Stakeholders

Welcome to the World of Stakeholders!

In this chapter, we are going to explore the different groups of people who have an interest in how a business is run. Think of a business like a giant puzzle—many different people hold the pieces, and they all want the final picture to look a certain way. By the end of these notes, you’ll understand who these people are, what they want, and why they sometimes argue!

1.1 What is a Stakeholder?

Before we dive in, let’s clear up a common point of confusion. A stakeholder is any person, group, or organisation that has an interest in or is affected by the activities of a business.

Analogy: Imagine your school is the "business." The students, teachers, parents, and even the local shopkeepers nearby are all stakeholders because what happens at the school affects them all in different ways.

Common Mistake to Avoid: Don't confuse stakeholders with shareholders. All shareholders are stakeholders, but not all stakeholders are shareholders! A shareholder actually owns a piece of the company, while a stakeholder might just live next door to the factory.

Quick Review: A stakeholder "holds a stake" (an interest) in the business. If the business does well, they might benefit; if it does poorly, they might lose out.

1.2 Types of Stakeholders

The OCR syllabus identifies several specific groups you need to know. Let's break them down into internal (inside the business) and external (outside the business) groups.

Internal Stakeholders

1. Owners/Shareholders: These people provide the capital (money) to start and run the business. They want the business to survive and make a profit so they get a return on their investment.
2. Employees (including Managers and Directors): These are the people who do the work. Managers and Directors make the big decisions, while other employees carry out daily tasks. They want good wages, job security, and a safe working environment.

External Stakeholders

1. Customers: The people who buy the goods or services. They want high-quality products at a fair price.
2. Suppliers: Other businesses that sell raw materials or parts to the business. They want to be paid on time and receive regular orders.
3. Lenders: Usually banks who have lent the business money. They want the business to be able to pay back the interest and the original loan.
4. Government (Central and Local): They want the business to follow the law, pay its taxes, and provide jobs for the country.
5. Local Community: People living near the business. They want jobs for local people but don't want the business to cause noise, traffic, or pollution.
6. Potential Investors: People or organisations thinking about putting money into the business in the future. They are looking for a business with high growth potential.

Memory Aid: To remember the main ones, think of "C.E.O.S." — Customers, Employees, Owners, Suppliers!

Key Takeaway: Every stakeholder group has a different reason for caring about the business. Some care about money, some about jobs, and some about the environment.

1.3 Stakeholder Objectives

Each stakeholder has a "goal" or objective. Because they are all different, their goals often clash. Don't worry if this seems tricky; just think about what each person "gets" from the business.

Summary of Objectives:

• Owners: Want high profits and a growing business.
• Employees: Want high pay and to feel "safe" in their jobs.
• Customers: Want the best value for their money.
• Suppliers: Want long-term contracts and prompt payment.
• Government: Wants the business to follow legal regulations and pay tax.
• Lenders: Want to see a healthy cash flow so they know they'll get their money back.

Did you know? Some businesses, called social enterprises, have a "social mission" as their main objective. For them, the local community might be the most important stakeholder of all!

1.4 The Impact of Stakeholders

Stakeholders don't just watch the business; they can change how it acts. This is called their impact.

Impact on the Business

• Employees can go on strike if they are unhappy, which stops production.
• Customers can choose to shop elsewhere if prices are too high, which lowers revenue.
• Lenders can refuse to give more money if the business looks too risky.
• The Government can pass new laws (like a higher minimum wage) that make the business's costs go up.

Impact on Other Stakeholders

Everything a business does creates a "domino effect" between stakeholders.
Example: If the Owners decide to move a factory to a different country to save money, the Local Community loses jobs, and the Employees lose their income. However, the Customers might get cheaper products.

Quick Review Box:
- Internal stakeholders have a direct hand in running the business.
- External stakeholders are affected by the business's actions from the outside.
- Impact can be positive (e.g., a local business providing jobs) or negative (e.g., a business polluting a local river).

1.5 Stakeholder Conflict

Conflict happens when the objectives of two or more stakeholders cannot be met at the same time. This is a very important concept for your exams!

Classic Examples of Conflict:

1. Profit vs. Wages: Owners want to keep profit high, but Employees want higher wages. If the business pays higher wages, the profit goes down.
2. Price vs. Quality: Customers want high quality but low prices. To provide high quality, the business might have to pay Suppliers more for better materials, which might force them to raise prices.
3. Environment vs. Growth: The Local Community wants less pollution, but Potential Investors want the business to build a massive new factory to increase market share.

How do businesses handle this?

Businesses often have to prioritise. Usually, the most powerful stakeholders (like owners or major lenders) get their way first, but modern businesses are learning that ignoring the local community or customers can lead to a bad reputation and long-term failure.

Key Takeaway: Conflict is a natural part of business. Managing these conflicts is one of the hardest jobs a Manager or Director has!

Final Summary: The Stakeholder Checklist

When you are looking at a business case study, ask yourself these three questions:

1. Who are the stakeholders involved in this situation?
2. What do they want (what is their objective)?
3. How will they react if the business makes a specific decision (what is their impact)?

Mastering these three questions will help you tackle any stakeholder question with confidence! Keep up the great work!