The meaning and types of stakeholders

Stakeholders include all individuals or groups affected by a business's activities. Each stakeholder group has specific goals they aim to achieve, which may align with or oppose the business's own objectives. Businesses take these goals into account when setting their aims and making decisions.

Categories of stakeholders

Stakeholders fall into two main groups:

• Internal stakeholders - Individuals or groups within the business, such as owners and employees, who are directly involved in its operations.
• External stakeholders - Individuals or groups outside the business, such as customers and suppliers, who are impacted by its actions but not part of its internal structure.

Internal stakeholders and their objectives

Internal stakeholders work within the business and have a direct stake in its success. Their goals often focus on financial rewards, working conditions, and the business's overall performance.

Owners and shareholders

Owners are central stakeholders who benefit from profits and control the business's direction. Their primary goal is often to maximise profits, though they may also prioritise ethical practices.

Types of ownership:

• In limited companies, shareholders own shares and are the owners.
• In private limited companies, shares are typically held by friends and family of the founders.
• In public limited companies, shares can be purchased by the general public.

Shareholder benefits and influence:

• Shareholders receive dividends from profits and have voting rights on major decisions.
• A majority shareholder, holding over 50% of shares, has the greatest influence on choices.

Employees

Employees seek fair pay, safe and comfortable working environments, stable employment, and opportunities for advancement.

Managers

Managers share employee concerns but also face accountability for the business's performance, gaining recognition for successes and criticism for failures.

External stakeholders and their objectives

External stakeholders are outside the business but influenced by its decisions and operations. Their goals often revolve around quality, fairness, and community impact.

Customers

Customers aim for high-quality goods or services at affordable prices, supported by reliable support and clear information.

Suppliers

Suppliers provide materials or services to the business, relying on it for revenue. Their goals include receiving reasonable payments promptly.

Local community

Community members want the business to enhance local living standards.

Benefits to the community:

• Job creation
• Support for local events

Potential drawbacks:

• Environmental issues like pollution
• Excessive noise
• Employment reductions

Government

The government seeks tax income from the business to fund public services. It also encourages business expansion for job growth and increased tax contributions, while ensuring legal compliance.

Pressure groups and campaigners

These groups advocate for issues like environmental protection or workers' rights. Their aim is to ensure the business's actions support their causes.

Conflicts between stakeholder objectives

Stakeholder goals frequently clash, requiring businesses to balance competing interests. Businesses may adopt different strategies, focusing either on shareholders or a broader range of stakeholders.

Common conflicts

Shareholders often push for higher profits through cost reductions, which can:

• Lower product standards (affecting customers)
• Reduce wages or limit promotions (impacting employees)
• Switch to lower-cost suppliers (harming existing suppliers)

Business approaches to stakeholder management

Shareholder-focused approach:

• Prioritises profit maximisation, share value growth, and dividend increases.
• Often involves short-term strategies to deliver quick returns.

Stakeholder-focused approach:

• Considers the needs of all groups in decisions.
• Emphasises ethical behaviour and social responsibility over maximum profits.
• Typically adopts long-term strategies for sustainable outcomes.

Managing stakeholder relationships and stakeholder mapping

Effective management of stakeholder relationships helps avoid issues like employee turnover or industrial action. Businesses use communication and consultation to build positive ties.

Strategies for managing relationships

• Consultation - Involving key stakeholders in major decisions makes them feel respected and increases support for changes.
• Communication - Regular updates, such as informing staff about upcoming shifts, foster inclusion and reduce resistance.

Stakeholder mapping

Stakeholder mapping assesses the interest and influence (power) of different groups over the business. It helps prioritise management efforts by placing stakeholders into categories based on these factors.

The power/interest matrix in stakeholder mapping

• Manage closely - High power and high interest groups need the most focus, as their support is essential.
• Keep satisfied - High power but low interest groups should be monitored to maintain their contentment.
• Keep informed - Low power but high interest groups require updates to stay engaged.
• Monitor - Low power and low interest groups need minimal attention but should be watched for changes.