The definition and importance of stakeholders

Stakeholders include any individuals or groups impacted by a business's activities. Even small businesses can have numerous stakeholders, each affected in unique ways. These groups often hold varied opinions on what defines business success and which objectives the firm should prioritise.

Key characteristics of stakeholders:

• Stakeholders experience different effects from business operations.
• Their views on success can differ.
• Businesses must consider stakeholder perspectives when setting goals.

Different stakeholder groups and their interests

Businesses interact with various stakeholder groups, each with specific concerns related to the firm's performance and decisions. Understanding these interests helps explain how stakeholders shape business strategies.

Owners and shareholders

Owners hold the primary stake in the business. They make a profit if the business is successful and decide what happens to the business. Shareholders, in a limited company, usually want high dividends and a high share price. Dividends are profit shares distributed based on the number of shares owned.

Managers and employees

Managers and employees are interested in job security and promotion prospects. These improve if the firm is profitable and growing. Employees want decent wages and good working conditions.

Suppliers

Suppliers deliver essential materials or services to the business. They benefit from profitable, growing businesses that need more materials.

Local communities

Communities can suffer if businesses cause noise and pollution. Communities benefit when businesses provide good jobs and sponsor local activities. When businesses employ local residents, these employees spend in local shops.

Government

The government collects taxes from profitable businesses.

Customers

Customers look for high quality products at low prices.

Pressure groups

Pressure groups are organisations that try to influence public opinion. Pressure groups influence firm decisions through bad publicity or encouraging positive action. For instance, an environmental group might push retailers to cut down on disposable plastics.

Preferred objectives for various stakeholders

Each stakeholder group favours certain business objectives that align with their interests. These preferences can guide a firm's priorities but may also create tensions.

How stakeholders influence business decisions

Stakeholders affect business choices to different extents, with some holding more power than others. Owners typically have the greatest say, but all groups can impact outcomes through their actions or opinions.

Degrees of stakeholder influence:

• Owners - They make decisions, making them the most influential stakeholders. They must consider other stakeholders' interests when setting objectives.
• Customers - No business can ignore its customers, as without sales, it won't survive.
• Employees - Unhappy workers can make a business unproductive.
• Suppliers - A business may want to retain cash flow, but suppliers become unhappy if not paid on time.
• Local communities - A manufacturing company may accept being unpopular locally if its market is primarily international.
• Pressure groups - They can sway decisions by generating negative media or promoting beneficial changes.

Conflicts between stakeholder interests

Stakeholder views frequently clash, forcing businesses to make trade-offs. While some conflicts can be managed, ignoring key groups risks the firm's stability.

Common conflicts and business responses:

• Differing priorities - Stakeholders often have conflicting opinions about objectives and activities.
• Survival considerations - Businesses may ignore some stakeholders but must consider others to survive.