HOW ARE SMALL BUSINESSES INFLUENCED Stakeholders N4 BUSINESS IN ACTION/N5 UNDERSTANDING BUSINESS

LEARNING INTENTIONS AND SUCCESS CRITERIA I understand that there are different stakeholders who can influence business activities and success. SUCCESS CRITERIA: I can explain what a stakeholder is I can identify and describe internal and external stakeholders I can describe the different interests that stakeholders have and how these can conflict. I can describe what stakeholders can do to influence a business both positively and negatively.

WHAT IS A STAKEHOLDER? A person or group of people who have an interest in a business or organisation and in the way in which it is managed and run.

PORTLETHEN ACADEMY STAKEHOLDERS Think about our school. There are many people that have a ‘stake’ in it and have a genuine concern about how well it is performing. Can you name some of these stakeholders? What is the difference between them?

BUSINESS STAKEHOLDERS As with the school, businesses have people or groups of people who are interested in how each business performs. Each will be looking for that business to produce results which suit their own personal needs.

INTERNAL STAKEHOLDERS These are people or groups of people who are inside the business, eg employees. Can you think of any more internal stakeholders? Managers, Directors, Shareholders/Owners, Volunteers, Councillors.

EXTERNAL STAKEHOLDERS These are people or groups of people who are outside the business eg suppliers. Can you think of any more external stakeholders? Customers, Lenders, Government (HMRC), Local Community, Pressure Groups, Support Agencies

VIDEO Let’s watch a short video clip about Stakeholders: http://www.bbc.co.uk/learningzone/clips/10969.html Now complete Worksheet 13 on the computer and Worksheet 14 in your jotters.

Conflicts of Interest You have seen by doing Worksheet 14 that different stakeholders have different interests. Can anyone see a problem with this? Due to the demands placed on businesses by so many different stakeholders, it is no surprise that there are often disagreements and conflict between the different groups.

AREAS OF CONFLICT Shareholders and Employees Shareholders want good dividends whereas Employees want good pay and conditions of work. To give employees a pay rise means that costs will be up and profits down, so Shareholders will get a smaller dividend.

AREAS OF CONFLICT Managers and Employees Managers want to keep within the budget for their department so that they get a bonus. Employees want more pay eg more overtime pay. To give employees more overtime pay means that managers go over their budget and will not receive a bonus.

AREAS OF CONFLICT Customers and Business Owners Customers want value for money, good quality and good service. Owners want good profits. To give customers value for money may mean lowering the selling price which may mean lower profits. To get good profits businesses may cut costs by reducing the quality of the product.

AREAS OF CONFLICT Local Community and the Business Owners The local community can often suffer at the hands of a businesses through the effects of pollution, noise, congestion and the building of new factories in areas of outstanding beauty. However, if the business faces strong protests from residents and from pressure groups concerned about its actions, then it may decide to relocate to another area, causing much unemployment in the community it leaves behind.

TASK In pairs, each of you will be given the interests/complaints of stakeholders in the business Primark. Starting with the pair who are the Chancellor of the Exchequer, read your script and then exchange views and have a lively debate about stakeholders conflicts of interests!

INFLUENCE OF STAKEHOLDERS OWNER’S INFLUENCE Owners influence the activities of a business by being able to MAKE DECISIONS that managers and staff have to work to achieve. Owners have a HIGH level of influence because no one else in the business has the authority to overrule their decisions.

STAKEHOLDER INFLUENCES MANAGER’S INFLUENCE Managers influence the activities of business by MAKING DECISIONS to help it achieve the objectives the owners have set. The level of influence of a manager VARIES with their level of AUTHORITY. For example, top managers can overrule decisions of managers below them in the organisation.

STAKEHOLDER INFLUENCES EMPLOYEES INFLUENCE Employees can positively influence the activities of a business by WORKING HARD to support the decisions of owners and managers. Employees can negatively influence the activities of a business by INDUSTRIAL ACTION (such as a STRIKE).

STAKEHOLDER INFLUENCES THE GOVERNMENT Government influence the activities of a business by MAKING LAWS which change the way that they have to operate. They also influence the activities of a business by changing TAX RATES which will affect the amount of money that it has. Government has a HIGH level of influence because businesses will end up in court facing penalties if they do not do as they are told by law.

STAKEHOLDER INFLUENCES BANKS Banks positively influence the activities of a business by LENDING enough money at reasonable RATES OF INTEREST to allow them to do things that will increase consumer satisfaction. Banks negatively influence the activities of a business by NOT LENDING enough money or charging high RATES OF INTEREST.

STAKEHOLDER INFLUENCES CUSTOMERS Customers can positively influence the ability of a business to achieve its objectives by USING MORE OF THEIR GOODS AND SERVICES. Customers can negatively influence the ability of a business to achieve its objectives by NOT USING THEIR The level of influence that a customer has VARIES with the amount that they are SPENDING.

STAKEHOLDER INFLUENCES SUPPLIERS Suppliers positively influence the activities of a business by PROVIDING the RESOURCES they need for production. Suppliers negatively influence the activities of a business by NOT PROVIDING the RESOURCES they need for production eg if they were not paying their bills on time.

STAKEHOLDER INFLUENCES LOCAL COMMUNITY The local community can positively influence the activities of a business by supporting them through the MEDIA eg writing good reviews. The local community can negatively influence the activities of a business by campaigning against them as PRESSURE GROUPS and in the MEDIA.

TASK Complete Worksheet 15 in your jotters.