Welcome to "Stakeholders in Business"!
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—lots of 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 are so important to a business's success.
1. What is a Stakeholder?
Before we dive in, let’s get the most important definition sorted. A stakeholder is any person, group, or organisation that has an interest in or is affected by the activities of a business.
Don't worry if this seems tricky at first! A simple way to remember it is that a stakeholder has a "stake" (an interest) in the business, meaning they care about what happens to it. They aren't always the owners; they can be anyone from the person working the till to the person living next door to the factory.
Quick Review Box:
• Stakeholder: Anyone with an interest in a business.
• Interest: A reason to care about whether the business succeeds or fails.
2. Internal vs. External Stakeholders
We usually split stakeholders into two main camps: those inside the business and those outside of it.
Internal Stakeholders
These are people who are directly involved in the daily life of the business because they work there or own it.
1. Owners
• Their Role: They provide the money (capital) to start the business and make the big decisions.
• Their Objective: They usually want the business to make a profit and grow so their investment becomes more valuable.
2. Employees
• Their Role: They do the actual work, whether that’s making products or serving customers.
• Their Objective: They want fair pay (good wages), job security (not being fired), and a safe place to work.
External Stakeholders
These are people or groups outside the business who are still affected by what the business does.
1. Customers
• Their Role: They buy the goods or services the business sells.
• Their Objective: They want high-quality products at a fair price and good customer service.
2. Suppliers
• Their Role: They sell raw materials or parts to the business (e.g., a farmer selling milk to a chocolate factory).
• Their Objective: They want the business to pay their bills on time and keep ordering from them in the future.
3. The Government
• Their Role: they create the laws that businesses must follow.
• Their Objective: They want the business to follow the law, provide jobs for people, and pay taxes on their profits.
4. The Local Community
• Their Role: They live in the area where the business operates.
• Their Objective: They want the business to provide local jobs but they also want low noise and pollution.
Memory Aid: The "CEO SLG" Mnemonic
To remember the six main groups, think of: Customers, Employees, Owners, Suppliers, Local Community, Government.
Key Takeaway: Internal stakeholders are part of the business (Owners/Employees), while external stakeholders are outside the business (Customers/Suppliers/Gov/Community).
3. How Business Activity Affects Stakeholders
Everything a business does has a "ripple effect." Like throwing a stone into a pond, one decision can hit many different people.
Example: A local supermarket decides to stay open 24 hours a day.
• Employees: Might be happy because they can earn more money working night shifts, or unhappy because they have to work late.
• Customers: Happy because they can shop whenever they want.
• Local Community: Might be unhappy due to more noise and traffic late at night.
Common Mistake to Avoid: Don't assume an activity is always "good" or "bad." Most business decisions help some stakeholders but make things harder for others!
4. How Stakeholders Affect the Business
This is a two-way street! Stakeholders aren't just sitting there; they can take action that changes how the business operates.
How they exert influence:
• Owners: Can choose to close the business or change the manager if they aren't making enough profit.
• Employees: If they are unhappy, they might work slowly or even go on strike, which stops production.
• Customers: If they don't like a product or a price increase, they will stop buying, and the business will lose money.
• Suppliers: If a business doesn't pay on time, the supplier might refuse to send any more materials.
• Government: Can pass new laws (like increasing the minimum wage) that make it more expensive for the business to run.
• Local Community: Can protest against the business or write to the council to stop the business from expanding.
Did you know? Social media has made the Local Community and Customers much more powerful. One viral post about a business being "unethical" can lead to thousands of people boycotting their products!
Key Takeaway: Stakeholders have the power to help a business thrive or make it very difficult for them to operate.
5. Stakeholder Conflict
Because different stakeholders want different things, they often disagree. This is called stakeholder conflict.
The Classic Conflict: Owners vs. Employees
Imagine a business makes a large profit at the end of the year.
• Owners want to keep that money as profit for themselves.
• Employees want that money to be used for a pay rise.
They both want the same money for different reasons!
Another Example: Owners vs. Local Community
• Owners want to build a massive, cheap factory to save money.
• The Local Community wants the area to stay quiet and green with no pollution.
The business's goal of "low cost" conflicts with the community's goal of "quality of life."
Quick Summary of Objectives:
• Profit: Usually the main goal of Owners.
• Value: Usually the main goal of Customers.
• Security/Pay: Usually the main goal of Employees.
• Sustainability/Jobs: Usually the main goal of the Local Community.
Final Key Takeaway: A successful business is one that manages to keep as many stakeholders happy as possible, even when their goals conflict. This is often a delicate balancing act!