws and regulations (e.g., employment law, health and safety, environmental protection).
• Their Influence: They have the legal power to fine businesses or shut down illegal operations.
7. Lenders (Banks)
• Objectives: Repayment of loans on time and steady interest payments.
• Their Influence: They can refuse future credit, increase interest rates, or demand immediate repayment of debts.
Memory Trick (C-S-G-L-L-O-E): Remember your external stakeholders using the phrase: "Clever Students Get Lots of Learning" (Customers, Suppliers, Government, Local community, Lenders) and your internals (Owners, Employees)!
---4. Stakeholder Conflict
Stakeholder conflict occurs when the objectives of two or more stakeholder groups clash, meaning satisfying one group's goal directly harms the goal of another group.
In your exam, always state who is conflicting, what each group wants, and why they cannot both have their way at the same time.
Classic Conflict Example 1: Owners vs. Employees
• Owners want to maximise profit, which often means keeping operating costs as low as possible.
• Employees want higher wages and better benefits, which increases business costs.
• The Conflict: If the business raises employee wages, production costs rise, which directly reduces the profits available to the owners.
Classic Conflict Example 2: Local Community vs. Customers / Owners
• Customers and Owners want 24-hour opening times or late-night delivery services to maximise convenience and sales.
• The Local Community wants peace and quiet at night, minimal traffic congestion, and low air pollution.
• The Conflict: Operating delivery lorries late at night increases convenience for customers and sales for owners, but causes noise disturbance and traffic for local residents.
Key Takeaway: Businesses must balance conflicting stakeholder needs to maintain a good reputation and smooth operations.
---5. Business Size Thresholds
As you study Unit 1 (Creating a Business), it is essential to know how businesses are classified by size. The number of employees directly impacts how many internal stakeholders a firm has to manage!
Under official CCEA standards, business sizes are classified by employee numbers:
• Micro-business: \(1 - 9\) employees
• Small business: \(10 - 49\) employees
• Medium business: \(50 - 249\) employees
• Large business: \(250+\) employees
Exam Tip: A micro or small business will usually have a very close relationship with its employees and local community, whereas a large business (\(250+\) staff) often deals with formal trade unions and thousands of external shareholders.
---6. Quick Summary & Exam Technique Checklist
Before moving on to practice questions, check off these essential points:
• Definition: Can you define a stakeholder accurately? (Person/group affected by or interested in the business).
• Classification: Can you correctly place each group into Internal (Owners, Managers, Employees) or External (Customers, Suppliers, Community, Government, Lenders)?
• Specific Language: Did you avoid writing "money"? Use precise terms: dividends and profit for owners, fair wages for employees, taxes for government, and prompt payment for suppliers.
• Conflict Explanation: Can you explain step-by-step why two groups disagree (e.g., wage costs reducing profit margins)?
• Size Thresholds: Do you know the exact numbers? (\(1-9\) Micro, \(10-49\) Small, \(50-249\) Medium, \(250+\) Large).