Business Organisation & Environment Stakeholders 1

Stakeholders Person or organization that has a direct interest in and is affected by the performance of a business They include owners, managers, employees, customers, suppliers, investors, competitors, the local community and the government 2

Internal Stakeholders They are members of the organization i.e. employees, shareholders (owners), managers and directors. 3

Employees They have a stake (an interest) in the organization they work for. They strive to improve on their pay and other financial benefits, working conditions, job security, training, etc. But these can only be offered to employees if the business is performing well. 4

Shareholders (Stockholders) Owners of the private and public limited companies by purchasing shares in these companies. Shareholders have two main objectives and that is maximize on the share dividend payments and achieve a rise in the value of the share price (known as capital gains). 5

Managers and Directors People who plan, organize and control the daily running of the business. Directors are senior executives who are elected by the company’s shareholders to oversee business operations. 6

Senior managers and directors will aim to maximize their own benefits such as their annual bonuses and other perks, and therefore they are likely to aim for profit maximization for the company. 7

External Stakeholders They do not form part of the business i.e. customers, suppliers and the government but have a direct interest or involvement in the action of the organization. 8

Suppliers They provide stocks of raw materials, component parts, finished goods and other resources for production. They can also provide business services such as maintenance and technical support. 9

They aim for regular contracts with clients at good prices and request that customers pay their outstanding bills on time. 10

Customers The key stakeholder group who determines the financial performance of a business. No business will survive without customers as they are the ones who provide a business with most of the revenues. 11

Customers can simply choose to spend their money elsewhere thereby threatening the survival of a business. Therefore, it is vital that business pay attention to the needs of their customers. 12

Special Interest Group An organization that advocates certain issues such as the prevention of cruelty to animals, protection of the environment, etc. They serve to protect the specialist needs and concerns (interests) of their members or followers eg trade unions, pressure groups, industry trade groups and the local community. 13

Trade Unions or Labour Unions Aim to uphold and enhance the conditions of work for their members. Seek or campaign for wages and salaries to rise in line with inflation, introduction of minimum wage to improve the earnings of those on relatively low income, better working conditions, etc 14

Pressure Groups Consist of individuals with a common interest who seek to place demands on organization to act in a particular way or to influence a change in their behaviour. 15

They often try to achieve their objectives by aiming to influence government policy, such as lobbying for a change in legislation, e.g. include organizations set up to protect the environment, campaigning against smoking, deforestation, etc 16

Industry Trade Groups Organizations that specialize in public relations with the aim of promoting a particular industry through education and advertising e.g. a PR campaign on anti-piracy by an industry trade group. 17

Movie and music companies fund the advertising and educational campaign to reduce the number of people involved in illegal downloading of movies and music from the internet. 18

Local Community Places demands on the businesses that operate in their community e.g. job creation and opportunities, need to be considerate of the local environment, sponsorship of local and fund-raising events, etc. Such considerations are paramount to the local community’s acceptance of businesses setting up in the area. 19

Competitors They are rival businesses of an organization, interested in the activities of a business for several reasons including avoiding anti- competitive practices of rival firms. 20

Larger firms tend to exploit their monopoly power, although this may be restricted by government intervention. As a stimulus to innovation and product development, firms may benefit from some competition as rivalry can lead to more ideas being generated; etc 21

Government This is an important external stakeholder that is likely to have a large influence on business behaviour. 22

Government will be interested including assurances that there is no unfair business practices, health and safety standards at work are met, correct payment of corporation tax, employment legislation is being upheld, etc 23

Stakeholders’ Conflicts Different stakeholder groups have varying interests in an organization and therefore conflict will arise. Business cannot necessarily meet the needs of all its stakeholders simultaneously 24

If owners want more profit, may need to cut staff benefits, this will upset employees; suppliers want payment on time and full price in one transaction but could harm that of the business, conflict may arise between the business and its suppliers. 25 Examples of Conflicts

Other source of potential conflict is that some stakeholders have more than one interest in an organization e.g. managers who are employees of a company, may also be shareholder of the company; a customer is also likely to be a member of the local community 26